Pressure from regulators on water and energy companies to make efficiency savings as they enter new price control periods is turning the spotlight on the way capital projects are managed. It’s led to some companies in the water sector (now at the start of AMP7) to decide to manage projects in-house and hire tier 2 and 3 contractors directly, in a bid to reduce costs and boost value. Tier 1 contractors are no longer the automatic go-to option as they have been in the past.

And as Ofgem begins its RIIO2 price determinations with the gas and electricity transmission companies, the same trends are emerging in energy transmission as well as distribution organisations.

So, as supply chains become complex and interwoven, what is the best approach to managing information and helping organisations collaborate and connect with the centre and each other? How big a role can data play in managing risk? And are energy and water companies managing the data they hold well enough to provide the best information for informing their decision-making?

These were some of the questions posed at a roundtable discussion with a group of procurement, commercial and operation directors from water and energy network companies. The event was convened in November and held in association with Oracle Construction and Engineering.

Here we highlight some of the key talking points.

Bringing design in-house and promoting greater collaboration between suppliers

A number of those around the table talked about changes in capital project delivery, and in particular working directly with tier 2 and 3s, with networks now moving in the same direction as water companies.

There was a clear trend towards bringing more design capability in-house, as well as appointing technical consultants early. The aim of that is to spend more time honing projects before the delivery stage, which can drive efficiencies.

All agreed that the regulatory price periods did not make for the most efficient delivery, but as one network participant put it when referring to the new five-year control periods: “ED1 was eight years and now it’s going to five years. We’re not moving to longer periods. Regulated industries just have to accept that cycle and put measures in place to minimise the impact.”

The need to give suppliers more information

As companies look to cut out tier 1s and work directly with the tier 2 and 3 suppliers, what has become apparent is the need to provide these suppliers with as much information as possible, and as early as possible, to allow them to plan and invest in innovation.

Said a water company director: “We’re finding out that our supply chain want access to our thinking and access to our data in ways that they haven’t asked for previously and we are working hard to try and give them that high level of access.

“We feel that we need to be giving them that, particularly if we want them to do their best – particularly around innovation.

“So, we can say for the entire AMP period what we want to resolve and what sites we want to work on.”

However, the director warned: “There’s a difference between what is interesting for a supplier and what is valuable. I’m not sure we’re quite there yet. It’s interesting for a supplier to know that we are spending X amount on our screens, but more helpful and valuable if we can be more specific and say what we need at the product level, so we need X hundred of a particular product and we’re going to need it for Y number of years. It gives them the confidence to invest and be innovative.”

Getting to know suppliers was also imperative. “It’s quite easy if you have five partners and you are working with them. If you have an ecosystem with a greater number of suppliers then you have to take the trouble to get to know them, find out about their needs,” said the water director.

However, another participant said that using tier 2 and tier 3 contractors necessitated a much more hands-on approach. “We are getting involved in much more micromanagement of our supply chain. It’s not the best use of effort – but seems necessary given the cost challenges we’re facing to drive every drop of efficiency.

“We want to be able to track the individual activities being carried out on site. It is all about striking the right balance and building up our confidence in the supply team so we then can step back.”

Gathering the right data and using it properly

As appetite for risk diminishes and water companies and networks look to control projects more tightly, getting the right data at their fingertips is critical to allow their project managers to make the right decisions, both in real time and at a portfolio level.

However, there was also common agreement that it’s not necessarily about generating more data, but the better use of data.
One participant explained how he was trying to get his project teams into a mindset that recognises that the data they are producing is an asset, so it’s not just the physical asset they are delivering.

“We are under enormous pressure to reduce our carbon footprint, so the operational performance data of this building will be invaluable to feed into specifications of the next projects. Therefore, the process we have in creating, collecting, and analysing data is as important as the asset we are creating.”

Another participant also stressed the need to make time to analyse the data generated: “We spend so much time ‘feeding the beast’, we don’t really stop to think about what it means and what value to the business we get from it.”

Participants also pointed out that teams were already generating huge swathes of data, including data in BIM (building information modelling), and in design, through site information using iPads, scanners and video footage.

“We don’t need more data – it needs to be more integrated and we need to use the data in a way that gives us warning of a risk to our programmes. It’s about risk management and data to model risk management and to help quantify risks,” said one.

It’s all about integrating data

It was also pointed out that fostering greater collaboration means that data must flow down and across and not just up the supply chain. “Project teams are relying on people in supply chains sharing data in ways they’ve not before,” said Geoff Roberts director, global industry strategy, at Oracle Construction and Engineering.

“We’re not very good at pushing data down to field operatives so they understand the impact, such as programme slippage. These are things they need to be aware of so they can manage their business effectively,” he added.

This point resonated with the group, who agreed that the downwards supply of information was often poor. “I think a lot of us are in the same boat. We need to engage with the tier 1s and tier 2s earlier in the game with the data flow. We’re nowhere near where we should be. But we’ve got plans to improve that by engaging earlier,” one said.

The need for data integration as well as downward flow was also emphasised. “All of our organisations are data rich – but using that data in the best way is not easy because it’s all in disparate systems. To get a single version of the truth to inform management decisions is quite tricky at times.”

Summing up, Roberts said: “It’s all about integrated data. Bringing together all the disparate information from across the organisation and from supply chains is the most fundamental part. Once you’ve done that, you can start your AI machine learning stuff. But it all starts with getting that data together in one place.”

Comment

Geoff Roberts, director, global industry strategy, Oracle Construction and Engineering

Connecting teams internally and externally to enable data-driven decision making

Oracle Construction and Engineering’s powerful combination of solutions supports the discussion that we heard in the roundtable by providing data flows both to and from the supply chain in near real time. In addition, that data also flows between suppliers and internal departments, so it’s not simply limited to internal connections. This data flow enables effective informed data-driven decisions to be made at all levels throughout an organisation and throughout the supply chain.

As the supply chain base expands it is important that solutions support the following key areas: ease of use and ease of access to information; seamless movement of data – in that data should naturally move to enable informed decision making across the organisation and its supply chain; and data sharing based on intelligence – in that it provides the right data to the right people.

They should be cloud-enabled to ease access to the ever-expanding supply chain and provide inherent governance and control while being easy to use. They must provide access to the whole team through mobility and provide near real-time visibility to data to enable decision makers to act effectively.

Further, they should be scalable. Utility businesses engaging in innovative digital transformation programmes, such as Scottish Water, need solutions that work now but can also grow with the business and capitalise on future technology advancements instead of becoming obsolete.

Scottish Water implemented its project, programme and portfolio management solution (P3M), a single source of information for the capital programme consisting of integrated cloud-based Oracle Construction and Engineering products.

The new system has created a robust governance system for Scottish Water, enabling visibility and control and has helped to drive consistency across the business, providing relevant and timely data to relevant teams leading to informed decision making across the capital programme.

According to Brian Maxwell, general manager, portfolio management at Scottish Water: “P3M and the other cloud-based changes implemented by Scottish Water is a real step forward in terms of how our business is managed and feeds into our longer-term digital strategy focused on continual improvement.”