The Clean Water and Drinking Water Infrastructure 

Gap Analysis 

With the aging of the nation’s infrastructure, the 

clean water and drinking water industries face 

a significant challenge to sustain and advance their 

achievements in protecting public health and the 

environment. To gain a better understanding of 

the future challenges facing these industries, the 

U.S. Environmental Protection Agency (EPA) has 

conducted a study, The Clean Water and Drinking 

Water Infrastructure Gap Analysis, to identify whether 

a funding gap will develop between projected 

investment needs and projected spending. The 

study provides an important empirical basis for 

discussions addressing the critical needs of our 

water infrastructure. 

What Does the Study Cover? 

The Gap Analysis covers a 20–year period from 

2000 to 2019 and includes estimates of the funding 

gap for both capital and operations and 

maintenance (O&M). The report discusses the 

methods for calculating the capital and O&M gaps, 

but does not address the policy implications of the 

results. 

For clean water, the estimates of investment needs 

and spending used to calculate the gaps cover all of 

the approximately 16,000 publicly owned treatment 

works (POTWs). The drinking water analysis covers 

the approximately 54,000 community water systems 

and the 21,400 not-for-profit noncommunity water 

systems in the 50 states, U.S. Territories, and Tribal 

areas. 

How was the Study Conducted? 

EPA conducts surveys of the nation’s clean water 

and drinking water infrastructure needs every four 

years. These surveys formed the starting point for 

calculating the capital and O&M investment needs. 

EPA adjusted the surveys’ estimates to account for 

the under-reporting of needs, particularly for 

capital replacement. The Gap Analysis used several 

alternative assumptions to generate a number of 

scenarios for estimating the capital and O&M gaps. 

The estimates represent the average of these 

scenarios. 

What Are the Findings? 

The Gap Analysis presents the projected funding 

gap over the 20–year period in two ways: a “no 

revenue growth” scenario that compares the 

projected need to current spending levels; and a 

“revenue growth” scenario that assumes spending 

will increase by 3 percent per year. This annual 

increase represents a real rate of growth of 3 

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percent over and above the rate of inflation—a 

projection which is consistent with long-term 

growth estimates of the economy. 

The “no revenue growth” scenario is useful for 

understanding the extent to which spending might 

need to increase relative to the status quo. This 

analysis estimates a total capital payments gap of 

$122 billion, or about $6 billion per year, for clean 

water and $102 billion, or about $5 billion per year, 

for drinking water. The O&M gap is estimated at 

$148 billion, or $7 billion per year, for clean water 

and $161 billion, or $8 billion per year, for drinking 

water. 

Under the “revenue growth” scenario, the capital 

gap is $21 billion, or about $1 billion per year for 

clean water and $45 billion, or about $2 billion per 

year, for drinking water. The O&M gap is 

estimated at $10 billion, or $0.5 billion per year, for 

clean water, while no O&M funding gap would 

occur for drinking water. 

Each of these numbers represents an average 

within a range of estimates. Under the 

assumptions used to calculate the funding gaps, 

some of the models predict that total spending will 

exceed the total need over the next 20 years. 

Therefore, this range of estimates may include 

negative numbers. The full report provides a 

detailed explanation of the methods and the gap 

estimates. 

How Credible Are the Findings? 

A diverse panel of external peer reviewers drawn 

from academia, think tanks, consulting firms, and 

industry commented on the methods and data used 

in this study. Overall, the reviewers commended 

the report as a reasonable effort to quantify the 

gap, particularly given the limitations of the 

available data. EPA revised projections and 

approaches to incorporate the comments of the 

peer reviewers. 

Is a Funding Gap Inevitable? 

No. It is important to recognize that the funding 

gaps would occur only if capital and O&M 

spending do not increase from present levels. This 

assumption understates future spending and 

ignores other measures that can be taken. These 

can include, but are not limited to, asset 

management to reduce capital and O&M costs and 

rate structures that better reflect the cost of 

service. In reality, increasing needs will likely 

prompt increased spending and thus a smaller 

funding gap, as is captured by the “revenue 

growth” scenario. However, the analysis presents 

an indication of the funding gap that will result if 

we ignore the challenges posed by an aging 

infrastructure network—a significant portion of 

which is beginning to reach the end of its useful 

design life. 

Where Can I Obtain More Information? 

Copies of the Gap Analysis and the Needs Surveys 

are available from the Safe Drinking Water Hotline 

at 1(800) 426-4791, the Office of Water Resource 

Center at 1(800) 832-7828, and on the Internet at 

www.epa.gov/ow. 

Office of Water September 2002 EPA 816-F-02-017