1.2 INSTITUTIONAL FRAMEWORK OF A PROJECT
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Every project finds itself in the middle of different stakeholders, individuals and organisations who are actively involved in the project, or whose interest may be affected in a positive or negative manner as a result of project execution or successful project completion. The institutional framework of a project usually consists of:
The Beneficiaries of a project are the future users, those for which the project is implemented, those whose needs have to be satisfied and taken into account when the project is set up. Their close involvement into the needs assessment is important whenever it is possible. If the needs assessment is flawed or wrong the whole project will be a failure. The end beneficiary of all public projects – directly or indirectly – is the general public, the citizen.
The project owner is the legal entity which takes the legal responsibility for the project once it has been implemented. Normally, the mastermind of the project, i.e. the entity that instigated and conceived the project will later become the project owner. Its commitment is a prerequisite for the project success. The project owner is the representative of the beneficiaries.
The project owner will be responsible for the maintenance and the operational cost of the project. From this point of view, a cost-efficient solution over the whole life-cycle of the investment and a reasonable scope of the project are in the best interest of the project owner. It will, therefore, meticulously check the cost-benefit analysis and insist that a solution is found which the project owner can afford also on the long run.
Small straightforward projects may be implemented (managed) by the project owner, either with own capacities or by contracting economic operators for single components. But it cannot be expected that public project owners will be staffed to meet all challenges to implement all projects they own. For most of its projects, a project owner will have to assign the implementation of the whole project to an economic operator by conducting a tendering process. The tendering process is conducted either with own resources (in this case the Project Owner is also the Contracting Authority) or it may be formally assigned to another Contracting Authority.
The Contracting Authority is the central government or the legal person governed by public law which is responsible for conducting the public procurement process and concluding the contract on its behalf (in this case it is also the Project Owner), or on behalf of a third party, which is the Project Owner. If the Contracting Authority is adequately staffed to support the project implementation, it also undertakes the role of the Implementing Agency.
The implementing agency is an entity with sufficient technical and managerial know-how and capacity to put the project design (the stipulations in the Project Fiche) into reality. This requires, amongst others, adequate authority, control, financial resources, technical competence, legal expertise, and managerial capacity to implement the project. If the project owner is a public entity, e.g. a municipality, a regional administration, or a department at central level, the implementing agency would, ideally, be an entity in the public sector, depending on the scope, the territorial coverage, or the importance of project. The public sector is, therefore, usually organised in such a way that important publicly owned projects can be implemented by public implementing agencies. However, in many cases, the project management or the implementation itself is contracted out to private firms. It should be noted that in any case the responsibility of decision making remains to the implementing agency.
No matter whether done by a public or a private entity, the services for the implementation of a project are not free of charge. Related costs have to be included in the project budget.
The project owner may be in a position to self-finance its project, have the project co-financed from other sources, or finance the project entirely from external resources. The funds may be made available from the regular budget of the project owner or, in the case of external funding, in the form of a grant or a loan.
It is worth remembering that for public projects the taxpayer/citizen is the original “source of funding”, providing funds, dominantly via the taxation system. As the general public is the original provider/co-provider of funds, the public interest is the supreme criterion when deciding on scope and design of a project. Cost-efficiency in terms of initial cost and, as important, operational cost is of highest importance.
For this Guide, we assume that financing projects from national public budgets and/or EU support funds will be the most frequent situation. External funding by means of grants/loans or public-private mixed contracts is thus considered to be only of marginal interest to the target group of the Guide.
The public administration may consider borrowing as a source of funds for investments. However, a meticulous cost-benefit analysis has to give evidence that reliable revenues justify this method of financing for an important investment.
Example 1-1: Project’s Institutional Framework
The graph below illustrates the course of action to set up and implement a project. Starting on top and following the graph clock-wise the steps to follow become apparent. The graph also symbolises the central role of the result of the project design process.
Figure 1-2: Course of action to set up and implement a project
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