Hinkley Point C achieves cost reductions through contract management

The commercial director of EDF Energy, Ken Owen, has said that the key to cost…...

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The commercial director of EDF Energy, Ken Owen, has said that the key to cost reduction in large-scale infrastructure projects such as the Hinkley Point C (HPC) nuclear power station is rigorous contract management.

Managing contracts, he said, was “fundamental” to making sourcing savings and keeping large high-tech projects on course. In an interview with Francis Churchill of the Chartered Institute of Procurement and Supply (CIPS), he explained that HPC had developed innovative procurement solutions by using contracts to drive new collaborations.

“Our philosophy is about collaborating with industry and partners, because ultimately the risk to the contract is always with the developer.”

His comments come after the HPC project – Britain’s first new nuclear power plant in a generation – came under fire after it transpired that a key supplier making parts for the station had falsified documents. But a subsequent investigation by Britain’s nuclear authority, the Office for Nuclear Regulation, found that “good progress” had been made in preventing this kind of malpractice.

Owen’s team specialises in the supply of services and it is here that an innovative procurement model rooted in the contract side of supply chain management has proven immensely valuable.

He and his colleagues eschewed the practice of tendering all service contracts to vast multinational contractors (like Carillion) and worked instead with the Somerset Chamber of Commerce to create six consortia composed of local SMEs that were sufficiently competitive to win contracts.

Services supplied by these consortia include transport, catering and hospitality. To date, the arrangement has seen £465m worth of contracts go to local Somerset firms and has created over 660 jobs in the process.

Building trust was essential to the success of the innovation. As Owen put it: “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.”

Ed Cross

Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.

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