Halving the number of people without sustainable access to safe drinking water by 2015 is an
important Millennium Development Goal. How do we design policies and projects that will efficiently
and equitably help meet this goal? How do we accurately monitor and systematically evaluate
progress towards attaining this target? By characterizing the current needs and constraints of
households and service providers, the data from baseline surveys define the starting point in
quantifiable terms. Collectively such information can be deployed in generating hypotheses and
explanations about the behaviors of households and providers, designing incentives and directives,
setting targets, defining indicators, monitoring progress toward goals, and evaluating specific
programs and projects for desired outcomes. We illustrate these features through a case study of
water, sanitation, hygiene, and poverty from coastal towns of southwest Sri Lanka.
In the early 2000s, the government of Sri Lanka considered engaging private operators to manage
water and sewerage services for two separate service areas that spanned the districts of Gampaha,
Kalutara, and Galle.1 To better inform the design of these private sector transactions, we surveyed
1,800 households in southwest Sri Lanka and created spatial maps of poverty and network services.
Our maps and models lead us to four conclusions. First, poor and non-poor households have different
behaviors regarding water and sanitation, which affects the distributional impacts of the proposed
private sector participation (PSP) transactions. Second, although the three localities are close
geographically, they are sufficiently heterogeneous in terms of consumption patterns and preferences
to ensure that details of the design of the transactions have to be adapted to the specific service
areas. Third, affordability of connection charges for network services can be a constraint in the service
areas, which is evident from comparing poor and unconnected households to non-poor and
connected households. Fourth, the existing tariff structure and its inherent consumption subsidies are
an ineffective mechanism for targeting the poor; this is because the existing tariff structure mainly
benefits non-poor households.