Quantitative Approach in Evaluating Water and Waste Water Projects and Operations

Question

Every water utility undergoes tariff reviews (done by governing regulatory body) by validating the expenses incurred by the utility company on project improvements and operations.
Are there any best practices or references that improve projects evaluated quantitatively (using sort of a score card) and if the projects do not meet the criteria, such projects are not be recovered in the tariff, hence, the tariff will not increase. 
Your thoughts please? Thank you.

Alan Bland · Accepted Answer

I can describe how the UK water regulator has approached this problem, but there are alternative approaches as well. The role of an economic regulator is to act in place of a free market, which cannot exist in water, but a free market would force projects to be carried out efficiently. This means they deliver the best value for money that can be achieved. The UK water regulator has judged this through comparisons of similar projects proposed by the water companies and benchmarking the companies' overall efficiency in delivering capital projects. Where a company falls below the benchmark standard, the capital cost is reduced in the allowance made for the tariff increase. In extreme cases, this might result in no tariff increase, but the regulator also applies incentive mechanisms, so that if a project is completed at lower cost than allowed in the tariff-setting, the company can recover part of the saving at the next price review. However, a water company cannot ensure efficient project implementation unless it embraces the best practices of asset management and internalises these so they become routine processes. This opens the door to innovation in project design and delivery. This is a very big subject!

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