Adopting a Delivery Partner Model at Sydney Water

In 2015, Australia’s largest water supplier, Sydney Water, launched the Lower-South-Creek-Treatment (LSCT) program. This $500 million program comprises three staggered plant renewal projects to upgrade wastewater assets in Sydney’s north west. The program is due for completion in 2021 and aims to:

• Support an extra 0.5 million people in North-West Sydney by 2040
• Cater for growth in Riverstone
• Replace ageing assets at Quakers Hill and
• Ensure growth and renewal at St Marys.

The program goes beyond the scope of the infrastructure upgrades. It pilots a ground-breaking purchasing strategy and collaborative delivery model known as Delivery Partner (DP). Its overarching goal aligns with Sydney Water’s corporate strategy to find more sustainable ways of delivering greater value and better outcomes to the community.

Following a dynamic three-stage procurement process, UGL Limited (UGL) and WSP Australia (WSP) were appointed as the Delivery Partner under a joint venture structure.

Implementing the Delivery Partner model

The DP procurement strategy began with an extensive research project into internal procurement, interrogating the potential benefits of delivery partnering at Sydney Water and engaging diverse stakeholders in the process.

Throughout the tendering process, Sydney Water sought industry input to establish the collaborative practices enshrined in the resulting joint venture structure. Similarly, contract negotiation mechanisms provided an opportunity to agree shared risks, rewards and responsibilities with the DP.

The consortia-model unites Sydney Water and the DP in working towards a common goal with shared risk-reward, shared resources and integrated purchasing practices across the program.

The DPs is responsible for all aspects of program delivery under a standardised approach (rather than separate design-and-construct contracts for each project).

In practice, the DP procures and manages design and delivery contracts in accordance with Sydney Water’s procurement policies. Contacts are made directly with Sydney Water, rather than sub-contracted to the contractor as per a traditional delivery model. This distinction is shown in the diagram below.

A transparent and comprehensive performance measurement framework is instrumental to fostering collaborative practices. The Key Performance Indicator (KPI) regime monitors time, environment, staff retention, flexibility of resources, safety and quality measures. This model eliminates conflict of interest by replacing self-assessed  performance with a dynamic and objective mechanism. Under the structure, contractor re-engagement is based on demonstrated value for money and performance measured against KPIs.

The program structure and staggered delivery format enhances productivity and teamwork as resources are re-allocated directly from one project to the next as associated work packages begin and complete.

Creative cost savings built into the non-traditional DP model include:

• the elimination of margin on margin costs in overhead and profit
• elimination of risk on risk
• reduced direct costs and
• flexible packaging solutions.

Measuring program success

Adopting such a strategy has enhanced the LSCT program and resulted in many achievements and benefits for Sydney Water. These include:

• $8 million savings on the Riverstone project and forecast $53 million or 14% cost savings for the program based on established pain-sharing gain-sharing mechanisms
• 20% reduction in Sydney Water procurement FTE for this level of spend
• Cost savings translated into the application of trailblazing technology on the program including Aerobic Granular Sludge, Mechanical Primary Sedimentation, Thermal Hydrolysis Process, Building Information Modelling and virtual reality which together improve design, optimise plant operations and reduce operational and delivery costs
• Reduction of carbon emissions, noise pollution and footprint through technological innovations (e.g. St Marys will self-supply 60% of electricity using onsite renewables)
• The design of St Marys and Quakers Hill both received an “excellent” Infrastructure Sustainability rating from ISCA in 2019, which is an industry first for an Australian water authority
• The treatment capacity of the Riverstone Plant has increased three-fold, which will support tens of thousands of new residents
• The promise of reduced asset lifecycle costs supports liveability objectives for the community and provides resilience to future environmental challenges
• The model enhances governance, collaboration, integration, innovation, cost, procurement, scope and risk management on the program.

As a result of the program’s success, Sydney Water appointed a panel of specialist suppliers in December 2019 under a new procurement framework called ‘Partnering for Success’ (P4S) using NEC4 contracts.

The new partners for each region are:

• Broadspectrum (Australia), Downer Utilities Australia, Jacobs Group (Australia) in the North
• Comdain Infrastructure, John Holland, Lendlease Services, WSP Australia in the South
• Stantec (Australia), Atlas Personnel Services, Abergeldie Contractors, Fulton Hogan Industries, Programmed Facility Management in the West

These partners will help Sydney Water provide water, wastewater and recycled water systems and services over the next decade. Mark Simister, Head of Delivery Management, said “Innovation and collaboration are at the heart of P4S.   This is the template for world class infrastructure delivery and water services”.

PASA Awards 2019

Sydney Water was an entrant in PASA’s “Breaking The Mould – Best example of non-traditional procurement” award. This award invited submissions from procurement teams in Australia and New Zealand and was designed to highlight and recognise procurement projects where there has been a demonstrably new, unique or non-traditional approach taken.