# _Timeframe for Recurrent Expenditures_

Project implementation is typically phased, so components of the project become operational before the full project is complete. In this case, recurrent expenditures related to operation and maintenance will also commence before project implementation is completed.

Project documentation should indicate when true recurrent expenditures are expected to begin, their initial levels, and their build-up to the point of full operation. Project documentation should also indicate the life of the investment and the pattern of recurrent expenditures consistent with this timeframe.

Average annual recurrent costs can be used to indicate medium to long-term recurrent costs. This will help simplify provision for periodic maintenance costs, as arise for transportation and other forms of capital investment.

In some cases provision may be necessary for phased escalation of recurrent costs. For example, scheduled increases in teachers' salaries should be reflected in the salaries of teachers hired so as to add new capacity to the school system.

The estimation of recurrent expenditures should derive from country-based data concerning operating and maintenance costs. However, caution is in order so as to avoid repeating underprovision for recurrent expenditures. Such under-provision is been systemic and serious in many developing countries.

# _Incremental and Indirect Costs_

The cost estimates should be _incremental_ recurrent costs. That is, they. should include only those additional costs that must be made because of the project and would not have been necessary if the project had not been undertaken. Some of these incremental recurrent costs may be indirect. For instance if a project establishes a number of new schools in a province it may be necessary to increase the number of staff for provincial administration. Although these additional staff are not working in the new schools their salaries should be counted as an indirect recurrent cost.

The following two examples are meant to demonstrate the types of costs that should be included in recurrent costs estimates as well as the relationship between implementation and operating periods.

# _Example 1: An Irrigation Project_

The first example is an irrigation project which has four phases. In each of four successive years, pumps are installed and ditches dug to create new irrigated areas. As a result the project lasts four years but the operating period begins in the second year when the first pumps begin pumping. The main operating cost is fuel for the pumps. This cost begins in year two and jumps up again in years three, four and five as each of the new pumps comes on stream. Thereafter the costs increase in line with the expected rise in the price of fuel. Costs for spares for the pumps are relatively small and are shown in the next line. Maintenance has to components. The first is routine maintenance which consists of dredging the ditches to ensure adequate flow. In addition, once every two years the pumps are taken apart and overhauled to ensure their continued operation. Fees collected from the participating farmers are used to pay for a portion of the fuel and this partially offsets the amount that has to be covered from the budget.

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