Managing experimental smart projects

Supporting DLGTD is about facilitating policy and institutional changes that transform the sub-national system of governance and public administration and make it developmental.

Successful smart projects have shown that the project aid modality may be particularly relevant in this regard, with comparative advantages over other aid modalities in supporting the emergence of feasible solutions through local experimentation by front-line development agents. But what kind of projects will ensure that such comparative advantages are realised?

The answer may lie in the design of a new generation of smart projects that support DLGTD by setting up policy and institutional innovation facilities (PIIFs). A PIIF is characterised by both:

■ a management unit that, in contrast with a traditional project implementation unit, can actually accompany and facilitate the search for innovative solutions, rather than imple-ment blueprint models;

■ the ability to provide direct financial support to participating LAs to enlarge their fiscal space and stimulate bottom-up learning and capacity development.

Practice-driven institutional change and policy development do not follow predetermined, linear paths. They require the right type of agency with the ability to convene multiple actors and facilitate decision-making processes over an extended period of time — and with inev-itable ups and downs. This is not a task for a project implementation unit narrowly con-cerned with the management of planned operations and the accounting of project financial resources, but instead requires a managing entity with a broader mandate.

M a n a g i n g t h e P I I F

A PIIF has three main functions.

■ The PIIF acts as a convener and facilitator of place-specific and problem-driven strategic dialogues between the relevant LAs, potential service providers from the private and non-profit sectors, representatives of user communities, as well as ministries and other central agencies.

■ The PIIF supports experimentation by local actors of innovative institutional solutions to local governance and service delivery problems. To this end, the provision of direct funding to participating LAs should be understood as an incentive to experimentation for improved local development planning and delivery practices and to the promotion of civic engagement and local resource mobilisation around local priorities and the achievement of national objectives (such as the Sustainable Development Goals). Experimentation should be systemic in scope and include the improvement of practices and capacities for state oversight of LA systems (the vertical partnership link), as well as the development of forms of public-community-private partnerships for co-production of infrastructure and services and the promotion of active citizenship (the horizontal partnership link).

■ The PIIF develops and manages a learning platform, drawing on policy-oriented monitoring and evaluation and other analytical efforts including technical studies and the drafting of policy papers by academia and national task forces. These efforts are aimed at (i) generating evidence about how limitations of current policy and institutions constrain

the ability of LAs to operate as developmental actors, and (ii) ensuring that the lessons learnt and good practices developed are effectively shared with policymakers. Such les-sons should be discussed by a PIIF multi-stakeholder advisory board composed of key players including the national entity leading the decentralisation reform process as well as other core and line ministries, civil society organisations (CSOs) and LA associations⁽³⁾. Experience suggests the critical importance

of the EU delegations carefully selecting the managing entity in charge of the PIIF.

Knowledge of European Commission finan-cial and administrative procedures is not sufficient; the team needs to have the right mix of process facilitation and programme management skills (see Box 14.2).

The EU delegation has several procedural options in establishing the facility and securing the services that will assure its effective management:

■ international tender for the services of a private firm;

■ a call for proposals open to international organisations, international CSOs, and international LA association;

■ direct award to a national LA association, where it may be the sole provider of the required services;

■ a delegation agreement with international organisations or Member States.

Figure 14.3 visualises how such a PIIF would look in practice in terms of the various actors/

entities involved, the roles each fulfils and the instruments used.

I m p o r t a n c e o f p r o v i d i n g d i r e c t f i n a n c i a l s u p p o r t t o l o c a l a u t h o r i t i e s

There are three main reasons smart projects put direct funding of LAs at the centre of their intervention.

■ Direct financial support is the entry way for building the capacities of all actors at the sub-national level of governance. Smart projects use the experimentation space in which they operate to reverse the classic fiscal decentralisation approach (i.e.

funding is transferred after functions and when capacities exist) and consider direct seed funding as a prerequisite for real capacity development through learning on the job. On a day-to-day basis, the LAs will be confronted with myriad practical problems. Yet in the

(3) To ensure the participation of CSOs and LA associations on this advisory board, targeted support could be provided through the CSO-LA Thematic Programme.

B O X 1 4 . 2 The art of process facilitation in a PIIF

T

■ listening to the various actors/stakeholders — seeking to understand their interests and incentives;

■ advising local actors to search for best fit solutions;

■ mediating, where mistrust exists or competing interests need to be reconciled;

■ facilitating learning through local-level platforms and monitoring and evaluation systems;

■ connecting actors and levels of governance to ensure that valuable lessons are scaled up and influence future policies and practices.

Mobilisation of independent local expertise is crucial to facilitate a clear understanding of deeper political/institutional realities and dynamics. External experts can add value by bringing in experiences from other countries and serving as neutral mediators between different groups of local actors.

process of addressing these bottlenecks within the framework of the existing national system and laws, learning takes place, step by step.

The importance of direct financial support applies to the whole local public sector as well, including deconcentrated services of the central administration and other public agencies operating in the locality. These actors need to come to grips with the practical implications of decentralisation reform and adapt their own roles and ways of working through learn-ing-by-doing approaches. A case in point is the need for deconcentrated services to move away from a top-down command mode of operations that hampers the empowerment of LAs. Rather, deconcentrated services should be seen as a set of critical support and control functions oriented towards LAs so they can fulfil their developmental role. Smart projects can help the local public sector engage in processes of institutional adaptation and behavioural change.

■ Direct funding to LAs allows the project to serve as a laboratory for innovation.

To bring decentralisation reforms to life, smart projects can provide the seed money to experiment within existing national policies and systems in order to test out workable models — for local planning, investment, procurement, etc. — that could be institution-alised over time.

■ Direct funding to LAs may help restore the link between LA autonomous action and accountability. By making LAs responsible for their own public policy choices, a different kind of local political process can start to emerge, involving citizens and geared at more transparent, accountable delivery/co-production of services. Over time, this may F I G U R E 1 4 . 3 The PIIF in practice

Direct financial support  to selected LAs:

■Call for proposals (program estimates) Call for proposals (CSO, international organisation)

change citizens’ negative perceptions of LAs as well as promote a more positive attitude towards taxes. Evidence suggests that the willingness of local populations to pay taxes increases if LAs are seen to properly manage public affairs. Hence, a strategic use of the project approach may help address the vicious cycle of decreasing LA delivery capacity and legitimacy towards the more virtuous circle illustrated in Figure 14.4 (Zhou, 2007).

O p t i o n s f o r c h a n n e l l i n g d i r e c t f u n d i n g t o l o c a l a u t h o r i t i e s

There are three main options for directly channelling financial resources to LAs when using project approaches.

■ Call for proposals. The call for proposals process is either managed directly by the EU delegation (which has the disadvantage of potentially high transaction costs) or by the private firm in charge of the PIIF, following an international tender and operating through programme estimates.

■ Direct grants to LAs. These grants are coordinated through the managing entity receiv-ing the EU grant — i.e. the international organisation, international or national CSO or LA association, etc., selected through a call for proposals — using a sub-grant system that allows for direct funding of LAs.

F I G U R E 1 4 . 4 Towards a virtuous circle of legitimate and performance-oriented local authorities

VICIOUS CYCLE OF WEAK AND