Sydney Water Partnering for Success

Image courtesy Sydney Water

Context^[1]

• Sydney Water, owned by the NSW Government, is the largest water authority in Australia and supplies water, wastewater, and stormwater services to over 5 million people in the Sydney region.
• Sydney Water currently manages 248 reservoirs, 16 wastewater treatment plants, 152 drinking pumping stations, 22,474 km of water mains, and 26,350 km of sewers and will need to deliver significant amounts of new infrastructure to accommodate the predicted growth of Sydney’s population by 2.7 million people by 2036.
• Sydney Water is part of the Project 13 early adopter group, which is part of an industry-led response focused on improving infrastructure delivery and providing better outcomes for customers through a shift towards a more sustainable and collaborative business method benefiting project owners and contractors.
• Sydney Water’s new collaborative framework called ‘Partnering for Success (P4S)’ covered the appointment of long-term integrated planning partners in 2019 and a 10-year partnership with three regional delivery consortia (RDC) from 2020. The partnership is responsible for all design, construction, and maintenance works, integration of internal Sydney Water civil and maintenance workforce, matrix support from an integrated Centre of Excellence (COE), unified portfolio management of renewals, growth and major projects under a single framework.

Problem^[2]

• Sydney Water’s earlier procurement arrangement was perceived to be largely transactional vs. strategic, with works procured on a project by project basis. This was leading to cost overruns and inefficiencies arising from the loss of attained staff knowledge and expertise.
• The transaction-based arrangement was fragmented, largely reactive, and needed improvement to align with Sydney Water’s core strategic procurement fundamentals, (e.g. performing a thorough market assessment to attract the best solution for the business, increasing focus on end-to-end procurement process and development of new commercial approaches, partnering with the business to ensure optimum value).
• The Performance Partnering model preceding P4S was efficient and maintained continuity of suppliers and personnel. However, hundreds of contracts were being awarded annually with thousands of suppliers in the supply chain, and a number of key panels expired in 2020. This created an opportunity for Sydney Water to improve its procurement approach to further drive efficiencies, increase value-for-money, better cater for Sydney’s future growth and meet the increasing pressure on Sydney Water to deliver on its 30-year infrastructure plan for a growing city and population.

Improvement

• Under the new model, Sydney Water entered into 10-year partnerships with three RDC to deliver end-to-end design, construction, maintenance, and facilities management services across the north, south, and west regions.
• The 10-year agreements with the RDCs were let under the New Engineering Contract 4 (NEC4) which provided flexibility and shared terms, conditions, and clauses.^[3] Sydney Water is the first company in Australia to adopt the NEC4 form of contract as a standard for all supplier engagements, including collaborative framework agreements and major projects. Specifically, works are being let under the NEC4 Engineering and Construction Contract (ECC) (options A to E) and NEC4 Engineering and Construction Short Contract (ECSC).
• Many of the works were undertaken with a target-cost regime, where a regional program-wide painshare / gainshare process was implemented to ensure fair and appropriate risk allocation and incentive alignment between Sydney Water and the RDCs.
• The RDCs’ key performance indicators were collaboratively developed with Sydney Water and use the NEC4 early warning mechanism to mitigate risk and address issues proactively and collaboratively. Program underspend was pooled into a ‘regional performance and innovation fund’ for investment in future initiatives focused on improving innovation and collaboration.
• Under the partnership, an Integrated Planning Partner was appointed. This partner’s team was co-located with Sydney Water and they were jointly responsible for providing system services planning and overseeing planning through to concept design, project engineering, and handover to the contractors in a collaborative manner.^[4]

Stakeholders

• Sydney Water – Project Owner
• Confluence Water – North Regional Delivery Consortia – Ventia / Broadspectrum, Jacobs, and Downer Utilities
• D4C – South Regional Delivery Consortia – John Holland, Lend Lease, Comdain Infrastructure, and WSP
• West Region Delivery Team (WRDT) – West Regional Delivery Consortia - Stantec, Atlas Personnel Services, Abergeldie Contractors, Fulton Hogan, and Programmed Facility Management
• Aurecon / Arup - Integrated Planning Partner.

Timeline

• December 2018 – Integrated Planning Partner appointed
• December 2019 – Contract awarded to all three RDCs
• January 2020 to June 2020 – RDC Mobilisation
• July 2020 – RDC Delivery Commences.

Results / impact^[5]

• Integrated delivery of planning and design, construction, maintenance, and facilities management services for Sydney Water’s assets by the RDC in each region is expected to result in 5-10% annual program savings compared to Sydney Water’s traditional procurement model.^[6]
• Use of the NEC4 contracts allows standardisation and is designed to increase collaboration between Sydney Water and its partners and minimise the risk of disputes by encouraging closer interaction between Sydney Water and the RDCs, enabling better communication, smoother information exchange, and efficient decision making.^[7]
• The longevity of the agreements provides the RDCs with a secure pipeline of future projects. This secure pipeline provides increased incentives for RDCs to justify new investments in innovative technologies and staff capability – especially ones that may improve delivery times and cost given the painshare / gainshare mechanism – and encourages RDCs to adopt a long-term view of resourcing.^[8]
• The integrated program approach allows for shared purchasing for specialised goods and services to achieve economies of scale, through increases in buying power and development of deeper relationships with preferred suppliers throughout the entire asset lifecycle.^[9]
• The 10-year agreements allow the RDCs to develop long-term, more sustainable relationships with communities and the environment, providing consistency and better value for Sydney Water’s over five million customers.^[10]

Key lessons learnt

• Approaching the delivery of projects with an enterprise approach making the best use of the supply chain partners generates better outcomes including program cost savings, improved collaboration between Sydney Water and its supply chain, and more efficient information exchange and decision making.
• The end-to-end scope for the RDCs from design through to operations and maintenance, coupled with the use of integrated teams allows a high level of cross business interaction and collaboration.^[11]
• Considerations in the use of this model include a requirement for there to be an alignment between the asset owner’s goals and the principles that the model represents, particularly given it is a long-term approach.^[12]
• Use of the NEC suite of contracts requires proactive contract management from the asset owner with parties required to act in a spirit of mutual trust and co-operation. Sydney Water updated its contract administration system in collaboration with the RDCs to ensure it was compliant with NEC4 requirements prior to works commencing.^[13]
• A regional based stakeholder engagement approach, informed by local council strategic plans and census demographic data, allows for deeper understanding of key stakeholders and more inclusive engagement to increase social equity through better access to infrastructure.^[14]