The Totex and AMP6 survey published recently by WaterBriefing raised some fascinating and fundamental questions about the development of whole life costing in water asset management, operation and maintenance.

Keith Hayward, Sales and Marketing Manager, European Wastewater, Hydro International explores the issues.

This first survey in a series exploring key operational and strategic issues during AMP6 revealed that most of the professionals questioned believe our industry is failing to embrace a totex approach - despite accepting that it would encourage innovation and, in turn, drive lower operating and energy costs. 

The respondents represented a broad cross-section of water companies, contractors and equipment suppliers, as well as a good mix of levels of seniority and role. To begin with, almost 90% agreed that that there was still a lack of consensus on what totex really means.

Only 14.5% believed the UK water industry is already changing to meet totex objectives. The survey clearly indicated that people believe levels of acceptance of totex in water companies are low, and particularly so among Operations and Maintenance personnel, as well as among middle management whom one respondent described as a "treacle layer" working to outdated practices. People also felt that a lack of discussion between budget holders within organisations could be holding back the totex agenda.  

The survey chose the example of grit removal and responses supported a view of the ‘disconnect’ between the opportunities of a totex model and the reality of practice. Nearly all relevant respondents agreed that inadequate grit removal could be reducing the overall efficiency of their plant and that grit abrasion impacts on wear, replacement of parts, treatment capacity and effectiveness of biological treatment. 

Yet, at the same time, most people also viewed grit removal as an area of wastewater treatment operation where settling for a compromise in the level of protection is accepted. 

So, having viewed the results – and I commend the survey report to you, if you have not yet read it - the question remains: where do we go from here?  What are the steps that will get us closer to the ultimate totex goal?

More work to be done

Collaboration is needed between professional and trade groups to find answers, and at Hydro International we are keen to see a specific industry initiative with an agreed agenda to tackle at least some of these issues.   I believe engaging the supply chain in developing the answers is critical.  A cross-industry working group or perhaps continuing the Cyclicality Working Group are possible options to help draw up a roadmap that can accelerate necessary change.

What can totex achieve?

Rather than looking at totex as a financial methodology for asset planning to satisfy the regulator, it is perhaps helpful to see totex as the principle that fuels a journey towards optimum operating efficiency and costs.  A totex approach presents opportunities to achieve incremental benefits along the way that ultimately deliver better value for the consumer. 

Key outcomes of totex should be more innovation, better process efficiency and performance, reduced operating costs, and reduced maintenance.  More integrated management of water and wastewater assets should drive key operating outcomes, which in turn benefit water company customer.

The supply chain has a lot to offer in terms of highlighting solutions to the totex challenge. The opportunity presented by grit removal is a case in point, and it is encouraging to see such strong agreement of its potential to contribute to a totex evaluation of operating efficiency and cost savings.

To find the best solutions, the water industry can look to other parts of industry and the public sector to find best practice solutions for Whole Life Costing and collaborative supply chain management.

So what are the areas of focus to achieve the incremental steps we need in order to ensure that a positive, beneficial totex culture and practice becomes the norm?  Here’s my suggested top ten:

1. Innovation

Innovation can target the totex outcomes that can be delivered through supply chain partnership.   We need to encourage operators to want to be the first; willing to try out new technologies and processes to gain advantage and to provide new and unexpected benefits for themselves and for their users.

2. Industry Standards

Industry design standards for the equipment that runs key processes must be able to respond quickly to reflect what the newest and best technologies can achieve. We should be nimbler in updating standards to reflect the latest best practices and review any that have not changed for many years.

3. Procurement

More ‘joined-up’ procurement practices are needed to facilitate a totex investment in equipment and related maintenance and services, based on the predicted whole-life performance of assets. This requires a better communication and collaboration that crosses traditional water company demarcations. It will also require cross-industry consultation. 

4. Best Value Costing Models

Adopting effective cost models that consider ‘best value’ rather than ‘lowest cost’ is a relatively straightforward and incremental “quick win” that does not necessarily require major organisational change but will provide real and significant bottom-line savings.

5. Innovative Contracting Models

Choosing best value should also be the basis for more innovative contract arrangements between suppliers, contractors and even operators that could share risks and rewards of the through-life operation of equipment or systems.

6. Supply Chain Collaboration

Manufacturers and service suppliers offer expert equipment and operating knowledge.  Finding new and more collaborative ways of working between the supply chain, contractors and water companies could promote a more integrated approach to whole-life water asset management.  Models such as the BS11000 certification, as used in other contracting sectors, could help to promote best practice.

7. Building Information Modelling (BIM)

Wider adoption of BIM would support a holistic view of the management of water assets and processes.  BIM could help to integrate regulatory submissions, water company asset planning and supply chain contributions.  It is now a well-proven approach and widely adopted in other areas of public sector infrastructure development.   Sharing data via BIM models of water assets would support decisions for best through-life process performance, efficiency and operating savings.

8. Data

With improvements in communication and sensing technologies, the water industry should use instrumentation and software more widely to collect data to monitor performance and provide evidence to justify totex investments based on Whole Life Cost impacts.

9. Equipment Standardisation

Greater standardisation in the way equipment is specified, packaged and tendered is a sure-fire way of achieving efficiencies.  This is true for individual water companies, as well as across the industry. Not only would this encourage an infrastructure based on best practice, standardisation could also remove the costly inefficiencies of repeated framework negotiations.

10. Cyclicality

Doing more to tackle the market conditions generated by cyclicality would support better totex outcomes, primarily because there will be less pressure to isolate investment decisions and budgeting into five year periods. 

However, the cycle arguably provides a built-in ‘feast and famine’ mechanism for contractors to keep pushing for lowest capex, no matter whether this produces the best WLC cost-to-performance benefits.  Recent media reports have suggested that the move to ODIs and totex may also have been a distraction from addressing ‘boom and bust’. Surely, if totex is about balancing the best risks and rewards across the whole life of assets, it should help to smooth UK investment cycles?

Grit Removal

Seeing totex as an incremental journey, rather than an unachievable prize, may help progress. Returning to the example of grit removal offers some evidence of the ‘green shoots’ of change.

Several UK water companies are now working with us to undertake sampling studies across the UK, which are already showing promising results.  We are also conducting pilot trials of our HeadCell® advanced grit management system at selected wastewater treatment sites in England and Scotland and hope to be able to set up a full operating trial soon. A new online Cost of Grit Calculator uses real operating plant data to help asset managers and engineers assess the financial impact of grit on downstream processes.

Download the Survey Report

WaterBriefing readers can download the survey findings in full here. Readers must  register to access the report - registration is free.