Report No. 2946

Operational Policy ReviewDelays in Project ImplementationThe ReportApril 11, 1980

Operations Evaluation Department

. FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted drstribution and may be used by reciptrentsonly in te performance of theit offtcal duties,.Its contents may 'notothe.rwise be disc:osed without World Bank authorization.

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FOR OFFICIAL USE ONLYTHE WORLD BANK

WAashir:gton DC 20433

Office ot Director-GeneralOperations Evaluation

April 11, 1980

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Operational Policy Review: Delays in Project Implementation

Attached, for information, is a copy of a report entitled"Operational Policy Review: Delays in Project Implementation" pre-pared by the Operations Evaluation Department.

Mervvn L. Weinerby Shiv S. Kapur

a

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not other%ise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLY

OPERATIONAL POLICY REVIEW

DELAYS IN PROJECT IMPLEMENTATION

Table of Contents

Page No.

PREFACE ............................................................ i

FINDINGS, CONCLUSIONS AND RECOMENDATIONS .......................... iv

Chapter I. An Overview of Recent Implementation Experience ...... 1

Expectations versus Experience .................... 1Implementation Patterns ...........................

A. By Subsector of Operation ............ 3B. By Countries of Lending .............. 6C. Trends ..................................... 8

Chapter II. Location and Immediate Causes of Delays .............. 9

A. Start-up Phase ............................. 9B. Execution Phase ........................... 16C. Summary .................................... 19

Chapter III. Underlying Causes for Delays ......................... 20

A. Exogenous Factors .......................... 20B. Other Causes ...................... ....... 21C. Country Factors ............................ 29

Chapter IV. Adjustments During Implementation .................... 33

Project Environment ........................... ... 33Change in Beneficiaries ........................... 33Institutional Adjustment .......................... 34Procurement of Goods and Services and Execution

of Contracts ............. o ..... o.. ........... . 35Redesign of Project ............................... 36

Appendix Tables

Table I. Pattern of Disbursements by Sector and Sub-sector - FYs70-74

This document has a restricted distribution And may be used by recipients only in the performanceof their oficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Table of Contents (Continued)

Page No.

Table II. Patterns of Disbursement: Selected Sectors and

Subsectors by Level of Disbursement Achieved

Table III. Slow Projects and Percent of Total Projects bySector and Subsector

Table IV. Projects Selected for Case Histories

Table V. Operations From Which Cases Were Selected:Distribution of Loans and Credits by Sectorand Subsector

Table VI. Operations From Which Cases Were Selected:Distribution of Loans and Credits by Regionand Sector - Summary Table

Table VII. Completed Projects Delayed 20% or Less

Table VIII. Causes for Delay

SUPPLEMENT 1/

SELECTED CASE STUDIES

GLOSSARY

PREFACE ......... ****** -i

CASE STUDIES:

BANGLADESH - Highways (Cr. 408-BD) ............................ 1BRAZIL - Santos Port (Ln. 756-BR) ......................... 14

GHANA - Eastern Region Cocoa (Cr. 205-GH) ................ 29GUYANA - Livestock (Cr. 221-GY) ................. ********.. 42INDIA - Bihar Markets (Cr. 294-IN) ....................... 58

INDIA - Wheat Storage (Cr. 267-IN) ....................... 69

1/ This supplement may not be of as general interest as the main report and

has therefore not been circulated as widely; it is, however, available to

readers on request.

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Table of Contents (Continued)

Page No.

MAURITANIA - Livestock (Cr. 273-MAU) .......................... 82SENEGAL - Site and Services (Cr. 336-SE) .................... 90SRI LANKA - Mahaweli Ganga Development (Ln. 653/Cr. 174-CE) .. 102SUDAN - Second Mechanized Farming (Cr. 311-SU) ........... 114TURKEY - Second Livestock Development (Cr. 330-TU) ........ 124ZAIRE - Education (Cr. 272-ZR) ........................... 132

QQ

1111.

PREFACE

The objectives of this study are to identify the Bank-assistedprojects 1/ which have suffered severe delays in recent experience, and toanalyze the anatomy of delay with a view to identifying the potential forimprovement in project implementation.

A delay in the start of a project or an extension in the time takento complete it can represent a loss to the borrower. Some projects might nothave been undertaken if their appraisers had more perfect foresight._ On theother hand, delayed projects are not necessarily poor projects; the time takenfor completion is not a sufficient measure of project success or failure.Many project tasks prove more difficult and take longer to accomplish thanexpected, but the projects are still successful in achieving their majorobjectives.

The concept of delay in the context of this study is somewhatelusive. Apparent delays in. project implementation may, in fact, simplyreflect unrealistic expectations at appraisal. Indeed, in many of the casesunder review it appears that schedules prepared at appraisal were intended tobe targets rather than best estimates of what was most likely to happen.In particular, the schedules often did not allow sufficient time for suchessential activities as recruiting staff, hiring consultants, and lettingcontracts which, because they involve several parties in a process of negotia-tion, often take considerable time.

A realistic and useful concept of delay must, therefore, referto an extension of time over what could reasonably be required to carry outthe actions in question and not simply an extension over the time originallyallotted. This is not simple to determine; it involves an ex-post judgment ofthe realism of the original schedule and whether, given the subsequent circum-stances, certain activities could have been completed earlier.

The measurement of delay is also made difficult by problems centeredon the data available. First, there are no Bank-wide records of implementa-tion time per se; the nearest approximation is disbursement data. Disburse-ment data however tend to lag behind physical implementation insofar as theyrepresent applications for reimbursement for goods and services alreadypurchased by borrowers. They may, in some cases, lag significantly if dis-bursements are delayed for purely administrative reasons. The incidence ofsuch cases is however small. Another defect of disbursement data is that theyrefer only to expenditures and do not reflect the achievement, or lack ofachievement, of project objectives. Second, there is no body of readily

1/ Bank includes IDA, loans includes credits.

available data - even disbursement data - comparing anticipated with actual

disbursements.l/ Only the absolute figures of the time taken from project

effectiveness to achieve a given amount of disbursement, or figures of dis-

bursements as a proportion of the approved loan amount, are available Bank-

wide. The only readily available guide to a fast or slow project is a com-

parison of -disbursement experience with an empirically derived norm for the

sector concerned.

Finally, although this does not affect an examination of the causes

of delay, it must be pointed out that, in terms of the flow of benefits from a

project, completion itself has variable significance. A bridge or a hydro-

power plant renders no benefits until all works are completed; a power trans-

mission/distribution project, on the other hand, or one comprising a number of

school buildings, begins to offer some benefits as soon as the first units are

finished. And delays in technical assistance may not have a direct bearing on

the receipt of benefits from the physical elements of the project.

Within the above limitations, this study approaches its task in a

series of steps, using a number of samples in order to get at "real" delay

beyond what can be explained by lack of realism in the original estimate and

whose causes, in retrospect, appear to have been avoidable.

Since the starting point for any evaluative analysis is the gap

between expectation and achievement, the study first seeks to establish a

measure of this as the difference between scheduled and actual implementation

time. This was based on the experience recorded in the Second, Third, Fourth

and Fifth Annual Reviews of Project Performance Audit Results, reinforced by a

review of a random sample of 100 more recent projects. The second step

involved broad analysis of the disbursement experience of projects for which

loans or credits were made in FYs 1970-74. This is a much larger group than

the two involved in the first step of the exercise, although a substantial

number of projects are common to all three groups. FYs70-74 were selected for

the second-step exercise because the projects are now old enough to provide

sufficient experience in implementation, yet recent enough to include repre-

sentatives of the newer types of projects. As of December 31, 1978, 60% of

these projects were completed and over half of the remainder were three-

quarters complete. Disbursement was used as proxy for completion and data for

each project loan or credit were classified in terms of the number of quarters

from effectiveness to reach 25%, 50%, 75% and 95-100%.2/ The objective was to

analyze differences in the disbursement (and implementation) experience among

various sectors and subsectors to identify sector characteristics and to make

cross-comparisons where feasible.

1/ In accordance with the instructions outstanding at the time, disbursement

estimates also have a built-in bias towards optimism because they ex-

plicitly do not take into account future events such as Acts of God,

legislative delay, generalized local currency shortage, strikes, etc.

2/ It was assumed that the quarter in which 95% disbursement was achieved

was 9 satisfactory indicator of total time taken.

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Given the extreme variety of projects, even within the same sectorand subsector, and the diversity of environments in which they are imple-mented, statistical analyses or broad comparisons ultimately have limitedvalue. In the study they were used primarily to put the problem in perspectiveand provide a framework for the analysis of specific projects. For the thirdstep, therefore, 42 cases from the FYs70-74 group of projects were selectedfor detailed study. These were drawn from the substantially delayed projectsin five sectors 1/, and include a number which have appeared on the Bank'slist of problem projects for various periods of time. Of the 42, 22 weresubjected to field studies based on visits by OED staff and consultants to 15

, countries; the remaining 20 were desk studies. Each of the 42 cases wasintensively discussed with the concerned operating staff in the Bank and draftfield studies were subsequently sent for borrower review and comment. Aselection from the latter, in an abbreviated form, is presented in the Sup-plement to this report. A group of 22 projects from the same years andsectors and with delays of 20% or"less (Appendix Table VII), on which ProjectPerformance Audit Reports had been prepared, was used as counterpoint to testthe validity of some of the conclusions emerging from the heavily delayedsample.

The sample of 42 cases is not representative of overall implementa-tion performance; it has been deliberately drawn from a set of seriouslydelayed projects because the causes of delay are the focus of the study.Similarly, the dimensions of the problems encountered here are not typical ofBank experience; they are magnified, for easier identification and analysis.The study also distinguishes between the immediate and the underlying causesof delays. In moving from the former to the latter, special attention hasbeen given to the clustering of immediate causes and their recurring designs.At this level of analysis the nature of problems encountered in projectimplementation and their incidence reach beyond the limited sample. This isthe basis of concern in the study, and for the broader conclusions that itreaches.

The field work was carried out by nine OED staff members and oneconsultant, and the desk studies by two research assistants. OED is gratefulto: the borrower governments and officials for giving so generously of theirtime and attention to the field missions and in providing comments on draftcase studies.

1/ Agriculture, education, public utilities, transport and urban. For fur-ther details of the criteria for selection of case studies and theirlisting, see paras. 2.01 and 2.02, and Appendix Tables IV-VI and VII.

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FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

BACKGROUND

1. - The implementation of projects is primarily the responsibility ofthe borrower. The local environment - institutional, political and cultural -

directly affects the manner and speed with which a project is implemented.Since administrative weaknesses exist in a large number of the Bank's bor-rowers, these inevitably affect project implementation, and management prob-lems have surfaced as a major source of delay in this study. As a development

agency, the Bank frequently has a lead role in the preparation and design ofprojects, and a supervisory and supportive role in their efficient imple-mentation. While in general its role remains limited, as are the resources at

its disposal, its responsibility varies in accordance with the measure of that

role as actually exercised from project to project.

2. The conclusions and recommendations that follow bear in mind this

sensitive and complex relationship that exists between the Bank and the

borrower in the process of project implementation. If the focus is on theBank's role this is in accordance with our terms of reference and with thedesire to explore the possibility of improvement in how the Bank conducts its

functions. A study of this kind would not be the proper instrument for

generalized comment on borrower institutions and capabilities considering that

Bank-financed projects in most countries comprise a relatively small part oftheir investment programs, and that they are often implemented under espe-cially favorable conditions not available to domestic projects. Borrower

responsibility in specific cases has been, however, identified as necessaryand feasible.

3. Limitations and opportunities are thus inextricably mixed up in the

role of the Bank in the implementation of projects. This study is not in-

tended to be an overall assessment of the success or failure of that role.

The positive contribution that the Bank has made, and continues to make, insupporting project implementation is fully recognized by its borrowers and the

achievement documented, most recently in the Operations Evaluation Department

review of the supervision of Bank-financed projects.l/ What this study looks

for are the opportunities missed in the knowledge that where they have been

availed of the results have been often different.

4. Within the ambit of the Bank's role in project implementation,the study seeks to pare down the evidence to delays which might have been

avoidable, and to see how these could be minimized if not avoided in the

future. The paragraphs that follow summarize the main findings of the

1/ Operational Policy Review: The Supervision of Bank Projects (SecM80-129).

-v -

study, the deficiencies in scheduling, the location and dimensions of delay,the particular importance of project preparation and design, and experiencewith adjustments made in projects to control delays after the implementationproblems have developed. Main conclusions are stated and some recommendationsmade for improving future performance.

5. A number of actions have been taken by the Bank which would affectthe preparation, design and iiplementation of projects subsequent to thegroups on which this study is based. The section on recommendations whichfollows takes account of these actions.

FINDINGS AND CONCLUSIONS

A. Dimensions of Delay

6. The average time to complete 250 projects audited in the four years1975 through 1978 exceeded estimated time by over 40% despite a reduction inthe scope of a number of these projects. Data from a random sample of 100projects initiated in FYs72-74 indicate the continuing existence of a dis-parity of similar magnitude. Some of the disparity is probably due to thespecial difficulties attached to projects appraised during the first half ofthe 1970s which was a period of economic turbulence in the world and also sawthe beginning of experimentation with new style projects. Unrealistic sched-uling nevertheless emerges as a problem in this study; recent Bank policy hasincreasingly emphasized greater realism.

7. The experience in our samples varied among sectors and subsectors.Actuals within the 250 audited projects ranged from around 5% above estimatesfor livestock to 65% above for education, 74% for water supply and 82% forport projects. The analysis of the larger sample of projects initiated inFYs70-74 similarly indicates substantial differences in the overall disburse-ment and implementation experience among sectors and subsectors. The slowerdisbursing sectors - education, water supply, irrigation - tended also to bethose most delayed in respect to original estimates. While scheduling is thusa problem generally, unrealistic schedules affect some sectors more thanothers. Differences in average performance among sectors also seem to under-line the importance of sector-specific factors in project implementation.

8. In regard to the implementation profile, the early period wasdominant in determining the overall time taken in implementation. Forty tosixty percent of the time required to complete the 702 projects initiated inFYs70-74 was required to disburse the first 25% of the loan or credit. Thisis not surprising considering the concentration of the sources of delay in thestart-up period as discussed in the section that follows. The length of thisinitial period varied considerably among sectors, from seven quarters for thefastest disbursing ones (industry and DFCs) to fifteen.quarters for education.Sectors which took longer than average to start up, took longer than averageto complete. In general, differences in initial disbursement experiencesamong sectors and subsectors were maintained through to completion.

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9. Slow projects - defined as those which have required 50% more timethan the average for the subsector and most of which have also suffered delayswhile others have taken too long because of their nature and size - werescattered fairly widely among Bank borrowers. Nevertheless, a relativeconcentration of such projects appears among some of the Bank's larger bor-rowers and seven countries in this group had over 20% of their projects slow.Among these are some of the Bank's experienced borrowers, with well-developedadministrative systems, causing one to conclude that some special circum-stances may be in operation in these countries which call for study and

country-specific response (paras. 1.01-1.10).

B. Location and Causes of Delay

(i) Start-up Phase

10. The heaviest incidence-*of delays in our sample of 42 projects tookplace in the start-up period. Seventy percent of these projects were soaffected. A number of them had not reached a sufficiently advanced state ofpreparation at the time of loan presentation, and necessary engineering hadnot been undertaken. A majority of delays related to procurement proceduresand occurred over issuing and evaluating documents. There were also disagree-ments between Bank and borrower over the selection of contractors or sup-pliers, and although the Bank staff showed flexibility in ultimately reachingan agreement with the borrower, delays had in several cases already takenplace.

11. Complex contracting procedures of the borrower contributed todelays: cumbersome prequalification methods, bidding systems, and clearanceprocesses emerged as main factors. Financial problems, resulting from under-

estimation of costs or price increases, contributed to delays in lettingcontracts and, in some cases, to retendering. The situation was aggravated in

the sample reviewed for this study, which was affected by sharp and unforeseen

price increases in the early 1970s. Given the financial stringency of manyborrowers, an inter-acting spiral of time and cost overruns can have seriousimplications for project implementation, especially in inflationary times(pAras. 2.04-2.11).

12. Institutional problems were second only to the letting of contractsfor civil works and equipment and affected 55% of our sample during start-up.Institutional problems included the organizational structure of the projectunit and its fit within the borrower's bureaucratic structure, staffingproblems concerning initial recruitment for the project unit as well as itsmaintenance during implementation, and delay in the hiring of consultants.

13. A shortage of qualified local staff was a major problem, exacerbated

by noncompetitive salary structures in the -public sector organization.Project units were sometimes incorrectly located and often did not possess

sufficient autonomy to be effective. New units created specifically for the

implementation of Bank-supported projects were especially prone to these

problems as against organizations or project units which had already been in

existence.

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14. There was some reluctance on the part of borrowers to hire consul-tants, or to use Bank funds for that purpose when financing from less expen-sive sources was expected to become available. Such reluctance manifesteditself in lengthy negotiations over,fees and conditions, and disagreements onthe division of respons-ibility between consultants and projects staff; thelatter sometimes carried through into project implementation and initialdelays were aggravated by subsequent friction. It would thus appear that thepurposes and extent of technical assistance needed were not fully discussedand agreed with the borrower sufficiently early in the project cycle so as toavoid subsequent misunderstandings and tension (paras. 2.14-2.17).

15. Acquisition of land for civil works or for on-leasing to projectbeneficiaries was a source of delay in about one-third of the projects in oursample. Political, administrative or legal problems were the most commoncause, with unrealistic provision of time having been made in the projectdesign for securing land. The delays .in such cases got compounded and theoverall impact on project implementation was considerable. The failureappears to have lain both on the Bank and the borrower in not making suf-ficient allowance for the administrative and legal processes involved in thecountry and the project area concerned (paras. 2.18-2.22).

(ii) Execution Phase

16. Civil works and the installation of equipment were delayed in asmany as 82% of cases in our sample. Delays in civil works had many causes. Acommon source was the trouble foreign consultants and contractors had inadjusting to local administration and customs, often compounded by lack ofsufficient coordination between consultants and borrowers or between con-sultants and contractors. Sometimes the performance of consultants wasinadequate, sometimes the supervision of construction by the project agencywas weak.

17. Financial problems of borrowers and contractors had considerableimpact in delaying completion of civil works components. About two-thirds ofthe 32 sample projects in this category ran into some form of financialhardship.. At least a dozen projects reviewed suffered from contractor under-capitalization, bankruptcy or related problems which were sometimes caused orexacerbated by inflation, and almost an equal number suffered from the bor-rower's financial constraints. That delays have a cumulative effect is

£ apparent from 27 of this group of 32 projects in which delays in the start-upphase carried forward into project execution (paras. 2.23-2.29).

18. Incorrect anticipation of beneficiary response, often derived frompoor knowledge of local conditions, and changes in market conditions or sectorpolicy environment caused delays in project implementation. Most such projectswere located in agriculture or urban development. Insufficient knowledge ofthe local environment, as reflected in the project design, has emerged as aproblem area in a number of reviews made by OED. The borrower and its agenciesprobably have a special responsibility in this respect in view of the compara-tive advantage that local authorities may be expected to have over Bank staffor expatriate consultants. So far as the Bank is concerned, more attention is

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now being given to the sociological factors that affect projects in people-oriented sectors.

19. Most of the problems relating to beneficiary response stemmed froman overestimation of the risk-taking abilities of the target population, or amisunderstanding of their needs, or a combination of both. Factors exogenousto the; projects included government policies which pointed in a directiondifferent from that of the objectives of the original project, a poor invest-ment climate, or just bad weather (paras. 2.34-2.36).

20. Iwenty-three of the 33 sample projects with technical assistancecomponents experienced delays in the completion of those components. In some,the technical assistance component was not implemented at all.

21. The major source of delay appears to have been an unclear under-standing of or lack of commitment to the purposes of studies included intechnical assistance on the part of both Bank and borrower. Most technicalassistance, whether in the form of experts, training or studies, was part ofan institution building effort; its time horizon tended to reach beyond theimmediate project - a crucial factor which is now receiving greater attentionin the Bank in designing technical assistance for institution-building pur-poses (paras. 2.30-2.33).

(iii) Inflation and Provision for Contingencies

22. Most of the projects in our sample were affected by the sharp andgeneralized inflation of recent years. Since these price increases could nothave been foreseen, the provision for contingencies in Bank financing provedseriously short. There were consequent delays in the letting of contracts and

in the execution of civil works. Even as the overall project costs went up,

the Bank's share declined, placing a severe burden on the financial resourcesof borrowers in conditions of economic difficulty. More realistic provisionfor contingencies is being made by the Bank in subsequent projects (paras.3.03-3.07).

- (iv) Project Preparation and Design

23. Of the underlying causes of delay in project implementation, defi-

ciencies in project preparation and design are identified in this study asbeing most important. Problems attributable to these deficiencies affected 35

of the 42 cases studied in detail, calling for changes to be made in the

original projects through to implementation. These changes mostly affectedprojects in three sectors: 15 of the 17 agricultural projects, all fiveeducation projects, and both urban development projects. All three were

people-oriented sectors with relatively complex projects.

24. Deficiencies in technical preparation caused delay in the imple-mentation of many projects. At its simplest, deficient technical preparationtook the form of insufficient or no engineering work having been done by thetime of loan effectiveness: a situation which has been largely remedied in

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more recent Bank projects. In other cases, the technical packages that were

introduced were untested and unsuited to local conditions. Two of the worst

cases in our sample illustrate attempts to introduce concepts and approaches

which were alien and unsuited to the -local environment. While we recognizethe necessity and virtue of experimentation, this is justified only within

reasonable bounds, with explicit acknowledgment of the risks involved, and in

specially controlled conditions.

25. Project desigr includes the various elements that are sought to be

brought together to achieve project objectives, and the interrelations between

a network of activities to be completed within a certain time frame. This

structure of tasks and their interrelations may be unusually sensitive to

delay at critical points.

26. There were deficiencies in designing some projects in our sample in

the sense indicated above. A critical .element was identified at appraisal in

one case but omitted from the project design, and not identified in another.

Some projects included procedures inappropriate to local conditions, orunusually sensitive to delay due to their legal and sociological implications,

or poorly timed. In one illustrative case, a lack of clear delineation of

responsibilities led to problems of coordination and implementation (paras.

3.16-3.20).

27. Project management has been a crucial factor. One or the other of

the following institutional problems contributed to delayed implementation in

our sample: (a) implementing agency not adequately staffed by the time of

loan effectiveness, (b) implementing agency staff salaries not competitiveenough to attract and retain good staff, (c) administrative authority divided

between government agencies, with insufficiently delineated lines of responsi-

bility, and (d) an entirely new project unit created specifically for the

project and either improperly located or lacking in power to make itself

effective. These institutional difficulties are not limited to the samplereviewed for this study; they have emerged as a persistent problem in a

variety of other documents produced by OED and other Bank staff. Frequently,

they have involved basic issues like the insufficient availability of trained

staff, noncompetitive salaries and lack of job security which could only be

remedied by systematic effort and over a period of time, supported by appro-

priate policy changes. What is immediately important is that where they

caused delays in the present group of projects, they often conveyed eithermisjudgment of institutional capability on the part of the Bank and the

borrower, or a failure on the part of the borrower to establish an effective

institution in a timely fashion and to give it support (paras. 3.21-3.26).

28. Borrower commitment to the finally agreed project design is crucial

to its successful implementation. Borrower involvement in project preparationand his full understanding of and agreement with its objectives have a strong

bearing on his subsequent commitment to project implementation. Insufficient

involvement of the borrower with project preparation and design runs as a

common theme through the deficiencies outlined above in many cases. Some of

the projects reviewed were prepared by consultants and/or Bank staff with very

little borrower participation. In some of these cases the borrower did not

develop a strong position on project design; in others he did, and on several

occasions his position was not accepted or incorporated into the project.

This unresolved difference became a cause for delay, with the borrower alien-

ated and not prepared to carry out the project in all respects. This under-

lines the risk of acquiescence, as against full participation, to which the

borrower is a party and for which, in the light of subsequent reluctance or

failure to fulfill agreed obligations, he must share responsibility with the

Bank.

29. Achieving strong borrower involvement in the preparation and design

of projects may be limited in the short run by the expertise at his disposal.

This can be a serious limitation in respect of a number of Bank borrowers and

raises the question of the rate at which projects can be developed with

significant borrower participation. Nevertheless, this does not preclude

intensive dialogue and maximum undtrstanding between the Bank and the borrower

on the project and its objectives, and should certainly preclude the Bank and

borrower working at cross-purposes at the project and policy level as happened

in a few cases in this sample (paras. 3.27-3.32). Bank practices have in-

creasingly recogni;ed the importance of early borrower involvement.

(v) Country Factors

30. Some 34% of 108 slowest disbursing projects among those approved

in FYs70-74 occurred in a group of seven countries (para. 9); this seems to

indicate the prevalence of certain factors resulting in particularly slow

project implementation. Only a limited review of the case material available

on these two countries - Brazil and Turkey - has been possible in this study.

31. In the case of Brazil, these factors included insufficient borrower

participation in project preparation and design, political and institutional

complexity within a federal system highlighting the problems of coordination,

particular procedures for procurement used in some cases, and the nature and

size of some of the projects themselves. In Turkey, country factors appear to

point to political and institutional complexity, a general pattern of borrower

disagreement with certain procedures and actions required for project imple-

mentation, a disinclination to use foreign experts, and serious problems in

meeting staffing requirements (paras. 3.31-3.42 and footnote on page 32).

C. Adjustment and its Timing

32. Projects are frequently changed in the process of implementation.

Such changes, or adjustments, have various causes. Sometimes they reflect

desirable flexibility to respond to changed circumstances during project

implementation; sometimes they are indicative of original design deficiencies

which need correction. In either event the timing and scope of change is

important and affects the total time taken in implementing a project.

33. The magnitude of the adjustment reflects either the degree of

change in the project environment and/or the nature and extent of deficiencies

in it original preparation and design. At the extreme, a few projects in our

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sample were changed during implementation to the point of almost complete

redesign. The timing of the adjustment can reflect the sensitivity of the

mechanisms for monitoring project implementation, including supervision, or

the nature of the change required if it involves consultants and contractors

in a sensitive area of -the Bank - borrower relationship, or the nature and

magnitude of the change itself. Substantial redesign is naturally late to be

undertaken partly because of innate caution in embarking upon it, and partly

because of the contingent arrangements in project implementation that such a

major change would entail.

34. In some projects a sector policy change was necessary for timely

and successful project implementation. An initial conflict existed between

project objectives and the sector policy environment, leading to the frustra-

tion of the former. Since sector policy changes have ramifications extending

much beyond the immediate project, changes are very likely to be seriously

delayed if an alignment does not exist or is not obtained between the project

objectives and the sector environment at the time the project is initiated or

within a reasonable period thereafter. In at least one case in our sample,

the required increase in producer prices which was critical to the project

did not come about until six years after the loan became effective.

35. Incorrect estimation of beneficiary response caused delay in some

projects which was overcome only by a change in the target group during

implementation. In one such project, the Loan Agreement had to be revised to

accommodate change within a year after its becoming effective, and a need for

yet another further change surfaced within a year thereafter. In another

project the need for a change in beneficiaries was not identified until three

years after loan effectiveness. In their separate ways, both projects point

to an initially incorrect estimation that contributed to delay in implementa-

tion. In one of these cases, however, a fairly sensitive response mecha-

nism brought about needed changes in reasonably quick time while adjustment

appears to have been unduly delayed in the other case.

36. Delays relating to project implementation units have been mentioned

earlier. Opportunities for adjustment occurred frequently in these cases but

at different points in time, affecting overall project implementation. Some

new units presented problems of location: these locations had to be changed

more than once, and the evolution of the unit with the necessary autonomy and

managerial strength took time. Problems relating to lack of coordination

between the agencies concerned, and those arising from the lack of a central

project authority, appeared to have been more intractable, underlining thelimitations of corrective action during implementation where basic flaws exist

in the original project design.

37. The resolution of procurement problems did not come readily; in

a number of the cases studied corrective action was taken by the Bank after

some delay had taken place. Interventions in the problems between borrowers,

consultants and contractors have been particularly difficult because of the

limited freedom that the Bank has in this area. The necessity to respect the

sensitiveness of a situation which primarily concerns the borrower resulted

in delays before important interventions could take place with Bank support.

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38. Major changes involving redesign of projects took long to be ef-

fected (para. 33). This was particularly so where the project conditions

changed radically or where the original design was innovative and untested

(paras. 4.03-4.22).

RECOMMENDATIONS

39. In recent years, important changes have been made in Bank policies

and procedures to improve project preparation, design and implementation. The

Project Brief System (OMS 2.13; April 1977 and September 1979) was introduced

to help generate projects that are responsive to the development objectives of

member countries and to make the project generation process more efficient.

Project generation and design were also the subject of detailed instructions

(OMS 2.12; August 1978) on project identification and preparation and on the

need to examine the impact of design alternatives on project outcome. The

knowledge of intended beneficiaries, local involvement in the process and the

need to ensure country commitment to project objectives were stressed. The

introduction of the Project Preparation Facility at the end of 1975 was

intended to finance certain activities related to the prompt preparation of

Bank-supported projects.

40. Revised guidelines have been issued for the use of consultants and

the procurement of goods and services (April 1977 and April 1979) both

emphasizing the use and development of local procedures and capability to

the extent feasible. Finally, instructions on the State of Project Prepara-

tion Necessary for Loan Approval (OMS 2.28; October 1978) are aimed at improv-

ing cost estimates and carrying project preparation and design to a more

advanced stage before loan approval so as to improve the efficiency of project

implementation and reduce delays. The results of these actions will be

observable only in subsequent projects. Based on the evidence examined for

this study, the following paragraphs re-emphasize the importance of these

recent changes in policies and procedures and offer additional proposals to

reduce avoidable delays.

I. Scheduling

(i) Implementation Planning

41. Much greater realism in scheduling project implementation is needed

than was evident in this study. We find the use of implementation schedules

for purposes of target setting as ultimately counterproductive; unrealistic

scheduling to the extent revealed in this study is unlikely to be taken

seriously by Bank staff or borrowers, and there is evidence of both. Comple-

tion schedules enter into the economic analysis of projects. They also

provide the basis for calculating the effect of inflation in total project

costs and in the determination of price contingencies in Bank financing.

Delays which result from unrealistic scheduling distort borrower planning for

the provision of counterpart financing, contributing to difficulties in

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project implementation. Sectors and subsectors in which the gap betweenactual and estimated project completion is particularly pronounced - educa-tion, water suply, and ports - should receive prior attention for the develop-ment of more realistic schedules.

42. We recommend the use of network analysis and the critical pathmethod (CPM) as instruments for identifying activities and decision points inthe implementation schedule, highlighting critical actions, and forcing aswell as presenting a realistic picture of the interrelations of all these.This should help avoid the omission of critical components from the design forproject implementation and provide a tool to Bank staff and borrower manage-ment for monitoring project progress. Network analysis and the development ofthe CPM should take place in consultation with the borrower, in particularwith the decision making and implementing agencies, at the time of appraisaland confirmed during loan negotiations. Since the appraisal report oftenserves as an operational document for implementing agencies, the CPM should beincorporated in the appraisal report.

43. The CPM and the plan of operations should be reviewed with the con-struction consultants as soon as they are in place. This study reveals heavyincidence of delays in civil works, a major cause being lack of coordinationand differences between the borrower, the consultant and the contractor. Inorder to help set this relationship on a proper footing, and to minimizepossibilities of misunderstanding, an early discussion of the plan of opera-tion and the CPM between these parties, with the participation of the Bank, isconsidered useful.

44. We would also recommend that the CPM and the plan of operations berevised in consultation with the borrower in the event of major slippages fromschedule, so as to bring out the revised interrelations between activities andthe new decision points in time.

45. The Bank is already encouraging the use of bar charts and the CPM;it has been suggested that the development of the CPM calls for specialexpertise lacking in most of our borrowers and that bar charts would doequally -well. We do not believe that bar charts serve the same purpose as theCPM in focussing on the interrelations of activities in time and on the morecritical decision points. We would therefore recommend that the use of

* network analyses and the CPM be extended at least to all multiple-activity andmore complex projects, that necessary expertise be developed in the Bank, andthat the CPM be used as a management tool in a continuing fashion throughoutthe implementation period in the Bank's more experienced borrowing countriesto begin with.

(ii) Sensitivity Analysis

46. While completion time is used in the sensitivity analysis of projectcosts and benefits at loan presentation, this practice is not universal.Considering the magnitude of the disparity between scheduled and actualcompletion times which has emerged in this study, we would recommend that thispractice be adopted for all loans and credits made by the Bank.

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II. Location and Causes of Delays

(iii) Project Preparation and Design

47. Deficiencies in project preparation and design have surfaced as themost important underlying cause of delay in project implementation. The

people-oriented and relatively complex sectors of agriculture, education andurban development have been most heavily affected. Insufficient borrowerinvolvement with :project preparation is an important contributing factor.

48. We support the recent Bank emphasis on enlarging borrower partici-pation in the preparation and design of projects. Stronger and well-informedborrowing country involvement at this stage could help eliminate some of thedesign deficiencies arising from insufficient knowledge of local conditions.This would apply in particular to the sociological and legal bases of projects

and could involve local agencies,..institutions and consultants in and outside

the government.

49. Strong borrower involvement could also help in ensuring a closerrelationship betwee4 specific project objectives and their sector environment.

It has been suggested that the alignment between sector policies and projectobjectives very often must come in the course of, and partly through theprocess of, project implementation and that sector policies are, in any case,constantly evolving and highly political. We are aware of these constraints,

and that country considerations may subsequently call for a change in sectorpolicy. But in light of the limitations of the project as a sector policyinstrument, we recommend recent Bank instructions on the need for a closerunderstanding and greater congruence between project and sector objectives atthe design stage.

50. Management and staffing arrangements - a prolific source of delaysin our sample - constitute the institutional aspect of sector environment.Shortage of qualified local staff cannot be made up nor all institutionalproblems settled before loan approval. The lessons of experience here would

however suggest that existing organizations and units are likely to do better

than new ones, and that an understanding should be reached with the borroweron organizational problems or salary structures which might affect projectimplementation. It is equally necessary that, on his part, the borrowershould enter into reasonable commitments and should then ensure that they are

fulfilled.

51. OED's Fifth Annual Review of Project Performance Audit Resultsadvocated the development of institutional profiles for individual countries

in major sectors of Bank involvement. It was suggested that such profilesjointly review with the borrower the technical manpower availability, developa time-phased program for strengthening local institutional capability, andidentify interim requirements of expatriate consultants. A beginning inthis direction has been made by at least one Region in the Bank. We are

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conscious that the development of sector-wide institutional profiles ortraining programs is a large task and will take time. It may also call foradditional manpower resources. But at a minimum, we would recommend thatlocal capability be reviewed with the borrower wherever a series of projectsis envisaged, and the need for assistance agreed upon. Agreement on theseissues should be reached during the preparation and appraisal of these proj-ects and confirmed at loan negotiations.

52. This study indicates that the extent of borrower involvement inproject preparation and design affects a subsequent commitment to its imple-mentation (para. 28). Since the final project is negotiated and agreedbetween the Bank and the borrower, a commitment to its full implementation bythe borrower should follow. We would however suggest that a stronger borrowerinvolvement at the preparation and design stage, which is the objective ofrecent Bank policy, would help to enhance the prospect of the project beingimplemented in all its components.

53. Untested technical packages which were not suited to local condi-tions have led to extensive delays and substantial project redesign. Wecommend the increased use by the Bank of the pilot project approach.

(iv) Project Start-up and Execution

54. The heavy incidence of delays in the start-up period points to threemain causes: insufficiently advanced state of project preparation, delaysover procurement procedures, and institutional problems.

55. We endorse recent Bank actions (paras. 39 and 40) aimed at reducingdelays caused by the above-mentioned factors. We would also recommend spe-cially intensive Bank supervision during this period; the recent OED review ofthe supervision of Bank projects does not indicate such concentrated super-vision in the early stages.

56. In view of the heavy concentration of delays in civil works, inselecting consultants and contractors their previous experience in similarsituations should be taken into account by the Bank and the borrowers to helpensure that they will be able to function effectively in the local milieu.Relevant experience and any other factors bearing on the ability to functionin this manner could be included among the technical criteria to evaluate thesuitability of consultants and contractors. The terms of reference of theconsultants should be reviewed to ensure there is no ambiguity about theirresponsibilities and relationships within the borrower organization. Theearlier suggestion (para. 43) to involve consultants and contractors indeveloping the plan of operations and reviewing the CPM should also helpstrtigthen coordination and improve understanding between borrowers, con-sultants and contractors.

57. Borrowers have an obligation to provide the necessary local financ-ing for project execution. Considering the financial problems of many bor-rowers, however, it would help if the timing of Bank loans and the scheduling

- xvi -

of projects took into account the borrower's own financial cycle. Initialdifficulties in providing counterpart financing sometimes resulted from a lack

of congruence between the borrower's budgetary process and the timing of theproject.

58. In a number of projects in our sample, spiraling costs sharplyreduced the proportion of Bank contribution and equally sharply increasedthe financing burden on the borrower. In addition to making more realistic

contingency provisions, as is now being done, it is suggested the Bank con-

sider ways of helping its weaker borrowers in timely fashion in respect ofcost overrun financing.

59. The financial problems of contractors were frequently a reflectionof those of the borrower. It is nevertheless necessary that borrowers review

their procedures for payment to contractors to avoid unnecessary delay. Since

contractor bankruptcies affect the development of local contracting indus-

tries, there is need for the borrowers to see that contractors are paid

promptly as part of the effort to build up local capability. The Bank, on its

part, should review the payment procedures of borrowers to suggest ways in

which they could be made more efficient.

60. To improve the implementation of technical assistance, it is recom-

mended that clear understandings be reached by the Bank with the borrower

during project preparation as to the purposes of and approach to technicalassistance.

(v) Country Factors

61. We recommend that the Regions undertake special issues-oriented

implementation reviews to identify the more generalized reasons for the

incidence of seriously delayed projects in the seven countries mentioned in

paras. 9, 30 and 31 above. Such reviews are now being undertaken for some

but not all of these countries.

62. The conclusions of these reviews should be taken into account in

designing projects in these countries and the stronger borrowers in that group

should be assigned a greater role in the project cycle.

63. Programs staff in the Bank should be fully involved in the project

implementation reviews in this group of countries. Such staff should also be

involved in designing projects which would not suffer from the kind of dis-

abilities noted in the case studies relating to the two countries briefly

reviewed here. Further, countries like Turkey, with its persistent dis-

inclination to use foreign experts, should be the prime candidates for the

development of institutional profiles (para. 51) jointly with the borrowers in

the major sectors of Bank involvement.

III. Adjustment and Timing

64. Several projects in our sample were changed during implementation.

Given the difficulties inherent in the development process, it is reasonable

xvii -

change and that some projects will require major redesign. We recognize thepossible trade-off between flexibility and rigorous design criteria and thevalue of flexibility in some situations and for certain types of projects.Actions already being taken by the. Bank will probably help define reasonableboundaries between a flexible and a more thoroughly prepared project design ona case-by-case basis. Whatever the balance in individual cases, the followingsuggestions of a general nature would seem to emerge from the experiencereviewed in this study-

(a) the Bank should occasionally accept more modest objectives in linewith local conditions in the design of operations than has beensometimes the case in the past, and should see if a simpler design,involving a smaller number of borrowing country agencies, would notproduce almost as good results, more rapidly and with less strain onlocal institutions; and

(b) a full-scale review of project progress at a specified time or phasein its implementation should be provided for in the appraisalreport, as has recently been done for some rural development andpopulation projects. This would apply to projects whose designs are

substantially flexible and where changes are expected either becauseof incomplete knowledge at the outset, or there is a prospect ofchange in project assumptions, and where a pilot approach was notjustified. The major options should as far as possible be spelledout as part of the risk analysis at appraisal, and the subsequentreview should be planned in advance to provide a basis for sys-tematic adjustment in project design and its anticipated costs andbenefits.

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CHAPTER I

AN OVERVIEW OF-RECENT IMPLEMENTATION EXPERIENCE

Expectations versus Experience

1.01 The foliowing paragraphs present an overview of the implementationexperience of a sample of Bank-supported projects. The analysis is based on250 projects for which loans were made in FYs67-72 and which were completed inFYs73-77. The projects were audited in the years 1975-78 and the experiencerecorded in the Second, Third, Fourth and Fifth Annual Reviews of ProjectPerformance Audit Results. The purpose of this analysis is to establish themagnitude of the difference between scheduled and actual implementation time.

1.02 The comparison of estimated and actual completion times appearsin Table 1 below. On the average, this group of projects took 40% more timethan estimated. A variety of factors affected this outcome; an attempt hasbeen made later in the study (Chapters Il and III) to identify these factorsthrough case studies for a more recent group of projects. The magnitude and

Ancidence of the glap between expectation and performance represented in Table1 does, however, illustrate a general tendency to underestimate implementationtime in all the.sectors shown. There was considerable variation among sectorsin the magnitude of the difference. Of the sectors with 12 or more cases,the greatest difference between actuals and estimates was found in education.Although the estimates for education projects were longer than average theystill were generally far short of the actual time taken. The smallest dif-ference was in some subsectors of agriculture, which was also the sector inwhich the longest estimate of completion time was made at appraisal. Noobvious explanation for the sector differences emerged althou ' gh it is recog-nized that the practice of reducing project scope in face of increasingcosts, which also tends to avoid extensions in implementation time, can beapplied more readily in some fields (where projects are easily divisible) thanin others (where investments are lumpy). This could account for some of thedi:fferences in performance, e.g., many agricultural projects can more readilybe reduced in scope than port or power projects.

1.03 Since the projects covered by the analysis contained in Table 1were relatively old, a comparison between appraisal estimates and performancewas made for more recent projects, using disbursements as proxy for compari-son. From a random sample of 100 projects approved in FYs 72-74, 82 werescheduled for completion by the end of 1977 but only 30 had been completedand, of these, only 11 (13%) on schedule. At the halfway mark, 22% ofthe projects were on schedule and over 35% were already more than a yearbehind appraisal estimates.

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Table 1: ESTIMATED AND ACTUAL TIMES FOR PROJECT COMPLETIONFROM PROJECT PERFORMANCE AUDITS /a

(Averages in Years)

No. of Time Actual as %

Sector Projects Estimated Actual of Estimated

Agriculture

Livestock 16 4.6 4.8 105

Area Development 15 4.7 5.7 122

Agricultural Credit 14 3.7 5.1 136

Perennial Crops 12 .. 4.8 5.4 ill

Irrigation 11 4.0 6.0 149

Other 2 6.9 6.1 89

Education 19 4.0 6.6 165

Industry 11 2.9 4.6 159

Public Utilities

Electric Power 43 3.5 4.9 141

Telecommunications 14 3.8 5.4 142

Water Supply 14 3.1 5.4 174

Transportation

Righways 62 3.6 5.4 150

Ports 11 3.3 6.0 182

Railways 6 3.7 5.9 162

Overall Average 250 3.8 5.4 142

/a Sources: Projects audited in 1975, 1976, 1977 and 1978 as reported in the

Second, Third, Fourth and Fifth Annual Review of Project Perfor-

mance Audit Results.

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Implementation Patterns

1.04 The Bank approved 702 projects in the five years, FYs70-74.1/ Thisis a different and much larger sample than that used in Table 1: it includesprojects which are old enough to provide experience in implementation yetrecent enough to include representatives of the newer types of projects andsome of the newer practices. This sample is used to provide comparativeanalysis of the disbursement experience between sectors and subsectors.

A. By Subsector of Operation

1.05 In Table 2, the data on disbursements for these projects have beenarranged by sector and subsector, and in terms of the number of quarterselapsed since effectiveness to reach levels of 25%, 50%, 75% and 95-100% oftotal disbursement.2/ Major sectors and subsectors are shown in order of thepace of their disbursement; the .sector averages are based on the number ofprojects which have reached the level of disbursement (as proxy for comple-tion) indicated in the columns. The last column indicates the percentage ofprojects in each sector which have been completely disbursed.3/ The averagetime to complete disbursement on the 61% of the projects which were fullydisbursed as of December 31, 1978 was 18 quarters (four and one-half years).

1.06 It is, however, important to note that 18 quarters understates theaverage time which will be taken to complete disbursements on this group ofprojects, the incomplete projects are not just the newer ones, they are alsothe slower ones.4/ Projecting the completion time for incomplete projectsbased on their position at the end of 1978 at a reasonable rate of continuingdisbursement, the overall average for completion would increase from 18 to20 quarters, or five years.5/

I/ The 702 include all lending operations during the period except: tech-nical assistance (19), non-project (12) and those in sectors with lessthan 10 operations; population (9), tourism (8) and energy (3).

2/ It was assumed that the quarter in which 95% disbursement was achievedwas a satisfactory measure of total time taken. This allows for timebetween actual spending by the borrower and reimbursement by the Bank,which appears as "disbursement".

3/ The total number of projects on which each average is based is shown forall sectors and subsectors in Appendix Table I.

4/ This is illustrated for selected sectors in Appendix Table II.

5/ A reasonable rate would be three quarters -to disburse 25%, which is theexperience of the group as a whole between the 25% and 75% levels ofdisbursement. This rate is faster than that experienced by the incom-plete projects during the same period. Applying this rate to the incom-plete projects, full disbursement for DFCs and industry would increasefrom 16 to 17 and 14 to 15 quarters respectively, while education wouldgo up from 23 to 25, water supply from 20 to 23 and area development from19 to 22. The overall effect of this adjustment would be to accentuatethe difference among the sectors.

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Table 2: PATTERNS OF DISBURSEMENT BY MAJOR SUBSECTORS /a

(All Projects FYsl970-74) /b

Average Elapsed Quarters fromEffectiveness % of

25% 50% 75% 95-100% Projects

No. of Dis- Dis- Dis- Dis- Completely

Sector Projects bursed bursed bursed bursed Disbursed

Slower than Average

Education 72 15 18 20 23 (39)

Water Supply and

Sewerage 32 10 13 17 20 (44)

Irrigation 52 10 14 17 18 (52)

Perennial Crops 27 9 13 17 19 (56)

Telecommunications 32 10 12 16 20 (66)

Ports 31 10 12 16 18 (51)

Area Development /c 26 9 13 14 19 (58)

Livestock 41 9 12 15 15 (51)

Average all Projects 702 9 12 15 18 (61)

Faster than Average

Highways 98 9 11 14 16 (60)

Agricultural Credit 41 7 11 14 16 (81)

Hydro Power 28 7 10 13 17 (82)

Railways 30 7 9 12 16 (80)

DFCs 65 7 9 12 16 (72)

Industry 32 7 9 11 14 (72)

a/ Where major sectors are divided into subsectors, e.g., Agriculture,

Transportation and Power, only those subsectors with 25 or more projects

are included. Undivided sectors with less than 25 projects are also

excluded.

b/ Loans and credits made in FYsl9 7 0- 7 4 ; disbursement data through December

31, 1978. Average elapsed quarters for projects reaching the level

of disbursement indicated; fewer projects represented at higher disburse-

ment levels; last column indicates percentage of those in first column

completely disbursed on December 31, 1978.

c/ The term used to classify agricultural projects, including a large

proportion of rural development projects, which are concerned with

development on a regional rather than a functional basis. Disbursement

data are not filed for rural development projects per se. (See para.

1.05 and footnote 5, para. 1.06.)

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1.07 The above analysis reveals the following overall characteristicsof the disbursement experience:

(a) Dominance of the initial period: The pace of disbursement duringthe initial period following loan effectiveness was much slowerthan the subsequent periods due to various start-up activitieshaving to be undertaken before substantial disbursements can bemade. "From 40% to 60% of the total time required to completedisbursements was needed to disburse the first 25% of the loan. Thetime required to disburse the initial 25% ranged from 7 quarters forindustrial projects to 15 for education. The average for allprojects was 9 quarters.

(b) Persistence of disbursement patterns: Sectors which took longerthan average for start-up also took longer to complete. There wasno evidence of sectors or subsectors catching up in the sense ofchanging their relative positions after a slow start. However, oncethe first quarter of the funds were disbursed, projects in sectorswith widely differing early experience showed similar times fordisbursing the last three quarters.

(c) Differences among sectors and subsectors: There were substantialdifferences in the overall disbursement experience among sectors andsubsectors. These differences in average performance appeared topersist regardless of the particular project environment and seem toindicate the importance of sector-specific aspects: a point whichstrikes us as being of particular importance in terms of possibleremedial action. The regularity of the disbursement experience isnotable for education projects; it is least apparent in livestock.Overall, the data divide the sectors into two main groups, a fast-disbursing and a slow-disbursing one.l/

The large group of education projects (72) was by far the slowest tostart and to be completed, in part because of their lower state ofpreparation at the time of loan approval. This conclusion is inline with that emerging from Table 1 and stated earlier in para.1.02. Water supply and sewerage projects were also among theslowest. At the other extreme were industrial projects and loans toDFCs. The disbursement pattern for rural development projects is a

1/ The representativeness of the averages varied from sector to sector. Forexample, it appears to be most representative for education and telecom-munications and least representative for railway and livestock projects.For a rough indication of the range of experience around the averagesee Appendix Table III.

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little slower than the average for all projects.l/ The group of

urban projects is both too small (10) and too varied to provide a

useful basis for conclusions.2/

B. By Countries of Lending

1.08 In order to determine whether there are implementation differences

among individual countries which might point to country factors affecting

delays, slow disbursing and delayed projects were identified and grouped by

country. The projects were those which had required 50% more time than the

average for the subsector 3/ to reach whichever was the furthest of the four

disbursement levels (25%, 50%, 75%, 95-100%) reached. On this basis 108, or

about 15% of the 702 projects, were classified as "slow". These projects were

found in 52 of the 97 countries in which the 702 operations took place, 4/ but

were unevenly distributed. This is shown in Table 3, which indicates a higher

concentration of slow projects approved in FYs70-74 in the group of countries

with programs of 10 projects or more, than among borrowers with smaller

programs. Programs below this level were too small to offer a significant

correlation.

1/ "Rural development" was not established as a special category when

these projects were appraised and does not correspond to one of the

standard subsector categories used in the functional classification of

agricultural projects and presented in Tables 1 and 2. However, an ex

post classification of all agricultural projects of these years has

been made by Central Projects Staff and 68 of them, in which the majority

of the beneficiaries were intended to be below the poverty income level

for the country, have been classified as rural development projects.

These 68, however, run across the other subsectors used in the classifi-

cation in this study. They comprise: area development (22), irrigation

(20), perennial crops (13), agricultural credit (4), livestock (4), crop

processing (4), and fishery and forestry (1). The breakdown is given in

Appendix Table III.

2/ Only 3 of the 10 are sites and services projects, a type which has

become the dominant form of subsequent urban lending. Among the others

are several urban transport projects, a metropolitan-wide development

project and a sea defense project. The disbursements for this group have

been faster than average (see Appendix I).

3/ It follows from the similarities among projects within sectors (para.

1.07 (c) ) that an appropriate basis for judging disbursement perfor-

mance on individual projects would be the average experience of projects

in that particular sector, i.e., against a sector or subsector norm.

4/ Twenty-six of these 108 projects are included in the case histories

undertaken for this study.

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Table 3: DISTRIBUTION OF SLOW PROJECTS /aBY SIZE OF LENDING PROGRAM

Size of Lending Program Countries Slow Projects Total ProjectsFYsl970-74 % Total % Total % Total

10 or more projects 22 (21) 56 (60) 50 (349)

5 to 9 projects 43 (42) 38 (41) 37 (264)

less than 5 projects 35 (34) 6 ( 7) 13 ( 89)

Total 100 (97) 100 (108) 100 (702)

/a Fifty percent slower in disbursement than average for subsector measuredat farthest disbursement point reached: 25%, 50%, 75%, 95-100%.

1.09 An interesting feature which emerges from this analysis is that someof the borrowers with the largest programs, and which might therefore beviewed as experienced borrowers in terms of Bank lending, have a number ofslow projects. Fourteen of the 21 countries with programs of 10 projects ormore in the above period had at least two slow projects, and seven countriesin this group had over 20% of their projects slow. Among these are Turkeywith a 22-project program of which 36% were slow within the definition; Brazilwith 24 projects, 29% slow; Ethiopia with 15 projects and 27% slow; Tanzaniawith 12 and 25%; Bangladesh with 13 projects and 23% slow; India with 38projects, 21% slow; and Malaysia with 14 projects and 21% slow. Colombia,Indonesia and Pakistan are only slightly better. A concentration of 36 or 34%of the 108 slowest projects among those approved in FYs70-74 provides a focusfor concern.

1.10 While the above results could be affected by the nature of theproject portfolio - more complex and larger projects may be undertaken byexperienced borrowers - they do suggest that country characteristics orsituations may be behind the slow disbursement rate. These may includegeneral economic and fiscal problems, insufficient borrower commitment toparticular projects, differences with the Bank on issues or policies, changesin government and policies, the institutional organization and structure ofthe country resulting in slower decision making and insufficiency of trainedstaff. What particular country conditions may contribute to a concentration

-8 -

of slow projects can only be determined from time to time by examining indi-

vidual country conditions. For the purposes of this study, an analysis of

case material was attempted only in respect of Turkey and Brazil and is

presented in Chapter III (paras. 3.32 to 3.43).

C. Trends

1.11 A long-term analysis of disbursement, and therefore implementation,

experience identified a slowing down in the pace of disbursements between the

1960s and the 1970s.l/ *About half of the change was attributed to increases

in the level of commitments, termination of disbursement to Part I countries

and a change in the sectoral composition of Bank lending programs. The

remainder was attributed to various long-term factors more difficult to

quantify. The data relating to the projects approved in FYs70-74 reviewed

here does not provide clear evidence whether this trend continued during the

five-year period studied. The experience seems to fluctuate from one year's

set of projects to the next, with neither an overall quickening nor a slowing

down of disbursement for the period as a whole. The period is too short in

which to establish an internal trend, and further analysis would be needed to

determine whether any long-term change is taking place.

1/ FY79 Operating Programs and Administrative Budgets: Mid-Year Review

(R79-2), January 10, 1979). The slowdown was in the overall disbursement

rate, defined as disbursements during the year expressed as a percentage

of the undisbursed balance at the beginning of that year.

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CHAPTER II

LOCATION AND IMMEDIATE CAUSES OF DELAYS

2.01 In this chapter the analysis is carried to the project level basedon an examination of 42 cases selected from those for which loans and creditswere made in FYsi970-74. These were drawn from the substantially delayedprojects in agriculture, education, transport, electric power, water supplyand urban development. The two largest sectors were subdivided: agricultureinto traditional agriculture, area development and other agriculture; andtransport into highways and projects from the other modes. About 7.5% of thetotal number of projects in each sector or designated part of a sector wereselected, and all Regions are represented in the sample.1/

0

2.02 The selected sample is not representative of the universe of Bank-financed projects for that period; it does represent the slowest or the mostheavily delayed 25-30%. The review of the project case histories that followsis intended to identify the specific points in the implementation process andthe tasks for which the time required most frequently exceeded expectations.The immediate causes of delays within certain locational groups are indicatedhere. It is noted that delays are not isolated events but come in series.The broader underlying causes are examined in the next chapter.

2.03 For purposes of discussion, the implementation process can bedivided into two general phases: start-up and execution, the latter usuallycommencing at the point when all the necessary conditions have been met forundertaking the main items of construction. This distinction has some utilityinsofar as the delays occurring in the start-up phase can often be related tothe state of project preparation at the time the loan was made. Some delays,however, can be placed within either phase and some continue through both.Delays are discussed here in terms of the frequency of their occurrence withinthe sample, and the circumstances are illustrated from the experience ofindividual cases. The findings are described in the following paragraphs andthe points of delay summarized in Table 4.

A. Start-up Phase

(i) Letting of Contracts

2.04 The letting of contracts for civil works and equipment proved to bethe most frequent point of delay in the start-up phase, accounting for exten-sions of time on 29 of the 42 projects surveyed. In many of these 29 projects

1/ The projects for which case histories were prepared are listed in AppendixTable V and shown in the context of the projects from which they wereselected, arranged by sector and by Region in Appendix Tables VI and VII.A selection of case histories appears in the Supplement to this report.

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Table 4: PROJECTS FOR WHICH CASE HISTORIES WERE ?REPARED:

.OINTS IN 21PLEIMENTATION PROCESS WHERE DELAYS OCCURRED

Start-up Phase Execution Phase

EstaolishingLetting of & Staffing of Riring of Land Civil Works Tech. Assistance Benefic4ary

Subsector/Project Contracts Organization Consultants Acquisition & Equi2ment and Studies Resoonse

AGRICULTURE AND RURALDEVELOP!MENT

1) AGRICULTURE

Guyana Livestock; Cr. 221 x x x x

Turkey Livestock II, Cr. 330 x

Turkey Fruits & Vegs. Ln.762/Cr.257 xx x x

Greece Groundater, La. 754 x x

Ghana Eastern Region Cocoa, Cr. 205 x x x

Mauritania Livestock, Cr. 273 x x x x

Ethiopia Coffee Processing, Cr. 290 x x x

Philippine Rice Processing, La. 720 x x x

India Wheat Storage, Cr. 267 x x x x x

India Bihar Agriculture, Cr. 294 x x x x x

Sri Lanka Mahawli Ganga Develop.,Ln. 653 x x x x

2) AREA DEVELOPMENT

Brazil Alto Turi, tn. 853 x x x x x

Sudan Mechanized Farming, Cr. 311 x x x x

3) OTHER AGRICULTURE PROJECTS

Spain AgricuL. Research, LA. 168 x x x

Ghana Fisheries, Cr. 163 x x x x

Indonesia Fisheries, Cr. 211 x x x x

India Punjab Ag. Credit, Cr. 203 x x x

EDUCATION

Turkey Fducation, IA. 748 x x x x

Iran Education, IA. 718 x x x x x x

Zaire Education, Cr. 272 x x x x x

Malaysia Education III, IA. 810 x x a

Thailand Education 1I, Io. 822 x x x

URBAN

Jamaica Sites & Services,Un. 1003 x a x a

Senegal Sites & Services,Cr. 336 x x x x x a

TRANSPORTATION

1) RICHATS

Qsyana Highways, Cr. 301 x x a x

Iran Roads V, ln. 697 a x x

Nigeria Highwys V, In. 838 x x

Cameroon Highwmys II, La. 935 a x x x

Tanzania Highways III, Cr. 265 x x x a

Bangladesh Highway, Cr. 408 x a x x

Nepal Highay, Cr. 223 x x x

2) OTHER TRANSFORTATION

Brazil Santos Port, ln. 756 x a x a a

Afghanistan Aviation, Cr. 374 x x x

Nigeria Lagos Port II, Ln. 922 x

Philippine Port II, IA. 939 x x

PUBLIC UTILITIES

1) WATER

Colombia Bogota Water Supply II,In. 741 x x

Yugoslavia IBAR Multi-Purpose,in. 7

77 x x x x a

2) POWER

Philippine Power V, ln.809/Cr.296 x x

Malaysia Power V, In 700 x x x

India Power II, Cr. 242 x

Pakistan WAPDA Power, Cr. 213 x x x x

Turkey Elbistan-Lignite Mine&Poer, ln. 102

3 x x x x

TOTALS (42 projects) 29 23 19 12 32 23 11

detailed engineering had not been undertaken before loan effectiveness. Thiswas the case for all education and urban projects. However, the fact that allbut one of the seven public,' utilities projects, for which detailed designswere produced well, before effectiveness, also had problems with letting con-tracts indicates that the state of design preparation at effectiveness may notalways explain delays under this category.

2.05 o40S t delays occurred over issuing and evaluating bid documentsand could be traced to unfamiliarity with or problems involving either Bank orborrower procedures or a disagreement between the two over the choice of acontractor. Some minor delays can be attributed to less than expeditiousreview, evaluation or approval by the Bank [Malaysia, Education; Cameroon,Highway]. In at least five cases there was a misunderstanding or ignorance of- or opposition to - Bank procurement guidelines and international competitivebidding (ICB): [Greece, Ground Wataer; Turkey, Education; India, Wheat Storage;Iran, Highway; Iran, Education].

2.06 Unfamiliarity with Bank procurement procedures and/or reluctance tofollow agreed procedures in Turkey resulted from a change in government; therewas slow clearance of equipment bids and procurement lagged by two years. Inthe India Wheat Storage project lingering disagreement between the Bank andborrower over procurement covenants contributed to more than a year's delay inletting contracts. Provision that a single invitation to bid for constructionon several sites would be issued so as to enable foreign contractors tobid, and a covenant requiring prequalification of major contractors andsuppliers, had been a cause of breakdown in loan negotiations at one point andthe borrower continued to dispute them after loan signing. The first super-vision mission to the project recommended waiver of the requirements. Thiswas done. But the process of making changes and preparing tender documents onthe new basis took time and it was a year before all was ready. In thehighway project in Iran, there was' disagreement between the Bank and theborrower on how to evaluate the many bids received for a construction task,and how to award the contracts. An objective system of evaluation, acceptableto the borrower, was subsequently evolved by a Bank team.

2. 07 In several cases where ICB was undertaken, various factors combinedto frustrate the process completely, and civil works financed with loan fundswere carried out by force account while equipment was exempted from ICB andprocured locally. A lack of interest by foreign contractors, restrictedpublicity, or the nature of the political situation or even of the work itself(inherently poorly suited to contracting or bulking) contributed to theunsuccessful application of the Bank's standard contracting procedures inthese projects [wells for livestock, Mauritania; coffee washing stations,Ethiopia; road construction, Bangladesh].

2.08 In one instance - a highway project i n Guyana - the Bank insistedon having the work done by contracting, rather than by force account as theGovernment recommended.* The contractor selected eventually went bankrupt, andthe work was then subcontracted to him through force account.

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2.09 Five of the cases studied attributed delays to the complex contract-

ing procedures of the borrower. Cumbersome prequalification measures, bidding

systems, and clearance processes emerged as main factors [Philippines, Power;

Thailand, Education II; Senegal, Sites and Services; Bangladesh, Highways;

Brazil, Santos Port]. The three-envelope bidding system 1/ used by the

Government to evaluate potential contractors in a Brazilian port project would

appear to have contributed to a delayed start-up. Tenders were requested a

total of three times because most of the bids from the first two tenders had

to be rejected on various grounds. Over two and a half years were taken in

the process. Problems in obtaining clearances on tendering and contract

awards arose in Thailand Education and Senegal Sites and Services projects;

customs clearance caused significant delays in the Bangladesh Highway project.

2.10 Disagreements between Bank and borrower over the selection of con-

tractors or suppliers was a problem in,.this sample. A case in point was an

irrigation project in Sri Lanka in which the credit agreement required inter-

national competitive bidding for the major civil works, with the Bank to

review the tender documents. This requirement was observed. Initially,

however, there was disagreement between the Bank and the borrower over the

prequalification of one foreign (regional) and one local contractor. The Bank

finally agreed to prequalify both provided they formed a joint venture with a

third, wellqualified foreign contractor, but again objected when the borrower

wanted to award the contract to a joint venture of the two original con-

tractors. After another six months' discussion, the Bank finally agreed to

this arrangement.

2.11 Financial problems, mainly manifested in underestimation of costs

or price increases - generally a reflection of the worldwide economic situa-

tion of the early 1970s - contributed to delays in letting contracts and, in

some cases, to retendering. In the Tanzania Highway project bids submitted

were double the appraisal estimate, which led to a reevaluation of the econo-

mics of the project. In the Zaire Education project one and a half years were

lost in appointing consultants, due mainly to unfamiliarity with selection

procedures, disagreements over consultant fees and, in an effort to reduce the

latter, a need to change the consultant's terms of reference. During this

time there were major price escalations and the project scope had to be

reduced. Some four years after effectiveness an equipment contract was signed

with a local supplier but was canceled 18 months later when the contractor,

1/ Under this system the Brazilian authorities do not prequalify before

sending out formal bid invitations, but request qualifications along with

technical and price packages, thus "postqualifying" bidders. While the

Bank favors prequalification because it eliminates unqualified contrac-

tors with out their having gone to the expense of preparing a bid pack-

age, the Brazilians justify this practice on the grounds that contractors

for large works constitute a relatively small market and that prequali-

fication would invariably produce the same bidders and encourage col-

lusion among them.

- 13 -

unable to obtain a bank guarantee to cover advance payments, requested amend-ing the contract to receive 100% payment in advance. Another supplier,similarly undercapitalized, initially agreed to the original contract butlater changed his position to ask for 100% advance payment as well.

(ii) Establishing and Staffing the Organization

2.12 Establishing the implementation unit and staffing the project wasa point of delay in 23 of the 42 cases. Staffing problems concerned initialrecruitment for the project unit as well as its maintenance during implementa-tion. As might be expected, a shortage of qualified local staff was a majorfactor in causing delays. Sometimes this was related to the unplanned loss ofexpatriate staff where trained local staff was scarce [Tanzania, Highways],sometimes to complications in transferring or seconding staff to the projectunit [India, Bihar Markets] , or difficulties in maintaining staff in the faceof the attractive claims of competitors, public and private [Senegal, Sitesand Services; Guyana, Highways]. The lack of adequate local cost financingand/or financial incentives for project staff were specific contributingfactors; the attractive salaries in the local private sector and in the MiddleEast drew qualified personnel away from several of the projects.

2.13 As will be discussed in greater detail in Chapter IV, in somecases it was apparent that the organizational structure of the project unitand its fit within the borrower's bureaucratic structure was unclear ateffectiveness [Afghanistan, Aviation; Philippines, Rice Processing; Ghana,Cocoa]. When the location of the project unit was inappropriate to itsfunction, or the unit did not possess sufficient authority to execute theproject [Mauritania, Livestock; Jamaica, Sites and Services] this resulted inthe reallocation of responsibility for certain project components, and inthree instances even the relocation of the project unit itself. In Brazil,[Alto Turi] because of a short lead time to organize and staff the projectunit, it was not established until a month after effectiveness and resulted inearly problems in analyzing development plans under the project. Delayedstaffing of the central project unit in the Guyana Cocoa project similarlycaused delay in project implementation.

(iii) Hiring Consultants

2.14 There was delay in the hiring of consultants in 19 of the 42 cases.As with the letting of contracts, the reasons were varied, but borrowerreluctance to hire foreign consultants - especially for studies - or to useBank funds for that purpose (expecting less expensive forms of technicalassistance to be available) seemed to predominate, despite the presence ofcovenants or side letters stipulating the use of consultants.l/ Such reluct-ance was frequently reflected in lengthy negotiations over fees and conditions.

1/ See OED Study of the Role and Use of Consultants in Bank Financed Projects;December 8, 1977; SecM77-865.

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For example, although consultants had been involved in the preinvestment

studies for a highway project in Tanzania and hiring of consultants was a

condition agreed during negotiation, there were protracted differences over

fees and the Government also expressed a desire to proceed without consultant

assistance for one part of the project. Expatriate consultants were even-

tually hired, but the delay was critical since project work could not proceed

without their being on the site. In this case the Government variously argued

that it had the capacity to proceed on its own; that its staff would gain in

experience by taking full responsibility; and that money could be saved if

local staff were trained for the work. The Bank's position was that the use

of consultants would avoid the diversion of the limited skilled manpower of

the ministry responsible. Seven years later the understaffing of the ministry

continues to be cited as a cause of slow implementation.

2.15 The division of responsibi4ity between consultants and project

staff was frequently found to be a point of contention. The reasons lay in

the way the tasks were set out in the project design [Zaire, Education] or in

the unit wishing to take greater control of some of the consultant'*s functions

after the project commenced [Turkey, Elbistan].

2.16 Other miscellaneous reasons for delays in hiring consultants are

evident from the case material. In two cases financial problems hindered the

appointment of consultants: in one, because the borrower was preoccupied with

the general cost overrun problem [Cameroon, Highway]; in the other, because

lack of counterpart funding impeded the hiring of three expatriate consultants

and other necessary technical staff [Turkey, Livestock]. Disagreements over

designs with potential consultants and the need for Bank comments on consult-

ant performance provided other causes of delay. According to the borrower,

employment of foreign consultants unfamiliar with local practice was a major

factor in causing delays in the Bangladesh Highways project: the consultants

did not understand the attitudes and problems of local contractors and thus

were not able to work with them effectively.

2.17 It is interesting to note the overlapping of problems in this

category. Thus, a reluctance to hire consultants was often followed by

protracted fee negotiations or a lack of counterpart funding. Resistance to

the use of expatriate consultants gets reflected at several points in the

process.

(iv) Acquiring Land

2.18 Acquiring the land for civil works or for on-leasing to project ben-

eficiaries was a point of delay in 12 projects: delaying effectiveness [Turkey,

Education; Brazil, Alto Turi); the execution of civil works [Bangladesh,

Rigliways; Brazil, Santos Port; Iran, Education; India, Wheat Storage]; and the

ultimate achievement of project objectives vis-a-vis end users [Senegal, Sites

and Services; India, Bihar Markets; Guyana, Livestock]. Political, adminis-

trative, or legal problems were the most common sources of these delays where

the Bank had not made realistic provision of time for securing land or the

borrower was unable to live up to commitments. The problem of displacing

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landowners or squatters, unforeseen or underestimated at appraisal, compli-cated the implementation of at least two projects [India, Bihar Markets;Brazil, Santos Port].

2.19 While the types of problems in acquiring land were varied, thedelays frequently got compounded and the overall impact on project implementa-tion was considerable. In' the India Wheat Storage case, acquisition of siteshad gone ahead on the basis of the Bank's initial research into legal aspectsand site suitability. Fifteen months after loan signing, the loan was madeeffective by the Bank only to find some months later that several sites wereunsuitable and would have to be replaced. This, in turn, caused delays incivil works and in the preparation of a project report by consultants, and wascompounded by other delaying factors. Almost four years after the loan wassigned, it was decided to reduce the number of silo sites in order to compen-sate for inflation in construction costs in the meantime and one godown waseliminated from the project.

2.20 In Brazil Alto Turi, the loan was declared effective after theBank was furnished with documentary evidence that all land had been acquired.It was subsequently discovered that the land acquisition was illegal and thatsome or all of the settlers currently occupying the land could be evicted ifattempts to resolve the legal questions were unsuccessful. Ultimately,achievement of project goals is threatened by this situation, underlining thecrucial importance of land acquisition where this is a factor in projectimplementation. In another case unrealistic planning combined with complexlegal, political and social factors adversely affected land acquisition whichwas the principal source of delay in implementation. Nine months were allowedfor acquisition of sites in the Bihar Markets project in India. In fact,acquisition has taken from one to four years in more than 40% of cases despitethe use of emergency procedures on 14 sites, indicating a complete initialmisunderstanding of the local situation.

(v) Other Points of Delay in the Start-up Phase

2.21 The majority of early delays have been discussed above; the remain-der include a few cases each and fall into one of two categories: passing ofnecessary legislation or appraisal of subprojects. There were three caseswhere the passing of a critical piece of legislation held up project implemen-tation, two of them involving uncertain borrower commitment to the project.These two, in turn, raise larger questions of what can be done to ensurestronger borrower commitment, and of the legal and institutional frameworkaffecting implementation of projects in certain countries. One of these casestook place in Turkey (Education] in which insufficient borrower commitmentcoexisted with a difficult institutional structure in the country, leading todelays of six to seven years in the enactment -of legislation to establishadvisory committees for technician schools and to set up the industrialdevelopment training center. Problems of another kind afflicted an urbanproject in Senegal where misunderstanding prevailed among the various minis-tries as to which one was supposed to introduce the decrees necessary toestablish the project unit which would, in turn, make the credit effective.

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This example would appear. to point to inadequate project preparation which

might have pinpointed legislative responsibility in consultation with the

Government in order to avoid subsequent misunderstanding.

2.22 A. few cases involved the preparation and appraisal of subprojects.

This delay was most critical in a livestock project in Turkey, where the

inability to hire sufficient field staff to evaluate the farmers' plans led to

the completion of only a few plans and a consequently small amount of on-

lending. The interdependence of staff build-up and the preparation of farm

plans was critical for the success of this project.

B. Execution Phase

(i) Civil Works and Equipment

2.23 Civil works and the installation of equipment - which constituted

almost all of physical project implementation - had the most common points of

delay in the execution phase as well as within the entire implementation

process. Out of the total of 42 cases, 32 projects had delays in this cate-

gory; of the 10 remaining cases, 3 were largely credit projects, and therefore

not applicable, and 7 had civil works components which were not delayed. Of

the 32 delayed cases, 20 were in civil works, 2 in equipment installation and

10 had delays in both.

2.24 Civil works delays stemmed from a variety of reasons. Many were

related to the consultant's performance, his managerial, technical, and

financial capabilities, or the way he interacted with the borrower and

inability of either the consulting engineers or the project unit itself

to manage or coordinate the efforts of those involved in the project was a

common problem. Some delays resulted from contractors' weakness in dealing

with subcontractors or from conflicts between consultant and contractor.

2.25 Foreign consultants and contractors often had trouble understand-

ing and dealing with local administrations and customs and this problem was

compounded when firms lacked the necessary experience for the job. In a water

project in Colombia, the foreign firm hired to carry out the tunnel construc-

tion (the most important component of the project) failed to perform as

expected. Subsequently, external consultants concluded that the poor per-

formance was due to lack of experience, lack of planning to cope with the

problems that frequently appear in tunnel construction and failure to estab-

lish good working relations with borrower personnel. Supervision of construc-

tion by the project agency was not as strong as was needed under the circum-

stances. When it was clear that no amount of remedial action would resolve a

rapidly deteriorating situation the contract was terminated, but not before a

delay of three years had resulted from slow tunnel. construction. A similar

problem was encountered in the urban project in Senegal, where a European

consulting firm had been hired to provide assistance with engineering designs

as well as with the overall coordination and the management of the project.

Although the perceptions of the Government officials interviewed differed on

the adequacy of services provided, there was general agreement that a number

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of difficulties encountered with the consultants contributed significantly toimplementation delays. These difficulties included cultural differences, aninability to speak French, and a lack of flexibility in adapting to theSenegalese administrative structures.

2.26 Lack of coordination by the expatriate consultants and the bor-rower, or between consultants and contractors, caused other delays. Such lackof coordination between the local design unit and foreign agricultural consul-tants was the cause of substantial delays during an education project inZaire. In the Turkey Elbistan Power project, lack of understanding andcoordination affected relations between consultants and the borrower and aconflict arose over certain design aspects, which conflict was never resolveddespite best efforts on the Bank's part to help. Delays in completing some ofthe civil works in the highway project in Bangladesh were traceable to dis-agreements between the borrower's *.engineering consultants and the foreigncontractor. The conflict initially arose over payments due to the contractorunder a previous highway project, but it also included the contractor'sconstruction methods and procedures.

2.27 Financial problems - both on the side of the contractor and thatof the borrower - had considerable impact in delaying completion of physicalcomponents. At least a dozen projects reviewed suffered from contractorundercapitalization, bankruptcy or related problems which were sometimescaused or exacerbated by inflation, and an almost equal number suffered fromthe borrower's financial constraints in the way of insufficient counterpartfunding; again sometimes aggravated by inflation. Thus, about two-thirds ofthe 32 projects in this section encountered some form of financial hardship.

2.28 Most financial problems occurred with civil works contractors.The case of a port project in the Philippines is interesting because itdemonstrates the effect of internal governmental changes on the privatesector's involvement with the project. In this case one of the contractorsdid not receive the necessary "work commencement order" from the government intime, nor could he find a bank to loan him the money needed to take an optionhe held on a dredge or to conclude an agreement with the subcontractor. In afisheries project in Indonesia, boat construction was delayed for up to oneyear because of the contractor's financial problems, in addition to otherfactors. Affected by high inflation, several contractors went bankrupt in theBihar Market project in India and the work had to be retendered, contributingto delays of between one and three years in the completion of markets.

2.29 It is interesting to note that all but five of the 32 projectswith civil works components were also delayed in the start-up phase inletting contracts or in the hiring of consultants, and half of those 27 hadsustained both types of earlier delays. This suggests that delays are seldomthe result of a single cause, and that one delay may have a cumulative effectleading to further delays later in implementation.

(ii) Technical Assistance and Studies

2.30 About four-fifths of the 42 cases had some technical assistancecomponent, usually in the form of experts, training or studies. Twenty-three

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of these experienced delays in the completion of their technical assistance

components. In the remaining cases the technical assistance was either

implemented in a timely fashion or not implemented at all.

2.31 The technical assistance or software components were usually not

on the critical path of project implementation. These were often institution

building efforts, and in some cases where feasibility studies were carried

out, were not pertinent to the concerned project but were directed towards

future projects. In some other cases they were tangential to or dependent

upon the completion of civil works, as in evaluative studies [India, Bihar

Markets; Turkey, Fruits and Vegetables; Brazil, Santos Port]. In two cases

delays in technical assistance or studies resulted in actual delays in project

implementation. In an agricultural project in Sudan, research on a new crop

which the project was to process was not completed before the project was

approved and was thereafter slower t4an anticipated, resulting in delay and a

substantial change in the project. In the highway project in Iran, a study of

maintenance practices, program and organization, and the adoption of the

proposed plan, were made a condition of disbursement on the road maintenance

equipment component. Heavy delays ensued and the matter was finally resolved

by a flexible response to the situation on the Bank's part.

2.32 From a review of 23 cases of delays in technical assitance compo-

nents, an unclear understanding of or lack of commitment to the purposes of

the study on the part of both Bank and borrower emerges as a primary reason

for delay. For instance, in at least two projects studies were delayed when

the terms of reference were changed after the project had become effective.

In cases where the borrower had initially resisted hiring expatriate experts,

there were ensuing problems over the quality of the work or continuity or

sensitivity of those hired. Finally, studies were delayed or not carried out

in several cases because the borrower did not accept their format or had not

supported them in the first place, or because counterpart funding or staff

were not forthcoming.

2.33 In some cases Bank staff appear to have contributed to delaying

technical assistance either by overestimating the capacity of a certain agency

to undertake the study, or in trying to override strong borrower objections,

or by not following up sufficiently closely on the fulfillment of covenants

covering technical assistance.

(iii) Beneficiary Response

2.34 In 14 of the 42 projects the physical completion of the project

or the achievement of its objectives depended upon actions by end users.

These projects required a predicted response by a target group for the use of

credit, water, land or equipment for their success. Eleven of the 14 were

delayed because the beneficiaries did not respond -as anticipated: of these

one was in urban development, one in public utilities (power) and nine were in

agriculture.

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2.35 Most problems stemmed from an overestimation of the risk-takingabilities of the target population, or a misunderstanding of their needs, or acombination of both. Unforeseeable events sometimes contributed to a slowbeneficiary response. In five projects [Senegal, Sites and Services; Ghana,Cocoa; Ghana, Fisheries; Turkey, Fruit and Vegetables; and Guyana, Livestock]credit components were poorly suited to the subborrower's capacity and theon-lending institutions were not particularly sympathetic to their needs.Stiff loan conditions, high interest rates, or a high deposit or downpaymentrequirement deterred many potential clients. The fact that no demonstrationmodel was available also adversely affected these projects, as there was noway of proving the attractiveness of the investment. In some cases, particu-larly Ghana Cocoa and Guyana Livestock, potential beneficiaries lacked confi-dence in cooperatives which were key organizational units in these projects.

2.36 In the Philippines Rice P.ocessing project (where farmers preferredto invest in the rehabilitation of old mills rather than the construction ofnew ones) and in Ghana Fisheries (where fishermen preferred to invest inhigher powered vessels than those provided under the project) the projectdesign ignored or misread local conditions and the intentions and desires ofthe end users. In the former case, other aggravating factors included a shifttowards maize processing and storage in response to Government encouragement,a poor investment climate, and poor rice crops due to bad weather.

C. Summary

2.37 There was a heavy concentration of delays in the start-up period.Within this phase, the most common points of delay were in the letting ofcontracts, in establishing and staffing the project organization, and inhiring consultants. Delays in execution involved civil works and the deliveryand installation of equipment, and in adjusting to incorrectly estimatedbeneficiary response. The majority of technical assistance components werenot implemented on schedule.

2.38 Where problems occurred in the start-up phase, generally there wererelated problems in subsequent project execution. Thus, a problem over hiringconsultants was later reflected in civil works delays, and problems in re-cruiting staff were reflected in maintaining them. Such redurrence pointed tounderlying causes, whether they arose from deficiencies in project preparationand design and lack of full borrower commitment to the project objectives, orfrom the policy and institutional environment in which those projects werelocated.

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CHAPTER III

UNDERLYING CAUSES FOR DELAYS

3.01 In this chapter underlying causes for the observed slow implementa-

tion experience are identified from the case material; to provide a basis for

comparison, this has been supplemented by a review of project performance

audit reports on 22 projects initiated in the same period but completed with

time overruns of less than 20%.l/

3.02 Broadly speaking, underlying causes may be of two kinds. One group

may be described as comprising exogenous factors, mostly outside the control

of the borrower and the Bank. While these factors can play an important role

in causing delays in project implgmentation, our primary focus is on the

second group of causes which offer scope for correction. A classification of

factors responsible for delay in each project reviewed is set out in Appendix

Table VIII.

A. Exogenous Factors

Inflation

3.03 The Bank normally provides for the impact of inflation on project

costs by including price contingencies in its estimates of project costs and

project financing plans. The provision for price contingencies reflects

assumptions about inflation which are kept under frequent review. The infla-

tionary forces which erupted in the early 1970s could not, however, have been

foreseen and price contingencies in the loans approved for projects which were

under implementation at this time inevitably turned out to be grossly inade-

quate. The burden of inflation and its many adverse effects on project

implementation were borne almost fully by the borrowers.

3.04 Inflation was a contributing factor to delays found in all civil

works contracts, a factor in contractor bankruptcy, the prime factor in

material shortages - especially the shortage of cement - and the overriding

factor in delays in letting contracts in five cases. It was the cause of

prohibitively high contractors' bids in the Cameroon Road project; prolonged

bid evaluation and rebidding in the procurement of equipment for transmission

lines in the India Power project; prolonged bid evaluation and rebidding also

in the procurement of equipment from abroad in two agricultural projects in

India and the Philippines; and in the renegotiation of overseas suppliers'

contracts in the Pakistan Power project.

1/ These 22 projects are listed in Appendix Table VII.

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3.05 The severity of inflation and its ramifications tested the bor-rowers' commitment to the project in a manner that few other developments did.Notwithstanding borrowers' disagreements with the Bank on and lack of enthu-siasm for specific project features in particular cases, borrowers financedall those incremental project costs which were not offset by reducing thescope of the project. There was only one exception in the sample (Cameroon,Roads], where the Bank provided supplementary finance to help cover these

* incremental project costs.

* 3.06 In five projects, borrowers absorbed large increases in their shareof project costs without curtailing any very important elements of the projectconcerned. These included a port project where the Bank's share of costsdropped from a planned 57% to about 20% [Brazil], and another port projectwhere civil works costs in an oil-producing country [Nigeria] increasedfourfold from a planned $50 million ;o more than $200 million. In the ColombiaWater project the Bank's share of costs was reduced from 74% at appraisal to23%, in the Guyana Road project the Bank's share fell from 68% to 35%, againdue to inflation. In an education project in Iran the Bank's share of totalcosts declined from a planned 54% to less than 8%. In one of the two urbanprojects included in the study [Jamaica] the flow of local finance was main-tained despite severe budgetary cutbacks elsewhere and a greatly extendedimplementation process.

3.07 There were several cases where borrower or client support for allaspects of the project studied was less than wholehearted. However, anincrease in costs does not appear to have been a prime reason for weakeningborrower support, despite the fact that these cases suffered unusually lengthyimplementation periods at a time of rapid inflation.

Other Exogenous Factors

3.08 In 19 of the 42 cases there were delays in implementation dueto other causes which could not have been foreseen and which were beyond thecontrol of the Bank and/or the borrower. In only one case [Turkey], a changeof government led to significantly changed official attitudes towards Bank-financed projects. In five cases, projects were disrupted by severe dis-turbances, strikes or the aftermath of wars [Jamaica, Sites and Services;Mauritania, Livestock; Pakistan, WAPDA; Malaysia, Power; and Bangladesh,Highways]. In two cases, political actions taken by the borrower delayedproject implementation: a new land reform program which grew out of aradical change of government affected directly one of the agricultural proj-ects in Ethiopia, and legal action against civil servants caused delays in theimplementation of a Bank-financed road project in Tanzania. Finally, 10projects (including five already mentioned under this category) were affectedby exceptionally bad weather.

B. Other Causes

Project Preparation and Design

3.09 The process of preparation can be described in terms of the elementswhich, taken together, contribute to a realistic project proposal. One major

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element is technical 'preparation which includes the satisfactory completion of

such tasks as engineering studies, land and crop surveys, sociological analy-

sis, marketing studies, as well as analyses of the sector policies needed and

institutions expected to implement the project. A second major element is the

specific design of the project itself. This comprises a structure of tasks

to be performed and the arrangement, timing and sequencing for their perfor-

mance. This design may be developed in parallel with the technical prepara-

tion and certainly must relate to it closely at various points. A third

element in the preparation process is the involvement and commitment of the

borrower and, in several cases, of the beneficiaries. This is a more diffi-

cult element to assess but in our view, substantiated by the case histories,

it is extremely important. The extent to which the borrower is involved in

the preparation and design of the project appears to have important implica-

tions for the course of project implementation.

3.10 We have identified problIs attributable to deficiencies in some

phase of preparation as important causes for delay in 35 out of the 42 cases

studied. Findings are summarized in Table 5. In many of the 35 cases changes

causing delay had to be made in the original projects in order to carry

through their implementation. Most of these changes occurred in three sectors:

15 of the 17 agricultural projects, all five education projects, and both

urban development projects; all of them complex, people-oriented sectors.

(i) Technical Preparation

3.11 There are many examples of deficient technical preparation resulting

in delayed project execution. In the Santos Port project in Brazil the state

of engineering work at effectiveness led to subsequent delay. The project,

which included major foundation work, earth fill and tunnel and bridge works,

was appraised on the basis of a feasibility study before preliminary engineer-

ing had been done. This led to a serious underestimation of both cost and

time. In the Sudan Second Mechanized Farming project, the preparation for the

introduction of a new crop - which the project had been designed to process -

was incomplete when the credit was made and progress thereafter was slow,

resulting in delay and a substantial change in the project. The project

included finance for an expanded research program which would develop a

sorghum variety acceptable to local tastes that could be harvested by combine.

The program did not make the expected progress and the project grew 20%

combineable and 80% hand-harvested sorghum, just the reverse of the propor-

tions expected at appraisal. The combine harvesters envisaged under the

project were never needed and never bought.

3.12 In other cases the deficiencies arose from an incorrect assessment

of the working of local laws and institutions, or the behavior of project

beneficiaries.l/ Underestimation of the time required for the process of land

1/ Including an inaccurate assessment of the possibilities of change result-

ing from the project.

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Table 5: PROJECT PREPARATION ASPECTS WHEREDEFICIENCIES CONTRIBUTED TO IMPLEMENTATION DELAYS

Technical OrganizationPreparation of Project Borrower

Subsector/Project and Designa Management/b Involvement/c

I. AGRICULTURE AND RURAL DEVELOPmENT

a. Agriculture

Guyana Livestock - Cr. 221 xx -Turkey Livestock II -:Cr. 330 xx xTurkey Fruits & Vegetables - Ln. 762/

Cr. 257 xx x xGreece Groundwater - Ln. 754 x -Ghana Eastern Region Cocoa - Cr. 205 xx x xMauritania Livestock - Cr. 273 x xxEthiopia Coffee Processing - Cr. 290 x - xPhilippine Rice Processing - Ln. 720 xx x xIndia Wheat Storage - Cr. 267 x - xIndia Bihar Markets - Cr. 294 XX x

b. Rural Development

Brazil Alto Turi - Ln. 853 xx xSudan II Mechanized Farming - Cr. 311 xx x

c. Other Agriculture

Spain Agricultural Research - La. 768 x - xxGhana Fisheries - Cr. 163 xx x xIndonesia Fisheries - Cr. 211 x x x

II. EDUCATION

Turkey Education - Lu. 748 - - xIran Education - Ln. 718 x x xZaire Education - Cr. 272 XX xMalaysia Education - La. 810 xx - xxThailand Education - Ln. 822 xx -

III. URBAN DEVELOPMENT

Jamaica Sites & Services - LU. 1003 xx xx -Senegal Sites & Services - Cr. 336 xx x xx

IV. TRANSPORTATION

a. Highways

Guyana Highways - Cr. 301 xx - xIran Road V - LUn. 697 x -Tanzania Highways III - Cr. 265 x -Nepal Highways I - Cr. 223 x xBangladesh Highways III - Cr. 408 - x -

b. Other Transaortation

Brazil Santos Port - Lu. 756 x - -Afghanistan Aviation - Cr. 374 x x xxPhilippine Port II - Ln. 939 x - -

V. PUBLIC UTILITIES

a. Water

Colombia-Bogota Water Supply - Lu. 741 - x -Yugoslavia lBAR Multipurpose - Ln. 777 x xx -

b. Power

Philippine Power V - Cr. 296/Ln. 809 - x -Pakistan WAPDA Power - Cr. 213 - x -Turkey Elbistan Lignite Mine & Power

- Lu. 1023 x - xTOTAL 30 20 16

/a Technical preparation and design of implementation--structure of tasks to beundertaken.

/b Organization and location of responsibility for management, provision forstaffing of implementation unit, etc.

ic Borrower participation during preparation including matters of project content -and procedures.

xx Source of major problem.

Source: Appendix Table VIII

-4 -

acquisition is an example of the first. In the Bihar Markets project in India

only nine months were allowed for acquiring land from a large number of

private owners. In the event, this turned out to be a very unrealistic

estimate. There were difficulties over the price to be paid for the land,

many smallholders were involved and a lengthy appeal process was set in

motion. This resulted in a stay of acquisition and in delays which ranged

from one to four years.

3.13 The Bihar Markets project also provides an example of delayed

completion because the local markets' situation and the project beneficiaries'

response were not clearly anticipated by both the Bank and the borrower.

The project proposal assumed that traders would profit by moving to the

new market sites because, although their gross income would be reduced, their

operating cost would be lower. This view was not shared by the traders them-

selves. At the time of the OED mission, the traders had shifted into only 6

of the 19 markets and that after Teing forced to do so by being refused

renewal of trading licenses for operations outside the market locations. At

one market this move took 18 months from completion of the market yard and was

only achieved after administrative action had been taken against the 10

largest traders.l/

3.14 Another example of insufficient understanding of local conditions

and misjudged beneficiary response is the Guyana Livestock project. In this

case the appraisers expected farmers to join cooperatives and form large

ranches under professional management. Commercial banks were to provide the

necessary credit. The farmers did not respond as expected. After about five

years of promotional work it was finally recognized that the project was based

on incorrect premises and that there was no significant demand for credit from

these farmers - at least not for the purposes of joining the proposed type of

cooperatives. The project therefore had to be substantially redesigned.

3.15 In a rice processing project in the Philippines, again, lack of

local knowledge and inadequate technical preparation contributed to unworkable

design. The project was prepared by a foreign engineering firm. In addition

to setting up overoptimistic projections of paddy production and unrealistic

targets for construction, the firm based the designs for rice storage on wheat

and corn facilities used in the United States which turned out to be too large

and capital-intensive for the Philippines. As a consequence the project scope

had to be changed considerably during implementation, from building new to

rehabilitating old mills, from storing rice to storing maize, and from exclud-

ing to including established producers.

1/ The Appraisal Report, however, did recognize the uncertinty of timing in

making the marketing arrangements fully effective, and a time delay had

been taken into account in the rate of return calculations.

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(ii) Project Design

3.16 Preparation takes concrete form in the design of the project. Allproblems of design cannot be foreseen, especially in the case of projects innew fields or with new borrowers. Certain elements may be omitted, proceduresor project components may be included which prove to be unworkable in prac-tice, or the structure of tasks and their interrelations may be unusuallysensitive to delay at critical points. Some of the projects which suffered

* from these deficiencies appear, in retrospect, to have been better designed aspilot efforts: to test the technical package, institutional capability, orbeneficiary need and response before proceeding with a full-fledged project.As has been stressed in other recent OED papers, pilot efforts can also beused as a basis for agreeing with the borrower on certain sector policies andfor setting in motion systematic development of local institutional capabilityand the identification of external assistance needs.

3.17 The Bank's first sites and services project in Senegal was apioneering attempt to design a project to benefit the urban poor. The projectprovided for the preparation of serviced sites on which low-income familiescould construct inexpensive dwellings, but it did not include a provision forcredit for the settlers. This proved to be a crucial element for projectimplementation and its absence became one of the causes for delay. In anothercase [Turkey, Livestock] the critical element was clearly identified but stillomitted. It was recognized that the execution of the project depended uponmaintaining adequate technical personnel to evaluate the subprojects, and thatTurkish laws controlling salaries had kept the salaries of middle and higherlevel civil servants from rising. For these reasons the Bank proposed thesetting up of a Special Operations Fund (SOF) to provide fringe benefits tothe project staff. However, since neither the Bank nor borrower was willingto meet the prefunding commitment, prefunding the SOF was dropped from thecredit agreement, the Fund never became operational, and problems with staff-ing did result. In this case a technically sound project was weakened by lackof support for a critical institutional element.

3.18 The Guyana Livestock project suffered not only from poor technicalpreparation but also from having procedures included that proved to be un-workable and unsuited for local conditions. Project documents specified thatland surveying be done by aerial methods and land clearing by chaining.Neither practice had been used in Guyana and neither was successfully appliedin this case; after significant delay both requirements were dropped. Otherexamples of procedures inappropriate to local conditions occurred in con-nection with procurement practices. For the wells program of the MauritaniaLivestock project, calls for tender were advertised locally and on a limitedscale internationally following the normal practice for ICB. The bids re-ceived were not accepted by the Bank. International firms seemed disinter-ested in rehabilitating wells which were widely dispersed over a large area,and local firms did not have the capacity for major well construction work.Eventually the Bank accepted the limited suitability of the wells program forcontract work and agreed to its bein& carried out by force account.

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3.19 Finally, there are examples of designs which were unusually sensi-

tive to delay. The crucial role of land acquisition in the Bihar Markets

project has already been mentioned. The Thailand Education project was also

subject to procedural delays that were not foreseen. It was designed to be

carried out in a succession of steps involving the planning of a new campus,

the design of the new facilities and their construction. At each step the

process encountered delay in reaching agreement with planners, architects,

engineers and contractors respectively. Each step was dependent on the

preceding one; all were delayed. While the approach adopted might have

appeared at the time to be dictated by prudence, the question that arises in

retrospect is whether the project should not have been undertaken in two

separate stages, or financing provided to complete the design work before the

main loan was made. Changes subsequently made in Bank procedures, including

financing being provided under the project preparation facility, are expected

to help remedy such problems.

3.20 A somewhat similar problem of coordination arose in the Zaire

Education project, where planning and supervision of construction of the

schools were to be divided between the design unit in the Ministry of Educa-

tion and consulting firms, but the exact division of tasks and responsibili-

ties was not specified. The consulting firm objected to the proposed division

of labor, and negotiations were delayed. There were subsequent coordination

problems and disagreements over the consultant's designs.

(iii) Institutional Arrangements

3.21 The problem of project management is a recurring theme in most of

the cases reviewed; conversely, in experience with the non-delayed cases

selected from the audits, effective management was repeatedly mentioned as the

single most important reason for project success. In the context of defi-

ciencies of project preparation as they relate to implementation delays,

institutional arrangements are a crucial element of project design. A satis-

factory design must be within the capacity on the ground to carry it out.

3.22. One of the following situations occurred in most of the delayed

cases in this sample: (a) the implementing agency was not adequately staffed

by the time of loan effectiveness or did not subsequently have the level of

competence required by the project; (b) the administrative authority was

divided between at least two government agencies, with insufficiently delin-

eated lines of responsibility and coordination; and (c) an entirely new

project unit was created specifically for the project and was either im-

properly located for efficient project implementation or lacked the power to

make itself effective.

3.23 The difficulties of staffing implementing agencies or project

units have come up at various points in this report-as well as in a variety of

other documents produced by OED. Invariably they have involved insufficient

availability of trained staff and issues of pay and job security which could

only be corrected by systematic effort and over a period of time, supported by

appropriate policy changes. Where they caused implementation delays in the

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present group of pro'jects, they conveyed either misjudgment of institutionalcapability or a failure to establish an effective institution in a timelyfashion. The Jamaica Sites and Services project is an example of the latter,in which the failure to establish an institution with appropriate adminis-trative, operational, and financial autonomy from the Ministry of Housing wasfor a time a major factor inhibiting effective execution of the project.There were cases where the institutional design of the project called forcoordination among several agencies, and such coordination suffered from alack of designated or de facto project authority [Ghana, Fisheries; Yugoslavia,IBAR; Mauritania, Livestock]. The Mauritania project particularly' sufferedfrom a lack of central project authority. Although the project was tech-nically under the jurisdiction of one ministry, its largest part was carriedout by another, while other components were implemented by still other depart-ments. Even a coordinating commission of various ministerial representativeswas not very effective in facilitating implementation.

3.24 A frequent Bank response to a situation of general institutionalinsufficiency is to design a separate unit for the implementation of a spe-cific project or, in some cases, a succession of them. This arrangement canand often does h'ave the merit of being effective in the short term; byitself, however, i-t does little to develop domestic institutional capabilitiesin the longer run. In respect of individual projects, special units alreadyin existence and charged with sole responsibility for management are morereadily effective than new ones. Already established units are however likelyto be available only in repeater projects. In 10 of the 17 agriculturalprojects included in the present sample, an entirely new project implementa-tion unit was created as part of the project design; the same was true for thefive education projects and the two urban projects. The Bank is now increas-ingly tending to work through existing organizational structures in itsprojects, promoting and supporting improvement as necessary. Training oflocal staff in implementing agencies has also been increased.

3.25 Implementation units are also not immune from certain disabilitiesof other institutional arrangements. In the cases reviewed, management dif-ficulties frequently arose from the position of the implementation unit in theborrower's administrative system. In three cases [Ghana, Cocoa; Afghanistan,Aviation; Turkey, Fruits and Vegetables] the location of the unit provedunsatisfactory, and had to be moved two, three and four times respectively.In some cases the unit lacked the power to coordinate the activities of othersor the autonomy to act on its own [Jamaica, Sites and Services; Brazil, AltoTuril.

3.26 In addition to the problems inherent in the operations of newproject units, there were a number of cases where the administrative capacityof a unit which had performed well on an initial project was overestimatedfor a subsequent one [Sudan, Mechanized Farming; Colombia, Water]. In SudanMechanized Farming II insufficient staff incentives, coupled with a rapidoverextension of the project unit's responsibility within the Government, ledto ineffective management of the project.

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(iv) Borrower Involvement and Responsibility

3.27 There are examples in these cases where the borrower was not pre-

pared to carry out the project in all respects as set forth in the Project

Agreement. In some cases this was due to frequent changes in borrower staff

or out of insufficient understanding of what was involved; in others, out of

disagreement with project elements and associated Bank policies and proce-

dures. The latter, in turn, often reflected insufficient involvement of the

borrower with project preparation and design.

3.28 In some of the cases reviewed, projects were prepared by consultants

and/or Bank staff with very little borrower involvement. In some of these

instances the borrower did not develop a strong position on project design but

in others he did, and on several occasions his position was not accepted by

the Bank or incorporated into the project. Still, he did not change his view

as subsequent events showed and thisr unresolved difference became a cause for

delay.

3.29 There is no doubt that loan agreements generally reflect compromises

and are mutually agreed; borrowers, like the Bank, are obliged to carry them

out. Any initial borrower reservations about project components may be

grounds for seeking mutually acceptable change later but not for ignoring

agreements already reached. What also concerns us, however, is the nature of

the Bank-borrower relationship in furthering development, the lead that the

Bank not infrequently takes in that relationship, and the resulting obligation

to encourage active borrower participation in the project process if the basis

for full borrower commitment to a project, as distinct from acquiescence, is

to be laid and local capability developed. The cases mentioned here do not

seem to have been grounded in such an active relationship.

3.30 An agricultural research project in Spain was approved without all

borrower agencies involved being committed to it. Its implementation subse-

quently encountered numerous problems attributable to this original lack of

interest in the project as designed. An aviation project in Afghanistan was

based on a UNDP-financed study which was first presented to the Afghan au-

thorities at the time a mission visited the country to appraise the project.

The Afghans did not agree with all the recommendations of the study nor were

they satisfied with the changes made in the appraisal process, and unresolved

differences were a cause of subsequent delays. In the Wheat Storage project

in India, differences over two procurement provisions were not settled before

effectiveness and contributed to delays later on. In other cases there was

reluctance to hire foreign consultants or use ICB procedures which affected

the speed of implementation.

3.31 Among the cases of Bank and borrower working at cross purposes was

the urban project in Senegal (also see next section, Country Factors). The

Bank had sought to design a project which would benefit the urban poor. This

involved a more drastic reform than the borrower was willing to endorse at the

time. Although the project unit attempted to carry out the project as it was

designed and agreed upon, the parent agency and the Government preferred to

follow the traditional policy of building middle-income housing. Despite

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repeated efforts by Bank staff, the basic problems remained unresolved untillate 1978, when a new Minister or Urbanism, who favored the original projectgoals, assumed office.

3.32 The importance of borrower involvement in preparation as a precondi-tion to his commitment to the project design and its implementation, waspointed out in the earlier OED study on delays in project preparation.1/ More

* recently the 0ED study on education 2/ and the Fifth Annual Review of ProjectPerformance Audit Results 3/ have strongly stressed the desirability of fullerborrower participation in design and preparation, in the interest of bothbetter implementation and the longer term development of borrower capability,to permit replication of projects.

C. Country Factors

3.33 The statistical analysis bf disbursements (paras. 1.08 and 1.09)indicated a heavy incidence of slow projects in seven countries. Since thissmall group accounts for a large concentration of Bank-supported projects, andsome of the countries in the group are experienced borrowers, a special reviewof delayed projects in this group should be useful. A detailed analysis hasnot been possible within the scope of this review. On the basis of availablecase material, a brief analysis is presented here in respect of only twocountries, Brazil and Turkey. The Bank is addressing this problem throughcountry implementation reviews.

3.34 Reasons for slow project implementation 4/ in Brazil included (a)insufficient borrower participation in project preparation and design, (b)

1/ "Delays in Project Preparation", February 18, 1976, SecM76-100).

2/ "Review of Bank Operations in the Education Sector", December 29, 1978,SecM79-3.

3/ "Fifth Annual Review of Project Performance Audit Results", August 27,1979, R79-229.

4/ Some projects in the Bank's larger borrowers are slow in relation to thesector or subsector average either because of their larger size orgreater complexity. They are not delayed projects (para. 9). Examplesof these were provided by several large hydroelectric projects in Brazil.These were considerably larger and more complex than the average projectof this type financed by the Bank during the period of our sample.During that period, unlike the Brazilian projects, not all hydroelectricprojects included construction of dams; some were run of the river andsome for the expansion of existing plants. A steel mill project includedin the group provides a similar example. This was also a large andcomplex project in relation to other industrial projects financed bythe Bank and the time required for its completion was not unduly exces-sive in terms of the task undertaken. The Brazilian hydroelectric proj-ects, and the steel mill project come out as being especially slow in.comparison to other and simpler projects which dominate the norm used forpurposes of comparison.

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special complications of implementing projects within a federal system, (c)

particular procedures for procurement used in Brazil, and (d) the nature of

the projects themselves. Not all factors affected all projects, but there are

examples of the effect of each among the slower disbursing projects.

3.35 Effective project preparation and implementation require borrower

participation and commitment, especially when the borrower is strong and

capable and is disinclined to depend on foreign experts for technical or

policy advice. In two of the Brazilian cases studied, Santos Port and Alto

Turi Settlement, the borrower was not strongly involved in project prepara-

tion. In Santos Port the loan to support a large and complex project was made

on the basis of a feasibility study. This feasibility study was not the one

prepared by the Government's consultant, or submitted by the Government, or

the one which the mission had expected to appraise. The proposal adopted by

the appraisal mission had been previously rejected by the Brazilian authori-

ties. No engineering was available,"although major foundation, earth filling,

tunnel and bridge works were to be included, and the terrain was known to be

difficult. The Government's consultant had advised against the proposal

contained in this study and had recommended that further extensive studies be

undertaken before proceeding with development. As it was, a project was

adopted to which the Government was not strongly committed, and for which

engineering was not available and knowledge of actual field conditions was

insufficient at the time the loan was made. Appraisal quality suffered as a

result and project costs and implementation time were seriously underesti-

mated. A full reappraisal, accompanied by a one-year suspension of project

implementation, was required as soon as the engineering consultant's cost

estimates - twice as large as the appraisal mission's - became known. Adding

to the difficulties were the large size and complexity of the project.

3.36 Among the multiplicity of causes affecting the Alto Turi Settlement

project, again, the project was designed by consultants and a Bank mission and

represented a departure from the accepted Government strategy in its emphasis

on assistance to small borrowers. The case study seems to indicate insuf-

ficient understanding with the Brazilian authorities on the project's exact

nature and the role it was supposed to play in the development of the Amazonia.

While the situation appeared to call for a strong role on the part of the

Programs staff in developing such an understanding, this appears to have been

absent and none of the three staff members or the two consultants in the

appraisal mission had been to Brazil before.

3.37 Institutional complexity added to the difficulties. The project

was originally conceived by a regional development agency and the Bank, and

its details were developed by consultants and Bank staff. The regional

authority set up a subsidiary colonization company to implement the project.

incLuded as shareholders of the company were the state government of the

region and the regional bank. Outside of the regional organization but vital

to the implementation of the project were the central bank, which supplied the

operating funds for the regional authority and had to appraise and approve the

project's credit component, and the federal land settlement institute which

had to approve all land settlement projects in the country. The Central Bank

- 31 -

could not release on-farm credit funds for the project until the land settle-ment institute had carried out a technical appraisal of the project. Therewere political sensitivities between the federal agency and the regionaldevelopment agency. The Bank focussed attention on the colonization companyas the implementing agency; the relationships among the agencies were notclearly seen; and the other relevant agencies were not brought into thepreparation discussions. As a result, the project agreements proved to beinadequate to ensure prompt implementation. The land settlement institutetook its time in approving the settlement scheme, with consequent delays inthe release of funds for on-farm credit. This complex and innovative projectneeded wide support and interagency cooperation; these were missing.

3.38 Finally, the three-envelope system used in Brazil, and describedelsewhere in the report (see footnote to para. 2.09), contributed to thelonger time taken for procurement than had been anticipated by the appraisalmission. In our sample, the system contributed especially to a slower im-plementation and rate of disbursement on the Santos Port project.

3.39 There were four projects in Turkey among the 42 delayed casesexamined which eyperienced somewhat similar problems, especially a generalpattern of borrower disagreement with procedures and required actions includedin project agreements. In all four cases the borrower was disinclined to useforeign experts, had difficulty in following Bank procedures, and encounteredserious problems in meeting the staffing demands of the projects. Internallegislative requirements and institutional complexity also contributed todelays.

3.40 The case of the Elbistan Lignite Mine and Power Project is illus-trative. The actual engineering design of the project was satisfactory, butimplementation was contingent upon major changes in the power sector includingtariff increases and reorganization. Staff who appraised the project antici-pated the heavy demands on supervision that would be required but the decisionwas made to proceed with the project. There was an expectation that theproject would strengthen the operations of the sector. Problems began soonafter the loan was made. It was delayed two years in reaching effectivenessbecause the borrower did not increase the tariffs as agreed during negotia-tions, seeing a conflict with larger economic policies which were aimed atcontaining inflation. The tariff issue was never completely resolved; theBank agreed to proceed with the loan on the basis of the borrower agreeing hewould make every effort to raise the tariffs.

3.41 A second problem arose over the role of the design consultant.The project involved some complex construction work and the Bank insisted thatthe design consultant, a foreigner, be made a member of the project co-ordinating committee. The borrower did not involve him in this committee norwas he given any direct authority over the contractor, and the consultanteventually refused to be responsible for the outcome of his designs.

3.42 Finally, there was considerable difficulty in adhering to Bankprocedures. Some government officials interviewed expressed a belief that theBank did not sufficiently understand the context in which problems must beresolved and the practical constraints faced by the authorities. Specific

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examples relate to the Bank's involvement in staffing and the revaluation of

the assets of the Turkish Electricity Authority (TEK) which was one of the

borrowers. On revaluation of assets, for instance, it was stated that,

although not inconsistent with' Turkish laws and practices, revaluation did

not fit easily into -the Turkish context and TEK was the only public sector

undertaking required to revalue its assets. It was not seen as being possible

to approach the problems of-the borrowers in this case in isolation from the

entire public sector, Many changes required approval by the Government and

Parliament and had to be viewed against a background of sensitive political

developments and a period of growing economic difficulties. Turkish au-

thorities recognized the long-term value of the institutional and other

improvements advocated by the Bank. The structural problems were also known

to the Bank through its extensive activity in the country, and the problems

were foreseen and explicitly addressed. The basic difference in approach

concerned the time horizon over which required changes could realistically be

brought about.

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CHAPTER IV

ADJUSTMENTS DURING IMPLEMENTATION

4.01 Some adjustments in the project are almost inherent in the processof implementation. These adjustments can be large or small, and within theproject design and ..scope or in the surrounding conditions. They may berequired by deficiencies in the project design which came to light only duringimplementation, by imperfect understandings between the Bank and the borrower,or by changed external circumstances.

4.02 What is specially important from our point of view here is themagnitude of the change involved and its timing, both of which carry implica-tions of delay and cost.

Project Environment

4.03 In some projects delays have been caused by market forces or by achange in sector policy affecting producer prices. The Ethiopia Coffee Proc-essing project was appraised on the assumption that the price differentialbetween washed and unwashed coffee would justify investment in, or rehabili-tation of, coffee washing machines. For the first two years after loaneffectiveness the differential was too narrow; there was no demand forloans from the coffee producers. Then the spread widened and a seriouslydelayed project, based on incorrect price estimates, began to realize itsobjectives. In the meantime, however, the scope of the project had beenreduced as a result of increased costs caused by the delay.

4.04 Among the various problems that afflicted the Ghana Cocoa project,low producer price of cocoa was identified as a major element in the projectnot achieving its objectives. Farmers were much more interested in growingfoodgrains than cocoa, and subsidized inputs to the Ghanaian cocoa farmer werefar from compensating for inadequate and controlled producer price. Although,following high-level discussions between the Bank and Ghanaian authorities in1977 some increase was allowed in the producer price - some six years afterthe loan became effective - the extent of farmer participation envisaged inthe project remained unrealistic. While it is recognized that the Bank andthe borrower were preoccupied by a variety of other project problems, anunderstanding on the pricing policy should probably have been a precondition tothis loan.

Change in Beneficiaries

4.05 Changes in projects made during implementation sometimes involvedchanging project beneficiaries. While such a change may help restore eco-nomic benefits, their distribution is likely to be changed. In two cases,for example, [Philippines, Rice Processing; Turkey, Fruits and Vegetables]project beneficiaries were initially limited to new producers; establishedproducers were not made eligible. . The demand for new equipment, however,came very, largely from established producers who wanted to expand or modernize

-34 -

their operations. In the Philippines project, further, the demand for rice

storage facilities failed to develop as expected but there was a substantial

demand for the storage of maize.

4.06 The Philippines project has been delayed for over four years.

Within a year of the Philippines loan becoming effective, the Bank was aware

of design deficiencies, and :the Loan Agreement was revised to provide for the

demand for improvements and additions to existing storage and milling facili-

ties. Within a year thereafter it was noticed by the Bank that there was a

demand for processing and storage facilities for grains other than rice and,

two years after the previous amendment to the Loan Agreement, a further change

was made to provide for demand for maize processing and storage facilities.

Project implementation proceeded satisfactorily thereafter.

4.07 The Turkey Fruits and Vegetables project has been delayed about five

years in respect of the original I'oan (this was followed by a credit). A

supervision mission three years after loan effectiveness was specially

directed to identify the reasons for the slow disbursement 6f on-farm credit.

Changes were then introduced to allow provision of credit to old, existing

plantations as well as to new ones. Bureaucratic delays in the country caused

another year to pass before necessary changes were made effective.

4.08 While corrective action was taken in both cases, the problems origi-

nated in the project appraisal and design, and there appears to have been some

avoidable loss of time in correcting the design deficiencies.

Institutional Adjustment

4.09 Opportunities for adjustment occurred frequently in connection with

the project implementation units - their location, the degree of autonomy

granted to them, and their managerial strength. The relationship between the

Bank staff and these units was an important area of focus in the case studies

and there were several instances of action taken to increase the effectiveness

of the units, and some where no action occurred. The two urban projects

discussed below provide contrasting experience.

4.10 In the Jamaica Urban project, the implementation unit was located

in the Ministry of Housing but originally it had neither a separate accounting

system nor a salary scale attractive enough to permit staffing up to the

minimum level required. Through mid-1977, almost three years after the date

the loan became effective, the implementation unit had lost more of the

original professional staff than it had gained. Eventually these problems

were brought to the attention of senior officials in the borrowing government,

and the Bank suggested that the project implementation unit be moved to a

national housing corporation. Although the borrower decided against the

move, he did establish within the Ministry of Housing a separate accounting

system for the project implementation unit and a more attractive salary scale.

The unit is now reasonably staffed and adequately organized.

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4.11 The Jamaica Urban project was a first venture in a complicated newsocial sector in which the Bank and the borrower had little experience informulating or administering low-cost housing schemes. The preappraisal andappraisal missions had noted the relevant institutional weaknesses in theMinistry of Housing and had correctly identified the need to establish a unitfor project implementation. A small, enthusiastic ad hoc team, which laterbecame the core of the implementation unit, operated as a fairly cohesive unit

* in the early years and carried out good ground work for the project. Thisperformance understandably led to the assignment of the implementation respon-sibility to this unit before the details of its establishment and staffing hadbeen fully worked out.

4.12 In the Senegal Sites and Services project the implementation unitwas located in a ministry which, for the first five years of project implemen-tation, had no strong sense of involvement or participation in the project(para. 3.31). Again, there was n separate accounting system and staffchanges were frequent and disruptive. However, in this case there wereproblems stemming from a basic disagreement over project objectives andefforts were focussed on this issue rather than on strengthening the institu-tional arrangements. The physical components of the project are now expectedto be completed about three years behind schedule.

4.13 In two cases, India Bihar Markets and Thailand Education, high-levelcoordinating committees were established and gave impetus to projects whichhad become substantially delayed. In two other cases, there was in effect noproject implementation unit responsible for overall direction of the projectand this was a major source of delays. In the Mauritania Livestock project,the lack of a central project authority and the resulting coordination prob-lems were comprehensively reviewed within three years after loan effective-ness, when it was decided to appoint a full-time project coordinator tostrengthen project management. It was, however, another two years before theproject coordinator took up his assignment. His impact on project implementa-tion thereafter was significant. In the Ghana Fisheries project, there weremany disparate elements which were not easy to coordinate; basic flaws inproject design and preparation were not overcome, and some opportunities forcorrective action were missed.

Procurement of Goods and Services and Execution of Contracts

4.14 The process of procuring goods and services frequently takes longerthan expected (see Table 4). Problems sometimes arise from inflexibility andinconsistency in the application of Bank policies, occasional conflict withestablished local procedures, and the lack of familiarity of the borrower withBank procedures or his failure to accept or implement them. In a number ofcases studied Bank action was required and taken, with some delay, to dealwith procurement problems.

4.15 In two cases [Mauritania, Livestock; Guyana, Highways] the Bankfavored using contractors for civil works instead of force account; in bothcases the Bank adjusted its position in the face of practical difficulties andwithdrew its objection to force account. In the first case, involving the

- 36 -

construction of wells in the countryside, a major source of delays was the

time required to decide on the way the construction program should be exe-

cuted. A foreign contractor proved to lack the necessary knowledge of the

local situation to be effective. ' By the time the Bank agreed to force ac-

count, the project was almost two years behind schedule; construction costs

had risen and the wells construction program was reduced from 300 to 200 wells

to remain within planned budget allocations. In the Guyana case, a joint

venture of local contractors went bankrupt on the project. In addition to

accepting force account as the alternative, the Bank persuaded the borrower to

institute, with the help of consultants, a cost-effectiveness system within

the Highway Department that had potential benefits beyond the project itself.

The case studies conclude that most of the difficulties faced by these proj-

ects might have been foreseen at appraisal with a better appreciation of local

realities.

4.16 After contracts are let, the relationship of the Bank to problems

that arise is somewhat different. Consultants and contractors are employed by

the borrower and the opportunities for Bank assistance in dealing with prob-

lems that may arise must respect this relationship.

4.17 Within this important limitation, opportunities for remedial action

and adjustment do exist. The case studies disclosed instances where the Bank

staff supported the borrower in his action to dismiss a consultant whose

performance was not satisfactory or, after investigation, have supported

borrower resistance to the claims of a consultant for large increases in fees

due to changes in work orders. On the other hand, in a case involving a

dispute between an engineering consultant and a borrower in a small port

project (Philippines] , the Bank staff was unaware of the dispute and did not

contribute to settling it, although, considering the heavy delay that re-

sulted, the lack of awareness would appear to be surprising. The Bank appears

to have been more preoccupied with the institutional aspects of this rela-

tively small project than with the construction: an emphasis which seems to

have been somewhat misplaced considering the severe geological problems

encountered by the project and the direct and indirect cost of serious delays

in construction. The borrower's own bureaucratic procedures further contri-

buted to the delays.

Redesign of Project

4.18 In one way or another, most of the adjustments made during project

implementation affected some aspect of its design. Marginal changes were

often made in reasonable time, although there were cases where earlier reme-

dial action appears, in retrospect, to have been both desirable and feasible.

Major changes take longer to be effected, either because the project condi-

tions have changed radically or because the original design was innovative and

untested, resulting in both cases in a desire on the part of the Bank to be

cautious in undertaking major redesign of projects. The delay in making such

changes can be therefore heavy and their cost substantial.

- 37 -

4.19 An example of major change in design was the livestock project inGuyana developed by Bank staff, which promised the establishment of a com-pletely new capacity to export meat from a small and very poor country. Thedesign, which was contested within the Bank at the time of preparation, wasbased on unwarranted :assumptions and defective in various ways. Cattle wereto be prepared for the export market by cooperative groups of private ranch-ers, financed by local commercial banks. The ranchers resisted joining theproject; only two loans to them were ever made. As a prerequisite to theestablishment of project ranches, provision was made for land clearance by

* chaining. After attempts to get foreign or local contractors to undertakeland clearing by this method had failed, it was finally concluded that chain-ing was impractical in the wet, marshy lands of the project area.

4.20 None of the different project elements progressed according to planand almost all of them, with the sole exception of a study, had to be changedbefore the pace of implementation picked up. Major changes had to be made inthe project four years after loan effectiveness. The borrower noted that mostof the earlier supervision missions were more concerned with enforcing theproject as originally appraised and agreed than exploring the causes of delayand helping in rectifying them.

4.21 The project will never show an economic return commensurate withwhat was envisioned at the time of appraisal. What has emerged from thereview is essentially a new project, raising a question whether a pilotproject in the circumstances would not have been more advisable. The experi-ence of the most productive farms already operating in the country might haveprovided useful insights on ways to increase the productivity of otherswithout introducing entirely new and different approaches from abroad.

4.22 Another project which suffered heavy delays in almost all itsconstituent elements was the education project in Zaire. About four yearsafter loan effectiveness, the delays in implementation coupled with the strongprice escalation which had taken place, resulted in an estimated cost overrunof about 150%. This made it impossible to complete the eight schools en-visaged under the project without a very large additional contribution fromthe Government. It was consequently decided to cut the project by half; eventhe cost of the revised project was however 56% above the original costestimate, with the additional funds to be provided by the Government.

- 38 -

APPENDIX Table I

PATTERN OF DISBURSEMENTS BY-SECTOR AND SUBSECTOR - FYs70-74

Average Elapsed Quarters from Effectiveness

to Reach Various Levels of Disbursement

Percent Disbursed

No. of 25% 50% 75% 95-100%

Sector Projects (Quarters) (Quarters) (Quarters) (Quarters)

Agriculture

Irrigation 52 10 (49)L.a 14 (47)/.a 17 (41)L 18 (27).L.

Livestock 41 9 (39) 12 (36) 15 (32) 15 (21)

Agric. Credit 32 7 (32) 11 (32) 14 (31) 16 (26)

Perennial Crops 27 9 (26) 13 (25) 17 (23) 19 (15)

Area Development 26 4 (25) 13 (22) 14 (16) 19 (15)

Crop Processing 14 13 (13) 16 (09) 17 (06) 12 (03)

Forestry & Fishing 11 10 (11) 13 (11) 16 (10) 19 (09)

Research & Others 10 8 (10) 10 (09) 13 (09) 16 (07)

Total Agriculture 213 9 (205) 13 (191) 16 (168) 17 (123)

Education 72 15 (67) 18 (56) 20 (41) 23 (28)

Power

Hydro 28 7 (28) 10 (28) 13 (25) 17 (23)

Trans. Distrib. 16 10 (16) 13 (16) 15 (15) 19 (14)

Thermal 13 8 (13) 11 (13) 14 (13) 18 (11)

Other 19 6 (18) 9 (18) 11 (17) 12 (11)

Total Power 76 8 (75) 10 (75) 13 (70) 16 (60)

Water Supply, etc. 32 10 (32) 13 (31) 17 (24) 20 (14)

Transportation

Highways 98 9 (97) 11 (92) 14 (89) 16 (59)

Ports 31 10 (31) 13 (28) 16 (26) 18 (16)

Railways 30 7 (30) 9 (30) 12 (30) 16 (24)

Other 11 9 (11) 11 (10) 13 (09) 18 (09)

Total Transport. 170 9 (169) 11 (160) 14 (154) 16 (108)

Urban 10 8 (10) 12 (10) 14 (07) 15 (04)

Telecommunications 32 10 (31) 12 (29) 16 (27) 20 (21)

DFC 65 7 (65) 9 (65) 12 (63) 16 (47)

Industry 32 7 (32) 9 (31) 11 (30) 14 (23)

Average all Sectors 702/b 9 (686) 12 (648) 15 (584) 18 (428)

/a Figures in brackets show number of projects on which disbursement has reached

indicated level.

/b The 702 include all lending operations during the period except those of a non-

project nature (Technical Assistance [191, non-project [12]) and those in sec-

tors with less than 10 operations (Population [9], Tourism [8] and Energy [3]).

Disbursement data through December 31, 1978.

- 39 -

APPENDIX Table II

PATTERNS OF DISBURSEMENT: SELECTED SECTORS AND SUBSECTORS

BY LEVEL OF DISBURSEMENT ACHIEVED

Average Elapsed Quarters from Effectivenessto Reach Indicated Levels of Disbursement

No. of Percent DisbursedProjects Less than 25% 25% 50% 75% 95-100%

1. Education

All projects 72 - 15 18 20 23

Fully disbursed only 28 - 13 16 19 23

75% disbursed only 13 - 14 18 22 (>25)

50% disbursed only 15 - 16 21 (>24)

25% disbursed only 11 -- 17 (>20) -- --

Less than 25% disbursed 5 19 (>19) - -

2. Water Supply & Sewerage

All projects 32 - 10 13 17 20

Fully disbursed only 14 - 9 12 16 20

75% disbursed only 10 - 9 13 18 (>23)50% disbursed only 7 - 11 17 (>23)

25% disbursed only 1 - 15 (>23) -

Less than 25% disbursed -- 0 - - - -

3. Irrigation

All projects 52 - 10 14 17 18

Fully disbursed only 27 - 9 12 14 18

75% disbursed only 14 - 11 15 20 (>24)

50% disbursed only 6 - 13 17 (>20)

25% disbursed only 2 - 17 (>17) -

Less than 25% disbursed 3 17 (>17) - - -

4. Area Development

All projects 26 - 9 13 14 19Fully disbursed only 15 - 7 10 14 19

75% disbursed only 1 - 12 16 18 (>21)

50% disbursed only 6 - 12 18 (>20)25% disbursed only 3 - 13 (>31) -

Less than 25% disbursed 1 18 (>18) -- - -

5. Livestock

All projects 41 - 9 12 15 15

Fully disbursed only 21 - 7 10 13 15

75% disbursed only 11 - 11 13 20 (>23)

50% disbursed only 4 - 10 15 (>26)25% disbursed only 3 - 12 (>22) -

Less than 25% disbursed 2 17 (>17) - - -

* 6. Rural Development/a

All projects 68 - 10 13 16 18

Fully disbursed only 34 - 8 11 14 18

75% disbursed only 15 - 10 15 20 (>24)

50% disbursed only 8 - 11 16 (>19)25% disbursed only 7 - 13 (>18) -

Less than 25% disbursed 4 19 (>19) - - -

/a This category is based on a classification of beneficiaries and overlaps

with functional categories.

Note: Bracketed figures are averages of elapsed quarters already reached by

the group of projects indicated in left column by December 31, 1978.

Figures will be higher when group reaches level of disbursement

indicated in column and overall average will be changed as a result.

- 4o -

APPENDIX Table III

SLOW PROJECTS AS PERCENT OF TOTAL PROJECTS

BY SECTOR AND SUBSECTORIa

Slow ProjectsNumber of As % of No.

Projects Number of Projects

Railways 30 07 23

Livestock 41 09 22

Irrigation 52 11 21

Hydro Power 28 06 21

Perennial Crops 27 05 19

Agricultural Credit 32 06 19

Highways 98 15 19

Iridustry 32 06 19

Area Development 26 05 16

DFCs 65 07 15

Ports 31 04 13

Water Supply & Sewerage 32 04 13

Telecommunications 32 02 09

Education 72 02 03

Average All Sectors 702 107 15

/a 50% slower in disbursement than average for subsector

measured at farthest disbursement point reached--25%,

50%, 75%, 95-100%.

Note: Only subsectors with 20 or more projects included in

table.

APPENDIX Table IV

Page 1 of 2

PROJECTS SELECTED FOR CASE HISTORIES

(Original) %Loan/Credit Estimated Disbursed

Amount Approval Closing as ofSubsector/Project (USSmln) Date Date 12/31/78

AGRICULTURE AND RURAL DEVELOPMENT

1. Agriculture

Guyana Livestock, Cr. 221* 2.20 11/24/70 12/31/76 77

Turkey Livestock II, Cr. 330* 16.00 04/04/72 12/31/76 53

Turkey Fruits & Vegetables, Ln. 762/ 10.00 06/10/71 06/30/74 )Cr. 257 15.00 06/10/71 06/30/76 ) 88

Greece Groundwater, Ln. 754 25.00 06/10/71 06/30/76 75

Ghana Eastern Region Cocoa, Cr. 205* 8.50 06/23/70 12/31/75 92

Mauritania Livestock, Cr. 273* 4.15 11/02/71 12/31/76 90

Ethiopia Coffee Processing, Cr. 290 6.30 01/18/72 12/31/77 90

Philippine Rice Processing, Ln. 720 14.30 01/26/71 06/30/75 84

India Wheat Storage, Cr. 267* 5.00 07/20/71 09/30/75 43

India Bihar Agriculture, Cr. 294* 14.00 02/29/72 12/31/78 60

Sri Lanka Mahaweli Ganga Dev., Ln. 653* 14.50 01/20/70 06/30/76 80

2. Area Development

Brazil Alto Turi, Ln. 853* 6.70 07/06/72 12/01/78 51

Sudan Mechanized Farming, Cr. 311* 11.25 08/01/72 12/31/78 53

3. Other Agriculture Projects

Spain Agricultural Research, Ln. 768 12.70 05/18/71 06/30/76 86

Ghana Fisheries, Cr. 163* 1.30 09/23/69 12/31/72 100

Indonesia Fisheries, Cr. 211 3.50 07/07/70 06/30/76 100

India Punjab Ag. Credit, Cr. 203 27.50 06/11/70 12/31/72 100

EDUCATION

Turkey Education, Ln. 748 13.50 05/20/71 09/30/76 71

Iran 'ducation, Ln. 718 19.00 10/27/70 06/30/77 78

Zaire Education, Cr. 272* 6.50 -11/30/71 04/30/77 55

Malaysia Education III, Ln. 810* 15.50 03/28/72 12/31/77 69

Thailand Education II, Ln. 822 15.40 05/02/72 06/30/78 59

URBAN

Jamaica Sites & Services, Ln. 1003* 15.00 05/07/74 12/31/78 54

Senegal Sites & Services, Cr. 336* 8.00 06/22/72 06/30/79 62

4 2 -

APPENDIX Table IV

Page 2 of 2

PROJECTS SELECTED FOR CASE HISTORIES

(Original)

Loan/Credit Estimated Disbursed

Amount Approval Closing as of

Subsector/Project (USSmln) Date Date 12/31/78

TRANSPORTATION

1. Highways

Guyana Highways, Cr. 301* 4.40 11/25/72 12/31/76 88

Iran Roads V, Ln. 697 42.00 06/16/70 06/30/75 63

Nigeria Highways V, Ln. 838 26.30 04/11/72 06/30/77 47

Cameroon Highways II, Ln. 935/ 24.00 07/03/73 06/30/78 9Cr. 429 24.00 07/03/73 06/30/77

Tanzania Highways III, Cr. 265* 6.50 07/27/71 12/31/74 100

Bangladesh Highway, Cr. 408* 25.00 06/28/73 12/31/77 61

Nepal Highway, Cr. 223 2.50 11/10/70 06/30/75 100

2. Other Transportation

Brazil Santos Port, Ln. 756* 45.00 05/25/71 09/30/76 73

Afghanistan Aviation, Cr. 374 2.50 04/26/73 06/30/79 48

Nigeria Lagos Port II, Ln. 922 55.00 07/03/73 12/31/79 78

Philippine Port II, Ln. 939* 6.10 10/16/73 12/31/77 86

PUBLIC UTILITIES

1. Water

Colombia Bogota Water Sup. II, Ln. 741 88.00 05/25/71 06/30/78 90

Yugoslavia IBAR Multi-Purpose, Ln. 777 45.00 06/10/71 12/31/76 66

2. Power

Philippine Power V, Cr. 296*/ 10.00 03/21/72 06/30/76 8Ln. 809* 22.00 03/21/72 06/30/76 82

Malaysia Power V, Ln. 700* 20.00 07/07/70 01/31/75 100

India Power II, Cr. 242 75.00 04/27/71 09/30/75 100

Pakistan WAPDA Power, Cr. 213 23.00 08/11/70 12/31/74 97

Turkey Elbistan Lignite Mine* 118.00 61

& Power, Ln. 1023 (1 and 2) 30.00 06/27/74 06/30/82 0

* Projects visited by OED Mission.

APPENDIX Table V

OPERATIONS FROM WHICH CASES WERE SELECTEDDISTRIBUTION OF LOANS AND CREDITS BY SECTOR AND SUBSECTOR/a

FYs70-74

Agriculture I 134 (11)

Irrigation 52 ( 2)Livestock 41 ( 3)Perennial Crops 27 (2)Crop Processing and Storage 14 ( 4)

Agriculture II 53 ( 4)

Agricultural Credit 32 ( 1)Forestry & Fishery 11 ( 2)Research and Other 10 ( 1)

Area Development 26 ( 2)

TOTAL AGRICULTURE 213 (17)

Highways 98 ( 7)

Other Transportation 72 ( 4)

Ports 31 ( 3)Railways 30 --Airways 7 ( 1)Pipelines 2 -Other 2 -

TOTAL TRANSPORTATION 170 (11)

EDUCATION 72 ( 5)

Power 76 ( 5)

Hydro 28 -Thermal 13 ( 2)Transmission 16 ( 2)Other 19 ( 1)

Water Supply 32 ( 2)

TOTAL PUBLIC UTILITIES 108 ( 7)

URBAN 10 ( 2)

GRAND TOTAL 573 (42)

/a Coverage same as Appendix Table I, excluding Telecommunica-tions, DFCs and Industry.

Figures in brackets indicate case histories prepared.

APPENDIX Table VI

OPERATIONS FROM WHICH CASES WERE SELECTEDDISTRIBUTION OF LOANS AND CREDITS BY REGION AND SECTOR

SUMMARY TABLE

Public

Regions Agriculture Education Utilities Transportation Urban Total

East Africa 38 (2) 11 (1) 10 - 28 (1) 1 -- 88 (4)

West Africa 34 ( 3) 16 - 7 - 45 ( 3) 1 ( 1) 103 ( 7)

East Asia & Pacific 35 ( 2) 13 ( 2). 16 ( 2) 25 ( 1) 1 -- 90 ( 7)

South Asia 31 (4) 3 - 9 (2) 12 (2) 1 -- 56 (8)

Europe, Middle East& North Africa 38 (4) 15 (2) 30 (2) 30 (2) 4 - 117 (10)

Latin America & theCaribbean 37 (2) 14 - 36 (1) 30 (2) 2 (1) 119 ( 6)

TOTAL 213 (17) 72 ( 5) 108 ( 7) 170 (11) 10 ( 2) 573 (42)

Figures in brackets indicate case histories prepared.

APPENDIX Table VII

COMPLETED PROJECTS DELAYED 20% OR LESS.(Effective Dates Between FYs70-74)

Loan/ Estimated ActualCredit Date of Completion Completion % Time

Sector/Subsector No. Approval Date Date Overrun

AGRICULTURE & RURAL DEVELOPMENT

1. Agriculture

Colombia Livestock II L 651-CO 12/09/69 07/75 07/75 -1

Uruguay Livestock III L 773-UR 06/10/71 12/72 12/72 0

Uruguay Livestock IV. L 816-UR 04/25/72 12/73 03/74 15

Madagascar Lake Alaotra Irrigation C 214-MAG 07/28/70 12/75 10/76 16

Ivory Coast Palm Oil Processing I L 611/ 05/15/69 12/74 09/75 14

612-IVC 05/15/69 12/74 01/75 0

2. Area Development

Malawi Lilongwe Land Development,

Phase II C 244-MAI 05/13/71 12/75 12/75 0

3. Other Agriculture

Iran ADBI Agricultural Credit I L 662-IRN 02/17/70 12/72 03/73 9

Iran ADBI Agricultural Credit II L 821-IRN 01/25/72 11/76 11/76 0

Israel Agricultural Credit L 709-IS 10/13/70 03/74 03/74 0

Mexico Agricultural Credit L 747-ME 06/09/71 09/75 09/75 0Kenya Forest Plantations L 641-KE 10/28/69 06/75 12/74 -9

TRANSPORTATION

1. Highways

Botswana Road C 303-BT 01/25/72 Early '75 10/74 -11

Congo Highway Improvement C 189-COB 05/05/70 03/73 03/73 0

2. Other Transportation

Senegal Dakar Airport L 867-SE 11/28/72 06/75 12/75 20Guinea Boke Bauxite L 766-GUI 06/22/71 04/73 C7/73 14

PUBLIC UTILITIES

1. Water

Cameroon Water Supply L 604-CAM 05/06/69 05/71 08/71 13

Ghana Accra/Tema Water Supply& Sewerage C 160-GH 08/12/69 12/72 08/73 20

2. Power

El Salvador Power V C 227-ES 01/12/71 12/72 12/72 0Thailand EGAT I L 655-TH 01/13/70 12/73 06/74 13

Kenya Kamburu Hydroelectric L 745-KE 06/01/71 02/74 07/74 16

Ghana Power II C 256-GH 06/15/71 12/73 06/74 20China Power II L 671-CHA 04/21/70 12/72 06/73 19

/a Does not include Urban or Education projects; no audits done in Urban and no

completed Education audits show a 20% or less time overrun. Subject to this

qualification, this sample is drawn from the same time period and sectors as

'for the 42 case studies listed in Appendix Table IV.

Source: Second, Third and Fourth Annual Review of Project Performance Audit Results.

- 46 -

APPENDIX Table V'MIPage 1 Or

CAUSES FOR :ELAY

Exogenous Factors Other FactorsOrganiza-

Technical tion of

Major Preparation Project BorrowrInflation Other and Manale- Involve-

Subsector/Project ProblemaL.a Desig nentS. MontA COMMENTS ON MAJOR PROBLM AREAS

I. AGRICULTURE AND RURAL DEVELOPMENT

a. Agriculture

Guyana Livestock, Cr. 221 n Inadequate preparation. Untested design involved private co-ops.coesercial Loans, and new livestock practices. Poor response;*ajor change in design required.

Turkey Livestock UI, Cr. 330* ZZ x Delay in staffing Project Implementation Unit (P..U.) - lack ofnecessary financial incencives. Special Operations Fund established

to provide such incentives but no agreement to provide initial

finance.

Turkey Fruits & Vegetables, a nZ x a Shifting responsibilities for project with change in government.

La. 762/Cr. 257 Poor response of farmers to initial terus and conditions for

subloses.

Creece Underground Water, La. 754 x Mange in physical design of project made necessary when water flow

from weils exceeded estimates. Project revised and rephased.

Chanas Eastern Region Cocoa, x x X x x low price of cocoa; growing other crops more actractive, restricted

Cr. 205* project ares, disease-prone. parts unsuitable for cocoa, also

unusually dry weacher and Inconsistencies in government policies.

Mauritania Livestock. Cr. 273* x x as Difficulty coordinating work of several ministries involved - no

central project authority. Attempt to apply international

competitive bidding (ICE) to program for constructing wells

unsuccessful. Force account used after delay.

Ethiopia Coffee Processing, x zz x Project based on price differential between unshed and unwashed

Cr. 290 coffee that did not saterialise as expected. Lack of demand for

vashing reduced urgency. Slow procurement process. Change in

governemt.

Philippine Rice Processing, a x Xx x x Shortcomings in preparation; overestimated demand for credit

La. 720 and for sew milling capacity, design of mills too large and

capital intensive, problems with application of ICS.

India Wheat Storage, Cr. 267* x x x x Problem with procurement provisions. Design conflict on silos.

Problems with inflation, scheduling around monsoons.

Cement shortages.

India Bihar Markets. Cr. 294 a a ae x Inadequate time allowed for land acquisition. Underestimated

hardships on traders moving co market yards-consequent slow

response. Administrative design problems: sulti-agencycoordination required. Contractor bankruptcies; land litiga-

tion; civil strife.

Sri -aks MhoweLi Gangs No major design/tochnLical preparation problems. Re-negotiation

Developent, L. 653* xx due to change in government. Severe flooding, civil disturbances.

Poor contractor performance due to inexperience.

b. Rural Development

Brazil Alto Turi, La. 853* Zx a Project concept - aid to small farmers - not fully accepted by

borrower. Implementation Unit dependent on other agencies for

finance and sanction of plans which were neither involved in

preparation nor sympathetic to project objectives.

Objectives changed.

Sudan 11 Mechanized Farming, aCK x Design based on research on combinable sorghums which had

Cr. se Fot been completed and was delayed. One elemenc-trainingcenter--soc administered by P.I.U. lacked funding and support.

Rapid development of responsibilities and loss of staff severely

strained Unit's capacity.

*.47 -

PP?ETDCX GABLEII

?age I of 3

c. Other Agriculture

Spain Agricultural Research, xx An ambitious oroject that did iot receive scrong borrower support.La. 768 Foreign experts Involved so design and operation of project.

Borrower did not supply local funding neeaed and witherewapplication for a second project.

Ghana Fisneries, Cr. 163* xx I I Preparation and design proved faulty. Project involved bothfishing and port development. Disagreements over identificationof oort for development. Demand for boats did not develop asexpected; both design and price were factors. Absence of singleentity responsible for implementation.

Indonesia Fisheries, Cr. 211 x x x Complex project required greater management capability than existedin state unit. Efforts to strengthen management not fully

. successful.

India-Punjab Agriculture Credit, x Problems with procurement of tractors involving national policiesCr. 203 of borrower and Sank's concern with ICB. Indo-Pakistan war.

11. EDUCATION

Turkey Education, ls. 743 XX x Change in government after appraisal. Slow fulfillment of originalcovenants.

Iran Education, In. 718 x I x X X Complex for a first venture. implementation Unit's locationinappropriate - eventually moved; coordination of agencies a problem.

i1 boom changed borrower perspectives.

Zaire Education, Cr. 272* x xx x Weak design: split responsibility between P.I.U. and consultantdid not work successfully. Supplier undercapitalized.

Malaysia Education, 1a. 810* xx xx Diffuse purposes; lack of full agreement on components.

Thailand Education, ie. 422 xa Design involved three successive steps each involvingnegotiation of complex contracts. Ddlay occurred at each step.

III. URBAN DEVELOPMENT

Jamaica Sites and Services, x xx xx An ambitious first project; problems with administration, staffingin. 1003* P.I.U. and coordination among agencies involved. P.I.U. moved

from original location.

Senegal Sites and Services, xx x xx Inadequate preparation; borrower not prepared for change inCr. 336- policy involved; credit provision omitted. Problems with

enactment of law and management of project.

IV. TRANSPORTATION

a. Highways

Guyana Highways, Cr. 301* x XX x Complex design--many items to be administered separately; ICBinappropriate to situation, after delay resorted to force account.

Iran Road V, Ln. 697 x x Borrower did not accept need for transport study. Change inperspectives with oil boom.

Nigeria Highways V, Ln. 838 x Change in government. Requests for reimbursement delayed.Differences between Sank and borrower on feasibility studydelayed that component.

Cameroon Highways II. 1n. 935 x Sharp increase in costs from inflation - adjustment of project -supplemental finance frem Bank.

Tanzania Highways III, Cr. 265* x x Long delay in reaching agreement with consultants. Appraisalestimates based on preliminary engineering, road base deterioratedduring delay, volume of work and prices increased.Reformulation of project necessary.

Nepal Highways I, Cr. 223 x x A first project; problems with design of project and itsadministration; efforts to strengthen borrower'sadministrative capability only partially successful.

Bangladesh Highways III, Cr. 408* x x Problems of local contractors executing unfamiliar designs tounfamiliar standards. Problems of administration and supplies.

a

-48-

APPENDIX Table VIIIPage 3 of 3

b. Other Transportation

Brazil Santos Port, Ln. 756* xx Based on preliminary engineering; problems of cost and execution

not foreseen. Problems of coordination among agencies and between

Bank and borrower.

Afghanistan Aviation, Cr. 374 x X a Incomplete agreement on project components aelayed implementation.

Nigeria Lagos Port :I, in. 922 x x Project expanded and costs increased greatly after effectiveness.

Delay in contracting procedures. Oil boom and improvement in

borrower's financial situation influenced position vis-a-vis

proceaures and covenants.

Philippine Port II, Ln. 939* x I x Technical problems from discovery of coral bed after construction

began. Problems of contractor wth modest resources obtaining work

order from government as basis for needed credit. Change in

government a factor.

. PUBLIC UTILITIES

a.lae

Colombia-Booca Water Supoly, x x Contractor encountered technical problems, performance not up to

a,. 741 expectations. Agency had problems financtng project, demand

overestimated and tariff increases delayed.

Yugoslavia ISAR Multi-purpose, x XX Poor division of resoonsibility between local government

Ln. 777 and P..U.-in effect, 2 P.:.U.s with 2 schedules; important

elements (extension service) not funded by Bank and not

executed by governent as intended.

b. Power

Philippine Power V. x Slow procurement; execution of related components not well

Cr. 296/tn. 809* coordinated.

Malaysia Power V, In. 700* x Procurement delay-disagreement in prequalification and subsequent

problems of supplier in Parct II country largely related to change

in availability of steel and power and dock strikes.

India Power II, Cr. 242 x Problems with procurement and with carrying out financial covenants.

Pakistan WAPDA Power, Cr. 213 x X x Problems with administration and procurement.Change of government and in senior staff of executing agency

following war with India.

Turkey Elbistan Lignite x x Large integrated lignite and power project. Many conditions;

Mine and Power, In. 1023* to-year delay effectiveness. Problems with staffing,coordination and finance.

TOTAL 14 20 30 20 16

/a All projects suffered from inflationary pressures.

/b Technical preparation and design of implementation-structure of tasks to be undertaken.

c Organization and location of responsibility for management, provision for staffing of implementation unit, etc.

Id Borrower participation during preparation including mstters of project content and procedures.

x Problem

xx Severe or Major Problem in Project

* Projects visited by OED mission

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