Compact Development Guidance: Compact Development Guidance | February 2017

Chapter 8: Guidelines for Developing Project Proposals

Through the development and submission of Concept Notes, a selected country constructs the rationale for its proposed compact program and works with MCC to reach agreement on the core problem, primary objective and strategic approach – the concept – at the heart of each proposed project. Once agreement on the concept is reached, the selected country’s Compact Development Team will prepare and submit a Project Proposal, a detailed description of the specific components that make up the substance of each proposed project. Each Project Proposal defines the components, estimates their total costs, expands the preliminary theory of change into a more complete project logic that connects each component to a series of intermediate outputs and long-term impacts, identifies expected beneficiaries and begins to quantify the benefits they are likely to receive, indicates the conditions and timeline for their implementation, and highlights the full range of potential risks and other issues associated with the proposed project.

Project Proposals give the Compact Development Team an opportunity to clarify, elaborate, organize and further develop its initial concepts into a set of specific components explicitly designed to address the root causes of the core problem and achieve the agreed objectives. At the same time, the Project Proposals allow the Compact Development Team to provide more detailed arguments about the linkage between those components and the long-term goals of poverty reduction, increased income and economic growth, and to support those arguments with data and other evidence. Discussions between the Compact Development Team and MCC about the Project Proposals help ensure that the proposed approach, structure, and components are sound and that outstanding issues are fully identified before significant resources are invested in full development and preparation of the proposed projects through feasibility studies, environmental and social impact assessments, and other preparatory work.

The remainder of this chapter provides a more detailed explanation of the rationale, required content, and process of review for Project Proposal(s).


The Project Proposals that a selected country submits to MCC serve a range of purposes in the process of developing a compact program. Among these purposes, each Project Proposal should:

  • Refine and sharpen the specific core problem that the proposed project will address and the specific project objective it will achieve;
  • Describe the combination of specific components that comprise a proposed project, including any physical construction or rehabilitation of “hard” assets along with “soft” investments in policy, legal and regulatory reforms, institutional capacity building, technical assistance and social and behavior change and explain the current status of preparation of each component, and estimate the total cost of each;
  • Present a detailed project logic that clarifies how the components will work together to address root causes of the core problem, and that links each proposed component to projected outputs, those outputs to anticipated intermediate outcomes, and those intermediate outcomes to the primary objective and the long-term goals of increased income, economic growth and poverty reduction;
  • Identify the expected beneficiaries of the proposed project, specify the economic benefit streams that the proposed project is expected to deliver, and where possible estimate the total magnitude of expected benefits;
  • Catalogue critical technical, economic, environmental, social and gender issues and risks that must be understood and mitigated before the proposed project can be considered for a final investment decision;
  • Assess the likely sustainability of the proposed project and define any particular measures that may be necessary to strengthen the proposed project’s viability or to enhance, expand or extend its expected economic benefits; and
  • Propose specific implementing entities that will lead, manage or oversee the implementation of the proposed project.

Selection of Project Proposals

As a general rule, selected countries should expect to submit one Project Proposal for each concept that MCC has agreed to consider supporting through its assessment of and response to the original Concept Notes. In some cases, a country’s Compact Development Team may decide to combine elements of more than one agreed concept into a single proposed project in an effort to take advantage of synergies, for example, where combining elements strengthens the program logic or raises the likelihood that a project will achieve the agreed objective. In such cases, the selected country should discuss options with MCC in advance and should clearly explain its decision in its written submission.

MCC encourages the Compact Development Team, as it develops each Project Proposal, to consider a variety of alternative approaches that may address the core problem and achieve the project objective, and then to test each against a range of factors, including its appropriateness in the local context and its likelihood of delivering the expected outputs and outcomes. The Compact Development Team should also be aware that some proposed activities (and in some cases, entire proposed projects) may not stand up to scrutiny during the Project Development phase or ultimately meet the rigorous MCC Investment Criteria.

At this stage of the compact development process, selected countries should refrain from developing Project Proposals for concepts not previously proposed and reviewed through Concept Notes, unless explicitly invited to do so by MCC.

Required content and sources of information

Before starting the process that leads to Project Proposals, a selected country’s Compact Development Team should already have direct access to technical specialists who have extensive experience with similar economic development projects or relevant economic or industrial sectors (as explained in Chapter 5). In most cases, these technical specialists will spearhead the writing of the Project Proposals, working in close collaboration with other members of the Compact Development Team.

In developing Project Proposals, the Compact Development Team should rely on the data, evidence, information, experiences and lessons learned that come from related economic development efforts – both within the selected country itself and in other, similar country contexts. Such efforts may have been supported by local governments, the national government, development banks or other public institutions or may reflect support from charitable organizations or international development partners. In many cases, trade or industry groups, business owners, domestic or foreign investors, and other private sector groups have experiences to share and constructive ideas to contribute. Ideas, assessments and proposals from academic institutions, civil society organizations, public policy think tanks, or other organizations may also be helpful.

The Compact Development Team should use a variety of methods to gather data, evidence and other information from these sources. MCC encourages the Compact Development Team to make use of its own technical specialists, who should be well-versed in the selected country’s development experience and its future economic development plans. The Compact Development Team should also make use of the knowledge and expertise in the selected country’s various agencies, departments, ministries and public enterprises. And MCC encourages the Compact Development Team to work closely and collaboratively with the MCC country team, which can share perspectives from MCC’s own experience with planning, developing and implementing projects around the world.

Regardless of the source of information, the Compact Development Team must develop a well-organized, well-articulated Project Proposal that offers a set of specific investments and other activities that will effectively address the core problem and its underlying issues and achieve the objective of the agreed concept. In doing so, the Compact Development Team must present a strong project logic supported by data, empirical evidence and lessons from similar projects and developmental contexts. To maximize the opportunities for success, MCC encourages the Compact Development Team to develop and explain each proposal carefully and organically, rather than pulling “off the shelf” projects that were previously developed for very different purposes or audiences.

As a general rule, each Project Proposal should be between twenty (20) and thirty (30) pages and should follow the template for Project Proposals, in form and substance similar to the template attached below and otherwise available from the MCC country team or through MCA Collaborate website.

MCC review and assessment

As with Concept Notes, MCC will undertake a detailed review and assessment of the selected country’s Project Proposals to ensure a common understanding of the components that merit the commitment of additional resources for full preparation and development during the next phase of the compact development process.

MCC’s assessment will be based on the clarity, depth and coherence of the contents of each Project Proposal, as well as the extent to which the proposed investments and other activities are likely to meet MCC’s criteria for the investment of MCC funds, commonly known as the “MCC Investment Criteria”. The MCC Investment Criteria require that each project:

  • Aims to alleviate root causes of a binding constraint. MCC expects the compact programs it supports to reduce the most critical impediments to a selected country’s long-term economic growth, as identified in the constraints analysis. MCC’s assessment of proposed projects will be significantly more rigorous at this intermediate stage than at the Concept Note stage. MCC will look closely at the detailed project logic in each Project Proposal to determine if the proposed components directly and fully address the full range of root causes that give rise to the core problem and if successful implementation of the proposed project is likely to resolve the core problem and thereby alleviate the associated binding constraint. MCC will also examine the detailed project logic to ensure that social and gender issues, poverty reduction and benefit distribution are being integrated into the proposed components at this stage.
  • Generates high economic returns. MCC expects each project it supports to generate tangible economic benefits that significantly exceed the project’s total costs, as measured through a cost-benefit analysis that determines an economic rate of return (ERR). At this intermediate stage, each Project Proposal should distinguish the primary streams of economic benefits that the proposed project is expected to generate, consistent with the detailed project logic. The Project Proposal should also describe the data or other supporting evidence required to conduct a complete cost-benefit analysis for the proposed project, clearly identifying any missing data and laying out a plan for its collection and verification. Where possible, the Project Proposal should also provide an initial assessment or outlook for the potential ERR, based on existing data and key assumptions.
  • Allows full implementation within a five-year compact term. MCC’s compact programs are strictly limited to an implementation period of no more than five years. To support successful implementation, MCC at this intermediate stage will carefully examine the nature, sequencing and interdependencies of the proposed components in each Project Proposal to ensure that the proposed project can reasonably be started and completed within those strict limitations. MCC will also look closely at the current level of preparation for the proposed project, including resource requirements and timelines associated with completing full feasibility studies and environmental and social impact assessments, as well as related assumptions, issues and risks when assessing the implementability of the proposed project.
  • Represents country ownership of both the problem and the solution. MCC believes that economic development assistance is most effective when it strengthens the relationship between a selected country’s government and its citizens, reflects the selected country’s own priorities, and augments the impact of other development projects and plans. As in earlier stages of the compact development process, MCC will look to the selected country for an ongoing commitment of resources in the development of the Project Proposals, including full staffing of the Compact Development Team and meaningful support from other, relevant government agencies, as well as continued timely, participatory and meaningful consultations with civil society organizations, the private sector, other international development partners, and people who are likely to be directly impacted by the proposed projects. MCC will examine each Project Proposal for indications that such consultations have been captured, assessed and taken into account in the proposed project. MCC will also examine each Project Proposal for evidence that it takes into account the development strategies, plans and priorities of other international development partners, as well as any complementary investments that may impact the results expected from the proposed project. Finally, MCC will also look for evidence that the proposed project fits within the selected country government’s existing development strategies and sector development plans, the responsible government agencies fully support the proposed components, and that the government is committed to the policy, legal, regulatory or institutional reforms that may be needed in the affected sector(s).
  • Complies with the MCC Environmental Guidelines and the MCC Gender Policy. MCC recognizes that economic growth and poverty alleviation can only be achieved when the natural environment is protected and the participation of women, the poor and disadvantaged social groups is ensured. At this intermediate stage, MCC will closely examine each Project Proposal to ensure that environmental and social issues (including involuntary resettlement and land acquisition, as well as gender and social inequalities in the control of resources or the distribution of expected benefits) will be examined across the proposed project’s full area of influence, that potential adverse risks are of a type or degree that can likely be avoided or mitigated, that the selected country plans to undertake rigorous environmental and social assessments to fully assess the potential impacts of all proposed components, and that the proposed project appears to have an acceptable risk profile overall.
  • Includes clear metrics for measuring results. MCC supports projects that set clear, measurable goals and are designed to continuously monitor their progress and performance. To encourage well-designed projects, MCC will closely examine each Project Proposal to ensure that it identifies specific indicators, metrics or measures by which the interim results associated with each component and the impact associated with the project objective and explains their relationship to elements of the economic model. Where possible, the Project Proposal should also identify baselines and interim targets for the various indicators, or where those are not available, should describe a plan for collecting the relevant information and setting baselines and targets during the next phase of the compact development process.
  • Supports the long-term sustainability of results. MCC expects its compact programs to continue delivering benefits long after a five-year compact program comes to a close. To do so, compact programs must be designed and implemented for long-term sustainability. At this intermediate stage, MCC will look closely at each Project Proposal to ensure that it identifies risks or impediments to long-terms sustainability and explains an overall strategy for enhancing the legal or regulatory, institutional, social or behavioral, environmental or financial sustainability of the proposed projects. Such a strategy may include specific investments or other actions, such as the adoption of a new law, the creation of an independent regulator, strengthening of operations and maintenance regimes, tariff changes to fully cover costs, the strengthening of private sector activity, and enhanced physical resilience to the effects of climate change, among others.

In addition to these required criteria, MCC may have also informed the selected country that other investment criteria will apply to the proposed project, in recognition of the particular opportunities or trade-offs that the proposed project represents. In some selected countries, for instance, MCC may encourage project design approaches that generate the highest possible economic rate of return (ERR). In other cases, MCC may encourage approaches that direct larger shares of the expected benefits to poor segments of the population while recognizing that the absolute magnitude of benefits received by the poor per dollar investment is more important than the share received by the poor. Likewise, in some selected countries, MCC may encourage approaches that lead to private participation in the proposed project or that enable complementary private investment. Yet in other cases, MCC might encourage close work with other international development partners to leverage additional sources of public funding.

Whatever the case, MCC will use its assessment to ensure that Project Proposals reflect high standards of project design, including strong linkage from the core problem to the proposed investments and other activities, supported by relevant data and evidence; a clear explanation of the expected economic benefits; a well-developed project logic that specifies intermediate outputs and long-term objectives; specific indicators for measuring the success or impact of the proposed project; clearly defined groups of beneficiaries, wherever possible disaggregated by income, gender and other demographic characteristics; and clearly defined issues and risks that present a reasonable risk profile.

The MCC country team will remain in contact with the Compact Development Team and may request clarifications or supplemental information to ensure a common understanding and facilitate a full and accurate review.

As a general rule, MCC will provide detailed feedback within six (6) to eight (8) weeks after the selected country’s Compact Development Team formally submits its Project Proposal(s) to MCC. In its feedback, MCC will identify the investments and other activities that represent the best opportunities for full project preparation and development through feasibility studies and other preparatory work. In so doing, MCC may offer recommendations to strengthen the proposed project or increase its likelihood of success, based on its experience with the design and implementation of complex economic development projects within a rigorous results framework.

In many cases, MCC will be in position to offer another type of Compact Development Funding that allows the selected country to undertake some or all of the necessary feasibility studies, environmental and social impact assessments, and other analyses for the full preparation of agreed projects. This Compact Development Funding for Project Preparation is covered in the next chapter (see Chapter 9).