1. IPA Funds Programme Management 12-19 sept. 2011 1 Bölgesel Rekabet Edebilirlik Operasyonel Programı’nın Uygulanması için Kurumsal Kapasitenin Oluşturulmasına Yönelik Teknik Yardım Technical Assistance on Institutional Building for the Implementation of RCOP in Turkey This project is co-financed by the European Union and the Republic of Turkey Project Appraisal in depth for Business Infra and Business Support Gerbrand.vanBork@ecorys.com

2. 2 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Project Appraisal Objectives  Understand key principles of project appraisal  Project selection by selection criteria approach Key points  Call for proposals  Selection criteria  Feasibility Study

3. 3 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Concept Project Proposal Funding Implem- entation Need More information Project Idea & Partner Search Screening/Prioritisation More mature project Project Proposal & Partnership The Project Pipeline Process

4. 4 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 The Project Appraisal Process Not eligible (Information to MC and Lead Applicant) Eligible 0 Knock out (objective of the project can not be fulfilled) 1Very poor 2Poor 3Adequate 4Good 5Excellent 1. Eligibility Check 2. Quality Check 3. Approval Rejected Approval with conditions Approval

5. 5 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 A. Eligibility Check Documents submitted in due time Application is complete Application is fully and properly filled, signed, dated and stamped All Co-financing Statements are correctly filled and printed (draft) Partnership agreement Partnership, budget, etc. following rules (minimum / maximum partners?)

6. 6 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 B. Quality Check (Selection Criteria) 1) Relevance of the proposal 2) Coherence of the proposal 3) Quality of results 4) Quality of management 5) Quality of partnership 6) Budget and finance Content related Implementation related

7. 7 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 The general evaluation critera

8. 8 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Criteria for Project Appraisal Important categories of appraisal criteria: 1. Institutional assessment (implementation related) 2. Relevancy of the project 3. Coherence of the proposal 4. Effectiveness and efficiency 5. Risk assessment 6. Economic and financial assessment 7. Sustainability of the project 8. Cross-cutting issues

9. 9 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 1.Institutional Assessment: suitabilility of applicant and partners for implementing the project Are the implementation structure and responsibilities clear? What is the experience of applicant with relevant project implementation experience? Is a PIU established and no. of operational staff? Experience of staff in PIU? Financial status of applicant? Partnership: are relevant partners involved (NGOs, key SMEs etc.) eligible and suitable?

10. 10 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 1.Business infra and support projects projects Partnership: Is a key branch or business organisation involved? Are key players in the sector involved? Is there a demand pull mechanism in the project?

11. 11 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 2. Relevancy of the project Justification: what are the key problems the project should solve or what are the needs of the target group (or opportunities)? Does the project address the causes of these problems/needs of the target groups or opportunities? Are the target groups the relevant ones?

12. 12 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 2. Relevancy: business infra and business support Business infra: Demand and shortage? The right concept and sectors targeted? Business support: The right clusters or SME types targeted? The right training and consultancy planned (relevant for business needs)?

13. 13 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 3. Coherence of the proposal Is the project logically structured (LFA: overall objective, specific objective, activities, measurable indicators quantified) Do the activities lead to the results and specific and overall objectives? Is the target group clearly defined? Are the indicators well defined, SMART and relevant for assessing the achievements regarding the objectives Is there a clear and feasible implementation schedule?

14. 14 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 4. Effectiveness and Efficiency Are the expected impacts on the main objectives potentially substantial or very limited? What are the cost per effect obtained (cost- effectiveness)? Co-finance: are the contributions of main stakeholders who obtain benefits from the project in line with these benefits?

15. 15 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Effectiveness: Business infra and business support Business infra: Sustantial amount of new companies or visitors pot. attracted? Net employment impacts substantial? Business support: Impact on cluster growth, business turnover, profits or employment expected? Impact on investments? Impact on nr. of start-ups?

16. 16 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Effectiveness: innovation projects Is the future growth potential of the relevant cluster likely? Is there a pull mechanism in the project to create market oriented innovations? (partnership: companies or branches involved, open shared facilities, innovation platforms and networking mechanisms) Uniqueness: is the innovation or research project different from other innovation initiatives elsewhere? Promotion: is there a mechanism in the project to diffuse/ promote the innovations? (demonstration facilities, platforms, etc.) Is the innovation project linked to other initiatives or universities?

17. 17 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Efficiency Business infra: Is the ratio between estimated costs and expected results satisfactory? - Cost per ha land? - Cost per new companies or visitors pot. attracted? - Cost per gross or net employee created? Is the proposed expenditure necessary for the implementation of the action? Business support: Cost per business plan or company trained? Cost per start-up expected?

18. 18 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 5. Risk Assessment Are there important risks for the project? Can the project deal with these risks (is the design so that risks are minimized)? Unacceptable risk (killer assumption): redesign the project!!!! How to assess importancy of risks? Impact on projects LowMediumHigh Probability 0.65 - 1.0MediumHighUnacceptable 0.3 - 0.64LowHighUnacceptable 0.0 - 0.29LowMediumHigh

19. 19 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Risks Business infra: Competition and demand (attraction of new companies or visitors) Cost overruns Technical implementation and delays Business support: Low participation of target group No demand pull mechanism Innovations not diffused or adopted Competition from other sectors or other innovation projects (in or outside Turkey) Lack of other relevant support policies

20. 20 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 6. Economic and Financial Appraisal Does the project really need a subsidy (is the project not profitable?) (see later) Is the project financially sustainable? How big are the expected main economic impacts (employment, incomes)? Are the outcomes of the CBA (if available) positive?

21. 21 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 7) Sustainability of the Project What is lasting after the project has been implemented? Institutional sustainability: what provisions for long term are made in the project? Exit strategy and follow –up available? Financial sustainability: are there financial means arranged for long term impacts?

22. 22 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 7. Sustainability mechanisms for business support Ownership of political and management levels Budget agreements on financing of long term business support (centers) Sound business support models (services, target groups, mechanisms) Financial models (fee based business support) Capacity building in services delivery and fund raising

23. 23 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Sustainability mechanisms for innovation projects Ownership of political and management levels Bedding in research institutions and regional network Budget agreements on financing of long term operational costs of research centers Sound partnership/collaboration models and dissemination/diffusion methods Open facility sharing and up to date research and facilities Good legal framework for patents and publications

24. 24 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 8) Cross-cutting issues Impacts on horizontal principles Gender equality Minorities and disadvantaged groups Environmental impacts Information Society and Innovation

25. 25 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Exercise: Project Appraisal 2. Objectives, Rationale, Results, Activities and SustainabilityAssess the OIS in your folder (and mainly read 2. Objectives, Rationale, Results, Activities and Sustainability and focus on relevancy, effectiveness and sustainability of the project. a)What are strong points of the operation? b)What are weak points? c)What should be improved? d)How could sustainability be (further) improved?

26. 26 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Steps in Feasibility Analysis/CBA 1.Step 1: Context analysis & project objectives 2.Step 2: Project identification 3.Step 3: Feasibility and option analysis 4.Step 4: Financial analysis 5.Step 5: Economic analysis 6.Step 6: Risk assessment and sensitivity analysis

27. 27 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 1: Context analysis & project objectives Socio-economic context of the project Consistency with EU and national frameworks Legislation Policies What are the key objectives of the project?

28. 28 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 2: Project Identification Problem or need analysis: what is the main problem or need as a justification for the project? The project must be a clearly identified single unit of analysis Scope and scale of the project Identification of project services (“the project market”) Identification of relevant stakeholders (winners and losers)

29. 29 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 3: Feasibility: demand versus supply

30. 30 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 3) Option Analysis Are other policy options for reducing the problem considered? Do Minimum alternative: cheaper smaller scale solutions, use of existing facilities Global alternatives: Non investment policy instruments (regulation, pricing etc.)

31. 31 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 4 Financial Analysis  What is the project’s commercial profitability?  What amount of finance is needed and how will the project be financed?  What will be the subsidy (or EU contribution)?  Will the project be financially sustainable? Financial Analysis FINANCIAL SUSTAINABILITY FINANCIAL PROFITABILITY The answers to these questions are given by the financial analysis of the project FINANCIAL VIABILITY

32. 32 This project is co-finnced by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Financial return on investment

33. 33 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 5: Economic analysis: socio economic costs & benefits of projects Contribution of the project to wellfare (well being) of the country or region: so all impacts are in principle included Perspective: society Types of impacts: Market impacts: for users and suppliers on the market of project services (coverse financial analysis + add) Non market (external) impacts: no market price available: environmental impacts, social impacts Indirect impacts: priced impacts for other markets/actors

34. 34 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Outcomes CBA Decision rules government

35. 35 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Step 6. Risk and sensitivity analysis External risks (political, economic, demographic) Project internal risks (technical, organizational etc.) Selection of important factors which influence the results (NPV of IRR): Sensitivity analysis: impacts of different factors on outcomes demand, FA, CBA Scenarios future amount of waste (or water/ energy consumption) Discount rate Higher financial costs etc.

36. 36 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Example: Possible risks business infrastructure Competition of other business parks Lower demand for land (lower economic growth) Lower land prices Higher investment costs Higher operating costs Delays in construction due to technical risks or land acclamation problems

37. 37 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Conclusions Feasibility studies are useful for decisions of government (project selection, timing, size) Feasibility studies can help to improve projects (timing, size) Feasibility study shows items for risk management Assumptions are important for the outcomes of the study Check the assumptions in the studies!

38. 38 This project is co-financed by the European Union and the Republic of Turkey IPA Funds Programme Management 12-19 sept. 2011 Each group will identify for their project which elements should be in the Terms of Reference for a feasibility study 1. What are the most important questions and specific issues relevant for your project for the consultant to address? 2. Which important risks should be described and which sensitivity analysis should be undertaken? 3. If you have time: which partners/stakeholders would you invite for guiding & commenting on the study?