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+# Leak Detection, Health, and Allocation Protection
+
+## Overview
+
+NICo evaluates leak-related conditions from compute-tray sensor health and BMS leak events. It turns active conditions into health signals and, where configured, allocation protection.
+
+BMS owns the physical leak sensors and remediation actions. NICo provides the infrastructure-management health and allocation-protection surface.
+
+## Current capability
+
+### Compute-tray sensor health
+
+NICo hardware-health monitoring discovers configured BMC endpoints and queries them through Redfish. When compute-tray BMCs expose leak-related sensor data and the relevant health collector is configured, NICo considers that data as part of hardware health.
+
+```text
+Compute-tray leak sensor
+        ↓
+Compute-tray BMC
+        ↓ Redfish
+NICo hardware-health service
+        ↓
+NICo hardware health
+        ↓
+Aggregate host health
+```
+
+The alert classification and operational effect for this path depend on the site's health-processor configuration.
+
+### BMS leak-event integration
+
+NICo also supports a BMS event path through `nico-dsx-exchange-consumer`.
+
+```text
+BMS detects or clears a leak condition
+        ↓
+BMS publishes MQTT metadata and value events
+        ↓
+NICo DSX Exchange consumer
+        ↓
+NICo rack health report
+        ↓
+Aggregate host health and allocation protection
+```
+
+The consumer supports these BMS event types:
+
+- Rack leak detection (`LeakDetectRack`)
+- Rack leak-sensor fault (`LeakSensorFaultRack`)
+- Rack-tray leak detection (`LeakDetectRackTray`)
+
+For an active supported BMS event, NICo creates a rack health alert with these classifications:
+
+- `PreventAllocations`
+- `SensorCritical`
+- `Hardware`
+
+`PreventAllocations` blocks new allocations for hosts affected by the active rack-health condition. When BMS publishes a clear event, NICo removes the corresponding rack health report. NICo then recalculates aggregate health; allocation eligibility can recover when no other active health condition prevents allocation.
+
+## Deployment requirements for BMS event integration
+
+The BMS event path is not enabled automatically in every NICo deployment. To use it, a deployment must have all of the following:
+
+1. `nico-dsx-exchange-consumer` enabled. This Helm subchart is disabled by default.
+2. Connectivity and configuration for the BMS MQTT broker and event topics.
+3. BMS metadata and value events that use supported point types and identify the affected rack.
+4. The consumer configured to call the NICo API.
+5. Health aggregation configured for the relevant racks and hosts.
+
+Without these prerequisites, BMS events do not create NICo rack health reports.
+
+## Operational meaning
+
+NICo provides **health visibility and allocation protection** for leak-related conditions. The current BMS event workflow creates a rack health alert that propagates through NICo health aggregation, while BMS handles physical remediation.
+
+Current operational visibility is provided through NICo's health data, health alert details, logs, and metrics.
+
+## Next phase: API-based leak workflows
+
+The next phase follows [issue #5018](https://github.com/NVIDIA/infra-controller/issues/5018) by adding API-based workflows for rack and tray leak detection and leak-handling state. It builds on the current health and allocation-protection workflow; it does not replace it.
+
+The API workflows expose:
+
+- rack and tray leak status;
+- tray and BMS sensor details, including optional readouts and thresholds;
+- BMS leak-handling status;
+- ongoing handling operations, such as tray shutdown or rack isolation;
+- previous handling results and details.
+
+This phase makes leak state and handling workflow available through the NICo API. BMS remains responsible for physical detection and remediation, while NICo provides the infrastructure-management health and lifecycle surface.
+
+## Related documentation and implementation
+
+- [Monitoring and Health](monitoring-health.md)
+- `crates/dsx-exchange-consumer/README.md`
+- `crates/dsx-exchange-consumer/src/health_updater.rs`
+- `helm/README.md`
+- [Issue #5018](https://github.com/NVIDIA/infra-controller/issues/5018)