Network DEA models for assessing urban water utility efficiency

Abstract

Urban water utilities (UWUs) operate in environments without competitors; regulators use targets to monitor UWU operations, with the expectation that the current year's performance should be equal to or better than the previous year's performance. This paper presents a performance analysis of UWUs using data envelopment analysis (DEA). Standard DEA for relative performance evaluation has shortcomings and does not allow for setting clear improvement guidelines. For this reason, network DEA models are proposed to overcome the problem. This novel benchmarking technique produces an efficiency value for a UWU in a competitive scenario with other UWUs. The technique allows decision-makers to sort out UWUs with the best and worst management environments and set clear performance improvement guidelines.