Leading Edge Asset Decisions Assessment (LEADA), 2004

The Situation

Water service providers are responsible for the maintenance of assets worth billions of pounds which provide households and businesses with an essential service. To manage the maintenance of their asset network effectively, companies need a detailed understanding of how their assets are performing, the risks and effects of local asset failure, an understanding of future demographic changes in their supply area, and the preferences that customers have over the various aspects of its services.

In 2002, Yorkshire Water embarked on a programme to develop a coordinated approach to asset maintenance through the construction of a set of tools and processes under the banner "Leading Edge Asset Decisions Assessment" (LEADA). This was to be an advanced, comprehensive economic analysis of the utility's operations and customer needs over the rest of the decade. The objective of the programme was to determine the likely risks and service benefits associated with alternative investment options and identify the least-cost portfolio of maintenance schemes while maintaining a manageable level of risk within the system.

NERA's Role

NERA provided design and auditing services for LEADA, advising on a range of sophisticated econometric and modelling techniques to evaluate some 55,000 infrastructure investment options -- from realigning a single water main to replacing a major pumping station. A key objective was to determine the likely risks and service benefits associated with either investing in - or delaying - such improvements.

The LEADA project was unusual because of its emphasis on pinpointing customer benefits, its wide scope, and its treatment of detail. Projects of comparable scope using the techniques employed by LEADA are most often initiated to manage costs or risk in narrower fields.

The Result

Data provided by LEADA enabled Yorkshire Water to pinpoint the services that consumers value most -- and identify with the greatest detail the capital investments that would most effectively support and enhance those services. LEADA data proved critical in the development of Yorkshire Water's 5-year business and capital spending plan, submitted to Ofwat for the 2004 periodic price review.

The project was also honoured by the Operational Research Society with the prestigious President’s Medal for 2003. Founded over 50 years ago, with 3000 members in 53 countries, the Operational Research Society (ORS) is the world's oldest-established learned society catering to the Operational Research profession, which seeks to find practical and pragmatic solutions to operational and strategic problems. The President's Medal is one of the society's most prestigious awards and is given for the best practical application of operations research. ORS presented Yorkshire's LEADA group with the 2003 President's Medal "for their lucid presentation of work on a Cost-Benefit Approach to Capital-Maintenance Planning. The project was an excellent example of Operations Research at the strategic level."