Improving Transport Project Appraisals
In the Islamic Countries
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decentralised procurement agencies. According to OECD (2017), about 40% of public
investment is carried out by sub-national governments, albeit with some variability across
countries (federal countries reach 63% of total public investments). A reflection in academic
literature of this evolution is the Drèze and Stern (1987, 1990) framework (see also Florio, 2007,
2014) where CBA is no longer necessarily the prerequisite of an all-powerful central planning
body, but is described as a consistent set of rules to be applied by each level of government, each
enjoying some scope for policy choice. The existence of a consistent set of rules is thus a
mechanism to counteract the risk of fragmentation that can derive from a decentralisation of the
investment appraisal and decision. In particular, it is observed that, without the definition of a
precise set of rules specifying when, by whom and how to perform project appraisal, different
sectoral (and sub-sectoral) or local practices can be developed to respond to the specificities of
own investment decisions. This can result in plethora of practices and uses that do not allow for
comparability and consistency in the approach.
In most of the countries, this progressive shift of emphasis from the centre to line ministries,
agencies and sub national government in the ownership of capital expenditure has not been
matched by appropriate tax reforms. In this perspective, there still is a rationale for having a
central scrutiny of project evaluation at central level, even if project decisions are taken at sub-
national level, or by sector departments and agencies. As a matter of fact, project appraisal
systems can be steered by a coordinating entity at central level, but appraisal practices can be
largely delegated to sectoral or local procurement agencies as well.
Coordination and clear rules, balancing the different roles are necessary to reduce or mitigate
opportunistic or myopic behaviours. In particular, a clear division of responsibilities and tasks
among promoter, funding agency and reviewer should be distinct in order to reduce conflicts of
interest and avoid potential bias due to manipulation or optimism. For example, if central
funding agencies follow an expenditure-driven approach (they have a generic budgetary
allocation for investment), their priorities can conflict with those of line departments or local
administrators which have different constituencies and compete among them for scarce funds;
private contractors implementing capital investments are often inclined to optimism bias when
estimating their capacity to manage the project with the set timing and; project analysts may
receive their remit not appropriately specified in terms of quality standards and requirements.
Looking at whom is performing the appraisal, there is a wide variety of practice in use , ranging
fromdedicated units within the organisation or private consultants employed by line ministries,
as presented i hich shows who performs CBA in the OECD countries. The potential
trade-off here is between the ownership of the appraisal (in terms for example of key assumptions
and overall concept idea), which as far as possible shall be internal to the implementing agency,
and technical expertise (see also section below), which may not be necessarily granted with
internal resources, especially for very complex projects. In fact, within the complex chain of
responsibility in project planning, funding and implementation, different actors hold different
incentives which sometimes may clash. For example, the project sponsor (i.e. the agency
providing the funds) can have an interest in ensuring the project sustainability and value for
money while the procuring agency (i.e. the one in charge of selecting and managing the