Contracting Out

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Contracting Out
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Relationship Between Contracts and Projects

• Contract
• Legally enforceable document
• Purpose
• Judicial review in event of a disagreement
  between the parties
• A good contract is able to be understood by a
  member of the judiciary
• Projects define obligation by time and money.
  Limited time and limited money

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Judicial Review of Contracts

• Judge may be assumed to be a lay-person in terms
  of the technical aspects of the contract
• For judicial review the contract should strive to
  make the technical issues as clear as possible
• Understandable not just to project teams but to
  lay individuals as well

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Judicial Review of Contracts

• Few contracts are in fact brought before the
  judiciary for determination
• Nonetheless, it is this ultimate test--against
  judicial criteria--that sets the pattern for
  contract administration

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Project Planning Documents

• Help clarify contract elements
• Consists of the following
• A meeting of the minds
• Specific deliverables
• Consideration
• Force Majeure
• Objectively Verifiable Indictors

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A Meeting of the Minds

• Intent of a contract
• Establishes for judicial review "why" the
  contract was entered into
• Includes knowing why the two parties have entered
  into a contract their long-term objectives
• Actions consistent with the meeting of the minds
  are consistent with the contract
• Actions inconsistent may constitute breach of
  contract or non-performance

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A Meeting of the Minds

• Relates directly to the purpose and goals
  identified in the projects planning document
• Project document always indicates outputs in
  the hope that it will result in an agreement that
  the task is completed

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A Meeting of the Minds

• Contractor is expected to obey reasonable
  person rule
• contractor is expected to do all the things that
  any reasonable person would do given the
  resources available, and
• add to the list of outputs in order to reach the
  agreed upon purpose
• contracting agent agrees to modify or add to the
  inputs in order to reach a modified meeting of
  the mind

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A Meeting of the Minds

• Contracting agent has a reasonable right to
  expect that the contractor will obey the
  reasonable person rule
• However, contractor expects that the contracting
  agent will attempt to take all reasonable actions
  necessary to realize the overall goal of the
  activities

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A Meeting of the Minds

• Purpose of Contract
• Most important project focus
• Facilitates "meeting of the minds" by clarifying
  long-term objectives

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In the Development Context

• Parties to the Contract
• Developing Country
• Sponsoring or donor agency
• USAID, the World Bank, UNDP
• Host Country
• Contractor
• NGO, For-profit private firm, University

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In the Development Context

• Developing (host) country is usually considered
  ultimate client of the contractor, although
  this is not legally binding if the contract is
  made with the donor agency

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Deliverables of Contract

• Essentially the outputs
• Things the contractor has agreed to produce
• Important to note that deliverables under a
  contract should be results, not activities (or
  inputs)
• Further, objectively verifiable indicators must
  be provided for each output with qualitative,
  quantitative, and time targets

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Consideration

• Essence of a contract, particularly in terms of
  its equity provisions
• What do a contractor and contracting agent each
  promise to provide each other?

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Consideration

• Minimum guarantee is the inputs
• Contractor agrees to provide technical personnel,
  commodities and undertake activities, etc.
• Sponsor agrees to pay contractor certain fees,
  and may provide on-site support, etc. as agreed
  upon in the contract

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Force Majeure

• The project framework documents and the contract
  clarify force majeure by
• Identifying factors that require re-analysis of
  the ability to perform
• Setting levels at which those factors become
  important

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Force Majeure

• At input level, contractor identifies assumptions
  that must be made in order to guarantee ability
  to produce outputs
• Example If the contractor assumes that host
  government will provide ten vehicles and drivers
  in order produce the project outputs, but in fact
  only five are provided, then we expect a
  corresponding reduction in the quantity or
  quality of outputs produced

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Objectively Verifiable Indicators

• Indicators that determine if the terms of a
  contract have been met
• To avoid a misunderstanding and provide an
  objective means for recognizing successful
  achievement of the project objectives, the
  contract and associated planning documents must
  establish objectively verifiable indicators

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Objectively Verifiable Indicators

• Indicators show the results of an activity
• Not the conditions necessary to achieve those
  results
• Indicators clarify exactly what we mean by our
  statement of the objectives at each level in the
  project planning document

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Objectively Verifiable Indicators

• At input level
• only concerned with consumption of project
  resources
• At the purpose level
• These are of particular importance and are given
  a special name
• End of Project Status (EOPS)

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Project Planning and the Planning Cycle

• Contracts, Foreign Aid and International
  Development

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Interaction of Major Agency Processes
Planning
Budgeting
Office of Management And Budget (OMB)
Ongoing Projects
Design Approval
Legis- lation
Foreign Policy
Implementation
Evaluation
LDC Needs
Reporting
Operational Year Budget (OYB)
Appropriation
Congressional Presentation (CP)
Budget Submissions
Host Country
Agency Policy Global Sector Strategies Regional
Strategies Research Strategy Management Objectives
Evaluation
Implementa- tion
Pre- Implementa- tion
Project Paper (PP)
Project Review Paper (PRP)
Project Identification Document (PID)
Field of Concentration Strategy (DAPII)
Country Program Strategy (DAPI)
Project Reporting Project Performance Tracking
(PPT) Financial Reporting
Ex-Post Facto Evaluation
Prior Evaluation
Financial MANAGEMENT Programming
INFORMATION Management Reports Implementation SYST
EM External Needs Program Support Data Bank
(CPDB, PAIS, DIS, ESDB) Personnel Administration
Support Database for Future Decisions, Policy
Lessons Learned Evaluation Criteria
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Blueprint Approach to Development Planning
Pilot Project Researchers
Tested Models
Planner
Project Blueprints
Actual Change Versus Targeted Change
Administrators
Evaluation Researchers
Actions
Before-After Surveys
Target Population
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The Project Cycle

• Analysis--collection of
• Social Analysis targeted groups women,
  minorities, indigenous peoples
• Economic Analysis--Cost Benefit
• Institutional Analysis
• Sustainability
• Organizational Requirements
• Recurrent Cost Implications
• Human Skills Needed
• Social Acceptance

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The Project Cycle

• Design
• Identifying nature of problem and possible
  solutions--specific needs and desired changes
• Appraisal
• (Mandatory) data needed to prepare project plan

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The Project Cycle

• Analysis--collection of
• Prediction
• Selection of preferred alternatives

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The Project Cycle

• Analysis--collection of
• The Logical Framework (LOGFRAME)
• If-then conditions
• AID moved away from logframe
• Was replaced by a system based on identifying
  Strategic Objectives, Intermediate Results,
  Measurable Indicators, etc.
• That system was recently "de-emphasized."
• AID mission requests for funds were tied to
  promises of specific results
• Results Framework system is "under review."
• The documents

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The Project Cycle
Source Project Management System, Practical
Concepts, Inc., Washington, DC 1979.
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Project Management System Provides Management
Toolsto Support all Stages of the Project Cycle
Logical Framework
Performance Networks
1. Design
Networks display performance plans over time
Project Objectives Achieved
3. Evaluation
2. Execution
Evaluation System
Reporting System
ACHIEVEMENT
EXCEPTION
Evaluations assess performance against plans and
analyze causal linkages
Progress indicators and formats for communicating
project information
Practical Concepts, Incorporated
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Preparation of Documents Donor - USAID

• Country Strategy Paper
• Concept Paper
• Project Identification Document (PID)

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Implementation Documents
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The Project Cycle

• Implementation
• Carrying out actions planned
• Personnel
• local (and foreign)
• Physical and organizational Needs

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The Project Cycle

• Monitoring and Evaluation
• Linked to End of Contract and Verification of
  Objective indicators
• Understanding what has happened and assessing
  changes and quality of change
• Issue sustainability regarding follow-on within
  the country and replicability from one country to
  another

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Monitoring and Evaluation

• Nature of Data
• Interview vs. survey
• Seat of the pants observation
• "the old quick and dirty"
• The problem of project goals
• Goals are to be limited and bounded
• Specific activities are to be clearly defined and
  achieved
• Short run success leads to successful evaluation
• Short-term loop is five years

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Monitoring and Evaluation

• Nature of Data
• Judgment Evaluation vs. Assessment
• Two views
• a. Learn from experience
• b. Judge performance
• Problem judgment requires clear goals, in
  contradiction with learning
• Problem power of the expert

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Monitoring and Evaluation

• Nature of Data
• Evaluation is a donor requirement
• External activity
• Targets blueprint activity (CPA)
• Critical path analysis (Time based action)
• PERT chart (Project Evaluation Review Technique)
  very technical, programmed
• Evaluation often the need for more action

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Monitoring and Evaluation

• Nature of Data
• Evaluation as an end product
• Separate from implementation
• Action pre-determined in design prior to
  evaluation
• Separates evaluation from the on-going activity

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Monitoring and Evaluation

• Issues
• Problem with Evaluation concept
• Implementation suggests a finished product
• Bureaucratic action is ongoing
• Part of larger system with ambiguous boundaries
• Assessment
• Ongoing, part of implementation process

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End of Project Status (EOPS)

• Are of great importance and are primary target of
  project efforts and discussion
• Projects are usually very complex
• It is common to find that no single indicator is
  sufficient to describe the project achievement
  completely

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End of Project Status (EOPS)

• In determining EOPS we apply following principle
• If all EOPS conditions are satisfied, then there
  would be no credible alternative explanation
• Except the purpose of the project (and the
  contract) has been achieved
• Good project design will include the conditions
  that demonstrate successful achievement of the
  Project Purpose

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End of Project Status (EOPS)

• Example
• PROJECT PURPOSE IN THE DEVELOPMENT OF AN OIL
  FIELD
• Export oil
• EOPS
• 50,000 Barrels of crude/day transferred to
  tankers at nearest port
• Quality of crude produced is competitive with
  that currently sold on world market. To verify,
  one needs a) the purity of oil, b) the world
  price, c) price sold, d) amount sold