Small Scale Private Providers

Consumers often have come to rely on small scale providers of water supply and sanitation (WSS) as investors, developers, and/or managers of WSS services. In the water subsector, these providers either operate as an extension of formal utilities depending on them for bulk water supply, or operate independently and in competition with them. They play an important role in reaching poor, underserved, and remote communities in niche markets that the formal utility is not well placed to reach. 

While the role of small-scale providers has long been accepted as an important mode of service delivery in rural areas (e.g. cooperatives, water user associations), in urban areas that typically fall under the exclusive mandate of a monopoly provider, they are often viewed as a temporary fix, soon to be replaced by utility services and therefore not warranting attention from practitioners and policy makers. 

Over the past 10 years, it has become evident that these providers are often an important link in the service delivery chain - reaching areas that have proved difficult to formal utilities. In some countries, (e.g., low income and postconflict countries), the goal of providing efficient, effective, and sustainable services for all may require a phased approach that takes stock of existing modes of service delivery that consumers rely on and finds ways to improve these in the short, medium and long term. Providing access to a conventional utility water supply may, in practice, be the second or third phase of a longterm strategy that recognizes that it may take a decade or more to ensure access to the piped network, and in some cases (e.g., peri-urban, remote, and dispersed settlements) the economies of scale required for monopoly provision of water supply may not obtain -- even in the long term. In these instances, working with small scale providers is part of a long term sector strategy. 

When small scale providers of WSS work as an extension of the utility -- purchasing bulk water and retailing it to customers within the utilities service area -- efforts to improve the quality of services may involve contracting out service delivery, establishing bulk tariff rates, and introducing regulatory oversight. Small scale providers that are independent from the network may require support to regularize their business, provide permits for abstraction or operating licenses, and establish suitable arrangements for regulation of water quality and prices.