By the late 1990s, a reform program supported by the World Bank and other donors set out to improve the system by separating asset ownership from system operations, and by commercializing service delivery through public-private partnerships. Water management at the local level was then delegated to local Water Authorities, which receive financial and technical support from the MWE.
Within the past five years, a further innovation has been introduced in small towns including informal settlements of Kampala with the piloting of a contract modality funded by output-based aid (OBA).
The OBA project is designed to provide water to low-income communities. This is implemented through the Urban Pro-Poor Branch of NWSC and follows a number of earlier donor-funded initiatives to reach poorer households. The OBA project funds the installation of private yard taps and pre-paid meters for public standpipes. Investments are financed by the NWSC in advance through its own funds.
Another OBA pilot program, initiated by the Uganda Government targets six small towns and four rural growth centers which have not previously had a piped water system. Under this OBA scheme, NWSC pre-finances the required investments to achieve the target for a certain number of connections defined in the OBA agreement, using internal funds.
Upon verification that the agreed targets have been achieved, NWSC is reimbursed by a pre-defined OBA subsidy. The utility uses in-house capacity and does not subcontract the implementation of the OBA project components. In addition, NWSC is planning to install pre-paid meters along with all future yard tap connections.
Introduction of reforms enabled NWSC to become one of the most successful water utilities in the region. This is partly attributed to the introduction of a Performance Contract between NWSC and the government, which introduces a set of performance benchmarks. Between 2005–2006 and 2008–2009, the number of connections increased by almost 50% and turnover by more than 70%.