Investment Planning and Prioritisation Group (IPPG) report: quarter 3 2021 to 2022

Report on the progress of interventions to meet the needs on the development list: Quarter 3 2021-22

This report sets out how Scottish Water(SW) is progressing in developing interventions to address the needs on the 'Development List' up to the end of December 2021 (Quarter 3 2021/22). It has been prepared for the Investment Planning and Prioritisation (IPPG), set up by Ministers to provide reassurance and report on the delivery of their Objectives.

The content and format of this report is under review by the Investment Reporting Task and Finish Group and Investment Reporting Data Subgroup which in turn report to IPPGWG. The amendments listed below have been made following stakeholder feedback from previous IPPGWG and IPPG meetings and further developments are being explored:

• An additional explanation of Management Approaches has been added to the beginning of the document.
• A summary section has been introduced to provide stakeholders with the current view of our 6 year investment profile.
• Section 5 (key decisions) has been renamed "Adjustments to Management Approaches" and has been positioned earlier in the document and is now Section 3.

What We Monitor

The Development List contains named Needs and Needs associated with repair, refurbish and replacement activities.

Scottish Water's Management Approaches set out:

• the policies that define the inspections that will be undertaken;
• the policy triggers for interventions that will be developed and then committed to delivery.

Where interventions are forecast to exceed £3m or have a high customer and community engagement, a Level 1 or 2 project appraisal is developed to assess the options to deliver the need.

Each quarter Scottish Water reports to IPPGWG on its progress in developing interventions to address the needs on the Development List. This report includes:

Section 1 - Indicator ofoverall progress towards the Committed List: to provide reassurance to stakeholders on the overall volume of intervention development relative to what is required for expected investment levels in future years.

Section 2 - Overview of progress in developing interventions grouped by Management Approach: to provide reassurance to stakeholders that Scottish Water is developing sufficient interventions within each Management Approach, compared to investment expectations over the short term. 

Section 3 – Adjustments to Management Approaches: sets out the decisions Scottish Water has taken in the most recent quarter to pause the development of any individual intervention and any adjustments to Management Approaches, explaining the rationale behind the decisions.

Section 4- Progress in the development of interventions with Level 1 and 2 appraisals: to provide reassurance to stakeholders on progress of developing interventions subject to a Level 1 and Level 2 appraisal and a view of current expectations of when they will reach future appraisal stages.

Section 5- Summary of progress of interventions that are of particular interest to IPPG members: a summary of the output of bilateral SW/stakeholder sessions (e.g., Joint Development Groups) highlighting by exception those that are of concern to an IPPG member.

Summary

The current investment forecast over the 6-year investment period is shown below (Figure 1). This shows a combination of Live Investment (investment which is currently going through either the Plan, Prepare or Deliver phase of the project lifecycle) and Non-live investment (investment identified but not yet initiated in the system).

Year 1 investment is mature and being progressed through delivery. Scottish Water is forecasting total investment to be in the range £790m - £820m. Tier 2 investment is forecast to be in the range £620m to £640m.

During Quarter 3 our focus has turned to planning for year 2, ensuring sufficient investment is initiated in the system to achieve the planned increase from c. £800m to c. £850m. This is progressing well, and there is a total of £800m initiated to date. £654m of this is Tier 2 with £515m with our delivery teams in the Prepare or Delivery phase. There is increasing confidence that the Year 2 investment levels as set out in SW's Delivery Plan will be achieved.

1 - Indicator of overall progress towards the Committed List

The indicator of overall progress towards the Committed List is a high-level measure of the overall volume of intervention development relative to what is required for expected investment levels in future years. This measure – Progress to the Committed List (PCL) assesses whether Scottish Water is promoting sufficient volumes through the stages in each of its development pathways.

A score of less than 100% indicates that the rate of overall progress in developing interventions may not be sufficient. A score of more than 100% indicates that the rate of overall progress is more than sufficient and will allow prioritisation/choice in what to commit to delivery. Changes may occur due to 'positive' and 'negative' attrition. 'Positive attrition' occurs if forecast costs for an intervention have reduced or if the required delivery timescales have been extended. 'Negative attrition' occurs if forecasts costs have increased, or additional evidence is required which extends the project appraisal process.

At the end of December 2021 Scottish Water's indicator of overall progress towards the Committed List was 114% with a year-end forecast of 118%. Early indications therefore are that Scottish Water is developing more than sufficient volumes of investment across the programme.

Section 2 - Overview of progress in developing interventions grouped by Management Approach

This section provides an overview of the maturity of investment by Management Approach, for the current year (2021-22). This is shown below (Figure 2) and at this stage there are no areas of concern.

Section 3 – Adjustments to Management Approaches (MAs)

In Quarter 3 no policy changes to existing Management Approaches were made. Two Management Approaches (MA106 Secondary disinfection and MA105 Access to Equipment) have been approved. This brings the total number of management approaches to 78^[1]. A full list of the management approaches is provided in Annex A.

To date five Management Approaches have been reviewed and re-published. A further eight are currently being reviewed and we would welcome any comments from stakeholders on these (Annex B, part a). Over the next 6 months Scottish Water plan to review a further six (Annex B, part b) and will provide an update at the next IPPGWG meeting.

Currently SW is initiating all work that meets its policies. To understand the demand within each Management Approach, it is carrying out regular 'health checks' and through these identifying where the demand materialising significantly exceeds the Investment Planning Scenario (IPS). This acts as an early warning for decision making. There are six Management Approaches that SW is currently reviewing following 'health checks'. These are detailed in Table 1 below.

In January 2022, the first pilot Portfolio Reviews were held for Water and Wastewater.

Section 4 - Progress of the development of interventions with Level 1 and 2 appraisals

This section provides an overview of the progress of interventions that are subject to Level 1 and 2 appraisals^[2].

Key points to note are:

• 11 of 30 project investment appraisals included in the October forecast for Quarter 3 have been delivered to the forecast.
• The main learnings for changes to the forecast are:
  • Technical information availability. Appraisals have required more time to consider options, phasing and develop a more robust evidence base.Appropriate time needs to be built in to make sure the technical evidence base and assurance is robust enough to progress to the next appraisal stage.
  • Costing information availability. Costing information is often only available once technical evidence is completed- or requires revision to ensure it remains correct. Costings between Stage 3a and 3b (G50-70) require time for discussions. Appropriate time to be built in to allow for initial costing, and changes of scope to be reflected and checked in the costing assurance process particularly in Stage 3a- 3b (G50-70).
  • Prioritisation. Several projects have been reforecast for later delivery as a number of projects were/are accelerated as these projects have a more urgent demand than the others originally programmed. This flexibility in the programme reflects the PIA model for SR21 but has an impact on the resources available for the production and review of existing appraisals.

Below is the forecast for the next three quarters (Table 2). It is not intended to be a fixed set of dates as Scottish Water recognises its processes are not mature enough to know how long each of these stages will take.

Section 5 - Summary of progress of needs that are of particular interest to IPPG members

During discussions held as part of the regular bilateral meetings two interventions have been identified by DWQR as being of particular interest to IPPGWG, namely Glenfarg WTW and Black Esk WTW. As agreed with DWQR, in the next quarter Scottish Water will provide IPPG with an overview of these WTW Capability improvement projects which will include the development work to date, evolution of the preferred options and how work with the supply chain is being used to inform risks to benefit delivery, reductions in whole life costs, reductions in carbon and reducing impacts on communities.