Presentation on theme: "for Project Preparation and Appraisal"— Presentation transcript:
1 for Project Preparation and Appraisal Overall Frameworkfor Project Preparation and AppraisalSaeed Ahmed RanaADFD/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 CycleProject 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:IdentificationPreparationAppraisalNegotiations and ApprovalImplementation and SupervisionCompletion andEvaluation
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 projectsPilot 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 evaluationProject 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 ProjectCountry Development PlansBorrower Specific RequestUnforeseen Conditions (e.g. natural calamities)Set Project Development ObjectivesBasic 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 groundCountry capacity buildingMeasuring and reporting on resultsEnabling environmentBeneficiary participation/ownershipCommunication/messaging on resultsGender balanceHarmonization with MDBs
12 Bank’s Communication/Messaging on Results Achieving Results on the GroundRealistic DOs, Strategy, Quality, RX Frameworks, ImplementationRisk Mgmt, RX based instrumentsMeasuring and Reporting on ResultsMDGs, CountryCAS ProgramSector/ThemeProjectCore IndicatorsQuantitativeQualitativeEnabling EnvironmentCountry Capacity Building MfDRStatisticsM &EPublic Sector ManagementRX BudgetingSenior Management attentionRecognitionTools, IT systems, RX Platform, CPRTTraining, KLResourcesHarmonization with MDBs/Donors
13 Project Preparation - Borrower Role Review identification and resultsInitiate project preparationIdentify/set institutional frameworkDetermine need for TASet up project preparation officeAppoint project consultantsInter-agency/departmental coordinationPrepare a Project Information Paper (PInfP)Approach donors
14 Project Preparation - Donor Role Assign project preparation teamReview borrower progress in project identification/preparationIdentify shortcomings and suggest actions to completeReview alternative designs and justification for the selected designPrepare Interim Information document (PID) based on PinfPSet up peer reviewersReview consultant’s progress and propose strengthening, if neededDiscussionsBorrowerStakeholdersPotential donors
15 Sustainability Considerations At Preparation Post project needsFollow-up to sustain benefitsInstitutional arrangementsImplementationFollow upBudget for O&M (Operation and Maintenance)Beneficiary participationAre 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 progresstechnical, economic, environment, social studiesCompletion of feasibility studiesDiscussions with probable/potential co-financiersPrepare Project Implementation Plan (PIP)Project componentsImplementation planMonitoring and Evaluation (M&E) ArrangementsPrepare Project Operation Plan (POP)GuidelinesArrangements for effective project operationRisk analysis and mitigation measuresPerformance 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 quantitativeHowever, make sure that the selected indicators measure all PDO dimensionsIndicators should be S-M-A-R-TS SpecificM MeasurableA AttributableR RealisticT Targeted
18 The Project Concept Note (PCN) Draft and Circulate Project Concept Note [PCN] *hyperlinkThree to four page documentIt focuses on project concept, not designIt is prepared soon after project identification before project preparation costs become substantialFunctionsExamine the strategic rationale for Bank involvementPromote consideration of alternative project conceptsSeek a go/no-go decision from the Country DirectorObtain early guidance/agreement on issues and approachesFlag risks and potential mitigation measuresSeek early guidance on potential safeguard issues, consultation and disclosureAgree on a resourced estimate, schedule and team [See PCN Template 1]
20 Preparation Completed Quality Enhancement Review (QER)Consistency of design with approved project conceptQuality assurance of the technical aspects of the projectEstablish fiduciary (Financial Management and Procurement) requirements that need to be met by appraisalReview 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 PCNAt Preparation stage all technical economic financial institutional social environmental M&E O&M aspects must be fully analyzed with viable options presentedPCN reviewDiscussion at management LevelFollow up on PCN review and finalize PCNObtain management’s authorization for project appraisal.
21 Project AppraisalProject 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/justificationPre-Mission ActionsFinalize appraisal arrangementsAssign appraisal mission membersEnsure all subject matter specialists are includedPreferably Bank regular staff – consultants only in specialized areasEnsure staff continuity until mission accomplishedDraft Project Appraisal Document
22 Pre-Mission Actions Critical elements of PAD are: Country background Sector backgroundProject Development Objectives (PDO) Project Design (Tech. Institutional, Financial, Social, Environmental, Procurement, M&E)Project cost and financingProject analysis (economic, financial)Implementation arrangements (PIM, Institutional etc.)Sustainability consideration
25 Pre-Mission Actions (Contd.) Prepare issues paperExplain unresolved issues and proposed solutionsHold decision meetingSeek 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 assumptionsEnsure that all information in the draft PAD is correct – make changes as necessary to make it a factual documentReach agreement with the government/borrower on all project aspectsAgree on holding Medium Term Review (MTR) in due coursePrepare an aide memoire summarizing main findings and understanding reached by the mission, mainly on:Policy issuesSupplementing and strengthening project components with special reference to:SocialEnvironmentalProcurement arrangementsFinancial and Economic AnalysesSafeguards
27 Field Mission Completed Institutional arrangementsNGO role, if anyImplementation scheduleFunding arrangementsM&E arrangements.Actions to be completed by government/borrower and the donor to complete project appraisalConfirm Aide Memoire (AM) findings and agreements with the government/borrower
28 Learning loop: evaluation Managing for Results:The Results ChainTimeLastingImpact?Eg.$ to water sectorBudgeting & planning activitiesInputs:Eg:(on-going)OutcomesOutputs &IntermediateWater connectionsResults (3-5 yrs)ProgramStrategy &Improved water access + qualityGettingDesired Results?Doing them right?LevelCountry/ SectorLong termOutcomesEg:MDGs etcDoing 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 planningduring implementation for day to day management and evaluation of project progressnear the end for overall project evaluation and feedback.
31 Post-Mission Activities Management approval of mission findingsConvey management approval and the loan conditionality to the government/borrowerComplete outstanding actions agreed in the aide memoireDetermine if post appraisal mission work is neededUpdate appraisal documentCoordinate with the government/borrowerNegotiationsBoard approvalLoan agreement signingProject 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 PDOProject implementation period is not long enoughMismatch with country contextInflexibility in project designComplexity of project design compared to absorptive capacity of the government, including project cost and post project activitiesInadequate M&E arrangementsWeak governmental institutionsPoor risk analysisLack of beneficiary participationWeak ownership by the governmentWeak 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 objectivesDelay in the establishment/appointment of project implementation unit (PIU)Delay in recruitment of project consultantsDelay in holding a project launch workshop. This is the venue to straighten out financial, procurement and startup issuesSlippage in the government’s ability to meet obligations in the conditionality package including fundingAbsence of a champion in the government for achieving project objectives
36 Some Examples of Project Experience Republic of Yemen (RoY) Case General BackgroundSince 1995 Bank assisted RoY in 47 projects for US$1.7 billion and has provided substantial technical and analytical supportImplementation overall has been satisfactorySome cases of strengths and weaknesses are presented in the following slides
37 Taiz: Municipal Development and Flood Protection PDOProtect city residents, businesses and infrastructure from seasonal flash floodingCapacity development of Taiz local governmentSupport for Yemen Decentralization ProgramStrengthSimple design conforming to Govt. dev strategy; clear focused Development Objectives (DOs)High level of borrower commitmentExperienced PMUTargeted good training programWeaknessOriginal 4-year time frame was too ambitious; had to be extendedHowever, in view of satisfactory implementation Bank approved additional financing for enlarged scope.
38 Third Public Works Project PDOProvide needed infrastructure to improve services and environmental conditionsCreation of short term employmentCommunity involvement in project selection, preparation and implementationDevelopment of local contracting and consulting businessStrengthWell designed Repeater ProjectClear objectives applying lessons from previous projectsStrong government supportPMU gained experience and responded to implementation issues (e.g. unexpected events such as sharply increasing costs of construction materials)WeaknessNo major weakness. Presents a good model for Repeater Projects and Pilots.
39 Groundwater and Soil Conservation Project PDOImprove groundwater conservation in farming areas and increasing surface water availabilityImprove water use efficiencyImprove recharge and protection of watershedsSupport groundwater management framework and institutionsStrengthPDOs are strategically strong but not fully supported by project designProject 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 usageWeaknessM&E design – inappropriate indicatorsWeak project consultants (funded by other agency with no Bank control)
40 Second Rural Access Project PDOReduce isolation of poor rural people by giving them better access to markets and servicesStrengthResult framework is well designedPDO very relevant to government’s Poverty Reduction Strategy Paper (PRSP)Provides impetus to sound institutional frameworkWeaknessBeneficiary participation lowPoor preparation – premature Board presentation - first year’s design not readyWeak risk analysis - particularly related to benefits to minorities who are the main beneficiaries - elite capture prospects
41 Yemen Rural Energy Access Project PDOIn 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 mannerDemonstrate feasibility of increasing access in the off grid areas using solar energy.StrengthHigh level of borrower commitment; Institutional and legal framework in place; significant local fundingClear objectives relevant to sector development strategyAchievable and monitorable objectives; satisfied consumer population is a good indicator of desired outcomeSimple design with a low cost pilot component for sustainable solar energy useSubstantial co-financing by IDB,AFD, Germany, France ($80 m+ compared to $25 m by IDA and $11 m by government) indicates confidence in project designTargeted good training programWeaknessSelection 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 riskNeed 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, SustainabilityDesign Flexible, Relevant, Proven Track RecordParticipation Beneficiary, GovernmentOwnership Beneficiary, GovernmentAppraisal Project Ready for ImplementationResult Achieve PDOFinal Word Beneficiary Satisfaction
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