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QQMOO – Who Knew? – Assessing the fitness of your water supply chain agreements

We have written before about the importance of understanding your handover points, from a governance and water quality supply chain risk perspective. However, in our experience, we still see many water supply chain agreements in which it is difficult to interpret exactly what is being required of the parties and therefore, how it is possible to understand whether those water supply chain agreements are actually being complied with in practice. We have therefore come up with a simple five part framework to help address the issues that we see and help you to assess whether your water supply chain agreements are fit for purpose: QQMOO – who knew?!.

Q1: Quantity

There is a raft of information you will need to know about your water ‘take’ and ‘supply’ obligations. Many of these details should also be specified in your water supply agreement. For example, what is the source of water supplied under the agreement (e.g. extraction from the environment for supply to a particular end point or provision of raw water for treatment to end point specifications)? How much must be supplied and when, at what flow rate or pressure? These details might be variable, as demand can change in both predicted and unforeseen ways.

Q2: Quality

Water quality is often a forgotten component in water supply instruments. If it is included, often the responsibility for the handover point is not well-defined or understood. Monitoring has also changed significantly in recent times. Many parameters are now amenable to real-time or near-real-time measurement – the onus is on you to understand what is available and what you would be reasonably expected to have in place.

M: Maintenance

There are many moving and static assets (including natural assets) in the supply of water. It is therefore important to understand who is responsible for doing what, why, when and where. An example of maintenance requirements could be the servicing of a flow meter, the cleaning of distribution reservoirs or maintenance of catchments to ensure subsequent fitness for purpose for downstream end uses as well as for compliance requirements. An asset register is an important component for understanding what is in place and what needs to be maintained. It is important to confirm that appropriate resources are committed, within an appropriate risk framework, to ensure that assets are maintained at the right frequency and level.

O1: Operations

Understanding your assets is also important in understanding what needs to be operated, why, how, when, where, and the responsibilities involved. Operation and maintenance of assets are often services that are contracted out, therefore it is doubly important to understand what is in the contract, the monitoring of the contract and the review of the contract, to make sure that services are fit for purpose from a water quality and quantity perspective. Importantly, many utilities function under an operating licence and the responsibility is firmly on them to ensure that their contractors (and the contractors of their contractors!) also perform to the standard required in the operating licence.

O2: Ownership

Not all utilities will own all the assets that are required in their delivery of water from point A to point B. We have seen complex handover points that involve several parties and several pieces of infrastructure. Understanding who owns what, even down to the valve level, is important in understanding responsibilities. For instance, if Party A was supplying water through pipework owned by Party B, but Party A was responsible for the quality of water in the pipework, how would you go about assuring the continued fitness for purpose of that water, and apportionment of liability if something happened in that pipework section – especially where that pipework also has your handover point located?

Reviewing your water infrastructure, your water supply agreements, and your handover points, with the QQMOO lens applied (Table 1), will help you better understand your liabilities and how you can manage them.

Table 1. Example QQMOO checkpoints for your water supply agreements.

Q1: Quantity• What is the source of the water being supplied, and how do you ensure the legal right to take and supply it?
• Do you know how much water must be supplied - day to day, month to month, and annually? Who bears the risk of any change in demand?
• How will you ensure continuity of supply (e.g. by maintaining adequate reserves, or purchasing on the market?)
• Have you agreed how to share risk from changes in availability of water, and is your water supply agreement clear about this?
• How will the quantity supplied be measured, and at what point?
Q2: Quality• What quality do you need to meet?
• Over what timeframe do you need to meet that quality (100% of the time? 95%? Etc).
• Is your monitoring set up correctly to make sure you are measuring the right parameter, at the right frequency, at the right point, with the right method, to match your formal requirements?
• Is your water quality data feed protected? What processes are in place to ensure that you get and trust the water quality data?
• What will happen if water is not, or cannot, be delivered at the required quality?
M: Maintenance• Who is responsible for maintaining which infrastructure components and at whose cost?
• If maintenance is contracted out, is the contract consistent with the specifications of the water supply agreement?
• How will proper maintenance be established (e.g. by providing calibration certificates, and will there be an option for requiring additional testing)?
• What will happen if infrastructure fails? How will costs of failure be allocated or shared?
• Where infrastructure is used for shared provision of water (e.g. in bi-directional pipelines), are maintenance responsibilities clearly articulated and for which part of the pipeline?
• If assets are not owned by the party responsible for their maintenance, how is access ensured?
• If water is being supplied through a flow meter but you are not responsible for that flow meter – how do you ensure it is reading true?
O1: Operations• Is the point of supply clear? On whose land is that point, and who has access to it?
• Are all costs of supply under the contract appropriately allocated, and is there certainty about price?
• Are the circumstances in which supply may be interrupted (e.g. for testing or maintenance) agreed and stipulated?
• If another party operates assets on your behalf, are operating conditions clearly established and understood?
• Do your BOO and other contractors operate to the standard required in your operating licence? How do you know?
O2: Ownership• If you don't own the land where the point of supply is located, do you have the right to immediate access to that point (e.g. to monitor delivery)?
• Do you have the right to immediate access to all infrastructure you are liable for maintaining?
• Do actions of other parties in the supply chain impact on the infrastructure that you own (an example might be changing a water source resulting in increased corrosivity and asset impacts)?
• If you are sourcing water from groundwater, do you own the land in which the bore is situated? If not, do you have an easement or other legal protection such as Local Environment Plan provisions for water supply catchments?

When was the last time you reviewed your water supply agreements? Undertaking a review of your water governance arrangements may help you to identify gaps which need to be filled to help protect both you, and your customers – especially in light of the rapid pace of change in monitoring and data analytics.

Need help? Annette Davison and Megan Dyson have a fundamental understanding and wide breadth of experience in water quality risk and law. We can assist you with review of your water supply and extraction agreements. Our aim is to provide well-articulated areas for improvement for our customers. Learn more here.

Annette Davison, Director and Principal, Risk Edge Pty Ltd; Director and Chief Risk and Product Officer, D2K Information Pty Ltd

Megan Dyson, Law and Policy

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