Consultants, contractors and investors have flagged up the risks and gaps regulators need to address to facilitate successful delivery of the 18 major schemes currently under development in the £14 billion RAPID programme.

At the beginning of May, the Regulators’ Alliance for Progressing Infrastructure Development (RAPID), the cross-regulatory unit based in Ofwat consisting of Ofwat, the Environment Agency and the Drinking Water Inspectorate, sent out two surveys to understand the views of the supply chain and investors in the context of the upcoming RAPID programme

The regulators involved are 

In total, both surveys had a combined total of 31 responses to a range of questions seeking views from consultants, contractors and investors on how likely they were to want to participate in one or more of the RAPID schemes based on their understanding with respect to size and complexity, timing and risk and opportunity profile.

Overall, the majority of respondents noted they would need further information on the programme to help make better judgements in these areas, issues raised included:

• The market is unsighted on risk allocation/commercial visibility at this stage.
• Respondents recognised that there could be challenges with the demands of AMP8 and AMP9.
• Risk profile associated with DPC may be a challenge to attract contractors and concerns about how much risk is passed onto the Competitively Appointed Provider (CAP).

The survey also sought to assess the level of interest for all RAPID schemes – responses indicated this is high/medium as the schemes are still early on in the development stage and suggested that the level of interest would depend on the staggering of the projects. Generally the level of interest is based on the geographical location of the schemes and existing relationships respondents have with water companies.

Investors also had a preference for larger schemes – for example, reservoirs.

The survey also asked respondents to indicate what information Ofwat/RAPID should ensure is available prior to schemes coming to the market. Consultants flagged up standardisation of contracts and staggering of schemes.

Contractors highlighted a number of specific areas where more information should be made available, including:

• More detail of works and contracts
• Sequencing and packaging of schemes
• Timescales
• Planning consent status
• Level of early contractor involvement that will be considered
• Budget estimates
• Tender costs
• Terms and conditions
• Early supplier engagement event

Investors expressed an interest in having more detail with regard to the up to date size and timings of schemes, procurement timelines, how schemes interact with existing regulated networks and assets and risk profiles around incentivised risk management.

Commenting on what would be required from Ofwat/RAPID to make scheme development a success prior to them coming to the market, consultants suggested more visible support of schemes was required regionally, nationally and internationally, both politically and publicly. They also flagged up the need for open dialogue with willingness to listen and respond to market feedback and for ther regulators to set out what the schemes would mean in terms of affordability, value for money and customer bills.

Contractors likewise had clear ideas on what would be needed to ensure successful scheme development, including:

• Outline business cases
• Staggered procurement timelines
• Information and engagement as early as possible, with one-to-one sessions
• Early view on procurement route and terms and conditions to enable a view on risk allocation
• Stakeholder maps with decision makers for all parties
• Clear financing and contracting models
• Combined delivery team formed to deliver entire RAPID programme
• Site and works information

Investors suggested success factors included clear timetables, risk allocation as early as possible in the process, size of opex and capex for individual schemes with reasoning behind the numbers, together with more market engagement.

The survey also included some interesting responses on what would be desirable from Ofwat/RAPID to look to include in scheme development prior to them coming to the market, including:

Consultants

• High level regular updates through forums/mini conferencesor quarterly teams call
• Clarity on risk allocation
• Clarity on delivery routes
• Clarity on financing and how the residual value will be treated under DPC
• Risk of planning approval is removed from solutions
• Greater flexibility to manage scope change

Contractors

• Engagement with technology companies directly to understand the importance of key products
• Smaller number of bidders
• Out phase from AMP8
• Integrated delivery team
• Early contractor involvement
• One-to-one face-to-face meetings
• Tender costs recovered

Investors

• Mature scheme designs
• Land acquisition and planning in place
• Limited number of bidders
• Timeframe for tender

Ofwat and RAPID also invited respondents to comment on any red flags they could identify and what key things should be excluded prior to schemes coming to the market.

Issues flagged up bu consultants included:

• Multiple procurement routes
• Risk of land and planning not being secured early enough
• Pressure on the supply chain from other national infrastructure
• Ofwat/RAPID guidance requirements and how it impacts the planning process
• Level of risk exposure and liability transferred to the contractors
• Inconsistent position by regulators or water companies
• Narrative of scheme benefits within the portfolio and risks not clear enough

Contractors highlighted similar concerns around UK supply chain resources and other competing national infrastructure and an overly complex procurement process which does not incentivise delivery, alongside the current balance between risk and reward and solutions not being developed in a collaborative matter.

In terms of making the RAPID programme a success, joint procurements and staggering of the pipeline were identified as key issues by all groups.

Consultants also want to see more engagement as early as possible with regular communication, including a centralised engagement forum, while contractors also singled out recoverable bid costs, fair risk allocation between parties and standardisation of contracts.

Respondents were divided on the question of whether there is a skills gap to deliver the upcoming programme. Several said they did not believe there is a gap as long as the timing of schemes is appropriate and correct measures are in place to reduce the risk.

Other responses suggested there could be a skills gap due to the challenges with AMP8, nationwide competing infrastructure and the water sector lacking expertise. More specific comments included:

• UK may need to attract overseas labour to support this delivery
• There needs to be understanding of modern methods of procurement and contracting models
• Sufficient programme sight and resourcing plans for the sector will help to reduce this gap and allow the correct investments to be made and delivery requirements met
• Skills gap could be down to the lack of product knowledge base

Ofwat has not yet indicated how the responses will be addressed in the development of the RAPID programme – the regulator said the report is “a summary of responses only and does not reflect any of the Ofwat/RAPID views.”

Click here to download the report in full