Unlocking social and economic value in megaprojects through the ‘Golden Triangle’

Unlocking social and economic value in megaprojects through the ‘Golden Triangle’

Hinkley 433x242The large-scale, multi-billion pound complex capital investments that we label ‘megaprojects’ loom large not only in scale and scope but also in the expectations of the public and government who await realisation of social and economic benefits. Despite the faith put into projects such as HighSpeed2, Crossrail or the London 2012 Olympics, to create prosperity and improve people’s lives, little work has been done to capture the best way to achieve social and economic value for a region or a country as a whole.

In order for megaprojects to realise value, business-leaders, policymakers and academics need to work together in a so-called ‘Golden Triangle’. The symbiotic relationship between a variety of disciplines needs to be realised to access the knowledge and expertise required to realise value maximisation. This is the starting point for the University of Bath and its partnership with EDF Energy: working together to understand the complex supply network of the construction of Hinkley Point C (HPC), the first nuclear power station to be built in the UK in over 20 years, and provide business and policy insights for megaprojects of the future. (Scroll down for video)

A social and economic legacy

The vast industrial scale of HPC makes it one of the most complex infrastructure projects in Europe. From the outset, EDF Energy, the company responsible for setting up and managing a complex network of suppliers, has been clear that HPC is more than a power station, believing it can function as a vehicle to drive economic and social prosperity for the South West region of England and the UK.

A key aspect of the HPC megaproject is about creating a legacy of local capability development to attract more businesses to the South West and to encourage local suppliers to participate in future megaprojects. EDF Energy occupies the focal supply network firm role (also called ‘the network orchestrator’) to actively engage with key stakeholders in megaprojects, thus driving fundamental changes to the procurement process, overturning the traditional default mode of awarding service contracts to multinational companies, opting instead to work with local SME businesses. It worked towards enabling local businesses to take on contracts in catering, transport and construction site maintenance, helping them to overcome any barriers to delivering on such a large scale.

Engaging with local suppliers through a range of various delivery models (ranging from consortia to joint ventures to alliances) has helped to build collaboration not only amongst SMEs but also large multinationals and SMEs to deliver key services to the HPC project. Working closely with the UK government and local councils and associations such as the Somerset Chamber of Commerce was vital to realise social and economic value for the region. For example, HOST, a Somerset consortium of four companies, was awarded the Team Service Contract to manage workers’ accommodation campuses for HPC, a contract valued at approximately £50 Million. Overall, EDF Energy has now put more than £465 million into local and family-owned firms. Current challenges for SMEs are focused on not only improving their capabilities but also scaling up their service delivery, thus ensuring that these local SMEs will grow further over the lifecycle of the project and beyond.

A legacy of learning

In March 2017, EDF Energy formed a research partnership with the University of Bath to investigate the challenges that come with planning, developing, managing and delivering complex supply networks and megaprojects. Based in the School of Management, the goal of the HPC Supply Chain Innovation Lab is to improve the management of supply networks in megaprojects through impactful research insights, tools and advice, connecting the Golden Triangle of business-leaders, policymakers and academics.

To date the majority of our understanding of the strategic supply network design has come from manufacturing, which doesn’t tell us anything about megaprojects’ unique characteristics. For instance, the scale of demand increases massively over the project phases, thus contrasting with more stable manufacturing operations.

A key focus for the HPC Supply Chain Innovation Lab is to investigate and provide insights into how network orchestrators such as EDF Energy can integrate local SMEs into a megaproject’s complex supply network. Understanding the different drivers and challenges in this process will help social and economic value creation for future megaprojects in the UK and around the world.

In a true symbiotic relationship, the HPC Supply Chain Innovation Lab works closely with business-leaders and policymakers, hosts regular events and workshops, bringing together key decision-makers to share knowledge on the big challenges they face. It also works closely with the next generation of leaders by supporting placement opportunities, research projects and delivering award-winning teaching cases. 

Understanding the Golden Triangle

The partnership between EDF Energy and the University of Bath illustrates the strength of the collaborative approach of the Golden Triangle to address social and economic value generation. This is an important theme for the University and we see the benefits not only in the HPC Supply Chain Innovation Lab, but also other leading initiatives such as The Institute of Coding; the Institute for Advanced Automotive Propulsion Systems; and the Institute for Mathematical Innovation.

We explored the benefits and challenges of the collaborative approach at a recent high-profile event on the Golden Triangle which brought together business-leaders, policymakers and academics.

This collaborative approach will become more important than ever post-Brexit, as we seek to unlock the economic and social opportunities presented by the Industrial Strategy. The HPC Supply Chain Innovation Lab is fundamental to helping EDF Energy, other industry partners and the government ensure that the benefits of megaprojects outlive the construction process and provide a lasting economic, social and skills legacy in the South West and beyond that can help power the UK’s industrial future.

Professor Jens Roehrich, Mr Jas Kalra and Professor Brian Squire HPC Supply Chain Innovation Lab, School of Management, University of Bath

 

 

Expand for more