PM in projects funded by European and international institutions

Abstract

European Union (EU)and international institutions use the Logical Framework Approach and Logical Matrix to plan and design programmes and projects worldwide. These methodologies help in managing the project cycle at these institutions and for contractors, but lack detail as to project management processes, tools and techniques. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) Project Management Knowledge Areas (PMKAs), processes and tools can be very valuable when supervising a portfolio of projects or managing a single project as a contractor. Some Knowledge Areas- such as Time or Risk management- are less developed than is usual in the private sector, or when compared to other Government's procurement and project management procedures. Other PMKAs are especially challenging given their environment- such as Human Resource and Communications management. In any case, it is argued that a “translator” for project management terms and techniques is adopted when first working with these kinds of projects, and that slowly Project Management Institute (PMI®)-certified staff introduce PMI techniques into the management of such projects. It is recommended that PMI continue its efforts at introducing its principles and certification at EU and other international fora, and it is argued that likely the push to adopt PMI as the world standard at these institutions might come from emerging countries, such as China or Brasil, where PMI is becoming a force, that the institutions will be forced into recognising de “de facto standard” as a the real international standard.

Introduction

International institutions are possibly the largest sponsors of projects in developing and transition economies. Among the largest institutions we can mention are: the European Union, the World Bank, Regional development banks (Inter-American, African, European, Caribbean, Central American, Islamic etc..), the member agencies of the United Nations system (17 official and many others associated), the Word Trade Organisation, etc. These institutions sponsor, finance and control projects- and procure goods and services for them- to a value of over 60 billion USD per year. Beyond these so-called multilateral institutions, other agencies from industrialised countries- and some emerging ones, such as China and Turkey, also fund development projects in a multitude of areas, such as infrastructure, economic, social, health, technology, e-business, agriculture, etc., to the tune of another 20-30 billion USD per year.

The sum of these two types of institutions is the so called “Official Development Assistance” (ODA), which is topped up with funding from private foundations, NGO's, churches and corporations, which also fund projects in developing regions and emergency situations.

What project management and project cycle management methods are used in these projects, and what are their similarities and differences to the PMBOK® Guide areas of knowledge from PMI? Would the implementation of PMI-type project management practices help improve what is traditionally perceived as a poor record of quality and an abysmal schedule/time performance? Is there any chance that an international standard for project management be adopted for all (or most) institutions, instead of each having their own terminology and recipes? This presentation addresses these issues, albeit only in a summarized manner, as the topic is as complex as are many of these institutions.

Project Management at the European Institutions

The European Union, through its executive branch, the Commission, has adopted a methodology for its external projects, called Project Cycle Management (PCM). It defines five phases for its projects: 1) Programming, 2) Identification, 3) Formulation or design, 4) Implementation (or execution), and 5) Evaluation, and then again Programming.

In each of these phases certain tools and techniques are utilised; yet the overall approach used throughout the project cycle is called the LOGICAL FRAMEWORK APPROACH, which has also been adopted -with small variations - by virtually all international institutions worldwide. The Logical Framework starts by defining the problem that the project would like to solve, analyzes the options or alternative solutions, and then goes on to define the project's 1) general objectives 2) specific objectives 3) components and 4) activities/resources. For each of these four items (which are really levels of detail of the project), a Description, the Indicators, the Means of Verification, and Assumptions (and Risks) are defined. See below in Exhibit 1 a representation of the tools of the two Phases of the Logical Framework Approach: the Analysis and the Planning Phases.

The Logical Framework Approach of EC projects

Exhibit 1: The Logical Framework Approach of EC projects

The whole project design is summarized in a matrix denominated LOGICAL FRAMEWORK MATRIX (LFM), which is generally a compulsory attachment to all programs and projects issued by the European Commission (EC). See Exhibit 2 below for a description of its contents and levels of the LFM.

Contents of the Logical Framework Matrix

EXHIBIT 2. Contents of the Logical Framework Matrix

The Logical Framework Matrix is also used during project execution for monitoring (control) of partial and final results and deliverables, as well as for the compulsory intermediate and final project evaluations. This project approach in complemented at EC projects with the so-called Sector Approach, which aims at identifying and programming sector-wide actions with direct financial support.

Project evaluations, as defined by the EC, are the analysis of project status with a comprehensive set of qualitative and quantitative parameters, addressing the project justification, effectiveness (achievement of objectives and outputs), efficiency (cost-benefit of the project and its deliverables) and impact (short medium and long term). Evaluations after the project is finished (ex-post) will also include cost and schedule variances, but do not use the comprehensive set of ratios of PMI's Earned Value Analysis.

While the EC requires the Logical framework and PCM for its external assistance projects (managed by the Europeaid and Enlargement General Directorates-DGs), it is a bit more relaxed on its use in project implemented at the DGs which deal with the Member States themselves. The DG for Regional Policy, the one managing with the massive Structural and Cohesion funds (which represent one third of the EU Annual Budget), requires all contractors of infrastructure and engineering projects to follow the rules of the International Federation of Consulting Engineers (FIDIC), which defines in detail in its coloured books (yellow, blue, white, green and red) the procedures and standards for all types of design/build and construction infrastructure projects.

In other areas, such as the DG Research's Framework Program for Research and Technological Development (FP for short, now in its sixth version, with over 9 billion EUR per year of funding), or the ones of DG Education, DG Transport, etc., the formats, applications and procedures are exhaustively defined, but not the project management methods. All projects contracted by the EC must have well-defined Terms of Reference (statements of work as per PMI) when tendered externally, and procurement and vendor selection procedures are exhaustively and quantitatively defined.

Generally, the EC shies away from recommending a project management method, as it considers that there are competing methodologies and PM frameworks among its Member States - IPMA is essentially a European-based organization, while PRINCE2™ is staunchly defended and applied in all British or British-influenced regions and projects.

Project Management at International Institutions

The World and regional Development Banks, the United Nations Agencies and most bilateral donors use variations of the Logical Framework Matrix and philosophy. The World Bank's (WB) project cycle is longer and contains more steps than the EC's, primarily because their so-called Projects are really Programmes, usually financed with loans or credits to countries or institutions, with multiple components, instruments, subprojects and very broad in scope (more so, the so-called Adjustment loans, than the Sector or Specialised loans).

The World Bank also finances a myriad of projects with the so-called Trust-funds. They are Funds which the Bank manages, but the money put up by individual countries who prefer (or have committed) to give the projects for management and control to the Bank, instead of identifying and tendering the projects themselves. The WB uses the Logical Framework, too, but is more geared to carry out an in-depth economic, financial, and cost-benefit analysis of its projects (including an evaluation of the “spill-over” benefits to stakeholders not directly assisted by the project- called “externalities”).

It does this in an elaborate and costly exercise called APPRAISAL, which is a sort of gigantic project charter, with plenty of annexes with Technical explanations, a procurement plan, specifications of certain goods or services to be delivered and much background analysis. Project approval for the large projects has to be done at WB Board level, and generally after ratification by the local Body needed to approve such loan or project according to the local legislation (frequently the Parliament of the country). Following this ratification, the project is almost ready to officially kick-off, pending only that the “preconditions” defined in the agreement are met (e.g., passing a law, allocating the counterpart funds for the project, setting up a project implementation unit, etc.).

As in the EU, the procurement of goods, works and services at International Institutions is carried out under a strict set of rules and guidelines, which require tendering most contracts (usually above 30.000 USD) with a variety of preset tender documents- usually based either on a cost-based selection (the winner is the lowest cost bid having overcome a threshold of quality at the technical evaluation), or a cost-quality selection (the quality of the project counts a 70% to 80% of the final grade, and the cost a 20% to 30%).

Project cycle management at the regional Development Banks and United Nations agencies follows essentially the same principles as those of WB and EC. Some differences in the logical process, the vocabulary and contents of the Logical matrix will exist- for example some institutions allow only for a single project objective called PURPOSE, while the EC and other institutions accept that a project could have various specific, but not conflicting, objectives. Some Logical matrixes include the project resources (budget, staff, technical equipment) besides the activities in the lowest- fourth- row, while others require a technical risk analysis in the last column, not just to include the assumptions of the project, components and activities.

Project risk analysis- both qualitative, quantitative and risk response planning- is usually quite underdeveloped in projects funded by these institutions - and frequently unknown. One reason could be that sometime the risks outweigh the short and medium-term benefits of the project. Nevertheless, sometimes these projects are undertaken anyway as it is considered that development is a long term endeavour that defies standard economic and risk analysis.

PMBOK® Guide Knowledge Areas in EU and International Projects

Reviewing the special characteristics of the nine PMBOK® Guide Knowledge Areas for projects funded by these institutions:

  • 1-    Integration: One of the poorest developed Areas, as different parts of projects can be financed by different institutions, which can have differing objectives/concepts and visibility requirements. Moreover, Integrated change control- when there is one, which is infrequent- is difficult to implement at these types of projects, as the Control Boards (steering committees usually) are staffed by various public bodies, frequently from opposing political parties, and/or uninterested members assigned only to these committees because of civil service duty.
  • 2-    Scope: While scope is usually exhaustively defined in most project documents, other times the project charter (usually contained or summarised in the Terms of reference) is defined by people with a lack of knowledge of the activity or sector of the project (the terms of reference and scoping is frequently subcontracted to short-term consultants with varying degrees of expertise) and is frequently too broad.

    The contractor's proposal is also part of the project charter (and usually an attachment to the contract), which gives rise to situations with extreme competitive pressure (short lists are usually 5 to 8 for larger service tenders, and when there is no shortlist frequently 20 to 40 bidders could find themselves competing with each other). Proposals can therefore end up being unrealistic and its deliverables unachievable.

    Scope control systems suffer from the same problems mentioned above in the integrated change control. Sometimes a contractor finds itself in a weak negotiating position if it wants to continue working with the institutions, as a flat negative to a scope change from a powerful sponsor or stakeholder could and costing much in terms of future contracts.

  • 3-    Time: Probably by far the worse-off of all PMKAs in these types of projects, as time is frequently perceived of secondary (or no) importance, compared to achieving the much “higher-level” and important humanitarian, impact or output objectives. Although in most projects time is a contractual constraint (all projects have a due date and implementation period in their contract), the theory of expectations seems to be self-fulfilling in institutional projects: nobody expects them to be on time-except when only “time” is sold, with few or no deliverables, such as in “mentoring” technical assistance, certain types of institutional strengthening, etc.

    Most projects funded by international institutions will require a time extension over the original schedule, in the form of a contract addendum, a new contract with the same contractor, etc., to finalise and/or complete what was intended. This can be partially explained because incentives for on-time (or early) completion are usually non-existent, neither for the public officials coordinating or supervising the project- which may lose status and activity when the project finishes- nor for the contractor, which only infrequently has penalty clauses for late completion.

  • 4-    Cost : This variable of the triple constraint is usually fixed, even if most public budgets will have small allocations for incidental expenses, plus there may still be unallocated funds which could be used to finance extra items. Yet, as in other types of public sector procurement, generally the contract amounts in the programme budget- or project “fiche” as it is called in the EC- are pretty fixed and major extensions will require retendering.

    Also limited and difficult are reallocations among budget items, and some rules- such as not accepting item transfers from the so-called reimbursable expenses (only paid if spent and invoiced) to the direct expenses (paid as a proportion of completion). Sometimes these rules make budgeting and project financial control an accounting engineering exercise. The Development Banks tend to use more lump-sum contracts, while the EC and United Nations steer away from them and prefer time-based ones. Certain EC projects can have up to twenty partners (FP and “networking projects”), which requires exhaustive cost detailing and reporting.

  • 5-    Quality: The most elusive and elastic variable of the triple constraint at institutionally-funded projects. Project quality is usually difficult to measure when there are multiple objectives, undefined standards in some areas (best practices in microfinance or in HIV-prevention is so recent, that there are still several schools of thought about how best to define and measure them).

    Nonetheless, in various project areas or sectors, quality is defined according to international standards (ISO and other), and in some projects a quality auditor of international standing is required (Bureau Veritas, SGS, etc., for the receipt of goods, and a professionally-certificated supervising engineer for the approval of construction work). Quality of technical assistance projects is usually evaluated as a mix of qualitative and quantitative indicators- those mentioned in the Evaluation section above-plus other softer criteria, such as “integrating with the implementing agency” or “producing a standard and consistent service or product” (a safe bet for the public official or the programme manager at the international institution).

    • 6. Human Resources: Probably the area where a project manager from outside the international institutions market is most shocked and amazed at first, then reacts and slowly understand the “logic”. Highly paid, frequently senior (or semi retired) project team members from industrialised countries working alongside- in all kinds of bizarre project structures- with counterpart- frequently young and motivated - local staff, which receive five to twenty times less money per unit of work. Part of this difference in remuneration can be attributed to the premium for danger and the opportunity cost of the foreign staff, and part to artificial exchange rates and low-paying local labour market.

      Irrespective of the differences in remuneration, cultural perceptions of key issues such as the importance of a due date to the role of women team-members or the language barrier, an international project manager must follow the principles of good management and motivation practices. Below the surface of language, dress, code and work ethics, project managers and team members throughout the world can be made to work effectively together, by adapting somewhat their styles and showing respect for different habits and customs. Unfortunately, the post-Sept 11 widening of the gap in the perception of security, shared values and acceptable responses to terrorism among the different cultures and nations, has made life more difficult for the international project manager or team member, and not only at airports.

      7. Risk: Risk analysis, as mentioned above, is seldom quantified for these projects, although certain risk response scenarios are now being included in the logical matrix. Still, risk analysis is usually carried out only at preliminary level compared to the private sector. Risk modelling and decision analysis are used in some projects, especially at planning or scoping level, but seldom are followed up during implementation. The tendency to hide the “lack of success” is still endemic, as it is a culture that still does not accept that you can learn by making (some) mistakes. Nonetheless, the trend is clearly to quantify and use PMBOK® Guide style qualitative and quantitative analysis and matrices with risk scenarios.

      8. Communications: Sometimes, communications in projects with so many nationalities (two or three EU nationalities are required in large projects), consortium members, subcontractors, team members, languages, etc., are stereotypes of inter-cultural conflicts and misunderstandings. In many European projects, especially those projects funded by grants- where the lead consortium firm is only the “coordinator” with legal responsibility, but few rights- the communications, enforcement of dates and deliverables can be a nightmare. In projects contracted out through tenders, at least there is a clear contractor, who usually acts with a more traditional “project management” role.

      Communications with project sponsors and other stakeholders is usually very influenced by politics, the attitude and the hidden agendas at both the International institution's representative and the local implementing agency. Yet, in most cases, flexibility, inter-cultural awareness and a humble, yet firm attitude always help in getting results at the various levels.

      9- Procurement: One of the most developed areas in these institutions, which are almost obsessed with fairness and transparency, as they are using public funds and are supervised closely by all member country representatives. All institutions have extensive procedures for procurement and publish manuals in bookstores, their websites, etc. (see the References section for some Guidelines and Manuals at the key institutions). Procurement selection and bid evaluation committees are exhaustively monitored and evaluated by independent experts. Yet, due to the myriad cultures, situations, local influences, etc., even though a great push has been made towards greater transparency, a good local contact or partner, a dose of common sense and strong ethical principles will help you navigate the very difficult and sometimes uncharted waters of new countries and situations.

Regarding the project management processes (whether following PMBOK® Guide 2000 or 2004), most are applicable and useful for application to the larger EU and international projects. Yet, most project managers and team members dropping for their first time into a project funded by International or European institutions are completely lost by the differences in terminology, practices, etc.- especially if they have only previous private sector or US Federal Government project experience. A “translator” of PMBOK® Guide terminology to that of international institutions is necessary, such as the one applied by our Training school ESCUELA DE PROYECTOS INTERNACIONALES (www.epinter.org, in Spanish) and associated consulting firm, Corporate Solutions SA (www.corpsolutions.net, in both Spanish and English), one of the few training and consulting institutions in western Europe exclusively specialized in international project management.

Conclusions and Recommendations for PMI

PMI has only recently taken seriously the approach to EU and international institutions, although substantial efforts have been made recently through the EMEA office. Also, PMI Board Member Mark Austin, at his employer the World Bank, and others in other PMI members at other institutions have introduced PMBOK® Guide concepts and certification as a method to increase the efficiency and professional approach of the staff working at these institutions, whose key job is one of Portfolio management and Project selection and procurement. PMI has to strengthen its links with the European (already started) and the international institutions (with some actions, but not systematic). Only by strengthening and lobbying these institutions, plus negotiating a merger with IPMA- which is small but strong in Europe- will PMI be able to become the real world standard, as opposed to the “de facto standard”, as the PMI promotion advertises.

Until such a situation arrives, and even if it does not arrive, PMI-certified project managers, contractors and subcontractors of internationally-funded projects will have to learn to live day-to-day with the tools and techniques of project cycle management and procurement of each institution, plus apply when possible and introduce complementary project management concepts and tools developed and standardised by PMI. Looking at the bright side, the situation looks promising for PMI, due to the increasing penetration and incorporation of PMI concepts in extremely important emerging economies, such as Brasil and China. The explosive growth and acceptance of PMI and Project Management Professional (PMP®) certification in these two countries point to a future where the recipients and implementers will require these institutions to acquire the PMBOK® Guide standard, rather than the opposite. A good lesson of the dynamism of the so-called emerging countries.

References

DG EuropeAid, EC. (2001). Practical guide to contract p[rocedures financed from the general budget of the European Communities in the context of external actions. Retrieved 31/3/05 from http://europa.eu.int/comm/europeaid/tender/gestion/pg/npg_en.doc

DG EuropeAid, EC. (2004). Project cycle management 2004 manual. Retrieved 31/3/05 from http://europa.eu.int/comm/europeaid/qsm/documents/pcm_manual_2004_en.pdf

DG EuropeAid, EC. (2003, June). Guidelines of the European Commission for support to sector programmes. Retrieved 31/03/05 from http://europa.eu.int/comm/europeaid/qsm/documents/spsp_guidelines_en.pdf

DG EuropeAid, EC. (2001, March). Evaluation of the European Commission. Retrieved 31/3/05 from http://europa.eu.int/comm/europeaid/evaluation/methods/guidelines_en.pdf

InterAmerican Development Bank (2005, January). Policies for the procurement of works and goods financed by the Inter-American Development Bank. Washington D.C., 20577 U.S.A.

InterAmerican Development Bank (Jan. 2005). Policies for the selection and contracting of consultants financed by the Inter-American Development Bank. Washington D.C., 20577 U.S.A.

International Federation of Consulting Engineers (Various Dates). FIDIC contracts and agreements collection. CH-1215 Geneva 15 – Switzerland.

The World Bank. (2002). Consulting services manual. Washington D.C., 20433 U.S.A.

The World Bank (1999, June). Guidelines procurement on IBRD loans and IDA credits. Washington D.C., 20433 U.S.A.

United Nations. (2001). General business guide for supplying goods or services, 20th Edition. Copenhaguen, DK-2100 Denmark.

United Nations (2004, January). Doing business with the UN system. Copenhaguen, DK-2100 Denmark.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2005, Julio Fuster
Originally published as part of 2005 PMI Global Congress Proceedings- Edinburgh, Scotland

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