Ageing assets, rapid population growth, the escalating consequences of climate variability and workforce challenges are converging to place unprecedented pressure on water authorities across the country.

Significant investment is required. While the scale of the required investment is becoming better understood, it is already clear that existing commercial approaches are not designed to accommodate this level of investment. The real pressure for governments, utilities and water authorities is how any investment is structured, procured and governed.

The challenges are structural, not cyclical

Water authorities are accustomed to cyclical pressures such as periodic asset renewal, incremental growth and demand peaks which are typically managed within the established investment and regulatory frameworks.

The sector now faces a different challenge.

Decades of constrained capital expenditure has left significant portions of the national water and wastewater assets at or well beyond their design life. The consequences are increasingly visible: rising incident rates, reactive maintenance cycles, and growing pressure on service reliability. The response, historically, has been reactive. The sector is now shifting to a proactive, risk-based asset management model which is widely accepted as more effective, but demands a level of capital commitment and procurement sophistication that many water authorities are still developing.

The sector needs commercial models that are as complex and adaptive as the assets they are built to serve.

Population growth compounds the challenge.

Recent regulatory investment proposals from major Australian water authorities have outlined programs with a substantial proportion directed toward servicing growth areas. Meeting that demand while maintaining affordability for existing customers – and satisfying regulators that proposed expenditure is both efficient and prudent – is a tension that sits at the heart of every investment cycle.

Arguably one of the biggest overarching challenges facing water authorities today is rising temperatures which are leading to higher evaporation and water demand. More extreme droughts and floods, often back-to-back, are resulting in reduced and less reliable inflows to dams and catchments and making short and long term planning harder. Coastal water authorities are facing the long-term risk of sea-level rise and saltwater intrusion.

The ongoing strategy for many water authorities is one of building increased resilience.

Underlying all of this is a workforce challenge of considerable magnitude. Independent analysis suggests that delivering the forward capital program will require a near-doubling of current sector capacity against a backdrop of an ageing workforce, acute skills shortages in asset management and digital systems, and intensifying competition from adjacent infrastructure sectors.

Learning from overseas but creating our own playbook

The challenges we are facing are not specific to Australia.

Over the past couple of decades, overseas water authorities have progressively moved away from discrete, competitively tendered contracts toward long-term, incentivised delivery partnerships. The results have been instructive, and the lessons, both positive and negative, are directly applicable to the approach Australia is considering today. Leading water authorities have demonstrated that shared risk, collective incentives, and transparent collaboration can drive measurable efficiency gains and cultural transformation in a water sector historically characterised by adversarial contracting.

The most cited success from the UK involves the evolution of delivery frameworks and alliancing models. The current regulatory cycle represents a record investment of over £100 billion and has seen water companies doubling down on program-based delivery structures, integrated partnerships, and outcome-focused commercial models.

Research also reveals potential pitfalls worth avoiding. Risk imbalances between clients and supply chains have driven capable contractors out of the sector. Short-termism embedded in five-year funding cycles has undermined long-term workforce investment. Siloed client teams have struggled to manage programs of a scale and complexity new to the sector.

This is similar to many stories emerging from peer industries and large infrastructure projects. While there is a learning curve, given the opportunities available to authorities looking for new models to approve significant investments, there is an opportunity to compress the learning curve significantly.

Australia’s own evolution is already underway

The good news is that Australia is not starting from scratch. Leading Australian Water Authorities have already started this transformation. The most progressive examples have replaced transactional, project-by-project procurement with long-term partnerships responsible for end-to-end design, construction and in cases maintenance and facilities management. This programmatic approach demands a holistic approach to the challenge, and provides clear clues for funding options.

That is not the only evidence of change.

Framework contracts are increasingly being used to create pipeline certainty for the supply chain and drive efficiency across programmatic work. The question is how to accelerate the uptake of these models across the broader water sector and how to calibrate them to the specific regulatory, geographic, and institutional realities of each water authority and state.

An evolving commercial toolkit

Whilst there is still a place for traditional contracting, we are seeing four distinct commercial themes that are gaining traction across the Australian water sector, each suited to different program characteristics and organisational contexts:

• Framework Contracts — Contractor’s are engaged through a header agreement across a program of works, with projects acting as call offs from the Framework Contract, rather than through project-by-project competitive tendering. Well-structured frameworks reduce procurement cycle times, provide the market with sufficient pipeline visibility to commit to workforce and technology investment, and create the conditions for continuous performance improvement.
• Alliance Contracting — Following a mixed track record across major Australian transport programs, the alliance model is attracting renewed interest in the water sector. For high-complexity, highly uncertain programmes where scope definition at procurement stage is inherently limited, alliances offer a structure within which collective decision-making, integrated risk management, and aligned commercial incentives can replace the adversarial dynamics.
• Delivery Partnerships — Long-term, integrated arrangements in which delivery partners are embedded within the client organisation as genuine program participants rather than transactional service providers. This approach is particularly well suited to water authorities managing geographically dispersed assets with high volumes of ongoing renewals and growth works, where knowledge retention, planning continuity, and supply chain capability development are as commercially significant as unit cost. The panacea of delivery partnerships is an enterprise model where rather than being engaged project-by-project or even programme-by-programme, the enterprise partners take on elements of accountability for the portfolio.
• Alternative and Private Financing — As investment requirements place increasing pressure on public balance sheets, both water authorities and governments are giving greater consideration to alternative financing pathways. Concession structures, availability-based arrangements, and hybrid financing models each offer the potential to accelerate investment timelines and improve whole-of-life asset performance through the discipline that rigorous financing frameworks impose.

Building the client-side capability to deliver

The effectiveness of any commercial model is ultimately constrained by the capability of the organisation deploying it. A recurring finding from international experience with large-scale collaborative programs is that client organisations frequently underestimate the governance demands, decision-making velocity, and commercial sophistication required to manage long-term integrated partnerships. Typically, large scale collaborative contracts supported by open book or target cost payment mechanisms require a greater commercial team than a traditional lump sum contract.

The contract may be well designed, however, the organisation must be equally fit for purpose.

Effective client-side delivery capability encompasses more than a procurement function.

It requires integrated expertise across strategic asset management, commercial and contract governance, programs controls, stakeholder management, and technical assurance. For many water authorities, developing that capacity organically is a multi-year investment. The more immediate solution, and one increasingly adopted by leading water authorities is to engage an independent program partner or delivery partner function that augments internal capability, accelerates institutional knowledge transfer, and ensures that accountability for outcomes remains firmly with the client organisation.

Our approach

MBB brings deep, hands-on experience across the full procurement and transaction lifecycle for major water and wastewater infrastructure programs. Our team has worked across all states and territories, advising water authorities, government agencies, and delivery partners on the commercial and transactional challenges that determine whether a major program succeeds or stalls. We understand that no two water authorities face identical challenges, the geographic reach, its regulatory environment, its workforce capability, and its investment pipeline all shape what the right commercial approach looks like.

We bring specific capability across transaction management, collaborative contracting and alliance structuring, delivery partnership development and organisational model design, framework contracting, client-side program management and capability uplift, and advisory services for programs exploring private financing or alternative funding pathways.

Australia has the chance to lead, not just adapt.

Given Australia is a water constrained continent, and at risk of increasing climate change events, such as the Super El Nino coming in summer 26/27, there is an increasing need for water authorities and funding partners to adapt.

The water sector’s direction is clear. The investment is coming, the complexity is growing, and the old ways of working will not be sufficient.  Water authorities who move now and seek deeper understanding of the opportunities presented by new commercial models, who are prepared to build genuine supply chain relationships, and design procurement strategies that are fit for the future, will define what Australian water infrastructure looks like for the next generation.

To find out how MBB can bolster your understanding of the possibilities in this sector, please do not hesitate to get in touch here.