A Pay for Success Approach to Water Infrastructure Delivery
At EPIC, we envision a future where every community has safe, reliable, and affordable water infrastructure. To reach this goal, we strive to deliver practical solutions for lead service line replacement (LSLR) and green stormwater infrastructure (GSI) through our policy research and expertise, technical support, and collaboration. As municipalities undertake these infrastructure projects, affordability and efficiency are important challenges.
How do communities and states ensure their dollars are going to the projects that will most effectively replace lead service lines? How can they hold contractors accountable for the delivery of impactful green infrastructure at reasonable prices? For contractors, how can they prove that their proposals are lower cost because they are more efficient, and not because they are cutting corners?
EPIC has consistently advocated for the use of Pay for Success contracts (PFS) to address similar challenges for conservation and nutrient reduction projects to meet water quality goals. PFS contracts pay for outcomes, not contractor hours. This reduces risk for state and local governments, who pay only for effective infrastructure, and rewards contractors who develop efficient techniques. PFS is becoming more popular for water quality projects; this year, Maryland committed $47 million to 15 projects to reduce nitrogen loads to the Chesapeake Bay and conservation projects where evidence suggests they can drive significant cost reductions. Now, we’re launching a new workstream to dig into how Pay for Success can similarly enable efficient LSLR and GSI projects, and what states, municipalities, and contractors can do to implement this approach.
Tackling Real World Hurdles in LSLR & GSI Contracting
We want to help practitioners address the practical challenges of LSLR and GIS contracting—whether they work for states, municipalities, or contractors. To do so, we plan to:
Develop lessons learned from success stories like the LSLR program of Wausau, WI, and funding for GSI projects to reduce impervious surfaces in Anne Arundel, MD.
Analyze state public procurement frameworks and other relevant laws, regulations, and funding programs to identify roadblocks and opportunities for reform that would advance PFS, such as those established under Maryland’s Conservation Finance Act.
Recommend best practices for the use of PFS contracts to shift project risk to contractors and promote price transparency.
Develop PFS contracting recommendations appropriate for LSLR and GSI project and industry practices, building off our prior research on procurement contracts and pay schedules.
PFS has a long history in state and local contracting, and we want to engage with what’s worked, what hasn’t, and how the requirements of LSLR and GSI projects will affect PFS practices. We want to ensure our recommendations are practical and engage deeply with the nature of LSLR and GSI projects. If you are interested in this work, we'd like to hear from you. Please contact us at the link below!
Why Pay for Success Could Benefit LSLR and GSI
Our previous work has shown that PFS can help states and municipalities execute infrastructure projects to get better outcomes for less money. Now we’re exploring how this approach can make LSLR and GSI projects more affordable and efficient. We have seen some success stories of PFS for LSLR—Wausau—and GSI—Anne Arundel County, but have not yet seen this approach adopted at scale for these types of projects. Our engagement with industry and municipal contacts suggests there are real barriers to more widespread use. These barriers – and how they might be overcome – are the focus of this workstream.
Overcoming these barriers will help states and municipalities replace more lead pipes and create green, robust stormwater infrastructure for less money, at a time when it is critical that municipalities use their dollars as efficiently as possible. After the first significant increase in federal water infrastructure investment in decades, future federal funds are in doubt. It remains to be seen if or how states and municipalities will fill this gap. While funding is in short supply, water infrastructure demands continue to grow. PFS won’t solve this problem, but it can help state agencies, municipalities, and contractors do more with less.
