'Intelligent Contracting': Stuart Rothery Interview with Karma Loveday, The Water Report

Interview with Murphy's Water Director Stuart Rothery as featured in The Water Report, May 2018, written and edited by Karma Loveday. Stuart discusses PR19, Murphy's unique process engineering, the future of the industry and direct procurement:

Engineering and construction company Murphy has its eyes on the prize for PR 19. It seems to have received Ofwat’s message that ‘it’s all about the customer’ loud and clear. Under the leadership of water sector director Stuart Rothery, the company is intent on positioning itself to help current and potential water company clients deliver on the commitments they will pledge in their business plans. In so doing, it hopes to expand its water sector footprint, thereby supporting growth in its already evolving business. Chartered engineer Rothery, with Murphy since 2016, has 35 years experience under his belt working for a wide range of supply chain businesses in multiple sectors. He has identified two key factors that he believes will underpin success for both his company and its water clients in the next AMP.

Understanding water companies’ world

The first can be summarised as being an intelligent contractor. This means keeping on top of changes that affect the sector, be they from regulatory, political, customer, technological or other drivers. It also means thoroughly understanding what individual water companies want and need, to add value for their ultimate clients – customers.

This is not a one-size-fits-all, and for this reason, Rothery sees an ongoing role for all of the main contracting models through which supply chain companies like Murphy currently do business in the sector: alliancing, frameworks and competitive tendering. He explains: “It depends on many things, like what’s the flavour of that organisation, and what are its experiences? ...It’s fair to say no one model has all the answers all the time. But we’ve got a number of clear examples of what works well and what works less well. I think it’s always worth reflecting on what are you trying to do and what can we really achieve to have the right influence on the outcome.” He observes the following:

❙ Alliancing – “Alliancing is a great place to be, if by that we mean everyone is working together, focusing on a common goal, with common interests, shared visions, shared incentives and penalties. That’s wholesome. That has to be a good thing. But there’s a step that comes before realising that, and that’s understanding what the risks are, what the scope is, who’s accountable for it and how trust is built. So it can work over time...but if you expect alliances to be a quick play, to just get over the line, there is less likelihood for success in the short term.”

❙ Frameworks – Rothery says these still provide the opportunity for long term alignment between water company and contractor “even though it’s only a five year cycle, that’s still a long time in the sense of most construction contracts”. But he adds: “A framework environment for me is still about making sure you set off with the right understanding, the right behaviours, and you’re clear what you’re accountable for again. You’re clear on the needs of the client. You understand the needs of the customer, and you’re thinking intelligently about how you are able to influence them.”

❙ Competitive tendering – Rothery asserts that “sometimes pure transactions are right,” particularly as water companies are intelligent buyers. He comments: “In the water sector, tendering appears to be a means of testing the market, an opportunity to not rely on the framework, to maintain some kind of tension in the team. It potentially allows innovation and fresh thinking to come in.” In such cases, he says, for Murphy it is about “understanding how the supply chain fits with that, to collaborate and support the development of potential solutions. So figuring out where you fit and what you’ve been asked to do, pushing the boundaries where you can. But it’s about being honest about your accountability. That’s the first step for me. If you can build on that, you can start getting the right type of approach going.”

Stuart at Murphy's Kentish Town Office

Optimal integration

The second key factor Rothery believes is essential for PR 19 success is integrating services and solutions to give the best possible value. Though best known for its infrastructure work, Murphy’s competency suite is extensive (see box). But it has a keen eye on working with others to provide a future-proof range of solutions. “I’m focused in my own mind now on the integration of services, how we integrate to give value,” he explains. “One of our strategic drivers is about being passionate about our direct labour model... but we don’t want to do everything ourselves. Even if we thought we could be all things to all people today, we wouldn’t be tomorrow, so having the right sort of integration with our suppliers is front and centre.”

Rothery says of Murphy’s supply chain: “The way we integrate with each other isn’t necessarily across every job or every sector or every skill set, it’s about us understanding what [they] are truly good at, and where we can help [them] with [their] strategic plan and where [they] can help us with ours.” Moreover: “It’s not just about the materials or the concrete or the delivery or the construction, it’s also about the way you behave, the way you understand and deliver on the client’s expectations. There’s lots of intervention and support we can get from the supply chain, other than just the normal construction related activities and that’s something we’re really keen to build on.”

A good example is collaboratively addressing shared challenges, like skills and resource constraints. Rothery comments: “One of the major risks in this sector and others is the availability of resources...We have a lot of engineering skills in the business and we recognise the need to have a sustainable plan for our own direct labour organisation. To ensure a sustainable approach across industries, we work closely with universities and academia, to make sure the right diversity of resources and mix of skills is coming in.”

Using data securely and effectively is another area where optimal integration is likely to yield the best results. Rothery comments: “There’s no such thing as bad data, but there is useless data. It’s about having access to the right data, and thinking, ‘what do you do with it’?”

PR19 demands

Looking more specifically at the demands coming down the line in PR 19, Rothery says the supply chain has a key role to play in raising the sector’s game. Murphy for one plans to proactively seize the opportunity. “As [Ofwat senior director] David Black has said in multiple interviews, there is a need here for people to step up to the plate for the customer. Water companies will produce their business plans and how well they do will come out over time. But we’re about thinking about, and aligning, what we can do to help. We can sit back, or we can go out there and start sharing some of the thinking...for me it’s about figuring out how we form the bridges and linkages.”

A key aspect of that, says Rothery, is apportioning risk appropriately. “The understanding and allocating of risk is really fundamental at the front end because that is one of the main reasons the wheels can come off – and then you’re immediately impacting on the client’s ability to deliver on its Performance Commitments. It comes back to understanding how we affect that end result…I think performance and results for customers is partly about making the way that you work slick. And having a lean operation that is demonstrably cost effective, well trained and consistent – that’s got to count for something.” Beyond that overarching position, Rothery sees opportunities for Murphy to contribute to the delivery of each of Ofwat’s four PR 19 themes. He comments as follows:

❙ Customer service – “An organisation like Murphy is well placed to understand what working with customers is all about. As a direct labour organisation, we are very visible in the street; our brand is out there. So we don’t have a choice. We must take continued leadership.” He offers the example of Murphy’s cultural development programme, which started with a health and safety focus but now also supports behavioural learnings and community engagement among staff, partners and stakeholders.

❙ Affordability – “This is about pushing back some of the boundaries in terms of things like asset standards. There is an opportunity to embrace engineering, and build engineering in to the front end. The utility companies already do this well, but what can we do to assist or support that? It’s also about considering the end game. When something is considered from a design and build point of view, does it stand the test of time?

Would we think differently about something if we had to operate it for the next 25 years? I can assure you we do. It might make you take different decisions on the capital spend at the front end.”

❙ Innovation – Murphy runs an Innovation Forum that is specifically focused on exploring and identifying new ways of working. Among the aspects it is currently looking at are real time data technologies and artificial intelligence. Rothery comments: “I see a lot of really smart innovation coming through the supply chain that just doesn’t see the light of day, or if it does, it can be glossed over (see report, The Water Report, May 2018, page 19). I think harnessing those things is perhaps what we need to focus on, rather than thinking about lots of new ideas. I want us to spend more time being really excellent at what we’re already good at doing.” He also urges water companies to look beyond the normal pool in their efforts to innovate: “The water sector could be more open to consideration of innovation from outside its normal reach. It’s like a really close family: that has lots of advantages in terms of knowledge sharing and close relationships, but what it might not do is learn across sectors. That’s something we want to bring into this.”

❙ Resilience – Ofwat’s ambitions are many faceted, but Rothery says from Murphy’s point of view “we need to look at the bits in our control, at what can we influence”. He elaborates: “When we go through a tender process, we make sure we bid reliably. I would prefer not to go into a new contract with a view that I’m going to start claiming and seeking variations just to make it work for us. I recognise in the real world those things happen, but in the real world they can cause frustration.” And once part of a delivery team: “We must always be ready to perform. All the way through, we need to reaffirm ‘what can we do here’? and make sure we know what the endgame is.” 

Direct procurement

Murphy is actively interested in exploring the opportunities Ofwat has put on the table by backing direct procurement after 2020. Rothery says: “We’re interested to learn more about schemes that water companies may adopt for this procurement route and we hope to be able to consider a proposal.” Following on from his points above, he is particularly attracted by the longer time frames directly procured projects could offer – say, 20 or 25 year concessions. “It gives you the opportunity to understand the risk and build that into the thinking properly right through the process. So the endgame’s in your mind; you’re accountable for it. You’re on the ball and you’re not going to try to figure out a way of passing the responsibility, because you can’t.” He considers: “I think it’s [direct procurement] got legs and there are some great opportunities for value. It’s not just about the percentage on finance; it’s about removing some of the waste in the way a project is procured, because at the end of the day, procurement can be a very costly exercise.” One plea he has is for better visibility of the projects that will be put out to third parties: “A pipeline of visibility on a UK basis would be useful. Looking at each organisation individually means you’ve got some sporadic bidding practices, which probably are inefficient. Question: is there a way of exposing the DPC positioning for AMP7 on a UK basis? There might be a way of learning from one project to another. Obviously there’s lots of major aqueduct considerations in the offing. There’s lots of major treatment works in the offing too. Could we, for instance, spring board off the work our joint venture team is doing at [Thames Water sewage works upgrade] Deephams? What is it we can do to learn from this experience?”

Ambition

Opportunities in direct procurement are related to one of Murphy’s wider ambitions in water going forward: promoting the design, build, operate, maintain model in the UK outside of Ireland. Rothery explains operate and maintain is a core part of the picture in water in Ireland unlike in the UK: “The Irish model is different to the UK. Operate and maintain is more prevalent there, so we’ve got a model with 15-20 years worth of operating activity. It’s a really interesting dynamic for us going forward, and one that prompts us to think differently about how we could influence water in the UK.” He sees potential benefits, should the appetite for DBOM grow: “When you look at capital and operational investment, you’ve got a better knowledge about where money needs to be spent…Our role in life, and I would suggest the industry’s role, is to really understand how it creates the best solutions for the money available. If that means there’s risk left, that could be fine. It’s about understanding those risks and having the available data to make those informed decisions. If you don’t have the right data, there’s a tendency for you to want to gold plate everything, to invest in a new solution when often you might not need one.” More widely, Murphy is looking to bolster its presence in water as AMP7 deals come around. Rothery concludes: “The ambition is to see if we can increase our footprint. We’ve got some really strong positions already and those are equally important to us. We won’t necessarily focus only on what is big and shiny; there are smaller organisations and non-regulated organisations that we are interested in too. So my ambition would be to have a mix of the right portfolio of work: a combination of frameworks and major schemes spread across infrastructure and non infrastructure.”

In trying to see the world through water company eyes, and in mapping its capabilities onto water company goals, Murphy is already a long way down the road of being an intelligent contractor and seems well placed to realise its ambitions. The Water Report

 

 

Posted Thursday, July 5, 2018 by Emma Best

Opinion, People, Engineering, Design, Water

About Emma Best

Communications officer based in London. Project experience from rail and power sectors. I like visiting projects and writing first-hand about the great things we are doing, get in touch if you have a story to tell! 

emmabest@murphygroup.co.uk / 0203 757 1273 / LinkedIn here

 

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