Water - Investment Planning and Prioritisation Group (IPPG) report: quarter 3 -2022 to 2023

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

The purpose of this section is to provide:

• An overview of the progress of interventions in Q3 that are subject to Level 1 and 2 appraisals^[1]
• Highlights from significant Level 1 or 2 project investment appraisals completed in the last quarter
• A review of lessons learnt from the delivery of PIA forecast in the last quarter and a look ahead to the next quarter.
• The full list of interventions with Level 1 and 2 appraisals, with an indication of the anticipated timing, is shown in Appendix C, which is an additional document to this paper.

Quarterly review of progress of appraisals

Good progress has been made in project level decision making within Q3:

• 10 project investment appraisals stages were completed within the quarter. This includes the additions to the forecast in the quarter (4 or 14% of the initial demand).
• 9 of 10 projects progressed through first time at IAG/IG or through offline approval. These projects had a value of c.£147m.
• Project investment appraisal documents continue to be shared with all stakeholders at Stage 3a and 4.
• A positive session with the Independent Customer Group (ICG) was held in December 2022 to cover Value Management as part of the PIA process. The feedback reflected the continual improvements in this process.

Highlights from project investment appraisals completed within the quarter are included in Table 2.

Table 2: Project Investment Appraisal Highlights

Castle Moffat WTW

Stage 3a

Oct-22

The area supplied by Castle Moffat WTW has a history of microbiology exceedances of regulatory standards, which will continue if no measures are taken to address disinfection incapability. This PIA also includes an early-stage assessment of the preferred option for the nearby Hopes WTW.

The preferred option is to rationalise Hopes from Castle Moffat WTW, and upgrade and enhance Castle Moffat WTW in phases: new chlorine contact tank (2025), new filters (2030), (ion exchange by 2040). This will deliver benefits to customers by prioritising the highest risks first for the lowest NPC and carbon impact. The PIA has been shared with stakeholders.

Aberlour WwTW

Stage 3a

Nov-22

This is a wastewater growth project; with growth projected to exceed site capacity by 2024.

The recommended intervention is to upgrade the current works with a biofilter; the lowest cost and carbon option, which utilises existing assets and has future flexibility should further growth materialise beyond the current forecasted requirements. The PIA has been shared with stakeholders.

A review of lessons learnt from the delivery of PIA forecast in the last quarter

An overview of the appraisals at Stage 2/3a/b/4 that were forecast to be delivered during Q3 2022/23 and the appraisals delivered is shown in Table 3.

The purpose of Table 3 is to provide internal visibility to enable forward planning for Level 1 and 2 needs and to ensure enough work is being appraised to support the investment programme. It is not intended to be a fixed set of dates and the dates presented are the earliest that those will be achieved. 50% of milestones to be achieved is targeted due to the dynamic nature of the programme. 10 PIA Stages or 31% of the initial forecast were completed down from 41% (16) in the previous quarter.

For example:

• The projects are subject to reprioritisation in a dynamic programme
• Dates have been reforecast to take into account lessons learnt from previous project investment appraisals, recosting of scopes and alternative options
• The dates are set to align with our challenge of achieving 50% less time to start on site, which results in ambitious milestone forecasts
• Some PIAs will require iterating after senior review at the Investment Group, which can have knock-on impacts on the rest of the programme.

There are three main themes driving the missed forecasts:

• Further investigation required to allow robust evidence for decision making. This affected 28% (9) of the initial projects. Unavoidable issues included survey requirements to inform the need (Liberton trunk main), pressure logging for Cockmuir DSR, investigation of additional flooding properties at Barron Terrace and Waggon Road, and investigation to confirm scope at Peatville Terrace, Edinburgh (IFOS).
• Confirmation of scope & costing. This affected 25% (8) of the forecast projects.
  • As per Q2 report in a demonstration of the PIA approach driving the best value decision, cost escalations for the preferred option have driven costing of alternative options (Eela Water WTW Stage 3b) or rescoped options (Kirk Yetholm WwTW Stage 3a).
  • Other costs were revisited in line with learning from the IG query for Marykirk WwTW to utilise the output of the Asset Stewardship Model (ASM) for BAU costing for WW projects. This affected 3 projects.
• Reprioritisation due to workload. This affected 13% (4) of the forecast projects which had forecasts adjusted to the following quarters in line with the dynamic programme. As an example, projects affected included East Stirling Villages (WW) and two water resilience projects.

Work to minimise the time associated with these activities in the last quarter has included:

• Projects which are yet to reach G50 will be re-baselined to current prices to avoid the need to revaluate at G70.
• A financial pack is now issued at G70 (Stage 3b) to explain any significant cost changes and learnings for the future
• Discussions have been held with the owners of the ASM model & NPCC to align use of ASM at project level. The principles of use being drafted to allow consistent application and avoid further queries. Further ASM improvements should be considered as part of SIDM.
• Capacity and capability support offered by the PIA team into early 23/24.

Projects reforecast by 12 months

In line with the dynamic programme a small number of projects have been reforecast by >12 months since the baseline forecast in April 2022. These are listed in Table 4 with the known consequences explained.

Table 4: Projects reforecast by >12 months

Project: 5037590000

Name: Liberton Trunk Mains

PIA Stage : Stage 2

G40 Original forecast dates (Sept-22): G40 (stage 2) was initially forecasted in SR15, before commencement of IAs

G40 Current dates (Jan-23): Aug-23

Reason for the movement: Delay to non-destructive testing (NDT) surveys results

Consequence: The results from the NDT surveys will inform the extent of the Need. There is a chance that there is no Need (if NDTs show asset does not qualify for promotion under the MA025). Initial need was raised as between 2012 and 2016 there were over 60 bursts in the Liberton Trunk Mains (TMs) and associated distribution mains attributed to the Alnwickhill PRVs. Since the PRV replacement in 2017 there have been no bursts. There are 4 mains downstream of the PRVs that are cross connected and run as one network. Although all the bursts can be attributed to the performance of the PRVs, work is being carried out by Scottish Water to understand if the mains present a security of supply risk.

Project: 509532

Name: Milngavie WTW

PIA Stage: 2

G40 Original forecast dates (Sept-22): July 22

G40 Current dates (Jan-23): November 2023

Reason for the movement: Project on hold. Prioritised other projects (Bradan and Turriff)

Consequence: These projects are Plan and Prepare only for SR21 so no delays to any major investment.

Project: 509438

Name: Roberton WTW

PIA Stage: 2

G40 Original forecast dates (Sept-22): May 22

G40 Current dates (Jan-23): November 23

Reason for the movement: Project on hold. Prioritised other projects (Bradan and Turriff)

Consequence: These projects are Plan and Prepare only for SR21 so no delays to any major investment.

Forecast for 23/24:

The forecast for 23/24 is shown below (Table 5).