Saeed Ahmed Rana

ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010

Overall Framework for Project

Preparation and Appraisal

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.

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Why A Project?

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.

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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 Failure4

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 PreparationAppraisalNegotiations and ApprovalImplementation and SupervisionCompletion and Evaluation

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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.

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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.

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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.

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Project Identification

Birth of a Project

Country 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)

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Project Development Objective Guidelines

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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.

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

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Bank’s Communication/Messaging on Results

Harmonization with MDBs/Donors

•Senior Management attention •Recognition •Tools, IT systems, RX Platform, CPRT •Training, KL •Resources

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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

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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

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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?15

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)

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Performance Indicators and Guidelines

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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

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]

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Sample PCN Cover Sheet

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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.

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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

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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

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PAD Cover Sheet (1)

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PAD Cover Sheet (2)

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Pre-Mission Actions (Contd.)

Prepare issues paper Explain 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

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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

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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 appraisal

Confirm Aide Memoire (AM) findings and agreements with the government/borrower

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Country/ SectorLong termOutcomes

Eg:MDGs etc

Managing for Results: Managing for Results: The Results ChainThe Results Chain

Doing right

things?

Doing them right?

GettingDesired Results?

Lasting Impact?

Time

Level

Learning loop: evaluation28

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.

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Example of Results Framework

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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 document Coordinate with the government/borrower

NegotiationsBoard approvalLoan agreement signingProject launch workshop

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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.

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Checklist of General Deficiencies in Project Preparation

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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

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.

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Early Signs of Project Failure

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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

Investigate Reasons• Procedural Issues• Lack of Political Will• Lack of Commitment Procedural Issues Effectiveness delay

Parliamentary Approval – Pursue with Govt, but bear with it

Covenant Compliance Delay Issues Appointment of PIU, Consultants –Provide assistance as needed. Co financing – Agree with Govt on initiating implementation of components not affected

by co financing

Lack of Political Will Lack of Commitment

Non compliance of Covenants

Corrective Measures

Corrective Measures (contd.)

Inability to provide counterpart funding Persistent procurement delays Poor performance of PIU and lack of action by Government to strengthen Beneficiaries’ apathy towards project goals

Lack of political will and commitment are serious matters. Donor should not ignore the above signs and should:

Discuss with Government restructuring or rescoping the project Suspend disbursements partially or totally and put pressure on the Government

to act Based on non compliance of the covenants consider punitive actions including

cancellation.

Mid Term Review (MTR)

Based on past ISRs, prepare an Issues Paper Discuss issues and proposed solutions with the management. Constitute MTR team with the specialists to deal with weak areas Prepare Mission’s TOR emphasizing in-depth review of the weak areas If implementation progress is satisfactory and likelihood of achievement

of PDOs is satisfactory, prepare an action plan to address implementation issues

If implementation issues are serious and PDO achievement is likely, consider: Project restructuring Project rescoping If above actions change PDO,seek Board approval

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.

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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)

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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

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YemenRural 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 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

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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

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Project Preparation Exercise

Example: Yemen Water SectorExercise: For information available from projects in our files, let us set up

PDOs for a follow on project to the Irrigation Improvement Project in Yemen.

Sectoral Objective: Enhance water resources production in Yemen Lessons Learned in Yemen Water Sector: Give adequate time for institution building, particularly for the

participatory approach Have M&E systems in place right at the start Clarify cost sharing by beneficiaries during project preparation A previous project showed that it is possible to make significant water

savings through improved irrigation technologies up to 30% in localized on-farm irrigation systems

Efficient conveyance, distribution and micro-irrigation technologies require decentralized structure and cost sharing by beneficiaries.

Project Preparation Exercise Contd.

PDO: Achieve sustainability of past investments in Wadi irrigation development in Yemen.

• If achieved, will it partly contribute towards meeting the sectoral objective?

• Does it conform to the guidelines in Slide # 10

• If not, what should be the PDO?

• Propose components to achieve the suggested PDO

Thank You

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