The objective of this project is to develop an output-based aid (OBA)facility aimed at establishing an efficient and transparent mechanism for financing infrastructure in water and sanitation projects in Honduras. The project will increase access to water and sanitation services and improve the quality of existing services for about 15,000 low income households in rural and peri-urban areas. Key objectives include: Increase the number of household water connections with meters, yard taps, public points and water availability; and Increase water quality and household connections to sewer systems in selected peri-urban and rural communities. The project consists of the following parts: Part 1: OBA Facility: Creating an output based-aid financial mechanism (the "OBA Facility") to be managed by the Recipient for the provision of a GPOBA subsidy to be paid by the Recipient to eligible Implementers who carry out Eligible Sub-projects upon the delivery of certain pre-specified Outputs. Part 2: Technical Assistance: Providing technical assistance to assist the Implementers to formulate viable and eligible sub-project proposals by retaining specialized consultants to assist in the preparation of such proposals. Part 3: Project Management, Monitoring and Evaluation: (a) Strengthening the OBA Unit's management capacities by hiring specialized management consultants including but not limited to a financial management specialist, procurement specialist, technical specialist, Construction Supervision Officer and administrative support staff. (b) Carrying out of audits, monitoring and evaluation activities by hiring an Independent Verification Agent.