Water companies to use benchmarking to cut costs

Ofwat has called on water companies to benchmark their working practices with the best in the world after a report it commissioned said significant cost savings could result.

PA Consulting was asked to look at the scope for water companies to do more benchmarking of their operational processes. It looked at benchmarking in related industries and activities and found that savings of around 30 per cent on benchmarked activities have been frequently achieved.

“The efficiency targets I will set in November for the years 2000-05 will be challenging for the water companies but achievable,” said Ian Byatt, director general of Water Services. “This report demonstrates that benchmarking and other cost reduction techniques have been used with great success in other sectors.

“I am now looking forward to seeing the companies’ business plans for the years 2000-05 to see what companies have already achieved through benchmarking and how they plan to take this work further.”

Another piece of the price review jigsaw has been put into place with the publication of how Ofwat will assess water and sewerage companies’ plans to carry out essential work on both their underground pipes and surface assets, such as water and sewage treatment works, sludge treatment works and buildings.

Ofwat’s assessment of the latest information provided by companies is that services to customers are stable and. in some companies, it is improving.

“This is good news for customers and bodes well for prices,” said Mr Byatt. “It suggest that industry wide the current levels of capital maintenance activity should be sufficient to maintain services for the next five years.

“Continuing efficiency savings will enable companies to improve services to customers as well as keeping costs down.”

Ofwat’s assessment is based on serviceability to customers. This means that companies must carry out work on underground pipes and service assets such that services to customers do not deteriorate. Price limits will be set at a level that ensures companies are able to do so.

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