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for Project Preparation and Appraisal

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1 for Project Preparation and Appraisal
Overall Framework for Project Preparation and Appraisal Saeed Ahmed Rana ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010

2 Why A Project? This is an instrument to provide assistance to the billions in the developing world, who need to overcome poverty and raise their standards of living. Investment projects contribute to the sustainable socio-economic development of member countries. Such investment helps borrowers make the best use of their resources – natural, financial and human – to alleviate poverty, protect the environment and enhance effectiveness of public and private sectors.

3 Why project preparation and appraisal?
Project preparation and appraisal processes play an important role in enhancing the developmental impact of investments and building government capacity in national planning and investment. These processes are not intended to be document driven but to bring together multiple perspectives on a project and various tools of analysis needed to assess, monitor and improve on the different activities and expenditure components involved in the project. A strong foundation of preparation and appraisal can ensure better performance and disbursement during the life of the project and is the primary framework for conducting project supervision and monitoring.

4 A Framework for Project Preparation and Appraisal
I. Project Cycle II. Project Rationale and Preparation III. Borrower Roles IV. Donor Roles V. Project Appraisal Costing Analysis Environmental and Social Assessments VI. Assessing Project Quality VII. Early Signs of Project Failure

5 The Bank Project Cycle Project Cycle - The project cycle starts with a development strategy based on selectivity and comparative advantage. It is targeted to country’s development objectives. It is followed by: Identification Preparation Appraisal Negotiations and Approval Implementation and Supervision Completion and Evaluation

6 Stages of the Bank’s Project Cycle (I)
Country Assistance Strategy-the Bank proposes lending and advisory services to help countries identify their priorities and reach their main development goals. Identification-Projects are identified that support country strategies and that are financially, economically, socially and environmentally sound. Preparation-The Bank provides policy and project advice along with financial assistance. Clients conduct studies and prepare final project documentation. Appraisal-The Bank appraises the economic, technical, institutional, financial, environmental and social aspects of the project. The project appraisal document and draft legal agreements are prepared.

7 Stages of the Bank’s Project Cycle (II)
Negotiation and Board Approval-The Bank and Borrower agree on loan or credit agreement and the project is presented to the Board for approval. Implementation and Supervision-The Borrower implements the project. The Bank ensures that the loan proceeds are used for the loan purposes with due regard for economy, efficiency and effectiveness. Implementation and Completion-The Bank team evaluates the performance of both the Bank and Borrower. Evaluation-The Bank’s Independent Operations Evaluation Department prepares an audit report and evaluates the project. Analysis is used for future project design.

8 Project/Lending Types
Development Projects can be original projects, pilot projects or repeater projects Pilot projects test the design criteria and implementation strategy of new technologies before embarking upon a full scale investment. Repeater projects adopt the design and practices of a successful project for the same Project Development Objective (PDO) under similar implementation conditions and environments. A SWAp is a sectorwide approach that supports locally owned programs for a particular sector in a comprehensive and coordinated manner. SWAps promote increasing reliance on country systems and procedures and use a common framework for planning, implementation, expenditure, and monitoring and evaluation Project Lending is primarily the Specific Investment type Loan (SIL). Lending is also extended for sector investment, maintenance, financial-intermediary and technical assistance projects. 8

9 Project Identification
Birth of a Project Country Development Plans Borrower Specific Request Unforeseen Conditions (e.g. natural calamities) Set Project Development Objectives Basic Consideration: If the project is successful, what will be its principal outcome for the primary target group? General Guidelines (see next slide)

10 Project Development Objective Guidelines
What group is targeted directly by the project as the key recipient of project benefits? Immediately after the close of the project what problem would have been solved for the target group? What will the target group be doing differently after the project that should make it better off? The PDO should focus on the outcome for which the project reasonably can be held accountable, given the project duration, resources and the approach. The PDO should not merely restate the project’s components or outputs. Efficient use of inputs or delivery of outputs must be translated into outcomes or results for the primary target group. KISS Your PDO (Keep – It – Short - and - Simple), concise and meaningful. Don’t try to reach the sky in one go. PDO should not encompass higher level objectives that depend on other efforts beyond the scope of the project.

11 Strategic Areas of Focus for the Bank
Achieving results on the ground Country capacity building Measuring and reporting on results Enabling environment Beneficiary participation/ownership Communication/messaging on results Gender balance Harmonization with MDBs

12 Bank’s Communication/Messaging on Results
Achieving Results on the Ground Realistic DOs, Strategy, Quality, RX Frameworks, Implementation Risk Mgmt, RX based instruments Measuring and Reporting on Results MDGs, Country CAS Program Sector/Theme Project Core Indicators Quantitative Qualitative Enabling Environment Country Capacity Building MfDR Statistics M &E Public Sector Management RX Budgeting Senior Management attention Recognition Tools, IT systems, RX Platform, CPRT Training, KL Resources Harmonization with MDBs/Donors

13 Project Preparation - Borrower Role
Review identification and results Initiate project preparation Identify/set institutional framework Determine need for TA Set up project preparation office Appoint project consultants Inter-agency/departmental coordination Prepare a Project Information Paper (PInfP) Approach donors

14 Project Preparation - Donor Role
Assign project preparation team Review borrower progress in project identification/preparation Identify shortcomings and suggest actions to complete Review alternative designs and justification for the selected design Prepare Interim Information document (PID) based on PinfP Set up peer reviewers Review consultant’s progress and propose strengthening, if needed Discussions Borrower Stakeholders Potential donors

15 Sustainability Considerations At Preparation
Post project needs Follow-up to sustain benefits Institutional arrangements Implementation Follow up Budget for O&M (Operation and Maintenance) Beneficiary participation Are beneficiaries identified? Are they organized? Are they willing to participate in project activities? [Participation is important to ensure ownership and sustainability.] Any NGO participation?

16 Project Preparation Update Project Information Document (PID)
Field visit to assess preparation progress technical, economic, environment, social studies Completion of feasibility studies Discussions with probable/potential co-financiers Prepare Project Implementation Plan (PIP) Project components Implementation plan Monitoring and Evaluation (M&E) Arrangements Prepare Project Operation Plan (POP) Guidelines Arrangements for effective project operation Risk analysis and mitigation measures Performance Indicators PI. (see next slide)

17 Performance Indicators and Guidelines
Fewer is better. Identify a limited set of indicators for the Project Development Objective (PDO)– both qualitative and quantitative However, make sure that the selected indicators measure all PDO dimensions Indicators should be S-M-A-R-T S Specific M Measurable A Attributable R Realistic T Targeted

18 The Project Concept Note (PCN)
Draft and Circulate Project Concept Note [PCN] *hyperlink Three to four page document It focuses on project concept, not design It is prepared soon after project identification before project preparation costs become substantial Functions Examine the strategic rationale for Bank involvement Promote consideration of alternative project concepts Seek a go/no-go decision from the Country Director Obtain early guidance/agreement on issues and approaches Flag risks and potential mitigation measures Seek early guidance on potential safeguard issues, consultation and disclosure Agree on a resourced estimate, schedule and team [See PCN Template 1]

19 Sample PCN Cover Sheet

20 Preparation Completed
Quality Enhancement Review (QER) Consistency of design with approved project concept Quality assurance of the technical aspects of the project Establish fiduciary (Financial Management and Procurement) requirements that need to be met by appraisal Review safeguards needed and specify project’s environmental and safeguard classifications and the requirements to be met by appraisal. Review project feasibility and sustainability aspects. Propose actions to update PCN At Preparation stage all technical economic financial institutional social environmental M&E O&M aspects must be fully analyzed with viable options presented PCN review Discussion at management Level Follow up on PCN review and finalize PCN Obtain management’s authorization for project appraisal.

21 Project Appraisal Project Appraisal is the process of assessing, in a structured way, the case for proceeding with a project or proposal. It involves comparing various options, based on economic and financial viability, technical feasibility and social and environmental consideration/justification Pre-Mission Actions Finalize appraisal arrangements Assign appraisal mission members Ensure all subject matter specialists are included Preferably Bank regular staff – consultants only in specialized areas Ensure staff continuity until mission accomplished Draft Project Appraisal Document

22 Pre-Mission Actions Critical elements of PAD are: Country background
Sector background Project Development Objectives (PDO) Project Design (Tech. Institutional, Financial, Social, Environmental, Procurement, M&E) Project cost and financing Project analysis (economic, financial) Implementation arrangements (PIM, Institutional etc.) Sustainability consideration

23 PAD Cover Sheet (1)

24 PAD Cover Sheet (2)

25 Pre-Mission Actions (Contd.)
Prepare issues paper Explain unresolved issues and proposed solutions Hold decision meeting Seek managerial guidance on unresolved issues [Note: Above two steps may be combined with activities under PCN Review] Finalize appraisal arrangements with the government, borrower and co-financiers, if any. Prepare mission TOR

26 Appraisal Mission Field Activities
Field check design assumptions Ensure that all information in the draft PAD is correct – make changes as necessary to make it a factual document Reach agreement with the government/borrower on all project aspects Agree on holding Medium Term Review (MTR) in due course Prepare an aide memoire summarizing main findings and understanding reached by the mission, mainly on: Policy issues Supplementing and strengthening project components with special reference to: Social Environmental Procurement arrangements Financial and Economic Analyses Safeguards

27 Field Mission Completed
Institutional arrangements NGO role, if any Implementation schedule Funding arrangements M&E arrangements. Actions to be completed by government/borrower and the donor to complete project appraisal Confirm Aide Memoire (AM) findings and agreements with the government/borrower

28 Learning loop: evaluation
Managing for Results: The Results Chain Time Lasting Impact? Eg.$ to water sector Budgeting & planning activities Inputs: Eg: (on-going) Outcomes Outputs & Intermediate Water connections Results (3-5 yrs) Program Strategy & Improved water access + quality Getting Desired Results? Doing them right? Level Country/ Sector Long term Outcomes Eg: MDGs etc Doing right things? Learning loop: evaluation

29 Results Framework (RF)
RF is the program logic that explains how (PDO) is to be achieved. It links PDO, outputs, outcomes to be delivered and indicators used to verify achievement. RF is a management tool for all stages : at the beginning for strategic planning during implementation for day to day management and evaluation of project progress near the end for overall project evaluation and feedback.

30 Example of Results Framework

31 Post-Mission Activities
Management approval of mission findings Convey management approval and the loan conditionality to the government/borrower Complete outstanding actions agreed in the aide memoire Determine if post appraisal mission work is needed Update appraisal document Coordinate with the government/borrower Negotiations Board approval Loan agreement signing Project launch workshop

32 Assessing Project Quality
A checklist of commonly found deficiencies in project preparation is given in the next slide. A focused and timely Quality Enhancement Review (QER) should help in making up these deficiencies before the project is appraised. A second look at these issues would determine, among others, if post-appraisal work is needed.

33 Checklist of General Deficiencies in Project Preparation
Overambitious and non achievable Project Development Objectives (PDO) Project design not fully relevant to PDO Project implementation period is not long enough Mismatch with country context Inflexibility in project design Complexity of project design compared to absorptive capacity of the government, including project cost and post project activities Inadequate M&E arrangements Weak governmental institutions Poor risk analysis Lack of beneficiary participation Weak ownership by the government Weak sustainability analysis

34 Early Signs of Project Failure
Normally, with the approval of a project by the Board and signing of the loan agreement, the appraisal team signs off with mission accomplished satisfaction and the ball bounces to the implementation court. As noted in the project cycle steps, the next step is equally important for the parties concerned. Early signs of implementation issues should be carefully monitored. The main issues are listed in the next slide.

35 Early Signs of Project Failure
Undue delay in project effectiveness [recipient country’s legal requirements]. An initial test of the recipient’s commitment to the project objectives Delay in the establishment/appointment of project implementation unit (PIU) Delay in recruitment of project consultants Delay in holding a project launch workshop. This is the venue to straighten out financial, procurement and startup issues Slippage in the government’s ability to meet obligations in the conditionality package including funding Absence of a champion in the government for achieving project objectives

36 Some Examples of Project Experience Republic of Yemen (RoY) Case
General Background Since 1995 Bank assisted RoY in 47 projects for US$1.7 billion and has provided substantial technical and analytical support Implementation overall has been satisfactory Some cases of strengths and weaknesses are presented in the following slides

37 Taiz: Municipal Development and Flood Protection
PDO Protect city residents, businesses and infrastructure from seasonal flash flooding Capacity development of Taiz local government Support for Yemen Decentralization Program Strength Simple design conforming to Govt. dev strategy; clear focused Development Objectives (DOs) High level of borrower commitment Experienced PMU Targeted good training program Weakness Original 4-year time frame was too ambitious; had to be extended However, in view of satisfactory implementation Bank approved additional financing for enlarged scope.

38 Third Public Works Project
PDO Provide needed infrastructure to improve services and environmental conditions Creation of short term employment Community involvement in project selection, preparation and implementation Development of local contracting and consulting business Strength Well designed Repeater Project Clear objectives applying lessons from previous projects Strong government support PMU gained experience and responded to implementation issues (e.g. unexpected events such as sharply increasing costs of construction materials) Weakness No major weakness. Presents a good model for Repeater Projects and Pilots.

39 Groundwater and Soil Conservation Project
PDO Improve groundwater conservation in farming areas and increasing surface water availability Improve water use efficiency Improve recharge and protection of watersheds Support groundwater management framework and institutions Strength PDOs are strategically strong but not fully supported by project design Project pursued needed policy objectives (increasing fuel price and reducing subsidy) Institutional strengthening e.g. IAS Fed of WUAs, quality control and agreement with beneficiaries on water usage Weakness M&E design – inappropriate indicators Weak project consultants (funded by other agency with no Bank control)

40 Second Rural Access Project
PDO Reduce isolation of poor rural people by giving them better access to markets and services Strength Result framework is well designed PDO very relevant to government’s Poverty Reduction Strategy Paper (PRSP) Provides impetus to sound institutional framework Weakness Beneficiary participation low Poor preparation – premature Board presentation - first year’s design not ready Weak risk analysis - particularly related to benefits to minorities who are the main beneficiaries - elite capture prospects

41 Yemen Rural Energy Access Project
PDO In pursuance of GoY’s commitment to an agreed nationwide rural electrification program and the strategy set out in PRSP, the PDOs are to: Improve electricity access of rural population in the selected areas of Yemen in a financially sustainable manner Demonstrate feasibility of increasing access in the off grid areas using solar energy. Strength High level of borrower commitment; Institutional and legal framework in place; significant local funding Clear objectives relevant to sector development strategy Achievable and monitorable objectives; satisfied consumer population is a good indicator of desired outcome Simple design with a low cost pilot component for sustainable solar energy use Substantial co-financing by IDB,AFD, Germany, France ($80 m+ compared to $25 m by IDA and $11 m by government) indicates confidence in project design Targeted good training program Weakness Selection of beneficiary areas may become an issue. Financial sustainability RESPs will be difficult to achieve. A combination of tariff adjustment and government subsidies needed to achieve full financial viability. Keeping end use tariff affordable to rural consumers is a High risk Need to develop a suitable solar energy system with little outside help

42 Summing Up PDO Simple, real, achievable - KISS it
Preparation Complete with full justification Resource, Availability, Institutional Framework, Risk, Analysis, Sustainability Design Flexible, Relevant, Proven Track Record Participation Beneficiary, Government Ownership Beneficiary, Government Appraisal Project Ready for Implementation Result Achieve PDO Final Word Beneficiary Satisfaction

43 Thank You شکراً جزیلاً

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