PLANNING ARCHITECTURE AT PROVINCIAL LEVEL

Planning & Development Boards/Departments:

2.2 Planning & Development Boards/ Departments are planning bodies at the
provincial level, P&D activities of all nation-building departments and agencies are
coordinated by these boards/ Departments. In Punjab and Sindh, planning & development
activities are being undertaken by the Planning and Development Boards while in
Baluchistan, Khyber Pakhtunkhwa, Azad Jammu Kashmir, Gilgit Baltistan, and FATA,
Planning & Development Departments are responsible for planning & development in
their respective areas. The Head of Planning & Development Boards is called Chairman.
Additional Chief Secretaries (Development) head Planning machinery of Khyber
Pakhtunkhwa, Baluchistan and Special Areas.
PUNJAB:
Planning & Development Board:
2.3 The Planning, Development Board in Punjab is headed by the Chairman and
assisted by Chief Economist, Secretary Planning & Development Department, Joint Chief
Economists, Members, Senior Chiefs and Chief of Sections for disposal of assigned
tasks. The P&D Board is divided into self-contained sections, each of which is headed
by a senior chief/chief of section. The sections of P&D Board comprises of Economic,
Technical and other Sections. The Economic Sections deal with the matter relating to
coordination with the Federal Government on economic issues and development plans;
macroeconomics and policy analysis; appraisal; and Monitoring & Evaluation (M&E).
The Technical Sections appraise projects from a technical viewpoint. These sections
include water and power, roads and bridges, urban development/ rural development
authorities/regional planning, agriculture, livestock and dairy development, forests
and fisheries, industries and manpower, 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
include external capital assistance (ECA), environment and the Projects Training
Institute.
Functions of P&D Board:
The functions of the P&D Board are as under:
• Formulation of the provincial government vision, policies and strategies for
economic Planning &Development in consultation with all stakeholders in the
light of National Economic Council's (NEC's) guidelines to achieve Perspective
Plan Targets (Long term vision) and National Development Plans commonly
known as Five Year Plans.
• ADP/MTDF:
– preparation in coordination with all departments of the provincial
government
– implementation and monitoring
– evaluation of development projects and programs
• Economic Issue(s):
– conducting research/surveys
– review/analysis of socioeconomic data
• Annual Development Programs (ADPs):
– Preparation of short-term and long-term provincial development plans
– 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 and disbursement of
supplementary grants
• Secretariat for the Provincial Development Working Party (PDWP) and
clearinghouse for development projects to be placed before Central Development
Working Party (CDWP) and Executive Committee of the National Economic
Council (ECNEC) for consideration / approval
Foreign assistance:
– determination of key areas for foreign assistance and preparation of the
sector-wise portfolio for foreign assistance
 – loan negotiations and securing of federal financial guarantees, wherever
required for 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 faster development of rain-fed (Barani) and less developed areas
• Framing of guidelines for gaining of consultancy service
• Policy formulation with respect to private sector development and promotion and
public–private partnership (PPP) execution, development and administration in
respect to foreign aided/ financed and mega ADP projects
• Matters relating to attached departments, autonomous bodies and special
institutions of the P&D Department
• Information Technology:
– IT policy
– electronic data management
– control of and liaison with district IT departments
– e-governance and e-service delivery web content management
– pre-qualification of firms to provide IT consultancy, software development
and IT products to the government
– coordination with both public sector departments and private sector agencies
in the field of IT
– 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
2.4 While performing its functions, the Board closely coordinates with the Finance
Department regarding formulation and determination of the size of ADP. The Finance
Departments are also involved with the process of approval of individual development
schemes. This function is associated more directly with the process of ADP
implementation.

Provincial Development Working Parties (PDWP)

2.5 PDWP is the highest body at the provincial level to approve the provincial
development projects. The composition of the PDWP is as under:
1. Chairman, P&D Board Chairperson
2. Secretary P&D Department Secretary / Member
3. Secretary Finance Member
4. Secretary, Environmental Protection Member
5. Secretary concerned Department Member
6. Chief Economist, P&D Board Member
7. Director Punjab Economic Research Institute Member
8. All P&D Members of P&D Board Member
9. Director General M&E, P&D Board Member
10. Any co-opted Member
The PDWP is competent to approve development projects costing up to Rs. 10,000
million provided;
a) Projects are to be fully financed from Provincial resources
b) Projects are not related to Water Sector
c) Foreign financing is less than 25% of project cost

Departmental Development Sub-Committees (DDSCs):

2.6 DDSCS are responsible to approve the projects costing up to Rs 200 million at the
departmental level. The composition of the DDSC is as under:
i. Administrative Secretary concerned
Chairman
ii. Representative from P&D Board not below the rank of Chief Member
iii. Representative from Finance Department not below the rank of AS
Member
iv. Director (Works), Communication and Works Department
Member
(If building component is involved and technical advice is needed).
The DDSC is not competent to approve schemes based on foreign aid component and
subsidy. Such schemes are placed before PDWP for consideration / approval as per above
guidelines.
Planning at Divisional/ District/Agency levels:
2.7 The functions of Divisional Development Working Party at divisional level
include finalization of lists of schemes, and approval of development schemes. Planning
agencies at district/divisional level are responsible to prepare and implement
development programs through their own budget. The Divisional Development Working
Parties (DDWPs) are responsible to approve the projects costing up to Rs. 100 million.
The District Development Committee (DDC) are responsible to approve projects in area
of their competence up to Rs. 50 million and the schemes of the town/tehsil municipal
administrations (TMAs) exceeding Rs. 5.0 million. The Category I Officer is also
authorized to approve the schemes of respective offices/departments reflected in the ADP
costing up to Rs. 2.5 million (without PC-I). The Union Administration is also authorized
to approve the schemes with costs below Rs 0.100 million included in ADP of Union
Administration. TMA Works Committee can approve the development works costing up
to Rs 5 million included in approved budget of TMA.
Divisional Development Working Party Composition
i. Divisional Commissioner Chairman
ii. DCOs of the division  Member
iii. SE (Irrigation & Power)  Member
iv. SE (C&W) Member
v. Divisional Head of the sponsoring department  Member
vi. Director (Dev/ Finance) Member/Secretary
District Development Committees (DDC)
i. District Coordination Officer Chairman
ii. EDO (Finance & Planning) Member
iii.EDO (Works & Services) Member
iv. EDO (Revenue) Member
v. EDO (Concerned) Member
vi. District Officer (Planning) Member/Secretary
2.8 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 their operation areas and relevant sectors. These development
authorities have their own procedures for preparation, approval and implementation of
respective programs. At all levels, efforts have been accelerated to involve non-
governmental organizations (NGOs)/communities in development works. For social
sectors, NGOs involvement in development works through health and education
foundations is being promoted. Lately, the private sector has also been involved in
project financing and implementation.
PROJECT PLANNING AND MANAGEMENT
Definition of Project
3.1 Projects are unique in their output, having a definite starting and ending point, are
temporary in nature, carried out to manifest an organization’s strategic objectives. These
temporary and unique endeavors are playing a vital role in today’s modern organizations
both public and private alike. There is a growing interest on how these projects are
managed within the public sector in Pakistan.
Project Management Framework
3.2 The Project Life Cycle refers to a series of activities which are necessary to fulfill
project goals or objectives. Public sector projects in Pakistan vary in size and complexity,
but, no matter how large or small, all projects can be mapped to the following life cycle
structure based on the processes in the public sector in Pakistan which are briefly stated
below. However, details have been discussed in other chapters of this manual.
 •
Identification: stage where one project-idea out of several alternatives is chosen
and defined.
• Preparation: defined idea is carefully developed to the appraisal stage.
• Appraisal: every aspect of the project idea is subjected to systematic and
comprehensive evaluation, and a project plan is prepared.
• Presentation: detailed plan is submitted for approval and financing to the
appropriate entities/relevant forum.
• Implementation: with necessary approvals and financing in place, the project plan
is implemented.
• Monitoring: at every stage the progress of the project is assessed against the
planned activities of the projects; and
• Evaluation: upon completion the project is reassessed in terms of its efficiency
and performance.
The above Life Cycle can be clearly understood from the figure below:

3.3 The public sector projects are broken down into phases so that extra control can be
applied to effectively manage the processes. These phases are further divided into subsets
for easy management, control, and planning. The following diagram further depicts these
phases and their sub phases or components in each phase pictographically, however,
details of which are stated in the relevant chapters of this manual;
Project Management

3.4 Project management is the art of managing the project and its deliverables with a
view to produce finished products or service. There are many ways in which a project can
be carried out and managed. Project management includes: identifying requirements,
establishing clear and achievable objectives, balancing the competing demands from the
different stakeholders and ensuring that a commonality of purpose is achieved. It is clear
that unless there is a structured and scientific approach to the practice of management,
organizations would find themselves adrift in the ocean called organizational
development and hence would be unable to meet the myriad challenges that the modern
era throws at them. Without a scientific approach to the task of managing the projects and
achieving objectives, it would be very difficult for the organizations to successfully
execute the projects within the constraints of time, scope and quality and deliver the
required result. In other words, there has to be a framework and a defined way of doing
things to ensure that there is a structure to the art of project management.

Formation of International Associations

3.5 By the end of the 1960s there was an increased understanding to recognize project
management as a separate discipline. This recognition led to the creation of the two major
professional bodies in the field of project management. The International Project
Management Association (IPMA) was founded in Europe in 1965. The vision behind the
formation of IPMA was to promote project management and to lead the research in the
development of the profession. In 1969, the Project management Institute (PMI) in
United States was formed to serve the interests of the project management industry. The
premise of PMI is that the tools and techniques of project management are common and
they can be used across different industries.
Development of International Standards / Guide
3.6 The role of standards for project management profession has been an important
issue for many years. A variety of benefits have been identified which accrue from
standardization. General benefits which apply to both technological and professional
standardization include encouragement of technological innovation, guaranteeing
marketplace, competition and convenience. In 1981, PMI Board of Directors authorized
the development of a Body of Knowledge (BOK), containing standards and guidelines of
practice that can be widely used throughout the profession. This initiative resulted in the
publication of: A Guide to the Project Management Body of Knowledge commonly
referred to as a PMBOK in1996. On the other hand, the IPMA developed the ICB: IPMA
(IPMA Competency Baseline) in 1998.
The major standards that are related to project management are as follows: -
• Project Management Body of Knowledge (PMBOK) by PMI.
• Association for Project Management (APM) BOK by UK APM.
• Project in Controlled Environments (PRINCE2) by Office of Government
Commerce
• United Kingdom.
• Project and Program Management for Enterprise Innovation (P2M) by
Engineering
• Advancement Association of Japan (ENAA).
Project Management Body of Knowledge (PMBOK)

3.7 The PMI has developed arguably the most significant Project Management
standard, PMBOK Guide. The PMBOK Guide is approved as an American National
Standard by the American National Standard Institute (ANSI) and is recognized by the
Institute of Electrical and Electronics Engineers (IEEE) as an IEEE standard. The PMI
describes that much of the knowledge of tools and techniques for managing projects are
unique to project management. However, understanding and applying the knowledge,
skills, tools and techniques which are recognized as best practices are not sufficient alone
for effective project management. PMI emphasizes that in addition to the knowledge of
tools and techniques, there are various other areas that are also vital in the application of
project management. These are:

• Application Area Knowledge, standards and regulations

• Understanding the project environment
• General management knowledge and skills
• Interpersonal skills
3.8 The PMBOK guide divides the project into the five phases and describes it as a
project management process groups. It also advocates that for the project to be successful
the project team must select the appropriate processes within the process group to meet
the project objectives. These process groups are defined as:
• Initiating Process Group
• Planning Process Group
• Executing Process Group
• Monitoring and Controlling Process Group
• Closing Process Group
3.9 The guide also provides a matrix that maps project management process onto five
project management process groups. The PMBOK has become a de facto international
standard for project management knowledge. However, it is also acknowledged that it has
been developed predominantly for a North American audience.
Association for Project Management (APM) Body of Knowledge
3.10 Project management provides the single point of integrative responsibility needed
to ensure that everything on the project is managed effectively to ensure a successful
project deliverable.
The APM BOK is divided into four major categories:
• Project management
• Organizational Issues
• Tools and Techniques
 • General Management
3.11 These four categories are then subdivided into 40 elements / process of project
management but what’s important is that all project management associated aspects are
covered in this BOK. This model from APM has worked well for two decades since it
was launched in 1993 and is now widely used as the basis of competency assessment by
many companies in Europe.

Project in Controlled Environments 2 (PRINCE2)

3.12 PRINCE stands for Projects IN Controlled Environments and is a management

approach owned and promoted by the Office of Government Commerce (OGC, part of
UK treasury). PRINCE was initially published in 1989 and has derived its roots from an
earlier method called Project Resource Organization Management and Planning
Technique PROMPT (a project management method created by Simpact Systems Ltd. in
1975). In 1996 a consortium of some 150 European organizations contributed and
published a version 2 of PRINCE. PRINCE2 was originally aimed at the public sector;
however, it is now being adopted faster in the private sector and is growing in importance
internationally. PRINCE2 is described as a structured method for effective project
management. The project management process in PRINCE2 is divided into four stages.
These stages are:
• Pre-project stage,
• Initiation Stage,
• Continuation Stage, and
• Closing Stage
3.13 The model further divides these stages between seven main processes and three
main sections. In addition to these seven processes and three main sections, there are
different themes in PRINCE2. These themes are used as a tool by project managers for
the execution of the processes, these themes are:
• Business Case (Why)
• Organization (who)
• Planning (where, how, when and how much)
• Controls
• Configuration management
 • Risk management (what if)
• Quality
• Change management
3.14 The PRINCE2 guide provides recommendations to use the PRINCE2 approach
within a closed organization. It further states that the PRINCE2 approach is a single
unified (closed) methodology starting from developing the initial product breakdown
structure through to identifying the corresponding network scheduler. It is because of this
unified approach the monitoring is carried out in a closed and organized way. In addition,
PRINCE2 also contains suggestions for the adaptation of the project so that each project
can be precisely customized.

Project and Program Management for Enterprise Innovation (P2M)

3.15 P2M proposes a framework based on a Mission Driven Approach and on

insightful thinking. This enables solving complex ambiguous problems in uncertainty.
Furthermore, the P2M approach integrates multi/interdisciplinary knowledge and
methodologies. The approach of P2M is to recognize three kinds of projects consisting of
concept development (Scheme model), implementation (System model), and operation
(Service model) and to generate diversified, creative and synergistic business models.
This could also be called as a domain of P2M.The scheme model means a conception
plan to develop a mission into multiple scenarios, with a scheme report concerning the
feasibility as a deliverable. The key attributes of the scheme model are the definition of
feasibility, internal structure and external relationship, and flexible adaptation to the
owner request to change. The first step of Project Management Entry of P2M describes
how to make a first step as a Mission-achievement professional. The second step of
Project Management explains the basic definition and framework of project management.
The third step of programme management introduces program management that
organically combines multiple projects. The fourth step of segment management offers
11 domains of project management. Project management domains are used in a
standalone or combined manner for individual tasks and challenges of project and
program management.
 PROJECT IDENTIFICATIONS, LINKAGES AND FINANCING

Project Identification

4.1 Project identification is the first step in the strategic planning process. A project is
a notion, speculative imagining of a proposal deemed fit for a prospective undertaking. It
may be defined as a proposal for investment to achieve certain objectives. J. Price
Gittinger, in his book, "Economic Analysis of Agricultural Projects" maintains that "all
we can say in general about a project is that it is an activity on which we will spend
money in expectation of returns and which logically seems to lend itself to planning,
financing and implementation as a unit. It is a specific activity with a specific starting
point and a specific ending point intended to accomplish a specific objective. It is
something you draw a boundary around and say: 'This is the Project'. Project is
measurable both in its major costs and returns. Normally it will have some geographical
location or at least a rather clearly defined area of geographic concentration. It has a
relatively well-defined time sequence of investment and production activities. It will be a
partially or wholly independent administrative structure and set of accounts". Every
project has beginnings, middle period during which activities moved the project towards
completion and an ending. A standard project typically can be divided into four major
phases: initiation, planning, execution or implementation and closure. Taking together,
these phases represent the path a project takes from the beginning to its end and are
generally referred to as the project life cycle. In case of public sector projects another
important phase is essentially required to be added is project scrutiny and its approval
from a competent forum.

4.2 Projects in various sectors are proposed and prepared by concerned

ministries/departments. In advanced countries, there are special organizations which are
employed on permanent basis in the field on surveys and necessary investigations
required for formulation of feasible projects. These outside agencies, engaged for the
purpose, prepare complete project documents including cost estimates and financial and
economic analyses of such projects enabling the Government in appropriate evaluation of
their potential and fixation of their priorities in a particular sector. In less
developed/developing countries, there are no such organizations; the following sources
are used for project identification.

Steps in Project Identification:

4.4 In general, Project Identification constitutes of the following steps1:

i. Propose measures to solve major problems identified in the development

strategy and to meet diverse development needs, while setting clear project
objectives and identifying target groups receiving benefits from the project;
ii. Establish the project concept (together with alternative plans) that will
effectively serve to achieve the country’s development objectives;
iii. Assess the priority or urgency of the project in the context of the country’s
economic and social development plan and sector investment program;
iv. Examine consistency with the master plan (M/P) and the regional
development plan;
v. Consider the adequacy of the Executing Agency and the possibility of private-
sector participation in the project;
vi. Estimate approximate project cost (together with the cost of alternatives)
based on the conceptual design;
vii. Make preliminary assessment of the feasibility of the project and its impacts
on the country, its specific region or sector.

4.5 Projects are usually identified by the following entities:

i. Government agencies preparing the national, regional or sectoral development
plan;
ii. Bilateral or multilateral aid agencies conducting country economic/sector
studies or ex-post evaluation of completed projects; and
iii. Public or private-sector entities in the country or donor countries, local
governments, non-governmental organizations (NGOs), academics conducting
a project.

Strategic Planning:
1
4.6 Strategic planning helps prioritize regional restoration efforts, allows for
widespread restoration support, and may focus available funding on projects that meet
larger spatial and temporal goals and objectives. Identification of projects in different
sectors of the economy plays a key role in overall development / progress of a country. It
both has backward and forward linkages with the issues faced in the past and potential
future challenges of a country. The very rationale of the projects to be undertaken should
be clearly maintained and supported by well-designed development programs, which
must be in consistent / in line with the short, medium and long-term perspective plans of
the country. Otherwise, proper utilization of limited development resources / public
money could not be materialized in its true letter and spirit.

Project Strategic Linkages

4.7 Vision statements, long term perspectives, five year plans, annual plans and the
Public Sector Development Programs (PSDP) are interdependent documents and
identification of a development project must have certain strategic linkages with the long
term plans or the vision. Pakistan 2010 was the first ever vision statement approved by
the NEC in 1998. Later on Vision 2030 was launched in 2005. But after 18 th
Constitutional Amendment, there was a need to develop new vision to address the
devolution. Therefore, NEC approved the vision 2025 in the year 2014 that has been
developed through wider consultations with all the stakeholders as is a shared vision by
all definitions.

Vision

4.8 Vision 2025 rests on seven pillars identified as the key drivers of growth which
will transform Pakistan into a vibrant and prosperous nation by 2025. The pillars are; (i)
People First: Developing Social and Human Capital and empowering women; (ii)
Growth: Sustained, indigenous and inclusive growth; (iii) Governance: Democratic
governance: institutional reform & modernization of the public sector; (iv) Security:
Energy, water & food security; (v) Entrepreneurship: Private Sector &
entrepreneurship-led growth; (vi) Knowledge Economy: Developing a competitive
knowledge economy through value addition and; (vii) Connectivity: Modernizing
transportation infrastructure & regional connectivity.

The eleventh five-year plan justified the Vision 2025 as follows:

“The Vision aims to serve as aspirational document visualizing the destination

of balanced human, social, and economic progress throughout Pakistan. It
emphasizes revival of growth, strengthening of the country’s development
foundation and enabling it to reach the status of an upper middle income
country by 2025.”

Plan Priorities / Plan Documents

4.9 The development plans are prepared after thorough scrutiny and judicious
selection of the most important and remunerative projects by the Planning Commission/
Planning and Development Division of the Government of Pakistan charged with the
responsibility of giving the final shape to these plans. The order of priority assigned to
each project depends on its viability and impact on national economic growth, social
development, generation of greater resources/revenues and overall Government policy.
All such potentially promising projects are identified and included in the national
development plan, subject to expected resource availability. These selected projects find
place in the plan priorities and picked from the whole lot of projects. Such projects have
their relevance within the perspective plan's spanning long periods and aim at the steady
evolution of the economy towards a state of self-sufficiency with characteristic of a
prosperous progressive nation. On these aspirations of a self-reliant free nation, the
projects are identified in plan documents.

Five Year Plan

4.10 A single year is too short a period to accomplish anything. A five-year plan on the
contrary has the advantage of reasonable time frame for maneuvering and achievement of
solid results. A five-year plan is a general statement of objectives and targets relating to
the economy as a whole and its various component sectors. It is not an authorizing
document in the sense that it does not authorize expenditure to the relevant operating
agencies. It provides a broad framework for formulation of the plan. Preparation and
approval of five year plans started in 1957, which came to a halt with the abortive Fourth
Five Year Plan 1970-75. It was resumed with the Fifth Five Year Plan 1978-83 and
continued until 1998. The draft Ninth Five Year Plan 1998-2003 was prepared but not
placed before the NEC. Eleventh Five Year Plan 2013-18 is under implementation at
presentation. A list of five year plans is placed at (Annex--).

4.11 In keeping with the Rules of Business, all projects approved for implementation
are included in the Annual Development Plan subject to resource availability. The
projects prepared in each sector and presented by a provincial government for financing
are adjudged individually and collectively. The selection/acceptance depends, among
other factors, on the general constraints over the country's capacity and position of her
exchequer, which may permit only such projects as give quick returns, alleviate poverty,
eradicate social evils, promote export, curtail import and provide a springboard for faster
development of science and technology.

Annual Plan

4.12 The principal instrument for adjusting the five-year plan to current realities is the
annual plan, which has proved a dependable method for translating plan objectives into
an operational programmed. In other words, it is regarded as the implementation side of
the five-year plan. The annual plan includes an evaluation of past performance, a
presentation of the main targets, an assessment of the resource position for the year, an
outline of the investment programed in the public and private sectors and a broad outline
of the economic policies that may be necessary to achieve the targets.

4.13 In Pakistan, during the period 1972-77, medium-term planning was abandoned in
favor of annual budgeting. Medium-term planning was revived again with the Fifth Five
Year Plan in 1978, but the practice of annual plans was retained (Annex--)

Five Year Plan Periods in Pakistan

 # Plan Period
1. Colombo Plan (Six Year Plan) 1951-57
2. 1st Five year Plan 1955-60
3. 2nd Five year Plan 1960-65
4. 3rd Five year Plan 1965-70
5. 4th Five year Plan 1970-75
6. 5th Five year Plan 1978-83
7. 6th Five year Plan 1983-88
8. 7th Five year Plan 1988-93
9. 8th Five year Plan 1993-98
10. 9th Five year Plan (not launched) 1998-2003
11. Medium Term Development Framework (MTDF) 2005-10
12. th 2010-15
10 Five year Plan (drafted twice but not launched)
th
13. 11 Five year Plan 2013-18

National Development Program Outlay

4.14 The general development plans, currently prepared in Pakistan, provide the overall
framework within which project planning is undertaken. Perspective and five years’
plans’ objectives and targets are ultimately translated to doable individual targets
according to the priorities of the national planning strategy. Plans frequently form the
basis of identifying new projects. Under a systematic planning procedure, planners
determine general guidelines for the fulfillment of overall development goals which are
further transformed into specific sectoral objectives, along with overall resource
allocation between those.

4.15 Annual Development Plan for a particular financial year is the basic document
describing such targets. The objectives and targets, according to traditional and standard
planning process are rendered in the form of implementable projects. A development plan
is essentially a forward-looking policy framework which envisages a concrete and
prioritized but somewhat flexible program of action to be launched in a dynamic situation
to attain specified economic and social objectives. A realistic and practical plan visualizes
a very close corresponding relationship between the plan, its programs and projects
which, in turn, are harmonized and integrated intra-sectoral and inter-sectoral in order to
move them in step on the path leading to the achievement of the plan objectives and
targets. A plan or a program/project is ultimately as good as its implementation, since it is
the actual achievement of the results in line with the targets, and not merely the targets
set or the resources allocated, that determine the degree of success or failure of the
plan/program as well as its impact on the socio-economic life of the people. Thus, it is
clear that only the technically, financially and economically sound projects/ programs, if
properly executed in a coordinated manner with the active and popular support of
concerned departments, the target groups and the continued political commitment and
support at the highest level can provide a strong edifice for the successful implementation
of the plan.

4.16 Projects are the cutting edge of development. By this is meant that, without
projects, it is unlikely that general development plans which accelerate economic growth
and further a range of social objectives will be fulfilled. Projects provide an important
means by which investment and other development expenditure foreseen in plans is
incurred. Sound planning requires good projects but effective project preparation and
analysis must be set in the framework of a broader development plan. As such they must
fit in appropriately in the broad strategy. Projects are defined in different ways. The
definition given in the UN Manual on Programming Techniques for Economic
Development, produced under United Nations, ECAFE, 1960 defines a development
project as follows: -

"The smallest unit of investment activity to be considered in the course of

programming. It will, as a rule, be a technically coherent undertaking which has to
be carried out by a private or public agency and which can be carried out,
technically speaking, independently of other projects. Examples of projects are the
building of a factory, the construction of a bridge or a road, the reclamation of a
piece of land".

Thus from the stand point of economics, a project is the minimum investment which is
economically and technically feasible. A project is, thus, an activity on which we spend
money in expectation of returns and which logically seems to lend itself to planning,
financing and implementation as a unit. It is a specific activity with a specific starting
point and a specific ending point intended to accomplish a specific objective. Normally
it will have some geographic location, specific clientele, defined time sequence of
investment and operation and a bunch of benefits which can be quantified.

Modes of Financing

4.17 Identification, appraisal and approval of projects and programs calls for their
financing so that the envisioned objects take the practical shape and existence.
Financing of development projects in infrastructure, social and other sectors requires
huge public investment every year. In Pakistan this investment is mainly provided
through Public Sector Development Program (PSDP) at federal level and through
Annual Development Plan (ADP) at provincial level. However, since recent years’
endeavors are under way to integrate private sector into the development process
through emerging instruments like public-private partnership (PPP) and community
participation.

Public Sector Development Program (PSDP)

4.18 The Public Sector Development Program (PSDP) is an annual financial outlay in
the form of a document that lists all the public sector projects and programs with
specific allocations made for each one of those in that particular financial year. It is the
operational side of the Five Year and Annual Plans. In other words, it is that part of the
country's annual budget which deals with development expenditure. The PSDP
document consists of all necessary information pertaining to the projects and programs
including total cost, foreign assistance component, forum and date of approval,
expenditure incurred up to the end of preceding financial year and allocation; in terms
of both rupee and foreign assistance component, for the current financial. These
individual details are however listed for only federally funded projects and programs.
Estimated levels of Annual Development Plans (ADPs) of provinces are included in the
summary of the PSDP and details thereof are compiled in individual ADPs of the
respective provinces. The PSDP procedure differs from the project approval procedure.
Due to the general constraint which exists on government funds, projects are competing
for a limited amount of funds available for development. An essential part of the
procedure, therefore, is a shift from the examination of a project in isolation to the
selection of a limited number of projects out of a much larger portfolio.

4.19 The preparation of the PSDP is coordinated by the Public Investment

Programming (PIP) Section of the Ministry of Planning, Development and Reform
(PD&R). Financial year of Pakistan starts with effect from 1st July of a year and ends on
30th June of the next year. The process of budget preparation including PSDP in the
country starts well before the commencement of a financial year. At around October /
November each year Ministry of Finance conveys approximate purse for oncoming
financial year’s PSDP to the Ministry of Planning, Development and Reform. Ministry of
Planning, Development and Reform then issues a call letter to the line ministries and
executing agencies informing them of their respective indicative budget ceilings (IBCs)
commensurate with their requirements, capacity to utilize, and prevailing national
priorities. The call letter includes a time schedule, and standard proforma along with
guidelines on the preparation of the PSDP and selection of projects. Copy of the call
letter for the year 2017-18 may be seen at (Annex---). The concerned heads of technical
sections of PD&R are constantly on board during this process.

4.20 The development projects and their allocations proposed by Ministries /Divisions
are discussed by the high powered Priorities Committee jointly chaired by Secretaries of
Finance, Economic Affairs and Planning, Development & Reforms Divisions. The draft
PSDP is then considered by the Annual Plan Coordination Committee (APCC) chaired by
the Deputy Chairman, Planning Commission /Minister for PDR and comprises, among
others, Finance Ministers of Provinces, AJK, Gilgit-Baltistan and FATA. The Final
PSDP is approved by the National Economic Council, which is chaired by the Prime
Minister and among others includes Provincial Chief Ministers as members. The National
Assembly finally approves these budgetary allocations along with Finance Bill.

4.21 While structuring the PSDP, the following general strategies and principles are
kept in sight:
 (a) Harmony with National Development Planning
Foremost goal of allocating funds in PSDP is that it is consonant with overall
development objectives laid down in long term and medium term e.g. Vision 2025 and
Eleventh Five year Plan.

(b) Sectoral Balance

Allocations in PSDP are made according to the national requirements of investment in all
sectors including infrastructure, social and other sectors. Presently major portion of
development funding goes to infrastructure including energy, transport and
communications, and water sectors. Adequate financing to social subjects like health,
education and food security is also ensured.

(c) Provincial Equilibrium

While safeguarding the overall objectives, PSDP is prepared in such a manner that
priorities and requirements of the four provinces as well as special areas of AJ&K, GB
and FATA are guaranteed.

During formulation of PSDP, the following guidelines/ priorities are adopted in general
while allocating project-wise funds:

 On-going projects with physical progress over 70% are adequately funded for
early completion, followed by physical progress between 50-70% for completion
within two to three years.
 Foreign aid availability is accommodated by providing the required matching
rupee allocations for foreign aided projects
 Development packages and projects of less developed areas (FATA, AJ&K,
Gilgit-Baltistan and Baluchistan) are protected for financing.
 Allocations to vertical Programs of Health and Population Welfare as per decision
of Council of Common Interests dated 28-04-2011 are adequately funded
 Inclusion of new schemes discouraged unless critical and fall in the development
agenda of the Government.
4.22 During the financial year, if any agency requires additional funds for some of its
projects for inescapable reasons, the agency approaches the Ministry of Planning,
Development and Reform (PIP Section) in either of two ways.

a) If some savings are available within that ministry/agency's PSDP allocation, it

requests the Ministry of Planning, Development and Reform for re-appropriation.
After consideration of the case, in consultation with concerned technical section
and in tandem with the implementation of other projects, the case is decided in
affirmative or otherwise.
b) If saving is not available in the agency's allocation, it requests the Ministry of
Planning, Development and Reform to allow a supplementary grant. The Ministry
of Planning, Development and Reform decides each case on its merit and then
recommends it to the Finance Division.
Release of PSDP Funds

4.23 Up to the financial year 2009-10 funds allocated in PSDP were released by
Finance Division through its FA organization on project based demand by the line
ministries and executing agencies. During that year a long round of consultations was
held in order to further streamline the process of release of funds. The Finance Division,
the Planning and Development Division (now PD&R), office of the Accountant General
of Pakistan Revenue (AGPR), executing ministries and agencies took part in the lengthy
consultative process. As a result of the consultative process it was decided that having
first-hand knowledge of the projects’ status and being custodian of the development
financial allocations, the Planning and Development Division (now PD&R) should
manage authorization of releases to the extent of PSDP funds.

4.24 The Ministry of Planning, Development and Reform, then Ministry of Planning
and Development, was entrusted with the responsibility to authorize releases to PSDP
funded development projects with effect from 1st July 2010 i.e. since fiscal year 2010-11.
Public Investment Programming (PIP) section carries out this assignment placing a team
of officers/officials headed by a Deputy Chief through Section Chief under the overall
supervision of Joint Chief Economist (operations). Advisor (Dev. Budget) also provides
advisory and input in the process. Instructions / guidelines in the form of a New Release
Mechanism were circulated to all Ministries/Provinces for submitting their demand for
releases vide this letter No. 4(1) PIP/PC/2010-11 dated 4 thAugust 2010 (Annex--). The
basic purpose of the mechanism was that provision of funds to development projects
should be speedy, automatic and predictable. Under this mechanism Ministry of
Planning, Development and Reform has been performing the function of authorization of
release of PSDP funds as per release strategy issued by Finance Division at the start of
each Fiscal Year. Presently the quarterly limits fixed by the Finance Division are as
follows

i) 1st& 2nd quarters 20% each

ii) 3rd& 4th quarter 30% each
A copy of Finance Division’s release strategy is placed at (Annex---)

4.25 The Ministries and other executing agencies are nevertheless given the flexibility
to obtain releases for fast moving and near completion projects in excess to the projects’
individual ceilings for a certain quarter, however, remaining within the overall respective
ceiling. This flexibility is basically meant to minimize the throw forward and to avoid
time and cost overruns as far as possible. The Ministry of PD&R keeps constant liaison
with executing agencies, project implementation agencies and monitoring network.
Releases are therefore authorized keeping in view the on ground pace of work and
implementation status of the projects. Ministries have given their positive feedback to
this mechanism during the previous years.

Request by Ministry/Agency: -

 Sponsoring Ministry/Agency will submit release request on prescribed

proforma (Annex---) complete in all respects duly signed by
Secretary/PAO.
 Since release is authorized only to approve projects, the ministries and
executing agencies are required to furnish administrative approval of the
projects with valid implementation period.
Approval at M/o PD&R: -
  PIP Section examines and processes the release case.
 Views/Comments of concern Technical Section, if required are obtained.
 Based on their recommendation, the case is submitted to Secretary, PD&R
for approval.
 After approval of Secretary, PD&R release authorization is issued to the
client Ministry/Division/Executing Agency.
Steps after Release Authorization: -

 In case of above Rs. 50.00 million release or as specified in Finance

Division’s release strategy, sponsoring Ministry/Agency forwards the case
to Finance Division for ways & means clearance.
 After Finance Division clearance, Sanction is issued by the
Ministry/Agency.
 PIP Section punches the sanctioned amount in AGPR’s SAP System.

4.26 The obligation of authorizing release of funds by Ministry of PD&R is only to the
extent of rupee component PSDP. Foreign assistance component is directly disbursed to
the recipient projects and programs by the donors. The Economic Affairs Division
compiles this data. Ministry of PD&R constantly updates foreign assistance disbursement
status in accordance with data issued by the Economic Affairs Division. In order to
maintain transparency and provide user friendly information for researchers, academia
and general public, release data is uploaded weekly on the official website of Ministry
of PD&R http://www.pc.gov.pk

PSDP Review Meetings

4.27 At the end of each quarter of ongoing financial year a review meeting of PSDP
is held. The meeting is chaired by the Minister / Deputy Chairman, Planning
Commission. For each ministry / executing agency project wise progress is analyzed.
Necessary adjustment in allocations according to the pace of work and utilization are
allowed where necessary with a view to steer optimal and efficient utilization of
development funds.
Public-Private Partnership

4.28 Given resource constraints faced by the government for financing huge
challenging development portfolio it has become imperative that potential and capability
of the private sector is tapped into the core national socio-economic process. Indeed,
specific policies, framework, laws and regulations are to be in place for confidence
building of the private sector for venturing into this arena offering vast opportunities
albeit with certain risks and apprehensions. Successive incumbent governments have
been trying to make progress in this direction step by step.

4.29 Public Private Partnership (PPP) is defined in various ways in literature relating to
procurement. Generally PPP is described as "a long-term contract between a private party
and a government entity, for providing a public asset or service, in which the private
party bears significant risk and management responsibility, and remuneration is linked to
performance".2.

There can be various PPP modalities for infrastructure projects. The major transaction
modalities are given below but a particular PPP transaction can also be a hybrid model.
Build-and-Transfer (BT): A contractual arrangement whereby the Private Party
undertakes the financing and construction of an infrastructure project and after its
completion hands it over to the Government Agency. The Government Agency will
reimburse the total project investment, on the basis of an agreed schedule. This
arrangement may be employed in the construction of any infrastructure project, including
critical facilities, which for security or strategic reasons must be operated directly by the
Government Agency.
Build-Lease-and-Transfer (BLT): A contractual arrangement whereby the Private Party
undertakes the financing and construction of an infrastructure project and upon its
completion hands it over to the Government Agency on a lease arrangement for a fixed
period, after the expiry of which ownership of the project is automatically transferred to
the Government Agency.
Build-Operate-and-Transfer (BOT): A contractual arrangement whereby the Private
Party undertakes the financing and construction of an infrastructure project, and the
operation and maintenance thereof. The Private Party operates the facility over a fixed
term during which it is allowed to collect from project users’ appropriate tariffs, tolls,
fees, rentals, or charges not exceeding those proposed in the bid or negotiated and
incorporated in the PPP agreement, to enable the Private Party to recover its investment
2
http://ppp.worldbank.org/public-private-partnership/overview/what-are-public-private-partnerships
and operating and maintenance expenses for the project. The Private Party transfers the
facility to the Government Agency at the end of the fixed term that shall be specified in
the PPP agreement. This shall include a supply-and-operate situation, which is a
contractual arrangement whereby the supplier of equipment and machinery for an
infrastructure project operates it, providing in the process technology transfer and training
of the nominated individuals of the Government Agency.
Build-Own-and-Operate (BOO): A contractual arrangement whereby the Private Party
is authorized to finance, construct, own, operate and maintain an infrastructure project,
from which the Private Party is allowed to recover its investment and operating and
maintenance expenses by collecting user levies from project users. The Private Party
owns the project and may choose to assign its operation and maintenance to a project
operator. The transfer of the project to the Government Agency is not envisaged in this
arrangement. However, the Government Agency may terminate its obligations after the
specified time period.
Build-Own-Operate-Transfer (BOOT): A contractual arrangement similar to the BOT
agreement, except that the Private Party owns the infrastructure project during the fixed
term before its transfer to the Government Agency.
Build-Transfer-and-Operate (BTO): A contractual arrangement whereby the
Government Agency contracts out an infrastructure project to the Private Party to
construct it on a turn-key basis, assuming cost overruns, delays and specified
performance risks. Once the project is commissioned, the Private Party is given the right
to operate the facility and collect user levies under the PPP agreement. The title of the
project always vests in the Government Agency in this arrangement.
Contract-Add-and-Operate (CAO): A contractual arrangement whereby the Private
Party expands an existing infrastructure facility, which it leases from the Government
Agency. The Private Party operates the expanded project and collects user levies, to
recover the investment over an agreed period. There may or may not be a transfer
arrangement with regard to the added facility provided by the Private Party.
Develop-Operate-and-Transfer (DOT): A contractual arrangement whereby favorable
conditions external to an infrastructure project, which is to be built by the Private Party,
are integrated into the PPP agreement by giving it the right to develop adjoining property
and thus enjoy some of the benefits the investment creates such as higher property or rent
values.
Rehabilitate-Operate-and-Transfer (ROT): A contractual arrangement whereby an
existing infrastructure facility is handed over to the Private Party to refurbish, operate and
maintain it for a specified period, during which the Private Party collects user levies to
recover its investment and operation and maintenance expenses. At the expiry of this
period, the facility is returned to the Government Agency. The term is also used to
describe the purchase of an existing facility from abroad, importing, refurbishing,
erecting and operating it.
Rehabilitate-Own-and-Operate (ROO): A contractual arrangement whereby an
existing infrastructure facility is handed over to the Private Party to refurbish, operate and
maintain with no time limitation imposed on ownership. The Private Party is allowed to
collect user levies to recover its investment and operation and maintenance expenses in
perpetuity.
Concession Agreement: A contractual arrangement whereby the Government Agency
entrusts the operation and management of an infrastructure project to the Private Party for
an agreed period on payment of specified consideration. The Government Agency may
charge the user levies and collect the same either itself or entrust the collection for
consideration to any person who shall pay the same to the Government Agency.
Management Contract (MC): A contractual arrangement whereby the Government
Agency entrusts the operation and management of an infrastructure project to the Private
Party for an agreed period on payment of specified consideration. The Government
Agency may charge the user levies and collect the same either itself or entrust the
collection for consideration to any person who shall pay the same to the Government
Agency.
Service Contract (SC): A contractual arrangement whereby the Private Party undertakes
to provide services to the Government Agency for a specified period with respect to an
infrastructure facility. The Government Agency will pay the Private Party an amount
according to the agreed schedule.
Special Purpose Vehicle (SPV)

4.30 A special purpose vehicle (SPV) may be created for executing a Public Private
Partnership (PPP) project. The creation of a Special Purpose/Project Vehicle (SPV) is a
key feature of most PPPs. The SPV is a legal entity that undertakes a project. All
contractual agreements between the various parties are negotiated between themselves
and the SPV.

4.31 In 2007 Infrastructure Management Unit (IMU) of Planning Commission prepared

a diagnostic report on ‘Constraints to Private Sector Investment in Infrastructure’, as
part of Asian Development Bank’s Small Scale Technical Assistance (SSTA 4635 Pak)
for Support of Infrastructure Development. The report identified an array of political,
economic, financial, legal, jurisdictional and other generic constraints hampering PPP
culture in the economy. The report also suggested possible remedies to address these
constraints. The report can be viewed and downloaded from official website of Ministry
of PD&R.
4.32 In order to facilitate private investment, the Ministry of Finance established the
Infrastructure Project Development Facility (IPDF) in May 2006 to facilitate the
preparation and closure of PPP transactions between public sponsors and private
investors and to determine the funding gap for public funding for making transactions
viable while minimizing the cost for the public through competitive bidding. IPDF was
assigned task to provide expertise and hands-on support to implementing agencies (line
ministries, provincial governments, local bodies, and state owned enterprises) in
improving their PPP proposals, preparing them for tendering, and supervising the bidding
process without becoming a contract signatory to a transaction.

Special Policy Directives

4.33 Projects are also identified as a result of special policy directives of the
Government. Projects initiated under such directives should be taken up on priority, even
by postponing/ superseding other projects, if availability of funds is the constraint. It is
always to be borne in mind that the over-riding limiting factor to the desired level of
development in each sector, or to meet the need of the hour under the situation or to
follow freely the special government policy, is the resource position.

4.34 A PPP policy Task Force (TF) composed of senior officials from ministries and
provinces, and advisors from the private sector, has been established. The TF has a
secretariat housed in the IPDF to coordinate its activities. Main activities are as follows:

(i) facilitate the preparation and improvement of PPP proposals submitted by

public implementing agencies to ensure that the projects are viable;
(ii) ensure that only superior proposals with value for money will be supported;
(iii) oversee the preparation and implementation of PPP projects consistent with
prudent financial, environmental and social safeguards;
(iv) build on the job experience of implementing agencies and private partners; and
(v) provide the secretariat to the PPP Task Force, and coordinate with other
agencies and public and private stakeholders.
Pakistan Policy on Public Private Partnership

4.35 Approved by the Economic Coordination Committee (ECC) of the Cabinet on

January 26, 2010 ‘Pakistan Policy on Public Private Partnerships’ was put in place in
2010. In order to encourage the private sector to participate in the country’s infrastructure
development, the PPP policy aims to implementing a combination of policy reforms,
institutional support, incentives and financing modalities to bolster private sector
participation in financing, developing and managing future infrastructure development
projects. Full text and document of Pakistan Policy on Public Private Partnerships is
placed at (Annex--)

The Public Private Partnership Authority Act, 2017

4.36 The Public Private Partnership Authority Act, 2017 has been enacted by National
Assembly in March 2011. The act extends to whole of Pakistan and applies to all kinds of
projects undertaken by an implementing agency under public private partnership. As soon
as it deems appropriate after the commencement of this Act the Federal Government shall
establish Public Private Partnership Authority for carrying out the purposes and
objectives of this Act.

Notwithstanding anything contained in the Companies Ordinance. 1984 (XLVll of 1984)

and any other law for the time being in force, on the date of commencement of this Act,
the Company (IPDF) shall cease to exist and all assets, rights, powers, authorities and
privileges and all property etc. shall stand transferred to and vest in the Authority.

There shall be a Board of Directors of the Authority comprising the following members,
namely: -

i) Minister of Planning, Development and Reform Chairperson

ii) Secretary, Finance Division Vice Chairperson
iii)Secretary, Planning, Development and Reform Division Member
iv) Secretary Board of investment Member
v) Two members from private sector to be nominated by Members
the Federal Government
vi) Chief Executive Officer Member
 vii) Secretary Concerned Division Co-opted Member

The Chief Executive Officer shall also act as Secretary of the Board. The members from
the private sector shall be appointed by the Federal government for a period of three
years and shall be entitled to such terms and conditions as the Federal Government may
prescribe.

4.37 As per the PPP Authority Act 2017 a Fund has been established to be called the
Public Private Partnership Authority Fund which shall vest in the Authority and shall be
utilized by the Authority to meet the charges in connection with its functions under this
Act. The Fund of the Authority shall comprise of the following:

i) such sums as the Federal Government may, from time to lime, allocate to it in the
annual budget;
ii) grants from the federal (government);
iii) donations and grants from the international donor agencies;
iv) income from the investments:
v) fees; and
vi) Any sources approved by the federal Government.

Viability Gap Fund (VGF)

4.38 A Viability Gap Fund will be established which shall be managed, controlled and
administered by the Authority in prescribed manner. The VGF is defined in the act as
fund to be established by the Board to provide project support to an implementing agency
for those projects for which a feasibility study has found to be economically or socially
justified but are not financially viable because of lack of affordability. Viability Gap
Fund shall be established by an amount specified by the Board within the Public Private
Partnership Authority Fund. Besides above given salient features, the ACT describes all
administrative, financial and disciplinary details in its six chapters, containing clauses
and sub-clause, Full text of the Act is placed at (Annex----)

Public Private Partnership structure at Provincial level

4.39 According to Asian Development Bank (ADB) Country Partnership Strategy:
Pakistan, 2015–2019 ‘Recent constitutional reforms have devolved to provincial
governments the main responsibility for most forms of infrastructure development. But
this devolution still has to be matched with financial and technical capacity development
at each provincial Government. Sindh and Punjab are the two largest provinces of
Pakistan and account for roughly 77% of Pakistani population, and 85% of the country’
GDP. Bankable PPPs can be implemented in these provinces, which can not only have
demonstration effects on the overall PPP market in Pakistan, but also help start closing
the infrastructure gap in the country. The infrastructure and social service needs of Sindh
and Punjab outpace the provincial fiscal space that is currently available for new
infrastructure investments. Prospects are limited for the near future development of
provincial government debt issuance, or for the mainstreaming of cost-reflective user
charges, by provincial governments, in current and new public sector infrastructures. The
provincial governments were not behind establishing PPP structures; rather some of them
took lead in enacting PPP laws. Punjab

4.40 The Provincial Assembly of the Punjab passed Punjab Public Private Partnership
Bill on 21 May 2014 and The Punjab Public Private Partnership Act 2014 was notified on
29 May 2014. As per institutional arrangement under this act a PPP Steering Committee
has been established with Minister for Planning and Development as Chairperson and
Minister for Finance as Vice Chairperson respectively. Other Members include inter alia
Chairman, Planning and Development Board, two members from the Provincial
Assembly and some departments’ secretaries. Government of the Punjab has established
a Public Private Partnership Cell in Planning and Development Department. The PPP
cell is serving as a focal point for supporting all PPP initiatives in the province. The
mandate of the PPP Cell is to promote and facilitate PPP development in Punjab and
assist line departments and local governments in preparing and executing high-quality
PPP projects. To fulfill this mandate, the PPP Cell is performing the role of a PPP
catalyst and advocate, knowledge manager, policy and project advisor. PPP Cell is
 providing support to line departments and City District Governments in identifying
financially viable concepts and also building the capacity of their staff to transform these
concepts into projects. PROJECT PREPARATION
5.1 Development Policy of the Government of Pakistan is to efficiently utilize natural
and economic resources of the country for socio-economic welfare of the people. This
objective may be achieved only when development projects are planned and executed
with vigilant management. A project usually brings change resulting in benefits to a
target group. Projects involve a group of inter-related activities that are planned and then
executed in a certain sequence to create/provide a unique service or output within a
specific time frame. The GOP’s Project Management Life Cycle has five distinct phases.
(i) Identification, (ii)preparation; (iii) Appraisal (iv) Approval; (v)
Implementation/Execution (vi) Monitoring; (vii) Completion/Closure; and (viii) Ex-post
Evaluation.

5.2 Project identification and its formulation is the most important segment in a
project cycle in which the sectoral priorities must be followed. Since such priorities in a
sector have competing claims on the limited resources available, it is imperative that
various Ministries prepare their sectoral strategy right. Flowing from the national
planning document and priorities fixed by NEC and other forum, such sectoral strategy
must also take into account the country assistance and partnership strategies of the
donors. In advanced countries, there are special organizations which are employed
continuously in the field surveys and necessary investigations required for formulation of
feasible projects. In less developed/developing countries, unfortunately, there are no such
organizations. In Pakistan projects are normally identified by the line
Ministries/Divisions, public sector corporations, NGOs, pressure groups and public
representatives.

Document Format for Preparation

5.3 Development projects are prepared on the approved format i.e. PC-I
PROFORMA. Until 1975, only one PC-I form remained in use for the projects of
various sectors. Since then, 12 sectoral PC-I forms were in use. In 1995, the number of
PC-I forms have been increased to 14. A separate PC-I form for the small schemes,
costing up to Rs. 1.000 million, also exists. The Planning Commission has devised three
PROFORMA in 2005, one each for Infrastructure Sector, Production Sector and Social
Sector. The sectoral/sub-sectoral forms have been introduced with a view to have detailed
information on each aspect of the project. The PC-I PROFORMA along with detailed
instructions for filling them, are also available on Planning Commission’s Website,
www.pc.gov.pk.The PC-I should be supported with a feasibility study, survey and
investigation and market survey report. For undertaking any such feasibility, a proper
request on the PC-II Profroma is to be submitted for approval and allocation of funds.

5.4 It is mandatory that all infrastructure projects (or having infrastructure component)
costing Rs.50 million or above should be based on feasibility studies (PC-II) including
reference design and bill of quantities, etc. Separate provision is used to be provided in
the PSDP, under P&D Division for financing of the cost of feasibility studies of
development projects and appointment of Project Directors at initial stage of project
formulation. This facility can be availed of by different Ministries/Divisions for
undertaking feasibility studies. For mega projects, where huge amount for feasibility
studies is involved, a separate proposal on PC-II PROFORMA is to be submitted for
approval. In case of more complex concepts one of the donors could be required for TA
Grant. For other low cost projects, in-house feasibility is carried out. Based on the data
and positive findings of feasibility study, PC-I is prepared and submitted for approval by
the concerned forum.

5.5 At the project preparation stage, various indicators such as input, baseline data,
outputs and outcome, are determined over the life of project. In addition, viability of the
project in terms of financial and economic indicators is also determined, which focus on
financial and economic viability 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. After preparation of PC-I/PC-II, the
Principal Accounting Officer has to sign the PC-I/ PC-II certifying that “the project
proposal has been prepared on the basis of instructions provided by the Planning
Commission for the preparation of PC-I of the concerned sector projects”. Thereafter,
PC-I/PC-II is to be submitted to the relevant forum for approval/authorization.

Weaknesses in Project Preparation

5.6 If a project is prepared with due care and based on surveys, investigations and
feasibility studies, the time taken in its examination (and also execution) will be greatly
reduced. Following are common weakness

i) Inadequacy of data specially situation on ground

ii) Unrealistic cost estimates
iii) Over-estimation of benefits
iv) Lack of coordination with the related agencies
v) Incorrect assumption of availability of inputs
vi) Lack of proper implementation schedule
vii) Ambiguity about availability of funding/finance for the project
viii) Improper financial phasing which does not commensurate with physical
phasing
ix) Lack of proper Cost-Benefit, Risk, Sensitivity, Stakeholder, Environmental
and Sustainability Analyses
Linking Projects to Resources
5.7 While preparing projects, the sponsoring agencies do not keep in view the resource
availability in the Plan. At present, a large number of projects are being prepared and
approved irrespective of the Plan provisions or likely availability of resources. Due to
this, the available resources are being thinly spread over a larger number of projects,
including low priority projects. Because of this, priority projects, in particular aided
projects, are not implemented according to the prescribed time schedule. The inadequate
provision of rupee funds arises out of the budgetary constraints. The Planning Division
conveys tentative sectoral allocations based on resource availability to the Ministries/
Divisions well before the preparation of PSDP. However, the Ministries/Divisions
prepare their demands much in excess of the resource availability indicated to them. This
results in the distortion of priorities in resource allocation. The Ministries/Divisions etc.
should themselves determine their priorities, duly protecting aided projects within the
resource availability indicated to them. Moreover, in case a new priority of the
Government is received, the agency concerned should re-order the priorities of the
existing projects to accommodate the new priority within the available resources. What
happens is that both the old and new priorities are sought to be accommodated in the
limited available resources. At the time of approval of the projects, the availability of the
resources in the Plan and PSDP should be looked into very carefully. The sponsoring
agencies should structure their priorities according to the available resources and not
come up with an over-ambitious program, which may not be possible to implement.

5.8 Some sponsoring agencies suggest that the detailed design and drawings etc., of
the project should not be a pre-requisite for the approval of the PC-I. The approval should
be given on the basis of the rough cost estimates, which may be adjusted within the
permissible limit of a 15% increase. In this connection, the decision of the NEC dated 4-
7-1988 is as under: "Within six months of project approval, detailed design and costing
should be finalized and submitted to the competent authority. Implementation of such
project components, which require detailed designing, should be started only when these
have been finalized". The NEC further decided in the same meeting that all PC-Is costing
Rs. 50 million and above should be supported by a feasibility study. However, this does
not rule out a feasibility study in the case of PC-Is costing less, where it may be needed.
(Annex---)

Key Components of the PC-I

5.9 PC-I is the basic project document. Preparation of the project on the PC-I
proforma is the pivotal phase of the project cycle. The maxim 'well begun is half done' is
most appropriate for completing this phase. The Sponsoring Agency should be given or
give itself adequate time to prepare a project. The time taken in the examination of a
project would be in inverse proportion to the time taken in its preparation. Thanks to the
effort, the project would in fact lend itself to smoother and speedier implementation. A
hurriedly prepared project, on the contrary, would run a difficult course throughout the
project period and be afflicted with time and cost overrun and may ultimately prove to be
counter-productive. A lot of information is required for preparation of projects. With a
view to avoiding cost over-runs and repeated revisions of project, it is extremely
important that information against various columns of the PC-I is carefully provided. The
key components of the PC-I are discussed in the following paragraphs.
Objective and purpose
5.10 Project has specific predetermined objectives to be archived within specific time
and cost/budget. While preparing a project, particular heed has to be paid to align the
objectives of the project with the goals and targets set out in the Five Year Plan. Besides,
its relationship with the other projects of the same sector/sub-sector should be shown
over and above an indication of its own contribution, in quantifiable terms, to an
integrated program or the five-year plan. In this regard, the sponsors have to obtain
information from other related agencies by personal contact or correspondence. The
desired information can also be obtained by consulting the various published documents
like the Five Year Plan, Annual Plan of the Planning Commission, Economic Survey of
the Finance Division and statistical data periodically published by the Statistics Division.
The objectives of the project should be framed in the manner to qualify the “SMART”
criteria.

Location, Area and Population Coverage

5.11 A proper location analysis is required to be undertaken to select a suitable location

for the project. It should include the following:

i) Place and administrative district where the project is located.

ii) Map of the project area with GIS coordinates.
iii) Reasons for selection of location. In this connection it may be noted that
many projects have suffered tremendously in the past from cost over-runs
and delay in implementation due to hasty selection of site. The project also
 suffers due to delay in acquisition of land. Therefore, the availability of
land needs to be assured. In selecting the location, area and population to be
served by the project, the income and social characteristics of the
population will have to be kept in view. Similarly, the economic
characteristics of the area i.e. present facilities and availability of inputs and
regional development needs will also have to be taken into consideration.
Environmental Impact Assessment (EIA)

5.12 PC-I form should clearly indicate that the environmental aspects of the project
have been duly taken into account. The EIA report duly approved by the concerned
Environmental Protection Agency (EPA) should invariably be attached with the PC-I.
Simple statement that the negative impact will be mitigated under the project is approved
to be supported with certain details.

Project Description
5.13 The description of the project should provide information pertaining to its physical
features and technical aspects. It should also include its justification and rationale, in
addition to a brief account of the work done in the past, the feasibility study undertaken
and Government instructions and policies on the subject. Project description is indeed a
synopsis of the entire project and has to be given in a manner that the appraising and
sanctioning authority is enabled to appreciate its broad aspects without having to go into
the minute details. It is also to be stated whether the output would be used for import
substitution or export promotion or meeting the increased domestic demand or a
combination of these. The technology to be adopted and the source of supply of
machinery and equipment should also be mentioned.

Project Scope
5.14 The sponsoring agency should ensure that the project scope includes only the
requirement of the present project necessary to achieve the envisaged objective. While
giving the scope of the project, the sponsors should indicate in quantitative terms the
proposed facilities which would become available from its implementation. Information
is also required to be given in respect of the following:
 i. Demand for output, with its basis.
ii. Existing position regarding (a) capacity (b) actual supply of output
iii. The gap that the project is going to fill between the supply and demand.

5.15 All proposals for procurement of machinery and equipment by the Government
departments/agencies should be accompanied by an inventory of the existing strength of
machinery of all the public sector departments/agencies. Similarly, whenever a provision
of new vehicle is made in the development project or in non-development side, the
concerned Ministry/Department/Agency should furnish as a supporting document, full
inventory of the existing vehicles both on development and recurring side, along with
their date of purchase, to justify the purchase of new vehicles.

Change in Scope of Projects

5.16 The physical and financial scope of a project, as determined and defined in the
project document (PC-I), is appraised and scrutinized by the concerned agencies before
submitting it for approval of the CDWP/ECNEC. Once approved by the competent
authority the executing agency is supposed to implement the project in accordance with
the PC-I provisions. It has no authority to change and modify the main approved
parameters of the project on its own, beyond permissible limit of 15%. However, if at
some stage modifications/changes become imperative then project authorities should
revise the project and submit it for the approval of competent authority, immediately
(Annex-).

Cost Estimates
5.17 The cost estimates of a project have to be prepared with a lot of care so that these
are not revised again and again and implementation is not delayed due to non-availability
of provision of funds and revised sanction of the competent authority. Besides, the cost
debit-able to the development budget has to be distinguished from the cost debit-able to
the revenue budget. The concept and definition of development expenditure is explained
in the Planning Commission's paper F.M. I (Annex---). The cost details have to be given
according to the requirements of the PC-I of each sector. However, the following
guidelines will generally apply to all:

(a) The local and foreign exchange costs have to be shown separately.
(b) The cost of imported items available in the local market should be reflected in the
local component and not in the foreign exchange component.
(c) A break-down of the total cost has to be given item-wise, e.g.;
i) Land and its development
ii) Civil Works
iii) Machinery and Equipment
iv) Supplies
v) Consultancy, if any
vi) Project Staff
vii) Interest during construction, etc.
viii)Price and Physical Contingencies
(d) Unit cost has to be given separately in the appropriate column of the PC-I.

(e) In case of revised project, the reasons for increase in respect of each item as originally
estimated have to be furnished. Similarly increase due to revision in the scope of the
project is to be given separately in accordance with the additional sheet annexed with
each sectoral PC-I.

(f) In case a project has been revised for the first time either due to increase in the total
cost by more than 15% or due to revision in its scope, it would be treated as a new
scheme for obtaining sanction of the competent authority. Any further increase
thereafter is not allowed. Therefore, it is essential that the revised cost estimates are
prepared with due care (Annex---). A copy of the Planning and Development
Division's letter dated 12-12-1989 is also enclosed for guidance (Annex---).

Revised Cost Estimates:

5.18 The ECNEC in its meeting held on 29th November, 1978 decided that all the
authorities concerned should keep an effective check on the increase in the approved cost
(Annex---). The main effective role in this regard can be that of Audit. The Ministry of
Finance should look into this problem more thoroughly and request Audit not to make
any payment if the cost of the project is found to be exceeding 15% over the approved
cost.

Financial Plan

5.19 The sponsoring agency has to indicate the financial plan of the project in the
appropriate column of the PC-I. The position in this regard has to be indicated in specific
terms so that there remains no ambiguity or confusion in getting the necessary funds from
the sources indicated. In case, a foreign agency is committed to finance the project either
partly or fully, the name of the agency with the amount of foreign exchange and local
currency committed, is to be mentioned in the PC-I. Similarly, the source and amount of
the rupee component, which may be as under, should be indicated.

a) Government Sources
i) Grant
ii) Loan
iii) Equity
(b) Sponsoring Agency's Own Fund
(c) Private Investment
(d) Local Body Services, if any
(e) Non-Government Borrowing
(f) Other Sources (e.g., Recoveries)
Usually foreign aid negotiations should be undertaken after a project has been approved
by the competent authority or at least cleared by the Concept Clearance Committee
headed by the Deputy Chairman, Planning Commission.

Financial Phasing

5.20 The financial phasing of a project is to be given for each financial year related to
the physical work proposed to be undertaken, keeping in view the implementation of
similar projects in the past. It should be as realistic as possible. Funds utilization capacity
of executing agency should be kept in view while determining financial phasing of
project.

Physical Scheduling of Activities

5.21 The scheduling of activities and availability of physical facilities are interlinked
with the completion period. The availability of physical facilities e.g., (i) access road, (ii)
power supply, (iii) water, gas, telephone and other utilities, (iv) education facilities, (v)
housing etc., have to be ensured. The sponsoring agency has also to indicate separately
what facilities would be available from the project itself and to what extent these would
be available from the public utilities. The scope of work to be carried out should be gone
into very thoroughly to facilitate physical and financial phasing as well as supervision.

Period of Implementation

5.22 Time calculated for the completion of the project should be on a realistic basis.
The following factors will have to be taken into consideration to firm up the
implementation period:

(a) Total allocation made in the Five Year Plan.

(b) Expected allocations in the PSDP, keeping in view the past experience.
(c) Time to be taken in preparing the detailed design(s), invitation of tenders
and award of contract(s).
(d) Availability of land; time taken in its acquisition.
(e) Time to be taken in the land development, keeping in view its topography
and construction of access road.
(f) Availability of professional and technical manpower.
(g) Availability of materials, supplies and equipment.
(h) The implementation schedule should be based on Bar Charts/PERT/CPM
and should essentially form part of every project document.
5.23 Project Evaluation and Review Techniques (PERT), Critical Path Method (CPM)
or Bar Charts be prepared to help implementation of the project according to the plan. A
model copy of each of these techniques to be adopted by the sponsoring agencies
concerned is enclosed (Annex-). The National Economic Council in its meeting held on
July 4, 1988 had decided that the implementation schedule should be based on the Bar
Chart/PERT/CPM. This decision of the NEC (Annex---) needs to be strictly followed by
the sponsoring agencies while preparing the project on the PC-I. This is essential for the
proper physical and financial phasing of the project.

Appointment of Consultants for Project Preparation, Detailed Designing and

Tender Documents
5.24 The fundamental policy of the Government in the matter of preparation of a
development project is to ensure that it is prepared with the utmost care and skill in
accordance with the requisite economic, financial and technical standards, and keeping in
view the objectives and targets laid down in the Five Year Plan. In case local expertise is
not available, foreign experts/consultants can be employed to prepare projects which are
technically and economically viable. Efforts are going on to develop local consultancy
but, in case of sophisticated projects involving new technology, foreign consultants have
to be appointed. Most of our large projects are foreign-aided and engaging foreign
consultants is made part of the aid. However, Government has recently decided that 30
percent of the expenditure to be incurred on foreign consultancy should be diverted to the
development of local consultancy. This requirement was first made mandatory but later it
was decided that it may not be applied rigidly and would be subject to the technical needs
and availability of local consultants with requisite qualifications and experience. In order
to give preference to local consultants, relevant extract of Prime Minister's Order dated
7th November, 1993 is as: "The Pakistani consultants and engineers be given full
opportunity and they should be the first to be hired for projects for consultancies in
Pakistan before hiring any foreigners. The decision of the Economic Coordination
Committee of Cabinet (ECC) for a minimum of 30% award of consultancy contract to
local consultants may be strictly enforced".

5.26 In the TOR of consultants, whether local or foreign, when appointed for the
preparation of a project, it is to be made incumbent, that in addition to the scope,
technical viability of the project etc., they have also to provide the implementation
schedule supported by a Bar Chart, CPM, PERT, etc.

Project Benefits
5.27 The economic aspects of a proposed project /sector / program contribute
significantly to the development of the economy through backward/forward linkages. The
economic benefits of the projects could be: enhanced production, employment, and
increase in the value of output due to quality improvement or otherwise. The benefits
could be affected because of change in the location of project, time of sale or change in
the grade. Moreover, the benefits could accrue owing to reduction in cost or gains from a
mechanization of the process, from reducing the distribution cost and or by avoiding the
losses. In social sector projects, the benefits could accrue by increasing the earning
capacity of the institutions, say, by increasing the tuition fee in an educational institution.
In certain projects like those of transport, benefits could accrue because of a saving in
time, savings in operation cost, accident reduction and on account of new development
activity. The projects have also some intangible benefits like better income distribution,
national integration, national defense or just a better life for any segment of population
like the rural population, especially of the far-flung and backward areas.

Inter-Agency Coordination / Stakeholder Consultation

5.28 With a view to avoid duplication of efforts and in order to ensure efficient
implementation of the proposed project, it is highly desirable that all the relevant data
have been obtained and the agencies concerned consulted. For example, in respect of a
health scheme, information about public and private sector institutions in the area, their
staff and equipment and the number of persons served by them have to be obtained and
reflected in the project. With the same end in view, data about the population of the area
and the economic characteristics of the persons who are being provided service, as well
as data about morbidity and incidence of epidemics during the last five years or so, have
to be obtained.

5.29 Inter-agency coordination is also necessary for the availability of utilities, such as
water and power supply, education facilities and housing. For example, before an
industrial scheme sponsored by the Production Division is embarked upon, it is
absolutely necessary that the clearance of the concerned agency is obtained for the
availability of water supply and other utilities. As decided by the NEC in its meeting held
on 4-7-1988, the Project document should clearly indicate that coordination with the
other agencies to facilitate project implementation had been effected.

Management Structure

5.30 The project management structure needs to be elaborated in detail in the relevant
column of the PC-I. In case a separate PMU is required to be established, the staff
requirement with full justification, mode of appointment, salary package, detail TORs
giving roles and responsibilities of each position, and requirement of accommodation,
rent, office equipment and vehicle may be provided with cost estimates and full
justification.