• The PCA Project has developed clear methodologies and recommendations regarding the consolidated monitoring system for the implementation of the PCA and new Association Agreement (given the requirement that the present project bases its activities on the results of the PCA Project);

• There will not be a deterioration in the macroeconomic and/or budget situation of Ukraine or adverse developments in the management of public finance to a degree that would lead to the budget support being suspended;
• Donor coordination mechanisms are in place and the Consultant will have access to other donor contact persons to discuss and commonly develop areas of mutual interest and/or which would maximise the effectiveness of the energy sector programme – in this regard, we note that the ToR refer to the Government having established a government-led donor coordination mechanism, with the energy sector thematic working group being co-led by the EU;
• Progress against the indicators will be discussed in an open and frank manner, including and especially when a performance review may reveal disappointing results, and policies and strategies can be adjusted in light of the results achieved;
• MoECI counterpart staff can act independently and are not subject to influence from any particular vested interests;
• The project will be adequately staffed on the part of the beneficiary (in terms of both number of staff and suitability of skills and qualifications, including in information and communication technology), and personnel will be available to work with the Consultant;
• MoECI sustains ownership of the project, supports it implementation by providing adequate office space for it and by ensuring ongoing commitment of its staff;
• The active support and participation of other stakeholders such as the energy businesses will be forthcoming and facilitated by MoECI, ideally through existing channels of dialogue and sector coordination;
• There will be no turbulence in the political scene and no cause of instability in the institutional, legislative and economic environment; and
• Turn-around times for comments and submissions, and milestones and deadlines will be respected by all concerned (project's staff, MoFE, JMG, the project Steering Committee, etc.) and everybody will work in a spirit of cooperation.

The project does not foresee any significant risks to the project, other than those listed in the ToR, namely:

• One or several of the ministries, agencies or companies involved in the programme might either be reluctant or not have the capacity to cooperate in an ordered manner; and
• The economic situation in Ukraine deteriorates to a point that it affects the financial and operating capacities of the main programme’s stakeholders.

Regarding the first identified risk, the project considers that there is a high probability of it occurring but with measures that the project proposes to undertake, the impact will be minimised. More specifically, the issue of reluctance is essentially one of incentives for which the project notes the following:

• Project expects (as is usual when reforming governance) that incentives to cooperate in the establishment of new systems and, particularly, performance monitoring systems, will indeed be weak or even non-existent.
• Weak incentives or demand can be a serious obstacle to building effective monitoring systems, but there are measures that can be adopted to strengthen demand. First, it may be helpful to raise awareness among senior officials and explain the ways in which monitoring can be valuable to them. It is also important to find powerful 'champions' and allies (e.g. MoECI representatives on the JMG), who can in turn help advocate and support monitoring. Third, it is imperative that capacity development needs are derived from the energy sector setting in Ukraine, rather than imposed solely on the basis of best practice principles in other countries. Study tours and interaction with officials in other administrations, however, who can share their positive hands-on experience of performance monitoring can also be valuable.

The second element of the first risk is that the relevant stakeholders may have willingness but not the capacity to cooperate. The first thing to note in this respect is that budget support as an instrument seeks to improve capacity within the existing government structures and systems. Hence, while use of national systems and processes may not be straightforward, budget support is meant to focus attention precisely on improving such systems, so that there are lasting improvements to local capacity. Secondly, in the efforts to build capacity and successfully introduce monitoring the project will use simplicity as a guiding criterion. It is always best to build capacity incrementally and to simplify and rationalise monitoring systems, or conversely to avoid over-engineering and advocating complex methods that will seldom or never be used.