Water - Investment Planning and Prioritisation Group (IPPG) report: quarter 2 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 Q2 that are subject to Level 1 and 2 appraisals
• 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 Q2:

• 16 project investment appraisals stages were completed within the quarter. This includes the additions to the forecast in the quarter (15% of the initial demand).
• 15 of the 16 projects progressed through first time at the Investment Group/Investment Approval Group. These projects had a value of c.£190m.
• A session with the Independent Customer Group (ICG) was held on 29th September. The feedback at the session was positive on the progress made to date in the development of the PIA, and the joint approach to the session by the PIA team and Corporate Affairs.
• A positive session with Consumer Scotland held with the purpose of providing an update on the progress of PIA development within FY22/23 and to seek to understand any further expectations.
• Project investment appraisal documents continue to be shared with stakeholders at Stage 3a (preferred option) and Stage 4 (Commitment).

Highlights from project investment appraisals completed within the quarter are shown below.

Project Investment Appraisal Highlights

Dunside reservoir Stage 3a Aug-22

Project on a non-operational reservoir that has investment needs for matters in the interests of safety.

The appraisal considered the resilience requirements due to the impact of climate change and assessed the community use of the asset. We plan to breach the reservoir and planting trees in the land space available. This removes an asset which would have ongoing liabilities and maintenance requirements, and turns it into a carbon sequestration opportunity, returning the land to a natural state and contributing to our net zero target. The PIA has been shared.

Erskine WwTW Stage 3a Sept-22

There were 21 strategic needs previously identified in the Erskine catchment. A system strategy is being developed to ensure these long-term needs are addressed optimally. Whilst this system strategy is developed, a tactical solution is required for Erskine WwTW to enable short-term growth and maintain compliance with the Controlled Activities Regulations (CAR) licence requirements. This appraisal considers the tactical needs only to a nominal horizon of 2026 to enable forecast short-term growth which exceeds the design capacity of the WwTW by c.70%.

The recommended intervention for Erskine WwTW will restore the health and safety risk for operating the site to an acceptable level, restore operation of failed assets, can be constructed offline from the existing process reducing complexity, brings the WwTW into compliance with technical standards for primary treatment, meets the requirement for short term growth as well as recovers primary sludge for future digestion. The option is a least regrets approach. The PIA has been shared.

Udny Green WwTW Stage 4 Sept-22

The WwTW has had a number of consent failures. To reduce the risk of compliance failure, a temporary chemical dosing system has been in use since 2018. There is no capacity to treat any additional load and flow due to growth. The Stage 4 PIA confirmed that constructing a new WwTW on the adjacent land is the best intervention option to be implemented. The PIA has been shared.

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

An overview of the appraisals at Stage 2/3/4 that were forecast to be delivered during Q2 2022/23 and the appraisals delivered is shown in Table 1.

The purpose of Table 1 is to provide internal visibility to enable forward planning for Level 1 and 2 interventions 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. A target of c.50% of milestones to be achieved is targeted due to the dynamic nature of the programme. 16 PIA Stages or 41% of the initial forecast were completed up from 36% 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:

• Repriorisation due to workload. This affected 23% (9) of the projects which had forecasts adjusted to the following quarters in line with the dynamic programme. Projects which were prioritised include Daer WTW and Bradan WTW.
• Confirmation of scope & costing. This affected 18% (7) of the forecast projects.
• o 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 rescoping options (Kirk Yetholm WwTW Stage 3a).
• Further investigation required. This affected 10% (4) of the initial projects.

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 2 with the known consequences explained.

Forecast for remainder of 22/23

The forecast for 22/23 is shown below (Table 3) and the details are provided here

Table 3: Forecast of project appraisals at each gateway to be delivered during the following quarters of 22/23