Question: It was a warm afternoon as Stefano
It was a warm afternoon as Stefano Moretto, Commercial Director of Hinkley Point C (HPC), and Eva Glens, Senior Supply Chain Engagement Manager, stood looking out of their office. Stefano, having recently joined EDF, had been tasked with establishing a supply network for the recently approved HPC project – the first of a number of new nuclear power stations aimed at supporting the United Kingdom (UK) Government’s intended ambition of creating a ‘clean, safe and affordable’ energy future.
EDF and the Hinkley Point C (HPC) project
As with many other projects that the two had worked on, HPC would be complex and EDF would be right at the center of things. The firm would hold detailed knowledge of the power station’s design, maintain codes and standards, contribute to the design process at a strategic level and ensure the execution of the detailed design at an operational level. Over the coming years, EDF and its partners would need to build, test and commission two massive reactors, turbine halls and an electricity substation on the site, located in the South-West of the UK. Managing construction would involve people from many different organizations and disciplines working alongside each other. It would be EDF’s responsibility to ensure that all relationships were underpinned by a consistent set of values and behaviors. However, at that moment, Stefano and Eva were preoccupied with another piece of the jigsaw – the site operations services.
Site operations services
Site operations services involved all the services not required for the actual construction of HPC. People and organization services were there to make workers’ lives more convenient and pleasant. Examples included catering, hospitality, cleaning, security and transportation. Space and infrastructure services were concerned with the physical infrastructure of the site. Examples included running the site’s network of permanent and temporary roads safely and securely, as well as building maintenance, heating, lighting, plumbing, fire safety, etc. At the time, EDF expected to spend over 500 million on its site operations services over the period of HPC’s construction (in fact, this figure rose to over 1 billion as the project developed). Given the large number of people likely to be on site at any one time, they were going to be vital to the project’s success. ‘It’ll be like a small town’. said Stefano. ‘We’re going to have a lot ofpeople to move about, accommodate and feed.’ ‘I know’, said Eva, ‘and the clock’s ticking! We need to make some decisions on the way we’re going to go with this soon.’ The two then sat back down and began to discuss some of the key services needed at the HPC site and its associated development sites in nearby towns:
Catering
The HPC catering contract covered all aspects of catering at the HPC site and associated developments (AD). The scope of supply included: food production and preparation; food and beverage vending across the site; bar operations; management of food waste; chilled and ambient food distribution; cleaning and maintenance of kitchen and food server areas; hospitality services; and management of all catering-related staff.
Transportation
A transport service provider would be responsible for operating and managing a bus service to transport construction and office workers between the HPC main site, associated development sites, car-parks and selected local towns in the area. Bus services would be operated in the following ways:
• Park and ride: Workers would embark at a single point of departure, travel directly to HPC main site, disembark at the site perimeter, pass through security and embark on an internal bus to be dropped off at the contractors’ compound.
• Direct service: Buses would drop-off/pick-up at a number of different points to deliver workers to the HPC main site. They would then follow the same process as above.
• Direct secure: Operated from specific locations, workers would pass through security before embarking on buses that would deliver them directly to their place of work on site. These buses would pass through a ‘fast-gate’ at the site perimeter, negating the need for internal bus transfer.
• Internal buses: The transport provider would provide buses on the internal HPC site circuit to use in conjunction with the park and ride and direct service offerings.
Accommodation management
EDF would be building new campus accommodation buildings at the HPC site and in Bridgewater, a town close to the site. Once completed, the contracted firm would need to run these facilities. This would include: management of the hotel services for campus sites; day-to-day management of the catering contractor (see above); management of the campus buildings, campus grounds and sports facilities;creating additional sales from hotel services; management
of the security of guests while in the accommodation; 24/7 reception services; and management of all campus accommodation staff.
Facilities management
The facilities management contract would provide services to the HPC site and some of the associated developments. The scope of the services required would include: daily operational management of all temporary building facilities; general office services, including reception, porters and drivers, postal services and room booking; daily office cleaning, window cleaning and specialist cleaning (server rooms, etc.); domestic waste removal including confidential
and segregated recycling; mechanical, electrical and building fabric maintenance, internal plumbing and drainage, and pest control; and audio-visual (AV) equipment management, maintenance and support.
Infrastructure operations and maintenance
EDF would construct the necessary permanent and temporary road network and other infrastructure for the HPC project both at the main construction site and at the associated development sites. Once constructed, these would need to be operated and maintained to ensure that the sites would be managed in a safe, secure and efficient way. The infrastructure operations and maintenance (O&M) contract would cover this activity. Big or small?
‘OK, so we’re pretty clear on what we need Eva. The next big question is big or small?’ Eva knew what Stefano was referring to – two competing views on the best strategy for sourcing EDF’s site operations services. On one side was the argument that EDF should use one large ‘generalist’ supplier for each of the five main categories identified. These suppliers were typically multinational companies (MNCs) capable of providing a one-stop shop for the complete service solution required in any given contract. It was a tried-and-tested solution for sourcing in projects of this size. On the other side was the view that the firm should instead look to award contracts to local specialist small and medium-sized enterprises (SMEs) where possible. To do this would require breaking down some of the categories into more ‘bitesize’ contracts or possibly encouraging consortia of local suppliers who could jointly deliver site service requirements.‘Eva, you know I’ve been working with some of the MNCs for years. They’ve got proven experience and expertise. Given that you, me and the team have got to set up over 150 tier-1 supply contracts over the next few months, maybe we’re better going with what we know?’ Eva thought for a moment and responded: ‘I see that argument, but sometimes I don’t really rate these =/0%? firms. /y experience is often they’re hard work in negotiations and it doesn’t get a whole lot better once they start providing the services. Also, they have too many other customers tobe really concerned about giving us top service quality. At least smaller suppliers are likely to really put the effort in. Besides, I think we’re agreed that it’s at least worth thinking about whether we could really do something different this time.’‘All good points Eva’, said Stefano. He was also very keen to invite local SMEs to take advantage of the opportunities afforded by the HPC project. ‘How good would it be to actually make a difference to the region through our supply chain?’, he thought. Still, earlier in the day, a conference call with another manager, discussing a leading global catering supplier intending to bid for the catering contract, ad left Stefano unsure. His colleague had argued that it made more sense to let an experienced contractor with global presence help EDF manage the uncertainties associated with these contracts. Then he thought about some of the conversations that he’d had over the last two weeks. ‘Another issue I’m thinking about here,’ Stefano continued, ‘is what some of the service managers, who will eventually be responsible for the quality of services, have been saying to me. They seem to think that the local suppliers may not have the capability to deliver on this scale. Ultimately, if these services are not performed right, this project won’t get off the ground.’ Eva sighed. Stefano was right that most of the suppliers in the region were indeed small businesses, with no experience of delivering on the scale that would be required by EDF. But in the back of her mind was the feeling that not developing a local supply base would be a missed opportunity. ‘I don’t really agree with them on this Stefano. To be honest, much of this is just about a fear of doing things differently. Yes, MNCs are the safe and familiar option, but we’re not talking about rocket science stuff here! All these services should be possible for local suppliers to deliver, surely?’Stefano thought for a moment. ‘That’s true Eva. Still, local SMEs are going to need a lot of upskilling to align with our needs. Developing a bespoke, local supply base with capabilities up to the quality standard we need will be a lot of effort. Remember, this project is already a very BIG jigsaw – I suspect some of the stakeholders might not think it’s a good idea to add yet more pieces! And another thing, it’s not just servicing the initial three or four thousand people on site that worries me, it’s the ability to scale up to the seven, eight or nine thousand we’ll probably have at the height of construction.’ Eva shook her head. ‘The services might be complex to manage, but they’re not really capital- or technology-intensive. I think capability development in this area would be a lot easier to achieve than the manufacturing operations. From my conversations with the local chamber of commerce, it’s clear that local businesses are very keen to work with us. We just need to develop a process of engaging more with local businesses, as I think quite of few of them wouldn’t even think to bidfor this work at the moment. I also wonder if we should encourage them to club together for some of these bits of work. It wouldn’t just help now, but even more as we look to scale up further down the line.’
‘Maybe Eva, maybe.’ Stefano quietly rejected that he was glad to be working with someone who was so passionate and shared his desire to do something value-added for the community. Eva’s inputs certainly helped, but he remained undecided as to the best route forward. In addition to the issues they had just discussed, there was the broader political and public pressure to create economic and social value for the region. Construction of HPC was controversial and a recent piece of research had revealed that a substantial proportion of local residents were opposed to the project, while the acceptance of others was ‘potentially fragile’. So, any good news stories were likely to be appreciated by the firm’s leadership. Stefano stood up again. ‘Come on Eva, I think we need to get the team together and try and make a decision. Let’s go for a coffee first s I think we’re in for a long day!’
Questions
1. How do the characteristics of different site operations services influence the sourcing decision (MNCs versus local SMEs)!
2. What other factors are affecting the decision!
3. If HPC were to adopt a sourcing strategy with a preference for local SMEs:
(a) How might it engage effectively with local businesses to encourage bids!
(b) How might it effectively configure these sourcing arrangements!
(c) What approaches might it take to supplier capability development!
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