Water sector regulator Ofwat has launched a consultation on new conditions for the delivery of schemes through its Direct Procurement For Customers (DPC) initiative.
At this stage Ofwat is only proposing to make licence amendments for those water companies where DPC schemes have been identified or where there is the possibility of a DPC scheme being procured within the 2020-25 control period.
The proposed amendments relate specifically to the conditions of the appointments of the following six water companies:
- Anglian Water Services Ltd
- Dŵr Cymru Cyfyngedig (Welsh Water)
- United Utilities Water Ltd
- Southern Water Services Ltd
- Affinity Water Ltd
- Bristol Water plc
This would not preclude other companies coming forward with suitable DPC schemes within the 2020-25 control period and amendments to their licences could then be made when necessary.
Under the DPC process, a water company can competitively tender for financing and delivery of the project by appointing a third-party competitively appointed provider (CAP).
Ofwat does not intend for DPC to replace the provisions companies currently make for outsourcing services to third parties to deliver ongoing operations, maintenance and capital investment.
The first proposed modification would introduce a new licence condition to establish the processes by which the water company could undertake the procurement of a third party competitively appointed provider (CAP). In particular, under the new condition the regulator is proposing that Ofwat agreement will be required for the company to:
- undertake a DPC procurement and obtain designated status;
- enter into a contract with the CAP;
- vary the contract; and
- revoke designated status.
The second modification would amend an existing licence condition (Condition B) to permit the water company to pass onto customers the charges payable to the competitively appointed third party service provider. The services provided by will normally include the design, build, financing, maintenance and operation of assets.
Ofwat said it will safeguard customer interests and ensure that value for money is achieved as the decision to proceed with the DPC will be taken through a rigorous procurement process with gated decisions. DPC arrangements do not allow the CAP to charge more than would be the case if the project were undertaken in house.
Ofwat will continue to assess the value for money throughout the decision gates and provide, if appropriate, consent at key stages to ensure the interests of customers are protected and that a project represents best value for money.
The regulator also wants to approve the planned DPC procurement process prior to it being undertaken. Before any DPC procurement process - typically the Invitation to Tender - is commenced, it wants the water company to agree with Ofwat the key stages, timings and contact points.
The regulator takes the view that by having a “hard consent” this will ensure Ofwat is satisfied that the interests of customers will be protected and best value for money achieved.
Ofwat has proposed that the procurement process would not proceed until it had considered, among other things, the procurement process and the proposed terms and conditions of the CAP Agreement. The water company would be expected to agree the procurement process with Ofwat to so that they were both clear about their respective responsibilities at each stage of the procurement process.
Ofwat also wants its agreement to be required for the exit of any project from the DPC regime at any point in the process. This would include the possibility that a procurement could fail during the procurement process itself where the water company is unable to appoint a CAP - e.g. insufficient interest from bidders. In that event the water company could then seek to return the project to an in-house delivery route - Ofwat would want assurance that it was in customers’ best interests to exit the DPC process instead of undertaking a further procurement process.
Similar considerations would also apply if a CAP Agreement was terminated and the water company wanted to bring the project back in-house.
Ofwat is now seeking comments on the proposed licence amendments. Deadline to submit responses to the consultation is Monday 6th April 2020 – click here to download the consultation paper
With the UK government demanding a 50% reduction in storm overflow spills by 2029, the era of reactive management is over. Speaking in the House of Commons on 21 July 2025, then environment secretary Steve Reed said, “This Government will cut water companies’ sewage pollution in half by the end of the decade.”
ERG, the leading supplier of odour control systems and industrial gas cleaning & thermal systems, has been awarded the coveted King’s Award for Enterprise.
Welsh Water’s new artificial intelligence-driven tool, ORAI, has been shortlisted for three categories at the prestigious British Data Awards 2026 – underscoring the company’s commitment to using cutting-edge technology to deliver better outcome for customers.
Barhale has completed work on two separate Rapid Action Taskforce Spills projects it is carrying out for Severn Trent.
Hear how Scottish Water has completed its £235 million Ayrshire Glasgow Resilience Project - customers across Greater Glasgow, Ayrshire and East Renfrewshire will now benefit from a more secure and resilient water supply.
Hear how United Utilities is accelerating its investment to reduce spills from storm overflows across the Northwest.
Find out more about the remarkable career opportunities on offer at WSP - scroll down to watch the inspirational video.