Contracting Out

Relationship Between Contracts and Projects  Contract Legally enforceable document Purpose  Judicial review in event of a disagreement between the parties A good contract is able to be understood by a member of the judiciary Projects: define obligation by time and money. Limited time and limited money

Judicial Review of Contracts  Judge may be assumed to be a lay-person in terms of the technical aspects of the contract  For judicial review the contract should strive to make the technical issues as clear as possible Understandable not just to project teams but to lay individuals as well

Judicial Review of Contracts  Few contracts are in fact brought before the judiciary for determination Nonetheless, it is this ultimate test--against judicial criteria--that sets the pattern for contract administration

Project Planning Documents  Help clarify contract elements  Consists of the following: A meeting of the minds Specific deliverables Consideration Force Majeure Objectively Verifiable Indictors

A Meeting of the Minds  “Intent” of a contract  Establishes for judicial review "why" the contract was entered into Includes knowing why the two parties have entered into a contract; their long-term objectives  Actions consistent with the meeting of the minds are consistent with the contract Actions inconsistent may constitute breach of contract or non-performance

A Meeting of the Minds  Relates directly to the purpose and goals identified in the project’s planning document  Project document always indicates “outputs” in the hope that it will result in an agreement that the task is completed

A Meeting of the Minds  Contractor is expected to obey “reasonable person” rule contractor is expected to do all the things that any reasonable person would do given the resources available, and add to the list of outputs in order to reach the agreed upon purpose contracting agent agrees to modify or add to the inputs in order to reach a modified “meeting of the mind”

A Meeting of the Minds  Contracting agent has a reasonable right to expect that the contractor will obey the “reasonable person” rule  However, contractor expects that the contracting agent will attempt to take all reasonable actions necessary to realize the overall goal of the activities

A Meeting of the Minds  “Purpose” of Contract Most important project focus Facilitates "meeting of the minds" by clarifying long- term objectives

In the Development Context  Parties to the Contract: Developing Country Sponsoring or donor agency  USAID, the World Bank, UNDP Host Country Contractor  NGO, For-profit private firm, University

In the Development Context  Developing (host) country is usually considered ultimate “client” of the contractor, although this is not legally binding if the contract is made with the donor agency

Deliverables of Contract  Essentially the “outputs” Things the contractor has agreed to produce  Important to note that deliverables under a contract should be results, not activities (or inputs) Further, objectively verifiable indicators must be provided for each output with qualitative, quantitative, and time targets

Consideration  Essence of a contract, particularly in terms of its equity provisions  What do a contractor and contracting agent each promise to provide each other?

Consideration  Minimum guarantee is the inputs Contractor agrees to provide technical personnel, commodities and undertake activities, etc. Sponsor agrees to pay contractor certain fees, and may provide on-site support, etc. as agreed upon in the contract

Force Majeure  The project framework documents and the contract clarify force majeure by: Identifying factors that require re-analysis of the ability to perform Setting levels at which those factors become important

Force Majeure  At input level, contractor identifies assumptions that must be made in order to guarantee ability to produce outputs Example : If the contractor assumes that host government will provide ten vehicles and drivers in order produce the project outputs, but in fact only five are provided, then we expect a corresponding reduction in the quantity or quality of outputs produced

Objectively Verifiable Indicators  Indicators that determine if the terms of a contract have been met To avoid a misunderstanding and provide an objective means for recognizing successful achievement of the project objectives, the contract and associated planning documents must establish “objectively verifiable indicators”

Objectively Verifiable Indicators  Indicators show the results of an activity Not the conditions necessary to achieve those results  Indicators clarify exactly what we mean by our statement of the objectives at each level in the project planning document

Objectively Verifiable Indicators  At input level: only concerned with consumption of project resources  At the purpose level: These are of particular importance and are given a special name: End of Project Status (EOPS)

Project Planning and the Planning Cycle Contracts, Foreign Aid and International Development

Interaction of Major Agency Processes Office of Management And Budget (OMB) Evaluation Ex-Post Facto Evaluation Implementa- tion Pre- Implementa- tion Project Paper (PP) Project Review Paper (PRP) Project Identification Document (PID) Field of Concentration Strategy (DAPII) Country Program Strategy (DAPI) Prior Evaluation Operational Year Budget (OYB) Appropriation Congressional Presentation (CP) Budget Submissions Ongoing Projects Host Country Legis- lation Foreign Policy LDC Needs Agency Policy Global Sector Strategies Regional Strategies Research Strategy Management Objectives Financial MANAGEMENT Programming INFORMATION Management Reports Implementation SYSTEM External Needs Program SupportData Bank (CPDB, PAIS, DIS, ESDB) Personnel Administration SupportDatabase for Future Decisions, Policy Lessons Learned Evaluation Criteria Project Reporting Project Performance Tracking (PPT); Financial Reporting Planning Budgeting Design Approval Implementation Evaluation Reporting

Blueprint Approach to Development Planning Pilot Project Researchers Before-After Surveys Planner Administrators Target Population Evaluation Researchers Actions Project Blueprints Actual Change Versus Targeted Change Tested Models

The Project Cycle  Analysis--collection of: Social Analysis targeted groups: women, minorities, indigenous peoples Economic Analysis--Cost Benefit Institutional Analysis  Sustainability  Organizational Requirements  Recurrent Cost Implications  Human Skills Needed  Social Acceptance

The Project Cycle  Design Identifying nature of problem and possible solutions-- specific needs and desired changes  Appraisal (Mandatory) data needed to prepare project plan

The Project Cycle  Analysis--collection of: Prediction Selection of preferred alternatives

The Project Cycle  Analysis--collection of: The Logical Framework: (LOGFRAME)  If-then conditions  AID moved away from logframe  Was replaced by a system based on identifying Strategic Objectives, Intermediate Results, Measurable Indicators, etc.  That system was recently "de-emphasized."  AID mission requests for funds were tied to promises of specific results  Results Framework system is "under review." The documents:

Source: Project Management System, Practical Concepts, Inc., Washington, DC Project Objectives Achieved 3. Evaluation2. Execution 1. Design The Project Cycle

Logical Framework Performance Networks Practical Concepts, Incorporated Project Objectives Achieved 3. Evaluation2. Execution 1. Design Evaluation SystemReporting System Evaluations assess performance against plans and analyze causal linkages Progress indicators and formats for communicating project information Networks display performance plans over time ACHIEVEMENT EXCEPTION Project Management System Provides Management Tools to Support all Stages of the Project Cycle

Preparation of Documents: Donor - USAID  Country Strategy Paper  Concept Paper  Project Identification Document (PID)

PP (USAID) (PP = Project Paper) Program Agreement (Donor) Technical Proposal (Contractor to Donor) Country Context (Contractor to Country) Implementation Documents

The Project Cycle  Implementation Carrying out actions planned Personnel  local (and foreign) Physical and organizational Needs

The Project Cycle  Monitoring and Evaluation:  Linked to End of Contract and Verification of Objective indicators Understanding what has happened and assessing changes and quality of change Issue: sustainability regarding follow-on within the country and replicability from one country to another

Monitoring and Evaluation  Nature of Data: Interview vs. survey Seat of the pants observation  "the old quick and dirty" The problem of project goals:  Goals are to be limited and bounded  Specific activities are to be clearly defined and achieved  Short run success leads to successful evaluation  Short-term loop is five years

Monitoring and Evaluation  Nature of Data: Judgment: Evaluation vs. Assessment  Two views: a. Learn from experience b. Judge performance  Problem : judgment requires clear goals, in contradiction with learning  Problem : power of the expert

Monitoring and Evaluation  Nature of Data: Evaluation is a donor requirement  External activity  Targets blueprint activity (CPA)  Critical path analysis (Time based action)  PERT chart (Project Evaluation Review Technique) very technical, programmed  Evaluation often the need for more action

Monitoring and Evaluation  Nature of Data: Evaluation as an end product:  Separate from implementation  Action pre-determined in design prior to evaluation Separates evaluation from the on-going activity

Monitoring and Evaluation  Issues Problem with Evaluation concept  Implementation suggests a finished product  Bureaucratic action is ongoing  Part of larger system with ambiguous boundaries Assessment  Ongoing, part of implementation process

End of Project Status (EOPS)  Are of great importance and are primary target of project efforts and discussion  Projects are usually very complex It is common to find that no single indicator is sufficient to describe the project achievement completely

End of Project Status (EOPS)  In determining EOPS we apply following principle: If all EOPS conditions are satisfied, then there would be no credible alternative explanation  Except the purpose of the project (and the contract) has been achieved Good project design will include the conditions that demonstrate successful achievement of the Project Purpose

End of Project Status (EOPS)  Example PROJECT PURPOSE IN THE DEVELOPMENT OF AN OIL FIELD:  Export oil EOPS  50,000 Barrels of crude/day transferred to tankers at nearest port;  Quality of crude produced is competitive with that currently sold on world market. To verify, one needs a) the purity of oil, b) the world price, c) price sold, d) amount sold