The Elephant in the Room

Around the World, various intriguing methods are used to source water. Take the Samburu people of Kenya, for example, who rely on wild elephants to help them find water when the rivers run dry since elephants have a natural ability to detect underground water. Tracking the elephants closely, the Sumburu are able to draw water from the shallow wells that the elephants leave open for them. Back in their village, they thank the elephants by filling troughs which they leave out for thirsty animals.

It’s a stark reminder of how lucky we are in England to have water on tap, readily available and relatively cheap to boot. And yet, we too have an elephant in the room. It’s called the English water market opening.

How can it be that, with shadow operations (testing the market) about to commence, many decision makers and procurement teams are still burying their heads in the sand rather than taking action when it comes to their water supply contract? Is it because water makes an insignificant impact on the budget? Is there simply still a lack of awareness of the opportunities that this transition could open up for public sector organisations across England? Or is it perhaps because water, unlike most of the rest of the supply chain, is unchartered territory and, therefore, a potential minefield?

It needn’t be. In a procurement landscape where more attention is sometimes given to short term cost reduction as opposed to driving long term strategic value, sound water management is actually an area that could provide both: a quick win and a good return on investment over the longer term.

Having the opportunity to switch suppliers, says OFWAT, could mean that you benefit from “a wider choice of tariffs, better standards of service, tailored service offerings, advice on saving water and lower prices” – all (and this is the crucial bit since it applies to so little in traditional supply chain networks) with a cast iron guarantee that there will be no reduction in the quality of the product.

In Scotland, where the water market opened some time ago, over 130,000 customers are already enjoying the benefits of being able to shop around for water. There, over 50% of organisations have renegotiated with their water supplier and many have already switched.

As with any procurement exercise, you’ll naturally want to find out about suppliers’ charges, their approach to account management and customer service, whether they can provide any additional added value, and, should things go wrong, what they will do about it. But, when it comes to water, there’s a strong case for taking the time to gain a deeper understanding of your organisation’s current and future potential operational water footprint before entering into contract negotiations.

The water market, just like the gas and electricity markets, is a complex one. With 1.2 million customers and a total market value of £2.4 billion, England will be the largest retail water market in the World, creating a wide variety of challenges such as price variations, metering issues, billing inefficiencies and overly complex tariff structures.

Just like the Samburu have elephants to guide them through the water landscape, public sector procurement professionals can also benefit from working with a partner that has expert knowledge. That’s why independent water consultancy Waterscan suggests a six step procurement strategy which embraces continual improvement:

  1. Strategy Development: Define a strategy for the next five years to deliver on key drivers including service, flexibility, costs and terms.
  2. Solution Design: Develop a complete water consumption data-set for supplier comparison, while setting out desirable contract terms and cost reduction targets.
  3. Virtual RFP: Conduct a pre-tender review of available options looking at pricing, servicing, innovation and added value services such as automated meter reading (AMR).
  4. Competitive Tender: Run an outsourced end-to-end tender process incorporating supplier selection, RFP preparation, supplier management and negotiation. Retailers will be judged on best support services to help deliver strategic goals, innovative solutions tailored to the client’s needs and expert market and competitor analysis.
  5. Contract Negotiation: Provide expert advice to procurement teams to deliver the best outcome, looking at flexibility, improved SLAs and further cost savings.
  6. Water Bureau: Conduct ongoing price benchmarks and supplier management to deliver against the strategic plan. The total package includes data and financial management, accruals, budgets, wholesale negotiations and driving down fixed costs and support water reduction programs.

Waterscan’s Water Supply Procurement service is available to existing and potential customers in local government, the NHS and other public sectors as well as all commercial industries in the UK.

What’s more, experience of deregulation of the Scottish market means that the process can be completed quicker and more cost effectively than traditional in-house processes while clients retain oversight and operational control. The system is fully compliant with corporate governance requirements and Waterscan never takes any fees, commissions or brokerage charges from any water retailers.

Isn’t it time to shoo the elephant out of the room?

Keep up to date at www.open-water.org.uk and www.waterscan.com