Project Delivery Competencies

Module 3: Project Initiation and Preparation

Project Preparation Phase Overview

Once a project concept is deemed promising, the initiation and preparation phase formally begins. This is where the idea is fleshed out into a detailed plan. For sovereign operations, the borrower government often establishes a Project Preparation Team or Unit and may use Project Preparation Facility (PPF) funds or technical assistance to conduct required studies (engineering designs, environmental impact assessments, etc.).

The IFI assigns a task team with specialists (engineers, economists, social/environment experts, procurement specialists, etc.) led by a Task Team Leader (TTL). For non-sovereign projects, the sponsor company refines its business plan and feasibility studies, while the IFI's investment team (lead investment officer, analysts, E&S specialists) commences their due diligence planning.

Key Activities in Preparation

Feasibility Studies

Comprehensive studies covering technical feasibility, economic viability (e.g. cost-benefit analysis for public projects), and financial feasibility (for revenue-generating projects, a financial model projecting cash flows). These studies might be done by the client with consultants, often with IFI oversight or quality assurance.

Environmental and Social Impact Assessment (ESIA)

If the project has potential environmental or social impacts, a detailed ESIA is commissioned early. This includes consulting affected communities and designing mitigation measures. For example, building a highway would require studying effects on nearby communities, land acquisition needs, and environmental impacts on wildlife or waterways.

Early stakeholder consultations are critical and often mandated – communities and local NGOs should be informed about the project and their input sought on design and mitigation.

Stakeholder Analysis and Engagement Plan

Building on the initial stakeholder mapping, a thorough plan is prepared to engage each stakeholder group throughout the project. This might include scheduling community meetings, setting up a project grievance redress mechanism, and coordinating donor or co-financier inputs.

IFIs like the EIB emphasize that "meaningful stakeholder engagement is a cornerstone of sustainable and inclusive development". In practice, this means the project team must design participation processes so that affected people's rights are respected and their feedback can genuinely shape project decisions.

Project Design and Implementation Planning

Detailed project design is carried out, answering questions such as: What are the specific components and activities? What is the implementation timeline and procurement plan?

For instance, a health project might be designed with components like infrastructure (building clinics), capacity building (training staff), and service delivery improvements – each with defined activities and budgets. A procurement plan would outline key contracts (works, goods, services) needed and their scheduling, since timely procurement is critical for on-schedule implementation.

Internal Kick-off and Quality Review

Many IFIs require a formal review of the project at an early preparation stage (often called a "Concept Review" or similar). Here, internal committees or managers review the concept and preparation plan to ensure the project is on the right track, has adequately scoped studies, and addresses initial risk areas.

This is a checkpoint to authorize full due diligence spending. The project team incorporates guidance from this review (e.g. expand stakeholder outreach, consider alternative design, etc.).

Internal Units' Roles During Preparation

Throughout preparation, internal units start playing defined roles:

• Legal department provides guidance on any legal structuring issues (e.g. does the project need special agreements, are there policy compliance questions, what might go into covenants).
• Procurement specialists ensure the borrower's procurement arrangements meet IFI policies, often advising on drafting terms of reference or bidding documents for studies and later for implementation.
• Finance/Treasury teams might advise on loan terms or hedging options if the project will involve complex disbursement arrangements or currency risks.
• Risk management units identify any show-stopping risks early – for example, if a project relies on government co-financing that is uncertain, this will be flagged so mitigation (like securing a guarantee or alternative funding) can be explored.
• Environmental and Social (E&S) specialists guide the borrower on required assessments and stakeholder engagement, ensuring compliance with standards (such as IFC's Performance Standards or the World Bank's Environmental and Social Framework).

E&S specialists help integrate E&S considerations into project design (for instance, redesigning a road route to avoid a sensitive habitat, or planning livelihood restoration for people who must resettle). The engagement of E&S specialists at this stage is crucial, as evidenced by IFI policies – "E&S specialists should support TTLs helping to address accessibility (universal access) in project design" from the very beginning, indicating that social inclusion and environmental care must be built into the project's DNA, not tacked on later.

Real Case – Complex Preparation: Nam Theun 2 Hydropower Project

The Nam Theun 2 Hydropower Project in Lao PDR illustrates extensive preparation. This $1.3 billion project, co-financed by 27 parties including the World Bank and ADB, was one of the most complex in the country.

During preparation, a joint government-developer team conducted detailed feasibility studies and a massive ESIA given the project's displacement of villages and environmental impact. An independent International Panel of Environmental and Social Experts was appointed to oversee and advise on mitigation plans.

Multiple stakeholder consultations were held, from local villages (to agree on resettlement and livelihood programs) to international NGOs concerned with biodiversity. Such thorough preparation – lasting several years – was instrumental in designing mitigation measures (e.g. fisheries programs for resettled communities, shown by reservoir fisheries becoming a major income source for those resettled) and setting a robust implementation plan.

While time-consuming, this groundwork helped make Nam Theun 2 a model for complex project prep in an IFI context.

Tools and Templates for Project Preparation

This phase benefits from structured guides and checklists. Common tools include:

• Feasibility Study Template/Terms of Reference – to ensure studies cover all necessary aspects (technical options, economic analysis per IFI guidelines, environmental/social baseline, etc.).
• Stakeholder Engagement Plan template – covering identification of stakeholders, methods of engagement (workshops, surveys, focus groups), schedule of engagements, and resources required.
• Risk Assessment Matrix – an evolving document initiated now, listing potential risks (technical, financial, political, etc.), their likelihood and impact, and preliminary mitigation strategies. This will be refined during appraisal, but early identification (e.g. risk of land acquisition delays) allows the team to start mitigation (like beginning land acquisition planning early or simplifying project scope).
• Project Management Plan – detailing governance of the project (who will manage, decision-making hierarchy, reporting arrangements). For sovereign projects, this might outline the structure of the Project Implementation Unit (PIU) and coordination mechanisms between government ministries; for private projects, it might outline the sponsor's project team and how the IFI will liaise with them during implementation.

Assessment