Steve Morris, Managing Director at wastewater technology specialists HUBER Technology UK, offers a supply chain perspective on delivering the upcoming AMP8 investment programme.

Steve Morris: Like many companies in the UK water sector supply chain, I read with interest the report published by British Water’s independent subsidiary body the Water Industry Forum in July 2022 entitled The optimal delivery model for AMP8 - A view from the supply chain.

Produced with the support of Turner & Townsend, the report encapsulates many of the challenges both the water companies and the wider supply chain face as they gear up for AMP8 and beyond.

We all know huge programmes of work need to be delivered requiring significant investment – and the report rightly points out that AMP8 is set to be procured “against a challenging backdrop with rising costs... driven by general and construction inflation; and supply chain issues because of Brexit, Covid-19, the Ukraine war and increased demand in other sectors.”

This article takes a look at some of the issues from a Tier 2 supplier point of view.

Firstly, at HUBER UK, we are very fortunate in having the benefit of being backed by a family-led technology company with 150 years of expertise, experience and knowledge. This includes a significant commitment to the long-term, both in terms of investment, continuous innovation and development to meet the needs of our customers.

This year we are also celebrating the 30th anniversary of our presence in the UK –and we have worked with the UK water companies since privatisation across successive AMP investment periods. As we move towards AMP 8, it’s fair to say that we agree with the report’s conclusion that this time round the water sector “requires a re-think of project delivery life cycles and client-side capability”

One of the other interesting comments the report also makes is that in AMP8 the water companies “will need to review the approach to risk allocation and focus far more on becoming a client of choice and attracting suppliers than previously.”

So what have we got to offer in this context? I don’t propose to go into detail about our people, products, experience, expertise, knowledge, a parent company heavily investing in new production facilities, and new innovations coming on board etc. Instead, I would like to explain why these things matter to our water company customers in terms of helping to deliver the AMP8 investment programme.

As a wastewater technology treatment specialist, we are highly aware of the tough regulatory targets and public pressure the water companies are now seeking to address on the thorny question of storm overflows.

However, while the water companies are in the process of developing their individual AMP8 business plans, as yet there is still relatively little visibility with regard to the detailed investments they will make and how the projects and packages of work will be scheduled and procured.

In addition to developing the plans, they will also need to demonstrate that there is capacity within the supply chain to deliver – but currently there is no real clarity as to how this will happen.

The supply chain is anticipating that when Ofwat considers the draft business plans, the regulator will not simply agree to additional multi-billion pound expenditure - Ofwat will also be asking how the additional workload will be delivered and how the supply chain will be able to accommodate it.

This could be further complicated by the fact that to some degree the water companies are still striving to deliver back-end loaded AMP7 work – with the million dollar question being how are they going to deliver an even bigger AMP8?

From our side, in contrast to previous AMP periods, it appears that the water companies are now being challenged in a different way by Ofwat in terms of being required to demonstrate resilience and capacity in the supply chain.

At this stage of the AMP8 procurement process there is still a considerable level of uncertainty about investment in individual projects and the timelines for when they are likely to be needed or delivered.

It is not yet clear how AMP8 will look – so some indication of the type of commitments the water companies are likely to make would be of considerable benefit to the supply chain as they put their own plans in place. We are aware – as are our counterparts in the wider supply chain – that we are not quite at that point yet, but there is undoubtedly an expectation that the utilities are set to take a different approach at AMP8 to how things have been done in the past.

The supply chain is also likewise aware that during AMP8 the water companies will be moving more towards Nature Based Solutions to address some of the serious challenges they face. However, while this may be the longer term aim, such solutions take time both to implement and to start delivering results – which suggests there will need to be a transition period as they move away from more traditional engineered approaches.

This is where in the short term, companies like HUBER UK can offer built solutions which bridge the gap. For us, it is more a question of recognising that the way things have always been done might not be the way things are done in the future.

To take two of our technologies as an example, our Ro-Win and Carbon Win solutions are helping to address these issues from a different perspective by helping the water companies to cut carbon emissions, reduce their energy use and costs en route to achieving their target of NetZero by 2030.

As the companies currently develop their AMP8 business plans they want to be confident that they can put supply chain capability in place that they can rely on. Working with suppliers like HUBER UK – with our 30 year track record of working with the water companies and their Tier 1 partners, the level of trust we have built up with our customers and low risk, proven solutions – undoubtedly offers them considerable advantages and peace of mind that their supplier can be counted on to deliver.

If they are able to provide some context and a steer for the supply chain that projects are definitely going to happen, this will likewise offer suppliers the confidence to ensure that they have the necessary resources and capabilities in place for when the AMP8 work programme starts to come on stream.

Looking further ahead, at HUBER we’re already working on new product development – developing the technologies we think will be needed for additional wastewater treatment processes resulting from more rigorous regulation.

I’m talking specifically here about the next stage beyond the tertiary treatment process – the quaternary treatment stage to address the removal of substances like micropollutants, forever chemicals, pharmaceutical components and the like.

The question that water companies and regulators alike are likely to already be asking themselves is how a fourth treatment stage can be optimally integrated or retrofitted.

We are aware this fourth stage treatment is coming down the line – In Germany, HUBER is adopting a pioneering role and already implementing solutions which will protect the water course from harmful and hazardous trace susbstances.

Finally, suppliers understand that the need to balance changing priorities are part of the challenges the water companies will continue to face – which sometimes see projects change their position on risk management registers.

We understand that water companies’ priorities can change – so a constructive approach which takes into account the potentially disruptive impacts of pulling projects at relatively short notice will play a key role in ensuring they have a healthy supply chain they can rely on.

If there is going to be a step change in delivery at AMP8, this is the point at which things are expected to change for both the water companies and the supply chain alike.

I’d like to conclude by referring back to the WIF report which says:

“Due to the changing landscape and challenging headwinds, a new approach will be required for AMP8 to further increase efficiency, reduce waste, deliver water company business plans within budget and avoid the risk of incurring significant performance commitment penalties…

“The solution lies in more effective application of existing models and alignment with the client-side capability to underpin effective delivery and facilitate a sustainable supply chain ecosystem…..

“...there is a need to ensure that future delivery models implemented in AMP8 and beyond focus on ensuring a sustainable supply chain ecosystem. This will attract suppliers to the sector, increase competition and reduce the risk to water companies of supplier failure.”

Click here to download the British Water report The optimal delivery model for AMP8.