Ofwat – Target Operating Model Review Consultancy Project

Profile

Ofwat is the economic regulator of water and wastewater services in England and Wales. They are a non-ministerial government department founded in 1989 and  oversee licensed private companies delivering water, sanitation and drainage services to more than 55 million people every day. Between them, the private companies they regulate (the ‘water sector’) have an annual turnover of more than £11 billion each year and have about 30,000 employees – with many more employed in the supply chain.

The Challenge

The objective was to assist Ofwat with the development of a Target Operating Model (TOM) for its procurement function. The Procurement TOM project needed to set out the structure, skills, processes and information to deliver a business focused procurement service to meet Ofwat’s present and future needs. The project also needed to improve the planning of procurements, creating a planned, up to date pipeline of work as well as to improve systems and processes to provide compliance with EU procurement regulations, Cabinet Office Controls and Treasury consultancy approval requirements. Ensuring that value for money was central to all procurement was a key aim.

Change Pressures

The procurement department had become overloaded by day-to-day activities and was unable to carry out any strategic work. It was felt that savings could be made but there was no capacity within Ofwat to carry out the work necessary to achieve these.

How Counterpoint helped

Counterpoint worked together with Ofwat to design and develop the new TOM. This reinforced the need to maintain a small procurement centre of excellence with most buying devolved to the various user departments but supported by the procurement function.

We carried out:

  • Stakeholder analysis including interviews with Ofwat staff and suppliers
  • Spend analysis
  • Procurement workshops
  • Analysis of existing contracts

The focus of this work was to establish a baseline consisting of:

  • Current procurement at Ofwat – what was working well and what was working not so well
  • Where Ofwat spent its money, and therefore where procurement attention perhaps needed to be focused
  • Stakeholder needs – now and for the future 

What were the results?

Within 10 weeks we presented Ofwat with a TOM including:

  • A procurement strategy aligned to Ofwat’s existing financial strategy setting out a more strategic role for the procurement function
  • A detailed set of supporting processes with clearly labelled responsibilities at each step
  • A procurement planning process so that demand was smoothed and there were fewer pinch points
  • Clearly defined roles and responsibilities, such that the procurement function’s involvement in preparing business cases was significantly reduced, freeing up time for real procurement activity
  • More support for users in terms of clearly defined processes, templates for quotations and tenders, standard terms and conditions of purchase and “how to guides” for common procurement activities
  • More focus on the need for excellence in contract management as part of procurement activities

 

Care was taken to ensure that the new operating model both allowed fast and flexible procurement, with no discrimination against SMEs and other disadvantaged bidders, and was demonstrably open, fair and transparent.

Reference

“It’s hard to believe how much work Steve and Ros carried out in such a short space of time. We really felt that they had our organisation at heart and were determined to leave us with a way forward that would work in the best interest of Ofwat an the tax payer.”

Rebekah Eden, Director of Programmes and Projects at Ofwat