# **3. Independent Review of Appraisal**

20. It is always sound practice to subject project appraisals to an independent review. Optimism bias amongst those developing project proposals –under-estimation of costs and over-estimation of benefits- is well documented. This function can be performed by the ministry of finance, a planning ministry, or other specialized agency. Where departments and ministries (rather than a central unit such as the ministry of planning) undertake the appraisal, an independent peer review might be necessary in order to check any subjective, self-serving bias in the evaluation. This function can be performed by the ministry of finance or by a designated specialized agency. In countries where donor-financed projects are significant, upstream aid-coordination can help channel resources to priority areas but should be subjected to the same appraisal stages as government funded projects. In this context, clarity of specific responsibilities is important. A multiplicity of players with unclear accountabilities can overburden the appraisal system. A formal set of delegations is necessary to keep minor projects away from clogging up appraisal.

**Box 2 Excerpts from U.K.’s “The Green Book”**

“Appraisal, done properly, is not rocket science, but it is crucially important and needs to be carried out carefully. Decisions taken at the appraisal stage affect the whole lifecycle of new policies, programmes and projects. Similarly, the proper evaluation of previous initiatives is essential in avoiding past mistakes and to enable us to learn from experience.” “The first step is to carry out an overview to ensure that two pre-requisites are met: firstly that there is a clearly identified need’ and secondly that the proposed intervention is likely to be worth the cost.

The second step is to set out clearly the desired outcomes and objectives of an intervention in order to identify the full range of options that may be available to deliver them.

The third step is to carry out an option appraisal. This is often the most significant part of the analysis.

Following option appraisal, decision criteria and judgment should be used to select the best option or options, which should then be refined into a solution. Consultation is important at this stage...... Procurement routes should also be considered, including the role of the private sector. Issues that may have a material impact on the successful implementation of proposals must be considered during the appraisal stage, before significant resources are committed.

(The main) purpose (of evaluation) is to ensure that the lessons are widely learned, communicated, and applied when assessing new proposals.” Source: H.M. Treasury, “The Green Book: Appraisal and Evaluation in Central Government.” 2003

# **4. Project Selection and Budgeting**

21. It is essential that the process of appraising and selecting public investment projects is linked in an appropriate way to the budget cycle even though the project evaluation cycle may run along a different timetable. There is clearly a two way relationship between the budget cycle and the project selection cycle. The fiscal framework and the annual budget 7