Guidance Note Project Management 102005

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Guidance Note forProject Management

Strengthening Institutional Capacityduring Project Implementation

October 2005


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FOREWORD

Helping to build country institutional capacity is at the

heart of the World Banks mission to promote sustainabledevelopment and poverty reduction. Greater integration of projectmanagement in a countrys existing institutions and systems isimportant to this goal, and to the Banks effort to move towardgreater use of country systems in lending. The Paris Declarationon Aid Effectiveness adopted at the High-Level Forum in March2005 reaffirmed the donor communitys commitment to align theirprograms to national development strategies, institutions, andprocedures. It identified a reduction in the number of parallel

project implementation units (PIUs) as one of the key actions theaid community could take to promote greater capacitydevelopment within our borrowers, and thus increase aideffectiveness.

The organizational structure for project management isoften chosen to mitigate risk in a weak capacity environment, but itmay also reflect internal incentives that focus on speed of projectprocessing and disbursement, and perceived stigmas in low

implementation performance ratings. The result is often the use ofPIUssometimes semi-permanentlyeven though regionalstudies have shown that they are suboptimal organizationalarrangements and create problems of morale among governmentofficials. While there are examples of good efforts during projectdesign and implementation to focus on sustainable institutionalcapacity development and use of country systems, they are rare.

This note aims to encourage operations managers and staff

not only to give priority to project implementation performancebut also to balance it with sustainable institutional capacitydevelopment beyond the project. To that end, existing countryinstitutions should be the default mode, and PIUsespeciallyparallel stand-alone PIUsshould be phased out. This notereflects lessons learned and draws on existing good practices in theexpectation that they can become the rule rather than theexception. I encourage all operations staff and managers to readthis note as they plan for new operations and to reflect its

recommendations in their ongoing work. James W. Adams

Vice PresidentOperations Policy and Country Services


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Abbreviations and Acronyms

CAS Country Assistance StrategyECA Europe and Central Asia RegionOED Operations Evaluation DepartmentPAD Project Appraisal DocumentPIU Project implementation unitSWAp Sectorwide approach


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Contents

I. Introduction ..................................................................... 1

II. Background .....................................................................3

III. Good PracticeAdapting Bank Processesand Systems...................................................................... 8

A. Country/Sector Dialogue Issues............................. 8

B. Project Design and Implementation Issues.........13

IV. Management, Skills, and Incentives Issues ................17

Annex: Good Practice Examples

1. China: Using Existing Organizational Structures forProject Implementation..........................................23

2. Lao PDR: Road SectorNew Implementation Paradigm...25

3. Tanzania: Health SectorFrom PIU to GovernmentStructures under a Sectorwide Approach ............27

4. Albania: Public Administration Reform Project An Integrated Implementation System ................29


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Guidance Notefor

Project Management

Strengthening Institutional Capacityduring Project Implementation

I. Introduction

1. This note is intended to help shift the implementationparadigm for Bank-financed operations toward organizationalstructures that systematically foster more sustainable capacitydevelopment through greater use of and support for countrysystems and institutions, while ensuring timely projectimplementation and disbursement. The Bank has longrecommended that stand-alone project implementation units(PIUs) be mainstreamed into existing ministry structures,because they are inconsistent with the Banks mission ofcapacity development and institutional strengthening indeveloping countries.1 However, many projects continue to

Note: Preparation of this note was coordinated by Chiyo Kanda (taskmanager) and M. Sri-Ram Aiyer (consultant and primary author),Operations Policy and Country Services. Regional practices and recent

studies on PIUs were reviewed in 2004.

1 As long ago as the early 1980s, the Bank issued a Central ProjectsNote on Project Management to this effect. Later, the Banks Senior

Vice President, Operations, determined that operations andmaintenance expenditures, including special pay for governmentofficials assigned or released to PIUs, were ineligible for financing

with loan/credit proceeds, as operations and maintenance costsshould be financed by government budgets. In 2003, the substantivemessage on PIUs was repeated by the Operations EvaluationDepartment, which also noted that capacity development within aPIU does not spill over into the ministry where it is located, and thatthe selection and composition of technical assistance through PIUsreflect donor rather than government preferences; see Toward Country- led Development: A Multi-Partner Evaluation of the ComprehensiveDevelopment Framework, 2003.


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GUIDANCE NOTE FOR PROJECT M ANAGEMENT

rely on PIUs because external and internal incentives worktoward organizational arrangements that favor the short-term

goal of safeguarding project fiduciary and performanceobjectives.

2. Focus. The focus of this note is twofold: (a) on thenature and design of organizational structures forimplementation of Bank-financed projects and the priorityaccorded to sustainable country institution development; 2 and(b) on internal incentives and practices to support Bank staff

in assisting borrowers with project management.3. Purpose. The note aims to raise awareness amongBank staff and managers, stimulate sharing of experiencesacross Regions and sectors, and foster deeper reflection ondevelopment effectiveness during the preparation andimplementation of lending operations . It is primarilyintended as internal guidance to Bank staff and managers, but

is also expected to contribute to knowledge on good practicethat can be shared with borrowing country officials and otherexternal partners.

4. The note recognizes that the approach and pace oftransition from PIUs to government ministries andinstitutions will vary by country and by project. Therefore, itdoes not attempt to prescribe how to because of the wide

differences among countries and sectors in theirimplementation capacity and specific needs andcircumstances.

5. The note by itself is not sufficient to make adifference in practice; the new implementation paradigm willhave to be applied in day-to-day operations by staff andmanagersfor example, task team leaders, who lead project

2 The issue is not the title PIU per se, but the organizationalstructure designed for project implementation and its effects on thelonger-term capacity of local institutions. The aim is to makeattention to institution building and country systems more systematic.

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appraisal and the dialogue with clients on implementationmodalities; country directors, who are responsible for

addressing systemic issues of long-term capacity development with countries; sector managers, who are responsible forproviding guidance and recognition to front-line sector staff;and senior managers in the Regions and Networks, as well asstaff engaged in portfolio monitoring and operational supportin the Regions, who will need to address issues of staffincentives, training, cost, and quality.

6. Section II provides background on PIUs, theirconsequences, and their typology. Section III containsguidance in project management, describing how Bankprocesses and systems can be better adapted to achievegreater focus on sustainable institutional capacitydevelopment. Section IV points to the critical roles ofincentive systems and Management actions in changing staffbehavior. The Annex presents good practice examples of

project management to illustrate ways of addressing bothimplementation performance and sustainable institutionalcapacity development.

II. Background

7. Organizational structures for project managementshould be responsible and accountable for implementation ofthe project and for timely progress and expenditure reportingthat adheres to Bank policies and guidelines. The commonapproach, introduced over 40 years ago as a technical solutionto deliver engineering projects in newly independentdeveloping countries, is to create a cell dedicated toimplementing the project. 3 Over time, PIUs became vehiclesto bypass local bureaucracies to get the job done. Since theBanks internal incentivessuch as lending cycles that

3 Such dedicated structures go by several names: PIU, projectmanagement unit, project coordination unit, and so forth. This paperuses the term PIU to refer to any such structure.

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emphasize fast delivery, strict fiduciary requirements, andfocus on disbursement speed in portfolio monitoringfavor

known and tested arrangements for implementation, PIUs areused even in countries that have well-established institutions.

8. PIU Consequences. In all Regions and types ofprojects, PIUs have often undermined long-term institutionaldevelopment in countries line ministries, sustainability,4 andownership, and have often created tensions with sectorministries.

A study by the Middle East and North Africa Region 5 found that while PIUs have facilitated monitoring andimplementation of Bank-financed projects, they havefailed dismally in terms of any positive long-termimpact on capacity building and institutionaldevelopment in line ministries; they supplant ratherthan supplement existing capacity.

A study in the Latin America and the CaribbeanRegion6 found that implementing projects withingovernment structures enhanced administrative andoperational coordination with government supportand provided greater opportunity for capacitybuilding and institutional development, and thatsuch projects were more likely to be sustainable.

Locating PIUs outside the government structureresulted in a lack of learning and of coordinationacross agencies, eroding performance.

4 World Bank, World Development Report 2004: Making Services Work forPoorPeople, pp. 205-206.

5 Lourdes N. Pagaran, Project Implementation Units (PIUs): Assessing their Performance and Relevance, and Providing aFramework for Design and Implementation, draft, March 10, 2002.

6 Daniel Boyce and Afef Haddad, Thematic Review on Project

Implementation Units, An Analysis of Ongoing and CompletedProjects in Latin America and the Caribbean, March 2001.

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A comprehensive review on PIUs in the EasternEurope and Central Asia Region (ECA) 7 analyzed the

pros and cons of different types of PIUs, and led tothe issuance of a regional guideline on PIUs in April2001, advising staff to start moving beyond PIUs toaddress countries institutional capacity development.8

In the Africa Region, the Operations EvaluationDepartment (OED) documented the detrimentalimpact of PIUs on local capacity, noting that

stakeholders in Africa heavily criticized the Banksuse of PIUs, typically staffed by technical advisers andestablished outside the regular governmentstructures.9 OED considered that PIUs, which hadassumed many routine ministerial functions, hiredaway the most competent staff, and created friction

with ministries, have promoted rapid and efficientproject implementation at the expense of long-term

capacity building.9. Although PIUs can include government staff to

varying levels, frequently they employ contracted national andexpatriate staff whose pay scales, financed by loan/creditproceeds, are much higher than those of government staff atequivalent skills/grades10 a source of tension withministries. Some countries give government employees leave

of absence without pay to enable them to accept the highersalaries from projects while serving on a PIU.

7 Poverty Reduction and Economic Management Unit, ECA Region,Implementation of World Bank-Financed Projects: A Note on theECA Experience with Project Implementation Units, March 2001.

8 ECA Guidelines: Use of PIUs in Implementing Bank-FinancedInvestment Projects, April 19, 2001.

9 World Bank Operations Evaluation Department, Capacity Building in Africa: An OED Evaluation of World Bank Support,2005. 10 For example, in Georgia, the average civil service salary is US$50 permonth, while the average monthly fee for a local consultant is inexcess of US$300. In Yemen, salaries paid to PIU staff are some 8 to10 times greater than government salaries.

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10. PIU Typology . In practice, PIUs vary in size,function, physical location, legal status, degree of integration

into existing country structures, and effects on the countryslong-term capacity. In general, the degree of integration intoexisting institutions is positively correlated with the projectscontribution to developing the capacity of implementingagencies.

Stand-alone or enclave PIUs are generallyconsidered most detrimental to long-term institutionaldevelopment. They are typically created outside thestructure of an implementing ministry/agency. Theyoften recreate (or even duplicate) functions andcapabilities of the ministry that oversees the sector,and are responsible for all implementation in aturnkey fashion, handing over the completedproject to the administration for operation.

Semi-integrated PIUs partially use existing

structures augmenting them with some capacity. Forinstance, a PIU may be headed by one of the directorsresponsible for the project area, while long-termtechnical assistance and/or specialists address somefunctions and capabilities. Alternatively, a ministrymay retain responsibility for managing content (e.g.,planning, finance, administration) while outsourcingthe fiduciary management of the Bank-financed

project (e.g., procurement, financial management andreporting). Super PIUs, a variant of the stand-alone or semi-

integrated type, handle multiple projects in a sector(financed by different donors), multiple sectorsfinanced by a single donor, or related projects in aregion.11 The key difference from the first two types

11 For instance, this type of PIU is used in a group of very smallcountries where capacity is overstretchede.g., Organization ofEastern Caribbean States.

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is that these PIUs consolidate the managementfunctions of several donors or countries projects. 12

While such PIUs do not integrate all PIU functionsinto the governments structures, they do reduce thenumber of PIUs.

Semi-autonomous agencies are structures outsideregular government structures (either newly created oralready existing) that serve as project implementingagencies for programs (e.g., newly created social fundsor independent authorities). These agencies assumeall PIU functions, thus obviating any need to createan additional project implementation unit.

Fully integrated PIUs promote institutionaldevelopment, as the project implementingagency/ministry takes full responsibility andimplement a project using its own structure and staff.In some cases, the ministry may reassign staff to carryout project activities by releasing them from otherministry functions. Fully integrated PIUs may besupported by limited technical assistance for specificareas that require additional skills or expertise.

11. Since country institutions are not always sufficientlydeveloped to undertake project implementation, there mayoccasionally be a place for PIUs. Particularly challenging may

be multisectoral projects that involve multiple ministries andimplementing agencies, or projects with new clients (e.g.,subnational governments) that lack experience with Bankprojects.

12. When establishing project management arrangements,however, in all cases it is essential to maximize the use ofexisting staff and institutions, and integration into the

12 In Ugandas highways sector, a super PIU financed by several donorsto manage the projects they were financing, has, after seven years andseveral projects, morphed into a sustainable sector institution.

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countrys structures and processes. It is also important toagree on a strategy for full integration, and for phasing out

any enclave units as rapidly as possible, by preparing a time-bound action plans for necessary capacity development, suchas training.

III. Good Practice GuidanceAdaptingBank Processes and Systems

13. This section describes ways of better adapting andexploiting Bank processes and systems to help developcountry capacity. The Annex provides good practiceexamples of using a countrys systems and institutions toaddress both implementation performance and capacitydevelopment.

A. Country/Sector Dialogue Issues

Country Dialogue/Country Assistance Strategy (CAS)Process: Bring the issue of country capacity developmentand project implementation arrangements into the country-level dialogue and CAS discussions.

14. The issues of capacity development and the impact ofPIUs should be a regular part of the Banks dialogue withcountries on its overall country assistance. Especially in areasin which continued Bank engagement is foreseen, an explicitdiscussion with country officials during each CAS cycle onpotential negative effects of PIUs would strengthen thestrategic focus on capacity development. Such a CASdialogue might cover a range of areas:

The scope for public sector reform issuessuch asaccounting, audit and financial management,procurement, and civil service pay reformsmay bereviewed.

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Use of the Banks analytic and advisory activities tostudy specific institutions capacity to perform would

merit discussion, since a better understanding of suchdetails would permit tailoring project-related technicalassistance to fill gaps.

Greater selectivity and fewer lending operations maybe considered, to increase support and continuity forselected ministries or agencies where lending isconcentrated.

Sectorwide approaches (SWAps), which strive forgreater use of country systems and capacity, may bepursued where appropriate.

Country Incentive Issues: Increase understanding of thecountrys internal incentive mechanisms and broader systemicissues that affect implementation of individual projects.

15. In designing project management arrangements, staffshould be fully aware of the countrys internal incentivesystems related to project implementation arrangements.

Views on PIUs often vary across different parts of thegovernmentfor example, between sector ministries andcentral authorities, and sometimes between the topmanagement and technical level officials within the sameministry.

Sector ministries or implementing agencies may favorPIUs for efficient project implementation, whilecentral authorities such as ministries of finance mayhave concerns over proliferation of PIUs acrossgovernment agencies. Implementing agenciesincentives may also be rooted in circumventing civilservice salary levels.

When Bank-financed projects call for procedures thatdiffer markedly from regular government procedures(procurement, accounting, financial management,

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needs for capacity and ensure continuity during thetransition period. 16

18. Whatever the project implementation modalities, it isimportant for all implementing agencies to take a similarapproach, suited to the countrys existing system, for projectstaff remuneration, technical assistance arrangements toministries/agencies, and means of meeting officialsoperational expenses.

Sectorwide Strategies for Institution Building: Addressbroader institutional capacity development issues at the sectorstrategy level, and align projects implementationarrangements with the sectors technical and institutionalgoals.

19. A governments sector strategy provides theframework and underpinning for long-term Bank engagement

and for the CAS lending program. Sound sector strategiesidentify constraints affecting sector performance and includeappropriate policy and institutional measures to relieve theseconstraints. However, the ministry/agency for the sectordoes not always have the capacity to implement thesemeasures. An institutional capacity analysis could facilitatebuilding consensus on key capacity gaps in such aministry/agency, and on sustainable ways to address them.

20. Borrowers indicate that occasionally Bank-financedprojects are designed to fit the Banks vision without regardto government programs in a sector, and that such projectscrowd out existing national programs. To enhance localcapacity and program sustainability, it would be worthconsidering ways to support existing programs and tacklesystemic issues that affect the entire sectorfor example, by

16 One country (Morocco), is working to build permanentimplementation capacity through a program of training of trainers,designed to assist line ministries in executing both donor-financedand locally financed projects.

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supporting a sectorwide program under a SWApratherthan a discrete set of investments.

21. Solutions will vary depending on the circumstances e.g., first-time clients, borrowers launching multisectoralprojects, and so on. Special analysis of existing institutionalcapacity may be needed before organizational arrangementsfor project implementation are agreed. In addition,coordination arrangements will be needed for multisectoralprojects that span agencies.17

B. Project Design and Implementation Issues

Project Implementation Arrangements: Use existinginstitutional structures as the default mode, and use enclavePIUs as an exception. Set realistic expectations on the speedof implementation.

22. To increase the likelihood of sustainability, the use ofexisting institutional structures should be the default optionto implement Bank-financed projects. Projectimplementation plans and disbursement forecasts shouldreflect realistic expectations based on the current capacity andneeds for training and capacity development. Even whenexisting structures are not totally suitable for successfulproject implementation, they should be used to the maximumextent possible, and the project should include measures tominimize distortions in the governments internal incentives.Stand-alone PIUs should be used only as an exceptionforexample, when there is a virtual absence of functioninggovernment entities because of emergency or conflict, inexceptionally large or complex projects, or when there are

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In India and some other South Asia countries, an existing countryinstitution is normally assigned responsibility for projectimplementation, but a separate project coordination unit is also setup at a higher level to ensure that decisions that cross jurisdictionsand require high-level attention are taken in a timely manner.

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issues of shielding projects from political influences. Inpreparing such projects, staff should give attention to

strengthening country institutions and planning for atransition of the PIU functions.

23. Rather than financing PIU salaries, a project couldincorporate necessary operational costs for the project-relatedincremental expenses of government officials, with the levelsdetermined on the basis of project needs and the countryparameters under Operational Policies 6.00, Bank Financing.

Project Processing: Provide clear justification for non-integrated PIUs in the Project Appraisal Document (PAD),along with a strategy for institutional capacity developmentand greater integration over time. In overseeing projectprocessing, country and sector management should giveparticular attention to the institution-building aspects.

24. To maximize sustainability and developmenteffectiveness, the organizational arrangements proposed forproject implementation should be consistent with thecountrys institution-building strategy for the sector.Managements signals to staff are critical in influencing staffbehaviors and practice on the ground.

Country and sector management, as well as Regionaloperational support/quality groups, should provideguidance to staff on appropriate project management,encourage use of existing institutions, and demandclear justifications for non-integrated PIUs.

While the Project Concept Note stage is usually tooearly to discuss specific project implementationarrangements, it is the most appropriate time for staffto begin thinking of using existing institutions formanaging implementation. Often needs for PIUsarise from certain project designs that require specialskills or a designated unit; it is important to design a

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project taking into account the existing institutionsand capacity.

Project preparation should include an adequateassessment of institutional capacity, particularlyidentifying the strengths and weaknesses of existingsystems and institutions and setting out the riskmitigation mechanisms needed when these structuresare used for project implementation.

The PAD should clearly describe and justify the

organizational arrangements for implementation, andexplain how the project would contribute tosustainable long-term country capacity, linking it asappropriate with any country or sectoral institution-building strategy. In particular, the PAD shouldjustify any proposal to use non-integrated PIUs, andshould discuss the transitional arrangements to moveto use of the countrys institutions, along with the

upstream preparatory actions required (such asrecruitment and training). Where possible, monitorable performance measures

and indicators related to project management andcapacity development, including intermediateprogress benchmarks, should be agreed with clientsand included as part of the projects key monitoringindicators.

Ongoing Projects with Non-integrated PIUs: Takeadvantage of all opportunities to increase integration, enhancethe development of capacity/systems, or restructureimplementation arrangements.

25. While supervising projects, Bank staff should seekand take advantage of all opportunities to deepen theintegration of project management into the countrys existing

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institutions. Some PIUs may be quickly integrated intoexisting government structures, while others may take longer.

While ensuring that effective project implementationis not seriously compromised, staff should explorealternative organizational options for projectmanagement, giving priority to structures that wouldbe integrated with existing institutions.

If a PIU phase-out within the project life is notrealistic, government and Bank staff should discussand implement measures to prepare for integration inthe follow-up operation or to ensure institutionalsustainability in the post-completion period.

For each country and sector, staff should discuss withthe government a strategy to phase out stand-aloneunits and integrate them into government structuresover time, while preserving the features that enable

timely implementation. Progress in this regard shouldbe monitored every 6 to 12 months as part of regularsector/country/Regional portfolio reviews. Theultimate goal is to use country systems andinstitutional structures for all projects.

Dynamic Implementation Monitoring: Monitor changesin project implementation capacity and periodically adjustimplementation arrangements or risk mitigation measures.

26. Bank staff should begin to use portfolio monitoringand project reworking in a dynamic way, making adjustmentsin project management even during implementation, andproviding feedback to Regional managers on progress.

As part of regular project supervision of ongoingprojects, staff should continuously assess changes inthe implementing agencys capacity and revisit riskmitigation measures. For instance, have government

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staff gained sufficient skills and experience thattechnical assistance could be phased out and

implementation responsibilities handed over forcertain functions? The Implementation Status and Results reports, which provide the institutional record on eachprojects implementation status and progress inachieving results, could be used to highlight progressand issues in strengthening country implementationcapacity.18

Country Portfolio Performance Reviews, whichgenerally focus on generic implementation problemsand achievements, can also be a vehicle to report onissues related to PIUs and the contribution of Bank-financed projects to strengthening sustainableinstitutional capacity across sectors in a country.

IV. Management, Skills, andIncentives Issues

27. This section deals with issues internal to the WorldBank. If staff are to change behaviors and adopt the goodpractices described above, line managers up the chainfromRegional vice presidents and Network chairs to Regional

front-line managers and the management in the HumanResources Departmentwill need to address internalincentives and practices. Managerial attention and leadership

18 The Implementation Status and Results report has a rating forProject Management, but it refers to the capacity and performance ofany current project management arrangements, thus providing an

incentive to substitute stand-alone PIUs for weak implementingagencies. When appropriate, broader capacity- or institution-buildingissues or sustainable institutional impact could be addressed as partof the project development objectives and/or key performanceindicators.

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should encourage staff to highlight implementation problemscandidly, and should recognize and reward staff who work

actively to resolve such problemseven if resolution takeslonger than projected. Disbursement forecasts must reflectrealistic estimates aligned to existing capacity, especiallyduring a projects early years.

31. Cost Implications. While there are benefits tostrengthening country institutional capacity during projectimplementation, the incremental financial and nonfinancial

costs associated with upstream analysis or enhancedsupervision, and for restructuring ongoing projects, are lessclear. However, preparation and implementation costs mayfall gradually for later operations because there will no longerbe a need for borrowers to create and maintain, and for theBank and other development agencies to supervise, parallelsystems for ring-fenced projects. Another potential effectof adopting the good practices identified in this paper is a

decline in lending targets for a transitional period, and even insome of the portfolio performance indicators (e.g.,disbursements). However, such potential incremental costs

would be more than offset by the longer-term benefits ofstronger, more sustainable national institutions, and bygreater overall development effectiveness.

32. Staff Recognition. Greater attention to incentives

for changes in staff behavior will pay off in encouraging asustained effort to address capacity development in projectmanagement. One positive incentive would be to recognizethe contributions of staff who use lending operations to helpcountries develop sustainable institutional capacity, throughsuch instruments as Overall Performance Evaluations, spotawards, Awards for Excellence, and other instruments. Toencourage dynamic monitoring of projects, staff should also

be rewarded for responding to changes in implementationprogress and for initiating such actions as project redesign orrestructuring.

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33. Country Recognition. Countries that make rapidand sustained progress on building capacity in key sectors

could be recognized through annual awards or in other waysto showcase their accomplishments. The Grants Committeecould be asked to explore the possibility of designing grants(possibly supported also by bilateral donors) for thosecountries. The Bank-Fund Annual Meetings could be anappropriate forum for announcing such awards. Countrydepartments, with inputs from sector managers, wouldnominate countries from each Region. The number of

countries that receive an award would be a function of grantamounts available, but should be limited to two or three.

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ANNEX

Good Practice Examples This Annex describes good practice examples that

address implementation performance and sustainableinstitutional capacity development. Further details may befound in individual Project Appraisal Documents (PADs).

Cases :

1. ChinaUsing Existing Organizational Structures forProject Implementation

2. Lao PDR: Road SectorIntegrating Multiple PIUs intoCombined Implementation Responsibilities

3. Tanzania: Health SectorFrom PIU to GovernmentStructures under a Sectorwide Approach

4. Albania: Public Administration Reform ProjectAnIntegrated Implementation System

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CASE ONE

CHINA

Using Existing Organizational Structures forProject Implementation

Project implementation in China has consistentlybeen satisfactory. Because China has highly decentralizedadministrative structures, implementation of World Bank-financed projects tends to be the responsibility of provincesand municipalities, through locally established projectmanagement offices (PMOs). Multiprovince projectstypically have a central office in the ministry in Beijing, withlower-tier offices at each subnational level involved. (WorldBank-financed railways projects in China are an exception,and are administered centrally by the Ministry of Railways inBeijing.)

Good project implementation practices include thefollowing:

PMOs established as part of governmentstructures. Even though PMOs have quasi-independent status, they are attached to one of theline departments (e.g., urban construction departmentof the Ministry of Construction for urban projects;communications department for a highway project).

When projects are completed, the PMO may continueto manage the successor project or other externallyassisted projects.

Management responsibility. Typically the directorof the parent agency exercises control over the PMO.Higher-level offices are responsible for overall project

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coordination and equipment procurement, whilelower-level offices are responsible for implementation

and procurement of works. Staffing. Staff in PMOs can be seconded from the

parent agency or the subnational office, but oftenthere are only three or four staff for large projects,and only one or two at the municipal level.

Pay scales. PMO staff receive the same salary as

they would for other government functions, and theGovernment covers operational expenses (such as site visits and meals). By law, international procurementin China is undertaken by tendering agencies, whichtypically pay higher salaries than the governmentdoes.

Operating costs. Projects generally do not cover

operating costs of PMOs, but typically finance allequipment needs.

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CASE TWO

LAO PEOPLES DEMOCRATIC REPUBLIC

Road SectorIntegrating Multiple PIUs intoCombined Implementation Responsibilities

The World Bank, Asian Development Bank, JapanInternational Cooperation Agency, and Swedish InternationalDevelopment Agency had been financing projects in theLaotian roads sector for many years. Each donor hadestablished its own PIU, outside the structure of the Ministryof Construction, Transport, Ports and Communications(MCTPC). The PIUs bypassed the MCTPC bureaucracy,reporting directly to the vice minister, to whom donor taskmanagers had direct access through their PIU. Each projectfollowed its donors own procurement, financialmanagement, and reporting systems, complicating matters forprivate contractors and others. The salaries of PIU staff weremuch higher than those of regular MCTPC staff, who thushad little incentive to work hard.

Leadership for paradigm change. In 2000, thenew Bank task manager, recognizing that the Laoroads sector would require donor assistance for manyyears and needed a sound maintenance program toprotect road assets, assisted the government to bringdonors together to produce a long-term sectorstrategy, including donor partnership and institutionbuilding in MCTPC to put the government in thedrivers seat.

Initial resistance. The idea met with stiff initialresistance by donor agencies and staff. Eventually it was agreed to harmonize standard bidding documents

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for the roads sector, adopt a single financialmanagement system, disband multiple PIUs, and shift

responsibility for implementationincludingprocurement, financial management, disbursement,and reportingto MCTPC departments.

Integrated implementation responsibility . MCTPC departments took responsibility formaintenance, construction, monitoring, financialmanagement, and human resource developmentfinanced under the project. Appropriate devolutionof these responsibilities to MCTPCs subnationaloffices was also put in place. Consultancy assistance

was financed by the project. Self-evaluation. The strategy built in self-evaluation

of consultants and ministry staff, along with atechnical audit of the whole project, paid with creditfunds.

Staff operational expenses. An operational fund was set upwith initial financing from thegovernment, to be replenished from project funds to pay out-of-pocket operational expenses of localstaff. This arrangement replaced the salarysupplements that had been paid to PIU staff.

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CASE THREE

TANZANIA

Health SectorFrom PIU to Government Structuresunder a Sectorwide Approach

Tanzanias health sector had received considerable

attention from the government and several donors for manyyears, but the country still suffered from high rates of malaria,diarrhea, and perinatal maternal conditions, along withinadequate capacity to manage resources or provide effectiveservice delivery. Multiple donor-assisted projects duplicatedgeneric functions, leading to much inefficiency; ad hocapproaches were driven by availability of funds rather than byan integrated sector plan. Under a new government-led

program for the whole sector, donors agreed to follow asectorwide approach (SWAp) in a phased manner.

The World Bank provided its support through aphased adaptable program loan (with the first phase approvedin May 2000, and the second phase in December 2003),pooling funds with several other major donors. Donorsagreed not to use any project-specific PIU-type structures in

the SWAp. The stand-alone PIU used for the previous Bank-financed operation was phased out at its closing in 1999.

Use of existing structures. Existing institutionalstructures and governments budgeting mechanisms

were used to manage program implementation,including the pooled fund. Responsibility foroversight and coordination of the program rests withthe Permanent Secretary (PS) of the Ministry ofHealth (MOH) in close collaboration with the PS forthe Regional Administration and Local Governmentof the Presidents Office (PORALG). The Director

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for Health Policy and Planning (DHPP) is responsiblefor day-to-day coordination and monitoring, including

donor coordination. The MOH strengthened itsexisting Primary Health Care Secretariat as a HealthSector Reform Secretariat under the DHPP tosupport this coordination. Accounting, financialmanagement, and procurement are carried out by theMOHs Department of Administration and Personnelas part of its normal functions. To facilitatesustainable institutional development and avoid

remuneration distortions, the practice of payinghigher salaries to project staff was discontinued, andprogram implementation and reporting are carried outby civil servants.

Coordination mechanisms. A SWAp committeeand a basket financing committee providemechanisms of continuous policy dialogue,

communication, and coordination among over 15external partners. The SWAp committee, chaired bythe PS/MOH, is the forum for coordinating all thedonor-assisted activities, financed through parallel orpooled funds. The basket financing committee, co-chaired by the PS/MOH and PS/PORALG, overseesthe pooled funds, including approval of work plans,budgets and quarterly release of funds, quarterly

reviews of progress and expenditures, and monitoringof achievements against performance indicators.

Refinement. All donors introduce refinements tothe joint systems under the program at a feasible paceand scale. Over the past five years, the number ofadministrative steps has been much reduced, andcapacity has been strengthened as government staffreceived needed training and gained experience.

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CASE FOUR

ALBANIA

Public Administration Reform Project An Integrated Implementation System

The Albania Public Administration Reform Project(PARP) has four primary counterpart agencies, three of

which are lodged within the Council of Ministers (CoM): theDepartment of Public Administration (DoPA), the SecretaryGeneral of the Government and the Minister of State forPolicy Coordination and Anti-Corruption, the PublicProcurement Agency, and the Ministry of Finance. Becausethe CoM plays a central role in the reform agenda that PARPsupports, and to ensure seamless integration of the variouscomponents of the project, implementation management washoused within CoM.

Because one of PARPs core objectives is to create ameritocratic civil service, during preparation the DoPAleadership was adamant that the unit responsible for projectmanagement administrative tasks should be part of CoMsregular organizational structure, and should be staffed not by

consultants but by civil servants, who would be paid civilservice salaries from CoMs annual budget.

This unitthe Unit for Implementation of the Public Administration Reform Program (UIPARP)has performedexcellently from its inception, and has handled all projectadministrative responsibilities (monitoring and reporting ofproject impact indicators, procurement, and financialmanagement, including accounting, oversight of all contractexecution, and preparation of quarterly implementationreports). Each of the projects counterpart entities preparesits own terms of reference (TOR), while UIPARP ensures

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that TOR and bidding documents meet all Bank requirementsand obtains the Banks feedback and no-objections. UIPARP

has representatives on all bid evaluation committees(including, at least, a procurement specialist, and usually oneor two other members), along with representatives from thebeneficiary entities who have prepared the TOR. Its projectimplementation reports are good practice models for trackingall stages of project execution (TOR preparation,procurement, contracting, and contract execution, includingboth reporting on the work undertaken and accounting for

the financing flows).

Four factors largely account for UIPARPs excellentperformance.

Qualified and motivated staff. Civil service salaries were made roughly competitive with relevant privatesector comparators shortly after UIPARP was formed.Staff have the due process protections provided to allcivil servants, and are recruited through the competitiveand transparent recruitment and selection proceduresmandated by the Civil Servants Law.

Properly managed staff. The Director of DoPA at thetime the UIPARP was staffed was a civil service reformchampion. She made clear during recruitment that sheexpected competence, professionalism, and performance

from UIPARP staff, and she provided clear guidance toUIPARP staff regarding performance expectations.Moreover, she acted as an advocate for UIPARP staff

within CoM. No threat to beneficiary entity authority . UIPARPs

role is clearly defined as an administrative supportfunctionproviding project administration services tosupport beneficiary entities in mobilizing and overseeingthe investments and technical assistance made availablethrough PARP. All substantive aspects of the public

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administration reform effort are left to the relevantentities.

No source of envy for beneficiary entity staff. UIPARPs staff are civil servants, subject to the same dueprocess protections (including transparent, competitiverecruitment and selection procedures) and paid the samesalaries as their colleagues in the beneficiary entities.

Guidance Note Project Management 102005

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Transcript of Guidance Note Project Management 102005