1. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 1 Robin Smail Senior Lecturer CoR / DG Regio Open Days 28 September 2004 Steps for Project Appraisal and project selection

2. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 2 Ex-ante project appraisal 10 steps for assessing a project: guiding principles helps to design and develop a project - so integrate into thinking reflected in the project selection criteria and any scoring system you will use…..hopefully! appropriate for ERDF or FIFG or EAGGF, even ESF. Essential for MAJOR projects (>50m Euro) and Cohesion Fund projects appraisal proportional to size of project

3. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 3 10 steps to project appraisal 1. project scope and objectives 2. market appraisal 3. option & feasibility appraisal 4. financial appraisal 5. economic appraisal 6. environmental appraisal 7. risk and sensitivity analysis 8. other socio-economic considerations 9. procedures and indicators for monitoring 10. indicators for impact assessment

4. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 4 1. Project scope & objectives define project objectives – advantages of multiple aims contribution to higher objectives: check project is in line with priorities, measures fit with strategies and policies? synergies with other policies? scope of project eligible and ineligible costs

5. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 5 2. Market appraisal what evidence that this will contribute vitally to the ongoing economic activity of the area? (demand) can it become a self-sustainable project? what evidence that the market will not fill this gap if there is no assistance? what is the MARKET FAILURE? what benefits which will not be provided by the market? bringing opportunity to certain disadvantaged groups in the most deprived areas equal opportunities

6. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 6 3. Option & feasibility appraisal Is the project best designed in order to meet the stated objectives?  location? nature? scale?  funding package? private/public sector mix?  timing and withdrawal of support? what are the best alternatives? which options are technically feasible? consider the « do-nothing option »......the project has an OPPORTUNITY COST

7. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 7 4. Financial appraisal concerns monetary flows of the project (income and expenditure) - check cash flows discounted future cash flows >>Net Present Value (does not calculate wider economic benefits) Where revenues generated or private sector invests: critical for private sector involvement: calculation of internal rate of return (  ) minimum level of public sector, maximise leverage use Net Grant Equivalent - state aids check

8. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 8 5. Economic appraisal Measures costs and benefits to the wider economy impacts on jobs or value added... >NET COST PER JOB >benchmarking allow for displacement / add knock-on multiplier effects other socio-economic benefits... >accessibility >innovation go beyond simple financial spreadsheet to add-in all economic costs and benefits, including externalities

9. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 9 6. Environmental appraisal What reduction in pollution? What increase in capacity to treat waste? What energy savings? required by Environmental Directives? benefits can be difficult to measure - we want to give maximum benefit to the maximum numbers of people. So devise scores where weights according to: remove hazards provide visual improvement provide recreational utility numbers in contact with the site nature protection

10. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 10 7. Risk and sensitivity analysis Not exact - another aid to decision making: what assumptions were made? list all the key risks and uncertainties are the benefits realistic (eg visitor numbers in tourism)? are the cost estimates over optimistic (building spend….)? for larger projects especially, conduct sensitivity analysis to financial and economic appraisals

11. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 11 8. Other socio-economic considerations What other objectives? re-distributional / equal opportunities ease of mobility / reduction of travel times (high-tech) company start-ups levels of investment / exports What elements can not be quantified easily? longer-term benefits (eg of infrastructure) public goods eg parks/open spaces; improvements to the urban environment dealing with externalities eg pollution...plus the qualitative elements:

12. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 12 9. Procedures and indicators for monitoring What indicators will be used to monitor project progress and measure performance? financial spend physical targets being met with planned expenditure inputs: no. of trainees; m² of floorspace; km² of land cleared etc. outputs: no. of qualifications; no. of new businesses in business space etc. Can the data be collected easily? What systems in place for adjustment according to results?

13. © EIPA – Robin Smail / Ex-ante Project Appraisal & project selection 13 10. Indicators for impact assessment impact assessment What measures and indicators should be used to measure final impact? output and impact data needs to be collected Control group followed? economic relationships monitored; modelling required? external factors monitored and assessed …feedback results into policy loop