The Cost of Pipe Breaks: New Knowledge for Improved Risk Management

The need to re-invest in our drinking water infrastructure has been a growing concern for water utilities for the last 20 years. A recent American Water Works Association (AWWA) Buried No Longer report identified an anticipated funding gap of more than $1 trillion over the next 25 years for drinking water infrastructure (AWWA, 2012). The major cost associated with this funding gap is replacement of buried pipelines. For North America, most of these pipes were installed during periods of economic expansion, but now some of these pipes are estimated to
need whole-scale replacement due to deterioration, and most utilities do not have a bank of accumulated capital to devote to re-investment in this infrastructure.

As an approach to help close the funding gap, risk management techniques have received focus to help distinguish which pipes should receive immediate attention – typically those judged to have a high risk of failure and/or high consequence of failure, as contrasted to those pipes which can be addressed later due to lower likelihood or consequences of failure. Much effort has been spent in the water community to develop means to better identify which pipes are at greater risk of failure, but relatively few studies have addressed the consequences of failure.

One substantial effort to better understand the consequences of failure is the Water Research Foundation study “Managing Infrastructure Risk: The Consequence of Failure of Buried  Assets,” published April 2017. In this report, the full costs of 150 pipe breaks, primarily North American, are evaluated in detail. These are “triple bottom line costs,” meaning the sum of the direct, social, and environmental costs for a pipe failure. “Failure” means that the pipe’s physical integrity has been compromised resulting in a leak or break; it does not mean that the pipe must be replaced. Most commonly, even in the case of many catastrophic breaks, a pipe is repaired and placed back into service. This cost data provides insights into several risk management questions associated with buried infrastructure management. Given the more than 235,000 pipe breaks estimated to occur in North America each year, this is a limited data set, but we believe it is the most extensive data set on the cost of failure compiled to date. Some of the more important findings and observations from this study are addressed here.

We found that the costs associated with a pipe break are surprisingly hard to assemble. Utilities do not typically track their pipe break response costs. And, there is even less tracking of costs borne outside of the utility, such as third-party property damage, transportation disruption costs, or environmental consequences. For our 150 failures, however, we had good information
on costs from utility participants in the study. As part of the work in this project, modules were created to estimate the social and environmental costs, and to ensure that these estimated costs were reasonable. Most of the failures had social costs associated with the failure while only a few failures had associated environmental costs.

The overall dataset is skewed with most failures having a relatively modest total cost of failure (CoF), and just a few failures being very costly. There were also wide variations in the total CoF. The geometric mean of the entire distribution of failures is $42,168, and utility-borne costs are approximately one-half of these total costs, on average. However, the geometric mean of the top 10% of the costliest failures was $1,068,000, and utility-borne costs were only about one quarter of these total costs. We focused on the geometric mean since this is a better estimate of the central tendency of a skewed dataset than the arithmetic mean. From our dataset, the top factors that tend to drive the potential for a high cost of failure are:
• Location
• Duration and spatial footprint of the break
• Essential, high value customers being impacted

The location and duration of an event (including restoration of all impacted services, such as transportation) are the two factors that tend to drive higher failure consequences. Not  surprisingly, more densely populated and urban areas tend to have higher consequences associated with a failure than rural locations since there are more facilities to be impacted. In some instances, property damage can be significant and is typically due to flooding and water damage. While large diameter pipes tend to have the potential for relatively high total CoF due to increased flooding, size alone is not the sole driver for high CoF. Many smaller diameter pipes have the potential for generating relatively high CoF. The pipe break with the greatest CoF in the database is a relatively small 12-inch diameter pipe. The high CoF arose from an extended period of traffic disruption, highlighting the importance of location issues and duration of the event, including the time required to restore all impacted traffic services.

Traffic disruption is frequently a significant social cost associated with breaks. While the utility does not pay these costs, society does and these events can negatively impact the public perception of the utility. Of the top 15 (10%) most costly breaks in our dataset, the high cost in seven of these breaks, or nearly half of the most consequential breaks, is driven by high traffic disruption costs.

High value customers are enterprises where interruption of water service for
more than an hour or two poses significant losses. These types of  customers would be hospitals, schools, food-oriented operations, major water-reliant manufacturers, and other water-dependent enterprises. Once again, these costs are not typically borne by a utility, but the presence of critical high value customers dependent on a given pipe represents an important consideration in identifying possible high consequences associated with failure of that pipe.

With this project completed, a utility has more information available with which to better assess the costs likely to be associated with a possible failure. This information can be used to better differentiate amongst various pipes of otherwise similar characteristics to identify those with a higher possible risk. A simple risk profile matrix can be developed to consider the type and level of risk posed by various parts of a pipe inventory. In cases where data is limited, relatively simple screening and scoring approaches can be applied as the first steps in assigning comparative likelihood of failure and failure consequence levels to buried assets.

The risk management perspective also enables a utility to consider different strategies for mitigating the risks and comparing possible costs. In some instances, it may be advantageous to aim at reducing the probability of failure (e.g., via proactive pipe renewal, or reducing  operational stresses such as lowered operational pressures), and in other instances it may be useful to consider risk mitigation approaches aimed at reducing the consequences of an asset failure (e.g., through valve control programs, network redundancy). The results of the Water Research Foundation study “Managing Infrastructure Risk: The Consequence of Failure of Buried Assets” provides substantial useful information regarding the total cost of failures associated with pipe breaks.

Frank J. Blaha, P.E. is Regional Liaison with Water Research Foundation. He can be reached at fblaha@waterrf.org. Robert S. Raucher, Ph.D. is Director, Water Economics and Planning with Corona Environmental Consulting. He can be reached at BRaucher@CoronaEnv.com.