New Decade - New Challenges Annual Conference September 2010 Water Services Training Group 14 th Annual Conference New Decade – New Challenges 9 th September 2010

New Decade - New Challenges Annual Conference September 2010 WSIP Implementation Maria Graham Principal Officer Water Services Investment Section, DoEHLG

Key features of WSIP Scale of Programme €1 billion underway €1.8 billion contracts to commence (340 contracts) 190 schemes in planning Presented in River Basin District format Focus on contracts in medium term Integration of water conservation - €321m contracts to commence Annual Review

Framing the priorities for Setting programme priorities Water conservation Environmental objectives ECJ judgments Environmental & public health compliance Economic objectives – works to support sustainable development of hubs and gateways & strategically located areas & employment creation in line with Smart Economy report Assessment process Assessment by Water Services Authorities of projects not substantially advanced in period against these priorities. Subsequent evaluation by Department.

Key inputs… WSIP Assessment of Need EPA – Drinking water, Urban Waste Water Reports Work on RAL and waste water priorities NSS/ Developing areas Shellfish Pollution Reduction Plans Freshwater Pearl Mussels Plans Forfas Reports – Enterprise needs of Gateways and Hubs River Basin Management Plans: priorities for first cycle

Schemes/contracts excluded Did not rate sufficiently highly as contract/scheme … Did not feature highly on public health/ environmental grounds Involved plans for water supply capacity increases not justified by immediate economic need or progress on water conservation; Involved plans for increased waste water treatment capacity not reflected in waste water treatment priorities in first cycle of river basin management plans or other environmental priorities; Scope of proposal impacting on affordability;

WSIP €1.8 billion of contracts to commence Waste Water Infrastructure - €1 billion Water Supply Infrastructure - €800m

Infrastructure Investment priorities  Published by Dept of Finance in July 2010  Water Services - Almost €3.5 billion in Exchequer resources over the period  Report acknowledges progress made – but focuses on future issues –  satisfying demand in critical centres for industrial & commercial development to aid recovery;  tackling high levels of unaccounted for water and  achieving full compliance with directives. New Decade - New Challenges Annual Conference September 2010

Infrastructure Investment priorities New Decade - New Challenges Annual Conference September 2010 “ The new funding level will amount to a very substantial sum in real terms, given reduced tender prices..” Infrastructure Investment Priorities (D/Finance- July 2010)

Infrastructure Investment priorities– Anticipated outcomes by 2016  Make “major in-roads” in addressing deficiencies in water infrastructure particularly in hubs & gateways;  100% compliance with Urban Waste Water Directive – (from 2009 base of 92%);  100% compliance with drinking water standards;  Average level of unaccounted for water to be reduced from 43% to 33% New Decade - New Challenges Annual Conference September 2010

Local authority financing (1)  Measures to address changed financial climate  Alignment of WSIP with available resources  EPA Remedial Action List (RAL) – water pricing deferred to later contracts to facilitate early delivery  Mechanism for dealing with sunk costs on discontinued schemes (Circular L4/10)  Additional resources being devoted to final accounts in 2010  Borrowing  Approved allocations of €144m in 2010  Allocations sufficient to cover demands for completed works & works in progress New Decade - New Challenges Annual Conference September 2010

Local authority financing (2) Achieving a sustainable funding mix  RAL – generally 100% funding  Water conservation – generally 90% funding  Other contracts/schemes – need to ensure appropriate project scope and avail of beneficial market conditions  Continue to work with CCMA on issues arising. New Decade - New Challenges Annual Conference September 2010

Implications of move to contracts focus Contract = substantial advance, treatment plant Civil, Treatment plant M&E, Treatment Plant DBO, Network Civil, Network M&E, Pumping contracts (Circular L6/09 para. 6) Approved Budgets Application of Water Pricing Planning of Projects Programme/Project Management Annual Review

Approved Budgets  Planning stage:– budget covers cost to approval of PR and share of water pricing to be recouped from subsequent contracts;  Construction/Procurement:- budget details at two levels  Scheme ( or phase of scheme) level  Contract level reflecting both relevant contract & non- contract costs - water pricing will apply at this level (on bottom line basis)  WebPCS being adjusted to allow for these changes New Decade - New Challenges Annual Conference September 2010

Project financing – water pricing application to contracts New Decade - New Challenges Annual Conference September 2010 Scheme StageApproved Cost Water pricing WSA share (20%)Approved Grant Cumulative share of costs borne by Dept at end of each stage. Planning stage€2m €2m (with €0.4m to be recouped over the procurement/ construction phase) 100% Procurement/ Construction stage (€18m) Apportionment of planning costs across contracts (pro-rata share) Application of 20% to contract cost & pro-rata share of planning costs Contract 1 (including non- contract costs) €2m€0.222m€0.444m€1.556m 89% Contract 2 (including non- contract costs) €7m€.0.778m€1.556m€5.444m 82% Contract 3* (including non-contract costs) €4m€0.444m€0.889m€3.111m 81% Contract 4* (including non-contract costs) €3m€0.333m€0.667m€2.333m 80% Contract 5* (including non-contract costs) €2m€0.222m€0.444m€1.556m 80% Total€20m€16m (80%) * Construction post 2012 – illustrative example from Circular L4/10

Planning  Preliminary report  Critical appraisal tool – determining scale, scope and phasing of project;  Need broad vision to guide the incremental approach  Set in River Basin Management Plan context – need to look at opportunities for cross boundary synergies/economies of scale,  Reduce the need for “design reviews”  Aim - to have appropriate contracts ready to go for next investment cycle. New Decade - New Challenges Annual Conference September 2010

Programme/project management  Driving the programme  Need to use the “project steering group” meetings as “programme steering groups” to drive local programmes;  Determine key milestones at project level and monitor any slippage and address;  Be guided in implementation by WSIP priorities – quality, compliance and economic recovery;  Project management staff New Decade - New Challenges Annual Conference September 2010

Annual Review Review progress at end of each year of operation to allow for re-prioritisation; Review in line with programme priorities but will take account of new issues emerging – Remedial Action List (RAL), licensing/ certification etc RAL – call for proposals in Summer 2010 for small scheme funding.

Implementation - Future Trends  VFM study  Review of WSIP with outcome to inform implementation of WSIP ;  Due to be finalised in Autumn;  Steering group involving D/Finance and CCMA;  Terms of Reference to look at efficiency and effectiveness of overall investment & project delivery; New Decade - New Challenges Annual Conference September 2010

Implementation - Future Trends  Project scale -  Use of small schemes funding to complement overall priorities  Bundling and DBO :  “continued use of DBO” – Local Government Efficiency Review Group recommendation;  Consideration of bundling projects based on common compliance considerations as well as geographical proximity.  Clarity on overall strategy and contribution of individual contracts to delivering on outcomes New Decade - New Challenges Annual Conference September 2010

Economies of scale – waste water DBOs New Decade - New Challenges Annual Conference September 2010

Economies of scale –water DBOs New Decade - New Challenges Annual Conference September 2010

Implementation - Future Trends  Performance measurement  Greater definition of outcomes expected rather than output only - eg number of schemes/contracts completed  Shared services  Potential being considered in VFM study drawing from existing examples;  Governance issues being considered in context of implementation of River Basin Management Plans  Local Government Efficiency Review Group recommended – “enhanced regional office approach should be developed at river basin level for: - infrastructure delivery and implementation of river basin management plans…..” New Decade - New Challenges Annual Conference September 2010

Conclusion  Substantial Exchequer resources available over the coming years;  Opportunity to make major impact on water services infrastructure;  Priorities have been set;  Need to demonstrate success in terms of improved compliance, water conservation and security of supply if projected funding level is to be maintained. New Decade - New Challenges Annual Conference September 2010