Investing in Water Services
Quality and Standards III Work Package 3 Report
Interaction with Outputs
A Report to the Scottish Executive by the Quality and Standards 3 Project Board
February 2005
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Scottish Executive Water Services Division
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Edinburgh
EH6 6QQ
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Email: waterservices@scotland.gsi.gov.uk
Further information is also available on the Scottish Executive website at:
www.scotland.gov.uk/Topics/Environment/Water
The views expressed in this report are those of the researchers and do not necessarily represent those of the Department or Scottish Ministers
1. Context
As part of the Quality and Standards III (Q&S III) programme, Work package 3 (WP3) has been tasked with:
reviewing the predecessor Quality and Standards II (Q&S II) project to establish key learning points for Q&S III
proposing solutions for any transition issues that might arise between Q&S II and Q&S III
reviewing the interaction between the Q&S III project and the Outputs project.
This is the third paper to be produced by Work package 3 and it covers the third of the tasks listed above.
The first paper was submitted to the project board on 03/07/03 and reviewed Quality and Standards II (Q&S II), formulating a number of learning points and making associated recommendations for the various Work packages.
The second paper was submitted to the project board on the 19 th of August 2003 and established a set of detailed recommendations to cater for the transition period between Q&S II and Q&S III.
2. Aim & Deliverables
This paper aims to establish how best to coordinate the two parallel streams of work associated with the Outputs project and Quality and Standards III.
At the time of inception of the Quality and Standards III project it was expected that the Outputs project would have a significant impact on how the investment outputs of Scottish Water would be defined. Hence, it was seen as essential that there was consistency between the investment plan description in Quality and Standards II and the model being developed under the outputs project. In the event, the degree of progress of the output project has been short of original expectations and there are unlikely to be significant interaction issues. However, the work to date on the outputs project has established a number of useful output definitions that can be employed in Quality and Standards III. It is therefore important that those involved in devising the Q&S III investment plan are aware of, and take account of, the work to date of the Outputs Project and make allowance for the likely future direction of the Outputs project work.
A clearly defined and measurable set of investment plan outputs is obviously in the customers' interest. The Work package 3 paper reviewing Q & S II 1 stressed the importance of clear output definition and recommended that work packages "must ensure that clearly defined outputs are available for all planned investment". The information available from the Outputs project will assist in achieving this objective.
3. Background to the Outputs Project
a) Origins
The Scottish Executive published the Q&S II investment document "Water Quality and Standards - Investment Priorities for Scotland's Water Authorities 2002-06" in August 2001. This formed an essential input into the Water Industry Commissioner's (WIC) Strategic Review of Charges (SRC) which was published in November 2001. The Commissioner assessed the required investment and operating cost levels of the water industry in Scotland and applied efficiencies, which were incorporated in the setting of the revenue caps for the four-year investment period.
However the revenue caps is not the sole advice contained within the SRC. It also includes other recommendations including seeking the Minister's endorsement of the establishment of a joint project between the Water Industry Commissioner, the Scottish Environment Protection Agency (SEPA) and the then proposed Drinking Water Quality Regulator for Scotland (DWQR). This project aimed to ensure that "consistent output measures and metrics are collected and monitored". Its purpose was to "ensure that the environmental and public health benefits and the sustainable industry for which they (customers) are paying are actually delivered. 2"
The Minister for Environment and Rural Development (Ross Finnie MSP) accepted the advice in the SRC and subsequently what is now known as the "Outputs Project" was created to satisfy the proposed coordinated approach to outputs monitoring. The intention was to ensure that the process for output monitoring by regulators and Scottish Water would have improved consistency and transparency for the customers' benefit.
b) Scope of the Outputs Project
The terms of reference for the Outputs Project were developed in Spring 2002 3. The project was split into two parallel but interdependent work-streams, termed "Capital Outputs" and "Other Regulatory Data." It was envisaged that these work streams would be run separately at certain stages of the project then come together when there were interdependencies.
The deliverables for the Capital Outputs work-stream included defining a set of output metrics for the investment plan, linking these output measures to the Quality and Standards investment programme, devising a method for tracking any changes in these outputs and developing a database format to store the information.
The deliverables for the Other Regulatory Data work-stream involved developing a set of IT facilities to support the Water Industry Commissioner's office in monitoring Scottish Water's overall outputs. This included developing a suite of information systems, analysis tools and reporting mechanisms.
There was, and is, a specific need within the water industry in Scotland to develop a robust monitoring system so as to ensure the various stakeholders, and in particular customers, benefit from good quality, consistent and reliable information. This is a key objective of the Outputs Project.
c) Progress with the Outputs project
The work for the Outputs project began in earnest on the 11 th of November 2002 when a workshop was held to begin the "diagnostics" phase of the project and define the needs for the outputs metrics. It quickly became clear that the proper definition of the output measures was a critical, and complex part of the process. It was determined that a small number (7 to 10) of high level output categories could be identified which would fully define the overall impact of investment. However, these high-level outputs would need broken down into a large number of quantifiable, measurable and mutually exclusive elements.
An initial definition of the high-level output categories was established as:
Environmental
Drinking Water Quality
Health/Safety
Communications
Customer Service
Legal
Financial
Efficiencies
At a subsequent set of workshops, staff from the stakeholders "drilled down" on these high-level categories to obtain a more detailed set of output metrics and an initial set of investment output definitions and measures was derived. These are attached as Appendix 1.
During the process of establishing the investment outputs, it became clear that the complexity of the task was greater than originally envisaged and that the right mix of resources and expertise for the project were not readily available. Following a series of stakeholder meetings, it was decided that the capital outputs element of the project should be reviewed and ultimately it has been agreed to suspend further work in this area.
On the Other Regulatory Data element of the project the key achievements to date have been:
Diagnosis of Other Regulatory Data Needs:
The WIC information systems have been compared with other regulatory bodies to determine comparative sophistication.
SW's views have been sought on the current WIC information systems, particularly to identify areas of possible improved integration with SW systems.
Urgent Modifications to WIC Information systems:
The WIC Annual Return database has been expanded to incorporate SW projects.
The Investment Plan tables have been modified to facilitate additional analysis.
A Data Import facility has been developed
WICS IT Infrastructure/Office Procedures:
With the suspension of the capital outputs element of the project, further work on the Other Regulatory Data element has also been suspended. The remaining requirements are being reviewed and prioritised so that an appropriate delivery mechanism can be established.
4. Interaction with the Q&S III Project
A key element of the Outputs project is the definition of capital investment outputs and the ongoing monitoring of their delivery. This clearly interacts with the Quality and Standards III project where the investment requirements and the associated outputs for the period 2006 to 2014 will be defined. The mechanism employed for defining outputs in Q & S III needs to be consistent with the methodology developed for the Outputs project.
The definition of outputs has already been identified as a key element of Q&S III and the "Review of Q&S II" paper previously submitted by this workpackage includes the recommendation 4 that:
Work packages 2, 4, 5 & 6 must ensure that clearly defined outputs are available for all planned investment. These outputs should be fully described, measurable, time-bound and costed. Delivery of the outputs should be described by a set of clearly identifiable projects. They should include timescale definition to allow phasing of investment to be established. Work package 1 should oversee the delivery of properly defined outputs for the overall investment programme.
It is important that the outputs are described in a consistent format by the various workpackages. This will greatly assist with:
Establishing exactly what is being delivered from the investment.
Communicating this to the wider stakeholder group, including customers.
Prioritisation of outputs by the project board.
Monitoring delivery during the investment period.
Reviewing whether the outputs have been successfully delivered.
The degree of development of output definition in the Outputs project is behind expected progress. However, there is still hopefully sufficient material to assist with the definition of outputs in Q&S III and it may be possible for workpackages to build on the available material.
Another area of interaction between Q&S III and the Outputs project will be in ensuring consistency between the WIC information reporting requirements and the structure of the investment plan data gathered under Q&S III. Enhancements to the WIC reporting requirements are part of the Other Regulatory Data element of the Outputs project. Although, due to the current suspended state of the Outputs project, the vehicle for delivering these elements of the Outputs project is currently uncertain, the work will require to progress in the near future through some mechanism. Hence there is clearly an opportunity to ensure data format compatibility with Q&S III.
5. Recommendations for Q&S III
The key recommendations in this area from workpackage 3 are:
a) Q&S III Output Definition
There is an identified need for a clear and detailed definition of the outputs from Q&S III. This links the work being undertaken in the Capital outputs element of the outputs project with the development of the Q&S III investment programme. The work to date on the Outputs project hopefully provides a useful starting point. However, the definition of these outputs needs further careful consideration. The methodology proposed is that Workpackage 3 develop a framework and associated guidance for the other workpackages on the development of outputs for Q & S III. In particular, the aim would be to define a set of relevant and easily understood outputs. The outputs proposed by the various workpackages will be co-ordinated by workpackage 3 and ultimately approved by the project board.
Recommendation: Workpackage 3 will produce a framework and guidance on output development. Workpackages 2, 4, 5 & 6 should develop a set of outputs for their investment programmes based on this guidance which should be used by the appropriate work packages. The work packages should then submit their suggested outputs to Workpackage 3 who will co-ordinate the definition of outputs and ultimately seek project board approval.
b) Information Reporting
The information systems established between the regulators and Scottish Water for the ongoing reporting of Q&S III progress need to be consistent with the agreed set of investment programme outputs. The regulators would appear to be best placed to ensure this consistency. For the WIC requirements, there is an opportunity to ensure this is the case through the work associated with the "Other Regulatory Data" element of the Outputs project.
Recommendation: The regulators (SEPA, DWQR, WIC) need to ensure that the reporting mechanisms for monitoring delivery of the Q&S III programme are consistent with the agreed set of Q&S III outputs. The "Other Regulatory Data" element of the Outputs Project should ensure that this is in place for the WIC elements of Q&S III reporting.
6. Summary & Conclusions
There are clear interactions between the Outputs Project and the development of the Q&S III investment programme, particularly in the area of capital output definition. Given the current suspended state of work on the Outputs project, and the tight timescales for Q&S III, it will be necessary to develop Q&S III output definitions ahead of the Output project work. However, there is an opportunity hopefully to build on the work already undertaken in this area and ensure a co-ordinated approach. This will bring significant benefits to all stakeholders.
Footnotes
1 "Review of Quality and Standards II" - Q&S III/Workpackage 3 report 19/6/03
2 Strategic Review of Charges 2002-06, pg 3 c)..0i)
3 Outputs Project - "Defining & Monitoring Capital Outputs and other regulatory data" - Terms of Reference dated May 2002
4 "Review of Quality and Standards II" - Q&S III / Workpackage 3 report 19/6/03 Section 6 (d)