Evaluates project component to strengthen the capacity of Egypt's Ministry of Public Works and Water Resources (MPWWR) to plan and implement a rehabilitation/modernization program in 11 canal command areas covering 337,000 feddans. The evaluation covers the period 1987-11/93. The project is making satisfactory progress. Implementation was delayed until 1989 because key personnel had to be replaced during the first year. Since 1991, the project has gradually gained momentum and is now accelerating, although not all planned outputs will be in place in each command area by the PACD. to date, the project has created 7 Directorates and 2 Inspectorates, which are equipped with computers and office equipment, laboratories, transportation facilities, and trained personnel. Equipment for construction activities is in place and 36 mesqa improvement contracts covering 52,000 feddans and 26 main delivery system improvement contracts are in progress. While these efforts have not yet had a quantifiable impact on crop yields, they have given farmers the water resource security they need to select more high-yielding crops. Although institution building is still incomplete, the project has made significant progress in establishing a capacity within MPWWR to carry on project work after the PACD. Specifically, the project has trained engineers at the command levels; developed the Irrigation Advisory Service (IAS), which has conducted 17 feasibility studies; facilitated the evolution of a network of construction firms; and developed a technique for training and promoting Water User Associations (WUAs). The commodity procurement plan, which had overstated needs, has been revised and substantial savings have occurred as a result. The project has suffered from the following deficiencies. While irrigation system designs are generally appropriate, mesqas have been improved using mobile pumps, a strategy which is not always up to good design standards. Construction activities need to be more closely supervised and coordinated. Because implementation of downstream control structures to introduce continuous flow was delayed, many completed mesqas are now getting by on rotational delivery. What most hinders the project's sustainability and MPWWR's institutional capacity is that the WUAs are still awaiting legislative approval and the cost recovery issue has not yet been resolved despite several attempts to do so. The following lessons were learned. (1) It is important to consider the ensemble of a project's outputs -- not just physical outputs -- when deciding whether or not the project has met its goals. in the present case, while the number of mesqas installed and feddans improved has been low, the project has improved water control and delivery systems and created the potential for environmental amelioration. (2) The project's attempt to develop procedures to rehabilitate irrigation systems and increase crop yields requires an organization capable of managing the effort. The creation of an authority might be an improvement, but its political and financial implications need further study. (3) The project was well-planned; its major constraints have been lack of shared understanding among MPWWR, A.I.D., and the TA contractor. Disputes related to implementation and financing should be settled during the negotiation phase. (4) Interministerial coordination and cooperation are difficult to achieve; grant awards should be conditioned on positive policy decisions within projects that require a multidisciplinary approach.