Award

PR19 - Balance of Incentives and the Cost of Equity

WATER SERVICES REGULATION AUTHORITY

This public procurement record has 2 releases in its history.

AwardUpdate

22 Mar 2017 at 16:14

Award Notice
Award

02 Mar 2017 at 12:43

Award Notice
Summary of the contracting process

The procurement process titled "PR19 - Balance of Incentives and the Cost of Equity" was conducted by the Water Services Regulation Authority, based in Birmingham, England. This tender, classified under business and management consultancy services, aimed to assess and recommend improvements to the incentive framework for aligning the interests of companies with those of their customers. The tender period concluded on 7 November 2016, while the contract was awarded on 23 November 2016, with a total contract value of £138,000 and execution period from 29 November 2016 to 3 March 2017. The objectives of this tender include evaluating the cost of equity in relation to varying risk levels and providing strategic recommendations for the upcoming price review (PR19).

This tender presents significant opportunities for businesses, particularly those specialising in consultancy services within the water and wastewater sector. Small and medium-sized enterprises (SMEs) may find themselves well-positioned to compete due to the specific nature of the consultancy requirements, which demand tactical understanding of regulatory frameworks and company performance incentives. Companies engaged in financial consulting, economic analysis, and regulatory advisory services could greatly benefit from the insights and recommendations stemming from this tender, enhancing their expertise in a niche but vital area of public procurement.

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Notice Information

Notice Title

PR19 - Balance of Incentives and the Cost of Equity

Notice Description

The overall objectives of this work is to: * Review the overall incentive framework for aligning company interests (including company management and investors) with customers now and in the long term. This includes the setting of the single notional allowed return on capital, ODIs, cost outperformance, financing outperformance, as well reputational and procedural incentives associated with risk based review of business plans to consider whether this is most likely to allocate risk and align returns with best interests of customers. * Consider whether menu based differential on allowed return on equity would improve the overall incentive framework and what the implications might be for other elements of incentive package including outcome delivery incentives, totex and financing, if a differential cost of equity was to be introduced. Also consider whether a menu based differential in allowed return on equity would need to be modified to fit with overall incentive framework, in particular the outcome delivery incentives. * Consider desirability and feasibility of setting differential returns on equity for water and wastewater companes on basis of risk and/or ambition of company business plans. If feasible, recommend an approach as to how a menu based approach cost of equity could be best implemented including how an appropriate differential in return could be set. This should include consideration of the impacts on the cost of equity in a 'lower for longer' interest rate scenario. * Provide recommendations on the overall balance of financial and other incentives to best align company with customer interest now and in the longer term. This should include an assessment of the overall balance of incentive mechanisms. It should consider and provide recommendations on the development of appropriate incentive mechanisms for PR19, which may include the evolution or replacement of, mechanisms that applied at PR14. * Consider the implications of a lower for longer interest rate scenario on the cost of equity for PR19. This will consider whether the CAPM approach remains appropriate for setting the cost of equity in an environment of extremely low interest rates for total market returns, risk free rate and equity premium and for estimating the equity beta. We would welcome further suggestions from Contractors on what else should be considered as part of this work. As part of this work the Contractor will also need to engage with us on outcomes and cost assessment work. The Contractor may also need to engage with companies individually, and potentially in a workshop in developing final proposals. We are separately appointing consultants to consider the future development of performance commitments and outcome delivery incentives and so the Contractor will also be required to liase with the consultants developing our approach to outcomes in developing its work on the balance of incentives and risk and reward.

Notice Details

Publication & Lifecycle

Open Contracting ID
ocds-b5fd17-1effd34a-103a-4ce9-bc29-fad91cc2af9b
Publication Source
Contracts Finder
Latest Notice
https://www.contractsfinder.service.gov.uk/Notice/35f322ec-1ee7-43c0-a6fb-20f9947517f6
Current Stage
Award
All Stages
Award

Procurement Classification

Notice Type
Award Notice
Procurement Type
Standard
Procurement Category
Services
Procurement Method
Not Specified
Procurement Method Details
Other -
Tender Suitability
SME
Awardee Scale
Large

Common Procurement Vocabulary (CPV)

CPV Divisions

79 - Business services: law, marketing, consulting, recruitment, printing and security

CPV Codes

79410000 - Business and management consultancy services

Notice Value(s)

Tender Value
Not specified
Lots Value
Not specified
Awards Value
£138,000 £100K-£500K
Contracts Value
Not specified

Notice Dates

Publication Date
22 Mar 20178 years ago
Submission Deadline
7 Nov 2016Expired
Future Notice Date
Not specified
Award Date
23 Nov 20169 years ago
Contract Period
29 Nov 2016 - 3 Mar 2017 1-6 months
Recurrence
Not specified

Notice Status

Tender Status
Complete
Lots Status
Not Specified
Awards Status
Active
Contracts Status
Not Specified

Buyer & Supplier

Contracting Authority (Buyer)

Main Buyer
WATER SERVICES REGULATION AUTHORITY
Contact Name
Available with D3 Tenders Premium →
Contact Email
Available with D3 Tenders Premium →
Contact Phone
Available with D3 Tenders Premium →

Buyer Location

Locality
BIRMINGHAM
Postcode
B5 4UA
Post Town
Birmingham
Country
England
Major Region (ITL 1)
TLG West Midlands (England)
Basic Region (ITL 2)
TLG3 West Midlands
Small Region (ITL 3)
TLG31 Birmingham
Delivery Location
TLG West Midlands (England), TLI London
Local Authority
Birmingham
Electoral Ward
Ladywood
Westminster Constituency
Birmingham Ladywood

Supplier Information

Number of Suppliers
1
Supplier Name

PRICEWATERHOUSECOOPERS

Further Information

Open Contracting Data Standard (OCDS)

View full OCDS Record for this contracting process

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The Open Contracting Data Standard (OCDS) is a framework designed to increase transparency and access to public procurement data in the public sector. It is widely used by governments and organisations worldwide to report on procurement processes and contracts. 

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