UK: Thames Water makes waves. (2 of 4)

UK: Thames Water makes waves. (2 of 4) - With privatisation under his belt, Watts was free to steam ahead with the task of transforming Thames Water from a "production-led" public body to a "customer-led" private concern. The problems were twofold: to im

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Last Updated: 31 Aug 2010

With privatisation under his belt, Watts was free to steam ahead with the task of transforming Thames Water from a "production-led" public body to a "customer-led" private concern. The problems were twofold: to improve physical resources and to make the company an attractive financial proposition. In Mike Hoffman, the highly respected chief executive who joined Thames in January 1989, Watts had found an ideal sidekick, equally at home with economics and engineering.

A grizzled man whose bifocals slip down his nose, Hoffman is formidably intelligent. He leans forward in his chair like an eager greyhound straining at the leash. "EPS (Earnings per share) drives my living day," he explains, then in the next breath speaks of "switching hats to talk about contracting and products". As the hard yellow hat perched on his desk suggests, it is more than a metaphor.

In his two and a half years at Thames Water, Hoffman has concentrated research in a few key centres, reorganised the old geographical regions into two logical divisions - clean and dirty water - and masterminded a major initiative on both fronts. A £10 million project to upgrade all 400 sewage treatment works in compliance with new regulations will be finished by March 1992. The even more ambitious London water ring main is on target for completion in 1996.

Hoffman hired engineering director Bill Alexander to supervise construction of the ring main and co-ordinate project management. Alexander is tall, with deep-set eyes and a manner that suggests that he is slightly nervous of saying the wrong thing. But on his own ground - or rather, underneath it - he is a blunt taskmaster who talks about "driving a pile up the backside" of sluggish staff.

The ring main knocks the socks off the Channel tunnel for technological challenge. On completion it will form a girdle round London some 80 kilometres long, buried at an average depth of 40 metres. This gravity-fed tube will be able to move 285 million gallons of water a day from four treatment works to local distribution points. It is enough to fill the Albert Hall eight times over and will cater for half of London's needs.

Under Alexander's regime the speed of tunnelling has doubled, with the help of better equipment and new blocks designed in house. Circular sections about a metre wide, they are manufactured almost whole, rather than being cumbersomely assembled from segments fastened with the conventional bolts. To secure supply and save money, Thames Water has set up a joint venture with Taylor Woodrow and now makes the blocks itself.

But though the ring main is its biggest project, look almost anywhere in the Thames region and you will see men digging holes. The sheer volume of the company's capital programme has dictated innovations in construction methods as well as materials.

It was project manager Gerry Winterbourne who came up with an answer. Given the job of upgrading Camberley sewage works in just over two and a half years, Winterbourne soon realised that conventional civil engineering methods would take at least another year.

Turning to the Institute of Chemical Engineers for help, he decided to use a form of agreement in which the contractor undertakes design and construction on the basis of a target cost contract. The traditional approach, by contrast, involves building to detailed specifications previously drafted in house and then haggling over unexpected costs. The merits of his method are several, Winterbourne argues. It saves time, since "detailed design goes on in parallel with construction"; and it may also save conflict, if the contractor's incentives are the same as the client's.

The "extended arm" principle worked so well at Camberley that Winterbourne finished a few days short of his deadline. In the meantime it has been applied to other projects worth some £300 million. Arguably, however, the principle has proved rather less satisfactory without Winterbourne's personal skills: relations with Taylor Woodrow are said to be fractious.

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