Performance benchmarking using composite indicators to support regulation of the Portuguese wastewater sector

This paper develops a benchmarking framework to support performance-based sunshine regulation in the water sector. It uses benefit-of-the-doubt composite indicators formulated with a directional distance function. Weight restrictions are incorporated in the model to account for different perspectives in the performance assessment. The framework is tested using data of the Portuguese regulation authority concerning the activity of wastewater operators. The information obtained using this framework reflects overall performance at the firm level and complements traditional evaluations of regulatory authorities based on the analysis of individual indicators. The results can be used to disseminate best practices, motivate continuous improvement, and foster enhancements in the governance of regulated utilities.