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Contracting Out

Contracting Out. 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

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Contracting Out

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  1. Contracting Out

  2. 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

  3. 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

  4. 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

  5. Project Planning Documents • Help clarify contract elements • Consists of the following: • A meeting of the minds • Specific deliverables • Consideration • Force Majeure • Objectively Verifiable Indictors

  6. 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

  7. A Meeting of the Minds • Relates directly to the purpose and goals identified in the project’s planning document • Project document always indicates “outputs” in the hope that it will result in an agreement that the task is completed

  8. 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”

  9. 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

  10. A Meeting of the Minds • “Purpose” of Contract • Most important project focus • Facilitates "meeting of the minds" by clarifying long-term objectives

  11. 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

  12. 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

  13. 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

  14. 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?

  15. 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

  16. 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

  17. 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

  18. 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”

  19. 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

  20. 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)

  21. Project Planning and the Planning Cycle Contracts, Foreign Aid and International Development

  22. Interaction of Major Agency Processes Planning Budgeting Ongoing Projects Office of Management And Budget (OMB) Design Approval Legis- lation Foreign Policy Implementation Evaluation LDC Needs Reporting Budget Submissions Congressional Presentation (CP) Appropriation Operational Year Budget (OYB) Host Country Agency Policy Global Sector Strategies Regional Strategies Research Strategy Management Objectives Project Identification Document (PID) Project Review Paper (PRP) Project Paper (PP) Pre- Implementa- tion Implementa- tion Evaluation Country Program Strategy (DAPI) Field of Concentration Strategy (DAPII) Project Reporting Project Performance Tracking (PPT); Financial Reporting Ex-Post Facto Evaluation Prior Evaluation Financial MANAGEMENT Programming INFORMATION Management Reports Implementation SYSTEM External Needs Program Support Data Bank (CPDB, PAIS, DIS, ESDB) Personnel Administration Support Database for Future Decisions, Policy Lessons Learned Evaluation Criteria

  23. 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

  24. 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

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

  26. The Project Cycle • Analysis--collection of: • Prediction • Selection of preferred alternatives

  27. 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:

  28. 1. Design Project Objectives Achieved 3. Evaluation 2. Execution The Project Cycle Source: Project Management System, Practical Concepts, Inc., Washington, DC 1979.

  29. 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

  30. Preparation of Documents: Donor - USAID • Country Strategy Paper • Concept Paper • Project Identification Document (PID)

  31. Program Agreement (Donor) PP (USAID) (PP = Project Paper) Technical Proposal (Contractor to Donor) Country Context (Contractor to Country) Implementation Documents

  32. The Project Cycle • Implementation • Carrying out actions planned • Personnel • local (and foreign) • Physical and organizational Needs

  33. 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

  34. 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

  35. 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

  36. 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

  37. 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

  38. 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

  39. 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

  40. 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

  41. 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

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