Framework for Analyzing Public Investment Management

Tuan Minh LePresented at ICGFM Winter Conference

Washington D.C.December 6, 2011

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Performance benchmarking

2Source: CoST (2011b:3)

Pinpointing PIM problems

Well Executed Poorly Executed

Good Projects A C

Poor Projects B D

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A Framework for assessing PIM

• Two pillars of the approach– Desirable features of well-functioning system in 8 cycles– Diagnostic Indicators to assess actual system

• Focus on how to inform reform design to enhance efficiency by Gap-Analysis

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Desirable Institutional

FeaturesActual Functioning

DiagnosticIndicators

Gap

Analysis

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The eight “must-have” core PIM features

-1

Guidance &

Screening

2

Formal Project

Appraisal

3

Appraisal Review

4

Project Selection

& Budgeting

7

ServiceDelivery

6

Project

Changes

5

Implementation

8

Project Evaluation

Pre-feasibility

Feasibility

CE

CBA

Regulatory requirements

Project development

Detailed project design

Basic completion

review

Evaluation

1. Investment guidance & preliminary screening

• Existence of credible strategic guidance to PI

– National Plan, PRSP, Long-term Vision document

– Supplemented by a sector or sub-sector level strategy

Realism of strategy relative to available resources?

• Established process of first-level screening

– Basic consistency with government policy and

strategic guidance

– Centralized or delegated approval justification

What portion of projects screened are rejected?

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2. Formal Project Appraisal

• Existence of well publicized and transparent appraisal guideline– Larger projects requiring more rigorous tests of financial

and economic feasibility and sustainability Quality of guidance? Rate of rejection?

• Capacity of staff with project evaluation skills– An established process for training staff in project

evaluation technique Number of staff with evaluation skills?

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3. Independent Review of Appraisal

• Independent peer review might be necessary to check any subjective, self-serving bias

• Clarity of specific responsibilities – A multiplicity of players with unclear accountabilities can

overburden the appraisal system A formal delegation allowing central appraisal system to

review appraisal of relatively important projects

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4. Project Selection and Budgeting

• Transparent criteria for selecting projects

• Appraisal process is linked to the budget cycle– Maintaining an inventory of appraised projects

– Clear requirements for consideration of O&M

• Ensuring adequate financing for selected projects– Multi-year budget allocation system

Evidence of under-funding, large stock of uncompleted projects?

• Effective gate-keeping– Only appraised and approved projects are selected for

budget financing, except for emergency reason Percentage of projects evaded established process?

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5. Project Implementation

• Published guideline for project implementation

• Clear organizational arrangements and a realistic timetable to ensure the capacity to implement

Sample of project delays in implementation?

• Cost-effective procurement and contracting Portion of competitive project tendering?

• A system to prevent imprudent cost-increase in implementation

Estimates of cost overruns on major projects by specific sector? Percentage of cost overrun on major projects?

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6. Project Adjustment

• Flexibility to allow changes in disbursement plan according to changed circumstances

• Active monitoring and periodic progress reporting

– Updated cost and benefit Requirement for updating project documents during

construction?

• Mechanisms to stop projects with negative marginal benefits

Example of projects cancelled or closed on the account of changed net benefits?

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7,8. Facility Operation & Ex-post Evaluation

• Asset registers need to be maintained, and asset values recorded

Evidence that complete asset registers maintained?

• Ex-post Evaluation of completed projects

– Focus on the comparison of the outputs and outcomes with the established objectives in project design

– Feedback to improve future project design and implementation Evidence of response to the evaluation findings?

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Rajaram, Anand, Tuan Minh Le, Nataliya Biletska, and James Brumby. 2010, A Diagnostic Framework for Assessing Public Investment Management, World Bank Working Paper 5397, August 2010.

Construction Sector Transparency Initiative. 2011. Report on baseline studies: International comparison. January 2011.

Selected References

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