Multi-Decisions Rating Model: Establishing rescue policies for Regional Drinking Water Companies (PDAM) in Indonesia

Kirti Peniwati
PPM Graduate School of Management
Werner Brenner
The Indonesian Association of Water Companies

Publication date: May, 2008

Journal: European Journal of Operational Research
Vol.: 186- Issue: 3- Pages: 1127-1136

Publisher: Elsevier

Abstract: Fresh water is abundant in Indonesia, but only about 20% out of more than 200 million of its population have access to clean water supplied by 306 Regional Drinking Water Companies (PDAMs) around the country. The poor performance of most PDAMs is due to high level of debt, lack of investment, and inefficient operations. On one hand, the PDAMs need to increase its coverage capacity but on the other hand they have been operating under unfavorable regulated tariff policies. A government team involving the Indonesia Water Enterprise Association (PERPAMSI) has developed a multi-criteria model to rate the PDAMs, grouped them based on their scores, and formulated common policies for each group. Unfortunately, the recommended policies do not appear to be specific enough to make them useful. This paper proposes improvements to the original model which used the Analytic Hierarchy Process (AHP) while maintaining the original priority judgments. Model-1 is the AHP representation of the original model, Model-2 is similar to Model-1 with the principle of hierarchic composition satisfied, and Model-3 is a framework for multi-decisions decision making involving clustering the PDAMs based on their business performance. Model-2 did not prove useful for identifying specific group policies that fit the need of every PDAM in a given group. Model-3 enables one to identify a specific policy that is applicable to either all the PDAMs or those grouped as a certain cluster by rating them based on a set of criteria that is relevant to that policy. The results of the three models are evaluated and some examples of using the Model-3 framework to rate the PDAMs, each with a specific policy in mind, are provided.

Keywords: AHP, Multi-decisions model, Rating