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Project Cycle

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How The Project Cycle Works:

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Project Cycle

What is a project?
The World Bank lends money to low and middle-income countries to support development and change. Development projects are implemented by borrowing countries following certain rules and procedures to guarantee that the money reaches its intended target.

On this page
Identification- Preparation- Appraisal- Approval- Implementation
Completion- Evaluation

Country Strategy and Project Identification
The World Bank works with a borrowing country's government and other stakeholders to determine how financial and other assistance can be designed to have the largest impact. After analytical work is conducted, the borrower and the Bank produce strategies and priorities for reducing poverty and improving living standards. (See Poverty Reduction and Country Strategies)

Identified projects can range across the economic and social spectrum from infrastructure, to education, to health, to government financial management. The World Bank and the government agree on an initial project concept and its beneficiaries, and the Bank's project team outlines the basic elements in a Project Concept Note. This document identifies proposed objectives, imminent risks, alternative scenarios, and a likely timetable for the project approval process. Two other Bank documents are generated during this phase. The Project Information Document contains useful public resources for tailoring bidding documents to the proposed project, and the publicly available Integrated Safeguards Data Sheet identifies key issues related to the Bank's safeguard policies for environmental and social issues.

Project Preparation
The borrower government and its implementing agency or agencies are responsible for the project preparation phase, which can take several years to conduct feasibility studies and prepare engineering and technical designs, to name only a few of the work products required. The government contracts with consultants and other public sector companies for goods, works and services, if necessary, not only during this phase but also later in the project's implementation phase. Beneficiaries and stakeholders are also consulted now to obtain their feedback and enlist their support for the project. Due to the amount of time, effort and resources involved, the full commitment of the government to the project is vital.

The World Bank generally takes an advisory role and offers analysis and advice when requested, during this phase. However, the Bank does assess the relevant capacity of the implementing agencies at this point, in order to reach agreement with the borrower about arrangements for overall project management, such as the systems required for financial management, procurement, reporting, and monitoring and evaluation.

Earlier screening by Bank staff may have determined that a proposed project could have environmental or social impacts that are included under the World Bank's Safeguard Policies. If necessary, the borrower now prepares an Environmental Assessment Report that analyzes the planned project's likely environmental impact and describes steps to mitigate possible harm. In the event of major environmental issues in a country, the borrower's Environmental Action Plan describes the problems, identifies the main causes, and formulates policies and concrete actions to deal with them. From a social point of view, various studies aimed at analyzing a project's potentially adverse effects on the health, productive resources, economies, and cultures of indigenous peoples may be undertaken. An Indigenous Peoples Plan identifies the borrower's planned interventions in indigenous areas that may be needed, with the objective of avoiding or lessening potential negative impacts on the people. These plans are integrated into the design of the project.

A High Level of Due Diligence
Backing the building of a hydro-electric dam on the Nam Theun River in Lao PDR was deemed a risky but worthwhile endeavor. Years of careful studies preceded the project's approval by the Bank's Board of Directors in 2005. The World Bank is committed to ensuring that the project is developed in an environmentally and socially sound way and that revenues generated by the sale of electricity will be used to finance priority poverty reduction and environment protection projects.

Learn more about the safeguards in place at Nam Theun

Project Appraisal
Appraisal gives stakeholders an opportunity to review the project design in detail and resolve any outstanding questions. The government and the World Bank review the work done during the identification and preparation phases and confirm the expected project outcomes, intended beneficiaries and evaluation tools for monitoring progress. Agreement is reached on the viability of all aspects of the project at this time. The Bank team confirms that all aspects of the project are consistent with all World Bank operations requirements and that the government has institutional arrangements in place to implement the project efficiently. All parties agree on a project timetable and on public disclosure of key documents and identify any unfinished business required for final Bank approval. The final steps are assessment of the project's readiness for implementation and agreement on conditions for effectiveness (agreed upon actions prior to implementation). The Project Information Document is updated and released when the project is approved for funding.

Project Approval
Once all project details are negotiated and accepted by the government and the World Bank, the project team prepares the Project Appraisal Document (for investment lending) or the Program Document (for development policy lending), along with other financial and legal documents, for submission to the Bank's Board of Executive Directors for consideration and approval. When funding approval is obtained, conditions for effectiveness are met, and the legal documents are accepted and signed, the implementation phase begins.

Project Implementation
The borrower government implements the development project with funds from the World Bank. With technical assistance and support from the Bank's team, the implementing government agency prepares the specifications for the project and carries out all procurement of goods, works and services needed, as well as any environmental and social impact mitigation set out in agreed upon plans. Financial management and procurement specialists on the Bank's project team ensure that adequate fiduciary controls on the use of project funds are in place. All components at this phase are ready, but project delays and unexpected events can sometimes prompt the restructuring of project objectives.

Once underway, the implementing government agency reports regularly on project activities. The government and the Bank also join forces and prepare a mid-term review of project progress. In addition, the World Bank's Report on the Status of Projects in Execution, a brief summary of all Bank-funded projects active at the end of each fiscal year, is available to the public. As projects close during the fiscal year, they are removed from this report, since their individual Implementation Completion and Results Reports are publicly disclosed at that time.

The project's progress, outcomes and impact on beneficiaries are monitored by the government and the Bank throughout the implementation phase to obtain data to evaluate and measure the ultimate effectiveness of the operation and the project in terms of results.

Project Completion
When a project is completed and closed at the end of the loan disbursement period, a process that can take anywhere from 1-10 years, the World Bank and the borrower government document the results achieved; the problems encountered; the lessons learned; and the knowledge gained from carrying out the project. A World Bank operations team compiles this information and data in an Implementation Completion and Results Report, using input from the implementing government agency, co-financiers, and other partners/stakeholders. The report describes and evaluates final project outcomes. The final outcomes are then compared to expected results. The information gained during this exercise is also often used to determine what additional government measures and capacity improvements are needed to sustain the benefits derived from the project. In addition, the evaluation team assesses how well the entire operation complied with the Bank's operations policies and accounts for the use of Bank resources. The knowledge gained from this results measurement process is intended to benefit similar projects in the future.

Evaluation
The Bank's Independent Evaluation Group assesses the performance of roughly one project out of four (about 70 projects a year), measuring outcomes against the original objectives, sustainability of results and institutional development impact. From time to time, IEG also produces Impact Evaluation Reports to assess the economic worth of projects and the long-term effects on people and the environment against an explicit counter-factual.