Learning Curves

OED
February2007

ProjectImplementationUnits
Inthecontextofdonorfundedprojectsindevelopingcountries,thetermproject implementationunitgenerallyreferstoanykindofprojectofficethathasmadespecial staffingandringfencingarrangementstoimplementprojectsmoreeffectively. Manyinthedevelopmentcommunitythinkthatprojectimplementationunitshavehigh directandindirectcosts,tendtodevelopintoparallelorganizations,anddilutecentral governmentpolicythroughtheirallegiancetodonoragendas.
Background Projectimplementationunits(PIUs)arecommonly assignedauthorityandaccountabilitytoimplement donorfundedprojectsindevelopingcountries.Inmany cases,theneedforskilledhumanresourcesinsuch unitsistemporary. TheAsianDevelopmentBank(ADB)providesa greatdealofprojectmanagementsupporttoits developingmembercountries.Suchsupportincludes grantorloanbasedfundingofadministrationcostsand consultingservicesandADBreviewmissions. MostADBassistedprojectsalsorelyonPIUsto manageprojectimplementation.Theassumptionisthat implementationwillbehelpedbyaunitabletoemploy andretainprojectstaffunderspecialconditions,access moreregularbudgetsandbetterfacilities,avoid bureaucraticconstraints,andcatertoADBsneedfor fiduciaryarrangements.However,towhatextentdo theshorttermobjectivesofefficiencyandexpediency whichareimportantpracticalreasonsforestablishing PIUspreventthepartnercountryfrombuildingup moreregularunitsandmoresustainableproject managementcapacity? In2005,theOperationsEvaluationDepartment conductedaSpecialEvaluationStudyontheRoleof ProjectImplementationUnittoinvestigatethenature ofADBsarrangementsforPIUsandinvestigatehow muchtheycost,howtheyfunctioninthevarious agenciesandprojectsthatADBdealswith,andhow theyaredistributedacrosssectorsandcountries.The studyhopedalsotoassessimpactonproject implementationcapacitydevelopment.1Since informationonADBsuseofPIUswasnotreadily available,thestudyundertookconsiderabledata
Operations Evaluation Department Asian Development Bank

collectionandinvestigatedpatternsofimplementation arrangementswithandwithoutPIUsacrossprojects, agencies,andcountries.Fileswerestudied,ADB databaseswereanalyzed,andaquestionnairewassent toallinvestmentprojectsongoingforayearorlonger. Twohundredandsixprojectmanagersin152projects replied,or58%ofthe263projectscontacted.Missions visitedBangladesh,KyrgyzRepublic,Malaysia,Papua NewGuinea,Philippines,andVietNamtogather additionalinformationfromstakeholders. SummaryofFindings Around90%oftheprojectsexaminedwere managedbysomeformofPIU.Almostonesixthofthe projectsusedPIUsstaffedbytheexecuting/parent agenciesthemselves,andathirdusedonlyexternally recruitedstaff.Theremaininghalfoftheprojectswere managedbyPIUsconsistingofamixofinternally deputedandexternallyhiredstaff.Fortyfourpercent ofPIUsviewedthemselvesastemporaryandwereto bedissolveduponcompletionoftheproject;26%were unclearabouttheirfateafterprojectcompletion. TwelvepercentofPIUsregardedthemselvesas permanent,i.e.,theyexpectedtomanagenewprojects uponcompletionofthepresentproject(s).Eighteen percentweretomerge,i.e.,thePIUsstaffwouldbe(re) absorbedaspermanentstaffoftheparentagency. PIUswerefoundtobeprimarilyusedasa mechanismtoimplementprojectsandtocreatecapital assets,ratherthanasatooltobuildhumanor institutionalcapacity.TheeffectsofPIUsoncapacity developmentintheparentagencieswerevariable.A riskofseparate,externallystaffedPIUsundermining theagencysprojectmanagementcapacitywas confirmed.Alsoconfirmedwasaburdenfeltby

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governmentsconnectedwiththemanyseparate requirementsofexternalfundingagencies,asconveyed throughPIUs. ThestudyconcludedthatPIUsareagenerally legitimateandjustifiableimplementationarrangement forcapitalinvestmentprojectssuchasthosefinanced byADB,butmadeanumberofrecommendationsto improvetheireffectiveness. Recommendations ADBshouldmoresystematicallyassessthepotential effectsofprojectimplementationarrangementson agencycapacity.Wherepossible,thepotentialof sucharrangementsfordevelopingproject managementcapacityshouldbemaximized. Theprojectimplementationarrangementsshouldbe chosendependingoncarefulanalysisofproject, agency,andcountrycontexts. Ifthefinancingmodalityandgovernment preferencesrequiretheestablishmentofaPIU,ADB shouldencouragetheuseofPIUsthatarestaffed internally. IncaseswhereexternallystaffedPIUsaremore efficient,theriskthattheymightunderminethe parentagencysprojectmanagementcapacityneeds tobeassessedasastandardpracticeandmitigated. IncaseswhereexternallystaffedPIUsareplanned, ADBandparentagenciesshouldagreeinadvance ontheirexitstrategyand/ortransformationforthe projectsoperationandmaintenancephases. Thecostofprojectmanagementandthe developmentofcapacitytomanageprojectsshould bemoresystematicallyanalyzedduringproject preparation.Loanfinancingofproject administrationcostsshouldbewelljustified. ThefocusatthestageofBoardconsiderationshould beonthereadinessofprojects,sothatdelaysin establishingimplementationmechanismsdonot becomeareasonforsubsequentdelays.Ifcountry systemsdonotallowfortheestablishmentofPIUs beforeBoardconsideration,ADBshouldenterinto policydialoguetoseeifthissituationcanbe changed,pointingoutthecostofdelaysinfinancial termstotheborrower. Countryportfolioreviewsshouldmonitortheeffects ofPIUsoncapacitydevelopment.
Learning Curves available @ www.adb.org/evaluation/

Thestudyidentifiedgoodpracticesforproject implementationarrangementsanddrewachecklistfor institutionalanalysistodeterminetheneedfor,and natureof,aPIU.Thestudyalsoproposedfollowup actionsfocusingonintegrationofthegoodpractices andchecklistinstaffguidelines,and,intheinterim period,ontheirdistributiontostaffofADBand integrationintrainingprogramsthatADBrunsforstaff ofparentagencies. Feedback ADBManagementsResponserecognizedthe challengeofanalyzingtheroleandimpactofPIUs giventhewidevariationincountryandparentagency capacities,butsupportedthestudysrecommendations andnotedalsothatthestudyofferedusefulproject managementtools.ManagementrecognizedthatPIUs havemadeamixedcontributiontocapacity developmentinparentagencies,wherecapacity includesnotjusttheabilitytomeetprocedural requirements,butalsopertainstogoodgovernance, accountability,projectmanagementskills,andtechnical expertiseinaparticularfield.Evidencesuggeststhat thereissometradeoffbetweenhigherefficiencyin projectimplementationasaresultofhavingdedicated PIUs,andbuildinginhousecapacity.Itisimportantto usecounterpartstaffasmuchaspossibleandto integratePIUsintotheparentagencysoperations.ADB committedintheParisDeclarationonAid EffectivenessofMarch2005toharmonizeproject implementationarrangements,minimizetheuseof parallelstructuresforprojectimplementation,anduse jointPIUswithotherdonoragencieswherepossible. TheChairsSummaryoftheDevelopment EffectivenessCommitteeDiscussionsrecalledalsothat ADBhadin2005committedtoavoid,tothemaximum extentpossible,creatingdedicatedstructuresforday todaymanagementandimplementationofaid financedprojectsandprogrammestosupportthe strengtheningofpartnercountrysystems.While acknowledgingthatcommitment,theCommittee agreedwiththestudysmainconclusionthat,inthe foreseeablefuture,PIUsshallcontinuetobeagenerally legitimateandjustifiableimplementationmechanism forcapitalinvestmentprojects.
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2005.ADB.SpecialEvaluationStudyontheRoleofProject ImplementationUnits.Manila.Available: http://www.adb.org/Documents/Reports/Evaluation/sst reg200502/sespius.pdf

Team Leader: Walter Kolkma; Tel +63 2 632 4189; kolkma@adb.org