Suppliers' margin fears

24 February 2000
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24 February 2000 | David Arminas

Contractors working with water companies are waiting to see how increased competition in the utility market will affect their relationships, writes David Arminas.

Many water companies are bracing themselves for tighter margins as competition increases, according to British Water, which represents civil contractors, engineering consultants and equipment manufacturers.

More water companies are moving towards framework agreements with their traditional construction contractors, said Paul Mullard, British Water's commercial manager.

The result may be more work for fewer suppliers, Mullard added. "We strongly believe that the only way water firms can achieve more savings is to work more closely with suppliers." Hammering down supplier margins will be counterproductive, he said.

Access codes will be the key, Mullard said. These codes, whereby a water company has access to another water company's pipeline delivery system, could see a water company investing more in infrastructure outside its usual geographical area than inside it.

Regulator Ofwat's recent price review set Thames Water important financial challenges, said a spokesman. There had been a trend towards using framework agreements with engineering companies for five years at Thames Water, he added, which ensured value for money.


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