Rigorous contract management is the key to controlling the spend of large infrastructure projects, the commercial director at Hinkley Point C (HPC) has said.
Ken Owen, commercial director at EDF Energy, said managing contracts was “fundamental” to keeping large technical projects on track, and a failure to do so was one of the reasons so many UK infrastructure contracts fall into disputes.
“Procurement is the easy part of the journey, the hardest lesson is the contract management and making sure that all the obligations and all the processes are actually adhered to. We’ve invested heavily in EDF on defining what contract management is,” he said.
Speaking to SM ahead of a summit on collaboration hosted by the HPC Supply Chain Innovation Lab, a research partnership run by the University of Bath, Owen said driving collaboration through contracts had helped HPC create innovative procurement solutions. “Our philosophy is about collaborating with industry and partners, because ultimately the risk to the contract is always with the developer.”
HPC is the first new nuclear power station to be built in the UK in a generation, and it is being built by French state-owned firm EDF Energy with additional funding being provided by China General Nuclear Corporation.
The plant is expected to cost up to £21.1bn – after EDF increased the initial estimate by £1.5bn – and will be subsidised after construction by a guaranteed fixed wholesale energy price of £93 per megawatt hour for the first 35 years.
Recently the project’s supply chain oversight has come under criticism after it emerged that a key supplier forging parts for the power station had been falsifying documents. A subsequent investigation by the UK nuclear authority the Office for Nuclear Regulation, published in March, found “good progress” had been made but that some arrangements were still below standard.
An EDF spokesperson said the company was already implementing measures where improvement was required.
Owen’s team focuses more on the supply of services, where he says an innovative procurement model has helped improve provision and add value.
For the last couple of years HPC has been working with six consortia, made up of local SMEs, to provide services including hospitality, catering and transport. So far this set-up has seen £465m worth of contracts go to local businesses in the Somerset area and created more than 660 jobs. “We’ve removed the middle man and are going direct to the local companies,” he said.
Owen said they had eschewed tendering all the service contracts to the big multinational contractors and letting the winner subcontract to local businesses. “[It’s] a bit like the outsourcing model you see in the world we’ve all suffered with Carillion.” Instead Owen worked with the Somerset Chamber of Commerce to create local consortia that were competitive enough to win contracts.
Owen said creating the consortia was about building trust. “The business cultures [between EDF and the local SMEs] were at the opposite ends of the spectrum. Learning to trust each other to do something different, you have to be very hands on, interactive and open,” he said. In practice this meant a lot of open meetings, facilitated by the chamber of commerce, to “win hearts and minds”.
Owen’s team also met individual businesses to help them understand HPC’s requirements, and there is a steering group where businesses can share “growing pains”. “It's just being very open about issues. We have great service managers who are there to help them,” he said.
One of HPC’s biggest successes has been Somerset Larder, the consortium that provides catering. Owen and his team worked with the food producers to develope a “field to plate vision” so they could develop a full catering service. Now they provide 3,000 meals a day on site, “phenomenal growth’ in just two-and-a-half years, he said.
“They are probably catering more than any of the largest catering contracts in the UK,” he said.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.