Closed Compact Report: Vanuatu Closed Compact | October 2020

Lessons Learned

At the time of the development and implementation of the Vanuatu compact, many of the practices and policies that currently govern MCC’s compact development and implementation had not been developed. MCC currently applies a more rigorous approach and continues to refine its approaches in its commitment to enhance transparency and focus on results. The learning captured in the closed compact reports and MCC’s newer Star Reports helps to inform MCC’s evolving practice to refine and strengthen its own model and development guidance. Through the implementation of the Transport Infrastructure Project, MCC noted the following lessons. These lessons were identified at the end of the compact in 2011, and are framed within this context:

Conduct enhanced due diligence in order to more accurately estimate project costs. Detailed design, rather than preliminary design, should be used to estimate project costs. This is particularly important for construction work on islands or in difficult terrain as all construction materials have to be hauled in and the rubbish needs to be managed with extra care. In the Vanuatu Compact, costs were significantly underestimated and there was insufficient contingency. This contributed to the two-year delay early in the compact implementation period and the inability to complete the original scope of the compact.

Incorporate varying levels and types of analysis to gauge ERR risk. When considering a road investment, segment-specific analysis should assess the benefits and cost of improving an entire road versus different segments, based on traffic and road conditions for each segment. Just as road designs should incorporate sensitivity analysis into the cost benefit analyses, MCC’s investments in evaluations should consider sensitivity analyses to determine whether costly evaluation data collection activities are warranted in terms of improved results accuracy. And finally, to further improve evaluations, it is critical to collect accurate baseline traffic data to understand how the levels and composition of traffic change after road improvements.

Staff expertise must meet the position requirements. MCA staff must have the appropriate qualifications to implement the program in accordance with MCC standards and international best practices. MCA-V struggled to recruit staff with international project management and relevant contract experience. lt is imperative for MCC to provide the necessary oversight of the accountable entity’s recruitment process to ensure that all hired staff have the necessary skills and experience to implement the program.

The composition of compact governance bodies should be carefully considered. The compact started off with a Steering Committee that was too large (twelve voting members and three non-voting observers), and this proved unwieldy and problematic. When it was reduced to seven members with a quorum of four, this situation was improved. MCC should ensure that the composition of the steering committees or board of directors is well represented and dedicated, while keeping the number of representatives reasonable.

Thoroughly assess the institutional capacity of implementing entities to absorb support. Institutional capacity should be assessed and strengthened early in the compact process. The planned policy interventions did not adequately take into account the limited ability of the PWD to maintain all road infrastructure in Vanuatu, including the two MCC-funded roads, despite the increases in the funding, availability of equipment, and technical capacity that were instituted over the five years of the compact. PWD’s performance was hampered by frequent government and ministerial changes, lack of adequate road maintenance plant and equipment, insufficient government funding, unqualified engineers, high turnover, limited institutional capacity and policy reforms, and poor management and planning. MCC should carefully consider establishing targeted conditions precedent and deadlines to enable course corrections that can address institutional weaknesses early. Given the late recognition of this problem, the MCC and MCA-V agreed to reallocate funds from the Institutional Strengthening Activity to the Infrastructure Activity as the PWD did not meet the required conditions or perform according to what was agreed upon in the compact.  

Take advantage of the capacity built beyond the life of the compact. The GoV took advantage of the capacity developed by the MCA-V in project implementation and contract management by establishing the VPMU, the successor entity, which opened its doors in August 2011, based on the MCA-V model and core staff. The VPMU oversaw the remainder of the defects period with the road contractor, managed some important bridge repairs on Santo and Efate, and continues to oversee additional projects funded by other donors.

Collect and maintain data for future project design and monitoring. Vanuatu faced an issue common in many of developing countries with baseline data and information difficult to find or nonexistent. In the early stages of compact development, MCC should encourage country counterparts to gather the necessary data needed to establish baselines. MCA-V was able to work through relevant agencies to obtain vital background information and build on this to create its own M&E Plan and Indicator Tracking Table to monitor and track information for the purposes of the project. Government agencies’ ability to gather, manage, disseminate, and utilize data to inform future project design and implementation is critical.