99015 Page 1 of 6 pages INSTITUTIONAL DEVELOPMENT TECHNICAL NOTE NO. 2 INSTITUTIONAL CONSIDERATIONS IN INTERAGENCY COORDINATION I. Introduction 1. This Note advises on how to deal with interagency coordination during the course of Bank work. It is designed to help staff ensure that coordination arrangements take into account interests in both efficient project implementation, as well as institutional development of agencies and their organizational relationships. As the Note illustrates, there are many types of coordination arrangements for linking the strategies and/or operations of separate agencies or organized groups. Part I briefly reviews Bank experience and its implications for dealing with interagency coordination in future lending, and Part II discusses the main principles and issues involved. Part III reviews a range of coordination alternatives, beyond the usual formal arrangements employed in the past. The Annex outlines issues to be addressed at various stages of the Bank's project cycle. · · · · Implications from Experience 2. Bank projects in recent years have increasingly emphasized interagency coordination, for four reasons. First, though many traditional ~ infrastructure projects could be executed satisfactorily through just one agency (for example, a highway directorate constructing a highway or a power company improving its generating capacity), solo operations sometimes en.tailed disadvantages (for example, unbalanced growth in the transport sector or an uneconomic national system for power supply). Second, as more of the lending in traditional sectors has gone to rural and poor areas (e.g. for feeder roads or rural electrification projects), the Bank has turned to "integrated" projects involving several sectors and various levels (national, state, community) of government, which increases the number of agencies involved--thus increasing the need for coordination. 3. Third, social services and newstyle projects tend to involve a large number of groups at the community level--not only those responsible for implementation, but also community organizations and interest groups. To begin with, these groups are often geographically scattered, putting increased burden on coordination. Moreover, the agencies may not be located under a direct chain of control, which means that coordination would have to fill in 'where control is lacking. Fourth, operations in social services and newstyle sectors frequently rely on active, timely interventions by several agencies--for example, to ensure that agricultural inputs, credit services and marketing are synchronized. This contrasts with traditional operations where one. agency could operate independently oftentimes (albeit _with possible dis~conomies). I 4. Most often, Bank projects !lave relied on formal types of coordination, through committees or other organizational arrangements specifically established for that purpose. The most common types have been: Page 2 of 6 pages (a) Normal contacts among agencies in the course of their work, for example, a water department keeping in touch with health authorities monitoring water quality and control of water-borne disease; or a highway department maintaining contact with agencies in the agriculture sector. (b) Line coordination, in which a coordinating body directs the contributions of different agencies to a project or program; for instance, an urban development agency might be chargea with coordinating project inputs from municipal entities. (c) Advisory coordination, by a committee or agency that does not have authority over agency activities; typical of this category is the interministerial committee, where high officials meet to discuss operational issues, (eg., in rural development) but are not bound to apply the committee's decisions within their own ministries. Project units, a- common vehicle for coordination in Bank projects, typically have performed either an advisory or a line coordination role. S• In recent Bank projects, experience with interagency coordination has been mixed. Failures in coordination have led to delays in disbursement, equipment delivery and hiring of consultants, not to mention more serious problems such as diseconomies (eg., facilities built long before they· could be used and maintained) and duplication. When coordination was badly designed, it could also cause problems; for instance, a project might entail. arrangements which seemed to favor the investment, but ignored established interagency relationships, or potential frictions caused by new arrangements, or the need to establish a permanent and viable coordination system. II. Principles and Issues 6. The alternatives for coordination should be examined in the context of the sector or group of sectors involved, even though the .ultimate arrangement may have a limited scope. The following points deserve consideration in the formulation, implementation and evaluation of coordination arrangements: 7. Optimal scope of coordination. Beyond just identifying coordination needs, it is important to evaluate the urgency of the needs. While some coordination may be essential to 'operate effectively, other may be merely desirable. The idea is to find the optimal point: complete agency independence at one extreme can exact a heavy toll in duplication and diseconomies, but excessive coordinatio·n arrangements can also burden agencies beyond their capabilities and cost· more time and effort that it is worth. 1 Page 3 of 6 pages 8. The relationship of organizational level to coordination. Though used frequently and for ·many purposes, coordinating committees made up of ministers or high level officials have been effective mainly in interagency planning, policymaking or setting mandates~ (For instance, the power sector in many countries has needed such a transcending authority, since individual ~ompanies cannot be expected to.take responsibility for balancing country-wide generation and distribution; in fact, the companies may feel protective of their autonomy, commercially competitive, or more loyal to local or regional interests.) 9. High level committees, however, tend to be less effective for guiding day-to~day operations. Few higher officials have the time or inclination to contend with details. Also, agreements made at the national or state level cannot be relied on to "trickle down" to specific project -.:;- sites .1 Finally, high level officials may worry about protecting their agencies' sovereignty and responsibilities, or even renege on coordination agreements if these are not compatible with their own agencies' interests. 10. Coordination among disparate levels of agencies or sectors may be particularly difficult. First, vertical coordination is complicated when· linkages between higher and lower level bureaucracy are not strong (e.g., federal agencie~ in many Brazilian sectors exercise limited control over state and local entities). Second, linkages are frequently weak or even nonexistent among agencies in different sectors. Third, government authorities cannot exercise control over private agencies and groups to enforce coordination. Fourth, politial tensions may interfere, especially among entities of unequal power or responsibilities; for example, a large · entity may prefer to strong-arm a weaker one than passively coordinate, and a small one may (reasonably) fear being overwhelmed by larger ones. 11. Balancing authority and incentives. As tfie previous paragraph illustrates, coordination can sometimes be very difficult. To the extent that coordination is beyond strict control, incentives can help promo'te it. (a) Authority. Where none already exists, one can introduce some degree of authority over agency interactions in three ways. First, a single agency responsible for the bulk of a project or program could serve as a focal point for coordination among all contributing agencies. Second, a "lead agency" might be identified and charged with ensuring that coordination occurs with requisite frequency and efficiency. Third; an umbrella authority, such as a national planning office, could be made responsibile for coordination, when it is likely to be more effective than one line agency tryin~ to spur coordination with other coequals. 1/ Along these lines, the report "The Design of Organizations for Rural Development Projects--Progress Report," has found that "rural development requires relatively strong patterns of control and coordination at the local level." (B:· Smith, F. Lethem, B. Thoolen; Staff Working Paper No. 375; p. 25). Page 4 of 6 pages (b) Incentives. In looking for ways to induce coordination, one has 0 to investigate why the actors would want to comply. To begin with, the benefits of avoiding duplication and diseconomies may be much clearer and higher priority to the national government and the World Bank than they are to individual agencies. Besides benefits ,not always being clear, agencies may perceive a number of distinct disincentives for them in coordination, such as the surrender of responsibilities or political power, or possible meddling by higher levels of government. However, the disincentives can be consciously counterbalanced by incentives; for instance, in power projects some governments have succeeded in promoting the following benefits from coordination: joint company investment for faster exploitation of hydroelectric sites; pooled services and reserves for greater system reliability; reduction of peak loan burdens; and more efficient use of available generating capacity. 12. The incentives and authority in coordination design need to draw on benefits which are intrinsic to the existing institutional system. Contrived incentives stand a good chance of being shrugged off, giving way to more fundamental disincentives. Some incentives might seem small or peripheral to project designers (for example, providing extra vehicles to field offices) but, if an agency sees them as important, they can seal its commitment to co~r~ination. 13. Institutionalization. It is important to distinguish between transient project arrangements and the ones necessary for permanent interagency coordination. If coordination ought to take root permanently, arrangements will have to fit compatibly into the institutional context. Separate project units introducing coordination (and other project functions) outside existing channels have exemplified how project arrangements can neglect institutionalization, since the units have tended to disappear at the end of project-financing without making plans for continued coordination.2 Experience shows that unless the approach is suitable for the existing legal, political and value system, and unless agencies are convinced.of the need for coordination, then it is unlikely to be institutionalized. III. Alternative Coordination Arrangements 14. The most common types of coordination in Bank experience, mentioned in paragraph 2 above, are routine contacts, line coordination and advisory coordination. These three types rely on periodic meetings and maintaining consensus--conditions which can easily break down with neglect, politlcal intervention, interpersonal conflicts and the like. Therefore, it is worth considering. alternatives which can make coordination more automatic (paragraphs 15-18), or greatly reduce the need for it altogether (Paragraphs 19--20. 2/ See I.D. Technical Note No. 1 on the Institutional Impact of Project Units. Page 5 of 6 pages 15. Interagency Planning. Some coordination can transpire during interagency planning processes, or during project planning and preparation--deciding in advance which agencies will do what and when, rather than making coordination decisions on an ongoing basis during implementation. In the Mexico PIDER rural development case, planning proved to be an effective vehicle for coordination, because agencies were more receptive to establishing their respective roles beforehand rather than waiting until operations. started up. Resolving coordination during the planning or the initial stages of the project has the additional advantage of establishing mutual expectations early on, thus reducing the chance for later misunderstandings that could interfere with implementa- tion. This is not to say that coordination should be set in cement during planning, because arrangements can be amended should the need arise later on. 16. · Interagency clearance procedures. Another alternative is to build-in a system for clearance or prior agreement among agencies, which would be necessary before initiating key measures. For example, a vocational training program might establish a national certification system whereby public agencies' and private employers' vocational training programs must conform to specific standards in order to be certified. This relieves manpower or ed_ucat1on authorities of the difficult task of formally coordirrat·ing training programs among various public and private agencies. Similarly, an agriculture ministry might have to approve specific plans for feeder roads before the highway department begins construction. 17. Matrix reporting structures. In this alternative, certain staff or offices have to report to more than one agency. Since these staff or offices presu~bly are held accountable by each boss, they have to negotiate a position satisfactory to all involved, thereby achieving coordination automatically. For instance, a regional planning office might report to line ministries, as well as to budgetary and other central government agencies. Success depends on how well matrixed parties are reconciled. However, such a system can become seriously bogged down when the matrixed staff or office cannot find any common ground for agreement or is incompetent. Not only does coordination fail in this case, but furthermore the matrixed staff or office has inadequate authority to perform any of its operational functions. 18. Legal reforms. Sometimes existing legislation can be used or amended to aid coordination. For example, an urban development agency may have the legal authority to coordinate the work of various municipal entities. If no legal backing exists, legislation might be drafted to establish such authority. Similarly, legislation could establish the authority of a "lead agency" in coordinating procedures, or could fix formal interagency agreements as "convenios" have done in Brazil. 19. Simplified project design. Sometimes the need fo~ coordination can be reduced by simplifing project design. First, two or more simpler projects can in some cases substitute for a ~ore complex one; for example, 0 a rural education project could be separated from an integrated rural development effort. Second, a set of complex components could be phased over two or more projects, thus reducing the number of components and Page 6 ot 6 pages agencies with which each project uru_st deal. Third, the original objectives of a project can be scaled down--perhaps retaining only those activities that could be managed by one or a few agencies. Fourth, it is possible to begin with a compact pilot project and later expand to full-scale interagency coordination. 20. Reorganization or amalgamation. Reorganization (pertaining here to reallocation of responsibilities or· authority among agencies) and amalgamation (the merger of two or more agencies into one) are rather dramatic ways of reducing the need for coordination, or avoiding it altogether. There ·may be cases when an entire system is too complex or fragmented and needs substantial reorganization. However, less extreme steps may often be more practicable -- for example, shifting certain responsibilities from one agency to another, or making one agency more accountable to another. 21. Naturally, the alternative chosen will depend on how essential coordination is, what is being coordinated, and how capable are the agencies involved. Simple exchange of information, for example, requires less intensity than functional integration. The alternatives described vary according to· the degree of initiative (time and resources) and organizational change required to implement them: The further right the arrangement, the greater the organizational change and initiative entailed normal inter agency advisory line co or- matrix contacts clearance coordination; dination reporting procedures; inter agency legal systems; simplified planning reforms reorganiza- design tion or amalgamation 10/1/82 ANNEX Page 1 of 3 pages Coordination Issues to be Addressed During the Lending Cycle 1. The following considerations, derived from the discussions in Parts II and III of the paper, should help in ascertaining at each documentation stage of the project cycle that the approach to coordination has been well thought out. Country Sector Work 2. Country sector work provides a broad framework for the treatment of coordination in the sector's forthcoming projects. The analysis of existing interagency relationships cpuld typically cover the following points, including any intersectoral· relations which would affect the lending program: (a) Current status of interagency communication and coordination; causes of any tension or malcooperation; legislative background (and possibility for legislative changis; if deemed desirable); (b) Implications for future co~rdination arrangements in the sector; degree of potential commitment from government and agencies and their capability for · improved/added coordination; coordination strategy recommended for the sector; (c) Role of the Bank lending program in above context and new coordination burdens which lending might impose; relationship with lending in other sectors, and potential for intersectoral coordination; implications . for the scope and design of projects in the sector; (d) Next steps to be taken in Bank, and respective Programs and Projects divisions' responsibilities; further studies recommended; anticipated needs for and sources of expertise. Project Briefs 3. Analysis during identification and preparation should explore whether improved coordination will be necessary, and evaluate the alternative coordination arrangements. Since .the degree of coordination possible may affect the shape of the project, this is an important time for reaching consensus on the form of coordination as well as ascertaining that the resources and commitment required for it will exist. The project brief (PB) constitutes a key forum for addressing coordination issues at this stage. Normally the PB will cover the following kinds of considerations on coordination: 0 (a) A weighing of the proposed objectives against the resources, capabilities and com~tment feasible in coordination; an assessment of whether improved or ANNEX Page 2 of 3 pages additional measures are necessary to meet the desired level of coordination; (b) The alternative(s) chosen for coordination, and why; (c) Hierarchical level (national, regional, provincial, local, etc.) at which each form of coordination will occur, and rationale for this; (d) The agencies expected to be involved, specifying whether each wi_ll carry responsibilities for implementation or will just collaborate with project agencies; a description of the interagency relationships and lines of authority, and of.who will be responsible for ensuring coordination occurs as planned; a discussion of current incentives and disincentives for coordination, and how the project will r~inforce incentives; (e) Whether improvements in or additions to coordination are intended to be institutionalized; i f so, the measures needed. 4. How these factors are discussed within the PB will depend on the stage of project preparation at the time of issuance. In any case, the "Sector Development" and "Bank/Country Strategy" sections can make reference to the background to coordination, with any key unresolved matters appearing in the "Main Project Issue's and Recommendations" section. Finally, the PB details what next steps towards coordination will occur~ in the "Critical Path for Project Processing" or