Performance Assessment in the Water Utilities Sector in Portugal: A Stochastic Data Envelopment Analysis Approach

ABSTRACT Global water scarcity, exacerbated by climate change, presents critical challenges for ensuring equitable access and sustainable management of water resources, a cornerstone of the Sustainable Development Goal (SDG) 6. This issue is especially pressing for water‐stressed regions like Portugal, where optimizing the efficiency of water utilities is paramount. However, existing methodologies often fail to address the inherent randomness in operational data or account for regional variability. This study bridges this gap by employing an advanced stochastic data envelopment analysis (SDEA) model, incorporating chance‐constrained data envelopment analysis (CCDEA) with a novel tie‐breaking technique. Analyzing data from 116 Portuguese water utilities over 2013–2021, the research identifies efficiency patterns across diverse management structures and regions. The findings reveal that outsourcing water collection enhances efficiency, while municipal departments face persistent challenges. The delegation model (municipal company) is particularly effective in regions with higher average household incomes, offering valuable insights for policymakers. By addressing methodological and contextual limitations in existing research, this study not only advances performance measurement in the water sector but also informs targeted strategies for sustainable water management in regions vulnerable to climate‐induced disruptions.