Let battle commence: Anglian wins the public service water battle

Anglian Water Business has rocked up Business Stream’s doorstep and told them to get out as it is moving in.

The Huntingdon-based company has been named by the Scottish government as the “most competitive bidder” for a £320 million contract to supply more than 100 public sector organisations with water and wastewater services.

It has been described “one of the biggest deals since the market opened up”, and marks a significant shift in the competitive landscape in Scotland.

The knock on effects, for Business Stream but also the sector more widely in terms of competition and how future deals are handled, will be keenly felt.

The £320m debate

The Scottish government, after a long and protracted tender process, which was originally due to finish in March and suffered three delays, has named Anglian Water Business as the “most competitive bidder” for a potential four year, £320 million contract to supply the public sector with water and wastewater services.

The offer put forward by Anglian sets outs £40 million worth of savings – immediate savings of £5 million per year and further yearly savings of £5 million from water efficiency measures.

This trumped Business Stream’s offer of a potential £36 million of savings over the same four year period.

The decision has proven to be widely unpopular in Scotland, especially with MSPs who have called it “embarrassing”, “a real mess”, and “deeply regrettable”.

A blow to Business Stream

Losing the contract is set to make a significant dent in Business Stream profits. The company posted revenues of £320 million in 2014/15, so losing £73 million a year – which the previous contract was worth per year – wipes out more than 20 per cent of its revenues at a stroke.

The Scottish government, which owns the retailer, “maintains the no compulsory redundancy policy”, although no guarantees have currently been given over jobs at the company.

Green Party MSP Patrick Harvie told Utility Week the decision “will be a blow” to Business Stream and raised concerns about the company moving forward.

He added: “It will perhaps leave them in a weaker position for retaining work outside the public sector. That danger is there.”

However, he has called for a “focus in the next few years to ensure [Business Stream] is in a position to retake this contract at the next possible opportunity”.

Business Stream chief executive Johanna Dow stated the company’s “focus is firmly on the future”.

Recent contract wins in England, whereby it secured a two year deal with three House of Fraser stores in England, shows it is not willing to lie down in the face of competition. Dow adds: “We remain the leading supplier in Scotland, and we’ll be looking to build on that position whilst acquiring more customers in England, ahead of market opening up to competition in 2017.”

The biggest change since market opening

Consumer Futures Scotland manager Sarah Beattie-Smith told Utility Week the deal “is probably the biggest change since the market opened up in terms of the amount of money involved and the size of the contract”.

It is a sign that competition has arrived in Scotland, although others are not happy at the way the contract was put out to tender and are calling for changes.

Unison is saying “Scottish water should stay in Scotland in public hands”, while MSPs are urging the SNP-led Scottish government to make changes to the way it tenders contracts in the future.

Scottish Labour’s public services spokesperson Jackie Baillie said the SNP has “made a real mess” of the contract and stated that “there were options in the tendering process to break this contract down to deliver a better deal for the taxpayer and keep water management in public hands”.

That is something Green MSP Harvie is calling for. “Conditions could be arrived at to make this rather less juicy for private sector, especially if it is not awarded as single contract across public sector,” he said.

“We should be offering this in number of separate lots rather than one massive contract. This would make it less attractive for large external private sector bidder to bid for.”

He adds the Scottish government should “use the flexibility it has” to ensure the public sector runs public services”.

Anglian Water Business has taken the battle to Scotland and won.

While changes to how the Scottish government runs its tenders may happen in order for the Scots to buy Scottish, Business Stream is looking to continue its expansion when the English market opens and win contracts south of its homeland.

The battle of business supply has begun.