Output Based Contracts

Performance Based Contracts to Deliver for Non-Revenue Water (NRW)

Performance Based Contracts to Deliver for Non-Revenue Water (NRW)

A 2011 report by the American Society of Civil Engineers, found that by 2020, the predicted deficit for sustaining water delivery and wastewater treatment infrastructure will be $84 billion.

Meeting current water demand and supplying water for future generations is a significant challenge for the water treatment and transmission industry. With billions of gallons of treated drinking water lost each day primarily due to leaks, leak detection presents one viable solution to reduce this problem. The struggle to manage water loss by utilities and municipalities has been decades in the making and needs the adoption and implementation of newer technologies to effectively detect, locate and stop leaks with technical and managerial expertise. By reducing leaks, utilities save water and energy and can better recover the related sewer charges that are tied to water usage. To ensure water sustainability within many cities, reducing the real loss component of non-revenue water provides the cheapest option in water management for a utility.

Performance Based Contracts to Deliver for Non-Revenue Water (NRW)NRW has not been managed well in the past due to an assortment of issues; high NRW levels indicates a utility that lacks governance, autonomy, accountability, technical and managerial skills that are critical to provide reliable service that commercial and domestic customers pay for. The benefits of NRW reduction are obvious and the technologies are well developed and continuously improving. With years of discussions and work on this subject, the progress has been abysmal.

The volume and causes of NRW were often not properly quantified and presented to senior management
Demonstrating that there was a leak and the timely fixing of that leak rarely were tied together.
If the true volume of NRW was unknown, how can management know the true cost of the lost volume to the utility?
NRW reduction is not a politically exciting event, there are no ribbon cutting events, so politicians tend to favor the construction of new facilities and other projects with higher publicity.
Incentivizing internal employees to work weekends and the night shift on overtime to do the leak detection sounding surveys has also been a problem for utilities.
A NRW program is not simple to develop and implement, it requires the adoption of new technical methodologies to correctly quantify NRW volumes and then implement the specific reduction strategy for that geography and customer. An alternative that has recently been increasingly implemented to reduce NRW around the world is Performance Based Contracts. This approach is being regarded internationally as the best means of delivering substantial reductions in NRW and is gathering the support of governmental funding agencies. A NRW contractor has the specialized technical and management team required to deliver a NRW project and is incentivized to exploit solutions in design and implementation to deliver the agreed upon NRW performance indicators, which is sustained throughout the contract period and handed over to the customer. Public Private Partnerships can also be used to have the contractor participate in the upfront funding of project costs that can later be recovered from a portion of the savings achieved over the contract period. A critical piece of any NRW program is to have the transmission and distribution mains repairs or replacement budgeted and performed in a timely manner to actually realize the savings; Water audit, Intervention and Evaluation.