31 January 2019

Project Preparation – Introduction: Laying the foundations and charting a way forward

31 January 2019

Tackling the global infrastructure gap remains a priority for governments to drive inclusive growth and deliver quality infrastructure projects for their citizens.

Past studies have pegged infrastructure project preparation costs at between 5-12 per cent of total investment needs. And even if the lower end of this range is considered, financing needs for project preparation translate to US$4.7 trillion over the period 2015-2040, or US $188 Billion annually.  [2]

While this gap sounds insurmountable, one of the main constraints to infrastructure development is not a lack of finance, but rather a lack of well-prepared, bankable infrastructure projects.

Inadequate support at the project preparation stage can result in critical projects being scrapped prior to implementation or increasing the cost of implementation to a prohibitive degree.

Matthew Vickerstaff, interim CEO of the UK’s Infrastructure and Projects Authority, said of the importance of project preparation: “Ultimately it is both the quality of the people delivering the project, and the importance of the system in which projects are delivered, that helps ensure projects are set up for success”.

To that end, the Global Infrastructure Hub launched its Reference Tool on Governmental Processes Facilitating Infrastructure Project Preparation in January 2019. It is intended as a guidance document for governments and practitioners involved in early-stage infrastructure project preparation. 

The tool takes a holistic, country-lens approach, using fifteen country success stories to demonstrate leading practices at the national and sub-national level in terms of:

  • governance
  • institutional arrangements
  • project planning and delivery processes
  • funding mechanisms.

Furthermore, the tool has been designed to support the operationalisation of the G20 Principles for the Infrastructure Project Preparation Phase developed by the Infrastructure Working Group (IWG) and endorsed by the G20 Finance Ministers and Central Bank Governors. These principles include:

  • project rationale
  • options appraisal
  • commercial viability
  • long-term affordability, and

The purpose of this blog series is to share some of the leading practices found globally in the project preparation landscape, highlighting guidance points through success stories at the country- and project-level. 

The blog series will cover the following topics to start, with future blogs to delve deeper into the country and project case studies contained in the tool:

  1. Enabling environment for project preparation—the tool identifies leading practices in two dimensions of government action, namely a robust policy framework, and well-governed public institutions.
  2. Financing project preparation—three key project preparation financing sources are examined in the reference tool, those being project development funds (PDFs), project preparation facilities (PPFs), and government budgetary allocations.
  3. Infrastructure planning and project prioritisation—the tool discusses the importance of forming medium- and long-term infrastructure plans, and subsequently translating these plans into prioritised project pipelines.
  4. Project feasibility, reviews and approvals—a structured approach to project feasibility evaluation typically involves early-stage pipeline screening and pre-feasibility assessment, rigour in feasibility evaluation, and periodic review and approvals.
  5. Project communication—stakeholder engagement should be viewed as a strategic action and market interest for PPP projects should be evaluated early on.

The next blog will focus on the prerequisites required for an enabling environment that is conducive to effective and efficient project preparation, resulting in quality infrastructure projects.

[1] Including Unleashing private capital investments for sustainable infrastructure greenfield projects (Global Infrastructure Basel 2014), Catalysing early stage investment (United Nations 2011), Assessment of Project Preparation Facilities for Africa (Infrastructure Consortium for Africa 2012), and Infrastructure finance in the developing world (Global Green Growth Institute 2015), amongst others.

[2] Using Global Infrastructure Outlook data (GI Hub 2017).