09/04/2008 - 22:00

Utilities move to alliance agreements

09/04/2008 - 22:00

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Western Power has responded to the skilled labour shortages and rising costs in Western Australia by adopting a fundamentally different approach to its contracting and capital works program.

Utilities move to alliance agreements

Western Power has responded to the skilled labour shortages and rising costs in Western Australia by adopting a fundamentally different approach to its contracting and capital works program.

It has followed a lead set originally by the Water Corporation and later by Main Roads to use alliance agreements.

Western Power has established its first alliance with Downer EDI Engineering and Tenix Alliance, and was due to announce a second alliance this week.

Managing director Doug Aberle said Western Power was spending roughly $1 billion each year on its transmission and distribution network, a four-fold increase from the levels prevailing a few years ago.

The rise in spending, combined with the acute labour shortages, has prompted the adoption of alliances.

“We believe it will be more effective to develop longer-term collaborative arrangements where both parties involved in an alliance gain efficiencies and have greater certainty of supply and greater certainty of work respectively,” Mr Aberle said.

“This will be a pain-share, gain-share arrangement with transparency of accounting.”

The Downer-Tenix alliance will run for five years, with an additional five-year option, and has been designed to encourage investment into WA.

“We wanted to form long-term relationships with companies that can draw additional resources into the state,” Mr Aberle said.

“Alliance models are particularly effective at increasing efficiencies in an economic climate where demand outstrips supply for labour and materials, which is WA’s current environment.

“Western Power’s traditional approach of using a tender process to secure best prices is a model best suited to a situation where supply outstrips demand.”

He said Western Power would continue to selectively use traditional tendering arrangements, and would also retain the capacity to handle work in-house, particularly for maintenance and fault repairs.

During the time of the Court govern-ment, Main Roads outsourced so much of its work that it lost the in-house capacity to manage its contractors. It has since rectified that situation.

The Downer-Tenix arrangement is expected to handle $277 million worth of capital works in its first year of operation, or about one quarter of Western Power’s total spending.

Within the alliance, Downer and Tenix Alliance have formed a joint venture to consolidate their respective expertise in transmission and distribution.
The new arrangement follows rapid expansion of Tenix’s WA operations.

In the past year it has completed three WA acquisitions: the electricity construction and maintenance business of Bibra Lake firm Bremner Power Systems Pty Ltd; Kelmscott-based C&S Powerlines, which has provided network services for four years to Western Power and Alinta; and Atomic Power.

“This alliance is an example of how the needs of communities will be increasingly be met through more efficient business models which enable faster and more cost effective development of infrastructure,” Downer EDI chief executive Geoff Knox said.

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