Ofwat Abolished and Replaced – How Will This Impact Public Procurement?

According to a government press release, the new regulator will be responsible for the entire water system, with the objective of cutting pollution and taking responsibility for all water functions.

We analyse the potential impacts this could have on public sector tenders, and how bidder organisations can prepare in the interim.

How will new arrangements differ from the current Ofwat regime?

Between rumours of severe price hikes for consumers and uncontrolled sewage spills, the water industry has attracted much criticism over the past few weeks.

Currently, four regulatory bodies are responsible for all water functions across England and Wales – Ofwat, the Environment Agency, Natural England and the Drinking Water Inspectorate. This has led to separate regulators splitting up economic, environmental and drinking water regulation and oversight.

Secretary of State Steve Reed declared this has led to a ‘complex, tangled system of confusion’ and a ‘merry-go-round of regulators blaming each other’, hence the need for a new, single regulator.

In abolishing Ofwat, the Secretary of State claims the new regulator will:

• Provide the clarity and direction for a strong partnership between the government, water industry as a whole, and investors to attract billions of pounds of investment
• Oversee investment and maintenance of water infrastructure and protect consumers from large increases in monthly or annual bills
• Restore civic faith and investor confidence in the water industry as a whole following negative press and public attention
• Ensure all forms of pollution are reduced, resulting in clean rivers, lakes, seas and other bodies of water.

Following a consultation period earlier this year, the government’s proposals will be issued via a government White Paper this autumn, forming the basis of a new Water Reform Bill – which will presumably name the new regulator.

Will this impact public sector bidding?

Importantly, the Labour government are resisting calls for nationalisation of the water industry, meaning that any tenders run for the water industry will be via the private sector.

The current public procurement regime – governed by the Procurement Act 2023 – has a number of stipulations which public sector tenders need to meet, including:

• All contracts over a certain value threshold being published in a central, accessible location – Contracts Finder and Find a Tender
• Transparency and openness within procurement, inclusive of procurement notices, contract information, evaluation criteria and indicative timetables, providing accountability
• Fair, open competition for all public contracts, including making considerations for SMEs and VCSEs participating
• The contract must be awarded to supplier(s) who provide ‘value for money’ solution, including through delivery of social value and other positive outcomes through procurement of goods, works or services.

What suppliers can do in the interim

We recommend bidder organisations in relevant industries and sectors – including construction, legionella and water management, and drainage repairs and maintenance – should do the following:

• Continue to monitor government activity: With the consultation period closed and the official White Paper due out in the autumn, there may be updates released regarding the new regulator, similar to periodic updates on the Procurement Act (e.g. the new Central Digital Platform). As such, suppliers should monitor government outlets for more information and adjust their plans accordingly.
• Take note of any requirements from the new regulator: The new regulator may issue some or all of their requirements in order to bid for the contract. Suppliers should continue to monitor the above sources to ensure they are compliant with any updated requirements and can respond to invitations to tender in good time – without scrambling for certifications or accreditations.
• Prepare for any opportunities as if they were public sector: As above, whilst the water sector is a private organisation rather than government- or public sector-run, the new regulator may adopt similar mechanisms as the public sector – including the Procurement Specific Questionnaire or similar, requesting copies of policies and procedures, and an evaluation split between quality and price. Consequently, prospective bidders should prepare in much the same way as they would for a public sector bid, ensuring their bid library is up to date and readily accessible.

It should be noted that Scotland and Northern Ireland are subject to separate operators and regulators. In Scotland, the publicly owned Scottish Water is the operator, and the Water Industry Commission for Scotland regulates prices for consumers, whereas Northern Ireland is governed by Northern Ireland Water. Consequently, any suppliers in Scotland and Northern Ireland will not be affected by the new regulator.

Monitoring upcoming changes

Executive Compass will continue to monitor any changes stemming from the new regulator repealing and replacing Ofwat, and how this will impact any future public sector bids. For instance, even though water providers may continue to be privately owned companies, the new regulator may have greater oversight for procurement activity – leading to rules around how works or services are procured.

In the interim, to find out more about the bid services we provide, book a free 30-minute consultation with our sales and marketing team at info@executivecompass.co.uk, or via telephone 0800 612 5563.