During the World Water Forum in Mexico, there was a lot of debate bout public versus private service delivery. It was argued that private sector involvement has left the poor un-served. Others argued that the private sector is the best way to move forward. One thing everyone can agree on is that the poor do not have sufficient access to water and sanitation services.
One mechanism that can help bridge the "public/private" divide is output-based aid (OBA). OBA is about using explicit performance-based subsidies to help the poor afford access to basic services. The subsidies would be for the most part targeted to poorer consumers, and would be paid (through the provider) only after the provider has delivered the agreed output.
OBA is not a magic bullet -- it does not make a poorly designed project all of the sudden great, nor can it be looked at in a vacuum -- e.g. appropriate risk mitigation instruments, local financial capacity, etc... However, even governments that are quite skeptical of the private sector have realized that an OBA-type approach can be used to increase private sector involvement to help bridge the affordability gap for the poor, while at the same time increasing the accountability of the provider who receives payment mostly after delivering the service. OBA is a potentially strong mechanism to deliver aid more effectively and transparently.