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Report of the Task Force on Improving Project Quality
Executive SummaryProject failures and implementation delays cause substantial economic, financial and social costs to the Bank's developing member countries (DMCs), which ultimately have to repay their loans. Although the quality of the Bank's portfolio has been reasonably satisfactory, there are indications that it needs to be improved. A recent review of the Bank's projects under implementation indicated that about a fifth of the projects were experiencing problems in varying degrees. The need to assess and improve project quality also stems from the increasingly complex development challenges that the Bank is being called upon to meet. In this context, the setting up of the Task Force on Improving Project Quality in April 1993 signalled the Bank's determination to improve its standards of performance and enhance the effectiveness of its operations. The Task Force identified the following major themes that underlie the analysis of project quality: (i) Bank responsiveness to the needs of its clients, namely the DMCs; (ii) institutional capacity and project ownership in the DMCs; and (iii) accountability for project quality within the Bank. Analyses and assessment of current Bank practices and accumulated experience within the framework of these themes led to a number of important findings, which became the basis for the various recommendations and the action plan developed by the Task Force. Three findings relate to the Bank's responsiveness to its clients: (i) current practices put excessive emphasis on achieving annual levels of programmed lending, creating an "approval culture", which can result in inadequate project design and insufficient consideration of local needs, demands and absorptive capacities; (ii) the country focus in Bank operations needs strengthening, as do the links between economic and sector work, country economic documentation and programming and project design; and (iii) capacity in the Bank needs to be strengthened in selected areas to meet the increasing complexity of development challenges. Regarding institutional capacity and ownership in the DMCs, the Task Force's findings are: (i) capacity in DMCs for designing and implementing high quality projects needs to be augmented; and (ii) full "ownership" of projects by DMCs is often lacking as a result of their insufficient involvement in project design and their inadequate commitment of financial and human resources. The main findings regarding internal accountability are that (i) project administration is given less importance than project processing, a by-product of the approval culture; (ii) Bank practices and systems are overcentralized, resulting in reduced flexibility and initiative; and (iii) feedback on the lessons of past experiences is not fully utilized in programming and project design, and in implementation activities. These findings require significant changes to be introduced in the institutional culture, staff orientation and business practices of the Bank. To set the process of change in motion, the Task Force recommends immediate issuance of a clear policy statement by the President reasserting the importance of development impact rather than loan approval, and the equal importance of project administration and project processing. It also recommends the early development of a Bank policy for capacity building in the DMCs, and adoption of follow-up programs to help overcome institutional weaknesses. The Task Force also recommends strengthening the Bank's own institutional capacity, which is crucial to addressing the major findings of the Task Force successfully. Regarding the early phases of the project cycle, namely programming, project preparation and processing, the key recommendations of the Task Force are that (i) the Program and Projects Departments should be restructured to ensure better coordination and enhanced project preparation; (ii) special units (Social Dimensions Unit, Strategic Planning Unit, Private Sector Support Unit) and offices (Office of the Environment, Economics and Development Resource Center) and resident/regional offices (ROs) should be realigned to provide stronger operational support; (iii) governments and beneficiaries should be fully involved at all stages of the project cycle beginning with project identification; (iv) expected project benefits, costs and related risks, as well as the specific obligations and roles of all the parties, should be more clearly evaluated and discussed during project preparation and loan processing, and subsequently used for monitoring project implementation; and (v) three-year rolling indicative planning figures should be adopted to reduce the pressure generated by the present practice of yearly planning figures. As an essential basis for establishing clearer accountability for project implementation, the Task Force recommends a one-time "spring cleaning" of the portfolio of projects, in partnership with DMCs, to weed out inactive and slow-moving projects. The other principal recommendations regarding this phase of the project cycle are that (i) resources devoted to project implementation activities should be increased; (ii) Management and Directors should be more actively involved in project administration; (iii) staff performance in project administration should be rewarded on an equal basis as that in project processing; (iv) project implementation missions should have greater authority to make decisions in the field; (v) the Project Office should be set up and Project Manager appointed by the DMC prior to loan approval; (vi) the appraisal mission chief should continue with project administration for at least one year after loan effectiveness; (vii) the role of the Central Projects Services Office (CPSO) should be reoriented to accord with the changing implementation support needed by DMCs and with the Bank's country focus; (viii) the concerned departments and offices should have the authority to allocate the budgetary resources available to them among line items and to recruit staff consultants; and (ix) delegation of authority to ROs, particularly in relation to project administration, should be increased. To increase the utilization of feedback from the monitoring and evaluation of ongoing projects and post-evaluation results in project preparation and implementation, the Task Force recommends that (i) planning tools such as the logical framework should be more effectively used as a basis for project preparation and benefit monitoring as well as for project performance evaluation; (ii) Project Completion Reports should be expanded to include project performance assessment in the early years of operation; (iii) Project Performance Audit Reports should be reoriented to provide better assessment of a project's development impact; and (iv) a comprehensive annual performance evaluation program should be prepared to coordinate feedback from Bankwide assessments of project performance. Implementation of the Task Force's recommendations will have significant organizational, staffing and budgetary implications. The restructuring of the functions of the Programs and Projects Departments under one unit of responsibility and the reorientation of CPSO will need to be considered in the broader context of the Bank's ongoing organizational review. The recommendations regarding delegation of authority within the Bank and to the ROs will involve a major change in the Bank's business practices. The Task Force's recommendations will also entail a change in the Bank's skills mix and a shift in its training strategy. On the budget side, the resource implications of implementing the Task Force's recommendations cannot be estimated with a reasonable degree of accuracy at this stage. However, additional resources will be required to implement the recommendations in their .entirety .When the recommendations regarding better project preparation are implemented, processing schedules of projects will be lengthened and this may result in some decline in loan approvals, particularly in the initial 1-2 years. If the resource savings resulting from ongoing and proposed organizational reforms and productivity increases are not sufficient to meet the costs of implementing the Task Force's recommendations, the need for additional resources may have to be considered.
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