This report presents work undertaken for the Inception Phase of the DFID-funded KaR project R8335 'Small Scale Private Sector Participation In The Rural Water Supply Sector'. The Inception Phase covered a four-month period from November 2003 to February 2004 and required the establishment of project teams and management systems in Ghana, Tanzania and Zambia, as well as a knowledge review. In country teams were effectively and formally established and have been able to contribute to the knowledge review, electronic discussions and the development of project management guidelines. The knowledge review has been completed and is available as a separate document (R8335/1788/R1). The review succeeded in improving understanding of the nature of the study as well as highlighting where special emphasis should be placed. Following the experience of working with the country teams and the combined knowledge review exercise, it has been possible to review the project design and management structures prior to the completion of this Inception Report. No major changes are proposed to either the objectives, methodology, scheduling or financing of the study and it is expected that it can meet its original objective on time. In addition the project team has been able to identify a number of factors to be considered in order to ensure the methodology is more sensitive to a pro poor focus as well as recognising a number of unforeseen products that it intends to develop where possible.