A COURSEWORK ASSIGNMENT cademic Year 2020/21 Module Code: BNM862 Module Name: Performance Analytics Module Leader: Dr Dimitris Giraleas Coursework Title: Relative efficiency of Water service companies Task Details/Description: Background In some parts of the UK, water services are provided by relatively small, not-for-profit municipal companies. These Water Distribution companies are responsible for the abstraction (ie collection) of water, either through natural springs and aquifers or open rivers, its treatment (to ensure that the water is safe for drinking) and its delivery to each household under its domain. The aim of this assignment is to build appropriate models to assess the relative efficiency of a sample of such Water Distribution companies, using both parametric and non-parametric approaches, commenting on similarities and differences between the application of said approaches and their results. The Data Data is available on 237 Water Distribution companies, for a single year. See the file BNM825_assessment.xls. The dataset includes information on: OPEX: Total annual expenditure required to operate and maintain the distribution network. (in £million).Total amount of water delivered; this is believed to be one of the main drivers of OPEX. (in Ml/day).Network Length: total length of the water distribution network (over-ground and underground pipes); also believed to be one of the main cost drivers. (in 000’s of Km). Previous studies of water distribution suggest that there are a number of additional factors that could potentially influence the input requirements for distribution. These include: Rivshare: percentage of the water that is abstracted (ie collected) from rivers. Water sourced from rivers is relatively inexpensive to abstract since it requires less pumping and as such less energy (electricity costs), but on the other hand requires a substantial amount of treatment to ensure that it is clean and safe to drink. (in %) Connections: the amount of connections in the area served by the water distribution company in question. (in 0,000’s of connections). What you are required to do a) Being sure to justify the approach you have used, specify and estimate an appropriate and robust econometric model to describe the transformation process, taking into account the results of the regression diagnostics. (In this part you will be assessed on how you go about identifying a suitable set of variables and specifying a functional form to be used in the analysis.) (20 marks) b) Suggest input-output variables to be used in a DEA model for assessing the efficiency of the distribution companies in your sample. Specify the type of efficiency you would assess. Give your reasons for each input and output variable you select and for the type of efficiency you would assess. What would be the most appropriate orientation for the DEA model? What about the assumption on returns to scale? Justify your answers. (20 marks) c) Assess the relative efficiency of the distribution companies in your sample using the DEA model you derived in part (b). Provide summary statistics of relative efficiency using both assumptions for returns to scale and compare your results. Select two companies, one with low efficiency level and one with high. For these two companies, provides examples of best practice and targets (based on the model specification from part (b)), estimate the returns to scale these companies operate under and calculate their scale efficiencies and most productive scale sizes. Discuss how these measures can help these companies get a better understanding of their performance. (20 marks) d) Using the regression model you identified in part (a) as a base, assess the efficiency of the water distribution companies using both deterministic and stochastic econometric approaches. Discuss the merits of the two approaches in general and more specific for this particular application. From the different deterministic and stochastic models, first select one from each category (determinist and stochastic) that you consider as most appropriate. From these two models, which one would you adopt? In all instances, state and justify the reasons for you selections. Describe the efficiency estimates produced by the different approaches and comment about any particularly inefficient and efficient companies you identify. (20 marks) e) Compare your DEA results with the results from the two models selected in part (d) – namely the models that you consider as most appropriate for this application for the deterministic and stochastic categories (one from each). Commend on the differences and similarities between the three models/approaches both at the aggregate level (for example discuss the characteristics of each model and the different summary statistics of the efficiency estimates) as well as at the company level (for example discuss if there are any major disagreements at company level and try to explain why that could happen). Which results are likely to be more reliable and why? (20 marks) Module Learning Outcomes Assessed: 1. The overall ability of the student to carry out a performance assessment. 2. Student’s understanding of some of the most pertinent points of the theory, but also of the practical issues of performance assessments. 3. The ability to identify and discuss issues, possible shortcomings and interesting points raised by the analysis. Presentation Requirements: Use the main body of your report to explain your approach and to summarise your findings. Use appendices for any computer output you may want to include. Remember to include important figures or table in the main text! The main body of your report should be about 2500 words, excluding tables and figures. Excluding computer output your appendices cannot contain more than 4 pages of text. Font Size: 12, Arial or Times New Roman Line Spacing: 1.5 Submission Date & Time: TBA Assessment Weighting for the Module: 60% of total mark Assessment Criteria Each report will be assessed on three main criteria: 1) The strength of the analysis; student needs to make appropriate use of the selected approaches/techniques and the results presented must be verifiable (ie if the analysis was to be replicated, it would produce the same results as those presented by the student). 2) The detail of the provided discussion; the students need to discuss why they have selected the particular approaches/techniques for the analysis, provide a clear and concise explanation of the results and note any issues/shortcomings/particular interesting findings of the analysis in general. 3) The structure and the overall quality of the report itself; students need to state what they did and why in a clear and concise manner, make correct use of tables and figures and appropriate labelling; use correct and appropriate terminology and generally clear language throughout. Ethical Requirements N/A Essential Reading for Coursework Task (if in addition to reading provided in the module outline): N/A
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