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Report of the Task Force on Improving Project Quality : III. Assessment of Current Bank Practices and Areas for Improvement
A. Project Processing (Project-at-Entry)1. Economic and Sector Work, COSS and ERBOP50. With the recent introduction of the country focus to Bank operations, ESW, the COSS and the Economic Review and Bank Operations Paper (ERBOP) are considered critical activities that establish the socioeconomic basis, strategic focus and priority areas of Bank investments in each sector in the DMC. They are the first step in the project cycle and thus the initial determinants of project quality. They should define the nature, scope and extent of Bank investments based on macro and sectoral assessments, portfolio and institutional performance reviews, and the Bank's past experience in the country concerned. Put simply, if the Bank starts off on the wrong foot, much of its good work later in the project cycle is in danger of being compromised. 51. It is the view of the Task Force that, while improvements have recently been achieved in the quality of ESW produced by the Bank, its depth and sharpness of analysis can be substantially enhanced with more resources. While related work being done by other development institutions such as IMF and World Bank should be utilized and not duplicated, the Bank itself needs to do more in these areas. This will benefit the Bank's strategy formulation, policy dialogue, recommendations on institutional reform and project identification. In the case of PIDCs and other similar DMCs where in-country capacities for macroeconomic analysis and formulation of growth strategies and plans are limited, the availability of economic analysis and strategies from the Bank becomes a very valuable input to preparing development plans and coordinating aid assistance. Specific inadequacies identified in current Bank practices in regard to ESW include the following: (i) key macroeconomic and social developments in the DMC are not adequately assessed for their strategic implications on potential Bank investments; (ii) evaluations of the country's economic and social progress are not conducted sufficiently analytically; and (iii) detailed sectoraJ studies are often not available. 52. The quality of the COSS and ERBOPs has also improved in recent years, but these documents are not adequately integrated and complementary in their analysis and guidance to the Bank on the distinctive role it could and should play given the macro and sectoral context of the DMC. Also, better links need to be established between performance reviews undertaken as part of the ERBOP and COSS, and future lending strategies and levels. The reasons for these inadequacies are as follows: (i) lower priority given to solid macro and sectoral analytical (both economic and social) foundations for the Bank's strategies and investments in DMCs, (ii) inadequate staff and other resources devoted to these processes and their linkage to operations, and (iii) weak coordination and collaboration between the Programs and Projects Departments in the preparation of these documents. 53. The Task Force recommends as follows:
2. COPP and Project Identification54. The COPP sets out the Bank's proposed investments in a DMC, and is a logical extension of the COSS and the ERBOP. Decisions on the proposed nature, scope and levels of investments as reflected in the COPP should ideally be based on the macroeconomic and social analyses, absorptive capacity analyses and sectoral analyses undertaken during the COSS and confirmed during the Country Programming Mission (CPM). The COPP provides the opportunity for the Bank to dialogue constructively with the DMC; to undertake a detailed review of the performance of its existing investment portfolio in the country concerned; and to arrive at joint decisions on the lending volume, modality and mix for the short and medium term. The COPP is the annual occasion for the Bank and the DMC to strengthen their collaborative partnership and joint objectives, and to confirm the development investments that will be undertaken to support these objectives. 55. The Task Force considers that current COPPs and the processes that lead up to them, particularly the CPM, need improvement. While continuing progress is being achieved in strengthening the COPPs, their responsiveness to the priorities and directions laid out in the COSS could be enhanced. A number of identified projects do not necessarily reflect the preferred strategic emphasis of the Bank in the DMC and the sector concerned, nor do they always take adequate account of the institutional and absorptive capacities of the government, NGOs and beneficiary organizations to be involved. The degree of interest in and commitment of the government to the identified pipeline projects may also be unclear, and prospective implementing agencies and beneficiaries are not always involved at this early stage (see Box 4).
56. It is the opinion of the Task Force that project identification and the development of the country program are elements of the project cycle that substantially influence the quality of the Bank's portfolio. It is therefore important that the Bank urgently address the need to improve country programming exercises. These improvements particularly should include (i) use of the opportunity offered by the CPM for promoting substantive dialogue on the role of the Bank and on sectoral issues related to policy reform, project implementation and institutional strengthening; (ii) devoting time to catalyzing increased ownership of and commitment to proposed project investments; (iii) more systematic ESW and comprehensive institutional assessments to support the identification, prioritization and selection of projects; and (iv) improved coordination between the Projects and Programs Departments, with more optimal allocations of staff resources and time to the CPM. 57. Thus, the Task Force urges that the CPM and other processes leading up to the formulation of the COPP be strengthened, and recommends as follows:
3. Project Preparation58. As a project cycle phase, project preparation typically begins with a PPTA fact- finding mission and goes on through the approval and implementation of the PPTA up to the completion of the feasibility study. In many ways, it is the most significant of the project-at-entry phases inasmuch as it is during this period that key project quality factors are introduced and decided upon. These factors in turn determine critical issues such as ownership by the government and by prospective beneficiaries of the proposed project, the basic implementability of the project design and its consequent sustainability. 59. The project preparation phase comprises four key elements that need the Bank's particular attention: (i) the PPTA fact-finding mission, (ii) the PPTA Board document (which documents the PPT A design) and the related approval processes, (iii) the selection of consultants, and (iv) PPTA implementation and supervision. Beginning with the PPTA fact-finding mission, the Task Force has identified several important concerns. Such TA preparation/fact- finding missions are often scheduled by the Bank primarily to meet staffing exigencies, with the government side sometimes not adequately prepared with respect to counterpart staff availability. Government recognition of the importance of PPTAs, and full support for their implementation, is essential if a good feasibility study is to be prepared. Sometimes, to meet budgetary or staffing constraints, the fact-finding missions are underfunded or understaffed. Consequently, the missions are not always able adequately to develop strong government understanding of, support to and commitment to the proposed project concept or to conduct comprehensive site visits and consult adequately with a cross-section of prospective beneficiaries and NGOs (see Box 5).
60. PPTA Board documents are not always satisfactory in the view of the Task Force. The rationale and justification for the proposed project concept in some cases is inadequate, and the goals and objectives unclear; linkage to the country/sector strategy may be lacking, and the terms of reference for the consultants are often not suitably precise and comprehensive. The selection of consultants is a fairly routine process, although potential improvements include making more comprehensive information available to consultants and allowing them greater flexibilities. 61. When PPTA implementation and supervision begin, the Bank as well as the DMC partially lose ownership of the PPTA, so that the eventual TA feasibility study report is the "consultant's report" rather than the Bank's or the borrower's. The Task Force perceives that a cause of eventual inappropriate project designs is the inadequate attention and resources devoted to PPTA supervision and support. PPT As represent substantial investments by the Bank, and they provide excellent opportunities for policy dialogue; if implemented effectively and participatively, they can create powerful ownership feelings on the part of the government and prospective beneficiaries of the project Very simply, they are the main project preparation process. Extensive dependence on consultants during project preparation reduces the use of staff time, which has helped the Bank economize on the number of staff-years used for this activity. However, this practice inhibits the Bank from developing strong, in-house sector expertise, and from conducting effective policy dialogue. 62. The Task Force's recommendations for strengthening the project preparation process are as follows:
4. Loan Processing63. This final stage of project-at-entry begins with the in-house examination of the feasibility study by the department concerned prior to the departure of the loan fact-finding mission. Because of resource constraints as well as the pressure of the approval culture, reviews of feasibility studies sometimes take place in the field when the final tripartite meeting to discuss the PPTA report is synchronized with the loan fact-finding mission. This practice is generally not appropriate, and can do much to compromise project quality. It does not afford an opportunity for interdepartmental and interdisciplinary review of the feasibility study, for the preparation of a preliminary project brief (PB) as a prelude to the fact-finding mission or for the identification of weak areas of project design that require specific attention. The Task Force considers that the preparation of a preliminary PB on the basis of the feasibility study prior to the project fact-finding mission will result in more clearly focusing the terms of reference of the mission. 64. The conduct of project fact-finding missions as currently undertaken by Bank staff can be substantially improved. A duration of two to three weeks appears to be the general rule. This need not be the optimal duration, particularly when the project involves. many government agencies and/or when it is complex, or when Intensive examination of social and Institutional issues and/or demand analysis is necessary. The missions do not always undertake all the necessary site visits, especially when the travel to sites is time consuming, as in many PIDCs. Also, the feedback from Project Completion Reports (PCRs), Project Performance Audit Reports (PPARs) and review mission reports is not always fully considered, as in many PIDCs. The timeliness, relevance and responsiveness of the project to general sector development and to prospective beneficiaries needs are often taken for granted, and the suitability of the EA and its related implementation capacities are not fully assessed. A thorough risk analysis is often not attempted. 65. The Management Review Meeting (MRM) is the first stage at which Management really encounters the project with all of its major implications. This is a very significant step in the project cycle, since Management feedback and guidance are considered essential. The Task Force is of the view that the MRM should be devoted primarily to receiving Management feedback. Thus, it should be incumbent on the concerned project director to ensure that I interdepartmental feedback is obtained and appropriately integrated into the PB prior to the MRM. The MRM should be Management focused. In this connection, the Task Force feels that the current rush with which PBs are sometimes prepared and the Iess-than-optimal time given to interdepartmental review are counterproductive to achieving quality. 66. Traditionally, the appraisal mission is devoted to fine-tuning the project details and tying up loose ends, finalizing costings and implementation arrangements, and following up on policy or other issues raised by Management at the MRM. In the view of the Task Force, if the issues raised at the MRM are substantive, a pre-appraisal mission should be sent, even if this will delay project approval, The more frequent despatch of pre-appraisal missions will demonstrate to the borrowers, as well as to processing staff, Management's firm commitment to enforcing certain standards of project quality regardless of impacts on lending levels and schedules. With regard to appraisal, missions should prepare the Memorandum of Understanding (MOU) in a format as close as possible to the loan documents to facilitate later loan negotiations. In addition, missions should also prepare and discuss with their counterparts a detailed and easily understood Project Administration Memorandum (PAM) for project implementation. The PAM should include details on procurement, contract packaging, consultant selection, implementation activity schedules and the like. Such missions should also ensure that commitments are obtained from the government on establishing the project office and appointing the project manager prior to loan approval. 67. At the Staff Review Committee (SRC) Meeting, while the issues raised at the MRM should be reviewed, considerable attention should also be given to ensuring the quality of the Report and Recommendation of the President (RRP) and the consistency between the RRP and the loan documents. 68. The Task Force recommends as follows: In general, the Bank should adopt a longer time frame for processing projects, particularly from the project fact-finding stage to loan approval.
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