Download Assessing Public Investment Management

Assessing Public
Investment Management
Lessons from the 2008 EU
Infrastructure Study and Beyond
Bernard Myers,
July 24, 2008
Administrative Context Affects
PIM in our Region
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Coalition governments, with weak MOFs
Political incentives to maximize absorption
of funds
Reliance on formal laws and regulations
High level of political involvement in
administrative decision-making
Lack of an evaluation culture
Incentives for performance are weak and ad
hoc
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Fragmented Institutional Responsibilities:
MoF can’t be the only client
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Potential TA targeted at multiple levels
Financing decisions at MOF – and possibly split
across directorates
Medium Term Planning by MoPlan or MoEcon
Appraisal Standards and Screening at MOF or
MOP
Preparation and appraisal by sponsoring ministry
Other bodies: State Expertise; Procurement Office;
SAI
Private sector firms conducting feasibility studies
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EU Report: Questions posed
at the beginning of the process
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How do countries determine the overall
envelope for investment
How do they determine sectoral allocations
How are projects selected within the sector
How do they monitor implementation of the
projects to assure effective outcomes
How do they evaluate project performance
ex-post
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Characteristics of the EU
Report Preparation
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Local consultants/former civil servants prepared
cases
Common questionnaire used, but strong reliance on
consultant judgment to guide process
Balance criticism of local practice with comparisons
to better practice in old member states
Drilled down into experience with individual projects
– comparing “formal” rules with the informal practice
(e.g., political decision-making)
Two dimensions: Institutional/Process issues
versus Technical Tools/Capacity
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Some Questions Are Difficult
to Assess Accurately
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Strategic Planning: How relevant is it for
decision-making
Cost-Benefit Analysis: What is the quality,
and is it really used
Alternative Options: Are the alternatives
proposed credible
Project Selection: What really drives
decision-making; the role of politics
Project Outcomes: How well are projects
being implemented (i.e., cost-effectiveness)
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Limitations of the Report: Not
all issues can be addressed
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Difficult to benchmark across countries
Recommendations are general and not country
specific
Possible risk that good practice examples may appear
too challenging
Limited attention to other relevant issues:
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How overall investment level is decided
Asset registries and under-funding of maintenance
Public Procurement processes and anti-corruption
Ear-marked revenues and off-budget financing
Screening for small, standard projects – e.g., school
construction
Improving absorption capacity of EU funds
Reasons for cost over-runs
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Main Findings from EU Study(1)
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Strategic Plans – usually disconnected from
medium term budget projections and lacking
genuine prioritization of projects
Budgeting – Funding is fragmented due to annual
budget process; not well supported by medium term
budgeting tools. Within-year funding rigidities
Project Appraisal and Selection
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Use of CBA on EU-funded projects, less so for national
projects
Impact of CBA on decision-making is questionable.
Risk of project over-design and limited consideration of
project alternatives.
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Main Findings from EU Study(2)
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Risk mitigation and project planning – Pro forma
part of feasibility study, but little risk mitigation.
Sometimes hurried project design leads to poor
implementation
Role of MOF and external bodies: Weak MOF
oversight role in setting quality standards. Inability
to stop bad projects early. Little external checks on
quality
PPPs and off-budget entities: Private financing
used primarily to get around fiscal constraints.
Project selection is ad hoc and internal expertise to
manage public risk is limited
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Main Findings from EU Study(3)
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Procurement strategies: Do not necessarily
balance risk between contractor and purchaser.
Project Monitoring: Little comparison of actual
cost versus planned cost over course of project life.
Limited non-financial indicators of performance
Audits and Ex-post Review: Internal and external
audit limited to financial compliance
Capacity development: Training efforts on CBA
but limited in scope. Unlikely to include project
management, procurement, or policy analysis
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Experience from Kazakhstan(1)
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Concerns about the quality of project selection and
cost-effectiveness of projects
Requirement for CBA is generally enforced, but
quality of analysis is inconsistent and capacity for
MOF to assess is weak. Limited private sector
capacity.
Strategic plans are too general to provide adequate
prioritization of projects or enable poor projects to
go forward (e.g., soviet-style norms)
No effective mechanism to prioritize projects or rank
them even within a sector
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Experience from Kazakhstan(2)
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High turnover of public investment staff in
MOF, insufficient clout to challenge
Information on project implementation not
well organized at MOF (no database)
Procurement procedures favoring lowest
bid, questionable bidders
Budget calendar forces rushed design
phase, leading to costly changes during
implementation
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Experience from Kazakhstan(3)
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Discrepancies between cost estimate
in CBA and actual contract award and
final completion cost.
PPPs not well integrated into overall
project prioritization processes
Ministry staff supervising contracts
lack expertise to challenge contractors
No ex-post evaluation of projects
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Survey results from 2008
Istanbul conference on PIM
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Which results are intuitive and which
are unexpected?
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What have been the most serious weaknesses in the way
public investment is managed in your country?
No or limited
review
processes and
therefore
lessons from
past
experience not
learnt?
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Inadequate
budgetary
processes
prevent long
term (i.e. more
than 1 year)
commitments
being made?
4
Other reasons
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Lack of
effective
appraisal
procedures
which results
in ‘ad hoc’
decisions?
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Inadequate
training in
project
management
and
procurement?
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Inadequate
financial and
performance
information is
available?
5
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Where a cost benefit analysis is prepared, are the
results of that analysis a major factor in deciding
which projects to proceed with?
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11
10
8
6
4
2
1
0
YES
NO
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What other factors affect the decision to
proceed with a particular project?
Other
reasons
4
Political
reasons
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Whether the
land is
already
available
8
Whether the
designs are
available
7
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