Public water systems in the U.S. require a massive infrastructure upgrade. The country’s drinking water systems need an estimated $625 billion in infrastructure investment through 2041, according to the EPA’s most recent needs survey. For civil engineering firms, that number anchors one of the most durable demand cycles in the industry. The spending on water infrastructure is driven by a combination of aging assets, stricter regulations tied to emerging contaminants and concerns about distribution lines contaminated with lead.
The EPA’s 7th Drinking Water Infrastructure Needs Survey and Assessment puts the 20-year investment need at $625 billion, a 32% increase over the prior survey (14% after adjusting for inflation). The survey breaks that need down by asset type:
| Category | 20-year need |
| Distribution and transmission | $420.8 billion |
| Treatment | $106.4 billion |
| Storage | $55.3 billion |
| Source | $22.9 billion |
Source: EPA 7th DWINSA, as summarized by Mitchell Williams. The survey covers drinking water only. According to the American Society of Civil Engineers (ASCE), wastewater and stormwater will require another $690 billion in spending over a similar time frame.
The clearest example is the various flavors of polyfluoroalkyl chemicals (aka “PFAS” or “forever chemicals”). The EPA’s 2024 rule set enforceable limits of 4 parts per trillion for PFAS chemicals, which was the first time the EPA established a limit for these chemicals that are linked to a wide variety of adverse health outcomes, including cancer. In May 2026, the EPA proposed keeping this limit while letting municipal systems request an extension to 2031. Under either timeline, utilities that exceed the PFAS limits need testing, treatment evaluation, design and construction support. While PFAS may be the new kid on the block, the problem of lead pipes contaminating the drinking water supply dates as far back as the Roman Empire. The most recent estimate by the EPA is that there are 4 million lines in the U.S. that need to be replaced because of the risk of lead contamination.
The massive level of investment required to rehabilitate the aging water infrastructure in the U.S. places a severe strain on traditional utility funding mechanisms such as the fees paid by local ratepayers and the issuance of municipal bonds. In 2021, the Federal Government stepped in to help fill some of this gap by providing $50 billion in funding to support drinking water, wastewater and stormwater investment as part of the bipartisan Infrastructure Investment and Jobs Act (IIJA). This act created funds to support lead service line replacement and measures to protect against emerging contaminants, as well as temporarily boosting funding for loans and grants provided by the Clean Water State Revolving Fund (CWSRF) and the Drinking Water State Revolving Fund (DWSRF). Unfortunately, IIJA’s five years of supplemental water funding ended with fiscal 2026, and it remains to be seen what (if any) additional funds will be allocated to future water infrastructure upgrades. This could certainly serve to dampen water infrastructure investment. On the plus side, funding from the program is still available for projects that were approved prior to the program’s expiration date, which means that IIJA funds will still be supporting water infrastructure upgrades into the 2030’s. Lower federal funding will not erase the need for upgrades, but it will slow the pace by shifting more of the cost to utilities and their ratepayers. This dynamic favors firms with strong relationships at well-funded systems, as well as those that are performing OPEX-related services such as regulatory compliance, inspections and periodic planning and asset management.
Companies that have a diverse set of municipal relationships are well positioned to create value. Municipal water utilities hire firms they trust with long-lived assets, and those relationships often span decades of master plans, rate studies and capital programs. This makes incumbents difficult to dislodge. Firms with recognized expertise in specific areas, such as treatment design for emerging contaminants, are in an even stronger position for both client retention and margin expansion.
For companies that are trying to break into municipal work or that have a limited number of municipal utility clients, establishing a diversified municipal utility revenue stream is more challenging. Utility procurement is slower than private work, and funding decisions can push schedules. With enough patience, an organic growth strategy can work. Alternatively, companies can accelerate the process by either acquiring companies with complementary municipal relationships or partnering with a company with a more diversified customer base.
Five questions that are worth thinking about when evaluating your own water engineering practice:
Next in the series: Industrial Water: The Private-Sector Side of Water Engineering
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Richard Pierce
Managing Director
Managing Director
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