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Overall Framework

for Project
Preparation and
Appraisal
Saeed Ahmed Rana

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

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.
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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.
II.
III.
IV.
V.

Project Cycle
Project Rationale and Preparation
Borrower Roles
Donor Roles
Project Appraisal
Costing Analysis
Environmental and Social Assessments
VI. Assessing Project Quality
VII. Early Signs of Project Failure
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The Bank Project Cycle


Project Cycle - The project cycle starts with a
development strategy based on selectivity and
comparative advantage.
It is targeted to countrys development objectives. It is
followed by:
Identification
Preparation
Appraisal
Negotiations and Approval
Implementation and Supervision
Completion and
Evaluation
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Stages of the Banks 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 Banks 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 Banks 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 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)

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 projects 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.
Dont 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.
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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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Banks Communication/Messaging on Results


Realistic DOs,
Strategy, Quality,
RX Frameworks,
Implementation
Risk Mgmt, RX
based
instruments

Statistics
M &E
Public Sector
Management
RX Budgeting

Achieving
Results on
the Ground

Country
Capacity
Building
MfDR

Measuring
and Reporting
on Results

Enabling
Environment

Harmonization with MDBs/Donors


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MDGs, Country
CAS Program
Sector/Theme
Project
Core Indicators
Quantitative
Qualitative

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

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 consultants 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?


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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


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
M
A
R
T

Specific
Measurable
Attributable
Realistic
Targeted
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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 projects 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 managements 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 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
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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 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
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Managing for Results:


The Results Chain
Time
Getting
Desired
Results?
Doing
them
right?

Level

Doing
right
things?
Inputs:
Budgeting &
planning activities
Eg.$ to water
sector

Outputs &
Intermediate
Outcomes
(on-going)
Eg:
Water
connections

Strategy &
Program
Results (3-5
yrs)
Eg:
Improved water
access +
quality

Learning loop: evaluation


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Lasting
Impact?

Country/
Sector
Long term
Outcomes
Eg:
MDGs etc

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 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
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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
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
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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


Undue delay in project effectiveness [recipient countrys
legal requirements]. An initial test of the recipients
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 governments ability to meet obligations in


the conditionality package including funding
Absence of a champion in the government for achieving
project objectives
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Corrective Measures
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 (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 Missions 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 governments Poverty Reduction Strategy Paper (PRSP)
Provides impetus to sound institutional framework

Weakness
Beneficiary participation low
Poor preparation premature Board presentation - first years design not ready
Weak risk analysis - particularly related to benefits to minorities who are the main
beneficiaries - elite capture prospects

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Yemen
Rural Energy Access Project
PDO

In pursuance of GoYs 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
Preparation

Design
Participation
Ownership
Appraisal
Result
Final Word

Simple, real, achievable - KISS it


Complete with full justification-Resource, Availability, Institutional
Framework, Risk, Analysis,
Sustainability
Flexible, Relevant, Proven Track
Record
Beneficiary, Government
Beneficiary, Government
Project Ready for Implementation
Achieve PDO
Beneficiary Satisfaction
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Project Preparation Exercise


Example: Yemen Water Sector
Exercise: 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