Transmission & Distribution
Areva joins the western Alliance1 May 2007
National Grid has decided to allocate a substantial part of its investment programme to upgrade and develop the electricity transmission network across England and Wales to a series of regionally focused collaborative partnerships that should help to achieve higher levels of quality and safety.
The concept of partnership to improve working relationships and performance up and down the supply chain has been used successfully for a number of years. So when National Grid, the electricity transmission network owner for England and Wales, decided to deliver a substantial part of its investment into the network through a series of regionally focused partnerships, the new rules of engagement promised a new and exciting way of working.
Faced with a rapidly increasing construction workload to reinforce and renew the electricity transmission network, including a marked increase in capital infrastructure projects over the next few years, National Grid decided to introduce a way of working new to the UK electricity industry, one that would move it closer to its major suppliers, and that it had introduced successfully with its gas Alliances to upgrade the national network of gas pipelines.
National Grid identified a number of key issues, the first and most important of which was to ensure continual improvement of health and safety. The second was the level of available expertise. While there is global competition for the supply of switchgear, transformers and the application of new technologies, there is a great shortage of suitably skilled and qualified people in the UK’s electricity industry.
The Alliance approach
In order to manage these issues, National Grid offered a number of regionally based framework contracts to major international players over a five year term.
National Grid’s director of UK construction, Rowan Sharples, said, “Providing long-term visibility of workload makes us a more attractive client and is essential for resourcing in a very buoyant world market .. working as one team will make the best use of competencies and the sharing of risk and reward improves both ownership and innovation.”
These contracts, among the biggest ever offered by National Grid, work on the basis of target costing, involving all the partners sharing the pain or gain of achieving the target for actual cost. The key to the success of this new working approach is to demand the strongest levels of collaboration between all parties and to drive it by aligning their needs.
Areva T&D was one of many companies that expressed an interest, an interest that culminated in its joining with Mott MacDonald and Skanska to form a joint venture company (AMS JV) which entered into a selection process for one of the four substation areas – the North, Central, South East and South West.
Collaboration is key
The selection process was multi-faceted, based not only on technical and project management expertise, but also on the cultural fit of the partners, their behaviour and ability to work collaboratively. The result was that in October 2006 the AMS JV Alliance was confirmed as National Grid’s preferred partner.
The Alliance management team is headed up by a senior National Grid manager who reports to a joint supervisory board made up of AMS JV and National Grid personnel. Regardless of employer the ‘best person for the job’ has been chosen to fill each role. The dynamics of the organisation have therefore changed for everybody, where bosses have become clients and clients have become subordinates – needless to say that this has presented interesting cultural challenges which are being actively addressed.
The collaborative approach and culture is driven across all four substation Alliances, and National Grid will assess the performance of the approach by measuring the success of their overall capital works programme for England and Wales. Therefore a significant proportion of the AMS JV’s incentive payments are reliant on the performances of other Alliances. All four substation Alliances must deliver their programmes safely, to time and to cost otherwise none of the area partners will receive their additional incentive payments. It therefore follows that if another area Alliance is in danger of missing its target, there is an incentive for the AMS JV to help it. Almost overnight, players who were competitors in the selection process have now become aligned to the common objectives of the Alliance approach.
Functioning of the Alliances
The four Alliances will focus on substation development and construction including the connection of new infrastructure, such as wind farms and other new electricity generation plant and enhancing and replacing existing assets.
The key to the success of the partnership for National Grid and the Alliance partners is firstly, its belief in the success of the Alliances. All of the partners have to adapt their working practices and ensure that there is alignment of vision, values, objectives and practices. Finally and most importantly there has to be a solid commitment to raising the safety standard – this can be done by providing the right focus on safety, developed right from the start of the project, ensuring that there are no accidents in any of the projects.
National Grid will benefit from forming this Alliance as it creates an opportunity for the best partners available in today’s market to come together – partners that can deliver a world class service and set new benchmarks in the execution of NG’s capital expenditure programme.
AMS JV’s involvement in the Alliance also brings important benefits. It allows Areva T&D as an organisation, and the AMS JV as a group of companies, to secure resources and to plan into the long term. With this collaborative approach the JV can now envisage a five year window against which it can plan and organise itself. Furthermore, the philosophy of the gain and pain principle is another key benefit – all partners, by working together and by sharing objectives and optimising their processes in the way that they work, will allow for gains to be made in the project for the benefit of everybody.
National Grid is expecting to spend over £2.5 billion through this mechanism over the next five years. The next step for AMS JV is for it to move into a central location, a move which is almost complete. It is important that it starts to look and feel like a single Alliance as it moves forward into the mobilisation stage. This secure and long term commitment will enable Areva T&D to plan, manage and harness the resources and capacity that will be necessary if it is to set a new benchmark in the delivery of transmission substation solutions.
By ensuring that the partners embrace the Alliance approach with its common vision, set of values, goals and objectives, National Grid is confident that it can maintain the safe and reliable operation of the high voltage network by replacing assets and by connecting new infrastructure to meet the growing demand for electricity.