Direct Procurement for Customers (DPC) is a process for water companies (‘appointees’) to competitively tender for a third-party (a competitively appointed provider) to design, build, finance, operate and maintain infrastructure. This initiative has the potential to provide significant benefits for customers through promoting innovation and enabling capital and operational cost savings as well as a reduction in financing costs. It allows new participants to bring fresh ideas and approaches to the delivery of key schemes.
Our final methodology for the 2024 price review (PR24) sets out that appointees are required to use DPC by default, for all discrete projects above a size threshold of £200m whole life total expenditure (totex). Ofwat reserves the right to explore the use of DPC for major projects below this size threshold, where it may offer value for money for customers to do so.
Our ‘Guidance for appointees delivering direct procurement for customers projects‘ sets out our expectations for the commercial model applicable to DPC projects and our approval and assurance processes to support DPC projects.
The purpose of the guidance is to:
- provide confidence in the regulatory framework: Appointees and investors can understand Ofwat’s requirements for DPC projects and the regulatory framework underpinning it;
- enable flexibility in the framework: while the guidance sets out our expectations for DPC projects, we are open to different approaches where the Appointee can explain why an alternative approach may be more appropriate and can demonstrates how this achieves best value for customers; and
- be a living document: the guidance will continue to evolve as more projects proceed as DPC projects and we commit to reviewing the document on a regular basis to ensure it remains relevant and useful to Appointees.
We consulted on our draft guidance in September 2022. To explain our decisions on the final guidance, we will publish ‘Draft Guidance for Appointees delivering Direct Procurement for Customers projects consultation: responses document’. We will update this page when it is available.
Technical discreteness guidance
For PR24 companies will:
- Identify all schemes that are over £200m of whole life totex; and
- Assess the extent to which these schemes are discrete, using our updated Direct Procurement for Customers – Technical discreteness guidance.
We no longer require a VfM assessment of delivery via DPC compared to the in-house counterfactual at this early stage in the DPC process.