20200511

Question  At the top of this article there is a statement that the World Bank has reduced the incidence of ERR assessments on projects. Is there any readily accessible evidence to confirm this?

Reply  This contribution was from an ex-staff member of the World Bank who participated in the Virtual Workshop.

He has confirmed that there are several sources beginning with an internal report "Report of the portfolio Management Task Force" (World Bank, July 1, 1992, 12,14) and "Cost-Benefit Analysis in World Bank Projects" (Independent Evaluation Group, World Bank, 2010).

We are also aware of the detailed evaluation in an OQSI publication "The impact of trends in the international development environment on project performance" (OQSI, 2018). This was an output from an ongoing monitoring and evaluation of project design and evaluation criteria initiated in 2010. The OQSI has confirmed that this has been extended and a new edition will be released later this year.

It is worth noting that some of the observations contained in the 2010 WB EIG report are surprisingly frank and do not reflect well on professional standards or a regime upholding adequate due diligence, these include the following:
  • Of 166 investment projects that closed in 2008, 93 reported no ERRs
  • A common reason for failing to report ERRs is the belief that calculating an ERR is not applicable.
  • Many of the reasons given for the lack of ERRs stem from basic problems with projects, rather than with cost-benefit methodology
  • The belief that benefits are not quantifiable is the most legitimateóbut also the most easily abusedóreason for not presenting cost-benefit analysis
  • Of 24 projects that claimed justification through cost-effectiveness analysis, only one appeared to use the technique correctly
  • Appraisal reports rarely discuss the public sector rationale for projects and the extent to which a project provides a public good
  • ERRs at appraisal assume everything will proceed as planned, which rarely happens
  • Downside risks are frequently not factored into the calculations
  • There is little evidence of a prior systematic effort to compare alternatives to a chosen project
  • Poverty analysis could be improved; the constraining factor appears to be lack of data
  • Sustainability of benefits is rarely checked after a project has ended, which likely imparts a positive bias to reported ERRs
  • Interviews with Bank staff reveal that cost-benefit analysis is usually prepared after major decisions are made and thus has little influence on those decisions
  • Cost-benefit analysis is often delegated to consultant
  • Senior staff show little interest in cost-benefit results and a great deal of interest in safeguards, procurement, and financial management