MODELLING INCENTIVES IN WATER SUPPLY CONCESSION CONTRACTS

Abstract

 In Japanese water supply projects, aging pipelines and other facilities require complete overhauls, while the income from a declining population is forecasted to decrease, threatening the sustainability of water supply services. As a solution to this problem, public-private partnerships, especially the concession method, is receiving more attention. At present, there are only cases where the maintenance and renewal of pipelines, which accounts for the majority of water supply facilities, is excluded from the business scope of private enterprises, and its effect is limited. In this research, in order to consider how to provide incentives to private enterprises in the concession method, we formulate the effect of contract extensions and additional remuneration according to business performance, and analyze performance data from Kashiwa city’s water supply project. As a result, the model suggests that it is appropriate to extend contracts that include pipeline maintenance and renewal according to business performance.