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Evolution of Contractual Relationships in Utility Networks: Breaking the Aggressive/Defensive Cycle

Explore the changing attitudes in outsourcing utility networks to break free from conventional contractual relationships. Learn about in-house versus client-contractor hierarchies and the evolution of contract development in the 1990s. Delve into the role of procurement functions, Schedule of Rates contracts, numerous KPIs, and the impact on costs for both clients and contractors. Discover how partnering and alliancing can lead to improved relationships, while questioning the understanding of contractual risks and accountability.

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Evolution of Contractual Relationships in Utility Networks: Breaking the Aggressive/Defensive Cycle

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  1. Outsourcing in Utility Networks Changing attitudes to break out of the aggressive/defensive cycle caused by contractual relationships

  2. In-house hierarchy

  3. Client-Contractor hierarchy

  4. Contract Development in the 1990’s Procurement function led Schedule of rates contracts – 100’s of prices items Many KPI’s – 20+ but lack of focus Client side costs increase – contract management Contractor side costs decrease – competitive bidding Net cost reduced but only for initial years

  5. 21st Century Solution Partnering, Alliancing leading to Improved Relationships But where is “Appreciation for a system”? Does the client & contractor really understand contractual risk and accountability?

  6. Water Supply NetworksQ: Identify up to five examples and prioritise

  7. Final Outcome • New contract focus on asset performance. • 10 key activities → 25 sub activities. Budgets & volumes agreed by activity • KPI’s: DG3 DG7 Repeat failures • £30m operation 15% reduction in 2 years 75% of savings on client side • Industry leader

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