Watercare Enterprise Model

Context

Watercare is owned by Auckland Council and is New Zealand's largest water utility responsible for providing water and wastewater services to the approximately 1.4 million people in the Auckland region.
Watercare is responsible for managing:
- 16,119 hectares of catchment
- 15 water treatment plants
- 17,000 km of water and wastewater pipes
- 18 wastewater treatment plants.
Over the ten years to 2029, Watercare expects to spend NZD8.9 billion (USD6.2 billion) on capital projects.

Problem

Watercare is required to maintain the network in line with the organisation's ambitious cost, sustainability, reliability, and safety targets, which include:
- Reducing carbon in infrastructure by 40% from 2019 levels by 2024
- Reducing the cost to deliver infrastructure by 20% from 2019 levels by 2024
- Improving the health, safety, and wellbeing of all people involved in delivering infrastructure by 20% year-on-year from 2019.
Watercare is responsible for managing a significant number of assets and has historically procured and undertaken works on a project-by-project basis.
This ad-hoc approach presented challenges within the infrastructure industry, with contractors struggling to justify investment in people, plant, and equipment when they lacked the necessary long-term security of forward works.
Contractors struggled to justify these investments as there was a significant level of market competition in Australia, where many contractors also had a large presence.

Innovation

Watercare developed a new way of working and created an enterprise model to drive innovation and investment in the local infrastructure industry in a way that would help Watercare meet its ambitious targets. The model was developed independently within Watercare and specifically catered to Watercare and the New Zealand infrastructure market. Late in the development, Watercare identified that its model was strongly aligned to the Project 13 enterprise delivery model developed by the Infrastructure Client Group UK (ICG UK). Watercare adapted the Project 13 enterprise delivery model to suit its specific needs, resulting in the creation of the Watercare Enterprise Model.
In September 2019 Watercare entered into a long-term agreement under the Enterprise Model with Fulton Hogan and Fletcher Construction, for the delivery of water and wastewater infrastructure works across Auckland for a period of ten years. The partners will deliver more than 60% of the Watercare capital program, with projects ranging from NZD2 million (USD1.4 million) to NZD150 million (USD102 million).
The Enterprise Model allows Watercare’s construction partners, and its existing design consultants to work together as one business unit.

Stakeholders

Watercare
Enterprise Model construction partners:
- Fulton Hogan
- Fletcher Construction
Watercare design partners:
- Beca
- Stantec
- GHD Group.

Timeline

February 2019 – Procurement for Enterprise Model commences through Request for Proposal (RFP)
June 2019 – RFP for Enterprise Model closes
September 2019 – Watercare enters into 10-year Enterprise Model partnership with Fulton Hogan and Fletcher Construction.

Results / impact

The Enterprise Model will support development of the construction sector in New Zealand by allowing contractors to enter into long-term agreements that enable them to justify investment in personnel, equipment, and innovations to construction methodologies.
Over the life of the partnership this is expected to drive cost efficiencies and increase the productivity and capabilities of the construction workforce. This is achieved through the removal of interface risk at a program and project level by having open and transparent risk allocation, continuity in the same workforce operating across multiple projects, and by providing opportunities for integrated planning and economies of scale for resource purchasing.
The long-term nature of agreements made under the Enterprise Model poses a risk in that they limit opportunities for other players to enter the market.
The model reduces the cost and time inefficiencies from Watercare procuring each project individually. The contractors are allocated their specific program of works for the full ten-year term of the agreement. All this is under the core principle of ‘program before project’.
The partnership will achieve carbon savings across the program and provide an opportunity to develop low carbon solutions through its adoption of the Carbon Hierarchy, where in descending order of carbon reduction potential, first the need to build something at all is challenged, the use of existing assets is optimised, use of low carbon materials and delivery is incorporated into design of new construction, and other low-carbon construction technologies incorporated.
Having two delivery partners embedded in the planning stage of all projects over a long-term program of works creates a feedback loop of lessons learnt during the construction phase being applied to subsequent projects, and across the broader construction industry. In addition, every project business case and design is developed with early contractor involvement.

Key lessons learnt

An enterprise approach allows a longer-term relationship that allows true collaboration to occur as opposed to a single project approach.
Having both the design and construction delivery partners integrated with the client allows a shared mission and a comprehensive understanding of the learnings from each project. The benefit of this model is best applied to a portfolio of assets.
The governance structure of Watercare as a council-owned organisation registered under the Companies Act 1993 enabled Watercare to contract in this manner with a higher degree of confidence and certainty than that of a government line agency due to their differing procurement policies.

Last Updated: 17 October 2021