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Project Selection and Evaluation How to Choose the Right Project

Project Selection and Evaluation How to Choose the Right Project. Martin Darcy. Regional Workshop on Concessions/Public-Private Partnerships Tirana, 11-12 December 2007. The Importance of Selecting Good Projects. Capital investment is vital Good projects:

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Project Selection and Evaluation How to Choose the Right Project

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  1. Project Selection and EvaluationHow to Choose the Right Project Martin Darcy Regional Workshop on Concessions/Public-Private PartnershipsTirana, 11-12 December 2007

  2. The Importance of Selecting Good Projects • Capital investment is vital • Good projects: • create economic benefits and growth • create confidence in a country • create value for money solutions thus minimising tax-take • Bad projects: • create ongoing liabilities for many years • big projects = big risks • failure is often high profile: nationally and internationally • can undermine investor confidence in the country • can make the good projects unaffordable

  3. How Poor Quality Projects Happen • Poor Objective Setting • Weak Option Appraisal • Inadequate Cost/Benefit Analysis (CBA) • Political rather than economic decisions • Poor Identification of recurrent costs • Under estimation of Capital costs • Inability or unwillingness to hire appropriate expertise • Fear of peer review • Transparent and fair Procurement processes

  4. Something to Remember • There is no such thing as a ‘PPP Project’ • There are only Public Investment Projects • Sometimes Public Investment Projects can be realised through PPP • But not always; since PPP is not always suitable.

  5. Issues to Consider 1 • Does the proposed project reflect the current policy environment of the government? • Is there political support? • Are the objectives of the proposed project clear and easy to communicate? • Have the project governance arrangements been agreed? • Skills and capacity (and funds to pay for it all)

  6. Issue to Consider 2 • Have all the options for realising the objectives been identified and evaluated? • How do you test the capital cost estimates? • How do you identify the recurrent costs? • Is the proposed project affordable to the State / to the Ministry’s budget • What is the likely impact on the National Debt?

  7. Issues to Consider 3 • Have all the Risks to the Project been identified? • Have the ‘worst case’ costs been evaluated and considered? • What other factors could influence the outcome? • Who are the stakeholders in the project? • Are project delivery times realistic? • Is there likely to be a competitive market to allow a healthy procurement process?

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