Suppliers and contractors need more support from water utilities, one New South Wales water business director says, as the loss of buyer momentum caused by COVID-19 threatens the financial health of the supply chain.
Permeate Partners Managing Director Kurt Dahl said that, while all businesses in Australia required time to retreat, reflect and take action on how to manage the crisis, there has been a lack of positive action from water utilities regarding how their supply chains will be engaged and managed in order to minimise impacts on services.
“When [the crisis] became apparent, everyone turned inward to ask: what does this all mean for us as a business?” he said.
“Of course water utilities needed to do this, too, but some utilities haven’t picked up the pace again, in terms of communication and business momentum.”
With water utilities taking steps to reassure customers about flexible payment options and other support initiatives, Dahl said he is disappointed in the lack of communication and initiative directed at consultants, suppliers and contractors.
“In my experience, utilities are facing outwards to their customers but not to their supply chain,” he said.
“We have heard close to zero from utility buyers about how they are going to ensure the continuity of their supply chain over the next weeks and months. It’s really disappointing.
“With a push towards outsourcing over the last decade, the supply chain is absolutely fundamental to their business – every utility is the same.”
More of a concerted effort to communicate the impacts of COVID-19 to suppliers is needed, Dahl said, as well as payment policy revision to ensure all businesses get paid on time.
“No one’s expecting all of the answers, but some form of insight into planning would be reassuring,” he said.
“I understand there was a broader directive from the Victorian State Government to utilities to reduce payment terms to five business days. I think that’s a great initiative.
“We just had an invoice paid by a large water utility this week, thankfully. To get paid hundreds of thousands of dollars eight weeks after you submit the invoice is bad for business.
“Lost momentum and a slow recovery is an unacceptable position for an industry that provides essential services. There will be very important businesses in the water sector which won’t survive that approach.”
With the ongoing drought still at the forefront of industry thinking, Dahl said he would like to see a long list of water security projects fast tracked to provide much needed resilience and broad economic activity.
“Now is the time to get these projects shovel-ready,” he said.
Australian Water Association CEO Jonathan McKeown said it was very important that the concerns of the association’s small- and medium-sized members were taken seriously and acted upon promptly.
“Many of our members have been very badly impacted by COVID-19 and the association is asking all its utility members and large corporate members to extend special consideration to the following,” McKeown said.
“First, to shorten payment terms to 7 days for suppliers to help them through this difficult cashflow period.
“Second, to fast track any existing projects that have approved capital expenditure to maximise the business opportunities and employment for suppliers.
“And third, communicate with your suppliers to ensure you have a clear understanding of their concerns to make sure we do not suffer unnecessary reductions in the number of suppliers in the supply chain, which is so crucial for the Australian water sector.”
McKeown is also calling for a special national code of conduct for procurement to set out equitable terms of engagement, remuneration of those in the procurement chain, and a fair and reasonable allocation of risk between the parties.
“Without such a code of conduct relating to procurement, many small- and medium-sized suppliers simply will not participate in procurement processes, which would restrict the amount of innovation that’s coming through our SMEs in the supply chain,” he said.
Digital-focused utilities better prepared
GHD Principal Rod Naylor said digital capability has been a notable issue for some water authorities and utilities, with more digitally mature organisations better able to maintain momentum.
“The water industry is fairing very well compared to other industries, but [the pandemic] has caused some distractions and delays – we’ve seen this from a supply-chain perspective,” he said.
“Depending on the digital maturity of the authority, there’s been quite a marked difference. GHD moved 10,000 people [to remote working] in two weeks and discovered several large clients were ready for us when we started work again, but others just had no capability at all.”
Given Australia’s strong position against the COVID-19 pandemic, Naylor said now is the time to address capability issues to ensure greater resilience in future.
“There is a lesson here, in terms of future resilience, in terms of both digital readiness and coordination with local supply chains,” he said.
“Some organisations need to be more digitally agile. This is an opportunity for learning, introspection and preparation, particularly around resiliency and incidents.”
For some, it’s business as usual
While the coronavirus has had an impact on some water organisations, others have managed to navigate the disruption, pointing to the potential of knowledge sharing post-crisis.
SA Water General Manager of Customers, Strategy and Innovation Anna Jackson said the utility had managed to continue with scheduled works as planned.
“Water and wastewater services are essential to everyday life, and with the ongoing support of our supply chain partners, we’ve been continuing to maintain reliable services while our wider community implements measures to contain the spread of COVID-19,” she said.
“Our full program of works continues at pace, to ensure initiatives that will improve our services are progressing and to support the local supply chain.
“SA Water’s supply chain is currently very healthy and at this time we don’t anticipate any significant issues materialising from the wider economic impacts of COVID-19.”