Case

Comprehensive Outsourcing Scheme of Water Supply in the Hakone District

Water utilityKanagawa Prefectural Public Enterprises Agency

General information of the utility (2019)*Upper low: Entire Kanagawa Prefectural Water Supply / Lower low: Hakone District Water Supply (part of upper low）

Operationtype

Public (retail supply)Service area (km2)808
33Population
served2,820,981
5,101

Distribution(m3/d)

871,031
6,954

Servicecoverage (%)

99.8
88.9

Pipe length (km)9,333,986
90,272NRW (%)

9.0-

Number of staff

639-

Number ofwater sources
Water rates(JPY)

Summary

Surface water (7), Groundwater (2), Others (subsoil x 3, wholesale received x 2)
Surface water (0), Groundwater (0), Others (spring water 3)

1,990(in case of 10m3 of water use per month forresidential customers)

The Kanagawa Prefectural Public Enterprises Agency (Agency) has
contracted out the whole operation of water supply in the Hakone district toprivate companies to help them acquire an operational know-how and build
a track record in water services operation.
Since the first phase of the project (FY2014-2018), the contractors havebeen smoothly operating the water supply in the district.
Through the first phase of the project, the Agency has been able toestablish its own (although a basic) public-private partnership model.
The conditions surrounding water supplies in Japan are becoming
increasingly difficult, and a comprehensive operational outsourcing to a
private sector can become one of the most effective ways to bring solutions
to small and medium-sized water utilities.

In Japan, many small and medium-sized water utilities are facing not only
sluggish growth in water rate revenues, but also rising renewal costs for aging
Current Status & water facilities as well as a decreasing number of experienced personnel due
Challenges
to retirement and the consequent degradation of operational expertise.
To cope with these issues, some municipalities are considering a regional
collaboration and the use of public-private partnerships.

Measures &Solutions

Under these circumstances, the Agency has made efforts to build a new
public-private partnership model called "Kanagawa Method," in order to foster
new undertakers of water supply and make sustainable water services.
As part of this initiative, the Agency has outsourced the whole operation ofwater supply in the Hakone district from source to tap to the collection of waterbills, in order to help private companies build expertise and track record inoperating water supplies.
This is a comprehensive operational contract with a private sector, including
operation and maintenance of related facilities, water bill collection, risk
management, and design, construction and inspection required for facility
renewal, while the Agency continues to manage the water supply and own thefacilities as the water supplier.
The characteristic of this contract is that it combines a "general contract
method" that had been carried out previously by the Agency and the "thirdparty contract system as defined by the Waterworks Act”. By utilizing the thirdparty contract system, the contractor will bear the responsibility stipulated by
the Waterworks Act. This allows the contractor to utilize advanced
technologies on its own responsibility, thus enabling efficient operations.
Upon the start of the contracted work, the Agency established a propermonitoring system and now supervising the Hakone district’s operation basedon the pre-determined performance requirements.
Since the first phase of the contract (FY2014-2018), the contractors havebeen proactively responding to a wide range of tasks, from normal operations
to unexpected events, and has been smoothly operating the water supply inthe district.
In the final evaluation conducted in FY2019, the contractors received agenerally favorable evaluation for having provided a safe and reliable watersupply. It can be said therefore that the Agency has been able to establish its
own (although a basic) public-private partnership model through the Hakone
initiative.
On the contractor’s side, they appropriately carried out tasks such as risk
management, facility renewal and operational manual development, which
they would not have been able to do under the conventional individual
contract method. As such, they were able to acquire experience and build
expertise in operating water supplies.
One of the contractors’ responses to unexpected events was to address theconsequences of the volcanic activity in Owakudani that started in May 2015.
The contractors promptly consulted with the Hakone Town Office and obtained
permission to carry out necessary work in an off-limits zone, thereby smoothly
responding to the sudden crisis. The Agency believes that this was a valuable
experience for them that enhanced their risk management.

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Future Plans

Conditions surrounding the water supply in Japan are becoming increasingly
difficult. The challenges include a declining demand for water due to ashrinking population, aging facilities, and a serious shortage of workers.
Comprehensive outsourcing through public-private partnerships is considered
to be one of the most effective ways to bring solutions to small and mediumsized water utilities.
The Agency will develop this public-private partnership model into a moregeneral-purpose public-private partnership model so it can be easily
introduced at small and medium-sized water utilities, and contribute to theconstruction of their sustainable water supply.

References

The Phase 1 Final Evaluation Report is scheduled to be published on thewebsite of the Water Treatment Division of the Agency.

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