Working Draft For Comments

Working Draft
MANUAL
FOR
DEVELOPMENT
PROJECTS
(Revised) 2017
IDENTIFICATION, PREPARATION, APPRAISAL, APPROVAL,
IMPLEMENTATION, MONITORING AND EVALUATION
_____________________________________
MINISTRY OF PLANNING, DEVELOPMENT AND REFORM

GOVERNMENT OF PAKISTAN
ISLAMABAD
1
2
CONTENTS
Proposed Contents Page No.
Foreword
Preamble
Preface
Abbreviations
Preparation Committee
Chapter -1 Planning Architecture at Federal Level 1-13
Introduction
Development Board
Planning Board
Planning Commission
Ministry of Planning, Development Reform (MoPDR)
National Economic Council (NEC)
The Executive Committee of the NEC (ECNEC)
Central Development Working Party (CDWP)
Department Development Working Party (DDWP)
Development Working Party (DWP- Autonomous Organizations)
Chapter -2 Planning Architecture at Provincial Level 15-30

Introduction
Planning & Development Boards / Departments
Punjab
Planning & Development Board
Provincial Development Working Party (PDWP)
Provincial Development Sub-Committees (DDSCs)
Planning at Divisional / District / Agency Level
Sindh
Departmental Development Working Party (DDWP)
Planning at Divisional / District / Agency Level
District Development Committees (DDC)
Balochistan
Planning & Development Department
Departmental Sub-committees
Divisional Development Working Party
Khyber Pakhtunkhwa
FATA
Azad Jammu & Kashmir
Gilgit-Baltistan
Chapter -3 Project Management Frameworks 31-42

Definition of Project
Project Management Framework
Project Management
Formation of International Associations
Development of International Standards / Guide
Project Management Body of Knowledge (PMBOK)
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Association for Project Management (APM) Body of Knowledge
Project in Controlled Environments 2 (PRINCE 2)
Project and Program Management for Enterprise Innovation (P2M)
A Case for Globally Accepted Standard of Project Management
Other Approaches to Project Management
Critical Change Project Management (CCPM)
Complex Project Management
Structured System Analysis and Design Method (SSADM)
Project Success Vs Project Management Success
Project Management Maturity (PMM)
Chapter – 4 Project Identification 43-60

Project Identification
Steps in Project Identification
Strategic Planning
Project Strategic Linkages
Vision
Plan Priorities / Plan Documents
Five Year Plan
Annual Plan
National Development Program Outlay
Mode of Financing
Public Sector Development Programme (PSDP)
Release of PSDP Funds
PSDP Review Meetings
Public-Private Partnership
Special Purpose Vehicle (SPV)
Special Policy Directives
Pakistan Policy on Public Private Partnership
Viability Gap Fund (VGF)
Public Private Partnership structure at Provincial level
Punjab
Sindh
Khyber Pakhtunkhwa
Chapter – 5 Project Preparation 61-72

Document Format for Preparation
Weaknesses in Project Preparation
Linking Projects to Resources
Key Components of the PC-I
Objective and Purpose
Location, Area and Population Coverage
Environmental Impact Assessment
Project Description
Project Scope
Change in Scope of Project
Cost Estimates
Revised Cost Estimates
Financial Plan
Financial Phasing
Physical Schedule of Activities
Period of Implementation
Appointment of Consultants for Project preparation,
Detailed Designing and Tender Documents
Project Benefits
Inter-Agency Coordination
Management Structure
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Chapter –6 Project Appraisal 73-87
Role of Appraisal in Project Planning Process
Concept of Project Investment
Discount Rate (DR)
Aspects and Types of Project Appraisal
Aspects of Project Appraisal
Types of Project Appraisal
Appraisal Methods, Tools and Techniques
Appraisal Methods
Appraisal Tools and Techniques
Risk and Sensitivity Analysis
Sensitivity Analysis
Switching Values
Shortcoming of Sensitivity Analysis
Chapter - 7 Project Approval 89-98

Approval Stages
Approving Forums and Sanctioning Powers
Executive Committee of NEC (ECNEC)
Economic Coordination Committee (ECC) of the Cabinet
Developmental Development Working Party (DDWP)
Approval Types and Procedures
Processing of Schemes
Procedure for Meetings of Various Bodies
Time Limits for Approval of Projects
Anticipatory Approval
Administrative Approval
Issuance of Administrative Approval
Concept Clearance of Projects for Foreign Aid Negotiations
Provincial Projects
Federal Ministries / Attached Departments Projects
Chapter – 8 Project Execution and Implementation 99-104

Role of Sponsoring, Executing and Implementing Agencies
Appointment and Role of the Project Director
Project Management Unit
Contract Award and Contract Management
Chapter – 9 Project Monitoring 105-109

Role in the Project Cycle
Conceptual Definition
Types and Methods of Monitoring
Internal Monitoring
External Monitoring
Methods of Monitoring
Project Monitoring & Evaluation System (PMES)
Chapter – 10 Project Evaluation 111-112

Purpose of Evaluation
Types of Evaluation
Methods of Evaluation
Chapter – 11 Project Closure and Transfer of Assets 113-115

What is Project Closure
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When a Projects is Considered Completed / Closed
What does Project Closure Involve
Operational Closure
Financial Closure
Who is Responsible for Project Closure
Basic Procedure and Checklist for Project Closure
Appendix
Annexures
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CHAPTER –1
PLANNING ARCHITECTURE AT FEDERAL LEVEL

Introduction:
1.1 The major task confronting developing countries includes poverty alleviation, primitive
agriculture, population pressure, capitalscarcity, social exclusion, gender inequality, low rate of
savings, inequitable income distribution, low level of literacy and high unemployment rate with a
consequent result of low level of economic development. Market forces alone cannot accomplish
this task. Resort has to bemade foradoption of planning techniques generally understood to be a
dynamic process, a method of analysis and thinking, which may or may not involve preparation of
comprehensive legally binding blueprint for socio-economic development. Plan is a package of
social and economic policies articulated with quantifiable targets and objectives to be achieved
during a laid-down period. Planning process takes care of ground realties and collective needs of the
citizens. It determines the future direction of an economy and provides powerful instrument for
reducing uncertainty. It facilitates the equitable distribution of economic empowerment. Planned
economy provides for proper coordination and thereby ensures optimal utilization of scarce
resources. It helps in coping with major economic challenges and enables the economy to look ahead
for laying foundation of long-term growth.
The present Planning Commission is an apex think tank for the government and has been evolved
through different phases. The chronology of the evolution of the planning machinery at federal level
is as under:
Development Board:
1.2 Despite grave economic and financial problems which beset the Government of Pakistan
soon after independence, a Development Board was established in Economic Affairs Division
(EAD)in early 1948 to deal with question of rapid economic development of the country and a
number of projects were undertaken on the recommendations of the Board. In 1950 a Six-Year
Development Plan was formulated and embodied in the Colombo Plan for Cooperative Economic
Development in South and South East Asia. This was essentially an outline plan and delineated only
a broad pattern of development.
Planning Board:
1.3 To prepare a more comprehensive national development plan, the Government of Pakistan
established a Planning Board on 18th July, 1953 vide Resolution No.2(24)-PC/53 (Annex--), with
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Mr. Zahid Hussain as its first Chairman and two other members. The Board was assisted by advisors
and consultants. The purpose and terms of reference of the Planning Board were as under:
(a). Purpose:
The economic and social objectives of government's policy were to develop resources of the
country as rapidly as possible so as to promote welfare of thepeople, provide adequate living
standards, social services, secure social justice and equality of opportunity through equitable
distribution of income.
(b). Terms of Reference:
i. To review the development that has taken place since independence
ii. To assess the resources - material and human, which can be made available for
development during the next 5 years beginning from April, 1954
iii. To prepare a national plan of development based on the fullest possible utilization of
these resources for implementation in a period of 5 years from 1st April, 1954 as a step
towards the attainment of the economic and social objectives of Government's policy
iv. To make proposals regarding the administrative machinery best calculated to assure the
successful implementation of the plan
v. To make any other recommendations which in the opinion of the Board will contribute
towards the successful implementation of the plan
1.4 To boost and enhance economic and social development of the country, in particular to assist
the progress towards the objectives stated in Section 28 and 29 of the Constitution of 1956, a
permanent Planning Board Vide Resolution No.29(3)-PP/53 dated 20th April, 1957(Annex--) was
established, with the following functions:
i. To prepare future five year plans of economic and social development
ii. To make additions and alterations in the existing five year plan consistent with the
changing economic conditions of the country
iii. To tender such technical advice, and offer such comments on financial matters bearing
on the development plans as may be requested by the Ministries of Government
iv. To stimulate, and where necessary, to initiate the preparation of schemes required to
achieve national objectives in the economic and social fields
v. To examine development schemes, programmes and proposals with a view to their
inclusion in the plans of development
vi. To maintain a continuous and constant review of the progress of development, the
benefits realized, and the difficulties experienced
vii. To maintain a continuous review of the economic conditions of the country so far as
these have a bearing on the development plans
viii. To submit such periodic reports as the Government may desire from time to time
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ix. To encourage the improvement and expansion of research (in particular economic
research), statistics, surveys, and investigations and evaluation needed to support
effective planning and development in the country
x. Generally to advise the Government on economic policies and problems in various fields
so far as these have a bearing on the development plans
1.5 The Board accordingly prepared and submitted a five year plan for the period 1955-1960 (1st
Five Year Plan) which was approved in principle by the National Economic Council (NEC). The
Board comprised a Chairman and at least two members one of whom was designated as Deputy
Chairman. The Prime Minister was declared Chairman of the Board. Mr. Said Hassan was
appointment as 1st Deputy Chairman of the Planning Board on April 17, 1957.
PLANNING COMMISSION
1.6 Subsequently, the President of Pakistan re-designated the National Planning Board as the
Planning Commission vide Notification No. Cord(I)- 8/84/58-I dated October 22,
1958.Followingobjectives and functions of the Planning Commission were notifiedvide Cabinet
Division's Resolution No. Cord(I)-8/29/59-III dated June 3, 1959.
Objectives:
1.7 The economic and social objectives of the Government are to promote the welfare of the
people and raise the standard of living of common man by developing the resources of the country
as rapidly as possible by making provision for the basic necessities of life, educational and health
facilities, and work under just and human conditions; by ensuring equitable adjustment of rights
relating to the ownership and use of land and between employers and employees; and by preventing
the concentration of wealth and means of production and distribution in a few hands to the detriment
of the people as a whole; and by securing social justice and equal opportunity to all.
Functions:
1.8 Following are the functions of the Planning Commission:-
i) In consultation with the Central and Provincial Governments and other appropriate
agencies:-
(a) To prepare a national plan at periodic intervals for the economic and social
development of the country;
(b) To make assessments from time to time of the human and material resources of the
country; and
(c) To prepare the Annual Development Programme (ADP) within the framework of the
national plan and on determination of priorities, to propose the allocation of resources
ii) To stimulate and where necessary initiate the preparation of development
programmes and projects; to examine and advise on all such programmes and projects
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with a view to deciding whether these conform to national objectives and, in general,
whether these contemplate the most efficient use of national resources
iii) To recommend such adjustments in the national plans as may be necessary in view
of the changing economic situation
iv) To co-ordinate the examination of development programmes and projects in
consultation with the appropriate authorities and to secure the approval of the Central
Government to acceptable programmes and projects
v) To advise on the nature of the machinery for securing the efficient execution of the
national plan
vi) To watch and evaluate the progress of implementation of the development
programme
vii) To advise on important economic policies and problems of various fields
viii) To undertake and promote economic research; and to undertake surveys and
investigations needed to support effective planning and development
ix) To examine such specific problems as may be referred to the Government
1.9 Later on the Government noticed that the economic administration suffered due to
insufficient status of the Planning Commission as its Chairman did not possess the status of head of
the planning body like in several other countries. The lack of effective coordination was also
observed between planning and implementation agencies/ economic ministries on economic policy
and research. The Government therefore decided to overcome it by enhancing the Planning
Commission status and by re-defining its functions. The President was made the Chairman of the
Commission vide Cabinet Division Resolution No.Cord(M)-109(9)/61 dated August 5, 1961
(Annex--) and the Planning Commission was re-constituted with the following composition:
1. The President of Pakistan as Chairman
2. A Deputy Chairman (with ex-officio status of a Minister with Cabinet rank)
3. Secretary incharge of the Planning in the Planning Division (Member)
4. The Secretary incharge of progressing in the Planning Division (Member)
5. A representative from the East Pakistan (Member)
6. A representative from the West Pakistan (Member)
1.10 For effective coordination, planning and implementation, the Project Division in President’s
Secretariat was abolished and its functions were amalgamated with those of the Planning
Commission. The Commission as a whole was granted the status of the Division in the President’s
Secretariat. The non-technical sections of the Division viz Coordination, Development
Authorization, Administration etc., whose work was similar in nature to that performed in other
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Ministries,were reorganized on the pattern of the Section Officers schemes in the Central Secretariat.
The following functions were assigned.
Planning
i) To prepare national plans at periodic intervals for the economic and social development
of the country
ii) To make assessments from time to time of the human and material resources of the
country
iii) To recommend such adjustments in the national plan as may be necessary in view of the
changing economic situation
iv) To stimulate and where necessary initiate the preparation of development programmes
and projects; to examine and advise on all such programmes and projects with a view to
deciding whether they conform to national objectives and, in general, whether they
provide for the most efficient use of available resources
v) To co-ordinate the examination of development programmes and projects in consultation
with the appropriate authorities and to secure the approval of the Central Government to
acceptable programmes and projects
vi) To prepare the annual development programme within the framework of the national plan
and, on a determination of priorities, to propose the allocation of resources
vii) To analyze and make recommendations on important economic policies and programmes
viii) To advise the Central and Provincial Governments, whenever so required, on economic
policies and problems
ix) To prepare data for the use of aid-giving countries, economic appraisement and
evaluation
x) To undertake and promote economic research; and to initiate surveys and investigation
needed to support effective planning and development
Progressing
xi) To progress the implementation of approved development projects, particularly aided
projects
xii) To devise, obtain, collate and distribute to all concerned reports on the progress of the
projects, and to prepare periodic digests of these reports for the information of the
government
xiii) To measure performance against promise, specially by comparing actual vs estimated
costs of projects
xiv) To identify the causes of delays and difficulties, if any, in the implementation of projects
and promote specific solutions
xv) To advise on the nature of the machinery for securing the efficient execution of the
national plan
1.11 The Minister for Finance andEconomicAffairs was designated as the Ex-officio
Chairmanof the Planning Commission vide resolution No. 104/3/82-Min-I dated January 7,
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1982.Deputy Chairman was given the Ex-officio status of Federal Minister or Minister of State as
may be specified at the time of appointment videResolution No.104/3/82-Min-I dated March, 24,
1983. (Annex---). The Planning Commission was reconstituted with the following composition:
i. The Minister for Finance and Economic Affairs Chairman ex-officio
ii. Deputy Chairman Member/ Deputy Chairman
iii. Secretary, Planning and Development Division Member-ex-officio
iv. Secretary, Economic Affairs Division Member-ex-officio
v. Secretary, Finance Division Member-ex-officio
vi. Mr. Manzoor Ahmed Sheikh Member
vii. Additional Secretary, P&D Division Member-ex-officio
viii. Chief Economist, P&D Division Member
1.12 The Planning Commission was revamped vide Resolution No.4-6/2006-Min-1, dated April
20, 2006 (Annex---), to ensure its effective role as apex planning and coordination body of the
country. The organizational structure was strengthened by inducting at least nine Members i.e.
Secretary Planning and Development Division as Secretary/ Member coordination;Chief Economist;
Director, Pakistan Institute of Development Economics (PIDE), Executive Director (Implementation
& Monitoring); and Members for Social Sector; Infrastructure; Energy; Food & Agriculture; and
Science & Technology as full time members. The Prime Minister of Pakistan was declared the
Chairman of the Planning Commission and Deputy Chairman as functional head of the Planning
Commission.
1.13 The Planning Commission was again revamped and restructured vide Resolution No.4-
6/2006-Min-I dated October 30, 2013, to enable it to effectively plan for economic and social
development of the country and to act as the apex Think Tank for the Government in the context of
adjusting to the new realities and challenges i.e. to achieve high and sustainable growth, participatory
and collaborative planning through increased role of private sector/ civil society/ media. The Prime
Minister is the Chairman of the Planning Commission and the Deputy Chairman Planning
Commission is the operational head. Three additional members i.e. Member (Governance), Member
(Media) and Member (Private Sector)) were inducted.
An Advisory Committee (Annex---) comprising members from private sector, academia, civil
society, public representatives, public sector and other segments of society was constituted to advise
Planning Commission in policy making. The organizational chart of the planning Commission is as
under:
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The names of the Deputy Chairmen of the Planning Commission of Pakistan to date in chronological
order are as under:
1. Mr. Zahid Hussain, 1953 to 1958

2. Mr. G. Ahmed, 1958 to 1959
3. Mr. Mumtaz Hassan Khan, 1959 to 1961
4. Mr. Said Hasan, 1962 to 1966
5. Mr. M. M. Ahmad, 1967 to 1969
6. Mr. M. H. Soofi, 1969 to 1970
7. Mr. Mahboob Ullah Rashid, 1970 to 1971
8. Mr. Qamar ul Islam, 1971 to 1973
9. Prof. Khurshid Ahmad, 30-08-1978 to 21-04-1979
10. Dr. Mahbub ul Haq, 07-03-1982 to 13-04-1983
11. Dr. V. A. Jafary, 22-09-1985 to 10-07-1986
12. Mr. A G N Kazi, 10-07-1986 to 23-08-1993
13. Mr. Saeed Ahmed Qureshi, 24-08-1993 to 30-06-1994
14. Mr. Qazi M. Alimullah, 01-07-1994 to 05-11-1996
15. Dr. Hafiz Pasha, 12-11-1996 to 12-08-1998
16. Prof. Ahsan Iqbal, 13-08-1998 to 12-10-1999
17. Dr. Shahid Amjad, 27-07-2000 to 08-08-2003
18. Engr. Dr. M. Akram Sheikh, 15-03-2004 to 07-05-2008
19. Mr. M. Salman Faruqui, 09-05-2008 to 28-11-2008
20. Mr. Sardar Assef Ahmed Ali, 29-11-2008 to 13-01-2010
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21. Dr. Ishfaq Ahmad, 15-01-2010 to 31-04-2010
22. Dr. Nadeem Ul Haque 01-05-2010 to 07-06-2013
23. Prof. Ahsan Iqbal, 08-06-2013 to 28-7-2017
24. Mr. Sartaj Aziz, 15-8-2017 to date
Ministry of Planning, Development and Reform (M/oPDR)

1.14 The Planning Commission is responsible to perform the functions as indicated in
Schedule-II of the Rules of Business 1973 under the heading of Planning, Development and
Reform Division. It provides all kind of support to the Planning Commission for disposal of its
assigned tasks. The functional wings of M/oPDR are as under:
1.15 As per new mandate of the Planning Commission, it is responsible to perform the functions
as indicated in Schedule II of the Rules of Business 1973 under the heading of Planning,
Development and Reform Division which inter-alia include:-:
Original Functions:
• Preparation of National Plan, its review, evaluation and implementation;
• Formulation of Annual Plan and PSDP;
• Monitoring and evaluation of major development projects and programmes;
• Stimulating of preparation of sound projects in regions and sectors lacking adequate
portfolio;
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• Continuously evaluating of economic situation and coordination economic policies; and
• Organize research and analytical studies for economic decision making
Additional Functions as per new mandate: (October 2013)
• Assisting in defining the national vision, and undertaking national strategic planning;
• Assessing the material, capital and human resources of the country and formulating proposals
for augmenting such resources;
• Assisting the Government in providing conducive macroeconomic and regulatory
framework; improved resource mobilization, institutional framework and efficient public
investment;
• Promoting and developing the role of private sector as engine of growth by co-opting it as a
partner in development process through institutionalized effective consultative process;
• Promoting and coordinating reform and innovation in government in partnership with
relevant Ministries/ Divisions and Organizations;
• Promoting and developing social capital for development with stakeholders (MDGs, Poverty
alleviation, social harmony), economic and infrastructure development;
• Promoting and developing economic and infrastructure development initiatives towards
developing regional economic integration;
• Monitoring Pakistan’s economic competitiveness and developing strategies for its
enhancement with relevant Ministries/ Divisions and Organizations;
• Promoting development discourse in the country towards participatory and collaborative
planning and development;
• Study trends and evaluate impact of globalization and develop appropriate national responses
in coordination with relevant Ministries/ Divisions and Organizations;
• Study and evaluate impact of new technologies on development and develop appropriate
national response in coordination with relevant Ministries/ Divisions and Organizations;
• Facilitating capacity building of agencies involved in development; and
• Any other function assigned by the Prime Minister
The Planning Architecture
1.16 As indicated above, Planning Commission/ Ministry of Planning, Development and Reform
isperforming the function as Think Tank on Economic Planning and policy formulation guided by
following approving fora before execution/implementation.
The National Economic Council (NEC)

1.17 Under Article 156 of the 1973 Constitution, the President of Pakistan shall constitute a
National Economic Council which shall consist of:
a) the Prime Minister, who shall be the Chairman of the Council;
b) the Chief Ministers and one member from each Province to be nominated by the
Chief Minister; and
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c) four other members as the Prime Minister may nominate from time to time
1. 18 The National Economic Council shall review the overall 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
Principles of Policy set out in Chapter 2 of Part-II of the constitution. 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. 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. The Council shall be responsible to the Majlis-e-Shoora
(Parliament) and shall submit its Annual Report to each House of Majlis-e-Shoora (Parliament).
The Executive Committee of the NEC (ECNEC)
1. 19 TheNEC has delegated its powers to ECNEC for smooth conduct of government
business.The main functions of the ECNEC are:
i) To sanction public sector development schemes exceeding financial competency of
CDWP
ii) To allow moderate changes in the plan and sectoral re‐adjustments within the over‐
all plan allocation
iii) To supervise the implementation of the economic policies laid down by the Cabinet
and the National Economic Council
iv) Reports asked for by the Committee in pursuance of its earlier decisions
v) The ECNEC only considers those development schemes which are recommended by
CDWP.No development scheme is placed directly before ECNEC. The meetings of
ECNEC can be held from time to time on need basis.
vi) Any other matter referred to the Committee by the Prime Minister, the National
Economic Council, the CCI or the Cabinet or raised by a member in the committee
with the permission of the Chairman
Composition of ECNEC
1.20 The membership of ECNEC changes from time to time. The current membership of
ECNEC (since March, 2017) is given below:-
i. The Prime Minister of Pakistan (Chairman)
ii. Minister for Finance, Revenue and Economic Affairs (Member)
iii. Minister for Interior (Member)
iv. Minister for Industries and Production (Member)
v. Minister for Commerce & Textile (Member)
vi. Minister for Planning and Development, Balochistan (Member)
vii. Minister for Finance, Government of Khyber Pakhtunkhwa (Member)
viii. Minister for Finance, Government of the Punjab (Member)
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ix. Minister for Planning and Development, Government of Sindh (Member)
By Special Invitation
i. Minister for National Food Security and Research
ii. Minister for Law & Justice
iii. Minister of State for Information Technology and Telecommunications
iv. Minister of State for Petroleum & Natural Resources
v. Deputy Chairman, Planning Commission
vi. Secretary, Economic Affairs Division
vii. Secretary, Finance Division
viii. Secretary, Planning Development and Reform Division
ix. Secretary, Statistics Division
x. Chairman Planning and Development Board, Punjab
xi. Chairman Planning and Development Board, Sindh
xii. Additional Chief Secretary, Planning and Development Department, Government
of Khyber Pakhtunkhwa
xiii. Additional Chief Secretary, Planning and Development Department, Government of
Balochistan
1.21 Other Officers of the Federal & Provincial Governments as well as of the Government of
AJ&K, Gilgit‐Baltistan & FATA shall be invited to the meetings of ECNEC on need basis. In case
of Prime Minister’s absence, due to someother commitment, Minister for Finance, Revenue and
Economics Affairs shall Chair the meeting. One‐half of the total membership of the ECENC will be
the quorum for its meetings as provided in Article 156(4) of the Constitution for the meetings of the
NEC. The secretariat assistance to the ECNEC is provided by the Cabinet Division.

1. 22 CDWP is responsible for the scrutiny/approval of development projects. The NEC authorized
CDWP to approve development schemes upto Rs.Rs.3000 million. Beyond this cost CDWP
recommends to ECNEC for consideration/approval. These sanctioning powers were notified vide
M/o PDR No.20(1)PIA-I/PC/2013 dated June 3, 2013 (Annex---). The composition of the CDWP
is as under:
Chairman
Deputy Chairman Planning Commission (DCPC) / Secretary, PDR Division (ifDCPC is not in place)
Members
Chairman P&D Boards/ACSs (Dev.) of Provinces, ACS (FATA & AJK) & Secretary (P&D),
Northern Areas, Finance Division, EAD, Chairman Pakistan Council of Science & Technology,
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Climate Change Divisionand Relevant Federal Administrative Ministry/ sponsor of the development
projects.
Ministry of Planning, Development and Reform / Planning Commission
Secretary, Chief Economist, Members Planning Commission (Infrastructure, Governance, Social
Sector, Private Sector, Media, Implementation and Monitoring, Energy, Food Security, Science
&Technology), Additional Secretary, Joint Chief Economists (Operations. & Macro), Advisor (DB),
Chiefs (PIP, PIA, PP&H, EA) and concerned Technical Section (s).
By special invitationHousing and Works Division, Pakistan Engineering Council, Board of
Investment, NESPAK, Environment Protection Agency, Representative of Pakistan Council of
Architecture and Town Planning.
Department Development Working Party (DDWP)
1.23 The sanctioning power of DDWP to approve PC-I/PC-II of an individual project is up to
Rs.60 million and are only for local funded projects involving foreign exchange/funding less than
25% of the total cost of the projectnotified vide Notification No.20(1)PIA/PC/2009 dated June 16,
2009 (Annex---). In case where foreign funding/ Foreign Exchange Component (FEC )/ assistance
is more than 25% of the total cost of project, the approval forum will be CDWP irrespective of the
cost of the project. The representative of the Finance Division and Planning,Development & Reform
Division would invariably be invited in every DDWP meeting. In case, anyone of these Divisions
disagrees with the project, the case will be referred to CDWP for consideration.
Composition:
Chairman: Secretary of the Federal Ministry concerned/PAO- (further delegation of powers is not
permitted).
Members: Representative one each from PDR Division and Finance Division, Joint Secretary,
Ministry/ Division concerned and Head of Department/ organization concerned
Development Working Party (DWP- Autonomous Organizations)
1.24 The autonomous organizations whether commercial or non-commercial having board by
whatever name called is competent to sanction their development schemes with 100% self-financing
with no government guarantee and involving less than 25% foreign exchange assistance, subject to
the following:
i. ADWP should be constituted by each organization and notified to consider and approve their
self-financed projects.
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ii. The DWP should be headed by the Chairman/ head of the organization and, among other,
should include representatives of the M/oPDR, Finance Division, and concerned Ministry/
Division each not below the rank of Joint Secretary
iii. The quorum of the DWP would be incomplete without the presence of either representative
of the Finance Division and the M/oPDR. In case either of these Divisions does not agree to
the project proposal or any accept thereof, the case would be referred to the CDWP for
consideration.
iv. The decision of DWP will be subject to the endorsement of the board of the organization.
The OM No.21(2-Gen)/PIA/PC/2004 dated 18th December, 2004 of the Planning Commission on
Procedure for approval of Self-Financed Development Sachems of Autonomous Organization
(Commercial/Non-Commercial) is at (Annex--).
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20
Chapter -2
PLANNING ARCHITECTURE AT PROVINCIAL LEVEL
Introduction:
2.1 In the wake of post 18th Constitutional amendment, provincial planning has undergone a
transformation with the introduction of a medium-term perspective, increased inflow of resources,
and new planning imperatives such as public–private partnerships and results-based management
(RBM). The formulation of the Annual Development Plan and approval of development projects are
important exercises carried out by the P&D Boards/ P&D Departments at provincial level in
consultation with concerned 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 provinces are determined. The Provincial Planning Departments/
Agencies were initially created in 1953 to facilitate Planning Board at provincial level.
The structure of planning machinery at provincial level is as under:
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 Balochistan, 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, Balochistan 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
21
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/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),
environmentand 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 programmes
• Economic Issue(s):
– conducting research/surveys
– review/analysis of socioeconomic data
• Annual Development Programmes (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:
22
– 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
forreview 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:
– 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:
23
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 programmes 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
24
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
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 programmes. 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.
SINDH:
2.9 The Government of Sindh established the Planning and Development Department on July 1,
1970 to formulate development policies, plans and projects. The Department played vital role in the
process of socioeconomic development of the province. After the 18th amendment, the responding
P&D Department in provinces are playing important role in achieving targets of growth emanating
from direct investment by both public and private sectors. This requires careful identification and
25
selection of projects for various departments and providing direction for private sector investment
through incentives and appropriate monetary, fiscal and trade policies. To ensure quick and effective
delivery of Public service, enhance the capacity of public sector/human resource and to meet the
emerging development needs, it was imperative to transform and restructure the P&D Department
into a Planning & Development Board. The P&D Board comprises a Chairman, the Secretary,
Planning & Development (Secretary of the Board), Chief Economist, Members of Energy &
Infrastructure, Development, Social Sectors, Services, and Natural Resource of P&D Board, are the
members. 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 major functions of the P&D Board are as under:
• Planning, including policy and development.
• Coordination of foreign aid and technical assistance from abroad through Economic Affairs
Division
• Conducting economic research
• Coordination of statistics in general, and all matters relating to Bureau of Statistics
• Processing of all development schemes, programs and proposals submitted by other
Departments and making recommendations to the government thereon
• Monitoring the progress and evaluation of development schemes and writing their critical
appraisal
• Maintaining liaison with the National Planning Agencies
• Initiating measures for giving suitable publicity to the Development Plans and educating the
public on the results achieved from time to time
• Co-ordination of foreign training programs officers working with Sindh Government
• Dealing with service matters of the Department except those entrusted to the Services and
General Administration Department.
Provincial Development Working Party (PDWP):
2.10 The PDWP is the highest body at the provincial level to approve the provincial development
projects. The Government of Sindh vide notification SO(Admn-1)P&D.12(149)/2016 dated July 14,
2017(Annex---) re-constituted the Provincial Development Working Party as under:
i. Chairman P&D Board Chairman
ii. Secretary (Finance Department) Member
iii. Secretary, Planning & Development Member
iv. Special Secretary (P&D) Member
v. Administrative Secretary concerned Member
vi. Chief Economist (P&D Board) Member
vii. Member Energy & Infrastructure (P&D) Member
viii. Member Services (P&D) Member
ix. Sr. Chief /Chief (Section concerned P&D) Member/Secretary
26
2.11 A Technical Committee under Secretary , Planning, Development& Special Initiatives Department
has also been constituted for scrutiny of development schemes before placing them on the agenda of the
Provincial Development Working Party. The PDWP is competent to approve development projects
costing up to Rs. 10,000 million provided;
i) Projects are to be fully financed from Provincial resources
ii) Projects are not related to Water Sector
iii) Foreign financing is less than 25% of project cost
The PDWP is also authorized to approve the feasibility studies costing upto Rs.500 million.
Departmental Development Working Party (DDWP):
2.12 DDWP is responsible to approve the projects costing up to Rs 100 million at the departmental
level. The composition of the DDWP is as under:
i. Administrative Secretary concerned Chairman
ii. Representative from P&D Department not below the rank of Chief/DS Member
iii. Representative from Finance Department not below the rank of DS Member
Planning at Divisional/ District/ Agency levels:
2. 13 Divisional Development Boards (DDBs)are responsible to approve development projects at
divisional level costing upto Rs.40 million. The composition is as under:
i. Divisional Commissioner Chairman
ii. DC 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
Itis responsible to approve the projects costing uptoRs. 20.00 million.
i. Deputy Commissioner Chairman
ii. EDO (Finance & Planning) Member
iii. EDO (Works & Services) Member
iv. EDO (Concerned) Member
v. District Officer of concerned Dept Member
vi. District Officer (Planning) Member/Secretary
BALOCHISTAN:
Planning & Development Department (P&D):
27
2.14 The P&D Department is a prime body at the provincial level responsible for formulation of
socio-economic development plans and policies. The P&D Department is headed by the Additional
Chief Secretary (Development) and assisted by eleven sections i.e. Programming, Communication
&Transport, Water &Power, Education &Local Government, Agriculture, Food &Fisheries, Health
&Social Welfare, Natural Resources, Development Packages, Development Authorities, Forest,
Livestock, Foreign Aid and Information Technology. These sections are headed by the Chief and
are responsible to look into development matters concerning different sectors, sub-sectors and other
development packages.
The main functions of P&D Department are as under:
•
Planning including policy and development.
•
Co-operation of technical assistance from abroad.
•
Economic research (and matters relating to Board of Economic Inquiry).
•
Co-operation of statistics in General, and all matters relating to the Bureau of Statistics.
•
Processing of all development schemes, programs and proposals submitted by other
Departments and making recommendations to Government thereon.
• To evaluate the progress of development schemes and write their critical appraisal.
• Maintaining liaison with the National Planning Agencies.
• Initiation of measures for giving suitable publicity to the Development Plan and educating
the Public on the results achieved from time to time.
• Co-operation of training of local officers in foreign countries
• Foreign aid including donor cooperation, concept clearance and keeping proper liaison
with all the donors and the federal ministries concerned.
• Autonomous bodies i.e. Quetta Development Authority, Balochistan Development
Authority, Gwadar Development Authority, Balochistan Coastal Development Authority,
and Balochistan Water and Sanitation Authority.
• Inter-departmental Co-operation in cases relating to Economic Policy and Development.
• Inter-Provincial Co-operation in the field of Economic Policy.
• Monitoring and evaluation of all development projects and programmes in the province.
Approval Process of the Development Schemes:
2.15 PC-I or PC-II of development schemes are prepared on relevant Planning Commission’s
Forms and submitted to the relevant forum for approval. PC-I / PC-II should be jointly prepared by
the implementing Department/Agency and the sponsoring Department/Agency. For Umbrella Type
schemes, name, location and specific details of works of each component with cost should be
mentioned in PC-I.
Provincial Development Working Party (PDWP):
The composition of the PDWP is as under:
28
i) Additional Chief Secretary (Dev:) (P&D Dept) Chairman
ii) Secretary, Finance Department Member
iii) Secretary of the Concerned Administrative Department Member
iv) Concerned joint Chief Economist (P&D Deptt) Member
v) Chief of Section, P&D Deptt: Member/Secretary
vi) Any Co-opted Member (s).
2.16 The PDWP is the highest body at the provincial level to approve the provincial development
projects.There is no restriction on the PDWP, if it feels necessary, to call for, or to consider, any
scheme below its powers, referred to it by the DSC/DDWP or any Department/Agency.The PDWP
will also consider approval of schemes below its powers which do not fall solely within the
jurisdiction of any particular Department but pertain to whole of Baluchistan.Properly formulated
schemes should be submitted to the PDWP through the Planning and Development Department.
Baluchistan specific scheme, reflected in Federal PSDP and proposed to be executed by Provincial
Department/ Agency, will be approved by the PDWP first and later on submitted to Planning
Commission for further processing.
c) Foreign financing isless than 25% of project cost
2.17 The schemes sanctioned by the PDWP should bein line with the objectives of the National,
Provincial or Sectorial Plans and there is no deviation from the principles and policies encompassing
the plans and the schemes(s) shall fall within the territories of the Province of Baluchistan.
Departmental Sub-Committees (DSC):
i) Secretary to the Govt. (Provincial) in the Concerned Department Chairperson
ii) A representative of Finance Department Member
iii) A representative of Planning and Development Department Member
iv) Any Co-opted Member (s) Member
v) Concerned Head of Section/Wing Member/Secretary
Divisional Development Working Party (DDWP).
i) Divisional Commissioner. Chairperson
ii) Deputy Commissioner in the Division. Member
iii) Divisional Head of the concerned Department. Member
iv) Director Development, P&DD Member/Secretary
29
2.18 When there is unanimity, no reference to the Provincial Development Working Party
(PDWP) shall be necessary but in case of difference of opinion, the scheme shall be referred to the
Provincial Development Working Party (PDWP).These powers shall be exercised only in respect of
Plans / Schemes involving Development expenditure. In case any member is not present, the scheme
shallnot be considered,unless his/her comments in writing are obtainedby the DSC. Copies of PC-I/
PC-II of schemes approved by PDWP/DSC & DDWP shall be sent to the Planning & Development
Department and Finance Department simultaneously. It is assured that the schemes sanctioned by
the PDWP/DSC/DDWP are in line with the objectives of the National, Provincial or Sectorial Plans
and there is no deviation from the principles and policies encompassing the plans, and the scheme(s)
shall fall within the territories of the Province of Baluchistan.
KHYBER PUKHTUNKHWA:
Approval Process of Development Schemes
2.19 The Planning & Development Department of KPK is the major policy decision-making in
the field of development in the Province. P&D Department is responsible to formulate sectoral
policies, priorities for projects according to the required resources, implement and monitor overall
development plans of the Province.
The main functions of the P&D Department are as under:-
Strategic planning for provincial economy
 Formulation of Annual Development Plan
 Appraisal and review of Projects
 Monitoring and evaluation of development schemes, Socio-economic impact analysis
 Management of Provincial Statistics
 Foreign Development Assistance – Donors Coordination.
 Processing Foreign trainings & visits
 Lead Provincial representation in National Development Forums
 Lead Steering Committees and PRBs of mega projects
 Secretariat support to PDWP/CDWP/ECNEC/NEC, etc
 Coordination and implementation of Reforms Agenda
PROVINCIAL DEVELOPMENT WORKING PARTY: (PDWP)
2.20 The PDWP forum is competent to approve provincial developmental schemes. The forum is
chaired by Additional Chief Secretary and comprise of following five members.
1. Additional Chief Secretary Chairman
2. Secretary, Finance Department Member
3. Secretary, Environment Department Member
4. Secretary, Concerned Department Member
30
5. Secretary, C&W Department Coopted Member
6. Secretary, LG&RD Department Coopted Member
c) Foreign financing isless than 25% of project cost
DEPARTMENTAL DEVELOPMENT WORKING PARTY: (DDWP)

2.21 DDWP forum is chaired by the concerned Administrative Secretary and competent to
approve the project costing upto Rs. 60.0 million. It comprised of two permanent members one each
from Finance and Planning & Development Department.
The composition is as under:
1. Secretary concerned Deptt. Chairman
2. Secretary, P&D Department Member
3. Secretary, Finance Department Member
4. Secretary, LG&RD Department Member
5. Secretary, EnvironmentDepartment Member
6. Secretary, C&W Department Member
DISTRICT DEVELOPMENT COMMITTEE (DDC):

2.22 DDC is a district level forum for approving developmental scheme at District level is chaired
by Deputy Commissioner and comprises the following members.
The composition is as under:-
1. Deputy Commissioner Concerned District. Chairman
2. Executive District Officer (F&P) Member
3. District Planning Officer Member
4. Executive District Officer C&W Member
5. Executive District Officer Concerned Department Member
6. District Officer Sponsoring Department Member
The sanctioning power of DDC is Rs.40.00 million. All the non ADP schemes, regardless of cost
would be presented to the PDWP forum for approval.
FATA:
2.23 The Planning and Development Department is headed by Secretary P&D. The Planning &
development Department is responsible for planning, implementation, monitoring and evaluation of
all development activities related to FATA.
31
The main functions of P&D Department are:-
i. All matters relating to the formulation and approval of development projects including:
• Policy formulation and coordination of activities relating to the Annual Development
Plan, and its review
• Processing of all development schemes and proposals submitted by line departments of
the FATA Secretariat
• Secretarial functions for the Departmental Sub-Committee (DSC)
ii. Preparation of Annual Development Plan for FATA
iii. Recommendations for sector-wise/scheme-wise allocations/re-allocations.
iv. Assessment of requirements, programming and negotiations for external economic and
technical assistance from donor agencies, through the concerned Federal Government
Ministry/Division.
v. Review of the implementation of development projects and programs to identify bottlenecks
and take remedial action.
vi. Identification of regional sectors and sub-sectors lacking adequate portfolio of projects and
taking steps for the preparation of productive project proposals for those areas.
vii. Technical and economic appraisal of projects.
viii. Coordination with donor agencies for donor funded projects
ix. Collection and maintenance of statistical data necessary for the formulation of economic
development policy for FATA.
x. Coordination with the Federal and Provincial Government’s Planning
Division/Department/Forums.
xi. Preparation of briefs/presentations for various dignitaries/forums regarding development in
FATA.
xii. Deal with Pak-Army related projects.
xiii. Allocation of development funds amongst agencies/FRs on the basis of approved policy.
xiv. MNAs/Senators development programs.
xv. Public demands regarding development projects received from various sources.
Procedure for Development Projects of FATA
2.24 The Government of Pakistan, Ministry of Planning, Development and Reform vide
U.O.No.20(1-1)PIA/PC/2013 dated 21st September, 2015 has revised the procedure for approval of
development projects of FATA (Annex--)which is as under:
Project Approval Powers(In Rs
Chairman Members
Forum million)
Agency/FR Upto Rs.20 PA/DCO -Deputy Secretary (P&D), FATA Sect.
Development Sub- million
Committee -Deputy Secretary (Finance), FATA
(ADSC/FRDSC) -Head of the concerned line dept. at
Agency/FR level
32
FATA Development Above Rs. 20 Additional -Representative of SAFRON, GoP
Working (FDWP) million and Chief
upto Rs.200 Secretary - Representative of PDR, GoP
million (FATA) -Secretary Finance/FA, FATA
-Secretary Planning & Development, FATA
-Secretary, Administration/ Coordination,
FATA
-Head of line Department concerned, FATA
FATA Development Above Rs. 200 Governor -Additional Chief Secretary, FATA
Council million and Khyber
upto Rs.400 Pukhtunkhwa -Representative of SAFRON, GoP
million - Representative of PDR, GoP
-Secretary Finance, FATA
-Secretary Planning & Development, FATA
-Secretary, Administration/ Coordination,
FATA
-Secretary/ Head of line Department
concerned, FATA
All development funds are provided by the Federal Government.Details at(Annex----)
AZAD, JAMMU AND KASHMIR:

2.25 In the mid-fifties, economic and social development process,despite financial
constraints,was launched in AJK to provide sound base for development of the area. In early sixties,
a planning cell was established in Finance Department with some skelton staff to develop the area.
In 1972, the cell was upgraded as full fledge department.
The functions of the Planning and Development Department are as under;
• Planning and Development including policy and procedures.
• Co-ordination work relating to the preparation of the Annual Development Programme and
its review.
• Processing of all development schemes, programmes and proposals submitted by other
Departments including autonomous bodies, making recommendations to the Government
thereupon and functions of the Development working Party.
• Maintaining Liaison with the national Planning Agencies.
33
• Dealing with Autonomous and Semi-Autonomous Bodies with regard to development
planning, programmes and projects in AJ&K.
• Co-ordination of economic assistance.
• To monitor and evaluate the progress of development schemes and their critical appraisal.
• Co-ordination of technical assistance from abroad including training facilities.
The approval forums of development projects in AJK areas under:
Project Approval Powers(In
Chairman Members
Forum Rs million)
Azad Kashmir Upto Rs.100 Additional - Secretary (Finance), AJK.
Development million Chief Secretary
-JS (AJK Council), GoP
Working Party (Development)
(AKDWP) -JS(KA&GB), GoP
-Chief Economic Appraisal, MoPDR,
Azad Kashmir Above Rs. Prime Minister -All Cabinet Members
Cabinet 100 million AJK
- Secretary, AJK Council
Development and upto
Committee Rs.400 -Chief Secretary, AJK
(AKCDC) million -ACS Development, AJK
-Secretary Finance, AJK
-Chief Economic Appraisal, MoPDR,
All development funds are provided by the Federal Government.
GILGIT BALTISTAN:
2.26 The Planning and Development Department is a prime body of the Government of GB
responsible for planning, implementation, monitoring and evaluation of all development activities
related to GB. The P&D Department is headed by Secretary P&D. The main functions of P&D
Department as per Rule of Business 2009 are as under:
• Preparation of Annual Development Program in coordination with all department of the
Government.
• Monitoring the utilization of Annual Development Program funds
• Approval of development schemes
• Coordination training in economic development for all officers serving with the Gilgit-
Baltistan Government.
• Preparing five years and other provincial development plans
• Service matter except those entrusted to S&GAD Department
34
• Liaison with UNDP, UNICEF, PARC, AKF, GTZ and other International agencies/donors
• Coordination and supervision of development activities with line departments and Federal
Ministries
• Data collection, tabulation, statistical matters
• Periodical reports and review meetings on ADP
• Attending seminars, conferences, meetings related to Public Sector Development
Programme.
• Processing Proposals for foreign assistance/aid projects
• Authorization and Re-appropriation of development funds
• Focal department for all National/International trainings.
• CPEC unit, Climate Change Cell, SUN unit, SDG unit etc.
• In addition to the above, the cabinet of GB has decided that the functions of P&DD as per
Planning Commission, Government of Pakistan shall be considered as part of Rules of
Business of Gilgit-Baltistan.
COMPOSITION/SANCTIONING POWER
Project
Sanctioning
Approval Chairman Member
power
Forum
GB-DDWP Projects up to Secretary P&DD Secretary Finance, Secretary
Rs. 60 Million. EnvironmentDG, CMIT
Concerned Secretaries
GB-DDWP Projects above Rs.60 Chief Secretary Secretary P&D, Secretary Finance
million up to Secretary Environment, DG CMIT
Rs. 200 Million. Concerned Secretaries
GB-DWP Projects above 200 Minister Finance, Minister P&D

million upto Chief Minister Secretary P&D, Secretary Finance
Rs. 750 Million. Secretary Environment
DG, CMIT
Concerned Secretaries
35
Projects costing above Rs. 750 million or in case of foreign exchange/foreign assistance more than
25% of the total cost are forwarded for consideration/ approval of Central Development Working
Party(CDWP)/Executive Committee of National Economic Council (ECNEC) as the case may be.
All funds for development are provided by the Federal Government.
36
Chapter-3
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
beendiscussed 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
37
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
38
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 Bodyof 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)
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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
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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)
• Organisation (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
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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 problemsin uncertainty. Furthermore, the P2M approach
integrates multi/interdisciplinaryknowledge and methodologies. The approach of P2M is to
recognize three kinds ofprojects consisting of concept development (Scheme model),
implementation (Systemmodel), and operation (Service model) and to generate diversified, creative
andsynergistic business models. This could also be called as a domain of P2M.The scheme model
means a conception plan to develop a mission into multiplescenarios, with a scheme report
concerning the feasibility as a deliverable. The keyattributes of the scheme model are the definition
of feasibility, internal structure andexternal 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.
A Case for Globally Accepted Standard of Project Management

3.16 The development of standards in project management began with recognition of shared
interests, resulting in fairly informal community gatherings. Through regular meetings and
recognition of shared experience, practitioners began to think of themselves as a community. This
led to attempts to define and delineate that profession in order to make it visible and acceptable to
those outside the community. Over the last decades different standards or BOKs has been introduced
in the profession of project management. These standards can be classified into three categories of
project related, organization related and people related standards. The project related standard are
focused on the knowledge and practices of management of projects with the viewpoint of an
individual project. The organization related projects are focused on the knowledge and practices of
management of projects with the viewpoint of an enterprise. The people related standards are focused
on the development, assessment and certification of people.
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3.17 These standards were helpful in developing the profession yet they were evolving from
within particular national boundaries and have the perception of being influenced by particular
national cultures and practices. Though in the early ages of the profession these national bodies were
dominant in building the profession but now the profession has global audiences and this led to the
call for a globally applicable standard of project management.
3.18 This call was answered in the formation of a working group on Global Performance Based
Standard for Project Management Personnel (GPBSPMP) in 2002.This standard can be seen as an
attempt to further the profession, by providing opportunities for countries without existing standards
to have a basis of criterion of their own and by creating a global basis for professional reciprocity.
Other Approaches to Project Management
3.19 All of the above approaches to project management are based on the process based
methodologies. A part from these process based methodologies other paradigms for managing
projects has also surfaced. Some of these approaches are as follows:-
Critical Chain Project Management (CCPM)
3.20 Critical Chain project management which was developed and publicized by Dr. Eliyahu M.
Goldratt in his book ‘Critical Chain’ is a novel approach for managing projects. Goldratt is well
known in the operations management community as the inventor of the Theory of Constraints
(TOC). TOC is a tool for managing repetitive production system based on the principle that every
system has a constraint, and system performance can only be improved by enhancing the
performance of the constraining resource.
3.27 CCPM is an extension of the TOC designed specifically for project environment. In CCPM
the first step is to identify the critical chain activities by using the critical path method. The next step
is to recalculate the project schedule based on shortened task duration estimates for the critical
activities. The difference between the project duration based on new estimates and the original is
called the project buffer. The same procedure applies for calculating the activities which are not
critical and a buffer is created which is called feeding buffer. This buffer is placed in the path where
it feeds back into the critical chain path. According to CCPM a feeding buffer represents the extent
of protection of the critical chain against the uncertainty. The third type of buffer used by CCPM is
called a resource buffer, which is a virtual task inserted prior to critical chain tasks that require
critical resources. Its purpose is to issue a signal to the critical resources that a critical task to which
they are assigned is due to start shortly.
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3.28 The resource buffer does not actually consume any resources and it adds neither time nor
cost to the project. As progress is reported the CCPM schedule is recalculated, keeping the final due
date of the project constant by adjusting the buffer sizes. In other words in a CCPM the flexibility
in the start time of the resources and the ability to quickly switch between the activities and activities
chains keep the whole project on schedule.The opponents of CCPM methods dismiss the hype that
CCPM can lead to superior performance and argues that experienced project managers have known
the principles behind CCPM for decades and CCPM’s uniqueness is in the terminology rather than
in its substance.
Complex Project Management
3.21 A recent addition in the list of professional organization in the field of project management
is the college of complex project managers. The college of complex project managers has developed
their own standards to manage the complex projects and called it as the Competency Standards for
Complex Project Managers (CSCPM).The principle behind this is that the complex system is formed
out of many components whose behavior is emergent and the behavior of the complex system cannot
besimply inferred from the behavior of its components. So, to manage this complex system a
complex project manager is required who by understanding complexity and accepting it, can gain
insight and have a capability to steer a project towards its intended outcomes. The Complex project
managers need to focus on aspects of complex projects that distinguish them from traditional
projects. The opponents of this standard argue that the definition of complex does not stand up to
any scrutiny. They further argue that there has been no analysis of the problems that the
establishment of this initiative is intended to solve. In addition to this the process by which the
college and the standards have progressed has gone un-checked; and that the standard is not
established on evidence based practice.
Structured System Analysis and Design Method (SSADM)
3.22 The Structured Systems Analysis and Design Method (SSADM) is the standard structured
method used for computer project in UK government departments. SSADM has also been adopted
as a standard by public utilities, local government, health authorities, foreign governments and
several large private sector organizations. The basic principles of SSADM are shared, to a varying
degree, by many of the modern structured methods of system analysis and design. The proponents
of the SSADM argues that its being used in large number of projects principally in the area of
government data processing systems and experience shows that the method has improved the quality
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of system analysis and design. They also accentuate that a large number of projects are now
completed on time and there implementation was considered to be a success.
Project Success Vs Project Management Success
3.23 One of the most common approaches to project success has been the fulfillment of golden
triangle of cost, time and scope. Although this may seem true in some cases and appropriate in the
short run when time to market is critical there are many examples where this approach is simply not
enough there could be different criteria for the success of the project. There is a distinction between
project success, measured against the overall objectives of the project, and project management
success (measured against the widespread and traditional measures of performance against cost, time
and quality). Furthermore, the different objectives projects are designed to achieve can be arranged
in a hierarchy, with not all equally important, and that the different stakeholders in the project such
as owner, user, sub-contractor, supplier or designer may all have success criteria that differ from
each other. This makes the measurement of success a complex and inexact matter, since it is possible
for a project to be a success for one party and a disaster for another. It can also appear to be success
one day and a failure the next day.
3.24 The construction of Sydney opera house is one example the project took three times longer
than the anticipated and cost almost five times higher than planned. But once it completed it quickly
became Australia’s most famous landmark. Therefore one can infer that in the context of managing
the project the Sydney opera house can be termed as a failure but as a project it is highly
successful.Both project success and project management success are interdependent and important
for any project. If a project achieves success without project management success, there is the
inevitable conclusion that even greater benefits could have been realized. On the other hand, if
project management success is achieved without project success, then the owner or sponsor has
failed to obtain the benefits that the project was designed to achieve.
3.25 As projects become the currency for improved business performance, making project
management a core capability of successful organizations in turn becomes paramount. But to
demonstrate the true competence, project management success cannot be an occasional event.
Performance that is good, on average is not sufficient. Repeatability and relentless improvement
must be the standard. Therefore to understand an organization’s project management effectiveness
is to determine its project management maturity (PMM). It’s significant in a sense that by having a
grasp of where an organization lies on the spectrum, management can determine its project
management strength and weakness.
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Project Management Maturity (PMM)
3.26 Organizations frequently opt to implement standard project management method as givenby
PMI, APM etc. These organizations expect that such an approach can lead to better performance.
The Project Management Institute (PMI) issued a standard, the Organizational Project Management
Maturity Model (OPM3) which suggests the adoption of standard project management methods. The
purpose of this standard is to provide a way for organizations to understand the project management
practices and to measure the maturity of PM process. The concept of maturity was born in Total
Quality Management (TQM) movement, where the application of statistical process control
techniques showed that improving the maturity level of any technical process leads to two things: a
reduction in the variability inherent in the process, and an improvement in the performance of the
process. Based on this concept Carnegie-Mellon University has developed a model called the
Capability Maturity Model to measure organization process maturity. According to this model the
organization process maturity advances through five stages. These stages are:
Level 1: Ad hoc (Chaotic) --- the starting point for use of a new process
Level 2: Repeatable ---- the process is able to be used repeatedly, with rough repeatable outcomes
Level 3: Defined --- the process is defined/confirmed as a standard business process
Level 4: Managed ---the process is managed according to the metrics described in the defined stage
Level 5: Optimized: process management includes deliberate process optimization or improvement.
3.27 At level 1 an organization has no formal project management processes in place. Success of
any project at this level depends on individual effort, since systems and procedures are poorly
defined. The PM process isunclear and projects are marked by cost, quality and schedule problems.
Interfacingwith functional areas within the organization is usually laden with communication
problems. At level 2 (repeatable) PM systems and processes for planning, scheduling, tracking and
estimating are in place and perceived as important within an organization. The tools are seen as a
solution to some of the performance problems, yet they are notused in a fully integrated form. Project
success continues to be unpredictable, and cost& schedule fluctuations persist throughout the
projects. There is no integration of databases, although schedule information is generally abundant.
3.28 At the defined level (level 3) the organization has standardized approach to project
management within the organization. The project management systems, defined and documented,
are integrated into the organization systems and procedures. Project performance is predictable, with
a high degree of accuracy. Schedule and cost performance tend to improve and utility considerations
are considered appropriately. Strong emphasis is placed on scope management, which is perceived
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as a fundamental part of managing projects. At level 4 (managed level) process management is
measured and controlled. Management is linked with the information flow on major projects and
knows how touse and interpret the information. Systems are able to generate integrated management-
level information without reprocessing and reformatting. Project performance tends to conform to
plans, thus the project success rate is high. There is consolidated project database, which can be
accessed for estimating and benchmarking purposes.
3.29 At the top level of PM maturity (the optimized level), project management processes within
an organization are continuously improved. A sophisticated system exists suchthat both top-level
management reporting requirements and tracking needs are met. Resource optimization is a reality,
not only at the project level but also on an organizational basis. Reliable information can be rolled
up across all projects and analyzed from an organization-wide standpoint.In addition to the above
discussion on project management maturity the PMI defined project management maturity as the
degree to which an organization practices organizational project management. The two most
renowned project management maturity models are OGC’s PMMM (Office of Government of
Commerce which has produced PRINCE2, Project Management Maturity Model) and OPM3
developed byProject Management Institute (PMI). Integral in measuring the organization project
management maturity the organization advances through a series of five stages of maturity.
3.30 The Project management institutes launched an organizational project management maturity
model (OPM3). The basic building blocks at the heart of OPM3 are following five different kinds
of entities:
1. Best practices associated with organizational project management
2. Capabilities that are prerequisite to best practices
3. Outcomes that attest the given capability of the organization
4. Key Performance Indicators (KPIs) that provide the means of measuring the outcomes
5. Pathways that identify the capabilities aggregating the best practices.
3.31 In addition to these five building blocks the model is designed to be used by the organizations
for four types of purposes. These are:
1. To understand what practices and process have been found to be useful for organization
to achieve its aims
2. To measure an organization ability to implement its high level strategic planning
3. To drive business improvement
4. To integrate organizational practices and processes in the domains of portfolio
management, program management and project management.
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48
Chapter – 4
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.
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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:
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
1
https://www.jica.go.jp/english/our_work/types_of_assistance/oda_loans/oda_op_info/guidance/c8h0vm0000aoeoch
-att/03_identification_and_preparation.pdf
50
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 documentsandidentification 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 18th 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 ans 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
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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
programme. 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
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of the resource position for the year, an outline of the investment programme 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 favour 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
10. 9th Five year Plan (not launched) 1998-2003
11. Medium Term Development Framework (MTDF) 2005-10
th
12. 10 Five year Plan (drafted twice but not launched) 2010-15
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 programme of
action to be launched in a dynamic situation to attain specified economic and social objectives. A
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realistic and practical plan visualizes a very close corresponding relationship between the plan, its
programmes 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 programme/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/programme 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/ programmes, 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,
54
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 programmescalls 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 Programme
(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 Programme (PSDP)
4.18 The Public Sector Development Programme (PSDP) is an annual financial outlay in the
form of a document that lists all the public sector projects and programmes 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 programmes 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 programmes. 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
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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
alongwith 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.
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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 aidedprojects
 Development packages and projects of less developed areas (FATA, AJ&K, Gilgit-Baltistan
and Balochistan) are protected for financing.
 Allocations to vertical Programmes 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
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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 4thAugust 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.
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 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 programmes 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.
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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
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
2
http://ppp.worldbank.org/public-private-partnership/overview/what-are-public-private-partnerships
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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
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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
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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 PrivatePartnership
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);
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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
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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.
Sindh
4.41 The Provincial Assembly of the Sindh passed Sindh Public Private Partnership Bill on 18
February 2010 and The Sindh Public Private Partnership Act 2010 was notified on 17 March
2010. The organizational framework a Policy Board has been established under the chairpersonship
of Chief Minister with Advisor/Minister P&D as Vice Chairperson. Other Members include inter
alia Chairman, Planning and Development Board, two members from the Provincial Assembly and
some departments’ secretaries and also members from private sector.Government of Sindh has
established a Public Private Partnership Unit in the Finance Department. This unit has executed
a number of important projects on PPP mode.
Khyber Pakhtunkhwa
4.42 Khyber Pakhtunkhwa Public Private Partnership Act, 2014, with an amendment in 2016, is
also in place. Under the Act a Public Private Partnership Committee has been established with a
mandate to promote, facilitate, coordinate and oversee private investment in infrastructure or
development Projects using the public-private partnership approach. Minister for Planning &
Development and Minister for Finance are Chairperson and Vice Chairperson of the Committee
respectively. Other Members include inter alia Member for Energy and Power, Chief Secretary,
Additional Chief Secretary (Dev.). Five members are also included in the Committee as nominated
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by the Chairperson.As empowered by the Act a Public Private Partnership Unit has been established
under the chairmanship of the Secretary to Government Planning and Development
Department, with permanent members not below the rank of Additional Secretary, nominated from
the Finance Department and Law, Parliamentary Affairs and Human Rights Department and such
other co-opted members as the Committee deems appropriate. Committee has the freedom to add
other members in the composition of PPP Unit.
Functions of the PPP Unit include:

a. Serve as the secretariat and technical arm of the Committee; and
b. Provide technical, financial and legal expertise to the Committee and any PPP Node
established under this Act.
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Chapter – 5
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
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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.50million or above should be based on feasibility studies (PC-II) including reference design and
bill of quantities, etc. Separate provision are 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
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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 concernedshould 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
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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
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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
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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 isexplained 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.
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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---).
(g) In case the PC-I provides 15% or more escalation in loan agreement of Aided Projects, the
provision of 15% escalation over the approved cost of the project as contained in Planning &
development Division's letter dated 15-4-1989 (Annex---) shall not therefore be admissible in
such cases.
(h) When the need for revision of cost becomes evident due to higher bids received in response to a
tender, the revised scheme based on the accepted tender cost should be submitted to the
competent authority for fresh approval. As regards the question as to when a revised scheme, the
cost of which has exceeded more than 15% of the originally approved cost, should be prepared
and submitted to the competent authority for approval, it is to be noted that no difficulty should
be experienced if PC-III (Quarterly Progress Report) is duly prepared. If columns 6 and 7 of the
said form indicate that the percentages of financial expenditure have exceeded the percentages
of physical work by more than 15% it is enough indication that the cost of the project would go
beyond the approved cost. As soon as the indication is visible, the executing agency should start
work on revising the scheme and submit for the approval of competent authority (Annex---)
without stopping the actual work. In the exceptional case where the revised PC-I cannot be
prepared in time, recourse could be had to obtaining the anticipatory approval of the Chairman,
ECNEC (Annex---). However, increase in the cost due to delinking of the Pakistani Rupee from
the Dollar will not need fresh approval of the CDWP/ECNEC. The sponsoring agency shall
however intimate the revised cost due to the depreciation of Pakistani currency to the Cabinet
Division, Planning and Development Division and Finance Division (Annex---).
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(i) In the case of non-aided projects where the cost of the project remains within 15% of the original
cost/scope, the case for extension of the execution period beyond that shown in the approved
PC-I need not be referred for approval to the Planning and Development Division. However, the
Planning and Finance Divisions may be informed when such extensions are involved, giving
reasons for the delay in the execution of the projects. In case of aided projects, the extension, if
necessary isobtained from the Economic Affairs Division and the Planning and Development
and Finance Divisions isinformed. The Economic Affairs Division, for such extension, would
consult the aid-giving agency/agencies and the Planning and Development Division and Finance
Division (Annex---).
(j) While preparing the cost estimates, the formula regarding the provision for future price
escalation given by the Planning Commission should be kept in view (Annex---). This provides
for 6.5% increase in the second year, 13% in the third and 20% in the fourth year.
(k) Cost estimates should also be based on present market survey or/and pre-tender quotation. The
schedule of rates used in estimating the project cost should be regularly updated by taking into
account the market rates, instead of allowing across-the-board premium on the schedule of rates
(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.
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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
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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
76
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
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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.
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Chapter – 6
PROJECT APPRAISAL
6.1 Project appraisal is one of the crucial stage/phase in project planning & management cycle.
Primary purpose of project appraisal is to facilitate the decision maker to arrive at a better-informed
decision on the proposed project/investment as decision cannot be taken without an appraisal. Project
is defined as an investment activity intended to achieve specific pre-determined objectives within a
given time and budget (cost). Projects are ad-hoc resource consuming activities and are expected to
generate enough resources in realization of their objectives. A distinction is made between a public
and private sector project. The public-sector project is to ensure a level of service to the community
which is timelier, cost effective, and efficient in delivery with acceptable quality - have more basic
objectives beyond profit motive. On the contrary, the private sector aims to achieve a return on their
investment in generating sufficient future cash flows to cover initial capital cost and the
operating/financial charges thereto as well as ensuring enough profit - sole objective of private
sector.
Role of Appraisal in Project Planning Process
6.2 Project analysis/appraisal forms part of the broader process of project planning, which
focuses on discrete, new activities, involving a substantial commitment of investment resources. It
consists of a set of procedures and techniques that can be applied, first, in the decision making
process whether to invest or not and, secondly, in the implementing and operationalizing of the new
activity on a sustainable basis. If a project is well formulated and thoroughly appraised, it would be
sustainable and subsequently the targets and goals could be achieved.
6.3 The feasibility study of a project determinesthe viability, based on the feasible and available
technical alternative and an implementation plan. An organizational and legal basis has to be defined
for undertaking the investment and managing the operations. Sufficient financial resources have to
be brought together on terms that can be met. However, the estimates of project benefits and costs,
analyzed and defined in more detail during appraisal, still provide a crucial element. The project
analysis should now extend beyond the basic economic characteristics to include assessment of
financial viability, leading to a detailed financing plan and the distribution of benefits and costs
between different project segments/stakeholders. The comparisons of costs and benefits will also
have to be repeated from the view point of different participants/stakeholders, for example, from the
79
point of view of the project owners in particular, as well as the investment as a whole. A proper
analysis will cause the project to be redesigned so that it is less likely to fail. Poorly prepared projects
have 16 times as high a probability of failure as compared to well-prepared projects (World Bank).
The project appraisal ensures to:
 develop and formulate potential projects precisely and concisely

 stop bad projects “white elephants”
 prevent good projects from being destroyed
 determine if components of projects are consistent and “optimally” designed
 assess the sources and magnitudes of the risks
 determine how to reduce risks and efficiently share risks
Concept of Project Investment
6.4 Money can either be spent (consumed) or saved for investment. If money is spent now, it will
not grow over time. So, investment involves sacrifice of today’s consumption to gain extra consumption
(C) in future. Hence, investment decision is about foregoing consumption today in order to gain extra
consumption in future. Therefore, to determine whether an investment project is worthwhile we must
be able to compare the value of (C) foregone today with the future value of (C) at different movement
in time. It can be concluded that (a) future consumption worth less than the present consumption and
(b) funds when invested yield a return. Development Projects are investment activities and such
investment is justified if sufficient returns (benefits) of the projects are realized.
6.5 Discounting recognizes the time value of money. The process of discounting applies weight to
the resources (costs and benefits) in different years to convert them to a common basis. The weight
applied in different years is known as the discount factor and it depends upon a chosen rate of discount
which measure the fall in the value of net benefits over time.
Discount rate (DR)
6.6 DR is defined as the rate at which the value of the numeraire (saving/investment) falls over time.
The time value of money is specified as a discount rate (which is effectively the same as an interest
rate) of the cost of capital. It is used as common yardstick, measuring yard for discounting the project
financial or resource statement as money spent or received at different times cannot be compared
directly. The discount rate should be the real discount rate.
6.7 The real rate of discount = (1+i)/(1+p) where i is the nominal rate and p is the annual average
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rate of increase in price. A first approximation might be the public long term borrowing rate minus the
rate of inflation. In general, the real rate will rarely be less than 10% or greater than 20%. However,
15% is generally thought of as the minimum target for most public-sector projects, though in the case
of certain long-gestation projects (forestry) a lower discount rate may be appropriate. The World Bank
uses a 12 % Discount rate in the Economic Evaluation of Projects. This figure is not necessarily a
precise reflection of the opportunity cost of capital in the borrower countries; instead it can be viewed
as a rationing device for World Bank funds.
6.8 Economic viability of the project is invariably judged at 12 percent discount rate/opportunity
cost of capital. However, in case of financial analysis, the actual rate of interest i.e. the rate at which
capital is obtained is used. For the governmentfunded projects, the discount rate fixed by the “Budget
Wing of the Finance Division” for development loans and advances on yearly basis is used. The
provisional rate of mark-up fixed by the Finance Division for the fiscal year (2016-17) is 7.37 %. In
case the project is funded by more than one source, the financial analysis is carried out on the weighted
average cost of capital (WACC) for each project. If the project is financed through foreign grants, the
financial analysis is undertaken at zero discount rate. However, the economic analysis is undertaken at
12% discount rate. Discount Factor is just the opposite of the compound factor (1+r)t where r is the DR
and t is time in years. So the Discount Factor = 1/ (1+r)t .
6.9 Typically, investments require cooperation between a number of participants – owners,

operators, lenders, workers, or producers, government and even output users. An analysis beginning
from the same basic project description and statements can be carried out from the point of view of
each participant, recording their particulars costs and benefits. A pre-condition for a successful and
productive project is that all participants should share in the additional resources the project
produces, at a sufficient level to justify their participation.
6.10 A final decision on whether to proceed with a project will depend on a range of factors. An
essential component of the decision is a comparison of a particular project with alternative
investments. It is not sufficient that project benefits should exceed project costs; they must do so by
more than in other feasible investments. Project analysis techniques must incorporate this
comparative element so that the appropriate decision can be taken.
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Aspects and Types of Project Appraisal
Aspects of Project Appraisal

6.11 Appraisal is undertaken / required to select viable projects for implementation and to determine:
 Technical Feasibility
o Appropriately designed/engineered
o All technical alternatives to be considered
o Correct engineering data on which volume estimates are based
o Unit cost figures and machine capacities
o Review and updating of cost estimates
 Economic Viability
o Justification of expected benefits, where both benefits and costs are valued from the
point of view of the economy as a whole
o Contribution towards more efficient allocation of resources
o Based on Accounting or Shadow prices instead of Market prices
 Financial Viability
o Profitability and liquidity
o Projections of balance sheet, income statement (profit & loss account and cash flow
table)
o Level and structure of prices: based on market prices
 Commercial Viability
o Study of the market potential in terms of various options/alternatives
o Marketing of the output and procurement of materials/services
o Market analysis should cover price movements, expected market share,
distributional arrangements, provisions to finance the marketing and present/future
Government policies
 Institutional/Organizational & Management Capability
o To avoid delays in implementation and operation
o To ensure availability of appropriate technical and managerial skills for
implementation and operation of the project
o Linkage with the organization cultural environment (Vision and Mission)
 Social & Political Acceptability,

o Requires value judgments indicating the relative importance of social objectives
other than the efficient allocation of resources, e.g. growth and income distribution
o Concern about project impact on different groups in present society (intra-
generational distribution)
o Concern about project impact on future generation (inter-generational distribution)
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 Environmental Sustainability
o Valuing and quantifying environmental impact of projects and policies
o Many environmental services and assets are not priced or underpriced leading to
over-exploitation of these services and assets
o Difficult to quantify environmental costs and benefits
Types of Project Appraisal
6.12 Three types of projects can be identified depending upon how new resources are committed
to them relate to existing economic activities. First, the largest type of project, around which project
analysis grew up, involves entirely a new economic activity. New investments are designed to
establish a new productive process independent of previous lines of production. They often include
a new organization, financially independent of existing organizations. Second, there are expansion
projects, which involve repeating or extending an existing economic activity with the same output,
technology and organization. Third, there are updating projects, which involve replacing or changing
some elements in an existing activity without a major change of output. Updating projects involve
some change in technology but within the context of an existing, though possibly reformulated,
organization. With changing economic circumstances, the balance between these types of project
may change.
6.13 Whatever type of project is being analyzed, the effect of using new resources has to be
distinguished from the effect of existing operations. The incremental resources costs have to be
identified, that is, the resources that will be committed in a project over and above what would
otherwise have been used. Similarly, the incremental and additional benefits over and above what
would otherwise have occurred have to be identified. Both incremental costs and incremental
benefits have to be valued. For a new investment, the entire outputcosts will be incremental; for
expansion and updating projects, the effects of the new resources have to be separated from the
effects of existing resources.
6.14 Many investment projects are addition to existing facilities/activities and thus benefits and costs
relevant to the new project are those that are incremental to what would have occurred if the new project
had not been added. During the operating life of a project, it is very important to measure all costs and
benefits as the difference between what these variables would be if no project were undertaken and
what they will be implemented (with project). It is very common error to assume that all costs and
benefits are incremental to the new project when, in fact, they are not. Hence, considerable care must
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be taken in defining a “base case” which realistically sets out the profile of costs and benefits expected
if no additional investment is undertaken.
Appraisal Methods, Tool & Techniques
6.15 Appraisal involves a careful checking of the basic data, assumptions and methodology used
in project preparation, an in-depth review of the work plan, cost estimates and proposed financing,
an assessment of the projects organizational and management aspects, and finally the viability and
sustainability of project. It is mandatory for the project sponsoring authorities to undertake proper
appraisal or at least give details of financial, economic and social benefits and suitably incorporate
it in the PC-I/project document. In the Planning, Development and Reform Division, these projects
are again examined before approval, from the technical, institutional/ organizational, social,
environmental, managerial, financial, commercial and economic point of view depending on nature
of the project. On the basis of such an assessment, a judgment is reached as to whether the project
is technically sound, financially justified and viable/sustainable from the point of view of the
economy as a whole.
6.16 In the Planning, Development and Reform Division, there is a division of labor in the
appraisal of projects prepared by the concerned Federal Ministries/Divisions and Provincial
Government Departments and other sponsoring agencies and submitted for approval. The technical
section concerned in consultation with other technical sections i.e; Physical Planning & Housing,
Manpower, Governance and Environment undertake the technical appraisal, wherever necessary.
This covers engineering, commercial, organizational and managerial aspects, while the Economic
Appraisal Section carries out the pre-sanction appraisal of the development projects from the
financial and economic points of view incorporated as Part-C in the working paper for CDWP.
Economic appraisal of a project is concerned with the desirability of carrying out the project from
the standpoint of its contribution to the development of the national economy. Financial analysis
deals with only costs and returns to project participants (individual / organization’s point of view),
whereas economic analysis deals with costs and returns, in case the project is implemented, to the
society as a whole. The rationale behind the project appraisal is to provide the decision-makers with
financial and economic yardsticks for the selection/rejection of projects from amongst competing
alternative proposals for investment.
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Appraisal Methods
6.17 Methods and process to analyze and asses all the relevant costs and benefits of a project are
called project appraisal. Discounted/cash flow techniques and un-discounted techniques/methods such
as payback analysis, financial statements (profit and loss account) are used for undertaking the financial
and economic appraisal. Efforts are made to use all type of techniques require for appraisal/analysis of
all aspects of a complex project. The analysis of Public Private Partnership (PPP) projects and
evaluation of different financial arrangements are also considered. Risk and sensitivity analysis are used
to determine/ design key parameters, thus warning planners about the most important things that can go
wrong.
For any type of analysis, the basic task of project planner is to:
 Identify
 Quantify, and
 Value
All the relevant cost and benefit for a year in which they occur and to enter these in the project cash
flow over the life of the project.
6.18 Project Benefits are defined relatives to their effect on the fundamental objectives. Project
financial benefits are different from economic benefits. For instance, the financial benefits of a road
projects are the toll and other such revenues collected from the user of the road. The economic
benefits of such a project are derived from the savings in vehicle operating cost and travel time of
passengers by using the improved road.
6.19 Project Costs are defined relative to their opportunity cost, which is the benefit foregone by
not using these resources in the best available investmentalternative that can be undertaken if the
resources are not used in the project. The forgone benefits are in turn defined relative to their effect
on the fundamental objectives. Economic cost v/s Financial Cost need not coincide. Economic costs
may be larger or smaller than financial costs. Simultaneously, the economic benefits may be larger
or smaller than financial benefits. Economic costs and benefits are measured by “Shadow prices”
which may well differ from the market prices approximation for financial costs and benefits.
6.20 In economic appraisal, only the valuation process of costs and benefits is different from that
of Financial Appraisal of a project. Here the concept of Opportunity Cost is used. Economic Prices
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are generally different from the market prices. The adjustment factors required to change financial
prices into economic prices are called accounting ratios or conversion factors.
6.21 The central tool of the analysis is the proforma cash flow and net economic/financial benefit
statements, with projected annual inflows and outflows, over the life of the project. There are two
goals of the appraisal. First, the appraisal determines the financially sustainable of a project. In the
case of a private sector project, in order for the equity holders or any other financial stakeholders to
be willing to undertake a project, the net present value of project’s predicted stream of annual net
cash flows (NPV) should be positive and the Internal Rate of Return (IRR) should be greater than
the discount rate (cost of capital). Other measures of financial performance such as the debt service
coverage ratios are also important indicators of financial sustainability. The proforma net economic
benefit statement constructed from financial appraisal serves as the basis for determining the
project’s economic feasibility.
6.22 Table of Parameters is to be prepared at a convenient place on a spreadsheet. This table

should contain all the information about the project that is exogenous to the analysis. (all the analysis
should be done on the single Excel Spreadsheet. Using separate sheets though possible but creates
problems at latter stage.
6.23 How to handle inflation? The easiest way to handle inflation is to price costs and benefits
at today’s prices; if inflation is assumed to affect costs and benefits equally, then the effects of
inflation will cancel out. If however, it can be estimated that some prices will change at different
rates from others over the project life, inflation does matter and these differential effects must be
taken into account. It is recommended that all cash flows be adjusted by expected inflation over the
future period plus separate adjustment for any change in real prices of specific revenues or
expenditures items. Interest/discount rates need to be adjusted in a similar fashion with the same
inflation expectation to have consistency in appraisal of investment projects.
6.24 Exchange Rate and Cash Flows: Neutral assumption is that exchange rate will devalue in
line with the differential in the rates of general price inflation in the domestic and foreign currencies
– known as maintenance of Purchasing Power Parity (PPP). Example of PPP adjustment in
Exchange Rate: If expected domestic inflation is 8 % and expected foreign inflation is 2% then
simply the expected rate of depreciation of domestic currency is 6%.
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6.25 Timing & Scale in Project Appraisal: On the basis of the cash flows and resource
statement of the project, it is very easy to select the appropriate timing and scale of investment. High
Fixed cost investments such as roads, bridges, schools and hospitals with respect to their size and
scales are important projects as too large or too small can destroy a good project. Other example of
scale sensitive investment are all processes in greasing tanks, pipes, etc. for handling or pumping
fluids – oil and gas, chemical, and water supply.
Rule: Optimum Scale is when NPV = 0 for last addition to scale and NPV > 0 for the whole project.
6.26 InvestmentTimings: What is right time to start a project and what is right time to end a
project? Just because a benefit exceeds project cost does not mean that the project should be started
immediately. Effect of postponing a project for different time period on NPV and IRR may be
different due to different project resource statement over different time. Such effects of timing of
investment need to be considered in appraisal of the project.
Appraisal Tools& Techniques
6.27 Techniques of appraisal can be divided under two heads; (a) undiscounted and (b) discounted.
Undiscounted techniques include (i) Payback period, (ii) Profit & Loss account and (iii) Breakeven
Analysis. Discounted techniques take into account the time value of money which includes (a) Net
Present Value (NPV), (b) Benefit Cost Ratio (BCR), (c) Internal Rate of Return (IRR). Different
investment appraisal criteria are given at Annex--.
Discounting Techniques:
6.28 The discounted cash flow techniques include NPV, BCR, IRR.
i) Net Present Value (NPV) is simply the difference between the present value (at an
appropriate discount rate) of benefits and present value of costs. A Project is accepted if NPV
is positive and rejected if NPV is negative.
Mathematically:NPV = ∑t Bt / (1+r)t - ∑t Ct / (1+r)t OR ∑t [(Bt - Ct) / (1+r)t]
Where r is the discount rate, t is the number of years from the base year and Bt and Ct are total
benefits and total costs in year t.
ii) Internal Rate of Return (IRR) is that discount rate which just equates discounted costs
and benefits and the NPV is zero. If IRR exceeds from the opportunity cost of capital, the project
is accepted (otherwise rejected).
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Mathematically:IRR = NPV = ∑t [Bt - Ct) / (1+r)t ] = 0
The IRR has two disadvantages (a) Uniqueness - if positive or negative values in a cash flow
alternate, the solution for the IRR need not be unique. (b) Mutually Exclusive Projects – in
case of mutually exclusive projects, the IRR may lead to the selection of wrong project
alternative.
iii) Benefits Cost Ratio (BCR) is the ratio of the present value (at an appropriate discount
rate) of benefits and costs. A project is accepted if BCR > 1
Mathematically:BCR = ∑t [t / (1+r)t] / ∑t [Ct / (1+r)t]
Un-Discounted Techniques
i) Payback Analysis: The pay back (payout) period is most commonly defined on the length
of time required to recover the cost of an investment from the net cash flow produced by
that investment for an interest equal to zero. The shorter the time for recovery, the more
profitable is the project. The limitation of this method is that the earnings after payback
period are not considered.
ii) Unit Cost Analysis: The unit cost is simply derived by dividing the present worth of
production cost by the present worth of output of the project.*
iii) Break Even Analysis (BEA) may be mathematical or graphical in nature and is useful in
relating fixed and variable costs to the revenue. The BEA should be used in a number of
ways. The most common model is to estimate the ratio of fixed cost and marginal
contribution where, marginal contribution is the net difference of revenue and variable costs.
Mathematically: Break Even Point=Fixed Cost / (Revenue–Variable Cost) X 100
*Note: (The output unit could be kg, liter, student, hospital bed, etc. This method is also called cost effectiveness analysis
as knowing the unit cost we are able to compare cost of production in different project, process or methods. This method is
very useful in projects where benefits are not quantifiable, such as social sector projects.)
Risk and Sensitivity Analysis
Risk Analysis
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6.29 The futuristic nature of project activities involves uncertainty and risks of different types and
magnitude. Risk is the effect of uncertainty in objectives (ISO Guide 73 - 2009).According to PMI’s
PMBOK, project risk is “an uncertain event or condition that, if it occurs, has a positive or negative
effect on one or more project objectives such as scope, schedule, cost or quality. The standard risk
management procedure has six steps (i) identify risk, (ii) analysis, (iii) assessment, (iv) mitigation
strategy, (v) monitoring and (vi) documentation and reporting.
6.30 Sensitivity analysis is required to assess various risk factors followed by devising an
appropriate risk mitigation/management strategy. There are two kinds of risks. The “Known risks”
are those which identified and analyzed beforehand in such a way as to be able to reduce the
likelihood of their occurrence and plan a risk response to reduce their impact in the event that they
occur. “Unknown risks” are those that are not identified beforehand and thus cannot be managed
proactively. However, when risk has already materialized, it becomes an issue.
6.31 The causes of risk can come from a variety of sources, such as: a requirement, an assumption,
a constraint, or a condition. The success and failure of project is thus, necessarily depending on how
well and professionally all the risks factors involved have been identified, quantified and assessed
in terms of their criticality and probability of occurrence. Remedial measures and required actions
taken to avert, minimize or at least allocate all the probable, possible and eventual risks involved.
There can be a long list of potential risks which can affect the project expected outcome.
Nevertheless, such risks can be classified into two main categories, (i) General risks and (ii) Project
specific risks. Project risks comprise host of problems arise from the way a project is planned,
implemented and managed. Such problems ranges from the very basic tasks like land acquisition
site selection weather conditions and to the more technical problems associated with designs, plant,
equipment, material problems associated with suppliers,releases of funds, organizational problems
associated with subcontractors, manpower problems associated with unions, contractual problems
associated with agreements and environmental problems associated with pollution, etc. In contrast,
general risks are though not directly associated with project strategies, yet can have a significant
impact on its outcome. These normally arise from natural, political, regulatory, legal and economic
events in the general macro environment surrounding the project.
6.32 Traditionally, the process of financing, design, construction and operational responsibilities
are separate. However, in projects conceived on the principle of Public Private Partnership (PPP),
such processes converged in a single entity. Grimsey and Lewis have identified six areas of risk
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associated with PPP projects, namely; public risk, asset risk, operating risk, sponsor risk, financial
risk and default risk. Public risk relates to the government’s duties to ensure that the facilities are
constructed in accordance with legislation and codes of practices to ensure the wellbeing of workers
and consumers. Step-in rights usually existing in most PPP contracts to allow the government to
intervene if this risk eventuates. Asset risk can arise if the life of a facility proves to be shorter than
anticipated, if the costs of maintenance exceed that expected, the asset may be damaged or destroyed
by a force majeure event, etc. These risks can be mitigated by agreed maintenance and refurbishment
scheduled, etc. Operating risk reflect the chance that the purchased services are not delivered as
agreed in terms of specification, costs or timing. Sponsor risk arises when the private partner is
unable to meet its contractual obligations and the government is unable to enforce them or recover
compensation. Normally, parent company guarantees, performance bonds and sureties are used to
mitigate operating and sponsor risks. Financial risk can arise from price and cost increase, financiers
withdrawing, interest rates increasing or from poorly designed financial structures. Finally, default
risk can arise when a party is unable to perform its contractual obligations on time or to defined
standards. In this case the contract will provide for remedies such as obligations to rectify,
abatements, step-in rights, termination and the transfer of completed assets according to a predefined
valuation mechanism.
Sensitivity Analysis
6.33 Sensitivity analysis assesses risk by identifying the variables that most influence a project’s
net benefits and quantifying the extent of their influence. It consists of testing the effects of variations
in selected cost and benefit variables on the project’s IRR or NPV. For example, if we have a project
to renovate coffee plantations and we want to identify which of two variables, coffee price or yield,
is the most critical for project success, we would assess the impact on the project’s NPV of varying
coffee prices and yield by some arbitrary percentage, say 15 percent. Sensitivity analysis may help
identify weak design options and pinpoint the need for obtaining additional information on some
variables. It may also help convey some idea of project risk.
Switching Values:
6.34 The preferred approach to sensitivity analysis uses switching values. The switching value of
a variable is that value at which the project’s NPV becomes zero (or the IRR equals the discount
rate). Switching values are usually given in terms of the percentage change in the value of variable
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needed to turn the project’s NPV equal to zero. Switching values may be useful in identifying which
variables most affect project outcomes. The switching values of the relatively more important
variables may be presented in order of declining sensitivity.
Variable Switching value
Yield per hectare -25%

Construction costs -40%
Irrigated area per pump -50%
6.35 In this example, the most critical variable is yield, a decrease of more than 25 percent in the
expected yield will make the NPV negative if other things remain as expected. If experience suggests
that yield can easily be that much less than expected (perhaps because of poor-quality extension
services), then this project is very risky, unless actions can be taken to prevent such a shortfall. The
project’s worth is also sensitive to construction costs, but a 40 percent increase in these costs (in real
terms) may be considered quite unlikely if, for example, the state of engineering for the project is
advanced. It is helpful to distinguish between factors that are completely beyond control, such as
rainfall and world market prices, and factors that can be fully or partially controlled by project
managers, such as implementation schedules and quality of extension services.
Shortcomings of Sensitivity Analysis
6.36 Sensitivity analysis has three major limitations: it does not take into account the probabilities
of occurrence of the events; it does not take into account the correlations among the variables; and
finally, the practice of varying the values of sensitive variables by standard percentages does not
necessarily bear any relation to the observed (or likely) variability of the underlying variables. The
usual technique of varying one variable at a time, keeping the others constant at their expected
values, is justified only if the variables concerned are uncorrelated; otherwise the related variables
must be varied jointly. If the variables are correlated, varying only one variable at a time may lead
us to conclude erroneously that a project is robust.
6.37 Finally, the practice of varying a key variable by some arbitrary percentage, say 10 percent,
may cover most of the distribution for some variables, but only a minor fraction for others. Take
example of two commodity prices, the price of oranges and the price of urea. The average price of
orange during 1970-93 was Rs.520.00 per metric ton. Seventy-five percent of the observed prices
were between Rs.450.00 and Rs.550.00. A variation of + 10 percent would have covered most of the
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observations in the period. But for urea, a commodity whose price ranged from Rs.70 to Rs.770.00
per metric ton, a similar variation would have covered only 25 percent of the observations. Because
of these three shortcomings, it is preferable to use techniques other than sensitivity analysis for
assessing risk.
Monte Carlo Simulation and Risk Analysis
6.38 Proper estimation of the expected NPV of a project normally requires the use of simulation
techniques. Simulation is the only simple and generally applicable procedure for overcoming the
limitations of sensitivity analysis, calculating the expected NPV, and analyzing risk. Simulation
usually required more information than sensitivity analysis, but the results in terms of improved
project design are worth the effort.
Limitations of Project Appraisal
6.39 Shortcomings in the project appraisal should be kept in view while using it as a policy decision-
making tool. Some of these limitations are:
i. Quality of analysis depends on quality of data and forecast made about costs and benefits.
Over-estimation of benefits and underestimation of cost is quite common to get the project
approved.
ii. Useful where benefits or major parts of thereof are measurable and can be quantified. In
cases where non-quantifiable externalities (e.g. job creation, skill development, technology
transfer etc.) and projects related to health, education, rural development etc., where benefits
cannot be quantified, benefit-cost analysis may not be applied. In such cases only unit cost
analysis is undertaken to evaluate cost effectiveness.
iii. Useful when there is a definite starting and finishing points. It could not be used for ongoing
services/programs like Police, Hospital, etc.
iv. Due to uncertainty about the future it is impossible to quantify the risks. Sensitivity analysis
in one way to examine strength of a project against future risks.
v. There are other ways for resource allocation, which are equally important, and effective;
such as price policies, tariff policies, exchange rate policy, and interest rate policy which
may also be considered to supplement decision making on project selection.
vi. Conflicts (political, social, economic, financial valuation) in project appraisal may affect
results.
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Chapter-7
PROJECT APPROVAL
Approval stage
7.1 According to the project cycle, approval comes after appraisal. This is logical as approval is
normally based on the results of appraisal. There are various approving bodies, the details of which
follow in the succeeding paragraphs. Simply, "approval in principle" does not entitle the sponsoring
agency to execute a project. In fact "approval in principle" needs to be qualified by mentioning
clearly to what extent and for what purpose the approval in principle is required.
Where approval has been given to a project with certain conditions, it has to be ensured by the
executing agency that those conditions are duly fulfilled, especially those which have to be fulfilled
prior to the execution.
Approving Forums and Sanctioning Powers
7.2 The project approving bodies working at various levels are the following:
i) National Economic Council (NEC)
ii) Executive Committee of National Economic Council (ECNEC)
iii) Economic Coordination Committee of the Cabinet (ECC)
iv) Central Development Working Party (CDWP)
v) Departmental Development Working Party (DDWP)
vi) Provincial Development Working Party (PDWP)
The details of these approving bodies have already been given in Chapter-I.
7.3 The National Economic Council (NEC) is the supreme policy-making body in the economic
field. It is headed by the Chief Executive of the country, President/Prime Minister. Its members
include Federal Ministers in charge of economic ministries, the Deputy Chairman of the Planning
Commission and the Governors/Chief Ministers of the provinces. The NEC is in overall control of
planning machinery and approves all plans and policies relating to development. NEC was
established IN December, 1962 under article 145 of the Constitution of Pakistan
Executive Committee of National Economic Council (ECNEC)
7.4 Presently, the Executive Committee of the National Economic Council (ECNEC) is headed
by the Prime Minister of Pakistan . However, vide ECC decision taken in its meeting held on
28thJanuary, 1997,
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the Adviser to the Prime Minister on Finance, Economic and Planning was designated as its
Chairman (Annex---). Its members include Federal Ministers of economic ministries, Provincial
Governors/Chief Ministers or their nominees and the Provincial Ministers concerned. Secretariat
support is provided by the Cabinet Division. The functions of the ECNEC are:
a) To sanction development schemes in the public sectors costing over the sanctioning limit
of the CDWP. At present it approves cost of more than Rs 3000 million.
b) To allow moderate changes in the plan and in the plan allocations.
c) To supervise the implementation of economic policies laid down by the NEC or
the Government.
Economic Coordination Committee (ECC) of the Cabinet
7.5 The Economic Coordination Committee of the Cabinet is headed by the Federal Minister
for Finance and Federal Ministers of economic ministries as its members. It attends to all urgent
day-to-day economic matters and coordinates the economic policies initiated by the various
Divisions of the Government. It keeps vigilance on the monetary and credit situation and makes
proposals for the regulation of credit in order to maximize production and exports and to prevent
inflation.
The approval of development projects financed from Public Sector Development Programme
(PSDP) does not come in the perview of ECC. However, it gives approval to the projects in private
sector and public sector energy projects financed by the private sector.
7.6 The development projects exceeding a certain financial limit prepared by the Central
Ministries, Provincial Governments, Autonomous Organizations, etc., are scrutinized for the
purpose of approval by the Central Development Working party (CDWP) which is headed by the
Deputy Chairman, Planning Commission and which includes as its members the Secretaries of the
Federal Ministries concerned with the development and the heads of the Planning Departments of
the Provincial Governments. Federal Ministries which are permanent members of the CDWP
should not be represented below the rank of Additional Secretary. Similarly the concerned Federal
sponsoring/executing agencies should be represented at the level of Head of the Department or
Additional Secretary. The schemes approved by the Central Development Working Party costing
Rs. 3000 million and above are submitted to the Executive Committee of the National Economic
Council for final approval. The project with 25% or more FEC component also fall in the
jurisdiction of the CDWP as such project are not allowed for approval by DDWP or PDWP etc.
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including DWPs established for approval of self-financing schemes of the autonomous
bodies/corporations. Secretariat support is provided by the Ministry of PDR.

7.7 It is a body for approving development projects/ programmes for Federal
Ministries/Divisions/Departments according to their approved financial limits. It is headed by the
respective Secretary/ Head of Department and includes representatives of Finance Division and
concerned Technical Section in the Planning and Development Division. At present its sanctioning
limits up to Rs. 60.00 million excluding projects with 25% or more FEC component.
7.8 Each Province has a Provincial Development Working Party which is headed by the
Chairman, Development Board/ Additional Chief Secretary (Development) and includes
Secretaries of the Provincial Departments concerned with development, as its members. The
Provincial Development Working Party scrutinizes various projects for inclusion in the Annual
and Five Year Plans. It is competent to approve projects up to a certain financial limit. Projects
exceeding this limit are submitted to the Central Development Working Party for approval. At
present PDWPs enjoy sanctioning powers up to Rs. 10.00 billion provided external financing is
not more than 25 % of the project cost excluding water sector projects due to IRSA certification.
7.9 The Provincial Government's projects are presently considered in the meetings of the
Provincial Development Working Party (PDWP) chaired by the Additional Chief Secretary (Dev.)
in the provinces of Balochistan and KPK. The PDWP in the Punjab and Sindh province are headed
by the Chairman, Planning & Development Board. Corresponding to these bodies, there exists in
the Federal Government, Departmental Development Working Parties (DDWP) in the
Ministries/Divisions headed by their Secretaries with the Financial Advisors and others concerned
as members. The schemes initiated by the Provincial/Federal Corporations are also processed
through these bodies.
7.10 The projects meant for approval of CDWP/ECNEC are processed through the above bodies
and passed on to the Planning Development & Reform Division for action by the various Technical
Sections concerned and a Working Paper is prepared and placed before the Central Development
Working Party (CDWP). The schemes above Rs. 3000 million are considered by the ECNEC,
which presently is headed by the Prime Minister of Pakistan. The ECNEC comprises the
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representatives of the Provincial Governments and the Federal Ministries/Divisions. The
composition and charter of the ECNEC is given in (Annex---). The Cabinet Division is the
Secretariat of the ECNEC.
Approval Types and Procedure
7.11 The basic principle of review of projects, both at the Federal as well as Provincial levels,
should be that projects are examined jointly and simultaneously rather than in succession. A copy
of "Procedure for Preparation and Approval of Development Schemes" approved by the National
Economic Council in July, 1959 is at (Annex---) for guidance.
7.12 In accordance with para-8 of the above procedure, copies of PC-I/PC-II have to be sent by
the sponsoring agencies i.e. Provincial Governments and the Federal Ministries to the Planning,
Development and Reform Division and other members of the Central Development Working Party
for simultaneous examination. The composition and Charter of the CDWP is given in (Annex---).
At present 45 hard copies of PC-I duly signed by the Principal Accounting Officer or Chairman,
P&D Board or ACS (Dev) is required.A soft copy in shape of CD is also required for uploading
the project on Planning Commission’s website for general inputs.
7.13 The number of copies required by the Planning, Development and Reform Division which
acts as the Secretariat of the CDWP, has been specified from time to time according to the
requirements. In order to ensure that a copy of PC-I/PC-II has reached to all the members of CDWP
before it is considered in the CDWP meeting, the Planning, Development & Reform Division
arranges to send a copy of PC-I/PC-II to all the members of CDWP. A scheme sponsored by the
Federal Ministry/ Corporation should be supported with a statement that the scheme has been seen
and approved by the Secretary of the Ministry concerned. Similarly, a scheme sent by the
Provincial Government should carry a certificate that it has been seen and approved by the
respective Chairman/ACS (Dev.) (Annex---).
7.14 PC-I form of the project should invariably be signed with date by the officers (Name and
designation along with telephone number of the officer may also be spelled out) as specified at the
end of part "A" (Project Digest) of the proforma.
Processing of Schemes
7.15 As soon as PC-I/PC-II is received by a member of the CDWP/PDWP/DDWP, its
examination is conducted as per guidelines of ECNEC approved in its meeting held on April 24,
2000, that three weeks are for preliminary approvals, two weeks for response by the sponsors. One
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week for holding pre-CDWP meeting to sort out issues with the sponsoring agency (ies).
7.16 The Planning Development and ReformDivision has to ensure that the PC-I has been
prepared correctly and according to the prescribed procedure. In case, the PC-I is found sketchy
and deficient it is returned to the sponsors with the approval of Secretary (Planning)/Deputy
Chairman (Planning Commission)/ Members of Planning Commissionunder intimation to all the
members of the CDWP.The M/o Planning, Development and Reform should, when necessary,
make a consolidated enquiry from the sponsors with respect to deficiencies in the proforma and
seek clarification/ additional information. A Chart showing flow of PC-I/PC-II within the Planning
Development and ReformDivision and their processing through the CDWP/ECNEC is given in
(Annex---).
Procedure for Meetings of Various Bodies
7.17 The ECNEC meetings are normally chaired by the Finance Minister. However, at present
the Prime Minister of Pakistan is the chairman of ECNEC. The latest Charter and composition of
ECNEC is given in (Annex--). According to the decision taken by the Cabinet at its meeting held
on 1-11-1973 and 18-9-1994, the Central Development Working Party and ECNEC should meet
regularly every month and after every six weeks, respectively. The procedure for approving
schemes should be streamlined so that a project is approved within 2 months.
7.18 The meetings of the Central Development Working Party are normally held every month.
The Planning Development and ReformDivision isthe Secretariat of CDWP. The ECNEC
however, generally meets once in 6 weeks or in certain cases may meet early if so required. The
agencies represented on CDWP should circulate their comments to each other well before the
CDWP meeting so that the discussions are useful and schemes are cleared speedily.
7.19 The minutes of the CDWP meeting are recorded by the Planning Development &
ReformDivision and circulated to all CDWP members and other agencies concerned. The agencies
represented on the CDWP should, however, be expected to take action required by them without
waiting for the minutes. The minutes of CDWP should be treated as confidential. The
minutes/record of discussions of ECNEC should be treated as secret. However, decisions of
ECNEC in respect of public sector development projects would be unclassified unless specially
classified by the Cabinet Division "Procedure in regard to ECNEC" (Annex---).
7.20 Every effort should be made to clear a scheme in one meeting, where this is not possible,
the scheme should be considered at successive meetings of the CDWP until it is disposed off. The
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basic requirement is that the scheme should not be lost sight off and the progress in its disposal is
maintained. With a view to avoiding lengthy discussion on detailed comments of the various
agencies represented on CDWP, a Pre-CDWP meeting is to be held to resolve the outstanding
issues in respect of federal schemes under the respective member or Sr. Chief/ Chief of the
Planning Commission. (Annex---).
Time limit for Approval of Projects
7.21 In accordance with the directive given by the Cabinet in its meeting held on 1-11-1973, a
project is required to be approved within two months. However, in accordance with the
comprehensive procedure approved by the National Economic Council in July, 1959 (Annex---),
the time for approval given is in more specific terms, viz: the formal submission of schemes and
approval of the Economic Council (now ECNEC) should be completed within 3 months.
Anticipatory Approval
7.22 In accordance with para II (2) of the "Procedure in regard to ECNEC" (Annex---), the
ChairmanECNEChas powers to allow the execution of a scheme in anticipation before its formal
approval by ECNEC. The request for anticipatory approval has to be submitted to the Cabinet
Division through Planning Commission for on-going and new schemes in the proforma prescribed
for each of them (Annex---). The request for anticipatory approval should be signed by the
Secretary of the Division concerned in the case of federal schemes and by the Chairman P&D
Department or ACS (Dev.) in the case of provincial schemes, accordingly.
7.23 The ECNEC in its meeting held on 29-11-1978 further decided that the Chairman, ECNEC
may dispose of any case/scheme in his discretion pending the formal submission of the Summary
to the Committee, provided that in such cases the particular scheme would be processed through
the normal channels and submitted to the Executive Committee of the National Economic Council
(ECNEC) after completing all the formalities within six months with further provision that the
total period of anticipatory approval should not exceed 12 months in any case. Furthermore,
anticipatory approval and sanction for incurring expenditure shall in no case be allowed beyond
the end of each financial year, i.e 30th June(Para-3 ofAnnex---). On the expiry of the date for
which anticipatory approval has been granted, the case will have to be processed afresh in the same
manner as mentioned above, if further extension is required. It may be noted that the grant of
anticipatory approval falls in the category of "extraordinary jurisdiction" and this power cannot be
re-delegated both for reasons of uniformity of treatment and to maintain financial discipline and
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control. Therefore, all cases of anticipatory approval, irrespective of the cost involved, have to be
submitted only to the Chairman, ECNEC for approval (Annex---).
Administrative Approval
7.24 Project approval communicated by the Planning Commission through authorization letter
is followed by administrative approval and sanction for incurring expenditure. Administrative
approval is issued by the Federal Ministry in respect of federally sponsored projects, while for the
Provincial projects the approval is issued by the Provincial Department concerned. Administrative
approval is a sort of general sanction of the scheme in which total cost foreign exchange component
and any other riders imposed by the approving body are incorporated. This sanction is distinct
from the sanction for incurring expenditure on the scheme which is to be issued on yearly basis
restricted to the budget provision (Annex---).
Issuance of Administrative Approval
7.25 The decisions of the CDWP and ECNEC in respect of approval of projects are circulated
by the Planning Development &ReformDivision through an authorization letter/O.M. The
Administrative Ministries concerned with the federal projects and the Provincial Governments
concerned with the provincial projects are advised to take urgent steps to issue necessary
administrative approval and expenditure sanction in respect of the schemes approved by the said
bodies. Copies of sanction letters issued by the Federal Ministries and the Provincial Governments
should be endorsed to the Planning Development &ReformDivision, Cabinet Division and Finance
Division and Finance Department in the case of provincial projects.While issuing administrative
approval, the Federal Ministries/Provincial Departments should specifically incorporate the
conditions of approval, if any, are imposed by the approving body so that the Project
Director/Executing Agency should be fully aware of its responsibilities in complying with those
conditions before, during and after the implementation of the project.
Concept Clearance of Projects for Foreign Aid Negotiations
7.26 The foreign aid is an important element of financing our development programme. This
assistance is pledged by various donors largely to meet the foreign exchange requirements of the
projects undertaken by Government of Pakistan either through Federal PSDP or through provincial
ADPs, depending on the agency for the implementation of the project. In view of paucity of
domestic resources there should be effective utilization of foreign economic aid. It was decided
that at the preliminary stage, where only a broad outline regarding the nature and scope of the
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project is known, clearance should be obtained from the Planning Development & Reform
Division even before the preliminary discussions with the aid giving agencies take place (Annex-
--). This is necessary to establish at the very outset whether the project fits in the priorities laid
down in the Five Year Plan and the overall economic development policies of the government. A
committee for concept clearance of foreign aided projects was set up in the Planning Development
and ReformDivision. The Concept Clearance Committee is chaired by Deputy Chairman, Planning
Commission and provincial Governments have also been given representation in this Committee.
Its composition is at (Annex---). A prescribed proforma for concept clearance has been devised
(Annex---). Sponsoring agencies are required to submit 35 copies of the project proposal on this
format to the PIP Section of Planning Development and ReformDivision. After obtaining the
recommendations of the concerned technical section the project proposal is submitted to Concept
Clearance Committee for its approval. The approval of the Concept Clearance Committee is
communicated to EAD and sponsoring agency for aid negotiations with the donors. At present
CDWP also acts as Concept Clearance Committee and decided all the cases of foreign funding
proposals side by side development projects
7.27 Concept clearance is required for those projects only which have not been cleared by the
CDWP/ECNEC. The project should, however, fit in with the priorities laid down in the Five
Year/Perspective Plans and the overall economic development policies/ priorities of the
Government. After the concurrence of Concept clearance by the competent forum, the donor
agency generally arranges pre appraisal/appraisal missions to discuss the project with the
EAD/other agencies concerned. After appraisal of the project, sufficient data is available with the
sponsoring agency to prepare the PC-I. The sponsoring agency are required to submit the PC-I to
Planning Development and ReformDivision within a maximum period of one month after
appraisal of the project by the donor agency for processing through the relevant approving
authority. It is necessary that the decision of the CDWP is available before formal loan negotiation
is held with the donor agency, so that loan negotiation conforms to the decision of the CDWP.
Likewise, the loan agreement, etc. should not be signed before approval of the project by the
competent forum or the anticipatory approval of the Chairman, ECNEC.
7.28 In September, 1994 it was decided that in future the proposals which constitute a part of
the approved PC-I and for which the donors are changed should be considered conceptually cleared
and should not be brought afresh for consideration. It has been noticed that the proposals for
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seeking foreign assistance are sent by sponsoring agencies for approval of Concept Clearance
Committee without proper examination, and sufficient details of proposals establishing their need
are not available. It has accordingly been decided (Annex---) in the meeting of CDWP/CCC held
on 29-3-1995 that in future:
“All concept clearance proposals costing Rs.10.00 million and above must accompany a
feasibility study prepared departmentally.”
(Now stand redundant due to value for money concept). No proposal for foreign assistance will
be considered for the purchase of vehicles, air conditioners and other consumer durables,
produced in the country.
7.29 After careful study of the whole procedure, the following guidelines are framed:
(i) It should be a normal practice to submit projects on PC-I or PC-II for the approval of
CDWP. However, only those projects should be sponsored for concept clearance where
strong indication is available from multilateral agencies/donors for making available
necessary funding and formal request for donor financing cannot wait for preparation of
PC-I/PC-II.
(ii) The proposals should be accompanied by adequate information regarding basic concept of
the project and cost details/breakdown with departmental feasibility if the cost of the
project is Rs. 500 million and above.
(iii)Donor assistance should not be sought for the purchase of vehicles, air conditioners and
other consumer durable goods produced in the country. Similarly, projects should not be
sponsored for outright import of road making or earth moving machinery and drilling rigs
etc. by the government departments/agencies without a project design fully justifying the
additional acquisition after taking into account inventory of the existing machinery of all
public sector departments/agencies. Effort should always be made for pooling available
resources rather than resorting to fresh imports under new projects.
(iv) Following the concept clearance of the project, if the project design is altered by donor
agencies at any subsequent stage Planning Development and ReformDivision should
invariably be consulted and clearance obtained by the executing agency before proceeding
ahead with negotiation.
(v) It should be ensured that the executing matching local currency funds would be available
in PSDP/ADP to absorb the aid being sought.
7.30 Instances have come to the notice that executing agencies negotiate and finalize foreign aid
(loans and grants) much beyond the scope and size allowed under concept clearance. It has,
therefore, been decided vide the then Programming Section's O.M. No.7(4)PS/PC/96-FA dated the
9th September, 1996 (Annex---)that in case the loan and/or grants negotiated and/or finalized is
over and above the size and scope of concept clearance the proposal be re-submitted for approval
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of the competent authority. It has further been decided that no aid agreement be finalized and
signed till PC-I is approved or at least anticipatory approval of the competent authority is obtained
with respect to scope and size of the PC-I and possibility of its budgetary financing is envisaged.
Vide Planning and Development Division's O.M. No. 7(20)PS/PC/95-Fa dated 4-1-1997, it has
been decided that concept clearance of foreign aided projects by the Concept Clearance Committee
will be considered as final as was the practice from the year 1983 to 1990 (Annex---).
Provincial Projects
7.31 Provincial projects involving outlay of Rs. 10,000 million or less, approved by the
Provincial Development Working Party which will not be financed entirely from the revenue
surplus of the province, should be forwarded to the Planning Commission for seeking approval of
the Concept Clearance Committee. Provincial projects of more than Rs. 10,000 million will be
considered by the Concept Clearance Committee/ CDWP/ ECNEC as usual.
Federal Ministries/Attached Departments Projects
7.32 Projects of Federal Ministries and attached departments which are sanctioned by the
Departmental Development Working Party may also be forwarded to the Planning Commission
for seeking approval of the Concept Clearance Committee. Federal projects costing more than Rs.
60 million will be submitted to the CDWP as usual.
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Chapter -8:
PROJECT EXECUTION AND IMPLEMENTATION

The Role of Sponsoring, Executing and Implementing Agencies
8.1 Sponsors secure funding for projects from the development budget and serve as project
advocates. The sponsor chooses an implementing agency and is the customer of the implementing
agency. There can be more than one partner sponsoring the project. In that case they act as co-
sponsors with a shared responsibility for securing funds for the project.
8.2 The implementing agency is the entity charged with the responsibility of successful
completion of project’s components including completion of all permits and studies; preparation of
plans, specifications, and estimates; the acquisition of land, rights-of-way etc.; procurement of
goods and services; construction; project management; engineering, including surveys and
inspection etc. There could be a different implementing agency for each component of a project.
To ensure clear lines of responsibility, only one agency can be the Implementing Agency for a
single component. The Implementing Agency is responsible for ensuring the adequacy of its
products through a quality control and quality assurance procedure.
Appointment and Role of the Project Director (PD)
8.3 The activation of the project is achieved through the appointment of a Project Director. As
per ECNEC decision dated 06 May 2011, appointment of an independent (full time) Project
Director is mandatory for the project costing Rs. one billion and above. Project Director can be
appointed on additional charge basis, if the cost of the project is below Rs. one billion. However,
if project authorities have sufficient justification to appoint independent Project Director in projects
costing less than Rs. 1,000 million, the case is placed before CDWP for prior approval with full
justification. The guidelines governing the appointments of independent Project Director are given
at (Annex---).
8.4 Project Director, who is the focal point in project implementation, is responsible for project
execution according to its objectives, work scope and implementation schedule. Suitable and
qualified Project Director should be appointed to manage the project whoshould not normally be
transferred during currency of the project. Project Director should be delegated full administrative
and financial powers to improve project management, supervision and help fix technical and
financial responsibility. No member of staff working under administrative control of the Project
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Director should be posted/transferred without his/her prior consent/concurrence. As a team leader,
he/she is under obligation to account for all actions, steps and decisions taken during project
execution. It is advisable to set up headquarters of the Project Director as close to the site of work
as possible preferably at site, to ensure his/ her availability for taking on-spot decisions on emerging
issues. Project Director should supervise project and try his/her best to resolve day-to-day problems
faced in implementation independently within the administrative and financial powers delegated to
him/her for project execution. If necessary, he/she may seek help from concerned Federal Ministry
and/or Provincial Government for resolving the problems.
8.5 In case of mega projects, consultants should be appointed for preparation and supervision
of work. Consultants should be associated from the stage of preparation of the project.
Donor/lending agencies generally insist on appointment of consultants in accordance with their
own procedures. To enhance of capacity of the local consultant, the government may appoint local
consultant along with foreign consultant if so required. In case it is not acceptable to a particular
donor/lending agency, we should insist that our local consultants should work jointly with foreign
consultants at equal status and reasonable salary structure comparable with their counterparts,
except for the top positions where foreign consultants may continue to operate.
Project Management Unit (PMU)

8.6 The requirements of public administration institutions are increasing and projects becoming
progressively challenging. Managing a project is a complex activity, in particular when it involves
many people working over long periods of time and many different stakeholders. This increasing
complexity requires management practices and tools that assure an efficient use of resources. In
this context, a Project Management Unit (PMU) can be of great value. In the public sector
environment, new projects are constantly being undertaken and public sector is striving for ways to
reduce costs, improve processes, and enhance productivity across them. At times, managing these
projects is a difficult endeavor for which the risk of failure is often too high. One of the most
appropriate methodologies to ensure the governance of projects across all levels is to establish a
Project Management Office (PMO) in line with management standards and best practices. An
effective PMO will then be provided with an infrastructure, resources, processes, and tools
necessary for effective project management by leveraging standards, allocating resources, and
establishing communication channels. The benefits of Project Management Office (PMO) include:
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– Standardized project management methodology across the organization
– Effective reporting on project progress
– Effective project management with available resources
– A central repository for project management
– A central project coordination unit for the stakeholders
Contract Award and Contract Management
8.7 A contract is a legal form of communication agreed to between two parties for further
execution in a bidding form. This facility is used very commonly by the project director/manager
and owner to control the delivery of their projects. A contract has the added advantage of forcing
owners to define their requirements, organize and arrange their thinking, and make a commitment
to their project. It defines the work and the owner’s delegation of responsibilities to the various
parties to complete the work it inherently defines the nature and extent of risk to various parties. It
defines the transfer of financial incentives to complete the work.These are the five basic elements
of a contract
 Offer
 Consideration
 Acceptance
 Legal purpose
 Legal capacity
The agreement is designed to formalize the contract. It brings together all the other contract
documents by reference to them and is a legal instrument verifying the contract.
Contract Administration
8.8 Contract administration involves the following:
•Managing the contract and relationship between the buyer and seller.
•Reviewing and documenting how a seller is performing or has performed to establish
required corrective actions
• Provide a basis for future relationships with the seller,
• Managing contract-related changes and,
• When appropriate, managing the contractual relationship with the outside buyer.
Contract Closure
8.9 Contract closure involves the following activities:
• Completing and settling each contract, including the resolution of any open items,
• Closing each contract applicable to the project or a project phase.
Contracts during Different Phases of Projects
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8.10 Contracts are used during all phases of projects. In the first phase, which is the feasibility
phase, contracts are formed between an owner and a consultant or an engineering firm, or an
architectural firm to perform a feasibility and site selection study. Inthe executionphase contract
isformed between an owner and a contractor firm.
Stages of Contract Management

8.11 Following are the four main stages of contract management in projects:
A. Pre-requisition of invitation to tender
A-1. Completion of feasibility studies
 Technical feasibility
 Economic viability
 Environmental impact assessment(EIA)
A-2. Detailed engineering design
 Design of project components
 Finalization of technical reports
 Specifications
 Computation of quantities
 Formulation of engineer’s estimate
A-3. Administrative approval
 Preparation of pc-1 proforma
 Approval by the government
A-4. Arrangement of finances
 Local & foreign exchange components
A-5. Land acquisition
A-6. Prequalification of contractors
B. Formulation of tender documents
o Specifications
o Detailed Design
o Tender Drawings
o Estimation of Quantities
o Decision About Specific Provisions
o Decision About format-ADB/IDA
o Conditions of Contract - Part 1 & II.
C. Tendering/evaluation/award
C-1. Tendering
– Tendering Process
– Packaging
– Local Competitive Bidding (LCB)/ International Competitive Bidding (ICB)
Tendering
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– Types of Tender
– Procedure for Tendering
C-2. Evaluation
– Tender Opening
– Preliminary Evaluation
– Detailed Evaluation
– Procedure for Preference
C-3. Award
The Tenderer whose tender has been accepted shall be notified of the award by the employer
prior to expiration of the tender validity period in writing. This letter (hereinafter called the
“Letter of Acceptance”) shall state the sum that the employer shall pay the contractor in
consideration of the execution, completion, and maintenance of the works by the contractor
as prescribed by the contract (called the “Contract Price”).
D. Contract administration
o Performance Bond
o Financial Assistance/Mobilization Advance
o Appointment of the Engineer and Authority
o Priority of Contract Documents
o Retention Money
o Insurances and risk management
o Liquidated Damages
o Bonus
o Variation Orders
o Claims
o Dispute Resolution
o Price adjustment Clause
o Taking over Certificate
o Defect Liability Certificate
o Contract Coordination
o Foreign Employee clause
o Project timelines
8.12 Good contract management creates client and customer satisfaction as well as consolidates
long term win-win relationship among all parties involved. Contract law and its management is a
core activity of any project. Contracts not only bind the parties in legal obligations and framework,
they are also instrumental in risk minimization or elimination. For good contract management
knowledge of the following is mandatory and for which the Ministry of Law, Justice and Human
Rights can provide paramount guidance and assistance to government entities.
 Legal aspects of contracts

 Legal provision regarding creation of contracts.
 Legal provision regarding dis-chargement of contracts.
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 Legal provision regarding specialized contracts.
 Practical aspects of contract management:
 Practical handling in creation of contracts.
 Practical approach in inculcation of terms of the contract
 Practical approach in handling of disputes in contracts
8.13 Procurement, contract award and contract management go hand in hand. Procurement in
Government is governed by the Public Procurement Regularity Authority (PPRA) and its rules.
According Public Procurement Rules, 2004 which apply to all procurements of goods, services and
works made by all procuring agencies of the Federal Government whether within or outside
Pakistan.For infrastructure and engineering works contracts samples, guidelines and standard forms
are provided by the Pakistan Engineering Council which are variations based on the international
FIDIC contracts.
8.14 In case of Federal funding Public Procurement Rules2004 and different regulations issued
by PPRA including “the Procurement of Consultancy Services Regulation 2010” are applicable
which are placed at (Annex---). PPRA Ordinance 2002 is placed at(Annex---) for reference.
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Chapter-9:
PROJECT MONITORING
Role in the Project Cycle

9.1 The first three stages of the project cycle (identification, preparation and
appraisal/approval), precede the actual project implementation stage. Once the implementation
stage is reached, the "monitoring activity" assumes great importance which is followed by the final
stage, i.e. project completion/post-completion evaluation. The importance of "monitoring and
evaluation" activities hardly needs any emphasis since both provide timely and useful information
not only to the project management/implementation agencies but also a feed-back to the policy
makers. The linkage between the stages is also important. Each stage leads to the next and the last
phase, in turn, produces new approaches/ideas, improving the planning and implementation
process of future projects. This makes the "Project Cycle" self-renewing.
Conceptual Definition
9.2 Conceptually, "monitoring" means to check and assess the implementation status of a
project/programme/plan during the implementation on a regular basis. The system of watching/
monitoring the progress of a programme/ project implementation, besides being an important link
in the project cycle, helps in the identification/analysis and removal of bottlenecks and expediting
action where projects have stalled or fallen behind schedule. Project monitoring is invariably done
with the active participation of the project management and is, therefore, quite distinct from
inspection which is generally undertaken at a higher level but not very regularly. In fact, project
monitoring is a tool to serve the interests of both the project management and the planners, as they
share a common concern for the timely completion of projects within the approved cost, scope and
time schedule. For an effective monitoring system, the project document must have the following
essential data/information:
A clear-cut statement of project objectives and benefits;
i) Detailed project cost estimates-component/activity-wise;
ii) Source of funding;
iii) Annual financial phasing conceived on the basis of implementation plan;
iv) Physical scope in quantitative terms with components detail; and
v) Phasing of physical scope as per its implementation schedule, duly based on PERT/CPM
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or Bar Charts.
TYPES AND METHODS OF MONITORING
9.3 Conceptually, monitoring is distinguishable into two categories viz Internal and
External. These terms are defined as under:
(i) Internal Monitoring
9.4 Internal monitoring serves the objectives of internal project management and is always the
responsibility of those sponsoring ministries/ divisions and executing agencies directly or
indirectly involved in project formulation, appraisal/approval and implementation, i.e. on daily
basis at the project level, monthly by the executing agency and quarterly by the sponsoring agency.
The internal monitoring unit is to work like an eye of the project management for ensuring the
successful and timely completion of the project. A close collaboration and understanding between
the project management and the monitoring unit is very important. The essential thing is the quick
taking of appropriate decisions on the part of the project management to remove the bottle-necks
and solve the problems.
(ii) External Monitoring
9.5 External Monitoring which serves the objectives of higher level authorities outside project
management is always undertaken by an outside central agency like Planning Development and
Reform Division. This is done to watch the progress of development projects to gain inside
knowledge for the benefit of the planning agency from the macro-planning point of view and that
of the sponsoring agency for strategic feed-back on the progress of implementation, its impact on
problems and removal of bottlenecks. Accordingly, as per the Rules of Business, 1973 issued by
the Cabinet Division (updated upto February 1985), progress monitoring of all major development
projects/ programmes, identification of bottle-necks and initiation of timely action is included in
the charter of duties of the Planning and Development Division (Annex---). The external
monitoring unit which works along with the internal monitoring system provides a link between
the higher level authorities and the project management. The internal monitoring unit has to feed
the external monitoring unit with necessary information. The external monitoring unit makes
efforts for the preparation of special review reports and collection of information on the spot,
through field visits, to counter-check the validity of information being provided by the field staff.
Methods of Monitoring:
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9.6 The methods or techniques adopted for project monitoring should effectively measure the
progress of a project, in comparison to its approved cost, scope, time schedule and objectives and
be capable of producing the information, according to the requirements of all concerned. The
implementation schedule of the smaller projects may be prepared in the form of Bar Charts.
However, for the major projects, the project management must use modern network methods
(CPM/PERT) to plan in advance, time and resources required for completion of individual
activities. All these techniques can be applied effectively for progress monitoring of capital
expenditure strictly in accordance with the physical scheduling. The NEC at its meeting held on
July 4, 1988 also directed that the implementation schedule be based on Bar Charts/PERT/CPM,
which should essentially form part of every project document. It further directed that the schedule
rates used in estimating project cost should regularly be updated by taking into account the market
rates, instead of allowing across-the-board premium on the schedule of rates.
The monitoring methodology being followed by the Projects Wing since its creation in 1983 is
briefly described below:
(a) Project selection criteria:
9.7 The Projects for monitoring are selected on the basis of the following criteria:-
i) The size of projects in financial terms, i.e. projects costing Rs. 50.00 million and above;
ii) Slow-moving foreign-aided projects;
iii) On-going major projects where some progress has already been made, particularly those
facing inter-agency coordination/ implementation problems;
iv) Projects not monitored for the last one year or more; and
v) Special M&E assignments by the CDWP, ECNEC or any other authority.
In addition, where the importance of the development impact justifies it, projects can be
selected for review irrespective of the volume of investment.
(b) Collection of Monitoring Data:
9.8 As referred to earlier, a specially designed proforma for progress monitoring (PMES-I) is
directly addressed to the Project Directors under intimation to all concerned for reporting
implementation status particularly on the following:-
i) Project's approved PC-I cost, time schedule and objectives;
ii) Item-wise physical and financial progress;
iii) Any changes in the plan of work or envisaged activities, along with the cost estimates
andlikely period of completion of the project;
iv) Expected cost and time over-runs; and
v) Problems being encountered in the implementation of the projects with proposals for
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remedial measures.
Quarterly progress is obtained on PMES-II proforma from executing agency.(Annex--)
(c) Monitoring Teams:
9.9 Multi-disciplinary monitoring teams, comprising the representatives of the Planning and
Development Division (Projects Wing and concerned Technical Sections), Sponsoring/executing
agency and Provincial Government (for provincial projects only) are deputed for undertaking site
visits and also to focus specifically on the following:-
i) Divergence between the PC-I work plan and the actual physical implementation;
ii) Whether the physical output is commensurate with the financial outlay of the projects?
iii)Status of foreign-aid utilization;
iv) Availability of inputs other than finance;
v) Unit rate analysis and assessment of project effects viz-a-viz output, employment,
environ-mental etc; and
vi) Source of the recurring cost and maintenance liability on completion of project.
(d) Progress Monitoring Reports:
9.10 The review reports generally consist of four parts. The first part gives the background
of the project, approval, financial allocation, utilization/ expenditure by main items, and the
likely cost after of the project, physical progress and the bottle-necks, if any. The second part
deals with results covering economic, financial analysis etc; the third part embodies findings
and the fourth part relates to statistical appendices. After its approval, the same is circulated to
concerned sponsoring ministry/ division/executing agency, Project Director, concerned
economic/technical sections of the Planning and Development Division and Finance Division
(Development Wing) for comments and initiating actions on the measures/ recommendations
made in the report. The progress monitoring reports are in the nature of review of progress as
related to project implementation status/work plan particularly with reference time and cost
over-runs and removal of bottlenecks.
(e) Inter-agency Meetings:
9.11 Inter-agency meetings are also organized by the Projects Wing in case of a situation
which coordinated effort on the part of more than one organization/agency and to discuss draft
review reports of the monitoring teams.
Project Monitoring and Evaluation System (PMES)

9.12 The Management Information System of an organization plays an important role in
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decision making. No sizeable organization can work effectively without a well-managed
information system. To introduce professional project management in Public Sector and to
make the projects monitoring and evaluation more effective, a web based Project Monitoring
and Evaluation System (PMES) has been developed. It is facilitating the line
ministries/divisions for projects planning, progress tracking, monitoring and timely
identification of corrective actions.
PMES provides three major functionalities:
i. Tools & Systems for Project Management
ii. Systems for monitoring and evaluating projects
iii. Analytical tools for overall PSDP/portfolio analysis
9.13 PMES is the backbone of PSDP projects monitoring activity which comprises of a data
bank of the implementation information like cash/work plan, releases of funds, physical and
financial progress etc. of the development projects.
PMES serves three informational requirements:
a) For Project Directors/Project Implementing Authorities:
i. Firmness and clarity of scope as per PC-1 ( Profile)
ii. Provides tools for project Planning and control (Cash/Work plan)
iii. Track progress and report issues (PC-III A, PC-III B)
b) For Controlling Ministries
i.
Approve financial/Physical requirements of Projects as per Ministries
priorities (Cash/work plan)
ii. Have a quick access to progress and issues in their project
c) For Planning Division:
iii. A Platform for professional monitoring (Project scope, plans, progress,
issues etc)
iv. Overall progress of PSDP projects
v. Repository for projects
vi. Projects synopsis and PSDP projects performance analysis (Executive
Dashboard)
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Chapter-10
PROJECT EVALUATION
Purpose of Evaluation:
10.1 The final phase in the project cycle is itsevaluation. The analyst looks systematically at the
elements of success and failure in the project experience to learn how to plan better for the future.
Thebasic objective of such a study is to ascertain the real worth of a project or programme as far
as possible. Broadly speaking, evaluation may be defined as "a process which attempts to
determine as systematically and objectively as possible the relevance, effectiveness and impact of
activities in the light of the objectives". It is, thus, a critical analysis of the factual
achievements/results of a project, programme or policy vis-a-vis the intended objectives,
underlying assumptions, strategy and resource commitment. In specific terms, it makes an attempt
to assess objectively the following:-
(a) the relevance and validity of the objectives and design of the project/programme in terms
of broader issues of development policy, sector/sub-sector priorities and strategies as well
as other problems of a wider nature;
(b) the efficiency and adequacy of the pace of progress of the project/programme where the
focus is mainly on managerial performance and productivity;
(c) the effectiveness of the project/programme - a major part of an evaluation exercise-in
realizing the intended objectives from a variety of angles; and
(d) the identification of reasons for the satisfactory or unsatisfactory accomplishment of the
results of the project/programme and to deduce critical issues and lessons which may be of
relevance to other on-going and future projects/programmes of a similar nature.
Types of Evaluation
10.2 Evaluation can be applied for different purposes as well as to a specific activity, project or
programme. It is not restricted to the completion stage only but involves periodic investigations at
many stages. The different types of project evaluations carried out are: (i) ex-ante evaluation, (ii)
on-going evaluation and (iii) terminal evaluation/ex-post evaluation. The ex-ante evaluation/pre-
approval appraisal has already been discussed with methods and techniques in earlier chapters.
The on-going evaluation is carried out by the organization of its own to re-assess the projected
feasibility of the PC-I content because of the time lag, while external evaluation is done by an
agency other than the body involved in the implementation of a project. On-going and post-
completion evaluation is discussed below:-
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(a) On-going/Mid-term Evaluation
10.3 The main purpose of an on-going/mid-project evaluation is to assist the project
management to make appropriate adjustments in the changed circumstances or to rectify any
shortcomings in the original design, so as to improve its efficiency and overall performance.
(b) Post-Completion Evaluation
10.4 The purpose of an ex-post or post-hoc evaluation is to discover the actual, as opposed to
the projected, results of implementing a project. The aim of evaluation is primarily to compare
the actual outcome of the project with the projections made at the appraisal stage. The examination
of different aspects of the project can provide important lessons derived from experience for the
new projects. The overall impact of the project will result in a number of effects which can be
classified as costs and benefits, direct and indirect or tangible and intangible. Ex-post evaluation
takes place after the completion of the project and is often more in-depth as it focuses on the
analysis of impact. Besides, it is time-consuming, costly and calls for persons with special skills.
METHODS OF EVALUATION
Evaluation Indicators
10.5 Evaluation indicators are the yardsticks for the assessment of overall performance of a
project/programme with reference to stipulated targets and objectives. The main indicators can
be identified as under:-
i) Physical achievements indicators
Overall physical progress and Overall cost utilization
Timely or untimely completion of a project or a programme (delay in years).
ii) Output or Impact Indicators
Production (whether crops, livestock, forest products, fish, etc.) e.g., percentage of children in a
target group receiving supplies feed, number of acres surveyed, loan applications
processed/approved, trained manpower, a laboratory set-up etc.
iii) Economic Indicators
Financial and economic benefits (e.g. financial rate of return, internal rate of return, benefit-cost
ratio, etc.).
iv) Social Indicators - Quality of Life Indicators
Income distribution with equity, level of food consumption, health and education facilities,
shelter, access to essential amenities/basic needs, life expectancy, etc.
Chapter- 11
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PROJECT CLOSURE AND TRANSFER OF ASSETS
What is project closure?
11.1 The principal aim of project closure is to mark achievement of an important stage in the
project cycle and to inform all parties. The final stage of the project is its completion and formal
closure. Project closure triggers the winding up of technical, operational and/or administrative
actions by the project sponsoring public sector entity as determined in the last approved version of
the PC-I.
When a project is considered completed/closed?
11.2 The project is considered to be completed / closed when all the funds have been utilized and
objectives achieved, or abandoned for any reason. At this stage, the project has to be closed
formally, and reports prepared on its overall level of success on PC-IVproforma. PC-IVis evaluated
by the projects wing/concerned technical section and decision on project assets or requirement of
human rehouses is decided to run the activities after completion of the project. What does project
closure involve?
11.3 Project closure involves handing over the deliverables to the concerned authorities, closing
of supplier’s contracts, and closure of bank account, releasing security money, staff and equipment
and informing stakeholders of the closure of the project as per last approved PC-I. Project closure
can be best understood by dividing the closure into operational closure and financial closure as
described below:
Operational closure
11.4 Operational closure signifies the stage when the last input has been provided, all project
activities have ended, assignments of all project personnel have been completed, disposal/transfer
of equipment purchased by the project has been carried out. It also marks the point in time beyond
which no further financial obligations/commitments should be incurred. For regular operation and
maintenance of projects after completion stage, it should be handed over to the agency responsible
for maintenance and operation. Timely efforts are required to be made for the handing over of the
project and provision of maintenance cost to the authority concerned. This exercise should be taken
in hand before six months of the expected completion date. If any of the project staff has to be
retained for the operation of the project, a case for the shifting of the post in revenue budget may
118
be initiated and got approved from the Finance Division well in time so that continuity in project
operation is not hindered and public assets created under the project are properly maintained. After
closure of the project, annual operation reports have to be submitted to the Planning Commission
every year for five years on PC-V proforma.
Financial closure
11.5 Financial closure follows the operational closure as soon as possible. Ideally, the operational
and financial closure should be done simultaneously in order to avoid large gaps between the
operational closure and financial closure. Financial closure marks the date after which no further
transaction on that project account will be permitted. The sponsoring agency concludes that all
financial transactions authorized by it are finalized and that there are no further financial
commitments (Hard/Soft Commitment) or forecasts, that there is no cash deficit or a liability exists.
The sponsors must also verify that total expenditures are within the allotted budget. However, the
closure of the project may not be delayed on account of security money. It is recommended that
pay order of security money be got prepared from banks and released after completion of
maintenance period/ defects liability period as per rules. The financial closure may be achieved
within six months of operational closure.
Who is responsible for project closure?
11.6 The project sponsoring agency is responsible for initiating, carrying out and monitoring and
executing the tasks necessary for completion and closure of the project. They have the final
responsibility for ensuring the project closure tasks are undertaken as and when required. It is worth
mentioning that liquidation of commitments is usually the most time demanding task and for this
reason it is advisable that the sponsoring agency prepares and regularly updates the liquidation of
commitments, including final payments. The same applies to the disposal or transfer of project
assets.
Basic procedures and check list for project closure
11.7 The project sponsoring agency initiates project closure by:
• Consulting the last approved version of the PC-1 and its amendment(s)/ revision(s) if any
to determine the final closure date;
• Prepares the project completion report PC-IV well in time;
119
• Ensures that the terminal report PC-IV is drafted and technically cleared by the relevant
sponsoring agency before submission to Projects Wing of the Planning Commission;
• Submits the same PC-IV to the Projects Wing Planning Commission.
• Changes the project status in the Project Monitoring & Evaluation System (PMES) to
“Activities Completed” as a means of marking a project as being in the process of
operationally and financially closed;
• Provides recommendations for the disposal or transfer of assets purchased by the project;
• Coordinates the departure of the project personnel and communicates with the concerned
unit six months before the project closure date, so that action to transferor or separate
personnel is taken;
• The project sponsor ensures that the last project inputs are provided by directing completion
of all subcontracts, ordering the last expendable or non-expendable equipment items;
• Provides the account closing instructions including impress accounts to the concerned
quarters if relevant and applicable;
• Conducts disposal of project equipment if required either by transfer/ donation to other
sections/departments, sale or write-off. Unless disposal directives are already specified in
the PC-1, the main options for disposal of equipment’s in projects are for equipment either
to be donated/transferred to the recipient department/ government, transferred to another or
follow-up project or become part of the sponsoring agency’s inventory. Further options are
that equipment items may be sold or, in specific circumstances, written-off with the
approval of the competent authority. For all projects, vehicles shall be transferred to the
government/ministry.
• It is the responsibility of the sponsoring agency to inform all concerned parties about
operational closure. The sponsoring agency of the project is responsible for conducting post
completion audit and prepares a budget revision in order to surrender the balance of the
project allocation/release if any.
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MINISTRY OF PLANNING, DEVELOPMENT AND REFORM

Chapter -2 Planning Architecture at Provincial Level 15-30

Chapter -3 Project Management Frameworks 31-42

Chapter – 4 Project Identification 43-60

Chapter – 5 Project Preparation 61-72

Chapter - 7 Project Approval 89-98

Chapter – 8 Project Execution and Implementation 99-104

Chapter – 9 Project Monitoring 105-109

Chapter – 10 Project Evaluation 111-112

Chapter – 11 Project Closure and Transfer of Assets 113-115

PLANNING ARCHITECTURE AT FEDERAL LEVEL

1. Mr. Zahid Hussain, 1953 to 1958

Ministry of Planning, Development and Reform (M/oPDR)

The National Economic Council (NEC)

Central Development Working Party (CDWP)

Departmental Development Sub-Committees (DDSCs):

The composition of the PDWP is as under:

DEPARTMENTAL DEVELOPMENT WORKING PARTY: (DDWP)

DISTRICT DEVELOPMENT COMMITTEE (DDC):

All development funds are provided by the Federal Government.Details at(Annex----)

AZAD, JAMMU AND KASHMIR:

GB-DWP Projects above 200 Minister Finance, Minister P&D

PROJECT PLANNING AND MANAGEMENT

Formation of International Associations

Project Management Body of Knowledge (PMBOK)

• Application Area Knowledge, standards and regulations

Project in Controlled Environments 2 (PRINCE2)

Project and Program Management for Enterprise Innovation (P2M)

A Case for Globally Accepted Standard of Project Management

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

i. Government agencies preparing the national, regional or sectoral development plan;

Project Strategic Linkages

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

Plan Priorities / Plan Documents

Five Year Plan

Five Year Plan Periods in Pakistan

National Development Program Outlay

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

Public Sector Development Programme (PSDP)

(a) Harmony with National Development Planning

(b) Sectoral Balance

(c) Provincial Equilibrium

Release of PSDP Funds

i) 1st& 2nd quarters 20% each

 Sponsoring Ministry/Agency will submit release request on prescribed proforma

 PIP Section examines and processes the release case.

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

PSDP Review Meetings

Special Purpose Vehicle (SPV)

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

Special Policy Directives

Pakistan Policy on Public Private Partnership

The Public Private Partnership Authority Act, 2017

i) Minister of Planning, Development and Reform Chairperson

Public Private Partnership structure at Provincial level

Functions of the PPP Unit include:

Document Format for Preparation

Weaknesses in Project Preparation

i) Inadequacy of data specially situation on ground

Key Components of the PC-I

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