Project procurement - finance

Project procurement - finance

Does finance = funding

Funding and cash flow are only part of it...

The Finance Officer's many roles in capital projects ...

source of picture: "The Finance Officer's Role in Capital Projects" by Joesph P. Casey, June 2008


Presentation by Ian McAulay, Mark Wilson & Daressa Frodsham. London (2009)


Funding is controlled and determined by the type and nature of the project and the main risks. Questions to ask include:
  • Can sufficient funding be secured at attractive rates?
  • Are there any government or international grants or low cost loans that could be used?
  • Is the budget available to achieve the required programme of work?
  • How much confidence (certainty) is there in the estimation of the programme cost? Is there any contingency money and if so, how much?
  • Are there robust governance and checking processes in place to prevent escalation of costs?
  • Are social objectives priced in budgets?
  • Is there adequate budget for operation and maintenance?


Cash flow

Accurate prediction of future cash flow could be a challenge. Donors and clients often expect the asset/service to generate revenue to pay for maintenance via user charges. However, the revenue might be inadequate, used on other initiatives or siphoned off by corrupt practices.
Questions to ask:

  • Is the revenue sufficient for repayment of the loan?
  • Has long-term finance for the operation and maintenance been considered? Is the revenue going towards maintaining the assets? Is the amount sufficient to cover the costs?
  • How are risks shared?
  • Does the depreciation assumed in the financial modelling reflect the realistic life expectancy of the project assets?

Look at efficiency and benefits realisation

Beyond the basics:

Figure 1 Example of where efficiency savings can be made

Source of picture: OGC, UK (2009) Procurement Efficiency and Value for Money Measurement

Further references:
Merna, T and Njiru, C (2002) Financing Infrastructure Projects
Hawkins, J, Herd, C and Wells, J (2006) Modifying Infrastructure Procurement to Enhance Social Development
London Centre of Excellence (2006) Procurement Performance Measurement


Bureaucracy and corruption could be significant obstructions. Questions to ask include:

  • Who are the major players?
  • Who is best placed to deliver the programme? Negotiate an optimum deal?
  • Is there appropriate governance in place? How to ensure transparency of process and accounting?
  • Who has the skills to perform due diligence?
  • Consider use of framework contract / standardised contract?
  • Consider use of e-procurement systems and spend analysis?
  • How to identify and address the external factors that may affect the efficiency and profitability of the project?


Institution capacity building should not be neglected. Questions to ask include:

  • Have objectives been fulfilled? Value added?
  • Are there areas of improvement? Particularly around cashable savings and improved quality of services.
  • Has delivery of political related priorities been considered?
  • Has improved corporate/government knowledge been achieved?
  • Assess strategic, operational and external indicators