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Recommendations to Goulburn Murray Water (GMW)
1. Improving financial sustainability
Recommendation 1 (as stated in the Strategic Advisory Panel Report noting adjustments were made following completion of Recommendation 4)
Status: Complete
In the short term (2018 to 2024), identify and achieve a further 10% efficiency in both operating and capital expenditure across its regulated core businesses of gravity irrigation and 29% in the pumped irrigation, drainage, water districts and fee for service businesses from 2019/20.
The short-term savings required are estimated at $1.4 million in capital expenditure and $8.3 million in total operating expenditure (operations, maintenance and overheads). If more capital savings are achievable, then the estimated operating cost savings could be reduced accordingly. This also applies for the medium and long-term estimates.
- In the gravity irrigation business, this is equivalent to an average annual saving of $1.4 million in capital expenditure and $4.8 million in total operating expenditure (labour, operations, maintenance and overheads). These amounts are additional to the share of the efficiencies that GMW has already identified through its asset initiatives ($474 million) and efficiencies measures ($15.2 million by 2022) and incorporated in the revised base case scenario.
- In the non-gravity irrigation (pumped irrigation, drainage, water districts and fee for service) businesses, this amount is equivalent to average annual savings of $3.5 million in operating expenditure, in addition to the efficiency measures already incorporated into the revised base case.
Recommendation 2
Status: Embedded in GMW’s ongoing business practices
In the medium term (2025 to 2040), identify and achieve further efficiencies in the gravity irrigation business of around 15% in 2024/25, and additional efficiencies of 5% in 2029/30:
- This amounts to additional average annual savings of around $7.9 million in capital expenditure and $10.1 million in operating expenditure on top of the 10% savings assumed for 2019/20.
- In addition, GMW should consider whether it may be appropriate to moderate the magnitude of savings required in 2029/30 by increasing prices in real terms by 0.75% over the five-year period from 2024/25 to 2029/30.
Recommendation 3
Status: Embedded in GMW’s ongoing business practices
In the long term (2041 to 2067), identify additional 5% efficiencies in operating and capital expenditures in 2039/40 in the gravity irrigation business, and apply these with a 1% per annum price increase over the 10-year period 2029/30 to 2038/39.
The estimated savings amount to an additional average annual savings of around $5.2 million in capital expenditure and $2.4 million in operating expenditure.
Recommendation 4
Status: Complete
GMW should confirm the savings targets by undertaking further modelling work in 2018 once it has validated the capital and maintenance cost inputs.
2. Transforming GMW’s business
Recommendation 5
Status: Complete
Adopt the GMW Transformation Implementation Plan.
Recommendation 6
Status: Complete
Establish a Transformation Panel to focus and drive the necessary structural and cultural change in the business and to ensure that GMW is supported with specialist advice to transition and transform the business.
Recommendation 7
Status: Complete
To avoid delay in commencing the transformation, establish a dedicated Transition Panel by February/March 2018. The Transition Panel will translate the findings and recommendations of this report into GMW and draft a preliminary transformation delivery plan.
It will also set up transformation project teams, conduct Connections Project lessons learnt workshops, plan for the GMW business unit restructure, and commence planning for the irrigation asset review work (for example, channel by channel assessments).
Recommendation 8
Status: Complete
Recommendation 8:
Form lead project teams to assist in creating a vision for the future and integrate and communicate transformation throughout the organisation.
Recommendation 9
Status: Complete
Establish a Transformation Manager as the ‘change agent’ to lead the transformation within the business until December 2019.
Recommendation 10
Status: Complete
Employ a Chief Operating Officer to initially focus on delivering the transformation plan with the Managing Director.
Recommendation 11
Status: Complete
Establish a new business structure (individual business units) to successfully deliver GMW’s services reliably to customers at efficient prices over the short, medium and long term.
3. Improving asset management
Recommendation 12
Status: Complete
In the context of the transformation activities, including channel by channel assessments, review latest asset management performance against the benchmark ISO 55000 standard and Asset Management Accountability Framework requirements and use this to develop a comprehensive action plan to address any systemic and ongoing issues.
Recommendation 13
Status: Complete
Undertake a full review of Connections Project’s activities to identify opportunities to improve GMW’s asset management practices, including conducting workshops.
Recommendation 14
Status: Embedded in GMW’s ongoing business practices
Develop a plan to address the potential reduction in GMID’s footprint over the next 50 years due to changing environmental, market and cost challenges.
Recommendation 15
Status: Complete
Review and consolidate the improvement opportunities identified in the Capital Investment Framework review and the Connections Project lessons learnt review.
Recommendation 16
Status: Complete
After reviewing the Connections Project lessons learnt, develop a detailed implementation plan that assigns clear timeframes and staff accountabilities to deliver all activities, including assigning an overall project leader with full authority to deliver.
5: Improving how GMW delivers
Recommendation 22
Status: Complete
Develop a reporting framework that is consistent and accurate across the organisation to ensure informed decision making. This needs to include key performance indicators (KPIs), timeframes and strategic initiatives that align with GMW’s strategy and transformation. The reporting framework should not be outsourced to large consulting firms if they do not fully understand the business.
Recommendation 23
Status: Complete
Ensure the Board has directives in place to ensure the Managing Director can provide necessary leadership, strategic direction, communication and the resources to ensure business transformation is successful and enduring.
Recommendation 24
Status: Complete
Review all committees to ensure they are effective, necessary and consistent with a transformed GMW. Each committee should have clear objectives and accountabilities, through well focused charters or terms of reference and report their outcomes, recommendations and minutes to the Board.
Recommendation 25
Status: Complete
Review its Board attendance to ensure it is a meeting of directors and not management. Management should not attend Board meetings except to deliver and discuss specific papers.
Recommendation 26
Status: Complete
Review the quality and coverage of Board papers to ensure that they properly inform the Board and assist members in decision making. The Managing Director should be able to understand and respond with enough detail on papers presented to the Board.
Recommendation 27
Status: Complete
Review performance reporting arrangements to ensure that they are clearly aligned to strategic and corporate planning documents and are informative about the evidence or reasons for any assessment of performance.
Recommendation 28
Status: Complete
Review decision making processes to eliminate additional processes that slow decision making and are inconsistent with delegated authorities.
Recommendation 29
Status: Complete
Review the operation of all its business functions including finance (eg. separate regulatory and non-regulatory business unit reporting, borrowings profile), IT (eg. the Enterprise Information Management System), risk, human resources, legal, billing, technical services.
The review should include staffing, output, reporting and value add to the business.
Recommendation 30
Status: Complete
Review its non-core activities, including the fledgling commercial activity, given its additional cost and diversion of management time and attention.
The review should include developing overarching principles that would determine initially if assessments of any commercial opportunities proceed, and risk assessed business plans and Profit & Loss accounts applying SMART principles (specific, measurable, attributable, relevant and time-bound) to each activity.
These measures would determine whether those activities continue within GMW or could be divested by the end of 2019.
Recommendations to the Department of Environment, Land, Water and Planning (DELWP)
All DELWP recommendations
Recommendation 1
Status: Complete
The Minister’s Letter of Expectations should be updated to reflect the transformation outcomes as outlined in this report.
Recommendation 2
Status: Complete
The current DELWP delivery share review should have regard to the Panel’s recommendations related to delivery shares as set out in this report.
Page last updated: 08/09/23