copy the linklink copied!5. Proposed procedures for project cycle management

This chapter presents an overview of the project cycle management procedures developed for each project pipeline identified as part of this green public investment programme. Essentially, the implementation unit should ensure that the programme follows these procedures. A well-designed process – which is the responsibility of the programming entity – should guarantee that only eligible projects compete for public support and that the most cost-effective ones are selected for financing and implementation.


Project cycle management (PCM) comprises several distinct stages: 1) identifying and assessing projects for eligibility; 2) preparing programmes; 3) project development; 4) financing projects; 5) controlling and monitoring project impacts; and 6) maintaining a database of project impacts. Each of these stages is detailed in the sections below.

copy the linklink copied!5.1. Identifying and assessing projects

The first step in the PCM process is to identify eligible projects that respond to the strategic and specific objectives of the national environmental/climate and energy policy, as well as the objectives defined in the CPT Programme. Eligible projects include investments in replacing the public transport fleet in order to reduce air pollution and greenhouse gas (GHG) emissions and improve service quality.

Eligible projects would involve the following activities:

  • Replacing old public transport vehicles (buses, trolleybuses and minibuses) with environmentally acceptable models equipped with diesel, CNG or LPG or electricity-powered engines, used for public transport in urban (Phase 1) and suburban routes and inter-city (Phase 2).

  • Investing in support activities (studies, construction of CNG filling stations, establishment of a maintenance workshop for new buses, and additional investments that improve public transport services) relevant to the bus replacements in the three pipelines (CNG/LPG, diesel, electric).

Only investment projects (i.e. those involving capital outlays) are eligible for financing under this programme. The list of eligible projects will be reviewed on an annual basis by the implementation unit to ensure that it reflects national environmental/climate and energy policy objectives.

5.1.1. Project eligibility criteria

Clearly specifying the eligibility criteria (in terms of project types, beneficiaries and project costs that will be supported by the programme) and setting robust project appraisal criteria will make programme implementation more transparent and efficient. It will also make the programme credible for financiers – be they public or private, local or foreign.

This section describes the minimum eligibility criteria. These are “knock-out criteria”, i.e. failure to meet even one of these criteria at this stage results in rejection of the project (though the option of re-designing the project proposal could be considered). Projects that pass the eligibility assessment but lack sufficient information can be returned to the applicant with a request for clarification. Annex D contains a template of an eligibility evaluation form that can be adapted for project screening.

Eligibility criteria allow the programme to conduct an initial and simple assessment of those projects that appear to address all crucial objectives related to the CPT Programme and that can potentially qualify for financing. The criteria include the types of eligible projects, eligible costs and eligible beneficiaries (project owners) for screening individual projects that apply for public support. The purpose of eligibility criteria is to conduct an initial and simple assessment of those projects that appear to address all the objectives related to the CPT Programme and that can potentially qualify for financing. Eligibility criteria should be simple, straightforward and clearly specified.

The following groups of eligibility criteria could be used to screen projects (detailed lists should be prepared by the Ministry of Economy before the programme launch):

  1. 1. Location of the project: limited to urban centres and suburban areas (Phase 1).

  2. 2. Types of eligible projects:

    1. a. the project type should be identified in the list of eligible projects

    2. b. all proposed costs of the project should be possible to identify in the list of eligible costs

    3. c. replacement of buses that are more than 10 years old and equipped with below Euro 5/V engines.

  3. 3. Types of eligible beneficiaries (project owners):

    1. a. private public transport operators that currently provide services in eligible urban centres (Phase 1) and suburban areas of the pilot cities or inter-city connections (Phase 2 – for a description of phases, see Section 2.3 and 2.4 above)

    2. b. municipal public transport operators that already provide services in eligible urban centres and suburban areas of the pilot cities (Phase 2)

    3. c. pilot cities’ administrative governments (for preparing the necessary studies and support investments).

  4. 4. Other eligibility criteria: existing city plans for additional (support) investments to improve the city’s urban public transport system.

Also, at this stage, a list of eligible vehicle models available on the market could be prepared in order to simplify the procedure and eligibility testing. The list could be updated in the future when new models come on the market. If the type of vehicle proposed for purchase is on the approved list, the IU can proceed without contacting the Ministry of Economy. If not, the project documents, especially technical specifications (which should be delivered by beneficiaries, bus producers or importers on request) should be sent to the Ministry of Economy for evaluation. The Ministry of Economy evaluates whether the vehicle model fulfils the programme objectives – if it does it is added to the list. If it does not fulfil the objectives of the programme, the Ministry of Economy informs the IU, the beneficiary is informed. The project can be re-evaluated if the beneficiary proposes a different vehicle type.

If a project does not comply with the eligibility criteria (i.e. if it receives a “no” response to any of the questions in the eligibility assessment), it is rejected and a written explanation is sent to the applicant. The project may be re-evaluated upon modification and re-submission.

The IU should select employees to help review and evaluate projects. The employees should participate in training by the Ministry of Economy to give them the skills to evaluate whether the project meets the CPT Programme objectives and complies with the eligibility criteria.

5.1.2. Project appraisal criteria

A project that meets the eligibility criteria then needs to be appraised to assess if it is worth funding. The appraisal is also done on the basis of clearly specified and rigorous criteria. These allow programme managers to compare, rank and select the most cost-effective projects for financing. When these criteria are applied uniformly across all (similar) projects, they can also help reduce management bias in selecting individual projects for financing.

Experience shows that a well-designed appraisal system is fundamental for selecting the most cost-effective investment projects for financing with public resources (see Figure 2.10 above). All projects that pass through the eligibility screening (pre-appraisal) are then appraised and ranked according to a set of appraisal and ranking criteria listed briefly below and scored using an evaluation table (see Annex E). Projects with the highest scores would make the biggest contribution to the CPT Programme objectives and therefore should be the first to be selected for co-financing.

The following appraisal criteria are proposed to evaluate projects in this pipeline:

  1. 1. Project preparation:

    1. a. prepared business plan or strategic plan for implementation of the clean public transport in the city.

  2. 2. Project location:

    1. a. buses to be replaced are operating in polluted districts of the cities (list of polluted districts)

    2. b. buses to be replaced are used only in the centre of the eligible city

    3. c. buses to be replaced are used in the city centre and on the outskirts/suburbs of the eligible city

    4. d. buses to be replaced are used in the city and connecting rural areas outside the eligible city.

  3. 3. Project type:

    1. a. buses have higher priority than minibuses

    2. b. compressed natural gas (CNG) buses have higher priority than liquefied petroleum gas (LPG) buses

    3. c. modern diesel buses are assigned the lowest priority.

  4. 4. Project size:

    1. a. replacement of more than 20 buses

    2. b. replacement of between 10 and 20 buses

    3. c. replacement of fewer than 10 buses1.

  5. 5. Proposed system of improvements of the urban public transport system in the city:

    1. a. length of new bus lanes

    2. b. number of traffic lights with priority for public transport

    3. c. number of bus stops newly equipped with online information for passengers

    4. d. number of new bus stops.

  6. 6. Environmental efficiency: Cost per reduction of a unit of particulate matter – PM2.5.

The applicants submitting applications and supporting documentation for those projects that pass the cut-off level for financing are then contacted by the IU in writing to inform them that their project has been selected for financing.

copy the linklink copied!5.2. Preparing programmes

Two cities, Bishkek and Osh, were selected for the pilot phase. To implement the pilot phase, it is recommended that a project selection procedure be followed based on negotiations between the city administrations and beneficiaries (operators of the public transport system). The Ministry of Economy, in co-operation with the State Agency for Environmental Protection and Forestry (SAEPF), who are responsible for the overall oversight of the programme, should give clear directions to local administrations, in particular on:

  • the amount of funds allocated for the pilot phase for each city

  • the maximum share of co-financing from public funds

  • the criteria that pilot projects should meet in order to be deemed eligible for financing (see Annex D).

The project cycle management – especially for the second (scaling-up) phase of the programme – will be complex, but in order to keep down administrative and transaction costs (see Table 2.6 and Table 2.7) for beneficiaries, most of the work will be done by the implementation unit (IU).

Programme preparations will consist of negotiations with the IU, signing agreements and designing procedures and forms to be used by the IU.

The IU’s main responsibilities should include:

  • marketing the programme to potential beneficiaries

  • identifying, assessing and selecting eligible projects and beneficiaries; preparing and signing loans; and conducting verification of the projects

  • ensuring operations comply with the programme, especially by applying the procedures and criteria established by the Ministry of Economy on selecting beneficiaries and their projects

  • reporting regularly on financial and physical implementation to the Ministry of Economy and the Ministry of Finance (every three months)

  • preparing forecasts of financial involvement for the next reporting period.

The IU will actively promote the CPT Programme by distributing information about it. This will involve publishing leaflets to be distributed to potential beneficiaries, which define eligible projects, eligible beneficiaries, eligibility criteria, and the type of financing available.

copy the linklink copied!5.3. Financing projects

Once the priority projects have been selected for financing, the proposed financing scheme for each project needs to be designed. This involves determining the amount of the grant required for the project to be viable.

When the proposed financing schedule has been defined, the IU invites the applicant to negotiations and to sign the loan contract. The contract should detail the rights and responsibilities of each party to the agreement, measures to be taken if the beneficiary fails to comply with the terms and conditions of the contract, as well as a disbursement schedule for the financial support.

During project implementation, settling payments with contractors is an important practical issue. The IU will settle payments with contractors.

There are two schemes for organising contracting and paying beneficiaries and contractors:

  • Scheme 1: Public support is transferred to the beneficiary (i.e. public transport operator), who organises a tender to select a contractor/supplier (of public transport vehicles). The bank transfers the funds to the beneficiary, who pays the contractor/supplier (of public transport vehicles) upon invoicing (Figure 5.1).

  • Scheme 2: Public support is transferred to the beneficiary, who organises a tender to select a contractor, but the contractor is paid directly by the IU. The bank agrees the amount of financing with the beneficiary, but pays the contractor/supplier directly upon delivery of the service and submission of invoice (Figure 5.2).

In both options, if the bus supplier has not already been selected, the beneficiary initiates a tender procedure (in accordance with public procurement law, if the purchases of this beneficiary fall under this law).

Under Scheme 1, at the end of an agreed time period (for example monthly), the Ministry of Economy receives from the IU the list of supported beneficiaries, number and types of purchased vehicles, cost of the purchase and information on the loan provided to the beneficiary. Based on this information, the Ministry of Economy releases the grant amount (calculated as a fixed percentage of the purchase cost). In general, Scheme 1 is more widely used than Scheme 2 (which has benefits under special circumstances, such as lack of trust).

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Figure 5.1. Payment scheme 1: beneficiary receives public funds
Figure 5.1. Payment scheme 1: beneficiary receives public funds

Source: OECD, own graphics.

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Figure 5.2. Payment scheme 2: contractor is paid directly
Figure 5.2. Payment scheme 2: contractor is paid directly

Source: OECD, own graphics.

It is important to highlight again (see Section 2.4) that the rate of financial assistance (subsidy rate) should be set to ensure that it does not replace, but instead leverages, the beneficiary’s spending. Thus, public resources should be seen as a last resort for covering the financing gap of green priority projects (following the principle of additionality). For this reason, the level of the subsidy should be kept at the absolute minimum. This optimal minimum can be defined as the rate of assistance that makes environmentally and economically important projects financially viable.

copy the linklink copied!5.4. Controlling and monitoring project impacts

Once implementation has commenced, the IU, as per the contract with the beneficiary, maintains the right to monitor and inspect the implementation of the project in order to:

  • compare actual with planned results in physical terms (e.g., number of buses; type of buses)

  • determine whether buses are being used to provide public transport in urban/sub-urban centres

  • monitor implementation of accompanying investments (e.g., dedicated bus lanes, improved bus stations).

5.4.1. Performance indicators

The following performance indicators could be used by the institution managing the expenditure programme:

  • number of buses replaced, 15 years or older, including minibuses

  • number of buses replaced, 10 years or older, including minibuses

  • number of LPG-fuelled buses replacing outdated buses

  • number of CNG-fuelled buses replacing outdated buses

  • number of new trolleybuses

  • number of model diesel-fuelled (Euro V or better) buses replacing outdated buses

  • kilometres of dedicated bus lanes

  • tonnes of carbon dioxide (CO2) reduced per year

  • tonnes of particulate matter – PM10 – reduced per year

  • tonnes of particulate matter – PM2.5 – reduced per year.

5.4.2. Impact assessment

In contrast to the control and monitoring procedures during project implementation described above, post-implementation control and monitoring (ex-post evaluation) involves determining whether the project has met its stated objectives. This is the primary responsibility of the IU, which reports the results to the Ministry of Economy (as manager of the CPT Programme).

Since direct and immediate measurement of project outcomes in terms of air pollution reduction and fuel consumption is very difficult, only the physical outcomes of the project should be monitored, namely:

  • the number of buses by engine type and whether buses are used to provide public transport services in urban centres

  • verification that emission reduction equipment remains installed in diesel engines

  • implementation of accompanying investments.

If the objectives have not been met, the beneficiary may have to return a part or all of the financial support provided under the programme. The contract must clearly rule on such an eventuality.

5.4.3. Maintaining a database of project and programme impacts

A final element of PCM is creating and maintaining a database of project and programme impacts. The Ministry of Economy should determine the best format for the database, such as an Excel-based system or a database software. The following parameters need to be included and maintained in the database:


  • expenditures by year for each type of project

  • actual expenditures compared to those budgeted

  • calculated emission reductions by year.


  • number of projects by type, by year

  • physical outcomes by year: number of buses by engine type

  • calculated emission reductions by year (estimated based on buses replaced)

  • project cost-effectiveness: cost per unit of emission reduction.

The database should be used to inform future beneficiaries, to adjust eligibility and appraisal criteria as needed and to ensure relevance.

copy the linklink copied!5.5. Conclusions for the CPT Programme

The major purpose of the public support under this programme is to provide incentives to local communities and enterprises to undertake green investments and spend more of their own resources on environment-friendly products and technologies.

Some of the main conclusions emerging from the discussion of programming and project cycle management include:

  • Programming is a political process, focused on defining priorities and goals and setting out rules for the project cycle (e.g. Ministry of Economy). Appraisal – but simplified – is conducted by professional technical staff (e.g., the IU), who are held accountable for their decisions. Responsibilities for programming and the project cycle management should be separated.

  • Transparency is key. Information (on project cycle procedures, eligibility criteria, and achieved results and benefits) should be disseminated widely. All potential applicants should be treated equally; decisions should be explained on time; stakeholders should be invited to participate.

  • While a two-step appraisal process is preferable, due to involvement of many small enterprises and banks the appraisal procedure should be simplified, as follows: the Ministry of Economy approves the list of buses that are eligible for financing, which makes it simple for banks to approve projects for a financing. If a type of bus is not on the approved list, it will not be financed and no further assessment is necessary.

  • The process does not stop once a decision to finance a project has been made: contracting, monitoring project implementation and assessing project outcomes are also essential, as programme managers will learn from this experience.

  • Attracting and retaining qualified staff is key: the capacity to challenge project owners and to manage the complex process of project appraisal requires experience in the field.


← 1. The appraisal system should award fewer points to projects involving CNG buses when there are no CNG filling stations in the city or they are not commercially profitable (there are fewer than 100 CNG buses).

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5. Proposed procedures for project cycle management