This document presents a framework for analyzing public investment management. It outlines eight core features that a well-functioning public investment system should have: 1) investment guidance and screening, 2) formal project appraisal, 3) independent review of appraisals, 4) project selection and budgeting, 5) project implementation, 6) project adjustment, 7) facility operation, and 8) ex-post evaluation. It then provides diagnostic indicators to assess where a country's actual public investment system performs well or poorly compared to the desirable features. The framework aims to inform reforms by identifying performance gaps between desired features and reality.

1. Framework for Analyzing Public
Investment Management
Tuan Minh Le
Presented at ICGFM Winter Conference
Washington D.C.
December 6, 2011
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2. Performance benchmarking
Source: CoST (2011b:3) 2

3. Pinpointing PIM problems
Well Executed Poorly Executed
Good Projects A C
Poor Projects B D
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4. A Framework for assessing PIM
• Two pillars of the approach
– Desirable features of well-functioning system in 8 cycles
– Diagnostic Indicators to assess actual system
• Focus on how to inform reform design to
enhance efficiency by Gap-Analysis
Desirable Institutional Gap
Actual Functioning
Features
Analysis
Diagnostic
Indicators
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5. The eight “must-have” core PIM features
Project Detailed project
development design
1 2 3 4 5 6 7 8
-
Guidance Formal Appraisal Project Implement Project Service Project
& Project Review Selection ation Changes Delivery Evaluation
Screening Appraisal &
Budgeting
Basic completion
review
Pre-feasibility
Evaluation
Feasibility
CE
CBA
Regulatory
requirements
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6. 1. Investment guidance & preliminary screening
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• Existence of credible strategic guidance to PI
– National Plan, PRSP, Long-term Vision document
– Supplemented by a sector or sub-sector level strategy
 Realism of strategy relative to available resources?
• Established process of first-level screening
– Basic consistency with government policy and
strategic guidance
– Centralized or delegated approval justification
 What portion of projects screened are rejected?

7. 2. Formal Project Appraisal
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• Existence of well publicized and transparent
appraisal guideline
– Larger projects requiring more rigorous tests of financial
and economic feasibility and sustainability
 Quality of guidance? Rate of rejection?
• Capacity of staff with project evaluation skills
– An established process for training staff in project
evaluation technique
 Number of staff with evaluation skills?

8. 3. Independent Review of Appraisal
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• Independent peer review might be necessary
to check any subjective, self-serving bias
• Clarity of specific responsibilities
– A multiplicity of players with unclear accountabilities can
overburden the appraisal system
 A formal delegation allowing central appraisal system to
review appraisal of relatively important projects

9. 4. Project Selection and Budgeting
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• Transparent criteria for selecting projects
• Appraisal process is linked to the budget cycle
– Maintaining an inventory of appraised projects
– Clear requirements for consideration of O&M
• Ensuring adequate financing for selected projects
– Multi-year budget allocation system
 Evidence of under-funding, large stock of uncompleted projects?
• Effective gate-keeping
– Only appraised and approved projects are selected for
budget financing, except for emergency reason
 Percentage of projects evaded established process?

10. 5. Project Implementation
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• Published guideline for project implementation
• Clear organizational arrangements and a realistic
timetable to ensure the capacity to implement
 Sample of project delays in implementation?
• Cost-effective procurement and contracting
 Portion of competitive project tendering?
• A system to prevent imprudent cost-increase in
implementation
 Estimates of cost overruns on major projects by specific sector?
Percentage of cost overrun on major projects?

11. 6. Project Adjustment
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• Flexibility to allow changes in disbursement plan
according to changed circumstances
• Active monitoring and periodic progress reporting
– Updated cost and benefit
 Requirement for updating project documents during
construction?
• Mechanisms to stop projects with negative marginal
benefits
 Example of projects cancelled or closed on the account of
changed net benefits?

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7,8. Facility Operation & Ex-post Evaluation
• Asset registers need to be maintained, and asset values
recorded
 Evidence that complete asset registers maintained?
• Ex-post Evaluation of completed projects
– Focus on the comparison of the outputs and outcomes
with the established objectives in project design
– Feedback to improve future project design and
implementation
 Evidence of response to the evaluation findings?

13. Selected References
Rajaram, Anand, Tuan Minh Le, Nataliya Biletska, and James
Brumby. 2010, A Diagnostic Framework for Assessing Public
Investment Management, World Bank Working Paper 5397,
August 2010.
Construction Sector Transparency Initiative. 2011. Report
on baseline studies: International comparison. January
2011.
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