Being bold together: Watercare’s approach to procurement
More than 1.7 million Aucklanders rely on Watercare to treat the region’s wastewater and deliver clean drinking water to them on a daily basis. It’s an essential service, but the region’s growing population means Watercare needs to consider what sort of infrastructure it needs in order to meet supply demands and expectations in the future. Unsurprisingly, a lot of money is being spent on capital expenditure in the region.
Over the next 10 years, Watercare expects to spend about $5.5 billion in capital projects across the Auckland region. This $5.5 billion is just a drop in the Auckland infrastructure bucket – Watercare’s Chief Executive Raveen Jaduram said there’s about $50 billion worth of infrastructure work happening in Auckland over the next 10 years. All of this work does pose some challenges for the construction industry. For starters, there’s a shortage of contractors and tradespeople to carry out the work (which means prices will go up), and a lack of investment in trades, skills, technology, and processes.
There’s also a productivity issue in New Zealand, with projects being notoriously slow to deliver. Raveen shared a story that he’s told ministers before: when he was an engineering student he spent one summer holiday employed by the former Ministry of Works to assist with the construction of a not-insignificant stretch of motorway. The project started in October and was wrapping up in February as he was returning to classes at university. He asked the audience to think about how long it takes for large construction projects to be completed today.
Having described the environment in which Watercare is carrying out these major projects, Raveen turned to what he and his team are doing to address these and other issues. Collaboration was a recurring theme, and it forms the basis of Watercare’s new approach to procurement. Given that there’s $50 billion worth of infrastructure work up for grabs in Auckland, Watercare wants to be the client of choice. Organisations often put a lot of effort into attracting top talent for their staff, and it makes sense to try and attract contractors in the same way. The key to this is building trust and confidence with contractors and their staff, and working with them rather than treating them solely as a supplier.
Over the last few months, Watercare has been implementing what it’s calling the Enterprise Model, an innovative way of procuring and working with contractors that seeks to redefine the customer—contractor relationship that focuses on mutual benefits that will deliver positive outcomes.
Although Watercare has identified a substantive programme of work in its asset management plan, contractors have no guarantee that they will get this work. If they do get the work, they’re likely to subcontract it out in order to manage any risks. This is not ideal for Watercare, as it means losing sight of the supply chain and prevents it from forming a collaborative relationship with the people carrying out the work.
A lot of Watercare’s planned work isn’t large scale like the Central Interceptor tunnel it’s building, which makes up about $1.2 billion of its capital project spend. Most of the work is upkeep and repairs of existing infrastructure, but it’s still substantial and crucial. So Raveen asked, what if this work was divided between two or three contractors? The successful contractors would be guaranteed work over a 10-year period (which allows them to plan and manage risk) and Watercare could work more closely with them to ensure that they have a shared purpose. This includes being involved much earlier with Watercare’s planning phase, which could make a big difference with progress further down the line.
Not all of the companies Raveen spoke to were happy with this proposed model, but the majority thought it was a good idea – a different way of approaching procurement. His message to Watercare’s contractors, and the construction industry more broadly, is to be bold and innovative, and to challenge and set standards. He wants to see companies setting the bar high and changing the environment they work in to increase productivity. In doing so, together they can make impacts locally and globally.
Raveen would like to see this model to result in not only a collaborative relationship between Watercare and its contractors, but also in better outcomes for the staff of its contractors, and for New Zealand. The contractors selected for the Enterprise Model will need to demonstrate how they are supporting some of the initiatives that Watercare has signed up to, such as the United Nations’ Sustainable Development Goals, the Prime Minister’s Business Leaders Advisory Council pledge to invest in training for New Zealanders, and Watercare’s own 40:20:20 objectives (a commitment to reduce construction industry carbon emissions by 40%, reduce cost of doing capital works by 20%, and reduce construction industry injuries by 20% by 2024).
Some of these are ambitious goals, and Raveen isn’t sure how and if Watercare can achieve them, but it’s something they’re striving for with the contributions of their contractors. He’s hopeful that one way of succeeding is by using effective and efficient procurement to deliver economic, environmental, social, and cultural outcomes. Watercare is committed to ensuring that its procurement is sustainable and, where possible, that the impact is positive for future generations.
Read Introducing our work about procurement to find out more about what we’re looking at over the next few years. If you’d like to receive updates about our future procurement events, please email reports@oag.govt.nz to be added to our procurement mailing list.