Water industry regulator Ofwat has issued a third waiver notice to Bazalgette Tunnel Ltd, the company delivering the £4.2bn Thames Tideway Tunnel, related to two separate software contracts on the grounds that going out to competitive tender would not have represented value for money.

In 2015 the regulator issued a notice to Tideway, disapplying the procurement regime which the licensed Infrastructure Provider must follow in circumstances where the Utilities Contracts Regulations 2006 (the UCR) or the Public Contracts Regulations 2015 do not impose a requirement to conduct a competitive tender process.

At the same time that Ofat issued the original project licence to Bazalgette Tunnel Ltd, which trades as Tideway, it also issued a waiver notice under the (Specified Infrastructure Projects) (English Undertakers) Regulations 2013 dis-applying to a limited extent Tideway’s obligation to apply the procurement provisions set out in the Regulations.

The Waiver Notice provided that Tideway should benefit from some of the exemptions that apply to all utilities under the UCR and that Tideway did not have to follow the modified procurement regime for contracts with a monetary value under a specified threshold. The threshold is the same threshold that applies to all utilities under the UCR - £328,352 for a supply or a services contract, and £4,104,394 for a works contract

In January this year Ofwat granted a second waiver in respect of certain professional services related to its financing arrangements and specific legal services contracts.

In October 2016 Tideway applied for a third waiver in respect of two software contracts – Ofwat has now agreed to grant this and a third Waiver Notice came into effect on 1 December 2016.

Tideway’s application for a further waiver related to the following contracts for services:

• Microsoft software used by Tideway to support its activities and those of its project manager; and
• Computer Aided Design (CAD) software provided by Bentley Systems.

The Microsoft software currently being used by Tideway and their project managers, CH2M Hill – according to Ofwat Tideway considers that continued use of the software is essential to its business. All agreements are entered into directly with Microsoft and payments made directly to Microsoft.

Setting out its reasons for granting the waiver, Ofwat said:

“Tideway understand from software procurement experts that the selection of the software advisor would not impact the terms, conditions and prices applicable as between Tideway and Microsoft. We are satisfied that granting a waiver in these circumstances is appropriate and represents value for money for customers.”

With regard to the Bentley CAD software waiver, Ofwat said Tideway had given two reasons why undertaking a procurement exercise for a potential replacement product for the Bentley software would not represent value for money.

The  Bentley software has been used to produce the design information that supported the Development Consent Order for the Tideway Tunnel which runs to over 100,000 records.

Ofwat explained that there are also thousands of further records which Tideway holds in a data creation area, all of which would need migrating to a new system. There is an inherent risk of data corruption in the migration and translation process and the risk that the metadata supporting the records (including version control and document relationship hierarchy information) might be lost.

In addition, although Tideway has not mandated the use of particular design software, the Main Works Contractors are also using the Bentley software for information management and CAD authoring. The use of a common platform enables streamlined collaboration across the project.

"Tideway makes a convincing case that a competitive tender process will not represent value for money"

Ofwat said:

“Again we consider that the request by Tideway makes a convincing case that a competitive tender process will not represent value for money in respect of the Bentley design software.”

“We did not consult prior to issuing this waiver notice as we considered that there was a very clear case for the waivers and the issue of the waiver notice was unlikely to be contentious.”

Ofwat previously consulted before issuing the first two waiver notices, receiving one response to the first consultation and no response to the second consultation. The regulator said the waivers were “more complex than this third waiver” and that consultation was appropriate prior to issuing the waivers, adding:

“ If Tideway applies for further waivers, we will consult if we consider that the application raises issues that are likely to be complex or contentious.”