<p>This paper addresses the valve location problem and the isolation system design in the water network under the pipe failure uncertainty. To overcome the weakness of the existing models in the literature, we formulate the problem as a two-stage stochastic bi-level programming model. Then, to solve the model, two methods are presented. The first one utilizes the duality theorems to reformulate the bi-level model as a single-level one and solves it by available optimization solvers. The second approach is a decomposition algorithm based on logic-based valid cuts. Computational results over a real-world network indicate that the proposed decomposition algorithm outperforms the direct resolution of the single-level model in all instances in terms of both solution quality and running time.</p>