Willingness-to-pay and design of water supply and sanitation projects : a case study

Using a case study, this paper demonstrates the usefulness of willingness-to-pay (WTP) studies in designing WSS projects. It draws from a contingent valuation (CV) study undertaken in 2003, which was intended to facilitate the design of a public–private partnership (PPP) to provide water supply and sanitation (WSS) services in southwest Sri Lanka. The paper aims to illustrate how the findings of a CV study can be used in designing WSS projects, besides estimating project benefits. The paper includes 1) the use of econometric methods to assess the validity of estimated willingness-to-pay (WTP); 2) how the estimated WTP function can be used to generate useful supplementary information to enhance project design; 3) conjoint analysis, a variant of CV, to illustrate its usefulness in further understanding demand; and 4) the use of the findings of the CV study, together with secondary information, to examine the overall viability of the PPP. While the paper demonstrates the value of supplementary information generated through a well-designed and carefully implemented CV study, it does not provide a complete set of practical guidelines on how to design and conduct CV studies.