The spreadsheet is necessary
The spreadsheet is often the easiest part of the room to agree on. By the time a project reaches an investment committee, the model has usually been through enough hands that the disagreements have been argued out of it. The discount rate is defensible. Revenue assumptions sit within a reasonable range. The returns clear the hurdle rate. Everyone can point to the numbers and say, correctly, that the project works.
That is precisely the moment I have learned to be careful.
Not because the numbers are unimportant or necessarily wrong. Costs must be understood, revenues credible, funding available and downside cases tested. The problem begins when a successful model is treated as a verdict on the entire project.
A spreadsheet can show what happens if a tariff is approved, an offtaker pays, an operator performs, a ministry issues an approval and a treasury honours a commitment. It cannot make any of those actors do those things. The model calculates the consequences of assumptions. It does not validate the system that must carry them.
Financial approval is not project readiness
Financial approval answers whether a structure meets specified economic and credit tests. Project readiness asks whether the work can begin, continue and operate under real institutional conditions.
The distinction is simple to state and expensive to ignore.
A project may have a positive return and still lack secure land. It may have an affordable tariff and no regulator able to approve or defend it. It may have concessional finance and no recurrent maintenance budget. It may have a ministerial champion and no official authorised to bind the treasury. It may have an implementation committee in the organogram and nobody whose career depends on delivery.
Readiness is therefore not another box at the end of financial appraisal. It is a separate test of institutional capacity, incentives, ownership, decision rights and execution assumptions.
This is not a contrarian view. The IMF’s Public Investment Management Assessment examines institutions across planning, allocation and implementation, and explicitly distinguishes institutional design from effectiveness. The World Bank’s governance work similarly emphasises commitment, coordination and cooperation rather than assuming that formal rules implement themselves. The evidence supports a practical conclusion: a sound project design still needs functioning machinery.
Institutional capacity must be specific
“Capacity” is often used so broadly that it becomes meaningless. A project team may conclude that an institution has capacity because it employs qualified people, has a legal mandate or has previously signed a similar agreement.
The better question is: capacity to do what, at what volume, for how long, under whose authority and with which budget?
The capacity to procure an asset is not the capacity to operate it. The capacity to deliver one donor-supported pilot is not the capacity to run a national programme. The capacity to sign a contract is not the capacity to monitor performance, collect revenue, manage claims and fund maintenance over twenty years.
Specificity changes the conversation. Instead of asking whether the implementing agency is capable, ask whether it can recruit and retain the required team, make decisions within the project timetable, pay suppliers on time, enforce the contract and maintain the asset after external support recedes.
Incentives can defeat competence
Projects are often discussed as if every participant shares one objective. They rarely do.
The investor seeks a risk-adjusted return. The ministry may need a visible result before an election. The treasury wants to limit contingent liabilities. The regulator must balance affordability and sector sustainability. The operator wants a manageable obligation. Communities may carry disruption now in exchange for benefits that arrive later.
These objectives can coexist, but they do not align automatically.
A competent official may delay a decision because approval creates personal or institutional exposure while delay carries little immediate cost. A local authority may publicly support a port upgrade while resisting fees that will anger voters. A donor may need rapid disbursement while the treasury needs more time to test long-term liabilities.
Calling this a lack of political will is rarely useful. Incentives are part of project architecture. If the project creates concentrated pain and diffuse benefits, resistance is predictable. The response is to redesign the allocation, sequencing or protection around the decision – not to place another optimistic assumption in the model.
Ownership and decision rights
Many projects have too many sponsors and no owner.
Political ownership is valuable, but it is not operational accountability. A minister can endorse a project without controlling the permits, guarantee, tariff or budget on which it depends. An inter-ministerial committee can create representation without creating decision rights.
For each critical milestone, the project should name one accountable decision owner, the legal basis of that authority, the information required, the deadline and the escalation route. If five institutions must agree, the sequence and veto points must be explicit.
Fragmented ownership is dangerous because it looks inclusive. Meetings are held, minutes circulated and progress reported, yet every difficult decision can still be referred elsewhere. Activity becomes a substitute for commitment.
The assumptions nobody tests
The most consequential assumptions often appear as ordinary lines in the model or implementation plan:
- tariff adjustment occurs on schedule;
- land is available when mobilisation begins;
- the offtaker pays within the contracted period;
- the operator has a funded maintenance capability;
- imported equipment clears without material delay;
- the project survives a change in political leadership;
- pilot exemptions continue at scale;
- a donor-funded project unit can hand responsibility to a domestic institution.
Each should be converted into a test. What evidence supports it? Who must act? Has that actor performed the function before? What incentive could prevent performance? What mitigation is funded and controlled by the project rather than merely hoped for?
A financially credible project that failed operationally
Early in my career, I advised on a rural water scheme whose financial logic appeared sound. Community willingness to pay exceeded the cost. The technology was simple. Donor funding was ready.
The weak point was visible before commitment. The district council was expected to maintain the handpumps and collect fees, but it had limited operational capacity. We recorded the weakness and proceeded, assuming that the strength of the underlying case would be enough.
Two years later, I returned. Half the pumps were broken. There was no dependable budget for spare parts and no workable collection system. The project had not been defeated by the capital structure. It had been defeated by an untested operating assumption.
The problem should have been acted on when operational responsibility was allocated to an institution without a funded mechanism to perform it. At that point, the choices were affordable: redesign the operating model, ring-fence maintenance, strengthen fee collection, phase the project or pause. After implementation, those choices became repairs.
A practical pre-commitment checklist
Before financial approval becomes an irreversible commitment, I use a compact version of the methodology developed in my book:
- Map the exposure. Identify who carries the fiscal, political, regulatory, operational and reputational consequences.
- Test the counterparty. Examine current payment performance, commercial autonomy and financial capacity – not only the authority to sign.
- Name the decision owners. For every critical approval, identify who can decide, who can veto and how delay is escalated.
- Score the execution system. Assess counterparty strength, regulatory credibility, tariff rationality, fiscal space, exposure allocation, institutional insulation, operational capacity and political commitment.
- Weight the fatal dimensions. A good aggregate score cannot compensate for failure in the one capability on which the project depends.
- Run a pre-mortem. Assume the project has failed two years from now. Identify the most plausible institutional cause and fund the mitigation before proceeding.
- Test the second transaction. Ask whether the domestic system can repeat the project faster and with less external scaffolding.
The purpose is not to manufacture certainty. It is to replace undifferentiated optimism with explicit, discussable assumptions.
The model and the machinery
The spreadsheet remains indispensable. It should simply be kept in its proper place. It tells us whether the economics can work under defined conditions. Readiness analysis tells us whether the institutions around the project can create and sustain those conditions.
That is the companion argument to Why Projects Fail When the Numbers Work: projects do not fail because finance is irrelevant. They fail because finance is embedded in a political, institutional and operating system that the model often treats as fixed.
If your institution is evaluating a project, financing a programme or teaching the next generation of practitioners, the next step is practical: place an execution review alongside the financial review before commitment. The book sets out the full framework; the checklist above is intended to be useful now. For the book, advisory enquiries or a direct conversation, click here.