MARCH2009 asset management - IWA Publishing€¦ · water asset management INTERNATIONAL MARCH2009 ISSUE1 VOLUME5 PAPERS 3 Asimplifiedtechnicaldecision supporttoolfortheasset managementofsewernetworks

waterassetmanagementI N T E R N A T I O N A L

MARCH 2009ISSUE 1 � VOLUME 5

PAPERS3 A simplified technical decision

support tool for the assetmanagement of sewer networksVitor Sousa, Filipa Ferreira,N. Almeida, José Saldanha Matos,José Martins and Ana Teixeira

10 Models of regional or municipalPublic-Private Partnership (PPP)in order to favour theindustrialization of the integratedwater service in the ATOs ofsouthern ItalyC. Arena, M. Genco andM.R. Mazzola

17 Asset management: Therequired utility organizationparadigm shiftScott Haskins

20 The inclusion of externalitiesin asset managementdecision makingDavid Marlow and Sewart Burn

The American Water Works Association(AWWA) and the ASME Innovative

Technologies Institute have announced apartnership to develop a national ‘voluntaryconsensus’ standard providing an all-hazardsrisk management process for water andwastewater utilities.ASME-ITI is a not-for-profit subsidiary of

ASME (the American Society of MechanicalEngineers). The standard will be based onRAMCAP (Risk Analysis and Management ofCritical Asset Protection).With help from the US Department of

Homeland Security, the EnvironmentalProtection Agency and the Water SectorCoordinating Council, ASME-ITI has tailored thegeneric version of RAMCAP so it applies to waterand wastewater utilities, and has adapted twopre-existing risk management tools so they areconsistent with the new standard.The standard will include protection (how to

avoid hazardous events or their consequences),and resilience (enabling rapid return to fullfunction after events occur).By using common definitions, threats, metrics

and methods to enable direct comparison of risk,resilience and risk management benefits, theRAMCAP standard is intended to help guide

allocation of limited funds among utilities’varied assets, across utilities in differentcommunities, and among assets in criticalinfrastructure sectors.The standard will be developed by a volunteer

committee comprising water and wastewaterutilities, practitioners, academics and the public.ASME-ITI will act as the Secretariat and the workwill follow ASME-ITI’s procedures for standardsdevelopment.ASME-ITI President J Reese Meisinger said:

‘We welcome the partnership with AWWA andare eager to develop a voluntary consensusstandard for the water and wastewater sector.The standard will build upon previouslydeveloped RAMCAP water sectormethodology to provide a basis for enablingutilities to make well-founded decisions whenallocating necessarily limited resources towardrisk-reduction options.’‘The work our committee members do

will ultimately enhance our sector’s riskassessment capabilities through a practical,yet rigorous process,’ said AWWA DeputyExecutive Director Tom Curtis. ‘The approachwill be kept relatively simple and intuitivewhile providing a sound basis for focusing onthe most critical assets at any given facility.’

Partnership produces ‘all hazards’ riskmanagement process

USBill sets out investments in research,sustainability and developmentThe American Recovery and Reinvestment Act

of 2009, introduced to the US Senate on6 January 2009, is set to provide a boost forinfrastructure investment, energy efficiency andresearch and development in addition to theanticipated jobs and stabilisation package.The research & development elements of the

Bill provide $2 billion to the National ScienceFoundation to expand employment opportunitiesin fundamental science and engineering to meetenvironmental challenges and to improve globaleconomic competitiveness, and $400 millionto the National Oceanic and AtmosphericAdministration (NOAA) for operations,research and facilities for habitat restorationand mitigation activities. A $350 million boost forthe Department of Defense for energy researchand development could potentially include water,experts have said.Project funding includes direct US

Department of Agriculture (USDA) loans for ruralwater and waste disposal projects, to a total of$1.5 billion to support an existing $3.8 billion ingrants and loans to help communities funddrinking water and wastewater treatmentsystems, though only publicly-owned treatmentworks can be funded.A $250 million package for economic

development assistance programmes is alsolikely to include water and wastewater projects.The Bureau of Reclamation also gets at least$126 million for water reclamation and reuseprojects and $80 million for rural water projects.There is $1 billion in Department of Energy

grants to institutional entities for energysustainability and efficiency and $6.2 billion for a‘weatherization assistance’ programme and an$8 billion innovative technology loanguarantee programme.The US Environmental Protection Agency also

gets a $6 billion boost for the Clean Water StateRevolving Fund, including negative interest loansand grants to municipalities for projects that areon states’ priority list, of which the documentstates 20% shall be ‘for projects to addresswater-efficiency goals, address energy-efficiencygoals, mitigate stormwater runoff or encourageenvironmentally-sensitive planning, design andconstruction, to the extent that there aresufficient project applications eligible forsuch assistance.’A further $2 billion is earmarked for the

Drinking Water State Revolving Fund, with 50%for additional subsidies to projects that addressserious public health risks and systems mostin need.

WATER ASSET MANAGEMENT INTERNATIONAL • 5.1 - MARCH 2009 • 2

EDITORIAL

Editors

Dr John [email protected]

Professor Stewart [email protected]

Andrew [email protected]

Water Asset Management Internationalis an international newsletter on assetmanagement in water and wastewaterutilities. The focus of the newsletter ison the strategic aspects of this developingfield, providing utilities with internationalperspectives on infrastructure planningand maintenance as they seek to delivercost-effective services to their customers.

Instructions for authors are available at:www.iwaponline.com/wami/default.htm

Papers for consideration should besubmitted to the editors or to:

Catherine FitzpatrickPublishing [email protected]

PUBLISHING

Associate PublisherKeith [email protected]

PublisherMichael Dunn

Water Asset Management Internationalis published four times a year (March,June, April, December) by IWAPublishing. Statements made do notrepresent the views of the InternationalWater Association or its Governing Board.

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waterassetmanagementI N T E R N A T I O N A L

NEWS

Professor Martin Cave’s interim report intocompetition and innovation in the English and

Welsh water markets sets out recommendations forincreasing retail competition in the water industrythat include substantially reducing the volumerequirements for competition and a majorrestructuring of the industry.The professor claims the measures could benefit

customers and the economy by up to £600 millionover the next 30 years and bring considerableenvironmental and service improvements.The key recommendations include introducing

legislation to allow 28,000 and subsequently162,000 large public and private sectororganisations in England and Wales to choose theirwater and sewerage retailer for the first time.Professor Cave also recommends that the water

companies’ retail divisions should be made legallyindependent from their network businesses, andcalls for a series of changes to provide incentives fornew water and wastewater suppliers to enter themarket. He also recommends reforming the accessprice and introducing national access codes and

suggests reform of abstraction and discharge rights,possibly to include trading.The professor also voices concern that inflexible

environmental regulation is stifling innovation,and says he intends to commission furtherresearch into the levels of and barriers to innovationin the industry.The recommendations are intended to reduce

costs and increase service levels for all customers,the report notes. The aim is also to support moreefficient water use and help companies to bettermeet the industry’s many challenges includingclimate change, containing costs, rising consumerexpectations and water efficiency.Professor Martin Cave said at the report launch:

‘Extending competition will deliver real benefits forcustomers and the environment through lowerprices, more choice, higher service levels and thebetter use of water.’The final report and further recommendations,

which will take into account individual companycircumstances such as Dwr Cymru’s uniquenot-for-profit position, will be published this spring.

UK report encourages increasedwater competition

The Asian Development Bank (ADB) has agreed anextra $30 million in funding for a project to

provide cleaner drinking water and better sanitationservices to 1.5 million people across four provincesof the Kyrgyz Republic.The community-based infrastructure services

sector project gained its original approval in 2000,when ADB agreed a $36 million loan. The additionalAsian Development Fund grant will ensure theproject in Chui, Jalal-Abad, Osh, and Batkenprovinces can be completed.Inflation is being blamed for the need to inject

extra funds – sharp increases in the prices of steel,cement, pipes, and petroleum products during theproject implementation period raised the averageper capita cost of constructing water supplyinfrastructure to $80 from $20.The ADB notes that climate change and drought

also limited the use of spring and groundwater nearthe project areas, which meant the water pipenetworks had to be connected to distant watersources, which increased the scale and cost ofthe project still further.

Shakeel Khan, Senior Urban DevelopmentSpecialist of ADB’s Central and West Asiadepartment, said: ‘Unless additional funding isprovided, many communities hoping to benefit fromthe project will remain without safe water supplyand sanitation.’So far, 118 out of 240 subprojects have been

completed. The additional funding will enable thegovernment to complete the remainder.The project is rehabilitating existing systems and

building new ones to provide better living and healthconditions. The intention is also improve the sectoragencies’ organisational and managerial capabilities– many existing systems were found to have failedbecause they were poorly designed and maintained.The project will also support the Kyrgyz

government’s ambition to reduce poverty, enablehuman development and decentralise, throughcommunities helping themselves.With the ADB loan approved in 2000 and the new

ADB grant, along with $16.5 million in contributionsfrom the Kyrgyz government and beneficiaries, thetotal project cost now stands at $82.5 million.

ADB loan for Kyrgyz Republic infrastructureservices

The African Development Bank (AfDB) Group hasapproved an €22.91 million ($31.3 million) loan

to finance phase two of Tunisia’s water sectorinvestment project (PISEAU II).PISEAU II is a component of the Tunisian water

mobilisation and management strategy for 2002-2011, and a sequel to PISEAU I (2002-2007). Themain objective of the new project is to promoteefficient and integrated management of conventionalwater resources including dams, catchmentponds, boreholes and surface wells, as well asnon-conventional water sources – wastewater andbrackish water – to meet the challenge of waterscarcity in the country.The project’s beneficiaries will be Tunisia’s rural

population, especially the most disadvantaged,across the country’s 24 governorates.The project will help improve living conditions by

increasing the amount of irrigated agriculture andproviding a better supply of drinking water. It willalso foster adaptation to climate change. Thebeneficiaries will participate in decisions aboutthe choice of investments for the project, and ininfrastructure management through AgriculturalDevelopment Groups (ADGs) (for irrigation anddrinking water), which will benefit from capacitybuilding activities under the project.The project promotes efficient integrated water

resources management by establishing a nationalinformation system for water resources andparticipatory management by the ADGs.Implementation will begin in 2009 and will last five

years. The total project cost is €122.01 million($167.6 million). The project will be co-financed bythe French Development Agency (AFD), the WorldBank and the Tunisian government.

AfDB approveswater sector investment loan


Asset management in waste-water collection systems

comprises technical decisions asthe core of the managementactivity.Technical decisions play adecisive role on the effectiveprocurement, operation,maintenance and rehabilitation ofinfrastructures. It is also a keycomponent of complying withchanging legal and social require-ments. In urban areas with largesewer networks, the sustainabilityof infrastructures largely benefitsfrom the implementation of anasset management system.Theefficiency of infrastructure assetmanagement is largely dependenton the use of decision supporttools to plan operation andmaintenance activities, namelytechnical decision support tools.The survey ‘Optimization of collec-

tion system maintenance frequenciesand system performance’ conducted byBlack &Veatch (1999) concluded thatthe most important operation andmaintenance activities for US waste-water agencies are sewer rehabilitation,line cleaning, closed circuit televisioninspection and pump station servicing.The Portuguese wastewater agencies,SIMTEJO – Saneamento Integradodos Municípios doTejo eTrancão SAincluded, also face the same challengeswith the addition of renewed demandsfrom increasingly stricter Europeanregulations.According to theWater Research

Center (WRc 2001), sewers arecategorized into critical and non-critical depending on the economicalimpact resulting from their failure.Hor(1992) defines primary sewers as thosewhere failure would have impacts onperformance somewhere in the systemor where failure would have seriouseconomic impact.WEF (WaterEnvironment Federation) andASCE(American Society of Civil Engineers)(1994) classify sewers into classA(critical),B (semi-critical) and C (non-critical), depending on the ratio of theneed for preventive rehabilitation andafter-failure repair as a function of theoverall impact resulting from aneventual failure.The majority of the asset manage-

ment strategies focus on proactiverehabilitation of critical sewers.Thisapproach is recommended taking intoconsideration that failures in thesesewers represent the major fraction ofthe repair costs (Fenner and Sweeting1999).Several models have beendeveloped to support decisions regard-ing proactive rehabilitation.The onedeveloped by theWater ResearchCenter is the simplest and consists ofrating the defects observed duringsewer inspections in order to obtain a

classification for the sewer condition.This approach has been implementedworldwide,despite minor adjustmentsby national institutions and localmunicipalities (WRc 2001;NRC-CNRC 2004).More complex andcomprehensive models were alsodeveloped with the purpose of opti-mizing rehabilitation solutions, takinginto account hydraulic, environmental,social and economical constrains in thedecision process.Examples of thesemodels are the Burgess model (Burgess1988),MARESS (Reyna 1993),APOGEE (Macgilchrist and Mermet,1989),Aflak model (Aflak 1994),PIPES (Lim and Pratti 1997),RERAUVIS (RERAU 1998) andCARE-S (CARE-S 2005).Non-critical sewers tend to be

managed reactively because it hasproven to be economically unviable toconduct periodical inspections in thesecases (WRc 2001).However,non-critical sewers represent the largestportion of drainage collection systems.These type of sewers usually consist ofsmaller diameter pipes,often laid atslack slopes, and experience service-ability problems like siltation,protrud-ing connections, infiltration, fatdeposition, encrustation and root

A simplified technical decision support toolfor the asset management of sewer networksPrioritising actions and investments in sewer asset management should be based on

the evaluation of sewer technical performance with respect to the probability of

technical failure. Vitor Sousa, Filipa Ferreira, N. Almeida, José Saldanha Matos, José

Martins and Ana Teixeira in this paper describe a general expert decision tool

developed towards supporting operation and maintenance activities on sewers.

This tool was developed to enable the identification of critical reaches of the system, the

establishment of priorities referring to sewer cleaning and inspection operations, and

the definition of cleaning and inspection frequency. It aims to reduce the number of

structural and functional failures and, as a result, reduce the number of emergency

repairs and corrective costs.

The tool is based on a ‘failure oriented forecast’ and takes into account the following

preselected parameters and data: sewer diameter, slope, material, age and depth. The

technical decision support tool was designed and developed regarding the asset

management of the collection network explored by SIMTEJO (Saneamento Integrado

dos Municípios do Tejo e Trancão SA) and applied to the Chelas sewer system, one of

the three main sewer systems in Lisbon and in Portugal.

Vitor Sousa,Teaching Assistant,Technical Institute of Lisbon, Portugal

Filipa Ferreira,Assistant Professor,Technical Institute of Lisbon, Portugal

N. Almeida,Teaching Assistant, TechnicalInstitute of Lisbon, Portugal

José Saldanha Matos,Full Professor,Technical Institute of Lisbon, Portugal

José Martins,Operation and MaintenanceGeneral Director, SIMTEJO –Saneamento Integrado dos Municípiosdo Tejo e Trancão SA

Ana Teixeira,Chelas WWTP Director,SIMTEJO – Saneamento Integrado dosMunicípios do Tejo e Trancão SA


Table 1Scores for theprobability ofsediment build up,according todiameter and slope

Diameter [mm] Score200-300 315-500 600-900 ≥1000

Slope [%] 0 ≤ 0 ≤ 0 ≤ 0 100 - 0.50 0 - 0.25 0 - 0.12 0 - 0.08 80.50 - 1.35 0.25 - 0.70 0.12 - 0.30 0.08 - 0.225 5> 1.35 > 0.70 > 0.30 > 0.225 1

A SIMPLIFIED TECHNICAL DECISION SUPPORT TOOL FOR THE ASSET MANAGEMENT OF SEWER NETWORKS


parameters: i) hydraulic performanceparameters, indicating the probabilityof clogging/blockage (related toself-cleansing), and ii) structuralperformance parameters, accountingfor the probability of structuralcollapse (related to durability andstructural resistance,mechanical andchemical actions).

Hydraulic performance parametersSediment built-upSediments are a source of numeroussewer problems, in particular blockageand clogging,which are in the highestpriority category in terms of opera-tional performance (Ashley et al. 2000;Ashley et al. 2004).Sediment accumu-lation in sewers depends upon severalparameters, including; flow velocityand relative water depth; concentra-tion, nature and density of the solidparticles present in the wastewaters;fluid properties (density and viscosity),and sewer characteristics (size, shapeand roughness) (Kleijwegt 1992;Mayet al. 1996;Butler et al. 2003).Theminimum velocity criteria wasadopted to evaluate the probabilityof sediment build-up.According to EN 752:2008 (the

European Standard for planning,design and operation of drain andsewer systems), self-cleansing of smalldiameter drains and sewers (less thanDN 300) can generally be achieved byensuring either that a velocity of atleast 0.7 m/s occurs daily,or that agradient of at least 1:DN is specified.Whenever the discharge is low, the EN752:2008 recommends the use ofslopes up to 1:DN/2.5.For largerdiameter drains and sewers,highervelocities may be necessary,particularlyif relatively coarse sediments areexpected to be present.Portugueselegislation (DR23/95 1995) requires,as a general rule, a minimum flowvelocity of 0.6 m/s for domestic sewersand 0.9 m/s for combined and stormsewers,which corresponds to the limitsrecommended byAmerican Society of

Civil Engineers (1970). In the UK, theBS 8005 establishes minimum veloci-ties of 0.75 m/s and 1.0 m/s for stormand combined sewer, respectively.

infestation, that tend to have a dispro-portionate effect on their performance.Consequently, they may be more proneto functional problems such as block-ages, clogging,odour impacts and evencollapse.As the service connections areusually linked to these sewers, the socialconsequences of failures (functionaland structural) may also be significant.

Therefore,wastewater agencies face thechallenge of starting to deal proactivelywith these sewers (Fenner andSweeting 1999).Additionally, there is agrowing demand for conductingperiodical sewer inspections in order tocomply with legislated requirements,(e.g.,most states in Germany requirethat inspections of the total sewernetwork are performed once every tenyears (Baur and Herz 2002)).This hasled to the development of models toassist decisions regarding the selectiveinspection of sewers,namelyAQUA-WertMin (Baur and Herz 2002) andSCRAPS (Hahn et al. 2002).

Tool design and developmentGeneral aspectsThe implementation of the existingmodels relies on the existence ofinformation about the sewercondition,which is obtained primarilyfrom inspections results. In Portugal,information regarding the sewersystems is often scarce,dispersed and, inseveral cases, incorrect.Nevertheless,there is a need to implement proactivestrategies towards managing suchsystems: sewer systems managers shouldoptimize inspection plans of pipes andmanholes due to the strong economicalconstrains and performance require-ments of these infrastructures.There isalso a growing need to optimize theoperation activities, especially sewercleaning,which is essential for

conducting efficient inspections andfor adequate performance of theinfrastructure as a whole.The present decision support tool

designated MOSIMO (Modelosimplificado para optimização daOperação de sistemas) (SOUSA et al.2007;VEIGAS et al. 2007), aims toassist in the implementation of

proactive management plans insituations of scarce or nonexistentinformation regarding the conditionand performance of the system. In

order to establish priorities, the toolevaluates the probability of failure orunacceptable performance of sewerreaches using a 1 to 10 scale.The resultscan be determined by applying thefollowing general expression:

where:E = evaluation result (1 to 10);K = correction factor, taking intoaccount the knowledge about thesystem (higher than 0);Si = score of performance parameter i(0 to 10);Wi = weighting of performanceparameter i (0 to 100%).

The probability of unacceptableperformance is evaluated taking intoaccount two sets of performance


Figure 1Minimum velocityevolution with

diameter (adaptedfrom Butler et al.

2003)

Figure 2Minimum slopeevolution withdiameter (adaptedfrom Butler et al.2003)

Table 2Scores fordurability,according topipe material

Table 3Scores for theprobability offailure, accordingto pipe diameter

Material / age Score

Cement based (> 30 years) 10Cement based (≤ 30 years) 9Stoneware / Cast iron 6PVC/HDPE/PP (> 15 years) 5Vitrified clay 4PVC/HDPE/PP (≤ 15 years) 2PVC/HDPE/PP Corrugated 1

Diameter Score

>1600 1900-1600 3600-900 5315-500 8200-300 10

Table 4Scores forstructural collapse,according tosewer depth

Depth [m] Score

> 5.5 102 - 5 1< 2 7


Table 1 defines classes of differentprobability of sediment build-up in thesewers’ invert,which is directly associ-ated with selfcleansing velocities.Table1 was developed considering therelationship between diameter, slopeand flow velocities for halfpipe condi-tions.The higher sediment build upprobability (score = 10) corresponds tonegative slopes,while the minimumprobability (score = 1) corresponds tovelocities over 1.5 m/s. Intermediatescores relate to flow velocities lowerthan 0.9 m/s, and between 0.9 m/s and1.5 m/s.The classes were defined bytaking into account the resultsobtained byArthur et al. (2008),whichindicate that combined sewers aremore prone to blockages due tosediments than the domestic ones, aswell as pipes with slopes below 1:DN,flow velocities inferior to 1.0 m/s anda diameter smaller than 225 mm.Thedifference between combined andseparate systems was not consideredsince, in practice,most systems in

Portugal are combined or semi-separate due to the existence of asignificant number of wrong

connections both in stormwaterand domestic systems.The limits inTable 1 were calculated

using the Manning-Strickler equation,considering the value of 80 m1/3/s forthe empirical coefficient Ks,whichcorresponds to the average of the rangerecommended by EN 752:2008.It must be acknowledged that the

use of the minimum velocity criterialeads to the overdesign of small sewers(diameter less than 500 mm) and largersewers,with respect to sedimentation(Arthur et al. 1999;Nalluri and Ghani1996). It was observed that, for largersewers, the critical bed shear stress is thebest indicator for self-cleansingconditions.Typical values for theminimum shear stress are in the rangeof 1-4 Newton metres (N)/mm2,butvalues of 6-7 N/mm2 were measured inthe presence of large sediments.Usuallyvalues of 2 or 2.5 N/mm2 are adopted(Arthur et al. 1999;Butler et al. 2003).Consequently,both the velocity andslope should be variable with the sewerdiameter in order to assure self-cleansing conditions.Figures 1 and 2show the evolution of flow velocityand slope with pipe diameter accordingto the design table for storm sewerswith high sediment loading and 2%allowable deposition presented byButler et al. (2003).

Retention in manholes and sectionreductionThe decision support tool takes intoaccount additional information regard-ing singularities in the sewer network,namely;manholes with retention(when the downstream pipe invert isabove the upstream pipe invert),wherethere are favourable conditions forsediment built-up, and sectionreductions,which are importantfactors for the probability of blockage.

Structural performance parametersMaterial and ageThe structural performance of vitrifiedclay pipes is similar to concrete pipes,with the former presenting usually asuperior chemical resistance.Micevskiet al. (2002) and Coombes et al. (2002)observed that vitrified clay pipesshowed smaller life cycles thanconcrete ones.However, since the useof vitrified clay pipes has declinedsignificantly during the last decades, itwas considered that the ones still inservice are in such places and undersuch conditions that their degradationis very slow.Distinction between

concrete pipes older than 30 yearsresults from the fact that thewater/cement ratio of the concretewas reduced during the 1960s andthe 1970s (CARE-S 2005).In polymeric pipes, structural

performance is highly dependent onthe bedding and trenching conditions,demanding a higher compactiondegree (Elzink and Molin 1992).Sinceonly in the last decade a generalizedincrease in quality control and careabout plastic pipes placement hasoccurred, a lower structuralperformance is expected from sewersconstructed before the early 1990s.Additionally, there has been acontinuous improvement in theproduction methods and chemicalcompositions, leading to higher perfor-mance polymeric pipes (Alferink et al.1995).The introduction of corrugatedpipes,which have higher stiffness ratiosand therefore are less prone to excessivedeformation and structural defects,increased significantly the long termstructural performance of polymericpipes.The statistical analyses of the datafrom the Dresden sewer networkconducted by Baur and Herz (2002)concluded that the PVC (polyvinylchloride) pipes had smaller life spansthan concrete and stoneware.However,as the authors point out, the study didnot include the relations between thevariables considered in the ageingforecast. Stein (2005) conducted astudy for theTEPPFA-Plastics EuropeSustainable Municipal Pipes project,which concluded that flexible pipessystems have,on average, just 20% ofthe defect rates of rigid pipe systems.Furthermore, considering only thedefective sections with defect types thatare the main causes of infiltration andexfiltration, such as fissures (BAB),break/collapse (BAC) or defectiveconnection (BAH),defect rates are,on average,25% of the defect ratesof rigid systems.Metallic pipes,namely cast iron,have

the highest mechanical resistance,though their durability is stronglydependent on the nature and integrityof the protective layers (due to internaland external corrosion).As expected, age increases the

probability of defective performance ofthe pipes.Yang (1999) analysed dataregarding the condition of sewer pipesand obtained an average increase of thecollapse probability of 2.62%/year.Examples of the scores used in the

decision support tool for pipe durabili-

Diameter [mm] Score200-300 315-500 600-900 ≥1000

Slope [%] > 15.00 > 7.50 > 3.50 > 2.5 105.25 - 15.00 2.75 - 7.50 1.25 - 3.50 1.00 - 2.50 61.35 - 5.25 0.70 - 2.75 0.30 - 1.25 0.225 - 1.00 3≤ 1.35 ≤ 0.70 ≤ 0.30 ≤ 0.225 1

Table 6Scores for theprobability ofcorrosion

Corrosion Score

Forced main upstream 10Probability of sediment build-up score of 10 8Probability of sediment build-up score of 8 6Probability of sediment build-up score of 5 3Probability of sediment build-up score of 1 1

Table 7Weighting of thetool parameters

Parameter Weights [%]Inspection Cleaning

Material / age 20.0 15.0Diameter 10.0 15.0Sediment build up - 40.0Abrasion 20.0 -Depth 10.0 -Corrosion 35.0 -Section reduction - 15.0Manhole with drop 5.0 -Manhole with retention - 15.0


Table 5Scores for theprobability ofabrasion,according to pipediameter and slope

Figure 3Abrasionresistance ofdifferent pipematerials (adaptedfrom RIB LOC 1999)


ty are defined inTable 2.These scoresrepresent the structural performance ofdifferent pipe materials, consideringthe mechanical resistance, structuralbehaviour and the chemical andphysical performance of the pipe.

DiameterThe survey conducted by Davies et al(2001a) refers to research projects withcontradictory results, some indicatingthat average-sized pipes have moreanomalies,while others show adecrease of defects with the increase ofpipe size.The statistical investigationconducted by Davies et al (2001b),showed a decrease in the defects ratewith the increase of the sewer size.Similar results were observed byMicevski et al (2002) and Coombes etal (2002).The latter suggested anunderestimation of the loads in thesmaller pipes as an explanation for therate decrease.Yang (1999) calculated adecrease in the probability of collapseof 0.39% for each additional centimetrein diameter.Baur and Herz (2002)reported that pipes with a diameter inthe range of 300 mm to 1000 mm arethe least prone to defect, followedclosely by pipes over 1000 mm indiameter, and the biggest rate of defectsaffect pipes below 300 mm in diameter.It must be acknowledged that, in all ofthese studies, the relationships betweenthe variables were not taken intoaccount in the forecast.Table 3 presents used scores for the

probability of failure according to pipediameter.Despite the small statisticaldifferences observed for pipes over 600mm in diameter,different scores wereadopted in order to incorporate theconstruction quality effect,which wasconsidered to be a determinant variableregarding the probability of failure. Infact, construction quality control isusually stricter in important sewers,which generally present the largestdiameters.

Sewer depthDavies et al. (2001a) reported that moststudies indicate a defect rate decreasedown to a depth of 5.5 m,below whichthe defect rate begins to increase withdepth,with the majority of problemstaking place in sewers installed atdepths below 2.0 m. It was suggestedthat this reflects the decreasing influ-ence of surface factors, such as roadtraffic and utility/surface maintenanceactivity, and the increasing effect ofoverburden factors.The statistical studyconducted by the same authorsconcluded that the sewer depth wasuninformative after accounting forsewer size because, in the samplenetwork studied, the increase in depthwas coincident with an increase indiameter (Davies et al. 2001b).Yang

(1999) also found that the sewer depthwas not a relevant parameter for theprediction of failures in his case study.However, as Davies et al. (2001b) states,‘this is not to say that sewer depth is nota significant variable when consideredon its own’.Table 4 presents scores of the devel-

oped tool for sewer depth categories.The presented scores are related withthe probability of structural collapsedue to surface and soil loads.Despitethe fact that some studies suggest thatbigger failure rates are related tosuperficial pipes, it was assumed abigger score for deeper pipes since theirstructural collapse usually correspondsto higher economic burdens.

AbrasionParameters involved in the abrasionphenomenon include amount, size,shape and hardness of the solid parti-cles, flow velocity, type of flow (turbu-lent or laminar), pipe material andsurface roughness. In sewer systems therepetitive cleaning procedures can alsocontribute to pipe erosion.Portuguese legislation (DR23/95,

1995) establishes a maximum flowvelocity of 3.0 m/s for domestic sewersand 5.0 m/s for combined and stormsewers, at design flows.According tothe Federal HighwayAdministration(FHWA,1996), four levels can bedefined for the abrasion potential:• Level 1 – nonabrasive conditionsexist in areas where there is no bedload and flow velocities are very low;

• Level 2 – low abrasive conditionsexist in areas with minor bed loads ofsand and flow velocities of 1.5 m/s;

• Level 3 – moderate abrasiveconditions exist in areas withmoderate bed loads of sand andgravel,where flow velocities arebetween 1.5 m/s and 4.5 m/s;

• Level 4 – severe abrasive conditionsexist in areas with heavy bed loads ofsand,gravel, and rock,where flowvelocities exceed 4.5 m/s.

Classes and scores for the probability ofabrasion considered in the developedtool are presented inTable 5.The scoresare related with flow velocities for half-pipe conditions. It was considered thatflow velocities below 1.5 m/s have thelowest abrasion potential (score = 1),while flow velocities over 5 m/s havethe highest (score = 10). Intermediatescore values correspond to velocities inthe range of 1.5-3 m/s and between3-5 m/s.The limits inTable 5 were calculated

using the Manning-Strickler equation,assuming half-pipe flow and consider-ing the value of 80 m1/3/s for theempirical coefficient Ks,whichcorresponds to the average of the rangerecommended by EN 752:2008.At the present stage of the technical

decision support tool development, theroughness or erosion/abrasionresistance of different pipe materialswas not taken into account directly,butindirectly through the material and ageparameters.Tests conducted byindependent laboratories proved thatconcrete pipes have less abrasionresistance than polymeric pipes. Somestudies indicate that vitrified clay pipeshave a erosion resistance similar topolymeric pipes, as long as the vitrifiedsurface layer is not worn off (UNI-BELL 2003),while others point to ahigher performance (NPCI 141,no date).

Figure 4Depth, slope andlength distributionof the sewerreaches of Chelassubsystem casestudy, Lisbon,Portugal



Figure 3 presents the results from astudy developed in DarmstadtUniversity,Germany,where the mostcommon pipe materials were evaluatedin terms of abrasion resistance.

CorrosionHydrogen sulphide is perhaps the mainreason for the corrosion problems insewers, especially in non-protectedconcrete and metal elements.Parameters on which the concentra-tion of hydrogen sulphide dependsinclude (EN 752:2008):• biochemical oxygen demand(BOD),which is a measure of theorganic matter of the wastewater;

• wastewater temperature,directlyresponsible for biological reactionrates and air-water transfer ofhydrogen sulphide;

• retention time and ventilation,which controls time and oxygenavailable for the reactions;

• flow velocity,which affects therate of oxygen absorption, the release

of hydrogen sulphide to theatmosphere and the build up ofsediments and slimes;

• turbulence,which increase theamount of oxygen absorbed into thewaste water and the hydrogensulphide gas stripping;

• pH,which influences dissociation ofthe sulphide ion species in the bulkwater (the lower the pH, the higherthe proportion of sulphide in theform of hydrogen sulphide);

• existence of rising mains orparticular trade effluent dischargesupstream of the gravity sewer.

The scores for the probability ofcorrosion presented inTable 6 weredefined in the developed tool consider-ing the probability of sediment build-up,or the existence of a rising maindischarging upstream (which representsthe highest probability score = 10).The action of hydrogen sulphide is

due to the corrosive potential of thebiogenic sulphuric acid formed.Sincenot all pipe materials have the samechemical resistance to biogenic sul-phuric acid, correction factors of 1.2for concrete and asbestos concrete,0.9for cast iron and 0.4 for the remainingpipe material were applied. It is consid-ered that the aspect of corrosion maybe significantly developed in the tool.

Manholes with invert dropThe existence of manholes with dropsover 0.5 m are more prone to abrasionand, if hydrogen sulphides are presentin the bulk wastewater, to corrosion.Therefore, the evaluation of thestructural performance considers thistype of singularities.

Weighting of performance parametersAccording toTran (2007), the mainparameters that contribute to thedeterioration of the hydraulic perfor-mance of storm sewers are:diameter;age; slope; and structural condition.Thesame author found that the structuralperformance depends mainly on thediameter, the location, and thehydraulic condition on the sewer.Sincenot all of the parameters analysed havethe same impact in the performance ofthe sewer,different weights wereattributed in order to establish priori-ties for cleaning or inspection activities.As the technical decision support

tool was developed for situations ofscarce information, the location wasnot taken into account. In Portugal,where significant variations of the landuse within the same locality is notusual, this is not expected to be arelevant parameter. Since the modelwas developed as a support tool to assistin the definition of inspection plans, itwas assumed that eventual structuraldefects that may affect the hydraulicperformance of the sewer system will

be detected and solved in time.Examples of weights for the different

selected parameters are presented inTable 7, for inspection (structuralperformance) and cleaning (hydraulicperformance) prioritization.In the absence of specific informa-

tion and knowledge, the correctionfactor that allows the introduction ofempirical information resulting fromthe experience of the system managerand operators may be considered 1.The results obtained with the

support tool should not be consideredas an absolute scale but rather as aprobabilistic classification for a givenarea.Therefore, the results should becategorized into three classes accordingto the probability of deficientperformance (E = evaluation result):• E > 5.5 - high probability;• 5.5 ≥ E ≥ 3.5 - medium probability;• E < 3.5 - low probability.

Application to a case studySIMTEJO sewer systemSIMTEJO was created in 2001 tocollect and treat sewage generated inthe hydrographic basins of theTrancãoRiver, the small basins on the rightbank of theTagus estuary betweenVilaFranca de Xira andAlgés, andtributaries in the district of Mafra inwestern Portugal, close to Lisbon.The Lisbon,Loures,Mafra,Odivelas

andVila Franca de Xira municipalitiesare entirely served by this system,which also serves part of theAmadoramunicipality.Covering a total area ofmore than 1000 square kilometres andserving about 1.5 million residents,SIMETJO system includes 26 waste-water treatment plants, 55 pumpingstations and 125 km of sewers.

Chelas sewer subsystemThe Chelas sewer subsystem,operatedby SIMTEJO, serves more than140,000 inhabitants and is divided intofour main trunk sewers with a totallength of 3300 m,with 131 manholes.The system also comprises five pump-ing stations and includes various weirsin order to separate domestic effluentsfrom the combined system andtransport them to the interceptors orto the pumping stations.The averagedepth, average slope and lengthdistribution of the sewer reaches arepresented in Figure 4.The tool presented in this paper was

applied to the Chelas sewer subsystemof the SIMTEJO served area. In termsof probability of structural collapse,5%of the reaches were classified as highprobability, 38% as medium probabilityand 57% as low probability.The clean-ing evaluation concluded that 10% ofthe sewer reaches were classified as highprobability, 17% as medium probabilityand 73% as low probability.The main

Figure 5Inspectionevaluation resultsof the applicationof the tool to theChelas subsystemcase study, Lisbon,Portugal



investigation.Elsevier,UrbanWater,3, pp.277-286.

DR 23/95 (1995) Regulamento geraldos sistemas públicos e prediais de dis-tribuição de água e drenagem de águasresiduais.Decreto Regulamentar 23,23 deAgosto 1995 (in Portuguese).

Elzink,W.and Molin, J. (1992)Theactual performance of buried pipes inEurope over 25 years.Plastic PipesVIII.

EN 752:2008 Drain and sewer systemoutside buildings.European Committee forStandardization,Brussels,Belgium.

Fenner,R. and Sweeting,L. (1999)Adecision support model for the rehabilitationof ‘non-critical’ sewers.Elsevier,WaterScience andTechnology,Vol.39,No.9, pp.193-200.

FHWA (1996) Federal lands highwayproject development and design manual.USDepartment ofTransportation,FederalHighwayAdministration,Publication No.FHWA-DF-88-003,USA.

Hahn,M.,Palmer,R.,Merrill,M.,

results are presented in Figure 5 and 6,for inspection and cleaningrespectively, according to pipematerial, diameter and slope.Figure 7 presents an analysis of the

cleaning and inspection evaluationrelating to the average depth, averageslope and total length of the sewersubsystem.These results are confirmed by the

experience and sensibility of the systemmanagers and operators, especially asfar as cleaning priorities are concerned.

ConclusionsThe technical decision support toolpresented in this paper was developedto assist the implementation of opera-tion and maintenance strategies insituations of scarce or nonexistentinformation regarding the conditionand performance of sewer systems.The probability of unacceptable

performance was evaluated usingseveral parameters that are known toinfluence the performance of sewernetworks.Parameters or variables suchas sewer condition, land use andwastewater characteristics were nottaken into account due to a lack ofappropriate data. Since the mainobjective of the decision support toolwas the definition of priority interven-tions based on a ‘failure orientedforecast’, the tool does not optimize theresults considering the economical,environmental or social costs that mayresult from failures.Future developments of the

presented decision support tool mayinclude the following aspects:• calibration of scores and weights ofthe parameters based on the datafrom the cleaning and inspectionoperations;

• possibility of increasing the accuracyof the tool through the considerationof further relevant factors,namelythe structural sewer condition, andthe elimination of eventual non-representative parameters.

The decision support tool is presentlyin implementation stage by Simtejo.Once the data collected during theinspections of the sewer system starts toallow for the modelling of sewers’ageing, it will be possible to predictrehabilitation needs.This tool may beconsidered as the first stage of theimplementation of a fully integratedtechnical management decision model,which will integrate hydraulic,environmental and, eventually,social constraints. �

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Grootoonk, J. (1995) Old PVC gravitysewer pipes:Long term performance.PlasticPipes IX.

Arthur,S.,Ashley,R.,Tait,S. andNalluri,C. (1999).Sediment transport insewers – a step towards the design of sewersto control sediment problems.Proc. Instn.Civ.Engrs.Wat.,Marit.& Energy,136,March 9-19.

Arthur,S.,Crow,H.and Pedezert,L.(2008) Understanding blockage formationin combined sewer networks.Proceedings ofthe Institution of Civil Engineers,WaterManagement 161, IssueWM4,pp.215–221.

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Ashley,R.,Fraser,A.,Burrows,R. andBlanksby, J. (2000)The management ofsediment in combined sewers.Elsevier,UrbanWater,2, pp.263-275.

Baur,R. and Herz,R. (2002) Selectiveinspection planning with ageing forecast forsewer types.Elsevier,Water Science andTechnology,Vol.46,No.6-7, pp.379-387.

Black &Veatch (1999) Optimization ofcollection system maintenance frequenciesand system performance.AmericanSociety of Civil Engineers and UnitedStates Environmental ProtectionAgency CooperativeAgreement#CX 824902-01-0.

Burgess,E. (1988)A Methodology forthe Planning of Rehabilitation of theWastewater Collection Infrastructure.MScthesis,University of Cincinnati,UnitedStates ofAmerica.

Burkhard,R. and Lakehal,S. (2006)Sewer rehabilitation planning: priority andcost planning using GIS. IWA,WaterPractice &Technology,Vol.1, Issue 1.

Butler,D.,May,R.andAckers, J. (2003)Self-cleansing sewer design based onsediment transport principles.ASCE,Journal of Hydraulic Engineering,Vol.129,No.4, pp.276-282.

CARE-S (2005) ComputerAidedREhabilitation of Sewer Networks.ProjectNumber EVK1-CT-2002-00106http://care-s.unife.it/ (accessed 15December 2006)

Coombes,P.,Micevski,T. and Kuczera,G. (2002) Deterioration, depreciation andserviceability of stormwater pipes.Conference on Urban StormwaterManagement,Stormwater IndustryAssociation,Orange NSW,23-24April.

Davies, J.,Clarke,B.,Whiter, J. andCunningham,R. (2001a) Factors influenc-ing the structural deterioration and collapseof rigid sewer pipes.Elsevier,UrbanWater,3, pp.73-89.

Davies, J.,Clarke,B.,Whiter, J. andCunningham,R. (2001b)The structuralcondition of rigid sewer pipes: a statistical

Figure 6Cleaning evaluationresults of theapplication of thetool to the Chelassubsystem casestudy, Lisbon,Portugal



Andrew B.and Lukas,A. (2002) Expertsystem for prioritizing the inspection ofsewers:Knowledge base formulation andevaluation.ASCE, Journal ofWaterResources Planning and Management,128(2), pp.121-129.

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Renya,S. (1993) Optimal Planning ofSewer Systems Rehabilitation.PhD thesis,Purdue University,United States ofAmerica.

RERAU (1998) Méthodologie deprogrammation de réhabilitation descollecteurs visitables.Projet NationalRERAU (Réhabilitation des Réseauxd'Assainissement Urbains) (in French).

RIB LOC (1999) Series 2000stormwater pipe.RIB LOCAustraliaPTY LTD,Technical Manual,April 1999.

Sousa,V.,Silva,M.,Veigas,T.,Matos, J.,Martins, J. andTeixeira,A. (2007)Technical management of sewer networks:Asimplified decision tool. IWA,LESAM2007 - 2nd Leading Edge Conference onStrategicAsset Management,Lisbon.

Stein,R. (2005) European study of theperformance of various pipe systems,respectively pipe materials for municipalsewage systems under special considerationof the ecological range of effects during theservice life.Report forTEPPFA-PlasticsEurope Sustainable Municipal Pipesproject,Stein & Partner GmbH,Bochum,

Germany.Tran,H. (2007) Investigation of

deterioration models for stormwater pipesystems.PhD thesis,Victoria University,School ofArchitectural,Civil andMechanical Engineering Faculty of Health,Engineering and Science,Victoria,Australia.

UNI-BELL (2003) Maintenance ofPVC sewer pipe.PVC PipeAssociation,UNI-TR-3-03.

Veigas,T.,Sousa,V.,Ferreira,F.,Matos,J.,Silva,M.and Martins, J. (2007) Modelosimplificado para a optimização da operaçãode sistemas de drenagem de águas residuais.APDA,Encontro Nacional de EntidadesGestoras,Lisboa,Portugal, 6-8 deNovembro (in Portuguese).

WEF/ASCE (1994) Existing sewerevaluation and rehabilitation.Water

Environment Federation Manual of PracticeFD-6 /American Society of CivilEngineers,Manuals and Reports onEngineering Practice No.62,SecondEdition,United States ofAmerica. ISBN:1 881369 92 7

WRc (2001) Sewerage RehabilitationManual.Fourth Edition,Water ResearchCenter,England.

Yang,Y. (1999) Statistical models forassessing sewer infrastructure inspectionrequirements.MasterThesis,University ofAlberta,Department of Civil andEnvironmental Engineering,127 pages,Edmonton,Alberta,Canada.

Paper presented at LESAM 2007 – 2ndLeading Edge Conference on StrategicAsset Management

Figure 7Inspection andcleaning evalua-tions according toaverage depth,average slope andtotal length.



MODELS OF PPP IN ORDER TO FAVOUR THE INDUSTRIALIZATION OF THE INTEGRATED WATER SERVICE

Introduction

The enforcement of thenational regulation reforming

the organization of civil waterservice (the so called ‘Galli’ lawof 1994, now replaced by thelegislative decree 152/2006), albeit

in an advanced state of completion,is experiencing in the south ofItaly,more than elsewhere in thecountry, difficulties and delays.ManyATOs (an Italian acronym for

OptimalTerritorialAmbit),hadinitially opted for competitiveprocedures in the selection of the

utility and since 2003-2004, a numberof tenders have been called for inregions such asTuscany,Calabria andSicily, either for the long-term (20-30years) entrustment of the integratedwater service to a private company,orfor searching for the private partner inpublic-private partnerships.However,

Models of regional or municipal Public-PrivatePartnership (PPP) in order to favour theindustrialization of the integrated water servicein the ATOs of southern ItalyThis paper assesses the critical issues in the industrialization of water services in

southern Italy and introduces two Public-Private Partnership (PPP) models; a regional

company for bulk water service and a network company at the scale of the integrated

water service (IWS – municipal water distribution, sewerage and wastewater treatment)

as a means to overcome them. Within the general framework of the current national

legislation providing the transfer via tenders of water service to contractors in charge of

operation, maintenance and carrying out the investments to be paid back by tariffs

under public regulation and control, critical aspects in the industrialization process of

the water services are identified at different levels. This starts from the drawbacks of the

methodology prescribed for the assessment of the average tariff, to the existence of long

transients towards the steady-state phase, during which contractors are demanded to

undertake risks related to the very uncertain environment in which they are to operate,

that are perceived as too high in comparison with the possible guarantees. PPP models

can represent a way to share risk between public and private partners, and to

encourage investors. The two above-mentioned PPP models are then introduced and

briefly discussed; one at a regional level for the bulk water service and one at the ATO

(Ambito Territoriale Ottimale – Optimal Territorial Ambit, an aggregation of

municipalities) level for the management of public assets (network company). They can

represent suitable operational models to share the risks related to the transition phase

while assuring an effective public control and seizing all the opportunities of an

industrial management of service without lowering the expected environmental and

service quality targets. The simulation of the behaviour of the network companies in two

Sicilian ATOs shows that the achievement of consumers’ benefit (rate reduction) can be

combined with increased operation returns, provided that the public company is able to

offer a superior reliability level to the credit system.

C. ArenaConsulting engineer, Palermo, Italy.Email: [email protected]

M. GencoConsulting engineer, Palermo, Italy.Email: [email protected]

M. R. MazzolaProfessor of Hydraulic Constructions,Hydraulic Engineering andEnvironmental Applications Department,DIIAA, University of Palermo, Italy. Email:[email protected]


public-private company (the privatestock majority owner has been chosenthrough an international tender),which is also in charge of realising andpartially financing the investments torenew and maintain the aqueducts.Fordetails on the organizational layout ofSiciliacque SpA refer to Genco andMazzola (2004b). In the local sector,applying a regional law,nineATOshave been stated that institutionallyassociates all the municipalities of eachof the nine Sicilian provinces.According to the current legislation, ineachATO the integrated water serviceis to be committed to a new servicecompany on the basis of an operationand investment programme (the socalled ‘Piano d’Ambito’,PdA),which isproposed by the company andapproved by theATOAuthority, inorder to achieve high serviceperformances and cost effectiveness infavour of the consumers.The servicehas already been committed throughtenders in theATOs of Caltanissetta,Enna and Palermo,while similarprocedures are being followed for theATO of Catania (with a Public-PrivatePartnership), Syracuse,Agrigento andTrapani where theATOAuthorityopted for a concession.In the two remainingATOs of

Messina and Ragusa, a lack of decisionby the appointed authorities (theconference of the mayors and theprovince chairman) has caused the

process to stop.As will be illustrated,similar situations are not typical ofSicily,but are ubiquitous insouthern Italy.In the other mainland southern

Italian regions, the integrated waterservice is also closely connected to theexisting bulk water companies for civilor multipurpose water supply. InCalabria, a public-private company, theSORICAL SpA,operates the bulkwater supply to fiveATOs.In Molise, the bulk water service for

civil purposes has been entrusted toERIM SpA,an in-house regionalsociety.The definition of ‘in-houseprovider’ comes from European Union(EU) legislation and specifically fromsome judgments of the EuropeanCourt of Justice. It identifiesundertakings of any legal form,provided that municipalities have onthem the same degree of control thatthey would have on their own offices;and provided that the concernedundertaking is delivering thesubstantial part of its activity on behalfof the owner local authority(Massarutto 2007, in press). InCampania, the operation of theAcquedotto Campania Occidentale(Western CampaniaAqueduct) hasbeen entrusted by a concession.In Basilicata,Apulia and Sardinia

regions there exists a singleATO atregional scale and for the bulkmultipurpose water service in-house

even if with some exceptions, theseefforts have not proved very effectivein fostering the creation of a waterindustry, especially in southern Italy -some tenders have been void or withonly one bidder, and even in thosecases where the new companies haveentered operations, the start-up phaseis proceeding very slowly.The reformof the water sector is at risk in thoseareas, and the state of water services islikely to remain quite unsatisfactory,oreven critical.Clearly, the water sectorhas slower and smaller capital recoveryrates than other types of services, sayenergy.This however does not dojustice to all of the specific aspects ofthe sector in the Italian context and inthe southern Italian context inparticular.The potential investor in theintegrated water service (IWS in thefollowing) is called to undertakeconsiderable financial risks, especiallyin the largerATOs, and this againstlimited returns and long recovery times.After a brief context analysis, the

paper examines possible solutions andproposes new Public-PrivatePartnership (PPP) models that may beviable for the management of the IWSeven in southern Italy’sATOs, and mayhence allow some relevant criticalissues to be dealt with.

Critical aspects of the integratedwater service in southern Italy

The Sicilian government has chosen toorganize the integrated water serviceinto two segments (Genco andMazzola, 2004a): i) the bulk watersupply sector (the so called‘Sovrambito’), constituted by majorinterbasin aqueducts, reservoirs andtreatment plants, selling drinking waterto customers located in differentATOs, and ii) nineATOs that managelocal resources for water supply andalso operate sewerage and wastewatersystems.In the first segment, the operation of

the large water infrastructures has beencommitted to Siciliacque SpA,a



Figure 1Average tariffs inSicily over theplanning (PdA)

horizon

Agrigento Caltanissetta Catania Enna Messina Palermo Ragusa Siracusa Trapani

Equity 68458 48763 145475 25700 117013 148051 44029 52153 71073

Loan 159735 113779 339442 59967 273029 345452 102734 121691 165836

Maximum short term debt 14301 50808 0 13382 19271 0 5738 930 11694

Short term debt in 30th year 0 34485 0 0 0 0 0 0 0

Residual value of the investment in 30th year 42535 46195 140858 32729 139150 89846 51818 88538 66704

IRR (%) 2.51 0.69 4.01 3.81 2.69 3.55 3.89 3.94 3.22

DSCR minimum (years 1- 20) 0.11 -1.89 1.84 0.73 0.93 1.80 1.64 1.87 1.11

DSCR mean (years 1- 20) 1.29 0.45 2.15 1.50 1.61 2.03 2.00 2.09 1.96

DSCR maximum (years 1- 20) 2.05 1.28 2.37 2.13 1.98 2.20 3.10 2.21 2.22

First year of positive net result 6 12 2 4 2 5 3 4 7

Table 1Financialindicators of theSicilian ATOs(Thousands of€, %)


companies (asAcqua SpA in Basilicata)or agencies (ENAS in Sardinia) havebeen established. InApulia,waterresources for civil supply are purchasedfrom both Consorzi di Bonifica(Land-reclamation and IrrigationBodies) and from conterminousregions (Basilicata through EIPLI,Campania and also Molise inthe future).

New ideas vs. resistance to change inthe water service policies

As mentioned above, the case of thetwo SicilianATOs where the changeprocess based on the entrustment ofservice through tender has come to ahalt, is not an isolated one.With theexception of Calabria, Sicily and twoATOs in Campania,many regions insouthern Italy (Abruzzo,Apulia,Basilicata, Sardinia and two otherATOsin Campania) opted from the onset forthe entrustment of service either toalready-existing public utilities,or tonew public companies that havemerged into the existing ones. In theseregions, the only entrustedATOs arethose for which in-house fully (as inApulia) or partially (as in Basilicataand Sardinia) region-owned publiccompanies have been created.A similaroption is also likely for the ‘Napoli-Volturno’ATO in Campania, after thevoid tender for the private partner in aPublic-Private Partnership.Also inCalabria,no tender for the selection ofa private partner or a service licenseehas, at least to date,been successful.However, the implementation of

such, at times,unsuccessful initiativeshas required that the regions ofsouthern Italy carry out actions tofoster the development of a waterindustry.Many of the followingconsiderations that refer to Sicilyalso apply to other southern Italiancontexts.The process leading to theentrustment of the IWS has receivedtimely support by the Siciliangovernment through appropriateplanning actions aimed at theequalization of rates and at makingthe PdAs (see subsection above)more attractive for investorsthrough financing of investmentsand operations.The investments planned in the

PdAs of the nine SicilianATOs (in 30years) and in the investment plan ofSiciliacque SpA (in 40 years) amount toaround €6.4 billion ($8.2 billion) butmost investments are concentrated inthe first years of operation - 34% isplanned in the first five years and 58%in the first ten years. Since the begin-ning of the process (2001), investmentsin the bulk water sector have received astrong support,with the allocation ofaround €153 million ($195.8 million)

grants plus around €46 million ($58.9million) from‘private’ financialresources, i.e. from bulk water tariffs, tocarry out nine high-priority strategicprojects on some of the large aqueductsto be entrusted for 40 years toSiciliacque SpA.The regional govern-ment also attempts to reduce andequalize tariffs by directly paying thecosts of all those desalting plants (someof which are now rather old) exceedingthe bulk water tariff (0.59 €/m3 (0.75$/m3)).Ever since 2002, the regionalgovernment has also started its plan offinancial support to theATOs based onCSF (Communitarian and national)funds 2000-2006.Such funds totalaround €1.1 billion ($1.4 billion), to

cover a consisting part of thefinancial demand for the projects to becompleted in theATOs in the firstyears of operation (around €2 billion($2.6 billion)).The leading criterion in the alloca-

tion of such funds to the variousATOswas to reduce as much as possible thedifferences among the expected tariffs.For this reason, a consistent part of thefinancial resources has been allotted tothoseATOs (Agrigento,Caltanissetta,Enna andTrapani) whose expectedrates were significantly higher than theothers. Increasing funds in theseATOshas lowered the expected tariffs, thuscontributing to reduce the expenses tobe born by customers for financing theplanned projects.The estimatedreduced expenses for customers in a 30year horizon are the following:• Agrigento €69.6 million

($89.1 million)• Caltanissetta €73.7 million

($94.3 million)• Enna €73.8 million

($94.4 million)• Trapani €34.1 million

($43.6 million)

Figure 1 reports the expectedevolution of tariffs in the 30 yearhorizon for the nineATOs togetherwith the (weighted) average tariff forthe whole island.The governmental support to

increase the grants for investments haslowered the expected tariff level, buthas not necessarily contributed toenhance the financial performances ofthe PdAs and in some instances haseven caused them to worsen.This canbe ascribed to the fact that in somecases the financial results are influencedmore by the operation costs than byinvestment costs in a way that is notallowed for in the Metodo Normalizzato(Normalized Method,NM in thefollowing), the standard procedureprescribed by law (Ministerial Decree1August 1996) for the assessment ofthe average tariff of the IWS.Theevolution of the tariff value isconstrained in the first years ofoperation to a maximum of the k value(price cap) and therefore may in somecases not allow the covering of theplanned operation costs even when theimpact of the investment costs on thetariff is extremely little. Stateddifferently,because of the constrainton the maximum k and of aninappropriately low zero-point tariff,recovering from the poor managementoptions of the past becomes feasibleonly in long term perspective. In Sicily,such poor management options can toa good extent be traced back to themunicipalities and to the public agency(EAS - EnterAcquedotti Siciliani),previously appointed to the operationof bulk water and in some contexts thewhole IWS. Although legislation andCIPE (the interministerial committeefor economic planning) resolutionshad already in the 1990s imposed toadjust local water tariffs to the actual

Figure 3Mean actual tariff(MAT) in theAgrigento ATO(€/m3)

Figure 4Mean actual tariff(MAT) in theTrapani ATO (€/m3)

Figure 2Scheme of the bulkwater regionalcompany



operation costs,municipalities andEAS have rather left the operationcosts of the IWS to weigh on theirbudgets and hence on public taxation.In many instances tariffs have not evenbeen adjusted to inflation.Such asituation is not accounted for by theNMwhich assumes instead that theshift in the IWS management takesplace from situations whose financialbalance is taken for granted.Table 1 illustrates some indicators of

the management of SicilianATOs.Indicators ofAgrigento’s andCaltanissetta’sATOs, refer to financialresults obtained without any supportfrom the regional government.Simulations show in these cases

consisting losses in the first years ofoperation,which can also last longerthan five years.Overall, the financialperformances of these plans are quitepoor. In such situations, increasing thegranted part of the investment fundsresults in a reduction of tariffs andhence, ceteris paribus, of the financialinput and may shift even forward therecovery of costs and operation lossesand cause a further reduction of thereturn and performance indices.In the awareness of all this, in 2004

the regional government decided tosupport the financial balance, throughsupport of the operation costs,of themost critical PdAs, i.e. those ofAgrigento and Caltanissetta, bygranting an annual contribution tooperations for the first six years (for an

overall expense of €51.2 M ($65.6 M)weighing on the regional budget),equal to the difference between theexpected tariff revenue as assessed bythe NM net of the auction markdownand the tariff yield that should benecessary to grant the financial balanceof operations.The financial results of both plans

improve considerably and the risk forthe IWS future operator decidedlyreduces - clearly, the regional contri-bution represents a ‘firm’yield, safefrom any possible (and to some degreelikely) bill evasion.The expected improvement through

the implementation of this kind ofsupport can be summarized forAgrigento by an increase of thernternal rate of return (IRR) from2.51% to 3.40% and of the average (yrs1- 20) DCSR from 1.29 to 1.72,whilethe first year with positive results shiftsfrom year seven to year five.Similarly,for Caltanissetta, the IRR is expected

to increase from 0.99% to 3.77% andthe average DCSR (yrs 1- 20) from0.45 to 1.94,while the first year withpositive results shifts from year 12 toyear four.As mentioned above, the

CaltanissettaATO now has a new IWScompany (Caltaqua -Acque diCaltanissetta SpA) and theAgrigentoATO is now completing theprocedures to entrust the service to anew company.The above policies implemented by

the Sicilian government to foster thedevelopment of a water industry on theisland have focused on supporting bothinvestments and operations in the start-up phase of the service, in the aware-ness of the critical aspects of a long anduncertain transient that is morecomplex than elsewhere in Italy andprobably than what could be imaginedby the authors of .36/94 law.Thisbecause the starting situation is, in themajority of cases, particularly backwardin many respects.Although a similar approach could

be followed in other southernATOs tomake the tenders more suitable to thefinancial investors, the shortdescription of the state of the serviceentrustment,here carried out,puts inevidence that numerous causes of thedifficulties of allocation of IWS insouthern Italy still persist. Some ofthem have been recently analyzed,between the others, also in Genco andMazzola (2005), in Gavasci (2007) and

inASRM (2007).Even in those caseswhere the service has been entrusted,the start-up phase of the new contractsis characterized by delays and unex-pected difficulties everywhere, even incentral and northern Italy.Overall, these authors recognize the

role of the NM in the evaluation of theActual MeanTariff (tariffa reale media-TRM) in producing plans with lowreturns and financial unbalances in thestart-up phase of the new IWS, i.eduring the long transient that isexpected to take place in most south-ern ItalianATOs.As mentioned above,the main assumption of the NM is thatthe old management has alreadypursued its financial balance: in thisspirit, the price cap mechanism and theother constraints of the NM have beendeveloped to increase the efficiencyand economicity of the service and tobenefit customers by tariff reductionand certainly not with the aim atrecovering from the unperformed

(because unpopular) tariff adjustmentsand the macroscopic diseconomies ofthe previous public management.There is an ongoing debate in Italy

on a proposal of update of the NM forthe evaluation of tariffs in order toremediate to some of its majordrawbacks and inconsistencies.However,no new method has beenadopted to date.Another criticalpoint concerning the PdAs is theconsiderable amount of investmentsrequired that is due to a neededsubstitution rate of the networks that ishigh per se and higher than theEuropean average and that is by manycommentators deemed as tooburdensome.Because of this, asreported in Gravasci (2007): ‘Theamount of planned investments makesit difficult to take part in the tendersbecause of the high borrowingsdemanded to stakeholders and becausethe banks find it difficult to develop aproject financing system,especiallywhenever the high residual value of theinvestments makes the possibility ofrecovering it as redemption, as envis-aged in the plans,quite far-fetched.’Investment costs can be (sometimes

considerably) reduced through thecompetitive procedures for serviceentrustment, as the improvement of theinvestment plans must be introduced asa crucial element in the tenders, andbids must capture the ability of theindustrial competitors to recalibratethe investments according to theirexperience in the field,by making use,for instance,of more cost-effectivetechnologies.However, the hiatusbetween targeted service levels and thepresent state of the networks,which inthe majority of cases is very poor andfar below the European average, is toolarge to legitimate the expectation of asubstantial reduction of the actualinvestment costs, unless a substantialreduction of the targeted service levelsis accepted, a hardly feasible alternativeas service and environmentaltargets are fixed by national andCommunitarian regulation.As mentioned before, further public

support to investments would be, in theabove cases,of little help - increasingthe grants for investments in the firstyears of operation would result in adecrease of tariffs, but would notimprove the financial performances ofthe PdAs or would even make themworse, especially those of the moreproblematic ones.To understand this,assume that the Sicilian governmenthad decided to grant the €51.2 M (seeabove) that has been allotted forsupporting tariffs, for supportinginvestment costs in theATOs ofAgrigento and Caltanissetta, and alsoassume that such financial resources aresupplied in the first six years in

Table 2Parameters for thenetwork companysimulationexercise

Parameters Base case from PdA Intermediate CompleteAsset remuneration rates 7.00% 6.60% 6.60%

Amortizations Adapted to the concession Intermediate time Long time

period (30 years)

(fix asset life = 40 years) (fix asset life = 50 years) (fix asset life = 100 years)



Agrigento, and in the first twelve yearsin Caltanissetta. In this case, the cus-tomers ofAgrigento would experiencetariff reductions of €0.05 ($0.06) onlyfrom the sixth year with an overall‘saving’of €22.5 M ($28.9 M) and thecustomers of Caltanissetta wouldsimilarly experience tariff reductionsfrom the sixth year with a maximumreduction of €0.14 ($0.18) and anoverall ‘saving’of almost €55 M ($70.7M).On the other hand, the IRRreduces in both cases - from 2.51% to2.49% forAgrigento, and from 0.69 to0.05 for Caltanissetta; the otherfinancial indicators also worsen.Solving the above critical points is

certainly an important step towards asuccesful entrustment of the serviceand to its industrialization.However,another point must be raised that isvery likely to be a key cause of thedeluding outcomes of many attemptsto complete the institutional change inthe management of water services - thenew IWS management must under-take, all at its expenses, considerablefinancial risk against little returns andlong recovery times.The high capitalintensity and the very longdepreciation schedule of physical assets

contribute to increase the investment-related risk and make the wholeventure highly hazardous, even againstlow operation-related risks once thetransition to the steady-state conditionsis over.A systematic review and analysisof the risks of the water sector can befound in Massarrutto et al. (2007).According to the scheme of law

36/94, the new IWS manager is incharge for carrying out the plannedinvestments,net of the sometimesconspicuous investment grants,together with all the expenses that areneeded to normalize service which willbe paid back (including interests onloans) by the water bills.With such ascheme,high, long-term borrowingsfrom banks will be needed and thecandidate contractors are required tohave generous capital available in orderto both reduce loans and to grant them(equity).Thus far, the way tenders arepresently regulated keeps the publiccounterpart free from any risk relatedto the financing of the IWS.Potential IWS managers have met

with considerable difficulties in findingthe necessary bank loans and this seemsto be another important source of

unsuccessfulness for many tenders andthe subsequent set up of an industrialprocess.For reasons that are beyond thescope of this paper to analyze (refer toRaggetti and Lucarelli, 2004),banks arevery cautious in taking risks for suchlong-term (20-30 years) projects andtherefore require guarantees that aredifficult to sustain for most private (andpublic) investors.The only viable pathto obtain the necessary bank loanshence seems to be the reduction ofrisk, for it is perceived by both thepotential investors and the banks as toohigh.For instance,one of the most felttypes of risk is the one related to thepotential bill evasion with thesubsequent uncertainty on the actualfinancial income (which often adds tothe uncertainty on the water amountsthat can be actually sold), the basis forpaying back loans.In order to obtain the targeted

quality level of the IWS also in theregions of southern Italy, it then seemsnecessary to redistribute risks betweenpublic and private granting at the meantime a fair reallocation of governanceresponsibilities.This may be attained bynew forms of PPP that may give rise toorganizational structure that can prove

suitable to cope with the longtransition phase towards the new IWS.

Sharing risk in bulk water andIWS management throughalternative PPP models

Besides the public-private company,probably the best known PPP model(but not the most effective, at least inItaly), alternative PPP models that arerespectful of the present regulation onthe entrustment of the IWS and thatfoster competition can arise from mixesof some of the constitutive elements ofPPPs.This can include awarding theprovision of water services for shorterperiods,using different company types,working on different stake mixes andgovernance schemes or on differentasset management (large outsourcing ofthe operation segments etc),or ondifferent schemes for carrying out

investments (either in-house orcontracting out).Recently, the above theme started to

receive more attention also in theinternational context. Just to give anexample,Yamout and Jamali (2007)have carried out a critical assessment ofdifferent forms of PPP in the contextof the economic and institutionalframework of the water service in theGreat BeirutArea in Lebanon.The pros and cons of each of such

PPP schemes must be assessed,focusing on the actual chances ofsuccess in view of the objective ofreforming the service in an industrialperspective. In particular, strengths andweaknesses of the model should beanalyzed with regard to the criticalaspects summarized in the previoussection.For instance, it should beassessed if the proposed model issuitable for potential industrial com-petitors, if it facilitates public controland makes it more effective, if it makesaccess to public and/or private crediteasier, if it allows to carry out theappropriate amount of investmentswithout the burden of oversizedprojects, operation and investment cost(and hence tariff) reduction, and so on.However, it is probably not

worthwhile searching for a one-fits-allsolution for all different types ofproblems, rather, the solution shouldbe sought at a local or regional scale.Atsuch scales, the features of the waterresources systems are less vaguelydefined, and so are the figures of waterdemand for the different uses and theeffects of possible demand-sidemanagement strategies. Irrigation andenergy policies (e.g.using reclaimedwater for irrigation or water recyclingfor factories) can be assessed with ahigher degree of likelihood.As mentioned in a previous section,

a number of PPPs have been started forthe bulk water sector in many southernItalian regions where water resourcessystems share similar features, bothfrom an hydrologic and an organiza-tional standpoint.These areas areexperiencing with growing frequencylong dry periods when thesupply/demand ratio often reduces tothe sustainability limit.The existingassets are highly interconnected,multipurpose water resources systemswith conflicting uses (civil, irrigation,industrial and, last but not least,ecological) and different bodies thatoperate service within each differentsector (ATOs for civil service, thereclamation bodies for irrigation,otherbodies for industrial uses).Put together, the uncertain

knowledge of water resourceavailability and the fragmentation ofservice are very likely to hinder anymarket-oriented reform if only one or

(M€) First ten years 30 yearsAgrigento Trapani Agrigento Trapani

Intermediate case 2.111 6.840 2.161 17.674

($2.7M) ($8.7M) ($2.8M) ($22.7M)

Complete case 4.962 10.488 6.704 20.943

($6.4M) ($13.5M) ($8.6M) ($26.8M)

AgrigentoBase case (actual) 2.51% 3.22%

Intermediate case 2.88% 3.43%

Complete case 3.04% 3.57%

Table 3Total customersaving in the twoATOs (M€)

Table 4Internal Rate ofReturn


Trapani


some pieces of the puzzle are touched,i.e. if the privatization or therationalization (even under publicprotection) of the civil or industrialsector is carried out without reformingthe whole system.In order to overcome these issues,

we propose a rather generalorganizational scheme that seemssuitable for complex water systems. Ithas the potential to perform bothdemand control and service even inthe condition of natural monopoly,bypursuing the necessary separationbetween controlling and controlledsubjects at the different levels ofthe scheme.The basic idea is that a region

constitutes a company of publicinterest to be awarded with the role ofsole purchaser of water resources, andwhich is hence in charge to specifywater resources demand.Such acompany,whose scheme is depicted inFigure 2 (Genco and Mazzola, 2004b),can have more than one region asstakeholder (multiregional company),in addition to other subjects withspecific skills in finance and engineer-ing. Such a regional (or multiregional)company should have theresponsability of supplying bulk waterand hence operates multipurpose ortrans-ambit assets.The company seeksto optimize the above assets with aneye on the rationalization of service‘downstream’ (ATOs, reclamation andirrigation bodies etc.) and havingefficiency and effectiveness of serviceand the minimization of water costs forall types of users as objectives.The region keeps its role of water

resources regulator, that is performedeither directly or by related publicbodies such as the DistrictAuthority.In this context, the company canprovide the region with technical andfinancial assistance for:• Planning water uses;• Identifying,assessing the feasibility ofand optimizing projects for thecompletion and rationalization ofwater resources systems,withparticular regard to safety plants forprolonged dry periods in drought-prone areas;

• Regulating and managing waterdemand for conflicting uses bydefining bulk water tariffs, allowingfor both supply costs and costs forequalizing different geographicalareas and uses.

The company is therefore also themedium for aids to irrigatedagriculture and for managing grantsfor infrastructures in that sector.Technical management of the

assets should be awarded throughcompetitive procedures to privatecontractors on the basis of short-term

contracts (five to ten years).Investments for the improvement/

rationalization of the assets aremanaged directly by the company,using project financing where possibleand by contracting out throughtenders.Contracting services out isselected as the competitive optionthat can reduce the bias of naturalmonopoly while keeping theorganizational costs at a minimum.Such a scheme separates at a regional

scale policy-making and control fromasset management and operation, andtherefore discourages ambiguousness inroles and should contribute to theminimization of the impact of possiblefailures.Moreover, the proposedorganizational outline aids to satisfy therequirements of EC Directive2000/60, allowing, for instance, a moresuitable allocation of costs and todefine tariff frames that are able toinclude all types of costs, including, inparticular, the environmental ones.The proposed scheme also seems to

be the most effective in minimizingdamages from water blackouts causedby long droughts, as evidenced byanalyses developed in the electricpower sector for blackouts in Italy andCalifornia.At the infrastructure level, ithas been recognized that the cause ofsuch failures has been the lack ofemergency stations that should havebeen built in advance to cover thepredictable difference between supplyand demand and the poor maintenanceof the transport networks.At the lower level of the ambits, the

opportunity for an alternative PPPmodel,which municipalities shouldnot miss in order to give value to theirassets, comes from article 35 of ItalianFinancial Law for the year 2002 thathas decreed the obligation for publicbodies to hand over their assets(networks and plants) to, i.e. 100%public-owned companies (so callednetwork companies), if the ambitauthority opts for the entrustment ofservice to a private contractor or topublic-private companies.In this context, two models are

possible (Prioreschi R.,2005):• A ‘minimal’network company, inwhich only the assets indicated bythe regulation should merge andonly in charge to administrate them

• A‘large’network company to beregarded as an asset managementcompany for the public bodiesholding it (and planning investmentsfor them) in which further assets canbe merged.

In this last scenario, the company cancarry out the projects and only entrustoperations to an industrial companyvia tenders.The rent paid by the privatecontractor collecting water bills to the

network company must not onlyfinance the company expenses, butmust also pay back capital and interestson loans or other types of obligationsfor investments. In this way, service canbe entrusted for shorter time periods,say five or ten years.In analogy with the above-described

regional society,network companiesalso call for high public control skills inorder to reduce costs related to thecomplexity of the system (PetrettoA.etal., 2003) and to avoid that a publiccompany becomes the source ofinefficiency for the whole system, thusrepeating models that have not had asecondary role in determining thepresent level of inefficiency of thesystem of water services insouthern Italy.The reduction, for the contractors,

of the financial risks deriving from theabove schemes is evident,both in thecase of the bulk water company and inthe case of the network companieswithin theATOs.A public assetscompany can, for instance, simplify theprocess of sharing risks related toinsolvency in those transition phasesthat many southern ItalianATOs arelikely to experience (or are alreadyexperiencing). In addition,depreciation times are madeindependent of the length of theconcession - this drastically reduces thedifficulties related to the redemption ofthe non-depreciated investmemts atthe end of the contract, a well-knownsource of legal disputes or the occasionfor the contractor to reduceinvestments below the optimal level inthe final period of the concession.Potentially,one of the most

important effects of the proposedschemes is the improvement of theconditions for financing projects.Apublic asset society that is really able toinspire confidence in the credit systemmay reduce the debt of water serviceoperators, improve their debt/equityratio,obtain credit at lower rates or pre-amortization periods or longer periodsfor the amortization of debts and so on.This may result in lower rates forcustomers while improving theoperative performances.As an example, in the following,

results are reported of a simulationexercise of the effects of twohypothetical network companiesoperating in the two SicilianATOs,Agrigento andTrapani,where a longexpected transition period in the startup phase of the IWS is expected.Thefinancial model of the PdA predicts anunbalance for six years with averageannual net deficits after taxes of €5.3M ($6.8 M) in theAgrigentoATO andan unbalance for seven years €3.4 M($4.4 M) in theTrapaniATO.For theoverall methodology employed to



carry out the simulations refer toMassarutto et al., (2007) and theirimpact of alternative managementmodels.Two cases are examined,indicated as ‘Intermediate’ and‘Complete’,whose main assumptionsare reported inTable 2. In both casesthe PPP company funds the differencebetween operation costs and returns inthe first years.To do this the companyraises a loan to be paid back by thereturns from rates at the following fixedconditions: 4.5% as total annual interestrate, 15 years amortization with fouryears of preamortization.With rispectto the PdAs,no modification isassumed for the financing of theplanned investments.Figures 3 and 4 show the per capita

tariff trends in the twoATOs along theplanned period. In bothATOs, after aperiod of five years when the tariffcannot vary with respect to the basecase because of the price cap, lowertariffs are expected than thosepredicted by the PdA in both cases inthe medium term,while in the longterm tariffs will increase owing to thelesser amortizations.On the basis of the expected sold

water volumes (around 40 Mm3/year insteady-state conditions for bothAgrigento andTrapaniATOsaccording to the PdAs),Table 3 reportsthe expected savings for users, that areparticularly significant for theTrapaniATO.As can be inferred fromTable 4,

even the expected returns from theinvestment plan improves with amaximum in the complete case.The possibility to opt for longer

periods for asset amortization and toreduce the interest rate of the investedcapital - such are the assumptions onwhich the above results have beenobtained - is however closely related tothe ability of the network company(clearly, similar considerations may bedeveloped for the regional company) toexert high-profile control on andguidance to the process, both on theengineering and on the financial side.Only a superior master of thetechnology issues of the sector andgood practices in the maintenance ofassets can prolong their life up to therequired levels.Furthermore, it is clearthat in order to achieve lower tarifflevels for customers by reducing theremuneration rate on assets as in theabove exercise, the network companywill need a high level of credibility andreliability,well beyond the guaranteesthat an ‘ordinary’ asset managementcompany is expected to provide, thatcan be attained only by showing thecompany’s ability to optimize themanagement of the assets, includingrenovation of obsolete ones andbuilding of the new ones.

Conclusions

The implementation of a waterindustry in Italy and in southern Italyin particular requires in the first placethe solution of issues related to a longtransition phase for which the presentregulation (act 36/94) does not seem toprovide convincing answers, as far asthe assumed institutional frameworkand the tariff assessment methodare concerned.The analysis of the critical aspects of

the process,which in the paper isdeveloped using the case of Sicily asrepresentative of the situation in thewhole south of Italy, shows the need ofsupport policies in both the investmentand the operation phases.A majorhindrance to succesful tenders seems tobe the perception of both investors andbanks of too high a risk to takecompared to the feasible guarantees.An alternative (and complementary)

way can be represented by PPPmodels, both in the bulk water sectorand in theATOs, that should redefinethe roles of the private and of thepublic sector and that should allow amore dynamic management of the risksrelated to service and assetmanagement.To this end, two PPPmodels have been introduced andbriefly discussed,one at a regional levelfor the bulk water service and one attheATO level for the management ofpublic assets (network company).Theycan represent suitable operationalmodels to share the risks related to thetransition phase while assuring aneffective public control and seizing allthe opportunities of an industrialmanagement of service withoutlowering the environmental andservice quality targets that are expectedby southern Italian customers.The simulation of the behaviour of

the network companies in two SicilianATOs shows that the achievement ofconsumers’benefit (tariff reduction)can be combined with increasedoperation returns,provided that thepublic company is able to offer asuperior reliability level to the creditsystem.This requires that such publiccompanies develop far greater skills tocontrol service and assets than thepublic management has shown topossess thus far in Italy. �

References

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Associazione Studi e Ricerche per ilMezzogiorno (ASRM) (2007).L’industria idrica italiana.Scenarioeconomico finanziario, struttura territoriale emodelli di gestione a confronto,Rome, Italy.

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Paper presented at LESAM 2007 – 2ndLeading Edge Conference on StrategicAsset Management



Successful implementation ofasset management has been

extensively researched and stud-ied, developed in terms of toolsand practices, and implemented inwater utilities across the globe.One of the challenges identified,however, has been that of organi-zational culture. Sometimesregarded as more art than science,the context and environment inwhich asset management is con-ducted has been a major challengeto describe,much less create,implement, optimize andinstitutionalize, and improve.Thecontinuous improvement oforganizations is commonly atopic of attention in utilities, butidentifying organizationalelements or attributes that arenecessary to organically developimprovement in an asset manage-ment context has been lacking.

Water sector initiative in theUnited StatesIn May 2007, a report was released byNorthAmerican water associations,entitled ‘Water sector collaboration oneffective utility management’1.Chartered by theAmericanWaterWorksAssociation (AWWA),WaterEnvironment Foundation (WEF),Association of MetropolitanWaterAgencies (AMWA),NationalAssociation of CleanWaterAgencies(NACWA),American PublicWorksAssociation (APWA), and NationalAssociation ofWater Companies(NAWC), this analysis was conductedwith participation by water utilitiesand the US Environmental ProtectionAgency (EPA).Ten attributes ofeffectively managed utilities wereidentified:• Product quality• Customer satisfaction

Asset management: The required utility organizationparadigm shift

Through changing organizational culture, a move can be made away from old styles of

thinking towards a new paradigm. Scott Haskins discusses this thought transition and

the example of Seattle Public Utilities, whose asset management programme has been

a successful example of changing organizational thinking.

Scott Haskins, CH2M Hill,Washington, USA.Email: [email protected]


ASSET MANAGEMENT: THE REQUIRED UTILITY ORGANIZATION PARADIGM SHIFT

• Employee and leadershipdevelopment

• Operational optimization• Financial viability• Operational resiliency• Community sustainability• Infrastructure stability• Stakeholder understanding andsupport

• Water resource adequacyIn addition,keys to managementsuccess were identified to generateutility management success.Thesenecessary factors were:• Leadership• Strategic business planning• Organizational approaches seekingto engage a participatoryorganizational culture

• Measurement• Continual improvementmanagement framework

Sample performance measurementmeasures were assembled, as well asnext actions or steps needed by thewater sector itself.

Comparative organization paradigmsFor utilities which are on a pathway tobecoming more mature organizations,and ones capable of implementing assetmanagement best practices, it is usefulto compare ‘old style’ vs.‘new style’organizational paradigms.A moreevolved utility which is addressing theattributes of effective utility manage-ment previously described can becontrasted with an ‘old style’organization, still dominant in the US.Such antiquated organizations areincreasingly ineffective for the type ofasset management tools, systems,processes, strategies, and practices beingexpected today.By categorizing assetmanagement elements into severalbasic categories, related organizationaland cultural attributes and practices canbe seen as being associated with old

and new style organizations as shownin Figure 1.

Transitioning from old to neworganizational paradigms atSeattle Public UtilitiesMany utilities are beginning toembrace and apply asset managementprinciples.This can not only involveinstalling new technology systems andprocesses, but also require changing theculture and realigning the organization.Seattle Public Utilities in Seattle,Washington,began its assetmanagement programme five years agoand has achieved significant results interms of service level improvement andcost reduction. In asset managementcircles, they are viewed as an industryleader and an example for others toemulate.However, there is still muchprogress to make.It is informative to review progress

that has been made and someremaining challenges and future focus.Where the focus or successes thus farhave been on tools, strategies, andprocesses, future attention is moredirected to addressing the people andculture side of the business.Followingare brief highlights of majoraccomplishments, along with some keychallenges and opportunities forimprovement for the next several years.

Current strengths andaccomplishments (expressedin terms of organizational cultureand focus)• Business case development.Requirement that all investments,particularly new and existing capitalprojects, be identified,developed,and implemented only after athorough analysis of costs, benefits,and risks.Project managers anddecision-makers trained on standardtools and protocol.Operation and


cases.Risk mitigation plansdeveloped for critical functions.Risk models developed for criticalasset categories to guide repair vs.replace decisions.

• Accountability.Utility reorganizedto more clearly define those respon-sible for managing and specifyingwork on assets,maintenance, andservice production (what we shoulddo,priorities and targets) vs. thoseresponsible for delivering projectsand O&M services (how to providework most efficiently to thecustomer).Asset management teamcreated to coordinate and supportdevelopment, implementation, anddecision-making for asset manage-ment across the entire organization.Authority given to ‘line of business’directors to manage water,waste-water, and solid waste across allfunctions and skill groups of theutility.Managing director andexecutive team responsible for allmajor utility investment decisions,priorities, and initiatives.Projectmanagement office created toenhance project deliveryperformance.

• Service levels.Customer andenvironmental service levels for allbusiness lines newly established,with performance targets andreporting. Incorporated in strategicbusiness plan.Performance againstservice levels leads to direct actions,with accountability, to addressproblems and issues which surface.

• Strategic planning. Strategicbusiness plan updated twice in lastfour years to incorporate assetmanagement principles, strategies,action plans, service levels, andreporting.Used as priority settingprocess for the organization toaddress gaps.

• Decision processes.AssetManagement and Line of BusinessCommittees established, along withcharters, protocols, and transparentprocesses.Covers all investmentdecisions,planning, and perfor-mance. Decisions documented.

• Lifecycle and triple bottom lineassessment.All investmentdecisions now incorporate lifecyclecosts and benefits, as well as finan-cial, social, and environmental costs,benefits, and risks.These conceptsare fully integrated into wide rangeof programmatic decisions.

• Analytical rigor.Analysis andanalytical skills are valued as normfor the utility and considered onpar with other skills like engineer-ing, finance, environmental science,and operations.Economist groupestablished to further analytic andreview focus.Linkage made to fieldforces,where availability, accuracy,

maintenance (O&M),capitalimprovement programme (CIP),financial plans, and resource require-ments linked.Guidelines and toolspublished and transparent.Themayor, city council, and citizencommittees aware and bought intothe use of tools and process for

decision-making.Linkageestablished to budget,CIP andlong-term plans.

• Consideration of risk.Corporate risk plan,methodologyand priorities established and beingmaintained with steering group.Risk costs identified in all business


ORGANIZATIONAL ELEMENTS ORGANIZATIONAL ELEMENTSOLD PARADIGM NEW PARADIGM

Category: Risk Equation – Risk, Service Levels and Cost

No explicit service levels, implied only and notcommunicated to public or decision-makersAll risks treated equally – no concepts of criticality orlikelihood of failureActivities not costed or reportedUnsure of customer willingness to payMaintain low profile with stakeholders and regulatorsShort-term decision making – no lifecycle or triplebottom line costs and benefits considered or analyzedReactive maintenance, operations drivenConservative decision-making, no risk sharing

Project decisions made only after considering lifecycleand triple bottom lineService level and performance information included instrategic business planStakeholders and elected officials aware and involved inservice level and risk issuesWillingness to pay analysis provided to show service leveland cost trade-offsRisk mitigation strategies implemented to addresshighest risk activities and eventsRisk models used to make repair versus replacedecisionsNon-quantified costs and benefits factored into decisionmakingHigher tolerance for risk (specific decision shared orelevated)

Organized in silosOrganized by classifications or skill categories, notfunction or major work processInflexible work assignments for workforceLittle communication with customersLong and rigid recruitment practicesRecruitment only when vacancies occurRigid pay structures without performance incentivesLeadership training secondary to technical proficiency

Mobile workforce – diverseActive and on-going recruiting and workforcedevelopmentPerformance tied to strategic goals and work planPay or reward for performanceFlexible workforce (movement throughout organization)Systems to capture corporate knowledgeRegular and ongoing communication between planning,operations, customer service, and financial functionsand staffEmployees continually ask the question, ‘what would thecustomer want?’

Decisions, strategies and work plan unconnected tobusiness planInformation technology (IT) systems not integrated –geographic information systems (GIS), computerizedmaintenance management systems (CMMS),Supervisory Controls and Data Administration (SCADA),customer and financial systemsBudget/rates/accounting/financial forecasting not linkedto asset managementInformation and decisions not transparentEngineering and economic support tools non-existent orcrudely developedManagement by crisis and reactiveBest practices not known or understoodNo strategic business plan to integrate the organizationand its performanceNot outcome based

Decisions clear and transparent, cross-organizationaland achieve expected outcomesBusiness case developed for investment decisionsDecisions reflect long-term economic impactsBudgets/rates tied to service levels and targetsTechnology integrated and supports the operationService providers focus on efficiencyBenchmarking with other utilities is common practiceOrganization committed to continual improvement

Don’t know assets owned and managedDon’t know condition of assetsOperations and maintenance (O&M), and capitaldecisions not connectedAsset performance requirements not explicit, known,or measuredLack of knowledge of upstream/downstream connectionof system elements

Inventory, value, life, and condition of assets areprojected and clearMaintenance strategies are developed for all categoriesof assetsDecision models assist in making repair versus replacedecisionsTactical plans developed to address major gapsAsset owners and managers are identifiedDelivery of new assets is streamlined and efficient

Category: Human Resources - Organization Structure, Skills, and Capacity

Category: Processes and Support, Including Decision-Making

Category: Physical Assets – Condition, Criticality

Figure 1Organizationalelements –old and new


and collection of data are considereda priority.

• Benchmarking and reporting.Metric and practice benchmarkinghas become a major priority as ameans to learn and improve.Performed practice benchmarkingwithWater ServicesAssociation ofAustralia (WSAA) for last five years,covering asset management (twice),civil maintenance,mechanical/electrical, and customer service.Developed and implementingrelated process improvements.Participate in Qualserve bench-marking. Search for best practicesand high performing utilities fromwhom to learn.Sought out assetmanagement technical exchangepartner,HunterWater fromAustralia,who has played an activerole and has had an ongoing physicalpresence in Seattle.Central report-ing responsibility created fromservice levels, to key performancemeasures, to work plans, to bench-marking initiatives.

Areas of challenge and future focus(expressed in terms of organizationalculture and business priorities)• Ongoing organizational change.The organization was changed andthere will likely be more change.While this has produced greater roleclarity, focus on asset management,and a climate of continuousimprovement, the high amount andlevel of change has created a level ofanxiety and uncertainty in a culturenot accustomed to such rapidrestructuring.The level of changehas required significant attention byitself and has been more challengingthan anticipated.Further adjustmentis needed both to further structurethe organization as well as adapt tothe capabilities of individuals as theytransition in the utility.Rank andfile employees will need to embracechange as a necessary part ofthe business.

• Brain drain.A common problemfaced by virtually all NorthAmerican utilities is the exodus of a

‘baby boomer’workforce along withthe knowledge that goes with it.Seattle will need to continue itsefforts to recruit, hire, train, retain,and develop necessary skills, as wellas further develop and use knowl-edge and intellectual property.

• Role and transition forindividual employees.Two typesof role issues have been challenging.The first was splitting utility specifierand service provider roles organiza-tionally, which had the effect ofshedding one or the other role fromindividuals previously performingboth.The other impact has beenmoving key individuals around theorganization.Both are key strategies;value will be appreciated more fullywhen individuals see benefit to theorganization as a whole as well as tothem personally.

• Driving the asset managementculture throughout the organi-zation. One of the greatestchallenges has been to demonstratethe benefits of asset management anda new way of doing business to eachof the types of work in the utility.Seattle is now more focused oninvolving and engaging the entirework force in the understanding andexecution of asset management, aswell as attending to the ‘businesscase’ to be made for all segments ofthe culture.

• Greater involvement by thecustomer and elected officials inservice levels and asset manage-ment principles.Great strides havebeen made.However, expansion of‘willingness to pay’ initiatives willallow better informed decisions asthe important balance is attemptedbetween service level and perfor-mance, cost, and risk.Also,whilemuch better decisions are beingmade, it has been difficult to strikethe best balance between short- vs.long-term costs and benefits for thecustomer.Too often the city startswith a rate,budget,or CIP target asgiven without optimizing long termfor the customer.Better long-termforecasting for Operating Expense(OPEX) and Capital Expense(CAPEX) will be part of the solu-tion, along with greater attention toefficiency.

• Prioritization of needs.Theorganization is still evolving in termsof addressing the organizational vs.activity and project based view of itsoperation.Also, the use of risk basedmethodology to prioritize capitalprojects, and to scale other depart-ment activities,has not been fullydeveloped.

• Development of long-termfinancial plans and rate path.Again, strides have been made,

particularly in forecasting require-ments for critical asset classes and indeveloping and following financialpolicies.But short- and long-termforecasts – which integrate capitaland O&M and are tied to decision-making,budget processes, andreporting – will ultimately helpproduce and optimize Seattle’sfinancial plans.

• User friendly IT systems andmobile computing. IT systems arenow being better integrated withstrategic business architecture, andwith an IT plan which is channeledto strategic priorities.Manyenhancements will be needed,including more efficient and user-friendly tools for field employees tocollect critical asset information.

• In-house vs. contractingdecisions (workforce strategy).Seattle, like other utilities,mustcome to grips in a highly competi-tive market for resources,withplanning and developing of corecompetencies; and then using themarket to provide resources for workleveling and skill enhancement.Efficient delivery and processeswhich produce best valuecontracting will be critical.

• Dealing with other agencies(transportation, environmental)with influence on triple bottomline decisions. Seattle is nowengaged in multi-agency decision-making and is learning to considerfinancial, social, and environmentalimpacts across jurisdictions.Sometimes the challenges are not somuch technical as they are political,particularly in terms of aligningdifferent entities to use assetmanagement frameworks andprocesses.Certainly, the major issuesand challenges facing the utility areneeding to integrate transportation,environmental, and community-wide interests and agencies.

Integration is keyFinally, for Seattle and other utilities,integration of organizational aspects iscritical.Figure 2 depicts the relation-ship between elements which in thepast have been considered separate.Strategically,while these concepts arewell established in some quarters,manyutilities still need to better integrateshort- and long-term plans and deci-sions; CIP and O&M processes; andpractices to better coordinate workplans with strategic plans, leadershipwith organizational culture, andplanning with service delivery. �

1EffectiveWater Sector UtilityManagement,EPA,AMWA,APWA,AWWA,NACWA,NAWC,WEF;May2,2006.

Figure 2Organizationalintegration diagram

Leadership and Culture

Action PlansStrategic Plans

Budget/Rates

Planner/Providers

Breaking Down Silos

Short-Term

Long-Term O&M Capital



Since externalities are impacts onthird parties, the cost and benefits ofthe associated economic activity arenot factored into the decisions of theeconomic agents involved in thetransactions (e.g.Hatton MacDonaldet al. 2005;van Bueren and HattonMacDonald,2004).As a result, appro-priate market (price) signals are notgenerated.This can lead to the ineffi-cient allocation of resources acrosscompeting activities.For example, the

In economic theory, the term‘externality’ is used to refer to acost associated with the produc-tion or consumption of a good orservices which,while important tosociety, has not been taken intoaccount by either the producers orconsumers (Denniss, 2003). Putmore simply, an externality is acost borne or benefit received by athird party not involved directly ina commercial transaction (Speerset al. 2002a).Of particular concernto today’s society are economicactivities that impose costs thatare not reflected in the marketprice.These so called ‘negativeexternalities’ can contribute to arange of issues; for example, publichealth, social, and environmentalimpacts, loss of amenity and

aesthetic value, or indirectfinancial consequences such asreduction in property values (e.g.Hatton MacDonald et al. 2005).Asintimated above, the concept of anexternality is, however, not justconfined to negative impacts,since economic activities mayalso provide indirect benefits.For example, catchmentmanagement activities for thepurpose of supplying potablewater can result in improvedbiodiversity, recreationopportunities, visual amenityand reduced water pollution (vanBueren and Hatton MacDonald,2004). Positive externalities canalso include the generation of newmarkets for products and newemployment opportunities.

Figure 1The basic

components ofPARMS

(Speers et al.,2002a)

The inclusion of externalities in assetmanagement decision-making

The need to consider externalities in asset management is becoming increasingly

important as water authorities start to address their performance across triple bottom

line measures. An externality is borne by a third party not involved directly in a

commercial transaction. Externalities can be either positive or negative, but it is the

existence of negative externalities that is of particular concern to today’s society. This

paper considers the issue of externalities within the water sector, giving specific focus to

the integration of externalities within whole of life costing and risk-based asset

management. To this end, the importance of externalities to the management of water

infrastructure is reviewed, including their role in an enlightened view of asset

management. It is asserted that during strategic planning, externalities should form part

of the option evaluation stage, undertaken within a whole of life context. For existing

networks, consideration of externalities involves an on-going evaluation of the level of

risk associated with individual assets and/or groups of assets. In this paper, a generic

framework for evaluating externalities is presented, which is summarised as: 1) Identify

the externalities, which implicitly demands that an appropriate system boundary is set;

2) Determine the magnitude of significant externalities; and 3) Estimate the value of

these externalities. This framework was applied in the development of the PARMS

software suite, and examples are presented throughout the paper to illustrate the

techniques used in the research.

David Marlow and Stewart BurnCSIRO Land and Water, Victoria,AustraliaFax: +613 9252 6614Email: [email protected]


THE INCLUSION OF EXTERNALITIES IN ASSET MANAGEMENT DECISION-MAKING


exclusion of negative externalitiesfrom market prices can skew decision-making towards short-term‘fixes’,rather than longer-term solutions.Awell-recognised example is the factthat market forces currently favourresource use and over-use, rather thanresource conservation and environ-mental protection.Another example ofparticular relevance to today’s society isthat uncosted impacts (the presence of

externalities) affect the relative com-petitiveness of alternative technologiesfor energy production that could helpto mitigate environmental impactssuch as those associated with green-house gas emissions.Notwithstanding the importance of

issues related to greenhouse gasemission, externalities in the watersector are a particular concern because,whilst water provides the basis for alleconomic and social activity andsupports the ecosystems that sustain alllife, fresh water has historically beenundervalued, and charging for theprovision of water services still remainsan emotive and complex ethical issue(e.g. see discussions in Barlow,2007).Without effective managementpolicies and institutional frameworks,however,water resources can beutilised without due consideration todownstream impacts.Externalities aregenerated because any use of water candirectly impact the availability and/orsuitability of water for other uses.Assuch, the 1992 Dublin Principles (seefor example Solanes and Gonzalez-Villarreal, 1999) recognised that water

has economic value in all its competinguses and should thus be consideredas an economic good (e.g.MeriemAïtOuyahia, 2006).From the authors’ review, in the

literature relating to the water sector,externalities tend to be consideredfrom the perspective of fresh waterresources; i.e. extraction of raw waterand disposal of wastewater to theenvironment (e.g. van Bueren andHatton MacDonald,2004).Lessattention has been given to the role ofexternalities in the management ofwater infrastructure.However, regula-tion can require externalities to beconsidered.For example, the CouncilofAustralian Government’sWaterReform Framework (COAG,1995;Hatton MacDonald et al. 2005) pro-posed a transition to full cost recoveryfor urban water use,which includesexternalities.Achieving this goalnecessitates the integration of external-ities into the decision-making of waterauthorities across the range of theiractivities, and thus the consideration ofexternalities within asset managementframeworks. It is this aspect of external-ities that is the focus of this paper.It is worth noting that the ultimate

goal of considering externalities withindecision-making is not to eliminatethem,but to take them into accountwhen allocating resources.This can bedone either by using economic instru-ments that aim to ‘internalise’ theexternality into decision-making (forexample,property rights, taxes orsubsidies), or by using regulatory andeducational approaches (e.g. vanBueren and Hatton MacDonald,2004;Denniss, 2003;BTCE,1998).

Externalities associated with waterdistribution systemsBy way of example, two externalitiesare considered in this paper; trafficdisruption and social/business disrup-tion associated with pipe failures.Traffic disruption caused by a watermains burst is a classic example of anexternality in infrastructure manage-ment, as is social disruption associatedwith such a failure.The cost of a watersupply disruption to a business is alsosometimes referred to as an externality.Strictly speaking however, this is anincorrect use of the term as the busi-ness has a commercial contract withthe water supplier, and is therefore nota ‘third party’ (Speers et al., 2002b).Nevertheless, because the cost to abusiness may not be fully captured in awater authority’s decision-making, andbecause the loss of service has widersocial impacts outside those associateddirectly with business loss, suchdisruption can be considered asanalogous to an externality.To thisextent, the term‘externality’ is not used

herein in its strict economic sense,butis instead used in the context of a costthat is not explicitly captured in thecompany’s decision-making or costingframework. It should be noted,however, that the term‘external cost’is also used herein to indicate directfinancial loss associated with servicedisruptions to other businesses that maynot be passed on to the water authority.

The PARMS suite of software toolsThe development of CSIRO’s PARMSsuite of software tools is used through-out this paper to illustrate how exter-nalities of interest can be identified andtaken into account in analysis relevantto asset management and whole of lifecosting.A brief description of PARMSis thus presented here for completeness.PARMS is a suite of modelling tools

developed in collaboration with watersector partners inAustralia, designed toassist in the management of waterdistribution networks.Additional toolsare under development for use in themanagement of large diameter pipes(PARMS-Risk) and sewers (PARMS-Sewers).Nevertheless, as it standsPARMS currently consists oftwo tools:• PARMS-PLANNING:a strategictool designed to be used annually forlong-term planning and regulatoryreporting at a macro (network) level.PARMS-PLANNING assessesreplacement needs based upon thepredicted cost of pipe failures inconjunction with the replacementand other policies adopted by thewater utility (e.g.Burn et al., 2003);and;

• PARMS-PRIORITY:a tacticalasset management tool designed tobe used on a regular basis to scheduleinterventions and manage risk at thepipe level (e.g.Moglia et al. 2006;Marlow et al., 2007).

Figure 1 shows the basic componentsof the PARMS-PLANNING softwaretool,which includes three elements ofrelevance to this paper:• A capacity for predicting asset

failures based on statistical analysis ofasset and failure data using logisticregression techniques.The model-ling approach taken is based on theassumption that pipe failures can berepresented as a Non HomogeneousPoisson process (i.e. as a countprocess).This approach allows theexpected number of failures in eachpipe asset in each year to bepredicted, as a function of material,diameter, age and other relevantfactors like soil type.An extension tothis model is made to produceBLUPs (Best Linear UnbiasedPredictors),which take into accountthe discrepancies between the actual(recorded) failures and the expected

Figure 2Magnitude settings

in PARMS;Interruptions

Figure 3Magnitude settingsin PARMS; Traffic

disruption



number of failures obtained from thebasic model (Jarrett et al., 2001).Thisextension is necessary because thenumber of failures varies morewidely than Poisson variationwould predict.

• A Lifecycle Costing Module thatallows a comparative cost assessmentto be made for alternativemanagement policies over aspecified period of time, takinginto account all initial capital costsand future (predicted) costs.

• The capacity to predictWhole LifeCosts (WLC);WLC includes theabove costs and the costs of relevantexternalities.

The ability to undertake analysis at theasset level is essential to the considera-tion of externalities because, althoughrepair and replacement costs mayremain relatively constant across a sub-network, the external costs associatedwith failure are site-specific.Forexample, the externalities associatedwith a burst are potentially higher in ashopping strip when compared to anunpopulated area.

Structure of paperAs noted above, this paper consideredthe role that externalities should play in

infrastructure management,using theexample of the PARMS tools toillustrate some of the underlyingconcepts.The remainder of the paperaddresses this subject matter in thefollowing way:

• The impact of externalities on assetmanagement decisions; discussed toprovide an introduction as to whyexternalities should be consideredby infrastructure managers andillustrated using externalitiesassociated with distributedpipeline assets as an example.

• A discussion of externalityevaluation; considering how toidentify externalities of relevanceand subsequent data collection andanalysis strategies.The points madeare illustrated with examples drawnfrom research into the developmentof the PARMS suite ofsoftware tools.

An indication of other approaches forconsidering externalities is also givenfor completeness; including the appli-cation of Life CycleAssessment (LCA).

The importance of externalities toasset managementThe role of externality costs in assetmanagement was previously addressedby Burn et al. (2007),who presentedconceptual arguments to show that, atleast when viewed from the perspectiveof the community, the tendency ofwater companies to ignore the full costof externalities and external costs in

their analysis could greatly underesti-mate the economic value of assetreplacement and lead to insufficientlevels of capital maintenance (renewalsspend). In contrast, the inclusion ofexternalities in the analysis can provide

a truer reflection of the cost of serviceprovision to the community across the‘triple bottom line’of economic, socialand environmental performance (e.g.,see Elkington,1998;Kenway et al.,2006 for a discussion of triple bottomline concepts), and can allow a higherexpenditure in maintenance activitiessuch as renewal to be justified, thoughaffordability and (more usually)customer willingness to pay issues muststill be considered (Burn et al., 2007).In a review of sustainability within

theAustralian water sector,Marlow(2008a) also argued that the inclusionof externality costs in decision-makingis necessary for the development ofasset management frameworks that arealigned with the enlightened conceptof ‘sustainable development’ (see alsoMarlow 2008b and 2006 for discussionof ‘sustainability based asset manage-ment’). Given the increasing stressplaced on the natural environment andcommunities around the world,sustainability is considered by theauthors to be a necessary and desirableaim in and of itself.However, from apragmatic perspective alone,waterauthorities could consider addressingsustainability aspects of assetmanagement both to facilitatestakeholder relationships and toimprove authority performance withrespect to financial, community andenvironmental indicators.

Integrating externalities into assetmanagementAs externalities are essentially costs,water authorities can treat them in thesame way as any other cost if anappropriate monetary value can beassigned.Since asset managers arecomfortable with a well used todealing with costs, this is the approachto considering externalities presentedherein.For example,once a monetaryvalue has been placed on anexternality, it can be incorporated intothe application of whole life costingtechniques and/or the way in whichrisk assessments are carried out.

Figure 4An Emphasis CurveMatrix (WRc, 2003)

Table 1A ranked listof failureconsequences

Table 2Worked examplesof externalities andexternal costs

Financial Consequences of $50,000Adverse publicityEffects on residential customers (e.g. emotional distress)Effects on commercial customersFinancial consequences of $20,000Effects on industrial customersEnvironmentally sensitive land impactedDisruption on major roadNon-sensitive river impactedFinancial consequences of $5,000… etc.

Effect Conditions Cost

Traffic Delay Lost time Initial road capacity 1200 vehicles/hour $1309(Private and Capacity during repairs reduced 40%commercial vehicles) 30% of vehicles find alternative route1

Queue takes 15 minutes to clear oncerepairs completedModelled for one hour interruption

Business Lost Lost net income Assumed cost of $18 per hour/employee $15,032Assumed value added multiplier 2.5215 connections in worked exampleMultiplier included reflecting criticality ofwater to enterprise; ranging from 0.1(not critical) to 0.9 (critical)Modelled for four hour interruption

1 Costs increase significantly if only more limited diversions are available



Whole of life considerationsIn asset management, externalities arisebecause those making decisions do notconsider all the impacts associated withavailable options.Externalities can arisedue to decisions made in each part ofthe life cycle; for example:• Overall design philosophy: thedesign criteria associated with waterresource exploitation (recycle, reuse,supply-demand,etc.) dictates theexternalities generated, as does theunderlying design philosophy of thesystem (capacity to meet demand,big-pipe centralized solutions,decentralized systems,pumped orgravity fed, etc.).

• Detailed design stage: includingthe selection of pipe materials,equipment, and other assets.

• System operation and maintenance:including the operating conditions,the level of maintenance to beundertaken, and the mix of reac-tive/proactive maintenance tasks.

• Rehabilitation: the type of

technique to be used (like-for-likereplacement, trenched replacement,trenchless replacement).

• End of asset economic life:the method of eventualdecommissioning and disposal.

Given this view, it is natural to takeaccount of externalities using asset lifecycle concepts, and to compare avail-able options from the perspective ofminimising costs.To this end,variousapproaches have been developed toanalyse asset life cycle costs (e.g.Boussabaine and Kirkham,2004), each

of which differ in the time scalesconsidered and scope of thecosts/impacts analysed.For example,water authorities can undertake lifecycle costing (LCC) to assist decision-making.However, in applying thisapproach, the assets, activities, andimpacts that lie within the systemboundary are taken to be those thatthe organisation has responsibility forand control over,which excludesexternalities.The boundaries of thecost analysis can be expanded toconsider externalities that couldsignificantly influence the decisionsbeing made (Burn et al., 2001).Thisapproach is taken in whole of lifecosting (WLC).WLC thus provides aframework within which to compareoptions, taking into account thefinancial impact of all cost elements,including externalities.

Asset riskAs intimated above, externalities shouldideally be first considered in the optionevaluation stage, and analysed within awhole of life context.This will ensure,as far as is practicable, that newinfrastructure minimises life cycle costs,including externalities.For existingassets, however, consideration ofexternalities is better undertaken as anon-going evaluation of the level of risk;analysis that should again aim tominimise the whole life cost of assetownership (e.g.Davis and Marlow,2008).Risk assessments should ideallybe undertaken in terms of the overallpotential impacts (tangible, intangible,and externalities) that asset failurecould impose on customers,communities, and the environment,along with the probability that theseconsequential impacts will be realised(Burn et al., 2007).

Evaluating externalitiesIt should be recognised that inclusionof externalities in risk and whole lifecosting techniques rely on the ability tofully capture environmental, social andother externalities in financial terms.Asset managers therefore needapproaches to help them achieve this,a subject which is addressed in theremainder of this paper.

A framework for evaluatingexternalitiesBowers andYoung, (2000) previouslydeveloped a framework for evaluatingexternalities related to water services, assummarised below:• Identify the externalities relevant tothe analysis/activity.

• Determine the magnitude ofsignificant externalities.

• Estimate the monetary value ofthese externalities.

Whilst the detail of this framework was

derived for considering water resourceaspects of water services (for example,to consider externalities associatedwith water abstraction and contamina-tion), the above outline schemeprovides a logical approach forconsideration of externalities for anyactivity.As such, this approach isadopted herein as the basis for dis-cussing the evaluation of externalities.

Identifying externalitiesAs previously noted, externalities canbe considered in terms of life cycleconcepts, and integrated into whole oflife analysis techniques.As with any lifecycle costing approach,boundariesneed to be set that constrain the extentof the analysis. For example, in the caseof infrastructure management, it is clearthat asset failures impact the widercommunity by producing trafficand other disruption, and that thecommunity would prefer not to havethese impacts imposed on them. It istherefore preferable to expand theboundaries of the analysis to considerexternalities associated withthese impacts.Once the system boundaries have

been set, the process of identifying theexternalities is in many respectsanalogous to the identification of risksin a risk assessment.A decision has tobe made as to what is significant,but noapproach can ensure all relevant issuesare captured.Previous experience andknowledge are a useful starting point.Systematic techniques such as Delphistudies (to mobilise expert opinion)and focus panels can also help toidentify relevant externalities.Forexample, in research undertaken duringthe development of PARMS-PLANNING, focus group workrevealed that the four most commonlymentioned impacts associated withwater-supply disruption were:• Impacts on household activity;• Impacts on traffic (road, rail etc.)flows arising from system breaksor repairs;

• Loss of business income; and• Damage to property or damage tothe environment.

Expert opinion can also be used toassess the relevance of the identifiedexternalities. In the case of PARMS-PLANNING, it was determined thattraffic interruption and loss of businesswould produce the greatest costs; thesecosts were therefore included in themodel (Speers et al, 2002b) In contrast,in PARMS-PRIORITY analysis isundertaken at a tactical level (finerspatial and temporal resolution), andproperty damage could therefore be asignificant decision factor under certaincircumstances.As a result, propertydamage (flooding) was consideredmore relevant to the analysis, and this

Figure 5Social cost settingsin PARMS; CustomerInterruptions

Figure 6Social cost settingsin PARMS; TrafficDisruption



externalities).The consequences arethen compared in pairs to rank them inorder of importance; the pre-deter-mined criteria for this prioritisationbeing the amount of money that theauthority would be prepared to pay toavoid the consequence.The basicprocedure used is thus to comparefactor 1 with factor 2 and select themost important.Factor 1 is thencompared with factor 3, then withfactor 4,5 and so on, as illustrated inFigure 4.Once complete, the factors are

ranked according to the number oftimes they were identified as being themore important.This produces aranked list of consequences,whichincludes both financial and non-financial consequences,of the formshown inTable 1.The financial conse-quences are then used as markers toassign notional monetary values toeach of the non-monetary conse-quences. For example, inTable 1 it canbe concluded that the authorityconsiders the externality ‘emotionaldistress’ to have a value greater than$20,000,but less than $50,000; anotional value of (say) $35,000 mighttherefore be used to represent thisimpact in costing or risk assessments.The emphasis curve approach has

the advantage that it allows monetaryvalues to be placed against non-financial consequences with aminimum of data.However, adisadvantage is that the prioritisationis subjective,being based solely on theviews of the participants.

Quantitative estimates fortangible externalitiesAs noted previously,data will not beavailable for costs as such,but basicassumptions can be made in somecircumstances to convert estimates ofmagnitude into monetary values.Forexample, for the externalities consid-ered within PARMS-PLANNING,data were available or could be collatedto estimate magnitude.The monetaryvalue was then assumed to be depen-dent on the value of time.Hence:• In the case of traffic disruptions,standard traffic models were appliedto hypothetical case studies, takinginto account the value of time andthe time cost of interruptions.

• Business loss was calculated bytaking a standard hourly rate foremployees, an estimate of thenumber of employees, and assuminga multiplier of 2.5 for lost valueadded per employee.

Table 2 shows outcomes of twoworked examples developed to gain afeel for the size of the cost of trafficinterruptions and lost business.Costsof $1309 and $15,032 respectivelywere estimated.These are not

aspect was thus incorporated intoPARMS-PRIORITY (see Moglia etal, 2006).

Determining magnitudeAnalysis of externalities can be carriedout at various levels of quantification.At one extreme the analysis is carriedout in the absence of quantitative dataand is based upon expert opinionalone.At the other end of the spec-trum, quantitative (cause-effect; dose-response type) models are used topredict the magnitude of the impacts.Whilst the application of subjective

approaches may be pragmatic, it isdesirable to base the assessment ofmagnitude on real data, rather than justopinion.The question then arises as towhat data can be obtained for anexternality. Some externalities aretangible, in that measurable data areavailable or can be collated,whilstother externalities are intangible; forexample customer distress.As with lifecycle costing (e.g.Burn et al, 2001),data generally comes in three forms:• Historic data – data recorded duringpast activities.

• Best available guess – obtainedfrom experts.

• Predictive calculations – forexample, energy requirements fromwhich annual greenhouse gasemissions can be calculated.

Combinations of data sources can beused in the analysis of externalitymagnitude.For example, the twoexternalities considered in PARMS-PLANNING are customer impacts andtraffic disruption. In the case ofcustomer impacts, the magnitude ofthe externalities is related to:• The length of time for which serviceis lost; and

• The number and type of customerwhose service is disrupted.

In the case of traffic disruption, themagnitude is related to such factors as:• The length of time for which trafficis disrupted.

• The timing of the disruption(whether peak or off-peak traveltimes); and

• The number of vehicles affected(which in turn depends on the typeof road).

Since water authorities collect data onthese factors,or can collate relevantdata from other sources and/or makeestimates, it was possible to model themagnitude of these externalities withinPARMS (see the examples given inTable 2 and associated discussions).Figures 2 and 3 show input screens thatallow authorities to tailor themagnitude of externalities to theirown circumstances.The potential magnitude of both

externalities is assumed to be directlyproportional to the outage duration.As

shown in Figure 2, the proportion ofoutage start times and/or durations canbe based on failure records (this optionis selected by checking the boxeslabelled ‘base on failure records’) or canbe input as an assumption based onoperational experience.The ability tomodel traffic disruption in PARMS isfacilitated by incorporating defaultvalues for traffic density into thesoftware,which can be modified by theuser as necessary.These default valuesare shown in Figure 3 and were derivedusing standard traffic models applied tohypotheticalAustralian case studies(Speers et al, 2002a).

Estimating monetary valueAs noted previously,one way ofintegrating externalities into assetmanagement decision-making is toestimate its monetary value and thentreat it like any other relevant costelement.However, it should berecognised that given the nature ofexternalities, there will be no explicitcost data available from which to derivethese values.As with estimates ofmagnitude, a range of approaches canbe used to place a monetary value onan externality.For example, subjectiveapproaches based on opinion can beused when the aim of the analysis issimply to take externalities intoaccount in a consistent way (forexample,when there is no justificationor capacity for more detailed analysis).More quantified approaches areavailable,which can involve the use ofbasic assumptions such as the value oftime,or more involved investigations ofwillingness to pay/accept. Someexamples of these types of approach aregiven below, though it should berecognised that a range of othertechniques are available in theeconomics literature.

A subjective approach to constrainmonetary valueA subjective approach that can be usedto take externalities into account,which has been previously used in theUK, is based on aTotal QualityManagement technique called anemphasis curve (WRc,2003).Thistechnique uses the fact that,whilst it isdifficult to make a judgement on therelative importance of more than threeor four non-quantifiable factors at onetime, it is relatively easy to judge whichis the more important of two factors,using some pre-determined criteria.In applying this technique, a

comprehensive list of consequencesassociated with hypothetical assetfailures is first produced,whichincludes a mix of both tangible costs(for example, failures resulting in adirect cost of $50,000) and non-costed(intangible) impacts (including relevant



insignificant sums, especially whenaggregated across a network.This rapid appraisal approach is

simple to use,but quite site (and thususer) specific.As such,PARMS wasagain designed to be user-configurable.Figures 5 and 6 show the input screensthat allows utilities to tailor themonetary value of externalities totheir own circumstances:

Choice modellingAs well as the approaches describedabove, choice modelling was alsoundertaken in the development ofPARMS to understand customerattitudes to service interruptions.Putsimply, choice modelling is a techniquefor determining preferences from arange of attributes (Speers et al, 2002a).The research undertaken involved thefollowing steps:• Defining what the change in aparameter of interest could be (e.g.flow, service interruptions).

• Determining the potential impactsof this change (at a micro and macrolevel); and

• Valuing the attribute changes usingthe choice modelling technique.

In summary, customer preferencesurveys were first used to determinethose aspects of service valued by thecustomer.Choice modelling was thenused to put a monetary value againstthe important aspects of service,expressed in terms of willingness topay (WTP) for improved service levels,or willingness to accept compensationfor decreases in standards.The resultswere then aggregated to evaluate thecost or benefit of the change instandard from the perspective of thecustomer (see Speers et al, 2002b fordetails). For example, the researchshowed that the customers included inthe choice modelling questionnaireswere willing to pay $2.35 per annumto achieve a reduction in the length ofan average interruption from six tofour hours.Assuming a site of 500,000properties, this translated into a totalannualWTP of $1,175,000 p.a.Similarly, customers were willing topay to pay $2.20 p.a. for a reduction infrequency of interruptions from twop.a. to one p.a.This process not only establishes an

estimate of what the community iswilling to pay for improved environ-mental quality or levels of service,butalso teases out how people valuespecific attributes.For example, in thedevelopment of PARMS-PLANNING, the research showed thatthe components of an interruptionthat were deemed important in termsof inconvenience were:• Duration of the interruption;• Advance notification ofthe interruption;

• Time of day of the interruption; and• Number of interruptions per year.Choice modelling also allowed theresearchers to determine that the costper supply interruption increases ifthere are multiple interruptions to asingle customer (see Speers et al,2002b).Hence, the perceived cost of(say) three interruptions to a singlecustomer is higher than three supplyinterruptions for different customers.

Beyond whole life costing andrisk assessmentThe approaches described above allowa cost to be put against some externali-ties. However, as noted previously, sincethere are no direct market prices forexternalities, these costs remaindifficult to represent in terms that areacceptable to all stakeholders. In awider context, sustainability issues suchas community values and socialacceptance are even more difficult toput a monetary value against.Analternative approach that can be usedwithout the need to reduce impacts topurely monetary terms is life cycleassessment (LCA).Similar toWLC,LCA is a technique for evaluating allprocesses involved with an asset,‘fromcradle to the grave’, that is, fromresources, through transport, to use anddisposal of the asset (Todd,1996).LCAcan also incorporate factors such associal issues (e.g. community values andsocial acceptance),which allows thistechnique to incorporate widersustainability principles (Maheepala etal, 2003).On the other hand,unlike thetreatment of externalities presentedherein,LCA does not provide answersin the language used by decisionmakers (i.e. dollars).There are thustradeoffs to be considered in the useof any decision support technique,including the considerationof externalities.Rather than advocate the use of one

methodology, asset managers shouldperhaps use a judicious combinationof available approaches to providedifferent views on the interventionoptions available,with due considera-tion being given to the data available tosupport analysis and the technicalcapacity available to use tools.Thisapproach is taken in the assessment ofwhole life value (WLV),which ispurportedly becoming adopted in theUK construction sector.TheWLV ofan asset represents the optimumbalance of stakeholders’ aspirations,needs and requirements, and costs overthe life of an asset (Mootanah,2005).As detailed in Bourke el al, (2005),

the assessment ofWLV is not a singlemethodology as such,but is insteadachieved through application of a rangeof methodologies includingWLC,

LCA,value management, and riskmanagement.WLV takes account ofthe costs and benefits associated withthe different stages of the whole life ofthe asset, and includes the considera-tion of the perceived costs and benefitsof some or all of the stakeholders’relevant value drivers. It can thus beinferred that if the stakeholder’saspirations embrace sustainabilityprinciples, the analysis of externalitieswill remain an important aspect ofWLV undertaken at the optionevaluation,planning and design stage.

ConclusionThis paper has considered the roleexternalities will play in an enlightenedview of asset management aligned withthe concepts of sustainable develop-ment. It must,of course,be acknowl-edged that for asset managementframeworks to become a real tool indelivery of sustainability objectives,stakeholders must first becomeengaged in the need for change, andsystems of regulation and incentivesput in place to drive businessaspirations in a sustainable direction.This in turn will require theintegration of externalities into theway decisions are supported.It has been shown that externalities

can be characterised in terms of theasset lifecycle.Given this view, it isnatural to take account of externalitiesusing life cycle costing techniques.Tothis end, analysis of externalities shouldform part of the option evaluationstage,undertaken within a whole oflife context.Techniques such as whole of life

costing and life cycle analysis facilitatethe consideration of externalities at thedesign stage.For existing networks,however, consideration of externalitieswill involve an on-going evaluationof the level of risk associated withindividual assets and/or groups ofassets.This analysis is again undertakento minimise the whole life cost ofasset ownership.The inclusion of externalities in the

analysis of investment decisionsprovides a truer reflection of the costof service provision to the communityacross the ‘triple bottom line’.This canallow a higher level of investment andexpenditure in maintenance activitiessuch as renewal to be justified, thoughaffordability and (more usually)customer willingness to pay issuesmust still be considered.A generic framework for evaluating

externalities related to water services ispresented in the paper,which issummarised as:• Identify the externalities, animportant aspect of which is todefine an appropriate



system boundary;• Determine the magnitude ofsignificant externalities;

• Estimate the monetary value ofthese externalities.

This framework was applied during thedevelopment of the PARMS softwaresuite, and examples have been present-ed that illustrate the techniques used,drawing on a range of data sources.Theresearch into PARMS showed that thelevel of externalities can be significantrelative to other factors involved in themanagement of water infrastructure.Since the costs generated in the

analysis of externalities are non-market, the efficacy or otherwise ofexternality calculations is always opento challenge.However, as illustrated inthis paper, analysis can be undertakenso as to represent externality issues in aconsistent manner and thereby provide,at the very least, a relative measure ofthe real cost of different managementstrategies.Water authorities can thenprovide justification to stakeholders forbudget levels that take into account thewider impact of their activities.Incorporating externalities into theapproaches used to select specific assetmanagement interventions also has thepotential for allowing more robustdecisions to be made, especially ifappropriate sensitivity analysis isundertaken to assess the impact ofexternalities on the relative value of theavailable options.The inclusion of externalities into

decision-making is essential if the watersector is to deliver across triple bottomline requirements.However, it isimportant to note that consistency inthe treatment of externalities (betweenwater authorities and even individualswithin a given authority) can only beachieved if appropriate guidelines areset and used.Development of theseguidelines is an important challengethat still needs to be addressed by thewater sector.

AcknowledgementsTheAuthors would like toacknowledge the financial support ofthe National FlagshipWater for aHealthy Country, and the internalreview of this paper by Steve Cook andLeonie Pearson of CSIRO,and thereview by Dr John Bridgeman of theUniversity of Birmingham,UK.

ReferencesBarlow,M. (2007) Blue Covenant,BlackInc,Melbourne,Victoria,Australia.

Boussabaine,A. and Kirkham,R.(2004)Whole Life-Cycle Costing:Riskand Risk response,Blackwell Publishing,Oxford,UK.

Bowers, J. andYoung,M.D. (2000)Valuing Externalities: a Methodology forUrbanWater,Final Report to CSIRO

UrbanWater Program,CSIRO Land andWater Policy and Economic Research Unit,Australia.

BTCE (1998),Externalities in theTransport Sector,Bureau ofTransport andCommunications Economics, downloadedfromhttp://www.btre.gov.au/publications/31/Files/is10.pdf, accessed October 2008.

van Bueren,M.and HattonMacDonald,D.H. (2004)AddressingWater-Related Externalities: Issues forConsideration,Paper presented at aWaterPolicyWorkshop convened by theAustralianAgricultural and Resource EconomicsSociety,10th February 2004,Melbourne.

Bourke,K.,Ramdas,V.,Singh,S.,Green,A.,Crudgington,A. and Mootanah,D. (2005)AchievingWhole LifeValue inInfrastructure and Buildings,BREBookshop,Bracknel,UK.

Burn,S.,Marlow,D.Moglia,M.andBuckland,P. (2007)Asset Management forWater Infrastructure,WaterAssetManagement International,2.3,12-18.

Burn,L.S.,Tucker,S.N.,Maheepala,S.and Mitchell.V.G. (2001)The applicationof LifecycleAnalysis in UrbanWaterSystems.4th International Conference onWater pipeline Systems,York,UK,28-30March 2001.

Burn L.S.,Tucker S.N.,Rahilly M,Davis P, Jarrett R and Po M (2003)Assetplanning for water reticulation systems - thePARMS model.Water science andtechnology:Water Supply 3,55-62.

COAG Expert Group (1995)AssetValuation Methods and Cost RecoveryDefinitions for theAustralianWaterIndustry,Canberra,Australia.

Davis,P. and Marlow,D. (2008)Quantifying Economic Lifetime forAssetManagement of Large-Diameter Pipelines,JournalAWWA,100:7, July 2008.

Denniss,R. (2003) ImplementingPolicies to Increase the Sustainability ofTransport inAustralia,Paper presented to‘WesternAustralia:Beyond Oil?’,downloaded from http://www.aspo-australia.org.au/References/Denniss-paper-2003.doc, accessed Oct,2008.

Elkington, J. (1998) Cannibals withForks: theTriple Bottom Line of 21stCentury Business.Gabriola Island,BC:New Society Publishers. ISBN 0-86571-392-8.

Hatton Macdonald,D.,Lamontagne,Band Connor, J (2005)The Economics ofWater:Taking FullAccount of First Use,Reuse andThe Return to the Environment,Irrigation and Drainage 54:S93–S102.

Jarrett,R.Hussain,O and van derTouw,J. (2001) Prediction of Failures inWaterMains and Prioritisation for Replacements;In Proc. International Conference ofMaintenance Societies,Melbourne,Australia.

Kenway,S.,Howe,C.and Maheepala,S. (2006)Triple Bottom Line Reporting ofSustainableWater Utility Performance,AwwaRF Report 91179,AwwaRF,CO,

USA.Maheepala,S.,Speers,A.,Booker,N.,

and Mitchell;V.G., (2003)A FrameworkforAssessing Sustainability of UrbanWaterSystems,The Institution of Engineers,Australia,28th International HydrologyandWater Resources Symposium,10-14November 2003,Wollongong,NSW.

Marlow,D. (2006) Sustainability BasedAsset Management;Enviro 06,Melbourne, paper e6190.

Marlow,D. (2008a) Sustainability-BasedAsset Management in theWaterSector,ThirdWorld Congress onEngineeringAsset Management andIntelligent Maintenance System Conference2008,Beijing,October 2008.

Marlow,D. (2008b) Sustainability-BasedAsset Management in theWaterSector,Water, theAustralianWaterAssociation Journal,September 2008,pp.50-54.

Marlow,D.,Moglia,M,and Burn,S(2007) PARMS-PRIORITY:AnAdvancedAsset Management SoftwareToolforWater Distribution Networks,AWWA2007 Research Symposium DistributionSystems:The Next Frontier March 2-3,2007.

MeriemAït Ouyahia (2006) Public-Private Partnerships for Funding MunicipalDrinkingWater Infrastructure:What are theChallenges?,Discussion Paper,PRI ProjectSustainable Development,May 2006.

Moglia,M.,Burn,S., and Medding,S.(2006) Decision Support System forWaterPipeline Renewal Prioritization,http://www.itcon.org/2006/6/, ITconVol.11,pp 63 to 82.

Mootanah,D. (2005) ResearchingWhole LifeValue Methodologies forConstruction; fromhttp://www.ciria.org/pdf/rp715_wlv_paper.pdf.

Solanes,M.and Gonzalez-Villarreal,F.(1999)The Dublin Principles forWater asReflected in a ComparativeAssessment ofInstitutional and LegalArrangements forIntegratedWater Resources Management;downloaded fromhttp://www.unsgab.org/III-1.6.pdf.

SpeersA.,Burn S.,Hatton MacDonaldD.,Young M.and Syme G. (2002a)Setting and Evaluating Customer ServiceStandards, IWA 3rdWorld water congress:Enviro 2002,Melbourne,Australia.

SpeersA.,Burn S.,Hatton MacDonaldD.,Nancarrow,B.,Syme G.andYoung M.(2002b) Determining Customer ServiceLevels - Development of a Methodology;Overarching Report,BCE Doc.Number01/199,CSIRO Report, July 2002.

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AM UPDATES

IWA has launched its Water OperatorsPartnership questionnaire to encouragenetworking and facilitate the sharing of bestpractices of water operator partnerships.The WOPS survey is part of an IWA work plan

currently being conducted to support theInternational Water Association’s WaterOperators Partnerships activities. The purpose ofthis survey is to establish a knowledge base onWOPs to catalogue experiences and to defineworkable WOP models that can be used acrossthe sector.A fundamental part of IWA’s mission is to

provide opportunities for members to learn fromeach other across the different subject areasand geographies. The IWA network providesopportunities for capacity strengthening and avariety of collaborations have been brokered overthe years, many specialists throughout the globalnetwork have contributed with their expertise.Following contact from UNSGAB, UN-DESA, andUN-HABITAT, IWA was invited by UN-HABITAT

to develop and coordinate WOPs-relatedactivities in developed and underdevelopedeconomies.No current organisations have the capacity to

reach the many thousands of water operators inthe world. The rationale behind the WOPsconcept is consequently that the most capacityfor improving water and sanitation operators iswithin the operators themselves. The WOPs isbased on mechanisms to allow these operators tosystematically communicate amongst eachother, without having to wait for donors, interna-tional financial institutions or other organisationsto establish contacts and develop projects.The main objectives of this WOPs

questionnaire are:• To help encourage networking and facilitatethe sharing of best practices of water operatorpartnerships;

• To better understand the institutionalarrangements and the characteristics of theutilities which make up successful

partnerships in different regions of the world;• To better understand the experiences and bestpractices of partnerships;

• To identify the challenges in partnerships andthe barriers in practice that may hinder theimplementation of successful water operatormodels.

Accordingly, IWA seeks the most accurate, non-biased and factually-based answers to the surveyquestions. The results of this survey will helpto ensure the appropriateness of actions ofinternational supporting companies towards theimplementation of successful WOPs models. Totake part in this survey, please download from theIWA website at:http://www.iwahq.org/templates/ld_templates/layout_633184.aspx?ObjectId=679683More information about the WOPs programme

can be found at the following link:http://www.iwahq.org/templates/ld_templates/layout_633184.aspx?ObjectId=675379

IWAWater Operators Partnerships (WOPs) launch of questionnaire

The WRc Group have now extensively revisedand updated The Sewerage Rehabilitation

Manual (SRM) 4th Edition by extending anddeveloping it into the Sewerage Risk Managementwebsite.

The Sewerage Rehabilitation Manual has forover 25 years been a key document forplanning upgrading work on sewer systemsboth in the UK and worldwide.The SRM presents an iterative,

comprehensive risk-based approach to themanagement of sewer system assets compatiblewith EN752:2008 Drain and Sewer SystemsOutside Buildings and the UKWIR CommonFramework which is able to take account ofstrategic drivers such as climate changeadaptation and integrated urban

drainage management.The key changes include performance

assessment approach being explicitly risk based,risk based tools provided for many of the mostimportant risks, and allowance of greaterflexibility in the scale of analysis (not justdrainage area). The introductory part of thewebsite is in the public domain. The detailedmethodology and reference information isavailable to interested parties on asubscription basis.The website is split into three sections:

general information, strategic overview andSRM procedure.The first section contains general information

about the SRM website including contactinformation, background to the manual and

broad principles of the approach, legal andcontractual information and an overview ofEN752. It is in the public domain.Section two summarises each of the 11 steps

of the SRM procedure and provides a usefulstarting point for novel users of the website or asa refresher for the 4th Edition of the SRM. Thisinformation is in the public domain.Section three occupies the major part of the

website and contains all the detailed data andinformation concerning the 11 step SewerageRisk Management procedure which will lead tothe formulation of a Sewerage ManagementPlan. Access to this part of the website isrestricted to licensed users.For more information, please visit:

http://srm.wrcplc.co.uk

WRc launches new approach to Sewerage RiskManagement

Flowserve Corporation, a provider of flowcontrol products and services for the global

infrastructure markets, has announced the launchof Flowserve ValveSight, an asset managementsolution for integrated control valves andautomated quarter-turn valve packages.The ValveSight solution aims to reduce

unexpected plant or process downtime bypredicting potential failure modes and prioritizingcondition-based maintenance before theperformance of the working process candegrade. ValveSight reduces maintenance costsassociated with preventative and break-fixactivities by ensuring that actions are focused onsolving root causes and not just symptoms. Mostimportantly, says the company, ValveSightimproves safety and environmental complianceby proactively identifying critical issues beforethey occur.ValveSight’s diagnostic software continuously

receives diagnostic data from the valve, actuator,positioner, and control signal while the process isrunning and displays the data in a graphical userinterface. The ValveSight interface is designed toallow users to translate a broad spectrum of

different alarms and data points into simple at-a-glance colour-coded health indicators. Thediagnostic algorithms within ValveSight recognizedata patterns that indicate an eroding servicecondition before a process variable reaches anout-of-tolerance level, and translate thatcondition into actionable device-specificmaintenance advice.‘Plant operations depend on the performance,

health, safety and environmental considerationsof valves and actuators. ValveSight’s predictiveintelligence built into the Logix MD digitalpositioners addresses these concerns byimproving output and lowering costs withoutsacrificing safety and reliability,’ said AhmadZahedi, Director of Research and Development,Control Sector, Flowserve Flow Control Division.‘ValveSight allows for increased mean timebetween failures by allowing plant managers topinpoint developing malfunctions while thecontrol valve is still in service, and reduces meantime to repair during turnaround periods.ValveSight software is easy to use and simple tointegrate into plant operations.’ValveSight helps plant managers better

prioritize planned maintenance. Instead ofchecking and servicing hundreds of controlvalves during scheduled downtime, ValveSightalerts maintenance only when and where it isneeded, saving time and money.The system is compatible with both Flowserve

and competitor valves and ValveSight is alsoavailable as an upgrade to most existing Logix3000 series positioners. The company plans tomake ValveSight available on the Flowserve Logix500 and PMV D3 family of positioners in the nearfuture, as well as the Flowserve Automax familyof smart switchboxes for quarter-turnvalve packages.Running on FDT/DTM, a globally recognized

integration standard, ValveSight can beconnected to a Host DCS, workstations, orany system that supports FDT/DTM openarchitecture. Due to the FDT/DTM technologystandard, the user does not need special trainingin order to gain immediate benefits of theValveSight system.

For more information, please visit:www.valvesight.com

Flowserve launches assetmanagement tool


AM DIARY

A listing of upcoming assetmanagement-related eventsand conferences. Send eventdetails to WAMI for inclusion.

Benchmarking water services:the way forward12-13 March 2009, Amsterdam,NetherlandsContact: Conference SecretariatTel: +31 725 899 062Email: [email protected]:www.moorga.com

Utilities Asset Managementconference24-25 March 2009, London, UKTel: + 44 (0) 20 7017 7790Email:[email protected]

Web: www.iir-events.com/IIR-Conf/page.aspx?id=17432

Water Loss 200926-29 April 2009, Cape Town,South AfricaEmail:[email protected]:www.waterloss2009.com

Water Malaysia 200919-21 May 2009, Putra WorldTrade Centre, Kuala LumpurContact: Ms Kelly LiauTel: 603 6140 6666Email: [email protected]: www.watermalaysia.com

AWWA Annual Conference &Exposition (ACE09)

14-18 June 2009, San Diego, USAContact: Cilia Kohn/TriciaLougheadEmail:[email protected]:www.awwa.org/ace09

Singapore International WaterWeek - Singapore22-25 June 2009Web: www.siww.com.sg/

Asset Management ofMedium and SmallWastewater Utilities3-4 July 2009, Alexandroupolis,GreeceContact: Konstantinos P. TsagarakisTel: +30 28310 77433 or+306945706431Email: [email protected]

Web: http://iwasam.env.duth.gr

2nd International Conferenceon Water Economics, Statistics& Finance3-5 July 2009, Alexandroupolis,GreeceContact: Konstantinos P. TsagarakisTel: +30 28310 77433 or+306945706431Email:[email protected]:www.soc.uoc.gr/iwa

5th IWA Specialist Conferenceon Efficient Use andManagement of UrbanWater Supply19-21 October 2009, Sydney,AustraliaWeb:www.efficient2009.com

AM UPDATES

Third Edition Concrete Pressure Pipe (M9)American Water Works AssociationThis AWWAManual of Water Supply Practicesprovides all of the supplemental informationengineers and designers need to achieve optimalfield performance of concrete pressure pipelines.Concrete Pressure Pipe (M9) was reviewed

and developed by an AWWA volunteer committeemade up of practitioners in concrete pressurepipe engineering and manufacturing. In addition,the manual was reviewed and approved by theAWWA Standards Committee on ConcretePressure Pipe. Additionally, Concrete PressurePipe (M9) includes the Guide Specifications forPurchasing and Installation of Concrete Pipes.This guide will assist engineers in controlling themany variables of pipe installation to assurespecified product performance.American Water Works Association, 2008ISBN: 1583215492Price: $113.00AWWA Member Price: $75.00To order visit: www.awwa.org/bookstore

Communicating the Value of Water:An Introductory Guide for UtilitiesAwwaRF Report 91222 + CD-ROMAuthors: E Means, Z Chowdhury, G Westerhoff, LPassantino, and J RuettanCommunication, both within the utility and withexternal stakeholders, is essential for the longterm sustainability of utilities. One of the biggestchallenges that utilities face is the ability toobtain the finances necessary to completeprojects related to water quality and waterquantity. If the utility can effectivelycommunicate the value of the water servicesit provides and the value of water as a life-sustaining resource, customers may be moreprudent in their use of water and more willing topay higher rates, city decision makers will bemore likely to approve rate increases, and theutility will be more likely to gain the financeneeded for long-term sustainability.

The goal of this project was to developpractical guidance and tools that can be used bywater officials to properly communicate the valueof water. The specific objectives were as follows:• Research available studies related tocommunication with customers and stake-holders both in the water utility field as well asother organizations that require public supportto glean ‘lessons learned’

• Supplement the available studies with surveysand workshops that are directly related tocommunicating the value of water

• Develop a branding strategy that builds publictrust and communicates the utility valueproposition to the customer and stakeholder

• Develop specific guidelines, plans, andprocesses, along with communication tools,that can be used by water utilities to devisea communication programme for theirwater utility.

The approach for completing this project startedwith an extensive literature search on the topic ofcommunicating the value of water followed byseveral workshops, meetings, focus groups, andinterviews to help identify key messages to beused in communications plans. The informationcollected in these project activities was summa-rized and used to develop a step-by-step modelfor communications planning. The modelincorporates aspects of strategic planning,communications gap analysis, behavioral gapanalysis, branding, and national communica-tions efforts. An electronic CommunicationsToolkit was also developed.IWA Publishing, January 2009161 pp. PaperbackISBN: 9781843396260Price: £120.00 / US$240.00 / €180.00IWA members price:£78.00 / US$156.00 / €117.00To order visit: www.iwapublishing.com

Analysis of Integrated Methods for

Wastewater Treatment Plant Upgrading andOptimizationWERF Report 04-CTS-5Author(s): Movva Reddy and Krishna PagillaThis guidance document incorporates thesystematic approach for integrated capacityassessment of a wastewater treatment plantand identifying performance limiting factors.Based on evaluation by the project team, thisdocument presents the ‘best-practices’approach that defines a systematic process forapplying analytical methods and testing toolsto optimize and upgrade wastewatertreatment plants.This guidance document suggests a

systematic approach for capacity evaluation,which has three generalized stages: desktopevaluation as an initial plant assessment;detailed evaluation for individual unit processanalysis and testing, along with integratedevaluation of the whole plant; and field scaletesting as confirmative testing for implementationof corrective actions.The document covers analysis, testing

methods, and protocols for plant monitoring. Itdescribes the integrated hydraulics and processmodeling approach for determining plantcapacity. The document addresses currentlypracticed treatment processes, evaluation tools,and equipment in the industry. Individual unitprocesses in liquid treatment and solids handlingare illustrated with detailed process analysis andtesting, performance limiting factors, approachesfor overcoming potential constraints, capacityassessments, and case studies. The documentalso provides recommendations and sources ofdetailed information for testing procedures.IWA Publishing, February 2009260 pp. PaperbackISBN: 9781843395256Price: £103.00 / US$206.00 / €154.50IWA members price:£77.25 / US$154.50 / €115.88To order visit: www.iwapublishing.com

For more information and to order these and other titles from IWA Publishing, visit www.iwapublishing.com

Documents

MARCH2009 asset management - IWA Publishing€¦ · water asset management INTERNATIONAL MARCH2009 ISSUE1 VOLUME5 PAPERS 3 Asimplifiedtechnicaldecision supporttoolfortheasset managementofsewernetworks