ABSTRACT.This paper attempts to spell out the difficult conditions faced by urban water supply managers in achieving overall efficiency. Based upon these conditions, and changes that are likely in the next decade, it then tries to suggest strategies that would lead to even higher levels of efficiency in the future. A blending of political and economic concepts is used to make what is hoped to be a realistic analysis.What do we mean by “efficient”? The usual welfare economics definition is attainable only under a very special and highly unrealistic set of institutional arrangements. As soon as we delegate responsibility to a specialized agency we provide the opportunity, indeed we make it imperative that, in a social sense, a sub‐optimization will take place.From the specifics of the indictment of this sub‐optimization we can learn something about the opportunities for more efficient management in the future. In general there is an under‐exploitation of multiple‐function, multiple‐objective opportunities.The pressures for sub‐optimization hinge very directly on the sources of support and opposition to the water supply agency. A change requires the creation of a broader political base.The search for regional solutions is largely a political problem, and probably the development of flexible, responsive regional agency, so long sought, is s
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