MANUAL FOR DEVELOPMET

PROJECTS - 2024

PLANNING COMMISSION
MINISTRY OF PLANNING, DEVELOPMENT & SPECIAL INITATIVES
GOVERNMENT OF PAKISTAN
 ACKNOWLEDGEMENT
I feel honored to present the updated & climate inclusive Manual for Development
Project 2024, approved by the Planning Commission in its meeting on 27-02-2024.
The manual is updated with the latest information, instructions, guidelines with the
special emphasis on climate aspects. The Compendium of Annexures (Appendix-B)
is updated with new notifications issued time to time and also include climate
proofed PC-I, 2024 to PC-V, 2024 proformas. Further, Instructions for Techno-
Economic feasibility Studies and Handbook on Climate Screening for Policy Planning
are added as Appendix C & D, respectively.

I would like to take this opportunity to say special thanks and gratitude to
Muhammad Jahanzeb Khan, Deputy Chairman Planning Commission & Awais
Manzur Sumra, Secretary M/o PD&SI for continuous guidance and supervision
throughout the up-dation process. I am also thankful to Mushtaq Ahmed Raja (JCE-
ops) and Zafar-ul-Hassan (JCE-EP) for critical review in refining and finalizing the
manual in its present form.

I would also like to acknowledge the contribution of Mr. Ali Touqeer Shiekh, advisor
on climate change for his valuable input and all my team members of Employment
& Research Section, especially Mr. Muhammad Umar, Research Officer for working
dedicatedly in completing this task. Finally, I am in all my humbleness, grateful to
all colleagues of Planning Commission & other ministries who have helped to give
different ideas to make this Manual for Development Projects, updated.

(Shahid Zia Cheema)

Chief (Employment & Research)

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Notification

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3
 ACRONYMS
ACS Additional Chief Secretary
ADPs Annual Development Programmes
AGPR Accountant General Pakistan Revenue
AJ&K Azad Jammu & Kashmir
AJKCDC Azad Jammu and Kashmir Central Development Committee
AJKDWP Azad Jammu and Kashmir Development Working Party
AP Appraisal Paper
APCC Annual Plan Coordination Committee
AS Additional Secretary
B&R Buildings & Roads
BCR or B/C Ratio Benefit-Cost Ratio
BoQs Bill of Quantities
CARA- Climate Adaptation and Resilience Assessment
C&W Communication & Works
CCC Concept Clearance Committee
CCI Council of Common Interest
CDA Capital Development Authority
CDM Clean Development Mechanism
CDWP Central Development Working Party
CF&AO Chief Finance and Accounts Officer
CGA Controller General of Accounts
CHIRA Climate and Hazard Initial Risk Assessment
CIME Climate Indicators for Monitoring and Evaluation
CMA Climate Mitigation Assessment
CPEC China-Pakistan Economic Corridor
CPM Critical Path Method
CSR Composite Schedule of Rates
DC Deputy Commissioner
DC PC Deputy Chairman Planning Commission
DDBs Divisional Development Boards
DDC District Development Committees
DDSC Departmental Development Sub-Committee
DDWP Departmental Development Working Party
DDWP Divisional Development Working Party
DOs District Officers
DPCs Development Policy Credits
DRRA Directorate of Revenue Receipt Audit
DWP Development Working Party
EAD Economic Affairs Division
ECA External Capital Assistance
ECC Economic Coordination Committee

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ECNEC Executive Committee of the National Economic Council
EDOs Executive District Officers
EIRR Economic Internal Rate of Return
EPA Environment Protection Agency
FBR Federal Bureau of Revenue
FEC Federal Executive Council
FEC Foreign Exchange Component
FIDIC Fédération Internationale des Ingénieurs Conseils
FIPs Financial Intermediation Programmes
FIRR Financial Internal Rate of Return
FY Fiscal Year
GB Gilgit-Baltistan
GBDDWP Gilgit-Baltistan Departmental Development Working Party
GBDWP Gilgit-Baltistan Development Working Party
GFR General Financial Rules
GIS Geographic Information System
GOCC Glossary of Climate Change terms
HEC Higher Education Commission
HR Human Resource
I&M Implementation and Monitoring
IBC Indicative Budget Ceiling
ICT Information and Communications Technology
IFIs International Financial Institutions
IRR Internal Rate of Return
IRSA Indus River System Authority
IT Information Technology
JACC Jawwad Azfar Computer Centre
JS Joint Secretary
KP Khyber Pakhtunkhwa
LFA Logic Framework Analysis
M&E Monitoring & Evaluation
MDGs Millennium Development Goals
MIS Management Information System
MP-III Management Position III
MTDF Medium-Term Development Framework
NA National Assembly
NDMA National Disaster Management Authority
NEC National Economic Council
NESPAK National Engineering Services Pakistan
NGOs Non-Governmental Organizations
NHA National Highway Authority
NOC No Objection Certificate
NPV Net Present Value
O&M Operations and Maintenance

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P&D Planning & Development
P&DD Planning & Development Departments
PAD Project Appraisal Document
PAEC Pakistan Atomic Energy Commission
PAO Principal Accounting Officer
PC Planning Commission
PCATP Pakistan Council of Architecture and Town Planning
PC-I -2024 Planning Commission Proforma I - 2024
PC-II-2024 Planning Commission Proforma II-2024
PC-III-2024 Planning Commission Proforma III-2024
PC-IV-2024 Planning Commission Proforma IV-2024
PCN Project Concept Note
PC-V-2024 Planning Commission Proforma V-2024
PD Project Director
PD&SI Planning, Development & Special Initiatives
PDWP Provincial Development Working Party(ies)
PEC Pakistan Engineering Council
PERT Project Evaluation and Review Techniques
PFM Public Finance Management
PforR Programme for Results
PIA Public Investment Authorization
PIDE Pakistan Institute of Development Economics
PIP Public Investment Programming
PKR Pakistani Rupee
PLC Project Life Cycle
PM Prime Minister
PMES Project Monitoring and Evaluation System
PMU Project Management Unit
PNRA Pakistan Nuclear Regulatory Authority
PP&DB Punjab Planning and Development Board
PP&H Physical Planning and Housing
PPB Planning Programming and Budgeting
PPMI Pakistan Planning and Management Institute
PPP Public Private Partnerships
P3A Public-Private Partnership Authority
P3WP Public-Private Partnership Working Party
PPRA Public Procurement Regulatory Authority
PRBs Programme Requirements Baseline
PSC Project Steering Committee
PSDP Public Sector Development Programme
PSDP+ Private Sector Development Programme Plus
PWD Pakistan Public Works Department
R&D Research & Development
RBM Results Based Management

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S&GAD Services and General Administration Department
SAP Systems Applications and Products
SBP State Bank of Pakistan
SDGs Sustainable Development Goals
SP&DB Sindh Planning and Development Board
SROs Statutory Regulatory Orders
SRR Schedule of Revised Rates
SSUs Shared Services Units
SUPARCO Pakistan Space & Upper Atmosphere Research Commission
TA Technical Assistance
TEFS Techno-Economic Feasibility Study
TSG Technical Supplementary Grant
TORs Terms of Reference
UN United Nations
UNDP United Nations Development Program
UNICEF United Nations Children’s Emergency Fund
VGF Viability Gap Fund
WACC Weighted Average Cost of Capital
WAPDA Water & Power Development Authority
WB World Bank
WBS Work Breakdown Structures
YTD Year to Date

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Content
Notification ................................................................................................................................................... 1
ACRONYMS ................................................................................................................................................... 4
CHAPTER 1 .................................................................................................................................................. 16
PUBLIC SECTOR INVESTMENT PLANNING AND PROGRAMMING ............................................................... 16
OVERVIEW .............................................................................................................................................. 16
CLIMATE SENSITIVE FRAMEWORK OF PLANNING .............................................................................. 18
ANNUAL PLAN ........................................................................................................................................ 19
PUBLIC SECTOR DEVELOPMENT PROGRAM (ANNUAL) ...................................................................... 20
Overriding Effects of Public Finance Management Act, 2019. ..................................................................... 20
Formulation of the PSDP ......................................................................................................................... 21
PROVINCIAL ANNUAL DEVELOPMENT PROGRAMME ........................................................................ 23
LIFECYCLE FRAMEWORK FOR MANAGING PROJECTS ........................................................................ 25
Project Lifecycle (PLC) Framework and PC Proformas ................................................................................ 25
Intelligent Project Automation System (iPAS) ..................................................................................... 28
Chapter 2..................................................................................................................................................... 30
PROJECT IDENTIFICATION AND PREPARATION ........................................................................................... 30
PROJECT NEED ASSESMENT ........................................................................................................................ 30
PROJECT IDENTIFICATION PROCESS ........................................................................................................... 30
Checklist for Project Identification ......................................................................................................... 30
Project Concept Note (PCN) ............................................................................................................................ 32
PROJECT FINANCING MODALITIES .............................................................................................................. 32
PC-II PROFORMA ......................................................................................................................................... 33
Checklist for PC-II .................................................................................................................................... 35
Public-Private Partnership (PPP) ....................................................................................................................... 36
VIABILITY GAP FUND................................................................................................................................... 38
RISK MANAGEMENT UNIT ......................................................................................................................... 38
PROJECT DEVELOPMENT FUND ................................................................................................................. 39
SALIENT MODES OF PPP ............................................................................................................................ 39
Checklist for climate proofing PPP Projects ................................................................................................ 41
PROCESS FOR PPP PROJECTS .................................................................................................................. 43
DEVELOPING A PPP PROJECT..................................................................................................................... 45
PROJECT PREPARATION .............................................................................................................................. 49

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UNDERSTANDING THE DIFFERENCE BETWEEN DEVELOPMENT AND NONDEVELOPMENT EXPENDITURE 50
LINKING PROJECTS TO RESOURCES ............................................................................................................ 54
PC-I PROFORMA .......................................................................................................................................... 54
KEY COMPONENTS OF PC-I ........................................................................................................................ 56
Project Objective ....................................................................................................................................... 56
Project Description ..................................................................................................................................... 56
Project Location ........................................................................................................................................ 57
Project Scope ............................................................................................................................................ 58
CHANGE IN PROJECT SCOPE ................................................................................................................... 58
Inventory of Machinery and Equipment ..................................................................................................... 58
Project Cost ................................................................................................................................................. 58
REVISED PROJECT COST ............................................................................................................................. 59
PROJECT FINANCING ................................................................................................................................... 60
Project Scheduling .................................................................................................................................. 63
Financial Phasing ..................................................................................................................................... 63
Physical Scheduling of Activities ............................................................................................................. 64
Project Implementation Period ..................................................................................................................... 64
EXTENSION IN IMPLEMENTATION PERIOD ........................................................................................ 65
INTER-AGENCY COORDINATION AND STAKEHOLDER CONSULTATION .................................................... 65
PROJECT MANAGEMENT STRUCTURE ........................................................................................................ 66
APPOINTMENT OF CONSULTANTS FOR PROJECT PREPARATION .............................................................. 68
REQUIREMENTS FOR SUBMISSION OF PC-I IN PLANNING COMMISSION ............................................... 69
Checklist for PC-I ......................................................................................................................................... 72
ROLE OF DEVELOPMENT WINGS OF LINE MINISTRIES/DIVISIONS ............................................................. 74
STANDARD FUNCTIONS OF THE DEVELOPMENT WINGS IN LINE MINISTRIES .......................................... 74
STANDARD WORK PROCEDURE AT DEVELOPMENT WING ...................................................................... 75
CHAPTER 3 .................................................................................................................................................. 77
PROJECT APPRAISAL AND APPROVAL ......................................................................................................... 77
OVERVIEW OF PROJECT APPRAISAL ............................................................................................................ 77
APPRAISAL STEPS ........................................................................................................................................ 77
INSTITUTIONAL RESPONSIBILITY ................................................................................................................. 80
ANALYTICAL ASPECTS OF PROJECT APPRAISAL .......................................................................................... 81
Technical Analysis ...................................................................................................................................... 81

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 Institutional Analysis .................................................................................................................................. 82
Social Analysis .......................................................................................................................................... 83
Environmental/Climate Analysis ................................................................................................................. 84
Financial and Commercial Analysis ............................................................................................................... 84
Economic Analysis ..................................................................................................................................... 85
PRICING OF PROJECT INPUTS AND OUTPUTS........................................................................................... 86
PRINCIPLE OF ‘WITH AND WITHOUT’ PROJECT ANALYSIS ........................................................................... 87
SHADOW PRICES ......................................................................................................................................... 87
NET PRESENT VALUE .................................................................................................................................. 88
INTERNAL RATE OF RETURN ....................................................................................................................... 90
PAYBACK PERIOD....................................................................................................................................... 90
COST BENEFIT ANALYSIS ............................................................................................................................. 91
COST EFFECTIVENESS ANALYSIS ................................................................................................................. 91
BENEFIT COST RATIO CRITERION ................................................................................................................ 92
RISK ASSESSMENT ................................................................................................................................... 92
Risk Management Planning......................................................................................................................... 92
Limitations of Project Appraisal ......................................................................................................................... 93
Project Approval Overview ............................................................................................................................... 94
APPROVAL PROCESS REQUIREMENTS........................................................................................................ 94
APPROVAL OF PROJECTS ............................................................................................................................. 95
PROCEDURE FOR MEETINGS OF VARIOUS FORUMS ................................................................................ 97
GENERAL INSTRUCTIONS/GUIDELINES FOR PROCESSING AND APPROVAL OF PC-I............................... 98
Pre-CDWP Meeting ................................................................................................................................... 100
Anticipatory Approval ............................................................................................................................... 101
ADMINISTRATIVE APPROVAL AND ACCOUNT OPENING ...................................................................... 101
CONCEPT CLEARANCE OF FOREIGN-ASSISTED PROJECTS BEFORE LOAN/AID NEGOTIATIONS ..... 102
Procedure for Approval of Programme Loans and Budget Support Financing................................................. 104
FINANCIAL MANAGEMENT ....................................................................................................................... 105
PSDP Funds ........................................................................................................................................... 105
AUTHORIZATION OF PSDP FUNDS .................................................................................................. 105
PSDP REVIEW MEETINGS ........................................................................................................................ 110
CHAPTER 4 ................................................................................................................................................ 112
PROJECT IMPLEMENTATION ..................................................................................................................... 112

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OVERVIEW OF PROJECT IMPLEMENTATION ............................................................................................. 112
ROLE OF SPONSORING AND IMPLEMENTING AGENCIES ....................................................................... 112
ROLE AND APPOINTMENT OF PROJECT DIRECTOR ................................................................................. 116
Selection and Appointment Committee .......................................................................................................... 117
Appointment Process .............................................................................................................................. 117
Mode of Appointment .............................................................................................................................. 118
TERMS OF REFERENCE OF THE PROJECT DIRECTOR .......................................................................... 119
Qualification and Experience Requirements .................................................................................................. 120
PROJECT MANAGEMENT UNIT AND STAFFING ........................................................................................ 120
WAIVER OF FRAMING OF RECRUITMENT RULES FOR PROJECTS POSTS IN
MINISTRIES/DIVISIONS ............................................................................................................................ 121
STANDARD PAY PACKAGE FOR PROJECT STAFF..................................................................................... 121
Staff for Land Acquisition and Resettlement ............................................................................................ 121
CONTRACT MANAGEMENT ....................................................................................................................... 121
RELEASE OF FUNDS ................................................................................................................................... 123
PROVISIONS OF PUBLIC FINANCE MANAGEMENT ACT (2019) FOR SMOOTH IMPLEMENTATION OF
PROJECTS AND MAINTENANCE OF PUBLIC ASSETS .................................................................................. 123
Chapter 5................................................................................................................................................... 126
PROJECT MONITORING ............................................................................................................................. 126
PROJECT MONITORING............................................................................................................................. 126
MONITORING AND EVALUATION ............................................................................................................. 126
Checklist for PC-III ........................................................................................................................................ 129
MONITORING METHODOLOGY................................................................................................................. 129
PROJECT MONITORING AND EVALUATION SYSTEM (PMES) ................................................................... 130
PMES System Architecture and Users ............................................................................................................ 131
PMES Information Components .................................................................................................................... 132
Chapter 6................................................................................................................................................... 133
PROJECT COMPLETION AND EVALUATION................................................................................................ 133
PROJECT COMPLETION ............................................................................................................................. 133
OPERATIONAL CLOSURE ........................................................................................................................... 133
FINANCIAL CLOSURE ................................................................................................................................. 134
RESPONSIBILITY FOR PROJECT CLOSURE ................................................................................................ 134
PROCEDURE FOR PROJECT CLOSURE ..................................................................................................... 134
Checklist for Project Completion and Closure (PC-IV) ........................................................................................ 136

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PROJECT EVALUATION .............................................................................................................................. 137
DIFFERENCE BETWEEN MONITORING AND EVALUATION....................................................................... 138
TYPES OF EVALUATION ............................................................................................................................ 138
EVALUATION INDICATORS ........................................................................................................................ 140
REQUISITES FOR PROJECT EVALUATION ................................................................................................. 141
Checklist for PC-V ......................................................................................................................................... 143
MANDATORY EVALUATION REPORTS ....................................................................................................... 144
EVALUATION FEEDBACK AND LESSONS LEARNED ................................................................................. 144
APPENDIX – A ............................................................................................................................................ 147
NATIONAL ECONOMIC AND DEVELOPMENT PLANNING SYSTEM ........................................................... 149
CONSTITUTIONAL AND LEGAL CONTEXT OF PLANNING IN PAKISTAN ..................................................... 149
NATIONAL PLANNING AND NATIONAL ECONOMIC COORDINATION ....................................................... 149
PUBLIC FINANCE MANAGEMENT ACT, 2019 (AS AMENDED IN 2020) ..................................................... 150
PLANNING COMMISSION ......................................................................................................................... 154
MISSION OF PLANNING COMMISSION .................................................................................................... 154
EVOLUTION OF THE PLANNING COMMISSION — A CHRONOLOGY ........................................................ 156
FUNCTIONS OF THE PLANNING COMMISSION ......................................................................................... 161
PRESENT STRUCTURE AND ORGANIZATION OF THE PLANNING COMMISSION .................................. 163
National Economic Planning and Coordination Forums ..................................................................................... 164
NATIONAL ECONOMIC COUNCIL (NEC) ................................................................................................. 164
ANNUAL PLAN COORDINATION COMMITTEE (APCC) .......................................................................... 165
Development Project/Programme Approval forums ........................................................................................ 165
EXECUTIVE COMMITTEE OF THE NEC (ECNEC) ..................................................................................... 166
CENTRAL DEVELOPMENT WORKING PARTY (CDWP) .......................................................................... 167
DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP) ....................................................................... 168
DEVELOPMENT WORKING PARTY (DWP – AUTONOMOUS ORGANIZATIONS) ................................... 168
ECONOMIC AND DEVELOPMENT PLANNING SYSTEM IN PROVINCES AND SPECIAL AREAS ................ 169
Planning and Development (P&D) Boards and Departments ....................................................................... 169
PUNJAB ..................................................................................................................................................... 170
PLANNING AND DEVELOPMENT BOARD ................................................................................................. 170
FUNCTIONS .............................................................................................................................................. 171
Development Project Approval forums in Punjab ............................................................................................. 173
PROVINCIAL DEVELOPMENT WORKING PARTY................................................................................... 173

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 DEPARTMENTAL DEVELOPMENT SUB-COMMITTEE ......................................................................... 173
DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP) ................................................................... 174
DISTRICT DEVELOPMENT COMMITTEES (DDC) ................................................................................. 174
SINDH........................................................................................................................................................ 175
SINDH PLANNING AND DEVELOPMENT BOARD ..................................................................................... 175
Development Project Approval forums in Sindh ............................................................................................... 177
PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP) ..................................................................... 177
DEPARTMENTAL DEVELOPMENT WORKING PARTY (DDWP) ........................................................... 178
DIVISIONAL DEVELOPMENT BOARDS (DDBS) ..................................................................................... 178
DISTRICT DEVELOPMENT COMMITTEES (DDC) .................................................................................. 178
KHYBER PAKHTUNKHWA ........................................................................................................................ 179
PLANNING AND DEVELOPMENT DEPARTMENT ...................................................................................... 179
Development Project Approval Forums in Khyber Pakhtunkhwa ...................................................................... 180
PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP) ..................................................................... 180
DEPARTMENTAL DEVELOPMENT WORKING PARTY (DDWP) ........................................................... 180
DISTRICT DEVELOPMENT COMMITTEE (DDC)..................................................................................... 181
BALOCHISTAN .......................................................................................................................................... 181
PLANNING AND DEVELOPMENT DEPARTMENT ...................................................................................... 181
Development Project Approval Forums in Balochistan ...................................................................................... 183
PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP) ..................................................................... 183
DEPARTMENTAL DEVELOPMENT SUB-COMMITTEE (DDSC) ............................................................... 184
DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP) ..................................................................... 184
SPECIAL AREA GOVERNMENTS ............................................................................................................... 185
AZAD JAMMU AND KASHMIR .................................................................................................................. 185
GILGIT-BALTISTAN...................................................................................................................................... 186
APPENDIX B .............................................................................................................................................. 187

Appendix A Planning Machinery

Appendix B compendium of Annexures (Notifications, Circulars, Instructions etc.)
Appendix C Instructions for Techno-Economic Feasibility Studies
Appendix D Handbook on Climate Risk Screening for Policy Planning

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List of Figures
Figure 1:PSDP Formulation and Approval Process ..................................................................................... 22
Figure 2: Provincial Annual Development Planning Process ...................................................................... 24
Figure 3: Project Life Cycle Stages and Project Proformas ......................................................................... 25
Figure 4: Process Flow for Development Projects ...................................................................................... 27
Figure 5: Interface of the Intelligent Project Automation System (iPAS) ................................................... 29
Figure 6: Common Mistakes in the Project Identification Process ............................................................. 31
Figure 7: Essentials of a Techno-Economic Feasibility Study ...................................................................... 34
Figure 8: Functions of the P3A ....................................................................................................................... 37
Figure 9: Responsibilities of an Implementing Agency ............................................................................... 38
Figure 10: Process for PPP Projects Part A .................................................................................................. 43
Figure 11: Process for PPP Projects Part B .................................................................................................. 44
Figure 12: Important Considerations for Developing a PPP Project ........................................................... 45
Figure 13: Types of Guarantees in PPPs ...................................................................................................... 48
Figure 14: Reasons for Failure of PPP Projects ........................................................................................... 49
Figure 15: Important Considerations for the Project Implementation Period ........................................... 64
Figure 16: Project Management Structure- Part A ..................................................................................... 67
Figure 17: Project Management Structure- Part B ..................................................................................... 68
Figure 18: Best Practices and Common Mistakes in an Appraisal .............................................................. 79
Figure 19: Steps in Appraisal Process (Breakdown of Timeline) ................................................................. 80
Figure 20: Analytical Aspects of Project Appraisal...................................................................................... 81
Figure 21: NPV Key Rules ............................................................................................................................ 88
Figure 22: Administrative Approval and Account Opening Process ......................................................... 101
Figure 23: Guidelines for Proposals Seeking Foreign Assistance .............................................................. 103
Figure 24: Funds Release Procedure......................................................................................................... 108
Figure 25: Funds Release for Federally Sponsored Provincial Projects, and Financing of NHA Projects . 108
Figure 26: Frequent Mistakes at Implementation Level ........................................................................... 113
Figure 27:Types of Evaluation.................................................................................................................... 139
Figure 28: Performance Indicators for Evaluation ..................................................................................... 140
Figure 29: Organogram of Planning Commission...................................................................................... 163

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List of Tables
Table 1: Key federal/national level forums for approval of development projects and programmes ....... 17
Table 2: Climate sensitive Framework for Planning.......................................................................................... 18
Table 3: Checklist for Project Identification ................................................................................................ 30
Table 4: Checklist for PC-II .......................................................................................................................... 35
Table 5: Modes of PPP ................................................................................................................................ 39
Table 6: Checklist for climate proofing PPP Projects .................................................................................. 41
Table 7: Types of Fiscal Commitments in PPPs ............................................................................................ 47
Table 8 : Climate Change 2022- Impacts, Adaptation and Vulnerability: Summary for Policy Makers ..... 51
Table 9: Climate Change 2022- Impacts, Adaptation and Vulnerability: Summary for Policy Makers ...... 53
Table 10: Item wise Breakdown of Project Cost by Year................................................................................... 59
Table 11: Describing the Source and Amount of Funding in PC-I ............................................................... 61
Table 12: Financial Phasing of Project Costs .................................................................................................... 63
Table 13: Project Appraisal Checklist ........................................................................................................... 82
Table 14: NPV Exercise 1.............................................................................................................................. 89
Table 15: NPV Exercise 2 ............................................................................................................................. 90
Table 16: NEC Approved Guidelines for Foreign Funded Projects ............................................................ 104
Table 17: Checklist for PC-III ..................................................................................................................... 129
Table 18: Checklist for Project Closure (PC-IV) ......................................................................................... 136
Table 19: Comparison of Monitoring and Evaluation .............................................................................. 138
Table 20: Evaluation Type and Purpose ................................................................................................... 139
Table 21: Key Questions for Evaluation ..................................................................................................... 142
Table 22: Checklist for PC-V ...................................................................................................................... 143
Table 23: Functional Wings of Planning Commission .............................................................................. 155
Table 24: List of Annexures in the Compendium of Annexures: Supplement to the Manual for
Development Projects by the Planning Commission ................................................................................ 187

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 CHAPTER 1
PUBLIC SECTOR INVESTMENT PLANNING AND PROGRAMMING
OVERVIEW
1.01 Development planning in Pakistan aspires to improve the quality of life of people through
various policies, programmes, and projects in the areas of social sector development, infrastructure
and connectivity, economic competitiveness, and climate change.
1.02 This manual enables the development of a sound economic planning system that is
evidence-based, aligned with the ground realities, and cognizant of the requirement of the
economy to better respond the collective priority needs of the citizens. At the primary level, an
economic development plan is a package of the socio-economic policies and programs aimed to
achieve predetermined and well-articulated objectives/goals (with quantifiable targets) over a
specified period. An effective economic planning system aims to articulate a development vision,
helps translate the vision into policy-driven goals and objectives, and then identifies and allocates
scarce resources to programmes and projects to help achieve climate smart and sustainable
development objectives.
1.03 The manual elaborates on key processes in the programme/project cycle such as project
identification and financing, preparation including use of all PC proformas, appraisal, approval,
implementation, monitoring, closure and transfer of assets, and evaluation. It guides the user on
requirements on every stage of the programme/project lifecycle, with helpful examples wherever
necessary. Further, a Compendium of Annexures: Supplement to the Manual for Development Projects
(in accordance with the list given at Appendix B), Instructions for Techno-Economic Feasibility Studies
(Appendix C), and Handbook on Climate Risk Screening for Policy Planning (Appendix D) by the Planning
Commission has been developed to facilitate the user in accessing key notifications, rules, and other
explanatory material such as methodologies and templets. All the appendices are available at the
Planning Commission website.
1.04 Projects and programmes (which typically encompass multiple projects) are the instruments
to achieve plan objectives and are the building blocks that transform the development plan and the
associated investments into physical outputs and tangible benefits. Public Finance Management

16
Act of 2019 (Amended up to 30th June 2020) stipulates specific provisions on “Development
Projects and Maintenance and Use of Public Assets”. This manual has accordingly clarified and laid
out guidelines on classification and preparation of projects, their quality assurance, technical approval
and their monitoring and evaluation.
1.05 The key federal/national level 1 forums for approval of development projects and programmes are
as follows:
Table 1: Key federal/national level forums for approval of development projects and programmes

Forum Function
National Economic Council (NEC) It is the apex economic and development policy forum
mandated by the Constitution, responsible for approval
the vision statements, long-term perspective plans, 5
years plans, annual plans, and the Public Sector
Development Programme (PSDP). The NEC is chaired
by the Prime Minister.
Executive Committee of the NEC (ECNEC) The ECNEC sanctions development projects in PSDP
(Federal/provincial) that cost more than Rs. 7.5
billion and are according to the sanctioning limits
approved by the NEC and notified/issued by the M/o
PD&SI. It allows changes, as deem appropriate, in
the plans initiated by the Planning Commission / M/o
PD&SI. Finally, it reviews policy issues relating to
development projects/programs/plans
before submission to the NEC.
Annual Plan Coordination Committee It is mandated to review the previous and current
(APCC) annual plans while recommending the annual plan for
submission to the NEC. The APCC is chaired by the
Minister PD&SI or the Deputy Chairman, Planning
Commission.
Central Development Working Party It is responsible for the scrutiny and approval of
(CDWP) development projects beyond the sanctioned limit of
DDWP and up to 7.5 billion, provincial projects having
federal financing and/or foreign component, and
federal projects having more than 25% of foreign
component. The CDWP is chaired by the Deputy Chairman
Planning Commission.
Divisional Development Working Party The DDWP has the power to approve PC-I or PCII of
(DDWP) project with a cost up to Rs. 1000 million and is

1
Each province has established its own forums for approval of development projects at departmental, divisional
and district level in addition to PDWP.

17
 chaired by the Secretary/Principal Accounting Officer
of an administrative division.
Development Working Party (DWP) DWP includes public sector autonomous
organizations which have the capacity to sanction
their development schemes via self-financing based
on specific requirements elaborated in Appendix A.

1.06 The economic and development planning system in provinces and special areas (AJ&K and Gilgit-
Baltistan) has been changed in accordance with the 18th Amendment in the Constitution of Pakistan. The
Amendment transformed the process of provincial planning by including increase in inflow of resources,
new planning imperatives like public private partnerships and more. The role of the provincial P&D boards
and departments has since then been more proactive as they work in consultation with the provincial
governments. This includes the drafting and approval of the Annual Development Programme and
approval of other development projects.
1.07 The functions and sanctioning powers of national and provincial development forums along
with their current composition of members can be found in Appendix A named as Planning
Machinery. This appendix also elaborates the constitutional and legal contexts of the economic
development planning practices in Pakistan. Further, it elaborates on the purpose of the Planning
Commission as well as details of its governance structure; the economic and technical sections, and
its specialized cells including the project wing, and its attached departments. Detail of all provinces’
Planning and Development Departments, their functions, tasks, and composition of members is also
given in Appendix A.

CLIMATE SENSITIVE FRAMEWORK OF PLANNING

1.08 A climate sensitive framework of planning and methodology is presented in Table 2 below:
Table 2: Climate sensitive Framework for Planning

Periods of plans Nature of planning Policy Instruments Climate Change Aspects

Medium- to Long-Term Aggregate economic Economic policy 1-National and Provincial
(5 or more than 5 years) framework and detailed management and Climate Change
or Perspective Plan plans for government directions for reforms Strategies
investment and (Long-term Vision,
and Plans
incentives for private Strategic Plans, above 5-
sector investment Year Plans, Growth 2- SDGs and NDCs
Strategies, 5Es outlook 3- Including
etc.) considerations of climate
change risks within long-

18
 term visions, poverty
reduction and
sustainable development
strategies.
Medium-Term (3-5 Compilation of public 5-year Plans, 5Es National level Risk and
years) investment programmes Framework, 3year Vulnerability
Rolling Development Assessments that will
strategies, MTDF etc. also inform on the
PPP policy assess future climate
change impacts and
adaptation priorities at
the national level
International Climate
Finance (ICF)
Annual or Medium- Sectoral planning/ Annual Plan including -do-
Term Priorities market Incentives to
stimulate private
sector investment
through the PPP and
other modalities
Programme and PSDP including Pre- -do-
Project Planning identified projects,
Provincial, PPP, and
SOE projects.

1.09 The ECNEC approved a proposal on the 1st October 2020 that main ministries and
departments will develop sector development vision and policies consistent with the national
priorities. Therefore, the overall simplification2 of processes and procedures to improve project
management is prepared after research and consultations with stakeholders (attached Annexure
1). The line ministries and departments will conceive a pipeline of potential projects with clear concept
notes, cost estimates and timelines in the order of priority and sequencing. Such project pipelines will be
regularly and periodically updated and shared with the Planning Commission/P&D departments.

ANNUAL PLAN
1.10 The principal instrument for adjusting the Five-Year Plan to current realities including emerging
trends is the Annual Plan, which is considered as a practical and dependable method to translate the

2
Simplification of Planning Commission, Planning Division Development Processes and Procedure to improve Project Management (Project
Identification and Preparation of PC I, Processing and approval of PC I, Project Management and Staffing, Opening of Project Assignment Account,
Procedure for release of funds, and Monitoring and Evaluation) approved by ECNEC on 1st October 2020

19
Five-Year Plan objectives and targets into an implementable operational programme. The Annual Plan
reflects macro-economic policies, development priorities in the context of prevalent climate and
including environment challenges, economic growth and other development targets, evaluation of the
past performance, and an outline investment programme in the public and private sectors necessary to
achieve the planned targets.

PUBLIC SECTOR DEVELOPMENT PROGRAM (ANNUAL)

1.11 The federal PSDP is an annual document, which lists all the public sector projects and
programmes with specific expenditure allocations for the given fiscal year. It includes the approval
status of the project, date of approval and the forum that approved the project, the total estimated
cost of the project including foreign loan component, expenditure incurred up to the end of preceding
fiscal year, throw-forward, and allocation for the fiscal year, in terms of rupee and foreign loan
component. The estimated levels of the provincial ADPs are included in the summary of the PSDP, and
details are compiled and presented in the individual ADP of the respective provinces.

Overriding Effects of Public Finance Management Act, 2019.

1.12 The PSDP formulation is now regulated by Sections 13 to 20 of the Public Finance Management
Act, 2019 (amended up to 30th June 2020). The Act, as amended from time to time, stipulates the
following conditions for a project to be eligible for inclusion in the PSDP or Demands for Grants:
i. Classification of projects as (a) core projects in the national infrastructure requiring complex
planning, design and implementation procedures, and (b) sectoral projects undertaken by
respective sectors and the federal ministries,
ii. Issuance of the technical approval for the proposed project,
iii. Budget allocation for the coming fiscal year along with the full proposed project cost,

iv. Budget tracking of SDGs and climate targets and goals to enable access to
international climate finance
v. All government expenditures, whether from a recurrent or development demand for a
grant, shall be based on well-defined plans and the strategic priorities, including climate
resilience priorities approved in the Budget Strategy Paper.
1.13 The chapter III of the PFM Act, 2019 titled “Development Projects and Maintenance and use of
Public Assets”, provides that Planning Commission will notify the procedures for classification of

20
different development projects their appraisal, approval and monitoring. Further, detailed procedure
and parameters of Public Investment will be issued separately.

Formulation of the PSDP

1.14 The formulation of the Annual Plan and the annual PSDP at the federal level is steered by
the Planning Commission in collaboration with the Finance Division and Economic Affairs Division.
The annual PSDP must be aligned with the growth strategy, the Five-Year Plan or Long-Term
Perspective Plan (if any) or vision document, provisions of the Public Finance Management Act, 2019,
international economic and social landscape, current development challenges and priorities, economic
growth targets, and country’s commitments to the Sustainable Development Goals (SDGs) and Paris
Climate Agreement 2016 among other priorities and commitments of the Government of Pakistan.
1.15 The final approval of the plans along with the federal budget lies with the National Assembly (NA).
The budget incorporates proposals for development and non-development expenditure as well as
resource availability. The Money Bill is not voted in the Senate. The Senate deliberates on the budget
proposals and sends its recommendations to the NA. NA is the constitutional forum for the approval
of the budget including the development budget. The NA finally approves the Annual Budget
Statement including development expenditure under Article 82 of the Constitution of Pakistan.
Following approval of the NA, the Prime Minister of Pakistan authenticates the Schedule of Authorized
Expenditure under Article 83 of the Constitution. The process for PSDP formulation and approval is
summarized in the figure below.

21
Figure 1:PSDP Formulation and Approval Process

22
1.16 While considering the portfolios and budgets for next year, the Planning Commission and respective
ministries prioritize fast-moving, strategic, and important projects. Other considerations include
recommendations from the NA Standing Committees of the respective ministries/ divisions,
availability of resources and the Indicative Budget Ceiling.
1.16 (b) New projects will be included only after providing the adequate funding to the on-going
projects as per their approved annual phasing and keeping in view the throw forward of the PSDP. Ideally,
throw forward should not exceed the 3 times of the size of the PSDP.
1.17 The Priorities Committee considers policy priorities, outputs, past performance of the ministry,
current year’s budgetary allocation, the indicative ceiling for the budget year and forecast years, and
overall resource availability for the development budget, both local and foreign funding.

1.18 While formulating the federal PSDP, now there is an increased emphasis on promoting
innovative financing modes (Public-Private Partnerships) to reduce the burden on the limited public
sector resources. The Public-Private Partnership Authority (P3A) has been made more functional to attract
private sector investment in development activities. (Refer to Chapter 2 for more details on PPPs).

PROVINCIAL ANNUAL DEVELOPMENT PROGRAMME

1.19 The provincial ADP formulation3 is steered by the P&D boards/departments of the provinces
in close coordination with the provincial finance departments, while the later start the preparation
with the issuance of the Budget Call Circular. The process is based on the national priorities,
communicated by the Planning Commission, and resource availability in each of the provinces. The
process for formulation of the provincial ADP is depicted in the figure below. In April of each year, the
Draft ADP for the next fiscal year is submitted for a review of the Chief Minister and the minister
concerned or the cabinet (as necessary) and is shared with the APCC and is reflected in the
summary, which is finally presented to the National Economic Council (NEC). While approving the
ADPs, the NEC may direct modifications in the national priorities and the overall magnitude of the
development effort to ensure balanced sectoral and regional development in the country.

3
A similar process applies to special areas - AJK and GB
23
Figure 2: Provincial Annual Development Planning Process

24
1.20 The provincial ADP is then formally submitted to the provincial cabinet for consideration
and approval in June after which it is submitted to the provincial assembly for discussion and vote. As
soon as the ADP along with the budget is approved by the provincial assembly, the Schedule of the
Authorized Expenditure is authenticated by the Chief Minister under Article 123 of the Constitution of
Pakistan.

LIFECYCLE FRAMEWORK FOR MANAGING PROJECTS

Project Lifecycle (PLC) Framework and PC Proformas
Figure 3: Project Life Cycle Stages and Project Proformas

1.21 The Project Lifecycle (PLC) defines the phases from the beginning to the end of the project. It
has five distinct stages including PCN: Project Identification and Formulation; Appraisal and Approval;
Implementation and Monitoring; Closure; and Evaluation. Although the public sector projects in
Pakistan vary significantly in size and complexity, all projects can be mapped to a common life cycle
framework based on the current development planning, programming, and budgeting (PPB) practice in
Pakistan. Project proformas developed by the Planning Commission are also commensurate with this
project lifecycle framework. The stages of PLC along with corresponding proformas are given below4.

4
The PCN & PC-I to PC-V proforma templates and other useful information is available at: https://www.pc.gov.pk/web/downloads

25
Project Identification and Formulation (PC-II): At this stage one project idea, out of several
alternatives, is chosen and defined based on a need analysis. The PC-II proforma is required to
conduct surveys and feasibility studies, with respect to larger projects, intending to obtain full
technical justification for undertaking the project before resources are committed and invested.
Further, the defined project idea is carefully developed, and a project plan is prepared in
accordance with the PC-I proforma.

Project Appraisal and Approval (PC-I): Every aspect of the project idea is subjected to a
systematic and comprehensive appraisal. The detailed proposal is submitted for approval and
financing to the appropriate entities and relevant forum. Final appraisal (working paper and the
minutes of the approval forum) reports of selected/Core Projects will be placed online.

Project Implementation and Monitoring (PC-III): With necessary approvals and financing in place,
the project plan is implemented. At every execution stage, the progress of the project is assessed against
the planned activities of the project. Course corrections are also done to ensure on time and within
budget completion. This is the monitoring stage and requires PC-III proforma. This form is designed to
furnish information regarding the financial as well as physical progress of the ongoing projects,
including information on any bottlenecks experienced during project execution and staffing issues.

Project Completion (PC-IV): The project closure brings project execution to a formal conclusion,
informing all stakeholders about the completion of the project, and winding up technical, operational,
and administrative actions. PC-IV form is required to be submitted at the time of project closure or the
termination of the physical implementation of the project. At the stage of project closure, PC-IV is
submitted.

Project Evaluation (PC-V): Upon completion, the project is reassessed in terms of its deliverables,
performance (results), efficiency and effectiveness. This form is to be furnished to the Planning

Commission on an annual basis, by the 31st of July of each year, for five years by the agencies
responsible for the operation and maintenance of the project. It is aimed at carrying out impact
evaluation of the project by reporting operational results during the previous fiscal year.

26
1.22 The following figure explains the process flow for development projects with references to
chapters in the manual for further details:

Figure 4: Process Flow for Development Projects

27
Intelligent Project Automation System (iPAS)
1.23 iPAS has been developed by the Planning Commission. It is a web-based tool for the process
automation of PSDP formulation, recording and tracking, process automation of releases, online
submission of progress and funds management (reappropriations, supplementary grants etc.)
involving all stakeholders of development portfolio. This means that all proformas (PC-I to PC-V) can be
submitted digitally. New projects/schemes can be initiated on the system, and it enables updating of
on-going projects. A separate tab is created for Public Private Partnership (PPP) projects as well.
1.24 The system shows the total allocations to projects divided in the following categories: local,
foreign, new, on-going, and PPPs. It also shows the total number of projects and projects under each
category. A timeline of projects completion is also given. Finally, a dynamic table shows the list of projects
along with their ministry/division, sector, approval status, cost, expenditure up to date, allocation, throw-
forward, and the province.
1.25 The system enables the user to select the project (schemes) from the list of available schemes along
with project type (new or on-going). Further, it efficiently categorizes the sectors, sub-sectors, relevant
departments, and executing/sponsoring agency for the project. The user can view the list of accounts
from which he/she would be authorized to record funds requests and utilizations for selected projects.
1.26 Through all the features mentioned above, the system aims to increase financial efficiency,
automate, and digitize manual processes, and minimize information gaps between all stakeholders
of development portfolio throughout the project life cycle

28
Figure 5: Interface of the Intelligent Project Automation System (iPAS)

29
 Chapter 2

PROJECT IDENTIFICATION AND PREPARATION

2.01 The project identification and conceptualization process ensure that the selected projects are
fully aligned with the national development goals and public policy objectives. Thus, the project concept
must be in sync with the Vision, the Five-Year Plan, and sectoral priorities. As sectoral priorities establish
competing claims on the limited resources available, it is imperative that relevant ministries, divisions,
and agencies put in place well- reasoned and consensus-based strategies. These strategies should flow
from the national plans and priorities established by the NEC and other forums. The strategies also
consider the sustainable development goals (SDGs), including climate risks and co-benefits and country
assistance and partnership strategies of development partners.

PROJECT NEED ASSESMENT

2.02 Need assessment is establishing socio-economic and commercial demand for infrastructure/ service that the
proposed project is supposed to address. Assessment of need, identified by the community or their public
representative, by sponsoring agency against the approved sector specific benchmark/criteria, before identification
of the project to address the same through PCN.

PROJECT IDENTIFICATION PROCESS

2.03 The project identification process constitutes the following steps5.
Table 3: Checklist for Project Identification

Sr. No Checklist for Project Identification Mark ✓if done

1. Conduct objective and logical analysis of documents using simple
management tools such as problem tree analysis, log frame analysis,
stakeholder consultations, etc. Documents such as vision, annual plans,
five-year plans, sectoral strategies and priorities, policy directives must
be utilized.
2. Describe climate change vulnerability context in the project area
3. Set clear project objectives, some or all should address the climate
vulnerability described in column #2 above. The project has objectives
that are of sectoral, economic, social, and climate (including
environmental) importance.
4. Project has mitigation and/or adaptation has the primary objective
and/or needs to be climate proofed

5
Adapted from JICA Guidance of Project Identification and Preparation (undated)

30
 5. Describe project activities linked to #3 above, aimed at reducing climate
vulnerability and/or emissions in the project specific area/sector.
6. Identify climate vulnerable target groups benefitting from the project,
as per #2 and #3 above.
7. Establish the project concept (together with alternative plans for
financing), which will effectively serve to achieve the project’s
development objectives.
8. Assess the priority or urgency of the project in the context of economic
and social environment & Climate l development plans and sector
investment programs.
9. Examine consistency with the relevant sector policies and master plan
and the regional/area development plan.
10. Consider the adequacy of the executing agency and the possibility of
private sector participation in the project.
11. Estimate approximate project cost (together with the cost of
alternatives) based on the conceptual design.
12. Make a preliminary assessment of the feasibility of the project and its
development impacts on the country, its specific region or sector
including CHIRA
13. Assess project sustainability (economic/financial, environmental, and
social). Also evaluate the project’s contribution to the achievement of
SDGs, and the impact on climate change.
14. Evaluate the project’s contribution to reducing the climate vulnerability
and achievement of national climate and SDGs goals and targets.

2.04 During Project Identification/Preparation level, the following common mistakes are made and
must be avoided:
Figure 6: Common Mistakes in the Project Identification Process

31
2.05 Projects are normally identified by the following:
i. Line ministries,
ii. Divisions,
iii. Public sector authorities and corporations (including the China-Pakistan
Economic Corridor (CPEC) and PPP authorities, the National Disaster
Management Authority (NDMA) for post-disaster relief, reconstruction, and
disaster risk reduction),
iv. Pakistan’s development partners (International Financial Institutions (IFIs),
bilateral aid agencies, etc.),
v. Private-sector entities in consultation with the government departments,
and
vi. Legislative and executive directives.

2.06 The Planning Commission, the provincial P&D boards/departments and other sub-national
planning agencies play a critical role in guiding and supporting the project identification process.

Project Concept Note (PCN)

2.07 The project identification phase should conclude with the preparation of a PCN, which is a
prerequisite for the initiation of project preparation. The PCN is cleared by the concerned Member of
Planning Commission, as described in Appendix B. PCN must also include the estimated expenditure and
source of funding for project preparation etc. for example climate co-benefits for adaptation or mitigation.
The approved PCN should signal the start of project preparation and the authorization to incur Pre-project
approval expenditures to that extent. All projects included in the PSDP/ADP should have an approved
PCN, with the clearance/approval date of the PCN as the official commencement date of the project6.
Templet for the PCN is given at ANNEXURE- 48.

PROJECT FINANCING MODALITIES

2.08 The mode of project financing is considered and assessed as part of the project identification
process. The government predominantly funds projects through the PSDP at the federal level, and
through the ADPs at the provincial level. The private sector is integrated into the development process
through the PPPs. For this purpose, the Public- Private Partnership Authority (P3A) has been set up
at the federal government level, while a similar arrangement is also present at the provincial level.

6
6 This applies equally to a program, a fund or a line of credit covering several projects or series of project
investments.

32
Firstly, Projects should be analyzed & offered for financing and operation by Private sector. Secondly,
the possibility of VGF and PPP mode by explored. Thirdly, to include the project in PSDP, sponsors
must include a certificate stating that first two options are being effectively considered and it is not
possible to operate the project on first two options.

PC-II PROFORMA
2.09 The PC-II approved by the relevant competent forum is required for the conduct of Techno-
Economic feasibility study, including technical investigations, market surveys and other studies
(Annexure 2). The requirement of a PC-II shall be mandatory for infrastructure projects, each
costing Rs. 500 million or above, and all other projects where the infrastructure component is equal
to or more than 30 percent of the total project cost. Projects falling in these categories shall require
Techno-Economic feasibility study undertaken through the PC-II, which must include, at least,
TORs, technical and reference design, assignments duly justified on man month basis on gantt chart
and as explained in the instructions for Techno-Economic Feasibility studies (Appendix-C).
2.10 The above condition shall not be applicable for infrastructure projects, each costing less
than Rs. 500 million, and all other projects where the infrastructure component is less than 30
percent of the total project cost.
2.11 The requirement of the PC-II shall also not apply to projects declared as R&D oriented or
innovative in nature, irrespective of their cost, by the forum having financial powers to approve
the projects. However, such projects shall be accompanied by a proper need assessment and
justification, which can be carried out in house.
2.12 The Techno-Economic feasibility should be proper and based on the current data,
including climate and environmental data. Any study older than three years is not accepted by
the Planning Commission (Annexure 3). For more complex projects or the projects that have
complex long-term climate impacts, technical assistance may be requested for a Techno-
Economic feasibility study from one of the development partners/donors.
2.13 Planning Commission has notified instructions for Techno-Economic feasibility studies.
(Annexure 49), however following are the essentials of a Techno-Economic feasibility study:

33
 Figure 7: Essentials of a Techno-Economic Feasibility Study

2.14 The PC-II, inter alia, needs to indicate studies and surveys already undertaken on the
subject. In case of studies done already, it may be certified that the latest study/survey is
necessary to add or validate and update the existing study/survey available with the sponsoring
or other departments. The TORs for the consultants may include the following:
i. Possibility of prospective project financing and implementation through
different modes, that is, private sector, PPP, etc.
ii. Environmental impact assessment, DRRA.
iii. Financial analysis (FIRR, NPV and BCR)
iv. Economic analysis (EIRR, NPV and BCR)
v. Risk and sensitivity analyses and proposed mitigation measures
vi. Conduct CHIRA, CARA, CMA and CIME 7
vii. Forward and backward linkages of the proposed study/survey
viii. Expected output of the proposed feasibility study/survey.

7
as indicated in the Handbook on Climate Risk Screening for Policy Planning (Appendix D)
34
2.15 Appropriate provision for funding the Tecno-Economic feasibility study is made in the
PSDP, and the sponsoring agency is required to appoint a Project Director at the initial stage of
project preparation.

Checklist for PC-II

2.16 The checklist for PC-II is given as follows:
Table 4: Checklist for PC-II

# Checklist items for PC-II Tick as appropriate

1 A general description of the aims, objectives and N/A Yes No

coverage of the survey/feasibility study is given.
2 Justification for undertaking the survey/ N/A Yes No
feasibility study is provided
3 Details of previous studies in the field, with similar N/A Yes No
context have been provided.
4 Duration of the study and proposed months of N/A Yes No
commencement and completion of the study are
indicated.
5 Item-wise/year-wise capital cost estimate of the study is broken N/A Yes No
down between local and foreign exchange.
6 Date on which cost estimates were prepared is indicated. N/A Yes No
7 Basis of cost estimates are justified. N/A Yes No
8 Sources of financing the capital cost are provided. N/A Yes No
9 Requirements for local and foreign personnel i.e. N/A Yes No
professional, technical, administrative, clerical, skilled, unskilled,
others along with their terms of reference are provided.

10 Period of contract of both the local and foreign consultants N/A Yes No
along with qualifications, experience and the terms of their
appointment are given.
11 Expected outcome of the survey/feasibility study is given N/A Yes No
in quantifiable terms.
12 Indicate whether any project will be prepared after the N/A Yes No
survey.
13 Climate change aspects covered i.e CHIRA, CARA, CMA and N/A Yes No
CIME etc. conducted.

35
Public-Private Partnership (PPP)
2.17 Given the resource constraints and untapped potential of efficiency gains through private
investment it has become imperative to pursue public private partnerships for the core national
socio-economic development process. For this purpose, specific policies, framework, laws, and
regulations are in place for confidence-building of the private sector for venturing into this arena.
2.18 PPPs are beneficial because they help:
i. Bridge gaps in infrastructure and service delivery,
ii. Shift public resources towards social sectors,
iii. Enable the public sector to define requirements and the private
sector to drive innovative and creative solutions,
iv. Gauge value for money by combining whole-life costs and quality,
v. Manage risk and allocation thereof to the party best able to manage,
control and mitigate it,
vi. Link payment to performance and service quality, and where
applicable, payment is linked to the users availing the services.
vii. It can serve as an avenue to contribute to climate finance delivery
2.19 The federal government has enacted the PPP (Amendment) Act 2021 that extends to the entire
country, applying to all Federal Government Entities with respect to all kinds of projects undertaken by a
federal implementing agency under a PPP arrangement. The application of the PPP (Amendment) Act
2021 is extended to the provinces in case the project falls within the exclusive domain of the federal
implementing agency. The PPP arrangements at the provincial level are guided by the PPP legislation
of the respective province8.
2.20 The PPP (Amendment) Act 2021 is “An Act to create an enabling environment for private sector
participation in development projects and in the provision of public infrastructure and related services in

8
The Punjab Public Private Partnership Act 2019 was notified on 13 December 2019 repealing 2014 Act; the Sindh
Provincial Assembly passed Sindh Public Private Partnership Bill on 18 February 2010 and The Sindh Public Private
Partnership Act 2010 was notified on 17 March 2010 http://sindhlaws.gov.pk/setup/publications_SindhCode/PUB-
16-000200.pdf; and the Khyber Pakhtunkhwa Provincial Assembly has enacted the Public Private Partnership Act
2014, with an amendment in 2016 http://www.pakp.gov.pk/2013/acts/the-khyber-pakhtunkhwa-public-private-
partnership-act2014/; Balochistan Assembly passed the Balochistan Public Private Partnership Act on 10 April 2018
and was notified on 19 April 2018http://pabalochistan.gov.pk/pab/pab/tables/alldocuments/actdocx/2019-11-
15_12:20:50_477ab.pdf.

36
Pakistan through public private partnership projects.”
2.21 The functions of the P3A Board and responsibilities of the implementing agency are
summarized in the figures below. It must be noted that the line ministry/sponsoring agency has the
primary responsibility for monitoring and evaluating PPPs and ensuring that all project KPIs are
being met by the private entity and interest of the public is safeguarded. Performance standards
should be clearly reflected in the contract along with the line ministry/sponsoring agency that is
responsible for monitoring and evaluation.
Figure 8: Functions of the P3A

37
 Figure 9: Responsibilities of an Implementing Agency

VIABILITY GAP FUND

2.22 The P3A will be establishing a non-lapsable Viability Gap Fund (VGF) through upfront grant-in-aid to
be managed, controlled, and administered by the Authority. It will be utilized to provide support to those
qualified projects which are economically and socially justified but are not viable financially according to
the Techno-Economic feasibility study.

RISK MANAGEMENT UNIT

2.23 A Risk Management Unit has been established at the Finance Division’s Debt Policy Coordination
Office. This unit will be responsible for providing guidance for managing risks of PPP projects, and assess
fiscal risks of projects submitted to the P3A.

38
PROJECT DEVELOPMENT FUND
2.24 The P3A will establish a non-lapsable project development fund. The project development
fund will be utilized, inter alia, to support the preparation of any proposals for qualified projects.

SALIENT MODES OF PPP

2.25 PPPs can happen under different modes; however, the salient modes are presented in the table
below:
Table 5: Modes of PPP

Models Description
Build-and-Transfer (BT) A contractual arrangement in which the Private Party
undertakes the financing and construction of an
infrastructure project and after its completion hands it over to
the Government Agency.
Build-Lease-and-Transfer (BLT) A contractual arrangement in which the Private Party
undertakes the financing and construction of an
infrastructure project and upon its completion hands it
over to the Government Agency on a lease arrangement
for a fixed period, after the expiry of which ownership of the
project is automatically transferred to the Government
Agency.
Build-Operate-and-Transfer A contractual arrangement in which the Private Party
(BOT) undertakes the financing and construction of an
infrastructure project, and the operation and
maintenance thereof. The Private Party transfers the facility
to the Government Agency at the end of the fixed term that
shall be specified in the PPP agreement.
Build-Own-and-Operate (BOO) A contractual arrangement whereby the Private Party is
authorized to finance, construct, own, operate and
maintain an infrastructure project, from which the
Private Party can recover its investment and operating
and maintenance expenses by collecting user levies from
project users.
The transfer of the project to the Government Agency is
not envisaged in this arrangement. However, the
Government Agency may terminate its obligations after
the specified time.

39
Build-Own-Operate-Transfer A contractual arrangement like the BOT agreement,
(BOOT) except that the Private Party owns the infrastructure
project during the fixed term before its transfer to the
Government Agency.

Build-Transfer-and-Operate A contractual arrangement whereby the Government

(BTO) Agency contracts out an infrastructure project to the
Private Party to construct it on a turn-key basis, assuming
cost overruns, delays, and specified performance risks.
Once the project is commissioned, the Private Party is
given the right to operate the facility and collect user
levies under the PPP agreement.
Contract-Add-and- Operate A contractual arrangement whereby the Private Party
(CAO) expands an existing infrastructure facility, which it leases
from the Government Agency. The Private Party operates
the expanded project and collects user levies, to recover
the investment over an agreed period.
Develop-Operate-and-Transfer A contractual arrangement whereby favorable conditions
(DOT) external to an infrastructure project, which is to be built
by the Private Party, are integrated into the PPP
agreement by giving it the right to develop adjoining
property and thus enjoy some of the benefits the
investment creates such as higher property or rent
values.
Rehabilitate- Operate- and- A contractual arrangement whereby an existing
Transfer (ROT) infrastructure facility is handed over to the Private Party
to refurbish, operate and maintain it for a specified
period, during which the Private Party collects user levies
to recover its investment and operation and
maintenance expenses. At the expiry of this period, the
facility is returned to the Government Agency.
Rehabilitate-Own-and-Operate A contractual arrangement whereby an existing
(ROO) infrastructure facility is handed over to the Private Party
to refurbish, operate and maintain with no time
limitation imposed on ownership. The Private Party can
collect user levies to recover its investment and
operation and maintenance expenses in perpetuity.
Management Contract (MC) A contractual arrangement whereby the Government
Agency entrusts the management of a project to the
Private Party for an agreed period on payment of
specified consideration.

40
 Service Contract (SC) A contractual arrangement whereby the Private Party
undertakes to provide services to the Government
Agency for a specified period with respect to an
infrastructure facility. The Government Agency will pay
the Private Party an amount according to the agreed
schedule.

Checklist for climate proofing PPP Projects

Table 6: Checklist for climate proofing PPP Projects

N/A Yes No
1. The Government has identified the project, completed the CHIRA9 and
deems the project fit under a PPP.
2. The government has prepared and released qualification criteria for
“Request for Qualification Stage” that includes climate specific
considerations in order to shortlist and hence select the most
competent private entities.
For instance, the private entities with sufficient experience in
managing projects with climate risk profiles will be preferred.
3. The procuring ministry/ department has set a minimum requirement
criterion for climate resilience it aims for in the project and use it to
pass or fail the bidders.
4. The procuring ministry/ department has advertised the ‘Request for
Proposals’ that explicitly lists down all necessary submission
requirements which includes the type and format of documents as
well as the contents of criteria on how the bid will be evaluated.
5. The procuring agency has the required expertise to set a criterion and
evaluate the climate resilience project proposals by the bidders to
supplement contract stage.
6. If the project is highly vulnerable to climate risks, for optimal results
government has included climate resilience in the evaluation criteria
so that private sector proposes best solutions to overcome the risks.
7. Depending on the nature and severity of climate risks, the evaluation
criterion included is a sub-criterion.
(The sub- criteria evaluation can be used for projects with no direct
mitigation or adaptation objective. This would require the proponents
to mention and discuss climate resilience in their other technical
reports, focusing on construction, operations and maintenance plans,
that will be submitted during bidding. For instance, an operation and
maintenance plan for the project including maintenance methodology
to address climate change hazards.)
Note: Do not answer the next question, if you have checked yes

9
Refer to Appendix D for CHIRA Methodology

41
8. Depending on the nature and severity of climate risks, the evaluation
criterion included is a separate criterion since the risks are extremely
high
9. The negotiations during procurement stage duly considered how
climate resilience/mitigation have been embedded in the output
specifications.
10. The designing of output specifications has considered what is
expected from the project, how they can link it with the performance
evaluation procedures and payment mechanisms and how changes
will be managed.
(For instance, is the performance evaluation considering changing
climate risks over the life of contract, through periodic update of
maintenance plan that addresses climate risks or a disaster response
plan?)
11. Climate experts are part of review committee for output
specifications.
12. The payment mechanism is being used to penalize/ enforce or
incentivize climate resilience based on a checklist.
(The checklist can include if the PPP agreement has climate related
technical requirements and indicators, the project should continue
only it is having and should evaluate avenues to use payment
mechanism to enforce/incentivize. For instance, there should be
deductions against ‘performance failure’ for targets missed.
13. The PPP agreement includes climate considerations in its definition for
performance failure.
14. The PPP agreement has annexed climate change ‘key performance
indicators’ (KPIs) or targets that are measurable and realistic.
15. The procuring ministry/ department has chosen bids based on best
value (for climate resilience) rather than lowest price.
16. During the drafting of the contract, the private party has been asked
to periodically submit an updated Climate Risk Mitigation Plan with
latest climate data every 3 to 5 years.
17. The private entity needs to hire an external consultant having the
required climate risk expertise to identify best practices to mitigate or
adapt to climate risks and hazards identified.
18. Financing of the project has been worked out.
State the source of funding/ financing: ________________________
19. If the answer to above is no, other avenues for funding have been
figured out such working on mechanisms to make the project’s climate
beneficiaries contribute financially.
20. If the answer to above is no, the government will utilize different
financial instruments such as ‘resilience bonds to raise financing for
resilience building projects, other options include utilizing risk pooling
and insurances to manage the risks associated with extreme weather
events
State the type of financing: ______________________

42
 21. The drafted contract has a certain level of flexibility in laws concerning
climate resilience of the project and having capacity to make changes.
This has been done by contract management team having the
required expertise.
22. Regardless of unanticipated nature of climate concerns, the contract
has included all the identified climate risks identified during the
screening process as well as the detailed mitigation and resilience
assessments.
23. The climate risk sharing is clearly mentioned in the contract that
clearly states how the risk will be shared in the aftermath of an
extreme event.

PROCESS FOR PPP PROJECTS

2.26 The process for PPP projects is explained in the figures below. However, detailed process of
submission and approval of PPP projects will be given through secondary legislation (prescribed)
under PPP (Amendment) Act 2021.

Figure 10: Process for PPP Projects Part A

43
Figure 11: Process for PPP Projects Part B

44
DEVELOPING A PPP PROJECT
2.27 These are some important considerations for development of a PPP project:
Figure 12: Important Considerations for Developing a PPP Project

2.28 The following additional questions to be addressed for climate perspective:

Q8 Does the CHIRA indicate that innovative adaptation, mitigation
and/ or Co-benefit solutions are required through PPP since it
involves thorough consultations and coordination among multiple
stakeholders

Q9 Does the CHIRA indicate that extra due diligence to climate risk
is required through private finance?

Q 10 Does the climate considerations included in economic,

financial, technical and environmental analysis indicate that the
project is most viable as a PPP?

Q 11 Is the lifetime of the infrastructure project long together with

medium to high climate risks (mitigation and/ or adaptation risks),
and it is preferred to opt for PPP since there is a better review of
the project lifecycle costs and risks, which will lead to better and
more climate resilient infrastructure project?

2.29 Under the International Public Sector Accounting Standards (IPSAS) Board (IPSAS, 2002)

45
contingent liabilities are “A possible obligation that arises from past events and whose existence will
be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events, not
wholly within the control of the entity.”
2.30 As the federal government is moving towards fostering PPPs, itis pertinent to focus on
risk management to maximize the potential benefits from PPPs. The Public sector often resorts
to guarantees and fiscal support for PPP projects that is generally conditional to occurrence
and/or non-occurrence of certain events in the future. Such support forms part of contingent
liabilities. Contingent liabilities in this case may be considered as the hidden costs involved in
introducing PPPs into the arenas traditionally dominated by the public sector, e.g., infrastructure
and service delivery. For the success of PPP projects, it is important to adequately analyze and
report potential risks emanating from PPP projects. Rules are being framed by Finance Division
containing specific terms and modalities with respect to Risk Management Unit (RMU).
2.31 It is important to understand that countries in the world have faced severe fiscal crisis
due to flaws in the design and structure of PPP projects. Many such instances occurred due to
mismanagement of Fiscal Commitments and Contingent Liabilities (FCCL). In some PPP projects,
government may commit fiscal resources, such as equity, VGF and subordinate debt under terms
of agreement of the project. Risks emerging from fiscal commitments also need to be analyzed
and reported by the government. FCCL become a fundamental issue to be addressed by the
government while making efforts to promote fiscally responsible PPPs.

46
 Table 7: Types of Fiscal Commitments in PPPs
Commitment Description
“Guarantees” on particular risk variables The government may commit to compensate
the private party for loss in revenue should a
particular risk variable deviate from a
contractually specified level. The associated
risk is thereby shared between the government
and the private party. For example, this could
include guarantees on the following:
• Demand remaining above a specified
level, or within a specified range
• Exchange rates remaining within a
specified range
• Tariffs being allowed to follow a
specified formula (where tariffs are set
or approved by a government
entity).

Force majeure compensation clauses The government may commit to compensate

the private party for damage or loss due to
certain specified force majeure events. These
are typically limited to those events for which
insurance is not commercially available, which
may include certain natural disasters.

Termination payment commitments The government may commit to pay an

agreed amount should the contract be
terminated due to default either by the
private party or by the government on their
obligations under the contract, and to take
control of the project assets. Typically, the
defined payment is lower in case of private party
default.
Credit guarantees The government may guarantee repayment of
some, or all the debt taken on by the project
company if the project company itself
defaults on the debt, regardless of the reason
for the default.
2.32 Three types of guarantees are provided in PPP projects. They are summarized in the figure
below:

47
 Figure 13: Types of Guarantees in PPPs

2.33 Common reasons for failure of PPPs are presented in the figure below. It is important to
understand such reasons for designing sound PPP projects.

48
 Figure 14: Reasons for Failure of PPP Projects

PROJECT PREPARATION
2.34 The formulation of development schemes should be a continuous process and should not
only be undertaken when required for the preparation of the project. Such project proposals
should be prepared in the prescribed format of the PC-I by incorporating maximum information
to justify public financing. The proposal should be prepared in consultation with the relevant
stakeholders including beneficiaries of the schemes. In some of the projects relating to service
delivery and operations of infrastructure, community and civil society organizations may also be
given an appropriate role in the implementation and governance of the project. In pursuance of
Section 14 (1) of PFM Act, 2019, all development projects shall be prepared in conformity with
prescribed processes/ procedures and templates formulated by the Planning Commission and as
amended from time to time.

49
UNDERSTANDING THE DIFFERENCE BETWEEN DEVELOPMENT AND
NONDEVELOPMENT EXPENDITURE

2.35 In general, expenditure on the establishment of new facilities (works, goods, and services)
is regarded as developmental, while expenditure on ordinary maintenance and running of the
existing facilities is treated as non-developmental and should be provided for in the non-
developmental requirements of the respective government departments. For example, the
existing level of expenditure on the agricultural extension services or research, etc., is treated as
non-developmental; so is the ordinary expenditure for routine maintenance of roads, canals,
buildings etc. All O&M expenditure on raw materials, spare parts and fuels is also to be treated
as non-developmental.
2.36 The concept of development expenditure is based on the premise that a development
project or programme supported by such expenditure will (i) enlarge and/or improve the physical
resources of the country, (ii) improve the knowledge, skills, and productivity of the people, and
(iii) promote efficiency in the use of available resources.
2.37 The distinction between development and non-development expenditures does not necessarily
reflect on the similar character of various activities. Similarly, the concept of development expenditure
should be kept separate from the question of project financing. The sectoral classification of development
expenditure in Annexure 4 provides guidelines for project expenditures, which should be treated as
developmental.
2.38 All development projects will or will not help with reducing climate risks or vulnerability
or strengthen national climate resilience. - all these projects that help reduce carbon emission or
help reduce the GHG emissions will contribute Pakistan’s climate mitigation efforts. Likewise, all
projects that strengthen Pakistan’s capacity to cope with extreme weather events such as (floods,
droughts, GLOFs, landslides, tropical storms, mudslides, landslides, snowstorms_ or help slow
down, reduce or enhance the capacity to cope with the slow-onset of climate change such as
increasing temperatures, variations in precipitation or rain patterns, resuothg in cropping
patterns will be considered adaptation related projected. Many adaptation projects will have
mitigation co-benefits and vice versa.

50
2.39 Climate Change will have impact on these developmental and non- developmental
aspects. CHIRA will help identify the potential impacts and their level of severity, as well as the
adaptive capacity and readiness of various components of concern.
2.40 The following tables presents an example of 25 adaptation project ideas in five key areas,
that will have mitigation benefits as well as economic technological, institutional social
environment and geo-physical areas meeting multiple SDG targets.
Table 8 : Climate Change 2022- Impacts, Adaptation and Vulnerability: Summary for Policy
Makers 10

10
Taken from IPCC
51
52
Table 9: Climate Change 2022- Impacts, Adaptation and Vulnerability: Summary for Policy Makers

53
LINKING PROJECTS TO RESOURCES
2.41 All sponsoring ministries/divisions/agencies must structure their priorities according to
available resources and avoid over-ambitious programmes beyond their absorptive and
implementation capacity. Therefore, all sponsoring agencies before preparing a project and
submitting it to the Planning Commission must ensure the availability of adequate resources in
the Plan and PSDP. Concurrently, the ministries/divisions are advised to ensure that the available
resources are not thinly spread over many projects, including low priority projects. The NEC, in
its meeting held on 10th June 2013, directed that the ECNEC and CDWP must ensure availability
of funds while approving development projects/schemes11 (Annexure 5). Further, under clause
(a) of Section 17 of the Public Finance Management Act, 2019, only technically approved projects
from the relevant forum shall be considered for inclusion in the demands for grants.

PC-I PROFORMA
2.42 The Planning Commission proforma I (generally called PC-I) is the primary project
document, and its preparation is a key step in project preparation and processing. The sponsoring
agency is expected to spend adequate time and resources in preparing this document to avoid
complications during project implementation resulting in delays in project completion and cost
overruns. The PC-I is used both for new projects and revision of ongoing projects. The Proforma
comprises of three parts:

i. Part A is the Project Digest, which requires basic project information, that
is, project title, location, sponsoring and executing agencies, project
description, justification and technical parameters, project cost and
completion period, physical and financial phasing, the status of a
feasibility study, and project objectives, plan, and sector strategy
linkages.

ii. Part B is Project Requirement, which includes project scope,

11
Planning Commission, ‘Assurance of Availability of Funds for Development Projects’, Notification No.21(1)
PIA/PC/2013, Islamabad, dated 26 June 2013.

54
 employment generation, management structure and manpower
requirements, the status of surveying and mapping and land acquisition
activities, and responsibility of operation and maintenance of project
assets after project completion.

iii. Part C is Appraisal and Analysis, which needs information on project

quantifiable benefits (financial, economic, social), revenue or income
generation after project completion, financial and economic analysis and
results, sensitivity and risk analysis, stakeholder consultation analysis,
environmental and social impact assessment (including climate
change, adaptation, mitigation & co-benefits assessment, and Clean
Development Mechanism (CDM) assessment), and disaster reduction
analysis. Only the Project Digest (with additional information) is required
to be submitted for the revised projects

2.43 There are additional proformas for preparing project summary for the ECNEC and working
paper for the CDWP, for both new and revised projects.

2.44 The following attachments are required to be annexed to the PC-I:

i. Certificate regarding the conduct of feasibility study
wherever applicable, which must include
technical/reference design, bill of quantities, etc.
ii. Environment Impact Assessment.
iii. Questionnaire for an assessment of the CDM potential in public sector
projects.
iv. CDM eligibility test for assessment and identification of a project in the
public sector.
v. Checklist for disaster risk reduction.
vi. Climate Screening Checklist, for public sector/PPP projects
vii. CHIRA conducted. (Refer to Appendix D for CHIRA methodology)
viii. Certificate that the project is not of a devolved subject
ix. Certificate that option for Private, PPP and VGF are considered and
none of these options available for project financing.

2.45 After preparation of the PC-I, the PAO signs the PC-I/PC-II certifying that “the project proposal has

55
been prepared on the basis of instructions provided by the Planning Commission for the preparation of
the PC-I of the concerned sector projects”. Thereafter, the PC-I or PC-II is to be submitted to the PIA
Section of the planning commission, which circulates it to the members concerned of the CDWP, including
the technical section concerned for their review and appraisal. (The appraisal process has been addressed
in the following chapter.) The PC-I proforma, along with detailed instructions are available on the Planning
Commission’s website12 and placed in Annexure 6.

KEY COMPONENTS OF PC-I

2.46 The PC-I preparation requires a large amount of data collection and analysis. It is important that
the required information is prepared and entered in the PC-I proforma with due care and diligence to
avoid repeated revisions during the project appraisal, review, and approval stages. The key components
of the PC-I are discussed in the following sections.

Project Objective
2.47 Every project must have a project development objective along with inputs, outputs, and
outcomes (the results chain), project components and activities to be implemented within a specific time
and cost, along with a monitoring framework. While preparing a project, it is important that the project’s
objective(s) must be aligned with the objectives, goals and targets set out in the currently operative
perspective growth strategy, Five-Year Plan or Annual Plan. The project must have a clear linkage with the
economic development policies of the government, including the relevant sector policies, strategies, and
master plans (as applicable). The project objectives should be linked to the SDGs indicating the specific
Goals, being addressed by the project. A relationship of the proposed project and its specific contribution
(in quantifiable terms) with other projects (completed or ongoing) in the same sector or sub-sector, must
be highlighted in the project document.

Project Description
2.48 The description of a project should provide information about its key features, components (both
hard and soft) and technical aspects. It should also include its justification and rationale, in addition to a
brief account of similar interventions, any feasibility study, and relevant government policies, sector
strategy, and plans of the past. The technology proposed to be adopted for the project and the source of

12
www.pc.gov.pk

56
supply of machinery and equipment should also be mentioned. It should also be stated whether the
project output would be used for import substitution, for export promotion or for meeting the increased
domestic demand or a combination of these.

Project Location
2.49 Regarding project location, due consideration should be given to the area and population to be
served by the project, the economic, environmental, and social characteristics of the project area, and the
income and other attributes of the beneficiary population. The location analysis should include the
following:

i. The rationale for the selection of a proposed project

ii. Place and administrative district where the project is located.

iii. Geographic Information System-based map(s) of the project area with the
Global Positioning System coordinates

iv. Reasons for selection of location.13

v. Availability/acquisition of land and other physical inputs needed for

the project.

vi. In the case of mega projects and water sector projects, a separate PC-
I for land acquisition should be prepared, if required. (Annexure 50).

vii. In case of projects involving the provision of buildings, plans

(including architectural drawings) prepared by a licensed
engineer/architect should be attached to the PC-I.

viii. The social and environmental impacts of the project, including

climate change.

13
Many projects have suffered tremendously in the past due to improper site selection done in haste. It results in
cost overruns and delays in project completion. Project implementation also suffers due to delay in land
acquisition. Therefore, the availability of land needs to be assured as part of the site selection process. In selecting
the location, area, and population to be served by the project, the income and social characteristics of the
population need to be assessed. Similarly, the economic characteristics of the area i.e., present facilities and
availability of inputs and regional development needs need to be considered.

57
Project Scope
2.50 The sponsoring agency should ensure that the project scope includes only the project
requirements necessary to achieve the envisaged objective. The scope of the project must be clearly
mentioned. While presenting it, the sponsors should indicate, in quantitative terms, the proposed
facilities and services, which would result from its implementation. In addition, the project sponsor should
provide information on:
i. Demand for project output, with its basis.
ii. Existing position regarding capacity and actual supply of output.
iii. The gap that the project is going to fill between supply and demand.
iv. Project lifespan to develop appropriate indicators (adaptation indicators
are sensitive to project lifespan)

CHANGE IN PROJECT SCOPE

2.51 Once approved, the executing agency is required to implement the project in accordance with
the PC-I provisions. It has no authority to change or modify any approved parameter of the project. If the
project executing agency determines (based on detailed justification) that the project cannot be
implemented under the approved parameters and it requires revision of scope, physical components or
financial allocation, a revised PC-I must be submitted to the competent forum for approval. No
expenditure may be incurred on additional scope, beyond the approved scope and cost of the project,
and if it is done, it will be considered as an inadmissible and illegal expenditure.

Inventory of Machinery and Equipment

2.52 All proposals for the procurement of machinery and equipment by the government departments
or agencies should be accompanied by an inventory of the existing pool of the machinery and equipment
held by them. For example, whenever a provision of a new vehicle is made in a development project, the
ministry, department, or agency concerned should furnish a supporting document, a complete inventory
of the existing vehicles both on the development and recurring side, along with their date of purchase, to
justify the purchase of new vehicles.

Project Cost
2.53 The cost estimates of a project must be prepared with due care and diligence so that these only

58
require revision on an exceptional basis and project implementation is not delayed due to the non-
availability of funds. Besides, the cost debitable to the development budget must be distinguished from
the cost debitable to the revenue budget. The Pakistani Rupee (PKR) equivalent of the Foreign Exchange
Component (FEC) of projects should be worked out based on the ‘Bank Floating Average Exchange Rate’
of the relevant currency as shown on the website of the State Bank of Pakistan (SBP) for the month
preceding the one in which the PC-I and PC-II were submitted to the Planning Commission (Annexure 7).

2.54 The following guidelines for cost estimation will generally apply to all projects:

i. Total cost of the project with local component and FEC (loan/grant)14

ii. Item-wise breakup of the total cost (Rs. in million)

iii. Unit cost (attach specifications)
iv. Comparison of the unit cost of the project with other
similar projects of the sector/area (in case of variations,
detailed reasons/justification be given for cost
estimation) using Composite Schedule of Rates
(CSR), Schedule of Revised Rates (SRR).
v. Date of preparation of cost estimates (Indicate if these are still valid).
vi. The cost of imported items available in the local market
must be reflected in the local component and not in
the FEC component.
vii. Annual Operating and Maintenance (O&M) cost and authorities
responsible for it, after completion of the project
2.55 The PC-I must also clearly show the component- and item-wise annual breakdown of the costs
over the project period as shown in the table below.
Table 10: Item wise Breakdown of Project Cost by Year

Item Year 1 Year 2 Year 3

Total Local FEC Total Local FEC Total Local FEC

REVISED PROJECT COST

2.56 The cost estimates must be prepared, which should be based on the current market survey,

14
Indicate source and rate of exchange -PKR vis-à-vis USD

59
updated schedule of rates and pre-tender quotation rather than using across board premium. The
Planning Commission will constitute a committee comprising of representation from Finance, Planning,
and national building /executing departments to develop a uniform single standardized schedule of rates,
updated quarterly like MRS Punjab, substituting existing several schedules or rates by Pak PWD, MES,
NHA etc. for goods/works/services to be procured for development projects by all federal entities.
The project cost may need a revision because of certain factors, which also include a change in
scope during implementation and cost overruns. In case of revision of the project, detailed
justification for changes in scope and cost must be provided separately along-with clear reasons
of revision. Instructions of the ECNEC about project cost revision are presented in Box 1.

PROJECT FINANCING
2.57 The sponsoring agency provides a detailed justification (for example, public good, market failure,
social protection, etc.) why the project cannot be implemented in the private sector or on the PPP basis –
in case the project is proposed to be financed through the public sector. The sponsoring agency then
develops and presents a financial plan of the project in the PC-I. The sources of project funding need to
be presented in clear and specific terms so that there remains no ambiguity or confusion regarding the
financing plan. In case, a foreign agency is committed to financing the project either partly or fully, the
name of the agency with the amount of foreign exchange and local currency committed, is to be
mentioned in the PC-I. The source and amount of funding should be described as follows

60
Table 11: Describing the Source and Amount of Funding in PC-I

61
62
2.58 The economic aspects of a proposed project or programme have a direct bearing on the
development of the economy through the backward and forward linkages. The economic benefits of
projects can enhance production, as well as employment, and increase the value of output due to quality
improvement or other factors. The benefits can also be accrued from reductions in cost or gains with the
mechanization of the production process, decreasing distribution costs and avoiding losses. In the
social sector projects, benefits can be gathered by increasing productivity and earning capacity
through improvements in health, education, and skills. In the infrastructure projects like
transport, benefits can be accumulated with savings in travel time, vehicle operating costs,
accident reduction and on account of new development activity. Projects also have some
intangible benefits, like better income distribution, national integration, national defence or
better quality of life of the rural population, especially in the far-flung and backward areas. The
benefits because of the project and its interventions must be clearly spelt out and quantified as
much as possible

Project Scheduling
2.59 The project implementation schedule must be developed using an appropriate analytical tool
such as Bar Charts, Project Evaluation and Review Techniques (PERT), Critical Path Method (CPM). These
should be incorporated in the PC-I and other project documents. It may be prudent to use software
applications available in the market for this purpose.

Financial Phasing

2.60 The financial phasing of a project is to be given for each fiscal year, related to the physical
work proposed to be undertaken, keeping in view the implementation of similar projects in the past.
It should be as realistic as far as possible. The fund’s utilization capacity of the executing agency must be
kept in view while determining the financial phasing of the project. Physical phasing/implementation
plan of major items/deliverables may be provided, and financial phasing should be derived from it.
Table 12: Financial Phasing of Project Costs

Items Units Year-1 Year-2 Year-3

63
Physical Scheduling of Activities
2.61 The scheduling of activities and the availability of physical facilities are interlinked with the
completion period. The availability of physical facilities, for example, access road, power supply, water, gas,
telephone and other utilities, education facilities, housing, etc., must be ensured. The sponsoring agency
has also to indicate separately what facilities would be available from the project itself and to what
extent these would be available from the public utilities. The scope of work to be carried out should be
investigated thoroughly to facilitate physical and financial phasing as well as supervision. The Work
Breakdown Structures (WBS) and Logic Framework Analysis (LFA) and similar management tools must
be used to conduct the physical scheduling of activities. It may be prudent to use software applications
available in the market for this purpose.

Project Implementation Period

2.62 Time calculated for completion of the project must be realistic. The figure below represents
factors that need to be considered in estimating the project implementation period:
Figure 15: Important Considerations for the Project Implementation Period

64
EXTENSION IN IMPLEMENTATION PERIOD
2.63 The guidelines for extension in the execution period of development projects are given below,
but these will be subject to ‘no change in scope and cost of the project(s)’ (Annexure 8).

i. The PAO of the sponsoring/executing agency may grant time extension in

the execution period of the project till the closing of the fiscal year,
twice in a project’s life, irrespective of the approving forums.

ii. In case of further extension, the provincial and special areas

Development Working Party will be empowered to grant time extension
based on reasons of delay in execution, irrespective of approving forums.

iii. In the case of the federally administered development projects,

further extension in the execution period will be granted by the DDWP of
the ministry/ division concerned based on reasons of delay in execution,
irrespective of the approving forums.

iv. In the case where there is no DDWP, the matter for further time
extension will be presented to the division/chairman office
concerned and a committee headed by the federal
secretary/chairman comprising representatives from the Planning
Commission and Finance Division, an officer not below the rank of
BS-19, will review and grant time extension based on reasons for the
delay in execution, irrespective of the approving forums, if required.

v. In the case of foreign-aided projects, consent of the donor/sponsor

will be compulsory in coordination with the EAD before processing the
case for a time extension.

INTER-AGENCY COORDINATION AND STAKEHOLDER CONSULTATION

2.64 To avoid duplication of efforts and ensure effective implementation of the proposed project, all the
relevant data should be obtained, and the agencies concerned consulted. Box 2 below represents the
case of a health scheme.

65
2.65 The inter-agency coordination is also necessary for the availability of utilities, such as water and
power supply, education facilities and housing. For example, before an industrial scheme sponsored by the
Production Division is undertaken, it is critically important that the clearance of the relevant agency
concerned is obtained for the availability of water supply and other utilities. As decided by the NEC
in its meeting held on the 4th of July 1988 the project document should clearly indicate the
coordination required with the other agencies to facilitate project implementation.

PROJECT MANAGEMENT STRUCTURE

66
Figure 16: Project Management Structure- Part A

67
 Figure 17: Project Management Structure- Part B

APPOINTMENT OF CONSULTANTS FOR PROJECT PREPARATION

2.66 In case local expertise is not available, foreign experts or consultants can be employed to
prepare projects, which are technically and economically viable. Efforts are being made to develop local
consultancy capacity, but in the case of large or sophisticated projects involving new technology, foreign
consultants are usually needed. Most of the large projects in Pakistan are foreign-aided and foreign
consultants may not be excluded from participation in providing the requisite services. However, the
government, to give preference to the local consultants, has decided that the Pakistani consultants
and engineers be given the full opportunity, and they should be the first to be hired for projects for
consultancies in Pakistan before hiring any foreigners. The decision of the ECC for a minimum of 30
percent award of a consultancy contract to local consultants may be strictly enforced. (Prime
Minister’s Order dated 7 November 1993). Moreover, the instructions of the Planning Commission
for the appointment of Consultant is attached at Annexure 51.

68
REQUIREMENTS FOR SUBMISSION OF PC-I IN PLANNING
COMMISSION

2.67 The following are the specific requirements for submission of the PC-I.
i. PCN is duly approved by the concerned Member
ii. Techno-Economic Feasibility Study is carried out.
iii. All PC-Is must be signed by the chairmen P&D boards, additional chief
secretaries (Development) in case of the provincial and special areas’
projects, and federal secretaries/PAOs in case of the federal project.
iv. The provincial and special areas projects, requiring federal financing
from the PSDP (fully or partially) irrespective of the cost, will be sent
to the Planning Commission for consideration of the CDWP, and if
required, by the ECNEC.
v. For the provincial and special areas projects, to be financed either
fully or partially by the federal government, the land will be provided
free-of-cost by the provincial or special areas’ governments.
vi. For the Provincial and Special Areas Projects, 50:50 cost sharing be
insured by the provincial or special areas’ governments as per NEC
approved guidelines (Annexure-52)
vii. The P&D boards/departments of the provincial and special areas,
where necessary, will recommend a scheme for approval of the
CDWP and ECNEC after approval from PDWP/special areas DWP. No
schemes will be sent to the federal government directly by the
provincial departments.
viii. The provincial projects, funded from the provincial governments’
resources, and where no federal assets are utilized, or federal liability
generated are to be approved by respective PDWP. Projects where
water distribution issues are involved, or the Indus River System
Authority (IRSA) certificate is required are an exception to this.

69
ix. In the case of the provincial and special areas schemes submitted to the
federal government and central schemes, copies thereof should be sent
simultaneously to the central administrative ministry and the Planning
Commission.
x. For seeking foreign assistance for the federal or provincial projects
(loan/grant), the requirement of concept clearance from the Concept
Clearance Committee (CCC) will be strictly adhered to. After the firm
commitment of availability of foreign assistance from a donor through
the EAD, the PC-I (along with the feasibility study, PAD, and draft
loan/grant agreement), will be forwarded to the Planning Commission for
consideration of the CDWP/ECNEC. The EAD will verify the availability of
foreign assistance.
xi. The objectives and outcomes of the project will be clearly mentioned in
the PC-I and II. Without detailed designing of civil work and item-wise cost
the PC-I will not be processed.
xii. To minimize and avoid payment of commitment charges, the loan
agreement should only be signed after approval of the PC-I and completing
all other code formalities.
xiii. For foreign-aided projects, land availability will be ensured by the
sponsoring/ executing agency before signing an agreement with donors.
xiv. In the case of a foreign-funded project, the name of the agency and amount
of foreign exchange and local currency committed is to be mentioned in the
PC-I. Similarly, the source and amount of rupee component should be
indicated as government sources, that is, grant, loan, equity, etc.
xv. The objectives of the project must be clearly indicated preferably in
quantitative terms and linked with the five-year-plan targets and growth
strategy of the sector.
xvi. Detailed designing of civil work, including BoQs and location map, will
be mandatory in the PC-I.

70
xvii. The feasibility study should be based on historical as well as current
data. Any study – older than three years – will not be accepted by the
Planning Commission.
xviii. Location analysis should be carried out scientifically
xix. Result Based Management (RBM) indicators, that is, input, output,
outcome, and impact should be clearly indicated in the PC-Is.
xx. Costing of the project should be based on realistic and justified
market prices indicating quantities and unit values and on the basis of
detailed engineering designing. Projects with rough cost estimates will not be
accepted.
xxi. Escalation charges, maximum up to 6.5 percent per annum of the
base cost, will be allowed based on justification from the 2nd year of
the project.
xxii. Contingencies charges, maximum up to three percent of the base
cost, will be allowed based on justification. However, in the case of
the revised PC-I, the number of contingencies will be capped at the
originally approved amount.
xxiii. The sustainability aspect (O&M cost) of the project will be mandatory
to be discussed and addressed with a proper mechanism in the PC-I.
xxiv. The Project Management Unit (PMU) will be set up with well-defined
roles, including TORs of the PD, consultants/experts, and
appointment terms with salary structures.
xxv. The Project Implementation Plan, covering both yearly physical and
financial plan, will be clearly indicated in the PC-I.
xxvi. In case of revised projects, original and revised scope of work
completed and to be done should be stated with item-wise quantities
and expenditures. Reasons for revision should also be given along
with justification.

71
 xxvii. In the case of the 2nd revised PC-I, an inquiry report by the head of
sponsoring agency identifying the reason and responsibility for the
inability to complete the project after the 1st revision will be
attached with the 2nd revised PC-I.
xxviii. Appraisal of submitted PC-I/II will be made simultaneously by all the
members. The technical section will coordinate the compilation of
comments from all concerned and incorporate these in the working
paper, which will be discussed in the PDWP or CDWP meeting.
xxix. While preparing projects and development portfolio ensure
compliance to Sections 13 through 17 of the Public Finance
Management Act, 2019. Project preparation commences with
approval of PCN

Checklist for PC-I

# Checklist items for PC-I Tick as appropriate
1. Confirmation regarding the preparation of the N/A Yes No
PC-Is and PC-IIs on the standard revised format
for different sectors (social, infrastructure and
production)
2. Confirmation and self-explanatory nomenclature N/A Yes No
3. Geographical specific area including reference to N/A Yes No
eco-agricultural zone/s, ecosystems and natural
habitats, other natural resources, socio-
economic conditions (Land-use, land use
change, Major sources of livelihoods and
economic activities, poverty) and recurrent
climate disasters in the area/
4. Location map of the project. Location of project N/A Yes No
is very critical as its vulnerability will depend on
the climate conditions in the region
5. Map and design of a building (if applicable) N/A Yes No
6. Climate rationale for the project stated N/A Yes No
7. Climate change adaptation or mitigation N/A Yes No
objective has been stipulated
8. Clarification about the source of financing N/A Yes No

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9. Plan Provisions for FY in PSDP/ADP Allocation N/A Yes No
10 Inclusion of tangible outcomes N/A Yes No
11 Proper addition of costs including FEC/foreign N/A Yes No
Funded including climate change specific grants and
indicate what percentage of estimated capital cost
will be spent on climate adaptation, mitigation or co-
benefits?

12 Inclusion of responsible agencies for sponsoring N/A Yes No

13 Execution N/A Yes No
14 Operation and maintenance consider climate risks during N/A Yes No
the build itself as well as changes in climate risks
during the planned operation and maintenance phases

15 Routed through proper channel from the ministry/ N/A Yes No

division/province/area concerned
16 Inclusion of effective cost estimation date (schedule N/A Yes No
of rates)
17 Inclusion of implementation schedule with the N/A Yes No
number of years of the project
18 Comparison of financial scope (in case of a revised N/A Yes No
project)
19 Comparison of physical scope (in case of a revised N/A Yes No
project)
20 Inclusion of RBM indicators climate-specific N/A Yes No
indicators (depending on nature of the project,
appropriate mitigation and/or adaptation
indicators)
21 Confirmation of signatures of the responsible officer N/A Yes No
concerned at column 15 of the PC-I (federal PAO/
provincial ACS) to provide an attestation that climate
change resilience/ mitigation assessment has been
carried out by expert and licensed professional

22 Digitally prepared PC-I/PC-II (received) N/A Yes No

23 Annexure of PDWP/DDWP minutes, if applicable N/A Yes No
24 Annexure or directives (President/PM), if applicable N/A Yes No

73
 23 Determination of the principal technical section of N/A Yes No
the Planning Commission
24 Circulation of copies of the PC-Is, PC-IIs to members N/A Yes No
of the CDWP and sections’ chiefs of the Planning
Commission for comments/scrutiny
25 Annexure of CHIRA conducted N/A Yes No

ROLE OF DEVELOPMENT WINGS OF LINE MINISTRIES/DIVISIONS

2.68 Development Wings in Line Ministries are established in the line ministries of the federal
government to facilitate interaction amongst Principal Accounting Officers (PAOs), Planning Commission
(Technical Sections, CDWP, APCC and other meetings), Finance Division, AGPR, Project Directors, and
other important stakeholders involved in the development process. These wings play an important role
in all stages of the project cycle i.e. project identification, feasibility, implementation, closure and
evaluation. They also perform role as a secretariat of DDWPs, where projects upto Rs. 1000 million are
submitted for the approval. These development wings shall be strengthened and where the Project
Management and Evaluation cells exists, those shall be raised to wing level by posting the professional
staff from M/o PD&SI.

STANDARD FUNCTIONS OF THE DEVELOPMENT WINGS IN LINE

MINISTRIES
1. Coordination with all the concerned Departments/ stakeholders for preparation of Annual Plan,
Five Year Plan, Pakistan Economic Survey, and material for Yearbook.
2. Maintain the record of PC-IV and submission of the PC-IV and PC-V to M/o Planning
Development & Special Initiatives.
3. Update the information of PSDP Projects on the website of line ministries if directed by PAOs.
4. Assist the Project Directors/PMU in the matters of Appropriation/Reappropriation of Accounts
of PSDP funded Projects.
5. Monitoring of PSDP funded projects and verification of monthly reports on the Project
Monitoring & Evaluation System (PMES).

74
 6. Assist the Project Directors/PMU in preparation and submission of New Item Statements (NIS)
/ Budget Orders (BO) of PSDP projects in the Planning, Development & Special Initiatives and
Finance Divisions.
7. Assistance in preparation of PC-Is for all proposed PSDP funded projects of Concerned Division
and releases/authorization of funds.
8. Coordination in administration matters and implementation of all PSDP funded projects of
Concerned Division.
9. Coordination with all the concerned line Ministries/ Departments/ stakeholders for approval of
PC-Is by the approving fora i.e, DDWP/CDWP/ECNEC.
10. Technical input / preliminary appraisal in process of PC-Is preparation before submitting to
relevant competent fora for consideration/approval.
11. Implementation in letter & Spirit the Project Management Policy and ECNEC Guidelines of
Project Management notified by Planning Commission.
12. Preparation of briefs for the APCC, DDWP, CDWP, ECNEC meeting.

STANDARD WORK PROCEDURE AT DEVELOPMENT WING

1. Project is identified. Such identification can be done by a range of entities like:
a. Development Wing under the guidance of Annual Plan, Five-year Plan Documents. These
are plans made by the Planning Commission to give sectoral priorities and ideas for
future projects.
b. Executing Agencies
c. Companies/ Attached Departments under Line Ministries
2. Project is submitted by either of the agencies mentioned above to the Development Wing of
concerned Ministries to be presented to the relevant forum.
a. If project amount is less than or equal to Rs. 1,000 million, Development Wing will
present the project to DDWP, chaired by PAO of line ministry.
b. If project amount is less than or equal to Rs. 7.5 billion, Development Wing will
present the project to CDWP, chaired by Deputy Chairman Planning Commission.
c. If project amount is greater than Rs. 7.5 billion, Development Wing will present the
project to CDWP which will then forward the case to ECNEC.

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3. On receiving the project, the Development Wing peruses each component of the PC-I
document and identifies any observations/issues/duplication/missing documents/
erroneous data etc. In case of any issues, the Development Wing sends the PC-I back to the
agency for revision.
4. The PC-I documents with no issues are put up for approval of the Secretary to be presented
to relevant forum.
5. On approval, focal person of the Ministry/Department uploads PC-I on iPAS for further
processing. In case of DDWP level project PC-I circulated by the DDWP Secretariat to all members
as per approved composition of DDWP. In case of project to be considered by CDWP the focal
person of Ministry/Department will forward the PC-I to PIA section of M/o PD&SI through iPAS
for further processing.

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 CHAPTER 3

PROJECT APPRAISAL AND APPROVAL

OVERVIEW OF PROJECT APPRAISAL

3.01 After submission of the project documents (PC-I and PC-II), technical & Economical
sections of the Planning Commission must undertake project appraisal in collaboration with the
sponsoring agency and concerned associated agencies, before submitting the project for consideration
of CDWP/ECNEC for informed and prompt decision-making15.
3.02 Appraisal of a project includes Techno-Economic feasibility, commercial viability,
institutional management capability, environmental sustainability, social acceptability, risk
management and sensitivity analysis. Comprehensive estimates of project benefits and costs
during the appraisal allow decision-makers to assess the project’s economic and financial
viability. An appraisal may also cause a project to be redesigned or restructured so that it is less
likely to fail.

APPRAISAL STEPS
3.03 Project shall only be considered for approval of CDWP/ECNEC after proper appraisal by
concerned Economic & Technical Sections of Planning Commission. An appraisal involves the following
steps:
i. Preliminary Examination regarding usage of respective template,
proper filling of respective columns, signatures of certificates,
attachment of PCN and other relevant documents (design, detailed
cost estimates etc.) compliance of procedure & instructions to fill
the proformas and uploading on iPas by PIA section.
ii. A careful checking of the basic data, assumptions and methodology
used in project preparation,
iii. An in-depth review of the work plan, cost estimates and proposed
financing and O&M cost

15
At the provincial/special area level, this function is performed by the technical sections of the P&D Boards/Departments

77
 iv. An assessment of the project’s organizational and management
aspects,
v. Validity of the financial, economic, and social benefits to be
accrued from the project.
vi. Concerned Technical Section will prepare Working Paper on the
respective templet.
vii. A pre-CDWP meeting will be carried out under the chair of
respective Member to consider and settle basic observations and
issues before placing it to the CDWP.
viii. On the same analogy, appraisal will be carried out by DDWP.

3.04 Based on such an assessment, a judgment is reached as to whether the project is

technically sound, financially justified, and economically viable. The project will be returned with
the approval of Member/JCE/Sr. Chief if the issues/observations of Pre-CDWP are not addressed
within 14 days. The member/section concerned will submit project to the CDWP for
consideration with clear line-of-action/recommendations whether to approve the project or
otherwise, indicating the major issues not settled in the Pre-CDWP
3.05 The best practices be adopted and common mistakes be avoided as shown in the figure
below:

78
 Figure 18: Best Practices and Common Mistakes in an Appraisal

3.06 The process of appraisal and tentative duration for each step are presented in the figure
below:

79
 Figure 19: Steps in Appraisal Process (Breakdown of Timeline)

3.07 If required, modified PC-I/II (in the light of pre-CDWP discussion) shall be submitted by
the sponsors to the technical section concerned before finalization of the working paper for
consideration of the CDWP.

INSTITUTIONAL RESPONSIBILITY
3.08 According to Sections 14, 15, and 16 of the PFM Act, 2019 (as amended from time to
time), the Planning Commission16 is mandated to:
i. Ensure that all development projects are prepared in conformity
with procedures, processes and templates defined by it,
ii. Undertake the cost and benefit analysis and risk assessment of all
development project proposals, above a threshold size prescribed
by it, and,
iii. Ensure quality assurance of all development project proposals,
which exceed the total cost of the specified thresholds. Such quality
assurance shall be undertaken by an individual/body, which is

16
The respective P&D Board/Department exercises this function with respect to projects in the provincial/special area ADPs.

80
 independent of the division/ ministry/ sector that has initiated the
preparation of the development project proposal.
3.09 All development project proposals shall be subject to a technical approval process, which
shall only be granted to projects which are compliant with the standards and procedures set by the
Planning Commission. Findings and recommendations of the independent quality assurance
reports, cost and benefit analysis and risk assessment (where required as per sub-section (2) section
14 of the PFM Act, 2019), shall be considered by the project approval forums while considering the
development project proposals.

ANALYTICAL ASPECTS OF PROJECT APPRAISAL

3.10 The project appraisal requires an examination of project soundness from diverse
perspectives17. These are represented in the figure below:
Figure 20: Analytical Aspects of Project Appraisal

Financial (including
Technical Economic commercial for
revenue generating
entities)

Institutional (including
organization and
Environmental/Climate
management)

Technical Analysis
3.11 Analysis for determining the technical viability of the development project is based on the technical
data and information given in the PC-I form as well as prior experience of carrying out similar projects.
The technical tests and yardsticks to be used to determine the technical viability differ from project to
project and sector to sector. In cases where high-level technology is involved and the country has

17
The detailed methodologies for project analysis and appraisal vary significantly from sector to sector (e.g.,infrastructure, social sectors,
economic sectors etc.) and fall outside the scope of this manual.

81
little or no experience, foreign consultants may be engaged to prepare the Techno Economic
feasibility studies.
3.12 This analysis concerns the project’s input (supplies) and output (production) of real goods
and services. For example, in an agricultural project, technical analysis will determine the potential
yields in the project area, the co-efficient of production, potential cropping patterns, and the possibilities
for multiple cropping. The technical analysis will also examine the marketing and storage facilities
required for the successful operation of the project. Aspects like soil, groundwater or the collection of
hydrological data may also be examined. Knowledge about farmers in the project area, their current
farming practices, and their social values to ensure realistic choices about technology is also examined.
The respective Member will lead & support in Technical Analysis.

Institutional Analysis
3.13 A range of issues, addressed in project appraisal, pertain to the overlapping institutional,
organizational, and managerial aspects of the project, which have a direct bearing on project
implementation and sustainability. The project proposal should respond to questions in the checklist
below:
Table 13: Project Appraisal Checklist

# Checklist Yes/No
1 Is the project institutionally sound and does adequate capacity exist for
its successful implementation?
2 Is the exercise of managerial authority balanced with
accountability for results and does the organizational set-up
encourage delegation of authority?
3 Are the functional (and reporting) relationships between the project
entity and its parent organization (ministry, division, agency) and
other planning, regulatory, and oversight bodies clearly defined?

4 Does the proposed project organization conform to the national laws,

regulations, and operational procedures as well as the
requirements of the external funding agencies?
5 Is the proposed project staffing commensurate with the project
requirements?

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 6 Are training arrangements in place to ensure sustainable operation
and maintenance of the project after the construction phase?

5. Does the project clearly articulate climate adaptation, mitigation

and co-benefits that will help reduce country’ vulnerability?

6. Does the institutions have the capacity to adapt or make changes

to the project design based on the adaptation/resilience and/or
mitigation assessments
7. Is there need to include additional stakeholders to address critical
issues such as climate change

3.14 Other questions may be added to the checklist above. The analysis includes an action plan
to rectify the identified institutional and organizational deficiencies and proposes an appropriate
management structure for the project. The respective Member will lead & support in the Analysis

Social Analysis
3.15 This analysis is a process that aims to identify social dimensions of projects, different stakeholders,
and their perspectives and priorities. It considers social aspects such as involuntary resettlement,
indigenous peoples, physical cultural resources, human health and safety and gender. It examines
aspects like poverty reduction, income distribution and employment creation and impacts on
special groups such as minorities, and less developed areas. Another aspect of a social analysis is
how the project is contributing to the attainment of relevant SDGs18 in national or sub-national
contexts. Briefly, the objectives of a social analysis are to:
i. Contribute to project sustainability by ensuring that it responds to
the needs of the individuals, communities, and areas served and
affected by it,
ii. Ensure project effectiveness by tailoring institutional arrangements
to the local culture and values,

18
The Sustainable Development Goals (SDGs) are a call for action by all UN member countries to promote prosperity while protecting the planet.
They recognize that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs
including education, health, social protection, and job opportunities, while tackling climate change and environmental protection. The 17 Goals are
all interconnected and aim to leave no one behind by 2030. Pakistan was the first country to adopt SDGs 2030 agenda through a unanimous
resolution of parliament. The seven pillars of Vision-2025 are fully aligned with the SDGs, providing a comprehensive long-term strategy for
achieving inclusive growth and sustainable development. Additional information available at: https://www.un.org/sustainabledevelopment/sustainable-
development-goals/

83
 iii. Make projects more inclusive by involving not only the immediate
beneficiaries but a diverse community of stakeholders (especially
the parties adversely affected by the project), and,
iv. Take into consideration the political economy of the project.
The respective Member will lead & support in the Analysis

Environmental/Climate Analysis

3.16 The environmental analysis evaluates a project’s potential environmental risks and
impacts in its area of influence. The environmental analysis considers the natural environment
(air, water, and land) and transboundary and global environmental aspects, with a special focus
on climate change (both mitigation and adaptation aspects).
3.17 The main objective of this analysis is to identify the ways and means to prevent, minimize,
mitigate, or compensate for adverse environmental impacts of a project and to enhance its
positive impacts. This includes consideration of project alternatives as well as measures to
improve project selection, siting, planning, design, and implementation. Wherever feasible, the
preventive measures are preferable to mitigatory or compensatory measures.
3.18 This analysis should take full cognizance of the national environmental action plans,
legislation and regulations, and obligations of the country under the relevant international
environmental treaties and agreements. As with the social analysis, the environmental analysis
should show how the project is contributing to the SDGs. The respective Member will lead &
support in the Analysis

Financial and Commercial Analysis

3.19 This analysis involves assessment of financial impact, judgement of efficient resource use,
assessment of incentives, provision of a sound financing plan, coordination of financial contribution, and
assessment of the financial management competence. The main objective of this analysis is to determine
the requirements of funds, timing, and the expected returns on investment as per various parties
involved in the financing of the project.

3.20 Under this analysis, judgement is framed about the project’s financial efficiency, incentives,
credit worthiness, and liquidity. Costs and benefits are calculated using current market prices. Taxes in the

84
form of excise and customs duties and sales taxes are included in the cost, while subsidies and loan receipts
are considered benefits and are fully accounted for in the analysis19.
3.21 The commercial aspects of a project (especially for revenue-generating entities) include the
arrangements for marketing the output produced by the project and the supply of inputs needed
to build and operate the project. On the output side, careful analysis of the proposed market for the
project’s production is essential to ensure that there will be an effective demand at set price. It needs to
be ensured that adequate input supplies are available for the efficient operation of the project. The
respective Member will lead & support in the Analysis.

Economic Analysis
3.22 This analysis aims to ensure that scarce resources are allocated efficiently, and the project
investment brings net benefits to the country while contributing to the welfare of its citizenry. Not
only should the proposed project investment contribute to the developmental goals of the country,
but also be large enough to justify the use of scarce resources such as capital, skilled labour, managerial
talents, etc., which are needed to implement and operate the project. All resource inputs used by a
project have an opportunity cost because, without the project, they could create value elsewhere in
the economy. An economically viable20 public sector project should meet the following key
requirements:
i. That it represents the least-cost or most efficient option among all the
feasible alternatives to achieve the intended project outcomes.
ii. It generates an economic surplus above its opportunity cost21.
iii. It will be sufficiently funded and have the necessary institutional
structure for successful operation and maintenance.

19
In financial analysis, the discount rate (DR) is the commercial interest rate, that is, the rate at which capital is obtained (borrowed) for the project.
For government-funded projects, the DR is fixed by the Budget Wing of the Finance Division for the development loans and advances on the yearly
basis. The provisional rate of mark up,fixed by the Finance Division, for the fiscal year (2017-18) was 6.54 percent. In case, the project is funded by more
than one source, the financial analysis is carried out on the Weighted Average Cost of Capital (WACC) for each project. If the project is financed by a
foreign grant, the financial analysis is undertaken at zero DR.
20
The metrics used for assessing the economic viability can be divided into two groups based on: (i) discounted cash flows: Net Present Value (NPV);
Internal Rate of Return (IRR); and Benefit-Cost Ratio (BCR), and (ii) undiscounted cash flows: Pay-back Analysis; Breakeven Analysis; and Unit Cost
Analysis. In cases where project benefits are largely unquantifiable, analytical techniques like Cost-Effectiveness Analysis and Multi Criteria Analysis
(MCA) are used.

21
When benefit can be valued, the project it will generate a positive economic net present value (ENPV) using the minimum required economic internal
rate of return (EIRR) as the discount rate, i.e., the project has an EIRR higher than the discount rate.

85
 iv. There is a strong rationale for the public sector to finance the project22.
3.23 Moreover, the project should distribute benefits and costs consistent with its intended
development objectives, and that it can internalize the environmental (including climate change) impacts.
In the economic analysis, input and output prices are adjusted to reflect true social or economic values.
These adjusted prices are often termed as shadow or accounting prices23. The taxes and duties are
treated as transfer payments and are excluded from the capital and operating cost. The economic
analysis also entails two key considerations, that is, the pricing of project inputs and outputs, and the
identification of project costs and benefits. The respective Member will lead & support in the
Analysis.

PRICING OF PROJECT INPUTS AND OUTPUTS

3.24 In the economic analysis, the valuation of inputs and outputs can be made keeping in view the
following three rules:
i. Most of the inputs in the economic analysis are valued at opportunity
cost or on the principle of willingness to pay. It is assumed that all inputs
to the project are diverted away from alternative uses and each input
generally has value in alternative use. Every input to the project is
valued at this opportunity cost, that is, the value of the input in its best
alternative use.
ii. For some final goods and services, usually non-traded ones, the
concept of opportunity cost is not applicable because it is a
consumption value that sets the economic value. This criterion is called
‘willingness to pay’ or ‘value in use’.
iii. The analysis is done at present, that is, constant prices. This is due to the
reason that the current price analysis entails the prediction of the inflation rate,

22
The public sector may also be viewed as a project investor of last resort; public sector financing may only be considered in instances of market
failure, provision of public goods, and where private sector finance is not available.

23
The term conversion factor refers to the multiplier used to convert market values to values at shadow prices for general categories of expenditure
- consumption, nontraded goods, and services, and so on.

86
 which is difficult and unreliable24.
iv. Identification of project costs and benefits

PRINCIPLE OF ‘WITH AND WITHOUT’ PROJECT ANALYSIS

3.25 An important principle followed for the correct quantification of costs and benefits is the ‘with
and without’ project comparison of costs and benefits. The analysis tries to identify and value costs
and benefits that arise with the proposed project, and to compare them with the situation as it would be
without the project. The difference is the incremental net benefits arising from the project investment.
This approach is not the same when comparing the situation ‘before’ and ‘after’ the project. The ‘before
and after’ comparison fails to account for changes in production over the life of the project, which will
occur without the project; thus, leading to an erroneous statement of benefits attributable to the
project investment. A change in output can also occur without the project if production would fall in the
absence of new investment. In some cases, an investment to avoid a loss might also lead to an increase
in production so that the total benefits will arise partly from the loss avoided, and partly from increased
production.

SHADOW PRICES
3.26 Market distortions result in market prices being different from the value of a
product/service unit to the economy. A private entrepreneur does not take such deviations and market
distortions into account, but the government must. Thus, the government must estimate a set of prices
that reflect both opportunity costs as well as societal objectives and apply these to the projects’ inputs
and outputs, i.e., costs and benefits. These prices are called shadow prices or accounting prices. In
economic analysis however, the shadow prices must be used instead of the market prices used in the
financial appraisal. Just as in the Financial Analysis NPV, IRR and BCR are used for economic analysis as
well.

24
In economic analysis, the time value of money is specified as the discount rate (which is effectively the same as an interest rate or the opportunity
cost of capital). The DR is defined as the rate at which the value of the numeraire (net benefits) declines over time. The real rate of discount = (1+i)/
(1+p), where ‘I’ is the nominal rate and ‘p’ is the annual average rate of increase in price and may be estimated (as first approximation) as the difference
between the public long-term borrowing rate minus the rate of inflation. In general, real discount rates range between 10-20 percent. However, 15
percent is generally thought as the minimum target for most public-sector projects, though in the case of certain long-gestation projects (water
resource, forestry) a lower discount rate may be appropriate.

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NET PRESENT VALUE

3.27 Net present value (NPV) is the difference between the present value of benefits and present value
of cost. NPV of a project can be calculated by discovering net cash flows at required rate of return and
deducting initial investment.

3.28 When investments occur at various time intervals, they are accounted for in the cashflows as
cashflows are calculated by subtracting payouts from deposits.

3.29 A project with positive net present value is accepted and with negative net present value is
rejected. If NPV = 0, it means that there is no loss but also no benefit on investment. If NPV < 0, There is a
loss on investment and the project is not feasible. If NPV > 0, There is a gain on investment and the
project is feasible. A project should be chosen only if NPV is greater than 0. If a choice must be made
from between competing projects, then the project with the Highest NPV must considered. These
rules are also summarized below:
Figure 21: NPV Key Rules

3.30 NPV is calculated as under:

88
3.31 NPV Exercise- Scenario 1: Limited Access (Toll) Highway Project Assumptions:
i. Discount rate = 10%,
ii. Life of Project = 10 years
iii. Capital Cost = Rs. 100 billion
iv. O&M cost = Rs. 40 billion
v. Revenue = Rs. 245 billion

Table 14: NPV Exercise 1

Year Capital O&M Total Revenue Net NPV

Cost Cost Benefit/Loss
1 30 0 30 0 -30 $18.78
2 30 0 30 0 -30
3 40 0 40 0 -40
4 4 4 20 16
5 5 5 25 20
6 5 5 30 25
7 6 6 35 29
8 6 6 40 34
9 7 7 45 38
10 7 7 50 43
Total 100 40 140 245 105

3.32 NPV Exercise- Scenario 2: Limited Access (Toll) Highway Project Assumptions:
i. Discount rate = Increased from 10% to 15%

89
 ii. Life of Project = 10 years
iii. Capital Cost = Rs. 100 billion
iv. O&M cost = Rs. 40 billion
v. Revenue = Rs. 245 billion
Table 15: NPV Exercise 2

Year Capital O&M Total Revenue Net NPV

Cost Cost Benefit/Loss
1 30 0 30 0 -30 ($1.72)
2 30 0 30 0 -30
3 40 0 40 0 -40
4 4 4 20 16
5 5 5 25 20
6 5 5 30 25
7 6 6 35 29
8 6 6 40 34
9 7 7 45 38
10 7 7 50 43
Total 100 40 140 245 105

INTERNAL RATE OF RETURN

3.33 IRR is that discount rate which sets the NPV of a project to 0. IRR must be thus compared with
the opportunity cost of funds (prevailing discount rate) to find if the project is feasible or not. If the
discount rate and IRR are equal it would mean that the project is on breakeven point and the decision
to implement the project would depend on other factors.

Where,
r = internal rate of return
CFn = net cashflow in period n

PAYBACK PERIOD

3.34 A project is accepted or rejected based on years that a project requires to recover the money

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invested in it. Payback period is the measure of project capital recovery. As per this technique the quicker
the recovery of initial investment the more desirable a project. The formula of the payback period is as
follows:

3.35 Further, there are two basic techniques for economic appraisal i.e., Cost Benefit Analysis (CBA)
and Cost Effectiveness Analysis (CEA).

COST BENEFIT ANALYSIS

3.36 Through Cost-Benefit Analysis (CBA), different approaches to achieving the project’s benefits are
assessed and compared to determine which approach is the most beneficial.

3.37 For different approaches, the stream of economic benefits is identified, quantified, and monetized
in net present value terms. These are then compared with the respective stream of economic costs (that
include the accounting cost and the opportunity cost) in net present values. The net benefit is assessed
and the option with the highest net benefit is selected as the approach to the project.

COST EFFECTIVENESS ANALYSIS

3.38 Cost effectiveness analysis is an analysis of the operational efficiency of a project. It is to

determine the least expensive approach to achieving a result, from two or more alternatives.

3.39 This approach is most used when it is difficult to monetize the economic benefits from a project,
e.g., number of lives saved from polio vaccinations. For such projects, different approaches are
evaluated by comparing the cost-effectiveness ratio:

3.40 The option with the lowest CE ratio is the preferred option.

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BENEFIT COST RATIO CRITERION

3.41 Also sometimes called the profitability index, the benefit-cost ratio, is the ratio of the NPV of
the net cash inflows (or economic benefits) to the NPV of the net cash outflows (or economic
costs):

i. If the ratio is less the one the project is not feasible,

i. If the ratio is greater than one the project is feasible
i i. If the ratio is equal to 1, the project would breakeven.

3.42 The BCR however does not take in account the scale of the project or the magnitude of the returns
and may mislead the decision maker in such cases.

RISK ASSESSMENT

3.43 This assessment is an important part of the project appraisal process as it helps to identify the
strengths, weaknesses, opportunities, and threats likely to affect project execution. The risk
assessment involves understanding potential project problems and how these might impede the
achievement of the project objectives. Risks can be negative and positive. The negative risks include
delays in completing work as scheduled, increases in the estimated costs, supply shortages, litigation,
strikes, etc. The positive risks include completing work sooner and/or cheaper than planned,
collaboration to produce better products, good publicity, etc. Risk identification is the process of
understanding what potential events or conditions might impede or enhance a particular project. This
is an ongoing process throughout the project lifecycle as things progress and change. The
unidentified risks cannot be managed; therefore, risk identification is of paramount importance.

Risk Management Planning

3.44 This planning involves the following elements:

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 i. Methodology: How will risk management be applied
to the project? What tools and data sources are
available and applicable?
ii. Roles and responsibilities: Who are the individuals
responsible for implementing specific tasks and
providing deliverables related to risk management?
iii. Budget and schedule: What are the estimated costs and schedules
for
performing risk-related activities?
iv. Risk categories: What are the main categories of risks
to be addressed by the project? Has a project risk
register been prepared?
v. Risk probability and impact: How will the
probabilities and impacts of risk items be assessed?
What scoring and interpretation methods will be
used for the qualitative and quantitative analysis of
risks?
vi. Risk documentation: Which reporting formats and processes will be used
for risk management activities?

Limitations of Project Appraisal

3.45 The shortcomings in project appraisal can adversely affect the investment decision- making
process. Some of these limitations are:
i. Quality of analysis depends on the quality of data and forecasts made
about costs and benefits. Over-estimation of benefits and
underestimation of cost are quite common to get the project approved.
ii. Conventional project economic analysis is best used where benefits or
major parts thereof are measurable and can be quantified. In cases
where project benefits (for example, health, education, rural
development, social protection, etc.) and externalities (for example job
creation, skill development, technology transfer, pollution etc.) cannot be
quantified, the cost-benefit analysis may not be applicable. In such cases,
the Multi-Criteria Analysis or Cost-Effectiveness Analysis may be used
for the justification of a project.

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 iii. Due to uncertainty about the future, it may not be possible to
quantify the project risks. The sensitivity analysis is one way to examine
the strengths of a project against potential risks.
iv. There are other ways for resource allocation, which are equally important
and effective, such as price policies, tariff policies, exchange rate policy, and
interest rate policy. These may be used to aid decision-making in project
selection.

Project Approval Overview

3.46 The project approval follows the satisfactory completion of the project preparation and appraisal
processes and marks the completion of the second stage of its lifecycle.

APPROVAL PROCESS REQUIREMENTS

3.47 Each sponsoring agency is required to submit digitally prepared PC-I or PC-II – duly signed by the
PAO or provincial chairmen of the P&D boards or additional chief secretaries (Development) – to the
Planning Commission for circulation to the members of the CDWP for examination and review. “NEC
decided that last date for submission of PC_I to the MoPD&SI shall be 31st March, every Year. After the date no PC-
I shall be entertained/accepted”. (Annexure 54) As soon as the PC-I or PC-II is received by a member of the
CDWP, PDWP or DDWP, its examination is conducted as per guidelines of the ECNEC, approved in
its meeting of the 24th April 2000 (Annexure 9). The ECNEC guidelines provide for a six-week time
limit for scrutiny of projects in the Planning Commission and submission to the CDWP. This duration has
been reviewed and further reduced to 5 weeks in the light of ECNEC recommendation dated 1st
October, 2020 with following breakup:
i. Three weeks for the preliminary appraisal,
ii. One weeks for replies to the queries to the Planning Commission
by the sponsoring agency, and
iii. One week for holding a pre-CDWP meeting to resolve outstanding
issues with the sponsoring agency.
3.48 The Planning Commission, on the directions of the ECNEC, as per its notification of 2013, has

94
informed that it would consider the inclusion of a project in the agenda, which is of urgent nature
provided that the PC-I has been received at least two weeks before the CDWP meeting.

3.49 The Planning Commission must ensure that the PC-I has been prepared correctly and
according to the prescribed procedure. In case, the PC-I is found deficient may be returned to the
sponsors by the Planning Commission. If considered necessary, the Division may make a consolidated
enquiry from the sponsors concerning deficiencies in the proforma and seek clarification or additional
information in the pre-CDWP meeting.

APPROVAL OF PROJECTS
3.50 All development project proposals are subject to a technical approval process. The PC-Is’ of all
development projects shall be approved by the respective competent forum and will be termed as
Technical Approval. This approval is only granted to projects found compliant to the standards and
procedures of the Planning Commission. In pursuance of Section 16 (1) of PFM Act, 2019, Technical
Approval (TA) shall be granted by the relevant fora i.e. DDWP, PDWP, Special Areas DWP, CDWP and
ECNEC for implementation/execution of projects based on detailed design/estimates. The competent
forum in compliant with the requirement in Manual for Development Project will approve the project. The
minutes of the meeting will be the TA followed by issuance of Authorization and Administrative
Approval. The standards and procedures for TA shall be as under:
i. Project objectives aligned with country’s development strategy/ plan/
sector strategy.
ii. Project addresses the sectoral issues properly.
iii. Need assessment carried out and incorporated in project document.
iv. Project activities fall under the category of development in nature.
v. Activities are aligned with project objectives.
vi. Options through PPP mode to finance/execute the project explored and
preferred.
vii. Cost estimates prepared on the basis of feasibility study and quality of
feasibility study endorsed by the sponsoring agency and/or verified by a
3rd party.

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viii. Unit cost of project components provided, and cost estimates are
competitive
ix. with prevailing markets rates/ departmental approved rates.
x. No duplication / overlapping of project activities with other ongoing
project
xi. (s) activities of the sector.
xii. Stakeholders’ consultation on the project carried out and input
incorporated.
xiii. Lesson learnt from previous sectoral interventions incorporated.
xiv. Technical viability and efficancy endorsed and confirmed.
xv. Specific, measurable, attainable and time bound KPIs provided.
xvi. Economic, financial, social and employment cost/benefits provided in
project document and aligned with objectives.
xvii. Sustainability mechanism after completion provided in PC-I.
xviii. Project assets management and procurement plan provided.
xix. Project management and governance structure and responsibility chart
provided in PC-I.
xx. Financial and other risks mitigation measures covered in PC-I.
xxi. Environmental /climate risks Assessment, Adaptation, resilient &
mitigation measures covered in plan strategy.
xxii. Activities chart/ implementation plan along with Financial Plan provided in
PC-I.
xxiii. Project employee’s salary package conversant with Finance Division
approved pay package or otherwise.
xxiv. Specification of equipment along with cost estimates and TORs of
consultants/ consulting firms provided.
xxv. Supply-demand analysis for inputs and outputs of projects incorporated.
xxvi. Yearly financing demand of PC-I and availability of financing requirements
by the Planning Commission and Finance Division.

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3.51 In accordance with of Section 17 (1) of PFM Act, 2019, no development project shall be considered
for inclusion in demands for grants that has not been granted TA (technical approval). TA shall be attached
with the request for inclusion of project in the PSDP/ADP. Further, in accordance with Section 17 (2) of
PFM Act, 2019, no development project shall be considered for inclusion in demands for grants unless
it is provided with a budget allocation for all coming years which fully reflects the proposed project cost
for each year of project life. Such yearly allocations will be protected every year. Each Ministry/Division
will ensure appropriate provision for budget allocation for first year and for subsequent years as per
approved phasing of PC-Is. New project will be proposed only if the indicative budget ceiling (IBC) permits
cushion after providing budget allocation, minimum as per approved annual phasing, for ongoing
projects. The draft PSDP proposal for each portfolio will be presented to CDWP before APCC in last
quarter, for appropriate decision if IBC is insufficient to provide required allocation to all ongoing
projects or to accommodate new projects to be selected/funded from portfolio / competing new
Technically approved projects’ list.

PROCEDURE FOR MEETINGS OF VARIOUS FORUMS

3.52 The Planning Commission is the Secretariat of the CDWP, which normally meets fortnightly
or as and when required through notification circulated by PIA section. The ECNEC, however,
generally meets once every six weeks or as and when required. The agencies represented on the CDWP
are required to circulate their comments to each other well before the CDWP meeting so that the
discussions are informed, and schemes are cleared expeditiously. The ECNEC, in its meeting held on the
1st of October 2020, approved that the Planning Commission will define and enforce specific
timelines for each stage of the PC-I processing and approval. The Commission and P&DDs will
maintain an updated list of received PC-Is on their websites.
3.53 The minutes of the CDWP meeting are recorded by the relevant technical section of the
Planning Commission. After approval by the chair, minutes are circulated to all concerned including
the sponsoring agency. The agencies, represented on the CDWP, are expected to take the action required
of them without waiting for the minutes. The decisions of the ECNEC, in respect of the public sector
development projects, are unclassified unless especially made classified by the Cabinet Division.

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GENERAL INSTRUCTIONS/GUIDELINES FOR PROCESSING AND
APPROVAL OF PC-I
3.54 The following are the general instructions and guidelines for the submission and processing
of the PC-I:
i. If any project could not be placed on the agenda of the CDWP in six months, the PC-I/II
will be reviewed by the technical section for updated cost and scope. No approval ‘in
principle or conditional’ would be made to avoid delay in implementation.
ii. If the project does not start functioning within 12 months of its approval or does not
achieve financial close, then it will be reconsidered by the approving forum.
iii. To avoid frequent revisions, no proposal for revision in cost or scope will be brought within
two years of approval/execution of a project. Same will apply for every subsequent
maximum three revisions. Strong justification would be needed, otherwise.
iv. Changes in the scope of work and cost beyond 15 percent of the original approved
PC-I/PC-II will require revise approval by the competent forum.
v. As notified by M/o PD&SI on the 7th of October 2021, no case of ex-post facto
approval will be processed for consideration of any forum. (Annexure 47)
vi. A summary of the approved cost would be part of the authorization letter and
administrative approval. A copy of the approved and signed PC-I/II, along with a
copy of administrative approval, will also be sent to the AGPR and Auditor General
for record and reference.
vii. After approval of the project from the CDWP or ECNEC, the concerned technical
section of the Planning Commission will provide a copy of the approved PC-I (in soft
form) to the PIA Section of the Planning Commission for its record. Issuance of
authorization and placement will be done on the PC website through the Jawwad Azfar
Computer Centre (JACC).
viii. A project, in parts or phases, will not be accepted. After completion of a project and
submission of completion report on the PC-IV, a fresh PC-I for any new project would
be submitted and processed based on evaluation and lessons learnt.
ix. A summary for the ECNEC will be prepared by the concerned technical section of the

98
 Planning Commission within two weeks after a recommendation by the CDWP.
x. Steering Committee, under any project, will not be authorized to approve subprojects
or alter the scope of the project. For such changes, approval of a competent forum
would be required.
xi. While approving projects the respective forum should also investigate the yearly
financial phasing and if necessary, seek assurance by the sponsors.
xii. While approving projects, the relevant forum should also investigate the
implementation capacity of the organization and seek assurance by the sponsors,
if necessary.
xiii. Projects to meet operational/recurring expenses will not be approved by the development
fora.
xiv. The administration will not be allowed cars in development projects. Only limited
operational vehicles, according to the nature of the project, would be considered for
approval while considering the existing resources.
xv. The concerned member of the Planning Commission will ensure that the scheme has
been prepared on sound lines in accordance with the approved PCN and the
necessary economic, financial, and technical scrutiny has been carried out. It also must be
ensured that all the information required in the proforma has been furnished, and the
relevant documents, such as project reports, maps, and plans, have been made available.
xvi. The appointment of an independent PD is allowed for ECNEC approved projects,
only. For all other development projects, sponsors may initiate, if necessarily
required and duly justified, the appointment of independent and full-time PD for
approval of CDWP.
xvii. The representation of other federal ministries in the CDWP (not below the Additional
Secretary level) is required to ensure that the officers can represent their respective
ministry/division well for the schemes under consideration.
xviii. Meetings of the CDWP shall be held with the specific agenda, to be circulated, in
advance, by the Secretary CDWP/Chief (PIA), Planning Commission.
xix. The time taken in the examination of a scheme by an agency should not exceed two

99
 weeks. Where an undue delay in examination occurs on the part of any agency, the
concerned technical section of the Planning Commission may submit the working paper
within five weeks indicating the position.
xx. It was noticed by the ECNEC on the 24th of April 2000 that sponsoring agencies
submit the PC-I at the eleventh hour and by showing some urgency, they put pressure on
the Planning Commission to include the project on the agenda of the CDWP. Resultantly,
proper examination could not be done. It was, therefore, directed that no project will be
included in the agenda if not received at least five weeks before the CDWP meeting.
xxi. Minutes of each meeting should be recorded by the concerned technical section of
the Planning Commission/Planning Commission and after approval of the chair, circulated
to all concerned. The agencies represented at the meeting should, however, be
expected to take the action required without waiting for the minutes.
xxii. Effort should be made to clear a scheme at one meeting. Where this is not possible, the
scheme should be considered at the successive meetings until it is disposed of. Steps for
approval of projects from the DDWP/CDWP/ECNEC are explained and given in Annexure
10 to 12.
xxiii. After the recommendation of a scheme by the CDWP, the agency (ies) concerned should
initiate compliance (if required) and submit a report within a week so that the technical
section may prepare and submit a summary for the ECNEC consideration.
xxiv. The time taken for the submission of a summary for the ECNEC should not exceed two
weeks. Where an undue delay in compliance occurs on the part of the agency, the
concerned technical section may submit the scheme to the forum indicating the
position.
xxv. Authorization of the project should be issued within three working days of issuance of
the approved minutes.
xxvi. For the social sector, only those projects may be considered for approval which help
in achieving plan objectives and SDGs.

Pre-CDWP Meeting
3.55 To avoid lengthy discussion on the detailed comments of various agencies represented in the

100
CDWP, the pre-CDWP meetings are held to resolve the outstanding issues in the federal schemes
under the respective member or senior chief or chief of the Planning Commission. Representation
from the sponsors below a Grade-20 Officer or equivalent is normally not accepted25.

Anticipatory Approval
3.56 The Chairman ECNEC has powers to allow execution of a scheme in anticipation of its formal
approval by the ECNEC. The request for anticipatory approval has to be submitted to the Cabinet
Division for consideration by the Chairman ECNEC on the respective prescribed proforma for new and
ongoing projects (Annexure 13). The request for an anticipatory approval should be signed by the secretary
of the division concerned in the case of the federal schemes, and by the chairman P&D board or ACS
(Development) in case of the provincial schemes.
3.57 It may be noted that the grant of anticipatory approval falls in the category of ‘extraordinary
jurisdiction’, and this power cannot be redelegated for reasons of uniformity of treatment, and to maintain
financial discipline and control.
3.58 All cases of the anticipatory approval, irrespective of the cost involved, must be submitted
only to the Chairman ECNEC for approval.

ADMINISTRATIVE APPROVAL AND ACCOUNT OPENING

3.59 Administrative approval and account opening take place as follows:

Figure 22: Administrative Approval and Account Opening Process26

25
Planning Commission, ‘Holding of Pre-CDWP Meeting in Planning Commission’, No.24(4) PIA-I/PC/2016 Islamabad, the 28 June 2016.

26
The procedure for opening an assignment account is given in Asaan Assignment Account Procedure (Local Currency), 2020 document
accessible here: https://www.finance.gov.pk/budget/Asaan_Account_Local_Currency_2020.pdf

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CONCEPT CLEARANCE OF FOREIGN-ASSISTED PROJECTS BEFORE
LOAN/AID NEGOTIATIONS
3.60 In many cases, proposals for seeking foreign assistance are sent by the sponsoring agencies for
approval of the Concept Clearance Committee (CCC) without sufficient detail and proper examination.
After careful review of the concept clearance procedure, the following guidelines were framed
(Annexure 15):

102
Figure 23: Guidelines for Proposals Seeking Foreign Assistance

103
3.61 The ECNEC, in its meeting of the 1st of October 2020, approved that the concept clearance of
priority projects provided by the Planning Commission will be an authorization for obtaining donor
commitment and preparation of project documentation in consultation with donors, and an indication of
its subsequent approval by the competent forums, subject to fulfilling required technical and financial
conditions.

Procedure for Approval of Programme Loans and Budget Support Financing

3.62 The government of Pakistan receives foreign assistance from multilateral sources (World Bank
and Asian Development Bank) and bilateral sources in two forms, that is, project financing through
bilateral and multilateral sources and programme loans only from multilateral sources. In case of
project financing, the PC-I is approved by the relevant competent forum and development funds are
made available to finance these projects through the PSDP or ADP (in case of the provincial projects).
The programme loans fall outside the PC-I purview as the financial assistance provided is for budgetary
and balance of payment support.
3.63 The International Financial Institutions (IFIs), especially the World Bank (WB), has introduced
hybrid financing instruments, which combine elements of both a project and a programme. These new
financial instruments of the WB, include Programme for Results (PforR), Development Policy Credits
(DPCs) and Financial Intermediation Programmes (FIPs). These instruments are designed mainly to target
policy and institutional reforms, while a part of financing also goes for technical assistance. These
instruments mainly contain performance indicators, set by the donors, which are based on disbursements
for budgetary support, while only a small portion is allocated for expenditure on base-activities. It was
noted that if the requirement of the PC-I were applied to PforR, FIPs and DPCs, disbursement of critically
needed funds from the IFIs would be significantly delayed.
3.64 To address the above issue, the NEC approved the following guidelines (Annexure 14):
Table 16: NEC Approved Guidelines for Foreign Funded Projects

# Checklist Mark ✓
if done
1 The relevant executing agencies shall obtain concept clearance of the
proposed programme(s) from the CCC housed in the Planning
Commission and communicate the same to the EAD.

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 2 On receipt of the concept clearance, the EAD will formally
request the development partner to seek funding support.
3 The development partner will prepare the Programme Appraisal
Documents in consultation with the sponsoring and executing
agencies and share these with the EAD for negotiations.
4 Before initiating loan negotiations, the EAD will seek clearance of the
programme loan agreement from the Ministry of Law and Justice and the
Finance Division.
5 Loan negotiations shall be conducted with the development partner after
the concept clearance by CDWP. The EAD, Finance Division, Planning
Commission, Law and Justice Division and relevant sponsoring agency and
executing agency will participate in the negotiations.
6 The EAD may, on completion of negotiations, move a summary for
approval of Chairman ECNEC, before signing the programme loan
agreement.
7 For TA parts of the PforR and FIPs, these shall subsequently follow the PC-
I by the respective executing agencies before the release of funds into the
assignment account/project account.

FINANCIAL MANAGEMENT
PSDP Funds
3.65 The PSDP is funded through the annual budget. It includes specific allocations for the projects
and programmes included in the PSDP, inclusive of government funds, foreign loans and grants, and any
other sources as approved by the government. The operational framework and procedures for
authorization and management of the PSDP funds are described in the following sections.

AUTHORIZATION OF PSDP FUNDS27

3.66 The Planning Commission has been entrusted with the responsibility to authorize the release
of development funds to the PSDP-funded projects. For this purpose, comprehensive guidelines are
prepared in consultation with all the stakeholders, ministries, divisions, including the Finance Division,
Accountant General Pakistan Revenue (AGPR), the provincial and special area governments. These

27
Regarding the provincially executed projects, the Ministry of Finance will continue to release funds as per the existing rules.

105
guidelines are regularly updated and issued from time to time by the Finance Division28 (Annexure 16)
The Planning Commission authorizes the release of development funds per release strategy
issued by the Finance Division at the start of every fiscal year.
3.67 If the authorization is not issued for want of modified PC-I in compliance of
DDWP/PDWP/CDWP/ECNEC decision, within 90 days of approval of the project, and subsequently
administrative approval is not issued within 15 days of approval of the project, a fresh approval from the
forum will be required.

FINANCING MECHANISM

3.68 The financing mechanism is as follows:

i. The release of funds is made according to funds release strategy of the Finance
Division.
ii. The federal government may not commit financing of the social sector and
agriculture-related provincial projects as those are the constitutional
responsibility of provinces after the 18th Constitutional amendment.
iii. Throw-forward of PSDP should ideally not exceed threefold of the current
PSDP.
iv. Commercial oriented/industry related projects in the public sector should be
considered on the PPP/PSDP+/private investment mode. For this purpose, the
techno economic feasibility studies for the commercially oriented projects,
above a certain threshold, should include PPP Option Analysis, PPP Risk
Assessment and PPP Value for Money Analysis. The feasibilities should also
feature themselves as ‘bankable’ feasibility studies.
v. Financing of all projects, which have commercial orientation, should be kept
outside the PSDP for private sector intervention.
vi. No block allocation, except for the special areas (AJ&K and GB) may be kept under
the demand of any ministry.

28
Finance Division, ‘Revised Release Mechanism for Funds Allocated for The Public Sector Development Programme (PSDP) 2019-20’,
Islamabad, dated 16 July 2023.

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vii. No token allocation to any project should be allowed in the PSDP as it increases the
overall throw-forward.
viii. The financial phasing for the life of project will be considered by the FD during the
approval of projects.
ix. Project-wise and sector-wise throw forward will be reviewed during the
quarterly review of the PSDP.
x. Rules for disbursement of foreign loans/grants are to be framed in consultation with
the EAD and Finance Division.
xi. Information will be provided on the PSDP proforma by the federal ministries/
divisions and provincial governments and SOE’s for allocation of funds.
xii. The strategy and procedure for the release of the PSDP funds are notified by the
Finance Division and the Planning Commission on yearly basis with a prime focus on
ensuring timely availability of funds and optimum utilization of the allocated
amount.
xiii. The Planning Commission and Sponsoring Agencies shall devise a division-wise and
project-wise strategy for release of funds for the PSDP within the appropriations
approved by the National Assembly and included in the Schedule of Authorized
Expenditure in terms of Article 83 of the Constitution.
xiv. The Planning Commission, in coordination with the Finance Division, has
curtailed unnecessary steps and requirements involved in release to spur the flow
of funds to the project authorities to avoid cost and time overrun of the project.
xv. The Finance Division issues release strategy for development funds at the start of every
fiscal year. Any relaxation to the release strategy shall be considered by the Budget
Wing, Finance Division on the recommendations of the Planning Commission.
xvi. For every line ministry, the budget set forth in the PSDP is determined by the
project details and the funds are allocated accordingly. These funds are released
by the Planning Commission in the form of quarterly releases. The AGPR’s SAP
system is updated with the details of transfer. The PAO then decides on the
release of funds for each project.

107
3.69 The funds release procedure has been further simplified and streamlined. Its main features
are shown in the figure below:
Figure 24: Funds Release Procedure

Figure 25: Funds Release for Federally Sponsored Provincial Projects, and Financing of NHA
Projects

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3.70 In line with the above-noted release strategy and procedure, the Planning Commission is
authorizing upfront development funds to undertake development expenditure within permissible
quarterly limits of rupee allocation of ministry/division/ agency concerned.
3.71 The Planning Commission, in consultation with the Finance Division, have empowered
respective ministries/divisions/agencies to issue release sanction as per the requirement of the
project(s) while remaining within the overall quarterly rupee allocation ceiling of the respective
ministries/divisions/agencies. In case any ministries/divisions/ agencies require more than

109
permissible quarterly funds, the additional amount can be facilitated by the PD&SI subject to
availability as well as the justification of the projects. The ministries/divisions will not release
additional funds to any project over and above the approved cost through internal adjustment. All
re-appropriations will be referred to the Planning Commission as per procedures.

3.72 All ministries/divisions will be responsible for updating the Project Monitoring and Evaluation on
iPas of each project by the 10th of the following month.

3.73 The PAO will ensure before issuing sanction letters for the release of funds to
development projects that all codel formalities/pre-requisites should have been completed and
adhere to the requirements of para 89 of GFR and para 13, VII of System of Financial Control and
Budgeting 2006.
3.74 The obligation of authorizing the release of funds by the Planning Commission is mainly
to the extent of the rupee component of the PSDP. The foreign exchange component can be
directly disbursed to the recipient projects and programmes by the respective development
partners. The Economic Affairs Division (EAD) compiles this data. The Planning Commission
regularly updates the foreign assistance disbursement status in accordance with the data issued
by the EAD. To maintain transparency and provide user-friendly information for researchers,
academia and the public, release data in respect of each sponsoring agency is uploaded monthly
on the official website of the Planning Commission, http://www.pc.gov.pk
3.75 The provinces get their share of resources as per the NFC Award and after the 18th
Amendment in the Constitution of Pakistan they are required to execute projects in the social
sectors. As a result, the special packages by the federal government are generally announced in
rare circumstances. Projects within approval limits of DDWP even if they are special packages, be
approved by the DDWP under the line ministry. Beyond that limit projects will be submitted to
CDWP.

PSDP REVIEW MEETINGS

3.76 At the end of each quarter of the ongoing fiscal year, a progress review meeting of the PSDP is
held. In the review meetings, the implementation status of the previous review meetings are reviewed

110
along with the previous quarter physical and financial progress. For each ministry or executing
agency, project-wise progress is analyzed. The necessary adjustments with a focus towards near
completion/high impact in the allocation of funds are allowed according to the pace of work and
utilization where necessary with a view to steer the projects towards optimal and efficient utilization of the
development funds. The project authorities are required to implement the decision of the review
meetings in letter and spirit. However, the PAOs will ensure regular monthly review of project wise
progress and monitoring of ongoing projects.
3.77 In view of PFM Act 2019, identification of Core Projects have been initiated and funding
availability mechanism have also chalked out which is at Annexure 60.

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 CHAPTER 4

PROJECT IMPLEMENTATION

OVERVIEW OF PROJECT IMPLEMENTATION

4.01 The achievement of project objectives and actualization of benefits depends on effective
project implementation according to the approved scope, cost, and time of the project. This crucial
stage in the project cycle consists of a set of actions in parallel or sequence, whereby the project
concept and design are implemented on ground. For achievement of the stipulated targets and
tangible returns it is imperative to entrust the management of the project with staff who are
competent and reliable with relevant qualifications and experience.

ROLE OF SPONSORING AND IMPLEMENTING AGENCIES

4.02 The project sponsors secure funding for projects from the development budget and choose
an executing/implementing agency.
4.03 The executing/implementing agency is the entity charged with the responsibility of successful
completion of the project’s components which include:
i. Completion of all preparatory studies.
ii. Detailed engineering.
iii. Inclusion of surveys, testing, etc.
iv. Preparation of projects/schemes, design specifications, and cost estimates.
v. Securing of all the permits and easements.
vi. The acquisitions of land and right-of-way, site preparation etc.
vii. Procurement of goods and services, construction.
viii. Project management and risk management.
4.04 Common mistakes at implementation level are summarized in the figure below:

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 Figure 26: Frequent Mistakes at Implementation Level

4.05 For smooth implementation of projects, the following guidelines may be adhered to:
i. While making the decisions to include projects in the PSDP, the PAOs should prioritize
existing projects instead of suggesting new projects.
ii. If the cost of the project exceeds 15% of the approved budget at the time the contract
is being awarded, PC-I will be revised immediately and should be submitted for approval
of the competent forum.
iii. If the project cannot be completed within the approved time frame, get the desired
extension from the relevant forum following the laid down procedure already
circulated by the Planning Commission, and such extension should invariably be sent to

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 the Planning Commission, Finance Division and in case of the foreign-aided projects, to
the EAD also.
iv. The PAO will ensure efficient allocation of funds under the project and their timely
utilization to achieve the approved and desired objectives.
v. Separate accounts of each project should be opened with separate account books for
each project.
vi. If expenditure in one head is expected to exceed the allocated amount, the
appropriation of funds should be approved by the PAO prior to incurring the excess
expenditure.
vii. An independent PD will be appointed in all projects with the maximum authority as
per prescribed procedure and guidelines issued by the Planning Commission time to
time.
viii. In the case of core projects, the project authorities will appoint a PD, along with
skeleton staff at the concept stage to coordinate the design and consultation with key
stakeholders in the preparation of project documents and PC-I, as per requirements.
ix. In the case of a foreign-aided project, a full-time PD will be appointed whose
salary/remuneration will be met from the project account, and the PD will not be
transferred without informing the DDWP/CDWP during the currency of the project.
x. The sponsors will ensure all appointments transparently. A representative of the
Planning Commission and Finance Division will be included in the hiring committee for
the selection of the PD.
xi. All the remaining appointments should be made by the PAO concerned, in
consultation with the PD, through transparent and approved procedures.
xii. The PD and staff will not be entitled to use project vehicles if the monetization facility
has been availed by the officer/s concerned.
xiii. The PAO of the sponsoring agency will notify and assign financial and administrative
powers to the PD, within 30 days, for implementation of the project as per the approved
PC-I document.
xiv. The sponsoring agency will evaluate the performance of the PD on an annual basis,

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and in case of delay in the achievement of targets and objectives, necessary measures
will be ensured under intimation to the approving forum.
xv. Remuneration on the Standard Pay Package for project staff recruited from the open
market on a contract basis for the execution of projects funded from the PSDP will be
paid in accordance with the notification issued by the Finance Division from time to
time.
xvi. The Planning Commission will develop a framework for hiring of consultancy services
for projects.
xvii. The project staff, as per the above arrangement, will be allowed by the PAO
concerned, for six months after obtaining a concept clearance from the CDWP, and
confirmation of the EAD that foreign assistance has been lined up. Any further
requirement will be reviewed by the PAO after the termination of the initial period.
xviii. Work/cash plan will be prepared and implemented as per instructions of the Planning
Commission.
xix. Monitoring of the project must be done as per the RBM indicators matrix in the
approved PC-I to review on a monthly, quarterly, and annual basis.
xx. In case of any issues or problems faced in implementation, corrective measures must
be taken by informing the authorities concerned, including the Planning Commission.
xxi. The monthly expenditure needs to be reconciled with the AGPR/banks.
xxii. Periodic checking of inventory and stocks for timely replenishment will be ensured.
xxiii. Logbooks of vehicles must be maintained.
xxiv. Specific duties of the project team should be assigned unambiguously.
xxv. Information and progress should be updated as per the PMES format of the Planning
Commission.
xxvi. There are generally four types of procurements, namely procurement for goods,
services, works or O&M. All the procurements under the project will be governed under
the Public Procurement Rules 2004, and the relevant regulations and guidelines issued
by the Public Procurement Regulatory Authority (PPRA) on a regular basis.
xxvii.The Project Purchase/Recruitment Committees will be formed, with the approval of

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 the PAO.
xxviii. In the case of the Project Steering Committee (PSC), the PD will ensure regular
meetings of the PSC and the circulation of minutes to all concerned.
xxix. The PD will be responsible for coordination among different stakeholders in case of
implementation of the national programmes and submission of the periodic monitoring
reports.
xxx. In case of depreciation of the PKR, an increase in demand of the FEC will not require
revision of the project (if properly highlighted in the approved PC- I). However, in case
of increase in incoming foreign currency revision of the project from the competent
forum will be required.
xxxi. The PD will highlight problems and issues hindering the successful implementation of
projects in the PC-III proforma.
xxxii.Dis/misinformation will be considered a crime under the project.
xxxiii. As per the existing mandate, Pakistan Public Works Department (PWD) is
responsible for the construction and maintenance of public buildings for which funds
are allocated on yearly basis. However, in case any ministry/division intends to hire any
private party/contractor for construction and maintenance of its physical
infrastructure, as per procedure a prior No Objection Certificate (NOC) from the
Ministry of Housing & Works is required. In the case of delay in NOC, the construction
and maintenance process will be delayed due to constraints with the PWD. The process
of such NOCs should be expedited and resolved by the competent forums.
xxxiv. In the case of other physical assets like plant, machinery, vehicles, etc., each
ministry/division will make its own arrangement for procurement and Operation and
Maintenance (O&M) services to any third party at a competitive price for the
sustainability purpose.
xxxv. The salary and recruitment of the project staff should be in line with the government
rules.

ROLE AND APPOINTMENT OF PROJECT DIRECTOR

4.06 The activation of the project is achieved through an appointment of the PD. The ECNEC on the

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6th May 2011, decided that an independent PD should be appointed only for projects, which are
approved by the ECNEC. For projects below this limit, if an independent PD is required, he/she is to be
appointed by the sponsors, and approval of the CDWP will be required to provide proper justification.
The guidelines, governing the appointment of an independent PD29, are given in Annexure 17.

Selection and Appointment Committee

4.07 The terms of reference of the Selection and Appointment Committee for the PD are as
follows:
i. The Committee will be headed by the secretary of the project sponsoring ministry or
division and include representatives of the Planning Commission (chief or head of the
section concerned), Finance (Development Wing) and Establishment divisions.
ii. In the case of a project jointly financed by the federal and provincial governments on a 50:50
cost-sharing basis, the Chairman P&D Board or ACS (Development) of the respective
province, AJ&K and GB will chair the Committee with representatives of the Planning,
Finance and Establishment divisions.
iii. In case of disagreement among members of the Committee, the matter will be referred to
the Deputy Chairman Planning Commission for the final decision
4.08 The Secretary of the ministry or division concerned may approve the appointment of a PD whose
salary package is equivalent or up to the maximum of MP-III.30 The cases of appointment of an
independent PD carrying emolument beyond MP-III shall be submitted for approval to the Prime
Minister of Pakistan.

Appointment Process

4.09 The following process should be adopted for an appointment of the PD:
i. The appointment of an independent PD, hired on a competitive basis, is mandatory
for projects costing Rs. 3,000 million and above (Annexure 18). As such provision for the
post of a PD should invariably be included in the project PC-I worth over Rs. 3,000 million.

29
Planning Commission, ‘Guidelines for Appointment of Independent Project Director in Development Projects’, Notification No.20(3) PIA-I
PC/2012, Islamabad, dated 5 April 2012.
30
Management Pay Scales were introduced to attract private sector talent or professionals in the Ministries/State Owned Enterprises. It is now
regulated by Management Pay Scales Policy 2020. Generally, MP-III is treated equivalent to BPS 20.
http://www.establishment.gov.pk/SiteImage/Misc/files/Management%20Position%20Scales%20Policy%202020.pdf

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 An additional charge for the posts of large projects will not be allowed to the officers of
line ministries and departments31.
ii. For projects less than Rs. 3,000 million, an additional charge of project posts may be
allowed to officers of the ministries and departments on a case-to-case basis, and the
proposed set up may be included in the PC-I.
iii. The expenses of the PD will be met from the project account and the hired PD shall not be
transferred during the duration of the project.

Mode of Appointment

4.10 The mode of appointment of a PD will be as follows:

i. A PD shall be appointed on a contract basis initially for two years, extendable on yearly
basis subject to satisfactory performance.
ii. The appointment will be made transparently through open merit by an
advertisement.
iii. As per the ECNEC meeting that took place on 1st October 2020 civil servants will be
allowed to compete for the PD positions, and on appointment will apply for a three-
year leave from service32.
iv. An independent PD will be hired or appointed by the Secretary / PAO of the relevant
ministry, based on the recommendations of the recruitment committee comprising
Member (I&M), PC, senior representative (not below the rank of Additional Secretary)
of the Finance Division, Establishment Division, and relevant ministry/division. In the case
of provinces, the committee will be head by the Chairmen of P&D Boards or ACS P&D
Departments. The hiring of other staff of the project is left to the PAOs, in consultation
with the PD 33.
v. Engagement of the retired officer(s) as a PD shall require prior permission of the
government without any exception – for example, the Establishment Division in case of
the retired civilian officers, the Defence Division in case of the retired Defence officers,

31
PPP (Amendment) Act 2021
32
For further clarification refer to Finance Division O.M No. 4(9)R-14/2008 dated 18th April, 2022 (Annexure 21)
33
PPP (Amendment) Act 2021

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 and Law, Justice and Human Rights Division, Supreme Court or High Courts in case of the
retired judiciary officers.
vi. While making an offer of appointment, the following will be provided in the contract
or agreement. Statement of objectives of the assignment should include:
• Responsibilities of the PD stating particulars of the deliverables required from
him/her.
• Responsibilities of the client indicating the types of inputs to be provided to the
PD.
• Duration of the contract indicating completion dates or termination of the
contract.
• The financial provisions reflecting the manner of payment of remuneration, etc.
• General provisions regarding matters, like early termination of the contract by
either party.
• Mode of the periodic performance appraisal of the PD.

TERMS OF REFERENCE OF THE PROJECT DIRECTOR

4.11 Details of the outputs required from the PD should be spelt out which, inter alia, may include
the following:
i. Exercise a strong check on time and cost overruns by monitoring the inputs, processes,
and outputs of the project.
ii. Ensure that proper procedures for reviewing and responding to progress reports are
established and follow that indicate how, what, and when to monitor and evaluate.
iii. Identify risks based on ground realities and formulate a risk mitigation plan.
iv. Prepare and submit reports in the prescribed manner and format including
recommended actions for the decision-making.
v. Work effectively and harmoniously with the project stakeholders (including external
partners) as well as with the project staff.
vi. Develop and use indicators to focus on results and progress of implementation.
vii. Establish and maintain custody of all project documents and prepare and submit

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 project status and completion reports (PC III/IV).
viii. Ensure timely provision of information on the PW-002 and PW-003 proformas to the
Projects Wing.
4.12 The powers of PD are delegated under the Guidelines of Project Management issued by
Project Wing Planning Commission 2008. The relevant paragraphs of these Guidelines are
reproduced in Annexure 19
4.13 The PD will be held accountable for any lapses in the exercise of his/her administrative,
functional, and financial powers. As a team leader, he/she will be obligated to account for all
actions, steps and decisions taken during his/her tenure. He/she will be responsible for the
supervision of project activities, including troubleshooting and best efforts to resolve day-to-day
implementation problems independently within the administrative and financial powers
delegated to him/her. If necessary, he/she may seek help from the federal ministry, division or
provincial government concerned for resolving the issue or problem.
4.14 It is advisable to establish the office of the PD as close to the worksite as possible,
preferably onsite, to ensure their availability to making spot decisions on unforeseen issues and
other ancillary matters.

Qualification and Experience Requirements

4.15 Qualification and experience for the post of a PD:
i. The educational qualification of the Project Director will be broad-based, that is, degree in
Project Management, B.Sc. Engineering or MBA /MPA, MBBS/MPH, Master or BS (4 years)
degree in economics or other relevant field from HEC recognized institutions,
depending upon the nature of the project.
ii. Minimum five years’ experience in project management or implementation, with
sound knowledge of project management fundamentals, particularly the government of
Pakistan’s project planning and management processes and procedures.
iii. Maximum age of 63 years on the date of appointment.

PROJECT MANAGEMENT UNIT AND STAFFING

4.16 The requirements of public administration institutions are rising and projects becoming
increasingly challenging. Managing a project is a complex activity, particularly when it involves many

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people working over a long period of time in collaboration with many stakeholders. This increasing
complexity requires management practices and tools, which ensure efficient use of resources. In this
context, a PMU can be of great value as it will be provided with infrastructure, resources, processes, and
tools necessary for effective project management by leveraging standards, allocating resources, and
establishing communication channels. The ECNEC has approved the Planning Commission proposal of

the 1st of October 2020, that hiring of other staff of the project is left to PAOs with the support of
the PD.

WAIVER OF FRAMING OF RECRUITMENT RULES FOR PROJECTS

POSTS IN MINISTRIES/DIVISIONS
4.17 There is no need to frame recruitment rules for the hiring of project staff as the standard
guidelines for their appointments have been already issued by the Establishment Division (Annexure 20).

STANDARD PAY PACKAGE FOR PROJECT STAFF

4.18 The standard pay package for the project staff, directly recruited for the development
projects 34is given in Annexure 21. The said pay package is effective from the 18th April 2022 for
new as well as the ongoing PSDP projects and is admissible subject to the conditions mentioned
in the above-referenced O.M. of the Finance Division.

Staff for Land Acquisition and Resettlement

4.19 In its meeting of the 1st of October 2020, the ECNEC approved the establishment of a
separate unit comprising 3-5 officials fully trained in each provincial revenue board for land
acquisition and resettlement to facilitate smooth implementation of infrastructure- related
projects.35

CONTRACT MANAGEMENT
4.20 A contract is an agreement between two or more parties creating mutual obligations,
enforceable by law. The basic elements required for the agreement to be a legally enforceable contract

34
Finance Division, ‘Standard Pay Package for the Project Staff Directly Recruited for Development Projects Funded from PSDP’, O.M No. F. 4(9)R-
14/2008, dated 18-04-2022 Islamabad
35
PPP (Amendment) Act 2021

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are mutual assent, expressed by a valid offer and acceptance, adequate consideration, capacity, and
legality.
i. They are commonly used by a PD, works manager, or owner to manage and control
project delivery.
ii. They have added advantage of requiring project sponsors/owners to define their
requirements while making an unequivocal commitment to the project.
iii. Contracts defines the scope of work, the responsibilities, and obligations of the parties to the
contract, the assignment of financial incentives to complete the work, and the nature and
extent of risk to various parties.
iv. The agreements formalize the contract and serves as a legal instrument for contract
verification.
4.21 Contracts are used during all phases of project management.
i. In the first feasibility phase, contracts are formed between the project owner and a
consultant or an engineering or architectural firm to conduct a feasibility and site
selection study.
ii. In the execution phase, a contract is formed between an owner and a contractor.
Effective contract management creates client and customer satisfaction as well as
consolidates a longer-term win-win relationship among all parties involved.
iii. Contracts not only bind the parties to legal obligations and framework, but they are
also instrumental in risk minimization or elimination and can be instrumental in
achieving project success and a long-term relationship. The Fédération Internationale
des Ingénieurs Conseils (FIDIC) – (the Federation of International Engineers and
Consultants) – have provided a detailed list of contracts for various types of works and
the same has been adopted and amended by the Pakistan Engineering Council (PEC).
The best practices from across the world indicated relationship management and
breaking the traditional client and contractor adversarial approach, which is the
leading cause of litigations and delay in implementation.
4.22 The procurement, contract award and contract management go together. The procurement
in the government is governed by the PPRA and its rules, Public Procurement Rules, 2004 and the

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Procurement of Consultancy Services Regulation 2010, which apply to all procurements of goods,
services and works, made by all procuring agencies of the federal government whether within or outside
Pakistan. For infrastructure and engineering works, contracts samples, guidelines and standard forms
are provided by the PEC. For further guidance, the PPRA Rules 2004 and PEC website can be
consulted.

RELEASE OF FUNDS
4.23 The ECNEC, in its meeting of the 2nd October 2019, has simplified the procedure for authorization
of release of the PSDP funds to ensure timely availability to the executing agencies/project authorities
without originating demands by the ministries concerned.36 In addition, the PAOs have been made
more responsible in ensuring timely completion of all code formalities such as authorization and
administrative approvals, valid execution period, extension in execution period, updating the PMES,
approved cash/work plan monitoring, observations, cost overruns and effective utilization of funds
that have been released to the project authorities before the issuance of the sanction letters for the
release of funds to development projects and undertaking expenditure. All ministries/ divisions will
be responsible for updating the PMES System of each project by the 10th of the following month.
(Refer to Chapter 3 for details on release of funds and financing issues.)
.

PROVISIONS OF PUBLIC FINANCE MANAGEMENT ACT (2019) FOR

SMOOTH IMPLEMENTATION OF PROJECTS AND MAINTENANCE OF
PUBLIC ASSETS
4.24 In pursuance of Section 19 (1) of PFM Act, 2019, every Ministry and Division shall include in its
demands for grants adequate funds dedicated for operation and maintenance of the physical
infrastructure assets under its supervision. Every PAO will ensure yearly stock taking of its assets and
their optimal utilization. They will intimate under their signature to PMO and PC, by 30 September,
every year.
4.25 In pursuance of Section 19 (2) of PFM Act, 2019, for provision of adequate amount for O&M
cost in current budget for maintenance of the assets, a committee shall be constituted by Finance
Secretary and its recommendations shall be presented to CDWP within one month. As the country

36
The respective P&D Board/Department exercises this function with respect to projects in the provincial/special area ADPs.

123
progresses, the size of the O&M budget should be progressively increased and the size of the PSDP
gradually decreased on attaining the higher stages of development. The committee shall also define
“adequacy requirements” for the following categories of infrastructure expressed as the ratio of
annual provision for maintenance and current value of the asset. Categories of infrastructure:
i. Dams
ii. Roads
iii. Bridges
iv. Buildings (a) Office & (b) Residence
v. Electrical Installation
vi. Mechanical Installation
vii. Strategic assets/Installation
viii. Vehicles/Aero planes/vessels, etc.
ix. All others assets
4.26 In pursuance of sub-section 1 of Section 20 of PFM Act, 2019, the Principal Accounting
Officer shall ensure maximum possible returns on each and every asset falling under the
respective Ministry/ Division, Provincial Governments and Special Areas Departments. For the
purpose, all PAOs shall ensure annual stock taking of all assets and make it compulsory part of
their “Yearbook”. A committee under the chairmanship of Secretary Finance with Secretary PD
&SI, Secretary EAD, Chief Economist/Member (EP), Member (PSD&C) and CEO-PPPA shall be
constituted to deliberate upon stocktaking of the assets by PAOs and optimal utilization for
maximum returns thereof.
4.27 In pursuance of sub-section 2 of Section 20 of PFM Act, 2019, the returns on public asset will
include utilization of the asset for delivery of one or more public services or a financial return accruing
to the Government from utilization of the asset. Possibilities will be explored by PAOs for their Optimal
utilization through PPP mode or collaboration for bearing/sharing O&M cost with “not for profit
organizations” as well as profit organizations. All body corporates /authorities /autonomous bodies
shall utilize their assets for self- reliance and sustainability.
4.28 In pursuance of sub-section 3 of Section 20 of PMF Act, 2019, with a view to achieving the
maximization of returns on public assets, government shall establish sovereign wealth funds

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through an Act of Parliament. The objective of sovereign wealth fund is to act as a holding institution
for public assets, which can bring to bear sound management and exploitation of opportunities for
the maximization of returns from the public assets.

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 Chapter 5

PROJECT MONITORING

PROJECT MONITORING
5.01 Monitoring, evaluation and reporting of development projects shall be carried out
according to Section 18 (2) of PFM Act, 2019. Project monitoring assumes critical importance after
the project launch and remains an essential activity during the project implementation period until the
project completion. Monitoring implies checking and assessing the implementation status of a project,
programme, or plan regularly. It is carried out with the active participation of the project management.
The process of observing or monitoring the implementation progress of the project helps in the
identification, analysis and removal of bottlenecks and expediting actions when the implementation has
stalled or fallen behind schedule. This enables the project management team and the planners to complete
the project within the approved cost, scope, and schedule. Monitoring has a cost so selective projects must
be chosen for monitoring which have exceeded their approved cost, scope, and schedule, or are facing
bottlenecks.

MONITORING AND EVALUATION

5.02 The monitoring of the development projects or programmes should be done internally by
the PD and sponsoring/executing agency. The sponsoring/executing agency may also hire third-party
consultants for monitoring of the project. Planning Commission’s Monitoring Wing will do monitoring of
selective projects. The PC-III proforma (see Annexure 22) along with PW-002 and PW-003 proformas is
used for monitoring implementation progress. In pursuance of Section 18 (1) of PFM Act, 2019, the
following mechanism shall be adopted for the monitoring of project during implementation:
i. Regular internal monitoring shall be made by the Project Directors and Consultants
appointed by the Sponsors of Federal Ministries/Departments, Provincial
Government and Special Areas in respect of their projects and will share monthly
progress with Planning Commission through PMES.
ii. Quarterly monitoring shall be made by Sponsor of Federal Ministries/ Departments,
Provincial Government and Special Areas in respect of their projects and will share
the progress report with Planning Commission.

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 iii. Third Party Monitoring shall be undertaken by Projects Wing of Planning Commission
along with Heads/ Reps of Technical Section by using latest monitoring tools,
techniques, and analytics in the following manner:
• Desk & field Monitoring under yearly action plan.
• Quarterly progress stocktaking reviews at provincial headquarters/
clusters level and development of data sheet of issues and risks for
course correction.
• Mid Term Monitoring of Core projects.
• Monitoring of specially assigned projects.
iv. Planning Commission shall undertake progress review of projects as per following
schedule:
• Monthly progress reviews by Member I&M based on PMES.
• Quarterly Progress reviews by respective Member and presentation to
DCPC.
• Midyear Review by DCPC.
• Full Year reviews by DCPC.
v. Projects Wing will involve all provincial and Special Areas P&D Departments in periodic
M&E of federal funded projects. The Provincial and Special Areas P&D Departments will
share Monitoring Reports with Planning Commission for progress review of federal
funded projects.
vi. Project Planning, Monitoring & Evaluation Cells in Ministries/Divisions will be
strengthened for regular data sharing and feedback to Planning Commission.
vii. Capacity building through trainings will be planned and organized.

5.03 In its meeting of the 1st of October 2020, the ECNEC approved the following institutional
arrangements for the project monitoring.37
i. The primary responsibility for the implementation of the project and coordination with
relevant stakeholders rests with the PD, who will hold regular on-site review
meetings on monthly basis to address operational issues and submit the minutes to

37
PPP (Amendment) Act 2021

127
 the PAO to keep him informed on project activities.
ii. The PAO/head of department will regularly monitor the performance of ongoing projects
under his control. The PAO will chair the monthly review meetings schedule of which
to be issued in advance at the beginning of the year. He/She will share the minutes of the
review meetings with the Planning Commission, P&DD concerned and EAD. The Planning
Commission will collate the information and share it with the Prime Minister’s Office.
iii. The PAO is authorized for financial decision making so the primary responsibility for project
monitoring lies on the line ministry. The Planning Commission has a monitoring wing,
but their responsibility is secondary in nature to the line ministry.
iv. As per the Rules of Business 1973, programming and mobilization of foreign economic
assistance is the primary responsibility of the EAD. However, the EAD undertakes a
portfolio review of the foreign-funded projects as a subactivity since the flow of foreign
funds largely depends on the progress of project activities. To ensure regular project
reviews, the following are envisaged:
• The concerned JS (EAD) to hold debriefing meetings with the missions and
conducting a monthly desk review
• Holding of the biannual trilateral review by the AS/JS and Planning
Commission at the provincial headquarters
• Conducting of the trilateral biannual portfolio review by the Secretary EAD
• Biannual review by the minister of mega projects, particularly of
problematic projects
v. A national Coordination Committee on foreign funded projects, headed by Minister
EAD, comprising of DCPC, Secretary PD&SI, Additional Secretary FD, Representative
of PMO, Minister and Secretary of concerned ministry, Sr. Member Board of Provincial
Revenue, Chairman P&D board / ACS Dev. of provinces /special areas AJK/GB,
Secretary and Additional Secretary EAD, has been constituted by PM to ensure
smooth implementation of foreign funded projects, fast track disbursement of
external Economic assistance, undertake portfolio review of problematic projects,
track implementation delays and recommend measures to address impediments.

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 Checklist for PC-III
5.04 The checklist for PC-III is as follows:
Table 17: Checklist for PC-III

38

MONITORING METHODOLOGY
5.05 The methods or techniques adopted for project monitoring should effectively measure
the progress of a project, concerning its approved cost, scope, schedule, and objectives and be
capable of producing the requisite data, information, and reports as needed by project management

38
Sample activity chart/work plan can be found on https://www.pc.gov.pk/web/downloads/pc.

129
and other stakeholders. The Bar Charts are commonly used to show the implementation schedule of
projects. However, for major projects, the project management must use modern network methods,
that is, CPM, PERT, LFA, WBS, etc. to plan the time and resources required for the completion of
individual project activities.

PROJECT MONITORING AND EVALUATION SYSTEM (PMES)

5.06 To introduce professional project management in the public sector and to make the projects
monitoring and evaluation more effective, a web based PMES has been developed. It is facilitating
the line ministries and divisions in projects’ planning, progress tracking, monitoring and timely
identification of corrective actions. The PMES performs the following three major functions:
i. Tools and systems for project management
ii. Systems for monitoring and evaluating projects
iii. Analytical tools for the overall PSDP and portfolio analysis

5.07 The PMES is the backbone of the PSDP projects monitoring activity, which comprises a data bank
of the implementation information like cash or work plan, releases of funds through SAP, physical and
financial progress etc., of the development projects. The PMES serves three informational
requirements:
i. For the PDs or project implementing authorities:
• Firmness and clarity of scope as per PC-I (project profile)
• Provides tools for project planning and control (cash or work plan)
• Track progress and report issues (PC-III)
ii. For controlling ministries:
• Approve financial or physical requirements of projects as per the ministries’
priorities (cash or work plan)
• Have quick access to progress and issues in their project
iii. For the Planning Commission,
• A platform for the professional monitoring (project scope, plans, progress,
issues, etc.)
• The overall progress of the PSDP projects

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 • Repository for projects
• Project’s synopsis and PSDP projects performance analysis (executive
dashboard)

5.08 The Planning Commission will soon enable the integration of PMES with MIS, iPAS, GIS, SAP, and
E-Office.

5.09 Major information management assignments served through the PMES are:

i. Regular physical and financial progress of the PSDP projects reporting to the PM
office.
ii. Responses of queries and reports to the Public Accounts Committee.
iii. Different reports to the parliamentary bodies per their demands.
iv. The PSDP review support (mid-term or quarterly) to the Planning Commission.
v. Monitoring of projects by the Planning Commission as well as the line ministries.
vi. Project control or tracking by the project-sponsoring ministries.
vii. Provision of authentic data source for dashboard development.

PMES System Architecture and Users

5.10 The PMES is a ‘Role’ based software, which can only be accessed by the authorized users (given
passwords) and each user is provided with a certain role and according to that role, the user gets
access rights of a specific portion of the software. The ‘Project Director User’ initiates the cash and work
plans at the beginning of each fiscal year in the PMES (for the ongoing projects) or whenever the project
gets approved and becomes part of the PMES System. The ‘Focal Person User’ of the federal ministry or
division concerned has the rights to verify the cash and work plans initiated and forwarded by the PD in
the PMES. The ‘Planning Commission User’ (Monitoring Officer) has the rights to give the final approval
to the cash and work plans initiated and forwarded by the PD and verified by the Focal Person of the
ministry concerned in the PMES. The ‘Project Director User’ also has the responsibility of entering the
project’s financial and physical progress, and releases of funds to the project on a monthly or quarterly
basis in the PMES, which is verified by the ‘Focal Person User’ of the federal ministry or division

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concerned in the PMES.

PMES Information Components

5.11 The main information modules and reports of PMES include:

i. Project’s basic information (physical and financial)
ii. Work plans and cash plans
iii. Release of funds
iv. Progress (financial and physical)
v. Monitoring information
vi. Reports (project profile report, professional reports, custom reports, and executive
reports)

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 Chapter 6

PROJECT COMPLETION AND EVALUATION

PROJECT COMPLETION

6.01 The project completion aims to bring project execution to a formal and orderly conclusion,
which includes informing all stakeholders about the completion of the project. It triggers the winding up
of technical, operational, and administrative actions by the project-sponsoring public sector entity as
determined in the last approved version of the PC-I.

6.02 The project is completed or closed when all the funds have been utilized and objectives
achieved or abandoned for any reason. At this stage, the project must be closed formally, and
reports prepared on its overall performance and results achieved using the PC-IV proforma
(Annexure 23). This involves handing over the deliverables to the authorities concerned, closing of
the supplier’s contracts, closure of bank account, releasing security money, staff, and equipment as
well as informing stakeholders about the closure of the project per the last approved PC-I.

6.03 Project closure can be best understood by dividing it into two parts: 1) Operational, and 2)
Financial.

OPERATIONAL CLOSURE

6.04 The operational closure of the project indicates the stage when the last input has been provided,
all activities including reconciliation of expenditure and statutory audit ended, assignments of all
project personnel completed and disposal of or transfer of equipment purchased by the project has
been carried out. It also marks the point in time beyond which no further financial obligations or
commitments should be incurred. For regular operation and maintenance of projects after the closure
stage, it should be handed over to the agency responsible for maintenance and operation. Timely efforts
are required to be made for the handing over of the project and provision of maintenance cost to the
authority concerned. This exercise should be initiated six months before the expected completion
date. If any of the project staff is required to be retained for the operation of the project, a case for the

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shifting of the post in the budget may be initiated and get approval from the Finance Division well in
time so that the continuity in project operation is not hindered and public assets created under the
project are maintained.

FINANCIAL CLOSURE

6.05 The financial closure takes place right after the operational closure. Ideally, the operational
and financial closures should be done simultaneously to avoid large gaps between the two. The
financial closure marks the date after which no further transaction on that project account will be
permitted. The sponsoring agency concludes that all financial transactions that it has authorized
have been finalized and that there are no further financial commitments (hard or soft) or forecasts and
there exists no cash deficit or a liability. The sponsors must also verify that the total expenditures are
within the allocated budget. However, the closure of the project may not be delayed on account of
the security money. It is recommended that the pay order of the security money is prepared by a
bank and released after completion of the maintenance period or defects liability period as per rules.
The financial closure should be achieved within six months of the operational closure. Procedure to
clear pending liabilities of the closed projects is given at Annexure 55.

RESPONSIBILITY FOR PROJECT CLOSURE

6.06 The project sponsoring agency is responsible for initiating, completing, monitoring, and executing
the tasks necessary for completion and closure of the project. They have the final responsibility for
ensuring the project closure tasks are undertaken as and when required. It is worth mentioning that
liquidation of commitments is usually the most time demanding task and for this reason, it is advisable
that the sponsoring agency prepares and regularly updates the liquidation of commitments including
the final payments. The same applies to the disposal or transfer of the project assets.

PROCEDURE FOR PROJECT CLOSURE

6.07 At the project closure, submission of the PC-IV to the Planning Commission by the
sponsoring agency is mandatory without any exception. Based on the PC-IV, the Projects Wing of
the Planning Commission will present the Appraisal Paper (AP) for the consideration of the CDWP. In

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the case of the DDWP, PDWP and special areas DWP projects, the AP will be represented by the
Planning and M&E Cells of the sponsoring agency, respectively. The respective forum will then
consider the PC-I targets (physical as well as financial) versus achievements, timelines and lesson learnt
before approval for project closure. The sponsoring agency will be responsible for replies and justification
if required by the competent forum.
6.08 If the project is to be maintained after completion by another agency, then both the agencies shall
coordinate in advance for the transfer of project assets and liabilities with a proper inventory of handing
and taking over. If some staff of the project is to be retained for the operation of the project, then a
case for the creation of posts under revenue budget may be initiated by the PD at least six months
ahead of the planned closing date. The sponsors (PAO) will submit and certify closure of bank accounts
and cash/accounts before consideration and approval of the PC-IV by the competent forum.
6.09 The sponsoring agency will ensure the required O&M budget allocation in consultation
with the Finance Division for the sustainability of the public investment. The sponsors (PAO) will be
responsible to submit an annual report on the operation and management of the project after
completion in the PC-V for 3-5 consecutive years (3 years of the sectoral projects and 5 years of the core
projects) to the Planning Commission.
6.10 The current market value of physical assets will be assessed and updated at the time of
completion of the project. Appreciation of land cost will be assessed due to its location as per the B&R
Code Act criteria and procedure. The cost of the physical assets will be registered in the inventory
registered, both moveable and immoveable. Report of the annual stock-taking of the inventory will
be maintained and will be submitted to the Cabinet as part of the Yearbook. Assets inventory
addition/deletion should be an essential part of the Yearbook and the auditor should also audit the
inventory and may submit a mandatory report. One percent of the current market value of the assets
may be earmarked for maintenance in the current budget by the ministry concerned.
6.11 In case of other physical assets like plant, machinery, vehicles, etc. each ministry/ division,
provincial government and special areas will make its own arrangement for the O&M services
including the option of any third party at a competitive price for the sustainability of public assets.

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Checklist for Project Completion and Closure (PC-IV)

6.12 The following is a checklist for project closure (PC-IV):

Table 18: Checklist for Project Closure (PC-IV)

# Checklist items for PC-IV Tick as appropriate

1. The name and location of the project along with N/A Yes No
sector/sub-sector in which the project falls are
mentioned.
2. The responsible agencies during and after N/A Yes No
completion of the project are given.
3. Date of approval of the competent forum such as N/A Yes No
DDWP, CDWP, ECNEC, etc. is provided with a copy of the
decision/s enclosed.
4. Planned, actual commencement & completion date N/A Yes No
and total duration (in months) is provided. Details of
extension granted are given.
5. Capital cost of the project as approved by the N/A Yes No
competent forum is given.
6. Actual expenditure incurred on the project till N/A Yes No
preparation of the PC-IV with expected/actual
completion cost is provided.
7. Financing/funding requirement and agency N/A Yes No
(indicating exchange rate in case of foreign
component provided in the PC-I) are given.
8. Details of financial phasing and expenditure as per N/A Yes No
PC-I along with actual PSDP allocations and yearly
releases for the project are included.
9. Quantifiable physical targets achieved vs. planned (as N/A Yes No
given in PC-I) are provided.
10 Item-wise allocations for the project vs. actual N/A Yes No
expenditures are given.
11 Actual achievement of objectives and outcomes N/A Yes No
against those stipulated in PC-I are included.
12 Result Based Monitoring & Evaluation (RBM&E) N/A Yes No
indicators as stated in PC-I are indicated along with
impact of the project on the target group/ area, etc.

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 13 Details of who is financially responsible for recurring N/A Yes No
costs and to whom assets of the project are
transferred, after project completion is given.
14 Mechanism by which project activities will be N/A Yes No
continued in a sustainable manner are indicated.
15 Financial, unit cost and economic analysis based on N/A Yes No
actual capital and recurring cost is given. The benefits
of the project may also be calculated on prevailing
prices and output.
16 Whether project has been implemented as per N/A Yes No
approved cost, scope and time is indicated. In case of
variation, reasons are provided.
17 Lessons learned during identification, preparation, N/A Yes No
approval, financing, and implementation of the
project are stated.
18 Suggestions for planning & implementation of N/A Yes No
similar nature of projects are given.

PROJECT EVALUATION

6.13 The final phase of the project lifecycle is the evaluation of project performance and results.
Project evaluation aims to determine the relevance, effectiveness, and impact of activities in the light of
the objectives as systematically and objectively as possible.39 It allows us to ascertain the net benefits
of a project or programme and draw lessons for the future. It is a critical analysis of the factual
achievements and results of a project, programme or policy vis-à-vis the intended objectives, underlying
assumptions, strategy, and resource commitment. PC-V proforma corresponds to project
evaluation and is reproduced in Annexure 24.

6.14 In specific terms, project evaluation tries to objectively assess:

i. The relevance and validity of the objectives and design of the project or
programme in terms of broader issues of the development policy, sector or sub-
sector priorities and strategies as well as other problems of a wider nature.

39
For definitions, see the UNICEF Guide for Monitoring and Evaluation (page 2); available at: https://silo.tips/download/a-unicef-guide-for-monitoring-
and-evaluation

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 ii. The efficiency and adequacy of the pace of progress of the project or programme where
the focus is mainly on the managerial performance and productivity.
iii. The effectiveness of the project or programme – a major part of an evaluation exercise
is realizing the intended objectives from a variety of angles, and

DIFFERENCE BETWEEN MONITORING AND EVALUATION

6.15 Evaluation is a learning management tool but differs materially from monitoring. The project
monitoring is undertaken at the implementation stage, while evaluation is generally preferred when a
project is complete. The monitoring reports provide the database for the evaluation, but evaluation
cannot contribute directly to monitoring. The evaluation studies are more comprehensive, covering all
aspects of the projects, whereas monitoring provides information mainly to assess and help maintain
or accelerate the progress of implementation. The key differences between the M &E functions are
summarized in the table below.
Table 19: Comparison of Monitoring and Evaluation

Monitoring Evaluation
Keeps track of daily activities as a Takes long-range view through in-depth
continuous function study – one-time function
Accepts objectives, targets and norms Questions’ pertinence and validity of
stipulated in the project document project objectives and targets
Checks progress towards output targets Measures’ performance in terms
of objectives
Stresses conversion of inputs to outputs Emphasizes achievement of overall
objectives
Reports on the current progress at short Provides an in-depth assessment of
intervals for immediate corrective actions performance for future feedback

TYPES OF EVALUATION
6.16 Evaluation can be applied for different purposes as well as to a specific activity, project, or
programme. It is not restricted to the completion stage only, but involves periodic investigations at
many stages. Four different types of project evaluations are: ex- ante evaluation, ongoing evaluation, final
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evaluation, and ex-post evaluation.
Figure 27:Types of Evaluation

Conception & Implementation Post-Closure

Decision Phase Phase Operation

Phase

Table 20: Evaluation Type and Purpose

Evaluation Type Purpose of Evaluation

Ex-Ante Evaluation It is a broad initial assessment aimed at
identifying which alternative will reap the
greatest benefit from the investment.
On-going Evaluation It assesses the intended outcomes, outputs,
and the success indicators of the project
half-way.
Final Evaluation The main purpose is to facilitate a process
which will document project outputs and
impact.
Ex-post Evaluation The aim is to derive lessons and
recommendations to improve the project
and plan more effective projects in the
future.

6.17 The ex-ante evaluation or pre-approval appraisal has already been discussed with methods and
techniques earlier in Chapter 5. The ongoing evaluation is carried out by the organization of its own to
reassess the projected feasibility of the PC-I content, because of the time lag, while external evaluation is
done by an agency other than the body involved in the implementation of a project. The main purpose
of this evaluation is to assist the project management to make appropriate adjustments in the changed
circumstances or to rectify any shortcomings in the original design to improve its efficiency and

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overall performance. Further, the midterm evaluation of the project, having an execution period of three
years or more must be conducted by a third party, as per the ‘Instructions on Evaluation and
Appraisal of Project’ issued by the CDWP40. This would help resolve any issues obstructing the project.
For foreign-funded projects, annual rapid appraisal must be carried out and an annual report must be
developed and shared.41
6.18 Final evaluation is done to assess results when a project concludes its implementation phase. It
provides information that can be used to control for any negative consequences or breakdowns in the
project to ensure smooth sailing in the future.
6.19 The purpose of an ex-post or post-hoc evaluation is to assess the actual as opposed to the
estimated/projected results of implementing a project. The aim of the evaluation is primarily to
compare the actual outcome of the project with the projections made at the appraisal stage. The
examination of different aspects of the project can provide important lessons derived from the
experience for the new projects. The overall impact of the project will result in several effects, which
can be classified as costs and benefits, direct and indirect or tangible and intangible. The ex-post
evaluation takes place after the completion of the project and is often more in-depth as it focuses on
the analysis of impact. Besides, it is time-consuming, costly and calls for persons with special skills.

EVALUATION INDICATORS
6.20 These indicators are the yardsticks for the assessment of the overall performance of a project
or programme regarding the stipulated targets and objectives. Typical performance indicators
include:
Figure 28: Performance Indicators for Evaluation

40
Planning Commission Notification. No. 20(1-42)/PIA-I/PC/2021, Islamabad, 13th September 2021
41
Ibid.

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 i. Physical achievements indicators – These pertain to physical progress, and project cost
and time over/underruns.
ii. Output or impact indicators – These are sector-specific—for an agriculture project, an
increase in the agricultural production (whether crops, livestock, forest products, fish, etc.)
in the project area could be used as an output indicator, and an increase in rural incomes as an
outcome indicator. Other indicators could be agriculture credit applications processed or
approved, agricultural extension workers trained, research and testing laboratories
established, and so on.
iii. Economic indicators – These are indicators of economic and financial return on the project
investment (for example, the financial rate of return, IRR, B/C ratio, etc.)
iv. Social indicators – These often pertain to basic needs and quality of life, for example, life
expectancy, literacy, income distribution with equity, level of food consumption, access to
health and education, shelter, clean drinking water, etc. Many of the UN SDGs fall under this
category.
v. Environmental indicators – These have a direct bearing on the quality of life and sustainable
development and include indicators related to air and water quality, land degradation, climate
change, biodiversity etc.

REQUISITES FOR PROJECT EVALUATION

6.21 The approved PC-I, along with the related project documents, such as concept clearance
paper, project appraisal report, loan/grant agreement and other documents for donor/IFI-assisted

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projects, and feasibility and other technical and sector studies, if any. The minimum requirements are:
i. Pre-approval appraisal notes/CDWP working papers
ii. Pre-approval technical scrutiny notes
iii. ECNEC summary and its decisions
iv. Sources of financial and other inputs
v. Annual/quarterly progress reports
vi. Project review/monitoring/mid-term evaluation reports
vii. Special reports
viii. Project completion report (including those prepared by external funding agencies)

6.22 The aforementioned documents form the basis of the assessment of different project
components and activities. Project site visits also help in the on-ground assessment of project performance
and results and its effect/impact on the target group/beneficiaries. The following key questions should be
addressed in any evaluation exercise:

Table 21: Key Questions for Evaluation

# Key Questions
1. Was the project properly conceived?
2. Has it fulfilled its basic objectives?
3. Was there any flaw in project design?
4. Was the project prepared in consultation with beneficiariesand other stakeholders?
5. Were the forecasts of output or benefits correctly made to a reasonable extent?
6. Was the technical preparation adequate?
7. How good were the original cost estimates?
8. If there were deficiencies in preparation, how were they addressed?
9. Was the project implemented per the plan?
10. If not, was this because of its haphazard preparation or because of delays in (a)
the authorization procedure, (b) obtaining suitable funds, and (c) other reasons?
11. Have you identified any lessons that could be learnt to improve the design and
implementation of future projects?

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Checklist for PC-V

6.23 The checklist for PC-V is as follows:

Table 22: Checklist for PC-V

# Checklist items for PC-V Tick as appropriate

1. Objectives and scope of the project as stated in the N/A Yes No
approved PC-I are indicated. It may also be indicated
that up to what extent the objectives of the project
have been met.
2 Planned (as per PC-I) and actual recurring cost of the N/A Yes No
project along with details for the financial year under
report are provided.
3 Category-wise details of manpower actually N/A Yes No
employed for the operation of the project as
compared to proposed in the PC-I is given.
4 Output of the project as given in the PC-I for the year N/A Yes No
under report vs. actual output of the project is given.
5 Income of the project as indicated in the PCI for the N/A Yes No
year under report along with assumptions vs. actual
income for the year are provided.
6 Comparison of quantifiable actual benefits to the N/A Yes No
economy vs. anticipated benefits as listed in PC-I is
given.
7 Social benefits to the target group as given in the PC- N/A Yes No
I are compared with the year under report and the
extent to which social benefits have been achieved is
stated.
8 Cost per unit produced and sold at the weighted cost N/A Yes No
of capital of the project is stated along with
comparison to PC-I figures.
9 Mechanism of marketing the output of the project is N/A Yes No
stated. In case it differs from the PC-I, the details may
be provided.

10 Arrangements made for the maintenance of building N/A Yes No

& equipment during the last financial year are
provided. It may also be indicated whether annual
maintenance of building & equipment is being carried

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 out.
11 Are output targets as given in the PC-I for the year N/A Yes No
under report met? In case of variation, reasons are
provided.
12 Lessons learned during the year under report related N/A Yes No
to operations, marketing, and management are
stated.
13 In case of any change in the senior management of N/A Yes No
the project, the details along with justification are
provided.
14 Based on the experiences gained during this project, N/A Yes No
measures are suggested to improve the performance
of similar projects in the future.

MANDATORY EVALUATION REPORTS

6.24 The project evaluation report is prepared by the Project Implementation Unit or other
designated staff using the PC-IV Proforma as part of the project closure activities. The PC-IV is evaluated
by the Planning Commission’s Projects Wing or technical section concerned. For regular operation and
maintenance of projects after the completion stage, the project is transferred to the department/agency
responsible for its maintenance and operation. After the project closure, annual operation reports must
be submitted to the Planning Commission for the next five years on the PC-V proforma, which is to be
furnished on annual basis, by the 31st of July of each year for five years, by the department/agency
responsible for operation and maintenance of the project. It provides information about the project’s
operational results during the preceding fiscal year.

EVALUATION FEEDBACK AND LESSONS LEARNED

6.25 Feedback is the most important element of a systematic and integrated approach to project
monitoring and evaluation. Essentially, it is the evaluation phase of the project cycle that provides the
lessons learned from the project implementation experience. The evaluation phase compares the
actual outcome of the project with the appraisal projections then examines the positive and
negative effects of the project, providing important lessons for the future. The feedback from the
evaluation is an essential input for effective project/portfolio management. But an evaluation without
any direction or support from the management can hardly be meaningful.

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6.26 Feedback from the evaluation is used for operational (mid-course corrections and follow-up
action), analytical (improvement of project design, objectives, etc.) and policy purposes (finding out the
validity of a given development strategy, etc.). To ensure that feedback is used systematically, there
must be an adequate institutional mechanism for channeling the findings and recommendations to
the relevant decision-makers and managers for the necessary follow-up action.

6.27 In pursuance to clause b of sub section 1 of Section 18 of PFM Act, 2019, following mechanism
shall be adopted for evaluation of development projects:

i. Submission of PC-IV to the Planning Commission by all the Sponsors shall be mandatory
for all projects.
ii. Based on PC-IV, the Projects Wing of Planning Commission will present Appraisal Paper
(AP) for consideration of CDWP within four (04) weeks. In case of DDWP, PDWP and
Special Areas projects, the AP will be presented by the Planning Cell and M&E Cells of
the concerned sponsoring agency respectively.
iii. The respective forum will consider PC-I targets (physical as well as financial) vs
achievements, timelines and lesson learnt before approval for closure of the project.
iv. In case of creation of posts on normal budget timelines will be decided in consultation
with representative of Finance Division.
v. In case of assets created under the project O&M arrangements will be provided by the
executing agency for transfer of project assets/liabilities with proper handing/taking over.
vi. The Projects Wing will carry out an evaluation report of completed project in coordination
with sponsoring agency and submit it report to the Member I&M. The Member I&M will
present findings of the evaluation report before the CDWP at the time of final PC-IV
(completion report received from the sponsoring agency) for consideration.
vii. On fulfillment of recommendations of the respective approving forum, sponsor shall submit
final PC-IV, which will include a certificate from PAO that bank and cash accounts of the
project have been closed.
viii. Projects Wing will recommend on the basis of forum’s decision and after approval

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 closure letter will be finally issued by the PAO and the project shall be deleted from active
projects list of PSDP.

6.28 In pursuance to clause (c) of sub-section 1 of Section 18 of PFM Act, 2019, Sponsor shall be
responsible to submit annual report on operation and maintenance, outcome, and impact of projects on
PC-V format for five consecutive years to Planning Commission for review of impact evaluation. In case
of core projects an independent impact assessment within five years after completion of the project
shall also be submitted to Planning Commission by the sponsors.

6.29 Monitoring, evaluation and reporting of development projects shall be carried out according to
Section 18 (2) of PFM Act, 2019.

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APPENDIX – A
Planning Machinery

147
148
 NATIONAL ECONOMIC AND DEVELOPMENT PLANNING SYSTEM
7.01 The following is the national economic and development system provided in the constitutional
context. The chapter 3 of the PFM Act, 2019 provides in detail, the planning process which has been
incorporated the relevant portion of this manual.

7.02 This section describes the constitutional and legal contexts of the economic development
planning practices in Pakistan discussing how the planning system has evolved since the early
1950s, the functional and organizational set up of the Planning Commission and the forums responsible
for the national economic planning, coordination and approval of development projects and
programmes.

CONSTITUTIONAL AND LEGAL CONTEXT OF PLANNING IN PAKISTAN

7.03 Article 156 of the Constitution of the Islamic Republic of Pakistan42 provides for constituting
the National Economic Council (NEC) by the President of Pakistan.43 The Council is responsible for
advising the federal government and the provincial governments in formulating plans regarding the
financial, commercial, social, and economic policies. In formulating such plans, it is to ensure balanced
development and regional equity, which are to be guided by the Principles of Policy as articulated in
Articles 29-40 (Chapter 2 of Part II) of the Constitution. The NEC is mandated to meet biannually.

NATIONAL PLANNING AND NATIONAL ECONOMIC COORDINATION

7.04 The national planning and national economic coordination, including planning and coordination
of scientific and technological research, fall under part II of the Federal Legislative List (Entry No. 7).
Hence, it is the domain of the Council of Common Interest (CCI), which shall formulate and regulate
policies concerning matters in part II of the Federal Legislative List and shall exercise supervision and
control over related institutions vide Article 154 of the Constitution.

42
The Constitution of the Islamic Republic of Pakistan, Part V, Chapter 3, Art 156; available at
http://www.na.gov.pk/uploads/documents/1333523681_951.pdf.
43
The Constitution refers to the 1973 Constitution and its various amendments. The NEC comprises the Prime Minister as its Chairman, Chief
Ministers of the provinces, one member from each province to be nominated by the Chief Ministers and four members to be nominated by the Prime
Minister.

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PUBLIC FINANCE MANAGEMENT ACT, 2019 (AS AMENDED IN 2020)

7.05 The Federal Public Finance Management Act, 2019 was added through the Finance Act 2020 for
the plan-based government expenditure. All government expenditures, whether from a recurrent or
a development demand for the grant, shall be based on well defined plans and the strategic priorities
approved in the budget strategy paper.

7.06 The Federal Public Finance Management Act, 2019 was enacted (became effective from July 1,
2019) and made to ensure compliance with Article 79 of the Constitution. To comply with Chapter III
of the Act titled “Development Projects and Maintenance and Use of Public Assets (Sections 13-20)”, the
Planning Commission has made the following decisions:
i. In pursuance of Section 13 (a) of PFM Act, 2019, the Core Projects in national infrastructure
requiring complex planning, design and implementation procedures shall include:
• Projects Rs.100 billion and above.
• This threshold may require to be in case of Social Sector projects or Donor’ funded
projects costing less than Rs.100 billion. In such cases, the CDWP may consider and
declare any project as core project. The Sponsoring Agency will indicate while submitting
the project to the CDWP whether these are core or otherwise based on the following
criteria:
i. National priority projects located in more than one province or more than one
province as beneficiary of the project.
ii. Projects relating to national infrastructure (inter-provincial roads, bridges,
railways, airports, seaports, dams, energy, housing, city & regional planning, water
& sanitation, digital networks, research, nuclear, national health, social security
and human resource development programs, etc.) any other project unique or
transformational in nature.
iii. The projects involving comprehensive planning, design and implementation
procedures which are complicated in nature.
iv. The projects to be undertaken through PPP mode with the approval of CDWP.

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 v. The parameters including Climate screening of the projects through CHIRA, CARA
and CMA shall be carried out by the sponsoring agencies at PC-I/PC-II stage, which
will further be scrutinized during the appraisal process;
vi. The core projects will be assigned the following priorities:
a. The PC-I shall be prepared upon recommendations of PC-II
b. Comprehensive techno-economic (including environmental) feasibility
based on PC-II shall be carried out consisting of general and specific TORs
including deliverables;
c. A detailed economic and financial appraisal including, risk and sensitivity
analysis. to be undertaken through PPP mode, Techno Economic Feasibility
Study should also include PPP Option Analysis and address bankability
aspects of the project; PPP Risk Assessment; and PPP Value for Money
Analysis;
d. The Core projects would be appraised by the consultant (individual/firm)
/3rd Party on assignment basis; Alternatively, a workshop can be organized
by the concerned section.
vii. The sponsoring agency will incorporate M&E mechanism including Gantt Chart/
Primavera/ Project Performance Monitoring in PC-I of the project.
viii. All the PAO will identify core projects at the time of PSDP preparation Allocation
of funds will be made as per annual financial phasing of approved PC-I by the PAO.
ix. Core Project will be reflected in the PSDP separately;
x. Release of funds will be made as per quarterly demand by PAO at the start of FY.
xi. The sponsoring agency will ensure timely execution and completion of the project
as per approved PC-I targets/ objectives.
xii. Quality assurance mechanism will be defined, included in the PC-I and undertaken
at pre and post project level by the executing agency;
xiii. In case of revision and delay, responsibility will be fixed on the basis of inquiry
under the directions of PAO of the sponsoring agency.
xiv. Submission of PC-IV & subsequently PC-V will be responsibility of PAO

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 xv. of the sponsoring agency.
xvi. Internal Monitoring on periodic basis will be ensured by the executing agency and
sponsoring agency will certify it on quarterly basis.
xvii. Quarterly Monitoring reports will be submitted by the sponsors to Planning
Commission on regular basis; Annual External Monitoring and Mid Term
Monitoring/ Review will be conducted by the Planning Commission and report will
be presented to the ECNEC for consideration. In case of land acquisition, land will
be procured under a separate project through state land and in case of non-
availability at market rates with re-settlement plan to avoid litigation issues and
delay in implementation.
xviii. The i-Pas system will introduce a checkbox to identify the project as core or
otherwise. The iPas shall not move forward without checking this box.
xix. On the basis of demand identified by the PAOs, list of core projects will be
compiled and presented to the CDWP, before APCC and in the working paper of
APCC approved projects as CORE will be presented along with allocation for the
next year.
xx. Annual Report of Core projects will be placed before NEC.
i . In pursuance of Section 13 (b) of PFM Act, 2019, all projects other than Core Projects undertaken in
different Sectors by Ministries, Divisions, Provincial Government and Special Areas to enhance the
development of that Sector in a Ministry, Division, Provincial Government and Special Areas will be
considered as sectoral projects. The sponsors will incorporate clear objectives, scope, output, and outcomes
in project document while ensuring compliance of all procedures in vogue.
➢ Section 14 – Preparation of development projects.
o All development projects shall be prepared in conformity with procedures, processes and
templates defined by the Planning Commission.
o Cost and benefit analysis and risk assessment of all development project proposals in
excess of a threshold size prescribed by the Planning Commission shall be
undertaken.
➢ Section 15 – Quality assurance

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 o Development project proposals, which exceed their total cost thresholds defined by the
Planning Commission shall be subject to quality assurance. Such quality assurance shall
be undertaken by an individual/body which is independent of the
sector/ministry/division that has initiated the preparation of the development project
proposal.
➢ Section 16 – Technical approval
o All development project proposals shall be subject to a technical approval process.
Technical approval shall only be granted to projects which are compliant with the
standards and procedures set by the Planning Commission.
o Findings and recommendations of the independent quality assurance reports, cost and
benefit analysis and risk assessment where required per sub-section (2) Section 14 shall
be considered by these forums while considering the development project proposals.
➢ Section 17 – Inclusion of development projects in demands for grants
o No development project shall be considered for inclusion in demands for grants if it has
not been granted technical approval.
o No development project shall be considered for inclusion in demands for grants unless
it is provided with a budget allocation for the coming year reflecting the proposed
project cost for each year.
➢ Section18 – Monitoring and evaluation of development projects. Development projects shall
be subject to the following forms of monitoring and evaluation, namely,
o Monitoring of progress during implementation
o Evaluation of the project on completion
o Those projects with the total cost exceeding the threshold set by the Planning
Commission, an independent impact assessment shall be devised within five years after
completion of the projects.
o Timelines, forms and formats and guidance on conducting monitoring and evaluation
and reporting shall be completed as prescribed.
➢ Section 19 – Budgetary provision for maintenance of assets
o Every ministry and division shall include in its demands for grants adequate funds

153
 dedicated for operation and maintenance of the physical infrastructure assets under its
supervision.
o The Planning Commission shall define adequacy requirements for different categories
of the physical infrastructure expressed as the ratio of the annual provision for
maintenance and the current market value of the asset.
➢ Section 20 – Utilization of public assets.
o The principal accounting officers shall ensure that the maximum possible returns are
achieved on every asset falling under the oversight of the ministry and division.
o The returns on a public asset may include the utilization of the asset for delivery of one
or more public services or a financial return accruing to the government from the
utilization of the potential of the asset.
o To achieve the maximization of returns on public assets, the government may establish
sovereign wealth funds through an act of the Parliament. The objective of a sovereign
wealth fund is to act as a holding institution for public assets which can bring to bear
sound management and exploitation of opportunities for the maximization of returns
from the public assets.

PLANNING COMMISSION
7.07 The Planning Commission is an apex planning and coordination body functioning under the
Chairmanship of the Prime Minister, while the Planning, Development and Special Initiatives (PD&SI)
Division is serving as the Secretariat of the Planning Commission.44

MISSION OF PLANNING COMMISSION

7.08 The Mission of the Planning Commission, as elucidated in the Cabinet Division Resolution
of October 201345 is to:
i.Act as the apex think-tank for the Government in the context of adjusting to the new
realities and challenges, including recognition of the increased role of the private sector,
impacts of globalization and National Finance Commission Award 2010 on the economic

44
Entry No 13 under Item 30 of Schedule II of the Federal Government Rules of Business, 1973, as amended from time to time.
45
Adapted from the mission statement and strategic objectives given at: https://www.pc.gov.pk/web/ministry

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 policy.
i .Effectively plan for the economic and social development of the country.
i i.Moving to a new paradigm of Participatory and Collaborative Planning involving the
Parliament, ministries/divisions, provinces, special areas, private sector, academia, civil
society, and diaspora to play the role of facilitator and stewardship as well as an integrator
in the areas of economic policy.

7.09 The Planning Commission is responsible for the performance of functions outlined in Schedule-
II of the Rules of Business 1973 (as amended), under the heading of the Planning, Development and
Special Initiatives Division. The PD&SI Division, as the secretariat of the Planning Commission, provides all
necessary economic, technical, and administrative support to the Commission for the discharge of its
assigned functions and responsibilities. The heads of economic and technical sections of the Planning
Commission coordinate the Annual Plan and PSDP preparation for their respective sectors. The
functional wings of the Planning Commission are shown in the table below.
Table 23: Functional Wings of Planning Commission

Technical Sections Economic Project Wing Attached Depts./

Sections Authorities/ Cells

155
 • Energy Wing • Economic • Infrastructure • Pakistan Bureau
(Fuel, Power, Appraisal • Social Sectors of Statistics
Energy Economic • Public Investment • Other Sectors • China Pakistan
and Energy Programming Economic Corridor
Information • Evaluation Authority
Sections) • Public Investment
Authorization • Management • Public-Private
• Transport and Information Partnership
Communication • Sustainable System
Development Authority
• Physical Planning Goals • Pakistan Planning
and Housing and Management
• Macroeconomics
• Food & Agriculture Institute
• International Trade
• Water Resources and Finance • Pakistan Institute
• Industries and of Development
• Money, Prices and Economics
Commerce Fiscal Policy
• Health • National Logistic
• Employment and Cell
• Nutrition Research
• SDL
• Education • Plan Coordination
• Population &
Social Planning
• Social Welfare
• Manpower
• Climate Change
and Environment
• Science and
Technology
• Governance
• Mass Media &
Culture, Sports,
Tourism and Youth
• Devolution & Area
Development

EVOLUTION OF THE PLANNING COMMISSION — A CHRONOLOGY

7.10 The evolution of the Planning Commission is summarized below, while the details are provided in
the referenced annexures.

156
i.1948- Development Board was established in the Economic Affairs Division (EAD)
under the Ministry of Finance and charged with economic development.
i .1950- The Six-Year Colombo Plan was mapped out.
i i.The Planning Board was established on 18th July 1953.

iv.1957- A permanent National Planning Board was established on 20th April 1957
under the chairmanship of the Prime Minister with two members to achieve progress
on Article 28 and 29 of the 1956 Constitution (now Article 37 and 38 of 1973
Constitution). The tasks assigned to the National Planning Board are given in Box 2

157
v.1958- The National Planning Board was redesignated as the Planning Commission
on 22nd October 1958 (Annexures 25 and 26).
vi.1961- The Project Division in the President’s Secretariat was abolished, and its functions
were amalgamated in the Planning Commission, and it was identified as a Division in the
President’s Secretariat. The President assumed the Chairmanship of the Planning

Commission on 5th August 1961 with a Deputy Chairman (status of a minister), two
members from the central government and one member each from West Pakistan
and East Pakistan. The Planning Division remained with the President from 1961 to
1971. The new Planning Division had two separate technical wings: Planning and

158
 Progressing. The latter focused on monitoring of implementation and delivery of
results. The non- technical sections of the Division (Coordination, Development,
Authorization, Administration, etc.) were reorganized on the pattern of the Section
Officers’ Scheme in the Central Secretariat (Annexure 27).
vii.1988- The Chief Executive of Pakistan was the Chairman of the Planning
Commission from October 1999 to November 2002 and subsequently, the Prime
Minister assumed the role.
viii.2006- The Planning Commission was revamped in April 2006 to ensure that it plays
an effective role as an apex planning and coordination body of the country. The
number of members increased to nine, while its chairmanship remained with the
Prime Minister. A Policy Board was established to be chaired by the Prime Minister and
included the Deputy Chairman, 10 federal ministers to be nominated by the Prime
Minister and all members of the Planning Commission. The functions assigned to
the Planning Commission in 2006 are given in Box 3.

159
ix.2013-The Planning Commission was reorganized by increasing the number of
Members to 12 while the Prime Minister continued to be the Chairman of the
Commission. The functions assigned to the Planning Commission are summarized in
Box 4. An Advisory Committee of the Planning Commission/ Ministry of Planning,
Development and Reform (MoPD&R) was also notified in October 2013, comprising
26 members, 12 federal secretaries, Chairman FBR, Chairman Board of Investment
(BoI), Vice-chancellor Pakistan Institute of Development Economics (PIDE) University,
Chairman Planning and Development (P&D) Board Punjab and Additional Chief Secretaries
of Sindh and KPK. The Terms of Reference of the Advisory Committee are to:
i. Promote public and private sector interface and develop a participatory approach in
decision making.
ii. Work as a strategic think-tank on policy issues of the Planning

160
 Commission/MoPD&R.
iii. Guide Planning Commission/MoPD&R in policy formulation, reform, and its
implementation as per the vision of the present government and the national
interest.
iv. Generate and build consensus on policies and strategies of the Planning
Commission/MoPD&R, and provide input and feedback from non-government
stakeholders to the policies/performance of the Planning
Commission/MoPD&R.
x.2019- In June 2019, the Deputy Chairman of the Commission was directed to report to
the Minister PD&SI in the following areas (Annexure 28).

i. All issues requiring approval/consideration of the Prime Minister, cabinet,

NEC, ECC and ECNEC.
ii. Brief and seek approval of the Minister PD&SI of the CDWP agenda.
iii. Finalization of the PSDP in consultation with the Minister PD&SI.
iv. Close liaison with the Minister PD&SI on all matters of development policy
formulation, etc.

FUNCTIONS OF THE PLANNING COMMISSION

7.11 The Rules of Business (Schedule II) as amended up to July 2020 indicate that the functions of
the Planning Commission continue to be as given in the Cabinet Resolution No. 4-6/2006-Min-1 dated
30 October 201346 . These functions are grouped in three broad categories as shown in Box 4)47.

46
This Cabinet Division Resolution Superseded Resolution No 4-6/2006- Min.1 dated 20 April 2006.

47
Schedule II of the Rules of Business 1973 (as amended from time to time) enumerates the functions assigned to the Planning, Development and
Special Initiatives Division and selected functions of the Division have been assigned to the Planning Commission. The Rules of Business has also
designated the PD&SI Division as the Secretariat of the Planning Commission and Secretary of the Division has been nominated as Member
Coordination.

161
162
 PRESENT STRUCTURE AND ORGANIZATION OF THE PLANNING
COMMISSION
7.12 The Prime Minister is the Chairman of the Planning Commission which excluding the Minister
PD&SI and Deputy Chairman has the following 12 members:
i. Secretary PD&SI Division/Member (Coordination)
i. Chief Economist/Member (Economic Policy/Planning)
i i. Member (Energy)
iv. Member (Implementation and Monitoring)
v. Member (Private Sector Development and Competitiveness)
vi. Member (Development Communication)
vii. Member (Food Security and Climate Change)
viii. Member (Infrastructure and Regional Connectivity)
ix. Member (Social Sector and Devolution)
x. Member (Governance, Innovation and Reforms)
xi. Member (Science, Technology, and ICT)
xii. Vice-Chancellor Pakistan Institute of Development Economics
(PIDE)/Member Research

7.13 The Planning Commission meets under the Chairmanship of the Prime Minister on a biannual
basis to monitor the progress of economic policies and for future guidance. The Advisory Committee
to the Planning Commission can be found in Annexure 29. An organogram of the Planning
Commission is shown in Figure. Names of the Deputy Chairmen/Chairperson in chronological order
are given in Annexure 30.
Figure 29: Organogram of Planning Commission

163
 National Economic Planning and Coordination Forums
NATIONAL ECONOMIC COUNCIL (NEC)

7.14 The NEC is the apex economic and development policy forum mandated by the Constitution
to approve vision statements, long-term perspective plans, five-year plans, annual plans, and the Public
Sector Development Programme (PSDP). The current composition of the NEC48 includes the Prime
Minister (Chair), four Chief Ministers, four members nominated by the Prime Minister and four members
nominated by the respective Chief Ministers.49

7.15 Those who can attend the NEC meetings on special invitation are: Governor Khyber
Pakhtunkhwa, Prime Minister Azad Jammu, and Kashmir (AJ&K), Chief Minister Gilgit -Baltistan (GB),
Deputy Chairman Planning Commission, secretaries Finance Division, EAD and Planning Commission,

48
Cabinet Division Notification No. F.5/4/2024-Com., Islamabad, dated 7 June 2024
49
CM can nominate one member on his behalf.

164
whereas the Chief Secretaries of the provinces, Azad Jammu, and Kashmir (AJ&K) and GB are invited on
need-basis.

7.16 The Council meetings are summoned by the Chairman or on request of one-half of the
members of the Council who shall meet at least twice a year and the quorum for a meeting is one-
half of its total membership. The Council is answerable to the Majlis- e-Shoora (Parliament) and
submits its Annual Report to the National Assembly and the Senate.

ANNUAL PLAN COORDINATION COMMITTEE (APCC)

7.17 The APCC is mandated to review the Annual Plan of the previous and current years and
recommends the proposed Annual Plan of the subsequent year for submission to the NEC. In
addition, it reviews the PSDP of the previous and current year and recommends the proposed PSDP
of the next year for submission to the NEC. The APCC is chaired by the Minister PD&SI or Deputy
Chairman Planning Commission. Its members include:
i. Governor State Bank of Pakistan,
i. Ministers for Finance Division
i i. P&D Departments of all provinces and AJ&K
iv. Deputy Chief Executive of Northern Areas
v. Chairmen P&D boards Punjab and Sindh
vi. Additional Chief Secretaries (Development) of Sindh, Balochistan, Khyber-
vii. Pakhtunkhwa, AJ&K and GB
viii. Provincial Finance Secretaries
ix. Secretaries of all Federal Ministries
x. Chief Economist Planning Commission
xi. Chairmen FBR, NHA, WAPDA, PAEC, PNRA, HEC and CDA
xii. Economic Adviser Finance Division
xiii. Additional Secretary (Budget) Finance Division
xiv. Members of Planning Commission and officers of the Planning Commission.

Development Project/Programme Approval forums

165
 EXECUTIVE COMMITTEE OF THE NEC (ECNEC)
7.18 The composition of the Executive Committee of NEC (ECNEC) changes from time to time.
Currently, the ECNEC50 includes three federal ministers and one minister from each of the four provinces,
whereas Deputy Chairman Planning Commission, secretaries EAD, Finance Division and Planning
Commission, Chairmen P&D boards of Punjab and Sindh, Additional Chief secretaries P&D
departments Khyber Pakhtunkhwa (KP) and Balochistan are invited to the meetings on special invitations
(Annexure 31). Moreover, other officers of the federal and provincial governments as well as
governments of AJ&K and GB are invited to the ECNEC meetings on a need-basis.
7.19 The functions and powers of the ECNEC are to:
i. Sanction development projects (both in public and private sectors) each costing more
than Rs. 7.5 billion or according to the sanctioning limits approved by the NEC and
notified/issued by the MoPD&SI51 52
i. Allow moderate changes in the Annual Plan and sectoral adjustments within the overall
Plan allocation.
i i. Allow changes, as deemed appropriate in plans initiated by the Planning
Commission/MoPD&SI.53
iv. Review policy issues relating to development projects/programs/plans before submission
to the NEC.54
v. Supervise the implementation of the economic policies laid down by the Cabinet and the
National Economic Council.
vi. Pronounce on cases for the grant of protection of indigenous industry.
vii. Pronounce on cases involving the grant of licenses for exploration or exploitation of oil and
other mineral resources or extension in the area of operation.
viii. Issue reports asked requested by the Committee in pursuance of its earlier decisions.
ix. Act on any other matter referred to the Committee by the Prime Minister, the NEC, the
Council of Common Interests (CCI) and the Cabinet or raised by any member in the

50
Cabinet Division Notification No. F.5/5/2024-Com., Islamabad, dated 14 June 2024.
51
Planning Commission Notification No. 24(7)/PIA-I/PC/22, dated 3 August 2012.
52
Cabinet Division Notification No. F.5/2/2018Com., Islamabad, dated 22nd September 2021.
53
Cabinet Division Notification No. F.5/2/2018Com., Islamabad, dated 22nd September 2021.
54
Ibid.

166
 Committee with the permission of the Chair.

CENTRAL DEVELOPMENT WORKING PARTY (CDWP)

7.20 The CDWP is responsible for the scrutiny and approval of the development projects. Its current
composition is55 (Annexure 32):

i. Deputy Chairman Planning Commission (as Chairman)

ii. Chairman P&D Board, Government of Punjab
iii. Chairman P&D Board, Government of Sindh
iv. Additional Chief Secretary (Development) P&D departments, governments of KP,
Balochistan, AJ&K and GB
v.
vi. Representatives of the Finance Division, EAD, Climate Change Division, Housing
& Works (not below AS/Sr.JS)
vii. relevant federal Ministry (Secretary/Incharge)
viii. Chairman Pakistan Council of Science and Technology
ix. Chief Statistician, Pakistan Bureau of Statistics
x. Planning Commission/PD&SI Division – Secretary, Chief Economist, all Members
of the Planning Commission, Vice Chancellor (PIDE), Additional Secretary(PD &
SI), Joint Chief Economists (Operation) and ( Economic Policy), Sr. Chief (Tech),
chiefs of sections including the Public Investment Programming (PIP), Public
Investment Authorization (PIA), Physical Planning and Housing (PP&H),
Employment and Research, Economic Appraisal, Governance, SDG, Foreign
Assistance, Chief of the section concerned, Director-General (Evaluation) Project
Wing, Director-General (Monitioring) Project Wing DG PPMI, Project Director
(strengthening of M/o PD&R in M&E of PSDP projects), and
xi.
by special invitation – Pakistan Engineering Council (PEC), BoI, , PPPA,
Environment Protection Agency, and advisor climate change and advisor Water
M/o PD&SI..
7.21 CDWP is authorized to approve development schemes above Rs. 1000 Million up to Rs. 7,500
million56. (Annexure 33). Beyond this cost threshold, the CDWP recommends projects to the ECNEC for
consideration and approval. The Deputy Chairman Planning Commission (DC PC) or Secretary, PD&SI
Division in the DC’s absence can chair the CDWP meeting.

55
Planning Commission Notification No.23(1-2) PIA/PC/2014, Islamabad, 23 January 2015.
56
These sanctioning powers for development projects are only for local funded projects. In cases where foreign exchange or foreign assistances is
more than 25 percent of the total cost of the project, the approving forum will be CDWP/ECNEC irrespective of the cost of the project vide Planning
Commission Notification No.24(7) PIA-I/PC/22 Islamabad, dated 3 August 2022.

167
 DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP)
7.22 The sanctioning power of the DDWP to approve the PC-I or PC-II of a project is up to Rs. 1000
million57 provided foreign assistance is less than 25 percent of the total cost of the project.
7.23 The composition of the federal DDWP includes:
i. Secretary/Principal Accounting Officer of an administrative division
(chairman).
i. Chief (in person) of the section concerned of the Planning Commission.
i i. Joint Secretary Finance Division.
iv. Chief Finance and Accounts Officer (CF&AO) of the division concerned.
v. Representatives of the Appraisal Wing of Planning Commission, EAD (if the
project involves foreign assistance).
vi. Environment Protection Agency (EPA).
vii. National Engineering Services Pakistan (NESPAK).
viii. PEC by invitation.
ix. A representative of the provincial government concerned if the
proposed projects impact it.
7.24 The functions of DDWP are given in Annexure 34. The procedure for approval of schemes by
the federal DDWP is given in Annexure 10.

DEVELOPMENT WORKING PARTY (DWP – AUTONOMOUS ORGANIZATIONS)

7.25 The Public sector autonomous organizations whether commercial or non- commercial
(with a functional board by any name) are competent to sanction their development schemes
based on 100 percent self-financing having no government guarantee and involving less than 25
percent foreign exchange assistance. These are subject to the following requirements (Annexure 35):
i. The DWP should be constituted by each organization and notified to
consider and approve its self-financed projects.

57
These sanctioning powers for development projects are only for local funded projects. In cases where foreign exchange or foreign assistances is
more than 25 percent of the total cost of the project, the approving forum will be CDWP/ECNEC irrespective of the cost of the project.

168
 i. The DWP should be headed by the chairman/head of the organization
and, among others, should include representatives of the Planning
Commission, Finance Division, and the ministry/division concerned,
each not below the rank of a Joint Secretary.
i i. Organization and, among others, should include representatives of the
Planning Commission, Finance Division, and the ministry/division
concerned, each not below the rank of a Joint Secretary.
iv. The quorum of the DWP will be incomplete without the presence of
either representative of the Finance Division or the Planning
Commission.
v. In case either of these divisions does not agree to the
project/proposal/PC-I or any aspect thereof, it will be referred to the
CDWP for its consideration.
vi. The decision of the DWP will be subject to the endorsement of the board
of the organization.

ECONOMIC AND DEVELOPMENT PLANNING SYSTEM IN PROVINCES

AND SPECIAL AREAS
7.26 After the 18th Constitutional Amendment, the provincial planning has transformed with the
introduction of a medium-term perspective, increased inflow of resources, and new planning
imperatives such as public-private partnerships and RBM.
7.27 The formulation of the Annual Development Programme (ADP) and approval of
development projects are important exercises carried out by the P&D boards/departments at the provincial
and special area levels in consultation with the provincial departments and agencies concerned. This
exercise is based on the guidelines provided by the federal government in accordance with the national
priorities and resource availability. The ADP formulation exercise determines the size and the direction of
the public sector programme in the provinces. .

Planning and Development (P&D) Boards and Departments

169
7.28 The P&D Boards of Punjab and Sindh – head by their respective Chairmen and P&D
Departments of KP, Balochistan, AJ&K and GB led by Additional Chief Secretaries (Development)
are responsible for the formulation of the development vision and economic planning policies of
the provincial and special area governments, in consultation with their all stakeholders by
following NEC guidelines. These are also responsible for the preparation of the Medium-Term
Development Framework (MTDF) and ADP as well as appraisal of development projects and
programmes, local funding and external financing, and monitoring of their implementation.
7.29 Further to the NEC decision of 24 May 2012 (Annexure 36), the Provincial Development
Working Party(ies) PDWP(s) in Punjab, Sindh, KP and Balochistan are competent to approve
development projects each costing up to Rs. 10,000 million provided that no external funding is
involved. The PDWPs are also authorized to approve feasibility studies costing up to Rs. 500 million

PUNJAB

PLANNING AND DEVELOPMENT BOARD

7.30 The P&D Department of Punjab was established on the 1st July 1970, which subsequently
evolved into the Punjab Planning and Development Board (PP&DB) in 1977.
7.31 The PPDB comprises the following:
i. Chairman of the Board,
i. Chief Economist,
i i. Secretary P&D Department, and
iv. Members Water, Private Sector Development, Production Sector, Energy,
Health and Nutrition, Governance, Information Technology (IT) and
External Capital Assistance (ECA), and Environment and Climate Change.
7.32 The Board is organizationally divided into functional sections, head by a senior
chief/chief/joint chief economist. The economic sections deal with matters relating to coordination
with the federal government on economic issues and development plans, macroeconomics and
policy analysis, project economic appraisal, and monitoring and evaluation (M&E). The technical
sections are responsible for the technical appraisal of development projects of different sectors, that
is, water and power, roads and bridges, urban development, development authorities, regional

170
planning, agriculture, livestock and dairy development, forests and fisheries, industries and manpower
health, population welfare and nutrition, education and training, information, culture, tourism, social
welfare, housing and physical planning, urban and rural water supply and sewerage. Other sections include
governance, IT, and ECA, Environment and Climate Change, and the Projects Training Institute.

FUNCTIONS
7.33 While performing its functions, the P&D Board closely coordinates with the Finance Department
regarding the formulation and determination of the ADP and the approval of individual development
schemes during the ADP implementation. At all levels, efforts have been accelerated to involve non-
governmental organizations (NGOs) and communities in development works. For the social sectors, the
involvement of the NGOs in development works through health and education foundations is being
promoted. Lately, the private sector has also been involved in project financing and implementation.
7.34 The functions assigned to PP&DB include:
i. Formulation of the provincial government vision, policies and
strategies for economic planning and development in consultation with
all stakeholders, in the light of the NEC guidelines.
i. ADP and MTDF including:
• Preparation in coordination with all departments of the
provincial
government
• Monitoring implementation, and
• Evaluation of development projects and programmes
i i. Analytical work on economic issues, including conduct research,
surveys, reviews, and analyses of the socio-economic data.
iv. PSDP including preparation of the short- and long-term provincial
development plans and coordination with the federal government.
v. Policy for the approval of development schemes as a catalyst for
different departments and sectors to improve the pace and quality
of economic development.
vi. Resource allocation, reappropriation of development funds,
appropriations from

171
 vii. block allocations and disbursement of the supplementary grants.
viii. Secretariat of the PDWP and clearinghouse for the development
projects and programmes requiring approval of the CDWP and
ECNEC.
ix. Foreign assistance, including determination of key areas for such
assistance and preparation of the sector-wise portfolios, loan
negotiations and securing federal financial guarantees, wherever
required, and review of foreign aided projects.
x. Coordination of nominations for foreign training, seminars,
conferences, and workshops for all officials serving in the provincial
government.
xi. Capacity-building of the government departments, agencies, and
functionaries
xii. for good governance.
xiii. Accelerated development of the rain-fed (barani) and less developed
areas.
xiv. Framing guidelines for the procurement of consultancy services,
policy formulation concerning private sector development and
promotion and public private partnerships (PPPs).
xv. Implementation, development, and administration in respect to the
foreign assisted/funded and mega ADP projects.
xvi. Matters relating to attached departments, autonomous bodies, and
special institutions of the P&D Department.
xvii. IT including:
• IT policy
• Electronic data management
• Control of and liaison with district IT departments
• E-governance and E-service delivery
• Web content management

172
 • Pre-qualification of firms to provide IT consultancy, software development,
• and IT products to the government
• Coordination with both the public sector departments and private sector
agencies in the field of IT
• Service matters of the IT cadres, both at the provincial and district levels
xviii. Administration of the following laws and the rules framed thereunder:
• The Cholistan Development Authority Act 1976.
• The Punjab Economic Research Institute Ordinance 1980.
• The Punjab Public-Private Partnership for Infrastructure Act 2010.

Development Project Approval forums in Punjab

PROVINCIAL DEVELOPMENT WORKING PARTY

7.35 The PDWP is the highest body in the Punjab province to approve the provincial development
projects. The composition of the PDWP is:
i. Chairman P&D Board
ii. Provincial secretaries P&D
iii. Finance, Environment, and the Project Sponsoring departments
iv. All members of the PP&DB
v. Director Punjab Economic Research Institute
vi. Director-General M&E of the P&D Board and any co-opted member/s.

DEPARTMENTAL DEVELOPMENT SUB-COMMITTEE

7.36 The DDSC in Punjab is authorized to sanction development schemes from Rs. 200 million to Rs.
400 million. The DDSC comprises of:

i. Secretary of the administrative department concerned (as chairman)

ii. Representatives of the Finance Department (not below the rank of
Deputy Secretary), PP&DB (not below the rank of the Chief of a
section), Communication and Works (C&W) /Engineering Department
(not below the rank of Chief Engineer) and any co-opted member/s.

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 DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP)

7.37 The DDWP is competent to approve development projects up to Rs. 200 million. The DDWP
comprises of:
i. Divisional Commissioner (as chairman)
ii. Deputy Commissioners (DCs) of the division
iii. Superintending Engineers of Irrigation, and C&W departments
iv. Divisional heads of the sponsoring departments
v. Director (development/finance) as a member/secretary.

DISTRICT DEVELOPMENT COMMITTEES (DDC)

7.38 The DDC is authorized to approve development projects costing up to Rs. 50 million in a district.
The Committee is composed of:
i. DC (Chairman)
ii. Additional Deputy Commissioners (Finance & Planning and Revenue)
iii. Chief Engineer/SE/XEN concerned
iv. Head of the office concerned and Deputy Director (Planning) as a
member/
secretary.

7.39 The DDSC, DDWP and DDC are not competent to approve any scheme having a foreign
exchange or foreign assistance component and/or subsidy, irrespective of the project cost. These
must be placed before the PDWP for consideration and approval. Similarly, any survey and feasibility
study (PC-II) is submitted to the PDWP for consideration and approval, irrespective of the cost.

174
 SINDH

SINDH PLANNING AND DEVELOPMENT BOARD

7.40 The government of Sindh established the P&D Department on the 1st July 1970 to formulate
development policies, plans and projects. Following 18th Constitutional amendment which
significantly enhanced the planning and service delivery functions of the provincial governments, it
became imperative to transform and restructure the P&D Department into a P&D Board. The Sindh
Planning and Development Board (SP&DB) came into existence on 21st February 2017. The Board
comprises a chairman and seven members:
i. Secretary P&D Department (as a member/secretary of the Board),
i. Chief Economist
i i. Members Development, Energy and Infrastructure, Services, Natural
Resources, and Social Sectors.
7.41 The Board is authorized to approve development projects.

7.42 The SP&DB has the following functions:

i. Coordination of technical assistance from abroad.

i. Coordination of statistics in general, and all matters relating to Bureau of
Statistics.
i i. Coordination and training of officers in foreign countries.
iv. Economic research and matters relating to the Board of Economic Inquiry.
v. Evaluation of the progress of development schemes and writing their
critical
vi. appraisal.
vii. Foreign aid and technical assistance.
viii. Initiation of measures for giving suitable publicity to the development plan
and educating the public on the results achieved from time to time.
ix. Maintaining liaison with the national planning agencies.
x. Planning including policy and development.

175
 xi. Processing of all development schemes, programmes and proposals
submitted by other department and making recommendations to the
government thereon.
xii. Bureau of Statistics.
xiii. Research and Training Wing.
xiv. Assessment, planning, coordination, promotion and development of
science and technology with the following methodology:
• Formulation requirement of science and technology studies, terms
of reference for selection of consulting firms and arranging
technology studies on contract.
• Dissemination of IT to the public and private sector.
• Implementation of approved science and technology programmes
based on such studies in consultation with the relevant agency, that
is, the Department of Education, universities, boards etc.
• Contractual research (funding, contracting, and monitoring) in the
public and private sectors in all fields of science and technology to
meet the assessed needs of industry and agriculture.
• Setting up of institutions, laboratories or organization for research
and
• development.
xv. Promotion of applied research and utilization of research results in
the scientific and technological fields carried out at home or aboard.
xvi. Guidance to the research institutions in the field of scientific and
technological research.
xvii. Development of human resources and their optimal utilization in
science and technology.
xviii. M&E work done by the provincial research and development (R&D)
institutes through a system of peer review and performance audit.
xix. Recognition of research achievement through prizes and awards

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 based on a system of peer review.
xx. Establishment of scientific and industrial research advisory council at
the provincial level.
xxi. Liaison and interaction with the Ministry of Science and Technology
and Research and Development.
xxii. Implementation of programmes under the national technology policy
as applicable to Sindh.
xxiii. Sindh Land Bank.
xxiv. Adopt modern techniques and tools of planning and development to
meet increasing development challenges confronted to the province
amidst persistent catastrophes (floods, devastating rainfalls,
droughts, etc.) and bring the province to the trajectory of sustainable
economic growth and prosperity.
xxv. Serve as an engine of growth for robust economic development in
different sectors of the economy.
xxvi. Matters relating to the Bureau of Statistics.
xxvii. Service matters, except those entrusted to the Services, General
Administration and Coordination Department.

Development Project Approval forums in Sindh

PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP)

7.43 The Party is the highest body in Sindh Province to approve the provincial development
projects. Its composition is:

i. Chairman P&D Board

ii. Provincial secretaries of the Finance
iii. P&D Department and Project Sponsoring Department
iv. Members P&D Board for Energy, Infrastructure and Services
v. Chief Economist

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 vi. Senior Chief/Chief of the section concerned of the P&D
Department (Annexure 37).

7.44 A technical committee under the Secretary P&D Department has also been constituted for
scrutiny of development schemes before placing them on the agenda of the PDWP.

DEPARTMENTAL DEVELOPMENT WORKING PARTY (DDWP)

7.45 The DDWP is responsible for approving projects costing up to Rs. 100 million at the
departmental level. It is head by the Secretary of the administrative department concerned, a
representative each from the Finance Department (not below the rank of Deputy Secretary) and P&D
Department (not below the rank of Chief of the section), C&W/Engineering Department (not below
the rank of a Chief Engineer) as members, and any co-opted member/s.

DIVISIONAL DEVELOPMENT BOARDS (DDBS)

7.46 These Boards are responsible for approving development projects costing up to Rs.60 million
at the divisional level. The Board includes:

i. Divisional Commissioner (Chairman)

ii. Deputy Commissioners of the division
iii. Superintending Engineers of Irrigation and Power
iv. C&W Departments,
v. Divisional head of the sponsoring department
vi. Director (Development/Finance) as a member/secretary.

DISTRICT DEVELOPMENT COMMITTEES (DDC)

7.47 This Committee, responsible to approve projects each costing up to Rs. 40 million, is composed
of:

i. Deputy Commissioner (as Chairman).

ii. Executive District Officers (EDOs) Finance and Planning, Works and
Services,
and department concerned.
iii. District Officers (DOs) Planning (member/secretary) and department
concerned.
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 KHYBER PAKHTUNKHWA

PLANNING AND DEVELOPMENT DEPARTMENT

7.48 This Department in KP, established on the 1st July 1970, is headed by the Additional Chief Secretary
(Development). The Department is responsible for the following functions:
i. Formulation of government vision, policies, strategies and development plans for
economic planning and inclusive/sustainable development.
i. Initiate reforms to accelerate the pace of economic and social development.
i i. Appraisal, monitoring and evaluation of development projects and programmes.
iv. Processing of development schemes, programmes and proposals
submitted by other departments including autonomous bodies and making
recommendations to the government thereupon.
v. Secretariat functions of the Provincial Development Working Party.
vi. Act as the clearinghouse for development schemes within the competence of the
federal government, that is, CDWP/ECNEC, including representation in the DDWP.
vii. Focusing accelerated development of the less developed and vulnerable areas.
viii. Periodically review the progress of development projects including PSDP and foreign-
assistance projects.
ix. Determining policies for approval, review, and monitoring of development
schemes for the government.
x. Appropriation and re-appropriation of development grants provided in the
budget.
xi. Protocol functions in connection with visits of the foreign economic mission and
delegations, etc.
xii. Coordination of the provincial statistics in general and all matters relating to the
Bureau of Statistics.
xiii. Economic research, analysis, and surveys.
xiv. Coordination of technical assistance from abroad including training facilities for
government employees, expert advisory services, and equipment.
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 xv. Policy formulation concerning private sector development and promotion and
public-private partnership (PPP).
xvi. Ensure compliance to the international commitments in the development
process.
xvii. Capacity-building of the government departments, agencies, and functionaries for
good governance.
xviii. Matters relating to attached departments, autonomous bodies, and special
institutions of the P&D Department.
xix. Electronic data management and liaison with the line departments at the
provincial and district levels regarding planning and development.
xx. Mattes ancillary to the above subjects.

Development Project Approval Forums in Khyber Pakhtunkhwa

PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP)

7.49 The composition of the PDWP in KP includes:

i. Additional Chief Secretary (as chairman)
ii. Provincial secretaries of the Finance, Forestry, Environment and
Wildlife
departments, and the department concerned
iii. Secretaries of the C&W and Local Government Department (co-opted).
DEPARTMENTAL DEVELOPMENT WORKING PARTY (DDWP)

7.50 The DDWP forum is chaired by the administrative secretary of the department concerned
and competent to approve projects each costing up to Rs. 200 million. Other members include:

i. Secretaries P&D and Finance departments

ii. Representatives of the Local Government, C&W, and
Forestry, Environment and Wildlife departments.

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 DISTRICT DEVELOPMENT COMMITTEE (DDC)

7.51 The DDC is a district level forum for approving development schemes and is chaired by the Deputy
Commissioner of the district concerned. Other members are:

i. EDOs (Finance and Planning) and C&W,

ii. District Planning Officer, EDO and DO (department concerned).

7.52 The sanctioning power of the DDC is Rs. 40 million. All the non-ADP schemes regardless of
the cost will be presented to the PDWP forum for approval.

BALOCHISTAN

PLANNING AND DEVELOPMENT DEPARTMENT

7.53 This Department in Balochistan was established with the dissolution of One-Unit on the 1st
July 1970. It is head by the Additional Chief Secretary (Development) and comprises operational
sections, that is, Programming, Communication and Transport, Water and Power, Education and Local
Government, Agriculture, Food and Fisheries, Health and Social Welfare, Natural Resources, Development
Packages, Development Authorities, Forest, Livestock, Foreign Aid, and Information Technology. Each
section is headed by a Chief and is responsible for examining all development matters about its assigned
sectors, sub-sectors, and related development packages.

7.54 Under Rule 16 of the Balochistan Rules of Business, the P&D Department is responsible
for all matters related to economic policy, planning, coordination, and development and for
coordinating the activities of the various provincial departments in the economic field. The cases shall be
referred to and processed by the P&D Department particularly about matters affecting or involving
economic policy or any change or modification therein, development schemes and major capital
outlays, all schemes and projects included in the Five-Year Plans, any matter affecting more than one sector
of the economy of the province, and all new expenditures of development nature.

7.55 The functions assigned to the P&D Department under the Balochistan Rules of Business
2012, include:

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 i. Scrutinizing development schemes prepared and forwarded by the
administrative departments.
i. Preparation of the ADP with the coordination of all departments of the
government of Balochistan.
i i. Preparation of long-term development plans and coordination in the
iv. preparation of 5-year/rolling plans and any other national development plan.
v. Researching economic issues of interest to the provincial government,
socioeconomic impacts analysis and helping in the formulation of views on
economic policy issues.
vi. Compilation of the provincial statistical data with the help of the Bureau of
Statistics.
vii. Acting as a catalyst between different development departments to improve
viii. the pace and quality of the economic development.
ix. Determining policy for the approval of development schemes of the provincial
government.
x. Revising strategy for investment priorities based on the availability of internal
and external resources.
xi. Helping in the formulation of policy regarding planning and devising guidelines
in the development programmes.
xii. Approval, monitoring, implementation, and allocation of development outlay
for development programmes and projects.
xiii. Acting as a clearinghouse for development schemes within the competence of
the federal government, that is, CDWP and ECNEC.
xiv. Implementation relating to development and administration in respect of
foreign assisted/funded projects in the province, lead steering committees in
the Programme Requirements Baseline (PRBs) of various foreign-funded mega
projects.
xv. Coordination of external capital development assistance including foreign
training for the provincial government employees.

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 xvi. Evaluating the progress of development schemes and their critical appraisal
xvii. Representation in the Departmental Development Committees.
xviii. Review of various development plans/projects to be implemented through the
PSDPs by conducting Quarterly Review Meetings.
xix. Giving suitable publicity to development plans for the education of the public
for better utilization of facilities development and the results achieved
periodically.
xx. Looking after affairs of the autonomous bodies, such as Quetta Development
Authority, Balochistan Development Authority, Gwadar Development Authority,
Balochistan Coastal Development Authority, and Balochistan Water and
Sanitation Authority.
xxi. Selection of the Project Directors (PDs) through the Project Director Selection
Committees.
xxii. Establishment of the Management Information System (MIS) for the provincial
line departments for planning and monitoring.
xxiii. All service matters of the employees of the attached departments, excluding
employees of the secretariat, and those matters entrusted to the Services and
General Administration Department (S&GAD) or any other department.

Development Project Approval Forums in Balochistan

PROVINCIAL DEVELOPMENT WORKING PARTY (PDWP)

7.56 The Party in Balochistan is head by the Additional Chief Secretary (Development), while the rest
of the members include:

i. Secretary Finance Department

ii. Secretaries of the administrative department concerned,
iii. Joint Chief Economist (P&D Department) as a member
iv. Chief of the section concerned of the P&D Department as a
member/secretary.

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7.57 The PDWP is also authorized to co-opt any member(s).

7.58 The PDWP is the highest body at the provincial level to approve provincial development
projects. There is no restriction on the PDWP, if it deems necessary, to call for or to consider any scheme
referred to it by the DDSC or any department or agency (even if it falls below its normative approval
threshold). The PDWP also considers approval of schemes that do not fall solely within the jurisdiction of
any department but pertain to the whole of Balochistan. The province-specific schemes, reflected in the
federal PSDP and proposed to be executed by the provincial department or agency, are approved by the
PDWP first, and later submitted to the Planning Commission for further processing.

DEPARTMENTAL DEVELOPMENT SUB-COMMITTEE (DDSC)

7.59 The Balochistan DDSC is headed by the secretary of the department concerned comprising
one representative each from the provincial Finance and P&D departments, and co-opted member(s),
and head of P&D section concerned as a member/secretary.

7.60 The DDSC is empowered to recommend and approve schemes or projects each costing up
to Rs. 200 million related to the provincial ADP, whereas the technical members of the relevant or
respective departments constituting the DDSC, are assigned to provide appropriate necessary technical
input to enable the DDSC to timely consider and expeditiously dispose of the cases referred to it.

DIVISIONAL DEVELOPMENT WORKING PARTY (DDWP)

7.61 The DDWP is competent to approve development projects at the divisional level each costing
up to Rs. 40 million. The DDWP is head by the Divisional Commissioner, Deputy Commissioner concerned,
divisional head of the department concerned as a member, and Director (Development) of the P&D
Department as a member/secretary.
7.62 The schemes approved by the PDWP, DDSC, and DDWP should be in line with the objectives of
the national, provincial, and sectoral plans, with no deviation from the principles and policies
encompassing the plans. The schemes shall fall within the territorial limits of Balochistan.

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 SPECIAL AREA GOVERNMENTS

AZAD JAMMU AND KASHMIR

7.63 A Planning Cell was established in the early 1960s to institutionalize a sound basis for the
economic planning and development in the AJ&K. The cell was upgraded to the Planning and
Development Department in 1972 with the following functions (almost similar to those of the
provincial governments):

i. Formulation of planning and development policies and procedures.

ii. Coordination work related to the preparation of the ADP and its review.
iii. Processing of all development schemes, programmes and proposals
submitted by other departments including autonomous bodies, making
recommendations to the government thereupon, and facilitating the
functions of the Development Working Party.
iv. Maintaining liaison with the national planning agencies.
v. Oversight of the autonomous and semi-autonomous bodies about
development planning, programmes, and projects in the AJ&K.
vi. Coordination of economic assistance.
vii. Monitoring and evaluation of the progress of development schemes and
their critical appraisal.
viii. Coordination of technical assistance from abroad including training
facilities.

7.64 There are two development project approval forums. The Azad Jammu and Kashmir Central
Development Committee (AJKCDC), head by the Prime Minister AJ&K, is empowered to sanction
development schemes from Rs. 400 million to Rs. 1,000 million. The Azad Jammu and Kashmir
Development Working Party (AJKDWP), headed by the Additional Chief Secretary (Development), is
competent to sanction development schemes up to Rs. 400 million (Annexure 38). The procedure of
submitting schemes to approving forums in the AJ&K includes prescribed time limits for various project
processing and approval stages (Annexure 39).

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 GILGIT-BALTISTAN
7.65 The P&D (P&D) Department is the premier agency of the government of Gilgit- Baltistan,
which is responsible for planning, implementation, monitoring and evaluation of all development
activities in GB. The P&D Department is headed by Secretary P&D. Its main functions as per Rule of Business
2009 are:
i. Preparation of the ADP in coordination with all departments of the
GB government.
ii. Monitoring the utilization of the ADP funds.
iii. Approval of development schemes.
iv. Coordination training in the economic development of all officers serving
with the GB government.
v. Preparing the Five-Year and other area development plans.
vi. Processing proposals for foreign assistance/aid projects.
vii. Data collection, tabulation, and statistical matters.
viii. Coordination and supervision of development activities with line
departments and federal ministries.
ix. Focal department for all national and international training programmes.
x. Liaison with the UNDP, UNICEF and other international agencies and
donors
xi. Attending seminars, conferences and meetings related to the PSDP.
xii. Service matters, except those entrusted to the S&GAD Department.

7.66 There are two development project approval forums in GB. The Gilgit-Baltistan Development
Working Party (GBDWP), head by the Chief Minister, is empowered to sanction development schemes
from Rs. 400 million to Rs. 1000 million. The Gilgit-Baltistan Departmental Development Working
Party (GBDDWP), head by the Chief Secretary, is competent to sanction development schemes up to
Rs. 400 million.

7.67 All funds for development programmes in the AJ&K and GB are provided by the federal
government. The sanctioning powers of the foregoing development forums are only for locally funded
projects. In cases, where foreign exchange or assistances is more than 25 percent of the total cost of
the project, the approving forum is the CDWP and ECNEC irrespective of the cost of the project.

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 APPENDIX B
LIST OF ANNEXURES IN THE COMPENDIUM OF ANNEXURES: SUPPLEMENT TO THE MANUAL
FOR DEVELOPMENT PROJECTS BY THE PLANNING COMMISSION

Table 24: List of Annexures in the Compendium of Annexures: Supplement to the Manual for
Development Projects by the Planning Commission

Annexure Title
No.
1 Processes and Procedures to Improve Project Management
2 PC-II Proforma - 2024
3 Planning Commission Feasibility Study Requirements
4 Sectoral Classification of Development Expenditure
5 NEC Meeting (10th June 2013)
6 PC-I Proforma - 2024
7 Planning Commission Guidelines on Calculating Pakistani Rupee (PKR)
Equivalent of the Foreign Exchange Component (FEC) of Projects
8 Extension in Execution of Development Projects
9 Guidelines/Procedures for Preparation and Approval of
Development Projects
10 Procedure for Approval of Schemes by Federal Level DDWP
11 Procedure for Preparation and Approval of Development Projects
12 Guidelines/Procedures for Preparation and Approval of
Development Projects
13 Procedure/Instructions Regarding Grant of Anticipatory Approval by the
Chairman, ECNEC
14 Concept Clearance Proposals – Policy Guidelines
15 Procedure for Approval of PforR, FIP and DPC Mode of Financing
16 Guidelines by Finance Division for Release of Development Funds to the
PSDP-Funded Projects
17 Guidelines for the Appointment of an Independent PD (5th April, 2012)
18 Guidelines for the Appointment of an Independent PD (11th March, 2016)
19 Guidelines of Project Management Issued by Project Wing Planning
Commission

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20 Waiver of Framing of Recruitment Rules for Projects Posts in Ministries/
Divisions
21 Standard Pay Package for the Project Staff
22 PC-III Proforma - 2024
23 PC-IV Proforma - 2024
24 PC-V Proforma - 2024
25 Redesignation of National Planning Board (Notification)
26 Redesignation of National Planning Board (Resolution)
27 Reorganization of the Non-Technical Sections of the Project Division
28 Report of Deputy Chairman of the Commission to the Minister PD&SI in
June 2019
29 Constitution of Advisory Committee of Planning Commission/Ministry of
Planning & Development
30 Names of the Deputy Chairmen/Chairperson in Chronological Order
31 Reconstitution of ECNEC
32 Composition of Central Development Working Party (CDWP)
33 Enhancement of Sanctioning Powers of Federal Projects Approving Fora
34 Functions of Federal Level DDWP
35 Procedure for Approval of Self-Financing Development Schemes of
Autonomous Organizations
36 Enhancement of Sanctioning Powers of the PDWPs
37 Constitution of the Sindh Provincial Development Working Party (PDWP)
38 Enhancement of Sanctioning Limits of Development Fora Of Special Areas
(AJ&K, GB, and FATA)
39 AJ&K P&D Department Guidelines/Time Limits, for Streamlining the
Process of Development Projects
40 Notice Regarding Financial Discipline in Execution of Projects/Schemes
41 Procedure for Fresh Approval of a Development Scheme in Case of More
Than 15% Increase from Originally Approved Cost
42 Resolution of the Ministry of Economic Affairs (July, 1953)
43 Resolution Regarding the Functions of the Planning Board (April, 1957)
44 Resolution of Cabinet Division (April 2006)

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45 Re-Naming of the Ministry of Planning and Development, and
Restructuring of the Planning Commission
46 Instructions on Evaluation and Appraisal of Project
47 Prohibition to Propose Ex-Post-Facto Approval of Projects
48 Templet for the Project Concept Note – 2024
49 Instructions for Techno-Economic Feasibility studies (notification)

50 Acquisition of Land for Mega Projects

51 Instructions for appointment of Consultants
52 Processing/Approval of Provincial Nature of Projects for financing
from PSDP
53 Re-appropriation of PSDP funds
54 Processing of development projects at Planning Commission/Ministry of
PD&SI (Fixation of time-line)
55 Procedure to clear pending liabilities of the closed projects
56 Participation in the meeting of CDWP
57 NEC approved priorities/guidelines for preparation of PSDP-Budget Call
Circular 2024-25
58 amendments/modification in certificate part of the PC-Is/IIs submitted
for processing of Development projects
59 Clarification for separate approval from CDWP regarding project posts
of PPS-10 to PPS-12
60 Identification of Core Project and funding mechanism

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