Becoming a client of choice will enable Northumbrian Water to better deliver its pipeline of project

Becoming a client of choice will enable Northumbrian Water to better deliver its pipeline of projects

Interview with John Murray, Category Manager at Northumbrian Water Group in conversation with Mark Coates, International Director of Public Policy and Advocacy at Bentley Systems and Chair of British Water’s UK Forum

When it comes to procurement Northumbrian wants to become a client of choice for businesses within its supply chain so it can better deliver its pipeline of projects in AMP 7 and beyond.

Water companies across Britain now face a growing challenge to reduce costs, modernise the network and deliver more sustainable operations to meet ambitious net zero targets.

Guided by its values Northumbrian took a bold decision to pledge to reach its goal of net zero in 2027 - three years ahead of the rest of the industry.

That’s why Northumbrian and other water companies maintain a robust supply chain of civil engineers, private contractors and industry partners to ensure it is delivering a better, smarter and faster operation across the board.

Why does Northumbrian want to do this? Industry research from Gallup suggests that when businesses proactively develop connections with suppliers, they reap substantial economic benefits - increased productivity, improved planning and lower costs.

To become a client of choice Northumbrian has pledged to get better at engaging the supply chain early. In years gone by Northumbrian would have put a tender out to market and been confident of getting plenty of responses.

However, the way the market now works has changed.

On average, Northumbrian spend four to five months consulting with experts in the market before putting work out to tender. 

The supply chain needs to understand a water company’s project pipeline, how it fits with their investment strategy and the resources they would need to bid and deliver the project. When Northumbrian put a contract out to tender Northumbrian is interested in having conversations about what else can be done to make a project deliver better results for the business and its customers.

In a highly competitive market and with a fast-changing macro-economic environment which includes the highest level of inflation for 40 years, Northumbrian needs to ensure it allocates risk appropriately which recognises the contractors' appetite for risk. To do this Northumbrian will evaluate risk to make sure it sits with the party best placed to hold it.

For example, procurement contracts traditionally place the inflation risk on the contractor. Now Northumbrian shares the inflation risk to deliver more balanced risk between Northumbrian and its suppliers.

A major project which showcases this philosophy in action is the Tees Central Strategic Transfer Mains pipeline - a £150m project involving 55km of new pipes. This infrastructure is more than 130 years old, and action is needed to prevent further water supply issues in the region. Northumbrian is expecting to start construction this autumn.

Following public consultation, Northumbrian put the first phase of works – worth circa £62m - out to tender. Following the economic turmoil of the pandemic, Northumbrian knows contractors are eager to win new work, but face their own challenges within their supply chains. 

The nature of the current market has also changed Northumbrian’s approach to business development, as it has had to take a more active role in this – a role more traditionally done by the contractor. 

As a result, it is now vitally important Northumbrian sells itself as a client to its suppliers. It needs to state a positive case as to why businesses should collaborate with Northumbrian on projects. As custodians of the water and sewage systems of the North East of England, its work puts it at the heart of local communities by delivering a vital public service.

As such its values as a business and its approach to procurement can help Northumbrian to deliver for more for the community in which it operates. Northumbrian cares for the essential needs of its communities and environment, now and for generations to come. These principles contribute to its aim of becoming a client of choice with its trusted suppliers.

However, the greater challenge for Northumbrian has been adapting to a new competitive tender strategy for its major projects. Market competition provides a level of comfort to a business that it is getting value for money. 

In Northumbrian’s bid to become a client of choice, its approach to negotiating projects has meant it has had to get closer to suppliers to negotiate contracts which work for both parties and still deliver excellent value for Northumbrian.

It is true that challenging situations often also present opportunities and Northumbrian has used this to redefine how it engages not only with the supply chain but also internally, while also allowing it to demonstrate the value of procurement and its ability to be agile and dynamic in terms of solving complex supply chain issues.

With procurement for contracts on a range of vital projects in the region - from the Springwell Service Reservoir to the Tees Pipeline – Northumbrian is confident that its approach to becoming a client of choice will help the business better deliver its pipeline of projects. 
It will also help deliver better value for money for customers, and by prioritising suppliers with a strong sustainability ethos, deliver more environmentally friendly projects which help it meet its net zero targets.