Peter Martin, Technical Director at Black & Veatch recently produced a blog on the Susdrain website ‘How might SuDS look in the water industry’s (brave) new world’. I would like to pick up on Peter’s point 3 on Totex in his blog.
Peter has stated how water company costs are now measured on a total expenditure basis, also known as ‘Totex’ rather than the previous capital expenditure (capex) and operating expenditure (opex) basis.
He expresses the importance of cost distribution within water companies and how it looks like water companies will now be able to partake with others in jointly funding projects and refocus their business on delivery of outcomes that directly benefit customers in place of project outputs biased towards asset creation.
Whilst these changes in principle make sense, they represent a profound change in business orientation that cannot be successfully implemented overnight on the back of a simple change of policy. It will require a culture change across all areas of the business and a suitably planned and co-ordinated change management programme. Currently, some water companies seem to be paying lip service to totex when in reality it is suspected that they continue to drive down capital expenditure using existing procurement models and supplier terms of contract as a basis to demonstrate reducing total expenditure.
A big challenge for asset owners in demonstrating authentic totex savings is the need to make reliable forecasts of the future performance of assets and the interventions required in order to extend the service life of the asset. This will be particularly challenging if accepting higher capex costs in order to deliver lower (opex and) totex costs. The design team must have confidence that the asset will perform as predicted and there needs to be adequate operational data and experience relating to the asset dating back, in some cases, many decades.
By way of an example, the UK’s sewerage infrastructure is up to 160 years old and we know that at the current level of investment in replacement and renovation that a sewer constructed today will need to last, on average, 800 years.
Is it likely that the funding for maintenance and the replacement of proprietary SuDS assets will be evidently different to that for sewers? Our knowledge of the sewerage market should help to inform us of the likely outcome with SuDS and the need to design systems that are durable. Totex cannot be determined reliably without proper consideration of the long term performance of assets in addition to capital cost efficiencies.
Concrete is inherently strong and robust and is well placed to offer capex savings through reduced cost bedding designs and safer, faster installation using the concrete pipe lifter whilst simultaneously providing opex benefits as a result of its proven long service life.
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