||This paper presents a brief background of the development and cost‐effectiveness of two water districts (WDs) in the Philippines. Water districts are the main providers of safe drinking water outside the National Capital Region. The factors impacting the cost‐effectiveness of WDs are both external and internal. The external factors pertain to the political and economic laws and regulations for all WDs. The two WDs are located in the same province and have a common geography. For this reason, our analysis has not taken into account the external factors. The internal factors, which are included in our analysis, include corporate governance, financial management, and operations management. The analysis provides answers to the research questions posed in this paper.