Construction Economics and Procurement

Water Utilities Sector
The water utilities sector is capital intensive and dependant on complex supply
networks in the delivery of services. Procurement is a critical activity in this delivery.
Generally, the value of external expenditure on procurement of goods and services
amounts to around 55% of the revenue of water utility organisations (such as
Thames Water; Southern Trent Water, Scottish Water etc). Procurement makes a
substantial contribution to the overall cost or expenditure of operations and risk
within the organisation’s supply chains. To ensure success, it is critical that
organisations in the water sector strive for continual improvement in procurement
and implement procurement strategies that fully align with or is integral to the
organisation’s overall strategic vision and objectives. Continual improvements also
mean not only adopting best practice, but also embracing innovation and shaping
best practice. Procurement outsourcing is regarded as an innovative way to improve
the procurement practice in the water utilities sector.
The Water Services Regulation Authority or OFWAT is a non-ministerial government
department in England and Wales. In Scotland, the equivalent is the Water Industry
Commission for Scotland. They provide information, as requested, to the Treasury;
the National Audit Office and the Public Accounts Committee. As the economic
regulator of the water sector these organisations role is to help the sector build trust
and confidence with customers and wider society. This means provoking,
challenging and where appropriate leading the sector, to ensure it has clarity on what
customers and society expect; overseeing how the sector is performing; seeking
assurance that service providers are acting efficiently, on the basis of good
information, a good understanding of the responsibilities and relationships they have
and overall being ready to step in, if service providers fall short.
You have been asked jointly by OFWAT and the Water Industry Commission for
Scotland to write a report that,
– Defines procurement and explains the relationship between procurement
strategy and the business case in the construction industry – 30%
– Defines procurement outsourcing in the in the context of Water utilities sector
– 30%
– Explains are the pros and cons of outsourcing procurement in general and the
water industry in particular – 15%
– Explains the key issues to be taken into consideration when making the
decision to outsource procurement and when evaluating and selecting an
outsourced procurement service provider? -15%
– Presentation – 10%
Word Count: 2500

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