Water industry procurement maturity | KPMG | AU

Water industry procurement maturity – water security for Australia

Water industry procurement maturity

Procurement plays a key role in the continuity of water supply through the provision of plant, equipment, spare parts and contractors to perform capital works and deliver operational support. Having a mature procurement capability can help utilities attain value for money, security of supply, commercial risk protection and meet social obligations. These benefits materially contribute towards utilities being able to provide affordable water to communities.

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Drop of water causing ripple effect

In the first of a series of discussion papers, the Australian Water Association has collaborated with KPMG to examine the impact of procurement in enhancing water security. Procurement plays a key role in the continuity of water supply through the provision of plant, equipment, spare parts and contractors to perform capital works and deliver operational support. Having a mature procurement capability can help utilities attain value for money, security of supply, commercial risk protection and meet social obligations. These benefits materially contribute towards utilities being able to provide affordable water to communities.

For this report, a series of interviews were undertaken with utility companies and suppliers to assess the sector’s procurement maturity. The four pillars of Strategy & Governance, Organisation & People, Process and Enablers, which underpin the KPMG Procurement Maturity Assessment, were used as the basis of the interview questions. The responses informed a view as to the maturity of the procurement operations of the sampled utilities.

As organisations move up the maturity curve, there is an increase in the value added from procurement. On an estimated $7 billion total spend by water utilities, there may be opportunity to achieve additional savings in excess of $110 million within the industry based on KPMG research. These benefits could be used to reduce prices for customers or increase investment to secure water supply. Distinct differences were highlighted in the perceptions of relative maturity between suppliers, smaller utilities and larger entities. Suppliers’ claims that significant development is required across all procurement pillars are echoed by the smaller utilities. However, larger utilities displayed greater levels of maturity, which indicates a correlation between the level of investment in procurement resources, technology and processes and the capabilities of the function.

Generally, utilities are moving beyond targeting short term, one-time outcomes and are looking to implement sustainable models that can deliver enhanced net public benefit over time. The findings presented in this paper indicate that there is significant scope for utilities and suppliers to accelerate and deepen this improvement journey to attain additional levels of benefit. Key improvement themes across the review included Positioning procurement to have a responsibility to the end water customer. Through greater alignment with internal stakeholders via effective business partnering and deeper supplier engagement, procurement functions would be enabled to develop a more customer-orientated strategy and direction that leads to supply security, maximising value for money while mitigating risks for water customers.

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