The cost-cutting culture – why the water industry needs to reassess its approach to cost versus value.

Over the last few months, tragic events have highlighted the very real and serious consequences of cost-cutting in construction.

Avoidable tragedies have sadly demonstrated how opting for cheaper, substandard materials and labour at the expense of quality and safety, can go seriously, and often fatally, wrong.

And it’s not just the construction sector that’s experiencing these symptoms of malaise. With an increasing focus on ‘outputs’ and cost-saving, businesses across the water industry are increasingly focusing on price and not value… but at what cost?

The definition of ‘value’ is certainly not ‘cheapness’ and we’ve seen a number of major incidents in the last decade or so that have been caused through this misplaced thinking:

• New Orleans

You’ll no doubt remember the catastrophic hurricane Katrina which devastated the city of New Orleans and killed over 1,800 people in 2005 after the city’s flood protection system failed.

Consequently, it was discovered that a number of crucial engineering errors had been made with the defence system not meeting design and construction criteria. Floodwalls were substantially higher than guidelines advised, causing them to topple once the water levels rose, and, while industry standards recommend inverted “T walls” for walls above seven feet, this option was never considered due to the additional costs involved. Cost-savings measures also meant that the walls were not properly tested for their ability to withstand rising water levels.

As Ray Seed, Head of the Independent Levee Panel which investigated the disaster said: “People didn’t die because the storm was bigger than the system could handle, people died because mistakes were made and because safety was exchanged for efficiency and reduced costs.”

• Somerset levels

In 2014, the UK experienced its wettest winter in decades. Heavy flooding overwhelmed communities across large swathes of England, with the low-lying Somerset levels suffering the brunt of the damage. Thousands of homes had to be evacuated, farmland was destroyed, entire villages were left isolated and large parts of the region remained under water for months.

The aftermath of the flooding saw many unhappy and angry residents and land owners who argued that the damage could have been prevented if the rivers been properly dredged – something they had been demanding for years. But, with cuts to spending on general river maintenance (not to mention new defences), this was overlooked.

Such disasters, and many others like them across the globe, have sparked wide debate in the media and, across the water industry as a whole, leading to an increasing awareness of the importance of choosing to opt for quality and value, over cost-savings.

Value engineering may cost more up front, but in the long term, the likelihood is it will bring about big savings on production, operation and maintenance costs.

With this in mind, we’re seeing a shifting approach across the sector from Capex, which focuses on driving down upfront costs, to Totex, where the total expenditure and overall economic consequences, including upfront capital, maintenance and future costs and savings, are considered as a whole.

This is a good start, but regulations themselves need to be amended to ensure buy-in across the sector. The unfortunate thing however is that it takes flooding disasters and similar incidents in order to prompt regulators to re-examine standards.

With the likelihood of flood incidents increasing over the years to come, it’s essential that the water industry shifts its perspective and recognises the importance of investing in value rather than cutting corners, with inevitably dire consequences.