Planning Manual Punjab PDF

The Planning Manual
Government of the Punjab

April 2015
Table of Contents
LIST OF ABBREVIATIONS 6
PREFACE 8
ACKNOWLEDGEMENTS 9
VOLUME ONE 10
SECTION 1 – INTRODUCTION 10
1.1 DEVELOPMENT PLANNING – CONCEPT AND PRACTICE 10
1.2 PLANS, PROGRAMMES AND PROJECTS 10
1.3 PLANNING PROCESSES 11
1.3.1 FORMULATION OF ADP 11
1.3.2 ADP AND MTDF FORMULATION GUIDELINES 15
1.3.3 PROJECT CYCLE MANAGEMENT 16
1.4 PLANNING: INSTITUTIONAL REGIME 17
1.4.1 PLANNING COMMISSION 17
1.4.2 P&D BOARD 18
1.4.3 PLANNING AT DIVISIONAL LEVEL 21
1.4.4 PLANNING AGENCIES AT DISTRICT/DIVISIONAL LEVEL 21
1.5 USER GUIDANCE FOR PLANNING MANUAL 21
SECTION 2 – HOW TO IDENTIFY AND FORMULATE A PROJECT 23

2.1 PROJECT IDENTIFICATION 23
2.2 SCREENING PROJECTS FOR PPPS 25
2.3 PROJECT FORMULATION 28
2.3.1 SOURCES OF DATA 28
2.3.2 STAKEHOLDER CONSULTATION – NEEDS ASSESSMENT 29
2.3.3 PRE-FEASIBILITY AND FEASIBILITY STUDIES 30
2.3.4 DETAILED PLANNING OF THE PROJECT 33
2.3.5 PROJECT REQUIREMENTS 35
2.4 CROSS-CUTTING THEMES 36
2.5 RESULTS FRAMEWORK 38
SECTION 3 – HOW TO APPRAISE AND APPROVE A PROJECT 39

3.1 APPRAISAL 39
3.2 IDENTIFICATION OF COSTS AND BENEFITS 39
3.3 TYPES OF APPRAISAL 41
3.3.1 VALIDATING ASSUMPTIONS AND DESIGN 41
3.3.2 TECHNICAL APPRAISAL 41
3.3.3 SOCIAL AND ENVIRONMENTAL APPRAISAL 42
3.3.4 FINANCIAL AND ECONOMIC APPRAISAL 43
3.3.5 ORGANISATIONAL AND MANAGEMENT APPRAISAL 50
• ENSURING THAT ADEQUATE RESOURCES EXIST OR PLANNED FOR; 51
• ASSESSING IF PREVIOUS EXPERIENCE EXISTS FOR MANAGING SIMILAR PROJECTS; AND 51
• VERIFYING THAT ANY EXTERNAL SUPPORT EXISTS, IF REQUIRED. 51
3.3.6 OVERALL QUALITY REVIEW 51
2 THE PLANNING MANUAL

3.4 PROJECT APPROVAL AND INITIATION 52
3.5 APPROVAL AT PROVINCIAL LEVEL 53
3.6 APPROVAL AT FEDERAL LEVEL 58
3.6.1 DDWP 59
3.6.2 CDWP 59
3.6.3 ECNEC 61
3.6.4 MULTI-STAGE PROCESS OF APPROVAL FOR PROJECTS 62
3.6.5 NEC 63
3.7 ADMINISTRATIVE APPROVAL 64
3.8 PROJECT PROCUREMENT, GOVERNANCE, APPOINTMENTS AND ALLOWANCES 66
SECTION 4 – HOW TO MONITOR AND EVALUATE 70

4.1 PROJECT PLANNING AND M&E 70
4.2 IMPLEMENTING THE M&E REGIME FOR A PROJECT 71
STEP 1 – IDENTIFY KEY QUESTIONS TO BE ASKED 72
STEP 2 – M&E APPROACH AND METHODOLOGY 75
STEP 3 – SELECTING INDICATORS 78
STEP 4 – DATA COLLECTION 80
STEP 5 – TIMEFRAME 85
STEP 6 – RESOURCES 87
STEP 7 – IMPLEMENTATION 88
4.3 USE OF GIS IN MONITORING 88
4.4 M&E INSTITUTIONAL REGIME IN PUNJAB 91
5.1 FOREIGN-FUNDED PROJECTS 95
BOX 30: LENDING AND GUARANTEE INSTRUMENT TYPES 96
5.1.1 SEEKING FOREIGN ASSISTANCE 96
BOX 31: SELECTED MULTILATERAL AND BILATERAL DONORS 97
BOX 32: COMMITMENT CHARGES – FOREIGN-ASSISTED PROJECTS 98
5.1.2 COORDINATION WITH FOREIGN MISSIONS 98
BOX 33: LOAN NEGOTIATIONS – KEY ISSUES FOR CONSIDERATION 99
5.1.3 KEY GUIDELINES FOR MANAGING FOREIGN-FUNDED PROJECTS 99
BOX 34: ACCOUNTING PROCEDURE FOR REVOLVING FUND ACCOUNT 102
5.3 PPPS – LOOKING FOR ALTERNATIVE FINANCING OPTIONS 106
5.4 PRIVATE SECTOR SUPPORT CALIBRATION 110
VOLUME TWO - APPENDICES 114

SECTION A – STANDARDS AND YARDSTICKS 114
SECTION B – PLANNING COMMISSION GUIDELINES/TEMPLATES AND OTHER RELEVANT FEDERAL
GOVERNMENT DOCUMENTS 114
SECTION C – GOVERNMENT OF PUNJAB NOTIFICATIONS AND DOCUMENTS 114
SECTION D – RELEVANT POLICIES AND PROCEDURES 114
THE PLANNING MANUAL 3

List of figures
Figure 1: Schematic for ADP Formulation.................................................................................. 12

Figure 2: Project cycle and use of project cycle forms .......................................................... 17
Figure 3: PPP project screening tool ............................................................................................ 25
Figure 4: Components of project appraisal................................................................................ 41
Figure 5: The RBM life-cycle approach ........................................................................................ 71
Figure 6: M&E – conceptual differences ..................................................................................... 72
Figure 7: Schematic for evaluation methodology adopted by Director General, M&E,
Punjab ............................................................................................................................................. 84
Figure 8: Assignment accounts and funds flow......................................................................100
Figure 9: Results chain schematic ..............................................................................................104
Figure 10: Flowchart of PPP approval process ......................................................................107
List of tables
Table 1: List of PC proformas .......................................................................................................... 16
Table 2: Planning Commission forms and their use ............................................................... 16
Table 3: PPP modalities ..................................................................................................................... 26
Table 4: Stakeholders group classification matrix.................................................................. 30
Table 5: Project appraisal toolkit................................................................................................... 52
Table 6: Development projects approval matrix ..................................................................... 53
Table 7: Composition of PDWP....................................................................................................... 53
Table 8: Composition of DDSC ........................................................................................................ 55
Table 9: Composition of DDWP ...................................................................................................... 57
Table 10: Composition of DDC ........................................................................................................ 58
Table 11: Composition of Union Administration..................................................................... 58
Table 13: Composition of DDWP ................................................................................................... 59
Table 14: Composition of CDWP .................................................................................................... 60
Table 15: Present composition of ECNEC ................................................................................... 61
Table 16: Special invitees for NEC meetings ............................................................................. 63
Table 17: Composition of committee for concept clearance for foreign-aided projects
........................................................................................................................................................... 66
Table 18: Project allowances for different basic pay scales ................................................ 68
Table 19: Relevant questions about results chain .................................................................. 74
Table 20: Monitoring, evaluation and impact assessment .................................................. 77
Table 21: Indicators at various levels of results chain .......................................................... 79
Table 22: Data collection tools........................................................................................................ 82
Table 23: Types of evaluation ......................................................................................................... 83
Table 24: PPP project life-cycle steps ........................................................................................110
Table 25: Private sector support calibration template .......................................................113

List of boxes
Box 2: Functions of Planning Commission ................................................................................. 18

Box 3: Structure of Planning Manual ............................................................................................ 22
Box 4: National Vision 2025 ........................................................................................................... 23
Box 5: Pillars of Vision 2025 ............................................................................................................ 24
Box 6: Key objectives of Punjab’s growth strategy ................................................................. 25
Box 8: Provision for consultancy ................................................................................................... 33
Box 9: Classification of project costs ............................................................................................ 36
Box 10: Various types of costs ........................................................................................................ 40
Box 11: Various types of benefits .................................................................................................. 40
Box 12: Discount rate ......................................................................................................................... 44
Box 13: Terms and conditions of DDSC ....................................................................................... 56
Box 14: Terms and conditions of DDWP ..................................................................................... 57
Box 15: Functions of CDWP ............................................................................................................. 61
Box 16: Functions of ECNEC ............................................................................................................ 62
Box 17: Charter of NEC ...................................................................................................................... 64
Box 19: Selection Committee for recruitment of project staff............................................ 68
Box 20: Steps for implementing M&E regime ........................................................................... 72
Box 21: Key questions for evaluation .......................................................................................... 74
Box 22: What is monitoring? ........................................................................................................... 76
Box 23: What is evaluation?............................................................................................................. 76
Box 24: Randomised control trials ................................................................................................ 77
Box 25: SMART indicators ................................................................................................................ 79
Box 26: Multiple stages for M&E .................................................................................................... 87
Box 27: IRIS – TUU............................................................................................................................... 89
Box 28: Recommendations for use of geospatial tools.......................................................... 91
Box 29: ToRs for Evaluation Committee ..................................................................................... 94
Box 30: Lending and guarantee instrument types .................................................................. 96
Box 31: Selected multilateral and bilateral donors ................................................................ 97
Box 32: Commitment Charges – Foreign-assisted projects ................................................. 98
Box 33: Loan negotiations – Key issues for consideration .................................................. 99
Box 34: Accounting procedure for revolving fund account ...............................................102
Box 35: What is a result? .................................................................................................................103

LIST OF ABBREVIATIONS
ADP Annual Development Programme

AG Accountant General
AGPR Accountant General Pakistan Revenues
BCR Benefit–Cost Ratio
BOT Build–Operate–Transfer
CBA Cost–Benefit Analysis
CDWP Central Development Working Party
CEA Cost-Effectiveness Analysis
CM Chief Minister
DAO District Accounts Officer
DDC District Development Committee
DDSC Departmental Development Sub-Committee
DDWP Divisional Development Working Party
DEV Development
DFID Department for International Development
DP Development Partner
EAD Economic Affairs Division
ECA External Capital Assistance
ECNEC Executive Committee for National Economic Council
GIS Geographic Information System
GoPb Government of the Punjab
IDA International Development Association
IRR Internal Rate of Return
M&E Monitoring and Evaluation
MDGs Millennium Development Goals
MfDR Managing for Developing Resources
MTDF Medium-Term Development Framework
NEC National Economic Council
NESPAK National Engineering Services Pakistan
NGO Non-Governmental Organisation
NPV Net Present Value
O&M Operation and Maintenance
P&D Planning and Development
PDWP Provincial Development Working Party
PERI Punjab Economic Research Institute
PKR Pakistani Rupee
PMIU Project Management and Implementation Unit
PPP Public–Private Partnership
PP&H Physical Planning & Housing
PSDP Public Sector Development Programme
PV Present Value
RBM Results-Based Management
S&GA Services and General Administration
SBP State Bank of Pakistan
TEVTA Technical Educational & Vocational Training Authority
TMA Town/Tehsil Municipal Administration
TMO Town/Tehsil Municipal Officer
ToRs Terms of Reference
TUU The Urban Unit
UNDP United Nations Development Programme
VGF Viability Gap Fund

PREFACE
Over the last few years, provincial planning has undergone a transformation in Punjab
with the introduction of a medium-term perspective, increased inflow of resources in
the wake of 18th constitutional amendment, and new planning imperatives such as
public–private partnerships and results-based management (RBM). The last Planning
Manual was issued in 1996; therefore it is clearly outdated and has some critical gaps.
These gaps underscore the need to revise the Planning Manual and develop a
document that is up-to-date and provides hands-on guidance to provincial
departments and officials.
It was against the backdrop of these emerging challenges and cumulative experiences
of recent decades that the Planning and Development (P&D) Board took up the
ambitious task of revisiting the existing Planning Manual in the province. The overall
objective of the assignment was to revisit the existing Planning Manual with a view to
restructuring it in line with modern notions of development planning while taking care
to remove the redundancies and obsolete notions. A conscious effort has also been
made to ensure that the revised manual serves as a user-friendly reference and
learning document for the policy-makers as well as the practitioners in the provincial
government. Moreover, the document has been structured so that it is aligned with the
project management cycle and different users can access the document as per their
specific needs. The manual also provides the much-needed guidance to provincial
departments on selecting projects for public–private partnerships (PPPs), while
formulating their plans. This manual consists of two parts. Volume I provides the main
contents of the Planning Manual, while Volume II consists of important appendices and
allied documents.
I would like to thank the relentless efforts by the staff of the P&D Board, Punjab as well
as the Sub-National Governance Programme, which has made the formulation of this
document possible in a relatively short span of time. We are also in the process of
creating an online version of this document to benefit users.
IRFAN ELAHI
CHAIRMAN
PLANNING & DEVELOPMENT BOARD

ACKNOWLEDGEMENTS
The P&D Board would like to express its satisfaction and appreciation for the
commendable work that has led to the formulation of the revised user-friendly
Planning Manual in Punjab. We are especially grateful to Mr. Javed Latif, Senior Chief,
Planning & Development Board for driving this effort and to Mr. Hamed Yaqoob Sheikh
and Mr. Naveed Saleh Siddique from the Sub-National Governance Programme for
providing technical assistance. Without consultations with and valuable feedback from
all provincial departments, it would not have been possible to develop the revised
Planning Manual. We would also like to thank Mr. Hasaan Khawar, the lead consultant,
for undertaking this effort to develop the document.
WASEEM AJMAL CHAUDHARY

SECRETARY
PLANNING & DEVELOPMENT

VOLUME ONE
SECTION 1 – INTRODUCTION
1.1 Development planning – concept and practice
Why is there any need for development planning? This question needs to be
answered so as to appreciate the rationale for planning. A close look at developing
countries reveals that they have certain common characteristics/features. These
common features are: poverty, primitive agriculture, population pressure, scarcity
of capital, social exclusion and gender inequality, low rate of savings, inequitable
income distribution, low level of literacy and high unemployment, with a
consequent low level of economic development.
Accordingly, planning is based on the following grounds:
• It takes care of the collective needs of the people, including women, girls and
the most vulnerable.
• It helps in determining the future desirable direction of the economy.
• It facilitates the equitable distribution of economic power.
• It serves as a powerful instrument for reducing uncertainty and provides
direction for future development.
• It provides for proper coordination and thereby avoids the waste of scarce
resources.
• It helps in coping with major economic changes.
• It facilitates the optimum utilisation of a country's resources.
• It enables the economy to look ahead and, thereby, to lay the foundation for
long-term growth.
Development planning primarily aims at the structural or economic transformation

of less developed economies in a manner that ensures the achievement of
universally acceptable economic and social objectives, e.g. rapid development of
resources, optimisation of resource use, provision of a reasonable standard of living,
equitable distribution of wealth and promotion of welfare of the society as a whole.
1.2 Plans, programmes and projects
In earlier stages of development, when the priorities in various sectors of the economy
are not clearly defined, programmes and projects may be conceived without reference
to an overall sector or national plan. However, as the development process gains
momentum, the choice of investment opportunities becomes wider and the task of
resource allocation against various competing demands becomes very complex and
difficult. At this stage, identification of specific plan objectives/targets and setting out
of detailed sectoral programmes become imperative. The achievement of physical
targets set for various sectors of the economy necessitates the preparation of a

number of programmes and projects. In order to distinguish between the two, it is
necessary to explain the difference between a 'programme' and a 'project'. Normally, a
programme consists of a number of identical projects. For instance, under a
programme for poverty alleviation for Southern Punjab, there could be a number of
projects such as establishment of an enterprise fund for providing micro-loans, skill
development, etc. Sometimes, the terms 'programme' and 'project' may mean the same
thing. A project is a specific investment entity with specific benefits to be attained in a
specific time. Nevertheless, projects, even if they are independent entities, are not
conceived and implemented in isolation. They are linked to the development
programme of the sector or sub-sector in which they fall as well as to overall
development plan. Projects, therefore, are also considered "building blocks" of
development. Accordingly good plans necessitate consistent linkage of projects,
programmes and plan targets. The success of a plan, therefore, hinges upon the
formulation of sound projects and their timely implementation.
The main instrument to implement a plan is the Annual Development Programme.

This document, commonly known as ADP, includes all those programmes and
projects that are duly approved and funded. More recently, the concept of the
Medium-Term Development Framework (MTDF) has evolved to develop a longer-
term perspective for planning, which consists of plans for the next three years.
Box 1: MTDF and ADP
1.3 Planning processes
1.3.1 Formulation of ADP
The formulation of the ADP/MTDF is an important exercise carried out by the P&D
Board, Government of Punjab (GoPb), in collaboration with the Finance Department
and other provincial departments and agencies. This exercise is based on the
guidelines provided by the federal government in accordance with the national
priorities and resource availability. As a result of the ADP formulation exercise, the size
and the direction of the public sector programme in the province are determined.
Thus, the task of formulation of ADP is of crucial importance as it has a significant
impact on the socioeconomic standing of the province. The preparation of the ADP
involves a number of stages, which are briefly discussed below:

Figure 1: Schematic for ADP Formulation
FIRST STAGE: ESTIMATION OF RESOURCES AND DETERMINATION OF INTER-

SECTORAL PRIORITIES
The first six months of a financial year typically represent the first stage of formulation
of the ADP. During this period, two main exercises are conducted in the P&D Board in
collaboration with the Finance Department. Firstly, an estimate is made in respect of
the expected resource availability for the next financial year. The trend of the past few
years and outlook of the economy constitute the basis of the estimate. An assessment
of the anticipated external capital assistance is also included in this estimate. Secondly,
determination of inter-sectoral priorities is carried out on the basis of the latest
government policies regarding concerned sectors, ongoing programmes expected to
be completed and new programmes likely to be initiated. After conducting these two
exercises the tentative size of the ADP, indicating sector-wise allocation for the next
financial year, is communicated to all the concerned departments. The departments
are required to prepare lists of the ongoing and the new schemes relating to their
respective sectors. Every year the P&D Board also issues ADP Formulation Guidelines
(as discussed later in this section).

SECOND STAGE: PREPARATION OF PORTFOLIO OF SCHEMES
All departments and concerned agencies prepare a portfolio of schemes for the
sector/sub-sector allocated to them. While preparing such portfolio the
following guidelines are to be considered1:
• Formulation of the ADP should follow the medium-term perspective,

with the objectives of ensuring predictability of flow of funds and the
ability to plan with a longer-term horizon in view, while realising fiscal
discipline and allocative and operational efficiencies.
• In line with the MTDF, the ADP should comprise a portfolio of
development schemes for the next year and projections for the two
subsequent financial years in the prescribed format.
• Line departments are required to submit a write-up on the
department/sector’s vision, objectives/policy and strategic
interventions to be achieved in the next two–three years. The
importance of the sector in the provincial economy and benefits/linkage
of proposed interventions in realising targets set out in the provincial
growth framework2 should be highlighted.
• Proposed interventions under the ADP must be arranged by assigning
clear and logical prioritisation, as well as facilitating readjustments and
course correction during the year, in accordance with the resource
situation. Proposed interventions establishing robust linkages with growth
targets and exhibiting a high multiplier effect on economic growth have to
be assigned top priority.
• The foreign aid component for the medium term (three-year period) has
to be determined/finalised by respective sectors/departments in
consultation with the ECA Section, P&D Department.
• Departmental ADP proposals should be provided on a prescribed
proforma (VOLUME TWO – SECTION C).
• Priority for allocation of funds should be as follows:
o Counterpart funds for foreign-aided projects as per commitment
should be given highest priority.
o The maximum allocation should be provided to ongoing projects
that are at a fairly advanced stage of implementation, and have a
demonstrated multiplier effect on economic growth.
o Full funding should be allocated to projects that are due for
completion in the next financial year.
o Projects dealing with emergencies, such as flood relief,
rehabilitation, etc. may be prioritised.
1 Government of Punjab Guidelines for Formulation of Annual Development Program 2015-16

2 Punjab Economic Growth Strategy

o Departments dealing with social sectors may focus on
consolidation and improvement of service delivery activities
instead of expansion and coverage of uncovered areas.
• Allocations to the individual projects should be decided on the basis of
past performance and the phasing set out in the PC-I/PC-II (project cycle
proformas, described in Section 1.3.3).
• Counterpart funding for the foreign-aided projects and projects co-
financed with the federal government should be phased as per the PC-I.
• For new projects, the departments are required to prepare a detailed
concept paper highlighting different aspects of the project, on a
prescribed form (VOLUME TWO – SECTION C).
• Cost estimation of new schemes proposed for inclusion in the ADP have
to be based on rational calculation, cost escalation and market analysis.
Any scheme whose cost would exceed by 15% the original cost
stipulated in the ADP would require fresh approval of the competent
authority.
• Project life should be kept at the minimum possible and ideally should
not exceed two–three years, unless dictated by the nature of the
project/sector. Projections for the two subsequent years (as per the
MTDF) have to worked out with due care.
• The allocation among new versus ongoing projects for the ADP should be
in accordance with the prescribed distribution formula, which currently
stipulates 70% for ongoing projects and 30% for reform initiatives and
new programmes.
• Unapproved projects in the current year may be considered for removal
if they are no longer priorities of the sector, after giving adequate
justification. All projects unapproved by the 30th of June of the current
year would automatically become new projects in the next ADP.
• To reinforce the government’s priority to effectively mainstream gender
and achieve the MDGs, line departments should consider fair and just
distribution of opportunities and resources between women and men.
Collection and analysis of gender-disaggregated data across all
departments should be emphasised to monitor progress for girls and
women.
• The time schedule for preparation of the ADP may be seen in VOLUME II –
SECTION C.
THIRD STAGE: PREPARATION OF PRELIMINARY DRAFT OF ADP
Preparation of the preliminary draft of the ADP starts from January every year. A
series of inter-departmental meetings are held during this period by the chief/senior

chief of sections/members of the P&D Department. The initial draft of the ADP serves
as a working paper for the final round of ADP meetings to be held in March. The initial
draft of the ADP, in accordance with the guidelines, is based upon the methodology of
preparing sector and sub-sector-wise listing of ongoing and new programmes in
descending order of priorities. This allows the subsequent changes in accordance with
the likely resource availability.
FOURTH STAGE: MEETING WITH DEPARTMENTS AND PREPARATION OF ADP
This stage takes two–three months, i.e. from 15 February to the first week of April.
During this period, ADP meetings are held in the P&D Board with the concerned
departments, including the Finance Department, headed by the chairman, P&D Board.
In these meetings, the lists prepared/finalised in the previous stages are modified, if
necessary, and brought in line with the anticipated financial resources. Simultaneously,
the draft ADP for the financial year is prepared. It represents an estimate of possible
minimum available resources. The departments have to complete the formalities, e.g.,
preparation of PC-I, as well as scrutiny and approval of projects from the competent
authorities, before publication of the ADP.
FIFTH STAGE: FINALISATION OF ADP AND ITS AUTHENTICATION
In the fifth stage, which is spread over the second week of April to the end of June, the
final shape is given to the ADP. During this period several meetings are held at the
federal level, e.g. of the Priorities Committee, Annual Plan Coordination Committee,
Executive Committee of the National Economic Council and National Economic
Council, to finalise the federal and provincial ADPs. It is presented to the Cabinet and
Provincial Assembly in June. After approval and with the governor’s authentication by
the end of June, the ADP is ready for implementation with effect from the beginning of
the financial year.
1.3.2 ADP and MTDF formulation guidelines
The P&D Department initiates the process of formulation of the ADP in January/
February each year with the issuance of the ADP Formulation Guidelines. The ADP is
prepared in accordance with the guidelines within the MTDF. These cover a three-
year period, with a scheme-based portfolio, allocation of funds for the next year, and
tentative financial projections for the two subsequent years. The guidelines direct
the adoption of a consultative process with the administrative departments and the
other stakeholders including public representatives and experts; the guidelines also
provide relevant proformas to be used for scheme-based sectoral programmes as
well as a prescribed time schedule. The guidelines have to be followed by
administrative departments, attached departments, autonomous bodies, project
directors, project executing agencies, and administrative divisions and districts.

Generally the ADP Formulation Guidelines also lay out the development strategy for
the period in question. The guidelines for financial year 2015–16 have been annexed
in VOLUME TWO – SECTION C.
1.3.3 Project cycle management
Various proformas are used for different cycles of the project, as prescribed by the
Planning Commission, as follows:
PC-I Detailed project document

PC-II For preparation of pre-feasibility and feasibility surveys
PC-III For submission of monthly/annual monitoring/progress report of project
PC-IV For submission of completion report of project
PC-V For submission of evaluation/implementation report on annual basis for five years
Table 1: List of PC proformas
Appendices (VOLUME TWO – SECTION B) present these forms and guidance notes
from Planning Commission.
PC-I PC-II PC-III PC-IV PC-V

PROFORMA PROFORMA PROFORMA PROFORMA PROFORMA
Project information Feasibility study of Progress report on Project completion Project impact
for pre-investment a large-scale use of funds and report assessment report
appraisal development achievement of
project project milestones Self-assessment of Follow-up of the
A planning process project financial terminal evaluation
from project Complete survey of Extent of project and physical report
identification to its project design performance on a conduct
approval quarterly basis Particulars
Experts’ opinions Internal analysis of regarding operation
A milestone to and justifications to Identification of project outputs and maintenance
improve project tie up large bottlenecks (O&M) of the project
quality resources in a experienced during Process of with regard to
programme ongoing project measuring project project evaluation
Baseline for activities outcomes and
monitoring and immediate impact
evaluation (M&E)
performance
measures
Table 2: Planning Commission forms and their use3
Figure 2 explains the roles of different proformas in the project cycle:
3 Director general, M&E, P&D, Punjab

Figure 2: Project cycle and use of project cycle forms4
1.4 Planning: institutional regime
The planning process was initially formalised in Pakistan with the creation of the
National Planning Board in 1953 along with provincial departments. The Planning
Commission at the federal level was set up in 1958 along with the provincial
departments. In addition, a number of planning agencies have come into existence at
different levels in the country. The present chapter briefly surveys the planning
machinery in operation at various levels:
• Planning Commission of Pakistan;

• provincial P&D departments/Board; and
• planning agencies at the divisional/district level.
1.4.1 Planning Commission
The Planning Commission, including the Planning, Development & Reforms Division,
occupies the central position in the overall planning machinery. The prime minister is
the chairman of the Planning Commission, which, apart from the deputy chairman,
comprises various members including the secretary, Planning, Development &
Reforms Division/member (Coordination); member (Private Sector Development &
Competitiveness); member (Energy); member (Food Security & Climate Change);
member (Science & Technology); member (Development Communication); member
(Infrastructure & Regional Connectivity); member (Social Sectors & Devolution);
4 Director general, M&E, P&D, Punjab

member (Governance, Innovation & Reforms); and vice chancellor, Pakistan Institute
of Development Economics (PIDE)/member (Research).
Functions of the Planning Commission
The functions of the P&D Division are as follows:
• preparing the national plan and review and evaluating its implementation;
• formulating the annual plan and ADP;
• monitoring and evaluating implementation of major development projects and
programmes;
• stimulating preparation of sound projects in regions and sectors lacking adequate portfolio;
• continuously evaluating the economic situation and coordinating economic policies;
• organising research and analytical studies for economic decision-making;
• assisting in defining the national vision, and undertaking strategic planning;
• assessing the material, capital and human resources of the country and formulating
proposals for augmenting such resources;
• facilitating capacity building of agencies involved in development; and
• any other functions assigned by the Prime Minister.
Box 2: Functions of Planning Commission
1.4.2 P&D Board
At the provincial level, P&D activities of all nation-building departments and agencies
are coordinated by this board. The P&D Board is headed by a chairman. He is assisted
by the chief economist, secretary, joint chief economists, members, senior chief and
chief of sections.
Distribution of work – The P&D Board is divided into self-contained sections, each of
which is headed by a senior chief/chief of section. The main sections are as follows:
• Economic sections – There are a number of economic sections established in

the P&D Board, Punjab. The matters dealt with by these sections include:
coordination with the federal government on economic issues and
development plans; macroeconomics and policy analysis; appraisal; and M&E.
• Technical sections – The technical sections appraise projects from a technical

viewpoint. These include: water and power; roads and bridges; urban
development/development authorities/regional planning agriculture; livestock
and dairy development; forests and fisheries; and industries and manpower.
• Social sections – The social sections mainly consist of health, population

welfare and nutrition; education and training; information, culture, tourism and
social welfare; housing and physical planning; and urban/rural water
supplies/sewerage.

• Other sections – Other sections include ECA; environment; and the Project
Training Institute.
Functions of the P&D Board – The main functions of the Board as per the Rules of
Business include:
• formulation of the provincial government vision, policies and strategies for

economic P&D in consultation with all stakeholders in light of the National
Economic Council's (NEC's) guidelines
• ADP/MTDF:
o preparation in coordination with all departments of the government
o monitoring implementation
o evaluation of development projects and programmes
• economic issue(s):
o conducting of research/surveys
o review/analysis of socioeconomic data
• Public Sector Development Programmes (PSDPs):

o preparation of short-term and long-term provincial development plans
o coordination with federal government
• policy for the approval of development schemes

as a catalyst for different departments/sectors to improve the pace and
quality of economic development
• resource allocation, re-appropriation of development funds, appropriations

from block allocations and disbursement of supplementary grants
• secretariat for the Provincial Development Working Party (PDWP) and

clearinghouse for development within the competence of the Central
Development Working Party (CDWP) and Executive Committee of the
National Economic Council (ECNEC)
• foreign assistance:
o determination of key areas for foreign assistance and preparation of the
sector-wise portfolio for foreign assistance
o loan negotiations and securing of federal financial guarantees, wherever
required
o review of foreign-aided projects
• coordination of nominations for foreign training, seminars, conferences and

workshops for all officials serving with the provincial government

• capacity building of government departments, agencies and functionaries for
good governance
• focusing on accelerated development of rain-fed (barani) and less developed

areas
• framing of guidelines for procurement of consultancy service
• policy formulation with respect to private sector development and

promotion and public–private partnership (PPP)
implementation, development and administration in respect to foreign-
assisted/ funded and mega ADP projects
• matters relating to attached departments, autonomous bodies and special

institutions of the P&D Department
• information technology:
o IT policy
o electronic data management
o control of and liaison with district IT departments
o e-governance and e-service delivery
o web content management
o pre-qualification of firms to provide IT consultancy, software development
and IT products to the government
o coordination with both public sector departments and private sector
agencies in the field of IT
o service matters of IT cadres at both provincial and district levels
• budget, accounts and audit matters
• purchase of stores and capital goods for the department
• service matters except those entrusted to service and General Administration

Department
• administration of the following laws and the rules framed thereunder:

o the Cholistan Development Authority Act, 1976
o the Punjab Economic Research Institute Ordinance, 1980
o the Punjab Public–Private Partnership for Infrastructure Act, 2010
• matters incidental and ancillary to the above subjects
While performing its functions the Board closely coordinates with the Finance
Department regarding formulation and determination of the ADP. The Finance
Department is also involved with the process of approval of individual development

schemes; this function is associated more directly with the process of ADP
implementation.
1.4.3 Planning at divisional level
The divisional functions for planning include:
Finalisation of lists of schemes – Assist the provincial government to finalise lists of

schemes for inclusion in the ADP.
Approval of Schemes – Approval of development schemes is accorded in a systematic

manner at various levels. At the divisional level a committee for that purpose has been
constituted, which is known as the Divisional Development Working Party.
1.4.4 Planning agencies at district/divisional level
All local government tiers prepare and implement development programmes through
their own budget. In addition, autonomous bodies like the Lahore Development
Authority, Multan Development Authority, Faisalabad Development Authority,
Gujranwala Development Authority, Bahawalpur Development Authority, Punjab
Small Industries Corporation, Punjab Mineral Development Corporation, Punjab
Industrial Development Board and Tourism Development Corporation have emerged
over time to cater for the specific development needs of those areas and relevant
sectors. These development authorities have streamlined their own procedures for
preparation, approval and implementation of their programmes. All these autonomous
bodies are carrying out small and big development projects, which are not fully
reflected in the ADP.
At all levels, efforts have been accelerated to involve non-governmental organisations

(NGOs)/communities in development works. For social sectors NGOs involvement in
development work through health and education foundations is being promoted.
Lately, the private sector has also come forward in supplementing the PSDP.
1.5 User guidance for Planning Manual
Special care has been taken to make the Planning Manual a user-friendly resource.
This manual has been divided into five sections. The first section presents the
introduction of the planning regime, etc., while the next four sections address
various user-planning needs. A reader does not have to go through the whole
manual to get any help and should rather consult the relevant section for quick
reference.

There could be a variety of reasons or areas for users to consult this manual,
depending upon the exact stage of the project cycle in which they are involved.
Based on this approach, Section 2 exclusively deals with project identification and
formulation. This section is especially useful for line departments, districts and
other agencies at the ADP formulation stage. Section 3 is about appraising and
approving a project and is particularly useful for members of different approval fora
as well as any official tasked with reviewing or appraising a project proposal.
Section 4 provides guidance on M&E of a project. The last section, Section 5, covers
some of the questions about more recent subjects faced by officials in the provincial
government such as PPPs, private sector support initiatives, direct or contingent
liabilities, RBM, etc.
Box 3: Structure of Planning Manual

SECTION 2 – HOW TO IDENTIFY AND FORMULATE A PROJECT
2.1 Project identification
Project identification forms the most critical stage in the project cycle because
projects are supposed to deliver public policy objectives to ultimate beneficiaries,
within limited resources. It is very important that all projects forming part of
ADP/MTDF are closely aligned with national and provincial policy frameworks and
work in sync with the overall development portfolio. Even if political leadership or
other stakeholders directly identify some of the projects, the line departments or
other users must apply some objective criteria to assess if the projects are
'correctly' identified and are aligned with the development portfolio.
For identifying any project, the users must look at the overall national and
provincial growth frameworks, which lay down the broader priorities. All projects
must also be part of their respective integrated sector framework. Usually each
sector has its own strategy or vision document, which lays out the key areas of
future interventions. Such documents can give any user a comprehensive
understanding of what needs to be achieved in a particular sector. Even if the users
feel that there is no formal strategy document or sector framework available, the
departmental strategy is usually articulated in the form of a presentation or
document, which can provide guidance on broad sectoral priorities.
At present, Vision 2025 presents the national growth framework, whereas the
provincial economic growth policy sheds light on provincial growth framework.
Recently a number of departments have also developed their sector plans, which
should be consulted for project identification.
Box 4: National Vision 2025
Other than these documents, the users should also look at global development
imperatives such as the MDGs as well as country assistance and partnership
strategies of donors and development partners (DPs) to identify intervention areas5.
Another lens that can help such identification process is the question of whether the
proposed project can be financed through private capital and can therefore be
potentially undertaken in PPP mode. If it can be, then ideally it should not form part
of the ADP6, which is meant for only publicly financed projects. It must be noted that
5 As per the Government of Punjab’s ADP Formulation Guidelines 2015-16, some of the articulated
priorities are given. As per the guidelines, efforts should be made to focus the new portfolio on the
economic growth strategy and sector plans. Education and health departments should make every
effort to ensure consolidation and improvement in service delivery projects for enhancing efficiency
and effectiveness to achieve the MDGs. Special attention may be given to new initiatives
/programmes of the government with an emphasis on inclusive growth, poverty alleviation, MDG
attainment, creation of productive assets and gender mainstreaming.
6 ADP funding may be used for public sector contribution for a PPP project for land acquisition or
other uses.

availability of financing is not the only criterion for undertaking a project in PPP
mode. This topic has been dealt with in greater detail in Section 5.
The following sections introduce the current national and provincial frameworks;
however, it is important that at the time of project identification, the user should
consult the most recent policy documents.
2.1.1 Vision 2025
Pakistan Vision 2025 is the national growth plan, recently developed by the
Planning Commission of Pakistan. The vision document puts forward the goal of
transforming Pakistan into one of the top 10 economies in the world by 2047. By the
year 2025, it envisions Pakistan among the top 25 economies of the world and an
upper-middle income country. The document also identifies five enablers and seven
pillars to offer an integrated approach for development and prosperity. The
enablers include a shared vision, political stability and continuity of policies, peace
and security, rule of law, and social justice.
PILLARS OF VISION 2025
Pillar I: Putting People First – Developing Human and Social Capital

Pillar II: Achieving Sustained, Indigenous and Inclusive Growth
Pillar III: Democratic Governance, Institutional Reform and Modernisation of the Public Sector
Pillar IV: Water, Energy and Food Security
Pillar V: Private Sector and Entrepreneurship-Led Growth
Pillar VI: Developing a Competitive Knowledge Economy through Value Addition
Pillar VII: Modernising Transportation Infrastructure and Greater Regional Connectivity
Box 5: Pillars of Vision 2025
2.1.2 GoPb's growth strategy
Punjab's growth strategy envisions Punjab as a secure, economically vibrant,

industrialised and knowledge-based province, which is prosperous and competitive
and where every citizen can expect to lead a fulfilling life. The strategy also
highlights key impediments to growth including an underutilised manufacturing
capacity and stagnant exports; low productivity of physical and human capital;
unemployment, under-employment and skills shortages; slow progress on achieving
the MDGs; and a difficult security situation.
Punjab's growth strategy

Key objectives
1. Achieving 8% economic growth (real growth rate in gross domestic product) in Punjab by 2018
2. Increasing annual private sector investment in Punjab to US$ 17.5 billion by 2018
3. Creating 1 million quality jobs every year in Punjab
4. Training 2 million skilled graduates in Punjab by 2018
5. Increasing Punjab's exports by 15% every year until 2018
6. Achieving all MDGs and targeted Sustainable Development Goals in Punjab

7. Narrowing the security gap with regional neighbours such as India and Bangladesh by reducing
crime and improving law and order in Punjab
Box 6: Key objectives of Punjab’s growth strategy
2.2 Screening projects for PPPs
A number of factors need to be considered while screening a project to assess if it

can be undertaken in PPP mode. Some of these criteria are explained briefly below.
For more detailed guidance, please consult the GoPb's PPP Project Inception Policy
Guidelines.
START PROCEED TO PPP
YES
NO Sector GoPb – Screening Projects for PPP Comparison
with Other
RANK LOW
Eligibility Projects
YES
YES
OUT
NO PPP Impact on NO
Applicability Compe on
LIKELY
YES
OUT
NO Specifica on Government UNLIKELY

of Outputs Support
YES
YES
YES
NO Private NO
Willingness VGF Available
Sector
to Pay
Capacity
NO
YES
YES
NO Technical Financial NO
Suitability Viability
YES
Figure 3: PPP project screening tool
1) Sector eligibility – Schedule I of the Punjab Public–Private Partnership Act 2014

lists the eligible sectors for PPP projects. The proposed project should belong to one
of these sectors.
2) PPP applicability – The project should be consistent with the following PPP
definition that underlies the government’s PPP policy: “PPPs are medium- to long-
term contractual arrangements between the public sector and a private party for the
provision of an infrastructure facility and/or service with a clear allocation of risks
between the two parties.” In line with this definition, the project should provide

opportunities for risk transfer to the private sector, which is the primary driver of
value for money in PPPs.
Furthermore, the project should adopt one of the PPP modalities listed in Schedule
II of the Punjab Public–Private Partnership Act 2014. Some guidance on these
models is given in the following matrix:
Modality Owner- Invest- O&M Commercial Duration Typical

ship ment Risk (years) Example
Service Contracts Public Public Public/ Public 1–3 Meter reading
Private and billing, or
road
maintenance
outsourcing
Management Public Public Private Public 2–5 Public utility
Contracts management
Lease Contracts Public Public/ Private Public/ 10–15 Leasing of
Private Private existing tourism
facilities
Concessions Public/ Private Private Private 25–30 Water supply
Private concession
BOT and Other Public/ Private Private Private 20–30 Independent
Similar Contracts Private power
(Please see producer
Schedule II of
Punjab PPP Act
2014)
Table 3: PPP modalities
BOT = build–operate–transfer; O&M = operation and maintenance.

Source: Public–Private Partnership Handbook, ADB, 2008 (with some variation).
3) Specification of outputs – The focus under PPP projects is on outputs, i.e.,

services being provided. By contrast, the focus in traditional public procurement has
always been on inputs. This change in the procurement paradigm means that the
line department should be able to specify in clear and measurable terms the
project’s outputs in terms of the expected improvements in the quantity and quality
of service delivery, based on which a payment mechanism can be devised in the PPP
agreement.
4) Private sector capability and appetite – The project should be within the
capability of the private sector to finance and implement. At the same time, the
project should be able to attract sufficient market interest and have the potential to
operate as a commercially viable venture. These criteria highlight the importance of
project size. On one hand, the project should have a certain minimum size to
generate cash flows that will enable both public and private parties to achieve value
for money and thereby attract investors’ interest. On the other hand, the project

should not have investment requirements that are so large that they exceed the
financial capability of the majority of potential investors.
5) Technical scope of the project – The project should be prima facie technically
viable. The PPP approach is particularly suitable if the following are needed:
• advanced design and state-of-the-art technology of equipment and processes,

which traditional public procurement is unlikely to provide;
• faster construction of the project than under traditional public procurement;
• improved quality of infrastructure services to customers in accordance with
internationally recognised standards; and
• enhanced management of the project O&M compared with the management
competence and capacity of the existing public utility. By transferring the
management of public infrastructure to the private sector, staff of the public
utility can focus on infrastructure planning and performance monitoring,
leaving the management of day-to-day delivery of infrastructure services to
the private party.
6) Financial viability of the project – To attract private investors and satisfy their
lenders, it should be demonstrated that the project most likely can generate
revenues over the concession period at levels sufficient to recover and repay the
estimated investment cost, cover the estimated O&M expenses, and generate a
commercially acceptable rate of return on equity.
7) Ability and willingness of customers to pay – The public demand and

willingness to pay for a more expensive project may be a key factor for successful
implementation of the project. The line department should therefore make a
preliminary assessment of whether the project and the customer charges needed to
make it financially viable are publicly acceptable. If not, then it should be
determined whether any viability gap funding is available.
8) Need for and availability of government support – There are four main
categories of government support for PPP projects including: administrative
support such as land acquisition, permits, etc.; asset-based support such as leasing
land or infrastructure facilities; direct financial support; and contingent support in
the form of government guarantees. It is important to identify any such support
required for the project and assess if such support is viable or likely.
9) Impact of the project on competition – A PPP project may create a monopoly

or provide extensive exclusivity rights for the private party for a long-term period.
This may have a negative impact on tariffs for the services and constrain the
government’s ability to promote competition and innovations in the service
provisions at a later stage.

10) Comparison with other project candidates – After the department has
completed the screening of the project and found the outcome positive, it should
compare it to other potential projects in the same sector and/or geographical area
in order to select the best candidate for the PPP mode.
2.3 Project formulation
All development projects in the ADP/MTDF have to be prepared in the approved

format, i.e. the PC-I proforma. The Planning Commission has devised three
proformas, one each for the infrastructure sector, production sector and social
sector. All the PC proformas, along with detailed instructions for filling them, are
placed in VOLUME TWO – SECTION B.
For mega projects, where significant resources for feasibility studies are involved, a
separate proposal on the PC-II proforma is to be submitted for approval. These
projects require proper feasibility studies to be undertaken before the submission
of the PC-I. In more complex projects, technical assistance could be requested from
one of the donors. For other low-cost projects, in-house feasibility studies can be
carried out. Based on the data and positive findings of the feasibility study, the PC-I
is prepared and submitted for approval by the concerned forum.
At the project preparation stage, various indicators such as required inputs, baseline
data, and expected outputs and outcomes are determined over the life of project. In
addition, the viability of the project in terms of financial and economic indicators is
determined, which focuses on financial and economic costs and benefits of the
project. Another important aspect, which needs to be considered, is the
sustainability aspect after completion: how it would yield the required
output/outcome. Therefore, due attention has to be given to the sustainability
aspect of the project at the preparation stage.
2.3.1 Sources of data
For accurate estimates, the users need to use credible sources of data only and
should clearly mention any source that they use. The users may consult the
following sources/documents for data and only if they cannot find the requisite data
from these sources should they consult other sources.
• Punjab Development Statistics released every year by the Bureau of Statistics

(www.bos.gop.pk);
• Multiple Indicator Cluster Survey (http://www.bos.gop.pk/?q=mics);
• Economic Survey of Pakistan (www.finance.gov.pk/);
• State Bank Data and reports (www.sbp.org.pk/ecodata);
• Pakistan Bureau of Statistics (http://www.pbs.gov.pk/) – various surveys
and statistical bulletins including the Pakistan Social and Living Standards
Measurement Survey (PSLM);

• management information systems developed by various line departments for
their respective sectors; and
• World Bank Open Data and World Development Indicators (accessed at
http://data.worldbank.org/).
2.3.2 Stakeholder consultation – needs assessment
Project stakeholders are those who have a 'stake' (investment, involvement,

concern, interest) in the success of the project. They are citizens or organisations
that have interests that are positively or negatively impacted by the project, or that
can positively or negatively impact the project processes, outputs or outcomes.
Project success depends in part on maintaining the commitment and confidence of

those providing resources; gaining the agreement of those who will utilise the
project outputs; and/or responding appropriately to the people and groups who are
impacted by (or who can impact the interests of) the project. The potential
stakeholder community surrounding a project can be difficult to identify because
they may be large, diffuse and amorphous; and/or the interests of stakeholders are
usually varied.
Stakeholder engagement is the process of identifying key stakeholders, analysing

their influence on the project, and managing their influence and impact – including
winning their support where possible. To keep everyone engaged for the duration of
the project, it is important to develop an understanding of the values and issues that
stakeholders have and address them.
Stakeholders can be defined as key or non-key for the purpose of planning

engagement strategies:
Key stakeholders are those individuals or groups whose interest in the project must
be recognised if the project is to be successful – in particular those stakeholders
who will be positively or negatively affected during the project or on successful
completion of the project.
Non-key stakeholders are those individuals or groups identified as having a stake in

the project but who do not necessarily influence its outcome.
Box 7: Key and non-key stakeholders
Classifying stakeholders – Classifying key stakeholders into groups according to

their interest in or influence on a project is a useful tool and allows managing them
effectively. There are generic stakeholder classes within government projects that
are a useful starting point for analysis. This is a useful way to broaden the thinking
from the immediately obvious stakeholders and gain a wider picture of the project’s
impact.

The table below provides a list of classifications that may be adopted by a project to
categorise groups of project stakeholders. In this classification method the holders
of specific roles within the project governance structure are not included as
stakeholders because they have been deliberately engaged to fulfil a requirement
(e.g. project manager, project team, consultants, contractors) and would likely have
no particular interest in the project if not appointed to that role.
The classification list is not definitive, nor will every project utilise every
classification. It may be necessary to break some groups down into sub-categories,
for example breaking the outcome-impacted group into beneficiaries (those
stakeholders who receive a benefit) and affected people (those stakeholders who
may experience some form of penalty, be harmed by the project or bear a cost). It
may also be useful to further break the groups down by gender to understand
different outcomes of a project for men and women separately.
Group
Group Description Stakeholder Examples
Classification
Which groups/individuals/decision- Political decision-makers

Review/
makers/organisations will review (e.g. CM Punjab for a micro hydel
Decision-making
project outputs or outcomes? project)
What projects and change activities will

Allied stakeholders
Allied/Peripheral impact the project and in what way?
(National Electric Power
Effects What projects and change activities will
Regulatory Authority)
the project impact and how?
Beneficiaries (positive – users of
Which
electricity)
individuals/groups/organisations will
Outcome Impact Affected people (negative –
be impacted positively or negatively by
communities that have to be
project outcomes?
displaced)
Project Delivery Unit

(Punjab Power Development
Which groups/organisations will be
Output Delivery Board/
required to deliver project outputs?
Project Management and
Implementation Unit (PMIU))
Output Project Developer/Financer

Who is responsible for project success?
Accountability (Secretary Energy)
Table 4: Stakeholders group classification matrix
The roles of all stakeholders should be fully understood and their concerns should
be highlighted. Any good project proposal would pre-emptively address concerns of
all stakeholder groups and would have mitigitating stratgies integrated into the
proposal to manage any risks. Such an approach would avoide later delay issues or
objections during the appraisal and approval process.
2.3.3 Pre-feasibility and feasibility studies

A pre-feasibility or feasibility study is the starting point in project formulation,
if either of the following two situations exists:
• no data/information to examine the viability of a project; and

• inadequacy of available data/information for ascertaining the
feasibility of a project.
The aforementioned studies are required to find out whether the project would be
technically feasible, administratively manageable, economically and financially viable.
These are normally required for big projects (at present costing more than PKR 300
million). In the case of medium and small projects, preliminary investigations are
comparatively simple. Hence, formally outsourced pre-feasibility and feasibility
studies are not needed for such projects.
Pre-feasibility study – A pre-feasibility study may be required primarily to:
• curtail the range of feasible alternative solutions; and

• ascertain whether or not a more detailed feasibility study is
needed.
Sometimes a pre-feasibility study is undertaken as a component of project

identification. Such a study helps in weeding out non-feasible solutions. Feasibility and
pre-feasibility studies differ mainly in respect of details and accuracy. The results of a
pre-feasibility study may lead to any of the following decisions:
• The proposed project may be rejected because it is not found to

be a viable proposition.
• Detailed planning of the project may be initiated on the basis of
the pre-feasibility results (preparation of PC-I).
• A detailed feasibility study may be initiated (preparation of PC-
II).
Feasibility study – If the decision is to undertake a detailed feasibility study, it will

entail a further probe into a number of areas or aspects pertaining to an investment
proposal. These areas/aspects have been briefly discussed below:
1) Market aspect – The study of the market is of basic importance. It is on the basis of
such a study that the demand for the product/services to be produced is estimated.
Similarly, levels and trends of supply are examined. The comparison of the project
demand with the supply gives the 'net demand'. The factors that determine the extent
of marketability of a product/service are the following:
• gap between the projected demand and forecasted supply;

• competitiveness of the proposed product services with similar available
products/services; and

• effectiveness of the marketing plan and organisation.
2) Technical aspects – At the feasibility stage, technical aspects of the proposed

project are also examined critically. There may be a number of alternatives to
implement and operate a project. The choices regarding size, location and technology
are ultimately based on the alternative chosen for the project. The guiding principles
for selecting an appropriate technical alternative are as follows:
• The size, location and technology match the project requirements.

• All technical features are reasonably defined and found feasible.
• Resources are available in the required quantity and quality in accordance with
the selected alternatives adopted.
3) Financial analysis – The objective of financial analysis is to ascertain whether or

not the proposed project is a financially viable proposition. For this purpose, financial
costs are compared with the financial benefits expected to be generated during the life
of the project. The financial feasibility is determined by the discounted cash flow
measures, i.e. benefit–cost ratio (BCR), net present value (NPV) and internal rate of
return (IRR).
4) Economic analysis – The economic analysis of the project helps to spell out the
impact of the project on the economy or the society as a whole. Such an analysis
involves comparison of the costs that the economy or society is required to bear to see
the expected benefits. A project is considered to be economically viable if it contributes
to the gross national product. The financial and economic analyses of projects are
discussed in detail in the next chapter.
5) Operational aspects – Operational aspects are examined to ascertain the viability

of a project on a legal, organisational, managerial and other administrative basis. The
agencies responsible for project implementation are identified at this stage. The role of
a sponsoring agency, whether it is a government department or a board of directors, is
to decide policies, approve budgets and appoint management. The management on the
other hand consists of key officials who are responsible for making day-to-day
decisions about the operation and supervision of the project.

PROVISION FOR CONSULTANCY
Need for consultants

In the case of projects, the need for consultants should be carefully considered and
approved during the appraisal / formulation of the project through a PC-I or PC-II.
Here it is pertinent to mention that the approving forum for the PC-II, irrespective of
its cost, is only the PDWP.
When consultants are used, it should be ensured that the functions and
responsibilities to be assigned to the consultant are adequately defined in the Terms
of Reference (ToRs). The consultants to be engaged by the client may, depending on
the circumstances, be individual consultants or consulting firms.
Costing and funding

The provision for consultancy should preferably be prepared on a person-month or
person-days basis. For development projects the client should use a PC-II or PC-I to
secure the necessary funds for consultancy work. For non-development work the
client can secure funding through an allocation to the budget head 'Payment to
others for services rendered'.
Selection of consultants
After approval of the PC-II / PC-I from the competent forum, including ToRs for the
consultants, the procuring agency shall select the consultants following the
provisions of Punjab Procurement Rules 2014. In the said rules Chapter VII has
specifically been added for procurement of consultancy services. The Client
Department shall also ensure that the consultant has adequate expertise to perform
the assignment. In the case of non-development funding, the Client Department may
select the consultant/firm without having a PC-I/PC-II. However, ToRs may be
cleared from the P&D Department.
Box 8: Provision for consultancy
2.3.4 Detailed planning of the project
Once the viability of a project is determined on the basis of pre-feasibility or feasibility

study, its detailed planning is initiated. A number of activities need to be carried out at
this stage, which include technical investigation, surveys and tests, site layout, design
of basic civil works, design of auxiliary facilities and phasing of various project
activities. Details are spelled out below:
Projects with civil works as major component
Technical investigations – For big projects, technical investigations in the form of

research, surveys and tests are needed in various phases of the technical study. Field
reconnaissance is performed to probe into the technical requirements further.
Land acquisition – For projects where land is required, either the government land is
provided or it has to be acquired under Land Acquisition Act 1894.

Site layout – For projects where construction work is involved, a site plan is drawn.
Such a plan shows spatial arrangements of various facilities. Thus, the site plan helps in
finding out the functional layout for the project.
Basic civil works – Various civil works are identified on the basis of the objectives of a
project. The types and characteristics of the civil works will depend on the selected
design. At the feasibility stage, civil work design includes preliminary architectural and
engineering plans along with specifications. The basic structural framework, thus
determined, should give the desired operational efficiency.
Auxiliary facilities – Besides basic civil works, auxiliary facilities are also required to
be spelled out. The auxiliary works normally include: roads, water supply and
drainage, power supply, housing facilities for employees, etc. Such works are also
planned in detail at the time of project formulation. The auxiliary works, in fact, are the
key elements, which need to be properly identified and provided in a project to ensure
its smooth and successful operation.
Projects without substantial civil work
For projects in which construction work is not a substantial part, the overall
methodology would be as follows:
• For construction works, the guidelines as given in the preceding section are
applicable.
• For other works, e.g. extension, research, training, education, health coverage,
etc., the implementation schedule should specifically indicate the various
activities and timings for their completion to achieve the desired objectives.
• Clear parameters for measuring the success of the project or achievement of
objectives should be highlighted for subsequent M&E. For performance
evaluation the benchmark survey should precede the project implementation.
Phasing of works and project activities
Once the basic and auxiliary civil works and other activities have been planned, the
next stage is to chalk out suitable schedules for implementation and operation of the
project. The implementation schedule should indicate the manner of executing the
physical work. In short, it should clearly reflect:
• time required for land preparation/clearing, foundation work, building

construction, roofing, etc.
• main elements affecting time and costs by using a network diagram7; and
7A network diagram, also referred to as a logic diagram, is an easy-to-use tool for visualising and
depicting how the project is expected to proceed. A network diagram is a sequence of steps

• types and quantities of inputs (manpower, material, equipment, etc.) required
for the project at different stages of its implementation.
2.3.5 Project requirements
The detailed planning of basic and auxiliary works enables the project planner to
determine the types and quantity of resources required for project implementation
and its subsequent operation. Different types of resources required for the project are
finances, machinery and equipment, manpower, supplies, materials and various
utilities, which should be commensurate with the requirements and implementation
plan. Details are given below:
Machinery and equipment – The choice for machinery and equipment is influenced
by the nature of project, alternative use of machinery, available technology levels, scale
of output, costs and availability of spare parts, and the performance reliability. When
selecting any machinery and/or equipment it is essential to consider the scale of
production for its optimal use.
Workforce requirement – The requirements for different types of workforce

(professional skilled, semi-skilled and unskilled) need to be worked out in detail. In
addition, requirements of the workforce at the implementation and operation stages
need to be clearly identified and determined.
Supplies and material – The quantities and specifications of supplies and materials
required for implementation and operation of the project may also be worked out in
detail. While estimating such requirements the availability and continuity of supply of
these resources may be thoroughly examined.
Utilities – The requirements for different utilities such as water, power, and fuel
should be properly identified for both implementation and operation of the project.
The analysis should also clearly indicate the sources and the cost for provision of the
required utilities.
In order to ensure timely implementation and subsequent smooth operation of the

project, a schedule in respect of resource requirements may also be chalked out in
detail. This schedule should clearly indicate the time quantities, specifications and
resources to meet various project requirements at different stages of implementation
and operation of project.
Project costs
Once the project requirements have been identified and quantified, its cost analysis is
taken in hand. This task should preferably be undertaken jointly by the experts to
(activities), commonly represented by blocks that are linked together in the logical sequence in
which they need to be carried out.

ensure that the technical as well as economic considerations have been taken into
account at the stage of project formulation. Details are as follows:
Classification of project costs – Project cost consists of all the expenditure

incurred on various goods and services required for the implementation, operation
and maintenance of the project. It includes local and foreign costs. In addition,
specification of the foreign assistance (donation/grant/loan), along with the local
currency as the counterpart should be reflected on a year- and component-wise
basis.
1) Capital cost – All the expenditure incurred on physical assets such as basic and
auxiliary civil works, machinery and equipment constitute the capital cost of the
project.
2) Recurring cost – The expenditure incurred on goods and services, e.g. salaries,
wages and running costs of essential utilities (water, fuel, electricity, etc.) and
expenses on repair constitute the recurring cost of a project.
Phasing of costs – The capital and recurring costs of a project should be phased out
on an annual basis for the entire project life. The requirements for funds to
implement the project will be mainly regulated by the financial phasing of the
project.
Box 9: Classification of project costs
2.4 Cross-cutting themes
All project proposals should conform to certain cross-cutting themes such as

sustainability, gender responsiveness and inclusive growth.
2.4.1 Sustainability – Sustainability can be defined as the ability of a project to

maintain its operations, services and benefits during its projected lifetime. The
World Bank defines sustainability as 'the ability of a project to maintain an
acceptable level of benefit flows through its economic life'. Some of the
sustainability dimensions are the level of continued delivery of project goods and
services; changes stimulated/caused by the project; and new initiatives caused by
the project. In order to ensure that all project proposals are sustainable, the
following issues must be considered:
• The project receives the necessary support (both budgetary and

institutional) to enable it to maintain the required level of facilities.
• All the costs and benefits under varying conditions are weighted properly
and the project guarantees an acceptable level of financial and economic
return.

• There is continued community participation in projects where active
community participation is crucial for stimulating new actions as well as for
cost recovery.
• There is equitable sharing and distribution of project benefits.
• The project adequately considered the institutional requirements and thus
made provisions so that management support to project operations
continues during the life of the project.
• The project considered environmental implications so that negative impacts
on environment are either avoided or mitigated during the life of the project.
2.4.2 Inclusive growth
All projects to the extent possible should have the inclusive growth integrated
within the proposals. Each project proposal should address the following issues:
• Does the project aim to reduce absolute poverty8 by appropriate targeting

mechanisms for direct or indirect beneficiaries?
• Does the project aim to and is it likely that it will lead to increasing
employment of poor people?
• Does the project aim to reduce economic and social disparities in income?
• Does the project positively impact non-income dimensions of well-being?
• Does the project encourage inclusion of disadvantaged and marginalised
groups?
• Does the project promote the human capacities of poor people, especially in
terms of health and education, so that they are better able to contribute
to/benefit from economic growth?
• Does the project results framework have appropriate indicators to track
inclusive growth?
2.4.3 Gender responsiveness
All projects should have gender-responsive proposals and ensure equitable gender
representation in project beneficiaries. Project design and implementation should
ensure that the projects aim to achieve positive results for women and girls, along
with other social groups. For example, human resources should also be planned
with a gender-sensitive lens. The project teams should also have gender
considerations knitted into their recruitment/selection criteria. Reporting and M&E
should be based on gender-disaggregated data. All public facilities as part of any
development project should ensure women-friendly facilities and all services
8 Extreme poverty, or absolute poverty, was originally defined by the United Nations in 1995 as 'a
condition characterized by severe deprivation of basic human needs, including food, safe drinking
water, sanitation facilities, health, shelter, education and information. It depends not only on income
but also on access to services'. Currently, extreme poverty widely refers to earning below the
international poverty line of $1.25/day (in 2005 prices), set by the World Bank.

projects should have clear targets for women and girls. Some key questions to
consider are:
• Does the project identify the needs of specific groups, especially for women,
girls and other vulnerable groups?
• Do the project targets specifically include women, girls and other
marginalised groups?
• Does the project help reduce gender disparity and help contribute to the
empowerment of women and girls and help promote social inclusion?
• Does the project promote capacity building of women, girls and other
marginalised groups?
• Does the project results framework have gender-sensitive indicators to track
results for women and girls?
2.5 Results framework
A results framework comprises different forms of representation of different levels,

or chains, of results expected from a particular project or programme. The results
typically comprise the longer-term objectives (often referred to as 'outcomes' or
'impact') and the intermediate outcomes and outputs that precede, and lead to,
those desired longer-term objectives. Other terms similar to ‘results framework’
include logical framework, logic model, theory of change, results chain, and outcome
mapping. Thus, the results framework captures the essential elements of the logical
and expected cause–effect relationships among inputs, outputs, intermediate results
or outcomes, and impact. The Planning Commission has now also incorporated a
results framework in the PC-I format and there is a separate sub-section in PC-I
proforma for laying down RBM indicators. The topic of RBM is covered in much
more detail in Section 5.
Irrespective of the level of results, for both intermediate and longer-term objectives,
the project proposal should clearly list quantifiable or measurable indicators to
make the project structure more objective and accountable. While these indicators
would vary from project to project, each sector/department should develop a
repository for relevant indicators to help the project formulation teams to make
their results framework more crisp and clear. VOLUME TWO – SECTION A lists some
indicators/parameters for social, productive and infrastructure sectors.

SECTION 3 – HOW TO APPRAISE AND APPROVE A PROJECT
3.1 Appraisal9
A project appraisal assesses the technical soundness and economic and financial
viability of a project. Appraisal facilitates the selection of suitable projects by clearly
identifying the financial and economic implications of various alternatives. If a project
is well formulated and thoroughly appraised, a good follow-through on subsequent
stages of the project cycle will see successful implementation of the project and
achievement of desired outcomes. The overall objective of systematic appraisal is to
achieve better spending decisions for capital and current expenditure on schemes,
projects and programmes.
Appraisal involves a careful review of the basic data, assumptions and methodology
used in project preparation, an in-depth review of the work plan, review of cost
estimates and funding arrangements, an assessment of the project's organisational and
management aspects, and finally an assessment the validity of the financial, economic
and social benefits expected from the project. On the basis of such an assessment, a
judgement is reached as to whether the project is technically sound, financially
justifiable and economically viable. A comprehensive project appraisal is carried out in
the P&D Department at approval stage. However, the responsibility of some form of
appraisal lies at multiple stages whenever the PC-I is reviewed or approved (such as at
district, division or department level).
This section provides an overview of the main analytical methods and techniques
that should be used in the appraisal process.
3.2 Identification of costs and benefits
The first step in project appraisal is proper identification of costs and benefits.
3.2.1 Concepts of cost and benefit and their comparison
To determine the viability of a project, the costs are compared with the benefits, i.e. if
the benefits are greater than costs, a project is considered viable. The proper
identification of costs and benefits is, therefore, a step of basic importance. In project
appraisal, the project objectives provide the basis of costs and benefits. For public
projects, the objectives can be as specific as provision of municipal services to citizens
of a community to sometimes as broad as to maximise the national income or reduce
poverty or stimulate economic growth. All projects consume resources such as land,
labour, capital, machinery, etc. and produce outputs in the form of goods and services.
Whereas the consumption of resources through investment in projects is a 'cost' to the
economy, the addition to the goods and services is the 'benefit' to the economy.
9An understanding of discounting and NPV calculations is fundamental to proper appraisal of

projects and programmes. A good understanding of cost–benefit analysis (CBA), IRR, multi-criteria
analysis and cost-effectiveness analysis (CEA) is also essential for economic appraisal purposes.

While appraising a project an analyst attempts to identify and value the costs and
benefits that will arise 'with' the proposed project and compare them to the situation
that will prevail 'without' the project. The difference between these two situations is
the incremental net benefit arising from the proposed project. Therefore, to identify
the contribution of a project, the correct approach is to compare the 'with-project
situation' with the 'without-project situation'. It is inappropriate to compare the
situations 'before' and 'after' the project because such a comparison fails to account for
changes happening irrespective of the project.
3.2.2 Classification of costs and benefits
There are different categories of costs and benefits, which need to be identified
carefully for their proper treatment. Various categories of costs and benefits are listed
below:
COSTS
Direct costs – These costs are directly borne by the project and are also known as primary costs. The
components of direct cost are expenditure incurred on all goods and services used in the execution of a
project including taxes, import duties, subsidies, etc. However, these components are treated differently
in financial and economic analyses.
Indirect costs – The project may lead to costs being incurred outside the project itself. Such a cost is
known as indirect or secondary cost. For example, construction of a dam may reduce river flow, causing
an increase in the cost of dredging of the dam site. If such a technological externality is significant and is
to be identified and valued, it may be treated as an indirect cost to the project.
Tangible costs – The costs that can be monetised are known as tangible costs, and these may include
components of direct and indirect costs.
Intangible costs (and negative externalities) – The costs that cannot easily be monetised are
intangible costs. The damage caused to the human health by air, water and noise pollution gives
examples of intangible costs.
Box 10: Various types of costs
BENEFITS
Direct benefits – Direct or primary benefits are those benefits that directly flow from the project.
Indirect benefits – The benefits that occur outside the project are considered secondary benefits. In
contrast to the primary benefits, which accrue to the project itself and are also derived as direct benefits,
secondary benefits are also known as indirect benefits.
Tangible benefits – All the direct and indirect benefits that can be measured in money terms are known
as tangible benefits.
Intangible benefits (and positive externalities) – Intangible benefits refer to the benefits that cannot
be measured in money terms. Examples of intangible benefits are improvement of a site as a result of
construction of a dam and appreciation in value of real estate due to infrastructural development.
Box 11: Various types of benefits

3.3 Types of appraisal
Various types of appraisals are typically involved in project appraisal. As an appraiser,

you may want to at least look into the following dimensions:
Valida ng Assump ons & Design
Technical Social & Environment
PROJECT
APPRAISAL
Organiza onal or
Economic & Financial
Management
Overall Quality Review
Figure 4: Components of project appraisal
3.3.1 Validating assumptions and design
The first step of any appraisal should be to carefully review the project proposal and
to assess the following:
• Ensure that the project goal and objectives are in line with sector plans and
the provincial growth framework.
• Validate all assumptions used.
• Make sure that specified project outputs are directly linked with intended
outcomes. The results framework should be a core element of this technical
review.
3.3.2 Technical appraisal
Every project must be technically feasible. Technical appraisal provides a

comprehensive review of all technical aspects of the project such as rendering
judgement on merits of technical proposals and operating costs. The following
elements should be reviewed during technical appraisal:
• There is a sound rationale for the selected technical design or approach.
• The proposed design conforms to international standards to the extent
possible.
• The proposed design meets the identified needs in the best possible way.
• The proposed technology has been proven or tested or has been in practice
elsewhere.
• The proposed design is aligned with existing structure/facilities/programmes.
• A list of equipment and machinery to be installed with the costs and
specifications of the equipment is attached.
• Equipment capacity is satisfactory and in line with requirements.
3.3.3 Social and environmental appraisal
A social appraisal reviews the project design and the process of project identification
through to implementation and monitoring, from a social perspective. Particular
attention is paid to the likely impact of the project on different stakeholders, their
opportunities for participation and the project’s contribution to poverty reduction.
Social and environmental appraisal should focus on following dimensions:
• Is the project likely to cause air and water pollution?

• Is the project posing any threat to community health, safety and security?
• Is the project resulting in any land acquisition and involuntary resettlement?
• Is the project likely to create differential access to project benefits or changes
in traditional rights or entitlements or does it ensure equal opportunities and
resources for women, girls and other vulnerable groups?
• Is the project likely to adversely affect labour and working conditions?
• Is the project going to threaten biodiversity conservation and natural
resource sustainability?
• Is the project causing any harm to indigenous peoples?
• What is the public perception and degree of voice in governance of the
project?
• Has the project proposal ensured the adequacy of the targeting and delivery
mechanism?
• Are interests of various stakeholder groups including women likely to be
affected and have they been consulted?
• What are the intended and unintended impacts on various social groups,
including women, girls and minority groups?
• Is the project going to destroy cultural heritage in any way?
• Has the project proposal addressed gender considerations to ensure
balanced participation by women?
• Does the project have a poverty focus?

The likely impacts in each of the above areas should be categorised as a potentially
significant impact; a potentially significant impact unless mitigation measures are
taken; a less than significant impact; or no impact at all.
Social and environmental considerations require that all projects avoid adverse
impacts on the people and environment and be appropriate for the culture of the
local communities and project beneficiaries. If adverse impacts are unavoidable,
efforts should be made to mitigate these impacts to ensure that the affected people
can restore or improve their living standards compared with the situation before
the project.
3.3.4 Financial and economic appraisal
3.3.4.1 Financial appraisal
For financial appraisal, the financial soundness of the project must be assessed. This
should include the incremental financial benefits and costs to the project and the
IRR or NPV. Assumptions underlying the forecasts of financial benefits and costs
(e.g., market outlook for key outputs and inputs, pricing, phasing of development)
and the results of sensitivity analysis testing and changes in assumptions are
reviewed. The adequacy of project financing and any risks it presents are also
assessed.
The recommended analytical methods for appraisal are generally discounted cash flow
techniques, which take into account the time value of money. People generally prefer
to receive benefits as early as possible while paying costs as late as possible. Costs and
benefits occur at different points in the life of the project, so the valuation of costs and
benefits must take into account the time at which they occur. This concept of time
preference is fundamental to proper appraisal and so it is necessary to calculate the
present values (PVs) of all costs and benefits.
NPV method – In the NPV method, the revenues and costs of a project are estimated
and then are discounted and compared with the initial investment. The preferred
option is the one with the highest positive NPV. Projects with negative NPVs should be
rejected because the present value of the stream of benefits is insufficient to recover
the cost of the project.
Compared to other investment appraisal techniques such as the IRR and the
discounted payback period, the NPV is viewed as the most reliable technique to
support investment appraisal decisions. There are some disadvantages with the NPV
approach. If there are several independent and mutually exclusive projects, the NPV
method will rank projects in order of descending NPV values. However, a smaller
project with a lower NPV may be more attractive due to a higher ratio of discounted
benefits to costs (see the section on BCR below), particularly if there are affordability
constraints.

Using different evaluation techniques for the same basic data may yield conflicting
conclusions. In choosing between options A and B, the NPV method may suggest that
option A is preferable, while the IRR method may suggest that option B is preferable.
However, in such cases, the results indicated by the NPV method are more reliable. The
NPV method should always be used where money values10 over time need to be
appraised. Nevertheless, the other techniques also yield useful additional information
and may be worth using.
The key determinants of the NPV calculation are the appraisal horizon, the discount
rate, and the accuracy of estimates for costs and benefits.
Discount rate11: The discount rate is a concept related to the NPV method. The discount rate is used to
convert costs and benefits to PV to reflect the principle of time preference. The calculation of the
discount rate can be based on a number of approaches, including, among others:
- The social rate of time preference – the way society values present, as opposed to future, consumption.
- The opportunity cost of capital – the value of the next-highest-valued alternative use of capital.
- Weighted average method – weighted average of different rates reflecting proportions of funds
obtained from their respective sources
The current recommended discount rate is 12.5%.
Box 12: Discount rate
EXAMPLE: Computation of NPV of Lahore–Sialkot Motorway (hypothetical figures)
Year Capital O&M Total Toll Incremental PV of Incr. Net

Cost Cost Cost Collected Net Benefit Ben.
1 20 20 (20.00) (17.86)
2 20 20 (20.00) (15.94)
3 20 20 (20.00) (14.24)
4 4 4 20 16.00 10.17
5 4.5 4.5 25 20.50 11.63
6 5 5 30 25.00 12.67
7 5.5 5.5 35 29.50 13.34
8 6 6 40 34.00 13.73
9 6.5 6.5 45 38.50 13.88
10 7 7 50 43.00 13.84
TOTAL 60.00 38.50 98.50 245.00 146.50 41.23
*PKR in billions; discount rate 12%
10 Time value of money – 'The idea that money available at the present time is worth more than the
same amount in the future due to its potential earning capacity. This core principle of finance holds
that, provided money can earn interest, any amount of money is worth more the sooner it is
received.' (Finance - Professional Essays and Assignments; Edited by Zoan NG)
11 Cost-Benefit Analysis for Development – A Practical Guide; Asian Development Bank

NPV = PKR 41.23 billion
Based on these hypothetical figures, the NPV of the Lahore–Sialkot Motorway

project at a 12% discount rate is PKR 41.23 billion. This value being positive shows
that the project in question is feasible on the basis of the NPV.
IRR – The IRR is the discount rate12 that, when applied to cash inflows of a project, sets
them equal to the initial investment. The preferred option is the one with the IRR most
in excess of a specified rate of return. An IRR of 10% means that with a discount rate of
10%, the project breaks even. The IRR approach is usually associated with a hurdle
cost of capital/discount rate, against which the IRR is compared. The hurdle rate
corresponds to the opportunity cost of capital. In the case of public projects, the hurdle
rate is the discount rate. If the IRR exceeds the hurdle rate, the project is accepted.
There are disadvantages associated with the IRR as a performance indicator. It is not
suitable for the ranking of competing projects. It is possible for two projects to have
the same IRR but different NPVs due to differences in the timing of when those costs
and benefits are accrued. In addition, applying different appraisal techniques to the
same basic data may yield contradictory conclusions. Moreover, the IRR technique is
only suitable for projects that are supposed to yield some revenues/cash inflows.
EXAMPLE: Computation of IRR of Lahore–Sialkot Motorway (hypothetical figures)
Year Capital O&M Total Gross Increment PV of Incr. PV of Incr.

Cost Cost Cost Benefit al Net Net Ben. @ Net Ben.
Benefit Disc Rate @IRR
1 20 20 (20.00) (17.86) (15.80)

2 20 20 (20.00) (15.94) (12.48)
3 20 20 (20.00) (14.24) (9.86)
4 4 4 20 16.00 10.17 6.23
5 4.5 4.5 25 20.50 11.63 6.31
6 5 5 30 25.00 12.67 6.08
7 5.5 5.5 35 29.50 13.34 5.67
8 6 6 40 34.00 13.73 5.16
9 6.5 6.5 45 38.50 13.88 4.62
10 7 7 50 43.00 13.84 4.08
TOTAL 60 38.5 98.5 245 146.5 41.23 (0.00)
IRR = 27%
(The calculation of IRR is done through an Excel model, the soft copy of which will
be made available through Punjab’s P&D Department’s website.)
12 Interest rate used for discounting future cash flows to compute present value of those cash flows.

The IRR is 27%. Since this rate is higher than the opportunity cost of capital
(assumed to be 12%), the project is considered to be a feasible proposition.
BCR – The BCR is the discounted net revenue divided by the initial investment. The
preferred option is the one with the ratio most in excess of 1. In any event, a project
with a BCR of less than 1 should generally not proceed. The advantage of this method
is its simplicity. Using the BCR alone to rank projects can lead to suboptimal decisions
as a project with a slightly higher BCR ratio will be selected over a project with a lower
BCR, even though the latter project has the capacity to generate much greater
economic benefits because it has a higher NPV value and involves greater scale.
EXAMPLE: Computation of BCR of Lahore–Sialkot Motorway (hypothetical figures)
Year Capital O&M Total PV of Toll PV of

Cost Cost Cost Costs Collected Benefits
1 20 20 17.86 0.00
2 20 20 15.94 0.00
3 20 20 14.24 0.00
4 4 4 2.54 20 12.71
5 4.5 4.5 2.55 25 14.19
6 5 5 2.53 30 15.20
7 5.5 5.5 2.49 35 15.83
8 6 6 2.42 40 16.16
9 6.5 6.5 2.34 45 16.23
10 7 7 2.25 50 16.10
TOTAL 60.00 38.50 98.50 65.17 245.00 106.41
*PKR in billion; discount rate 12%
BCR = PV of benefits/PV of costs = 106.41/65.17 = 1.63
Based on these hypothetical figures, the BCR of the Lahore–Sialkot Motorway

project at a 12% discount rate is 1.63. This value being greater than 1 shows that
the project in question is feasible on the basis of the BCR.
Sensitivity analysis – An important feature of a comprehensive CBA is the inclusion of

a risk assessment. The use of sensitivity analysis allows users of the CBA methodology
to challenge the robustness of the results to changes in the assumptions made (i.e.
discount rate, time horizon, estimated value of costs and benefits, etc.). In doing so, it is
possible to identify those parameters and assumptions to which the outcome of the
analysis is most sensitive. Therefore, this allows the user to determine which
assumptions and parameters may need to be re-examined and clarified.
Sensitivity analysis is the process of establishing the outcomes of the CBA, which is
sensitive to the assumed values used in the analysis. This form of analysis should also

be part of the appraisal for large projects. If an option is very sensitive to variations in
a particular variable (e.g. traffic estimates for a road), then it should probably not be
undertaken. If the relative merits of options change with the assumed values of
variables, those values should be examined to see whether they could be made more
reliable. It can be useful to attach probabilities to a range of values to help pick the best
option.
EXAMPLE: Sensitivity analysis of NPV and BCR with discount rate of Lahore–Sialkot
Motorway (hypothetical figures; data given in earlier examples)
Discount Rate Sensitivity Analysis
Discount Rate NPV BCR

10% 51.94 1.75
11% 46.35 1.69
12% 41.23 1.63
13% 36.54 1.57
14% 32.72 1.52
15% 28.26 1.47
16% 24.62 1.42
17% 21.27 1.37
18% 18.19 1.32
19% 15.35 1.28
20% 12.74 1.24
Scenario analysis – The scenario analysis technique is related to sensitivity analysis.

Whereas the sensitivity analysis is based on a variable-by-variable approach, scenario
analysis recognises that the various factors impacting upon the stream of costs and
benefits are independent. In other words, this approach assumes that altering
individual variables while holding the remainder constant is unrealistic (i.e. for a
motorway project, it is unlikely that traffic count and service area sales are
independent). Rather, scenario analysis uses a range of scenarios (or variations of the
option under examination), where all of the various factors can be reviewed and
adjusted within a consistent framework.
A number of scenarios are formulated – best case, worst case, etc. – and for each
scenario identified, a range of potential values is assigned for each cost and benefit
variable. When formulating these scenarios, it is important that appropriate
consideration is given to the sources of uncertainty about the future (i.e. technical,
political, etc.). Once the values within each scenario have been reviewed, the NPV of
each scenario can then be recalculated.

EXAMPLE: Scenario analysis with three Scenarios (best, middle, worst) of Lahore–
Sialkot Motorway (hypothetical figures; data given in earlier examples; middle case
uses information given in above examples)
SCENARIO 1 – BEST CASE

Year Capital Cost O&M Cost Toll Collected
1 15
2 20
3 18
4 5 30
5 5.5 35
6 6 40
7 6.5 45
8 7 50
9 7.5 55
10 8 60
TOTAL 53.00 45.50 315.00
PKR 90.90 billion
NPV
BCR 2.36
IRR 40%
SCENARIO 1: PROJECT FINANCIALLY FEASIBLE BY ALL THREE METHODS
SCENARIO 2 – MIDDLE CASE
1 20
2 20
3 20
4 4 20
5 4.5 25
6 5 30
7 5.5 35
8 6 40
9 6.5 45
10 7 50
TOTAL 60.00 38.50 245.00

PKR 41.23 billion
NPV
BCR 1.63
IRR 27%
SCENARIO 2: PROJECT FINANCIALLY FEASIBLE BY ALL THREE METHODS
SCENARIO 3 – WORST CASE

1 30
2 25
3 22
4 3 10
5 3.5 12
6 4 14
7 4.5 16
8 5 18
9 5.5 20
10 6 22
TOTAL 77.00 31.50 112.00
PKR (29.56) billion
NPV
BCR 0.59
IRR 1%
SCENARIO 3: PROJECT FINANCIALLY INFEASIBLE BY ALL THREE METHODS
3.3.4.2 Economic appraisal

For economic appraisal, the results of the analysis of economic soundness of the
project must be assessed carefully. Economic appraisal aims to assess the desirability
of a project from the societal perspective. This form of appraisal differs from financial
appraisal because financial appraisal is generally done from the perspective of purely
financial returns. Economic analysis also considers non-market impacts such as
externalities13.
Various analytical techniques are used for economic appraisal of projects but the
most frequently used are CBA (after incorporating economic returns) and CEA.
13In economic analysis, an externality is the cost or benefit that affects a party that did not choose to
incur that cost or benefit. For example, a dam that causes environmental degradation and
resettlement problems impose environmental and social costs on the whole society. Similarly, a
project may entail external benefits, such as improvement in public safety.

While the former is used for projects with benefits that are measurable in monetary
terms, the latter is used for projects with benefits normally not quantified in
monetary terms.
For projects appropriate for CBA, the analysis is based on summary measures of
performance (economic internal rate of return or NPV), calculated based on the
incremental benefits and costs of the project to society as a whole (using the 'with-
project' and 'without-project' criteria). The main benefits and costs, including the
key underlying assumptions made (e.g., market output for key outputs and inputs,
phasing of development, shadow prices) and sensitivity analysis should be
presented.
For projects not appropriate for cost-benefit analysis, the basis for the performance
of project should be clearly specified. For example, the project's cost-effectiveness
ratios may be compared with those of alternative designs that achieve the same
desired results. The analysis should identify those key variables that render the
cost-effectiveness ratio higher than that of a rejected alternative, or higher than
some critical point. All key assumptions should be presented.
CBA – The general principle of CBA is to assess whether or not the social and economic
benefits associated with a project are greater than its social and economic costs. To
this end, a project is deemed to be desirable where the benefits exceed the costs.
However, should the benefits exceed the costs, this does not necessarily imply that a
projects will proceed as other projects with a higher NPV may be in competition for the
same scarce resources. In addition, there are affordability constraints, which mean that
projects should not proceed even if the NPV is positive.
In CBA, all of the relevant costs and benefits, including indirect costs and benefits, are
taken into account. Cash values, based on market prices (or shadow prices, where no
appropriate market price exists) are placed on all costs and benefits and the time at
which these costs/benefits occur is identified. The analytic techniques outlined above
(i.e. NPV method, IRR method, etc.) are applied using the discount rate. The general
principle of CBA is that a project is desirable if the economic and social benefits are
greater than economic and social costs. It is vital that CBA is objective. Its conclusions
should not be prejudged. It should not be used as a device to justify a case already
leaning for or against a proposal. Factors of questionable or dubious relevance to a
project should not be introduced into an analysis in order to affect the result in a
preferred direction.
3.3.5 Organisational and management appraisal
An essential part of any appraisal is to carefully review the project organisational

and management aspects. This should include:

• ensuring that adequate resources exist or planned for;
• assessing if previous experience exists for managing similar projects; and
• verifying that any external support exists, if required.
3.3.6 Overall quality review
The overall quality review should include the following:

• Verify that all proposed financial management, recruitments and
procurements processes are in line with the GoPb's policies and procedures.
• If it is a complicated project, the design and structure should be fully
informed by a feasibility study or other diagnostic work.
• The project proposal should fully conform to the PC-I format and guidelines.
The users can also use the following appraisal toolkit as a hands-on tool to go through
the important dimensions of project appraisal:
PROJECT APPRAISAL TOOLKIT14

Validating Assumptions and Design
No Criteria ? Comments
1 Project outcomes are aligned with national/provincial ☐
framework ☐
2 Outputs are leading to outcomes
3 Inputs are sufficient for producing outputs
☐
4 Inputs are not excessive ☐
5 Assumptions are valid and objective ☐
Technical Appraisal
6 Sound rationale for the selected technical design or ☐
approach ☐
7 Proposed design conforms to international standards
8 Proposed design meets the identified needs in the best
☐
possible way
9 Proposed technology is proven or tested ☐
10 Proposed design is aligned with existing ☐
structure/facilities/programmes
11 List of equipment and machinery to be installed with costs
and specifications attached ☐
Equipment capacity is satisfactory and in line with ☐
12 requirements
Social and Environmental Appraisal

14The person entrusted with appraisal may like to look at different criteria with varying importance,
depending upon the project requirements. A simple checklist, rather than a scorecard, is deliberately
used to accommodate a variety of projects.

13 Air and water pollution ☐
14 Community health, safety and security
15
☐
Land acquisition and involuntary resettlement
16 Differential access to project benefits or changes in
☐
traditional rights or entitlements ☐
17
Labour and working conditions ☐
18
Biodiversity conservation and natural resource ☐
sustainability
19
20
Indigenous peoples
21 Public perception and degree of voice in governance ☐
22 Adequacy of targeting and delivery mechanism ☐
Interest of various stakeholders and whether they have ☐
been consulted ☐
23 Cultural heritage
☐
24 Gender equity and considerations
25 Poverty focus ☐
Financial and Economic Appraisal

26 Financial Appraisal ☐
Methodology Used
Results
27 Economic Appraisal
Methodology Used ☐
Results
Organisational and Management Appraisal

28 Adequate resources exist or are planned for ☐
29 Previous experience in agency for managing similar ☐
projects
30 Any external support exists
☐
Quality Review
31 Data inputs are valid ☐
32 Proposal conforms to PC-I format and guidelines
33 ☐
Feasibility study done, if required
☐
Table 5: Project appraisal toolkit
3.4 Project approval and initiation
For project approvals, various bodies involved in granting approvals for execution
of projects exist right from field levels to the federal level. These
bodies/committees can be divided into three categories, i.e. approval of projects by
bodies/committees constituted at federal, provincial, and sub-provincial (divisional
and district) levels. Please see the approval matrix below. The functioning and
powers of these bodies are briefly discussed below:

APPROVAL MATRIX
WHO? WHEN?
ECNEC All projects referred by provincial government exceeding PKR 10,000
million or having external financing – no limit
PDWP Projects up to PKR 10,000 million
(with external financing for up to 25% of the project)
No water project
Projects referred by Departmental Development Sub-Committee
(DDSC)
DDSC Projects up to PKR 200 million
Divisional Development Projects up to PKR 100 million

Working Party (DDWP)
District Development Schemes of devolved sectors up to PKR 50 million
Committee (DDC) Schemes of town/tehsil municipal administrations (TMAs) exceeding
PKR 5.0 million
Category I Officer Schemes of respective offices/departments reflected in the ADP
costing up to PKR 2.5 million (without PC-I)
Union Administration Schemes with costs below PKR 0.100 million included in ADP of Union
Administration
TMA Works Committee Development works costing up to PKR 5 million included in approved
budget of TMA
CDWP Approving provincial projects up to PKR 3,000 million, where federal
or foreign component is involved
Table 6: Development projects approval matrix
3.5 Approval at provincial level

3.5.1.1 PDWP
The highest body at the provincial level is the PDWP, composed of the following:
1. Chairman, P&D Board Chairman
2. Secretary P&D Secretary / Member
3. Secretary, Finance Department Member
4. Secretary of the concerned Department Member
5. Secretary, Environmental Protection Department Member
6. Director, Punjab Economic Research Institute (PERI) Member
7. All P&D members Member
8. Director general M&E, P&D Member
9. Chief Economist, P&D Department Member
Table 7: Composition of PDWP
The PDWP is competent to approve development projects costing up to PKR 10,000

million provided no external financing is involved. It cannot take any water project.
In the case of foreign-funded schemes, where rupee cover is to be provided from the

provincial resources, the project should be discussed between the Planning
Commission and the provincial government and the appropriate proposal, if
required, may be brought before the NEC15. In the case of projects referred to the
PDWP by the DDSC for consideration, the PDWP is fully empowered to
approve/reject the same irrespective of the costs of the projects. However, the
PDWP is a recommendatory body for projects whose costs exceed PKR 10,000
million.
Approval procedure – As regards the procedure for approval, concerned
administrative secretaries send eight copies of each PC-I form, along with a soft
copy of the same, with at least four copies of rough cost estimates to the
Coordination Section of the P&D Department. Simultaneously, the administrative
secretaries forward five copies of the PC-I form to the Finance Department and two
copies each to the chief engineer, Buildings, Punjab, Lahore (only in cases where
construction of a building is involved) and the director, PERI. On receipt of schemes
by the Coordination Section, one hard copy each is sent to the member (technical),
concerned member and concerned section chief to offer their comments. Each PC-I
is also forwarded to the Finance Department as well as the federal government,
while a soft copy is sent to the Environment Protection Department.
The task of economic/financial analysis of the schemes has been entrusted to PERI,
an autonomous organisation attached to the P&D Department16. Once comments of
the member (technical) and PERI are received by the Coordination Section, these
are separately annexed with the working papers prepared by the sector chiefs. The
sector chiefs supply the working paper (10 copies) to the Coordination Section
within a week after the receipt of the schemes in their sections for placing it before
the PDWP. The concerned chief of section of the P&D Department prepares minutes
of the meetings. Having gotten the minutes approved from the chairman, P&D
Board, the chiefs of sections send the minutes to the Coordination Section for
issuing to all the concerned departments/agencies. The concerned administrative
secretary then issues administrative approval.
The projects where costs exceed PKR 10,000 million are recommended by the
PDWP to the CDWP for consideration. The PC-I of the project recommended by the
PDWP is modified in light of its observations and after clearance from the section
concerned of P&D, the Coordination Section of the P&D Department sends 50 copies
of the relevant PC-I, duly signed by the chairman, P&D Board (and supplied by the
Administrative Department), to the Ministry of Planning, Development and Reform,
Government of Pakistan for placing it before the CDWP and for recommending it for
final approval by the ECNEC.
The PDWP has no authority to approve such schemes involving foreign exchange
component of more than 25% of the total cost of the projects.
15 Notified by the Finance Department vide letter No.FD(FR)II-2/89 dated 10.07.2012

16 Notified vide letter No.12(2)PO(COORD)P&D/ 2011 dated 04.04.2014

3.5.1.2 DDSC
The next important body at the provincial level is the DDSC, which has the following
membership17:
1. Administrative Secretary Convener
2. Representative of P&D Department Member

(Not below the rank of chief of section)
3. Representative of Finance Department Member
(Not below the rank of additional secretary
4. Director (Works), Communication and Works Department Member
(If building component is involved and technical advice is needed)
Table 8: Composition of DDSC
The DDSC is competent to approve the projects where the cost is up to PKR 200
million. The DDSC is fully competent to approve projects placed before it, reject
them outright or approve them with certain conditions. However, in the case of a
difference of opinion, the scheme is referred to the PDWP for
consideration/approval.
17Notified under the Punjab Delegation of Powers Rules, 2006 (amended up to 26th May 2009);
Powers of DDSC were enhanced from PKR 100 million to 200 million and notified vide letter No.35
(231)RO(COORD)/P&D/2006 dated 30.10.2006

Terms and conditions for DDSC
1) The DDSC is presided over by the administrative secretary in person and attended by
officers not below the rank of additional secretary/chief of section of the Finance and
P&D Departments.
2) These powers are exercised only in respect of approved plans of schemes included in the
ADP.
3) No expenditure is allowed to be incurred on a scheme that is not included in the
development budget of the year.
4) The scheme finally sanctioned by PDWP is sent to the P&D Department and Finance
Department for their records.
5) Posts created under the approved scheme should not be in grade 17 or above. Whenever
a post at grade 17 or above is involved, prior approval of the Finance Department would
be necessary.
6) A notice of the meeting is sent simultaneously to the P&D Department and Finance
Department at least 10 days before the scheduled date of the meeting.
7) The committee is not competent to approve any scheme based on a subsidy. All
development schemes with a subsidy element are sent to PDWP for approval irrespective
of their costs.
8) Five copies of the PC-I for all the schemes to be considered by the DDSC have to be
furnished to the Coordination Section of the P&D Department at least two weeks earlier
than the scheduled date of the meeting for internal distribution in the P&D Department.
9) The minutes of this sub-committee's meeting are approved and issued by the concerned
department and be simultaneously furnished to the Finance Department and other
members of the DDSC.
10) Administrative approval of the approved scheme is issued by the administrative
secretary of the department concerned.
11) On receipt of the schemes by the Coordination Section, copies of PC-I are supplied to the
technical, appraisal, and concerned chief of section. The views/comments of these
sections are separately annexed with the working paper.
12) The DDSC is not competent to approve schemes based on foreign aid component and
subsidy.
Box 13: Terms and conditions of DDSC
3.5.1.3 DDWP
DDSCs were established in 1979 at divisional headquarters. These committees
were abolished in 2001 due to introduction of a devolution plan. In 2008, a
DDWP was constituted at each divisional headquarters18, which is competent to
approve projects up to PKR 100 million. The existing composition of DDWP is as
follows:
18Notified by the Finance Department vide letter No.FD(FR) II-5/82-P-III dated 6th November 2008;
Finance Department’s Notification No. FD(FR)2-5/82-P-III dated 1st January 2009.

1. Divisional Commissioner Convener
2. District Coordination Officers in the division concerned Member
3. Divisional head of concerned department Member

4. Superintending Engineer, Irrigation & Power Department Member
5. Superintending Engineer, Highway & Building Member
6. Director (Development & Finance) Member/

Secretary
Table 9: Composition of DDWP
Terms and conditions of DDWP
1) The administrative approval of the schemes approved by the DDWP is issued by the
sponsoring department.
2) The development schemes relating to the judiciary under the Lahore High Court,
Lahore and other special institutions, including the Provincial Assembly, Punjab
Public Service Commission, Office of Ombudsman, Punjab Election Authority and
Technical Educational & Vocational Training Authority (TEVTA), fall outside the
purview of the DDWP.
3) Where a divisional tier of the concerned department exists, the divisional officer,
with the signatures of the divisional commissioner, issues administrative approval.
In cases where a divisional tier of the department does not exist, the administrative
approval is issued by the director (development & finance), with the signatures of
the divisional commissioner.
4) The schemes of district governments, financed through grants-in-aid of the

provincial government, and beyond the powers (up to PKR 50 million) of the DDC,
are approved by the administrative departments in DDSCs.
Box 14: Terms and conditions of DDWP
3.5.1.4 DDC
The DDCs were established in October 1998 to approve the schemes of the devolved
sectors costing up to PKR 20 million. Later on these powers were enhanced to
approve development schemes up to PKR 50 million19. The DDC can also approve
schemes of TMAs exceeding PKR 5.0 million.
19Vide the Finance Department's Notification No. FD(FR)II-5/82 dated 20th October 2006; Notified
by the Finance Department vide No. FD(FR)II-5/82 dated 11.08.2001.
The powers of DDC were enhanced from PKR 20 million to PKR 50 million vide the Finance
Department’s Notification No. FD(FR)II-5/82 dated 20.10.2006.
The TMO shall act as a member of the DDC to consider and approve development schemes of the
respective tehsil/town above PKR 5 million vide the Finance Department’s Notification No. FD(FR)II-
5/82(P) dated 01.04.2014.

The DDC cannot consider the schemes involving subsidy, foreign aid, creation of
posts, purchase of vehicles, etc. The composition of the DDC is as follows:
1. District Coordination Officer Chairman
2. Executive District Officer, Finance & Planning Member
3. Executive District Officer, Works & Services Member
Department
4. Executive District Officer, concerned sector Member
5. District Officer, concerned department Member
6. District Officer Planning Member/ Secretary
7. TMO, respective TMA Member
Table 10: Composition of DDC
Category I officer – Category I officers (i.e. district coordination officers, heads of

departments, administrative secretaries, etc.) are competent to approve schemes of
the offices/departments reflected in the ADP costing up to PKR 2.5 million. There is
no need for preparing a PC-I for a scheme costing less than PKR 2.5 million. Schemes
involving subsidies, foreign aid or creation of new posts would not be considered by
Category I officers.
Union administration – The Union Administration is competent to approve
development schemes pertaining to union administration that have costs of less
than PKR 0.100 million and are included in the ADP of union administration,
approved by the Union Council. The composition is as follows:
1. Union Nazim Convener/Chairman
2. Naib Union Nazim Member
3. Three councillors including one female Member
4. Union Secretary, Municipal Services Secretary/Member
Table 11: Composition of Union Administration
TMA Works Committee – The TMA Works Committee is empowered to approve

development schemes of TMA development works costing up to PKR 5 million
included in the approved budget of TMA. Those schemes involving a subsidy, a
foreign aid component or creation of new posts would not be considered.
Administrative approval of the scheme is issued by the concerned TMO. The
composition of the committee is as follows:
1. TMO Chairman
2. Tehsil/Town Officer (Finance) Member
3. Tehsil/Town Officer (Planning) Member
4. Tehsil/Town Officer (I & S) Secretary/Member
Table 12: Composition of TMA Works Committee
3.6 Approval at federal level
At the federal level, three main bodies are involved in the process of project
approval. These are briefly described below.

3.6.1 DDWP20
The DDWP is a forum constituted in each ministry/division to approve projects

costing up to PKR 60 million belonging to a ministry, division or federal-level
department. The composition of DDWP is as below:
1. Administrative secretary of the concerned ministry Chairman
2. Representative of Ministry of Finance Member
3. Representative of Ministry of P&D & Reform Member
4. Representative of Economic Affairs Division (EAD) Member
(In case of foreign-aided projects)
Table 13: Composition of DDWP
3.6.2 CDWP21
The next higher forum at the federal level is CDWP with the following composition:
1. Deputy Chairman/Secretary, Ministry of Planning, Development and Chairman
Reform, Government of Pakistan (in absence of DCPC)
2. Chairman, P&D Board, GoPb, Lahore Member
3. Additional Chief Secretary (DEV), P&D Department, Government of the Member
Sindh, Karachi
Khyber Pakhtunkhwa, Peshawar
Baluchistan, Quetta
6. Additional Chief Secretary (DEV), P&D Department, Government of Azad Member
Jammu and Kashmir, Muzaffarabad
7. Secretary, Development, Gilgit-Baltistan, Gilgit Member
8. Additional Chief Secretary, Development, Federally Administered Tribal Member
Areas, Peshawar
9. Finance Division, Government of Pakistan, Islamabad Member
10. EAD, Government of Pakistan, Islamabad Member
11. Chairman, Pakistan Council of Science & Technology, Islamabad Member
12. Climate Change Division, Government of Pakistan, Islamabad Member
13. Relevant federal administrative ministry Member
MINISTRY OF PLANNING, DEVELOPMENT AND REFORM/PLANNING COMMISSION
1. Secretary Member
2. Chief Economist Member
3. Members, Planning Commission Members
4. Additional Secretary Member
5. Joint Chief Economist (Operation & Macro) Member
20 Decision of NEC in its meeting held on 04.06.2009, notified by the P&D Department vide its
letter No. 35(231)RO(COORD)/P&D/2009.
21 Decision of NEC notified by Ministry of Planning, Development and Reform vide letter
No. 20(1)PIA-I/PC/2013 dated 03.06.2014 and also notified by the P&D Department vide its
letter No. 35(231)RO(COORD)/P&D/2014 dated 12.06.2014.

6. Adviser (Development Budget) Member
7. Chief, Public Investment Programming Member
8. Chief, Public Investment Authorisation Member
9. Chief, Physical Planning & Housing (PP&H) Member
10. Director general, Project Wing Member
11. Chief, Economic Appraisal Member
12. Chief, concerned section Member
13. Energy coordinator/official spokesman Member
BY SPECIAL INVITATION
1. Housing & Works Division, Government of Pakistan, Islamabad Member

2. Pakistan Engineering Council Member
3. Board of Investment Member
4. Infrastructure Project Development Facility Member
5. National Engineering Services Pakistan (NESPAK) Member
6. Environment Protection Agency Member
7. Representative of Pakistan Council of Architecture & Town Planning Member
Table 14: Composition of CDWP
The CDWP is empowered to approve all the projects belonging to

ministries/divisions costing up to PKR 3 billion. Projects of ministries/divisions
with costs exceeding PKR 3 billion are forwarded to the ECNEC to arrange approval.
All development projects of the provincial departments/agencies costing more than
PKR 10 billion , initially recommended by the PDWP, are processed/examined by
the CDWP and recommended to the ECNEC for consideration.
On the receipt of projects (50 copies) from the Provincial P&D Departments, the
Ministry of Planning, Development and Reform, Government of Pakistan circulates
copies of these projects among the concerned sections of the ministry. These
projects are scrutinised for their economic/financial and technical aspects by each
section and the findings/results are forwarded to the related section. For instance,
in the case of a water supply project, the Chief, PP&H will prepare the working
paper after incorporating views of different sections of the Ministry of Planning,
Development and Reform. The working paper is then circulated among all the
members of the CDWP for their comments. The sponsoring department/agency is
required to prepare the replies to the points raised in the working paper and also to
supply additional data, if required. The project is then put up for consideration by
the CDWP and recommendation to ECNEC. ECNEC is fully competent to approve or
reject a project on the basis of its merits and demerits. The CDWP may send a
project back to the sponsoring agency after making some observations and
suggesting modifications. These agencies carry out the amendments accordingly and
again forward the projects to the Ministry of Planning, Development and Reform,

Government of Pakistan. The concerned sections of this division prepare summaries
thereon for consideration by ECNEC.
Functions of CDWP
The CDWP, organised by the Planning Commission, should perform the following functions:
1) Review all development schemes submitted by the provincial governments and

central ministries or departments, approve schemes costing up to PKR 1,000 million
and recommend schemes costing more than PKR 1,000 million for the approval of
ECNEC.
2) Ensure that the scheme has been prepared on sound lines and that the necessary
economic, financial and technical scrutiny has been carried out.
3) Ensure that, as far as possible, the examination of the scheme in various offices is
conducted simultaneously and not in successive stages, and that the scheme is
completed in accordance with the schedule.
It is the function of Planning Commission to see that the scheme has been prepared correctly,
that all the information required in the proforma has been furnished, and that relevant papers,
such as project reports, maps and plans, are made available. The Planning Commission
Secretariat can, when necessary, make a consolidated enquiry of the sponsoring authority with
respect to deficiencies in the proforma, points requiring elucidation, and matters involving
further data).
Box 15: Functions of CDWP
3.6.3 ECNEC
All the projects of provincial government departments/agencies recommended by

CDWP and those of federal ministries/divisions/agencies costing more than PKR
3,000 million are submitted to ECNEC) for final approval. The current composition
of ECNEC is as follows:
i. Minister for Finance, Revenue, Economic Affairs, Statistics and Chairman
Privatisation
ii. Minister for Planning & Development Member
iii. Minister for Industries and Production Member
iv. Minister for Water and Power Member
v. Member of Provincial Assembly, Baluchistan Member
vi. Senior Minister for Finance, Member
Government of Khyber Pakhtunkhwa
vii. Minister for Finance, Member
GoPb
viii. Adviser to CM, Sindh on Finance Member
Table 15: Present composition of ECNEC

FUNCTIONS OF ECNEC
1) To sanction development schemes (in the public sector) pending their submission to the
NEC.
2) To allow moderate changes in the plan and sectoral re-adjustments within the overall
plan allocation.
3) To supervise the implementation of the economic policies laid down by the Cabinet and
the NEC.
4) Reports asked for by the committee in pursuance of its earlier decisions.
5) Any other matter referred to the committee by the prime minister, the NEC, the Council
of Common Interests or the Cabinet or raised by a member with the committee with the
permission of the chairman.
Box 16: Functions of ECNEC
3.6.4 Multi-stage process of approval for projects

The detailed preparation of a project involves a considerable investment of money,
amounting to sometimes as much as 3.5% of the total cost of the project. The
sponsoring agency has a strong urge to seek approval of a project at a very early
stage, even before the details of the project and the cost estimates are firm.
Therefore, ECNEC has approved a 'multi-stage' process of approval for projects
where the individual costs exceed PKR 50 million. This system is as follows:
a) ECNEC should approve the project finally only when detailed cost estimates
are available.
b) In cases where only rough cost estimates are available, ECNEC should give
approval in principle, subject to preparation of detailed cost estimates and
such other conditions as it may wish to impose.
c) Where approval, in principle, has been given, the sponsoring agency may
proceed to work out the detailed cost estimates. The sanction would be
specific and would not imply any permission to start work on the project or
make other irrevocable commitments, and the expenditure would be
confirmed for those elements necessary for project preparation.
d) The final sanction will be given by ECNEC after detailed estimates are ready.
The chairman, ECNEC would have authority to give the final sanction when:
• there is no material change in the basic features of the projects as
approved in principle;
• the increase in costs, compared to the estimates that were sanctioned
in principle, is within 15%; and
• the project remains economically/financially and technically viable.

3.6.5 NEC
Although the NEC does not approve projects, it is important to explain the
composition and functions of this body. According to Article 156 of the Constitution
of Pakistan, the composition of the NEC is as follows:
• prime minister of Pakistan (chairman);
• CMs of all provinces;
• one member from each province, to be nominated by the respective CM; and
• four other members, nominated by the prime minister.
The following attend the meetings of the NEC by special invitation for all items on
the agenda:
i. Governor, Province of Khyber Pakhtunkhwa

ii. Prime Minister, Azad Jammu and Kashmir
iii. Chief Minister, Gilgit-Baltistan
iv. Deputy Chairman, Planning Commission
v. Secretary, EAD
vi. Secretary, Finance Division
vii. Secretary, P&D Division
Table 16: Special invitees for NEC meetings
Other federal secretaries, including the secretary of the Board of Investment and
chief secretaries of the provinces Azad Jammu & Kashmir and Gilgit-Baltistan,
attend the meetings of the NEC by special invitation, as needed.
CHARTER OF NEC
156- National Economic Council:
1) The President shall constitute a National Economic Council which shall consist of
• the Prime Minister, who shall be the Chairman of the Council;
• the Chief Ministers and one Member from each Province to be nominated by the Chief
Minister; and
• four other members as the Prime Minister may nominate from time to time.
2) The National Economic Council shall review the overall economic condition of the country
and shall for advising the Federal Government and the Provincial Governments, formulate
plans in respect of financial, commercial, social and economic policies; and in formulating
such plans it shall, amongst other factors, ensure balanced development and regional equity
and shall also be guided by the Principal of Policy set out in Chapter-II of Part-II.
3) The meetings of the Council shall be summoned by the Chairman or on a requisition made
by one-half of the members of the Council.
4) The Council shall meet at least twice in a year and the quorum for a meeting of the Council
shall be one half of its total membership.
5) The Council shall be responsible to the Majilis-e-Shoora (Parliament) and shall submit an
annual Report to each House of Majlis-e-Shoora (Parliament).

Box 17: Charter of NEC
3.7 Administrative approval
3.7.1 Prescribed procedure

With the approval of a scheme by the competent authority, e.g. administrative
secretary, DDSC, PDWP, CDWP and ECNEC, the stage is set for the issue of
administrative approval, release of funds and implementation of the scheme.
The administrative approval is issued by the concerned Administrative Department
on behalf of the governor of the province. Before issue, the audit copy of the draft of
the administrative approval approved by the PDWP or a higher body is sent to the
Finance Department for countersigning. As soon as the audit copy is received back
from the Finance Department, the administrative approval is issued and its copies
are sent to the P&D Board, Finance Department, Accountant General’s Office and the
executing agencies.
Countersigning of audit copy by the Finance Department is not required for a
scheme costing up to PKR 6 million and approved by DDSCs, DDCs and Category I
officers. The administrative approval of such schemes can be issued straight away
by the aforementioned bodies.
The administrative approval contains details regarding the total cost of a scheme, its
breakdown into capital and revenue expenditure, number of posts created,
provision for machinery and equipment, etc. Apart from capital costs, the
administrative approval also includes recurring expenditure of a scheme after its
completion. The head of account under which the expenditure would be debited is
indicated in the administrative approval as well.
If the implementation of a scheme is spread over a period of more than one year, the
sanction of the scheme is issued on a yearly basis for the continuation of the scheme
and release of funds. The administrative approval once issued remains valid unless
there is a change in the cost and or scope of work of the scheme. If a scheme is
revised, the revised administrative approval is issued by the Administrative
Department without seeking the approval of the P&D Board and Finance
Department, provided the increase in the cost is less than 10%. Increases in costs of
more than 10% are referred to the P&D Board and Finance Department for
approval. Similarly, revised approval is also required if the design or scope of a
scheme already approved is changed.
3.7.2 Re-appropriation of funds
During the course of implementation, if the work on a project is not proceeding
according to the plan for various reasons, such as non-availability of required
manpower, problem with the acquisition of land due to litigation, delay in the
import of equipment and machinery for the project, etc., then some or all of the
funds allocated for the scheme may have to be surrendered at the end of the
financial year. On the other hand, there may be some schemes that are expected to
run short of funds on account of rapid progress. In such cases, re-appropriation of

funds from the schemes for which these cannot be utilised to those schemes that are
in need of more funds can be made by the Administrative Department with the prior
permission of the Finance Department through the P&D Board. The scrutiny of a re-
appropriation case should be based on the following factors:
i) The importance of a scheme to which the diversion of funds is suggested
through a re-appropriation proposal should be carefully ascertained.
ii) The stage of completion should also be kept in view. If a scheme can be
completed through re-appropriation of funds, it should be a better case for
this purpose. Simultaneously, the stage of implementation of the scheme
from which funds are proposed to be withdrawn should also be looked into.
If this scheme is also important and is nearing completion, re-appropriation
should normally not be allowed.
iii) No re-appropriation should be allowed from an unapproved scheme.
iv) Re-appropriation should also generally not be allowed in cases where it will
increase the approved cost of the project beyond 10%.
v) Re-appropriation should also not be made if the scope of work of the scheme
for which re-appropriation is being made is changed. This should in fact be
treated as a revised unapproved scheme.
The Administrative Department is empowered to make re-appropriations within
the schemes/sector provided the scope of the work remains unchanged.
3.7.4 Anticipatory approval for projects
In some of the projects, whose approval is not granted by the ECNEC, a request for
anticipatory approval is made to the secretary, Planning Division, Government of
Pakistan, generally through a D.O.22 letter addressed by the Chairman, P&D Board.
Anticipatory approval is sought for those projects that have been recommended by
the PDWP. If the ECNEC cannot consider this project for some reason, then the
provincial governments move to the federal government for a grant of anticipatory
approval, so that objectives/physical targets of the project may not suffer. Along
with the request of the Provincial P&D Department an annexure is enclosed
(VOLUME TWO – SECTION C), which clearly explains the main features of the
project. The annexure includes information such as the name of the project, its
location, the sponsoring agency, a brief description of the project entailing the scope
of the work, its physical targets, organisational structure, head-wise financial
phasing, etc. Apart from this, the date of consideration of the project by the PDWP
and, in case the project has been recommended by the CDWP, this date as well,
should be indicated. The reasons for getting anticipatory approval should be
elaborated as well. The finances already incurred and the physical targets achieved
should also be depicted in the annexure, so that the approving authority may have a
picture of the ongoing state of the project. It may be mentioned that anticipatory
approval should only be sought for those projects whose cost is beyond the
approving competency of the PDWP.
22 Demi official

3.7.5 Proposal for project concept clearance
All those projects that involve a foreign exchange component in the form of aid,
grants and technical assistance need to be cleared by a project concept clearance
committee. For all such projects whose sanction is within the competency of the
provincial government and that involve a foreign exchange component as well, the
concept clearance should be given by the provincial government and then
forwarded to the EAD directly for finding a suitable donor agency for foreign
assistance.
The chairman, P&D Board, GoPb has constituted a committee for the concept
clearance of foreign-aided projects. The composition of committee is as follows:
Chairman, P&D Board Chairman
Finance Secretary/Additional Secretary, Finance Department Member
Joint Chief Economist, P&D Department Member
Additional Secretary, in charge of ECA, P&D Department Member
Chief (ECA), P&D Department Member
Chief, concerned section, P&D Department Member
Representative of department concerned, not below the rank of additional Member
secretary
Table 17: Composition of committee for concept clearance for foreign-aided projects
All the administrative departments are required to submit proposals for

project concept clearance on a prescribed proforma.
3.8 Project procurement, governance, appointments and allowances
The following guidelines apply for projects as well as programmes, policy units and
policy cells.
• For larger projects, project steering committees may be formed, with due
approval from the government. Such steering committees should be
empowered to take all key decisions regarding project implementation. The
ToRs for such steering committees should include:
o providing overall policy direction to the project;
o deciding strategies for the implementation of the project;
o constituting sub-committees as and when required;
o reviewing work of any sub-committees and the project management
for conformity to the overall policy framework of the government;
o sorting out administrative and financial matters relating to the
project;
o monitoring the performance of the project in the terms of quality and
timelines;
o reviewing the impact of the project;

o taking corrective/remedial actions in the case of delays in the
implementation of the project activities; and
o ensuring corrective/remedial actions in cases where the quality of the
deliverables is not in accordance with specifications.
• As per the existing rules and regulations, all officers/officials

appointed/posted in different projects after selection through a competitive
process are entitled to a certain project allowance (as explained below) in
addition to their admissible salary under their respective pay scales.
Appointment of an independent project director is mandatory for projects
costing PKR 1,000 million and above. However, if an independent project
director is required to be appointed for projects costing below PKR 1,000
million, such cases have to be submitted for approval of the PDWP by
providing proper justification.
• Project directors have to be appointed for the project's life, in any case not
exceeding five years. Upon expiry of this project posting, a project director is
liable to serve under government for at least same period before jumping to
the next posting in a project. The higher pay packages/project allowances are
admissible for those government servants who are posted in different
projects and entities (both development and non-development) after
selection through a competitive process.
• The government officers/officials assigned special duties as ex-officio under

various projects may also be granted a special allowance/honorarium @
50% of the project allowance sanctioned for the same categories. ToRs or
specific tasks to be accomplished by the project director and other project
employees have to be made part of the PC-I.
Qualification/experience requirements
• The minimum educational qualification for the post of project director should be broad
based and not less than 16 years of education in the relevant field from institutions
recognised by the Higher Education Commission of Pakistan. However, administrative
departments may fix minimum qualifications according to the nature and requirement of
the project.
• Project directors must have a minimum five years' experience in project
management/implementation. They must also possess basic knowledge of the project
planning and management processes and procedures.
• An age limit may be prescribed by the administrative department according to the
requirement of the project.
Box 18: Qualifications/experience requirements for project staff
• Private sector employees posted in projects are entitled to a market-based

salary that is standardised by the Finance Department separately.

• As per the prevalent rules and regulations, officers/officials so
appointed/posted in projects through a competitive process are entitled to
the following monthly rates of project allowances in addition to their
admissible salary (substantive pay + admissible allowances) under their
respective pay scales with immediate effect:
Sr. No. Basic Scale Project Allowance (PKR)

1. BS-20 to BS-22 80,000/-
2. BS-19 60,000/-
3. BS-18 50,000/-
4. BS-17 40,000/-
5. BS-16 15,000/-
6. BS-11 to BS- 15 8,000/-
7. BS-5 to BS-10 4,000/-
8. BS-01 to BS-04 2,000/-
Table 18: Project allowances for different basic pay scales23
Selection Committee
i. A committee headed by the secretary of the project sponsoring department concerned

and including representatives of P&D (chief head of concerned section), Finance and
Service and General Administration (S&GA) Departments (additional secretary
concerned) shall select the programme/project director.
ii. For mega projects/foreign funded projects or projects financed by the federal and
provincial government on a 50:50 cost sharing basis, the chairman, P&D Board would
chair the committee with representatives of the Planning, Finance and S&GA
Departments (not below the rank of the additional secretary concerned).
iii. In the case of disagreement between members of the Committee, the matter will be
referred to the chairman, P&D (in the case of i) and to the chief secretary (in the case of
ii) for final decision.
iv. The Selection Committee mentioned in para (i) headed by the administrative secretary
shall also be empowered to select all other project employees.
v. The administrative secretary of the concerned department may approve the
appointment of the project director on the basis of recommendations of the
aforementioned committee.
Box 19: Selection Committee for recruitment of project staff
Project procurement
Projects may entail procurement of works, goods, consultancy services or other

services. All such procurements have to comply with Punjab Procurement
23 Notification No. FD. SR-I/9-20/2006; dated 21st November 2014; GoPb; Finance Department

Regulatory Authority Act, 2009 and Punjab Procurement Rules 2014. Key steps
involved in procurement cycle include24:
• identification of procurement needs;

• definition of specifications and the procurement method;
• supplier selection through pre-qualification and open bidding;
• technical and financial bid evaluation;
• acceptance of the bid and contract award; and
• management of the contract.
24 Procurement Training Handbook; Punjab Cities Governance Improvement Project

SECTION 4 – HOW TO MONITOR AND EVALUATE
4.1 Project planning and M&E
Effective M&E of a project depends on how effectively it has been planned and how
clearly the desired outcomes have been stipulated. It has been observed that in
many ongoing government projects, the outputs have been clearly earmarked but
either the intended outcome and impact are not clear or there are gaps in the results
chain. Planning and M&E processes should be geared towards ensuring that results
are achieved — not towards ensuring that all activities and outputs get produced as
planned. Moreover, these individual project results must be in line with the overall
national, provincial, sectoral and departmental goals and vision.
RBM is a good approach to synthesise planning and M&E, and is adopted by the
Planning Commission of Pakistan as well as the GoPb. All the PC-Is now have a
section on desired results, although they are seldom given due consideration in
project planning.
RBM25 is defined as ‘a broad management strategy aimed at achieving improved

performance and demonstrable results’ 26 , and has been adopted by many
multilateral development organisations, bilateral development agencies and public
administrations throughout the world. RBM is an ongoing process, encompassing
continuous feedback, learning and improving. Existing plans are regularly modified
based on the lessons learned through M&E, and future plans are developed based on
these lessons. More details on RBM are covered in Section 5.
Monitoring is also an ongoing process. The lessons from monitoring are discussed
periodically and used to inform actions and decisions. Evaluations should be done
for programmatic improvements while the project/programme is still ongoing and
should also inform the planning of new projects/programmes. This ongoing process
of implementing, learning and improving is what is referred to as the RBM life-cycle
approach.
25 At some places, RBM is also referred to as Managing for Development Results (MfDR) to place the
emphasis on development rather than organisational results.
26 Handbook on Planning, Monitoring and Evaluating for Development Results; UNDP

Planning
Stakeholder
Par cipa on
Monitoring
Monitoring
Figure 5: The RBM life-cycle approach27
4.2 Implementing the M&E regime for a project

There is a need to implement an efficient M&E regime for each project. While the
subsequent sections discuss in detail how to carry out M&E, this section presents a
step-by-step approach for relevant project managers or departmental staff on how
to implement the M&E regime for a particular project or activity.
27 Handbook on Planning, Monitoring and Evaluating for Development Results; UNDP 2009

Set Project
Objectives
(Planned)
Actual Project
Objectives (Achieved)
E E
M M M M
Project Time Project

Start (Gestation Period) Finish
Figure 6: M&E – conceptual differences28
In order to start M&E for any ongoing or new project or activity, there are seven
steps involved:
STEP 1 - Identify the key questions to be asked and answered by the M&E
STEP 2 - Agree the overall M&E approach and methodology
STEP 3 - Choose the appropriate indicators
STEP 4 – Select tools and instruments for data collection and analysis
STEP 5 – Plan clear timeframes with milestones
STEP 6 – Identify people and other resources for undertaking the M&E
STEP 7 – Implement the M&E plan

Box 20: Steps for implementing M&E regime
All these steps have been summarised here with relevant examples:
STEP 1 – IDENTIFY KEY QUESTIONS TO BE ASKED

The first step for developing any M&E regime would be to identify key questions
28 Director general, M&E, P&D Punjab

that need to be answered through M&E. The answers to these questions would then
help in reviewing progress of their projects and would feed into better planning.
While identifying these questions, the relevant project
manager/secretaries/officials may want to ask the following questions:
• Does this project have a results framework? If it does, then what are the key
outputs and desired outcome and impact for the project? If it does not, then
what should be the desired results?
• Did any other organisation undertaken a similar project earlier? If yes, then
what has been the learning?
• How would the M&E results feed into the project cycle? Is the design flexible
enough to incorporate the learning?
This section provides some guidance on developing a results framework for various
projects. However, detailed technical guidance is also available through a number of
internationally available resources on implementing RBM29. To begin with, the
project development team needs to clearly identify the desired impact and outcome
of every project and other activities as well as the planned outputs and inputs (or
activities) for them. Indicators for all targets also need to be identified along with
the source of their verification. The following matrix provides some guidance on
these terms:
PARAMETER QUESTIONS THAT THE RELEVANT PROJECT MANAGER OR

SECRETARY OF THE DEPARTMENT SHOULD ASK:
IMPACT What are we trying to achieve? Why are we working on this problem?
(Vision, goal, objective, What is our overall goal?
longer-term outcome,
long-term results)
OUTCOME Where do we want to be in three to five years? What are the most
(First, positive result or immediate things we are trying to change? What are the things that must
immediate result, be in place first before we can achieve our goals and have an impact?
prerequisites, short- and
medium-term results)
OUTPUT What are the things that need to be produced or provided through
(Interventions) projects for us to achieve our short- to medium-term results? What are
the things that different stakeholders must provide?
ACTIVITIES What needs to be done to produce these outputs?

(Inputs, actions)
29A) Results Based Management Handbook for UNDP

http://www.ilo.org/public/english/bureau/program/dwcp/download/undg_rbm1011.pdf
B) Promoting Results-Based Management in the Public Sectors of Developing Countries
http://www.adb.org/publications/promoting-results-based-management-public-sectors-
developing-countries

INDICATORS How will we know if we are on track to achieve what we have planned?
(Measurements of
performance,
performance standards)
MEANS OF What precise information do we need to measure our performance?

VERIFICATION How will we obtain this information? How much will it cost? Can the
(Data sources, evidence) information be monitored?
Table 19: Relevant questions about results chain
The outcome and impact part answers the 'why' question, while the outputs present
the answer to what is going to be done under any given project. Together, they
define the desired results. The input and activities on the other hand answer how all
of this is going to be done and what resources would be required for achieving this.
Evaluation usually involves using a number of different data collection tools to

obtain a range of quantitative and qualitative information about the outcomes and
impact of a project or programme. For example, focus group discussions and a small
number of detailed case studies as well as in-depth interviews may complement
surveys with key informants. This performs a checking role or triangulates the
information collected by combining multiple data sources and methods. In this way,
this can help to overcome the bias that comes from only using one source and
method of data collection.
What are the key questions for evaluation?30
'Evaluation is the systematic and objective assessment of an ongoing or completed project, program or
policy, its design, implementation and results. The aim is to determine the relevance and fulfillment of
objectives, development efficiency effectiveness, impact and sustainability. An evaluation should provide
information that is credible and useful, enabling the incorporation of lesson learned into the decision
making process of both recipients and development partners.'
Box 21: Key questions for evaluation
30 Development Effectiveness Framework; Inter-American Development Bank; 2008

EXAMPLES
SOLAR POWER PROJECT MOBILE HEALTHCARE UNITS
Desired impact: poverty reduction; economic Desired impact: poverty reduction; reduction in
growth mortality rates
Desired outcome: better access to electricity; Desired outcome: better access to healthcare
sustainable development
Desired output: fully equipped mobile healthcare
Desired output: solar power plant up and units delivering primary healthcare services
running, connected to national grid
Suggested inputs: vehicles; doctors and
Suggested inputs: civil works; equipment paramedics; equipment; etc.
(photovoltaic (PV) technology with solar
panels, inverters and control systems); M&E results from pilot project will feed into full-
technical services; engineering, procurement scale project
and construction contractor; etc.
Overall project statistics would be used for

subsidy for solar tariff regime, national feed-
in tariff
STEP 2 – M&E APPROACH AND METHODOLOGY31

This step would include developing the overall design of the M&E regime, such as
the target population, sampling, control points, etc. Some of the questions that need
to be answered at this stage include the following:
• What is going to be the best approach for M&E? What is the counterfactual?
• What has been learned from previous M&E designs?
• What is going to be the baseline? Would secondary data suffice or are
primary data needed?
• How will the sample be selected?
• What will be the periodicity of data collection?
M&E projects and activities help an organisation in assessing its performance,

calibrating and refining ongoing activities, and informing development of future
programmes and activities. M&E is also closely linked with planning as effective
project plans clearly lay out the results framework, determine expected outputs and
outcomes, and identify relevant indicators. It is also important to distinguish
between monitoring and evaluation as they generally encompass different activities.
Monitoring – Monitoring can be defined as the ongoing process by which regular

feedback can be obtained on the progress being made towards achieving a project’s
goals and objectives. Monitoring in its true sense should focus not only on reviewing
31 The Monitoring and Evaluation Handbook For Business Environment Reform

progress made in implementing actions or activities, but also reviewing progress
against achieving goals. This would mean that monitoring should focus on not
merely tracking inputs, as has been the case in many government projects, but also
output tracking.
Monitoring gives information on where a programme or project is at any given time (or over time)
relative to respective targets and outcomes. Monitoring focuses in particular on efficiency and the
use of resources. While monitoring provides records of activities and results, and signals problems to
be remedied along the way, it is descriptive and may not be able to explain why a particular problem
has arisen, or why a particular outcome has occurred or failed to occur.
Box 22: What is monitoring?
Evaluation32 – Evaluation is a rigorous and independent assessment of either

completed or ongoing activities to determine the extent to which they are achieving
stated objectives and contributing to decision-making. Evaluations, like monitoring,
can apply to many things, including an activity, project, programme, strategy, policy,
topic, theme, sector or organisation. The key distinction between the two is that
evaluations are done independently to provide an objective assessment of whether or
not they are on track. They are also more rigorous in their procedures, design and
methodology, and generally involve more extensive analysis. However, the aims of
monitoring and evaluation are very similar: to provide information that can help
inform decisions, improve performance and achieve planned results.
Evaluations can be done at the beginning of a project (baseline evaluation), during the
course of a project (mid-year, year-end or mid-term evaluations), at the end of a
project (end-term evaluation), or even after a few months or years subsequent to the
completion of a project (impact assessment).
Evaluation deals with questions of cause and effect. It is assessing or estimating the value, worth or
impact of an intervention and is typically done on a periodic basis – perhaps annually or at the end of
a phase of a project or programme. Evaluation looks at the relevance, effectiveness, efficiency and
sustainability of an intervention. It will provide evidence of why targets and outcomes are or are not
being achieved and addresses issues of causality.
Box 23: What is evaluation?
Director general, M&E has issued detailed evaluation guidelines, which are appended to this
32
manual.

Monitoring • Clarifies project objectives
• Links activities and their resources to objectives
Regular systematic collection and • Translates objectives into performance indicators and
analysis of information to track sets targets
the progress of project • Routinely collects data on these indicators, compares
implementation against pre-set actual result with targets
targets and objectives. • Reports progress to decision-makers and alerts them
to problems
Did we deliver?
Evaluation • Analyses why intended results were or were not
achieved
Objective assessment of an • Assesses specific casual contributions of activities to
ongoing or recently completed results
project, its design, • Examines implementation process and explores
implementation and results. unintended results
• Provides lessons, highlights significant
What has happened as a result? accomplishments or programme potential, and offers
recommendations for improvement
Impact assessment • Seeks to capture and isolate the outcomes that are
attributable (or caused by) the project
Impact assessment assesses what • Will review all foregoing M&E activities, processes,
has happened as a result of the reports and analysis
project and what may have • Provides an in-depth understanding of the various
happened without it – from a causal relationships and the mechanisms through which
future point in time. they operate
• May seek to synthesise, compare or contrast a range of
Have we made a different and interventions in a region, timeframe, sector or reform
achieved our goal? area
Table 20: Monitoring, evaluation and impact assessment
Randomised controlled trials
Randomised controlled trials (RCTs) have recently gained a lot of popularity in development science for
evaluations. Under an RCT, the people being studied are randomly allocated one of the different
treatments under study. RCTs are currently being used by a number of international development
experts to measure the impact of development interventions worldwide. The GoPb is also using RCTs in a
number of projects including Performance Incentive Scheme for Excise Officers as well as the Punjab
Economic Opportunities Programme implemented by the Punjab Skills Development Company.
Box 24: Randomised control trials

EXAMPLES
Approach for M&E: physical inspection; Approach for M&E: smart geographic
consultant validation information system (GIS)-based monitoring by
special M&E firm; vehicle tracking system;
What has been learned from previous M&E feedback system by calling selected treated
designs? Project completion time estimates; patients
approved tariffs
What has been learned from previous M&E
What is going to be the baseline? Greenfield designs? Staff absenteeism; pilferage in medicine
project dispensation
How will the sample be selected? Not What is going to be the baseline? Special baseline
required study commissioned to assess state of access to
primary healthcare services
What will be the periodicity of data
collection? Monthly site visit by line How will the sample be selected? Stratified
department; resident consultant on site sampling
M&E will cover periodic monitoring and final What will be the periodicity of data collection?
project evaluation Weekly visits by M&E firm; occasional visits by
line departments; real-time data on tracking
devices
M&E will cover baseline study, mid-term and

end-term evaluations, and impact assessment,
besides regular monitoring
STEP 3 – SELECTING INDICATORS

Selecting the right indicators is of paramount importance. Once key questions have
been identified these need to be translated into indicators and then targets (in the
results framework). Indicators are then measured to demonstrate that the project is
or is not doing what it set out to do. The key questions that need to be asked at this
stage include the following:
• Does the relevant sector/department use any core indicators?

• What should be the right mix of quantitative, core and customised, activity
and process indicators?
• How can indicators be appropriately disaggregated for various dimensions,
such as for gender, geography, etc.?
To measure something it is important to have a unit or variable ‘in which’ or ‘by

which’ a measurement is made, i.e. an indicator. The fundamental challenge for
various project development teams is to develop appropriate performance
indicators, which measure project performance. These indicators measure the
things that projects do, what they produce, the changes they bring about and what

happens as a result of these changes. In order to choose indicators, decisions must
be made about what to measure. Having the right indicators underpins effective
project implementation and good M&E practice. Therefore time, effort, debate and
thought should be given to their identification, selection and use.
Indicators for M&E should be SMART

• Specific – Reflect what the project intends to change and are able to assess performance
• Measurable – Must be precisely defined; measurement and interpretation are unambiguous
• Attainable – Achievable by the project and sensitive to change
• Relevant – Relevant to the project in question
• Time bound – Describes when a certain change is expected
Box 25: SMART indicators
Firstly, there is need to distinguish indicators for different levels of assessment –

that is monitoring, evaluation and impact indicators. The former (monitoring)
concern tracking the progress of project implementation and primarily relate to
inputs and activities. The latter two (evaluation) relate to measuring the results of
the project: the outputs, the outcomes and ultimately the impact. Each aspect of
implementing a project or programme has typical types of indicators illustrating
performance at each project level, as the following table shows.
LEVEL OF GENERAL EXAMPLES EXAMPLES FOR EXAMPLES FOR

INDICATORS BRICK-AND- SERVICES
MORTAR PROJECT PROJECT
Inputs/activities Human resources; financial Utilisation of project Training for
resources; material resources; funds; staff time; unskilled youth
training construction
material; equipment
Outputs Buildings; roads; bridges; schools; Completed school Training

hospitals; plans; products; sessions
studies/reports conducted; youth
trained
Outcomes Better access to healthcare and Enrolment of Skilled

education facilities; less time to students from employment of
communicate and travel; change in community youth
knowledge and/or behaviour;
improved practices; increased
services
Impact Reduction in mortality; improvement Improvement in Reduction in

in life expectancy; economic growth; literacy rate unemployment
increased employment
Table 21: Indicators at various levels of results chain

EXAMPLES
Does the relevant sector/department use any Does the relevant sector/department use any
core indicators? Access to electricity; average core indicators? Access to primary healthcare
household electricity bill; number of services; infant and adult mortality rate; life
fans/lights; energy mix (renewable versus expectancy; percentage coverage of
non-renewable energy) immunisation services
What should be the right mix of quantitative, What should be the right mix of quantitative,
core and customised, activity and process core and customised, activity and process
indicators? Design validation at design stage; indicators? Impact should focus on quantitative
percentage of completion during indicators in terms of better access as well as
construction; days left in project qualitative indicators such as improvement in
commissioning life expectancy indicators; process tracking
should also have thresholds for acceptable level
How can indicators be appropriately of service
disaggregated for various dimensions, such
as for gender, geography, etc.? Electricity How can indicators be appropriately
access to rural versus urban areas disaggregated for various dimensions, such as for
gender, geography, etc.? Electricity access to
rural versus urban areas: women's access to
healthcare services; availability of female staff on
board
STEP 4 – DATA COLLECTION

Although this is the simplest step, it is also quite critical because the information
that would feed into the M&E results is going to be collected at this stage. Data
collection needs to be undertaken at different times: prior to and during project
implementation, as well as at fixed points including at and after the end of the
project. Some of the key considerations here would include:
• In the case of secondary data, are the sources reliable?

• In the case of primary data, who will be collecting the data? How can data
integrity be ensured?
• How often should the various data sets be collected?
• Who will be responsible for subsequent steps such as data entry,
consolidation, cleaning and analysis?
As noted earlier, monitoring is ongoing provision of information on where a

programme or project is at any given time (and over time) relative to its respective
targets and outcomes. The function and role of evaluation is to build upon
monitoring data, bring together additional information and examine whether or not
the project results have been achieved.
How to monitor? – Monitoring includes periodically collecting information, through

use of appropriate tools, at specific points in the process. This information is then

used to assess various parameters, as against the initial plan or set standards. There
are a number of tools or instruments that can be used in M&E and in most of the
projects more than one tool can be used. Some of these tools and approaches are
complementary; some are substitutes. Some have broad applicability, while others
are quite narrow in their uses. The choice of which is appropriate for any given
context will depend on a range of considerations. These include the uses for which
M&E is intended, the main stakeholders who have an interest in the M&E findings,
the speed with which the information is needed, and the cost. Different
tools/instruments have strengths and weaknesses as methods of collecting different
types of data and their use with different types of stakeholders, application with
different types of indicators and different target groups. Some of the tools used for
data collection for both monitoring and evaluation are listed below, with a matrix
indicating their various attributes:
DATA COLLECTION DESCRIPTION EXAMPLES

TOOL
Monitoring form A form to record observations of an M&E Templates developed by

officer/manager against certain pre-selected various government
parameters. Qualitative information can also organisations and
be collected and converted to categorical projects to record
information (scale 1 to 5). Such forms can also monitoring field visits'
be sent to project staff for reporting purposes. findings.
Sample surveys Collect a range of data through questionnaires A number of citizens are
with a fixed format that are delivered via the interviewed for use of a
post, electronically, over the telephone and in basic health unit.
face-to-face interviews.
Quantitative data is
Can be used with a range of subjects such as produced on the average
households (socioeconomic survey); a sector time taken by citizens on
(livestock or agriculture survey); or an activity getting a fard (land
(school beneficiaries). revenue record) from a
land revenue record
centre.
A livestock census is
another example.
Group Collect largely qualitative data through Citizens participate in a

interviews/focus structured discussions among small groups of focus group discussion
groups pre-selected participants. on a community-driven
water supply and
Usually these groups will comprise no more sanitation scheme.
than 12 people and the sessions will last up to
three hours. Parents participate in a
focus group on school
These discussions are managed by an council activities.
appointed facilitator who is not a participant.

Individual interviews Collect a range of data through face-to-face A resident engineer is
discussions with individual stakeholders often interviewed on the
called 'informants'. progress of a brick-and-
mortar overhead bridge
These can be 'open' interviews or 'structured' construction project.
interviews, with questionnaires as part of a
sample survey. They can vary in time and be
held over a number of sessions.
Often stakeholders who are viewed as being

critical to the success of a project or
programme will be selected for an interview.
These are often called 'key informant
interviews'.
Case studies Collection of data usually through face-to-face Information is obtained

interviews with a particular individual, group, on how learning
location or community on more than one outcomes of a particular
occasion and over a period of time. school have improved
over time.
The questioning involves open-ended and
closed-type questions and involves the
preparation of 'histories'.
Participant Data are collected through observation where Observation is sought

observation the M&E person takes part in an event or through participating in
attends a place or situation and assesses what a TEVTA skill-training
is happening through what they see. centre.
May involve some questioning for clarification.

Observations may take place over a period of
time through a number of visits.
Tracer studies A range of data collection methods are used to A sample of beneficiaries
collect different types of data on an individual who have been provided
group or community to determine the effects literacy training are
of an aid intervention over a longer period. observed.
Table 22: Data collection tools
Types of evaluation
Project evaluation and impact evaluation are two main types of evaluation
techniques. The following matrix summarises the main components of these
evaluations.
Review Evaluation Impact Evaluation
Focuses on outcomes in terms of Is typically carried out towards or at the end

DESCRIPT
effectiveness, efficiency and relevance. of projects, or after their completion.

ION
Examines whether the activities have Is usually carried out by those 'outside' of the
delivered the planned outputs and whether project in an effort to enhance objective

these outputs have in turn led to outcomes accountability but may also involve insiders in
that are contributing to the purpose of the order to enhance lesson learning.
project.
Impact evaluations focus on relevance,
effectiveness, efficiency and sustainability in
relation to project goals.
Impact evaluations can also be carried out to

assess and synthesise the outcomes of several
initiatives together on a thematic, sector or
programme basis to examine their overall
impact.
Programme/project outcomes Programme/project goals or impact

CRITERIA
Whether the beneficiaries have been given Whether support to beneficiaries has led to
MEASURING
due support and facilitation and whether increased contribution to the economy,
they have been positively impacted leading to growth and poverty alleviation
Table 23: Types of evaluation
The evaluation methodology adopted by P&D’s Directorate General, M&E has laid
out the following process.

Figure 7: Schematic for evaluation methodology adopted by Director General, M&E, Punjab

EXAMPLES
In case of secondary data, are the sources In case of secondary data, are the sources
reliable? Not applicable reliable? Benazir Income Support Programme
data partially used for baseline study
In case of primary data, who will be collecting
the data? How can data integrity be ensured? In case of primary data, who will be collecting
Line department staff visit; consultant the data? How can data integrity be ensured?
reports M&E firm validating staff-submitted data;
triangulation through spot checks by department
How often should the various data sets be staff and feedback calls made to selected
collected? Monthly inspection visit; 24/7 patients; real-time information coming from
availability of resident consultant smart monitoring and vehicle tracking
Who will be responsible for subsequent steps How often should the various data sets be
such as data entry, consolidation, cleaning collected? Monthly M&E reports; real-time data
and analysis? Line department’s M&E cell plotted on web-based dashboard
Who will be responsible for subsequent steps

such as data entry, consolidation, cleaning and
analysis? M&E firm; vehicle tracking firm; etc.
STEP 5 – TIMEFRAME
It is essential to plan clear timeframes with milestones. The key considerations at
this stage include:
• What are the key M&E milestones and when should they be reached?
• How can the activities leading to these milestones be designed?
• What are the implications of delay?
Periodic reporting and review meetings – For smooth and timely implementation
of development projects, a number of periodic progress reports are obtained from all
the key departments and agencies. On-the-spot inspection is carried out and periodic
meetings are held on the basis of performance data furnished by the line departments
and agencies. A few words on the reporting procedure are given below:
• Monthly progress reports: The monthly progress reports are collected

from all the administrative departments and agencies on a regular basis. The
proforma used for this purpose is given in VOLUME TWO – SECTION C. The
most important information collected through this proforma relates to the
approval status, total cost, financial and physical targets and, progress
registered during the month being reported. The administrative
departments/agencies are supposed to furnish monthly progress reports,
which are usually received with a time lag of 16 days.

• Quarterly progress reports: The quarterly progress reports are obtained
from all the administrative departments/agencies in the PC-III proforma. These
reports are forwarded to the said agency on a quarterly basis. The quarterly
progress reports consist of three parts. Part 'A' covers overall information
regarding a project. Part 'B' is meant to record progress during the month being
reported. Part 'C' gives the consolidated picture of the progress during the
quarter being reported.
• Meetings: Apart from monitoring through reporting, review meetings are also
held at different levels to review the pace of implementation of projects. At the
provincial level, ADP review meetings are organised regularly in the P&D
Board. In these meetings, monthly progress reports sent by the administrative
departments/agencies are considered. Of these, the most important are the
mid-year ADP review meetings. A series of meetings are held in the P&D Board
wherein sector-wise and scheme-wise discussions are carried out to review the
progress of implementation of ADP. The main purpose of these meetings is to
ascertain the absorptive capacity of each department. The schemes with poor
progress are weeded out and additional funds are allocated to the schemes
with good progress. The inter-sectoral and intra-sectoral re-appropriation
proposals are also discussed and finalised in these meetings so as to ensure
successful implementation of the ADP. The line departments/agencies also hold
meetings to review the pace of implementation of their respective projects. At
the divisional level, the implementation of development projects/programmes
is reviewed by the Divisional Coordination Committees.
The M&E work needs to be carried out at multiple stages, depending upon the
project requirement. These stages include the following:
Baseline or initial mapping – If a project involves undertaking a baseline or

mapping exercise then the findings from this work need to be analysed and reported
quickly because they form an integral base from which the project proceeds and will
often determine what tasks will be progressed and which will not.
Pilot phase – A project may involve undertaking a pilot phase, where something
will be tested out with a group or a particular locality before the project is 'rolled
out' further. Again it is important that the analysis of M&E data from this pilot is
undertaken thoroughly and quickly, as the findings from this are needed to inform
the progression of the project.
Mid-term or periodic evaluation/review – Key findings from periodic evaluation

work, usually from the mid-term timeframe of the project onwards, need to be
analysed and reported in a timely manner as they illustrate whether the outputs of
the project are being achieved or not and whether process issues are progressing.
The findings from these mid-term evaluations inform the ongoing validity of the
M&E plan for assessing outcomes and impact for the project. If initial findings show
that the project is not achieving and/or is achieving in an unexpected way, then the

M&E plan may need to be reviewed and updated for the end of project evaluation
activities.
End of project evaluation/review – This is usually the most substantive analysis

as it is bringing all of the above together, as well as undertaking data collection
analysis and reporting for the end of project evaluation. This is the key time of
activity for M&E work if findings are to be processed and reported in a timely
manner after the end of the project. Therefore resources need to be in place and
tasks managed well during this period.
Impact assessment or post-project evaluation/review – This comes a certain

time period after the project completion to assess the impact of the project.
Box 26: Multiple stages for M&E
EXAMPLES
What are the key M&E milestones and when What are the key M&E milestones and when
should they be reached? Design sign-off and should they be reached? Procurement of vehicles
validation; ground breaking; civil works and equipment; recruitment of staff;
completion; equipment installation; grid procurement of medicine; commissioning
connectivity; commissioning
How can the activities leading to these
How can the activities leading to these milestones be designed? M&E firm inspections
milestones be designed? Design sign-off and and spot checks; validation by line department
validation – technical due diligence; ground staff
breaking – physical inspection; civil works
completion – physical inspection; equipment What are the implications for delay? Limited
installation – consultant sign-off; grid access to health services; cost overruns; delays in
connectivity – consultant sign-off; meeting national/provincial poverty reduction
commissioning – provision of power as per targets
required technical parameters
What are the implications for delay? Cost

overruns; Demand–supply gaps
STEP 6 – RESOURCES
Considering the general resource crunch and fiscal considerations, the resource
identification would be critical. It is important to have a realistic M&E regime in
place, so that the resource availability does not become a problem. Some of the
important questions at this stage would include:
• Who is going to bear the costs or provide resources for these activities?
• Is there any provision for M&E costs in the PC-I?
EXAMPLES
Cost provision for technical consultant 2.5% of project cost dedicated for M&E
Partial funding for joint venture
No separate provision of M&E costs; to be

borne by line department's M&E cell
STEP 7 – IMPLEMENTATION
Once the M&E plan is approved, the next stage is to undertake M&E activities. This
would include assigning M&E tasks and responsibilities; preparing ToRs for any
external sources needed; initiating baseline work; collecting data; etc.
4.3 Use of GIS in monitoring
'A Geographical Information System (GIS) is a computer-based system capable of

assembling, storing, manipulating and displaying geographically referenced
information, i.e. data identified according to their locations.' 33
A GIS makes it possible to link or integrate information that is difficult to associate

through any other means. Presenting data in the form of a map helps to understand
the significance of where, when, and by whom. GIS represents data on a map using
points, lines and polygons. Features that can be represented as points include
schools, hospitals and other points of interest. GIS is designed to capture, store,
manage, integrate and manipulate various layers of data, allowing the user to
visualise and analyse the data in a spatial environment.
Linking GIS with M&E in a development project/programme helps to assess

progress while considering geographic characteristics. This can better be achieved
by establishing a reliable baseline. For larger projects/programmes, baseline studies
encompass socioeconomic surveys and their results are generally spatially
distributed. Therefore, analysis of survey data benefits greatly from spatial display
and analysis, as spatial patterns can be identified and generally data are more easily
comprehensible if displayed graphically/spatially.
After baseline values for performance indicators are set, their change over time can
be monitored using GIS to see if the planned targets are reached or can be reached
realistically in the defined timeframe.
33 What is GIS? (https://www.e-education.psu.edu/geog468/l2_p3.html)

In Punjab, the work done by The Urban Unit (TUU) has provided a strong
technological foundation for implementing a GIS-based system. TUU has developed
a provincial GIS-based electro-mobile governance system – 'IRIS' – merging spatial
data and providing valuable insights to a wide variety of users, through attribution
of information. IRIS, when fully functional, will also have the capability of storing
and maintaining spatial data from various government departments and geo-
referencing them. The participating departments will be given access to respective
datasets and information; TUU would also assist them in developing customised
applications to make use of this information for effective decision-making.
IRIS will be a transformational solution, providing new insights for urban planners
and managers, through integrating various layers of data and providing ready
access to information. This in turn, once fully implemented, is expected to ensure
better coordination among departments; information validation from various
sources, increasing transparency; and access to digitised information, thereby
increased planning and responsive capacity of client departments. It is also a major
step towards e-governance, as it is resulting in digitisation of data sets in selected
sectors and processes and has introduced use of technology by various government
departments34.
IRIS – TUU
TUU has been working on IRIS since its inception in 2006 and the funding has been provided from
government's own resources. The IT interface and solution have also been developed and deployed
by an in-house team of experts, based at TUU. TUU initially collected spatial data of city boundaries
by taking their paper maps and geo-referencing them. Government departments, which became
clients for specific applications, were requested to share their lists of assets and other related
information. TUU's staff mapped these assets on the GIS-based map, after physical verification of
their location and recording of their geo-coordinates. The spatial maps were then shared with the
department for population of the attributed departmental data layer.
Evolution of GIS has proven to be a technological shift from paper-based maps to spatial data and has
opened up numerous possibilities for data integration, mining and analysis. The government
departments, which were initially hesitant in embracing technology, have also now gotten used to
this innovative use of technology and are moving ahead, with TUU's assistance, to develop various
new applications. IRIS basically acts as an information cube, with multiple applications of various
departments running on it.
Box 27: IRIS – TUU
Guidelines for using GIS in M&E
34A provincial department may only get access to its own data. Presently there is no mechanism in
IRIS to download boundary files, road layers, locations of schools and hospitals, or other layers. A
provincial department requiring such GIS layers for its M&E work would need to make some
arrangement with TUU to access this data – possibly a licensing arrangement. Presently inter-
departmental access to GIS layers from TUU is still facing some challenges and would require some
memoranda of understanding between departments to facilitate access to whatever GIS layers they
have themselves and to the GIS layers of TUU.

• All large projects should integrate a GIS-based approach into their M&E
solutions.
• Any GIS-based solution should be aligned with IRIS, to the extent possible.
• The M&E plan should also explore using mobile GIS and the concept of smart
monitoring through use of smartphones.
• GIS integration should start right from the baseline survey.
• All efforts should be made to align GIS-based systems with other systems
deployed in the province to ensure data integration.
• Adopting a GIS-based approach should encompass carefully reviewing

planning consideration, technical considerations and implementation
considerations.
o At the planning stage, the project development staff should carefully

review the project needs, type of information required for M&E, spatial
maps and visualisation required for decision-making, resource
requirements, etc.
o On the technical side, due thought must be given to the platform used,
data source identification, existing systems in use, integration and
scalability issues, etc.
o On the implementation front, adequate plans should be made for data

updating, system deployment, troubleshooting, personnel requirements,
etc.

Recommendations for use of geospatial tools1
1. Include geographic identifiers in programmatic data – In order to use data in a GIS, it

must have a link to geography. This can be something as simple as district or community
name or could be coordinates collected using GPS receivers or from a digital globe such
as Google Earth.
2. Adhere to data standards for both geographic identifiers and programmatic data –
Many countries have standardised unique identifiers and spellings of geographic features
in their country. Following these standards will make it easier to link datasets.
Programmatic data should follow relevant standards for metadata, indicator selections
and other key factors.
3. Be open – Making programmatic data widely available makes it easier to employ those
data in other evaluations. There are confidentiality and security issues that must be
considered; however, the growth of the open data movement offers promise to M&E.
4. Build organisational capacity to use GIS first – Before asking stakeholders to share
data, it is critical they have the necessary skills to use GIS technology, and their own data,
within their own organisations. Ensuring the training has a practical use builds
ownership and supports effective data-sharing.
5. Develop a strong logical framework – Linking data through GIS is feasible without a
logframe. However, a robust logframe is critical to ensure a clear linkage between
programme activities and the output and outcomes indicators associated with these
programme activities. It is essential that GIS users understand not only GIS technology,
applications and use, but also the need for a sound logic framework to justify the data
linkage as well as how to use linked data to support decision-making.
6. Continue to build the evidence base – More research and better data are needed to
improve project M&E information.
Box 28: Recommendations for use of geospatial tools
4.4 M&E institutional regime in Punjab
In Punjab, the agencies at the provincial level that carry out monitoring functions are
as follows:
Monitoring Section – P&D Board – The main functions of this section are
monitoring of sector-wise projects in terms of financial utilisation against the
allocations and physical achievements in comparison with the envisaged targets at
various levels. For the purpose of monitoring, monthly progress reports are
collected in the prescribed proforma in respect of all the projects included in the
ADP. The administrative departments and other agencies are required to send
monthly progress reports by the 16th of each month for the previous month. These
reports are considered in the ADP review meetings held regularly in the P&D Board
at various levels, i.e. under the chairmanship of the chief minister and minister, P&D
Department or chairman, P&D Board. The mid-year review of ADP is the most
important exercise. In a series of meetings a scheme-by-scheme review is carried
out in association with the Finance Department and the concerned administrative
departments. As a result of this exercise, schemes with slow/poor progress are
identified; additional funds are allocated to the schemes that register fairly good

progress. Apart from monthly progress reports, quarterly progress reports are also
obtained from the line departments. An example of the proforma used for quarterly
reporting is given in VOLUME TWO – SECTION C. The Monitoring Section
incorporates the information received through project inspection by P&D sections
and respective divisional directors (development) for their review meetings.
Departmental monitoring – Administrative departments monitor their projects on a

regular basis. For this purpose, their monitoring system consists of supervisory tiers at
different levels. For important projects the departmental inspection teams are
constituted for checking the progress on the project site.
Divisional level – At the divisional level, a Divisional Coordination Committee has

been constituted under the chairmanship of the divisional commissioner, to undertake
monitoring of development projects. The committee holds regular review meetings,
which are attended by all divisional heads. In these meetings efforts are made to
remove bottlenecks in the pace of progress. The minutes of these meetings are
circulated to all concerned, including the P&D and Finance Departments, for taking
appropriate action. The development director acts as Secretary of the Divisional
Coordination Committee.
The existing institutional arrangements for evaluation of projects at different levels in

the province are briefly reviewed below:
Evaluation Section – P&D Board – At present, an Evaluation Section is functioning in

the P&D Board, Punjab. The P&D Board is assigned the work of evaluating the
completed projects along with mid-term evaluation of important development
projects.
Planning cells – All the Nation-Building Departments and agencies are supposed to
have Planning & Evaluation Units. However, a number of departments do not have
proper Planning and Evaluation Cells. As such these units do not seem to be effective in
carrying out evaluation functions in their respective sectors.
Other agencies – From time to time the evaluation of important and big
programmes/projects is entrusted to other independent/autonomous organisations.
At the provincial level these agencies include PERI, NESPAK and other consultant
firms.
Divisional Directorates of Development – Divisional Directorates of Development

are functioning under the administrative control of the P&D Board. The staff provided
in a directorate includes a director, a research officer and other supporting staff. With
the creation of these directorates, schemes costing up to PKR 3.5 million in respect of
rural and urban water supply, education, health and government buildings are
processed and approved at the divisional level. These Directorates are also responsible
for carrying out M&E functions. The monitoring function is being performed by these
directorates mostly through review meetings.
Chief minister's Inspection Team – The chief minister's Inspection Team has the
function of monitoring and inspection of the specific development projects at the
direction of the chief minister. For this purpose, financial utilisation and physical
achievements of the concerned departments/agencies are scrutinised. The reports are
duly submitted to the chief minister, on whose direction the follow-up action is
initiated by the concerned agencies.
Directorate General, M&E – The Directorate General, M&E, headed by the director
general, has been established in the P&D Department to focus on the following core
areas:
• policy guidelines and standards for project management;

• project management services;
• project management capacity building;
• third party inspection and performance monitoring; and
• project/programme evaluation.
The post-completion evaluation of development projects is an important function

being performed by the Directorate General, M&E. In order to finalise the post-
completion evaluation reports of development projects, an Evaluation Committee is
constituted with the director general, M&E as chairperson; and the concerned sector
chief in the P&D Department, representative of the Finance Department, chief
(monitoring), P&D Department; and project director/executing agency as members.
The Monitoring Wing of the P&D Department in constitution with the sector chiefs
prepares a list of completed projects every year in the month of July and forwards it
to the director general, M&E for post-completion evaluation. The director general,
M&E then constitutes an Evaluation Team for evaluation and the reports prepared
would be considered by the aforementioned committee. The committee critically
reviews actual implementation of projects with reference to their costs and physical
work as given in the PC-I and identifies any costs and time overruns. No evaluation
report is required for the repetitive/standardised nature of schemes, e.g. projects
relating to establishment/upgrading of health and education institutions. However,
the concerned Administrative Department/sponsoring agency has to submit
completion report on the PC-IV of all completed projects in the month of July each
year to the (Monitoring Wing) P&D and Finance Departments for record keeping
and estimation of recurring/SNE 35 liability of such schemes. The Directorate
General, M&E is an integral part of the quarterly review meetings of the P&D Board,
wherein it submits its reports and also takes follow-up actions for implementation
of recommendations of the Evaluation Committee/reports.
35 Schedule of New Expenditure

ToRs for Evaluation Committee
• Make recommendations for further continuation of the project/programme in light of the

evaluation report or its transfer to the recurring budget, indicating the annual budgetary
requirement.
• Spell out factors responsible for deviation (if any), either in physical or financial terms or
both, in implementation of the project.
• Make recommendations to the government for future planning on the basis of lessons
learnt/feedback from evaluation.
• Handle direct preparation of PC-Vs and impact assessment reports of completed projects.
• Forward the final evaluation report to the concerned administrative department for
implementation with a copy to the chairman, P&D Department and Finance Department.
• The Directorate General, M&E will provide secretarial/logistical support to the
committee.
Box 29: ToRs for Evaluation Committee

SECTION 5 – NEW PLANNING IMPERATIVES
5.1 Foreign-funded projects
Apart from structural adjustment lending primarily secured from the International
Monetary Fund to redress balance of payment deficits, foreign assistance is also
sought for projects and programmes in the shape of soft loans, commodity aid,
grants and technical assistance to supplement provincial domestic resources,
poverty reduction and technical expertise for achieving accelerated growth in
priority areas. Specifically to Punjab, these areas include agriculture and livestock,
irrigation and energy, physical infrastructure, urban development, governance,
education, skill development, health, water and sanitation, and other areas.
Foreign assistance can be divided into the following categories:
Loans – Loans constitute the first category of foreign aid. These are obtained for
development projects as well as programmes. Major multilateral DPs extending
loans include the World Bank Group (including the International Development
Association (IDA), International Bank for Reconstruction and Development, and
International Finance Corporation) and the Asian Development Bank. Apart from
these international agencies, bilateral DPs such as the Department for International
Development (DFID)-UK and Canadian International Development Agency provide
grant assistance, whereas France, Germany, Italy and Japan provide loans as well as
grants/technical assistance. Loans are normally provided on beneficial terms such
as a nominal interest rate of approximately 1–2% and a repayment period averaging
25 years, including a grace period of 5–10 years. The International Fund for
Agricultural Development provides interest-free loans in the agriculture and
livestock sector with a longer repayment period.
Credit – IDA used to provide interest-free credit to Pakistan. However, IDA is now
providing credit on blended terms @ 1.25% with service charges of 0.75% and
commitment charges that could be up to 0.5%. The repayment period has been
reduced to 20 years, with a five-year grace period.
Grants – The third category of foreign assistance consists of grants in aid, which are
not to be paid back. Major agencies that provide grants include the United Nations
agencies such as the United Nations Children's Fund (UNICEF), World Food
Programme, United Nations Development Programme (UNDP), United Nations
Educational, Scientific and Cultural Organization (UNESCO) and Food and
Agriculture Organization, along with bodies granting official development assistance
in Japan, Canada, Germany, etc. A project-specific technical grant may include
equipment/material and technical expertise/consultancies. These grants must be
availed as needed..
Technical assistance – Foreign-assisted projects usually contain a component of

technical assistance in the form of consultants, training, project preparation

facilities, feasibility studies, design surveys, etc. The technical assistance is normally
provided by the United States Agency for International Development, UNDP, Asian
Development Bank, DFID-UK, Deutsche Gesellschaft für Internationale
Zusammenarbeit (GIZ)-Germany, Japan International Cooperation Agency and a
number of other countries. Under technical assistance, training facilities and
advisory services are provided with a view to improve the technological base in the
recipient country. Project preparatory technical assistance is also provided by
donors, under which services of experts are arranged on a grant basis for
preparation of feasibility studies and project documents. Technical assistance could
be on a loan or grant basis.
Lending and guarantee instrument types
APL Adaptable Programme Loan

DPC Development Policy Credit
DPL Development Policy Loan
DRL Debt Reduction Loan
EFF Extended Fund Facility
ERL Emergency Recovery Loan
FSL Fixed-Spread Loan
FIL Financial Intermediary Loan
LIL Learning and Innovation Loan
OCR Ordinary Capital Resources
PBG Policy-based Guarantee
PSAL Programmatic Structural Adjustment Loan
RIL Rehabilitation Loan
SAL Special Assistance Loan or Structural Adjustment Loan
SECAL Sector Adjustment Loan
SIL Specific Investment Loan
SIML Sector Investment and Maintenance Loan
SSAL Special Structural Adjustment Loan
TAL Technical Assistance Loan
VSL Variable-Spread Loan
Box 30: Lending and guarantee instrument types
5.1.1 Seeking foreign assistance36
The DPs prepare medium- to long-term strategic plans for specific countries in
consultation with all stakeholders in the public and private sectors. Accordingly, the
provincial government starts initial consultations with the DPs. Loans must not be
requested on a supply basis; rather, they should be demand driven. A foreign agency
showing interest in any project on its own must be discouraged. EAD coordinates all
36Detailed guidance on seeking foreign assistance is available from the Government of Pakistan's
Debt Management Manual, which can be accessed from
http://www.ead.gov.pk/gop/index.php?q=aHR0cDovLzE5Mi4xNjguNzAuMTM2L2VhZC9mcm1EZXR
haWxzLmFzcHg%2FaWQ9NSZhbXA7b3B0PXBvbGljaWVz

the foreign assistance. EAD demands projects that are conceptually cleared by the
CDWP/Concept Clearance Committee as a precondition for sending formal requests
for initiating the negotiation process by the DPs. On receiving a formal request from
EAD, the donor sends a project scoping/(pre) identification mission, which is
followed by a (pre) appraisal mission. On the basis of recommendations of the
appraisal mission, the PC-I is prepared and approved by ECNEC. Subsequent to the
finalisation of the negotiations, the loan documents are signed. The provincial
government must prepare the PC-I before entering into formal negotiations.
However, if sufficient data are not available, then it should get the concept paper
cleared from the CDWP/CCC. However, no loan document can be signed without the
approval of the PC-I by ECNEC. In the loan agreements there are sometimes
conditions for effectiveness, which must be fulfilled to declare the loan effective.
Some of the conditions could be furnishing the legal opinion and establishing a
Project Implementation Unit with the project director and with support/basic
essential staff.
Selected multilateral and bilateral donors
ADB Asian Development Bank

DFID Department for International Development
FAO Food and Agriculture Organization of the United Nations
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IDB Islamic Development Bank
IFAD International Fund for Agriculture Development
ILO International Labour Organization
IOM International Organization for Migration
IMF International Monetary Fund
JICA Japan International Cooperation Agency
MIGA Multilateral Investment Guarantee Agency
OFID OPEC Fund for International Development
OPEC Organization of the Petroleum Exporting Countries
UNDP United Nations Development Programme
UNESCO United Nations Educational, Scientific and Cultural Organization
UNFPA United Nations Population Fund
UNHABITAT United Nations Human Settlements Programme
UNHCR United Nations High Commissioner for Refugees
UNIC United Nations Information Centre
UNICEF United Nations Children's Fund
UNIDO United Nations Industrial Development Organization
UNOCHA United Nations Office for the Coordination of Humanitarian Affairs
UNODC United Nations Office on Drugs and Crime
UNOPS United Nations Office for Project Services
UNWOMEN United Nations Entity for Gender Equality and the Empowerment of Women
WB World Bank
WBG World Bank Group
WFP United Nations World Food Programme
Box 31: Selected multilateral and bilateral donors

In the case of foreign-assisted projects, allocation of the counterpart funds in the
ADP must be ensured. Monitoring of the projects is done on a regular basis by the
government and donors. It should be ensured that projects are completed on time;
otherwise the commitment charges on the unspent balance have to be paid by the
government for an extended period as well.
It should be ensured that projects are completed on time; otherwise the

commitment charges on unspent balance have to be paid by the government for
an extended period.
Box 32: Commitment Charges – Foreign-assisted projects
Foreign assistance is usually obtained for projects that involve large investment
outlays and foreign exchange requirements or modern technology. To obtain foreign
assistance, the administrative departments furnish the copies of relevant projects
on concept clearance proformas. The P&D Department, after getting the clearance of
the PDWP, submits the proposals to P&D Division, Government of Pakistan for
concept clearance by the Federal Concept Clearance Committee headed by the
deputy chairman, Planning Commission. Thereafter, the project proposals are
forwarded to EAD, Government of Pakistan to be presented to the DP.
5.1.2 Coordination with foreign missions
The P&D Department plays a coordinating role between the recipients and the
donors via EAD by coordinating visits of various types of foreign missions. Usually at
the end of the visit of a foreign mission, a wrap-up meeting is held in the P&D
Department wherein the mission presents its findings and recommendation. The
future course of action is agreed upon between project authorities and the mission
for smooth implementation of projects. The coordination role of the P&D
Department also includes the processing of all communications on federal
government participation in loan negotiation, signing of the project agreements, and
M&E of the foreign-assisted projects. The P&D Department also convenes review
meetings with various administrative departments/PMIUs to ensure timely
utilisation of the foreign assistance. Project Steering committees are usually housed
in P&D and led by the chairman, P&D Board. The Project Director is the member /
secretary of the committee.

KEY ISSUES FOR CONSIDERATION IN LOAN NEGOTIATIONS
Some of the key issues in negotiating a financing agreement include:
• Credit amount: Agreeing on the overall credit amount.

• Commitment charge rate: The commitment charge is a fee lenders
charge their borrowers for unused credit or credit that has been
promised at a specified future date. A lender charges a borrower a
commitment fee to keep a line of credit open, or to guarantee a loan at a
certain future date even through the credit is not being used at that
particular time.
• Service charge rate: Service charge on the withdrawn balance.
• Interest rate: Interest rate charged on the withdrawn financing balance.
The withdrawn financing balance is defined as 'the amounts of Credit
withdrawn from the Credit Account and outstanding from time to time'.
• Repayment schedule
• Currency of the Credit
Box 33: Loan negotiations – Key issues for consideration
5.1.3 Key guidelines for managing foreign-funded projects
Major foreign-funded projects may follow the following guidelines:
• Country partnership documents – Provincial departments and

authorities/agencies should actively participate in preparation of country
strategy documents of various donors to align sector plans as well as
development priorities of the province with donors' development portfolios.
• Provincial Working Group – For each significantly large foreign-funded

project, the concerned line department(s), with assistance from P&D, should
form a Provincial Working Group to work with the project design
team/mission deployed by the donor agency. Once the draft project design is
ready, the same working group should be entrusted the task to review the
design document. The PC-I prepared subsequently should also be reviewed
by the same working group to ensure synergies.
• Policies and procedures of donor agency – Unless explicitly mentioned in

grant/loan agreement, all the policies and procedures of donor agencies, in
the case of conflict, will take precedence in managing the projects regarding
issues of procurement, administration, etc.
• Proactive management of reviews – Departments should pro-actively

prepare for mid-year, mid-term or other reviews by the donor missions,
through formulation of a working paper/presentations, and ensure that

donor agencies' concerns regarding effective programme implementation are
addressed.
• Programme/project bank accounts – More complicated

programmes/projects generally have two streams of funds coming in,
including ADP allocation from the government as well as a foreign assistance
allocation coming in from the donor agency. In such cases two separate
assignment accounts should be opened in the name of the Project
Management Unit, including one assignment account in foreign currency (if
required) for funding provided by the donor agency and the other
assignment account in rupees for the contribution of the GoPb (counterpart
funding). The project director should be authorised to operate both accounts
and should act as the principal signatory for both accounts. The Finance
Department should authorise any other project staff member or any other
suitable official to act as a co-signatory of such accounts. If the
programme/project has district/operational tiers, for efficiency purposes,
such offices may open assignment accounts for operational expenses and the
relevant project staff along with any other official nominated by the Finance
Department can be the co-signatories. All requests/withdrawal applications,
however, for replenishing of accounts/transfer of funds should be routed
through the Project Management Unit.
Government Donor Agency
ADP Alloca on Foreign Aid
Assignment Account PROJECT MANAGEMENT UNIT Assignment Account

(PKR) PROJECT DIRECTOR – SIGNATORY (USD)
OTHER STAFF MEMBER – CO-SIGNATORY
Credits into and payments out of ‘Revolving Fund Accounts’ in Dollars shall be transcribed into Rupees at the SBP
weighted average buying rate of exchange prevailing on the date of transfer of funds by the Lenders or on the date of
payments to the payees
Both accounts lapsable. Lapsed balances in one year will be protected in the next year’s alloca ons.
Separate Company Account (In case of Sec on 42 companies)
District Account
Figure 8: Assignment accounts and funds flow

• Fund flow and disbursement arrangements – Foreign agencies will
transfer their funds through the State Bank of Pakistan (SBP) to the
assignment accounts opened in the name of the respective
programme/project. The transfer of funds to the State Bank and
subsequently from the State Bank to the programme/project accounts should
be governed by the Finance Division's OM37 no. F.2(1)- BR-II/2007-949
effective from 2 August 2013. Disbursements are translated into Pakistani
rupees by the SBP and therefore the local currency should form the
transaction basis for operation accounting and reporting.
• Reconciliation of contributions – Periodically, or at the end of every six

months, the contributions of the GoPb and donor agencies should be
reconciled. Before the end of the financial year it should be ensured that the
partner that contributed less than agreed in the arrangement bridges the
difference.
• Accounting and financial reporting – All financial transactions should be

recorded separately in the accounts in a manner that allows identification of
expenditures under different components and under different heads.
Accounting records of project accounts should be maintained using the
government-wide integrated financial management information system
being implemented under the Project to Improve Financial Reporting &
Auditing regime, and in accordance with the country accounting procedures
and policies defined in the New Accounting Model.
• Internal controls and internal audit – The project payments should go

through an internal audit process to ensure transparency and adherence to
financial rules and regulations. Management should ensure the financial
propriety of expenditures and revenues.
• External audit – The accounts of the programme/project, together with the

record of expenditures, should be audited annually by an auditor/(s)
acceptable to the donor agency in line with the grant/loan agreement. The
auditor general may manage/arrange an audit through its subsidiary offices
or through an auditor agreed between the donor agency and the GoPb.
ACCOUNTING PROCEDURE FOR REVOLVING FUND ACCOUNTS

(FOREIGN AID ASSIGNMENT ACCOUNT)
For a foreign donor-assisted project, a revolving fund account (RFA) in respect of donor financing
under a loan/credit/grant shall be established at a branch of the National Bank of Pakistan (NBP),
separately from the account to be established for the government's share of project financing
(counterpart funds), if any is required. Such accounts shall be in the nature of assignment
accounts.
37 Office memorandum

The NBP shall be the designated bank for handling all transactions of RFAs. The foreign
currency amounts received under a foreign credit/loan/grant for RFAs shall be translated/
converted into Pakistani rupees at the SBP's weighted average buying rate of exchange prevailing
on the date of transfer of funds by the donors.
The payments out of RFAs by way of reimbursement to NBP would be translated notionally at
the aforesaid SBP rate of exchange at which the foreign currency was purchased by the SBP (date of
receipt of funds from the donor in the SBP). The RFAs at NBP branches shall show debits, credits
and the balance in Pakistani rupees as the funds available to the project management would be in
Pakistani rupees.
The rate of exchange used for donor reporting purposes by the project authorities would be
the rate of exchange applied by the SBP for converting foreign currency into Pakistani rupees for that
tranche at the time of receipt of funds in the SBP from the donor. In the case of more than one tranche,
the rate applied for each tranche will be used for donor reporting purposes; the funds received in the
first tranche will be utilised first and the unutilised balance shall be attributed to the last tranche.
The 'foreign currency' for the purposes of this procedure would mean the United States Dollar
(USD), Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), Australian Dollar (AUD), Canadian
Dollar (CAD), Swiss Franc (CHF) and any other foreign currency that may be permitted specifically or
generally later on by the Finance Division (Budget Wing) in consultation with SBP (Finance
Department), Karachi.
Separate RFAs shall be established by the project management by the NBP for each of the
loans/credits/grants, and each RFA will be designated a special sub-fund identification number
upon establishment of the account. These individual sub-accounts will together constitute a single but
separate account (child account) under Central Government Account No. 1 (Non-Food) held
presently with the SBP.
The RFA shall be lapsable at the end of each financial year. However, the lapsed balance in one financial
year will be protected through a budgetary allocation in the next financial year.
If the funds from donors are received in currencies other than US dollars, these shall be credited in
respective RFAs in Pakistani rupees at the prevailing rate of exchange.
On receipt of the credit advice in respect of a disbursement of foreign currency funds to the project
from donors that must be routed through the SBP Karachi, the SBP's Finance Department will advise
the chief manager (SBP-Banking Services Corporation (BSC)) Karachi, to credit the Pakistani rupee
equivalent of the foreign currency to the assignment account (sub-account of Central Account-I) under
the appropriate debt or grant head. The chief manager will, in turn, and at the latest by the next
business day, authorise the amount in Pakistani rupee credit into the relevant RFA of the project.
The (SBP-BSC) Karachi will immediately report the receipt in Pakistani rupees and the equivalent
foreign currency to NBP headquarters with a copy to respective NBP branch, the relevant project
director, P&D Division/Department (as the case may be), EAD, Finance Division/Department and
AGPR/AG. No accounting entry shall be made in the books of DAO/AG/AGPR at this stage.
Box 34: Accounting procedure for revolving fund account

5.2 RBM38
The DPs and the developing countries under the Paris Declaration are bound to
work together and jointly monitor and evaluate foreign-funded development
projects and programmes to make sure that funds are spent on the approved
projects and programmes. To strengthen and streamline the system, the developing
countries agreed to introduce RBM systems. Other similar frameworks for results
mapping include:
• MfDR;
• results-based M&E;
• result management;
• performance measurement/management; and
• management by objective.
What is a result?
'A result is a describable or measurable change that is derived from a cause-and-effect relationship.
There are three types of such changes – outputs, outcomes and impact - which can be set in motion
by a development intervention. The changes can be intended or unintended, positive and/or
negative. It is expected that careful management for development results within programmes using
RBM will lead to positive change. However, this is not always the case. Change can sometimes lead to
unintended or negative consequences. It is therefore important to continually manage for results so
that programmes can truly result in positive change.'39
Box 35: What is a result?
Traditional monitoring looks into financial and physical progress but RBM probes
into the outcomes and impacts of development projects and programmes. RBM has
been promoted as an important means to improve the quality and impact of
development efforts. It is essentially a special public management tool; governments
can use it to measure and evaluate outcomes and then feed the information back
into the ongoing processes of governance and decision-making. At its core are
notions of:
• Goal orientation – Setting clear goals and results providing targets for
change and opportunities to assess whether change has occurred.
• Causality – Various inputs and activities leading logically to outputs,
outcomes and impacts, also called the 'results chain'.
• Continuous improvement – Periodically measuring results providing the
basis for adjustment (tactical and strategic shifts) to keep programmes on
track and to maximise their outcomes.
38 This section has been largely extracted from Planning Commission’s Guide on Project Management
and the United Nations Development Group's RBM Handbook.
39 United Nations Development Group's RBM Handbook

RBM framework – The RBM framework of a project/activity consists of four
phases, namely input, output, outcome and impact, which are explained below:
• Impact – The higher-order objective to which a development intervention is

intended to contribute.
• Outcome – The likely or achieved short-term and medium-term effects of an
intervention's outputs.
• Output – The products, capital goods and services that result from a
development intervention; this may also include results from the
intervention that are relevant to the achievement of outcomes.
• Input/activity – Actions taken or work performed through which inputs
such as funds, technical assistance and other types of resources are mobilised
to produce specific outputs.
RESULTS CHAIN
IMPLEMENTATION RESULTS
INPUTS ACTIVITIES OUTPUTS OUTCOME IMPACT
Ac ons taken or Ac ons taken or The changes in The ins tu onal Posi ve and
work performed work performed skills or abili es, or and behavioral nega ve long-term
through which through which the availability of changes in effects on
inputs, such as inputs, such as new products and development iden fiable
funds, technical funds, technical services that result condi ons popula on
assistance and assistance and from the that occur between groups produced
other types of other types of comple on the comple on by a development
resources are resources are of ac vi es of outputs and interven on,
mobilized mobilized within a the achievement directly or
to produce to produce development of goals. indirectly,
specific outputs. specific outputs. interven on. They are the intended
intended or or unintended.
achieved effects of
an interven on’s
outputs.
EXAMPLES EXAMPLES
Project budget; Civil works for Basic Provision of Improved access to Improved life
Availability of Health Unit primary healthcare basic healthcare expectancy
doctor and other services to services; Improved
staff for a BHU community vaccina on
coverage
Figure 9: Results chain schematic
In RBM, a results chain is used, which shows how activities, through a number of
intermediate causal links, are expected to result in the realisation of the goals of
those projects, programmes and policies. For example, training of farmers in
improved agricultural techniques can lead to changes in agricultural practices,

which can improve their yields, which in turn can enhance incomes of household
livelihoods.
Measuring results – The success of an RBM system hinges upon quantifying or

measuring results of a development project or a programme. The power of
measuring results comes from tracking them over time through tracking their
expenditures, revenues, staffing levels, resources, programme and project activities,
goods and services produced, and so forth. This is explained below:
• If you do not measure results, you cannot tell success from failure.
• If you cannot see success, you cannot reward it.
• If you cannot reward success, you are probably rewarding failure.
• If you cannot see success, you cannot learn from it.
• If you cannot recognise failure, you cannot correct it.
• If you can demonstrate results, you can win public support.
Utilising monitoring results after conducting field or desk monitoring of a

development project or a programme is the key step in reaping the benefits of the
project. Once this step has been taken, RBM itself begins to generate results.
5.2.1 RBM implementation
The following steps explain RBM implementation for a programme or a project:
• agreeing on performance outcomes to monitor and evaluate;

• developing key indicators to monitor results;
• gathering baseline data on indicators;
• planning for improvements – setting realistic targets;
• building a monitoring system;
• analysing and reporting findings;
• collecting and providing evaluative information; and
• using the findings – getting that information to the appropriate users.
5.2.2 Key indicators
Another important step for an organisation is to develop key indicators so that a

sustainable M&E system based on RBM is established. Without indicators, it is
hardly possible to monitor the targets vis-à-vis achievements of a development
project or programme. Indicators are 'yardsticks' that can be used to demonstrate
that changes have (or have not) taken place. Indicators of the achievement of
objectives are required in order to establish whether a project or programme is
achieving the desired changes. The key indicators will usually have been defined
during the planning process. Later, these need to be reviewed, and perhaps adjusted
or supplemented. The key questions concerning indicators are:

• For whom should something change?
• To what extent should something change?
• By when should something change?
5.3 PPPs – looking for alternative financing options40
The GoPb is committed to sustainable economic growth and inclusive social

development. Global experience has shown that there is a close relationship
between these objectives and infrastructure development as well as growth in
private investment. The correlation works in both ways – private investments and
infrastructure development are major drivers for economic growth, and economic
growth requires well-functioning infrastructure facilities and services as well as
financing to fuel growth. If infrastructure investments are not kept at a sufficient
level, economic growth becomes constrained by power shortages, traffic congestion,
high transport costs and other infrastructure bottlenecks. Similarly, public financing
is often limited and runs dry, in the absence of a healthy flow of private investments.
The government has therefore decided to significantly increase private investments

in infrastructure services and other sectors. The preferred mode is PPPs, where the
private and public sectors enter into mutually beneficial contractual agreements for
the provision of public infrastructure services. To provide an enabling framework
for private sector participation in infrastructure development, the government has
approved the Punjab Public–Private Partnership Act 2014, has issued a PPP policy
and issued detailed PPP policy guidelines and PPP rules for Punjab.
The lack of sufficient viable projects to offer to private investors has been pointed
out in a number of countries as one of the major constraints to promoting PPPs.
Therefore, a proactive approach is needed for identifying and screening projects
that are potentially suitable for implementation in the PPP mode. As the line
departments and local governments in Punjab lack experience in this area, there is a
need for adopting a relatively simple methodology and procedures, which they
could follow.
To provide the necessary support, the government has established a PPP cell in the
P&D Department, which is staffed by technical, financial and legal experts. All line
departments and local governments that want to implement PPP projects in their
sector and/or geographical area of responsibility can seek support from the PPP cell
in project identification, screening, preparation and transaction execution.
A practice-oriented methodology is described for the identification and screening of

potentially suitable PPP projects in Section 2 of this manual, which can be used by
40For detailed information on the subject, please see Punjab’s PPP Policy Guidelines, which can be
accessed at http://ppp.punjab.gov.pk/guidelines, as well as the PPP Act and Rules at
http://ppp.punjab.gov.pk/policy_act

line departments and local governments in-house without undertaking complex and
time-consuming assessment studies requiring external support.
5.3.1 PPP project life-cycle
The following four main phases can be distinguished in the overall life-cycle of PPP
projects:
• project inception;
• project preparation (feasibility study);
• transaction execution (procurement of the private party); and
• construction, operation and transfer (development, delivery and exit).
The sequence of the main activities during these phases is shown in the chart below:
Construction
Project Inception and Preparation Transaction Execution
and Operation
PPP Steering
Committee
Approval / Approval /
Approval / Rejection of
Rejection of
Rejection of Contract
Project
PDF Request Award
Proposal
PPP Cell
Review Prioritization Review Review

Management Unit
PDF funding
required
Risk
Review Review
No PDF funding
required
Market
Sounding
Government
Agency
Project Contract Monitoring

Feasibility Pre-
Identifi- Negotiations and
Study Qualification
cation and Signing Supervision
Bidding and
Bid Evaluation
Figure 10: Flowchart of PPP approval process
5.3.2 Inception phase

During the inception phase, the line departments can identify and conceptualise a
potential PPP project from its master plans and other planning documents. This
phase should include an initial needs and options analysis to determine the best
solution for developing the given infrastructure facility and/or providing the
necessary infrastructure service, as well as an initial viability analysis. To help
prepare the PPP project and select the private party, the line departments need to
recruit qualified consultants. Prior to doing so, they need to decide whether to cover
their cost from their own budget or the project development facility (PDF).41 In the
latter case, the line departments should submit a request for PDF funding through
the PPP cell to the PPP Steering Committee. The project inception phase ends with
the recruitment of the consultants who will provide support to the government
agency during the next two phases.
5.3.3 Project preparation phase

In the second phase, the line departments should manage preparation of the PPP
project by the consultants. The preparation consists of a feasibility study,
supplemented by an initial environmental examination, environmental impact
assessment (if required), risk analysis, assessment of the need for government
support, stakeholder consultations, determination of the PPP modality (project
structuring)42 , and drafting of tender documents including the PPP agreement. An
important part of the feasibility study is financial modelling to determine project
bankability and affordability.
5.3.4 Transaction execution phase
Provided the outcome of the feasibility study is positive and the PPP project
proposal is approved by the PPP Steering Committee for implementation, the third
phase – transaction execution – starts. During this stage, the consultants should
assist the line departments in undertaking market sounding aimed at packaging the
project in a way that attracts the interest of private investors. The market sounding
should be followed by the tendering process as prescribed in the Punjab Public–
Private Partnership Act 2014. Based on technical and financial evaluation of the bids
received, the preferred bidder should be determined and invited to contract
negotiations. After the PPP agreement has been signed, the selected private party
should endeavour to arrange the necessary financing and thereby achieve financial
closure for the PPP project. This will mark the end of the transaction execution
phase and the beginning of project construction.
5.3.5 Project construction and operation phase
41 As the costs of consultants are significant and cannot be funded frequently by the annual budgetary
allocations, the government has established the PDF as a part of the overall enabling PPP framework.
The PDF, which will be administered by the PPP cell, will ultimately be a revolving fund, with the
project preparation and transaction execution costs reclaimed from winning bidders.
42 These activities are sometimes referred to as technical, legal, environmental and financial due
diligence.

During the last phase, which covers construction, operation and transfer (if
applicable), the line department should be responsible for monitoring and
evaluating the PPP project to ensure its conformity with the plans, specifications,
performance standards and tariffs in the PPP agreement. The line departments
should submit annual reports on the PPP project to the PPP cell. At the end of the
period covered by the PPP agreement and if so provided therein, the PPP project
should be transferred by the private party to the government.
The following matrix lists the main responsibilities of different partners during the
PPP project life-cycle:
MAIN STEPS DURING THE PROJECT LIFE-CYCLE

Responsibility
Phase Steps
LD PPPC RMU CF PPPSC
Decide to explore the PPP mode
Identify a potential PPP project from the master plan or through a)
preliminary needs analysis

Screen the project using multiple criteria a)
1. Project inception
Decide whether to pursue the project any further a)
Prepare a project concept paper a)
Register the project with the PPP cell

Appoint a project manager
Draft ToRs for the feasibility study and transaction execution a)
Prepare a budget estimate for the required consulting services

Decide whether to request financing from the PDF a)
Prepare and issue a request for proposals for consulting services

Evaluate the technical and financial proposals a)
Negotiate and sign a contract with the first-ranked consultants

Carry out the feasibility study
2. Project preparation
Review its conclusions and recommendations

Decide on whether to proceed with the project any further
Prepare a report on the project proposal
Submit the project proposal through the PPP cell to the PPP
Steering Committee
Review the project proposal and prepare a briefing paper for the b)
PPP Steering Committee

Decide on whether to approve, reject or send back for
reconsideration the project proposal

Prepare an information memorandum for project marketing
Undertake market sounding of potential investors and lenders
Finalise project structure and tender documents
Establish a data room for due diligence by investors
Issue a request for pre-qualification applications
3. Transaction execution
Evaluate pre-qualification applications

Issue a request for technical and financial proposals to pre-
qualified bidders
Evaluate bids received
Prepare a bid evaluation report including recommendations on
the contract award
Submit the bid evaluation report through the PPP cell to the PPP
Steering Committee
Review the bid evaluation report and prepare a briefing paper for b
the PPP Steering Committee

Decide on whether to approve, reject or send back for
reconsideration the contract award recommendation
Conduct negotiations with the preferred bidder
Sign the PPP agreement
Fulfil conditions precedent to financial close
Monitor project implementation to ensure conformity with plans
delivery and exit
4. Development,
and specifications
Monitor and evaluate project operation to ensure conformity
with performance standards and tariffs
Prepare annual reports on project performance to the PPP cell
Monitor and evaluate financial performance of the project
Make arrangements for project transfer to the government at the
end of the term of the PPP agreement
Table 24: PPP project life-cycle steps
CF = Consulting Firm; LD = Line Department; PDF = Project Development Facility; PPP = Public–Private Partnership;
PPPC = PPP Cell; PPPSC = PPP Steering Committee; RMU = Risk Management Unit.
a) If support by the PPP cell for this activity is requested by the government agency.
b) If government support is required for the project.
5.4 Private sector support calibration
The GoPb has been endeavouring to support a number of industries in recent years,
through various interventions. Furthermore, in the past few years, the sponsoring
departments have increasingly opted for developing independent companies to take
responsibility for implementation of these interventions. These recently established
organisations usually take the form of a not-for-profit company, registered under
Section 42 of the Companies Ordinance (commonly referred as Section 42
companies). Most of these Section 42 companies have been established through a
direct grant or loan from the GoPb, but after the utilisation of initial seed money,
these companies often seek more funding through their parent department, with or
without PC-I, for meeting their recurring costs as well as for new development
initiatives.
It is imperative that anybody who is involved in requesting, appraising or approving

such grants should apply some objective criteria to ensure that such grants are
rightly targeted and effectively used. For this purpose, this section outlines an
approach to assess such cases, in line with the best practices followed across the
world to benchmark similar industrial support interventions.

The core principles in criteria for assessing private sector support initiatives include
the sunset clause; exit strategy; targeted interventions; clear objectives;
performance indicators; M&E mechanism; shareholder consultation and
participation; transparency; whole or partial cost recovery; simple design to
implement and manage; flexibility to adjust and scale up; market mechanism;
targeting of productivity or innovation gains; and ownership and accountability.
5.4.1 Market failures
The need for government interventions for industrial support should only be
justified if they are addressing a market failure that cannot be addressed by the
private sector itself43. These failures include coordination failures and information
spillover.
Coordination failures occur when markets are incomplete so that the return to
one investment depends on whether some other investment is also made:
building a hotel near a beautiful beach may be profitable if someone builds an
airport. The opposite may also be the case. However, there may be not be a way
for the market to coordinate both investments. A typical solution is for the
government to provide a guarantee to both investors. If done well, this will be
costless for the government ex post as the investments would be profitable
when they both take place. If the guarantee is not credible, then the
government can just build the airport and the hotels would follow.
Similarly, hypothetically a number of furniture manufacturers in Chiniot may not be

investing in high-quality designs or a highly skilled workforce, due to the absence of
a wood seasoning facility in the area. Nobody may be willing to invest in such a
seasoning facility, in the absence of high-quality manufacturers in the area. Again,
the government may either provide guarantees or invest and establish such a facility
to ensure availability of high-quality wood for more expensive designs.
Information spillovers mean that an entrepreneur shies away from investing in

something where he/she would incur costs (personalised costs), but if he/she is
successful the gains would be shared by others as well (social costs).
For instance, surgical instrument manufacturers may not invest in training their
workforce, as these workers, once trained, may be hired by other players in the
market. However, the government may address this failure by establishing a
technical and vocational training institute in the area for the surgical manufacturing
workforce.
5.4.2 Clear objectives and results-based performance indicators
43 Hausmann and Rodrik, 2006. Doomed to Choose; Industrial Policy as Predicament

All industrial support interventions should have well-defined objectives with
commitment at the outset of the intervention, so that all stakeholders know what
the new industrial support initiatives are trying to achieve. A well-designed
industrial support intervention must have both output- and outcome-level goals. For
instance, a technical and vocational training facility may have the outcome-level
objective/goal of enhancing the skill of the workforce in particular industries;
however, the output-level goals must include the number of trainees or number of
courses delivered over a period of time. Moreover, the outcome-level goals should
be quantifiable, which may then be verified through impact assessment exercises,
carried out by P&D Department, a third party or any other institution.
5.4.3 Performance benchmarks for beneficiaries
All private sector support interventions should have clear performance benchmarks
for beneficiaries, and if these are not met, there should be a clear process for
filtering out such beneficiaries. For example, in special industrial or export
processing zones, the beneficiaries can be asked to meet certain export targets.
5.4.4 Stakeholder consultation and participation
It is important to lay down this procedure to demonstrate how all relevant

stakeholders have been consulted. In many cases, a handful of stakeholders are
consulted or sometimes an important stakeholder is missed.
5.4.5 Whole or partial cost recovery
The notion of cost recovery is important not only for creating ownership and
responsibility but also so that the government’s limited resources could be
channelled in the most effective manner. The government may decide to support
interventions that do not contribute anything towards cost recovery; nevertheless,
the principle should be there to prioritise, rank and assess any such interventions.
5.4.6 Targeting
The government has the mandate of directing limited resources to the initiatives
that meet its strategic priorities. Some of the interventions, while having clear
objectives, only aim at increasing the profitability of the private enterprises.
However, all such interventions should target either productivity or innovation as
clear criteria for targeting. For instance, at the federal level, the export rebates are
given to all exporters, thereby increasing their profitability. As per this principle,
however, these rebates should be focused on certain types of exporters, including
those exporting to new markets (where they could not previously export and now
due to productivity enhancement have become more competitive) or in new
product categories (which indicates innovation).
5.4.7 Sunset clause

Sunset clauses define the time duration of an intervention and as such are termed as
the most effective policy design feature. Governments operate at a distance from
private enterprises. Most of the time, it is difficult for the government to pick
winners from among the interventions, and there is no explicit timeframe for an
intervention after which a third party may carry out a CBA to decide on continuing
or otherwise for that particular initiative. Therefore all the industrial support
interventions should exist for a limited period and must have sunset clauses. For
instance, provision of milk cooling tanks, mechanisation support for farms, etc.
under various industry support initiatives should have had a sunset clause with an
inherent assumption that by the time they end, they would have achieved the
desired objectives. Even the Section 42 companies, as well as public-sector training
institutions, exhibition centres, etc. must also have a sunset clause, as government
should not keep on supporting this essentially private sector activity for an
unlimited period. If the private sector continues to see value in these initiatives, they
should be taken up by the private sector itself. For example, Section 42 companies
for sector development in a particular industry can be taken up by the respective
industry association after a certain time. Similarly the public sector-led training can
be taken over by private sector players, if there is a sufficient element of cost
recovery. These sunset clauses, however, should correspond to an appropriate exit
strategy.
PRIVATE SECTOR SUPPORT CALIBRATION TEMPLATE

No Criteria Comments
1 Does the proposed project address a market failure? ☐
Please explain:
☐
2 Does the project have clear objectives and results-based
performance indicators?
3 Are there clear selection criteria for beneficiaries?
☐
4 Are there any performance benchmarks for beneficiaries? ☐
5 Have relevant stakeholders been consulted? ☐
6 Are beneficiaries making any cost contributions? ☐
7 Does the project have a sunset clause? ☐
8 Does the project have an exit strategy? ☐
Table 25: Private sector support calibration template

VOLUME TWO - APPENDICES
SECTION A – Standards and yardsticks

SECTION B – Planning Commission guidelines/templates and other relevant
federal government documents
SECTION C – Government of Punjab notifications and documents
SECTION D – Relevant policies and procedures

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The Planning Manual

Government of the Punjab

SECTION 2 – HOW TO IDENTIFY AND FORMULATE A PROJECT 23

SECTION 3 – HOW TO APPRAISE AND APPROVE A PROJECT 39

2 THE PLANNING MANUAL

SECTION 4 – HOW TO MONITOR AND EVALUATE 70

VOLUME TWO - APPENDICES 114

THE PLANNING MANUAL 3

Figure 1: Schematic for ADP Formulation.................................................................................. 12

4 THE PLANNING MANUAL

Box 2: Functions of Planning Commission ................................................................................. 18

THE PLANNING MANUAL 5

ADP Annual Development Programme

THE PLANNING MANUAL 7

8 THE PLANNING MANUAL

WASEEM AJMAL CHAUDHARY

THE PLANNING MANUAL 9

1.1 Development planning – concept and practice

Accordingly, planning is based on the following grounds:

Development planning primarily aims at the structural or economic transformation

1.2 Plans, programmes and projects

10 THE PLANNING MANUAL

The main instrument to implement a plan is the Annual Development Programme.

Box 1: MTDF and ADP

1.3 Planning processes

1.3.1 Formulation of ADP

THE PLANNING MANUAL 11

FIRST STAGE: ESTIMATION OF RESOURCES AND DETERMINATION OF INTER-

12 THE PLANNING MANUAL

• Formulation of the ADP should follow the medium-term perspective,

1 Government of Punjab Guidelines for Formulation of Annual Development Program 2015-16

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THIRD STAGE: PREPARATION OF PRELIMINARY DRAFT OF ADP

14 THE PLANNING MANUAL

FOURTH STAGE: MEETING WITH DEPARTMENTS AND PREPARATION OF ADP

FIFTH STAGE: FINALISATION OF ADP AND ITS AUTHENTICATION

1.3.2 ADP and MTDF formulation guidelines

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1.3.3 Project cycle management

PC-I Detailed project document

PC-I PC-II PC-III PC-IV PC-V

Figure 2 explains the roles of different proformas in the project cycle:

3 Director general, M&E, P&D, Punjab

16 THE PLANNING MANUAL

1.4 Planning: institutional regime

• Planning Commission of Pakistan;

1.4.1 Planning Commission

4 Director general, M&E, P&D, Punjab

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Functions of the Planning Commission

The functions of the P&D Division are as follows:

Box 2: Functions of Planning Commission

1.4.2 P&D Board

• Economic sections – There are a number of economic sections established in

• Technical sections – The technical sections appraise projects from a technical

• Social sections – The social sections mainly consist of health, population

18 THE PLANNING MANUAL

• formulation of the provincial government vision, policies and strategies for