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Why water utility infrastructure needs a focus on procurement: exploring today’s challenges and tomorrow’s opportunities

Water supports almost every part of our lives, from the clean, reliable drinking water we require, to providing green and natural spaces. Clean water is integral to life and brings tourists from around the world to our beaches, harbours, reefs and other natural habitats.

Australia’s water sector has typically performed well in meeting the needs of households, communities and businesses, and, for most customers, safe and reliable, water is largely taken for granted.

However, the water sector faces unprecedented risks and challenges. Population growth, aging infrastructure, climate change, changing community expectations and competing interests driven by a record infrastructure pipeline has ramped up pressure for limited resources.

Delivering future sustainable water infrastructure solutions will require the water sector to consider early market collaboration, more innovative procurement approaches, new construction delivery methods, more than anything a higher degree of commercial and contracting flexibility.

Current and future Infrastructure and supply challenges in Australia

Australia is currently experiencing unprecedent levels of infrastructure investment that has been linked to both immediate economic growth to boost spending and create jobs, and long-term growth by enhancing accessibility to education, health and transport, and increasing access to utilities.

To quantity this, every dollar spent on infrastructure should return an aspirational $3.70 in economic growth and/or social value.

Infrastructure demand pressures has been further impacted by a growing regional pipeline of community and transport projects, while ongoing supply chain constraints coupled with higher fuel and building material costs, and skilled labour shortages have contributed to the Australian infrastructure supply market hitting a delivery ceiling.

The construction industry also faces an elevated risk of modern-day slavery within its supply chains. Poor visibility across global supply chains for low-tier suppliers operating in high-risk geographies provide new ethical challenges in procuring materials and services to deliver infrastructure projects.

Downwards pressure on the water utility sector

Population growth, climate change and imminent renewals of new assets requires a rethink on how water sector infrastructure projects can be delivered. Government and water utilities will need to consider a shift away from current hard dollar and risk adverse contracts to more collaborative and commercial contracting models.

Organisations that use a competitive tender process on a project-by-project basis to drive a hard price below, and risk allocation above the level of market acceptance, are in danger of adopting high-risk, short sighted and potentially combative outcomes.

Water infrastructure owners that continuously require, design, construct, operate and maintain services will be better served by working with their supply chain to develop partnerships with commercial and risk-sharing arrangements that enable all parties to win together or lose together.

The water sector seems to accept this. For example, there has been a move away from project-by-project panel contracting and traditional Australian standard contracts to more collaborative bespoke contracts. Sydney Water has adopted NEC contracts, which is the global standard in collaborative contracting.

However, the overall progress that many water utility procurement teams have made against these aspirations has been marginal at best. This is not through lack of will but rather lack of investment. They simply don’t have the updated infrastructure procurement policy, framework, tools, guidance, and training required to deliver more innovative, collaborative and sustainable infrastructure solutions.

The investment required to overhaul procurement frameworks, contracting suites and provide training hasn’t been available.

Need for greater industry collaboration

There is an opportunity for greater uniformity in how the water sector plans and procures infrastructure services to achieve this desired step-change in infrastructure procurement. Continuous improvement in infrastructure procurement and contracting practices should be encouraged without continuously reinventing the wheel.

Organisations like Sydney Water have taken some innovative approaches to infrastructure program delivery, innovative contracting and supply chain development. This step change in philosophy, practices and learnings has the potential to be leveraged across the water sector.

Sustainable infrastructure is essential for society to function. Infrastructure procurement enables sound economic development, job creation, enhances quality of life and increases positive social impacts.

Achieving the promise of delivering future sustainable infrastructure solutions will require stronger supply chain development, more open and innovative procurement techniques and a move to collaborative contracting with greater consideration to shared risk and gain commercial models.