Manual for Development Projects | 1

MESSAGE
MINISTER FOR PLANNING, DEVELOPMENT AND SPECIAL INITIATIVES

The Ministry is continuously striving to improve the pace of

development in the country. This updated Manual for Development
Projects is another endeavour in this direction. The last edition of the
Manual was prepared in 1997, followed by the Guidelines for Project
Management, which were published in 2008. During a span of over 12
years, numerous changes were introduced in the processes and
procedures of development projects, and this warranted fresh
documentation.

The Manual has been updated with new information and simplified to
resolve issues faced by the sponsoring and executing agencies in the
processing of development projects. It is envisaged that this Manual
will facilitate all the stakeholders involved in the planning and
execution of development projects.

I would like to acknowledge the dedication and earnest efforts of my

team members who were involved in the preparation of this Manual.
The valuable inputs of the Asian Development Bank also merit
appreciation.

Manual for Development Projects | 2

 MESSAGE
DEPUTY CHAIRMAN PLANNING COMMISSION

Planning Commission is the apex development think-tank of the

Government of Pakistan. The Commission is of paramount importance
for ensuring efficiency and prudence in public expenditures for
socioeconomic development in Pakistan. The Manual for Development
Projects has been updated to be a guiding document for all the
stakeholders in the identification, preparation, appraisal, and
management of their development projects. It comprehensively covers
the instructions and guidelines issued by the Planning Commission on
how to prepare projects from conception to closure. It also delineates
steps for project implementation and impact evaluation.

One of the core objectives of the project reforms process is to achieve

maximum efficiency, ultimately ensuring effectiveness and proper
utilization of funds so that project outputs and outcomes are achieved.
The manual enables this by simplifying the process. It is an all-inclusive
document with comprehensive guidelines to help in improving
understanding and efficacy for project implementation in the public
sector.

We, at the Planning Commission, are hopeful that this updated Manual
would be a source of useful information to project authorities and
executing agencies.

We thank all the stakeholders who have helped us in preparing and

updating this Manual.

Manual for Development Projects | 3

 MESSAGE
SECRETARY MINISTRY OF PLANNING, DEVELOPMENT AND SPECIAL
INITIATIVES

Effective and efficient development spending is the priority of the

Government of Pakistan, considering the narrow fiscal space in which
the public sector operates. This updated Manual of Development
Projects will be very useful for the sponsoring agencies to enhance
their understanding and streamline the processes of the Public Sector
Development Programme (PSDP). This in turn will improve project
execution and delivery.

The Manual is a compendium of the rules, procedures, and instructions

– issued by the Government of Pakistan in different periods – for
effectively managing development portfolios.

This Manual has been designed as a live document, and the Planning
Commission shall strive to update it regularly. I sincerely appreciate all
my colleagues, particularly the committee entrusted with this
responsibility, for their hard work and effort in completing this
important national assignment. I am also thankful to the Asian
Development Bank team for its valuable feedback.

Manual for Development Projects | 4

 ACRONYMS
ACS – Additional Chief Secretary
ADPs – Annual Development Programmes
AGPR – Accountant General Pakistan Revenue
AJ&K – Azad Jammu & Kashmir
AJKCDC – Azad Jammu and Kashmir Central Development Committee
AJKDWP - Azad Jammu and Kashmir Development Working Party
AP – Appraisal Paper
APCC – Annual Plan Coordination Committee
AS – Additional Secretary
B&R – Buildings & Roads
BCR or B/C Ratio – Benefit-Cost Ratio
BoQs – Bill of Quantities
C&W – Communication & Works
CCC – Concept Clearance Committee
CCI – Council of Common Interest
CDA – Capital Development Authority
CDM – Clean Development Mechanism
CDWP – Central Development Working Party
CF&AO – Chief Finance and Accounts Officer
CGA – Controller General of Accounts
CPEC – China-Pakistan Economic Corridor
CPM – Critical Path Method
CSR – Composite Schedule of Rates
DC – Deputy Commissioner
DC PC – Deputy Chairman Planning Commission
DDBs – Divisional Development Boards
DDC – District Development Committees
DDSC – Departmental Development Sub-Committee
DDWP – Departmental Development Working Party
DDWP – Divisional Development Working Party
DOs – District Officers
DPCs – Development Policy Credits
DRRA – Directorate of Revenue Receipt Audit
DWP – Development Working Party
EAD – Economics Affairs Division
ECA – External Capital Assistance
ECC – Economic Coordination Committee
ECNEC - Executive Committee of the National Economic Council
EDOs – Executive District Officers

Manual for Development Projects | 5

 EIRR – Economic Internal Rate of Return
EPA – Environment Protection Agency
FBR – Federal Bureau of Revenue
FEC – Federal Executive Council
FEC – Foreign Exchange Component
FIDIC - Fédération Internationale des Ingénieurs Conseils
FIPs – Financial Intermediation Programmes
FIRR – Financial Internal Rate of Return
FY – Fiscal Year
GB – Gilgit Baltistan
GBDDWP - Gilgit-Baltistan Departmental Development Working Party
GBDWP - Gilgit-Baltistan Development Working Party
GFR – General Financial Rules
GIS – Geographic Information System
HEC – Higher Education Commission
HR – Human Resource
I&M – Implementation and Monitoring
IBC – Indicative Budget Ceiling
ICT - Information and Communications Technology
IFIs – International Financial Institutions
IRR – Internal Rate of Return
IRSA – Indus River System Authority
IT – Information Technology
JACC – Jawwad Azfar Computer Centre
JS – Joint Secretary
KPK – Khyber Pakhtunkhwa
LFA – Logic Framework Analysis
M&E – Monitoring & Evaluation
MDGs – Millennium Development Goals
MIS – Management Information System
MoPD&SI – Ministry of Planning, Development & Special Initiatives
MP-III – Management Position III
MTDF – Medium-Term Development Framework
NA - National Assembly
NDMA – Natural Disaster Management Authority
NEC – National Economic Council
NESPAK – National Engineering Services Pakistan
NGOs – Non-Governmental Organizations
NHA – National Highway Authority
NOC – No Objection Certificate
NPV – Net Present Value
O&M – Operations and Management

Manual for Development Projects | 6

 P&D – Planning & Development
P&DD – Planning & Development Departments
PAD – Project Appraisal Document
PAEC – Pakistan Atomic Energy Commission
PAO – Principal Accounting Officer
PC – Planning Commission
PCATP – Pakistan Council of Architecture and Town Planning
PC-I – Planning Commission Proforma I
PC-II – Planning Commission Proforma II
PC-III – Planning Commission Proforma III
PC-IV – Planning Commission Proforma IV
PCN – Project Concept Note
PC-V - Planning Commission Proforma V
PD – Project Director
PD&SI Division – Planning, Development & Special Initiatives
PDWP – Provincial Development Working Party(ies)
PEC – Pakistan Engineering Council
PERT – Project Evaluation and Review Techniques
PFM – Public Finance Management
PforR – Programme for Results
PIA – Public Investment Authorization
PIDE – Pakistan Institute of Development Economics
PIP – Public Investment Programming
PKR – Pakistani Rupee
PLC – Project Life Cycle
PM – Prime Minister
PMES – Project Monitoring and Evaluation System
PMU – Project Management Unit
PNRA – Pakistan Nuclear Regulatory Authority
PP&DB - Punjab Planning and Development Board
PP&H – Physical Planning and Housing
PPB – Planning Programming and Budgeting
PPMI – Pakistan Planning and Management Institute
PPP – Public Private Partnerships
PPPA – Public-Private Partnership Authority
PPRA – Public Procurement Regulatory Authority
PRBs – Programme Requirements Baseline
PSC – Project Steering Committee
PSDP – Public Sector Development Programme
PSDP+ - Private Sector Development Programme Plus
PWD – Pakistan Public Works Department
R&D – Research & Development

Manual for Development Projects | 7

 RBM – Results Based Management
S&GAD – Services and General Administration Department
SAP – Systems Applications and Products
SBP – State Bank of Pakistan
SDGs – Sustainable Development Goals
SP&DB – Sindh Planning and Development Board
SROs – Statutory Regulatory Order
SRR – Schedule of Revised Rates
SSUs – Shared Services Units
SUPARCO – Pakistan Space & Upper Atmosphere Research Commission
TA – Technical Assistance
TORs – Terms of Reference
UN – United Nations
UNDP – United Nations Development Program
UNICEF - United Nations Children’s Emergency Fund
VGF – Viability Gap Fund
WACC – Weighted Average Cost of Capital
WAPDA – Water & Power Development Authority
WB – World Bank
WBS – Work Breakdown Structures
YTD – Year to Date

Manual for Development Projects | 8

TABLE OF CONTENTS
CHAPTER 1: OVERVIEW .................................................................................. 14
CHAPTER 2: PUBLIC SECTOR INVESTMENT PLANNING AND PROGRAMMING
........................................................................................................................ 17
ANNUAL PLAN ............................................................................................................................... 18
PUBLIC SECTOR DEVELOPMENT PROGRAMME (ANNUAL) ................................................................ 18
PROVINCIAL ANNUAL DEVELOPMENT PROGRAMME ..................................................................................... 21
REVIEW AND APPROVAL OF ANNUAL PLAN AND PSDP ................................................................................. 22
LIFE CYCLE FRAMEWORK FOR MANAGING PROJECTS .................................................................................. 23

CHAPTER 3: PROJECT IDENTIFICATION AND FINANCING OPTIONS............ 30

PROJECT IDENTIFICATION PROCESS....................................................................................................... 30
PROJECT FINANCING MODALITIES ......................................................................................................... 32

CHAPTER 4: PROJECT PREPARATION ............................................................ 46

UNDERSTANDING THE DIFFERENCE BETWEEN DEVELOPMENT AND NON-DEVELOPMENT EXPENDITURE ..................... 47
LINKING PROJECTS TO RESOURCES ....................................................................................................... 47
PC-I PROFORMA .............................................................................................................................. 48
KEY COMPONENTS OF PC-I ................................................................................................................. 49
INTER-AGENCY COORDINATION AND STAKEHOLDER CONSULTATION ............................................................... 59
PROJECT MANAGEMENT STRUCTURE ...................................................................................................... 61
REQUIREMENTS FOR SUBMISSION OF PC-I IN PLANNING COMMISSION ............................................................ 62
PC-II PROFORMA.............................................................................................................................. 66

CHAPTER 5: PROJECT APPRAISAL.................................................................. 70

APPRAISAL STEPS .............................................................................................................................. 70
BEST PRACTICES AND COMMON MISTAKES IN APPRAISAL .............................................................................. 71
INSTITUTIONAL RESPONSIBILITY........................................................................................................... 73
ANALYTICAL ASPECTS OF PROJECT APPRAISAL .......................................................................................... 74
RISK ASSESSMENT ............................................................................................................................ 85

CHAPTER 6: PROJECT APPROVAL ................................................................... 87

APPROVAL PROCESS REQUIREMENTS ...................................................................................................... 87
APPROVAL OF PROJECTS ..................................................................................................................... 88
PROCEDURE FOR MEETINGS OF VARIOUS FORUMS ..................................................................................... 88
GENERAL INSTRUCTIONS/GUIDELINES FOR SUBMISSION AND PROCESSING OF PC-I............................................. 89
ADMINISTRATIVE APPROVAL AND ACCOUNT OPENING .................................................................................. 93
CONCEPT CLEARANCE OF FOREIGN-ASSISTED PROJECTS BEFORE LOAN/AID NEGOTIATIONS ................................. 93
PROCEDURE FOR APPROVAL OF PROGRAMME LOANS AND BUDGET SUPPORT FINANCING ...................................... 96

CHAPTER 7: PROJECT IMPLEMENTATION ...................................................... 98

ROLE OF SPONSORING AND IMPLEMENTING AGENCIES ................................................................................ 98
ROLE AND APPOINTMENT OF PROJECT DIRECTOR .................................................................................... 102
PROJECT MANAGEMENT UNIT AND STAFFING ......................................................................................... 106

Manual for Development Projects | 9

 CONTRACT MANAGEMENT ................................................................................................................. 107
RELEASE OF FUNDS ......................................................................................................................... 109

CHAPTER 8: PROJECT MONITORING............................................................ 110

MONITORING AND EVALUATION OF DEVELOPMENT PROJECTS ..................................................................... 110
MONITORING METHODOLOGY ............................................................................................................ 111
MONITORING MECHANISM ................................................................................................................ 112
PROJECT MONITORING AND EVALUATION SYSTEM (PMES)........................................................................ 113

CHAPTER 9: PROJECT CLOSURE AND TRANSFER OF ASSETS ...................... 120

COMPLETED OR CLOSED PROJECT ........................................................................................................ 120
OPERATIONAL CLOSURE .................................................................................................................... 120
FINANCIAL CLOSURE ........................................................................................................................ 121
RESPONSIBILITY FOR PROJECT CLOSURE ............................................................................................... 121
PROCEDURE FOR PROJECT CLOSURE..................................................................................................... 121
CHECKLIST FOR PROJECT CLOSURE ..................................................................................................... 123

CHAPTER 10: PROJECT EVALUATION ........................................................... 125

DIFFERENCE BETWEEN MONITORING AND EVALUATION ............................................................................. 126
TYPES OF EVALUATION ..................................................................................................................... 126
EVALUATION INDICATORS ................................................................................................................. 128
REQUISITES FOR PROJECT EVALUATION ................................................................................................ 129
MANDATORY EVALUATION REPORTS .................................................................................................... 130
EVALUATION FEEDBACK AND LESSONS LEARNED ..................................................................................... 130

APPENDIX A .................................................................................................. 133

1. NATIONAL ECONOMIC AND DEVELOPMENT PLANNING SYSTEM .................................................. 133
2. ECONOMIC AND DEVELOPMENT PLANNING SYSTEM IN PROVINCES AND SPECIAL AREAS ................................. 152

Manual for Development Projects | 10

LIST OF FIGURES
Figure 1: Provincial Annual Development Planning Process ........................................ 22
Figure 2: Life Cycle Framework for Managing PSDP/ADP Project Investments ............. 26
Figure 3: Interface of the Intelligent Project Automation System (IPAS) ..................... 28
Figure 4: Funds Release Procedure .......................................................................... 35
Figure 5: Funds Release for Federally Sponsored Provincial Projects, and Financing of
NHA Projects .......................................................................................................... 36
Figure 6: Functions of PPPA ..................................................................................... 39
Figure 7: Responsibilities of an Implementing Agency ............................................... 40
Figure 8: Process for PPP Projects ............................................................................ 43
Figure 9: Important Considerations for Developing a PPP Project ............................... 44
Figure 10: Types of Fiscal Commitments in PPPs ....................................................... 45
Figure 11: Types of Guarantees in PPPs ................................................................... 46
Figure 12: Reasons for Failure of PPPs ..................................................................... 46
Figure 13: Factors That Need to be Considered in Estimating the Project
Implementation Period ............................................................................................ 58
Figure 14: Project Management Structure- Part A ..................................................... 61
Figure 15: Project Management Structure- Part B ..................................................... 62
Figure 16: Best Practices and Common Mistakes in an Appraisal ................................ 72
Figure 17: Steps in Appraisal Process (Breakdown of Timeline) .................................. 73
Figure 18: Analytical Aspects of Project Appraisal ...................................................... 75
Figure 19: NPV Key Rules ........................................................................................ 81
Figure 20: Administrative Approval and Account Opening Process .............................. 93
Figure 21: Guidelines for Proposals Seeking Foreign Assistance ................................. 95
Figure 22: Frequent Mistakes at Implementation Level .............................................. 99
Figure 23: Monitoring Methodology ........................................................................ 113
Figure 24: PMES System Architecture .................................................................... 116
Figure 25: Data Flow Mechanism in PMES............................................................... 116
Figure 26: PMES Information Components .............................................................. 117
Figure 27: PMES Executive Dashboard ................................................................... 118
Figure 28: Types of Evaluation............................................................................... 127
Figure 29: Performance Indicators for Evaluation .................................................... 128
Figure 30: Functional Wings of MoPD&SI ................................................................ 138
Figure 31: Organogram of Planning Commission ..................................................... 147
LIST OF TABLES

Manual for Development Projects | 11

Table 1: Key federal/national level forums for approval of development projects and
programmes ........................................................................................................... 16
Table 2: Schematic Framework for Planning ............................................................. 18
Table 3: Modes of PPP ............................................................................................ 42
Table 4: Item wise Breakdown of Project Cost by Year .............................................. 53
Table 5: Financial Phasing of Project Costs ............................................................... 57
Table 6: Checklist for PC-I ....................................................................................... 66
Table 7: Project Appraisal Checklist .......................................................................... 76
Table 8: NPV Exercise 1 .......................................................................................... 82
Table 9: NPV Exercise 2 .......................................................................................... 83
Table 10: NEC Approved Guidelines for Foreign Projects ........................................... 97
Table 11: Comparison of Monitoring and Evaluation ................................................ 126
Table 12: Evaluation Type and Purpose .................................................................. 127
Table 13: Key Questions for Evaluation .................................................................. 130

Manual for Development Projects | 12

 14
CHAPTER 1: OVERVIEW

18
CHAPTER 2: PUBLIC SECTOR
INVESTMENT PLANNING AND
PROGRAMMING

Manual for Development Projects | 13

 CHAPTER 1: OVERVIEW

1.1 Development planning in Pakistan aspires to improve the quality of life

of people through various policies, programmes, and projects in the areas
of social sector development, infrastructure and connectivity, economic
competitiveness, and climate change.

1.2 This manual enables the development of a sound economic planning

system that is evidence-based, aligned with the ground realities, and
cognizant of the collective needs of the citizens. At the primary level, an
economic development plan is a package of the socio-economic policies
and programs aimed to achieve predetermined and well-articulated
objectives/goals (with quantifiable targets) over a specified period. An
effective economic planning system aims to articulate a development
vision, helps translate the vision into policy-driven goals and objectives,
and then identifies and allocates scarce resources to programmes and
projects to help achieve the development objectives.

1.3 The manual elaborates on key processes in the programme/project

cycle such as project identification and financing, preparation including
use of all PC proformas, appraisal, approval, implementation, monitoring,
closure and transfer of assets, and evaluation. It guides the user on
requirements on every stage of the programme/project lifecycle, with
helpful examples wherever necessary.

1.4 Projects and programmes (which typically encompass multiple

projects) are the instruments to achieve plan objectives and are the
building blocks that transform the development plan and the associated
investments into physical outputs and tangible benefits. Public Finance
Management Act of 2019 stipulates specific provisions on “Development
Projects and Maintenance and Use of Public Assets”. This manual has
accordingly clarified and laid out guidelines on classification and
preparation of projects, their quality assurance, technical approval and
their monitoring and evaluation.

Manual for Development Projects | 14

 1.5 The key federal/national level1 forums for approval of development
projects and programmes are as follows:

Forum Function

National Economic Council It is the apex economic and development policy

(NEC) forum mandated by the Constitution, responsible
for approval the vision statements, long-term
perspective plans, 5 years plans, annual plans, and
the Public Sector Development Programme (PSDP).
The NEC is chaired by the Prime Minister.

Executive Committee of the NEC The ECNEC sanctions development projects in

(ECNEC) PSDP that cost more than Rs. 10 billion and allows
moderate changes in the annual plan. It also
supervises the implementation of economic policies
and acts on any matter referred to it by the Prime
Minister, NEC, or other prominent bodies.

Annual Plan Coordination It is mandated to review the previous and current

Committee (APCC) annual plans while recommending the annual plan
for submission to the NEC. The APCC is chaired by
the Minister PD&SI.

Central Development Working It is responsible for the scrutiny and approval of

Party (CDWP) development projects beyond the sanctioned limit
of DDWP and up to 10 billion, provincial projects
having federal financing and foreign component,
and federal projects having more than 25% of
foreign component. The CDWP is chaired by the
Deputy Chairman Planning Commission.

Federal Departmental The DDWP has the power to approve PC-I or PC-II
Development Working Party of project with a cost up to Rs. 2,000 million and is
(DDWP) chaired by the Secretary/Principal Accounting
Officer of an administrative division.

Development Working Party DWP includes public sector autonomous

1
Each province has developed its own Planning and Development Manual for provincial
development process and projects.

Manual for Development Projects | 15

(DWP) organizations which have the capacity to sanction
their development schemes via self-financing
based on specific requirements elaborated in
Appendix A.

Table 1: Key federal/national level forums for approval of development projects and programmes

1.6 The economic and development planning system in provinces and

special areas (AJ&K and Gilgit-Baltistan) changed following the passage of
the 18th Amendment in the Constitution of Pakistan. The Amendment
transformed the process of provincial planning by including increase in
inflow of resources, new planning imperatives like public private
partnerships and more. The role of the provincial P&D boards and
departments has since then been more proactive as they work in
consultation with the provincial governments. This includes the drafting
and approval of the Annual Development Programme and approval of
other development projects.

1.7 The functions and sanctioning powers of national and provincial

development forums along with their current composition of members can
be found in Appendix A. The appendix also elaborates the constitutional
and legal contexts of the economic development planning practices in
Pakistan. Further, it elaborates on the purpose of the planning commission
as well as details of its governance structure; the economic and technical
sections, and its specialized cells including the project wing, and its
attached departments. Detail of all provinces’ Planning and Development
Departments, their functions, tasks, and composition of members is also
given in Appendix A.

Manual for Development Projects | 16

 CHAPTER 2: PUBLIC SECTOR
INVESTMENT PLANNING AND
PROGRAMMING

2.1 This chapter provides an overview of the public sector investment

planning and programming process in Pakistan, including the
development instruments – Annual Plan, Public Sector Development
Programme (PSDP), and the provincial Annual Development
Programmes (ADPs) – used for this purpose. It also includes a
description of the current five-stage life cycle framework for managing
the PSDP project investments and the prescribed forms (PC-I, II, III,
IV, and PC-V). A schematic framework of planning approaches and
methodology is presented in Table 1 below:

Periods of plans Nature of planning Budgetary instrument

of planning
Medium- to long- Aggregate economic
term (five or more framework and detailed plans Fiscal policy management
than 5 years) or for government investment and and directions for
Perspective Plan incentives for private sector economic reforms
investment
Medium-Term (3-5 Compilation of public Development budget,
years) investment programmes External Finance Budget,
PSDP (Annual) Pre-identified projects Investment Budget, PPPs
Annual or Medium- Sectoral planning Market Incentives to
Term stimulate private sector
investment through the
PPP and other modalities

Manual for Development Projects | 17

 Table 2: Schematic Framework for Planning

2.2 The ECNEC approved a proposal on the 1st October 2020 that main
ministries and departments will develop sector development vision and
policies consistent with the national priorities. Therefore, the overall
simplification2 of processes and procedures to improve project
management is prepared after research and consultations with
stakeholders (attached Annexure 1). The line ministries and
departments will conceive a pipeline of potential projects with clear
concept notes, cost estimates and timelines in order of priority and
sequencing. Such project pipelines will be regularly and periodically
updated and shared with the PD&SI Division/P&D departments.

ANNUAL PLAN
2.3 The principal instrument for adjusting the Five-Year Plan to current
realities is the Annual Plan, which is considered as a practical and
dependable method to translate the Five-Year Plan objectives and
targets into an implementable operational programme. The Annual
Plan reflects macro-economic policies, development priorities in the
context of prevalent challenges, economic growth and other
development targets, evaluation of the past performance, and an
outline investment programme in the public and private sectors
necessary to achieve the planned targets.

PUBLIC SECTOR DEVELOPMENT PROGRAMME

(ANNUAL)
2.4 The federal PSDP is an annual document, which lists all the public
sector projects and programmes with specific expenditure allocations
for the given fiscal year. It includes the approval status of the project,
date of approval and the forum that approved the project, the total
estimated cost of the project including foreign loan component,
expenditure incurred up to the end of preceding fiscal year, throw-
forward, and allocation for the fiscal year, in terms of rupee and
foreign loan component. The estimated levels of the provincial ADPs
are included in the summary of the PSDP, and details are compiled and
presented in the individual ADP of the respective provinces.

2Simplification of Planning Commission, Planning Division Development Processes and

Procedure to improve Project Management (Project Identification and Preparation of PC I,
Processing and approval of PC I, Project Management and Staffing, Opening of Project
Assignment Account, Procedure for release of funds, and Monitoring and Evaluation)
approved by ECENC on 1 October 2020
Manual for Development Projects | 18
 Overriding Effects of Public Finance Management Act 2019
2.5 The PSDP formulation is now regulated by Sections 13 to 20 of the
Public Finance Management Act, 2019 (amended up to 30th June
2020). The Act, as amended from time to time, stipulates the following
conditions for a project to be eligible for inclusion in the PSDP or
Demands for Grants:
i. Classification of projects as (a) core projects in the national
infrastructure requiring complex planning, design, and
implementation procedures, and (b) sectoral projects
undertaken by respective sectors and the federal ministries,
ii. Issuance of the technical sanction for the proposed project,
iii. Budget allocation for the coming fiscal year along with the full
proposed project cost,
iv. All government expenditures, whether from a recurrent or
development demand for a grant, shall be based on well-defined
plans and the strategic priorities approved in the Budget
Strategy Paper.

Formulation of the PSDP

2.6 The formulation of the Annual Plan and the annual PSDP at the
federal level is steered by the Planning Commission in collaboration
with the Finance Division and Economic Affairs Division. The annual
PSDP is expected to be aligned with the growth strategy, the Five-Year
Plan or Long-Term Perspective Plan (if any) or vision document,
international economic and social landscape, current development
challenges and priorities, economic growth targets, and country’s
commitments to the Sustainable Development Goals (SDGs) and Paris
Climate Agreement 2016 among other priorities and commitments of
the government of Pakistan.

2.7 The government’s fiscal year runs from July 1 of the calendar year
to June 30 of the next calendar year. The budget preparation process
commences with the issuance of the Budget Call Circular addressed to
all Principal Accounting Officers (PAOs) by the Ministry of Finance in
November-December each year. It contains a schedule, instructions
and standard proforma to be completed for both current and
development budgets, under the overall supervision of the respective
PAOs. As a follow-up, the PSDP Call Circular containing various
proformas, and detailed guidelines for project selection is also issued
by the Planning Commission with tentative timelines for the PSDP
formulation and approval.

Manual for Development Projects | 19

 2.8 The ministries/divisions are given sufficient time to conceive,
prepare and get cleared the proposed concept papers for the new
projects to be included in the forthcoming PSDP. For this purpose, the
committees have been formulated under the chairmanship of the
respective Members of the Planning Commission to review, screen, and
recommend the conceived proposals for processing of formal approval
through respective competent forums, and inclusion in the next PSDP.

2.9 Following the approval of the Budget Strategy Paper3 by the

federal Cabinet, the Ministry of Finance communicates the Indicative
Budget Ceiling (IBC) for the next fiscal year’s PSDP. The PD&SI
Division then conveys necessary instructions to all federal ministries for
proposing their development portfolios requiring of them that:
i. All proposed projects are in line with the Five-Year Plan goals
and objectives,
ii. All projects to be proposed by the ministries must comply with
the provisions of the Public Finance Management Act 2019,
iii. The thrust is for the ongoing projects with allocation over 80
percent of available resources to the ministry, and
iv. The foreign-aided projects are duly funded as per the loan
agreement signed with the development partners.

2.10 While allocating resources, projects and programmes benefiting

less developed areas are given due priority at par with other developed
parts of the country.

2.11 Each PAO/federal ministry prepares and submits Section-I Forms

for development budget to the Sector Chiefs in the PD&SI Division with
a copy to the Finance Division.

2.12 The respective technical sections in the PD&SI hold meetings and
consultations with the ministries to prioritize and rationalize portfolios
and budget allocations for the next fiscal year with a focus on the
requirements of fast-moving, strategic, and important projects. The
recommendations of the National Assembly Standing Committees of
the respective ministries/divisions on the proposed projects for
budgeting are also taken into consideration by the ministry/division
concerned depending on the availability of the resources and Indicative
Budget Ceiling.

3 Prepared and presented by the Ministry of Finance.

Manual for Development Projects | 20
 2.13 As soon as the PSDP is tentatively formulated by the PD&SI
Division, the tentative budget allocations to each sector/federal
ministry are discussed by the Priorities Committee jointly chaired by
the secretaries of the Finance Division, PD&SI Division and Economic
Affairs Division. This Committee deals with both the recurrent and
development budget proposals.

2.14 Each PAO, if seeking additional budget allocation, is invited to

present the respective federal ministry’s case, priority, and the
rationale for seeking additional budget allocation. Before consideration
of the Priorities Committees, the additional resource request of each
ministry must have been examined by the PD&SI Division as well as
the Finance Division. The Committee, while reviewing such proposals,
considers policy priorities, outputs, past performance of the ministry,
current year’s budgetary allocation, the indicative ceiling for the budget
year and forecast years, and overall resource availability for the
development budget, both local and foreign funding.

2.15 While formulating the federal PSDP, now there is an increased

emphasis on promoting innovative financing modes (Public and Private
Partnerships) to reduce the burden on the public sector resources. The
Public-Private Partnership Authority (PPPA) has also been made more
functional to attract private sector investment in development
activities.

PROVINCIAL ANNUAL DEVELOPMENT PROGRAMME

2.16 The provincial ADP formulation4 is steered by the P&D
boards/departments of the provinces in close coordination with the
provincial finance departments, while the latter start the preparation
with the issuance of the Budget Call Circular. The process is based on
the national priorities, communicated by the PD&SI Division, and
resource availability in each of the provinces. The process for
formulation of the provincial ADP is depicted in Figure 1. In April of
each year, the Draft ADP for the next fiscal year is submitted for a
review of the Chief Minister and the minister concerned or the cabinet
(as necessary) and is shared with the APCC and is reflected in the
summary, which is finally presented to the National Economic Council.

4 A similar process applies to special areas- AJK and G-B.

Manual for Development Projects | 21
 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
Department

Resource Availability Estimation

Finance

Ascertaining Inter-Sectoral

Meetings/Prioritization in P&DD or Planning Board/Review by CM

Board/Department

Priorities
Development

Finalization of

Draft ADP for next Financial Year

Planning &

ADP by P&DD

Tentative ADP
Size
Schemes Preliminary
Identification Draft of
ADP
and Departmental
Formulation
Formulation ADP
Line Departments

Guidelines

Tentative
Sector-Wise
Allocations
Approval by
the Cabinet
Assembly/Chief Minister

Approval by
Cabinet/Provincial

Provincial
Assembly &
Authentication

2.17 The provincial ADP is then formally submitted to the provincial

cabinet for consideration and approval in June after which it is
Figure 1: Provincial Annual Development Planning Process
submitted to the provincial assembly for discussion and vote. As soon
as the ADP along with the budget is approved by the provincial
assembly, the Schedule of the Authorized Expenditure is authenticated
by the Chief Minister under Article 123 of the Constitution of Pakistan.

REVIEW AND APPROVAL OF ANNUAL PLAN AND PSDP

Annual Plan Coordination Committee (APCC)
2.18 The recommendations of the Ministry of Planning, Development &
Special Initiatives (MoPD&SI) for the draft PSDP, following completion

Manual for Development Projects | 22

 of the Priorities Committee process, are placed before the APCC. 5 The
Committee reviews and deliberates upon the Annual Plan for the
current year and recommends the proposed Annual Plan for the next
year for submission to the NEC. It also reviews the PSDP of the current
year and recommends the proposed PSDP of the next year for
submission to the NEC.

National Economic Council

2.19 The MoPD&SI prepares a summary for the NEC highlighting
salient features of the proposed federal PSDP, strategic and sectoral
priorities and a summary of the provincial ADPs. The Ministry then
submits it to the NEC for consideration and approval. While approving
the ADPs, the NEC may direct modifications in the national priorities
and the overall magnitude of the development effort to ensure
balanced sectoral and regional development in the country.

Federal and Provincial Cabinets of Ministers and Assemblies

2.20 The development plans approved by the NEC are advisory in
nature. The federal and provincial governments place the plans, along
with the budget, before the respective cabinets for consideration and
approval. The budget incorporates proposals for development and non-
development expenditure as well as resource availability. The final
approval of the federal budget lies with the National Assembly (NA),
while the provincial budgets are submitted to the respective provincial
assemblies. The Money Bill is not voted in the Senate. The Senate
deliberates on the budget proposals and sends its recommendations to
the NA. NA is the constitutional forum for the approval of the budget
including the development budget. The NA finally approves the Annual
Budget Statement including development expenditure under Article 82
of the Constitution. Following approval of the NA, the Prime Minister of
Pakistan authenticates the Schedule of Authorized Expenditure under
Article 83 of the Constitution.

LIFE CYCLE FRAMEWORK FOR MANAGING PROJECTS

2.21 The federal PSDP and provincial ADPs include a detailed
compilation (by sector- ministry/agency, type of project, and funding
source) of the scope, budget, and expenditures (YTD6 and projected)
of individual investment projects. The investment projects have been
prioritized and approved by the Planning Commission and/or the sub-

5 The composition of APCC and its mandate is described in Chapter 1

6
Year to Date
Manual for Development Projects | 23
 national planning agencies, within the constraints of the available
funding envelope. The order of priority assigned to each project (both
new and ongoing) included in the development plans depends on its
viability and impact on the following factors: national economic
growth; social and balanced regional development; generation of
resources and revenues; and overall government policy.

Project Life Cycle (PLC) Phases

2.22 The PLC defines the phases from the beginning to the end of the
project. It has five distinct stages: Project Identification (need-based)
and Formulation, Appraisal and Approval, Execution, Monitoring and
Control, Completion and Closure, and Ex-post Evaluation. Each phase
of the PLC includes a series of activities necessary to achieve the
project’s goals and objectives. These phases are further divided into
activity subsets so that appropriate checks and controls can be applied
to effectively manage project delivery. Although the public sector
projects in Pakistan vary significantly in size and complexity, all
projects, no matter how large or small, can be mapped to a common
life cycle framework based on the current development planning,
programming, and budgeting (PPB) practice in Pakistan. The PLC
phases as depicted in Figure 2 (and discussed in detail in the following
chapters of this manual) are summarized below:
i. Identification: The stage where one project idea, out of
several alternatives, is chosen and defined based on a need
analysis.
ii. Preparation: The defined project idea is carefully developed,
and a project plan is prepared, which is examined at the
appraisal stage.
iii. Appraisal: Every aspect of the project idea is subjected to a
systematic and comprehensive evaluation.
iv. Review and Approval: The detailed plan is submitted for
approval and financing to the appropriate entities and relevant
forum.
v. Implementation: With necessary approvals and financing in
place, the project plan is implemented.
vi. Monitoring: At every execution stage, the progress of the
project is assessed against the planned activities of the projects.
The course corrections are also done at this stage to ensure on-
time and within budget completion.

Manual for Development Projects | 24

 vii. Evaluation: Upon completion, the project is reassessed in
terms of its deliverables, performance (results), efficiency and
effectiveness.

Five-Stages Lifecycle of Public Sector Projects and PC

Proformas
2.23 The Planning Commission has required Project Concept Clearance
by the Concept Clearance Committee – a precedent condition in the
case of all foreign-funded projects. The second ring in Figure 2
indicates the activities at each phase, while the central ring shows the
five proformas prescribed for the preparation and implementation of
development schemes. Two of these (PC-I and PC-II) deal with the
submission of project proposals (new and revised) and feasibility
studies, respectively. The PC-III is concerned with the progress of the
ongoing projects and two, (PC-IV and PC-V) are prepared after the
project completion. A brief description of these proformas is given
below7:
i. PC-I proforma: This is the basic project document, and its
preparation is the pivotal phase of the project cycle. This
proforma is required for both new and revised projects. The PC-
I form comprises three parts. Part A is the Project Digest with
the basic project information. Part B covers Project
Requirements, and Part C includes Appraisal and Analysis. Only
Part A (with additional information) is required for revised
projects.
ii. PC-II proforma: This form is required to conduct surveys and
feasibility studies, with respect to larger projects, intending to
obtain full technical justification for undertaking the project
before resources are committed and invested.
iii. PC-III proforma: This form is designed to furnish information
regarding the financial as well as physical progress of the
ongoing projects, including information on any bottlenecks
experienced during project execution and staffing issues. It has
three sections: project profile, a quarterly monitoring report (to
be submitted within 20 days of the closing of each quarter) and
a monthly progress report (to be furnished by the 5th of the
month) by the project executing agency/department.

7The PC-I to PC-V proforma templates and other useful information is available at:
https://www.pc.gov.pk/web/downloads
Manual for Development Projects | 25
 iv. PC-IV proforma: This form is required to be submitted at the
time of project closure or the termination of the physical
implementation of the project.
v. PC-V proforma: This form is to be furnished to the Planning
Commission on an annual basis, by the 31st of July of each
year, for five years by the agencies responsible for the operation
and maintenance of the project. It is aimed at carrying out
impact evaluation of the project by reporting operational results

Figure 2: Life Cycle Framework for Managing PSDP/ADP Project

Investments

during the previous fiscal year.

INTELLIGENT PROJECT AUTOMATION SYSTEM (IPAS)

2.24 IPAS has been developed by the MoPD&SI. It is a web-based tool
for the process automation of PSDP formulation, recording and
tracking, process automation of releases, online submission of progress
and funds management (re-appropriations, supplementary grants etc.)
involving all stakeholders of development portfolio. This means that all
proformas (PC-I to PC-V) can be submitted digitally. New
projects/schemes can be initiated on the system, and it enables

Manual for Development Projects | 26

 updating of on-going projects. A separate tab is created for Public
Private Partnership (PPP) projects as well.

2.25 The system shows the total allocations to projects divided in the
following categories: local, foreign, new, on-going, and PPPs. It also
shows the total number of projects and projects under each
aforementioned category. A timeline of projects completion is also
given. Finally, a dynamic table shows the list of projects along with
their ministry/division, sector, approval status, cost, expenditure up to
date, allocation, throw-forward, and province.

2.26 Through all the features mentioned above, the system aims to
increase financial efficiency, automate and digitize manual processes,
and minimize information gaps between all stakeholders of
development portfolio throughout the project life cycle.

Manual for Development Projects | 27

 Figure 3: Interface of the Intelligent Project Automation System (IPAS)

Manual for Development Projects | 28

 33
CHAPTER 3: PROJECT
IDENTIFICATION AND
FINANCING OPTIONS

52
CHAPTER 4: PROJECT
PREPARATION

Manual for Development Projects | 29

 CHAPTER 3: PROJECT
IDENTIFICATION AND FINANCING
OPTIONS

3.1 The project identification and conceptualization process ensure that

the selected projects are fully aligned with the national development
goals and public policy objectives. Thus, the project concept must be in
sync with the Vision, the Five-Year Plan, and sectoral priorities. As
sectoral priorities establish competing claims on the limited resources
available, it is imperative that relevant ministries, divisions, and
agencies put in place well-reasoned and consensus-based strategies.
These strategies should flow from the national plans and priorities
established by the NEC and other forums. The strategies also consider
the sustainable development goals (SDGs), and country assistance and
partnership strategies of development partners.

PROJECT IDENTIFICATION PROCESS

3.2 The project identification process constitutes the following steps8:
i. Conduct objective and logical analysis of documents using
simple management tools such as problem tree analysis, log
frame analysis, stakeholder consultations, etc. Documents such
as vision, annual plans, five-year plans, sectoral strategies and
priorities, policy directives must be utilized to propose measures
to solve major problems identified in the development strategy
and to meet diverse development needs. The proposal must set
clear project objectives and identify target groups benefitting
from the project.
ii. Establish the project concept (together with alternative plans for
financing), which will effectively serve to achieve the project’s
development objectives.
iii. Assess the priority or urgency of the project in the context of
economic and social development plans and sector investment
programs.
iv. Examine consistency with the relevant sector policies and
master plan and the regional/area development plan.

8 Adapted from JICA Guidance of Project Identification and Preparation (undated)

Manual for Development Projects | 30
 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 a preliminary assessment of the feasibility of the project
and its development impacts on the country, its specific region
or sector.
viii. Assess project sustainability (economic/financial, environmental,
and social). Also evaluate the project’s contribution to the
achievement of SDGs, and the impact on climate change.

3.3 Projects are normally identified by the following:

i. Line ministries,
ii. Divisions,
iii. Public sector authorities and corporations (including the China-
Pakistan Economic Corridor (CPEC) and PPP authorities, the
National Disaster Management Authority (NDMA) for post-
disaster relief, reconstruction, and disaster risk reduction),
iv. Pakistan’s development partners (International Financial
Institutions (IFIs), bilateral aid agencies, etc.),
v. Private-sector entities in consultation with the government
departments, and,
vi. Legislative and executive directives.

3.4 The Planning Commission, the provincial P&D boards/departments

and other sub-national planning agencies play a critical role in guiding
and supporting the project identification process.

3.5 During Project Identification/Preparation level, the following

weaknesses are generally observed:
i. Inadequacy of data to present the factual position.
ii. Unrealistic cost estimates
iii. Over-estimation of benefits
iv. Lack of coordination between the relevant agencies
v. An incorrect assumption of availability of inputs
vi. Lack of proper implementation schedule
vii. Ambiguity about availability of funding and financing for
the project
viii. Improper financial phasing incommensurate to the
physical phasing

Manual for Development Projects | 31

 ix. Lack of proper cost-benefit, risk assessment, sensitivity,
stakeholder consultation, environmental and sustainability
analyses
x. Extensive time taken by the sponsoring/executing
agencies, while responding to the observations of the
Planning Commission and modification in the PC-I
xi. In the case of energy, water, and communication
projects, a PC-I with a rough estimation of scope and
cost hinders technical, economic, financial, and
environmental appraisal.

Project Concept Note (PCN)

3.6 The project identification phase should conclude with the
preparation of a PCN, which is a prerequisite for the initiation of project
preparation. The PCN is cleared by the same competent forum
empowered to approve the project within their domain, as described in
Appendix A. The Note approval by the competent project approval
forum should signal the start of the project and the authorization to
incur project expenditures. All projects included in the PSDP/ADP
should have an approved PCN, with the clearance/approval date of the
PCN as the official commencement date of the project9.

PROJECT FINANCING MODALITIES

3.7 The mode of project financing is considered and assessed as part
of the project identification process. The government predominantly
funds projects through the PSDP at the federal level, and through the
ADPs at the provincial level. The private sector is integrated into the
development process through the PPPs. For this purpose, the Public-
Private Partnership Authority (PPPA) has been set up at the federal
government level, while a similar arrangement is also present at the
provincial level. The government is also embarking on the ‘PSDP
(Private Sector Development Programme) Plus’ plan. This plan aims to
increase the involvement of the private sector in the development
process and expedite efforts for achieving social and economic targets
by ending the shortage of funds in completion of government projects.

PSDP Funds
3.8 The PSDP is funded through the annual budget. It includes specific
allocations for the projects and programmes included in the PSDP,
inclusive of government funds, foreign loans and grants, and any other

9This applies equally to a program, a fund or a line of credit covering a number of projects or
series of project investments.
Manual for Development Projects | 32
 sources as approved by the government. The operational framework
and procedures for authorization and management of the PSDP funds
are described in the following sections.

AUTHORIZATION OF PSDP FUNDS 10

3.9 The MoPD&SI has been entrusted with the responsibility to

authorize the release of development funds to the PSDP-funded
projects. For this purpose, comprehensive guidelines are prepared in
consultation with all the stakeholders, ministries, divisions, including
the Finance Division, Accountant General Pakistan Revenue (AGPR),
the provincial and special area governments. These guidelines are
regularly updated and issued from time to time by the Finance
Division11 (Annexure 2). The MoPD&SI authorizes the release of
development funds per release strategy issued by the Finance Division
at the start of every fiscal year.

FINANCING MECHANISM
3.10 The financing mechanism is as follows:
i. The release of funds is made according to funds release
strategy of the Finance Division.
ii. The federal government may not commit financing of the social
sector and agriculture-related provincial projects as those are
the constitutional responsibility of provinces after the 18th
Constitutional amendment.
iii. Throw-forward liability, in any case, may not be allowed to
exceed the aggregate of 3-4 years of sector-wise PSDP
projections.
iv. Commercial oriented/industry related projects in the public
sector should be considered on the PPP/PSDP+/private
investment mode. For this purpose, the feasibility studies for the
commercially oriented projects, above a certain threshold,
should include PPP Option Analysis, PPP Risk Assessment and
PPP Value for Money Analysis. The feasibilities should also
feature themselves as ‘bankable’ feasibility studies.
v. Financing of all projects, which have commercial orientation,
should be kept outside the PSDP.
vi. No block allocation, except for the special areas (AJ&K and GB)
may be kept under the demand of any ministry.

10With regard to the provincially executed projects, the Ministry of Finance

will continue to release funds as per the existing rules.
11Finance Division, ‘Revised Release Mechanism for Funds Allocated for The Public Sector Development
Programme (PSDP) 2019-20’, Islamabad, dated 17 September 2019.
Manual for Development Projects | 33
 vii. No token allocation to any project should be allowed in the
PSDP as it increases the overall throw-forward.
viii. The financial phasing (2 years for DDWP, 5 years for CDWP and
7 years for ECNEC maximum) will be considered during the
approval of projects.
ix. Project-wise and sector-wise throw forward will be reviewed
during the quarterly review of the PSDP.
x. Rules for disbursement of foreign loans/grants are to be framed
in consultation with the EAD and Finance Division.
xi. Information will be provided on the PSDP proforma from the
federal ministries/divisions and provincial governments for
allocation of funds.
xii. The strategy and procedure for the release of the PSDP funds
are notified by the Finance Division and the MoPD&SI on yearly
basis with a prime focus on ensuring timely availability of funds
and optimum utilization of the allocated amount.
xiii. The MoPD&SI, in coordination with the Finance Division, has
curtailed unnecessary steps and requirements involved in
release to spur the flow of funds to the project authorities to
avoid cost and time overrun of the project.
xiv. The Finance Division issues release strategy for development
funds at the start of every fiscal year. For example, the release
strategy for FY 2020-21 the following strategy was given by the
Finance Division:
1st Quarter 20%

2nd Quarter 30%

3rd Quarter 30%

4th Quarter 20%

• Any relaxation to the above-mentioned quarterly limits shall

be considered by the Budget Wing, Finance Division on the
recommendations of the MoPD&SI.
• The MoPD&SI shall devise a project-wise/division-wise
strategy for the release of funds for the PSDP within the
appropriations approved by the National Assembly and
included in the Schedule of Authorized Expenditure in terms
of Article 83 of the Constitution.
• There shall be no requirement of ways and means clearance
from the Budget Wing, and endorsement of sanction letters
by the Expenditure Wing, Finance Division for the fund
releases for the PSDP approved projects.
Manual for Development Projects | 34
 xv. For every line ministry, the budget set forth in the PSDP is
determined by the project details and the funds are allocated
accordingly. These funds are released by the Planning
Commission in the form of quarterly releases. The AGPR’s SAP
system is updated with the details of transfer. The PAO then
decides on the release of funds for each project.

3.11 The funds release procedure has been further simplified and
streamlined during FY2020-21. Its main features are shown in the
figure below:

Figure 4: Funds Release Procedure

Manual for Development Projects | 35

 Figure 5: Funds Release for Federally Sponsored Provincial Projects, and Financing of NHA Projects

3.12 In line with the above-noted release strategy and procedure for
FY 2020-21, the MoPD&SI is authorizing upfront development funds to
undertake development expenditure within permissible quarterly limits
of rupee allocation of ministry/division/agency concerned.

3.13 The MoPD&SI, in consultation with the Finance Division, have

empowered respective ministries/divisions/agencies to issue release
sanction as per the requirement of the project(s) while remaining
within the overall quarterly rupee allocation ceiling of the respective
ministries/divisions/agencies. In case any ministries/divisions/ agencies
require more than permissible quarterly funds for any development
project, the additional amount is being recommended for authorization
in consultation with the Finance Division. The ministries/divisions will
not release additional funds to any project over and above the
allocated amount in the PSDP through internal adjustment. All
reappropriations will be referred to the Planning Commission/MoPD&SI
as per procedures.

Manual for Development Projects | 36

 3.14 All ministries/divisions will be responsible for updating the Project
Monitoring and Evaluation System (PMES) of each project by the 10 th
of the following month.

3.15 The PAO will ensure before issuing sanction letters for the release
of funds to development projects that all code formalities/pre-
requisites should have been completed and adhere to the requirements
of para 89 of GFR and para 13, VII of System of Financial Control and
Budgeting 2006.

3.16 The obligation of authorizing the release of funds by the MoPD&SI

is only to the extent of the rupee component of the PSDP. The foreign
exchange component is directly disbursed to the recipient projects and
programmes by the respective development partners. The Economic
Affairs Division (EAD) compiles this data. The MoPD&SI regularly
updates the foreign assistance disbursement status in accordance with
the data issued by the EAD. To maintain transparency and provide
user-friendly information for researchers, academia and the public,
release data in respect of each project is uploaded weekly on the
official website of the MoPD&SI, http://www.pc.gov.pk

PSDP REVIEW MEETINGS

3.17 At the end of each quarter of the ongoing fiscal year, a progress
review meeting of the PSDP is held. In the review meetings, the
implementation status of the previous review meetings is reviewed
along with the previous quarter physical and financial progress. For
each ministry or executing agency, project-wise progress is analyzed.
The necessary adjustments in the allocation of funds are allowed
according to the pace of work and utilization where necessary with a
view to steer the projects towards optimal and efficient utilization of
the development funds. The project authorities are required to
implement the decision of the review meetings in letter and spirit.

Public-Private Partnership (PPP)

3.18 Given the resource constraints and untapped potential of
efficiency gains through private investment it has become imperative
to pursue public private partnerships for the core national socio-
economic development process. For this purpose, specific policies,
framework, laws, and regulations are in place for confidence-building
of the private sector for venturing into this arena.

Manual for Development Projects | 37

 3.19 PPPs are beneficial because they help:

i. Bridge gaps in infrastructure and service delivery,

ii. Shift public resources towards social sectors,
iii. Enable the public sector to define requirements and the private
sector to drive innovative and creative solutions,
iv. Gauge value for money by combining whole-life costs and
quality,
v. Manage risk and allocation thereof to the party best able to
manage, control and mitigate it,
vi. Link payment to performance and service quality, and where
applicable, payment is linked to the users availing the services.

3.20 The federal government has enacted the PPPA Act 2017 that
extends to the entire country, applying to all Federal Government
Entities with respect to all kinds of projects undertaken by a federal
implementing agency under a PPP arrangement. The application of the
PPPA Act, 2017 is extended to the provinces in case the project falls
within the exclusive domain of the federal implementing agency. The
PPP arrangements at the provincial level are guided by the PPP
legislation of the respective province12.

3.21 The functions of the PPPA Board and responsibilities of the

implementing agency are summarized in the figures below. It must be
noted that the line ministry/sponsoring agency has the primary
responsibility for monitoring and evaluating PPPs and ensuring that all
project KPIs are being met by the private entity. Performance
standards should be clearly reflected in the contract along with the line
ministry/sponsoring agency that is responsible for monitoring and
evaluation.

12 The Punjab Public Private Partnership Act 2019 was notified on 13 December 2019 repealing 2014 Act; the
Sindh Provincial Assembly passed Sindh Public Private Partnership Bill on 18 February 2010 and The Sindh Public
Private Partnership Act 2010 was notified on 17 March 2010
http://sindhlaws.gov.pk/setup/publications_SindhCode/PUB-16-000200.pdf; and the Khyber Pakhtunkhwa
Provincial Assembly has enacted the Public Private Partnership Act 2014, with an amendment in 2016
http://www.pakp.gov.pk/2013/acts/the-khyber-pakhtunkhwa-public-private-partnership-act2014/; Balochistan
Assembly passed the Balochistan Public Private Partnership Act on 10 April 2018 and was notified on 19 April
2018http://pabalochistan.gov.pk/pab/pab/tables/alldocuments/actdocx/2019-11-15_12:20:50_477ab.pdf.
Manual for Development Projects | 38
 Figure 6: Functions of PPPA

Manual for Development Projects | 39

 Figure 7: Responsibilities of an Implementing Agency

VIABILITY GAP FUND

3.22 The PPP Authority will be establishing a non-lapsable Viability Gap
Fund (VGF) through upfront grant-in-aid to be managed, controlled,
and administered by the Authority. It will be utilized to provide support
to those qualified projects which are economically and socially justified
but are not viable financially according to the feasibility study.

RISK MANAGEMENT UNIT

3.23 A Risk Management Unit is being established at the Finance
Division’s Debt Policy Coordination Office. This unit will be responsible
for providing guidance for managing risks of PPP projects, and assess
fiscal risks of projects submitted to the PPPA.

PROJECT DEVELOPMENT FUND

3.24 The PPPA will establish a non-lapsable project development fund.
The project development fund will be utilized, inter alia, to support the
preparation of any proposals for qualified projects.

SALIENT MODES OF PPP

Manual for Development Projects | 40

 3.25 PPPs can happen under different modes; however, the salient
modes are presented in the table below:

Models Description
Build-and- A contractual arrangement in which the Private Party undertakes
Transfer the financing and construction of an infrastructure project and after
(BT) its completion hands it over to the Government Agency.
Build-Lease- A contractual arrangement in which the Private Party undertakes
and-Transfer the financing and construction of an infrastructure project and
(BLT) 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- A contractual arrangement in which the Private Party undertakes
Operate- the financing and construction of an infrastructure project, and the
and-Transfer operation and maintenance thereof. The Private Party transfers the
(BOT) facility to the Government Agency at the end of the fixed term that
shall be specified in the PPP agreement.
Build-Own- A contractual arrangement whereby the Private Party is authorized
and-Operate to finance, construct, own, operate and maintain an infrastructure
(BOO) project, from which the Private Party can recover its investment
and operating and maintenance expenses by collecting user levies
from project users.
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.
Build-Own- A contractual arrangement like the BOT agreement, except that the
Operate- Private Party owns the infrastructure project during the fixed term
Transfer before its transfer to the Government Agency.
(BOOT)
Build- A contractual arrangement whereby the Government Agency
Transfer- contracts out an infrastructure project to the Private Party to
and-Operate construct it on a turn-key basis, assuming cost overruns, delays,
(BTO) 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.
Contract- A contractual arrangement whereby the Private Party expands an
Add-and- existing infrastructure facility, which it leases from the Government
Operate Agency. The Private Party operates the expanded project and
(CAO) collects user levies, to recover the investment over an agreed
period.

Manual for Development Projects | 41

Develop- A contractual arrangement whereby favourable conditions external
Operate- to an infrastructure project, which is to be built by the Private
and-Transfer Party, are integrated into the PPP agreement by giving it the right
(DOT) to develop adjoining property and thus enjoy some of the benefits
the investment creates such as higher property or rent values.
Rehabilitate- A contractual arrangement whereby an existing infrastructure
Operate- facility is handed over to the Private Party to refurbish, operate and
and-Transfer maintain it for a specified period, during which the Private Party
(ROT) 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.
Rehabilitate- A contractual arrangement whereby an existing infrastructure
Own-and- facility is handed over to the Private Party to refurbish, operate and
Operate maintain with no time limitation imposed on ownership. The Private
(ROO) Party can collect user levies to recover its investment and operation
and maintenance expenses in perpetuity.
Management A contractual arrangement whereby the Government Agency
Contract entrusts the management of a project to the Private Party for an
(MC) agreed period on payment of specified consideration.
Service A contractual arrangement whereby the Private Party undertakes to
Contract provide services to the Government Agency for a specified period
(SC) with respect to an infrastructure facility. The Government Agency
will pay the Private Party an amount according to the agreed
schedule
Table 3: Modes of PPP

Manual for Development Projects | 42

 PROCESS FOR PPP PROJECTS
3.26 The process for PPP projects is as follows:

Figure 8: Process for PPP Projects

DEVELOPING A PPP PROJECT

Manual for Development Projects | 43
 3.27 These are some important considerations for development of a
PPP project:

Figure 9: Important Considerations for Developing a PPP Project

3.28 Under the International Public Sector Accounting Standards

(IPSAS) Board (IPSAS, 2002) contingent liabilities are “A possible
obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more
uncertain future events, not wholly within the control of the entity.”

3.29 As the federal government is moving towards fostering PPPs, it is

pertinent to focus on risk management to maximize the potential
benefits from PPPs. The Public sector often resorts to guarantees and
fiscal support for PPP projects that is generally conditional to
occurrence and/or non-occurrence of certain events in the future. Such
support forms part of contingent liabilities. Contingent liabilities in this
case may be considered as the hidden costs involved in introducing
PPPs into the arenas traditionally dominated by the public sector, e.g.,
infrastructure and service delivery. For the success of PPP projects, it is
important to adequately analyze and report potential risks emanating
from PPP projects.

3.30 It is important to understand that countries in the world have

faced severe fiscal crisis due to flaws in the design and structure of
PPP projects. Many such instances occurred due to mismanagement of
Fiscal Commitments and Contingent Liabilities (FCCL). In some PPP
projects, government may commit fiscal resources, such as equity, VGF

Manual for Development Projects | 44

 and subordinate debt under terms of agreement of the project. Risks
emerging from fiscal commitments also need to be analyzed and
reported by the government. FCCL become a fundamental issue to be
addressed by the government while making efforts to promote fiscally
responsible PPPs.

Commitmen Description
t
“Guarantees” The government commits to compensate the private party for loss
on particular in revenue should a particular risk variable deviate from a
risk variables contractually specified level. The associated risk is thereby shared
between the government and the private party. For example, this
could include guarantees on the following:
• Demand remaining above a specified level, or within a specified
range
• Exchange rates remaining within a specified range
• Tariffs being allowed to follow a specified formula (where tariffs
are set or approved by a government entity)
Force The government commits to compensate the private party for
majeure damage or loss due to certain specified force majeure events.
compensation These are typically limited to those events for which insurance is
clauses not commercially available, which may include certain natural
disasters
Termination The government commits to pay an agreed amount should the
payment contract be terminated due to default either by the private party
commitments or by the government on their obligations under the contract, and
to take control of the project assets. Typically, the defined
payment is lower in case of private party default.
Credit The government guarantees repayment of some, or all the debt
guarantees taken on by the project company if the project company itself
defaults on the debt, regardless of the reason for the default.
Figure 10: Types of Fiscal Commitments in PPPs

3.31 Three types of guarantees are provided in PPP projects. They are
summarized in the figure below:

Manual for Development Projects | 45

 Figure 11: Types of Guarantees in PPPs

3.32 Common reasons for failure of PPPs are presented in the figure
below. It is important to understand such reasons for designing sound
PPP projects.

Figure 12: Reasons for Failure of PPPs

CHAPTER 4: PROJECT PREPARATION

Manual for Development Projects | 46

 4.1 The formulation of development schemes should be a continuous
process and should not only be undertaken when required for the
preparation of the project. Such project proposals should be prepared
in the prescribed format of the PC-I by incorporating maximum
information to justify public financing. The proposal should be prepared
in consultation with the relevant stakeholders including beneficiaries of
the schemes. This chapter covers the operational policies, procedures,
and toolkits (PC I and PC II) for new project preparation as well as
restructuring (revision of ongoing projects in the PSDP/ADP portfolios.

UNDERSTANDING THE DIFFERENCE BETWEEN

DEVELOPMENT AND NON-DEVELOPMENT
EXPENDITURE
4.2 The concept of development expenditure is based on the premise
that a development project or programme supported by such
expenditure will (i) enlarge and/or improve the physical resources of
the country, (ii) improve the knowledge, skills, and productivity of the
people, and (iii) promote efficiency in the use of available resources.

4.3 The distinction between development and non-development

expenditures does not necessarily reflect on the similar character of
various activities. Similarly, the concept of development expenditure
should be kept separate from the question of project financing. The
sectoral classification of development expenditure in Annexure 3
provides guidelines for project expenditures, which should be treated
as developmental.

4.4 In general, expenditure on the establishment of new facilities

(works, goods, and services) is regarded as developmental, while
expenditure on ordinary maintenance and running of the existing
facilities is treated as non-developmental and should be provided for in
the non-developmental requirements of the respective government
departments. For example, the existing level of expenditure on the
agricultural extension services or research, etc., is treated as non-
developmental; so is the ordinary expenditure for routine maintenance
of roads, canals, buildings etc. All O&M expenditure on raw materials,
spare parts and fuels is also to be treated as non-developmental.

LINKING PROJECTS TO RESOURCES

Manual for Development Projects | 47

 4.5 All sponsoring ministries/divisions/agencies must structure their
priorities according to available resources and avoid over-ambitious
programmes beyond their absorptive and implementation capacity.
Therefore, all sponsoring agencies before preparing a project and
submitting it to the PD&SI Division must ensure the availability of
adequate resources in the Plan and PSDP. Concurrently, the
ministries/divisions are advised to ensure that the available resources
are not thinly spread over many projects, including low priority
projects. The NEC, in its meeting held on 10th June 2013, directed that
the ECNEC and CDWP must ensure availability of funds while approving
development projects/schemes13 (Annexure 4). Further, under clause
(a) of Section 17 of the Public Finance Management Act, 2019, only
technically approved projects from the relevant forum shall be
considered for inclusion in the demands for grants.

PC-I PROFORMA
4.6 The Planning Commission proforma I (generally called PC-I) is the
primary project document, and its preparation is a key step in project
preparation and processing. The sponsoring agency is expected to
spend adequate time and resources in preparing this document to
avoid complications during project implementation resulting in delays
in project completion and cost overruns. The PC-I is used both for new
projects and revision of ongoing projects. The Proforma comprises of
three parts:
i. Part A is the Project Digest, which requires basic project
information, that is, project title, location, sponsoring and
executing agencies, project description, justification and
technical parameters, project cost and completion period,
physical and financial phasing, the status of a feasibility study,
and project objectives, plan, and sector strategy linkages.
ii. Part B is Project Requirement, which includes project scope,
employment generation, management structure and manpower
requirements, the status of surveying and mapping and land
acquisition activities, and responsibility of operation and
maintenance of project assets after project completion.
iii. Part C is Appraisal and Analysis, which needs information on
project quantifiable benefits (financial, economic, social),
revenue or income generation after project completion, financial
and economic analysis and results, sensitivity and risk analysis,

13Planning Commission, ‘Assurance of Availability of Funds for Development Projects’, Notification

No.21(1)PIA/PC/2013, Islamabad, dated 26 June 2013.
Manual for Development Projects | 48
 stakeholder consultation analysis, environmental and social
impact assessment (including climate change and Clean
Development Mechanism (CDM) assessment), and disaster
reduction analysis. Only the Project Digest (with additional
information) is required to be submitted for the revised projects.

4.7 There are additional proformas for preparing project summary for
the ECNEC and working paper for the CDWP, for both new and revised
projects.

4.8 The following attachments are required to be annexed to the PC-I:

i. Certificate regarding the conduct of feasibility study wherever
applicable, which must include technical/reference design, bill of
quantities, etc.
ii. Environment Impact Assessment
iii. Questionnaire for an assessment of the CDM potential in public
sector projects
iv. CDM eligibility test for assessment and identification of a project
in the public sector
v. Checklist for disaster risk reduction

4.9 After preparation of the PC-I, the PAO signs 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 the PC-I of the concerned sector projects”. Thereafter, the PC-I or
PC-II is to be submitted to the PIA Section of the planning commission,
which circulates it to the members concerned of the CDWP, including
the technical section concerned for their review and appraisal. (The
appraisal process has been addressed in the following chapter.) The
PC-I proforma, along with detailed instructions are available on the
Planning Commission’s website and placed in Annexure 5 14.

KEY COMPONENTS OF PC-I

4.10 The PC-I preparation requires a large amount of data collection
and analysis. It is important that the required information is prepared
and entered in the PC-I proforma with due care and diligence to avoid
repeated revisions during the project appraisal, review, and approval

14 www.pc.gov.pk

Manual for Development Projects | 49

 stages. The key components of the PC-I are discussed in the following
sections.

Project Objective
4.11 Every project must have a project development objective along
with inputs, outputs, and outcomes (the results chain), project
components and activities to be implemented within a specific time and
cost, along with a monitoring framework. While preparing a project, it
is important that the project’s objective(s) must be aligned with the
objectives, goals and targets set out in the currently operative
perspective growth strategy, Five-Year Plan or Annual Plan. The project
must have a clear linkage with the economic development policies of
the government, including the relevant sector policies, strategies, and
master plans (as applicable). The project objectives should be linked to
the UN SDGs indicating the specific Goals, being addressed by the
project. A relationship of the proposed project and its specific
contribution (in quantifiable terms) with other projects (completed or
ongoing) in the same sector or sub-sector, must be highlighted in the
project document.

Project Description
4.12 The description of a project should provide information about its
key features, components (both hard and soft) and technical aspects.
It should also include its justification and rationale, in addition to a
brief account of similar interventions, any feasibility study, and relevant
government policies, sector strategy, and plans of the past. The
technology proposed to be adopted for the project and the source of
supply of machinery and equipment should also be mentioned. It
should also be stated whether the project output would be used for
import substitution, for export promotion or for meeting the increased
domestic demand or a combination of these.

Project Location
4.13 Regarding project location, due consideration should be given to
the area and population to be served by the project, the economic,
environmental, and social characteristics of the project area, and the
income and other attributes of the beneficiary population. The location
analysis should include the following:
i. The rationale for the selection of a proposed project
ii. Place and administrative district where the project is located.
iii. Geographic Information System-based map(s) of the project
area with the Global Positioning System coordinates

Manual for Development Projects | 50

 iv. Reasons for selection of location15
v. Availability of land and other physical inputs needed for the
project.
vi. In the case of mega projects and water sector projects, a
separate PC-I for land acquisition should be prepared, if
required.
vii. In case of projects involving the provision of buildings, plans
(including architectural drawings) prepared by a licensed
engineer/architect should be attached to the PC-I.
viii. The social and environmental impacts of the project, including
climate change.

Project Scope
4.14 The sponsoring agency should ensure that the project scope
includes only the project requirements necessary to achieve the
envisaged objective. The scope of the project must be clearly
mentioned. While presenting it, the sponsors should indicate, in
quantitative terms, the proposed facilities and services, which would
result from its implementation. In addition, the project sponsor should
provide information on:
i. Demand for project output, with its basis
ii. Existing position regarding capacity and actual supply of output
iii. The gap that the project is going to fill between supply and
demand.

CHANGE IN PROJECT SCOPE

4.15 Once approved, the executing agency is required to implement
the project in accordance with the PC-I provisions. It has no authority
to change or modify any approved parameter of the project. If the
project executing agency determines (based on detailed justification)
that the project cannot be implemented under the approved
parameters and it requires revision of scope, physical components or
financial allocation, a revised PC-I must be submitted to the competent
forum for approval. No expenditure may be incurred beyond the
approved scope and cost of the project, and if it is done, it will be
considered as an inadmissible and illegal expenditure.

15Many projects have suffered tremendously in the past due to improper site selection done in haste. It results in
cost overruns and delays in project completion. Project implementation also suffers due to delay in land
acquisition. Therefore, the availability of land needs to be assured as part of the site selection process. In
selecting the location, area and population to be served by the project, the income and social characteristics of the
population need to be assessed. Similarly, the economic characteristics of the area i.e. present facilities and
availability of inputs and regional development needs need to be considered.
Manual for Development Projects | 51
 Inventory of Machinery and Equipment
4.16 All proposals for the procurement of machinery and equipment by
the government departments or agencies should be accompanied by
an inventory of the existing pool of the machinery and equipment held
by them. For example, whenever a provision of a new vehicle is made
in a development project, the ministry, department, or agency
concerned should furnish a supporting document, a complete inventory
of the existing vehicles both on the development and recurring side,
along with their date of purchase, to justify the purchase of new
vehicles.

Project Cost
4.17 The cost estimates of a project must be prepared with due care
and diligence so that these only require revision on an exceptional
basis and project implementation is not delayed due to the non-
availability of funds. Besides, the cost debitable to the development
budget must be distinguished from the cost debitable to the revenue
budget. The Pakistani Rupee (PKR) equivalent of the Foreign Exchange
Component (FEC) of projects should be worked out based on the ‘Bank
Floating Average Exchange Rate’ of the relevant currency as shown on
the website of the State Bank of Pakistan (SBP) for the month
preceding the one in which the PC-I and PC-II were submitted to the
MoPD&SI16 (Annexure 6).

4.18 The following guidelines for cost estimation will generally apply to
all projects:
i. Total cost of the project with local component and FEC
(loan/grant)17
ii. Item-wise breakup of the total cost (Rs in million)
iii. Unit cost (attach specifications)
iv. Comparison of the unit cost of the project with other similar
projects of the sector/area (in case of variations, detailed
reasons/justification be given for cost estimation) using
Composite Schedule of Rates (CSR), Schedule of Revised Rates
(SRR).
v. Date of preparation of cost estimates (Indicate if these are still
valid).
vi. The cost of imported items available in the local market must be
reflected in the local component and not in the FEC component.

16 Planning Commission,’ Conversion Of Foreign Exchange Component of Development Projects In Pak Rupee’,
Notification No.4(1)PIP/PC/2013-14, Islamabad, dated 24 October 2013.
17 Indicate source and rate of exchange -PKR vis-à-vis USD.

Manual for Development Projects | 52

 vii. Annual Operating and Maintenance (O&M) cost after completion
of the project

4.19 The PC-I must also clearly show the component- and item-wise
annual breakdown of the costs over the project period as shown in
Table 3.

Item Year 1 Year 2 Year 3

Total Local FEC Total Local FEC Total Local FEC

Table 4: Item wise Breakdown of Project Cost by Year

REVISED PROJECT COST

4.20 The project cost may need a revision because of certain factors,
which also include a change in scope during implementation and cost
overruns. In case of revision of the project, detailed justification for
changes in scope and cost must be provided separately. The cost
estimates must be prepared, which should be based on the current
market survey, updated schedule of rates and pre-tender quotation
rather than using across board premium. Instructions of the ECNEC
about project cost revision are presented in Box 5.

Project Financing
4.21 The sponsoring agency provides a detailed justification (for
example, public good, market failure, social protection, etc.) why the
project cannot be implemented in the private sector or on the PPP
basis – in case the project is proposed to be financed through the
public sector. The sponsoring agency then develops and presents a
financial plan of the project in the PC-I. The sources of project funding
need to be presented in clear and specific terms so that there remains
no ambiguity or confusion regarding the financing plan. In case, a
foreign agency is committed to financing 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. The source
and amount of funding should be described as follows:

i. Equity
Indicate the amount of equity to be financed from the applicable
source/s:
1. Public Sector: Sponsor’s own resources, federal or
provincial government
Manual for Development Projects | 53
 2. Private sector: Foreign, domestic
3. Public-Private Partnership
4. General public
5. Foreign equity (indicate partner agency)
6. NGOs/beneficiaries
7. Other

Note: Attach date and decision of the Concept Clearance

Committee with a copy of minutes or decision annexed.

ii. Debt
1. Indicate the local and/or foreign loan.
2. Interest rate, grace period and repayment period for
each loan separately
3. The loan repayment schedule must be also annexed.

Note: Attach the Economic Affairs Confirmation in case of

foreign loan.

iii. Grants along with source.

Note: Attach the Economic Affairs Confirmation in case of

foreign grant.

iv. Weighted Average Cost of Capital (WACC)

Manual for Development Projects | 54

 Box 1 – Revision of Project and Cost Estimates1

• As per ECNEC no expenditure should be made beyond the approved cost of the
project. Instructions have separately been issued under Cabinet Division circular
d.o. letter No. 5/CF/75 dated 7 May 1975 requiring the executing agencies to start
preparing the revised scheme immediately when it was known that the cost of the
scheme is going to rise beyond the permissible limit of 15 percent. The ECNEC, at
its meeting held on 29-12-1974, approved the following procedure for obtaining
fresh approval of a development scheme in case its cost increased by more than
15 percent of the originally approved cost.

• “If the total estimated cost, as sanctioned increases by a margin of 15 percent or

more, or if any significant variation in the nature or scope of the project has been
made, irrespective of whether it involves an increased outlay, the approval of the
ECNEC/competent authority shall be obtained in the same manner as in the case of
the original scheme without delay. Permission of 15 percent given by the ECNEC is
in respect of the original cost and not the revised cost of the scheme.”3

• It is considered that no difficulty should be experienced in this regard, as PC-III

forms (quarterly progress report) are prepared in respect of all such schemes.

• Columns 6 and 7 of the PC-III forms, which indicate the percentages of physical
completion and financial expenditure are relevant. The two percentages have close
relationship. If the percentages of financial expenditure exceed percentage of
physical work by more than 15 percent, it is an enough indication to show that the
cost of the project would go beyond the approved cost. As soon as this indication
is visible the executing agency should immediately start work on revising the
scheme without stopping the actual work. In exceptional cases, where the revised
scheme cannot be prepared in time, recourse could be taken to obtaining
anticipatory approval of the Chairman Executing Committee of the National
Economic Council, following the procedure outlined in Cabinet Division circular
letter.

Manual for Development Projects | 55

 • A preliminary stage when the possibility of revision of cost becomes clear is when
the project is to be implemented through a few major contracts and the bids
received in response to tenders make it obvious that the sanctioned cost will be
exceeded.
1Planning and Development Division, ‘Submission of Revised Schemes when Cost Exceeds beyond 15 percent
Permissible Limit for Original Approved Schemes’, Notification No. 20(40)PIA/PC/2005, Islamabad, dated 26 May
2007. | 2 Cabinet Division Notification No.5/CF/75 Rawalpindi, dated 16 July 1975 (Annexure 38) | 3Planning and
Development Division Notification No. 20(1)DA/PC/79-Vol.XIV, Islamabad, dated 22 June 1980. Annexure 39)

Project Benefits
4.22 The economic aspects of a proposed project or programme have
a direct bearing on the development of the economy through the
backward and forward linkages. The economic benefits of projects can
enhance production, as well as employment, and increase the value of
output due to quality improvement or other factors. The benefits can
also be accrued from reductions in cost or gains with the
mechanization of the production process, decreasing distribution costs
and avoiding losses. In the social sector projects, benefits can be
gathered by increasing productivity and earning capacity through
improvements in health, education, and skills. In the infrastructure
projects like transport, benefits can be accumulated with savings in
travel time, vehicle operating costs, accident reduction and on account
of new development activity. Projects also have some intangible
benefits, like better income distribution, national integration, national
defence or better quality of life of the rural population, especially in the
far-flung and backward areas. The benefits because of the project and
its interventions must be clearly spelt out and quantified as much as
possible.

Project Scheduling
4.23 The project implementation schedule must be developed using an
appropriate analytical tool such as Bar Charts, Project Evaluation and
Review Techniques (PERT), Critical Path Method (CPM). These should
be incorporated in the PC-I and other project documents. It may be
prudent to use software applications available in the market for this
purpose.

FINANCIAL PHASING

Manual for Development Projects | 56

 4.24 The financial phasing of a project is to be given for each fiscal
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 far as possible. The fund's utilization capacity of the
executing agency must be kept in view while determining the financial
phasing of the project. See Table 4 below.

Items Units Year-1 Year-2 Year-3

Table 5: Financial Phasing of Project Costs

*(Physical phasing/implementation plan of major items/deliverables may be

provided and financial phasing should be derived from it).

PHYSICAL SCHEDULING OF ACTIVITIES

4.25 The scheduling of activities and the availability of physical
facilities are interlinked with the completion period. The availability of
physical facilities, for example, access road, power supply, water, gas,
telephone and other utilities, education facilities, housing, etc., must 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 investigated thoroughly to facilitate physical
and financial phasing as well as supervision. The Work Breakdown
Structures (WBS) and Logic Framework Analysis (LFA) and similar
management tools must be used to conduct the physical scheduling of
activities. It may be prudent to use software applications available in
the market for this purpose.

Project Implementation Period

4.26 Time calculated for completion of the project must be realistic.
The figure below represents factors that need to be considered in
estimating the project implementation period:

Manual for Development Projects | 57

 Figure 13: Factors That Need to be Considered in Estimating the Project Implementation
Period

EXTENSION IN IMPLEMENTATION PERIOD

Manual for Development Projects | 58

 4.27 The guidelines for extension in the execution period of
development projects are given below, but these will be subject to ‘no
change in scope and cost of the project(s)’18 (Annexure 7).
i. The PAO of the sponsoring/executing agency may grant time
extension in the execution period of the project till the closing of
the fiscal year, twice in a project’s life, irrespective of the
approving forums.
ii. In case of further extension, the provincial and special areas
Development Working Party will be empowered to grant time
extension based on reasons of delay in execution, irrespective of
approving forums.
iii. In the case of the federally administered development projects,
further extension in the execution period will be granted by the
DDWP of the ministry/division concerned based on reasons of
delay in execution, irrespective of the approving forums.
iv. In the case where there is no DDWP, the matter for further time
extension will be presented to the division/chairman office
concerned and a committee headed by the federal
secretary/chairman comprising representatives from the
Planning Commission and Finance Division will review and grant
time extension based on reasons for the delay in execution,
irrespective of the approving forums, if required.
v. In the case of foreign-aided projects, consent of the
donor/sponsor will be compulsory in coordination with the EAD
before processing the case for a time extension.

INTER-AGENCY COORDINATION AND STAKEHOLDER

CONSULTATION
4.28 To avoid duplication of efforts and ensure effective
implementation of the proposed project, all the relevant data should be
obtained, and the agencies concerned consulted. Box 6 below

Box 2 – Example of Interagency Coordination in a Health Scheme

The following information should be obtained and reflected in the project:

i. Public and private sector institutions in the area, their staff, equipment, and
the number of persons served by them,
18
ii. Population
Planning Commission, of the area,
‘Extension in Execution of Development Projects’, Notification No. 23(1-DDWP)/PIA-
I/PC/2017 dated 15 March 2019.
iii. Economic characteristics of the persons who are being provided service,
Manual for Development Projects | 59
iv. Morbidity and incidence of epidemics during the last five years or so,
v. Clearance from relevant authorities.
 represents the case of a health scheme.

4.29 The inter-agency coordination is also necessary for the availability

of utilities, such as water and power supply, education facilities and
housing. For example, before an industrial scheme sponsored by the
Production Division is undertaken, it is critically important that the
clearance of the relevant agency concerned is obtained for the
availability of water supply and other utilities. As decided by the NEC in
its meeting held on the 4th of July 1988, the project document should
clearly indicate the coordination required with the other agencies to
facilitate project implementation.

Manual for Development Projects | 60

 PROJECT MANAGEMENT
STRUCTURE

Figure 14: Project Management Structure- Part A

Manual for Development Projects | 61

 Figure 15: Project Management Structure- Part B

Appointment of Consultants for Project Preparation

4.30 In case local expertise is not available, foreign experts or
consultants can be employed to prepare projects, which are technically
and economically viable. Efforts are being made to develop local
consultancy capacity, but in the case of large or sophisticated projects
involving new technology, foreign consultants are usually needed. Most
of the large projects in Pakistan are foreign-aided and foreign
consultants may not be excluded from participation in providing the
requisite services. However, the government, to give preference to the
local consultants, has decided that the Pakistani consultants and
engineers be given the 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 ECC for a minimum of 30 percent award
of a consultancy contract to local consultants may be strictly enforced.
(Prime Minister's Order dated 7 November 1993).

REQUIREMENTS FOR SUBMISSION OF PC-I IN

PLANNING COMMISSION
4.31 The following are the specific requirements for submission of the
PC-I.

Manual for Development Projects | 62

 i. All PC-Is must be signed by the chairmen P&D boards, additional
chief secretaries (Development) in case of the provincial and special
areas’ projects, and federal secretaries/PAOs in case of the federal
project.
ii. The provincial and special areas projects, requiring federal financing
from the PSDP (fully or partially) irrespective of the cost, will be
sent to the Planning Commission for consideration of the CDWP,
and if required, by the ECNEC.
iii. For the provincial and special areas projects, to be financed either
fully or partially by the federal government, the land will be
provided free-of-cost by the provincial or special areas’
governments.
iv. The P&D boards/departments of the provincial and special areas,
where necessary, will recommend a scheme for approval of the
CDWP and ECNEC after approval from PDWP/special areas DWP.
No schemes will be sent to the federal government directly by the
provincial departments.
v. The provincial projects, funded from the provincial governments’
resources, and where no federal assets are utilized, or federal
liability generated are to be approved by respective PDWP. Projects
where water distribution issues are involved, or the Indus River
System Authority (IRSA) certificate is required are an exception to
this.
vi. In the case of the provincial and special areas schemes submitted
to the federal government and central schemes, copies thereof
should be sent simultaneously to the central administrative ministry
and the Planning Commission.
vii. For seeking foreign assistance for the federal or provincial projects
(loan/grant), the requirement of concept clearance from the
Concept Clearance Committee (CCC) will be strictly adhered to.
After the firm commitment of availability of foreign assistance from
a donor through the EAD, the PC-I (along with the feasibility study,
PAD, and draft loan/grant agreement, if required), will be
forwarded to the Planning Commission for consideration of the
CDWP/ECNEC. The EAD will verify the availability of foreign
assistance.
viii. The objectives and outcomes of the project will be clearly
mentioned in the PC-I and II. Without detailed designing of civil
work and item-wise cost the PC-I will not be processed.

Manual for Development Projects | 63

 ix. To minimize and avoid payment of commitment charges, the loan
agreement should only be signed after approval of the PC-I and
completing all other code formalities.
x. For foreign-aided projects, land availability will be ensured by the
sponsoring/executing agency before signing an agreement with
donors.
xi. In the case of a foreign-funded project, the name of the agency
and amount of foreign exchange and local currency committed is to
be mentioned in the PC-I. Similarly, the source and amount of
rupee component should be indicated as government sources, that
is, grant, loan, equity, etc.
xii. The objectives of the project must be clearly indicated preferably in
quantitative terms and linked with the five-year-plan targets and
growth strategy of the sector.
xiii. Detailed designing of civil work, including BoQs and location map,
will be mandatory in the PC-I.
xiv. The feasibility study should be based on historical as well as current
data. Any study – older than three years – will not be accepted by
the Planning Commission.
xv. Location analysis should be carried out scientifically.
xvi. Result Based Management (RBM) indicators, that is, input, output,
outcome, and impact should be clearly indicated in the PC-Is.
xvii. Costing of the project should be based on realistic and justified
market prices indicating quantities and unit values.
xviii. Escalation charges, maximum up to 6.5 percent per annum of the
base cost, will be allowed based on justification from the 2 nd year of
the project.
xix. Contingencies charges, maximum up to three percent of the base
cost, will be allowed based on justification. However, in the case of
the revised PC-I, the number of contingencies will be capped at the
originally approved amount.
xx. The sustainability aspect (O&M cost) of the project will be discussed
and addressed with a proper mechanism in the PC-I.
xxi. The Project Management Unit (PMU) will be set up with well-
defined roles, including TORs of the PD, consultants/experts, and
appointment terms with salary structures.
xxii. The Project Implementation Plan, covering both yearly physical and
financial plan, will be clearly indicated in the PC-I.
Manual for Development Projects | 64
 xxiii. In case of revised projects, original and revised scope of work
completed and to be done should be stated with item-wise
quantities and expenditures. Reasons for revision should also be
given along with justification.
xxiv. In the case of the 2nd revised PC-I, an inquiry report by the head
of sponsoring agency identifying the reason and responsibility for
the inability to complete the project after the 1st revision will be
attached with the 2nd revised PC-I.
xxv. Appraisal of submitted PC-I/II will be made simultaneously by all
the members. The technical section will coordinate the compilation
of comments from all concerned and incorporate these in the
working paper, which will be discussed in the PDWP or CDWP
meeting.
xxvi. While preparing projects and development portfolio ensure
compliance to Sections 13 through 17 of the Public Finance
Management Act 2019. Project preparation commences with the
project concept, namely, its objective, scope, estimated cost,
expected results and outcome, and funding modality. The concept
clearance paper is analyzed and approved by one of the competent
forums, that is, ECNEC, CWDP, PDWP, DWDP, etc.

Checklist for PC-I

4.32 Below is the checklist, which must be ensured before submission
of the PC-I for processing at the Planning Commission.

# Checklist items Tick as appropriate

1. Confirmation regarding the preparation of N/A Yes No
the PC-Is and PC-IIs on the standard
revised format for different sectors
(social, infrastructure and production)
2. Confirmation and self-explanatory N/A Yes No
nomenclature
3. Geographical specific area N/A Yes No
4. Location map of the project N/A Yes No
5. Map and design of a building (if N/A Yes No
applicable)
6. Clarification about the source of financing N/A Yes No
7. Plan Provisions for FY in PSDP/ADP N/A Yes No
Allocation

Manual for Development Projects | 65

 8. Inclusion of tangible outcomes N/A Yes No
9. Proper addition of costs including N/A Yes No
FEC/foreign funded
10. Inclusion of responsible agencies for N/A Yes No
sponsoring
11. Execution N/A Yes No
12. Operation and maintenance N/A Yes No
13. Routed through proper channel from the N/A Yes No
ministry/division/province/area concerned
14. Inclusion of effective cost estimation date N/A Yes No
(schedule of rates)
15. Inclusion of implementation schedule with N/A Yes No
the number of years of the project
16. Comparison of financial scope (in case of N/A Yes No
a revised project)
17. Comparison of physical scope (in case of N/A Yes No
a revised project)
18. Inclusion of RBM indicators N/A Yes No
19. Confirmation of signatures of the N/A Yes No
responsible officer concerned at column
15 of the PC-I (federal PAO/provincial
ACS)
20. Digitally prepared PC-I/PC-II (received) N/A Yes No
21. Annexure of PDWP/DDWP minutes, if N/A Yes No
applicable
22. Annexure or directives (President/PM), if N/A Yes No
applicable
23. Determination of the principal technical N/A Yes No
section of the PD&SI
24. Circulation of copies of the PC-Is, PC-IIs N/A Yes No
to members of the CDWP and sections’
chiefs of the Planning Commission for
comments/scrutiny
Table 6: Checklist for PC-I

PC-II PROFORMA
4.33 The PC-II approved by the relevant competent forum is required
for the conduct of feasibility study, including technical investigations,
market surveys and other studies. The requirement of a PC-II shall be
mandatory for infrastructure projects, each costing Rs500 million or

Manual for Development Projects | 66

 above, and all other projects where the infrastructure component is
equal to or more than 30 percent of the total project cost. Projects
falling in these categories shall require feasibility study undertaken
through the PC-II, which must include at least, technical and reference
design and bill of quantities, etc.

4.34 The above condition shall not be applicable for infrastructure

projects, each costing less than Rs500 million, and all other projects
where the infrastructure component is less than 30 percent of the total
project cost.

4.35 The requirement of the PC-II shall also not apply to projects
declared as R&D-oriented or innovative in nature, irrespective of their
cost, by the forum having financial powers to approve the projects.
However, such projects shall be accompanied by a proper need
assessment and justification, which can be carried out in the house.

4.36 The feasibility should be proper and based on the current data.
Any study older than three years is not accepted by the Planning
Commission19 (Annexure 8). For more complex projects, technical
assistance may be requested for a feasibility study from one of the
development partners/donors.

4.37 The PC-II, inter alia, needs to indicate studies and surveys already
undertaken on the subject. In case of studies done already, it may be
certified that the latest study/survey is necessary to add or validate
and update the existing study/survey available with the sponsoring or
other departments. The TORs for the consultants may include the
following:
i. Possibility of prospective project financing and implementation
through different modes, that is, private sector, PPP, etc.
ii. Environmental impact assessment, including CDM and DRRA.
iii. Financial analysis (FIRR, NPV and BCR)
iv. Economic analysis (EIRR, NPV and BCR)
v. Risk and sensitivity analyses and proposed mitigation measures
vi. Forward and backward linkages of the proposed study/survey
vii. Expected output of the proposed feasibility study/survey.

19Planning Commission, ‘Preparation of Proper Feasibility Study/PC-II by the Sponsors for Development
Projects’, Notification No.24(4)PIA-I/PC/2016, Islamabad, dated 28 June 2016
Manual for Development Projects | 67
 4.38 Appropriate provision for funding the feasibility study is made in
the PSDP, and the sponsoring agency is required to appoint a Project
Director at the initial stage of project preparation.

Manual for Development Projects | 68

 78
CHAPTER 5: PROJECT
APPRAISAL

97
Manual for Development Projects | 69
CHAPTER 6: PROJECT
APPROVAL
 CHAPTER 5: PROJECT APPRAISAL

5.1 Project appraisal is a critical phase in the project planning process.

The primary purpose of an appraisal is to facilitate informed decision-
making on the proposed project or investment. If a project is well-
formulated and thoroughly appraised, it will have a higher likelihood of
achieving its objectives and sustainable outcomes. A project appraisal
also ensures that a sound legal and institutional basis exists for
undertaking the investment and managing the operations, thereby
weeding out poorly conceived projects. Comprehensive estimates of
project benefits and costs during the appraisal allow decision-makers
to assess the project’s economic and financial viability. These estimates
include formulation of detailed financing plans and a plan for
distribution of benefits and costs among different project beneficiaries
and stakeholders. An appraisal may also cause a project to be
redesigned or restructured so that it is less likely to fail.

5.2 The physical and financial scope of a project, as determined and

defined in the project document (PC-I), is scrutinized, reviewed, and
appraised by a technical wing of the MoPD&SI in collaboration with the
sponsoring agency as well as associated agencies concerned, before
submitting the project for approval to the CDWP/ECNEC for an
informed and prompt decision-making20.

APPRAISAL STEPS
5.3 An appraisal involves the following steps:
i. A careful checking of the basic data, assumptions and
methodology used in project preparation,
ii. An in-depth review of the work plan, cost estimates and
proposed financing,
iii. An assessment of the project’s organizational and management
aspects, and finally,
iv. Validity of the financial, economic, and social benefits to be
accrued from the project.

20At the provincial/special area level, this function is performed by the technical sections of the P&D
Boards/Departments.
Manual for Development Projects | 70
 5.4 Based on such an assessment, a judgement is reached as to
whether the project is technically sound, financially justified, and
economically viable.

BEST PRACTICES AND COMMON MISTAKES IN

APPRAISAL
5.5 The best practices and common mistakes made at each level are
represented in the figure below:

Manual for Development Projects | 71

 Figure 16: Best Practices and Common Mistakes in an Appraisal

5.6 Appraisal of a project will assess technical feasibility, economic,

financial, and commercial viabilities, institutional management
capability, environmental sustainability, social acceptability, risk
management and sensitivity analysis. The next steps are presented in
the figure below:
Manual for Development Projects | 72
 Figure 17: Steps in Appraisal Process (Breakdown of Timeline)

5.7 If required, modified PC-I/II (in the light of pre-CDWP discussion)

shall be submitted by the sponsors to the technical section concerned
before finalization of the working paper for consideration of the CDWP.

INSTITUTIONAL RESPONSIBILITY
5.8 According to Sections 14, 15, and 16 of the PFM Act 2019 (as
amended from time to time), the Planning Commission21 is mandated
to:
i. Ensure that all development projects are prepared in conformity
with procedures, processes and templates defined by it,

i. Undertake the cost and benefit analysis and risk assessment of

all development project proposals, above a threshold size
prescribed by it, and
ii. Ensure quality assurance of all development project proposals,
which exceed the total cost of the specified thresholds. Such
quality assurance shall be undertaken by an individual/body,
which is independent of the division/ ministry/sector that has
initiated the preparation of the development project proposal.

5.9 All development project proposals shall be subject to a technical

approval process, which shall only be granted to projects which are

21The respective P&D Board/Department exercises this function with respect to projects in the provincial/special
area ADPs
Manual for Development Projects | 73
 compliant with the standards and procedures set by the Planning
Commission. Findings and recommendations of the independent quality
assurance reports, cost and benefit analysis and risk assessment
(where required as per sub-section (2) section 14 of the PFM Act
2019), shall be considered by the project approval forums while
considering the development project proposals.

5.10 In its meeting held on the 1st of October 2020, the ECNEC had
decided that the Planning Commission will define a simple practical and
actionable internal procedure for the processing and appraisal of the
PC-Is within the Commission. The observations of the Commission and
P&DDs on the PC-I will be communicated to the relevant ministry or
department promptly and electronically. Also, the ECNEC had
instructed that the Planning Commission and P&DDs revisit project
appraisal criteria, which shall consider payment of taxes, interest
during construction, future cost escalation, inflation, and exchange rate
variation.

ANALYTICAL ASPECTS OF PROJECT APPRAISAL

5.11 The project appraisal requires an examination of project
soundness from diverse perspectives22. These are represented in the
figure below:

22The detailed methodologies for project analysis and appraisal vary significantly from sector
to sector (e.g. infrastructure, social sectors, economic sectors etc.) and fall outside the scope
of this manual.
Manual for Development Projects | 74
 Figure 18: Analytical Aspects of Project Appraisal

Technical Analysis
5.12 Analysis for determining the technical viability of the development
project is based on the technical data and information given in the PC-I
form as well as prior experience of carrying out similar projects. The
technical tests and yardsticks to be used to determine the technical
viability differ from project to project and sector to sector. In cases
where high-level technology is involved and the country has little or no
experience, foreign consultants may be engaged to prepare the
feasibility studies.

5.13 This analysis concerns the project's input (supplies) and output
(production) of real goods and services. For example, in an agricultural
project, technical analysis will determine the potential yields in the
project area, the co-efficient of production, potential cropping patterns,
and the possibilities for multiple cropping. The technical analysis will
also examine the marketing and storage facilities required for the
successful operation of the project. Aspects like soil, groundwater or
the collection of hydrological data may also be examined. Knowledge
about farmers in the project area, their current farming practices, and
their social values to ensure realistic choices about technology is also
examined.

Institutional Analysis
5.14 A range of issues, addressed in project appraisal, pertain to the
overlapping institutional, organizational, and managerial aspects of the
project, which have a direct bearing on project implementation and
sustainability. The project proposal should respond to questions in the
checklist below:

Manual for Development Projects | 75

# Checklist Yes/N
o

1 Is the project institutionally sound and does adequate capacity

exist for its successful implementation?

2 Is the exercise of managerial authority balanced with

accountability for results and does the organizational set-up
encourage delegation of authority?

3 Are the functional (and reporting) relationships between the

project entity and its parent organization (ministry, division,
agency) and other planning, regulatory, and oversight bodies
clearly defined?

4 Does the proposed project organization conform to the national

laws, regulations, and operational procedures as well as the
requirements of the external funding agencies?

5 Is the proposed project staffing commensurate with the project

requirements?

6 Are training arrangements in place to ensure sustainable

operation and maintenance of the project after the construction
phase?

Table 7: Project Appraisal Checklist

5.15 Other questions may be added to the checklist above. The

analysis includes an action plan to rectify the identified institutional and
organizational deficiencies and proposes an appropriate management
structure for the project.

Social Analysis
5.16 This analysis is a process that aims to identify social dimensions
of projects, different stakeholders, and their perspectives and priorities.
It considers social aspects such as involuntary resettlement, indigenous
peoples, physical cultural resources, human health and safety and
gender. It examines aspects like poverty reduction, income distribution
and employment creation and impacts on special groups such as
minorities, and particular regions such as backward or less developed
areas. Another aspect of a social analysis is how the project is

Manual for Development Projects | 76

 contributing to the attainment of relevant SDGs23 in national or sub-
national contexts. Briefly, the objectives of a social analysis are to:
i. Contribute to project sustainability by ensuring that it responds
to the needs of the individuals, communities, and areas served
and affected by it,
ii. Ensure project effectiveness by tailoring institutional
arrangements to the local culture and values,
iii. Make projects more inclusive by involving not only the
immediate beneficiaries but a diverse community of
stakeholders (especially the parties adversely affected by the
project), and

iv. Take into consideration the political economy of the project.

Environmental Analysis
5.17 The environmental analysis evaluates a project's potential
environmental risks and impacts in its area of influence. The
environmental analysis considers the natural environment (air, water,
and land) and transboundary and global environmental aspects, with a
special focus on climate change (both mitigation and adaptation
aspects).

5.18 The main objective of this analysis is to identify the ways and
means to prevent, minimize, mitigate, or compensate for adverse
environmental impacts of a project and to enhance its positive impacts.
This includes consideration of project alternatives as well as measures
to improve project selection, siting, planning, design, and
implementation. Wherever feasible, the preventive measures are
preferable to mitigatory or compensatory measures.

5.19 This analysis should take full cognizance of the national

environmental action plans, legislation and regulations, and obligations
of the country under the relevant international environmental treaties

23 The Sustainable Development Goals (SDGs) are a call for action by all UN member countries to promote
prosperity while protecting the planet. They recognize that ending poverty must go hand-in-hand with strategies
that build economic growth and address a range of social needs including education, health, social protection,
and job opportunities, while tackling climate change and environmental protection. The 17 Goals are
all interconnected, and aim to leave no one behind by 2030. Pakistan was the first country to adopt SDGs 2030
agenda through a unanimous resolution of parliament. The seven pillars of Vision-2025 are fully aligned with
the SDGs, providing a comprehensive long-term strategy for achieving inclusive growth and sustainable
development. Additional information available at :
https://www.un.org/sustainabledevelopment/sustainable-development-goals/
https://www.sdgpakistan.pk/
Manual for Development Projects | 77
 and agreements. As with the social analysis, the environmental
analysis should show how the project is contributing to the SDGs.

Financial and Commercial Analysis

5.20 This analysis involves assessment of financial impact, judgement
of efficient resource use, assessment of incentives, provision of a
sound financing plan, coordination of financial contribution, and
assessment of the financial management competence. The main
objective of this analysis is to determine the requirements of funds,
timing, and the expected returns on investment as per various parties
involved in the financing of the project.

5.21 Under this analysis, judgement is framed about the project’s

financial efficiency, incentives, creditworthiness, and liquidity. Costs
and benefits are calculated using current market prices. Taxes in the
form of excise and customs duties and sales taxes are included in the
cost, while subsidies and loan receipts are considered benefits and are
fully accounted for in the analysis.24

5.22 The commercial aspects of a project (especially for revenue-

generating entities) include the arrangements for marketing the output
produced by the project and the supply of inputs needed to build and
operate the project. On the output side, careful analysis of the
proposed market for the project’s production is essential to ensure that
there will be an effective demand at set price. It needs to be ensured
that adequate input supplies are available for the efficient operation of
the project.

Economic Analysis
5.23 This analysis aims to ensure that scarce resources are allocated
efficiently, and the project investment brings net benefits to the
country while contributing to the welfare of its citizenry. Not only
should the proposed project investment contribute to the
developmental goals of the country, but also be large enough to justify
the use of scarce resources such as capital, skilled labour, managerial
talents, etc., which are needed to implement and operate the project.
All resource inputs used by a project have an opportunity cost because,

24 In financial analysis, the discount rate (DR) is the commercial interest rate, that is, the rate at which capital is
obtained (borrowed) for the project. For government-funded projects, the DR is fixed by the Budget Wing of the
Finance Division for the development loans and advances on the yearly basis. The provisional rate of mark up,
fixed by the Finance Division, for the fiscal year (2017-18) was 6.54 percent. 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 by a foreign grant, the financial analysis is undertaken at zero DR.
Manual for Development Projects | 78
 without the project, they could create value elsewhere in the economy.
An economically viable25 public sector project should meet the
following key requirements:
i. That it represents the least-cost or most efficient option among
all the feasible alternatives to achieve the intended project
outcomes.
ii. It generates an economic surplus above its opportunity cost26.
iii. It will be sufficiently funded and have the necessary institutional
structure for successful operation and maintenance.
iv. There is a strong rationale for the public sector to finance the
project27.

5.24 Moreover, the project should distribute benefits and costs

consistent with its intended development objectives, and that it can
internalize the environmental (including climate change) impacts. In
the economic analysis, input and output prices are adjusted to reflect
true social or economic values. These adjusted prices are often termed
as shadow or accounting prices.28 The taxes and duties are treated as
transfer payments and are excluded from the capital and operating
cost. The economic analysis also entails two key considerations, that is,
the pricing of project inputs and outputs, and the identification of
project costs and benefits.

PRICING OF PROJECT INPUTS AND OUTPUTS

5.25 In the economic analysis, the valuation of inputs and outputs can
be made keeping in view the following three rules:
i. Most of the inputs in the economic analysis are valued at
opportunity cost or on the principle of willingness to pay. It is
assumed that all inputs to the project are diverted away from
alternative uses and each input generally has value in alternative

25 The metrics used for assessing the economic viability can be divided into two groups based on: (i) discounted
cash flows: Net Present Value (NPV); Internal Rate of Return (IRR); and Benefit-Cost Ratio (BCR), and (ii)
undiscounted cash flows: Pay-back Analysis; Breakeven Analysis; and Unit Cost Analysis. In cases where project
benefits are largely unquantifiable, analytical techniques like Cost-Effectiveness Analysis and Multi Criteria
Analysis (MCA) are used.
26 When benefit can be valued, the project it will generate a positive economic net present value (ENPV) using

the minimum required economic internal rate of return (EIRR) as the discount rate, i.e., the project has an EIRR
higher than the discount rate.
27 The public sector may also be viewed as a project investor of last resort; public sector financing may only be

considered in instances of market failure, provision of public goods, and where private sector finance is not
available.
28 The term conversion factor refers to the multiplier used to convert market values to values at shadow prices

for general categories of expenditure - consumption, nontraded goods and services, and so on.
Manual for Development Projects | 79
 use. Every input to the project is valued at this opportunity cost,
that is, the value of the input in its best alternative use.
ii. For some final goods and services, usually non-traded ones, the
concept of opportunity cost is not applicable because it is a
consumption value that sets the economic value. This criterion is
called ‘willingness to pay’ or ‘value in use’.
iii. The analysis is done at present, that is, constant prices. This is due
to the reason that the current price analysis entails the prediction of
the inflation rate, which is difficult and unreliable.29
iv. Identification of project costs and benefits

PRINCIPLE OF ‘WITH AND WITHOUT’ PROJECT ANALYSIS

5.26 An important principle followed for the correct quantification of
costs and benefits is the ‘with and without’ project comparison of costs
and benefits. The analysis tries to identify and value costs and benefits
that arise with the proposed project, and to compare them with the
situation as it would be without the project. The difference is the
incremental net benefits arising from the project investment. This
approach is not the same when comparing the situation ‘before’ and
‘after’ the project. The ‘before and after’ comparison fails to account
for changes in production over the life of the project, which will occur
without the project; thus, leading to an erroneous statement of
benefits attributable to the project investment. A change in output can
also occur without the project if production would fall in the absence of
new investment. In some cases, an investment to avoid a loss might
also lead to an increase in production so that the total benefits will
arise partly from the loss avoided, and partly from increased
production.

SHADOW PRICES
5.27 Market distortions result in market prices being different from the
value of a product/service unit to the economy. A private entrepreneur
does not take such deviations and market distortions into account, but
the government must. Thus, the government must estimate a set of
29 In economic analysis, the time value of money is specified as the discount rate (which is effectively the same
as an interest rate or the opportunity cost of capital). The DR is defined as the rate at which the value of the
numeraire (net benefits) declines over time. The real rate of discount = (1+i)/ (1+p), where ‘I’ is the nominal
rate and ‘p’ is the annual average rate of increase in price and may be estimated (as first approximation) as the
difference between the public long-term borrowing rate minus the rate of inflation. In general, real discount rates
range between 10-20 percent. However, 15 percent is generally thought as the minimum target for most public-
sector projects, though in the case of certain long-gestation projects (water resource, forestry) a lower discount
rate may be appropriate.

Manual for Development Projects | 80

 prices that reflect both opportunity costs as well as societal objectives
and apply these to the projects' inputs and outputs, i.e., costs and
benefits. These prices are called shadow prices or accounting prices. In
economic analysis however, the shadow prices must be used instead of
the market prices used in the financial appraisal. Just as in the
Financial Analysis NPV, IRR and BCR are used for economic analysis as
well.

NET PRESENT VALUE

5.28 Net present value (NPV) is the difference between the present
value of benefits and present value of cost. NPV of a project can be
calculated by discovering net cash flows at required rate of return and
deducting initial investment.

5.29 When investments occur at various time intervals, they are

accounted for in the cashflows as cashflows are calculated by
subtracting payouts from deposits.

5.30 A project with positive net present value is accepted and with
negative net present value is rejected. If NPV = 0, it means that there
is no loss but also no benefit on investment. If NPV < 0, There is a loss
on investment and the project is not feasible. If NPV > 0, There is a
gain on investment and the project is feasible. A project should be
chosen only if NPV is greater than 0. If a choice must be made from
between competing projects, then the project with the Highest NPV
must considered. These rules are also summarized below:

Figure 19: NPV Key Rules

Manual for Development Projects | 81
 5.31 NPV is calculated as under:

Where,
t= time period
C= net cashflow
i = interest rate/discount rate
n= no. of periods

5.32 NPV Exercise- Scenario 1: Limited Access (Toll) Highway Project

Assumptions:
i. Discount rate = 10%,
ii. Life of Project = 10 years
iii. Capital Cost =Rs.100 billion
iv. O&M cost = Rs. 40 billion
v. Revenue = Rs. 245 billion

Year Capital O&M Total Revenue Net NPV

Cost Cost Benefit/Loss
1 30 0 30 0 -30 $18.78
2 30 0 30 0 -30
3 40 0 40 0 -40
4 4 4 20 16

5 5 5 25 20

6 5 5 30 25

7 6 6 35 29

8 6 6 40 34

9 7 7 45 38

10 7 7 50 43

Total 100 40 140 245 105

Table 8: NPV Exercise 1

5.33 NPV Exercise- Scenario 2: Limited Access (Toll) Highway Project

Assumptions:
Manual for Development Projects | 82
 i. Discount rate = Increased from 10% to 15%
ii. Life of Project = 10 years
iii. Capital Cost =Rs.100 billion
iv. O&M cost = Rs. 40 billion
v. Revenue = Rs. 245 billion

Year Capital O&M Total Revenue Net NPV

Cost Cost Benefit/Loss
1 30 0 30 0 -30 ($1.72)
2 30 0 30 0 -30
3 40 0 40 0 -40
4 4 4 20 16

5 5 5 25 20

6 5 5 30 25

7 6 6 35 29

8 6 6 40 34

9 7 7 45 38

10 7 7 50 43

Total 100 40 140 245 105

Table 9: NPV Exercise 2

INTERNAL RATE OF RETURN

5.34 IRR is that discount rate which sets the NPV of a project to 0. IRR
must be thus compared with the opportunity cost of funds (prevailing
discount rate) to find if the project is feasible or not. If the discount
rate and IRR are equal it would mean that the project is on breakeven
point and the decision to implement the project would depend on other
factors.

Where,
r = internal rate of return
CFn = net cashflow in period n

Manual for Development Projects | 83

 PAYBACK PERIOD
5.35 A project is accepted or rejected based on years that a project
requires to recover the money invested in it. Payback period is the
measure of project capital recovery. As per this technique the quicker
the recovery of initial investment the more desirable a project. The
formula of the payback period is as follows:

5.36 Further, there are two basic techniques for economic appraisal
i.e., Cost Benefit Analysis (CBA) and Cost Effectiveness Analysis (CEA).

COST BENEFIT ANALYSIS

5.37 Through Cost-Benefit Analysis (CBA), different approaches to
achieving the project’s benefits are assessed and compared to
determine which approach is the most beneficial.
5.38 For different approaches, the stream of economic benefits is
identified, quantified, and monetized in net present value terms. These
are then compared with the respective stream of economic costs (that
include the accounting cost and the opportunity cost) in net present
values. The net benefit is assessed and the option with the highest net
benefit is selected as the approach to the project.

COST EFFECTIVENESS ANALYSIS

5.39 Cost effectiveness analysis is an analysis of the operational
efficiency of a project. It is to determine the least expensive approach
to achieving a result, from two or more alternatives.
5.40 This approach is most used when it is difficult to monetize the
economic benefits from a project, e.g., number of lives saved from
polio vaccinations. For such projects, different approaches are
evaluated by comparing the cost-effectiveness ratio:

5.41 The option with the lowest CE ratio is the preferred option.
BENEFIT COST RATIO CRITERION
Manual for Development Projects | 84
 5.42 Also sometimes called the profitability index, the benefit-cost
ratio, is the ratio of the NPV of the net cash inflows (or economic
benefits) to the NPV of the net cash outflows (or economic costs):

i. If the ratio is less the one the project is not feasible,

ii. If the ratio is greater than one the project is feasible
iii. If the ratio is equal to 1, the project would breakeven.

5.43 The BCR however does not take in account the scale of the
project or the magnitude of the returns and may mislead the decision
maker in such cases.

RISK ASSESSMENT
5.44 This assessment is an important part of the project appraisal
process as it helps to identify the strengths, weaknesses, opportunities,
and threats likely to affect project execution. The risk assessment
involves understanding potential project problems and how these
might impede the achievement of the project objectives. Risks can be
negative and positive. The negative risks include delays in completing
work as scheduled, increases in the estimated costs, supply shortages,
litigation, strikes, etc. The positive risks include completing work
sooner and/or cheaper than planned, collaboration to produce better
products, good publicity, etc. Risk identification is the process of
understanding what potential events or conditions might impede or
enhance a particular project. This is an ongoing process throughout
the project lifecycle as things progress and change. The unidentified
risks cannot be managed; therefore, risk identification is of paramount
importance.

Risk Management Planning

5.45 This planning involves the following elements:
i. Methodology: How will risk management be applied to the
project? What tools and data sources are available and
applicable?
ii. Roles and responsibilities: Who are the individuals
responsible for implementing specific tasks and providing
deliverables related to risk management?
Manual for Development Projects | 85
 iii. Budget and schedule: What are the estimated costs and
schedules for performing risk-related activities?
iv. Risk categories: What are the main categories of risks to be
addressed by the project? Has a project risk register been
prepared?
v. Risk probability and impact: How will the probabilities and
impacts of risk items be assessed? What scoring and
interpretation methods will be used for the qualitative and
quantitative analysis of risks?
vi. Risk documentation: Which reporting formats and processes
will be used for risk management activities?

Limitations of Project Appraisal

5.46 The shortcomings in project appraisal can adversely affect the
investment decision-making process. Some of these limitations are:
i. Quality of analysis depends on the quality of data and forecasts
made about costs and benefits. Over-estimation of benefits and
underestimation of cost are quite common to get the project
approved.
ii. Conventional project economic analysis is best used where
benefits or major parts thereof are measurable and can be
quantified. In cases where project benefits (for example, health,
education, rural development, social protection, etc.) and
externalities (for example job creation, skill development,
technology transfer, pollution etc.) cannot be quantified, the
cost-benefit analysis may not be applicable. In such cases, the
Multi-Criteria Analysis or Cost-Effectiveness Analysis may be
used for the justification of a project.
iii. Due to uncertainty about the future, it may not be possible to
quantify the project risks. The sensitivity analysis is one way to
examine the strengths of a project against potential risks.
iv. 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. These may be
used to aid decision-making in project selection.

Manual for Development Projects | 86

 CHAPTER 6: PROJECT APPROVAL

6.1 The project approval follows the satisfactory completion of the

project preparation and appraisal processes and marks the completion
of the second stage of its lifecycle. The project approval procedures
used by the CDWP, ECNEC, and other approval forums, including
anticipatory approvals, have been covered in this chapter. Project
clearance procedure for foreign-aided projects is of special interest,
where only a broad outline regarding the nature and scope of the
project is required. This procedure could be extended to all the PSDP
and ADP projects.

APPROVAL PROCESS REQUIREMENTS

6.2 Each sponsoring agency is required to submit digitally prepared PC-
I or PC-II – duly signed by the PAO or provincial chairmen of the P&D
boards or additional chief secretaries (Development) – to the Planning
Commission for circulation to the members of the CDWP for
examination and review. As soon as the PC-I or PC-II is received by a
member of the CDWP, PDWP or DDWP, its examination is conducted
as per guidelines of the ECNEC, approved in its meeting of the 24 th
April 200030 (Annexure 9). The ECNEC guidelines provide for a six-
week time limit for scrutiny of projects in the PD&SI Division and
submission to the CDWP. This duration is divided as follows:
i. Three weeks for the preliminary appraisal,
ii. Two weeks for replies to the queries to the PD&SI Division by
the sponsoring agency, and
iii. One week for holding a pre-CDWP meeting to resolve
outstanding issues with the sponsoring agency.

6.3 The Planning Commission, on the directions of the ECNEC, as per

its notification of 2013, has informed that it would consider the
inclusion of a project in the agenda, which is of urgent nature provided
that the PC-I has been received at least two weeks before the CDWP
meeting.

30 Planning Commission, ‘Guidelines/Procedures for Preparation and Approval of Development Projects’,

Notification F.No.20(1)PIA/PC/2013, Islamabad, dated 10 December 2013.
Manual for Development Projects | 87
 6.4 The PD&SI Division must ensure that the PC-I has been prepared
correctly and according to the prescribed procedure. In case, the PC-I
is found deficient, it is returned to the sponsors by PD&SI Division. If
considered necessary, the Division may make a consolidated enquiry
from the sponsors concerning deficiencies in the proforma and seek
clarification or additional information in the pre-CDWP meeting.

APPROVAL OF PROJECTS
6.5 All development project proposals are subject to a technical
approval process. The PC-Is’ of all development projects shall be
approved by the respective competent forum and will be termed as
Technical Approval. This approval is only granted to projects found
compliant to the standards and procedures of the Planning
Commission. Findings and recommendations of the independent quality
assurance reports, cost and benefit analysis, and risk assessment,
where required, are also considered by the approving forums while
considering the development project proposals.

6.6 The ECNEC, in its meeting held on the 1st of October 2020,
approved that the Planning Commission will define and enforce specific
timelines for each stage of the PC-I processing and approval. The
Commission and P&DDs will maintain an updated list of received PC-Is
on their websites.

PROCEDURE FOR MEETINGS OF VARIOUS FORUMS

6.7 The PD&SI Division is the Secretariat of the CDWP, which normally
meets every week or as and when required. The ECNEC, however,
generally meets once every six weeks or as and when required. The
agencies represented on the CDWP are required to circulate their
comments to each other well before the CDWP meeting so that the
discussions are informed, and schemes are cleared expeditiously.
6.8 The minutes of the CDWP meeting are recorded by the relevant
technical section of the PD&SI Division. After approval by the chair,
minutes are circulated to all concerned including the sponsoring
agency. The agencies, represented on the CDWP, are expected to take
the action required of them without waiting for the minutes. The
decisions of the ECNEC, in respect of the public sector development
projects, are unclassified unless especially made classified by the
Cabinet Division.

Manual for Development Projects | 88

 GENERAL INSTRUCTIONS/GUIDELINES FOR
SUBMISSION AND PROCESSING OF PC-I
6.9 The following are the general instructions and guidelines for the
submission and processing of the PC-I:
i. If any project could not be placed on the agenda of the CDWP in
six months, the PC-I/II will be reviewed by the technical section for
updated cost and scope. No approval ‘in principle or conditional’
would be made to avoid delay in implementation.
ii. If the project does not start functioning within 12 months of its
approval or does not achieve financial close, then it will be
reconsidered by the approving forum.
iii. To avoid frequent revisions, no proposal for revision in cost or
scope will be brought within two years of approval/execution of a
project. Strong justification would be needed otherwise.
iv. Changes in the scope of work and cost beyond 15 percent of the
original approved PC-I/II will require approval by the competent
forum. The permissible 15 percent increase over the original
approved cost will be allowed in civil works and equipment. In case
of expenditure in others heads for operations, approval will be
sought by the PAO as a separate case by giving justification for the
increase before incurring such expenditures. The
ministries/divisions would be required to fix responsibility in case
projects are implemented beyond the 15 percent original approved
scope and cost.
v. In case of ex-post facto approval, the PAO will have to justify the
reason and assign responsibility for it before the competent forum.
vi. A summary of the approved cost would be part of the authorization
letter and administrative approval. A copy of the approved and
signed PC-I/II, along with a copy of administrative approval, will
also be sent to the AGPR and Auditor General for record and
reference.
vii. After approval of the project from the CDWP or ECNEC, the
concerned technical section of the Planning Commission will provide
a copy of the approved PC-I (both in hard and soft forms) to the
PIA Section of the Planning Commission for its record. Issuance of
authorization and placement will be done on the PC website
through the Jawwad Azfar Computer Centre (JACC).
viii. A project, in parts or phases, will not be accepted. After completion
of a project and submission of completion report on the PC-IV, a

Manual for Development Projects | 89

 fresh PC-I for any new project would be submitted and processed
based on evaluation and lessons learnt.
ix. A summary for the ECNEC will be prepared by the concerned
technical section of the Planning Commission within two weeks
after a recommendation by the CDWP.
x. Steering Committee, under any project, will not be authorized to
approve sub-projects or alter the scope of the project. For such
changes, approval of a competent forum would be required.
xi. While approving projects the respective forum should also
investigate the yearly financial phasing and if necessary, seek
assurance by the sponsors.
xii. While approving projects, the relevant forum should also investigate
the implementation capacity of the organization and seek assurance
by the sponsors, if necessary.
xiii. Projects to meet operational/recurring expenses will not be
approved by the development portfolio.
xiv. The administration will not be allowed cars in development projects.
Only limited operational vehicles, according to the nature of the
project, would be considered for approval while considering the
existing resources.
xv. The concerned member of the Planning Commission will ensure
that the scheme has been prepared on sound lines and the
necessary economic, financial, and technical scrutiny has been
carried out. It also must be ensured that all the information
required in the proforma has been furnished, and the relevant
documents, such as project reports, maps, and plans, have been
made available.
xvi. Previously, the appointment of an independent PD was decided by
the ECNEC on the 6th of May 2011 for ECNEC approved projects
only. Now all development projects may initiate the appointment of
independent and full-time PD by the sponsors.
xvii. The representation of other federal ministries in the CDWP (not
below the Additional Secretary level) is required to ensure that the
officers can represent their respective ministry/division well for the
schemes under consideration.
xviii. Meetings of the CDWP should ordinarily be held frequently, in
accordance with the agenda, to be circulated by the Planning
Commission in advance.

Manual for Development Projects | 90

 xix. The time taken in the examination of a scheme by an agency
should not exceed two weeks. Where an undue delay in
examination occurs on the part of any agency, the concerned
technical section of the Planning Commission may submit the
working paper within five weeks indicating the position.
xx. It was noticed by the ECNEC on the 24th of April 2000 that
sponsoring agencies submit the PC-I at the eleventh hour and by
showing some urgency, they put pressure on the Planning
Commission to include the project on the agenda of the CDWP.
Resultantly, proper examination could not be done. It was,
therefore, directed that no project will be included in the agenda if
not received at least six weeks before the CDWP meeting.
xxi. Minutes of each meeting should be recorded by the concerned
technical section of the Planning Commission/MoPD&SI and after
approval of the chair, circulated to all concerned. The agencies
represented at the meeting should, however, be expected to take
the action required without waiting for the minutes.
xxii. Effort should be made to clear a scheme at one meeting. Where
this is not possible, the scheme should be considered at the
successive meetings until it is disposed of. Steps for approval of
projects from the CDWP/ECNEC are explained and given in
Annexure 10 to 12.
xxiii. After the recommendation of a scheme by the CDWP, the
agency(ies) concerned should initiate compliance (if required) and
submit a report within a week so that the technical section may
prepare and submit a summary for the ECNEC consideration.
xxiv. The time taken for the submission of a summary for the ECNEC
should not exceed two weeks. Where an undue delay in compliance
occurs on the part of the agency, the concerned technical section
may submit the scheme to the forum indicating the position.
xxv. Authorization of the project should be issued within three working
days of issuance of the approved minutes.
xxvi. For the social sector, only those projects may be considered for
approval which help in achieving plan objectives and SDGs.

Pre-CDWP Meeting
6.10 To avoid lengthy discussion on the detailed comments of various
agencies represented in the CDWP, the pre-CDWP meetings are held to
resolve the outstanding issues in the federal schemes under the

Manual for Development Projects | 91

 respective member or senior chief or chief of the Planning Commission.
Representation from the sponsors below a Grade-20 Officer or
equivalent is normally not accepted31.

Anticipatory Approval
6.11 The Chairman ECNEC has powers to allow execution of a scheme
in anticipation of its formal approval by the ECNEC. The request for
anticipatory approval has to be submitted to the Cabinet Division for
consideration by the Chairman ECNEC on the respective prescribed
proforma for new and ongoing projects.32 (Annexure 13). The request
for an anticipatory approval should be signed by the secretary of the
division concerned in the case of the federal schemes, and by the
chairman P&D board or ACS (Development) in case of the provincial
schemes.

6.12 The Chairman ECNEC may dispose of any anticipatory approval

case or scheme at his discretion pending the formal submission of a
summary to the Committee, provided that in such cases, the scheme
will be processed through normal channels and submitted to the
ECNEC after completing all the formalities within six months with the
further provision that the total period of the anticipatory approval
should not exceed 12 months.

6.13 The anticipatory approval and sanction for incurring expenditure

shall in no case be allowed beyond the end of each fiscal year, that is,
30th June.

6.14 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 if a further extension for the anticipatory approval is required.
6.15 It may be noted that the grant of anticipatory approval falls in the
category of ‘extraordinary jurisdiction’, and this power cannot be
redelegated for reasons of uniformity of treatment, and to maintain
financial discipline and control.

6.16 All cases of the anticipatory approval, irrespective of the cost

involved, must be submitted only to the Chairman ECNEC for approval.

31 Planning Commission, ‘Holding of Pre-CDWP Meeting In Planning Commission’, No.24(4)PIA-I/PC/2016

Islamabad, the 28 June 2016.
32 Cabinet Division, ‘Procedure/Instructions with Regard to Grant of Anticipatory Approval by The Chairman,

ECNEC’, Cab Div U.O.No.6/5/2010-Com, Islamabad, dated 28 July 2010

Manual for Development Projects | 92
 ADMINISTRATIVE APPROVAL AND ACCOUNT
OPENING
6.17 Administrative approval and account opening takes place as
follows:

Figure 20: Administrative Approval and Account Opening Process

CONCEPT CLEARANCE OF FOREIGN-ASSISTED

PROJECTS BEFORE LOAN/AID NEGOTIATIONS
6.18 In many cases, proposals for seeking foreign assistance are sent
by the sponsoring agencies for approval of the Concept Clearance
Committee (CCC) without sufficient detail and proper examination.

Manual for Development Projects | 93

 After careful review of the concept clearance procedure, the following
guidelines were framed 33 (Annexure 14):

33Planning Commission, ‘Concept Clearance Proposals – Policy Guidelines’ Notification No.23(1) PIA-I/PC/2018
dated 4 April 2018.
Manual for Development Projects | 94
 Figure 21: Guidelines for Proposals Seeking Foreign Assistance
Manual for Development Projects | 95
 6.19 The ECNEC, in its meeting of the 1st of October 2020, approved
that the concept clearance of priority projects provided by the Planning
Commission will be an authorization for obtaining donor commitment
and preparation of project documentation in consultation with donors,
and an indication of its subsequent approval by the competent forums,
subject to fulfilling required technical and financial conditions.

PROCEDURE FOR APPROVAL OF PROGRAMME LOANS

AND BUDGET SUPPORT FINANCING
6.20 The government of Pakistan receives foreign assistance from
multilateral sources (World Bank and Asian Development Bank) and
bilateral sources in two forms, that is, project financing through
bilateral and multilateral sources and programme loans only from
multilateral sources. In case of project financing, the PC-I is approved
by the relevant competent forum and development funds are made
available to finance these projects through the PSDP or ADP (in case of
the provincial projects). The programme loans fall outside the PC-I
purview as the financial assistance provided is for budgetary and
balance of payment support.

6.21 The International Financial Institutions (IFIs), especially the World

Bank (WB), has introduced hybrid financing instruments, which
combine elements of both a project and a programme. These new
financial instruments of the WB, include Programme for Results (PforR),
Development Policy Credits (DPCs) and Financial Intermediation
Programmes (FIPs). These instruments are designed mainly to target
policy and institutional reforms, while a part of financing also goes for
technical assistance. These instruments mainly contain performance
indicators, which are based on disbursements for budgetary support,
while only a small portion is allocated for expenditure on-base
activities. It was noted that if the requirement of the PC-I was applied
to PforR, FIPs and DPCs, disbursement of critically needed funds from
the IFIs would be significantly delayed.

6.22 To address the above issue, the NEC approved the following
guidelines34 (Annexure 15):

# Checklist Mark ✓ if
process

34NEC, ‘Procedure for Approval of PforR, FIP and DPC Mode of Financing’, Case No. NEC-07/01/2019, Islamabad,
dated 29 May 2019
Manual for Development Projects | 96
 is
complete

1 The relevant executing agencies shall obtain concept clearance of

the proposed programme(s) from the CCC housed in the PD&SI
Division and communicate the same to the EAD.

2 On receipt of the concept clearance, the EAD will formally request

the development partner to seek funding support.

3 The development partner will prepare the Programme Appraisal

Documents in consultation with the sponsoring and executing
agencies and share these with the EAD for negotiations.

4 Before initiating loan negotiations, the EAD will seek clearance of

the programme loan agreement from the Ministry of Law and
Justice and the Finance Division.

5 Loan negotiations shall be conducted with the development

partner after the concept clearance by CDWP. The EAD, Finance
Division, PD&SI Division, Law and Justice Division and relevant
sponsoring agency and executing agency will participate in the
negotiations.

6 The EAD may, on completion of negotiations, move a summary

for approval of Chairman ECNEC, before signing the programme
loan agreement.

7 For TA parts of the PforR and FIPs, these shall subsequently

follow the PC-I by the respective executing agencies before the
release of funds into the assignment account/project account.

Table 10: NEC Approved Guidelines for Foreign Projects

110
CHAPTER 7: PROJECT
IMPLEMENTATION

124
Manual for Development Projects | 97

CHAPTER 8: PROJECT
MONITORING
 CHAPTER 7: PROJECT
IMPLEMENTATION

7.1 The achievement of project objectives and actualization of benefits

depends on effective project implementation according to the approved
scope, cost, and time of the project. This crucial stage in the project
cycle consists of a set of actions in parallel or sequence, whereby the
project concept and design are implemented on ground. For
achievement of the stipulated targets and tangible returns it is
imperative to entrust the management of the project with staff who
are competent and reliable with relevant qualifications and experience.

7.2 This chapter explains the role of the project sponsoring and
implementing agencies, the role of the Project Director (PD) related to
selection and appointment procedure, the need for a Project
Management Unit (PMU) and procedures for its staffing, and contract
management.

ROLE OF SPONSORING AND IMPLEMENTING

AGENCIES
7.3 The project sponsors secure funding for projects from the
development budget and choose an executing/implementing agency.

7.4 The executing/implementing agency is the entity charged with the

responsibility of successful completion of the project’s components
which include:
i. Completion of all preparatory studies.
ii. Detailed engineering.
iii. Inclusion of surveys, testing, etc.
iv. Preparation of plans, specifications, and estimates.
v. Securing of all the permits and easements.
vi. The acquisitions of land and right-of-way, site preparation etc.
vii. Procurement of goods and services, construction.
viii. Project management and risk management.

7.5 Frequent mistakes at implementation level are summarized in the

figure below:

Manual for Development Projects | 98

 Figure 22: Frequent Mistakes at Implementation Level

7.6 For smooth implementation of projects, the following guidelines

may be adhered to:
i. An independent PD will be appointed in all projects with the
maximum authority as per prescribed procedure and guidelines
issued by Planning Commission time to time.
ii. The PD and staff will not be entitled to use project vehicles if
the monetization facility has been availed by the officer/s
concerned.

Manual for Development Projects | 99

 iii. The PAO of the sponsoring agency will notify and assign
financial and administrative powers to the PD for
implementation of the project as per the approved PC-I
document.
iv. The PAO will ensure efficient allocation of funds under the
project and their timely utilization to achieve the approved and
desired objectives.
v. In the case of core projects, the project authorities will appoint
a PD, along with skeleton staff at the concept stage to
coordinate the design and consultation with key stakeholders in
the preparation of project documents and PC-I, as per
requirements.
vi. In the case of a foreign-aided project, a full-time PD will be
appointed whose salary/remuneration will be met from the
project account, and the PD will not be transferred without
informing the DDWP/CDWP during the currency of the project.
vii. The sponsoring agency will evaluate the performance of the PD
on an annual basis, and in case of delay in the achievement of
targets and objectives, necessary measures will be ensured
under intimation to the approving forum.
viii. Remuneration on the Standard Pay Package for project staff
recruited from the open market on a contract basis for the
execution of projects funded from the PSDP will be paid in
accordance with the notification issued by the Finance Division
from time to time.
ix. The hiring of consultancy firms, consultants, experts, or
specialists may be financed from the Project Development and
Appraisal Fund in the Planning Commission (Annexure 16) to be
used under agreed terms and conditions.
x. The project staff, as per the above arrangement, will be allowed
by the PAO concerned, for six months after obtaining a concept
clearance from the CDWP, and confirmation of the EAD that
foreign assistance has been lined up. Any further requirement
will be reviewed by the PAO after the termination of the initial
period.
xi. Work/cash plan will be prepared and implemented as per
instructions of the Planning Commission.

Manual for Development Projects | 100

 xii. Monitoring of the project must be done as per the RBM
indicators matrix in the approved PC-I to review on a monthly,
quarterly, and annual basis.
xiii. In case of any issues or problems faced in implementation,
corrective measures must be taken by informing the authorities
concerned, including the Planning Commission.
xiv. The monthly expenditure needs to be reconciled with the
AGPR/banks.
xv. Periodic checking of inventory and stocks for timely
replenishment will be ensured.
xvi. Logbooks of vehicles must be maintained.
xvii. Specific duties to the team members should be assigned
unambiguously.
xviii. Information and progress should be updated as per the PMES
format of the Planning Commission.
xix. If the cost of the project exceeds 15% of the approved budget
at the time the contract is being awarded, PC-I will be revised
immediately and should be submitted for approval of the
competent forum.
xx. If the project cannot be completed within the approved time
frame, get the desired extension from the relevant forum
following the laid down procedure already circulated by the
MoPD&SI, and such extension should invariably be sent to the
Planning Commission, Finance Division and in case of the
foreign-aided projects, to the EAD also.
xxi. Separate accounts of each project should be opened with
separate account books for each project.
xxii. If expenditure in one head is expected to exceed the allocated
amount, the appropriation of funds should be approved by the
PAO prior to incurring the excess expenditure.
xxiii. The sponsors will ensure all appointments transparently, and in
case of the key appointment of the PD, it should be made in
consultation with the Planning Commission.
xxiv. All the remaining appointments should be made by the PAO
concerned, in consultation with the PD, through transparent and
approved procedures.
xxv. All the procurements under the project will be governed under
the Public Procurement Rules 2004, and the relevant regulations
Manual for Development Projects | 101
 and guidelines issued by the Public Procurement Regulatory
Authority (PPRA) on a regular basis.
xxvi. The Project Purchase/Recruitment Committees will be formed,
with the approval of the PAO.
xxvii. In the case of the Project Steering Committee (PSC), the PD will
ensure regular meetings of the PSC and the circulation of
minutes to all concerned.
xxviii. The PD will be responsible for coordination among different
stakeholders in case of implementation of the national
programmes and submission of the periodic monitoring reports.
xxix. In case of depreciation of the PKR, an increase in demand of the
FEC will not require revision of the project (if properly
highlighted in the approved PC-I). However, in case of increase
in incoming foreign currency revision of the project from the
competent forum will be required.
xxx. The PD will highlight problems and issues hindering the
successful implementation of projects in the PC-III proforma.
xxxi. Dis/misinformation will be considered a crime under the project.
xxxii. As per the existing mandate, Pakistan Public Works Department
(PWD) is responsible for the construction and maintenance of
public buildings for which funds are allocated on yearly basis.
However, in case any ministry/division intends to hire any
private party/contractor for construction and maintenance of its
physical infrastructure, as per procedure a prior No Objection
Certificate (NOC) from the Ministry of Housing & Works is
required. In the case of delay in NOC, the construction and
maintenance process will be delayed due to constraints with the
PWD. Therefore, this issue may be examined and decided by
the competent forum (DDWP/CDWP) after receiving feedback
from the Ministry of Housing & Works and PWD.
xxxiii. In the case of other physical assets like plant, machinery,
vehicles, etc., each ministry/division will make its own
arrangement for procurement and Operation and Maintenance
(O&M) services to any third party at a competitive price for the
sustainability purpose.
xxxiv. The salary and recruitment of the project staff should be in line
with the government rules.

ROLE AND APPOINTMENT OF PROJECT DIRECTOR

Manual for Development Projects | 102
 7.7 The activation of the project is achieved through an appointment of
the PD. The ECNEC on the 6th May 2011 decided that an independent
PD should be appointed only for projects, which are approved by the
ECNEC. For projects below this limit, if an independent PD is required,
he/she is to be appointed by the sponsors, and approval of the CDWP
will be required to provide proper justification. The guidelines,
governing the appointment of an independent PD, 35 are given in
Annexure 17.

Selection and Appointment Committee

7.8 The terms of reference of the Selection and Appointment
Committee for the PD are as follows:
i. The Committee will be headed by the secretary of the project
sponsoring ministry or division and include representatives of
the PD&SI (chief or head of the section concerned), Finance
(Development Wing) and Establishment divisions.
ii. In the case of a project jointly financed by the federal and
provincial governments on a 50:50 cost-sharing basis, the
Chairman P&D Board or ACS (Development) of the respective
province, AJ&K and GB will chair the Committee with
representatives of the Planning, Finance and Establishment
divisions.
iii. In case of disagreement among members of the Committee, the
matter will be referred to the Deputy Chairman Planning
Commission for the final decision.

7.9 The Secretary of the ministry or division concerned may approve

the appointment of a PD whose salary package is equivalent or up to
the maximum of MP-III.36 The cases of appointment of an independent
PD carrying emolument beyond MP-III shall be submitted for approval
to the Prime Minister of Pakistan.

Appointment Process
7.10 The following process should be adopted for an appointment of
the PD:

35 Planning Commission, ‘Guidelines for Appointment of Independent Project Director in Development Projects’,
Notification No.20(3)PIA-I/PC/2012, Islamabad, dated 5 April 2012
36 Management Pay Scales were introduced to attract private sector talent or professionals in the Ministries/State

Owned Enterprises. It is now regulated by Management Pay Scales Policy 2020. Generally, MP-III is treated
equivalent to BPS 20.
http://www.establishment.gov.pk/SiteImage/Misc/files/Management%20Position%20Scales%20Policy%202020.p
df
Manual for Development Projects | 103
 i. The appointment of an independent PD, hired on a competitive
basis37, is mandatory for projects costing Rs3,000 million and
above38 (Annexure 18). As such provision for the post of a PD
should invariably be included in the project PC-I worth over
Rs3,000 million. An additional charge for the posts of large
projects will not be allowed to officers of line ministries and
departments.39
ii. For projects less than Rs3,000 million, an additional charge of
project posts may be allowed to officers of the ministries and
departments on a case-to-case basis, and the proposed set up
may be included in the PC-I.
iii. The expenses of the PD will be met from the project account
and the hired PD shall not be transferred during the duration of
the project.
iv. The sponsoring or executing agency will try, as far as possible,
to appoint an independent PD for the project. In case it is not
possible, the PD may be appointed from the available in-house
officers and in that case, reasons for transferring the services of
such officer internally to the project may be spelt out and
detailed justification may be given and approved by a committee
headed by the PAO/secretary of the sponsoring agency
comprising Member (I&M) Planning Commission, senior officers
(not below the rank of Additional Secretary) of the executing
agency and Finance Division.

Mode of Appointment
7.11 The mode of appointment of a PD will be as follows:
i. A PD shall be appointed on a contract basis initially for two
years, extendable on yearly basis subject to satisfactory
performance.
ii. The appointment will be made transparently through open merit
by an advertisement.
iii. As per the ECNEC meeting that took place on 1st October 2020,
civil servants will be allowed to compete for the PD positions,
and on appointment will apply for a three-year leave from
service. An independent PD will be hired or appointed by the
PAO of the relevant ministry, based on the recommendations of
the recruitment committee comprising Member (I&M), PC,

37 See footnote 50.

38Planning Commission, ‘Guidelines for Appointment of Independent Project Director in Development Projects’,
Notification No.20(3)PIA-I/PC/2012, Islamabad, dated 11 March 2016
See footnote 48
39

Manual for Development Projects | 104

 senior representative (not below the rank of Additional
Secretary) of the Finance Division, Establishment Division, and
relevant ministry/division. In the case of provinces, the
committee will be head by the Chairmen of P&D Boards or ACS
P&D Departments. The hiring of other staff of the project is left
to the PAOs, in consultation with the PD.40
iv. Engagement of the retired officer(s) as a PD shall require prior
permission of the government without any exception – for
example, the Establishment Division in case of the retired
civilian officers, the Defence Division in case of the retired
Defence officers, and Law, Justice and Human Rights Division,
Supreme Court or High Courts in case of the retired judiciary
officers.
v. While making an offer of appointment, the following will be
provided in the contract or agreement. Statement of objectives
of the assignment should include:
• Responsibilities of the PD stating particulars of the
deliverables required from him/her.
• Responsibilities of the client indicating the types of inputs
to be provided to the PD.
• Duration of the contract indicating completion dates or
termination of the contract.
• The financial provisions reflecting the manner of payment
of remuneration, etc.
• General provisions regarding matters, like early
termination of the contract by either party.
• Mode of the periodic performance appraisal of the PD.

Terms of Reference of the Project Director

7.12 Details of the outputs required from the PD should be spelt out
which, inter alia, may include the following:
i. Exercise a strong check on time and cost overruns by
monitoring the inputs, processes, and outputs of the project.
ii. Ensure that proper procedures for reviewing and responding to
progress reports are established and follow that indicate how,
what, and when to monitor and evaluate.
iii. Identify risks based on ground realities and formulate a risk
mitigation plan.
iv. Prepare and submit reports in the prescribed manner and
format including recommended actions for the decision-making.

40 See footnote 48
Manual for Development Projects | 105
 v. Work effectively and harmoniously with the project stakeholders
(including external partners) as well as with the project staff.
vi. Develop and use indicators to focus on results and progress of
implementation.
vii. Establish and maintain custody of all project documents and
prepare and submit project status and completion reports (PC
III/IV).
viii. Ensure timely provision of information on the PW-002 and PW-
003 proformas to the Projects Wing.

7.13 Also, the PD will be held accountable for any lapses in the
exercise of his/her administrative, functional, and financial powers. As
a team leader, he/she will be obligated to account for all actions, steps
and decisions taken during his/her tenure. He/she will be responsible
for the supervision of project activities, including troubleshooting and
best efforts to resolve day-to-day implementation problems
independently within the administrative and financial powers delegated
to him/her. If necessary, he/she may seek help from the federal
ministry, division or provincial government concerned for resolving the
issue or problem.

7.14 It is advisable to establish the office of the PD as close to the

worksite as possible, preferably onsite, to ensure their availability to
making spot decisions on unforeseen issues and other ancillary
matters.

Qualification and Experience Requirements

7.15 Qualification and experience for the post of a PD:
i. The educational qualification of the Project Director will be
broad-based, that is, degree in Project Management, B.Sc.
Engineering or MBA /MPA, MBBS/MPH, Master or BS (4 years)
degree in economics or other relevant field from HEC recognized
institutions, depending upon the nature of the project.
ii. Minimum five years’ experience in project management or
implementation, with sound knowledge of project management
fundamentals, particularly the government of Pakistan’s project
planning and management processes and procedures.
iii. Maximum age of 63 years on the date of appointment.

PROJECT MANAGEMENT UNIT AND STAFFING

Manual for Development Projects | 106

 7.16 The requirements of public administration institutions are rising
and projects becoming increasingly challenging. Managing a project is
a complex activity, particularly when it involves many people working
over a long period of time in collaboration with many stakeholders.
This increasing complexity requires management practices and tools,
which ensure efficient use of resources. In this context, a PMU can be
of great value as it will be provided with infrastructure, resources,
processes, and tools necessary for effective project management by
leveraging standards, allocating resources, and establishing
communication channels. The ECNEC has approved the MoPD&SI
proposal of the 1st of October 2020 that hiring of other staff of the
project is left to PAOs with the support of the PD.41

Waiver of Framing of Recruitment Rules for Projects Posts in

Ministries/Divisions
7.17 There is no need to frame recruitment rules for the hiring of
project staff as the standard guidelines for their appointments have
been already 42 issued by the Establishment Division (Annexure 19).

Standard Pay Package for Project Staff Directly Recruited for

Development Projects Funded from PSDP
7.18 The standard pay package for the project staff, directly recruited
for the development projects43 is given in Annexure 20. The said pay
package is effective from the 1st of July 2017 for new as well as the
ongoing PSDP projects and is admissible subject to the conditions
mentioned in the above-referenced O.M. of the Finance Division.

Staff for Land Acquisition and Resettlement

7.19 In its meeting of the 1st of October 2020, the ECNEC approved the
establishment of a separate unit comprising 3-5 officials fully trained in
each provincial revenue board for land acquisition and resettlement to
facilitate smooth implementation of infrastructure-related projects.44

CONTRACT MANAGEMENT
7.20 A contract is an agreement between two or more parties creating
mutual obligations, enforceable by law. The basic elements required

41 See footnote 48
42Establishment Division, ‘Waiver of Framing of Recruitment Rules for Projects Posts in Ministries/Divisions’, O.M.
No. 9/4/91.R.S. Islamabad, dated 28 January 2008.
43 Finance Division, ‘Standard Pay Package for the Project Staff Directly Recruited for Development
Projects Funded from PSDP’, O.M No. F. 4(9)R-14/2008,Islamabad, dated 19th July 2017, amended
through O.M. No. F. 4(9)R-14/2008/562 dated 19 October 2017 and O.M. No. F. 4(9)R-14/2017/698 dated 27
December2017.
44 See footnote 48

Manual for Development Projects | 107

 for the agreement to be a legally enforceable contract are mutual
assent, expressed by a valid offer and acceptance, adequate
consideration, capacity, and legality.
i. They are commonly used by a PD, works manager, or owner to
manage and control project delivery.
ii. They have added advantage of requiring project
sponsors/owners to define their requirements while making an
unequivocal commitment to the project.
iii. Contracts defines the scope of work, the responsibilities, and
obligations of the parties to the contract, the assignment of
financial incentives to complete the work, and the nature and
extent of risk to various parties.
iv. The agreements formalize the contract and serves as a legal
instrument for contract verification.

7.21 Contracts are used during all phases of project management.

i. In the first feasibility phase, contracts are formed between the
project owner and a consultant or an engineering or
architectural firm to conduct a feasibility and site selection
study.
ii. In the execution phase, a contract is formed between an owner
and a contractor. Effective contract management creates client
and customer satisfaction as well as consolidates a longer-term
win-win relationship among all parties involved.
iii. Contracts not only bind the parties to legal obligations and
framework, but they are also instrumental in risk minimization
or elimination and can be instrumental in achieving project
success and a long-term relationship. The Fédération
Internationale des Ingénieurs Conseils (FIDIC) – (the Federation
of International Engineers and Consultants) – have provided a
detailed list of contracts for various types of works and the
same has been adopted and amended by the Pakistan
Engineering Council (PEC). The best practices from across the
world indicated relationship management and breaking the
traditional client and contractor adversarial approach, which is
the leading cause of litigations and delay in implementation.

7.22 The procurement, contract award and contract management go

together. The procurement in the government is governed by the PPRA
and its rules, Public Procurement Rules, 2004 and the Procurement of
Consultancy Services Regulation 2010, which apply to all procurements

Manual for Development Projects | 108

 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 PEC. For further guidance, the
PPRA Rules 2004 and PEC website can be consulted.

RELEASE OF FUNDS
7.23 The ECNEC, in its meeting of the 2nd October 2019, has simplified
the procedure for authorization of release of the PSDP funds to ensure
timely availability to the executing agencies/project authorities without
originating demands by the ministries concerned.45 In addition, the
PAOs have been made more responsible in ensuring timely completion
of all code formalities such as authorization and administrative
approvals, valid execution period, extension in execution period,
updating the PMES, approved cash/work plan monitoring,
observations, cost overruns and effective utilization of funds that have
been released to the project authorities before the issuance of the
sanction letters for the release of funds to development projects and
undertaking expenditure. All ministries/divisions will be responsible for
updating the PMES System of each project by the 10th of the following
month. (Refer to Chapter 3 for details on release of funds and
financing issues.)

45 Footnote 60
Manual for Development Projects | 109
 CHAPTER 8: PROJECT MONITORING

8.1 The project implementation follows the first three stages of the
project cycle (identification, preparation, and appraisal/approval). The
project monitoring assumes critical importance after the project launch
and remains an essential activity during the project implementation
period until the project completion and post-completion evaluation (the
final stage of the project cycle). The PC-III proforma (see Annexure
21) along with PW-002 and PW-003 proformas is used for monitoring
implementation progress.

8.2 The main topics covered in this chapter are the monitoring
methodology and mechanism used by the Planning Commission,
supported by its IT-based PMES.

MONITORING AND EVALUATION OF DEVELOPMENT

PROJECTS
8.3 The critical feedback provided to the policymakers by the M&E
department makes the project cycle self-renewing. It often produces
new ideas about how to improve the planning and implementation
process for future projects.

8.4 Monitoring of the development projects or programmes can be at

the project management level (by the executing agency or through a
supervision/management consultant), by the sponsoring ministry,
department, or provincial government level (through a PMU), and a
third-party oversight level (by the Planning Commission, Prime
Minister’s Inspection Team, etc.).

8.5 Monitoring implies checking and assessing the implementation

status of a project, programme, or plan regularly. The process of
observing or monitoring the implementation progress of the project
helps in the identification, analysis and removal of bottlenecks and
expediting actions when the implementation has stalled or fallen
behind schedule. The project monitoring is carried out with the active
participation of the project management, and is, therefore, quite
distinct from inspection, which is generally undertaken at a higher
level, but inspection is not done regularly. In fact, project monitoring is

Manual for Development Projects | 110

 a tool to serve the interests of both the project management team and
the planners, as they share a common concern for the timely
completion of projects within the approved cost, scope, and schedule.

8.6 In its meeting of the 1st of October 2020, the ECNEC approved the
following institutional arrangements for the project monitoring.46
i. The primary responsibility for the implementation of the project
and coordination with relevant stakeholders rests with the PD,
who will hold regular on-site review meetings on monthly basis
to address operational issues and submit the minutes to the
PAO to keep him informed on project activities.
ii. The PAO/head of department will regularly monitor the
performance of ongoing projects under his control. The PAO will
chair the monthly review meetings schedule of which to be
issued in advance at the beginning of the year. He/She will
share the minutes of the review meetings with the MoPD&SI,
P&DD concerned and EAD. The MoPD&SI will collate the
information and share it with the Prime Minister’s Office.
iii. The PAO is authorized for financial decision making so the
primary responsibility for project monitoring lies on the line
ministry. The Planning Commission has a monitoring wing, but
their responsibility is secondary in nature to the line ministry.
iv. As per the Rules of Business 1973, programming and
mobilization of foreign economic assistance is the primary
responsibility of the EAD. However, the EAD undertakes a
portfolio review of the foreign-funded projects as a sub-activity
since the flow of foreign funds largely depends on the progress
of project activities. To ensure regular project reviews, the
following are envisaged:
• The concerned JS (EAD) to hold debriefing meetings with the
missions and conducting a monthly desk review.
• Holding of the biannual trilateral review by the AS/JS and
MoPD&SI at the provincial headquarters
• Conducting of the trilateral biannual portfolio review by the
Secretary EAD
• Biannual review by the minister of mega projects,
particularly of problematic projects

MONITORING METHODOLOGY

46 See footnote 48
Manual for Development Projects | 111
 8.7 The methods or techniques adopted for project monitoring should
effectively measure the progress of a project, concerning its approved
cost, scope, schedule, and objectives and be capable of producing the
requisite data, information, and reports as needed by project
management and other stakeholders. The Bar Charts are commonly
used to show the implementation schedule of projects. However, for
major projects, the project management must use modern network
methods, that is, CPM, PERT, LFA, WBS, etc.to plan the time and
resources required for the completion of individual project activities.
The NEC, in its meeting on the 4th of July 1988, had directed that the
project implementation schedule be based on Bar Charts, PERT or
CPM, which should essentially form part of every project document. It
may be prudent to use software applications available in the market for
this purpose. It further directed that the schedule rates used in
estimating project cost should regularly be updated by considering the
market rates, instead of applying an across-the-board premium
(adjustment) to the schedule of rates.

8.8 The minimum baseline project information for the M&E should
include:
i. A clear-cut statement of project objectives and benefits
ii. Detailed project cost estimates-component/activity-wise
iii. Source of funding
iv. Annual financial phasing conceived on the basis of the
implementation plan
v. Physical scope in quantitative terms with components detail
vi. Phasing of the physical scope as per its implementation
schedule, duly based on PERT, CPM or Bar Charts

MONITORING MECHANISM
8.9 The monitoring mechanism, being followed by the Projects Wing
since its creation in 1983, is based on the RBM indicators 47. To improve
the monitoring mechanism using new technology, it has been planned
to monitor the selected projects of the national importance through
satellite with the help of SUPARCO. Development of GIS software for

47Conceptually, monitoring indicators are specific yardsticks which can measure progress or changes in the
results, achievements (output, effect, or impact) of a project/programme or a national plan. The indicators are
thus specific measures of the degree to which an activity or a project is producing its outputs and achieving its
objectives. The indicators can also be stated as specific targets, to be achieved at specific points in time during
the implementation stage of an activity or can be categorized by type, such as, output or impact indicators. The
indicators can be direct or indirect (proxy) - where direct measurement is not feasible
Manual for Development Projects | 112
 Android application is planned so real-time imagery can be obtained
and site inspection can be done.

8.10 The following monitoring methodology is adopted by the Projects

Wing in the Planning Commission, which is entrusted for monitoring of
the development projects as a third party:

Figure 23: Monitoring Methodology

PROJECT MONITORING AND EVALUATION SYSTEM

(PMES)
8.11 The MIS of an organization plays an important role in the
decision-making. No sizeable organization can work effectively without
Manual for Development Projects | 113
 a well-managed information system. To introduce professional project
management in the public sector and to make the projects monitoring
and evaluation more effective, a web based PMES has been developed.
It is facilitating the line ministries and divisions in projects’ planning,
progress tracking, monitoring and timely identification of corrective
actions.

8.12 The PMES performs the following three major functions:

i. Tools and systems for project management
ii. Systems for monitoring and evaluating projects
iii. Analytical tools for the overall PSDP and portfolio analysis

8.13 The PMES is the backbone of the PSDP projects monitoring

activity, which comprises a data bank of the implementation
information like cash or work plan, releases of funds through SAP,
physical and financial progress etc., of the development projects. The
PMES serves three informational requirements:
i. For the PDs or project implementing authorities:
• Firmness and clarity of scope as per PC-I (project profile)
• Provides tools for project planning and control (cash or
work plan)
• Track progress and report issues (PC-III)
ii. For controlling ministries:
• Approve financial or physical requirements of projects as
per the ministries’ priorities (cash or work plan)
• Have quick access to progress and issues in their project
iii. For the PD&SI Division
• A platform for the professional monitoring (project scope,
plans, progress, issues, etc.)
• The overall progress of the PSDP projects
• Repository for projects
• Project’s synopsis and PSDP projects performance
analysis (executive dashboard)

PMES Objectives
8.14 The development and use of the PMES are predicated by the
following operational objectives:
i. Efficient project implementation
ii. Effective project control and management
iii. Timely and expeditious monitoring of project performance
iv. Better and faster overall information of the PSDP performance

Manual for Development Projects | 114

 8.15 Major information management assignments served through the
PMES are:
i. Regular physical and financial progress of the PSDP projects
reporting to the PM office
ii. Responses of queries and reports to the Public Accounts
Committee
iii. Different reports to the parliamentary bodies per their demands
iv. The PSDP review support (mid-term or quarterly) to the
Planning Commission
v. Monitoring of projects by the Planning Commission as well as
the line ministries
vi. Project control or tracking by the project-sponsoring ministries.
vii. Provision of authentic data source for dashboard development

PMES Evolution and Technical Specification

8.16 The development of the system started in September 2006 and its
implementation started in the FY 2007-08. Just like any other software
system, the PMES has evolved over the years with various versions.
The current version has major improvements and functionality
enhancements, including the following:
i. Application developed in Java 2 Enterprise Edition
ii. A database developed in Oracle 10 G
iii. Apache Tomcat Server for web serves
iv. Oracle Report Server

PMES System Architecture and Users

8.17 As shown in Figure 21, the PMES is a ‘Role’ based software, which
can only be accessed by the authorized users (given passwords) and
each user is provided with a certain role and according to that role, the
user gets access rights of a specific portion of the software. The
‘Project Director User initiates the cash and work plans at the
beginning of each fiscal year in the PMES (for the ongoing projects) or
whenever the project gets approved and becomes part of the PMES
System. The ‘Focal Person User’ of the federal ministry or division
concerned has the rights to verify the cash and work plans initiated
and forwarded by the PD in the PMES. The ‘Planning Commission User’
(Monitoring Officer) has the rights to give the final approval to the cash
and work plans initiated and forwarded by the PD and verified by the
Focal Person of the ministry concerned in the PMES. The ‘Project
Director User’ also has the responsibility of entering the project’s
financial and physical progress, and releases of funds to the project on
Manual for Development Projects | 115
 a monthly or quarterly basis in the PMES, which is verified by the ‘Focal
Person User’ of the federal ministry or division concerned in the PMES.
The data flow mechanism in the PMES is shown in Figure 22. The
PMES has more than 2000 registered users. It has a data repository of
more than 3000 PSDP projects and some 3600 monitoring reports have
been stored.

Figure 24: PMES System Architecture

Manual for Development Projects | 116

Figure 25: Data Flow Mechanism in PMES

 PMES Information Components
8.18 The main information modules and reports of PMES (Figure 23)
include:
i. Project’s basic information (physical and financial)
ii. Work plans and cash plans
iii. Release of funds
iv. Progress (financial and physical)
v. Monitoring information
vi. Reports (project profile report, professional reports, custom
reports and executive reports)

Figure 26: PMES Information Components

Manual for Development Projects | 117

 Executive Dashboard
8.19 The executive dashboard (Figure 24) has been developed to
provide:
i. A synopsis of key project data and performance indicators in a
graphical format,
ii. An analytical dashboard for the executive management, and
iii. Quick user access through mobile phones or other portable
devices.

PMES Executive Dashboard

Manual for Development Projects | 118

Figure 27: PMES Executive Dashboard

 136
CHAPTER 9: PROJECT
CLOSURE AND TRANSFER OF
ASSETS

141
CHAPTER 10: PROJ ECT
EVALUATION
Manual for Development Projects | 119
 CHAPTER 9: PROJECT CLOSURE AND
TRANSFER OF ASSETS

9.1 The project closure aims to bring project execution to a formal and
orderly conclusion, which includes informing all stakeholders about the
completion of the project. The project closure triggers the winding up
of technical, operational, and administrative actions by the project-
sponsoring public sector entity as determined in the last approved
version of the PC-I. The formal project closure steps and procedures
have been presented in this chapter.

COMPLETED OR CLOSED PROJECT

9.2 The project is completed or closed when all the funds have been
utilized and objectives achieved or abandoned for any reason. At this
stage, the project must be closed formally, and reports prepared on its
overall performance and results achieved using the PC-IV proforma.

9.3 The project closure involves handing over the deliverables to the
authorities concerned, closing of the supplier’s contracts, closure of
bank account, releasing security money, staff, and equipment as well
as informing stakeholders about the closure of the project per the last
approved PC-I. The project closure can be best understood by dividing
it into two parts: 1) Operational, and 2) Financial.

OPERATIONAL CLOSURE
9.4 The operational closure indicates the stage when the last input has
been provided, all activities ended, assignments of all project personnel
completed and disposal of or transfer of equipment purchased by the
project has been carried out. It also marks the point in time beyond
which no further financial obligations or commitments should be
incurred. For regular operation and maintenance of projects after the
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 initiated six months
before the expected completion date. If any of the project staff must
be retained for the operation of the project, a case for the shifting of

Manual for Development Projects | 120

 the post in the budget may be initiated and get approval from the
Finance Division well in time so that the continuity in project operation
is not hindered and public assets created under the project are
maintained.

FINANCIAL CLOSURE
9.5 The financial closure takes place right after the operational closure.
Ideally, the operational and financial closures should be done
simultaneously to avoid large gaps between the two. The 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 that it has authorized have been finalized
and that there are no further financial commitments (hard or soft) or
forecasts and there exists no cash deficit or a liability. The sponsors
must also verify that the total expenditures are within the allocated
budget. However, the closure of the project may not be delayed on
account of the security money. It is recommended that the pay order
of the security money is prepared by a bank and released after
completion of the maintenance period or defects liability period as per
rules. The financial closure should achieve within six months of the
operational closure.

RESPONSIBILITY FOR PROJECT CLOSURE

9.6 The project sponsoring agency is responsible for initiating,
completing, 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 the final
payments. The same applies to the disposal or transfer of the project
assets.

PROCEDURE FOR PROJECT CLOSURE

9.7 At the project closure, submission of the PC-IV to the Planning
Commission by the sponsoring agency is mandatory without any
exception. Based on the PC-IV, the Projects Wing of the Planning
Commission will present the Appraisal Paper (AP) for the consideration
of the CDWP. In the case of the DDWP, PDWP and special areas DWP
projects, the AP will be represented by the Planning and M&E Cells of
Manual for Development Projects | 121
 the sponsoring agency, respectively. The respective forum will then
consider the PC-I targets (physical as well as financial) versus
achievements, timelines and lesson learnt before approval for closure
of the project. The sponsoring agency will be responsible for replies
and justification if required by the competent forum.

9.8 If the project is to be maintained after completion by another

agency, then both the agencies shall coordinate in advance for the
transfer of project assets and liabilities with a proper inventory of
handing and taking over. If some staff of the project is to be retained
for the operation of the project, then a case for the creation of posts
under revenue budget may be initiated by the PD at least six months
ahead of the planned closing date. The sponsors (PAO) will submit and
certify closure of bank accounts and cash/accounts before
consideration and approval of the PC-IV by the competent forum.

9.9 The sponsoring agency will ensure the required O&M budget
allocation in consultation with the Finance Division for the sustainability
of the public investment. The sponsors (PAO) will be responsible to
submit an annual report on the operation and management of the
project after completion in the PC-V for 3-5 consecutive years (3 years
of the sectoral projects and 5 years of the core projects) to the
Planning Commission.

9.10 The current market value of physical assets will be assessed and
updated at the time of completion of the project. Appreciation of land
cost will be assessed due to its location as per the B&R Code Act
criteria and procedure. The cost of the physical assets will be
registered in the inventory registered, both moveable and immoveable.
Report of the annual stock-taking of the inventory will be maintained
and will be submitted to the Cabinet as part of the Yearbook. Assets
inventory addition/deletion should be an essential part of the Yearbook
and the auditor should also audit the inventory and may submit a
mandatory report. One percent of the current market value of the
assets may be earmarked for maintenance in the current budget by the
ministry concerned.

9.11 In case of other physical assets like plant, machinery, vehicles,

etc. each ministry/division, provincial government and special areas will
make its own arrangement for the O&M services including the option of

Manual for Development Projects | 122

 any third party at a competitive price for the sustainability of public
assets.

CHECKLIST FOR PROJECT CLOSURE

9.12 The following is a checklist for project closure:

# Checklist Yes/No
1 Has the most recent version of the PC-I along with its
amendment(s) and revision(s) been consulted to
determine the final closure date?
2 Was the project completion report PC-IV prepared in
time?
3 Was the terminal report on PC-IV been drafted and
technically cleared by the relevant sponsoring agency
before its final submission to the Projects Wing of the
Planning Commission?
4 Was the same PC-IV document submitted to the
Projects Wing of the Commission?
5 Has the status in the PMES been changed to ‘Activities
Completed’ identifying the project as operationally and
financially completed?
6 Were recommendations provided to aid in the disposal
or transfer of assets purchased by the project?
7 Was the departure of the project personnel done and
communicated to the unit 6 months prior to the
project closure date to ensure action to the transfer or
separate personnel is completed?
8 Were the last project inputs provided by the project
sponsor including directing the completion of all sub-
contracts and ordering the last expendable/non-
expendable equipment items?
9 Were the closing instructions including imprest
accounts to the quarters concerned if relevant and
applicable?
10 Was disposal of the project equipment completed
either by:
• Transfer or donation to other sections or
departments (of a follow-up project or
sponsoring agency’s inventory) OR
• Sold in sale OR
• Written-off with approval of competent
Manual for Development Projects | 123
 authority
10. Were vehicles transferred to the government ministry
1 or agency concerned?
11 Did the sponsoring agency inform all parties about the
operational closure?
11. Did the sponsoring agency conduct a post-completion
1 audit?
11. Did the sponsoring agency prepare a budget revision
2 to the surrender the balance of the project budget or
release?

Manual for Development Projects | 124

 CHAPTER 10: PROJECT EVALUATION

10.1 The final phase of the project lifecycle is the evaluation of project
performance and results. Project evaluation aims to determine the
relevance, effectiveness, and impact of activities in the light of the
objectives as systematically and objectively as possible48. It allows us to
ascertain the net benefits of a project or programme and draw lessons for
the future. It is a critical analysis of the factual achievements and results
of a project, programme or policy vis-à-vis the intended objectives,
underlying assumptions, strategy, and resource commitment.

10.2 In specific terms, project evaluation tries to objectively assess:

i. The relevance and validity of the objectives and design of the
project or programme in terms of broader issues of the
development policy, sector or sub-sector priorities and strategies as
well as other problems of a wider nature
ii. The efficiency and adequacy of the pace of progress of the project
or programme where the focus is mainly on the managerial
performance and productivity.
iii. The effectiveness of the project or programme – a major part of an
evaluation exercise is realizing the intended objectives from a
variety of angles, and
iv. The identification of reasons for the satisfactory or unsatisfactory
accomplishment of the results of the project or programme and to
deduce critical issues and lessons, which may be of relevance to
other ongoing and future projects or programmes of a similar
nature.

10.3 This chapter outlines the difference between monitoring and

evaluation, describes the types of evaluation and typical indicators used in
project evaluation, presents the requisites for evaluation, and highlights
the mandatory evaluation reports (PC-IV and PC-V) to be prepared after
project closure.

48 For definitions, see the UNICEF Guide for Monitoring and Evaluation (page 2); available at:
https://silo.tips/download/a-unicef-guide-for-monitoring-and-evaluation

Manual for Development Projects | 125

 DIFFERENCE BETWEEN MONITORING AND
EVALUATION
10.4 Evaluation is a learning management tool but differs materially from
monitoring. The project monitoring is undertaken at the implementation
stage, while evaluation is generally preferred when a project is complete.
The monitoring reports provide the database for the evaluation, but
evaluation cannot contribute directly to monitoring. The evaluation studies
are more comprehensive, covering all aspects of the projects, whereas
monitoring provides information mainly to assess and help maintain or
accelerate the progress of implementation. The key differences between
the M &E functions are summarized in the table below.

Monitoring Evaluation
Keeps track of daily activities as a Takes long-range view through in-depth
continuous function study – one-time function
Accepts objectives, targets and norms Questions’ pertinence and validity of project
stipulated in the project document objectives and targets

Checks progress towards output targets Measures’ performance in terms of

objectives
Stresses conversion of inputs to outputs Emphasizes achievement of overall
objectives
Reports on the current progress at Provides an in-depth assessment of
short intervals for immediate corrective performance for future feedback
actions
Table 11: Comparison of Monitoring and Evaluation

TYPES OF EVALUATION
10.5 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.
Four different types of project evaluations are: ex-ante evaluation,
ongoing evaluation, final evaluation, and ex-post evaluation.

Manual for Development Projects | 126

 Figure 28: Types of Evaluation

Evaluation Type Purpose of Evaluation

Ex-Ante Evaluation It is a broad initial assessment aimed at identifying
which alternative will reap the greatest benefit
from the investment.
On-going Evaluation It assesses the intended outcomes, outputs, and
the success indicators of the project half-way.
Final Evaluation The main purpose is to facilitate a process which
will document project outputs and impact.
Ex-post Evaluation The aim is to derive lessons and recommendations
to improve the project and plan more effective
projects in the future.
Table 12: Evaluation Type and Purpose

10.6 The ex-ante evaluation or pre-approval appraisal has already been

discussed with methods and techniques earlier in Chapter 5. The ongoing
evaluation is carried out by the organization of its own to reassess 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. The main purpose of this evaluation is to
assist the project management to make appropriate adjustments in the
changed circumstances or to rectify any shortcomings in the original
design to improve its efficiency and overall performance.

10.7 Final evaluation is done to assess results when a project concludes

its implementation phase. It provides information that can be used to
control for any negative consequences or breakdowns in the project to
ensure smooth sailing in the future.

Manual for Development Projects | 127

 10.8 The purpose of an ex-post or post-hoc evaluation is to assess the
actual as opposed to the estimated/projected results of implementing a
project. The aim of the 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 the experience for the new projects. The overall
impact of the project will result in several effects, which can be classified
as costs and benefits, direct and indirect or tangible and intangible. The
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.

EVALUATION INDICATORS
10.9 These indicators are the yardsticks for the assessment of the overall
performance of a project or programme regarding the stipulated targets
and objectives. Typical performance indicators include:

Figure 29: Performance Indicators for Evaluation

i. Physical achievements indicators – These pertain to physical

progress, and project cost and time over/underruns.
ii. Output or impact indicators – These are sector-specific—for an
agriculture project, an increase in the agricultural production
(whether crops, livestock, forest products, fish, etc.) in the project
area could be used as an output indicator, and an increase in rural
incomes as an outcome indicator. Other indicators could be
agriculture credit applications processed or approved, agricultural
extension workers trained, research and testing laboratories
established, and so on.

Manual for Development Projects | 128

 iii. Economic indicators – These are indicators of economic and
financial return on the project investment (for example, the
financial rate of return, IRR, B/C ratio, etc.)
iv. Social indicators – These often pertain to basic needs and quality of
life, for example, life expectancy, literacy, income distribution with
equity, level of food consumption, access to health and education,
shelter, clean drinking water, etc. Many of the UN SDGs fall under
this category.
v. Environmental indicators – These have a direct bearing on the
quality of life and sustainable development and include indicators
related to air and water quality, land degradation, climate change,
biodiversity etc.

REQUISITES FOR PROJECT EVALUATION

10.10 The approved PC-I, along with the related project documents, such
as concept clearance paper, project appraisal report, loan/grant
agreement and other documents for donor/IFI-assisted projects, and
feasibility and other technical and sector studies, if any. The minimum
requirements are:
i. Pre-approval appraisal notes/CDWP working papers
ii. Pre-approval technical scrutiny notes
iii. ECNEC summary and its decisions
iv. Sources of financial and other inputs
v. Annual/quarterly progress reports
vi. Project review/monitoring/mid-term evaluation reports
vii. Special reports
viii. Project completion report (including those prepared by external
funding agencies)

10.11 The aforementioned documents form the basis of the assessment of

different project components and activities. Project site visits also help in
the on-ground assessment of project performance and results and its
effect/impact on the target group/beneficiaries. The following key
questions should be addressed in any evaluation exercise:

# Key Questions

1. Was the project properly conceived?

Manual for Development Projects | 129

2. Has it fulfilled its basic objectives?

3. Was there any flaw in project design?

4. Was the project prepared in consultation with beneficiaries and other

stakeholders?
5. Were the forecasts of output or benefits correctly made to a reasonable
extent?
6. Was the technical preparation adequate?

7. How good were the original cost estimates?

8. If there were deficiencies in preparation, how were they addressed?

9. Was the project implemented per the plan?

10. If not, was this because of its haphazard preparation or because of delays
in (a) the authorization procedure, (b) obtaining suitable funds, and (c)
other reasons?
11. Have you identified any lessons that could be learnt to improve the design
and implementation of future projects?
Table 13: Key Questions for Evaluation

MANDATORY EVALUATION REPORTS

10.12 The project evaluation report is prepared by the Project
Implementation Unit or other designated staff using the PC-IV Proforma
as part of the project closure activities (see Chapter 9). The PC-IV is
evaluated by the Planning Commission’s Projects Wing or technical section
concerned. For regular operation and maintenance of projects after the
completion stage, the project is transferred to the department/agency
responsible for its maintenance and operation. After the project closure,
annual operation reports must be submitted to the Planning Commission
for the next five years on the PC-V proforma, which is to be furnished on
annual basis, by the 31st of July of each year for five years, by the
department/agency responsible for operation and maintenance of the
project. It provides information about the project’s operational results
during the preceding fiscal year.

EVALUATION FEEDBACK AND LESSONS LEARNED

Manual for Development Projects | 130

 10.13 Feedback is the most important element of a systematic and
integrated approach to project monitoring and evaluation. Essentially, it is
the evaluation phase of the project cycle that provides the lessons learned
from the project implementation experience. The evaluation phase
compares the actual outcome of the project with the appraisal projections
then examines the positive and negative effects of the project, providing
important lessons for the future. The feedback from the evaluation is an
essential input for effective project/portfolio management. But an
evaluation without any direction or support from the management can
hardly be meaningful.

10.14 To promote feedback from evaluation, it is necessary to:

i. Substantiate proper evaluation findings and pay proper attention to
specific issues of substance,
ii. Establish a feedback mechanism, preferably to the policymakers
and senior management, and
iii. Rely upon feedback through formal and informal channels.

10.15 Feedback from the evaluation is used for operational (mid-course

corrections and follow-up action), analytical (improvement of project
design, objectives, etc.) and policy purposes (finding out the validity of a
given development strategy, etc.). To ensure that feedback is used
systematically, there must be an adequate institutional mechanism for
channeling the findings and recommendations to the relevant decision-
makers and managers for the necessary follow-up action.

Manual for Development Projects | 131

 APPENDIX A

150
NATIONAL ECONOMIC AND
DEVELOPMENT PLANNING
SYSTEM

172
ECONOMIC AND
DEVELOPMENT PLANNING
SYSTEM IN PROVINCES AND
SPECIAL AREAS

Manual for Development Projects | 132

 APPENDIX A
1. NATIONAL ECONOMIC AND DEVELOPMENT
PLANNING SYSTEM
1.1 This section describes the constitutional and legal contexts of the
economic development planning practices in Pakistan discussing how the
planning system has evolved since the early 1950s, the functional and
organizational set up of the Planning Commission and the forums
responsible for the national economic planning, coordination and approval
of development projects and programmes.

Constitutional and Legal Context of Planning in Pakistan

1.2 Article 156 of the Constitution of the Islamic Republic of Pakistan49
provides for constituting the National Economic Council (NEC) by the
President of Pakistan.50 The Council is responsible for advising the federal
government and the provincial governments in formulating plans
regarding the financial, commercial, social, and economic policies. In
formulating such plans, it is to ensure balanced development and regional
equity, which are to be guided by the Principles of Policy as articulated in
Articles 29-40 (Chapter 2 of Part II) of the Constitution. The NEC is
mandated to meet biannually.

National Planning and National Economic Coordination

1.3 The national planning and national economic coordination, including
planning and coordination of scientific and technological research, fall
under part II of the Federal Legislative List (Entry No. 7). Hence, it is the
domain of the Council of Common Interest (CCI), which shall formulate
and regulate policies concerning matters in part II of the Federal
Legislative List and shall exercise supervision and control over related
institutions vide Article 154 of the Constitution.

Public Finance Management Act 2019 (As Amended in 2020)

1.4 The Federal Public Finance Management Act 2019 was added through
the Finance Act 2020 for the plan-based government expenditure. All

49 The Constitution of the Islamic Republic of Pakistan, Part V, Chapter 3, Art 156; available at
http://www.na.gov.pk/uploads/documents/1333523681_951.pdf.
50 The Constitution refers to the 1973 Constitution and its various amendments. The NEC comprises the Prime

Minister as its Chairman, Chief Ministers of the provinces, one member from each province to be nominated by the
Chief Ministers and four members to be nominated by the Prime Minister.

Manual for Development Projects | 133

 government expenditures, whether from a recurrent or a development
demand for the grant, shall be based on well-defined plans and the
strategic priorities approved in the budget strategy paper.

1.5 The Federal Public Finance Management Act 2019 was enacted
(became effective from July 1, 2019) and made to ensure compliance with
Article 79 of the Constitution. Chapter III of the Act titled “Development
Projects and Maintenance and Use of Public Assets (Sections 13-20)” has
the following provisions:
i. Section 13 – Classification of development projects: Projects
defined in Public Sector Development Programme shall be classified
as:
• Core projects in national infrastructure requiring complex
planning, design, and implementation procedures. The
Planning Commission shall designate projects as such in
accordance with the criteria notified in the official gazette.
• Sectoral projects undertaken by specific sectors, ministries
and divisions which are required to enhance the
development of that sector, ministry or division and do not
fall under the category of core projects.
ii. Section 14 – Preparation of development projects
• All development projects shall be prepared in conformity
with procedures, processes and templates defined by the
Planning Commission.
• Cost and benefit analysis and risk assessment of all
development project proposals in excess of a threshold size
prescribed by the Planning Commission shall be undertaken.
iii. Section 15 – Quality assurance
• Development project proposals, which exceed their total cost
thresholds defined by the Planning Commission shall be
subject to quality assurance. Such quality assurance shall be
undertaken by an individual/body which is independent of
the sector/ministry/division that has initiated the preparation
of the development project proposal.
iv. Section 16 – Technical approval
• All development project proposals shall be subject to a
technical approval process. Technical approval shall only be
granted to projects which are compliant with the standards
and procedures set by the Planning Commission.

Manual for Development Projects | 134

 • Findings and recommendations of the independent quality
assurance reports, cost and benefit analysis and risk
assessment where required per sub-section (2) Section 14
shall be considered by these forums while considering the
development project proposals.
v. Section 17 – Inclusion of development projects in demands for
grants
• No development project shall be considered for inclusion in
demands for grants if it has not been granted technical
approval.
• No development project shall be considered for inclusion in
demands for grants unless it is provided with a budget
allocation for the coming year reflecting the proposed
project cost for each year.
vi. Section18 – Monitoring and evaluation of development projects

1.6 Development projects shall be subject to the following forms of

monitoring and evaluation, namely,
• Monitoring of progress during implementation
• Evaluation of the project on completion
• Those projects with the total cost exceeding the threshold
set by the Planning Commission, an independent impact
assessment shall be devised within five years after
completion of the projects.
• Timelines, forms and formats and guidance on conducting
monitoring and evaluation and reporting shall be completed
as prescribed.
vii. Section 19 – Budgetary provision for maintenance of assets
• Every ministry and division shall include in its demands for
grants adequate funds dedicated for operation and
maintenance of the physical infrastructure assets under its
supervision.
• The Planning Commission shall define adequacy
requirements for different categories of the physical
infrastructure expressed as the ratio of the annual provision
for maintenance and the current market value of the asset.
viii. Section 20 – Utilization of public assets

Manual for Development Projects | 135

 • The principal accounting officers shall ensure that the
maximum possible returns are achieved on every asset
falling under the oversight of the ministry and division.
• The returns on a public asset may include the utilization of
the asset for delivery of one or more public services or a
financial return accruing to the government from the
utilization of the potential of the asset.
• To achieve the maximization of returns on public assets, the
government may establish sovereign wealth funds through
an act of the Parliament. The objective of a sovereign wealth
fund is to act as a holding institution for public assets which
can bring to bear sound management and exploitation of
opportunities for the maximization of returns from the public
assets.

Planning Commission
1.7 The Planning Commission is an apex planning and coordination body
functioning under the Chairmanship of the Prime Minister, while the
Planning, Development and Special Initiatives (PD&SI) Division is serving
as the Secretariat of the Planning Commission.51
MISSION OF PLANNING COMMISSION
1.8 The Mission of the Planning Commission, as elucidated in the Cabinet
Division Resolution of October 201352 is to:
i. Act as the apex think-tank for the Government in the context of
adjusting to the new realities and challenges, including recognition
of the increased role of the private sector, impacts of globalization
and National Finance Commission Award 2010 on the economic
policy.
ii. Effectively plan for the economic and social development of the
country.
iii. Moving to a new paradigm of Participatory and Collaborative
Planning involving the Parliament, ministries/divisions, provinces,
special areas, private sector, academia, civil society and diaspora to
play the role of facilitator and stewardship as well as an integrator
in the areas of economic policy.

51 Entry No 13 under Item 30 of Schedule II of the Federal Government Rules of Business, 1973, as amended from
time to time.
52 Adapted from the mission statement and strategic objectives given at: https://www.pc.gov.pk/web/ministry

Manual for Development Projects | 136

 1.9 The Planning Commission is responsible for the performance of
functions outlined in Schedule-II of the Rules of Business 1973 (as
amended), under the heading of the Planning, Development and Special
Initiatives Division. The PD&SI Division, as the secretariat of the Planning
Commission, provides all necessary economic, technical, and
administrative support to the Commission for the discharge of its assigned
functions and responsibilities. The heads of economic and technical
sections of the MoPD&SI coordinate the Annual Plan and PSDP
preparation for their respective sectors. The functional wings of the
MoPD&SI are shown in the figure below.

Manual for Development Projects | 137

Technical Sections Economic Project Wing Attached
Sections Depts./
Authorities/
Cells
• Energy Wing (Fuel, • Economic • Infrastructure • Pakistan
Power, Energy Appraisal • Social Sectors Bureau of
Economic and Energy • Public Investment • Statistics
Other Sectors
Information Sections) Programming • China-
• Evaluation
• Transport and • Public Investment Pakistan
Communication • Management Economic
Authorization
Information Corridor
• Physical Planning and • Sustainable System Authority
Housing Development
• Food & Agriculture Goals • Public-Private
Partnership
• Water Resources • Macroeconomics
Authority
• Industries and • International
• Pakistan
Commerce Trade and
Planning and
• Health Finance
Management
• Nutrition • Money, Prices Institute
and Fiscal Policy
• Education • Pakistan
• Employment and Institute of
• Population & Social
Research Development
Planning
• Plan Coordination Economics
• Social Welfare
• National
• Manpower Logistic Cell
• Climate Change and • SDL
Environment
• Science and Technology
• Governance
• Mass Media & Culture,
Sports, Tourism and
Youth
• Devolution & Area
Development
Figure 30: Functional Wings of MoPD&SI

EVOLUTION OF THE PLANNING COMMISSION — A CHRONOLOGY

Manual for Development Projects | 138

 1.10 The evolution of the Planning Commission is summarized below,
while the details are provided in the referenced annexures.
• 1948- Development Board was established in the Economic Affairs
Division (EAD) under the Ministry of Finance and charged with
economic development.
• 1950- The Six-Year Colombo Plan was mapped out.53
• The Planning Board was established on 18th July 1953. (see Box

Box 1 – Terms of Reference of the Planning Board

18th July 1953

The main functions of the Planning Board were to:

• Review the development which has taken place since the
independence.
• Assess the material and human resources which can be made
available for development during the next five years beginning
from April 1954 (later changed to April 1, 1955).
• Prepare a national plan of development based on the fullest
possible utilization of these resources for implementation in a
period of five years from the 1st April 1954 as a step towards the
attainment of the economic and social objectives of governments’
policy.
• Make proposals regarding the administrative machinery best suited
to assure the successful implementation of the plan while the First
Five-Year Plan (1955-60) was prepared and approved by the
National Economic Council (NEC).
• Make any other recommendations which in the opinion of the
Board will contribute towards the successful implementation of the
Plan.
Source: Resolution No.2(24)-PG/5, Ministry of Economic Affairs, Government of
Pakistan, Karachi, dated 18th July, 1953 (Annexure 40)

• 1957- A permanent National Planning Board was established on

20th April 1957 under the chairmanship of the Prime Minister with
two members to achieve progress on Article 28 and 29 of the 1956

Manual for Development Projects | 139

 Constitution (now Article 37 and 38 of 1973 Constitution). The
tasks assigned to the National Planning Board are given in Box 2.

Box 2- Tasks Assigned to National Planning Board

20TH April 1957
• To prepare future Five-Year Plans of economic and social
development.
• To make additions and alterations in the existing Five-Year Plans
consistent with the changing economic conditions of the country.
• 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 the government.
• To stimulate and where necessary, initiate the preparation of schemes
required to achieve national objectives in the economic and social
fields.
• To examine development schemes, programmes, and proposals to
include in the plan of development.
• To maintain a continuous and constant review of the progress of
development, the benefits realized, and the difficulties experienced.
• To maintain a continuous review of the economic conditions of the
country so far as they directly impact the development plans.
• To submit such periodic reports as the government may desire from
time to time.
• To encourage the improvement and expansion of research (economic
research), statistics, surveys, investigations and evaluation needed to
support effective planning and development in the country.
• Generally, to advise the government on economic policies and
problems in various fields so far as these have a bearing on the
development plans.

Source: Resolution, No.29(3)-PP/57, Ministry of Economic Affairs,

Government of Pakistan, Karachi, dated 20th April 1957 (Annexure 41)

Manual for Development Projects | 140

 • 1958- The National Planning Board was redesignated as the
Planning Commission on 22nd October 195854,55,56 (Annexures 22
and 23)

• 1961- The Project Division in the President’s Secretariat was

abolished, and its functions were amalgamated in the Planning
Commission, and it was identified as a Division in the President’s
Secretariat. The President assumed the Chairmanship of the
Planning Commission on 5th August 1961 with a Deputy Chairman
(status of a minister), two members from the central government
and one member each from West Pakistan and East Pakistan. The
Planning Division remained with the President from 1961 to 1971.
The new Planning Division had two separate technical wings:
Planning and Progressing. The latter focused on monitoring of
implementation and delivery of results. The non-technical sections
of the Division (Coordination, Development, Authorization,
Administration, etc.) were reorganized on the pattern of the Section
Officers’ Scheme in the Central Secretariat57 (Annexure 24).

• 1988- The Chief Executive of Pakistan was the Chairman of the

Planning Commission from October 1999 to November 2002 and
subsequently, the Prime Minister assumed the role.

• 2006- The Planning Commission was revamped in April 2006 to

ensure that it plays an effective role as an apex planning and
coordination body of the country. The number of members
increased to nine, while its chairmanship remained with the Prime
Minister. A Policy Board was established to be chaired by the Prime
Minister and included the Deputy Chairman, 10 federal ministers to
be nominated by the Prime Minister and all members of the

Manual for Development Projects | 141

 Planning Commission. The functions assigned to the Planning
Commission in 2006 are given in Box 3.

• 2
Box 3-Functions of Planning Commission
0 April 2006
The following functions of the Planning and Development Division under
1
Schedule3II of the Rules of Business were also assigned to the Planning
Commission.
-
• Preparing
T the National Plan, reviewing and evaluating its
implementation.
h
• Formulating the annual and Annual Development Plan.
e
• Monitoring and evaluating implementation of major development
projects and programmes.
P
• Stimulating
l preparation of sound projects in regions and sectors lacking
adequate portfolio.
a
• Continuously
n evaluating the economic situation and coordinating
economic policies and decision-making.
n
• Assisting
i in defining the national vision and undertaking strategic
planning.
n
• Assessing
g the material, capital and human resources of the country and
formulating proposals for augmenting such resources.
• Facilitating
C the capacity-building of agencies involved in development.
• Any othero function assigned by the Prime Minister.
m
Source: Cabinet
m Division Resolution No.4-6/2006-Min.I., Islamabad, dated 20th
April 2006.i (Annexure 42)
s
s
i
o
n

was reorganized by increasing the number of Members to 12 while

the Prime Minister continued to be the Chairman of the
Commission. The functions assigned to the Planning Commission
are summarized in Box 4. An Advisory Committee58 of the Planning

Manual for Development Projects | 142

 Commission/Ministry of Planning, Development and Reform
(MoPD&R) was also notified in October 201359, comprising 26
members, 12 federal secretaries, Chairman FBR, Chairman Board of
Investment (BoI), Vice-Chancellor Pakistan Institute of
Development Economics (PIDE) University, Chairman Planning and
Development (P&D) Board Punjab and Additional Chief Secretaries
of Sindh and KPK. The Terms of Reference of the Advisory
Committee are to:
i. Promote public and private sector interface and develop a
participatory approach in decision making.
ii. Work as a strategic think-tank on policy issues of the
Planning Commission/MoPD&R.
iii. Guide Planning Commission/MoPD&R in policy formulation,
reform, and its implementation as per the vision of the
present government and the national interest.
iv. Generate and build consensus on policies and strategies of
the Planning Commission/MoPD&R, and provide input and
feedback from non-government stakeholders to the
policies/performance of the Planning Commission/MoPD&R.

• 2019- In June 2019, the Deputy Chairman of the Commission was

directed to report to the Minister PD&SI in the following areas60
(Annexure 25).
i. All issues requiring approval/consideration of the Prime
Minister, cabinet, NEC, ECC and ECNEC.
ii. Brief and seek approval of the Minister PD&SI of the CDWP
agenda.
iii. Finalization of the PSDP in consultation with the Minister
PD&SI.
iv. Close liaison with the Minister PD&SI on all matters of
development policy formulation, etc.

FUNCTIONS OF THE PLANNING COMMISSION

Manual for Development Projects | 143

 1.11 The Rules of Business (Schedule II) as amended up to July 2020
indicate that the functions of the Planning Commission continue to be as
given in the Cabinet Resolution No. 4-6/2006-Min-1 dated 30 October
201361. These functions are grouped in three broad categories as shown
in Box 4)62.

61This Cabinet Division Resolution superseded Resolution No 4-6/2006- Min.1 dated 20 April 2006.
62Schedule II of the Rules of Business 1973 (as amended from time to time) enumerates the functions assigned to
the Planning, Development and Special Initiatives Division and selected functions of the Division have been assigned
to the Planning Commission. The Rules of Business has also designated the PD&SI Division as the Secretariat of the
Planning Commission and Secretary of the Division has been nominated as Member Coordination.

Manual for Development Projects | 144

 Box 4- Functions of Planning Commission since 2013
A. Core Development Functions
• Preparing the National Plan, reviewing and evaluating its
implementation.
• Formulating Annual Plan and Annual Development Programme.
• Monitoring and evaluating implementation of major development
projects and programmes.
• Stimulating preparation of sound projects in regions and sectors
lacking adequate portfolio.
• Continuously evaluating the economic situation and coordinating
economic policies and decision making.
• Organizing research and analytical studies for economic decision
making.
B. Vision, Strategic Planning and Capacity-Building Functions
• Assisting in defining the national vision and undertaking strategic
planning.
• Assessing the material, capital, and human resources of the country
and formulating proposals for augmenting such resources.
• Assisting the government in providing a conducive macroeconomic
and regulatory framework, improved resource mobilization, an
institutional framework and efficient public investment.
• Promoting and developing the role of the private sector as an engine
of growth by co-opting it as a partner in development process through
institutionalized effective consultative process.
• Facilitating capacity-building of agencies involved in development.
• Promoting and coordinating reform and innovation in the government
in partnership with relevant ministries/divisions and organizations.

Manual for Development Projects | 145

 C. Think-Tank including Research and Development Functions
• Promoting and developing social capital for development with
stakeholders (MDGs, poverty alleviation, social harmony).
• Promoting and coordinating economic and infrastructure 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 responses in coordination with relevant
ministries/divisions and organizations.
▪ Any other function assigned by the Prime Minister.

Source: Cabinet Division Resolution No. 4-6/2006-Min-1, Islamabad, dated

30 October, 201 (Annexure 43)

PRESENT STRUCTURE AND ORGANIZATION OF THE PLANNING

COMMISSION
1.12 The Prime Minister is the Chairman of the Planning Commission
which excluding the Minister PD&SI and Deputy Chairman has the
following 12 members:
i. Secretary PD&SI Division/Member (Coordination)
ii. Chief Economist/Member (Economic Policy/Planning)
iii. Member (Energy)
iv. Member (Implementation and Monitoring)
v. Member (Private Sector Development and Competitiveness)
vi. Member (Development Communication)
vii. Member (Food Security and Climate Change)
viii. Member (Infrastructure and Regional Connectivity)
ix. Member (Social Sector and Devolution)
x. Member (Governance, Innovation and Reforms)

Manual for Development Projects | 146

 xi. Member (Science, Technology and ICT)
xii. Vice-Chancellor Pakistan Institute of Development Economics
(PIDE)/Member Research

1.13 The Planning Commission meets under the Chairmanship of the

Prime Minister on a biannual basis to monitor the progress of economic
policies and for future guidance. The Advisory Committee to the Planning
Commission can be found in Annexure 26. An organogram of the Planning
Commission is shown in Figure 2. A chronology of the Deputy
Chairmen/Chairpersons is given in Annexure 27.

Figure 31: Organogram of Planning Commission

National economic planning and coordination forums

NATIONAL ECONOMIC COUNCIL (NEC)
1.14 The NEC is the apex economic and development policy forum
mandated by the Constitution to approve vision statements, long-term
perspective plans, five-year plans, annual plans and the Public Sector
Development Programme (PSDP). The current composition of the NEC63
includes the Prime Minister (Chair), four Chief Ministers, four members
nominated by the Prime Minister and four members nominated by the
respective Chief Ministers64.

63 Cabinet Division Notification No. F.5/1/2018-Com., Islamabad, dated 15 May 2019

64
CM can nominate one member on his behalf

Manual for Development Projects | 147

 1.15 Those who attend the NEC meetings on special invitation are:
Governor Khyber Pakhtunkhwa, Prime Minister Azad Jammu and Kashmir
(AJ&K), Chief Minister Gilgit-Baltistan (GB), Deputy Chairman Planning
Commission, secretaries Finance Division, EAD and PD&SI Division,
whereas the Chief Secretaries of the provinces, Azad Jammu and Kashmir
(AJ&K) and GB are invited on need-basis.

1.16 The Council meetings are summoned by the Chairman or on request

of one-half of the members of the Council who shall meet at least twice a
year and the quorum for a meeting is one-half of its total membership.
The Council is answerable to the Majlis-e-Shoora (Parliament) and submits
its Annual Report to the National Assembly and the Senate.

ANNUAL PLAN COORDINATION COMMITTEE (APCC)

1.17 The APCC is mandated to review the Annual Plan of the previous and
current years and recommends the proposed Annual Plan of the
subsequent year for submission to the NEC. In addition, it reviews the
PSDP of the previous and current year and recommends the proposed
PSDP of the next year for submission to the NEC. The APCC is chaired by
the Minister PD&SI or Deputy Chairman Planning Commission. Its
members include:
i. Governor State Bank of Pakistan,
ii. ministers for Finance Division
iii. P&D Departments of all provinces and AJ&K
iv. Deputy Chief Executive of Northern Areas
v. Chairmen P&D boards Punjab and Sindh
vi. Additional Chief Secretaries (Development) of Sindh, Balochistan,
Khyber-Pakhtunkhwa, AJ&K and GB
vii. provincial finance secretaries
viii. secretaries of all federal ministries
ix. Chief Economist Planning Commission
x. Chairmen FBR, NHA, WAPDA, PAEC, PNRA, HEC and CDA
xi. Economic Adviser Finance Division
xii. Additional Secretary (Budget) Finance Division
xiii. Members of Planning Commission and officers of the MoPD&SI.

Development Project/Programme Approval Forums

EXECUTIVE COMMITTEE OF THE NEC

Manual for Development Projects | 148

 1.18 The composition of the Executive Committee of NEC (ECNEC)
changes from time to time. Currently, the ECNEC 65 includes six federal
ministers and one minister from each of the four provinces, whereas
Deputy Chairman Planning Commission, secretaries EAD, Finance Division
and MoPD&SI, Chairmen P&D boards of Punjab and Sindh, Additional
Chief secretaries P&D departments Khyber Pakhtunkhwa (KP) and
Balochistan are invited to the meetings on special invitations (Annexure
28). Moreover, other officers of the federal and provincial governments as
well as governments of AJ&K and GB are invited to the ECNEC meetings
on a need-basis.

1.19 The functions and powers of the ECNEC are to:

i. Sanction development projects (both in public and private sectors)
each costing more than Rs10 billion and/or have 25 percent or
above foreign funding component66 pending their approval of the
NEC
ii. Allow moderate changes in the Annual Plan and sectoral
adjustments within the overall Plan allocation.
iii. Supervise the implementation of the economic policies laid down by
the Cabinet and the National Economic Council.
iv. Pronounce on cases for the grant of protection of indigenous
industry.
v. Pronounce on cases involving the grant of licenses for exploration
or exploitation of oil and other mineral resources or extension in
the area of operation.
vi. Issue reports asked requested by the Committee in pursuance of its
earlier decisions.
vii. Act on any other matter referred to the Committee by the Prime
Minister, the NEC, the Council of Common Interests (CCI) and the
Cabinet or raised by any member in the Committee with the
permission of the Chair.

CENTRAL DEVELOPMENT WORKING PARTY (CDWP)

1.20 The CDWP is responsible for the scrutiny and approval of the
development projects. Its current composition is 67 (Annexure 29)
i. Deputy Chairman Planning Commission (as Chairman)

65 Cabinet Division Notification No.F.5/2/2018-Com., Islamabad, dated 28 April 2020

66 Planning Commission Notification No. 20(1)/PIA-I/PC/2019, dated 23 September 2019
67 Planning Commission Notification No.23(1-2)PIA/PC/2014, Islamabad, 23 January 2015

Manual for Development Projects | 149

 ii. Chairman P&D Board, Government of Punjab
iii. Chairman P&D Board, Government of Sindh
iv. Additional Chief Secretary (Development) P&D departments,
governments of KP, Balochistan, AJ&K and GB
v. Secretary Development GB
vi. Representatives of the Finance Division, EAD, Climate Change
Division, relevant federal administrative divisions
vii. Chairman Pakistan Council of Science and Technology
viii. Planning Commission/PD&SI Division – Secretary, Chief Economist,
all Members of the Planning Commission, Additional Secretary,
Joint Chief Economists (Operation) and (Macro), Advisor
(Development Budget), Advisor (Development Projects), chiefs of
sections including the Public Investment Programming (PIP), Public
Investment Authorization (PIA), Physical Planning and Housing
(PP&H), Employment and Research, Economic Appraisal, Chief of
the section concerned, Director-General Project Wing, DG PPMI,
Energy Coordinator/official spokesman, and
ix. by special invitation – Housing and Works Division, Pakistan
Engineering Council (PEC), BoI, NESPAK, Environment Protection
Agency, and a representative of Pakistan Council of Architecture
and Town Planning (PCATP).

1.21 The CDWP is authorized to approve development schemes up to

Rs10,000 million.68 (Annexure 30). Beyond this cost threshold, the CDWP
recommends projects to the ECNEC for consideration and approval. The
Deputy Chairman Planning Commission (DC PC) or Secretary, PD&SI
Division in the DC’s absence can chair the CDWP meeting.

FEDERAL DEPARTMENTAL DEVELOPMENT WORKING PARTY

(DDWP)
1.22 The sanctioning power of the DDWP to approve the PC-I or PC-II of
a project is up to Rs 2,000 million69 provided foreign assistance is less
than 25 percent of the total cost of the project.

68 These sanctioning powers for development projects are only for local funded projects. In cases where foreign
exchange or foreign assistances is more than 25 percent of the total cost of the project, the approving forum will be
CDWP/ECNEC irrespective of the cost of the project vide Planning Commission Notification No.20(1)PIA-I/PC/2019
Islamabad, dated 23 September 2019.
69 These sanctioning powers for development projects are only for local funded projects. In cases where foreign

exchange or foreign assistances is more than 25 percent of the total cost of the project, the approving forum will be
CDWP/ECNEC irrespective of the cost of the project.

Manual for Development Projects | 150

 1.23 The composition of the federal DDWP includes:
i. Secretary/Principal Accounting Officer of an administrative division
(chairman).
ii. Chief (in person) of the section concerned of the MoPD&SI.
iii. Joint Secretary Finance Division.
iv. Chief Finance and Accounts Officer (CF&AO) of the division
concerned.
v. Representatives of the Appraisal Wing of MoPD&SI, EAD (if the
project involves foreign assistance).
vi. Environment Protection Agency (EPA).
vii. National Engineering Services Pakistan (NESPAK).
viii. PEC by invitation.
ix. A representative of the provincial government concerned if the
proposed projects impact it.

1.24 The functions of DDWP are given in Annexure 31. The procedure for
approval of schemes by the federal DDWP is given in Annexure 32.

DEVELOPMENT WORKING PARTY (DWP – AUTONOMOUS

ORGANIZATIONS)
1.25 The Public sector autonomous organizations whether commercial or
non-commercial (with a functional board by any name) are competent to
sanction their development schemes based on 100 percent self-financing
having no government guarantee and involving less than 25 percent
foreign exchange assistance. The requirements are given in Annexure 33,
subject to the following requirements:70
i. The DWP should be constituted by each organization and notified
to consider and approve its self-financed projects.
ii. The DWP should be headed by the chairman/head of the
organization and, among others, should include representatives of
the PD&SI Division, Finance Division, and the ministry/division
concerned, each not below the rank of a Joint Secretary.
iii. Organization and, among others, should include representatives of
the PD&SI Division, Finance Division, and the ministry/division
concerned, each not below the rank of a Joint Secretary.

Manual for Development Projects | 151

 iv. The quorum of the DWP will be incomplete without the presence of
either representative of the Finance or the PD&SI divisions.
v. In case either of these divisions does not agree to the
project/proposal/PC-I or any aspect thereof, it will be referred to
the CDWP for its consideration.
vi. The decision of the DWP will be subject to the endorsement of the
board of the organization.

2. ECONOMIC AND DEVELOPMENT PLANNING SYSTEM

IN PROVINCES AND SPECIAL AREAS

2.1 After the 18th Constitutional Amendment, the provincial planning has
transformed with the introduction of a medium-term perspective,
increased inflow of resources, and new planning imperatives such as
public-private partnerships and RBM.

2.2 The formulation of the Annual Development Programme (ADP) and

approval of development projects are important exercises carried out by
the P&D boards/departments at the provincial and special area levels in
consultation with the provincial departments and agencies concerned. This
exercise is based on the guidelines provided by the federal government in
accordance with the national priorities and resource availability. The ADP
formulation exercise determines the size and the direction of the public
sector programme in the provinces.
This chapter provides an overview of the economic planning and
development functions and the associated institutional framework in the
provinces and special areas, including AJ&K and GB.

Planning and Development (P&D) Boards and Departments

2.3 The P&D Boards of Punjab and Sindh – head by their respective
Chairmen and P&D Departments of KP, Balochistan, AJ&K and GB led by
Additional Chief Secretaries (Development) are responsible for the
formulation of the development vision and economic planning policies of
the provincial and special area governments, in consultation with their all
stakeholders by following NEC guidelines. These are also responsible for
the preparation of the Medium-Term Development Framework (MTDF)
and ADP as well as appraisal of development projects and programmes,
local funding and external financing, and monitoring of their
implementation.

Manual for Development Projects | 152

 2.4 Further to the NEC decision of 24 May 201271 (Annexure 34), the
Provincial Development Working Party(ies) PDWP(s) in Punjab, Sindh, KP
and Balochistan are competent to approve development projects each
costing up to Rs10,000 million provided that no external funding is
involved. The PDWPs are also authorized to approve feasibility studies
costing up to Rs500 million.

Punjab
PLANNING AND DEVELOPMENT BOARD
2.5 The P&D Department of Punjab was established on the 1st July 1970,
which subsequently evolved into the Punjab Planning and Development
Board (PP&DB) in 1977.

2.6 The PPDB comprises the following:

i. Chairman of the Board,
ii. Chief Economist,
iii. Secretary P&D Department, and
iv. members Water, Private Sector Development, Production Sector,
Energy, Health and Nutrition, Governance, Information Technology
(IT) and External Capital Assistance (ECA), and Environment and
Climate Change72.

2.7 The Board is organizationally divided into functional sections, head by

a senior chief/chief/joint chief economist. The economic sections deal with
matters relating to coordination with the federal government on economic
issues and development plans, macroeconomics and policy analysis,
project economic appraisal, and monitoring and evaluation (M&E). The
technical sections are responsible for the technical appraisal of
development projects of different sectors, that is, 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, social

Manual for Development Projects | 153

 welfare, housing and physical planning, urban and rural water supply and
sewerage. Other sections include governance, IT, and ECA, Environment
and Climate Change, and the Projects Training Institute.

FUNCTIONS
2.8 While performing its functions, the P&D Board closely coordinates with
the Finance Department regarding the formulation and determination of
the ADP and the approval of individual development schemes during the
ADP implementation. At all levels, efforts have been accelerated to involve
non-governmental organizations (NGOs) and communities in development
works. For the social sectors, the involvement of the NGOs in
development works through health and education foundations is being
promoted. Lately, the private sector has also been involved in project
financing and implementation.

2.9 The functions assigned to PP&DB73 include:

i. Formulation of the provincial government vision, policies and
strategies for economic planning and development in consultation
with all stakeholders, in the light of the NEC guidelines.
ii. ADP and MTDF including:
• preparation in coordination with all departments of the
provincial government
• monitoring implementation, and
• evaluation of development projects and programmes
iii. Analytical work on economic issues, including conduct research,
surveys, reviews and analyses of the socio-economic data.
iv. PSDP including preparation of the short- and long-term provincial
development plans and coordination with the federal government.
v. Policy for the approval of development schemes as a catalyst for
different departments and sectors to improve the pace and quality
of economic development.
vi. Resource allocation, reappropriation of development funds,
appropriations from block allocations and disbursement of the
supplementary grants.
vii. Secretariat of the PDWP and clearinghouse for the development
projects and programmes requiring approval of the CDWP and
ECNEC.

Manual for Development Projects | 154

 viii. Foreign assistance, including determination of key areas for such
assistance and preparation of the sector-wise portfolios, loan
negotiations and securing federal financial guarantees, wherever
required, and review of foreign aided projects.
ix. Coordination of nominations for foreign training, seminars,
conferences, and workshops for all officials serving in the provincial
government.
x. Capacity-building of the government departments, agencies, and
functionaries for good governance.
xi. Accelerated development of the rain-fed (barani) and less
developed areas.
xii. Framing guidelines for the procurement of consultancy services,
policy formulation concerning private sector development and
promotion and public-private partnerships (PPPs).
xiii. Implementation, development, and administration in respect to the
foreign assisted/funded and mega ADP projects.
xiv. Matters relating to attached departments, autonomous bodies, and
special institutions of the P&D Department.
xv. IT including:
• 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 the public sector departments and
private sector agencies in the field of IT
• Service matters of the IT cadres, both at the provincial and
district levels
xvi. Administration of the following laws and the rules framed
thereunder:
• The Cholistan Development Authority Act 1976.
• The Punjab Economic Research Institute Ordinance 1980.
• The Punjab Public-Private Partnership for Infrastructure Act 2010.

DEVELOPMENT PROJECT APPROVAL FORUMS IN PUNJAB

Manual for Development Projects | 155

 PROVINCIAL DEVELOPMENT WORKING PARTY
2.10 The PDWP is the highest body in the Punjab province to approve the
provincial development projects. The composition of the PDWP is:
i. Chairman P&D Board
ii. Provincial secretaries P&D
iii. Finance, Environment, and the Project Sponsoring departments
iv. All members of the PP&DB
v. Director Punjab Economic Research Institute
vi. Director-General M&E of the P&D Board and any co-opted
member/s.

DEPARTMENTAL DEVELOPMENT SUB-COMMITTEE

2.11 The DDSC in Punjab is authorized to sanction development schemes
from Rs200 million to Rs400 million. The DDSC comprises of:
i. Secretary of the administrative department concerned (as
chairman)
ii. Representatives of the Finance Department (not below the rank of
Deputy Secretary), PP&DB (not below the rank of the Chief of a
section), Communication and Works (C&W) /Engineering
Department (not below the rank of Chief Engineer)74 and any co-
opted member/s.

DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP)

2.12 The DDWP75 is competent to approve development projects up to
Rs200 million. The DDWP comprises of:
i. Divisional Commissioner (as chairman)
ii. Deputy Commissioners (DCs) of the division
iii. Superintending Engineers of Irrigation, and C&W departments
iv. Divisional heads of the sponsoring departments
v. Director (development/finance) as a member/secretary.

Manual for Development Projects | 156

 DISTRICT DEVELOPMENT COMMITTEES (DDC)
2.13 The DDC is authorized to approve development projects costing up
to Rs50 million in a district. The Committee is composed of:
i. DC (Chairman)
ii. Additional Deputy Commissioners (Finance & Planning and
Revenue)
iii. Chief Engineer/SE/XEN concerned
iv. Head of the office concerned and Deputy Director (Planning) as a
member/secretary.

2.14 The DDSC, DDWP and DDC are not competent to approve any
scheme having a foreign exchange or foreign assistance component
and/or subsidy, irrespective of the project cost. These must be placed
before the PDWP for consideration and approval. Similarly, any survey and
feasibility study (PC-II) is submitted to the PDWP for consideration and
approval, irrespective of the cost.

Sindh
SINDH PLANNING AND DEVELOPMENT BOARD
2.15 The government of Sindh established the P&D Department on the 1st
July 1970 to formulate development policies, plans and projects. Following
18th Constitutional amendment which significantly enhanced the planning
and service delivery functions of the provincial governments, it became
imperative to transform and restructure the P&D Department into a P&D
Board. The Sindh Planning and Development Board (SP&DB) came into
existence on 21st February 2017.76 The Board comprises a chairman and
seven members:
i. Secretary P&D Department (as a member/secretary of the Board),
ii. Chief Economist
iii. Members Development, Energy and Infrastructure, Services,
Natural Resources, and Social Sectors.

2.16 The Board is authorized to approve development projects.

Manual for Development Projects | 157

 2.17 The SP&DB has the following functions: 77
i. Coordination of technical assistance from abroad.
ii. Coordination of statistics in general, and all matters relating to
Bureau of Statistics.
iii. Coordination and training of officers in foreign countries.
iv. Economic research and matters relating to the Board of Economic
Inquiry.
v. Evaluation of the progress of development schemes and writing
their critical appraisal.
vi. Foreign aid and technical assistance.
vii. Initiation of measures for giving suitable publicity to the
development plan and educating the public on the results achieved
from time to time.
viii. Maintaining liaison with the national planning agencies.
ix. Planning including policy and development.
x. Processing of all development schemes, programmes and proposals
submitted by other department and making recommendations to
the government thereon.
xi. Bureau of Statistics.
xii. Research and Training Wing.
xiii. Assessment, planning, coordination, promotion and development of
science and technology with the following methodology:
• Formulation requirement of science and technology studies,
terms of reference for selection of consulting firms and
arranging technology studies on contract.
• Dissemination of IT to the public and private sector.
• Implementation of approved science and technology
programmes based on such studies in consultation with the
relevant agency, that is, the Department of Education,
universities, boards etc.
• Contractual research (funding, contracting and monitoring) in
the public and private sectors in all fields of science and
technology to meet the assessed needs of industry and
agriculture.
• Setting up of institutions, laboratories or organization for
research and development.

Manual for Development Projects | 158

 xiv. Promotion of applied research and utilization of research results in
the scientific and technological fields carried out at home or
aboard.
xv. Guidance to the research institutions in the field of scientific and
technological research.
xvi. Development of human resources and their optimal utilization in
science and technology.
xvii. M&E work done by the provincial research and development (R&D)
institutes through a system of peer review and performance audit.
xviii. Recognition of research achievement through prizes and awards
based on a system of peer review.
xix. Establishment of scientific and industrial research advisory council
at the provincial level.
xx. Liaison and interaction with the Ministry of Science and Technology
and Research and Development.
xxi. Implementation of programmes under the national technology
policy as applicable to Sindh.
xxii. Sindh Land Bank.
xxiii. Adopt modern techniques and tools of planning and development
to meet increasing development challenges confronted to the
province amidst persistent catastrophes (floods, devastating
rainfalls, droughts, etc.) and bring the province to the trajectory of
sustainable economic growth and prosperity.
xxiv. Serve as an engine of growth for robust economic development in
different sectors of the economy.
xxv. Matters relating to the Bureau of Statistics.
xxvi. Service matters, except those entrusted to the Services, General
Administration and Coordination Department.

DEVELOPMENT PROJECT APPROVAL FORUMS IN SINDH

PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP)
2.18 The Party is the highest body in Sindh Province to approve the
provincial development projects. Its composition is:
i. Chairman P&D Board
ii. Provincial secretaries of the Finance
iii. P&D Department and Project Sponsoring Department
iv. Members P&D Board for Energy, Infrastructure and Services
v. Chief Economist

Manual for Development Projects | 159

 vi. Senior Chief/Chief of the section concerned of the P&D
Department78 (Annexure 35).

2.19 A technical committee under the Secretary P&D Department has also
been constituted for scrutiny of development schemes before placing
them on the agenda of the PDWP.

DEPARTMENTAL DEVELOPMENT WORKING PARTY (DDWP)

2.20 The DDWP is responsible for approving projects costing up to Rs200
million at the departmental level. It is head by the Secretary of the
administrative department concerned, a representative each from the
Finance Department (not below the rank of Deputy Secretary) and P&D
Department (not below the rank of Chief of the section),
C&W/Engineering Department (not below the rank of a Chief Engineer) as
members, and any co-opted member/s.

DIVISIONAL DEVELOPMENT BOARDS (DDBS)

2.21 These Boards are responsible for approving development projects
costing up to Rs40 million at the divisional level. The Board includes:
i. Divisional Commissioner (Chairman)
ii. Deputy Commissioners of the division
iii. Superintending Engineers of Irrigation and Power
iv. C&W Departments,
v. Divisional head of the sponsoring department
vi. Director (Development/Finance) as a member/secretary.

DISTRICT DEVELOPMENT COMMITTEES (DDC)

2.22 This Committee, responsible to approve projects each costing up to
Rs20 million, is composed of:
i. Deputy Commissioner (as Chairman).
ii. Executive District Officers (EDOs) Finance and Planning, Works and
Services, and department concerned.
iii. District Officers (DOs) Planning (member/secretary) and
department concerned.

Manual for Development Projects | 160

 Khyber Pakhtunkhwa
PLANNING AND DEVELOPMENT DEPARTMENT
2.23 This Department in KP, established on the 1st July 1970, is headed
by the Additional Chief Secretary (Development). The Department is
responsible for the following functions:79
i. Formulation of government vision, policies, strategies and
development plans for economic planning and inclusive/sustainable
development.
ii. Initiate reforms to accelerate the pace of economic and social
development.
iii. Appraisal, monitoring and evaluation of development projects and
programmes.
iv. Processing of development schemes, programmes and proposals
submitted by other departments including autonomous bodies and
making recommendations to the government thereupon.
v. Secretariat functions of the Provincial Development Working Party.
vi. Act as the clearinghouse for development schemes within the
competence of the federal government, that is, CDWP/ECNEC,
including representation in the DDWP.
vii. Focusing accelerated development of the less developed and
vulnerable areas.
viii. Periodically review the progress of development projects including
PSDP and foreign-assistance projects.
ix. Determining policies for approval, review and monitoring of
development schemes for the government.
x. Appropriation and reappropriation of development grants provided
in the budget.
xi. Protocol functions in connection with visits of the foreign economic
missions and delegations, etc.
xii. Coordination of the provincial statistics in general and all matters
relating to the Bureau of Statistics.
xiii. Economic research, analysis, and surveys.
xiv. Coordination of technical assistance from abroad including training
facilities for government employees, expert advisory services and
equipment.

Manual for Development Projects | 161

 xv. Policy formulation concerning private sector development and
promotion and public-private partnership (PPP).
xvi. Ensure compliance to the international commitments in the
development process.
xvii. Capacity-building of the government departments, agencies and
functionaries for good governance.
xviii. Matters relating to attached departments, autonomous bodies and
special institutions of the P&D Department.
xix. Electronic data management and liaison with the line departments
at the provincial and district levels regarding planning and
development.
xx. Mattes ancillary to the above subjects.

DEVELOPMENT PROJECT APPROVAL FORUMS IN KHYBER

PAKHTUNKHWA
PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP)
2.24 The composition of the PDWP in KP includes:
i. Additional Chief Secretary (as chairman)
ii. Provincial secretaries of the Finance, Forestry, Environment and
Wildlife departments, and the department concerned
iii. Secretaries of the C&W and Local Government Department (co-
opted).

DEPARTMENTAL DEVELOPMENT WORKING PARTY (DDWP)

2.25 The DDWP forum is chaired by the administrative secretary of the
department concerned and competent to approve projects each costing
up to Rs200 million. Other members include:
i. Secretaries P&D and Finance departments
ii. Representatives of the Local Government, C&W, and Forestry,
Environment and Wildlife departments.

DISTRICT DEVELOPMENT COMMITTEE (DDC)

2.26 The DDC is a district level forum for approving development schemes
and is chaired by the Deputy Commissioner of the district concerned.
Other members are
i. EDOs (Finance and Planning) and C&W,
ii. District Planning Officer, EDO and DO (department concerned).

Manual for Development Projects | 162

 2.27 The sanctioning power of the DDC is Rs40 million. All the non-ADP
schemes regardless of the cost will be presented to the PDWP forum for
approval.

Balochistan
PLANNING AND DEVELOPMENT DEPARTMENT
2.28 This Department in Balochistan was established with the dissolution
of One-Unit on the 1st July 1970. It is head by the Additional Chief
Secretary (Development) and comprises operational sections, that is,
Programming, Communication and Transport, Water and Power,
Education and Local Government, Agriculture, Food and Fisheries, Health
and Social Welfare, Natural Resources, Development Packages,
Development Authorities, Forest, Livestock, Foreign Aid and Information
Technology. Each section is headed by a Chief and is responsible for
examining all development matters about its assigned sectors, sub-
sectors, and related development packages.

2.29 Under Rule 16 of the Balochistan Rules of Business, the P&D

Department is responsible for all matters related to economic policy,
planning, coordination, and development and for coordinating the
activities of the various provincial departments in the economic field. The
cases shall be referred to and processed by the P&D Department
particularly about matters affecting or involving economic policy or any
change or modification therein, development schemes and major capital
outlays, all schemes and projects included in the Five-Year Plans, any
matter affecting more than one sector of the economy of the province,
and all new expenditures of development nature.

2.30 The functions assigned to the P&D Department under the Balochistan
Rules of Business 2012, include:
i. Scrutinizing development schemes prepared and forwarded by the
administrative departments.
ii. Preparation of the ADP with the coordination of all departments of
the government of Balochistan.
iii. Preparation of long-term development plans and coordination in
the preparation of 5-year/rolling plans and any other national
development plan.

Manual for Development Projects | 163

 iv. Researching economic issues of interest to the provincial
government, socio-economic impacts analysis and helping in the
formulation of views on economic policy issues.
v. Compilation of the provincial statistical data with the help of the
Bureau of Statistics.
vi. Acting as a catalyst between different development departments to
improve the pace and quality of the economic development.
vii. Determining policy for the approval of development schemes of the
provincial government.
viii. Revising strategy for investment priorities based on the availability
of internal and external resources.
ix. Helping in the formulation of policy regarding planning and devising
guidelines in the development programmes.
x. Approval, monitoring, implementation, and allocation of
development outlay for development programmes and projects.
xi. Acting as a clearinghouse for development schemes within the
competence of the federal government, that is, CDWP and ECNEC.
xii. Implementation relating to development and administration in
respect of foreign assisted/funded projects in the province, lead
steering committees in the Programme Requirements Baseline
(PRBs) of various foreign-funded mega projects.
xiii. Coordination of external capital development assistance including
foreign training for the provincial government employees.
xiv. Evaluating the progress of development schemes and their critical
appraisal
xv. Representation in the Departmental Development Committees.
xvi. Review of various development plans/projects to be implemented
through the PSDPs by conducting Quarterly Review Meetings.
xvii. Giving suitable publicity to development plans for the education of
the public for better utilization of facilities development and the
results achieved periodically.
xviii. Looking after affairs of the autonomous bodies, such as Quetta
Development Authority, Balochistan Development Authority,
Gwadar Development Authority, Balochistan Coastal Development
Authority, and Balochistan Water and Sanitation Authority.
xix. Selection of the Project Directors (PDs) through the Project Director
Selection Committees.
xx. Establishment of the Management Information System (MIS) for
the provincial line departments for planning and monitoring.

Manual for Development Projects | 164

 xxi. All service matters of the employees of the attached departments,
excluding employees of the secretariat, and those matters
entrusted to the Services and General Administration Department
(S&GAD) or any other department.

DEVELOPMENT PROJECT APPROVAL FORUMS IN BALOCHISTAN

PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP)
2.31 The Party in Balochistan is head by the Additional Chief Secretary
(Development), while the rest of the members include:
i. the Secretary Finance Department
ii. Secretaries of the administrative department concerned,
iii. Joint Chief Economist (P&D Department) as a member
iv. Chief of the section concerned of the P&D Department as a
member/secretary.

2.32 The PDWP is also authorized to co-opt any member(s).

2.33 The PDWP is the highest body at the provincial level to approve
provincial development projects. There is no restriction on the PDWP, if it
deems necessary, to call for or to consider any scheme referred to it by
the DDSC or any department or agency (even if it falls below its normative
approval threshold). The PDWP also considers approval of schemes that
do not fall solely within the jurisdiction of any department but pertain to
the whole of Balochistan. The province-specific schemes, reflected in the
federal PSDP and proposed to be executed by the provincial department
or agency, are approved by the PDWP first, and later submitted to the
Planning Commission for further processing.

DEPARTMENTAL DEVELOPMENT SUB-COMMITTEE (DDSC)

2.34 The Balochistan DDSC is headed by the secretary of the department
concerned comprising one representative each from the provincial Finance
and P&D departments, and co-opted member(s), and head of P&D section
concerned as a member/secretary.

2.35 The DDSC is empowered to recommend and approve schemes or

projects each costing up to Rs200 million related to the provincial ADP,
whereas the technical members of the relevant or respective departments
constituting the DDSC, are assigned to provide appropriate necessary

Manual for Development Projects | 165

 technical input to enable the DDSC to timely consider and expeditiously
dispose of the cases referred to it.

DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP)

2.36 The DDWP is competent to approve development projects at the
divisional level each costing up to Rs40 million. The DDWP is head by the
Divisional Commissioner, Deputy Commissioner concerned, divisional head
of the department concerned as a member, and Director (Development)
of the P&D Department as a member/secretary.

2.37 The schemes approved by the PDWP, DDSC, and DDWP should be in
line with the objectives of the national, provincial, and sectoral plans, with
no deviation from the principles and policies encompassing the plans. The
schemes shall fall within the territorial limits of Balochistan.

Special Area Governments

AZAD JAMMU AND KASHMIR
2.38 A Planning Cell was established in the early 1960s to institutionalize a
sound basis for the economic planning and development in the AJ&K. The
cell was upgraded to the Planning and Development Department in 1972
with the following functions (almost similar to those of the provincial
governments):
i. Formulation of planning and development policies and procedures.
ii. Coordination work related to the preparation of the ADP and its
review.
iii. Processing of all development schemes, programmes and proposals
submitted by other departments including autonomous bodies,
making recommendations to the government thereupon, and
facilitating the functions of the Development Working Party.
iv. Maintaining liaison with the national planning agencies.
v. Oversight of the autonomous and semi-autonomous bodies about
development planning, programmes, and projects in the AJ&K.
vi. Coordination of economic assistance.
vii. Monitoring and evaluation of the progress of development schemes
and their critical appraisal.
viii. Coordination of technical assistance from abroad including training
facilities.

Manual for Development Projects | 166

 2.39 There are two development project approval forums. The Azad
Jammu and Kashmir Central Development Committee (AJKCDC), head by
the Prime Minister AJ&K, is empowered to sanction development schemes
from Rs400 million to Rs1,000 million. The Azad Jammu and Kashmir
Development Working Party (AJKDWP), headed by the Additional Chief
Secretary (Development), is competent to sanction development schemes
up to Rs400 million80 (Annexure 36). The procedure of submitting
schemes to approving forums in the AJ&K includes prescribed time limits
for various project processing and approval stages,81 (Annexure 37).

GILGIT-BALTISTAN
2.40 The P&D (P&D) Department is the premier agency of the
government of Gilgit-Baltistan, which is responsible for planning,
implementation, monitoring and evaluation of all development activities in
GB. The P&D Department is headed by Secretary P&D. Its main functions
as per Rule of Business 2009 are:
i. Preparation of the ADP in coordination with all departments of the
GB government.
ii. Monitoring the utilization of the ADP funds.
iii. Approval of development schemes.
iv. Coordination training in the economic development of all officers
serving with the GB government.
v. Preparing the Five-Year and other area development plans.
vi. Processing proposals for foreign assistance/aid projects.
vii. Data collection, tabulation and statistical matters.
viii. Coordination and supervision of development activities with line
departments and federal ministries.
ix. Focal department for all national and international training
programmes.
x. Liaison with the UNDP, UNICEF and other international agencies
and donors
xi. Attending seminars, conferences and meetings related to the PSDP.
xii. Service matters, except those entrusted to the S&GAD Department.

Manual for Development Projects | 167

 2.41 There are two development project approval forums in GB. The
Gilgit-Baltistan Development Working Party (GBDWP), head by the Chief
Minister, is empowered to sanction development schemes from Rs400
million to Rs1000 million. The Gilgit-Baltistan Departmental Development
Working Party (GBDDWP), head by the Chief Secretary, is competent to
sanction development schemes up to Rs400 million82.

2.42 All funds for development programmes in the AJ&K and GB are
provided by the federal government. The sanctioning powers of the
foregoing development forums are only for locally funded projects. In
cases, where foreign exchange or assistances is more than 25 percent of
the total cost of the project, the approving forum is the CDWP and ECNEC
irrespective of the cost of the project.

Manual for Development Projects | 168