PR19 - Direct Procurement for Customers (Technical)

Following the consultation we will publish our final methodology for Price Review (PR19) in December 2017. Ahead of our final methodology we are seeking technical consultancy support to inform us of the types of projects most suitable for Direct Procurement for Customers (DPC) on technical grounds. We expect that well-informed technical parameters will help ensure economic efficiency to maximise value to consumers.

Companies will be responsible for developing the projects as candidates for DPC before running a procurement process that will nominate a competitively appointed provider (CAP). We expect appointees to develop their projects with significant consideration for customer benefits. As this is a new requirement for appointees, we intend to provide robust guidance in December 2017 on the considerations we and the industry should have in selecting appropriate DPC projects.

The overall objectives of this work are to:

• Provide us with a set of guidance on the technical characteristics that make a project most suitable for DPC under different scenarios (eg early tender model vs late tender model).

• Provide risks (and how these can be managed) and opportunities associated with the technical project characteristics for different project types and tender models.

• Derive a set of key technical criteria and principles that both Ofwat and the industry can use in developing and assessing candidate DPC projects, as well as how they align with commercial principles laid out in our methodology consultation.

We expect this work will comprise the following main activities:

1) The contractor will develop guidance for Ofwat on the technical characteristics that make projects most conducive for DPC and deliver the greatest customer benefit.

2) To inform Ofwat's view of the relative risks of different DPC candidate projects, the contractor will advise us on the risks (and how these can be managed) and opportunities associated with the technical project characteristics for different project types and tender models from activity 1.

3) Based on an in-depth understanding of the technical thresholds and applying a hierarchy to potential DPC projects (activity 1), and the risks and issues associated with these for delivery (activity 2), we are seeking advice on establishing a set of technical principles that will support the commercial principles laid out in our PR19 methodology consultation and being developed in a parallel consultancy contract, PR19 - Direct Procurement for Customers - Commercial.