Water industry asset management: a proposed service-performance model for investment

The water industry in England and Wales has developed over the last century, from small organisations serving local communities to large integrated companies in private ownership, overseen by a government regulator. Asset management practice has developed greatly in the 17 years since privatisation, with companies able to plan their operations and investment as they believe appropriate for the provision of customer services, subject to justifying their plans to the economic, quality and environmental regulators. Investment has flowed into the industry to replace deteriorated assets and to improve the quality of drinking water and rivers. The asset base is complex and, with a replacement value of approximately £231 billion at the 2002–2003 price base index suitable approaches are required to ensure that both the water service and the sewerage service are delivered at the most appropriate long‐term cost. The 2004 UK water industry price review was supported by the introduction of a Capital Maintenance Planning Common Framework to help companies understand and explain their maintenance investment requirement. In this paper, a service‐performance model is proposed to improve managers' understanding of the way in which businesses and the environment change over time, taking account of maintenance and other strategic requirements. Although developed with the water industry in mind, the model is equally applicable to other asset‐intensive industries.