Ofwat has published updated guidance for stakeholders and water companies on its regulatory and commercial expectations where water companies are developing projects to be delivered using Direct Procurement for Customers (DPC).

Source: Ofwat

At the 2024 Price Review, Ofwat stated that major new infrastructure should be delivered by way of competitive delivery models. For all major new infrastructure projects, water companies need to assess whether they can deliver the projects under Ofwat's Direct Procurement for Customers (DPC) framework, or where appropriate, under the Water Industry (Specified Infrastructure Projects) (English Undertakers) Regulations 2013 (SIPR) – the model used to deliver Thames Tideway.

DPC requires water companies to put large infrastructure projects out to competitive tender where delivery by a third party is likely to offer better value for customers. A competitively appointed provider (CAP) will be appointed to design, build, finance, and potentially operate and maintain the  infrastructure. A water company will enter into an agreement with the CAP (a CAP Agreement or CAPA) to deliver the asset and associated services.

Amounts which are payable to the CAP pursuant to the CAPA will not be recoverable through the Price Review process. Instead, Ofwat will issue an Allowed Revenue Direction (ARD) which will enable a water company to recover the costs from its customers. The CAP Agreement and the ARD are expected to be long term arrangements that will span multiple Price Review periods.

The regulator will  be hosting a webinar at 2:15-3:00pm on 16 June 2026 for investors and supply chain participants. The session will give a brief overview of both the SIPR and DPC guidance and provide attendees with the opportunity to ask questions.

The new update supersedes the previous version of the DPC guidance issued in 2023 to reflect changes in the sector and take account of lessons learned from projects that either have undertaken or commenced the process of delivery under the DPC framework.

The purpose of the guidance is to:

• provide confidence in the regulatory framework: so that water companies and investors can understand Ofwat's requirements for DPC projects and the regulatory frameworks underpinning them;
• enable flexibility in the framework: while the guidance sets out the expectations for DPC projects, Ofwat is open to different approaches where the water company can explain why an alternative approach may be more appropriate and can demonstrate how this would likely achieve better value for customers; and
• be a living document: the guidance will continue to evolve as more projects proceed as DPC projects.

The guidance sets out:

• the regulatory framework for DPC projects and how this interacts with the commercial arrangements for those projects;
• the high-level approvals processes and water company assurance processes for DPC projects;
• the commercial arrangements including incentives on the Competitively Appointed Provider (CAP) and the water company;
• a standard, efficient risk allocation for DPC projects; and
• how Ofwat assesses value for money for DPC projects.

Ofwat has committed to reviewing the document on a regular basis to ensure it remains relevant and useful to water companies.

The guidance sets out:

• the regulatory framework for DPC projects and how this interacts with the commercial arrangements for the projects;
• the high-level approvals processes and water company assurance processes for DPC projects;
• the commercial arrangements including incentives on the CAP and the water company;
• a standard, efficient risk allocation for DPC projects; and
• how Ofwat assesses value for money for DPC projects.

Ofwat will not be formally consulting on the update - however, the regulator envisages issuing further updates to the guidance to reflect lessons learned and changes in the sector.

“We welcome any comments on this updated version 2.0 of the guidance and will take into account all comments when developing the next iteration of the guidance”, Ofwat says.

Any comments should be sent to This e-mail address is being protected from spambots. You need JavaScript enabled to view it by 5pm on Friday 31st July 2026.

Ofwat intends to publish the standard draft CAP Agreement in mid-2026.

Click here to register for the webinar on 16 June 2026 - 2:15-3:00pm

Click here to download the guidance document in full