Project and

Program
Development
and Management
(PAEL 323)

DENNIS SAGBIGSAL, LPT

COMPILER
 OVERVIEW

This module was extracted from CCRDA-AMBO University Partnership Postgraduate

Diploma Program in Development Management in view of the lack of organized material on the
subject especially designed for classroom purposes.

The module is organized into eight (8) chapters of related topics.

CHAPTER ONE: PROJECT AND ITS MANAGEMENT: AN OVERVIEW

CHAPTER TWO: ROJECT LIFECYCLE
CHAPTER THREE: PROJECT IDENTIFICATION
CHAPTER FOUR: PROJECT FEASIBILITY STUDY/ PREPARATION
CHAPTER FIVE: PROJECT IMPLEMENTATION
CHAPTER SIX: PROJECT MONITORING, EVALUATION, TERMINATION
AND LEARNING
CHAPTER SEVEN: MANAGING DEVELOPMENT PROJECTS
CHAPTER-EIGHT: THE LOGICAL FRAMEWORK APPROACH – A PROJECT
DESIGN AND MANAGEMENT TOOL

COURSE INTRODUCTION

Dear learners! Welcome to the course Project and Program Development and
Management (PAEL 323). This course provides you with the basic knowledge and skills required
for identification, formulation, and implementation and monitoring and evaluation of
development projects. Project analysis, implementation and management have a wide scope and
great applications in development plans of CSO, NGOs and Government Organizations.

This module provides an overview of project analysis and management. It covers topics
encompassing features /characteristics of projects, comparison of projects with plans and
programs, a project and stakeholders’ analysis. It also presents the project cycle: the BAUM’S and
UNIDO project cycle. Moreover, we will generally deal with project feasibility studies, Economic
and risk analysis, project implementation and management and monitoring system. Finally, the
Logical Framework Approach (LFA) -a management tool which mainly used for the designing,
monitoring and evaluation of development projects is analyzed. LFA is also widely known as Goal
Oriented Project Planning (GOPP) or Objectives Oriented Project Planning (OOPP).
 As you study the course, there are in text questions and activities/exercises. These assist
you in better understanding of the course. Be honest in doing the activities on yourself. But it does
not mean that discussing with others is impossible. The nature of the course forces you to discuss
with others; and it enables you to comprehend with the course better.

COURSE OBJECTIVES

After completing this course, you will be able to:

❖ Know project, its nature, benefit and management

❖ Apply the concept of project planning and management in developmental projects
❖ Apply the project lifecycle models: the UNIDO and BAUM’S project cycle models
❖ Apply project identification process
❖ Apply the procedures of project feasibility study in designing development projects
❖ Prepare project implementation plan
❖ Understand and apply project monitoring and evaluation
❖ Know project closure/termination and learning process
❖ Apply concept of Project management
❖ Know project scheduling and controlling
❖ Understand project organization
❖ Understand and apply Log-Frame (Logical Framework) in preparing development
Projects
 PRETEST
1. The PERT in project management means program evaluation and _____ technique.
(A) resource
(B) reconciliation
(C) reconsideration
(D) review

2. “Risk” is usually _______ as the project progresses.

(A) increases
(B) reduces
(C) remains same
(D) becomes negligible

3. Assembling project team and assigning their responsibilities are done during which phase of a project
management?
(A) Initiation
(B) Planning
(C) Execution
(D) Closure

4. Which from the following statement(s) is/are NOT true?

I. Projects have defined objectives
II. Programs have a larger scope than projects
III. The projects and programs in a portfolio must be directly related
(A) I only
(B) II only
(C) III only
(D) II and III only

5. Projects management is divided in _____ process groups.

(A) 5
(B) 7
(C) 9
(D) 11

6. If any one factor of a project changes, _____ other factor(s) is/are likely to be affected.
(A) all
(B) one
(C) at least one
(D) at most one

7. Business Value =
(A) Tangible Elements
(B) Intangible Elements
(C) Tangible Elements – Intangible Elements
(D) Tangible Elements + Intangible Elements

8. Which from the following is NOT a tangible element?

(A) Fixtures
(B) Trademarks
(C) Monetary assets
(D) Stockholder equity

9. Which from the following is NOT an intangible element?

(A) Utility
(B) Public benefit
(C) Brand recognition
(D) Good will

10. Which from the following represents the correct project cycle?
(A) Planning→Initiating→Executing→Closing
(B) Planning→Executing→Initiating→Closing
(C) Initiating→Planning→Executing→Closing
(D) Initiating→Executing→Planning→Closing

11. The strategy used to correct resource over-allocations by balancing demand for resources and the
available supply is known as
(A) resource assignment
(B) resource leveling
(C) resource splitting
(D) resource scheduling

12. A horizontal bar chart that shows project tasks against a calendar is called
(A) milestone
(B) goal
(C) Gantt chart
(D) PERT chart

13. The statistical tool that depicts a project’s tasks and the relationships between those tasks is known
as
(A) milestone
(B) goal
(C) Gantt chart
(D) PERT chart

14. Which of the following statement(s) is/are true about a Project?

I. It brings change
II. It has risk
III. The outcome is certain
(A) I only
(B) II only
(C) I and II only
(D) I, II, and III

15. Which of the following is NOT a part of project management?

(A) initiating
(B) monitoring
(C) closing
(D) All above are parts

16. The scope of the work is defined in which phase of the project management?
(A) Initiating
(B) Planning
(C) Executing
(D) Closing

17. How the project work will be carried out, monitored, and controlled? These questions are answered
in which phase of the project management?
(A) Initiating
(B) Planning
(C) Executing
(D) Closing
18. The review of the successes and the mistakes is normally held during _____ phase.
(A) initiation
(B) planning
(C) execution
(D) closure

19. The business case and the justification for the project is determined during the _____ phase.
(A) initiation
(B) planning
(C) execution
(D) closure

20. According to Olivier Mesly, the 4 P’s critical for the success of a project are:
(A) plan, processes, people, policy
(B) plan, processes, people, power
(C) plan, processes, potential, policy
(D) plan, processes, potential, power

21. The basic nature of a project is a/an _____ one.

(A) permanent
(B) temporary
(C) (A) or (B)
(D) Both (A) and (B)

22. A process that involves continuously improving and detailing a plan as more detail become available
is termed as
(A) project analysis
(B) project enhancing
(C) progressive deliberation
(D) progressive elaboration

23. A program is usually a group of

(A) plans
(B) people and work
(C) related projects
(D) unrelated projects

24. Which from the following statement(s) is/are NOT true?

I. Projects have defined objectives
II. Programs have a larger scope than projects
III. The projects and programs in a portfolio must be directly related
(A) I only
(B) II only
(C) III only
(D) II and III only

25. Projects management is divided in _____ process groups.

(A) 5
(B) 7
(C) 9
(D) 11
CHAPTER: ONE
1. PROJECT AND ITS MANAGEMENT: AN OVERVIEW
1.1 Introduction

A project is an interrelated set of activities that has a definite starting and ending point and
results in the accomplishment of a unique, often major outcome. Projects exist at all levels of
every organization and must be managed proactively, regardless of their size. Therefore, the
first chapter of this module is designed to provide you a reliable foundation on the
conceptual framework of projects.

Dear Student! Welcome to the first chapter of the module. In this chapter, we will deal with
the basic concepts of a project including the definition, nature/ characteristics and
importance of a project, classification/types of projects, the difference among plans, projects
and programs. Equally, the rationale and principles, the barriers and common pitfalls of
sound project planning is the concern of this chapter.

1.2 Chapter Objectives

After completing this chapter, you should be able to:

o Know project, its nature, benefit and management;
o Apply the concept of project planning and management in developmental projects
o Distinguish projects from programs;

1.3 Project and its management

Dear learner, How do you define a project?-------------------------------------------------------------

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The term project has a wider meaning. A project is accomplished by performing a set of
activities. For example, construction of a house is a project. The construction of a house
consists of many activities like digging of foundation pits, construction of foundation,
construction of walls, construction of roof, fixing of doors and windows, fixing of sanitary
fitting, wiring etc. Another aspect of project is the non-routine nature of activities. Each
project is unique in the sense that the activities of a project are unique and non-routine.

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A project consumes resources. The resources required for completing a project are men,
material, money and time. Thus, we can define a project as an organized program of pre-
determined group of activities that are non-routine in nature and that must be completed
using the available resources within the given time limit.

Several authors and institutions have provided different definitions of a project. Let us now
consider some definitions of ‘project’ to enable you have a better understanding.
 Project is speculative imagination; a scheme of something to be done; a proposal for
an undertaking.

 Project is a one-shot, time limited and goal directed major undertaking that requires
the commitment of varied skills and resources. Here, a project is considered as a
combination of human and non-human resources pooled together in a temporary
organization to achieve a specific objective.

 Project is an organized unit dedicated to the attainment of some objectives, the

successful completion of a development project on time, within budget, in
conformance with pre-determined program specifications. This definition implies the
fact that investment projects are carried out according to a plan in order to achieve a
definite objective within a certain time and which will cease when the objective is
achieved.

 Project is an approval for a capital investment to develop facilities that provide

goods and services for societies.
 Project is defined as “a non-routine, non-repetitive, one-off undertaking normally
with discrete time, financial and technical performance goals” This definition
explains the fact that a project is a unique unit in an organization.

 Project typically has a distinct mission that it is designed to achieve some specified
objectives and has a clear termination point, the achievement of the mission. These
writers focus on the explanation of the basic qualities of the objective a good project,
that is, specific, measurable, achievable, realistic and time bounded objective
(SMART).

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 Activity 1
What do you mean by a project? Give some examples of typical projects.

Dear student! What can be figured out from the above mentioned definitions? See the
following topic on characteristics/nature of projects to grasp the major concepts implied in
the definitions of project.

 Nature/characteristics of projects

As you have seen in the course, Financial Accounting and Management, the basic
characteristics of capital expenditures (also referred to as capital investments or capital
projects or just projects), are that they typically involve current outlay (or current and future
outlays) of funds in the expectation of a stream of benefits extending far into the future.
Capital investment decisions often represent the most important decisions taken by firms as
they involve huge amount of financial resources to be invested. It, therefore, calls for logical
and rational analysis of all aspects of such long term decisions. Capital investment decisions
have a far reaching impact into the future. They are also characterized by irreversibility of the
decisions once the resources are committed. Thus, a wrong capital investment decision often
cannot be reversed without incurring substantial losses/payout.

In this part, the fundamental characteristics of project are derived from the definitions given
by various authors/institutions. Projects are characterized by;

 Objectives: A project has a set of objectives or a mission. Once the

objectives are achieved the project is treated as completed.

 Life cycle: A project has a life cycle. The life cycle consists of five stages i.e.
conception stage, definition stage, planning & organizing stage,
implementation stage and commissioning stage.

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 Uniqueness: Every project is unique and no two projects are similar. Setting
up a cement plant and construction of a highway are two different projects
having unique features.

 Team Work: Project is a team work and it normally consists of diverse

areas. There will be personnel specialized in their respective areas and co-
ordination among the diverse areas calls for team work.

 Complexity: A project is a complex set of activities relating to diverse areas.

 Risk and uncertainty: Risk and uncertainty go hand in hand with project. A
risk-free, it only means that the element is not apparently visible on the
surface and it will be hidden underneath.

 Customer specific nature: A project is always customer specific. It is the

customer who decides upon the product to be produced or services to be
offered and hence it is the responsibility of any organization to go for
projects/services that are suited to customer needs.
 Change: Changes occur throughout the life span of a project as a natural
outcome of many environmental factors. The changes may vary from minor
changes, which may have very little impact on the project, to major changes
which may have a big impact or even may change the very nature of the
project.

 Optimality: A project is always aimed at optimum utilization of resources

for the overall development of the economy.

 Sub-contracting: A high level of work in a project is done through

contractors. The more the complexity of the project, the more will be the
extent of contracting.

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 Unity in diversity: A project is a complex set of thousands of varieties. The
varieties are in terms of technology, equipment and materials, machinery and
people, work, culture and others.

 Commitment of scarce resources: projects usually involve the

commitment of scarce resources to a specific line of action, which prevents
the use of those resources elsewhere. These resources include not only
financial capital, but also raw materials, the product of manufacturing and
service capacities elsewhere in the economy, labor of various kinds,
managers, organizers, entrepreneurs and so on. Almost all of these are
certain to have alternative possible uses elsewhere.

 Commitment of resource for a long term period: the commitment of

resources for the project is until the production of the goods and services
and till the return of benefits that are usually quite clearly identifiable, but
which may not occur or be clearly felt for several years. The effects and
impacts of projects are usually gradual and lasting, but involve waiting for
results. Waiting for results obviously has a cost.

 Special arrangements and procedures: for their success, projects are

usually subjected to special arrangements and unique procedures in their
planning, appraisal and so on, because of the shortage of resources usable for
development, the large amount of resources that they can absorb, and the
need to wait for benefits.

 Projects involve special financial arrangements: frequently, in the

context of development, projects involve special financial arrangements,
including loans from overseas, development banks and other agencies.
Because relatively few projects are financed simply from government
allocations, the financing arrangements for a project refer to closely defined
actions. This financial definition tends to give projects a clear boundary and
individual identity.
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  Resources are committed for capital investment: the pattern of resource
commitment in projects is usually for capital investments to be made to
establish productive capacity or physical works, which then have a long life
of operation or use.

 Dual attributes: every project is basically characterized by input-output

attribute and the cost-benefit characteristics. The input-output attribute can
be classified into two: 1) the input characteristics which define what the
project will consume because projects usually require raw materials, energy,
manpower, financial resources and an organizational setup, and 2) the output
characteristics that define what the project will generate, production of
additional goods, provision of additional services, etc. On the other hand, the
cost-benefit attribute reflects the fact that every project has cost-benefit
aspect which affects the current equilibrium of the availabilities and the non-
availabilities in an economy and thus involves the entire society in its
implications. The sacrifice which the society will be called upon to make and
the benefits which will be accrued to the society have, therefore, to be
carefully evaluated. According to the cost-benefit philosophy of undertaking
projects, a project constitutes the whole complex of activities in the
undertaking that uses resources to gain benefits that exceed these resources.

We should note that projects to which the above points apply are frequently those planned
for the public sector. The planning and examinations referred to are usually carried out by
government or public agencies. Private sector projects are also the subject of this kind of
planning, especially if they involve government participation. Within the public sector
systematic planning procedures can be applied to both directly productive and constraint
removing projects, to infrastructural and social services projects as well as those concerned
with industrial and agricultural development.

Activity 2
Describe at least five the characteristics of a Project. Give the example relating
the same with any project at your knowledge.

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1.4 Plans, programs, project, work package, task and activities
(project family tree)
Dear learner, in this part, we will look into difference among plans, programs, project, work
package, task and activities. So,

Do you know what programs are? What is the difference between a project and a program?
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It is necessary to distinguish between projects and programs because there is sometimes a

tendency to use them interchangeably. While a project refers to an investment activity where
resources are used to create capital assets that produce benefits over a long period of time
and has a beginning and an end with specific objectives, a program is an ongoing
development effort which may not necessarily be time bounded. Good example of program
could be a road development program, a health improvement program, a nutritional
improvement program, a rural electrification program, etc. A development plan is a general
statement of economic policy. National development plans are further disaggregated into a
set of sectoral plans.

A development plan or a program is, therefore, a wider concept than a project. It may
include one or several projects at various times whose specific objectives are linked to the
achievement of higher level of common objectives. For instance, a health program may
include water project as well as construction of health centers, both aimed at improving the
health of a given community which previously lacked easy access to these essential facilities.

Projects, which are not linked with others to form a program, are sometimes referred to as
“stand alone” projects. Projects in such context are the concrete manifestations of the
program in a specific place and time. One can think of projects as subunits and bricks of
programs, which constitute the national plan (usually the direction is from plans to projects).
A project is the smallest operational element prepared and implemented as a separate entity
in a national program.

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It can be seen that the major difference between a project and a program lies not so much in
objectives, but in scope, details and accuracy. A project is designed with a high degree of
precision and details (objectives, features, calculation of returns and implementation plan). A
program, by contrast, generally, lacks details and precision and usually aims at a broader goal
often related to a sectoral policy of a country or departmental policy of an organization.

Let us look into similarities and dissimilarities between Projects and Programs which are
given below:
 Similarities: The similarities between projects and programs are that both projects
and programs:
o Have objectives as well as goals.
o Require resources (financial, nonfinancial)
o Generate outputs of goods and/or services.
o Serve as instruments for the execution of development and
o Plans to develop the economy of a nation

 Differences: The differences between projects and programs are that:

Program Project
Have larger scope and typically run at Have narrower scope than program
higher levels in the organization
Have general objectives have specific objectives to achieve
Have numerous beneficiary groups Have specific beneficiary groups
No clear and detailed financial Clearly determined and allotted
resource allocation funds for executing
Have no specific program for have specific lifetime for completion
completion

Note: under project/s there are work packages, under work packages there is/are task/s,
and under task/s there is/are activities.

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A project normally originates from a plan, national plan or corporate plan. In normal scheme
of things, the family tree for a project would be as given below;
Plan = National/Corporate plan with target for growth

Program = health program, educational program, R&D program

Project = Power plant, hospital, housing project etc.

Work Package = Water supply, power supply and distribution package.

Task = Award of water supply contract, construction & foundation.

Activity = Excavation, laying of cable, preparation of drawing.

Figure 1: Project Family Tree

1.5 Role of project in national development

Projects play an important role in a socio-economic development of a nation. Projects

provide chandeliers for public and private investments, re-channel unused or underemployed
resources into productive uses, and offer expanded opportunities for entrepreneurship. They
have an increasingly important role in the public administration of developing countries
swell. Project becomes critical components of development assistances and basic building
blocks in the development process. In economic development, projects contribute to the
integration of markets by linking productive activities, provide the organization and
technology for transforming raw materials into socially and economically useful goods and
services, and establish the physical infrastructure necessary to increase exchange among
organizations and geographic areas.

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Projects have also been the primary instruments for grants, credits, loans, and technical aid
to developing countries by international assistance agencies. In a broader context, projects
have become vehicles for socio-economic change in many developing countries as parts of
larger social programs and sector plans, and are creating the capacity for ameliorating serious
of problems that abstract growth and delay progress.

In general, the important benefits that can be derived from a given good project are usually
categorized into two: micro and macro-level benefits
 The micro level benefits PROJECTS include:
 Initiating the process of development like production, employment, income
generation and so on.
 provision of the framework of the future activities of institutions;
 increase in wealth of suppliers of resources including owners or shareholders;
 shaping of the future pattern of services of the firm and industry as a whole;
 generating of surplus for the company’s long-term growth and result in
increased welfare of employees;
 At the macro level PROJECTS can;
 Become the catalytic (causing agents) of economic development
 Accelerate the process of socio-economic development.
 Initiate development of basic social infrastructure.
 Bring the necessary changes in society in course of time.

Activity 3
Explain how projects are important for social and economic development of a nation.

Dear learner,
What makes a project ‘a good project’?-------------------------------------------------------------------
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There are four yardsticks to measure the quality of a project:
i. Is it relevant? Does it really tackle the problem it sets out to address? If the
problem, for example, is that the children in the village can’t read, is a new school
the best answer, or should one look at the parents’ attitude to education, the shortage
of teachers, the lack of money in the village’s budget, the need for labor in the fields,
or the government’s lack of investments in the social sector? Does the project have a
credible “entry point”?

ii. Is it feasible? Is it likely to achieve its objectives? What risks does the project face?
What resources – financial and human - does it have? How realistic is it?

iii. Is it cost-effective? What is the relationship between the cost of implementing the
project and its expected benefits? Is there a strategy that would have achieved the
same results at lower costs? For example, sending all the children in the village who
can’t read to an expensive boarding school would probably improve their literacy,
but the cost would be immense, and the impact on the community would be very
destructive. So building a school might be a more cost-effective strategy.

iv. Is it sustainable? Can it go on delivering its benefits after the external assistance has
come to an end? For example, with there be teachers for the school, money to pay
them, parental support, good educational policies from the government – long after
the school has been built, and the project has closed down?

1.6 Project Management

Project management is an organized venture for managing projects, involves scientific

application of modern tools and techniques in planning, financing, implementing,
monitoring, controlling and coordinating unique activities or task produce desirable outputs
in accordance with the determined objectives within the constraints of time and cost.

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Equally, the project Management Institute defines project management as the application of
knowledge, tools and techniques to project activities in order to meet or exceed stakeholder
needs and expectations from a project. Meeting or exceeding stakeholder needs and
expectations invariably involves balancing competing demands among: scope, time cost
quality; stakeholders with different needs and expectation; identified requirements (needs)
and unidentified requirements (expectations).

Project management as processes describe a generalized view of how these processes

commonly interact, involving many subjects as marketing, time planning, quality
management, personnel management, risk management, financial management, physiology
of management and others.

The Project Management Institute defines nine project management knowledge areas shown in
Figure 2. below.

Fig 2: Project management knowledge areas

The following is the detail of each of the knowledge area depicted on the figure-1.2 above.

Project integration management describes the processes required to ensure that various elements
of the project are properly coordinated. It consists of project plan development, project plan
execution, and overall change control. In developing a project plan, we should at first
prepare opportunity and then feasibility studies. For a bigger complex project three studies –
opportunity, pre-feasibility and feasibility – should be prepared.
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Project scope management describes the processes required to complete the project include all the
work required, and only the work required to complete the project successfully. It consists of
ignition, scope planning, scope definition, scope verification, and scope change control. It is
very important especially for bigger project to make a proper scope definition. This activity
subdivides the major project deliverables into smaller, more manageable components. Scope
verification means formalizing acceptance of the project scope.

Project time management describes the processes required to ensure that the project is
completed within the approved budget. It consists of recourses planning, cost estimating,
cost estimating, cost budgeting, and cost control. In this chapter, we have to identify first the
specific activities that must be performed to produce various project deliverables, then
identify and document interactivity dependencies, estimate the work periods, the analyze
activity sequences, activity durations, and recourses requirement for creating project
schedule. For this purpose, various methods can be used such as PERT, CPM, Gantt charts,
calendar charts, “MS project” or other computer software.

Project cost management describes the processes required to ensure that the project is completed
within the approved budget. It consists of recourse planning, cost sentiment, cost estimating,
cost budgeting, and cost control. First, we have to determine what resources (people,
equipment, materials) and in what quantities should be used to perform project activates,
and then to estimate the costs of these resources. After that, we should allocate the overall
cost estimate to individual cost items, and certainly, control changes of the project budget.

Project quality management describes the processes required to ensure that the project will
satisfy the needs for which it was undertaken. It consists of quality planning, quality
assurance, and quality control. First, we need to identify which quality standards are relevant
to the project and determine how to satisfy them, and then evaluate the overall project
performance on a regular basis to provide confidence that the project will meet the relevant
quality standards, and ensure project quality control- monitor specific project results, identify
ways to eliminate cause of unsatisfactory performance.

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Project human recourses Management describes the processes required to make the most effective
use of the people involved in the project. It consists of the organizational planning, staff
acquisition, and team development. Human resources management is described more widely
in the next chapter.

Project communication management describes the processes required to ensure timely and
appropriate generation, collection, dissemination, storage, and ultimate disposition of project
information. It consists of communication planning, information distribution, performance
reporting, and administrative closure. Communication planning includes determining the
information and communication needs of the stakeholders: Who need information? When
they will need it? And how should they obtain it? Performance reporting includes status
reporting, progress measurement, and forecasting. Administrative closure obtains generating,
gathering,

Project risk management describes the processes of identifying, analyzing, and responding to
project risk. It consists of risk identification, risk quantification, risk response development,
and risk response control. First, we need to determine which risks are likely to affect project,
then define enhancement steps for opportunities and responses to threats.

Project procurement management describes the processes required to acquire goods and services
from outside the performing organization. It consists of procurement planning, solicitation
planning, limitation, source selection, contract administration, and contract close-out. In this
chapter, we have to determine what to produce and when. Then we have to document
product requirement and identify potential sources, oblations, bids, offers or proposals,
followed by quotations, bids, offers or proposals, then manage the relationship with the
seller. Contract close-out means completion and settlement of the project.

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1.7 Types and classification of projects

Dear leaner! It is important now to see the different types of projects and the way they can
be classified. Project can be classified under different heads, some of which are indicated as
follow:

1) Sectoral Classification of Projects

Based on the usefulness of projects in resource allocation at macro level, they may be
classified into the following sectors:
 Agricultural and allied sector projects
 Irrigation and Power sector projects
 Industry and Mining sector projects
 Transport and Communication sector projects
 Social Service Sector projects
 Miscellaneous projects
2) Techno-Economic based classification of projects
Based on their techno-economic aspect, projects can be classified into three groups
which are useful in the process of feasibility appraisal and the techno-economic
feasibility studies:
a. Factor Intensity- oriented classification: here, Projects may be classified
as Capital intensive projects (where large scale investment is made in Plant and
Machinery) or Labor intensive projects (where large scale investment is made in
Human Resources).
b. Causation-oriented classification: here, projects are classified as Demand-
based (where projects are formulated to meet the demand of any goods or
services when it is unavailable and more demanded by the consumers) and
Raw material based (where the project is formulated to make available of
inputs, skills or raw materials for starting a project).
c. Magnitude-oriented classification: here, Projects are classified on the basis
of size of investment forms as Mega-scale, Large-Scale, Medium–scale or
Small- scale projects.

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3) Age/experience and the purpose based classifications
Projects can be categorized based on the age and experience and the purpose for
which the project is being taken up as follows:
 New Projects
 Expansion Projects
 Modernization Projects
 Diversification Projects
4) Services Projects
These are further classified as:
 Welfare or Noncommercial projects
 Research and Development projects and
 Educational Projects and etc.
5) Ownership and control based classification: Under this approach, projects are
classified into:
 Corporate Projects: Projects in which a group of shareholders have sole
interest in the control of management of the projects are called corporate
projects.
 Partnership Projects: Projects in which a group of partners have sole interest
in the control of management of the project are called Partnership projects.
 Sole Proprietor Projects: Projects in which a sole proprietor or single owner of
business have control over management of project is called sole proprietor
projects.
6) Technology Based Classification: Based upon the level of technology applied, the
projects are classified as:
 High-Technology Projects: Projects which use most sophisticated technology
to meet its objectives such production of new goods etc., are called Hi-Tech
projects or High Technology projects.
 Conventional Technology Projects: Projects which use outdated technology
for its project completion process are called conventional technology projects.

16
7) Risk Based Classification: Under this classification, projects are classified into:
 High-Risk Projects: Projects which involves high risk to expand new
technology with available financial resources to earn high returns are called
High Risk or Venture Capital projects.
 Medium Risk Projects: Projects which involve only medium risk to earn
normal profits are called medium risk projects.
 Small Risk Projects: Projects which involve low risk to earn minimum
profits and which explore conventional technology for project completion
purposes are called small risk projects.
8) Country origin based classification: On the basis of this, projects are classified
into:
 National/Domestic projects: Projects carried in home country to carry on
with national interest are called domestic of national projects.
 International/Foreign Projects: Projects carried in one or more other
countries in global interest are called Foreign or International projects.
9) Productivity based classification: Under this approach, projects may be classified
as:
 Directly productive projects- In directly productive projects, the benefits and
costs of the project are accrued to a single large organization. This organization
will be able to calculate the surplus.
 Indirectly productive projects- Indirectly productive projects are those where
the benefits derived from a new project do not accrue to the organization
responsible for carrying out the costs. Hence, the resulting surplus is not
concentrated in the hands of a single organization. In the case of indirectly
productive projects, the calculation of benefits is difficult. Examples of
indirectly produced projects include infrastructural projects such as roads,
schools, health centers, where the benefits accrue to the users. Such large
projects are usually carried out by government because of the high investment
requirement and their longer gestation period i.e. the period between investment
and accrual of benefits.

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10) Social Welfare Projects and Infrastructure development projects
 Social Welfare Projects: These projects are non-industrial capital
projects/schemes and are undertaken for increased public welfare. For
example, creation of educational facilities, building up of medical centers,
creation of universities, community centers, sports facilities, libraries,
improving water supply, etc.
 Infrastructure development projects: These projects involve development
of infrastructure in sectors such as power, Telecommunications, Railways,
Roads, and Ports etc.

11) Classification of projects in an existing concern

Based on an existing organizations projects can be categorized as
a) Capacity Expansion/ Augmentation Project: This involves augmentation of the
existing capacity of product, either by installation of new facilities in the existing
set-up or by establishing of new units at some different location. The objective here
is increasing the market share of the company either through penetration into new
market or improving the share of existing ones by supplying the product at reduced
cost with latest technological features.
b) Modernization, Technological upgrading or Replacement Project: A
modernization project may involve acquisition of the latest technical know-how,
designs, drawings relevant to specific product, up gradation of process technology
with thrust on quality improvement comparable with acceptable domestic and
international standards, and also improvement in packaging. Here, the objectives of
the project include:
 to bridge gap in the existing facilities with the installation of new and
most sophisticated machines;
 to remove production bottlenecks (such as poor material handling
facilities, inadequate storage facilities, etc.) ;
 to add new features and systems to the existing facilities and
 to replace old/obsolete assets due to high operation cost and lower
productivity.

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c) Balancing facilities project: These projects are undertaken to fulfill facilities which
are required to remove gaps/bottlenecks in the specified operation area to achieve
certain targets and standards in respect of production/ capacity utilization,
productivity and quality. This may help achieve objectives such as:
 to remove production bottlenecks, thereby increasing capacity utilization ,
 to bridge technology gap,
 to provide for higher flexibility in operation,
 to make a strong infrastructural base;
 to improve cost effectiveness;
 to intensify research and development activities.
d) Diversification project: The objective of diversification is to enter into new
areas/product lines to achieve a higher rate of growth. Diversification in the
unrelated areas or where new technology is used may involve higher degree of risk.
e) Cost Reduction project: Here the objective is to gain cost leadership in the
competitive market. Usually companies achieve cost reduction through
modernization projects.
f) Research and Development Project: This category of project involves creation of
specific facilities to improve upon the characteristics/properties of something
which is already in existence and or/create, develop and build entirely new things
or processes. The objective here is to improve the quality of a product, attain
technological edge, familiarize with or develop new technology, and to indigenize
the product.
g) Quality improvement project: The objective of this type of project is to improve
quality of products through use of state-of-the-art measuring and testing
equipments and machines. These projects help in reducing the cost of rejection,
free replacement, repair and modification, and thereby, helping in reducing
manufacturing cost and cycle.
h) Employees’ Welfare Project: The objective of this kind of project is to install
infrastructural facilities for improving working conditions and labour relations as
well as developing managerial skills of the staff. Good examples of such a project
are capital expenditures on setting up of canteens, shopping complex, training
centers, crèches, recreation centers, schools, etc.
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 i) Statutory requirement or Obligation Project: The objective here is to meet
statutory requirements in respect of safety, security, pollution control, etc. and,
thereby, improving the overall living conditions in a society.

Activity 4
Identify some projects undertaken in your area and try to categorize them under different
project classifications mentioned above.

1.8 Project planning and objective setting

 Project planning
Dear colleagues, regardless of project sizes, a workable and effective plan are a must to every
project. Project planning is the pre-formulation stage in the total project life cycle. It
involves scanning of the environment to find out investment opportunities. A project
neither comes out of nothing, nor would it fall from the blue. In an institution, a good
project is not just born but somebody has to propose it. Projects have to be planned within
the framework of business strategies or national policy directives. Priorities should be fixed.
Project planning lays the foundation for project management success. Quality project
planning enables project managers to derive useful information for making decisions to
achieve safety, time and budget goals. On the other hand, poor project planning
incapacitates project management from using any analytical process to achieve the same
goals.

Furthermore, regardless of project sizes, a plan is a must to every project that is workable
and effective. The plans must be realistic from the beginning so that they result in a
successful project. Every team member in undertaking a project must be fully instructed on
“what to do” and “when to take the action”, enabling the project manager to control and
coordinate progress as the work moves from one stage to another. This should be a
continuous process involving decisions or choices about the alternative ways of using the
available resources with the aid of achieving particular goals. The rationale is that planning is
considered as an effective way in mobilizing resources and allocating them on priority area
of development.

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A development planning process is basically for making rational investment in a way that it
positively contributes to the overall wealth of a nation. It as such involves future events and
systematic thought and preparation. An adequately defined plan of a project will include the
following:
 A subject – Purpose of the project (intention)
 A start point – (present situation at commencement, what to do?)
 A target outcome – ( A situation on project completion)
 The cost budget- the amount of resources to be committed for the project
 A quality result – (based on project standards accomplishments must be met) i.e.
some essential ingredients of the outcome.
 A study date/time – for careful study and decisions.
 A project date to final completion (end result)
 Rationale of Project Planning
In the same context, the major logical justifications for project planning may include that it:
 is essential to survive in the most dynamic situations especially in modern
competitive world;
 strengthens the position of entrepreneurs to lead through right direction for
better survival of business;
 gives an overall picture of constraints faced and also enables to coordinate its
limited resources to maximum effort;
 gives a clear picture of problems that are likely a project manager is to face and
helps in preparing with necessary solution at time and
 helps in time management and therefore it results in proper coordination of
resources and fix priorities intelligently.

 Principles of Project Planning

Dear colleagues, it is of a paramount significance to know the principles of project planning,
be it in the context of a business, industrial or development projects. The main principles of
project planning are the following:

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 1. The factual basis of the project, its customers and its environment, should be
investigated.
2. To make planning realistic, it is necessary to have a clear understanding of one’s
business, strengths and weaknesses.
3. Alternative opportunities based on the resources of the project and the
anticipated needs of the customer should be developed.
4. Planning is a process, not an isolated occasional act. Hence, plans should always
be periodically reviewed and not be ritual or mere paper work.
5. A planned project should be supplemented by performance reporting. In other
words one who wishes to implement his plans successfully must regularly
examine the expected progress against actual progress to decide further course
of action.
 Barriers to proper Planning
The main barriers to proper project planning include:
 Lack of time, or not making time to plan;
 Not knowing how to plan;
 Difficulty in getting the right people together;
 Finding it difficult to plan because the future is uncertain and
 Wanting to do things immediately because the need is urgent, rather than think
about them

 Common pitfalls/drawback in project Planning

Dear learner, as we have seen from the experiences of different project implementing
agencies, the following is some of the examples that reflect the common pitfalls in project
planning:

 Plans do not address the real needs: Someone imports forks from other
country because he sees people in his country eating with their fingers and want
to change that eating habit. However, in that country people usually eat with their
fingers. This project does not address a real need.

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  Project plans usually miss the targeted beneficiaries: An agricultural project
wants to help poor people. An agriculturalist starts a program of vegetable
growing. While the project is technically sound, poor people do not benefit
because they have no land.
 Lack of technical information in planning: A fishery project digs ponds, but
they do not hold enough water because the soil does not contain enough clay.
This pitfall resulted from lack of adequate technical information.
 Lack of research evidence for planning: A handicraft project helps people
make shoulder bags. A year later, there are a large number of stocks of full of
unsold bags because not enough research had been done into the marketing
aspects of the project.
 Lack of social and cultural considerations in planning: A project built
latrines, but the women do not use them because the area is badly lit and they fear
attack by men. The central problem of such a project is that it was ventured
without carefully assessing the social and cultural factors that impede the
practicability of the project.

 Formulating Project Objectives

All project plans are based on “objectives”. There must be objectives that are unambiguous,
clearly defined, well known and fully understood by everyone concerned with the project,
because every project plan and activity will be focused on them. Each objective must be
much more than a “pious hope” or a statement of general intent, if it is to direct activity
accurately to the required outcome. Therefore, an adequately defined objective will include
the following basic characteristics, usually abbreviated as SMART: where

o S – Specific
A project should be specific in its objective. A project is designed to meet a specific
objective as opposed to a program, which is broad. A project has also specific
activities. Projects have well defined sequence of investment and production
activities and a specific group of benefits. A project is also designed to benefit a
specific group of people.

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 o M - Measurable
Projects should be designed in such a way that investment and production activities
and benefits expected from them should be identified and if possible be valued
(expressed in monetary terms) in financial, economic and if possible social terms.
Though it is sometimes difficult to value especially secondary costs and benefits of a
project, attempt should be made to measure them. Measure costs and benefits must
lend themselves for valuation and general projects are thought to be measurable.
o A – Achievable
As projects should have specific and identifiable group of beneficiaries, so also have
to have boundaries. In designing a project, its area of operation must clearly be
identified and delineated. Though some secondary costs and benefits may go beyond
the boundary, its major area of operation must be identified. Hence, projects are said
to be area bounded.
o R – Realistic
Planning of a project and its analysis must be made based on real information.
Planner must make sure whether the project fits with real social, economic political,
technical, etc situations. This requires making a detailed analysis of the different
aspects of a project.
o T – Time bounded
A project should have a clear starting and ending point. The overall life of the
project must be determined. Moreover, investment and production activities have
their own time sequence. Every cost and benefit streams must be identified,
quantified and valued and be presented year-by-year.

Activity 5
What do you understand by project planning?
Explain the rationale of project planning?
What are the principles of project planning?

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  Basic parameters of a project
Project parameter refers to the three basic parameters, quality, cost, and time, on which the
management focuses attention during a project life. A successfully managed project is one
that is completed at the specified level of quality, on or before the deadline and within the
budget. In addition, client satisfaction will indicate success and possibility for replication or
sustainability. Each of the parameters should be clearly specified in detail during the
planning phase of the project.

These specifications then form the basis for controlling the project during the
implementation phase. Fig 3. Below shows the relationship between these parameters.

Fig 3: Project Parameters and Specification

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  Beneficiaries and Stakeholders of a project

Who are the beneficiaries and stakeholders of the project?-------------------------------------------

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

o Beneficiaries: are those who benefited in whatever way the implementation

of the project. Distinction may be made between:
i. Direct beneficiaries: the group/entity that will be directly and
positively affected by the project at the project purpose level. This
may include staff from partner organization.
ii. Indirect beneficiaries: those who benefit from the project in the long-
term, for example children, due to increased spending on health and
education.
o Stakeholders: are individuals or institutions that may directly or indirectly,
positively or negatively affected by a project or a program.

It should be noted that a given project can have a number of stakeholders that are interested
in the project and its outcome. In dealing with a given project, it is essential that all
stakeholders get a chance to express their experience and ideas for the (new) project. The
views of each member should be respected and used to increase the effectiveness of the
project. Not only individuals can be stakeholders, but also organizations that have some sort
of socio-economic and political stake in the project need to be involved. Again, various
government and non-government institutions and other actors is very essential for successful
implementation of the project.

Activity 6
What are the three basic parameters of a project?
Who are the stockholders of a project? Give examples. How does each affect
and get affected by the project?

26
 The impact of project on the target groups (beneficiaries and target groups) can be
depicted as hereunder.

Unsatisfactory situation Action directed towards

of beneficiaries beneficiaries Improved situation
of beneficiaries

Project

Generation of project ideas /Assessment for project ideas

The search for promising project ideas is the first step towards establishing a successful
project. As the traditional adage goes, the key to success lies in getting into the right business
at the right time. Identification of such opportunities requires imagination, sensitivity to
environmental changes, and a realistic assessment to what the organization can do. The task
is partly structured, partly unstructured; partly dependent on convergent thinking, partly
dependent on divergent thinking; partly requiring objective analysis of quantifiable factors,
partly requiring subjective evaluation of qualitative factors; partly amenable to control, partly
dependent on fortuitous circumstances [the detail of this topic will be presented in chapter
three].

Preliminary screening and selection

Preliminary screening and selection of project idea follows the pool of project ideas for
project. The first step is to select one or more of them as potentially promising. This, calls
for a quick preliminary screening by experienced professionals who could also modify some
of the proposals. At this stage, the screening criteria are vague and rough, that becomes
specific and refined as project planning advances (see the detail of the process in chapter-
three).

27
1.9 Chapter Summary

The main objective of this chapter is to provide the students a reliable foundation on the
conceptual framework of projects. Thus, the meaning, definitions, characteristics,
classification and importance of a project, projects Vs programs, project planning,
stakeholders, project parameters and the role of a project manager and his team etc., have
been covered in this chapter.

A project is defined as an intervention that consists of a set of planned interrelated activities,

designed to achieve the defined objectives within a given budget and a specified period of
time. Projects exist at all levels of every organization and must be managed proactively,
regardless of size. Projects provide chandeliers for public and private investments, re-
channel unused or underemployed resources into productive uses, and offer expanded
opportunities for entrepreneurship. Project has an increasingly important role in the public
administration of developing countries.

Project classification helps in graphically expressing and highlighting the essential features of
a project. Projects can be classified on various bases. It is necessary to distinguish between
projects and programs because there is sometimes a tendency to use them interchangeably.

Project planning lays the foundation for project management success. Quality project
planning enables project managers to derive useful information for making decisions to
achieve safety, time and budget goals. Poor project planning, on the other hand,
incapacitates project management from using any analytical process to achieve the same
goals. During a project’s life, the management focuses attention on three basic parameters
viz., quality, cost, and time. Every project will have a number of stakeholders who are
interested in it and many affect its future course of direction.

For success of every project, an efficient project management is necessary. It is important to

remember that projects are carried out by people, and the human aspects of project
management are very critical for the project success. A project manager and a project team

28
are involved in the project. The role of the project manager is one of great responsibility as
he has to direct, supervise and control a project from beginning to end.
Review Questions

1. Define the term ‘Project’. How will you classify the projects?
2. How are projects classified? In your view which criterion seems to be more
rational and acceptable for classification of a project?
3. What factors influence the project ideas? Discuss their implications.
4. What do you understand by project identification? Discuss, with examples, the
process involved in project identification.
5. How would you use SWOT analysis to identify and select a project?

References
o Chandra, Prasanna Projects Planning, Analysis, Financing

o UNIDO, Manual for Preparation of Industrial Feasibility Studies, UN.1991

o Harlod Kerzner, Project Management

o Rory Burke, Project Management

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CHAPTER- TWO
2. PROJECT LIFECYCLE
2.1 Introduction

Project lifecycle is spread over a period of time. There is an unavoidable gestation period for
the complex of activities involved to attain the objectives in view. This gestation period,
however, varies from project to project but it is possible to describe, in general term, the
time phasing of project planning activities common to most projects. The principal stages in
the life of a project are: Identification, Initial formulation, Evaluation (selection or rejection),
Final formulation (or selection), Implementation and Completion and operation.

Development projects are expressly designed to solve the varied problems of the economics
whether in the short or long run. The surveys or in depth studies would locate the problems
and the project planner will have to identify the projects that would solve the problems most
effectively. The project begins as they are identified. It is often debated as to the point at
which the project life cycle is completed. The cycle is completed only when the development
objectives are realized.

Dear learner, here it is important to note that there is no single way of devising the different
phases of a project. Rather, as is in the case with aspects of project analysis, there are many
equally valid ways in which the project cycle may be divided. In this section, we will deal
with two basic models explaining the project cycle
i. The Baum project cycle and
ii. UNIDO project cycle

2.2 Chapter Objectives

Dear learners, in chapter one, we hope you acquired the basic concepts of project its
management. Here, in the second chapter of the module, where we will discuss about the
project cycle. After studying this chapter, you should be able to:
 Understand the project lifecycle, and
 Apply the project lifecycle models: the UNIDO and BAUM’S project cycle
models

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2.3 Project cycle
Project cycle is the various stages through which project planning process proceeds from
inception to implementation. It considers a various separable stages of activity which can be
thought of as constituting a definite sequence in which each stage not only grown out of the
preceding ones, but leads into the subsequent ones.
There are various models that deal with the project cycle, such as Baum’s, United Nations
Industrial Development Organization (UNIDO), Integrated Project Planning and
Management Cycle (IPPMC), etc. However for a clarity purpose let’s give more emphasis for
UNIDO’s and Baum’s model.

2.3.1. The Baum’s Project Cycle (The World Bank)

Dear colleagues! It is a historical record that the first basic model of a project cycle was
developed by Baum (1970), which has been adopted by the World Bank. The Baum model is
based on the concept that most projects typically run through several separable stages of
activities which can be thought of as constituting a definite sequence. One project cycle,
according to the Baum model, has the following five main stages/phases (see figure 1).
5. Evaluation 1. Identification
5
 Past
 Future  Resource Based
 Feed  Market Based
Back  Need Based
4. Implementation
2. Preparation
 Planning the work
 Work the planning
 Technical
 Monitoring
 Financial
 Economic
 Technical
 Financial
 Economic

3. Appraisal phase
Figure-1: the Baum’s project cycle

31
Note:
 Throughout the project cycle the primary preoccupation of the analyst is to consider alternatives,
evaluate them, and to make decisions as to which of them should be advanced to the next stage.

Thus, in the following section, we will briefly discuss the main stages of the Baum’s project
cycle.

a. Identification Phase

Dear colleagues, it is important to understand the way different projects can be identified.
The first stage in the project lifecycle is to find potentially promising projects which are
worthwhile for investment. Some of the sources of such projects idea are listed below:

 Some may be “resource-based” and stem from the opportunity to make profitable
use of available resources.
 Some projects may be “market-based” arising from an identified demand in home
or overseas markets.
 Others may be “need-based” where the purpose is to try to make available to all
people in an area of minimal amounts of certain basic material requirements and
services.
 Well–informed technical specialists and local leaders are also common sources of
projects. Technical specialists will have identified many areas where they feel new
investment might be profitable, while local leaders may have suggestion about where
investment might be carried out.
 Ideas for new projects also come from proposals to extend existing programs.

The detail analysis of project identification will be discussed in the subsequent separate
topics. However, in this section, it is important to understand the way different models treat
the different stages of a project. In general, most projects start as an elementary idea.
Eventually, some simple ideas are elaborated into a form to which the title “project” can be
formally applied.

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 b. Preparation Phase

Once projects have been identified, there begins a process of progressively more detailed
analysis of the projects and preparation of the project plans. This phase of the project
lifecycle which normally includes both the pre–feasibility and feasibility studies is a stage at which
the project is being seriously considered as a definite investment action. Project preparation
(project formulation) covers the establishment of all the technical, economic, social,
financial, institutional and environmental feasibility analysis. From the inferences of such
analysis, decisions have to be made on the scope of the project, location and site, soil and
hydrological requirements, project size (farm or factory size).

Resource base investigations are undertaken and alternative forms of projects are explored.
Complete technical specifications of distinct proposals accompanied by full details of
financial and economic costs and benefits are the outcome of the project preparation stage.
At this stage, the project now exists as a set of tangible proposals. Project design and
formulation is an area in which local and international consultants are very active especially
for big projects that cover large areas and have big budgets.

c. Appraisal Phase

Dear colleagues, after a project has been prepared, it is generally appropriate for a critical
review or an independent appraisal to be conducted. This provides an opportunity to re-
examine every aspect of the project plan to assess whether the proposal is appropriate and
sound before large sums are committed. Generally, only internal institution/government
staffs (but not consultants), are used for this work. And projects are appraised both in the
field and at the desk level. Appraisals should cover at least seven aspects of a project, each
of which must have been given special consideration during the project preparation phase:
 Technical – here the appraisals concentrate on verifying whether what is proposed
will work in the way suggested or not.
 Financial – the appraisals try to see if the requirements for money needed by the
project have been calculated properly, their sources are all identified, and reasonable
plans for their repayment are made where necessary.

33
  Commercial – the way the necessary inputs for the project are conceived to be
supplied is examined and the arrangements for the disposal of the products are
verified.
 Incentive – the appraisals look at whether things are arranged in such a way that all
those whose participation is required will find it in their interest to take part in the
project, at least to the extent envisaged in the plan.
 Economic – the appraisal here tries to see whether what is proposed is good from
the viewpoint of the national economic development interest when all project effects
(positive and negative) are taken into account and check if all are correctly valued.
 Managerial – this aspect of the appraisal examines if the capacity exists for
operating the project and see if those responsible ones can operate it satisfactorily.
Moreover, it tries to see if the responsible are given sufficient power and scope to do
what is required.
 Organizational – the appraisal examines the project if it is organized internally and
externally into units, contract policy institution, etc so as to allow the proposals to be
carried out properly and to allow for change as the project develops.

These issues are the subjects of specialized appraisal report. And on the basis of this report,
financial decisions are made – whether to go ahead with the project or not. In practice,
there can be quite a sequence of project selection decisions. Following appraisal, some
projects may be discarded. If the project involves loan finance, the lender will almost
certainly wish to carry out his own appraisal before completing negotiations with the
borrower. Comments made at the appraisal stage frequently give rise to alterations in the
project plan (project proposal).

d. Implementation
Phase
The clear objective of any effort in project planning and analysis is to have a project that can
be implemented to the benefit of the society. Thus, implementation is perhaps the most
important part of the project cycle. In this stage, funds are actually disbursed to get the
project started and keep running. A major priority during this stage is to ensure that the
project is carried out in the way and within the period that was planned.

34
Problems frequently occur when the economic and financial environment at implementation
differs from the situation expected during appraisal.

Frequently original proposals are modified, though usually only with difficulty, because of
the need to get agreement between the parties involved. It is during implementation that
many of the real problems of projects are first identified. Because of this, the feedback
effect on the discovery and design of new projects and the deficiencies in the capabilities of
the project actor can be revealed. Therefore, to allow the management to become aware of
the difficulties that might arise, recording, monitoring and progress reporting are
important activities during the implementation stage. There are some aspects of
implementation that are of particular relevance to project planning and analysis.

1. The better and more realistic a project plan is, the more likely it is that the plan can
be carried out and the expected benefit realized. This emphasizes once again the
need for careful attention to each aspect of project planning and analysis.
2. Project implementation must be flexible. Circumstances will change and project
managers must be able to respond intelligently to these changes. The common ones
are technical changes, price changes, economic changes and political changes. And
these will also alter the way in which projects should be implemented.

e. Evaluation

At a later stage (in 1978) Baum has added an additional stage called “Evaluation” which
usually closes the cycle as it gives rise to the identification of new projects. Of course, the
final phase in any project cycle is evaluation. Once a project has been carried out, it is often
useful, (though not always done) to look back over what took place, to compare actual
progress with the plans, to judge whether the decisions and actions taken were corrective, to
see whether the results obtained are optimal in a sense that whether resources are efficiently
utilized and whether the project goal and objectives are effectively achieved. The extent to
which the objectives of a project are being realized provides the primary criterion for an
evaluation. The analyst looks systematically at the elements of success and failure in the
project experience to learn how better to plan for the future.

35
Evaluation is not limited only to completed projects. It is the most important managerial
tool in ongoing projects and rather formalized evaluation may take place at several times in
the life of a project. Evaluation may be undertaken when the project is in trouble, as the first
step in a re-planning effort. Careful evaluation should precede any effort to plan follow–up
projects. And, finally, evaluation should be undertaken when a project is terminated or is
well into routine operation. Many different people may do evaluation.
 Project management will be continuously evaluating its experience as implementation
proceeds.
 The sponsoring agency, perhaps the operating ministry, the planning agency or an
external assistance agency – may undertake evaluation.
 In large and innovative projects, the project’s administrative structure may provide
a separate evaluation unit responsible for monitoring the projects implementation
and for bringing problems to the attention of the projects’ management.

Evaluation can help not only in the management of the project after the initial phase, but
will also help in the planning of future projects. Experience with one project can give rise to
new ideas for extension of the project, repetition, the need for “vertically” associated
projects, which supply, inputs to or process products from this project, and other ideas
which become the seeds of new project proposals. These processes can usefully be
considered as a comprehensive sequence in the sense that for the project that is
implemented, each stage naturally follows the proceeding one and leads on to the next.
Actually, the division into stages is artificial, but it helps us to understand that project
planning, though a continuous process over time, has distinct phases and stages.

2.3.2. The UNIDO Model

The United Nations Industrial Development Organization (UNIDO) is the most devoted
institution towards the development and standardization of the concept, context and content
(CCC) of industrial project management system.

36
 1. Pre-
investment
Phase
3. Operation
Phase  Opportunity Study
 Per feasibility Study
 Replacement of
 Feasibility Study
equipment
 Appraisal/evaluati
 Development,
on
invasion/liquidatio
n

 Negotiation and Contracting

 Engineering Design
 Construction
 Per Production Marketing
 Commissioning and Startup
 training


 Recruitment and training

2. Investment Phase

Figure-2: UNIDO’S project cycle model

According to the UNIDO approach, documented in the UNIDO manual, the project
development cycle comprises three distinct phases. Each of these three phases is divided
into several stages, some of which constitute important consultancy, engineering and
industrial activities as shown in figure -2. The following are details of each of these phases.

1. Pre-investment phase

Dear Learners! In a usual practice, project ideas must be elaborated in a more detailed study.
Increasing importance should be attached to the pre – investment phase as a central point of
attention, because the success or failure of an industrial project ultimately depends on the
marketing, technical, financial and economic feasibility study findings and their
interpretation. To reduce wastage of scarce resources, a clear comprehension of the
sequence of events is required when developing an investment proposal from the conceptual
stage by way of active promotional efforts to the operational stage.

37
However, formulation of the detail techno-economic feasibility study that enables a definite
decision to be made on the project is a costly and time-consuming task. Therefore, before
assigning large funds for such a study, a preliminary assessment of the project idea must be
made in a pre-feasibility study. This is just to see if:
o All possible project alternatives are examined
o The project concept justifies detail study
o All aspects are critical and need in–depth investigation
o The project idea is viable and attractive or not

According to the UNIDO Manual, the main stages of the pre–investment phase are stated as
follows:
 Identification of investment opportunities (opportunity studies)
 Analysis of project alternatives and preliminary project selection
 Project preparation (pre – feasibility and feasibility studies) and
 Project appraisal and investment decision (appraisal report).
These stages assist a potential investor in the decision-making process and provide the base
for project decision and implementation.

Dear colleagues, before we proceed to the detail study of the stages in the pre-investment
phase, it is important to understand that support or functional studies are also part of the
project preparation stage and are usually conducted separately, for later incorporation in a
pre–feasibility study or feasibility study as appropriate. Though it is easier to grasp the scope
of an opportunity study, it is not an easy task to differentiate between a pre – feasibility and
feasibility study in view of the frequently inaccurate use of these terms. The division of the
pre–investment phase into stages avoids proceeding directly from the project idea to the
final feasibility study without examining the project idea step by step or being able to present
alternative solutions.

38
This cuts out many feasibility studies that would have little chance of reaching the
investment phase. And finally it ensures that the project appraisal to be made by national or
international financing institution becomes an easier task when based on well – prepared
studies. All too often project appraisal actually amounts to project preparation, given the low
quality of the feasibility study submitted.

a. Opportunity Studies/project idea

The identification of investment opportunities is the starting point in a series of investment
– related activities, when potential investors (private or public) are interested in obtaining
information on newly identified viable investment opportunities. The main instrument used
to quantify the parameters, information and data required to develop a project idea into a
proposal is the opportunity study. An opportunity study should identify investment
opportunities or project ideas by analyzing the following factors in detail.
o Natural resources with high potential for processing and manufacture;
o The future demand for certain consumer goods or for newly developed goods;
o Imports in order to identify areas for import substitution;
o Manufacturing sectors successful in other countries with similar level of
development;
o Cost and availability of production factors;
o Possible extension of existing lines of manufacture;
o Possible inter-linkage with other industries;
o Possibilities for diversification of manufacturing;
o The possible expansion of existing industrial capacity to attain economics of scale
and
o Export possibilities.

Opportunity studies can be made either in a general or specific ways. A general opportunity
study is a sectoral approach which is usually based on area studies designed to identify
opportunities on a given area like administrative province, backward regions, industry zones
and etc. Specific project opportunity studies usually follow enterprise/entrepreneur approach
in nature.

39
Note:
 We have to understand that opportunity studies are rather sketch in nature and rely
more on aggregate estimates than on detailed analysis.
 The purpose of opportunity study is to arrive at a quick and inexpensive
determination of salient facts of an investment possibility. That is, it should not
involve any substantial cost in its preparation.
b. Pre–feasibility studies
A pre-feasibility study should be viewed as an intermediate stage between a project
opportunity study and a detailed feasibility study. The main difference between the pre-
feasibility study and the actual feasibility study is the degree of the detail of the information
obtained and the intensity with which project alternatives are examined. The structure of a
pre-feasibility study should be the same as that of the detailed feasibility study. These two
studies basically compile information on the justification of the project. In a practical sense,
the main components of the project feasibility report include:

 Executive summary
 Project background and history
 Market and plant capacity
 Location and site
 Project engineering (technologies and equipment and civil engineering
works)
 Factory, administrative and sale overheads
 Manpower
 Project implementation
 Financial analysis and
 Project risk analysis

Activity 1

What are the differences in an opportunity, a pre-feasibility and feasibility study?

40
c. Feasibility Studies
A feasibility study should provide all data necessary for making the investment decision. The
commercial, technical, financial, economic and environment prerequisites for an investment
project should therefore be defined and critically examined on the basis of alternative
solutions already reviewed in the pre – feasibility study. The results of these efforts is then a
project whose background conditions and aims have been clearly defined in terms of its
control objective and possible marketing strategies, the possible market shares that can be
achieved, the corresponding production capacities, the plant location, existing raw materials,
appropriate technology and mechanical equipment and, if required, an environmental impact
assessment.

The financial part of the study covers the scope of the investment, including the net working
capital, the production and marketing costs, sales revenue and the return on capital invested.
Final estimates on investment and production costs and its subsequent calculations of
financial and economic profitability are only meaningful if the scope of the project is defined
unequivocally in order not to omit any essential part and its related cost. There is no uniform
approach or pattern to cover all industrial projects of whatever type, size or category. The
emphasis on the components varies from project to project. For most industrial projects,
however, there is a broad format of general application – bearing in mind that the larger the
project the more complex will be the information required.

Although feasibility studies are similar in content to pre–feasibility studies, the industrial
investment project must be worked out with the greatest accuracy in an iterative
optimization process, with feedback and inter-linkages, including the identification of
commercial, technical and entrepreneurial risks. The sensitive parameters such as the size of
the market, the production program or the mechanical equipment selected should be
examined more closely. A feasibility study should be carried out only if the necessary
financing facilities, as determined by the studies, can be identified with a fair degree of
accuracy. There would be little sense in a feasibility study without the reliable assurance that,
in the event of positive study findings, funds could be made available. For that reason,
possible project financing must be considered as early as the feasibility study stage, because

41
financing conditions have a direct effect on total costs and thus on the financial feasibility of
the project.
D. Appraisal Report
When a feasibility study is completed, the various parties will carry out their own appraisal of
the investment project in accordance with their individual objectives and evaluation of
expected risks, costs and gain. Large investment and development finance institutions have
formalized project appraisal procedures and usually prepare an appraisal report. This is the
reason why project appraisal should be considered an independent stage of the pre–
investment phase, marked by the final investment and financing decisions taken by the
project promoters. The appraisal report will prove whether the pre–production expenditures
spent since the initiation of the project idea were well spent or not. Project appraisal as
carried out by financial institutions concentrates on the health of the company to be
financed, the returns to be obtained by equity holders and the protection of its creditors. The
techniques applied to appraise projects in line with these criteria center around technical,
commercial, market, managerial, organizational, and financial and possibly also economic
aspects.

2. Investment (Implementation) phase

The investment or implementation phase of a project provides wide scope for consultancy
and engineering work, first and foremost in the field of project management. The investment
phase includes the following activities:
Establishing the legal, financial and organizational framework: covers the signing of
contracts between the investor /entrepreneur on the one hand and the financing institutions,
consultants, architects and suppliers of raw materials and required inputs on the other.
o Technology acquisition and transfer.
o Detailed engineering design and contract, including tendering, evaluation of bids and
negotiations:
o Acquisition of land, construction work and installation: involves site preparation,
construction of buildings and other civil works, together with the erection and
installation of equipment in accordance with proper programming and scheduling.
o Pre – production marketing, including the securing of suppliers and setting up the
administration of the firm.
42
 o Recruitment and training of personnel.
o Plant commissioning and start–up

3. Operational phase

The problem of the operational phase needs to be considered from both short – and long –
term viewpoint. The short – term view relates to the initial after commencement of
production when a number of problems may arise concerning such matters as the
applications of production techniques, operation of equipment or inadequate labour
productivity owing to lack of qualified staff and labour. Most of these problems have their
origin in the implementation phase.

The long term view relates to chosen strategies and the associated production and marketing
costs as well as sales revenues. These have a direct relationship with the projections made at
the pre–investment phase. If such strategies and projection prove faulty, any remedial
measures will not only be difficult but may prove highly expensive. The given outline of the
investment and operational phases of an industrial project is undoubtedly an
oversimplification for many projects and in fact, certain other aspects maybe revealed that
even greater short or long term impacts may be seen.

Dear students, the above two models have shown us, in one way or another, a project’s
lifecycle means the various stages or phases of a project from its initiation (inception) to its
completion (termination). For the purpose of project management, these phases are the
different stages of information gathering and decision making. In reality, these phases are
somewhat artificial, but do serve to cite emphasis on the need to think of project planning as
a process of decision-making, which usual takes place over time. Broadly speaking, what is
important about this process is that it should begin with the identification of a number of
alternatives, suing existing information and gathering new data so as to limit alternatives
under consideration to those few, which are most promising.

Throughout the project cycle, the primary preoccupation of the analyst should be to
consider alternatives, evaluate them, and to make decisions as to which of them should be
advanced to the next stage. In short, the project planning process is essentially one of

43
eliminating questionable investment alternatives, and the planner naturally hopes that the
best alternative will emerge. Because, in such process:

1. The results (output) of a given stage serve as the input or part of the input of the
next stage, if it is decided to proceed to the next stage.
2. The output or part of the output of one stage may be used as a new input (feedback)
to reconsider or revise, where necessary, the result of a proceeding stages and
3. Most importantly, the results of the implementation, operation and ex-post
evaluation stages of a project constitute valuable learning from experience for the
preparation of subsequent projects provided that these inputs are systematically
documented and analyzed.

2.4 Chapter summary

The second chapter of the module, discuss about the project lifecycle. It is important to note
here that it tends to be a natural sequence in the way projects are planned and carried out.
The sequence of events, stages or phases that a project follows can be divided into several
equally valid ways, depending on the executing agency or parties involved. Even though,
some of these stages may overlap, what is very common is the fact that before any project is
actually realized it goes through various planning, implementation and post-implementation
phases. Therefore, the different stage through which a project passes constitutes what is
often called “the project lifecycle”. The main features and elements of this process are
information gathering, analysis and decision-making.

The project cycle considers various stages in which each stage not only is grown out of the
proceeding ones, but also leads into the subsequent ones. The planning process does not
contain such a stringent sequence of events since all aspects of the project have to be
considered simultaneously and, if necessary, adjusted to one another. Therefore, project
cycle is a self–renewing cycle in that new projects may grow out of the old ones in a continuous
process and self – sustaining cycle of activities. Here it is important to note that there is no
single way of devising the different phases of a project.

44
Rather, as is in the case with aspects of project analysis, there are many equally valid ways in
which the project cycle may be divided. In this chapter, we dealt with two basic models
explaining the project cycle: the Baum’s and UNIDO project cycle. A project cycle,
according to the Baum model, has the following five main stages/phases Preparation,
Appraisal, Implementation and Evaluation.
The United Nations Industrial Development Organization (UNIDO) is the most devoted
institution towards the development and standardization of the concept, context and content
(CCC) of industrial project management system. According to the UNIDO approach,
documented in the UNIDO manual, the project development cycle comprises three distinct
phases: Pre-investment, Operation and Investment Phases.

Review Questions
1. Describe project cycle.
2. Differentiate Baum’s and UNIDO project cycle models.

Individual Project
Take any project of your organization or any project at your knowledge and relate it
to either of the project cycle models. Why you reasoned that it is related to Baum’s or
UNIDO?
Note:
The assignment should be computer typed. Times New Roman, 12 font, 1.5 line
space, minimum of 3 maximum of 5

References
o Chandra, Prasanna Projects Planning, Analysis, Financing

o UNIDO, Manual for Preparation of Industrial Feasibility Studies,

UN.1991

o Harlod Kerzner, Project Management

o Rory Burke, Project Management

45
CHAPTER- THREE
3. PROJECT IDENTIFICATION
3.1 Introduction
As the traditional saying goes, the key to success lies in getting into the right business at the
right time. Identification of such opportunities requires imagination, sensitivity to
environmental changes, and a realistic assessment to what the organization can do. The task
is partly structured, partly unstructured; partly dependent on convergent thinking, partly
dependent on divergent thinking; partly requiring objective analysis of quantifiable factors,
partly requiring subjective evaluation of qualitative factors; partly amenable to control, partly
dependent on fortuitous circumstances.

Identification is often the outcome of a triggering process rather than an analytical exercise.
While the notion of identification is simple, it is difficult to develop methods or procedures
for accomplishing it as there is no well-defined theory to guide this task. During the
Identification phase, and within the framework established by the Country Strategy
Paper(for grant opportunities), the stress is on analysis of relevance of project ideas, which
includes an analysis of the stakeholders and of the likely target groups and beneficiaries (who
they are: women and men from different socio-economic groups; assessment of their
potentials, etc.) and of the situation, including an analysis of the problems they face, and the
identification of options to address these problems.

Sectoral, thematic or “pre-feasibility” studies may be carried out (including consultations

with stakeholders) to help identify, select or investigate specific ideas, and to define what
further studies may be needed to formulate a project or action. The out-come is a decision
on whether or not the option(s) developed should be further studied in detail.

46
3.2 Chapter Objectives

In this third chapter of the course, we will deal with project identification, identify
stakeholders, analyze the needs/problem, analyze objectives and select the project strategy.
After studying this chapter, you should be able to:
 Understand the project identification concepts
 Apply project identification process,
 Analyzed needs/problems, objectives and select the project strategy.

3.3 Project Identification

The primary step in any project analysis and planning is the search for promising project ideas,
which is technically known as project identification. Actually, project identification is the first
step towards establishing a successful venture, and this stage comprises three elements
including:
i. Pre-identification phase
ii. Identification, and
iii. Screening promising project ideas

I. Pre-identification phase

The pre-identification stage is an important prelude to project identification phase. This

stage involves surveying, reviewing, inventorying and analysis of strategies and policies,
natural resources data and socio–economic information. It is a very important phase in
project planning. Unfortunately, it is an aspect of planning, which is either, almost totally
ignored or for which inadequate resources are provided in most developing countries.

However, there are a number of justifications for conducting a pre-identification assessment

in identifying some project ideas, including:
 First, perhaps the most important of all, is sheer ignorance – an ignorance of need and
ignorance of cost–effective ways of carrying the research, surveys, inventorying of
resources and integrating and analyzing the information.

47
  Second, such work tends to be regarded as an expensive overhead cost and therefore
expendable in difficult times of budgetary.
 Third, a lot of the work has tended to be time consuming, people cannot wait for
results and do not consider it important to even start it.

Nowadays, modern technology is revolutionizing the survey methods and the means for
carrying out synthesis and analysis, speeding up some processes, reducing the costs of others
and providing new ways of looking at things. A good data being a prerequisite to sound
project formulation and the analysis of data identifying gaps and throwing up ideas for
possible projects, project identification must be carried out also within a frame – work of
national, regional and sectoral development (including pricing, taxation and subsidy) policies
otherwise much time and effort might be wasted in identifying and preparing projects which
would be reflected on policy grounds or which might turn out to be unfeasible because of,
for example, a tax and subsidy policy. Thus, those who are responsible for identifying
projects need to be aware of accepted strategies and policies and also be in a position to
feedback information to those who are responsible for formulating policies.

II. Identification phase

In business projects, the key to success lies in getting into the right business at the right time.
The objective is to identify investment opportunities, which are prima facie feasible and
promising and which merit further examination and appraisal. At this stage, an idea
regarding a required intervention in a specific area to address identified problems is formed
or developed. This idea is usually hatched through discussions by specialists and local leaders
in a community as need-based on issues, and crystallized into a proposal. The project can
therefore be conceived on the basis of:
 Consumer needs - to make available to all people in an area the minimum amounts
of certain basic material requirements or services. For this purpose, a needs
assessment survey establishes the urgency for intervention.
 Market demand: considering the existing and potential of domestic (local) and/or
overseas (international) markets.
 Resource availability: opportunity to make profitable use of available resources

48
  Technology: to make use of available technology
 Natural calamity: hedging against the adverse effect of natural events such as
drought, floods, tsunami and
 Political considerations: to be in line with the rules and regulations imposed on an
industrial unit, like discharging a corporate social responsibility (CSR).

Project identification a search for promising projects ideas, which could contribute towards
achieving specified development objectives. In principle, from the development perspective
and a public project view point, project identification should be an integral part of the
macro–planning exercise of the state, with sectoral information and strategies as the main
source of the ideas. In practice, however, projects ideas are not always derived from national
and sectoral plans. Instead, they may originate from several sources based on some vested
interests of the individuals involved.

However, irrespective of their origin, project ideas should, in general, aim at overcoming
constraints on the national development effort, be the material, human or institutional
constraints, or at meeting unsatisfied needs, and demand for goods and services. Constraints,
needs and demands should be interpreted broadly to include, for example, foreign exchange
constraints that might indicate the need to undertake projects for export promotion or
import substitution.

Dear learners, it is important to understand that good project ideas which are the key to
success are elusive. So, a wide variety of sources should be tapped to identify them. To have
a wide range of options, the source of project ideas can be categorized into two: the micro-
level and macro-level sources.

A. At micro-level
At micro-level, project ideas can be generated from various sources including:
1. Analysis of the Performance of Existing Industries: a study of existing
industries in terms of their profitability and capacity utilization can indicate
promising investment opportunities which are profitable and relatively risk-
free. An examination of capacity utilization of various industries provides
49
 information about the potential for further investment. Such a study
becomes more useful if it is done region wise, particularly for products which
have high demand for consumption and wide scope for production.
2. Examination of the Input-outputs of Various Industries: the analysis of
the inputs required for various industries may throw up project ideas.
Opportunities exists when (i) materials, purchased parts, or supplies are
presently being procured from distant sources with considerable time lag and
transportation cost, and (ii) several firms produce internally some
components/ parts which can be supplied at a lower cost by a single
producer who can enjoy economies of scale. Similarly, a study of the output
of the existing industries may reveal opportunities for adding value through
further processing of the main outputs, by-products, as well as waste
products.
3. Review of Imports and Exports: Analysis of import statistics for a period
of five to seven years is helpful in understanding the trend of imports of
various goods and the potential for import substitution. Indigenous
manufacture of goods currently imported is advantageous for several
reasons: (i) it improves the balance of payments situation, (ii) it generates
employment, and (iii) it provides a market for the supporting industries and
services. Likewise, an examination of export statistics is useful in learning
about the export possibilities of various products.
4. Investigation of Local Materials and Resources: A search for project
ideas may begin with an investigation into local resources and skills. Various
ways of adding value to locally available materials may be examined.
Similarly, the skills of local artisans may suggest products that might be
profitably produced and marketed. Such assessment may consider issues such
as the human and material resources, infrastructural facilities, and market for
various products.
5. Analysis of Economic and Social Changes: A study of economic and
social trends is helpful in projecting demands for various goods and services.
Changing economic conditions and consumer preferences provide new
business opportunities. For example, a greater awareness of the value of time

50
 is dawning on the public. Hence, the demand for time-saving products like
prepared food items, ovens, and powered vehicles has been increasing.
Another change that can be seen is the increasing desire for leisure and
recreational activities. This has caused a growth in the market for recreational
products and services.
6. Study of New Technological Developments: New products or new
process and technologies for existing products developed by research
laboratories may be examined for profitable commercialization.
7. Drawing Clues from Consumptions abroad: - Entrepreneurs willing to
take higher risks may identify projects for the manufacture of products or
supply of services which are new to the country but extensively used abroad.
Automatic vending machines, entrainment parks, and fast food restaurants
are examples of projects belonging to this category.
8. Exploring the Possibility of Reviving Sick Units - Industrial sickness is
rampant in many countries. There are innumerable business units which have
been characterized as sick. These units are either closed or face the prospect
of closure. A significant proportion of sick units, however, can be nursed
back to health by sound management, infusion of further capital, and
provision of complementary inputs. Hence, there is a fairly good scope for
investment in this area. Such investments typically have a shorter gestation
period because one does not have to begin from scratch. Indeed, in many
cases marginal efforts would suffice to revive such units.
9. Identification of unfulfilled Psychological Needs: For well- established
multi-brand product groups like bathing soap, detergents, cosmetics, and
tooth paste, the questions to be asked is not whether there is an opportunity
to manufacture them for satisfying an actual physical need but whether, there
are certain psychological needs of the consumers which are presently
unfulfilled. To find out whether such an opportunity exists, the technique of
spectrum analysis is useful. This analysis is done in the following manner (i)
important factors influencing brand choice are identified, (ii) Existing brands
in the market are positioned on a continuum in respect of the factors

51
 identified in step (i); (iii)Gaps which exists in relation to consumer
psychological needs are identified.

10. Attending Trade Fairs- National and international trade fairs provide an
excellent opportunity to know about new products and developments.
11. Stimulating Creativity for Generating New Product Lines- New product
ideas may be generated by thinking along the following lines: Modification,
rearrangements, Reversal, Magnifications, Reductions, Substitutions, Adaptations
and combinations. Even though there are enormous sources of project ideas as
discussed above, the variety of projects makes it impossible to prepare an
exhaustive list of sources from where project ideas emanate; much depend on
the experience and imaginative of those entrusted with the task of initiating
development projects.

Dear colleagues, micro-level analysis can add new project idea generation through:
o the identification of unsatisfied demand or needs
o indicating the existence of unused or underutilized natural or human resources
and the perception of opportunities for their efficient use
o the need to remove shortages in essential materials, services or facilities that
constrain development efforts;
o the initiative of private or public enterprises in response to incentives provided
by the government;
o the necessity to complement or expand investments previously undertaken.
o the desire of local groups or organization to enhance their economic status and
improve their welfare.
B. At macro-Level
At a higher macro-level, project ideas could be obtained from various sources as mentioned
below.
1. Project Ideas from Government Policy and Plan: From time to time,
governments produce guidelines such as the national development plans, sessional
papers which spell out the direction of what the government is likely to do to achieve
certain targets in various sectors of the economy and guidelines to various
52
 organizations and individuals. The information contained in these documents is
useful in generating ideas for new projects. For example, if government intends to
start a number of new schools in a given area, then a number of projects which are
related to the requirements of such schools would be considered.
Most governments in the world are moving away from directly initiating and
implements new projects. The emphasis is on local participation of the people in all
development matters. Hence, project idea can be obtained from government
development plan documents such as:
 National policies, strategies and priorities as may be articulated by
government from time to time;
 National, sectoral, sub–sectoral, or regional plans and strategies
supplemented by special studies, sometimes called opportunity studies,
conducted with the explicit aim of translation of national and sectoral, sub–
sectoral and regional programs into specific projects;
 General surveys, resource potential surveys, regional studies, master plan and
statistical publications, which indicate directly or indirectly investment
opportunities.
 Government decision to correct social and regional inequalities or to satisfy
basic needs of the people through development projects.
 Government decisions to create project-implementing capacity in such areas
as construction industry, tourism industry, textile industries etc.
 A possible external threat that necessitates projects aiming at achieving, for
example, self – sufficiency in basic material, energy, transportation, etc.
 Unusual events such as droughts, floods, earth – quakes, hostilities, etc.,
 Constraints on the development process due to shortage of essential
infrastructure facilities, problems in the balance of payments, etc.

Information contained in such types of papers provide clear guidelines to individuals or

organizations who wish to start industrial projects, especially small and medium sized ones
and would like to be supported by the government and other national institutions. However,
individual and institutions that are using government policy guidelines as a source for project

53
ideas must make sure that they operate within the overall national policy framework as
contained in the relevant documents.
2. Project ideas from Technical Specialists: For many industrial projects, ideas will
usually tend to come from technical specialists who by virtue of their experience
and/or research findings will give useful information which may lead to the
manufacturing of new products or improving the existing products.

3. Project Idea from Local Leaders: For community or social projects, local leaders
will usually have important ideas, which they, together with the local people, have
identified as being important in improving the welfare of the people. In the case of
social projects, depending on which one is to identify, there may be a number of
other projects which are linked to the identified project. For example, a project for
constructing a dam for the generation of hydroelectric power will bring about
suggestions for the start of an irrigation project, a fishing project and other related
projects.

4. Project Ideas from Entrepreneurs: For commercial and industrial projects,

entrepreneurship is an important source of ideas. Entrepreneurship, according to
Srivastava (1981), includes the characteristics of perception of managerial
competence and motivation to achieve results. Although entrepreneurship skill have
been passed on from one generation to another, along family and social-economic
circles, it has been recognized that programs for entrepreneurship development will
help individuals to come up with useful ideas which can be translated into viable
projects.

Project ideas can also be obtained from other sources such as general surveys,
resource potential surveys, constraints on the development process due to shortage
of essential infrastructure facilities, problems in the balance of payments, a possible
external threat that necessitates projects aiming at achieving, for example, self–
sufficiency in basic material, energy, transportation; unusual events such as droughts,
floods, earth quakes, hostilities, multilateral or bilateral development agencies and as

54
 a result of regional or international agreements in which the country participate and
so on.
5. Project Idea from grant opportunities
Considering their limited resources NGOs/CSOs/Public sectors are often seeking
different sources of funding in order to co-finance their projects. They can therefore get
new project idea from different granting institutions/organization (e.g. EU grant
opportunities, Nuffic (the Netherlands), VILR-UOS (the Flanders Belgium),
CUD/CIUF (the Flemish, Belgium), and etc). The possible findings available from
different sources can be found on the website of the funding bodies. Most grants are
awarded following a call for proposals publication. They can be restricted (by country,
sector etc) or can be open. Please follow the following links for further understanding of
different project calls.
o http://europa.eu.int/comm/europeaid/tender/practical_guide_2006/index_en.
htm

o http://www.vliruos.be/en/project-funding/calls-for applications/calldetail/call-
iuc-north-south-south-projects 20132014_4663/
o http://www.welcomeurope.com/europe-funding-opportunities/ipa-support-
social-enterprises-business-advisory-services-2013-5823+5723.html

III. Screening potentially promising project ideas

Once a list of project ideas has been put forward, the first step is to select one or more of
them as potentially promising. This, calls for a quick preliminary screening by experienced
professionals who could also modify some of the proposals. At this stage, the screening
criteria are vague and rough, that becomes specific and refined as project planning advances.
During the preliminary screening to eliminate ideas, which prima facie are not promising, it
is required to look into the aspects such as:
 Compatibility with the promoter
 Consistency with government priorities
 Availability of inputs
 Adequacy of market
 Reasonableness of costs
 Acceptability of risk level and etc
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Therefore, during the preliminary selection, the analyst should eliminate project proposals
that:
o Are technically unsound and risky;
o Have no market for the output;
o Have inadequate supply of inputs;
o Are very costly in relation to benefits;
o Assume over – ambitious sales and profitability.

Obviously, since the criteria tend to be somewhat nebulous, much depends on the
experience and sense of objectivity of the professionals applying them. It is, however,
necessary to conduct this screening, even with indistinct criteria, in order to reduce to a
manageable number of project alternatives to which more work and time will be devoted.
Indeed, project planning can be viewed as a process of elimination, i.e. elimination of
inferior alternatives.

As a result of the preliminary screening exercise, a project profile, an opportunity study

report, or an identification study report, as appropriate, is prepared showing which project
alternatives should be rejected and which ones may be advanced to the next stage. Process
rating index is helpful to show the project alternative that shall be accepted or rejected.
 Project rating index

When a firm evaluates a large number of project ideas regularly, it may be helpful to
streamline the process of preliminary screening. For this purpose, a preliminary evaluation
may be translated in to a project rating index. The steps involved in determining the project
rating index are as follows:
 Identify factors relevant for project rating.
 Assign weights to these factors (the weights are supposed to reflect their relative
importance).
 Rate the project proposal on various factors, using a suitable rating scale. (Typically a
5-point scale or a 7-point scale is used for this purpose.)
 For each factor, multiply the factor rating with the factor weight to get the factor
score.

56
  Add all the factor scores to get the overall project rating index.
Example: construction of rating index
Factors Factor VG G A P VP Factor
weight score
5 4 3 2 1
Input availability 0.25  0.75
Technical knowhow 0.1  0.4
Reasonableness of cost  0.2
******* **** ***
****** *** ****
Total 1 xxx

VG=very good, G=good, A=average, P=poor and VP=very poor

NOTE: The pre-feasibility analysis mainly aims at whether a project should be subjected
to a detailed actual feasibility study and come up with estimates of inputs and outputs of
the project. Using this preliminary data supplied by the various discipline specialists, a
preliminary financial and economic analysis will be conducted. If the project appear viable
from this preliminary assessment, the analysis will be carried to the feasibility stage.

3.4 Stakeholder’s analysis to select target groups

The “stakeholders” in a project are all the people or organizations who either stand to be
affected by the project, or who could “make and break” the project’s success. They may be
winners or losers, included or excluded from decision making, users of results, or
participants in the process. Stakeholders analysis is the mapping of a project’s key
stakeholders, who they are, what interests they have in the project (positive or negative), and
how these interests can affect a project, “make or break” it.

Such a mapping activity will help you identify:

o Which individuals or organizations to include in your “coalition” or network
o What roles they should play, and at what stage
o With whom to build relationships, which relationships to nurture
o Whom to inform and consult about the project

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You can use a matrix that would look like this:
Importance High influence Low influence
High importance Stakeholders who can gain or Stakeholders who stand to
lose a lot from the project, gain or lose a lot from the
and whose actions can affect project but whose actions
the project’s ability to meet cannot affect the project’s
its objectives ability to meet its objectives

These actors are powerful These actors lack power –

you need to develop good but you need to make sure
relationships their interests are fully
represented
Low importance Stakeholders whose actions Stakeholders who have little
can affect the project’s ability to gain or lose from the
to meet it’s goals, but who project, and whose actions
have little to gain or lose have little influence on the
from the project project

They may be a source of risk,

unpredictable, so keep an eye Just keep them informed
on them!

3.5Analyzing/Identifying the problem-assessing the needs

The most difficult part of designing a project is to know where to begin, and what questions
to ask. To decide where to begin, it often helps to draw a “problem tree” – looking at the
problems behind the problems, establishing a “causal stream”.

For example, you are concerned about the low income of family farms in your village. A
“problem tree” would look like this:
o Low family farm income, because of
o Declining crop yields, because of
o Severe soil erosion, because of
o Farmers using improper plowing techniques, because
o Farmers are unaware of the benefits of contour plowing, because
o They have no access to agricultural extension services or information.

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So where should your project intervene? Work directly with the farmers, or try to build
capacity in the rural agricultural extension services? Both strategies could make sense, and it
depends on the profile and capacities of your NGO which approach you choose.

You would ask questions such as:

 WHY is the project being undertaken? Sample answer: low family farm
income…
 WHAT specific aspect of the overall problem justifies the project? Sample
answer: the lack of rural extension services…..
 HOW does the project fit into any local, regional or national programs? Sample
answer: it would strengthen the very weak governmental agricultural support
services, and work with them, not apart from them…..

3.6 Selecting the Project strategy

First of all, you need to determine who is going to benefit from your project, who will be its
beneficiaries. Can you be precise: how many, where are they to be found, what are their
social, economic and cultural characteristics? Then ask yourself who will be your partners,
not only at the local, but also at the national level. If you have done the stakeholders analysis,
the answers should be obvious. Create a network, integrating beneficiaries and partners, that
is, make sure they talk to each other. Decide on their roles: how will you communicate with
them? What are the lines of authority (this is especially important if you work with other
groups who share your objectives, but whom you don’t control – they have their own
funding and staff)? Who takes decisions? Do you need a steering committee to bring
everyone to the table?

Then you need to decide on a project approach. There are two types of approach, and they
each require a very specific project design. Direct support (DS) is one type of intervention, and
it means that the project works directly with the beneficiaries (e.g., children, their families, a
group such as landmine victims) through the provision of services such as education and
training, health care, or construction of shelter. Many projects, however, choose a second
type of intervention, called institutional development (ID).
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Examples are the strengthening of NGOs or government institutions so they can deliver
better services to the target group, those children, families or landmine victims. In that case,
the NGOs or the government (for example, the national mine action center) are the direct
recipients of the project, but the beneficiaries ultimately are the people who get improved
services. The advantage of those “ID” projects is that they have a multiplier effect, as
eventually more people will be reached. But if the proper institutions are not there to be
strengthened, or if they are not interested, direct support may be preferable….

3.7 Analyzing the objective: From objectives to inputs

After you have decided on a strategy, identified your beneficiaries or target groups, and
mapped out your stakeholders, you now have to draw up a concrete action plan. This
normally has four components:
i. Objectives
ii. Outputs
iii. Activities
iv. Inputs

These elements have a logical relationship. If you have the inputs (people, supplies, vehicles
and so on), you can undertake the activities (e.g., build, organize, transport) so that the
output is produced. The school has been constructed, the well has been dug. Now your
objective should have been achieved: 200 children in the community can go to school; 300
IDPs have a well closer to their shelter, and the clean water brings diseases down.

Clearly, this logic only works if there is a realistic proportion between the inputs and the
objectives. You can’t build a school with ten bricks and one teacher, and with one spade, you
can’t dig a well.

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 OUTPUTS OBJECTIVES
ACTIVITIES

INPUTS

 About objectives

An objective is a simple expression of a desired end state, and it can usually be arrived at by
turning a problem on its head. Problem: in our village, 200 children between the ages of
seven and twelve can’t read. Objective: 200 children in our village between the ages of seven
and twelve will be taught to read. Very often, in a project document you will find two types
of objectives, or aims of the project: long-term and short-term, or broad as opposed to more
specific and time-bound. Objectives are usually measurable changes that occur in behavior,
attitudes, commitment, institutional and societal practices, or legal norms.

The long-term objective is also called the development objective, for example the
elimination of illiteracy among children – your project will not do that, but it will contribute
to this broad objective. The short-term objective, or immediate objective, is where you plan
to make a measurable impact: for example, the reading skills of those 200 children in your
village. Sometimes, in some models, people talk about goals (long-term, broad) and purpose
(short-term, concrete). In the European Union’s description of the project cycle, they use the
terms “overall objectives” and “operation purpose” – but the concepts are the same, no
matter the specific terms used.

 About outputs
Outputs are the products which result from the project activities. The key word is “to
produce”. Examples of outputs might be materials, curricula, reports, draft policies, or
people trained. Not all outputs are achieved at the end of the project – some may be ready
earlier than others.

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  About activities
Activities are the actions undertaken to produce the desired outputs, that is, they are the
things that will be done, not the results themselves. The key word is “to do” – organize,
develop, design, build, commission, and so on.

A good way to set out your activities is through a work plan. Your first draft is part of your
project document, and once implementation starts, you will have to update and adjust the
work plan all the time, as things never work out exactly as planned. Best to draw a chart of
your work plan, as illustrated in this simplified model:
Activity Quarter-1 Quarter Quarter-3 Quarter-4
-2
Design school and get permit 
Prepare the ground, dig foundations 
Start the walls 
Finish walls and put up roof 
Put in windows and paint, furnish 

In reality, your work plan (also called a Gantt chart) will be lot more complicated, and it may
be based on a weekly or monthly schedule, rather than quarterly. Activities may overlap, so
you may want to use bars instead of crosses. Carefully consider which activities can be
undertaken at the same time, and which have to be done sequentially (e.g., can’t paint the
rooms until the walls are up). Estimate carefully how long each activity will take – and stay
on the conservative side in your estimates!

 About inputs and budgets

Inputs are the funds, equipment, expertise, human resources, and so on, necessary for
carrying out the activities. Inputs may come from many different sources, and they can occur
at various levels: local, national and international. The inputs shape your budget, as each
element needs to be budgeted. When you prepare a budget, make sure that your own
contributions are reflected – if they are in kind (e.g., the time you spend finding good people
for your network), put a price on them.

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It is helpful to use a computer program, such as Excel, to prepare your budget. Standard
budget lines are: personnel (list each position and the salary required), personnel support
costs (taxes, insurance, benefits), transport (for vehicles, indicate both the cost of operations
and the cost of writing off their purchase), supplies, rent (office space, storage space),
monitoring and evaluation, and indirect costs (maintaining an office staff to support the
project administratively)

 What are the Expected Outcomes of Identification?

The expected outcomes of identification are:

o Whether required, a pre-feasibility study analyzing a given situation, suggesting

different options to address this situation and suggesting the one(s) to be further
studied during appraisal to ensure these ideas are feasible.
o Project Identification Sheet based, if possible, on the pre-feasibility study, and
examining the coherence between the project/program proposed and the objectives
defined in the grant project call indicating relevant experience to be taken into
account, determining the subsequent steps[for grant proposal]
o Decision taken by the donor/grant provider and the partner country to appraise the
suggested option(s) in detail (priority list), to reject the project[for grant proposal]
o In terms of Logical Framework, the pre-feasibility study should establish a rough
project description covering basically the Intervention Logic and the Assumptions.
This means that it should go through the Analysis Stage and parts of the Planning
Stage of the LFA, establishing Stakeholder Analysis, Problem Analysis, Analysis of
Objectives, Strategy Analysis. In most cases, it will be sufficient to roughly elaborate
the Intervention Logic and the Assumptions for the preferred option, as well as give
indications for possible Indicators, especially at the level of the Project Purpose and
the Results. So the outcome would look as follows:

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 The Logframe: What should be outlined at the End of Identification?

Intervention logic Objectively Verifiable Source of Assumptions

indicators verification
Overall Objectives
Project Purpose
Results
Activities Means costs preconditions

In addition, the pre-feasibility study should provide a first draft for an implementation
Schedule. Such a schedule should outline the timing for the major elements of further
preparation and implementation.
 What are the quality criteria for assessment of project ideas?

When assessing the quality of project ideas at the end of the Identification phase (i.e. the
pre-feasibility study report), it should mainly be ensured that these ideas are likely to be
relevant and that they are as well likely to be feasible (most steps of the sustainability check
will take place during Appraisal). The following questions and assessment criteria should
provide guidance for this check:
Quality Criteria for Assessment of Project Ideas
Question Quality assessment criterion
1. Relevance
1.1 Are the project objectives in line Outline project objectives are compatible with the overarching
with the overarching policy policy objectives; they fully respect them in the approach and seek
objectives of strengthening good to contribute to their achievement. The proposal indicates which
governance, human rights and the of them are most relevant and how they are linked to the project
rule of law, and poverty objectives.
alleviation?
1.2 Are the major stake-holders of the The stakeholders likely to be most important for the project have
project clearly identified and de- been consulted; and target groups and other beneficiaries have
scribed? been identified. They have expressed their interest and
expectations, the role they are willing to play, the resources and
capacities they may provide, also in a gender-differentiated way.
The other stakeholders have expressed general support for the
likely objectives of the project. Conclusions are drawn on how the
project could deal with the groups (alternatives are shown).
1.3 Are the beneficiaries (tar-get Their socio-economic roles and positions, geographical location,
groups and final beneficiaries) organizational set-up, resource endowment, etc. are described in
clearly identified? detail. Educational/skills level, management capacities and their
specific potentials are also described in detail, especially for the
target groups, providing a gender breakdown, where appropriate.
The analysis addresses options how the project could take
advantage of and support skills, potentials, etc. of the target
groups.
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1.5 Are the problems of target groups They are described in detail, including information on the specific
and final beneficiaries sufficiently problems faced by the target groups (including sub-groups) and
de-scribed? the final beneficiaries. Problem descriptions of possible project
partners show their specific problems and relate them to the
problems of the target groups.
1.6 Is the problem analysis The causes of the problems of target groups / final beneficiaries
sufficiently comprehensive? have been researched, and the problem analysis gives a clear
indication of how these problems are related (cause – effect).
1.7 Do the outlined Overall The proposals outlines
Objectives explain why the
project is important for sectoral • which longer term benefit the final beneficiaries find in the
development and society? project,

• how the project fits within the sectoral policies of the

Government and the sectoral objectives stated in the Indicative
Program, Country Strategy Paper, etc., and

• how the project fits within the overarching policy objectives of

the donor/grant provider.

1.8 Does the Project Purpose express The Project Purpose describes a direct benefit to be derived from
a direct benefit for the target the project by the target groups at the end of the project as a
groups? consequence of achieving the Results.
1.9 Does the EcoFin (Finan-cial and The EcoFin Analysis provides data on the possible incremental
Economic) Analysis provide net benefit of the beneficiaries as well as on the contribution to
adequate in-formation on the the achievement of national and donors policy priorities, if
questions raised above? possible for various project alternatives.

2. Feasibility
2.1 Will the Project Purpose Previous experience (in other projects or regions) has shown a
contribute to the Overall strong causal relationship between the Project Purpose and
Objectives (if the Assumptions Overall Objectives.
hold true)?
2.2 Are Results products of the All Results are a consequence of undertaking the related
implementation of Activities? Activities.

2.3 Will the Project Purpose be There is evidence that there is a direct and logical link between
achieved if the Results are the Results and the Purpose in terms of means-ends relationship,
attained? i.e. the achievement of the Results will remove the main
problems underlying the Project Purpose.
2.4 Can the Results and Purpose Indicators for Results and Purpose are ‘specific’ and are at least
realistically be achieved with the partly described with measurable quantities, time frame, target
Means suggested (first estimate)? group, location and quality. There is also evidence that Indicators
of the Results and Purpose are realistic given the time frame set
for the project.
2.5 Have important external factors Given the experience in the country and sector, and based on the
been identified? analysis of objectives, major external factors have been identified
at the relevant levels in the logframe.
2.6 Is the probability of realization of For each Assumption, some evidence is provided that the
the Assumptions acceptable? probability of realization is acceptable.

65
2.7 Will the suggested project The potential partners have actively participated in the
partners and implementingidentification phase and have relevant implementing experience.
agencies be able to implement theIf they do not have this experience outline capacity building
project? measures are already suggested to enhance implementation
capacity.
2.8 Does the EcoFin Analysis provide Efficiency is assessed roughly according to the EcoFin guidelines.
adequate information on the Relevant alternatives were analyzed. The impact of main risks
questions raised above? was assessed.

Note: Only if each criterion is met fully or at least fairly, it is recommendable to continue
with the appraisal of the project. Otherwise,
 Satisfactory clarification of the issue under consideration should be sought, i.e.
complementary information should be gathered from concerned parties, or
 Additional studies may be launched, etc. before deciding to continue with the
appraisal of the project by drafting TOR for the feasibility study – or
 The project idea should be completely rejected.

3.8 Chapter summary

The primary step in any project analysis and planning is project identification. Project
identification is the first step towards establishing a successful venture, and this stage
comprises three elements including; pre-identification phase, identification itself, and
screening promising project ideas.

Project identification consists of finding project ideas that could contribute towards
achieving specified development objectives. But, where do projects come from? There is no
simple answer. Some may be “resource based” stem from the opportunity to make optimum
use of available resources, the other may be from an identified demand in home or overseas
markets ‘’market based’ or “need based”, still the other emanates from country strategic
directions and overseas grant opportunities(project calls).

Once some project ideas have been put forward, the first step is to select one or more of
them as potentially promising. This calls for a quick preliminary screening. Preliminary
screening is conducted to reduce a number of proposals/projects to a manageable number.

66
As a result some of the project alternatives will be rejected and those that are promising will
be advanced to the next stage. During the Identification phase, and within the framework
established by the Country Strategy Paper, the stress is on analysis of relevance of project
ideas, which includes an analysis of the stakeholders and of the likely target groups and
beneficiaries and of the situation, including an analysis of the problems they face, and the
identification of options strategy to address these problems.

Finally the quality of project ideas shall be assessed at the end of the Identification phase (i.e.
the pre-feasibility study report). It mainly helps to ensure that the ideas are likely to be
relevant and that they are as well likely to be feasible.

Review Questions:
o Discuss suggestions helpful in scouting for project ideas.
o What key issues would you examine in preliminary screening?
o Discuss how project rating index may be developed?
o Discuss how to make stakeholder’s analysis and why?

Individual Project
Identify the problems that your organization is facing that you feel can be tackled by a
project and undertake,
 Preliminary screening and make selection of one project idea. Justify ?
 Does your idea satisfies the criteria for quality project idea/s
 Who are the stakeholder of your project? Why?
Note: The assignment should be computer typed, Times New roman, 1.5 line space and 12
font, minimum page 5 maximum page 7

References
 Chandra, Prasanna Projects Planning, Analysis, Financing

 UNIDO, Manual for Preparation of Industrial Feasibility Studies, UN.1991

 Harlod Kerzner, Project Management

 Rory Burke, Project Management

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CHAPTER FOUR
4. PROJECT FEASIBILITY STUDY/ PREPARATION

4.1 Introduction

Beneficiaries and other stakeholders participate in the detailed specification of the project
idea that is then assessed for its feasibility (whether it is likely to succeed) and sustainability
(whether it is likely to generate long-term benefits). Again, checks need to ensure that cross-
cutting issues and overarching policy objectives are adequately considered in the project
design and objectives. A detailed Logical Framework with Indicators, and Implementation,
Activity and Resource Schedules, should be produced.

On the basis of these assessments, a decision is made on whether or not to draw up a formal
financing proposal and seek funding for the project. The term “ex ante” evaluation is now
frequently used for “Appraisal” or “Feasibility Study”. While Appraisal refers to studies
during the preparatory phases of the project cycle (pre-feasibility or feasibility studies),
“evaluation” as such concerns the assessment of an ongoing or completed project, program
or policy, its design, implementation and results (see chapter 6): “Ex ante evaluation is a
process that supports the preparation of proposals for new or renewed Community actions.
Its purpose is to gather information and carry out analyses that help to define objectives, to
ensure that these objectives can be met, that the instruments used are cost-effective and that
reliable later evaluation will be possible.

4.2 Chapter Objectives

This chapter deals with project feasibility study. Thus, after studying this chapter, make sure
that you are able to:

 understand the concept of project feasibility study, major tasks involved, expected
outcome and quality check in the same, and
 apply the procedures of project feasibility study in designing development projects

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4.3 Project preparation

Project preparation is a very critical activity that determines the success or failure of a
project. When a project analysis fails to anticipate the outcome of a project investment, a
common reason appears to have been simply poor preparation of the analysis. Sound project
requires very realistic imagination, creativity and sensitivity to environmental changes, and a
realistic assessment of what the organization can do. Project preparation and analysis should
be based on relevant information gathered from different perspectives that would directly or
indirectly influence the project and its outcome.

If the project is largely a private venture in a widely market economy context, the initiating
entity will define the concept, expectation and objectives of the project. On the other hand
the project idea can also emanate from government agencies in the context of government
development plans. In the latter case sectoral orientations (i.e. the prioritization of different
sectors as per the needs of the society) matters a lot for acceptance of the project and should
be given a great weight in formulation of the project.

At this point it is worth mentioning that feasibility studies are not always free from vested
interests. That is, it is common to lack objective and neutral expertise (from project
promoter and/or consultants). This in turn will result in unsuccessful projects and rather
wasting of resources. Therefore, one should have a sharp eye on the crucial aspects of a
feasibility study. Moreover, it is not only necessary to have a professional interdisciplinary
team work, but it is also indispensable to link all planning activities even at the identification
and pre – feasibility stage as early as possible with all parties, which may be involved in the
project.

 What are the Expected Outcomes of feasibility study/appraisal?

The expected outcomes of Appraisal are:

o A feasibility study establishing whether the proposed project identified in the pre-
feasibility study is relevant, feasible and likely to be sustainable, and detailing the
technical, economic and financial, institutional and management, environmental and
socio-cultural and operational aspects of the project. The purpose of the feasibility

69
 study will be to provide the decision-makers in the Government and the European
Commission with sufficient information to justify acceptance, modification or
rejection of the proposed project for further financing and implementation.
o A decision taken by the donor/grant provider and the partner country or
organization

 to prepare a financing proposal based on the study

 to reject the project

 to further study certain aspects, if not yet clarified in a satisfactory

manner
In terms of Logical Framework, the feasibility study should establish a detailed project
description covering all aspects of the logframe. In addition, an outline of an Activity
Schedule and a Resource Schedule should as well be prepared for the project. Also, the
preparation of a first draft financing proposal forms part of the appraisal.

Figure 1: The Logframe: What should be defined at the End of Feasibility study/Appraisal?

Intervention logic Objectively Verifiable Source of Assumptions

indicators verification
Overall Objectives
Project Purpose
Results
Activities Means costs
preconditions

Outline of Activity and Resource schedule

 Major Tasks
For an individual project Appraisal will usually involve tasks comparable to those of the
Identification phase. The drafting of the TOR for the feasibility study (Standard TOR are
available for most of Donors/grant providers). These usually include;
• The decision made concerning which option to study in-depth,
• The pre-feasibility study report, taking into account the suggestions made there,
• Lessons learnt through evaluation of similar projects.

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Equally, the project design has to be assessed and improved, and a decision to be taken as to
whether or not to proceed with the preparation of a financing proposal. A typical feasibility
study mission will last for several weeks. The key focus for the mission will be:
i. To verify the relevance of the proposed project in addressing the existing problems,
suggested in or in addition to the options studied in the pre-feasibility study. This
means to check the validity of the logframe outline as it was developed during the
identification phase, and running in detail through the steps of the Planning Phase.
ii. To ensure that the project objectives are in line with the objectives in the indicative
program, the overarching policy objectives of the donor and linked to the (sub)
sector or applying institution’s objectives.
iii. To assess in detail the feasibility of the proposed project and to prepare / finalize a
logical framework planning matrix.
iv. To assess in detail the potential sustainability of the project results after project
completion based on consideration of the quality factors.
v. To prepare an Implementation Schedule, an outline for Activity and Resource
Schedules and the institutional structure for implementation stipulating the re-
possibilities of various bodies, project timing/phasing, estimated cost per budget
item.
vi. To draft design specifications, if required.
vii. To prepare a draft Financing Proposal.
viii. To provide recommendations for the next steps and any further actions necessary to
secure project financing and implementation and, possibly, the tender documents for
the selection of consultancy services.
Finally, a planning workshop held towards the end of the mission (and focusing on final
agreement on Overall Objectives, Results, Activities, and Indicators, the outline of Activity
and Resource Schedules and implementation arrangements) is strongly recommended. This
will help improving ownership by the target groups / beneficiaries.

 Project Appraisal Criteria

When assessing the quality of project design at the end of the appraisal phase, it should be
ensured that the project is relevant, feasible and likely to be sustainable. The following
questions and assessment criteria should provide guidance for this check:

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 Table 1: Quality Criteria for Assessment of a Detailed Project Design (or Draft
Financing Proposal)
Question Quality assessment criterion
1. Relevance
1.1 Are the project objectives in The project objectives are compatible with these
line with the overarching policy objectives they fully respect them in the approach
objectives of strengthening and seek to contribute to their achievement. The
good governance, human proposal states clearly which of them are most
rights and the rule of law, and relevant and how they are linked to the project
poverty alleviation? objectives.
1.2 Are the major stakeholders of The most important stakeholders for the project
the project clearly identified identified during identification have been confirmed
and described? and consulted; and the target groups and other
beneficiaries are clearly identified, have confirmed
their interest and expectations, the role they are
willing to play, the resources and capacities they will
provide, also in a gender differentiated way. The
other stakeholders have confirmed their general
support for the objectives of the project. Clear
conclusions are drawn on how the project intends
to deal with the groups.
1.3 Are the beneficiaries (target Their socio-economic roles and positions,
groups and final beneficiaries) geographical location, organizational set-up,
clearly identified? resource endowment, etc. are described in detail.
Educational/skills level, management capacities and
their specific potentials are also described in detail,
especially for the target groups, providing a gender
breakdown where appropriate. The analysis shows
clearly how the project will take advantage of and
support skills, potentials, etc. of the target groups.
No major changes occur compared to the pre-
feasibility study.
1.5 Are the problems of target They are described in detail, including information
groups and final beneficiaries on the specific problems faced by the target groups
sufficiently described? (including sub-groups) and the final beneficiaries.
Problem description of project partners shows their
specific problems and relates them clearly to the
problems of the target groups.
1.6 Is the problem analysis The causes of the problems of target groups / final
sufficiently comprehensive? beneficiaries have been researched, and the problem
analysis gives a clear indication of how these
problems are related (cause – effect).
1.7 Do Overall Objectives explain The proposals clearly indicates
why the project is important • which longer term benefit the final beneficiaries
for sectoral development and find in the project,
society? • how the project fits within the sectoral policies of
the Government and the sectoral objectives stated

72
 in the Indicative Program, Country Strategy Paper,
etc., and
• how the project fits within the overarching policy
objectives of the grant
provider[organization/country]

1.8 Does the Project Purpose The Project Purpose describes a direct benefit to be
express a direct benefit for the derived from the project by the target groups at the
target groups? end of the project as a consequence of achieving the
Results.
1.9 Does the EcoFin (Financial The EcoFin Analysis has been performed according
and Economic) Analysis pro- to the EcoFin guide-lines and provides extensive
vide sufficient information on data on the incremental net benefit of the
the questions raised above? beneficiaries as well as on the contribution to the
achievement of national and donor/s policy
priorities
2. Feasibility
2.1 Will the Project Purpose con- Previous experience (in other projects or regions)
tribute to the Overall has shown a strong causal relationship between the
Objectives (if the Assumptions Project Purpose and Overall Objectives.
hold true)?
2.2 Are Results products of the All Results are a consequence of undertaking the
implementation of Activities? related Activities.
2.3 Will the Project Purpose be There is clear evidence that there is a direct and
achieved if all Results are logical link between the Results and the Purpose in
attained? terms of means-ends relationship, i.e. the
achievement of the Results will remove the main
problems underlying the Project Purpose.
2.4 Are the Means sufficiently Indicators for Results and Purpose are ‘specific’ and
justified by quantified are described with measurable quantities, time
objectives? frame, target group, location and quality, if possible.
There is also confirmation of evidence that
Indicators of the Results and Purpose are realistic
given the time frame set for the project.
2.5 Have important external External factors and accompanying measures have
factors been identified? been comprehensively identified at the relevant
levels in the logframe.
2.6 Is the probability of realization For each Assumption, supporting evidence is
of the Assumptions provided that the probability of realization is
acceptable? acceptable.
2.7 Will the project partners and Responsibilities and procedures have been clearly
implementing agencies be able established, the partners have actively participated in
to implement the project? the appraisal phase, and there is clear evidence that
they have relevant implementing experience and
most of the capacity to cope with the tasks of the
project. If not: sufficient capacity building measures
are foreseen to enhance implementation capacity.

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2.8 Does the EcoFin Analysis Efficiency analysis was carried out according to the
provide sufficient information EcoFin guidelines. Relevant alternatives were
on the questions raised above? analyzed in detail. Appropriate sensitivity tests were
carried out.

3. Sustainability
3.1 Will there be adequate Target groups and beneficiaries took the initiative to
ownership of the project by the promote the initial idea, they have been active
target groups / beneficiaries? participants in all phases of the planning process,
and major decisions have been validated by them or
their representatives. They agreed and committed
themselves to achieve the objectives of the project.
3.2 Will the relevant authorities Relevant authorities have demonstrated support to
have a supportive policy during projects of this type through the adaptation of rules,
implementation and after regulations and policies, and the commitment of
project completion? significant resources.
3.3 Is the technology approach Various alternatives have been examined, and in the
appropriate for the local selection the different needs of the target groups
conditions? and beneficiaries (men and women), local conditions
and capacities (technical, financial, etc.) have been
taken into account.
3.4 Will the ecological The appropriate level of Environment Assessment
environment be preserved has been carried out (Environmental Integration
during and after the project? Form), and all necessary recommendations are
integrated in project design. This means that an
environment management plan which specifies the
environmental (mitigating) measures to be
undertaken should be in place, as well as a plan for
monitoring the environmental situation of the
project and for taking further environmental action
should the mitigating measures prove insufficient.
3.5 Will all beneficiaries have Socio-cultural norms and attitudes have been
adequate access to benefits and analyzed for all major sub-groups of beneficiaries,
products during and after the and details are provided how these norms and
project? attitudes will be taken into account in the project to
ensure a more equitable distribution of access and
benefits.
3.6 Will the project contribute to Sufficient measures are built into the project to
gender equality? ensure that it will meet the needs and interests of
both women and men and will lead to sustained and
equitable access by women and men to the services
and infrastructures.
3.7 Will the implementing agencies The implementing agencies have demonstrated a
be able to provide follow-up strong interest in continuing to deliver Results post-
after the project? project, adequate institution-building measures have
been built into the project to enable them to do so,

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 and evidence exists that the required resources
(human and financial) will be available.

3.8 Does the EcoFin Analysis The EcoFin Analysis was carried out according to
provide sufficient information the EcoFin Guidelines. The Financial Analysis of
on the questions raised above? the main stakeholders shows in detail that the
project is sustainable both during and after the
project. The Economic Analysis provides clear
evidence that the project is sustainable
internationally.

4.4 Environment Impact Assessment (EIA)

Environmental impact assessment is a field of growing importance in project analysis.

Failure to incorporate environmental issues in project analysis gives rise to negative
consequences like poor health conditions, social disruption, low productivity and ultimately
the undermining of the development. Recently, the trend is being changed and policy makers
are working towards making development sustainable.

 Environmental Sustainability of the Project

The World Commission on Environment and Development defines sustainable
development as ‘’development that meets the needs of the present without compromising
the ability of future generations to meet their own needs”. This definition strikes a balance
between the preservation of existing environmental assets and the practicabilities of
development aimed at the immediate alleviation of poverty.

Some commentators believe that we are obliged to ensure that future generations are better
or as well off as ourselves rather than preserving natural capital. In this argument, human-
made capital such as infrastructure and building is seen as sustainable for natural capital like,
forests and lakes.

For instance, Ethiopia, adopted its Environmental Policy and Conservation in 1997. During
this period, Environmental Protection Authority was given the legal authority to enforce
compliance with environmental laws and standards. Environmental issues are also given
prominence in Ethiopian Sustainable Development and Poverty Reduction Program.

75
When assessing the environmental sustainability of a project, it is necessary to consider these
legal laws’ implications and the weigh the level of potential damage against the potential
project benefits. Conservation does not imply that all resources must remain intact/
integral/ rather it seeks to protect those which are of most value. As a result, it is necessary
to divide natural resources into three categories:

i. Which are of crucial national and international importance and/ or critical ecological
roles,
ii. That are not unique or scarce bur where changes in land use need careful planning
and
iii. Which are in abundance can be substituted by human-made capital.

 Identification of major Environmental Impacts and Assessment of Relative

Importance
Environmental Screening- it is the first stage in the identification and assessment of
environmental impacts. The purpose of this screening process is to assess the type and
complexity of appraisal techniques which are likely to be necessary. The process aims to
assess the project against simple criteria to determine whether more detailed analysis is
required. The criteria used in environmental screening include:
i. Size – larger projects are more likely to require further detailed assessment,
ii. Location– projects which are being implemented in environmentally sensitive
areas are reliable to need further assessment,
iii. Complexity- a project with a number of disparate components is liable to have a
wide range of environmental impacts which need careful consideration and
iv. Type of Project- projects such as mines and dams are liable to cause a great deal
more damage than social projects.
Preliminary Assessment- this involves conducting a process of research and utilizing
expert advice in order to achieve the following three objectives:
a. to identify the key impacts of the project on the environment,
b. to predict and describe the impacts identified above, and
c. to assess the potential importance of these impacts to decision makers.

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  Environmental Management Plan[ EMP]
The environmental management plan set out various mitigation measures and related
monitoring and institutional arrangements to be carried out to reduce the environmental
impacts of a project. An environmental management plan is not required for all projects but
if serious potential impacts were identified during Environmental Identification Assessment,
then the preparation of an EMP is mandatory. The projects’ EMP should consist of the
following components:
A. Mitigation: (1) summarizes each potential negative impact, (2) Provide a detailed
description of mitigation strategies used to avoid, reduce or compensate for each impact,
(3)Encompasses further assessment of the potential environmental impacts of mitigation
strategies, and (4) Likes together the mitigation strategies for each impact to produce a
cohesive whole.

B. Monitoring: the EMP sets out arrangements for monitoring of potential impacts and
mitigation measures throughout the implantation and operational phases of the project cycle.
Continues monitoring will enable mitigation strategies to be adopted to ensure the minimum
possible environmental impact. Monitoring is essential to identify potential impacts which
may have been overlooked or underestimated during the projects’ design and appraisal
stages. Therefore, the EMP
 Provides detailed technical information as to the types monitoring to
be utilized,
 Identifies the relevant monitoring objectives and links these with a
potential environmental impacts identified during EIA,
 Provides details as to who will be responsible for monitoring
environmental impacts,
 Specifies their reporting and feedback procedures outlining who will be
responsible for processing and monitoring information and taking
appropriate actions where necessary.
C. Institutional Arrangements: this relates to the establishment of environmental units
with the specific task of implementing the EMP. Staff may have to be trained to ensure that
the project has the institutional capacity to implement the EMP. This arrangement might
also include such details as procurement arrangements, organizational structure, etc.
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D. Implementation Schedule and Costs: The EMP provides:
a. A project implementation schedule for all aspects of mitigation, monitoring
and institutional arrangements.
a. A detailed breakdown of the costs related to the implementation of
mitigation, monitoring and institutional arrangements. This cost should be
integrated into total project costs.
The EMP should be integrated into the overall implementation plan, budget and project
analysis. It should not be seen as a separate external component but rather as an integral part
of the project as a whole.

4.5 Social Cost Benefit Analysis (SCBA)

Social Cost Benefit Analysis (SCBA), also called economic analysis is a methodology
developed for evaluating investment projects from the view point of the society (or
economy) as a whole. Being primarily used for evaluating public investments (though it can
be applied to both private and public investments), SCBA has received a lot of emphasis in
the decades of 1960s and 1970s in view of the growing importance of public investments in
many countries, particularly in developing countries, where governments are playing a
significant role in the economic development. SCBA is also relevant to a certain extent to
private investments as these have now to be approved by various governmental and quasi-
governmental agencies which bring to bear larger national consideration in their decisions.

In the context of planned economies, SCBA aids in evaluating individual projects within the
planning framework, which spells out national economic objectives and broad allocation of
resources to various sectors. In other words, SCBA is concerned with tactical decisions
making within the framework of broad strategic choices defined by planning at the macro-
level. The perspectives and parameters provided by the macro level plans serve as the basis
for SCBA which is a tool for analyzing and appraising individual projects.

4.5.1 Rationale for Social Cost Benefit Analysis (SCBA)

SCBA or Economic analysis of projects is similar in form to financial analysis in that both
assess the profit of an investment. However, the concept of financial profit is not the same
as the social profit of economic analysis. The financial analysis of a project identifies the

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money profit accruing to the project operating entity or owners, whereas social profit
measures the effect of a project on the fundamental objectives of the whole economy. These
different concepts of project are reflected in the different items considered to be costs and
benefits and in their valuation. For instance, a money payment made by the project operating
entity for instance wages is by definition a financial cost. But, it will be an economic cost
only to the extent that the use of labor in this project implies some sacrifice elsewhere in the
economy with respect to output and other objectives of the country. Conversely, if the
project has an economic cost that does not involve money outflows from the project entity
it will not be considered as financial cost.

Similar comments apply to economic and financial benefits. It is important, therefore, to

remember that some costs and benefits that may appear in the financial accounts may not
appear in the economic accounts and vice versa. Similarly, some costs and benefits may be
lower (higher) in financial but higher (lower) in economic analysis even though that the cost
or the benefit appear in both economic and financial accounts. The extent to which
economic costs and benefits diverge from their counterpart financial costs and benefits rests
on the presence and extent of factors such as market imperfections, government
interventions of various forms and the fundamental policy objectives

4.5.2. Approaches to social-cost benefit analysis: UNIDO Vs Little-

Mirrlees approach

A project will be profitable to society if the economic/ social/ benefits of the project exceed
the economic/ social/ costs; or to put in another way, if the net present value of the project
to society is greater than zero. The question is how should a projects economic/ social/
benefits and costs be measured, and what common unit of account should the benefits and
cots be expressed in given a societies objectives and the fact that it has trading opportunities
with the rest of the world so that it can sell and buy outputs and inputs abroad (so that
domestic and foreign goods will be made comparable).

There is also conceptual difference between social costs - benefits and economic cost -
benefit analysis. The results of social cost-benefit analysis may diverge from the results of
economic cost-benefit analysis. Economic costs and benefits when they are adjusted to

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consider other objectives of society as distributional consequences and other objectives, they
become social costs and benefits of a project.
This depends on the method used in the analysis. If the market prices are adjusted only for
market distortions of various kinds; direct transfer payments and externalities, it is simply
economic cost-benefit analysis. If on the other hand, this adjustment process systematically
considers other objectives as distributional aspects it will become social cost-benefit analysis.
Hence, economic costs benefit analysis limits itself only to the analysis of effects of a project
on real national income of the country. Some analysts simply adjust financial cost and
benefits into efficiency prices and leave other social aspects for subjective judgments.

Some others recommend evaluating proposed projects first by using essentially the same
efficiency prices then by further adjusting these prices to weight them for income
distribution effects and for potential effects on further investment of the benefits generated.
Still some others, Little and Mirrlees (1974) and UNIDO Guidelines for project evaluation
(1972a), propose evaluating the project first by establishing its economic accounts in
efficiency prices then by adjusting these accounts to weight them for income distribution
and saving effects.

Making allowance for the effect of a project on income distribution and saving, however,
involves somewhat more complex adjustments than those necessary to estimate ‘efficiency’
prices and it also unavoidably incorporates some element of subjective judgment. In any
case, broadly there are two popular approaches of measuring social cost and benefit of a
project (SCBA): UNIDO approach and Little-Mirrlees approach.

⇒ UNIDO Approach
The UNIDO approach provides a comprehensive framework for SCBA in developing
countries. The rigor and length of this work created a demand for a concise and operational
guideline for project evaluation in practice. The UNIDO method of project appraisal
involves five stages, each of which measures the desirability of the project from different
angles.
 Calculation of the financial profitability of the project measured at market
prices.

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  Obtaining the net benefit of the project measured in terms of economic
(efficiency) price
 Adjustment for the impact of the project on saving and investment
 Adjustment for the impact of the project on income distribution
 Adjustment for the impact of the project on merit goods and demerit goods
whose social values differ from their economic values

 Net Benefits in terms of Economic (Efficiency) Prices

Stage two of the UNIDO approach is concerned with the determination of the net benefit
of the project in terms of Economic Efficiency Prices, also referred to as Shadow Prices.
Shadow prices are defined as the value of the contribution to the country’s basic socio
economic objectives made by any marginal change in the availability of commodities or
factors of production.

 Shadow Pricing: Basic Issues

i. Choice of Numeraire
One of the important aspects of shadow pricing is the determination of the numeraire, the
unit of account in which the values of inputs or outputs are expressed. To define the
numeraire, the following questions have to be answered:
a) What unit of currency (domestic or foreign) should be used to express benefits
and costs?
b) Should costs and benefits be measured in current values or constant values?
c) With reference to which point (present or future) should costs and benefits be
evaluated?
d) What use (consumption or investment) will be made of the income of the
project?
e) With reference to which group should the income of the project be measured?

The specification of the UNIDO numeraire in terms of the above questions is “net present
consumption in the private sector in terms of constant price in domestic accounting birr.”

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 ii. Concept of Tradability
A key issue in shadow pricing is whether a good is tradable or not. For a tradable good, the
international price is a measure of its opportunity cost to the country because it is possible to
substitute import for domestic production and vice-versa. Hence, the International Price,
also referred to as the Border Price, represents the “real” value of the goods in terms of
economic efficiency.
iii. Sources of Shadow Price

The UNIDO approach suggests three sources of shadow pricing, depending on the impact
of the project on national economy. A project may:
1. Increase or decrease the total consumption in the economy,
2. Increase or decrease production, and
3. Increase or decrease imports and exports

If the impact of the project is on consumption in the economy, the basis of shadow pricing
is consumer willingness to pay. If the impact is on production in the economy, the basis is
the cost of production. If the impact is on import and export, the basis is the foreign
exchange value.
iv. Taxes

When shadow prices are being calculated, taxes usually pose difficulties. The general
guidelines in the UNIDO approach with respect to taxes are as follows:
a) For fully traded goods, taxes should be ignored
b) When the project adds to non-traded consumer goods, taxes should be included.

v. Consumer Willingness to Pay

If the impact of the project is on consumption in the economy, the basis of shadow pricing
is consumer willingness to pay. How is this measured?

Prince
D S/

E
P

S
D/
82
0 Q Quantity
In the graph, DD’ represents the demand schedule, SS’ represents the supply schedule and E
represents equilibrium. The consumer who buys the first unit is willing to pay OD and the
consumer who buys the last unit is willing to pay OP for that unit.
The consumer willingness to pay for various units is indicated by the schedule DE. So the
total willingness to pay by consumers who buy the product is measured by the area ODEQ.
The price paid by them, however, is only OPEQ. The difference between ODEQ and
QPEQ, namely DEP, is referred to as the consumer surplus.

 Shadow Pricing of Specific Resources

o Tradable inputs and outputs
A good is fully traded when an increase in its consumption results in a corresponding
increase in import or decrease in export or when an increase in its production results in a
corresponding increase in export or decrease in import. For fully traded goods, the shadow
price is the Border Price, translated in Domestic Currency at the market exchange rate.

o None -Tradable Inputs and Outputs

A good is none-tradable when the following conditions are met:
i. Its import price (CIF) is greater than its domestic cost of production, and
ii. Its export price (FOB) is less than its domestic cost of production.

On the output side, if the impact of the project is to increase the consumption, the measure
of value is the marginal consumers’ willingness to pay. If the impact of the project is to
substitute other production of the same none-tradable in the economy, the measure of value
is the saving in cost of production.

On the input side if the impact of the project is to reduce the availability of the inputs to
other users, their willingness to pay for that input represents social value. If the project input
requirement is met by additional production of it, the production cost of it is the measure of
social value.
o Externalities
An externality, also referred to as an external effect, is a special class of good which has the
following characteristics:

83
 a) It is not deliberately created by the project sponsor but is an incidental outcome of
legitimate economic activity.
b) It is beyond the control of the persons who are affected by it.
c) It is not traded in the market place.
An external effect may be beneficial or harmful. Since SCBA seeks to consider all costs and
benefits, external effects need to be taken into account. The valuation of external effect is
rather difficult because they are often intangible in nature and there is no market price which
can be used as a starting point. Their value is estimated by indirect means:

For example,
a) The cost of noise may be inferred from the differences in rent in noise-affected area
and non-affected area,
b) The cost of pollution may be estimated in terms of the loss of earnings a result of
damage to health,
c) The value of better transport provided by the approach roads may be estimated in
terms of increased activities and benefits derived from them.

o Labour Inputs
When a project hires labour, it can have three possible impacts on the rest of the economy:
(1) It may take labour away from other employments,
(2) It may induce the production of new workers, and
(3) it may involve import of workers.

When a project takes labour away from other employments, the shadow price of labour is
equal to what other users of labour are willing to pay for this labour.

The social cost associated with inducing additional production of workers consists of:
(1) the marginal product of the worker in the previous employment,
(2) the value assigned by the worker on the leisure that he may have to forego,
(3) the additional consumption of good when a worker is fully employed as opposed
when he is idle or partly employed,
(4) the cost of training to improve skills, and

84
 (5) the cost of transport and rehabilitation when a worker is moved from one
location to another.
The social cost associated with import of foreign workers is the wage they command. In this
case, a premium should be added on account of foreign exchange remitted abroad.

o Capital Goods
The shadow pricing capital investment involves the value of physical assets and the
opportunity cost of capital. The shadow price of physical assets is equal to its border price if
it is a fully-traded good. If it is a none-traded good, its price is measured in terms of cost of
production or consumer willingness to pay.
The opportunity cost of capital is measured by the consumption rate of interest which
reflects the price the saver must be paid to, sacrifice present consumption.
o Foreign Exchange
The UNIDO method uses domestic currency as the numeraire. So the foreign exchange
input must be identified and adjusted by an appropriate premium. This means that the
valuation of inputs and outputs that were measured in border price has to be adjusted to
reflect the shadow price of foreign exchange. The foreign exchange requirement of a project
is met from the sacrifice of others. The use of foreign exchange may also induce the
production of foreign exchange through additional exports. In such a case, the shadow price
of foreign exchange would be based on the cost of producing foreign exchange. However,
consumer willingness to pay for foreign exchange is generally used as the basis for
calculating the shadow price of foreign exchange.

o Measurement of the Impact on Income Re-distribution

Stages three and four of the UNIDO approach are concerned with the measuring the value
of a project in terms of its contribution to savings and income redistribution. For income
distribution analysis, the society may be divided in to various groups. To facilitate such
assessments, we must first measure the income gained or lost by different groups within the
society, such as the project itself, other private business, government, workers, consumers,
and external sector.

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 o Measure of Gain or Loss
The gain or loss to an individual group within the society as a result of the project is equal to
the difference between the shadow price and the market price of each input or output. For
example, a project requires 100 labourers. These labourers are prepared to offer themselves
for work at a daily wage rate of Birr 4. The wage rate paid to the labourers is Birr 7 per day.
So, the redistribution benefit enjoyed by the group of 100 labourers is 300 (100 x 3) per day.

o Savings Impact and Its Value

Most of the developing countries face scarcity of capital. Hence, the governments of these
countries are concerned about the impact of a project on savings and its value. Stage three
of the UNIDO method, concerned with this, seeks to answer the following questions:
1. Given the income distribution impact of the project, what would be its effects on
savings?
2. What is the value of such savings to the society?

The savings impact of the project = Yi MPSi

Where: Yi = Change in income of group ‘i’ as result of the project
MPSi = Marginal propensity to save of group ‘i’.
For example, as a result of a project, the income gained by group ‘i’ is 20,000.
The marginal propensity to save of this group is 10%.
The impact on savings of the project is 2,000.

o Value of Savings
The value of a Birr of savings is the present value of the additional consumption stream
produced when that Birr is invested. The additional stream of consumption generated by a
Birr of investment depends on the marginal productivity of capital and the rate of
reinvestment from additional income.
o Income Distribution Impact
Many governments regard redistribution of income in favor of economically weaker sections
or economically backward regions as a socially desirable objective.

86
Due to practical difficulties in pursuing the objectives or redistribution entirely through the
tax, subsidy, etc, investment projects are also considered as investments for income
redistribution and their contribution towards this goal is considered in their evaluation.

This calls for a net to suitably weighing the net gain or loss by each group, measured earlier,
to reflect the relative value of income for different groups and summing them. In order to
decide the relative weights, the best single factor, the elasticity of marginal utility of income,
is used. The marginal utility of income is the value derived from one more unit of income.

o Adjustment for Merit and Demerit Goods

In some cases, the analysis has to extend to reflect the difference between the economic
value and social value of resources. This difference exists in case of merit goods and demerit
goods. A merit good is one for which the social value exceeds the economic value. For
example, a country may place a higher social value than economic value of creation of
employment. In the case of a demerit good, the social value of the good is less than its
economic value. For example, a country may regard cigarettes as having social value less
than the economic value.
The procedure for adjusting for the difference between social value and economic value is as
follows:
a. Estimate the economic value
b. Calculate the adjustment factor as the difference between the ratio of social value to
economic value.
c. Multiply the economic value by the adjustment factor to obtain the adjustment
d. Add the adjustment to the net present value of the project.

 Example:
The present economic value of the output of the project is 25 million.
The social value of the project is 20% greater than the economic value.
The adjustment factor would be, 0.2(or 120/100 – 1).

87
Multiplying the present economic value by 0.2, we get an adjustment of 5 million. This,
then, is added to the present economic value of 25 million. Where the socially valuable
output of the project doesn’t appear as an output in the economic analysis (example:
employment generated by the project), the output is treated like an externality and its
valuation in social terms is the adjustment.
⇒ Little-Mirrlees Approach
In this approach benefits and costs may be measured at world price to reflect the true
opportunity cost of project inputs and outputs using public saving measured in foreign
exchange as the numéraire (that is, converting everything into its foreign exchange
equivalent). The fact that foreign exchange is taken as a nureraire does not mean that project
accounts are necessarily expressed in foreign currency. The unit of account can remain the
domestic currency, but the values recorded are the foreign exchange equivalent that is how
much net foreign exchange is earned.
The stimulus to valuing output (and inputs) at world prices (as a measure of true economic
benefit) originally came in the context of import substitution policies pursued by many
developing countries in the 1950s and 1960. It is during these times that it becomes clear
that large number of commercially profitable industries were producing goods at a much
higher price than the alternatives available on the international market. It was thought that if
a project was analyzed at world prices, this would give an indication first of whether it could
survive in the long term in the face of international competition, and secondly of whether its
output could be obtained more cheaply from international sources.

If world prices are used, the economic price at which to value a project’s output is its export
price if it adds to exports or its import price if domestic production leads to a saving in
imports. Similarly, on the cost side, the price at which to value a project input is its import
price if it has to be imported, or export price if greater use leads to a reduction in exports.
The above adjustment applies for traded goods (imported or exported goods). But if the
goods (inputs and outputs) in question are non-traded ones, the analyst needs to use
conversion factor to translate domestic prices into their border price equivalent. A
conversation factor (CF) is the ratio of the economic (shadow) price to the market price, that
is:

88
 Economic price
CF=
Market price

Many analysts use conversion factors (the ratio of an item's economic price to its financial
price) to conduct economic appraisals of projects. However, whether the analyst uses
conversion factors or economic prices does not alter the conclusion of the analysis. In many
cases, however, conversion factors are more convenient than economic prices. First,
conversion factors can be applied directly to the financial data. Second, as long as the
underlying tax and subsidy distortions remain unchanged in percentage terms relative to the
price of the good, inflation does not affect conversion factors. Finally, as long as the
underlying distortions remained unchanged, conversion factors calculated for one project
can be applied to other project in the same country. The calculation of conversion factor is
straightforward if we know the economic and financial prices.

Ideally, the shadow price of a non-traded item is defined in terms of marginal social cost and
marginal social benefit. In practice, the calculation of marginal social cost and marginal social
benefit is often a difficult task. As a practical expedient, L-M suggests that the monetary cost
of a non-traded item be broken down into tradable, labor and residual components. The
tradable and residual components may be converted into social cost by applying suitable
social conversion factors; the labor component's social cost can be obtained by using social
wage rate. The shadow wage rate is an important but difficult-to-determine element in social
cost benefit analysis. L-M suggests the following formula for calculating the shadow wage
rate:
SWR = c' - 1/s(c-m)

Where:

SWR = shadow wage rate

c’ = additional resources devoted to consumption
1/s = value of a unit of committed resources
c = Consumption of the wage earner.

m = marginal product of the wage earner

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In any case, there are considerable similarities between the UNIDO approach and the L-M
approach. Both approaches call for:
 Computation of accounting (shadow) prices particularly for foreign exchange
savings and unskilled labor.
 Consider the factor of equity
 Use of the discounted cash flow analysis (DCF) analysis.

Despite considerable similarities, there are certain differences between the two approaches.

 The UNIDO approach measures costs and benefits in terms of domestic

prices, whereas, the L-M approach measures costs and benefits in terms of
international prices, also referred to as border prices;

 The UNIDO approach measures costs and benefits in terms of consumption

whereas the L-M approach measures costs and benefits in terms of
uncommitted social income; and

 The stage-by-stage analysis recommended by the UNIDO approach focuses on

efficiency, savings and redistribution considerations in different stages. The L-
M approach, however, tends to view these consideration together.
Activity

 Explain the similarities and differences between the following approaches of social-
cost benefit (SCBA) analysis of a project.
i. The UNIDO approach
ii. Little-Mirrlees Approach
4.6 Prioritizing projects
The prioritization of investment projects is a key task for all Candidate Countries. It is clearly
not possible to implement all projects simultaneously, and a rational, systematic approach to
prioritization will help to ensure not only that the requirements of the acquits are met as
early as practicable but also that the available resources (including project finance) are used
as effectively as possible.

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Prioritization needs to be carried out at many different levels, both geographically and
technically. In practice, any organization responsible for managing a pipeline of projects will
need to prioritize within that pipeline. Thus prioritization will often need to be carried out at
a national, regional and local level within government, and also by funding organizations
both within the country and outside. Equally, prioritization may involve a single directive
(e.g. Urban Waste Water), a specific sector (e.g. waste) or a range of sectors/directives.
Important to answer at this point is what criteria are there to prioritize projects?

There are many different criteria that might in principle be used for project prioritization.
The criteria(though not comprehensive) is grouped under seven separate headings, which
may themselves help to prompt the inclusion of other criteria that may be important in
specific circumstances. It is important to recognize that in any one prioritization exercise
only a small number of the most relevant criteria may be used. However, it is clear that
different criteria will be relevant in different circumstances.
The headings are:
 Accession Criteria, linked the role of the directive, sector or region in question to
the wider accession planning and negotiation process;
 Environmental Criteria, including all the relevant environmental costs and benefits
of a proposed project;
 Financial Criteria, covering the income and expenditure associated with the project
and the sources of finance;
 Economic Criteria, covering the wider economic framework (costs, benefits and
affordability);
 Technical Criteria, relating directly to the nature of the project and how and when
it can be implemented;
 Social & Political Criteria, particularly in relation to support for or opposition to a
proposed project;
 Commercial & Institutional Criteria that may impact on the timing or success of
a proposed project.

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4.7 Financing development Projects

The allocation of financial resources to a project constitutes an obvious and basic

prerequisite for investment decisions, for project formulation and pre-investment analysis,
and for determining the cost of capital and make through project appraisal and hence
selection.

4.7.1. Sources of Development Project Finance

There are different sources to finance development projects. The following figure indicates
some of the possible sources to finance development projects. Subsequently, the brief details
of each source are detailed.

 The International Monetary Fund (IMF)

 Set up in 1944 at the Bretton Woods Conference, New Hampshire
 Set up to help put in place an economic structure that would help prevent the
problems experienced by many countries in the 1930s

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 Aims to stabilise the international monetary system and help when monetary flow
from trade causes problems
 Provides help and advice as well as funds to countries experiencing balance of
payments problems

 IMF
 IMF gets its funds from its 184 member states – called ‘quotas’
 Current funds in excess of $310 billion
 Quotas determined by the economic size of the member state

 The world Bank

o An agency of the United Nations
o A group of five organisations which focus on providing funds for projects aimed at
alleviating poverty, inequality and promoting development
o Currently has 184 members
o The 5 institutions:
o The International Bank for Reconstruction and Development (IBRD) – provides
loans and advice to poor countries to assist development
o The International Development Association (IDA) – interest free credits and grants
to countries who are not able to borrow through normal market channels
o International Finance Corporation (IFC) – providing finance through the private
sector for development
o The Multilateral Investment Guarantee Agency (MIGA) – providing investors with
protection against risk
to promote investment in developing countries
o The International Centre for the Settlement of Investment Disputes (ICSID) –
arbitration service
in the event of investment disputes

 Special Drawing Rights (SDRs)-potential claim on IMF currencies

o Originally set up in 1969 to support fixed exchange rates
o Value based on a basket of international currencies – currently 1.24 SDRs to the £
o Now used as a potential claim on currencies of IMF members – currencies can be
bought in exchange for SDRs held by members

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  International Finance Facility (IFF)
o Aiming to bridge the gap between the funds currently pledged and those needed to
meet the Millennium Development Goals (MDGs)
o Aims to raise an extra $50 billion per year between now and 2015
o Uses the long term commitments of donor countries as security for raising further
funds on international capital markets
o There is concern from some about the technical feasibility of the scheme and
whether the funds will be used in the correct way
to achieve the MDGs

 Foreign Direct Investment (FDI)-Multinational Corporations

 Policies to attract investment
 Such investment often associated with multinational corporations (MNCs)
 Policies need to focus on having the right conditions in place –
o Infrastructure
o Security
o Peace
o Local laws and regulation
o Government corruption
o Freedom of the market
o Local labour supply
o Legal issues – protection for the investor, property rights, etc.
o Tax regime
 Has been criticised as being a means by which MNCs can exploit poorer countries

 Aid[official aid from Governments, or aid from charities]

o Bilateral – from one country to another
o Multilateral – aid distributed by an agency who co-ordinate donations
o Benefits:
o Help to kick-start economic development
o Used to help develop vital infrastructure needed to encourage other
investment

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 o Costs/disadvantages
o Not always used for appropriate purposes
o Can be linked to various ‘strings’ that may not be in the recipient countries’
interests
o Crowding out of domestic investment
o Creates a dependency culture
o Distorts the working of the market
Tax Measures
Includes;

 Tobin Tax(foreign exchange Transaction Levy)

 Reducing tax Evasion

 Taxing arms export

o Tobin Tax – a tax imposed on currency trading
o Aims to reduce short term speculative trades and stabilise currency flows
o Funds raised used to finance development projects
o Political will to implement such a tax?
o International aid to help developing countries improve tax systems to generate tax
revenue more efficiently
o International taxes on pollution, air transport, arms, rent on deep sea mineral
extraction – funds raised used to help fund development
o Issues of how far such taxes could raise sufficient funds and whether they would
distort markets too much

4.7.2. Cost of Capital

The cost of capital is a central concept in financial management. It is used for evaluating
investment projects, for determining the capital structure, for assessing leasing proposals, for
setting the rates that regulated organizations like electric utilities can change to their
customers, so on and so forth. An organizations cost of capital is the weighted average cost
of various sources ( WACC) of finance used by it, viz., equity(for business organization
only), preference, long-term and short term debt. The rationale for using the WACC as the
hurdle rate in capital budgeting is fairly straight forward, If an organization rate of return on
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its investment exceeds its cost of capital, decision could be made as to whether the project
should be taken or not[for business organizations only). For non-business organization this
solely helps to know the cost on outsourced funds for the project under consideration.

4.7.3 Financing institutions

In financial economics, a financial institution is an institution that provides financial

services for its clients or members. Probably the most important financial service provided
by financial institutions is acting as financial intermediaries. Most financial institutions are
regulated by the government. Broadly speaking, there are three major types of financial
institution;
i. Depositary Institutions : Deposit-taking institutions that accept and manage deposits
and make loans, including banks, building societies, credit unions, trust companies,
and mortgage loan companies
ii. Contractual Institutions : Insurance companies and pension funds; and
iii. Investment Institutions : Investment Banks, underwriters, brokerage firms.
Note:
It is relatively easy for a sound project to obtain loans, the process of project financing may
well start by identifying the extent to which loan capital can be secured, together with the
interest rate applicable. Such loan capital need to be separately defined as: short and medium
term borrowings from financial institutions(locally) for working capital or suppliers’ credit;
and long-term borrowings from national or international development finance
institutions(see section 4.8.1).

4.8 Project Appraisal and Selection

Project Appraisal is perhaps the best-known phase of project work ( in part, because it is
the culmination of preparatory work, provides a comprehensive review of all aspects of the
project and lays the foundation for implementing the project and evaluating it when
completed. It involves a further analysis of the proposed project. The systematic and
comprehensive review is usually undertaken by an independent team of experts in
consultation with the stakeholders of the project.

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The project is appraised in terms of relevancy, effectiveness, efficiency, feasibility,
sustainability and replicablity issues. This provides an opportunity to re-examine every aspect
of the project plan to assess whether the proposal is justified before large sums of resources
are being committed. Usually, project appraisal covers major issues such as technical,
institutional, economic and financial aspects.

Technical Appraisal- in this case appraisal is made to ensure whether projects are soundly
designed, appropriately engineered, and follow accepted standards. The appraisal mission
looks into technical alternatives considered, solutions proposed, and expected results.

More concretely, technical appraisal is concerned with questions of physical scale, layout,
and location of facilities; what technology is to be used, including types of equipment or
processes and their appropriateness to local conditions; what approach will be followed for
the provision of services; how realistic implementations schedules are; and what the
likelihood is of achieving expected levels of output.

A critical part of technical appraisal is a review of the cost estimates and the engineering or
other data on which they are based to determine whether they are accurate within an
acceptable margin and whether allowances of physical contingencies and expected prices
increased during implementation are adequate. In addition, technical appraisal is concerned
with estimating the costs of operating project facilities and services and with the availability
of necessary raw materials or other inputs. The potential impact of the project on human
and physical environment is examined to make sure that any adverse effect will be controlled
or minimized.

For instance, an appraisal of an education projects, with whether the proposed curriculum
and the number of layout of classrooms, laboratories, and other facilities are suited to the
country’s educational needs.

Institutional Appraisal-in current terminology, “institutional building” has become perhaps the
most important purpose of financing a project by many agencies and financial institutions.
This means that the transfer of financial resources and the construction of physical facilities,
however valuable in their own right, are less important in the long run than the creation of a
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sound and viable local “institution,” interpreted in its broadest sense to cover not only the
borrowing entity itself, its organizations, management, staffing, policies, and procedures but
also the whole array of government policies that conditions the environment in which the
institutions operates.

Experience indicates that insufficient attention to the institutional aspects of a project leads
to problems during its implementations and operation. Institutional appraisal is concerned
with a host of questions such as whether the entity is properly organized and its management
adequate to do the job, whether local capabilities and initiatives are being used effectively,
and whether policy or institutional changes are required outside the entity to achieve project
objectives.
Economic Appraisal- Through cost benefit analysis of alternative projects designs; the one that
contributes most to the development objectives of the country may be selected. This analysis
is normally done in successive stages during project preparation, but appraisal is the point at
which the final review and assessment are made. During economic appraisal, the project is
studied in its sectoral setting. The investment program for the sector, the strengths and
weaknesses of public and private sectoral institutions, and key government policies are all
examined.

For instance, economic appraisal a typical transportation project perhaps consider the
transportation systems as a whole and its contributions to the country’s economic
development; In agriculture, which is more diversified and accounts for a much larger share
of a developing country’s economic activity, it is more difficult to formulate a
comprehensive strategy for the sector; attention is given to sectoral issues such as land
tenure, the adequacy of incentives for farmers, marketing arrangements, availability of public
services, and government tax, pricing and subsidy policies.

In economic appraisal of a project, “Shadow Prices” are used when true economic values of
costs are not reflected in market prices as a result of various distortions, such as trade
restrictions, taxes, or subsidies. Whether qualitative or quantitative, the economic analysis of
a project always aims at assessing the contribution of the project to the development
objectives of the country.

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Financial Appraisal- financial appraisal has several purposes. One is to ensure that there are
sufficient funds to cover the costs of implementing the project. For revenue producing
projects, financial appraisal is also concerned with financial viability ( i.e. will it be able to
meet all its financial obligations, including debt services; will it be able to generate enough
funds from internal resources to earn a reasonable rate of return on its assets and make a
satisfactory contribution to its future capital requirements). The finances of enterprises are
closely reviewed through projections of the balance sheet, income statements, and cash flow
statements.

Financial appraisal is also concerned with recovering investment and operating costs from
project beneficiaries. For instance, government may expect farmers to pay, over time and
out of their increased production, all of the operating costs and at least a substantial part of
the capital costs of, say an irrigation project. For more understanding of the major outcomes,
tasks and criteria in appraising project refer section 4.1.

Project Selection - after appraisal, the viable project proposals are chosen for
implementation on the basis of the priorities of the stakeholders and the available resources.
For instance, Treasury may impose a ceiling on the ministries with a big portfolio of
investments, calling for prioritizations of the core and lower priority projects.

4.9 Chapter summary

The main purpose of conducting a feasibility study is just to evidentially determine the
worthiness of a given project and to make a rational investment decision which involves the
commitment of huge amount of resources. This chapter included how the output of the
feasibility can be used as an input in preparing the project.

Project preparation is a very technical activity which involves a thorough analysis of all the
critical factors affecting the project and planning for the project. In project preparation, the
concern of the three basic parameters including cost, time and quality would be used as
the determinant factors for planning. Accordingly, a preparatory studies is required to
analyze the technical, contractual and financial aspects and similar aspects of the project.
Relevant project ideas are developed into project plans. The particular stress should be on

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feasibility and sustainability / quality of the suggested intervention. Beneficiaries and other
stakeholders participate in the detailed specification of the project idea that is then assessed
for its feasibility (whether it is likely to succeed) and sustainability (whether it is likely to
generate long-term benefits). Again, checks need to ensure that cross-cutting issues and
overarching policy objectives are adequately considered in the project design and objectives.
A detailed Logical Framework with Indicators, and Implementation, Activity and Resource
Schedules, should be produced. On the basis of these assessments, a decision is made on
whether or not to draw up a formal financing proposal and seek funding for the project.
The term “ex ante” evaluation is now frequently used for “Appraisal” or “Feasibility Study”.
While Appraisal refers to studies during the preparatory phases of the project cycle (pre-
feasibility or feasibility studies), “evaluation” as such concerns the assessment of an ongoing
or completed project, program or policy, its design, implementation and results (see chapter
6):

“Ex ante evaluation is a process that supports the preparation of proposals for new or
renewed Community actions. Its purpose is to gather information and carry out analyses that
help to define objectives, to ensure that these objectives can be met, that the instruments
used are cost-effective and that reliable later evaluation will be possible.

Individual Project
Based on assignment-2[chapter three] for the project idea of your first choice undertake
detail project feasibility study.
Note:
 This assignment should be computer typed, font: times new romans, size 2 12, 1.5
spacing
 Min page number-6, maximum 10

References:
 UNIDO, Manual for Preparation of Industrial Feasibility Studies, UN.1991
 Harlod Kerzner, Project Management
 Chandra, Prasanna Projects-Planning, Analysis, Financing

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CHAPTER FIVE
5. PROJECT IMPLEMENTATION
5.1 Introduction
The project implementation phase embraces the period from the decision to invest to the
start of commercial production. This critical phase must be planned and analyzed, because
deviation from the original plans and budget could easily jeopardize the entire project. To
implement a project means to execute all the on – and off – site work and tasks necessary to
bring a project from the feasibility study stage to its operational stage. A realistic schedule
should be drawn up for the various stages of the project implementation phase. The
implementation of every project must be related to a time schedule, which must initially
define the various implementation stages in terms of resources and duration of activities
required for each stage.

5.2 Chapter objectives

Dear learner, we hope that you have successfully gone through the previous sections of the course.
After the project is prepared, funds are negotiated and secured what follows is implementation of
project. After completing this chapter, you should be able to:
 Understand project implementation and its pre-requisites
 Prepare project implementation plan

5.3 Project implementation

This is followed by project appraisal, selection, negotiation and finally approval. Approval means
that the funding agency has accepted in principle to finance the project. At this level, the financial
agreements are concluded and project implementation begins thereafter. Project implementation
can be referred to as a process whereby “project inputs are converted to project outputs as set out
in the project framework”. The process involves a series of activities, which need to be planned,
operated and controlled, and which will inevitably involve the utilization of resources. The
management of these activities is fundamental to a supervisor or monitor so that the project can
be completed on time and at cost consistent with the project plan.

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Project implementation may be looked at as:

o Putting in action the activities of the project.

o Putting into practice what was proposed in the project document i.e. transforming
the project proposal into the actual project.
o Management of the project or executing the project intentions.

Project, implementation is carried out following the already laid down timetable or work
plan. It leads to the realization of project outputs and immediate objectives.

Project implementation is usually done by the organization that prepared the project and
received funding for it. This organization is referred to as the implementing agency. The
implementing agency sets up a project implementation unit, which carries out the
implementation on behalf of the implementing agency.

Other organizations that participate in the implementation of the project by way of

collaboration say by according good working relationship, extending some technical advice
or seconding their staff to the project, are referred to as Co-operating agencies. Example:
If a given sub-county is to implement a sanitation project, the departments of water,
community development and health will act as cooperating agencies. The project
implementation phase involves: Project activation and Project operation

Project Activation

Project activation simply means making arrangements to have the project started. It is the
preliminary or foundation stage of project implementation and it involves the coordination
and allocation of resources (funds, labor and materials) to make the project operational.

The following activities are undertaken during project activation

o Establishment of Project Implementation Units (PIUs)
o Recruitment of project manager and other staff
o Tendering and procurement of machines, equipment and other suppliers
o Preparation of contingency plans
o Designation of the internal project authorities for decision making and establishment
of communication channels
o Putting in place staff training and development programmes and code of conduct
o Setting up linkages with the target group
o Location and negotiation of sites

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Project Operation

Project operation is also referred to as the development and normal life period of the
project. It is the actual management of a project in practical terms. This is the level when the
project inputs are transformed into outputs via the project activities following the laid down
work plan. This leads to the attainment of immediate objectives.

It involves the coordinating, monitoring and control of the performance of the various
project groups and the use of project resources in such a way that the project activities are
completed in an orderly and optimal fashion within the constraint of time and resources
available.

Operation and maintenance

In order to attain value from the project and get maximum returns on the investment the
district/municipality or the beneficiaries organize for the facility to be used properly and
maintained regularly. An operation and maintenance manual will be prepared by the
contractor and handed to the district.

 Approaches to Project Implementation

Top-Down Approach

In this approach, the implementation is mainly done by agencies from outside the
community with limited involvement by the beneficiaries. These agencies come with their
own staff and workers. They may include Government departments or ministries,
international development agencies.

This approach is good for projects that require quick results like relief projects, as there is
limited time to involve the target group.

The disadvantage with this approach is that it may result into passivity, hostility and
resistance by the beneficiaries. When it succeeds, it makes the beneficiaries develop a
dependence syndrome and lack of capacity building of the human resources and
sustainability of the project.

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Bottom-Up Approach

In this approach the beneficiaries implement the project. The outside agencies may provide
the financial resources and possibly technical assistance.

The advantages with this approach are that:

o Capacity is built within the community
o The project is readily acceptable
o There is increased use of local resources including labor
o The beneficiaries learn to be self-reliant leading too project sustainability

Collaborative Participatory Approach

This is when the aspects of both top-down and bottom-up approaches to project
implementation are applied in the implementation process.

A case in point is when a CBO is implementing a dairy project and say the Government
seconds a veterinarian to offer technical assistance by way of offering the needed veterinary
services.

5.4 Pre-requisites for successful implementation

Time and cost over-runs of projects are very common in developing countries, particularly in
the public sector. A similar analysis of state projects in developing countries like Ethiopia
would perhaps reveal an even more dismal picture. Due to such time and cost over-runs,
projects tend to become uneconomical, resources are not available to support other projects,
and economic development is adversely affected.

What can be done to minimize time and cost over-runs and thereby improve the prospects
of the successful completion of projects? While a lot of things can be done to achieve this
goal, the more important ones appear to be as follows:
 Adequate formulation.
 Sound project organization.
 Proper implementation planning.
 Advance action.

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  Timely availability of funds.
 Careful equipment tendering and procurement.
 Better contract management
 Effective monitoring.

1. Adequate Formulation
Often project formulation is deficient because of one or more of the following
shortcomings:
 Superficial field investigation.
 Hurried assessment of input requirements.
 Slipshod (careless) methods used for estimating costs and benefits.
 Omission of project linkages.
 Flawed judgments because of lack of experience and expertise.
 Undue hurry to get started.
 Deliberate over-estimation of benefits and under-estimation of costs.
Care must be taken to avoid the above deficiencies so that the appraisal and formulation of
the project is thorough, adequate, and meaningful.
2. Sound Project Organization
A sound organization for implementing the project is critical to its success. The
characteristics of such an organization are:
 It is led by a competent leader who is accountable for the project performance.
 The authority of the project leader and his team is commensurate with their
responsibility.
 Adequate attention is paid to the human side of the project.
 Systems and methods are clearly defined.
 Rewards and penalties to individuals are related to performance.
3. Proper Implementation Planning
Once the investment decision is taken - and often even while the formulation and appraisal
are being done - it is necessary to do detailed implementation planning before commencing
the actual implementation. Such planning should, inter alia, seek to:

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  Develop a comprehensive time plan for various activities like land acquisition, tender
evaluation, recruitment or personnel, construction of buildings, erection of plan,
arrangement for utilities, trial production run, etc.
 Estimate meticulously the resource requirements (manpower, materials, money, etc.)
for each period to realize the time plan.
 Define properly the inter-linkages between various activities of the project.
 Specify cost standards.
4. Advance Action
When the project appears prima facie to be viable and desirable, advance action on the
following activities may be initiated:
 acquisition of land(if necessary)
 securing essential clearances,
 identifying technical collaborators/consultants,
 arranging for infrastructure facilities,
 calling of tenders and etc.
To initiate advance action with respect to the above activities, some investment is required.
Clearly, if the project is not finally approved, this investment would represent an in
fructuous outlay. However, the substantial savings (in time and cost) that are expected to
occur, should the project be approved (a very likely event, given the prima facie desirability of
the project) often amply justify the incurrence of such costs.

5. Timely Availability of Funds

Once a project is approved, adequate funds must be made available to meet its requirements
as per the plan of implementation - it would be highly desirable if funds are provided even
before the final approval to initiate advance action. Piecemeal, ad-hoc, and ungenerous
allocation, with undue rigidities, can impair the maneuverability of the project team. It is a
common observation that firms, which have a comfortable liquidity position, are in general,
able to implement projects expeditiously and economically.

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Such firms can initiate advance actions vigorously, negotiate with suppliers and contractors
aggressively, organize input supplies quickly, take advantages of opportunities to effect
economies, support suppliers in resolving their problems so that they can in turn redound to
the successful completion of projects, and sustain the morale or project-related personnel at
a high level.
6. Judicious Equipment Tendering and Procurement
To minimize time over-runs, it may appear that a turnkey contract has obvious advantages.
Since these contracts are likely to be bagged by foreign suppliers, when global tenders are
floated, a very important question arises. How much should we rely on foreign suppliers
and how much should we depend on indigenous suppliers? Over-dependence on foreign
suppliers, even though seemingly advantageous from the point of view of time and cost, may
mean considerable outflow of foreign exchange and inadequate incentive for the
development of indigenous technology and capacity. Over-reliance on indigenous suppliers
may mean delays and higher uncertainty about the technical performance of the project. A
judicious balance must be sought which moderates the out flow of foreign exchange and
provides reasonable impulse to the development of indigenous technology. In any case, the
number of contact packages should be kept to a minimum in order to ensure effective
coordination.
7. Better Contract Management
Since a substantial portion of a project is typically executed through contracts, the proper
management of contracts is critical to the successful implementation of the project. In this
context, the following should be done:
 The competence and capability of all the contractors must be ensured - one weak link
can jeopardize the timely performance of the contract.
 Proper discipline must be inculcated among contractors and suppliers by insisting that
they should develop realistic and detailed resource and time plans, which are
congruent with the project plan.
 Penalties-which may be graduated-must be imposed for failure to meet contractual
obligations. Likewise, incentives may be offered for good performance.
 Help should be extended to contractors and suppliers when they have genuine
problems-they should be regarded as partners in a common pursuit.

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  Project authorities must retain latitude to off-load contracts (partially or wholly) to
other parties well in time where delays are anticipated.
8. Effective Monitoring
In order to keep a tab on the progress of the project, a system of monitoring must be
established. This helps in:
 Anticipating deviations from the implementation plan,
 Analysing emerging problems,
 Taking corrective action,
In developing a system of monitoring, the following points must be borne in mind:
 It should focus sharply on the critical aspects of project implementation.
 It must lay more emphasis on physical milestones and not on financial targets.
It must be kept relatively simple. If made over-complicated, it may lead to redundant paper
work and diversion of resources. Even worse, monitoring may be viewed as an end in itself
rather than as a means to implement the project successfully.

5.5 Project implementation planning

Project implementation planning is considered here mainly in order to draw the attention of
the project planner to the financial implications of project scheduling and possibilities of the
early detection of implementation delays and their financial consequences. A considerable
amount of time may elapse between the moment when the investment decision is taken and
the actual start of construction.

Projects involving few activities, resources, constraints and inter-relationships can be

visualized easily by the human mind and planned informally. However, when a project
crosses a certain threshold level of size and complexity, informal planning has to be
substitute by formal planning. The need for formal planning is indeed much greater for
project work than for normal operations because without formal planning there may be
chaos.

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The implementation period has usually three phases: the investment period, the development period,
and the full development period. This forms the life of the project. The investment period refers
to when the major project investments are undertaken and could take one to three years,
depending on the nature of the project. The development period occurs as the production
builds up, while the full development is reached when the production peaks up and
continues until the project ends. Both financial and economic analyses of the project relate
to the time horizon.

 Functions of Implementation Planning

Project implementation planning which is a vital aspect of project management, serves
several important functions, including:
 Planning provides the basis for organizing the work on the project and allocating
responsibilities to individuals.
 It is a means of communication and coordination between all those involved in
the project
 It induces people to look ahead
 Planning creates a sense of urgency and time consciousness in implementation.
 It establishes the basis for monitoring and control

 Area of Project Implementation Planning

Dear colleagues an adequate and comprehensive project implementation planning usually

covers the following aspects:
1. Planning the project work: The activities relating to the project must be spelt out
in detail. They should be properly scheduled and sequenced.
2. Planning the Manpower and organization: The manpower required for the
project (managers, technologists, operators, and others) must be estimated and the
responsibility for carrying out the project work must be allocated.
3. Planning the financial resources: The expenditure of money in a time-phased
manner must be budgeted
4. Planning the Information System: The information required for monitoring the
project must be defined.

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 Project Objectives and Policies
Dear colleagues, the focus of the project planning is on questions like who does what and
when. But, before, such operational planning is done, the objectives and policies guiding the
project planning exercise must be articulated. The main questions to be included in the
process of project implementation planning with regard to the objectives and policies
include:
 What are the technical and performance objectives?
 What are the time and cost goals?
 To what extent should the work be given to outside contractors?
 How many contractors should be employed?
 What should be the terms of contract?

Well-defined objectives and policies serve as the framework for the decisions to be made by
the project manager. Throughout the life of the project, he has to seek a compromise
between the conflicting goals of technical performance, cost standard, and time target. A
clear articulation of the priorities of management will enable the project manager to take
expeditious actions.

5.5.1 Work breakdown Structure (WBS)

When the scope definition has been completed, a high-level plan of milestones can be
developed. By expanding on what it will take to achieve the milestones (deliverables,
activities, and tasks), the team should construct a work breakdown structure (WBS). The
WBS can then be enhanced by sequencing the activities, adding durations and resources after
the necessary activities have been agreed upon. The WBS of the project divides the output of
the project into a comprehensive set of deliverables. Any deliverable not described in the
work breakdown structure is outside the scope of the project. Examples of these deliverables
may be:
• needs analysis report
• instructional design report
• deployment plan
• development status report
• course prototype
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 • pilot offering attendance report
• formative evaluation report
• summative evaluation report.
Those processes may inform the corresponding WBS deliverables. The objective of the WBS
is to identify required deliverables from the project, and to break these deliverables into
subcomponents. This breakdown to the subcomponent level will then help to increase the
accuracy of time and cost estimates for the subcomponents.

5.5.2 Responsibility matrix

The Responsibility Matrix (RM), also known as the Responsibility Assignment Matrix
(RAM), is used to show the connections between work that needs to be done and project
team members. This is a highly versatile tool that can be easily modified to suit multiple
project needs. RMs can be developed at various levels of detail, from high to low. It can be
used during any project phase, including the post-implementation support phase, and is
especially useful when activities require coordination between several different groups,
agencies, or vendors.

Setting up a Responsibility Matrix is about establishing "what", "who", and level of

participation. As shown in Figure 1, activities are listed on the rows and resources are in the
columns. Note that resources may be persons, roles, groups, or vendors.
Resource 1 Resource 2 Resource 3 Resource 4
Activity 1
Activity 2
Activity 3
Activity 4
Figure 1: Example of a Responsibility Matrix

The intersection points are used to describe each resource’s level of participation for the
activity. The participation type codes are inserted in these cells. A legend is included to
define the codes.

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 Bonsa Bontu Olfuna Fayisa
Review Resumes R S
Interview Applicants I R S
Hire Personnel R I I
Purchase Equipment A R

Legend: R=Responsible, A=Approve, I=Inform, S=Support/Assist

Figure 2: Example of a Responsibility Matrix with Participation Codes and Legend

As shown in Figure 2, resources might not have a participation type code for every activity.
Every activity should have one resource designated as the one responsible for the activity.
Also, it is recommended that each role for each activity receive just one participation type
code. When more than one code is used, it implies that resource’s role has not yet been fully
resolved, which can impede the value of this technique in clarifying the level of responsibility
for the task.

Because the purpose of the matrix is to gain clarity and agreement on who does what, the
columns and rows can be defined with as much detail as makes sense. For example, a high-
level RM can identify what project team group is responsible for each component of the
WBS, while lower-level RMs can be used to designate the participation level of specific
group members for specific activities. (PMBOK, 3rd edition)

There are a number of ways to create a Responsibility Matrix using different participation
types. One common version is called the RACI matrix. RACI is an acronym for Responsible –
Accountable (aka Approver) - Consulted - Informed. Figure 3 is a sample RACI chart.

Activity Mr.A Mr.B Mr.C Ms.D Ms.E Mr.F

A R A I C C

B I A C R

C R A I C

D R A I C C C

Legend: R=Responsible, A=Accountable, C=Consulted, I=Informed

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 Figure 3: Example of a RACI Matrix

Here is a detailed explanation of the participation types used in the RACI matrix:
 Responsible - The person or role who is assigned to achieve the task. There is only
one resource given this category type. Others may be required to assist in the work
but they are either given another participation code, such as Assist, or are not
included as the RM may only list the key people for the activities.

 Accountable – This person or role must sign off on work that Responsible provides.
They are ultimately accountable for the correct and thorough completion of the
deliverable or task, and the one to whom Responsible is accountable. There must be
only one Accountable specified for each task or deliverable.

 Consulted - Those whose opinions are sought and with whom there is two-way
communication.

 Informed - Those who are kept up-to-date on progress, often only on completion of
the task or deliverable, and with whom there is just one-way communication
(informational only).

In order for the matrix to be effective, it must accurately reflect people's expectations and
responsibilities. For instance, if the sponsor agrees that s/he will approve the Business
Requirements, then the matrix will reflect the sponsor’s approval is required. However, if the
sponsor delegated the approval of Business Requirements to a subordinate, that fact should
be represented on the matrix for all to see and approve. After the matrix is completed, it
should be circulated as a deliverable for the appropriate approval(s).

Figure 4 below is an example of a Responsibility Matrix for the development of project

deliverables. It lists the deliverables as activities and uses roles instead of specific individuals.
It also uses different participation types that may be more appropriate for this activity.

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 Project Functional Project Project Steering
Sponsor Manager Manager Team Committee

Project Definition A A C R A

Communication
A R C R A
Plan

Business
A R R C A
Requirements

Status Reports R R C R R
Legend: A=Approve, R=Review, C=Create
Figure 4: Example of a Responsibility Matrix for Deliverables

For this matrix, the participation codes used are:

 “A” means that the person (or role) approves the deliverable.
 ”R” means that the person (or role) reviews the deliverable.
 ”C” means that the person (or role) creates the deliverable; this could be C (1) for
primary, C (2) for backup. Usually there is only one person who is responsible for
creating a deliverable, although many people may provide input.

In Figure 4, the Project Definition is created by the project manager; approved by the
project sponsor, functional manager and the Steering Committee; and reviewed by the
project team. The Business Requirements are created by the project team; reviewed by the
project manager and the functional manager; and approved by the project sponsor and
Steering Committee.

5.5.3 Calendar of activities

As for overall implementation, the Implementation Schedule is an important tool: It is an
administrative planning and monitoring document covering administrative mile-stones and
sequencing from the preparatory phases to project completion and evaluation. It provides an
idea on how these milestones are met, and whether de-lays occur.

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During Implementation, this can indicate the need for re-planning, given the fact that e.g.
the remaining period may not be sufficient to undertake certain works, studies, etc. As all
other planning documents, the Implementation Schedule has to be up-dated by the project
management, and should be included in the progress reports. Conclusions with regard to
deviations should be made there. While work plans are objective-oriented and include
resource scheduling related to these objectives, the Implementation Schedule emphasizes
resource categories that may require budgetary commitments and / or tendering, as well as
other administrative milestones like reporting that may also lead to disbursements.

In a nutshell the Project Implementation Schedule answers questions regarding. What

activities will be undertaken to produce the expected project outputs?, What is the sequence
of these activities? What is the time frame for these activities? And who will be responsible
for carrying out each activity?

The following methods may be used to answer the above questions:

o The Gantt chart

o The Critical Path Method (CPM) or Network analysis (please refer books on
Operation research and Project Management)
o Project Evaluation and Review Techniques (PERT)[ (please refer books on
Operation research and Project Management)
o Simple formats

 The Gantt chart (example)

The Gantt chart is also referred to as the progress chart. It is a chart showing the timing of
project activities using horizontal bars. It is one of the techniques of project scheduling,
which depicts the frequency of activities and determines the period of time for
implementation.

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How to determine a Gantt chart

o Determine the parts or implementation phases of the project and the sequence in
which the associated activities shall be carried out
o Then estimate the amount of time required for each activity
o List the activities that can be carried out at the same time and identify those to be
carried out sequentially

How to construct the Gantt chart?

Time represented on the horizontal axis, and activities on the vertical axis. Bars are entered
to indicate the time period allocated for each activity and the state of progress at any
particular point in time.

Example: Maize farming project

Activity

Marketing

Threshing

Harvesting

Weeding

Planting

Preparing seedbed 0 Jan Feb. Mar. Apr. May Jun. Jul. Aug.

Time period in months

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It is a useful source of information to the supervisor or monitor who may not have the time
to read lengthy documents. It enables the supervisor to identify and report achievements
within the project period.

The Simple Format

Activity Starting Ending date Cost Responsible Remarks

date person

Preparing seed bed

Planning

Weeding

Harvesting

Storage

Threshing

Marketing

5.5.4 Resource plan and budget

In project implementation there should be appropriate planning and budgeting of resources.

The following is the example of human resource budgeting for hypothetical project. The
resource staffing plan outlines anticipated resource needs throughout the project life cycle.
The same approach should be followed in planning/budgeting all the necessary resources
required for the project.

Resource Staffing Plan

Resource Type Month 1 Month 2 Month 3 Month 4
Project Manager 1 2 1 1
Trainer 1 2 2 3
Programmer 3 5 5 3
Analyst 5 5 3 1
Consultant 2 2 2 2
Total 12 16 13 10

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Activity

1. Explain the basic functions, procedures and objectives of project implementation

planning.

2. Explain some of the prerequisite for successful implementation of projects.

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5.6 Chapter summary

After the project design is prepared, negotiations with the funding organization started and
once source of finance is secured what follows is implementation.

Implementation is the most important part of the project cycle. This is the crucial stage of
any project since the objective of the earlier effort in the stages above was to have projects
to be undertaken. At this stage, the activities of the project are actually carried out, and funds
are disbursed to facilitate the activities. The management should ensure that the project is
carried out according to the design. However, depending on the physical and policy
environment, there may be need for flexibility in response to the reality on the ground.

Monitoring of progress and reporting, therefore, becomes crucial. Implementation is a

process of refinement, or learning from experience and can actually be considered as a “mini
cycle” within the larger project cycle. What is found to be a base for an effective project
implementation is the degree of accuracy and care undertaken in the project planning
process. The better and more realistic the project plan is the more likely it is that the plan
can be carried out and the expected benefits realized.

At the project implementation phase tenders are let and contracts signed. Project
implementation must be flexible since circumstances change frequently. Technical changes
are almost inevitable as the project progresses; price changes may necessitate adjustments to
input and output; political environment may change.

Individual Project
Based on assignment-3[chapter four] for the project idea of your first choice based on
detail project feasibility study prepare implementation plan including Work breakdown
Structure (WBS), Responsibility matrix, Calendar of activities and Resource plan and budget
Note:
 this assignment should be computer typed, font: times new romans, siz2 12,
1.5 spacing
 minimum page number-6, maximum 10

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References
o Project Managing E-Learning, a hand book for successful design, delivery and
management

o PCM Manual and Handbook EC http://europa.eu.int/comm/euro

peaid/evaluation/methods/pcm.h
tm

o PCM Guidelines (in English, GTZ http://www.gtz.de/pcm/deutsch

French, German, Spanish) /pcmleit.htm

o PCM Guidelines, M&E, etc. UNDP/GEF http://www.gefweb.org/Operatio

nal_Policies/Operational_Strategy
/operational_strategy.html

o PCM, Monitoring, Swiss Agency for http://194.230.65.134/dezaweb2/

Evaluation Development and home.asp
Cooperation

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CHAPTER SIX
6. PROJECT MONITORING, EVALUATION, TERMINATION
AND LEARNING

6.1 Introduction

The mechanisms and specific responsibilities for monitoring and evaluation of all projects
must be defined at the formulation stage and appropriately incorporated in the projects
document. The document should also indicate when it is proposed that monitoring be
undertaken and related costs must also be earmarked for this purpose. Monitoring is
followed by report often called progress report/monitoring report. Equally, closing the
project is an important phase of the project and should not be overlooked. Valuable
information is gained through the project closing process and stored in the organizational
knowledge base as well as in increased knowledge and experience of the project team
members and future project endeavor.

6.2 Chapter learning objectives

Dear learner, aafter completion of this chapter, therefore, you will be able to:
 Understand project monitoring and evaluation
 Know project closure/termination and learning process

6.3 Project monitoring and evaluation

6.3.1 What is Monitoring?

Project monitoring is an integral part of day-to-day management. It provides information by
which management can identify and solve implementation problems, and assess progress.
The Logical Framework, the implementation Schedule and the Activity and Resource
Schedules provide the basis. The following basic issues need to be regularly monitored:
o Which Activities are underway and what progress has been made (e.g. at
weekly intervals)?
o At what rate are means being used and cost incurred in relation to progress
in implementation (e.g. monthly)?

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 o Are the desired Results being achieved (e.g. quarterly update)? (efficiency)
o To what extent are these Results furthering the Project Purpose (e.g. half-
yearly analysis)? (effectiveness)
o What changes in the project environment occur? Do the Assumptions hold
true?
Project management checks how the objectives are met, and analyses the changes in the
project environment including key stakeholder groups, local strategies and policies. If
progress falls short, corrective action has to be taken. Details of any action have to be
included in the next progress report.

The basis of project monitoring systems is to track actual progress against planned progress
at any given time. This covers financial progress (monitoring of actual expenditure against
budgeted expenditure) as well as the progress of project activities. Monitoring systems
should be considered alongside the implementation plan because it is the targets set out in
this plan which forms the targets for monitoring. The whole system is therefore often
referred to as an ‘Integrated Planning, Implementation and Monitoring System’ (IPLMS).
Monitoring systems should:
 At all times be concerned with future progress
 Be simple and cost effective
 Be able to detect deviations quickly and accurately
 Be verifiable
When designing a monitoring system, the planner should keep the following points in mind:
 Who are the key sources of information? These could include line managers,
accountants, contractors and suppliers etc.
 How often monitoring data should be collected? Remember that data is only
effective once it has been processed. A void collecting data for data’s sake this gives
the semblance of a monitoring system without serving any useful purpose.
 Who is responsible for processing data? Who has the responsibility to act as a
result of this data?

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  Have you achieved the right combination of speed and accuracy? Sometimes a
trade-off has to be made between the two with information that is extremely
accurate leading to delays in taking effective remedial action.
 Is the monitoring system only processing that data which is necessary?
Monitoring information increases the workload so it is important that only the most
essential data is requested for processing.
Monitoring systems in themselves are ineffective unless they are linked to an effective
control system which will allow the manager to take swift and effective action to remedy any
deviations from the implementation plan.
Monitoring systems have to be considered for both project implementation and operations.
Systems concerned with implementation measure the project’s effectiveness in converting
inputs to outputs; while monitoring systems concerned with operations measure the
project’s effectiveness in converting outputs into immediate and wider objectives.
The information acquired through monitoring systems can be divided into three categories:
 Monitoring of physical progress
 Monitoring of financial progress
 Monitoring the quality of project outputs
 Monitoring Physical Progress
The primary purpose of physical progress monitoring is to ensure whether project activities
are on schedule. This can be achieved through milestone monitoring and time chart
monitoring.

Milestone monitoring involves the use of project milestones which were identified as part of
the project implementation plan. The actual date on which these milestones were reached
can be entered in table form or on the Gantt chart.

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Milestone Chart
Milestone Date on original Date from revised Date actually
plan plan achieved

Milestone monitoring provides a retrospective record of project progress, but it is unable to

provide us with information about activities which are still in progress Time chart
monitoring is a method which is used to anticipate whether or not milestones will be reached
on schedule. When dealing with physical progress of an activity there are three possible
scenarios (Cusworth & Franks, 1993)
 Activity outputs can be quantified as a single number. This is relatively simple to
monitor. For example, if the activity was to print a certain number of textbooks
then both the physical target and progress to date can be expressed in terms of this
single number (for example, 250 books printed out of a target of 100).
 Activity outputs can be measured and valued. This is the case with the construction
of buildings and roads. Progress towards meeting physical targets should be
expressed as:
Value of work done x 100(%)
Total value of work planned
When dealing with direct labor the planner must be careful not to equate the value of
the work done with financial spending. The planner should devise methods to
measure actual physical progress.
 Activity outputs cannot be directly valued. This is the case in activities such as
training or in supply-only contracts. These activities should use milestones to mark
the beginning and end of each separate activity phase. If this is not possible, physical
progress can be expressed as:
Time spent to date x 100(%)
Total time to complete

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This can be problematic because the time taken may not bear any relation to the actual
amount of physical progress towards activity completion.
 Monitoring Financial Progress

This involves comparing actual expenditure against the financial plan (budget) produced as
part of the implementation plan. The project must therefore have a cost reporting system in
place to enable a comparison of actual and predicated costs. It is unwise to rely on existing
accounting systems to provide this information as these systems are liable to be slow and to
categories expenditure using different methods to those desired by the project manager.

The planner must therefore ensure that there is a cost reporting system in place which allows
the manager to receive timely and accurate cost information. As Cusworth and Franks
(1993:166) note “public sector managers will need to take particular care that they keep a
measure of overall spending of the project against overall budget …managers are not able to
spend above each year’s authorized budget, so that cost over-runs are met by delaying
implementation, or reducing the scope of the project to compensate.”
Once the manager has access to accurate cost data, it is possible to utilize this information in
the process of project cost control. This can be done by using the following relationship
(BCID, 2003:155):
Cost of work to date = Cost of work remaining
Value of work to date Value of work remaining

The information gained through this calculation can then be entered in tabular form:
Cost Control Table
Activity Actual Amount of Actual Cost of Amount of work Cost of Work
Work (time) Work Remaining (Time) Remaining

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  Monitoring the Quality of Project Outputs

This involves ensuring that outputs are delivered according to specification. This is normally
done through a system of direct inspection and supervision. Monitoring is sometimes carried
out by outside agencies against a set of internationally or nationally recognized standards (see
Section 4.5). A formal agreement between the implementing agency and the project owner
that project outputs are satisfactory is known as ‘signing – off. Each project will have its own
quality assurance features in operation and it is important that the quality control aspect is
not overlooked during project design.
 Reporting on Progress (monitoring report)
During the inception period of a project, mechanisms for communication have to be
established to ensure that the necessary information is generated and utilized in a timely and
effective manner. In this context:

 Progress review meetings are useful to review progress against the plan. This may be
also an opportunity for written reports to be presented and discussed, or simply for a
rapid oral assessment of current issues and problems.

 Project progress reports provide periodic summaries of project progress

incorporating key information from the physical and financial indicators included in
the log frame, Activity Schedule and Resource Schedule.
Progress reports are to be written in a standard format allowing for comparison be-
tween reports over time. The purpose of progress reports is to provide updates on
achievements against indicators and milestones, using the following framework:
 Data about intended achievements, is compared with
 Data on actual achievements, to identify...
 significant deviations from plan, as a basis for...
 identification of problems and opportunities,
to identify...
 corrective action and alternatives.

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6.3.2 Project evaluation

Evaluation is an “assessment, as systematic and objective as possible, of an ongoing or

completed project, program or policy, its design, implementation and Results. The aim is to
determine the relevance and fulfilment of objectives, develop-mental efficiency,
effectiveness, impact and sustainability. An evaluation should pro-vide information that is
credible and useful, enabling the incorporation of lessons learned into the decision-making
process of both recipients and donors”.
An evaluation can be done during implementation (“mid-term”), at its end (“final
evaluation”) or afterwards (“ex post evaluation”), either to help steer the project or to draw
lessons for future projects and programming. “Ex ante” evaluation refers to studies during
the preparatory phases of the project cycle (pre-feasibility or feasibility studies).
A typical evaluation mission would last several weeks in the partner country, followed by a
shorter period in the donors country/donor. The major principles governing evaluation can
be summarized as follows:

 Impartiality & independence of the evaluation process in its function from the
process concerned with policy making, the delivery and management of assistance (=
separation of evaluation and responsibility for the project/ program/policy

 Credibility depending on expertise and independence of the evaluators &

transparency to be sought through an open process, wide availability of results,
distinction between findings and recommendations

 Usefulness: relevant, presented in a clear and concise way, reflecting the interests
and needs of the parties involved, easily accessible, timely and at the right moment
=improved decision-making

 Participation of stakeholders (donor, recipient...); if possible: views and expertise

of groups affected should form integral part of the evaluation; involving all parties
=capacity building

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  Types of Evaluations
Evaluations can take place:
1. When the project is still under way: such interim evaluation are usually under-
taken at mid-term (mid-term evaluation), to review progress and propose
alterations to project design during the remaining period of implementation;
2. At the end of a project (final or end-of-project evaluation), to document the
re-sources used, results and progress towards objectives. The objective is to
generate lessons about the project which can be used to improve future de-
signs;
3. A number of years after completion (ex post evaluation), often focusing on
impact.

 Evaluation Criteria

 The evaluation criteria shall be closely linked to the logframe. The following
are the criteria to evaluate projects outcome/impact.

Relevance The appropriateness of project objectives to the problems that it was sup-
posed to address, and to the physical and policy environment within which it
operated, and including an assessment of the quality of project preparation
and design – i.e. the logic and completeness of the project planning process,
and the internal logic and coherence of the project design.
Efficiency The fact that the Results have been achieved at reasonable cost, i.e. how well
inputs/means have been converted into Results, in terms of quality, quantity
and time, and the quality of the Results achieved. This generally requires
comparing alternative approaches to achieving the same outputs, to see
whether the most efficient process has been adopted.
Effectiveness An assessment of the contribution made by Results to achievement of the
Project Purpose, and how Assumptions have affected project achievements.
Impact The effect of the project on its wider environment, and its contribution to the
wider sectoral objectives summarized in the project’s Overall Objectives, and
on the achievement of the overarching policy objectives of the EC.
Sustainability An assessment of the likelihood of benefits produced by the project to
continue to flow after external funding has ended, and with particular
reference to factors of ownership by beneficiaries, policy support, economic
and financial factors, socio-cultural aspects, gender equality, appropriate
technology, environmental aspects, and institutional and management capacity.

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What is the Difference Between Monitoring, Evaluation and Audit?

Frequently, there is confusion about what monitoring, evaluation and audit are, where and
how they differ and how they can be delimited from each other. See table that follows.

Criteria Monitoring Evaluation Audit

What? Mainly analysis of Mainly analysis of efficiency and Check compliance
efficiency and effectiveness, impact, relevance with legal and
effectiveness(measuring and sustainability of contractual
actual against planned action/intervention obligation in using
deliverables funds(traditional
audit)
How? Rapid and continuous In-depth analysis Verification of
analysis-to improve financial
ongoing records(financial
actions/performance audit)
Who? Internal and external External evaluators specialized in External
staff the subject evaluated professional
auditor
When? Regularly, several times Once or twice essentially at the During or after
end or ex-post drawing lessons implementation
from the past in order to orient
future policies and actions but
also during implementation: mid-
term evaluation to re-orient
implementation

 Evaluation Reports: Outline and Issues to Be Considered

The evaluation report should mirror the above evaluation criteria, taking into account the
nature of the project, the stage at which the evaluation is carried out, and the users for whom
the report is prepared. It should be kept in mind that information requirements vary widely
between the different types of users. When drafting Terms of Reference it is necessary to
decide the relative importance of each of the evaluation criteria for a given study: usually, a
mid-term evaluation will rather focus on questions of efficiency (while impact issues will not
be of highest importance); ex post evaluations may rather focus on questions of impact and
sustainability.

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In any case, conclusions need to be based on the analysis, and the link between
recommendations and conclusions needs to be clear. Recommendations should either
concern the project in question or similar projects in the future, depending on the type of
evaluation.

A standard format for evaluation including explanatory comments can be found on the
Internet. However, the structure of an evaluation report should be determined primarily by
its intended main purpose and its target groups/users. In general, the main sections of an
evaluation report should be as follows:

I- Executive It should be tightly drafted, and usable as a free-standing document. It

Summary should be short, not more than five pages. It should focus on the
main analytical points, indicate the main conclusions, lessons learned
and specific recommendations. Cross-references should be made to
the corresponding page or paragraph numbers in the main text that
follows.
II - Main Text The main text should start with an introduction describing, first, the
project or program to be evaluated and, second, the evaluation
objectives. The body or core of the report should follow the five
evaluation criteria, describing the facts and interpreting or analyzing
them in accordance with the key questions pertinent to each criterion.
III – Conclusions These should be presented as a separate final chapter. Wherever
and possible, for each key conclusion there should be a corresponding
Recommendatio recommendation. The key points of the conclusions will vary in nature
ns but will often cover aspects of the evaluation criteria. The ultimate
value of an evaluation depends on the quality and credibility of the
recommendations offered. Recommendations should therefore be as
realistic, operational and pragmatic as possible. Recommendations
should be carefully targeted to the appropriate audiences at all levels.
IV – Annexes
• Terms of Reference of the evaluation
• Names of the evaluators and their companies (CVs should be
shown, but summarized and limited to one page per person)
• Methodology applied for the study (phases, methods of data
collection, sampling etc)
• Logical Framework matrices (original and improved/updated)
• Map of project area, if relevant
• List of persons/organizations consulted
• Literature and documentation consulted
• Other technical annexes (e.g. statistical analyses)

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6.4 Project termination and Learning

The closing phase of the course development project overlaps with implementing the
course. The closing phase of the project is the most likely of the phases to be overlooked by
the project manager and the project team. For all purposes, the project has completed! The
course has been turned over to the owner and is being scheduled and delivered. However,
there is still valuable work to be done. Just as in all relationships, closure is important. In
project management the project requires closure after achieving its objectives or being
terminated for other reasons. Closing the project not only provides for completion of
administrative activities, but also provides evaluation of project performance which can be a
valuable learning tool for the project manager as well as others.

The project plan, baseline plan, and other project records have been compiled and updated
throughout the project’s life. Project facts or statistics should be compiled from project
information that will assist in the assessment of project performance. These might include
comparisons of the baseline plan to project plan, plan to actual results, scope changes,
milestones to actual results, and others. This, plus information about the delivered product,
will be used to assess project performance.

Let’s look more specifically at the sets of activities which must occur during the closing
phase of the project.
1. Hand off to the implementing organization.
2. Ensure project deliverables meet stakeholder requirements.
3. Close the project:
i. close contracts;
ii. document lessons learned during the project.
4. Release resources.
5. Evaluate the project process.

Steps 1 through 4 above formally complete the project and clearly end the project to the
sponsor and all stakeholders. It is important to secure this agreement to indicate to the

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sponsor and stakeholders that any additional work will require a new project and project
team.
i. Hand-off to the implementing organization
During the planning phase of the project, the project team identified activities for the hand-
off of the e-learning project to the implementing organization. These activities may have
included the development and delivery of the following:
o the development of customer service procedures documented in a manual, a
help system, and frequently asked questions document;
o the development of administrative procedures documented in a manual, a
help system, and frequently asked questions document;
o the development of information technology/information services procedures
documented in a manual, help system, and frequently asked questions
document;
o the development of end user procedures documented in a manual, help
system, and frequently asked questions document;
o a training course for customer service, administrative, and end users.

These items were all designed and developed in the executing and controlling phases of the
project and delivered to the respective users in the closing phase of the project. When these
documents, procedures, and help systems and the relevant training have been transferred
and delivered, the staff in the respective organizations is prepared to implement the e-
learning project.

ii. Obtain agreement on deliverables

During the design and development phases of this e-learning project, your relationship with
the sponsor and major stakeholders may have been strained. It is quite likely that they
wanted enhancements to the original scope of the project as described in the project charter.
And, considering the ever-present concerns regarding the project’s triple constraints, you
were not eager to agree to those enhancements. So, here we are at the end of the project,
and you must secure agreement from the sponsor that the project is finished. Hopefully, in
spite of the difficulties and challenges you may have faced during the project, your
relationship with the sponsor and key stakeholders is still amicable.

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The project deliverables, as modified through the change management process, have been
completed, tested, and transferred to the organization responsible for on-going operation.
Now is the time to signal to the sponsor and key stakeholders that the project is finished.
Any new updates, enhancements, fix, etc. are outside of the scope of this project. A new
project with new funding and a new team must be chartered for those enhancements. The
best way to signal the finality of this activity is to obtain the sponsor’s signature, possibly on
the project charter, agreeing to the completion. Now that the sponsor has agreed that the
project is finished, it’s time to close all contracts with internal and external consultants and
vendors and to store lessons learned into a knowledge base.
 Project closure report
As with any other project decisions, authority to close or merge a project should be carefully
documented. The most effective way of doing this is by production of a project closure
report. This should document the following:
o reasons for closure;
o who authorized closure and the agreement or sign-off from the project board
and/or sponsor;
o date of the decision;
o timescale for closure (a revised project plan or exit strategy, showing the
timescale for controlled shutdown of the project, including all its constituent
parts, unless they have been transferred or handed over to other projects or
operations);
o statement of delivery against the project plan. This should record if all the
deliverables are on time, cost and quality standards (any slippage should be
noted);
o how residual risks are to be managed (i.e., by whom);
o how residual issues to be handled (i.e., by whom and by when);
o how internal and external communications are to be handled;
o how project resource issues are to be handled (e.g., handling of staff/HR
issues, remaining budget funds or liabilities);
o transfer of responsibilities for the delivery of still required deliverables or
outcomes (To whom? Are the target dates different?);
o confirmation of whether lessons learned have been captured and reported;

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 o how the post-closure evaluation (in the form of post-implementation review)
is to be conducted (by whom, by when, and how resourced);
o confirmation that project documents have been completed and scrubbed of
any superfluous material in line with institutional records management
guidance. Also that they have been closed and archived or handed over to
the team responsible for managing any residual or operational issues and
risks.

iii. Close the project

To close the project, the project manager must verify that all project contracts originated for
the project have been closed and the deliverables have been delivered to and accepted by the
sponsor and receiving organization. All project records should be reviewed to determine the
success or failure of that particular activity and documented to be archived as lessons learned
from this project. The project management plan should be reviewed to ensure that all
updates to relevant plans have been completed.

 Close contracts
Just as when securing the final sign-off from the project sponsor, the project team must
close all contracts with internal and external consultants and vendors. When you secured the
sponsor’s signature, the sponsor agreed that the deliverables met the requirements of the
project. This final sign-off must also be done with internal and external consultants and
vendors. Ideally, as each service was performed or each item was received, the service or
item was checked to ensure that the requirements of the contract were met. However,
whether or not that check was performed, now the check must be performed. You are about
to sign the contract and quite possibly make the final payment for the service or goods, so
that final check must be made by the project manager or project team member responsible
for securing the consultant or goods.

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Closing contracts includes ensuring that the contracted goods and services were acceptable
and met the requirements of the contract. If the contracted resource was personnel, the
project manager should ensure that the contracted personnel met requirements of the
contract. In either instance, records should be updated to reflect satisfaction with the
contractor since this vendor might be considered for subsequent contracts. Projects are
temporary in nature, if the product or service is required for the on-going operation of the
project, a new contract with the vendor must be agreed to by the implementing organization.

 Post-project review – document lessons learned

Lessons learned during this project are an important knowledge base for the organization.
Other projects within the organization as well as projects in external organizations will
follow or adapt the best practices created during this project. The data stored as lessons
learned might be the entire project management plan, techniques used to estimate activity
duration and cost, satisfaction reports with contractors, satisfaction reports with vendors,
potential risks to the project, and results of implemented responses to risks. All of these may
be reviewed as part of the post-project review.

The objective of the review is to bring closure to the project, review project performance,
identify open issues, and document lessons learned. The review should be brief and include
primary project stakeholders. It is recommended that a facilitator be used during the review
to guide the process of project performance assessment. Lessons learned from the project
will be discovered in the review by discussing problem areas, identifying probable causes,
and developing suggestions for improvement.

Documentation of the post project review should be stored in an accessible place so that
subsequent projects may learn from this one. Process improvement suggestions should be
referred to the planning and leadership team. Additional information will likely be collected
as feedback from the post project review which may require follow-up by the project
manager. Documents should be updated to include new information. This will be especially
true of the “lessons learned” document, as customers and other stakeholders may have
suggestions that will be very helpful to the project manager and other projects.

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The project manager should review the project records to determine the value of specific
records for future projects and for historical understanding of project activities should the
need arise. Records of no value should be discarded. Product documentation should be
turned over to the product owner or support team. The remaining records should be moved
to the project archives for future reference. A similar process should occur for hard-copy
documents. In many instances, these records are considered intellectual property and not for
release outside of the organization. In other instances, these records are considered public
domain and used to expand the knowledge base of the profession. In either case, the project
team is relieved to have the project completed and excited to get on with the next activity on
their plate.

Documenting lessons learned is often overlooked – allowing all the knowledge gained
through the execution of this project to be lost to those outside of the project team.
Consulting organizations, in particular, value this information, treat it as intellectual property,
parse the data and plans into small reusable packages, and store these in a knowledge base.
Techniques used to store the data are:
o a simple folder system available to all employees of the organization;
o an online forum, similar to a discussion forum, with a file store for the documents
and a discussion area for an on-going “conversation” with hints, tricks, and
application notes for the tools and templates stored in the file store;
o a knowledge-based system that contains a data store as well as an intelligent
o search engine.

Of primary importance here is the actual capturing of the knowledge! As mentioned above,
this step is frequently overlooked to the detriment of all subsequent projects that may have
benefited from the knowledge gained in this project.

iv. Release resources

Now that final agreements have been received from the project sponsor, all contracts with
internal and external consultants and vendors have been closed, and lessons learned have
been captured in the knowledge base, the staff can be released to their parent organizations.
Staff records for personnel assigned to the project should be updated to reflect actual work

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performed. In many instances, the project manager will need to evaluate each staff member’s
performance.
In a matrix organization, reviews of employees by the supervisors and peers on the project
teams are a significant portion of the staff member’s mid-year or annual performance review.
Once a formal review between the project manager and the project team member has been
completed, the proper evaluation forms may be updated, results agreed, and forwarded to
the parent organization for inclusion in the mid-year or annual performance review.

Additional final activities will include the disposal of physical resources that may have been
acquired. Some projects may have required special tools, equipment, software, furniture, etc.,
that will need to be disposed of or formally transferred to another team or project. Each
item should be identified and taken care of in an appropriate manner.

v. Evaluate the project process

Obtaining project team member, stakeholder, and sponsor perspectives regarding this
combined set of processes should be recorded and evaluated. Data should be collected from
these groups and analyzed for improvements to the process. Methods used to collect this
data are:
o individual interviews using a form to facilitate capturing consistent
information from each member;
o a panel discussion with each group using a form to capture consistent
information from each group;
o an online survey.

Once the perspectives have been captured using the methods outlined above, the results
should be analyzed to identify areas of improvement. These improvements may be stored in
the knowledge base to make them available to project teams that follow.

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6.5 Chapter summary

Project shall be monitored ad evaluated. Monitoring and evaluation are management

functions through which stakeholders ascertain whether projects meet their objectives.
Monitoring systems should: At all times be concerned with future progress, be simple and
cost effective, be able to detect deviations quickly and accurately and be verifiable. The
information acquired through monitoring systems can be divided into three categories:
monitoring of physical progress, monitoring of financial progress, monitoring the quality of
project outputs.

Closing the project is an important phase of the project and should not be overlooked.
Valuable information is gained through the project closing process and stored in the
organizational knowledge base as well as in increased knowledge and experience of the
project team members and future project endeavor. Consultants and vendors have been
contracted, their services used and products received, payments made, and satisfaction
measured. These contracts are closed and the information stored to benefit projects that
follow. The completion of the project has been celebrated. Project team members have
gained knowledge and experience and been released to their parent organizations.

The project manager can take that well-deserved time off; certainly there was not time for
that during the project. And, the project manager should prepare for the next project.
Projects are transient – the project manager needs to find the next activity that will expand
his or her experience base. As the project is moving toward completion, the project manager
should be investigating that next project.

Individual Project
Based on assignment2-4[chapter five] for the project idea of your first choice based on
detail project feasibility study and implementation plan you have developed prepare the
project evaluation, monitoring and closure strategies.
Note:
 this assignment should be computer typed, font: times new romans, siz2 12,
1.5 spacing

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  minimum page number-6, maximum 10
References
o UNIDO, Manual for Preparation of Industrial Feasibility Studies, UN.1991
o Harlod Kerzner, Project Management
o Chandra, Prasanna Projects-Planning, Analysis, Financing
o Appraisal guidelines for public sector projects, October 2004,Addis Ababa

o PCM Manual and Handbook EC http://europa.eu.int/comm/euro

peaid/evaluation/methods/pcm.h
tm
o PCM Guidelines (in English, GTZ http://www.gtz.de/pcm/deutsch
French, German, Spanish) /pcmleit.htm

o PCM Guidelines, M&E, etc. UNDP/GEF http://www.gefweb.org/Operatio

nal_Policies/Operational_Strategy
/operational_strategy.html
o PCM, Monitoring, Swiss Agency for http://194.230.65.134/dezaweb2/
Evaluation Development and home.asp
Cooperation

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CHAPTER SEVEN
7. MANAGING DEVELOPMENT PROJECTS
7.1 Introduction
Project management as processes describe a generalized view of how these processes
commonly interact, involving many subjects as marketing, time planning, quality
management, personnel management, risk management, financial management, physiology
of management and others. In projects, value creation activity is carried out with cooperative
participation of multiple individuals, teams, departments, corporations, groups, etc., which
have the same objective so that the projects result in a success.

Project scheduling system provides current status and forecast of completion dates for
scheduled work. As work progresses, forecast dates different than baseline dates for
milestones are expected and generate variances that are a key element of performance
measurement and analysis. In addition, completion of activities and milestones must be
objectively determinable.

Despite some similarities in some of the activities project organizations are different from
organizations such as companies and public corporations in that the former is temporarily
formed by members who directly participate in a project to achieve its goal. Changes in the
environment surrounding projects are increasingly changing, so project organization
management that is flexible and prompt in coping with situational changes is required. These
concepts are the subject of this unit.

7.2 Learning Objectives

This chapter is dedicated to managing development projects. After studying this chapter, you will
be able to:
 Understand concept of Project management
 Know project scheduling and controlling
 Understand project organization

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7.3 Managing Development Projects

Project management is the application of knowledge, tools and techniques to project

activities in order to meet or exceed stakeholder needs and expectations from a project.
Meeting or exceeding stakeholder needs and expectations invariably involves balancing
competing demands among: scope, time cost quality; stakeholders with different needs and
expectation; identified requirements (needs) and unidentified requirements (expectations).

Enhancement of purpose awareness and demonstration of leadership are significant factors

to move people and are a core part in project organization management as well. The role of
the project manager, a core existence in a team, by considering that a project team is a group
of individuals in the project organization who are directly involved with the performance of
the project should also be described as hereafter.

A. The Project Manager

The project manager is a person responsible for planning, organizing, implementing, and
completing the project, beginning with a job of getting things started. Sometimes, a project
manager is chosen late in the project life cycle, usually to replace another project manager
who is leaving the project for another work. Planning and organizing are important tasks of
the project manager and should be done well by a person who enjoys process.

Although a good plan is more often than not the result of a team effort, a project manager
who enjoys planning will see organizing as just another part of a good plan as it indeed is.
The project manager should be a well-integrated person who can shift gears as well as pay
attention to and keep in balance many issues that inevitably come across the desk. Usually, a
senior manager briefs the project manager on the project so that the project manager can
understand where it fits in the general scheme of things in the parent organization.

The first set of tasks of the project manager is to:

 prepare a preliminary budget and schedule;
 help select people to serve on the project team;
 get knowledge about the client;
 make sure that the proper facilities are available;

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  ensure that any supplies required early in the project life are available when
needed and
 take care of the routine details necessary to get the project moving.

After all, the people are added to the project, plans and schedules are refined. Mechanisms
should be developed that facilitate communication between the project manager and top
management, the functional areas, and the client. The project manager should hold meetings
and briefings to ensure that all those who will affect or be affected by the project are
prepared in advance for the demands they will have to meet as the project is implemented.
Projects do not have plenty of time. Therefore, a manager cannot “grow into the job”. The
manager has to be:

 the link between the internal and external stakeholder and organization;
 leader and motivator of project personnel;
 regulator of progress, speed, quality and cost;
 controller of finance and other resources and
 communicator and negotiator in all things affecting the project.

As a result, we could note that the project manager is the hub around whom all activities of
the project revolve. The project manager’s responsibilities are broad and fall primarily into
three separate areas:
 Responsibility to the parent organization.
 Responsibility to the project and the client.
 Responsibility to the members of the project team

 Role of a Project manager

For every project to succeed of every project, an efficient project management is necessary.
Project management includes defining and planning the necessary work, scheduling the
activities to complete the work, monitoring and controlling project activities and finally
conducting activities to end the project. It is important to remember that projects are carried
out by people, and the human aspects of project management are very critical for the project

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success. A project manager and a project team are involved in the project. At this place, let
us look into the role of project manager and the project team in management of projects.
The project manager is the person assigned by the organization to achieve the project
objectives. The role of the project manager is one of great responsibility. It is the project
manager's job to direct, supervise and control the project throughout its lifetime. However,
project managers should not carryout project work as managing the project is enough.

 Required skills of a Project Manager

o Project managers bear ultimate responsibility for making things happen. Traditionally,
they have carried out this role as mere implementers. To do their jobs, they needed to
have basic administrative and technical competencies. Today, they play a far broader
role. In addition to the traditional skills, they need to have business skills, customer
relations skills, and political skills.

 Responsibilities of a Project Manager

The main responsibility of a project manager is to plan thoroughly all aspects of the project,
soliciting the active involvement of all functional areas involved, in order to obtain and
maintain a realistic plan that satisfies their commitment for performance. Further, he has to
lead the people and organizations assigned to the project at any given point of time. A strong
positive leadership must be exercised by a project manager in order to keep the many
disparate elements moving in the same direction in a co-operative. Further, the other main
responsibilities of a project manager include the following:

 The project manager must define the project, reduce it to a set of manageable tasks,
obtain appropriate resources and build a team to perform the work.
 The project manager must set the final goal for the project and motivate his/her
team to complete the project on time.
 The project manager must inform all stakeholders of progress on a regular basis.
 The project manager must assess and monitor risks to the project and mitigate them.
 No project ever goes exactly as planned. Therefore, the project manager must learn
how to adapt to and manage changes.

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  To monitor performance, costs and efficiency of all elements of the project and the
project as a whole, the project manager has to exercise his personal judgment and
leadership in determining the causes of problems and facilitating solutions.
B. Project Human Resources
i. The project team
The American Heritage dictionary defines team as a group of individuals organized to work
together or a group on the same side-as in a game. When one thinks of a team, usually it
relates to sports-such as baseball, basketball or football but the word team is also related
now to business and to projects as well. In terms of a business orientation, a team
assembling employees into groups with a common aim and a need to work as a unit to
achieve a desired result. In many ways a business team is not much different from a sports
team. All team members are working together on a stated objective, such as solving a
company problem.

Effective team members have some common characteristics:

 Technical skills. Team member must be able to solve most of the technical
problems of the project, the exact way of technology applied usually requires
adaptation by the project team. In addition, a great many minor technical
difficulties occur, always at inconvenient times and need to be handled rapidly;
 Political sensitivity. The project manager (as well as senior team members) requires
political skills. The project success depends on the support from senior
management in the parent organization and this support depends on the
preservation of a delicate balance of the power between projects and functional
units;
 Strong problem orientation. The chances for successful completion of a project are
greatly increased if project team members are problem-oriented rather than
discipline oriented. Problem-oriented people tend to learn and adopt whatever
problem-solving techniques appear helpful; but discipline-oriented individuals tend
to view the problem from the point of their discipline. At the same time, the
project manager should adopt system approach;
 Strong goal orientation. Projects do not provide comfortable work environment
for individuals who focus on the activity rather than on results. Work flow is rarely

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 even, and for professionals, a 60-hour week is common as there are periods when
there seems to be little to do;

 High self-esteem. Projects can rapidly get into deep trouble if team members hide
their failures, or even a significant risk of failure, from the project manager.
Individuals of the team afraid to acknowledge their own errors own errors, or
point out possible problems caused by the work of others.

ii. Purposes of project teams

Project teams are efficient and effective ways of managing projects, where efficiency is
important to perform the work well, and effectiveness is essential to perform the right work.
The purposes of project teams might be to:
 achieve the schedule commitment the volume of work must be distributed (shared )
amongst number of people;
 meet the scope of the project since a project may require a range of skills which one
person is unlikely to have;
 bring together a group of people to go through the decision-making process. The
selected option should have the support and commitment of the team who will
collectively share the risk of the decision;
 enhance motivation-not to let the other side down;
 support other team members when they need help.

Management tests show that teams repeatedly make better decisions than the team members
would make individually having the same information. The individual’s purposes for team
membership or the reasons why an individual wishes to be a part of the team include:

1. it is a means of satisfying an individual’s social or affiliated needs, to belong to

something or be part of a team;
2. it is a means of establishing self-esteem. People like to introduce themselves- in this
way, they are defining themselves in terms of their relationship to others, as
members of a team or company;
3. it is a means of sharing risk with other team members;

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 4. it is a means of gaining support to carry out their particular goals. It also allows you
to bounce ideas off other team members who can offer support, constructive
criticism and alternative suggestions;
5. the team provides a psychological home for the individual.
6. it should be mentioned, however, that not everyone wants to work in a team-many
people prefer working on their own. With the increasing use of the Internet and
other means of communication working from home or away from the project office
is becoming more feasible and popular.
iii. Team building
Team building, being a part of a team, is a critical issue in project management. Teams
however, do not spontaneously appear- they must be built. The term building refers to a
procedure by which planned action steps are created with the purpose of designing and
gathering information on the functioning of the team and implementing changes, when
needed, based on the team’s consensus. Sometimes, the following approach to building
teamwork is used;
 All members must understand and agree on the mission or purpose of the team
effort from the start.
 Each unit should have goal statements that are visible and relevant.
 The objectives of team based duty should be developed that are attached to the
mission and the goals that they support.
 Responsibility charting, which involves the activities of responsibility, approval,
support, and information should be a part of the team-building process.

The following ten specific suggestions are identified for building a project team.
1. Develop and maintain a personal plan for team building and operation. This plan
helps to understand the level about the team and its performance. The team has to
be continuously stimulated to do its best.
2. Hold both periodic and special team meetings. The usual forum for team operation
is a meeting of one type or another. Periodic meetings help to maintain continuity
and, depending on the project, can be held weekly, biweekly or monthly. Special
team meetings are called in response to unique situations that may arise.

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3. Clarify missions, goals and roles. It is necessary to clarify the overall mission of the
team, the specific goals that are to be achieved, and the roles of the various team
members. In a project context, these are often well known because, as a minimum,
they are articulated implicitly in the project plan.
4. Run the team in a participative, possibly consensual manner. This implies full
involvement of all team members in the process as well as in the products of the
team. Lack of participation can be a signal of some type of dysfunction in the team.
5. Involve the team in situation analysis and problem solving. Its purpose is to examine
difficult situations that inevitably arise during the course of a project and, thought a
dynamic team, develop a saluting. The project manager may have well-developed
ideas as to the nature of a problem as well as its solution, but it is critical to obtain
the ideas and inputs from other key team members who may be able to suggest
answers that may not have been considered.
6. Give credit to active, positive team members and contributions. This is a very
important part of the team building and it can be achieved in many ways-from a pat
on shoulder to formal acknowledgements at a meeting.
7. Assure team efficiency and productivity. This means making progress in accordance
with the project plan as well as being efficient in the use of everyone’s time at all
team meetings.
8. Obtain feedback from team members. Feedback should be sought from al team
members, preferably through one-to-one sessions. Team members who have
problems with the team may be wary about expressing their views to other.
9. Integrate, coordinate, facilitate and assure information flow. Adopting this position
normally pays great dividends to attain overall team effectiveness. This may appear
to be a passive role, but actually it can be exercised in a rather active manner. It
should be assured that the best efforts of all team members are brought out.
10. Maintain effective communication. This includes listening, adopting management by
walking around, assuring participation by all team members. Poor communicators
are likely to fail at the challenging job of running a project. Strong and well-
considered communication is at the heart of building a productive team

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 iv. Team development
Individuals brought together to work on a project do not automatically become a team the
day the project begins. It takes time and energy to transform a group of people into a team.
The individuals likely come from varied backgrounds and they may have different reasons of
being involved in the project. They may represent different levels (positions) from various
departments within the company, or some from other organizations altogether.
There may be cultural, linguistic, religious, or social diversity among team members, and it
may take time for them to get knowledge about each other and understand each other’s
motivations. Even if they are all committed to the project, they will likely have different
reasons for that commitment and different perspectives on what constitutes success in the
project.

Teams go through several stages of growth on their way towards becoming a cohesive and
productive team. Most books refer to the classic Tuchman Approach of the five stages in the
team development:
 Forming. This stage involves becoming committed to group goals and getting
acquainted with the other team members. Members of the team gain initial
awareness that they are now a team. They also are briefed on why the team was
formed and what is the team’s mission or charter. This way, the meaning to the
team’s existence is given. There is typically a level of confusion, and team members
look to the team leader to provide structure as they identify the role of each member
and determine how to function as a team. They also attempt to define their assigned
task and determine how to accomplish it. In this stage, the project manager
concentrates on providing leadership, direction, and a lot of information.
 Storming. As goals and objectives are clarified, at this stage, team members see the
gap between reality and their initial expectations. They may experience dissatisfaction
and begin to re-examine their goals and structure. They may also question the role of
the leader or other team members, and become defensive or competitive. At this
stage, it is critical for the project manager to keep the team focused and provide
encouragement as well as to listen with understanding to all the members.
 Norming. At this stage, team members begin to resolve conflicts through increased
cooperation and trust. They settle on ground rules and boundaries and establish

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 norms that keep them together or enable them to work together as one goal oriented
team. At this stage, the project manager provides leadership and continued
encouragement.
 Performing. At this stage, team members work together productively and produce
high quality results. They prevent problems or work through them constructively.
They provide their down direction and encouragement and feel satisfaction in
working with the team. Members become loyal to the ream and less dependent upon
the leader. In this stage the project manager can focus on getting the team the
resources and recognition it needs.
 Adjourning. At this final stage of team development, there occurs a team that has a
specified lifetime. An evaluation of team accomplishments provides important
feedback on job performance and working relationships.

7.4 Project Scheduling and Controlling: Activities and Resources

A schedule is the logical representation of all the activities in a project showing their
dependency relationships. Scheduling determines the timing of operations in the project.
The schedule will determine the specific start and completion dates for the project and all
project activities.

The process steps are:

 Develop the list of project activities

 Sequence the list of project activities
 Determine the relationships between activities
 Establish the duration for each activities
 Determine the project duration (start and completion dates)

1) Activity Definition

Identify the specific activities that must be performed to produce the various project
deliverables. Information or inputs to accomplish this are the following:

a) WBS is the primary input to activity definition. For more details seen
WBS Development and Maintenance guide in this manual.
b) Scope statement contains project justification and the project objectives.
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 c) Strategic plan should be supportive of the performing organization’s
strategic goals.
d) Historical information is activities which were actually required on
previous, similar projects.
e) Constraints are factors that will limit the project team’s options. For
example, a predefined budget is a constraint that is highly likely to limit
the team’s options regarding scope, staffing, and schedule.
f) Assumptions are factors that, for planning purposes, are considered to be
true, real, or certain. Assumptions affect all aspects of project planning,
and are part of the progressive elaboration of the project. Project teams
frequently identify, document and validate assumptions as part of their
planning process. Assumptions generally involve a degree of risk.
g) Expert Judgment will often be required to assess the inputs to this process.

Such expertise may be provided by any group or individual which specialized knowledge or
training, and is available from many sources, including:

 Other units within the performing organization.

 Consultants.
 Stakeholders, including customers.
 Profession and technical associations.
 Industry groups.

2) Activity Sequencing
Activity Sequencing involves identifying and documenting interactivity logical relationships.
Activities must be sequenced accurately to support later development of a realistic and
achievable schedule. Information or inputs to accomplish this are the following:
a) Activity list must include all activities that will be performed on the
project. It should be organized as an extension to the WBS to help
ensure that it is complete, and that it does not include any activities that
are not required as part of the project scope. As with the WBS, the

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 activity list should include descriptions of each activity to ensure that the
project team members will understand how the work is to be completed.
b) Product description documents the characteristics of the product or service
that the project was undertaken to create. The product description will
generally have less detail in early phases and more detail in later ones as the
product characteristics are progressively elaborated.

The product description should also document the relationship between

the product or service being created and the business need or other
stimulus that gave rise to the project. While the form and substance of the
product description will vary, it should always be detailed enough to
support later project planning.

c) Discretionary dependencies are those that are defined by the project team.
They should be used with care and fully documented, since they may limit
scheduling options. Discretionary dependencies are usually defined based
on knowledge of:
(1) “Best practices” within a particular application area.
(2) Some unusual aspect of the project where a specific sequence is
desired, even though there are other acceptable sequences. Often
they are called preferred logic, preferential logic, or soft logic.
d) External dependencies are those that involve a relationship between project
activities and no project activities. For example, environmental hearings
may need to be held before the site preparation can begin in the
construction phase of a project.
e) Milestones events should be identified to ensure that the
requirements for meeting the milestone(s) are met.
3) Relationships between Activities
Identifying direct relationships provides greater understanding to the project tasks and
schedule. By identifying the relationships between activities in scheduling, you identify
the sequence plus dependencies of tasks. There are 4 types of scheduling dependencies:

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 a) FS – Finish to Start - the initiation of the work of the successor depends
upon the completion of the work of the predecessor.
b) SS – Start to Start – the initiation of the successor depends upon the
initiation of the work of the predecessor.
c) FF – Finish to Finish – the completion of the work of the successor
depends upon the completion of the work of the predecessor.
d) SF – Start to Finish

Using the relationships, described above, the activities and the logical relationships
among them is formally known as a Network Diagram.
4) Activity Duration
Activity duration is estimating the number of work periods required to complete an activity
will often require consideration of elapsed time as well. It involves determining which day
of the week it begins, and whether or not weekend days are treated as work periods.
Information or inputs to accomplish this are the following:
 Activity list
 Constraints
 Assumptions
 Resource requirements are a description of what types of resources are
required and in what quantities for each element at the lowest level of the
WBS. Resource requirements for higher-levels within the WBS can be
calculated based on the lower-level values. If additional resources are
added, projects can experience communication overload, which reduces
productivity and causes production to improve proportionally less than the
increase in resource.
 Resource capabilities – the duration of most activities will be influenced by
the capabilities of the human and material resources assigned to them.
 Historical information
 Identified risks –the project team considers information on identified risks
when producing estimates of activity durations, since risks can have a
significant influence on duration. The project team considers the extent to

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 which the effect of risks is included in the baseline duration estimate for
each activity, including risks with high probabilities or impact.

5) Techniques for Estimating Activity

Duration
a) Expert Judgment – durations are often difficult to estimate because of the
number of factors that can influence them. Expert judgment and historical
information should be used whenever possible. If such expertise is not
available, the estimates are inherently uncertain and risky,

b) Analogous estimating, also called top-down estimating, means using the

actual duration of a previous, similar activity as the basis for estimating the
duration of a future activity. It is frequently used to estimate the project
duration when there is a limited amount of detailed information about the
project. This is a form of expert judgment. Analogous estimating is most
reliable when 1) the previous activities are similar in fact and not just in
appearance, 2) the individuals preparing the estimates have the needed
expertise.

c) Quantitatively based durations – the quantities to be performed for each

specific work category defined by engineering/design effort and the
construction effort, when multiplied by the productivity unit rate can be
used to estimate activity durations.

d) Schedule contingency – Project teams should incorporate an additional

time frame that can be added to the activity duration or elsewhere in the
schedule as recognition of schedule risk. This reserve time can be a
percentage of the estimated duration, or a fixed number of work periods.
The reserve time can later be reduced or eliminated, as more precise
information about the project becomes available. Schedule contingency
should be well document along with other data and assumptions.
6) Rolling Wave Concept
The Rolling Wave concept is a continual expansion of scheduling details as time progresses
increasing planning for near-term work. This continual review should further define

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activities with the most current available information, and is not to be confused with
schedule change resulting in delay or acceleration of work.
As a minimum, schedules should reflect detail planning for at least a six month period of
work which is in progress or near-term. The near-term work should be evaluated quarterly
to provide an additional three months of expanded detail; hence the term “Rolling Wave”.

o Baseline Schedule
Schedules are established by the generation of the Critical Path Method (CPM)
network representative of the total project scope for all functional organizations in
accordance with the WBS for the project. Resources are loaded at the Control
Account Level and CPM schedule calculations performed to determine early and late
schedule dates, total float, and network critical path based on a resource levelled
schedule. Any resource over-allocation is resolved before the schedule baseline is
targeted. It is recommended for resource loading to use man hours for scheduling
databases using hourly planning units/man days for scheduling databases using daily
planning units. Direct man hours, subcontract man hours, and equipment dollars are
the cost elements to be resource loaded.

o Schedule Status
Schedules will be updated on a periodic basis to measure performance and to provide
management pertinent information. This involves ascertaining the amount of progress
for all in- progress activities and determining whether or not an activity or milestone has
been started and/or completed. The actual status is recorded and graphically depicted
on appropriate schedules. Schedules used for performance measurement and reporting
are updated on a monthly basis, concurrent with cost accumulation and reporting.

Current schedule progress will be analysed in relation to the baseline schedule. This is
accomplished by setting the baseline schedule as the target in the current schedule. The
Total Float Variance is determined by measuring the Early Start/Finish of the Target
Schedule against the Early Start/Finish of the Current Schedule. This comparison will be
implemented in all project phases throughout the project’s life. Total float for those

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 activities which affect milestone dates or cross control accounts will be controlled by the
Project Manager; otherwise it will be managed by the responsible organization.
o Schedule Analysis
The Critical Path Method (CPM) analysis technique is used to determine the criticality of
an activity or milestone based upon the amount of time that activity/milestone can slip
without impacting the project completion. The number of working days which an
activity can slip without impacting the project completion is total float. The Project
Controls group is responsible for performing this analysis with input provided by the
Control Account Manager (CAM).

The Baseline schedule reflects all authorized scope and schedule changes. The Current
Schedule reflects the baseline plus actual progress to-date and forecast progress from that
date forward. A comparison between the Current Schedule and the Baseline Schedule, a
review of the resultant changes in total float for each activity will indicate the criticality of
the activity/sequence of activities in the timely completion of the milestone to which they
are related.

Late activities with a total float of twenty working days or less should be placed on a
Critical Items List. It is important to remember that schedule analysis should be performed
in conjunction with schedule performance measurement analysis. Only through schedule
analysis (CPM analysis) can one determine if work is progressing on the critical path.

The review and approval process follows after the analytical process has been completed.
More than one alternative work around plan (different logic scenarios) and associated
schedule impact may be identified, as impacts to the next higher schedule level are
identified. This could require higher level management involvement. Any impacts as a
result of the CPM analysis will be reported on the Critical Items List Report and
addressed in the Project Review Meeting for resolution. In addition, after the evaluation
recommendation to the Project Manager (PM) to issue an Early Warning will be made, if
he deems necessary.

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 A. Analysis Techniques
1) Compare Project Completion date – the current schedule early finish date to the
baseline early finish date.
2) Focus on critical path activities – for complex projects the first 3 critical paths should
be analysed and evaluated.
3) Gather relevant data:

a) Detailed activity data – validate the current activities and activity

sequencing reflects the intended steps for the responsible group to meet
their commitment.
b) Network logic – validate that the internal and external requirements
portrayed by the logic ties are still the current strategy for completing the
task(s).
c) Resource availability – validate that the resource requirements are
available to support the completion of the tasks as scheduled.

B. Critical Items List Report (CILR)

The Critical Items List is used to focus project team and management attention on problem
activities that may have significant impact on the project schedule. It should be the subject
of the Project Team Meetings to discuss corrective actions or alternatives to eliminate or
alleviate the schedule impact.

Only critical activities that are affecting the schedule or have the potential to do so should
appear on the list. Two categories of activities will be reflected, critical activities and
potential critical activities.

Those late activities with a total float of ten working days or less which may directly or
indirectly impact a project milestone should be categorized as a critical activity. Those late
activities with a total float of eleven to twenty working days should be categorized as a
potential critical activity. Unless the trend of schedule slippage is reversed, a potential
critical activity may become critical.

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o Schedule Revisions and Changes

Revisions to the schedule emanate from three sources:

 When progress reflects a schedule slip which may potentially impact project
completion, appropriate analysis is required to develop an acceptable recovery plan.
 Revisions necessitated by the limitation of planning insight into the future. This
usually involves assimilation of more details into the lower level schedules and may
involve logic and duration changes to reflect a current work plan.
 Revisions resulting from customer or project management redirection or change.

o Methods of shortening the schedule

 Focus on critical activities
 Add resources to reduce
durations
 Use relationships to
overlap activities
 Reevaluate relationships
 Break down long
activities
 Apply/modify
constraints
 Change calendar
assignments
 Put critical activities on a longer workweek
 Add exceptions to non-work time
o Duration Compression

Duration compressions uses ways to shorten the project schedule without changing the
project scope (e.g., to meet imposed dates or other schedule objectives). The techniques
for using duration compression are: Crashing and Fast Tracking.

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Technique 1 – Crashing or Crunching (Duration Reduction)

In which cost and schedule trade-offs are analysed to determine how, if at all, to obtain
the greatest amount of compression for the least incremental cost. Crashing does not
always produce a viable alternative and often results in increased costs.

Technique 2 – Fast Tracking

Doing activities in parallel that would normally be done in sequence Fast tracking often
results in rework and usually increases risk.

o Trending and Change Control

The schedule baseline is approved through the change control process, which sets
schedule dates for major tasks and commitments. The Project Milestone Schedule is
attached to the original BCP; which sets the cost and schedule baseline.

o Project performance is measured against the schedule baseline.

o Corrective action plans are developed to ensure project commitments are
met.
o Approved change control is utilized authorizing schedule baseline
changes.

The schedule baseline should be evaluated periodically to ensure that current project
strategies, current project internal and external commitments are incorporated. The Project
Manager executes the change control process as is written in the Project Execution Plan.
The Project Manager determines which level of the change control process is appropriated
by reviewing and evaluating each project change. The Trend Process is administered and
coincides in the total process.

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o Resource Scheduling and Levelling
A. Resource Loading
Resources are people (man hours/man days), equipment, costs, space, material bulks, etc.
It is recommended that direct hours, subcontract hours and equipment costs be utilized
for resource loading. The man hours/man days are further subdivided by the resource
types; Project Controls, Project Management, Engineering, Operations, etc. Project
Controls works closely with the Estimator during the process of developing an estimate.
Once the schedule is resource levelled and approved by the Project Team, Project
Controls provides the man hours by resource type and by month/year to the Estimator.
The Estimator computes the Direct Labor and Subcontract dollars, along with the indirect
costs for out year Wage Adjustments in terms of Ethiopian Birr.

B. Resource Scheduling
Good resource scheduling is the basis for maximizing the productivity of people and
equipment while minimizing their cost. It defines which resources should be utilized on
specific tasks, between which dates.
1) Resource definition
2) The advantages of Resource Scheduling are:
 Analytically manage and use
schedule float
 Analyse staffing requirements
 Evaluate effects of limited staffing
 Avoid wide fluctuations in daily need for various resources (levelling)
C. Resource Levelling
Scheduling without resource consideration often produces preliminary early-start
schedule that requires more resources during certain time periods than are available, or
requires changes in resource levels that are not manageable. Resource levelling often
results in a project duration that is longer than the preliminary schedule. This technique
is sometimes called the resource-based method, especially when implemented with
computerized optimization.

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 1) Advantages

a. Optimizes resource use

b. Helps maximize utilization of resources
c. Produces realistic start/finish dates
d. Avoids peaks and valleys in staff

2) Resource Over-Allocation

Resource Over-Allocation occurs when activities/tasks are competing for the same
resource at the same time. There are several means which can be used together or
independently to eliminate and/or reduce the over-allocation of a resource. Resource
reallocation from non- critical to critical activities is a common way to bring the schedule
back, or as close as possible, to its originally intended overall duration. Other methods
should also be considered in order to reduce duration of critical activities, such as; the
utilization of extended hours, weekends, or multiple shifts and the Use of different
technologies and/or machinery (i.e., automatic welding, electrical pipe cutters, etc.) are
other methods used to shorten durations that have extended the preliminary schedule.
Incorporation of the later method, will increase productivity and have a compounded
improvement of the activity’s duration.
a) The steps to resolve over allocation are
i. Increase the resource’s workweek
ii. Increase the resource’s workday
iii. Increase the resource amount by assigning additional resources to the activity.
o Switch or replace the over allocated resource with an available resource.
3) Resource Scheduling Techniques
i. Fast Tracking, if feasible is another way to reduce the overall project duration.
ii. Some project may have a finite and critical project resource, requiring that the
resource be scheduled in reverse from the project ending date; this is known as
reverse resource allocation scheduling - Backward Resource Leveling.
iii. Critical chain is a technique that modifies the project schedule to account for
limited resources.

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4) Resource Smoothing Techniques

The automatic approach to resource levelling is accomplished by scheduling each activity

when all resource requirements can be met for the entire, continuous duration of the
activity. If this condition cannot be met, the entire activity is delayed until the condition can
be met. The splitting, stretching or crunching technique can be specified as a levelling
technique.
a) Splitting
The nature of some activities dictates that the work, once it begins, must continue every
working day until it completes. Work on other activities, however, can occur during any
work-periods when sufficient resources are available, even if the work- periods are not
contiguous on the activity or resource calendar. This technique schedules a task to begin
when the required resources are available, suspends work if the resource supply becomes
too low, and resumes work when sufficient resources are available again.

b) Resource Stretching

Natures of some activities require a constant supply of resources for their entire
duration. Others tolerate a reduced supply, allowing them to continue working
through periods of low resource availability. This technique, stretching, increases the
duration of the activity by increasing the duration of the resources.

c) Crunching
Some activities cannot speed the completion by increasing their resource supply; these
activities are not crunchable. Crunchable activities can complete in less time if the resource
supply is increased. The duration of a crunchable activity is decreased by taking advantage of
additional available resources.

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7.5 Project Organization

In project management it is important to note that the traditional form of organization is not
suitable. This is because, a project is a non-routine, non-repetitive undertaking often plagued
with many uncertainties, the relationships in a project setting are dynamic, temporary, and
flexible which requires a coordination of the efforts of persons drawn from different
functional areas and contributions of external agencies. Due to these reasons, project
management calls for a different form of organization, sharper tools of planning and control,
and improved means of coping with human problems.

Hence there is a need for entrusting an individual (or group) with the responsibility for
integrating the activities and functions of the various departments and external organizations
involved in the project work. Such an individual may be called the project manager or
project coordinator. Depending on the authority that is given to the person responsible for
the project, the project organization may take one of the following three forms:
 Line and staff organization.
 Divisional organization.
 Matrix organization.

7.5.1 Line and Staff Organization

In this form of project organization, a person is appointed with the primary responsibility of
coordinating the work of the people in the functional departments. Such a person, referred
to commonly as the project coordinator, acts essentially in a staff position to facilitate the
coordination of line management in functional departments. The project coordinator does
not have authority and direct responsibility of the line management. He serves as a focal
point for receiving project-related information and seeks to promote the cause of the project
by rendering advice, sharing information, and providing assistance.

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7.5.2 Divisional Organization

Under this form of project organization, a separate division is set up to implement the
project. Headed by the project manager, this division has its complement of personnel over
whom the project manager has full line authority. In effect, this form of organization
implies the creation of a separate goal-oriented division of the company, with its own
functional departments. While the project manager still has the problem of coordinating the
inputs of other organizations involved in the project, he has total formal control over the
division he heads.

A very strong form of project organization, the divisional project organization facilitates the
process of planning and control, brings about better integration of efforts, and strengthens
the commitment of project-related personnel to the objectives of the project. It
considerably improves the prospect of fulfilling the time and budget targets.

This form of organization, however, may entail an inefficient use of the resources of the firm. It
may result in an unnecessary duplication of specialists in the company, because of the
necessity to allocate them in total to each project. Further, it may be difficult to achieve a
higher degree of specialization of expertise because the divisional project organization may
have to manage with, say, one mechanical engineer, rather than two specialists.

7.5.3 Matrix Organization

The line and functional form of organization is conducive to an efficient use of resources
but is not suitable for an effective realization of project objectives. The division form of
organization, on the other hand, is suitable for an effective realization of project objectives
but is not conducive to an efficient use of resources. The matrix form of organization, the
third form of project organization, seeks to achieve the twin objectives of efficient use of
resources and effective realization of project objectives - at the cost of greater organizational
complexity, of course.

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In a matrix organization, the personnel working on the project have a responsibility to their
functional superior as well to the project manager. This means that the authority is shared
between the project manager and the functional managers. The authority and influence of
the project manager cut across the traditional vertical line of command. The project
manager integrates the contributions of personnel in various functional departments toward
the realization of project objectives. While the personnel maintain their departmental
affiliation and are responsible to their functional superiors, they are responsible to the
project manager as well.

7.6 Chapter summary

‘Project management’ is defined as an organized venture for managing projects, involves
scientific application of modern tools and techniques in planning, financing, implementing,
monitoring, controlling and coordinating unique activities or task produce desirable outputs
in accordance with the determined objectives within the constraints of time and cost. The
person responsible for planning, organizing, implementing, and completing the project,
beginning with a job of getting things started is named project manager. Moreover, the
project manager should create team-assembling employees into groups with a common aim
and a need to work as a unit to achieve a desired result.

A project maintains a scheduling database which is a logical sequence from the project level
of the WBS to working level tasks. All schedules support baseline dates. Detail and working
level schedules are to be used for internal use only. At a minimum, a project should contain a
Project Milestone and Project Summary Schedule for monitoring and reporting project
status. The scheduling system should provide current status and forecast of completion dates
for scheduled work. As work progresses, forecast dates different than baseline dates for
milestones are expected and generate variances that are a key element of performance
measurement and analysis. In addition, completion of activities and milestones must be
objectively determinable.

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It is important to note here that the traditional form of organization is not suitable for
project management. A project is a non-routine, non-repetitive undertaking often plagued
with many uncertainties, the relationships in a project setting are dynamic, temporary, and
flexible which requires a coordination of the efforts of persons drawn from different
functional areas and contributions of external agencies. Due to these reasons, project
management calls for a different form of organization, sharper tools of planning and control,
and improved means of coping with human problems. Depending on the authority that is
given to the person responsible for the project, the project organization may take one of the
following three forms: line and staff organization, Divisional organization, Matrix
organization.

Individual Project
Based on assignment2-6 for the project idea of your first choice based on detail project
feasibility study and implementation plan you have developed analyze
 The management capability needed
 The organization structure needed for your project
 Make schedule analysis
Note:
 this assignment should be computer typed, font: times new romans, siz2 12,
1.5 spacing
 minimum page number-6, maximum 10

References:

1. UNIDO, Manual for Preparation of Industrial Feasibility Studies, UN.1991

2. Harlod Kerzner, Project Management
3. Chandra, Prasanna Projects-Planning, Analysis, Financing
4. Appraisal guidelines for public sector projects, October 2004,Addis Ababa

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CHAPTER-EIGHT
8. THE LOGICAL FRAMEWORK APPROACH – A PROJECT
DESIGN AND MANAGE-MENT TOOL

8.1 Introduction
The core tool used within PCM for project planning and management is described as the
Logical Framework Approach (LFA). The LFA is a technique to identify and analyze a given
situation, and to define objectives and activities which should be undertaken to improve the
situation. After program and project preparation, the LFA is a key management tool for
monitoring during implementation and evaluation. It provides the basis for Activity Schedules
and the development of a monitoring sys-tem, and a framework for evaluation. It thus plays a
crucial role in each phase of the cycle. Stakeholders should be involved into planning as much
as possible. This requires teamwork and facilitation skills on part of project planners. To be
used effectively, tools for technical, economic, social and environmental analysis support the
LFA. The nucleus of LFA is well described in this same chapter.

8.2 Chapter Objectives

Dear learner, going through all the chapters in the module we have reached the final chapter that
deals with project summary: The Log-Frame Approach (LFA). Upon completion of this chapter,
you will be able to:
 Understand and apply Log-Frame(Logical Framework) in preparing development
Projects

8.3 What is log-frame /Logical Framework?

LF is a method of planning, comprising a set of steps and a range of ‘tools’, which aim to
clarify perceptions, explore options and make choices about what solutions would effectively
address particular problems. The LFA starts with an analytical process and gives structure to
present the results of this process. It makes it easier to:
o set out systematically and logically the level of objectives of projects / pro-grammes
and the relationships between them;
o indicate whether they have been achieved;

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 o monitor the factors outside the scope of the project/programme which influence its
success.
Table 1. The logical frame work Matrix

Logical Objectively Sources of

Intervention(LI) Verifiable Verification(SV)
Indicators Assumptions
(OVI)

Overall
Objectives

Project Purpose

Result

Means Cost

Activities

Pre-conditions

The main results of this process are summarized in a matrix (the Logical Framework Matrix
or, more brief: the Log frame) with 16 boxes which shows the most important aspects of a
project, summarizing:

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 o why a project is carried out (Intervention Logic)
o what the project is expected to achieve (Intervention Logic and Indicators)
o how the project is going to achieve it (Activities, Means)
o which external factors are crucial for its success (Assumptions)
o where to find the information required to assess the success of the project (Sources
of Verification)
o which means are required (Means)
o what the project will cost (Cost)
o which pre-conditions have to be fulfilled before the project can start (Pre-conditions)

8.4 The Logical Framework Approach: Two Stages

Projects are designed to address problems faced by beneficiaries. A properly planned project
addressing the real problems of the beneficiaries cannot be achieved without an analysis of
the existing situation. The LFA is an evolutionary, iterative process starting with the
thorough analysis of an existing situation as a basis for later planning. Drawing up a logframe
has two stages, which are carried out progressively during the Identification and Appraisal
phases of the project cycle:
1. The Analysis Stage (Context / Situation Analysis), during which the existing
situation is analyzed to develop a vision of the ‘future desired situation’ and to select the
strategies that will be applied to achieve it. The key idea is that projects / programmes
are designed to address problems faced by beneficiaries, both women and men, as well as
to meet their needs and interests.

There are four steps to the Analysis Phase:

o Stakeholder Analysis
o Problem Analysis (image of reality)
o Analysis of Objectives (image of an improved situation in the future)
o Analysis of Strategies (comparison of different options to address a given
situation)
2. In the Planning Stage the results of the analysis are transcribed into a practical,
operational plan ready to be implemented. In this stage, the logframe is drawn up, and
Activities and resources are defined and scheduled.

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 ANALYSIS PHASE PLANNING PHASE

Stakeholder Analysis -identifying & Logframe-defining the project/ programme

characterizing major stakeholders, target structure, testing its internal logic, formulating
groups& beneficiaries, defining whose objectives in measurable terms, defining means
problems will be addressed by a future and cost (overall)
intervention

Problem analysis -identifying key Activity scheduling -deter-mining the

problems, constraints and sequence and dependency of activities;
opportunities; determining cause and estimating their duration, setting milestones
effect relationships and assigning responsibility

Analysis of objectives -developing Resource scheduling -from the activity

objectives from the identified problems; schedule, developing input schedules and a
identifying means to ends relationships budget

Strategy analysis -identifying the

different strategies to achieve objectives;
selecting the most appropriate
strategy(ies);determining the major
objectives (overall objectives and
project purpose)

The Analysis Stage:

i. Stakeholder Analysis

Any individuals, groups of people, institutions or firms that may have a relationship with the
project are defined as stakeholders. In order to maximize the social and institutional benefits
of the project and minimize its negative impacts, stakeholder analysis identifies all likely to
be affected (either positively or negatively), and how. It is important that stakeholder analysis
take place at an early stage in the identification and appraisal phases of a project.

In all societies, there are differences in the roles and responsibilities of women and men, and
in their access to and control over resources and their participation in decision-making.
Everywhere, women and men have inequitable access to services (e.g. transport, health,
education) and to opportunities in economic, social and political life. Gender inequalities
hinder growth and harm development.

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Failure to adequately address gender issues can damage the effectiveness and sustainability of
projects and programmes, even unintentionally exacerbate existing disparities. It is therefore
vital to analyze the gender differences and inequalities and to take them into account in the
intervention, its objectives, strategies and resource allocation. The stakeholder analysis must
therefore systematically identify all gender differences, as well as the specific interests,
problems and potentials of women and men among the stakeholder groups.
ii. Problem Analysis

Problem analysis identifies the negative aspects of an existing situation and establishes the
‘cause and effect’ relationships between the problems that exist. It involves three steps:
a) Precise definition of the framework and subject of analysis;
b) Identification of the major problems faced by target groups and beneficiaries
(What is / are the problem/s? Whose problems?);
c) Visualization of the problems in form of a diagram, called “problem tree” or
“hierarchy of problems” to establish cause – effect relationships.

The analysis is presented in diagram form showing effects of a problem on top and its causes
underneath. The analysis is aimed at identifying the real bottlenecks to which the
stakeholders attach priority and seek to overcome. The value of this type of diagram is
greatest if it is prepared at a workshop of those concerned (who there-fore know the
situation), thus establishing a commonly shared view of the situation.

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 Table 2. How to establish a problem tree
Step 1: Identify major problems existing within a given situation (brainstorming)
Step 2: Select an individual starter problem
Step 3: Look for related problems to the starter problem:
Step 4: Establish hierarchy of cause and effects:
• Problems which are directly causing the starter problems are put below
• Problems which are direct effects of the starter problem are put above
Step 5: Complete with all other problems accordingly
Step 6: Connect the problems with cause-effect arrows
Step 7: Review the diagram and verify its validity and completeness
Note:
1. Problems have to be worded as negative situations
2. Problems have to be existing problems, not future ones or imagined ones
3. The position of the problem in the hierarchy does not indicate its importance
4. A problem is not the absence of a solution, but an existing negative situation

Once complete, the problem tree represents a comprehensive picture of the existing negative
situation: There are two common difficulties that are experienced during problem
identification and analysis: inadequate problem specification and the statement of ‘absent
solutions’:

• Inadequate problem specification occurs when a problem is specified in

insufficient detail so that it does not communicate the true nature of the
problem. Statements such as ‘poor management’ need to be broken down so
that we understand what the problem is, and can therefore analyze the
• understand what the problem is, and can therefore analyse the underlying
causes - for example, the management problems might include poor financial
control, late delivery of key services, etc.
• Absent solutions are problem statements that do not describe the current
negative situation, but describe the absence of a desired situation. For exam-
ple, ‘Lack of trained staff’ does not describe the specific problem (staff has
in-sufficient or inappropriate skills), and risks biasing the intervention
towards the absent solution (‘training’) when in fact it might be an issue of
recruitment or personnel management.

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 iii. Analysis of Objectives
Analysis of objectives is a methodological approach employed to:
• Describe the situation in the future once the problems have been remedied, with the
participation of representative parties;
• Verify the hierarchy of objectives;
• Illustrate the means-ends relationships in a diagram.

The ‘negative situations’ of the problem tree are converted into solutions, expressed as
‘positive achievements’. For example, ‘agricultural production is low’ is converted into
‘agricultural production increased’. These positive achievements are in fact objectives, and
are presented in a diagram of objectives showing a means / ends hierarchy. This diagram
provides a clear overview of the desired future situation. Some objectives may be unrealistic,
so other solutions need to be found, or the attempt to solve them abandoned.

Step 1: Reformulate all negative situations of the problems analysis into positive situations
that are:
o desirable
o realistically achievable
Step-2 : Check the means-ends relationships thus derived to ensure validity and
completeness of the hierarchy (cause-effect relationships are turned into means-ends
linkages)
Step-3: If necessary:
o revise statements
o add new objectives if these seem to be relevant and necessary to achieve the
objective at the next higher level
o delete objectives which do not seem suitable / convenient or necessary

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Once complete, the objective tree provides a comprehensive picture of the future desired
situation, including activities necessary to achieve it (still formulated as objectives).
iv. Analysis of Strategies
The final step of the Analysis Stage involves selecting the strategy (ies) which will be used to
achieve the desired objectives. Analysis of Strategies involves deciding what objectives will
be included IN the project, and what objectives will remain OUT, and what the Project
Purpose and Overall Objectives will be. This step requires:

• Clear criteria for making the choice of strategies,

• The identification of the different possible strategies to achieve the objectives.
In the hierarchy of objectives, the different clusters of objectives of the same type are called
strategies. One or more of them will be chosen as the strategy for future operation. The
most relevant and feasible strategy is selected on the basis of a number of criteria to be
agreed upon for each project individually. The following are possible criteria:
o Priorities of and attractiveness to target groups, including time perspective of
benefits
o Resource availability:
 external funds
 counterpart / partner institutions’ funds
 expertise required / available
o Existing potentials and capacities (of target group/s)
o Relevance for sector / agreed strategy between EC and partner country and
relevance for contribution to overarching policy objectives
o Relationship and complementarity with other action
o Social acceptability
o Contribution to reduction of inequalities (e.g. gender)
o Urgency

These criteria will be used to compare the alternative project approaches and choose one or
more for future action. The criteria should be established by the concerned parties, including
beneficiaries and target groups, and best during a planning workshop, including all these
parties.
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 The selected strategy will then appear in the first column of the Logical Framework.

Table Step 1: Identify objectives you do not want to pursue (not desirable or not feasible)
Step 2: Step -2: Group objectives, to obtain possible strategies or components (clustering)
Step 3: Step-3: Assess which strategy/ies represents an optimal strategy according to the
agreed criteria
Step 4: Step-4 :Determine Overall Objective(s) and Project Purpose

8.5 The Logframe Matrix (how to read Log-frame)

The main document of the LFA is the logical framework matrix. It is a way of presenting the
substance of an intervention in a comprehensive form. The matrix has four columns and
four rows:
o The vertical logic identifies what the project intends to do, clarifies the causal
relationships and specifies the important assumptions and risks beyond the project
manager’s control.
o The horizontal logic relates to the measurement of the effects of, and resources used
by the project through the specification of key indicators, and the sources where they
will be verified.
o
Vertical Logic Horizontal Logic

Figure 1: how to read Log-frame.

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8.5.1 Intervention Logic [First Column]

The first column of the Logical Framework is called “Intervention Logic”. It sets out the
basic strategy underlying the project:
nd th
o Means (2 column, 4 row) - both physical and non-physical - allow to carry
out Activities;
o By carrying out these Activities, the Results are achieved;
o Results collectively achieve the Purpose;
o The Project Purpose contributes to the Overall Objectives.
The four levels of objectives are defined as follows:
i. The Overall Objectives of the project / program explain why it is important to society,
in terms of the longer-term benefits to final beneficiaries and the wider benefits to
other groups. They also help to show how the program fits into the regional /
sectoral policies of the government / organizations concerned and of the
overarching policy objectives of the donor or co-operation strategy of country. The
Overall Objectives will not be achieved by the project alone, it will only provide a
contribution to the achievement of the Overall Objectives.

ii. The Project Purpose is the objective to be achieved by implementing the project.
The Purpose should be defined in terms of sustainable benefits for the target
group(s) as part of the beneficiaries. The Purpose should also express the equitable
benefits for women and men among them. There should only be one Project
Purpose per project. Having more than one Project Purpose could imply an
excessively complex project, and hence possible management problems. Multiple
Project Purposes may also indicate unclear or conflicting objectives. Clarifying and
agreeing precisely what will define the project’s success is therefore a critical step in
project design.

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 iii. Results are “products” of the Activities undertaken, the combination of which
achieve the Purpose of the project. They should be numbered.
iv. Activities – the actions necessary to produce the Results. They summarize what will
be undertaken by the project. They should be related to the Results by adequate
numbering (Activity 1.1, 1.2….., 2.1, 2.2….).

8.5.2 Indicators [Second Column]

They are the detailed description of:

• The Overall Objectives
• The Project Purpose
• The Results
The physical and non-physical Means (inputs) necessary to carry out the planned Activities
are placed in the ‘bottom’ row of the second column, i.e. there are no Indicators for
Activities in the logical framework matrix. A rough estimation of the necessary resources
should be presented in this box. The Activities are related to the different Results. Indicators
for Activities are usually defined during the preparation of an Activity Schedule specifying
the Activities in more detail.

8.5.3 Sources of Verification [Third Column]

Sources of Verification indicate where and in what form information on the achievement of
the Overall Objectives, the Project Purpose and the Results can be found (described by the
Objectively Verifiable Indicators). The cost and sources of financing (Donor, Government,
etc.) are placed in the bottom row of the third column.

8.5.4 Assumptions [Fourth Column]

Assumptions are external factors that influence or even determine the success of a project,
but lie outside its control. They are the answer to the question: “What external factors are
not influenced by the project, but may affect its implementation and long-term
sustainability?” Pre-conditions differ from Assumptions in that they must be met before a
project can commence; often these concern back-up measures by the partners.

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For example, without the implementation of certain policy measures by the partner, the
project rationale may be undermined. Compared to the other columns, the ‘Assumptions’
column is lowered by one level and there are no Assumptions at the level of the Overall
st th
Objectives. The vertical logic in the logframe, i.e. the relationship between the 1 and the 4
column, works as follows:
o once the Pre-conditions are met, the Activities can start up;
o once the Activities have been carried out, and if the Assumptions at this level hold
true, Results will be achieved;
o once these Results and the Assumptions at this level are fulfilled, the Project Purpose
will be achieved;
o once the Purpose has been achieved and the Assumptions at this level are fulfilled,
contribution to the achievement of the Overall Objectives will have been made by
the project.

Figure 2. The vertical Logic

Interven Assump
tion tions
Logic

Overall
Objecti
ves

Project Assump
tions
Purpos
e

Results Assump
tions

Activiti Assump
es tions

Pre-
condi-
tions
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8.6 Additional points to LF understanding
Dear colleague, at this point we are aware that you still have another question to fully
understand Log-frame and apply it in developing development projects. The following are
the basic questions we feel are important to probe.

⇒ How to Identify the Intervention Logic?

Once agreement can be reached among stakeholders on what should be the Project Purpose,
then the objectives that lie within the scope of the project can be trans-posed from the
objective tree into the matrix. The objectives selected for inclusion in the project are set into
the first column of the Logframe. There are four levels of objectives. It is important to
ensure that the levels of objectives are correct.

1. Identification of the Purpose

Select from the hierarchy of objectives the objective that describes a sustainable benefit to the
target groups, including both women and men. To do so, it is helpful to start at the bottom of
the tree. By moving higher, objectives that reflect sustainable benefits can be identified.
2. Identification of the Overall Objectives
Select from the objective tree one or more objectives at the top which describe long term
benefits for society or the sector, to which the project will contribute.
3. Identification of Results
Select from the objective tree the objectives that – by the “means-to-ends” logic – achieve the
Purpose, and are thus Results.
Add other Results that also further the achievement of the Purpose. These can be identified
following a supplementary analysis of the opportunities and risks of the situation in question.
4. Transfer of objectives to the column Intervention Logic in the logframe (as OO, PP
and R)
5. Identification of Activities
o Select from the objectives tree the objectives that – by the “means-to-ends” – produce
the Results and translate them into Activities. Activities are formulated with the verb in
front: “Organize training sessions”, “Co-ordinate with major stakeholders”, etc.
o Add other Activities identified after supplementary analysis of the opportunities and
risks of the situation in question, e.g. through additional studies, through discussions
with stakeholders (e.g. in a planning workshop), paying attention to the specific
interests of under-represented groups.

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 6. The means-ends relationships are again analyzed and additional Results and
Activities may be incorporated, as denoted below by the boxes with an asterisk.
Note:
• Add only main Activities in the Logframe
• Relate them to the Results by attributing numbers to each Activity (Activity 1.1 is related to
Result 1, Activity 4.3 to Result 4.). This helps maintaining means to ends relationships.

⇒ How to find right level of Objective?

The following should provide guidance in defining the different levels of objectives in a
nation-wide sector programme:
• Worldwide, supra-regional, nation-wide benefits beyond the scope of the pro-
gramme at the level of the Overall Objectives, referring to the overarching
policy objectives of the donor (e.g donor like European Commission);
• Sustainable benefits for all target groups and beneficiaries at national and overall
sectoral level, including equitable benefits for women and men, at the level of
the Purpose;
• Sustainable benefits for segments of target groups at national or regional sectoral
level, at the level of the Results.
The objectives of one of the possible projects within the nation-wide sector pro-gramme
should correspond to the following levels of objectives described in section 8.4 above.

 sustainable benefits for all target groups and beneficiaries at national and
overall sectoral level, at the level of the Overall Objectives, referring, where
applicable, to the overarching policy objectives of the donor, including
gender equality ;
 sustainable benefits for segments of target groups at national or regional
sectoral level, including equitable benefits for women and men, at the level
of the Purpose and,

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  “products” of Activities undertaken (ends) at national or regional sectoral
level, at the level of the Results.
o How to Identify Assumptions?

It will have become apparent during the Analysis Stage that the project alone cannot achieve
all the objectives identified in the objective tree. Once a strategy has been selected, objectives
not included in the Intervention Logic and other external factors remain. These are crucial
for the achievement of Results, Project Purpose and Overall Objectives, but lie outside the
project’s its control. These conditions must be met if the project is to succeed, and are
included as Assumptions in the fourth column of the Logframe.
The probability and significance of external conditions being met should be estimated as part
of assessing the degree of risk of the project. Some will be critical to project success, and
others of marginal importance. A useful way of assessing the importance of Assumptions is
with the following flowchart. Once Assumptions have been identified, they are stated in
terms of the desired situation. In this way they can be verified and assessed. The following
table indicates possible steps on identifying Assumptions.

i. Identify in the hierarchy of objectives such objectives that are not covered by the
selected strategy but important for the success of the project
i. Place them as external factors at the appropriate level of the logframe
ii. Identify other external factors not included in the hierarchy which must be fulfilled
to achieve the Overall Objective, the Project Prpose and the Results
iii. Identify necessary Pre-conditions which have to be met in order to start with project
Activities
iv. Assess the importance of the external factors by using the assessment chart. De-
pending on the conclusions:
• Take out the external factor (almost certainly)
• Include the external factor as an Assumption (likely)
• Redesign the project (unlikely)
v. Check the Intervention Logic and Assumptions on completeness beginning with the
Pre-conditions, to see whether the Intervention Logic is indeed logical and
overlooks nothing

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 o Checking Quality Factors

A project can be said to be sustainable when it continues to deliver benefits to the project /
programme target groups for an extended period after the main part of the donor assistance
has been completed. In the past it has been found that projects have failed to deliver
sustainable benefits because they did not take sufficient ac-count of a number of critical
success factors. Quality is not an issue only to be considered shortly before the end of a
project, but should be kept in mind from the planning stage onwards.
o What are Quality Factors?
Experience has demonstrated that the longer-term sustainability of project benefits depends
on the following factors:
a. Ownership by beneficiaries – the extent to which target groups and
beneficiaries of the project / programme (including men and women) have
participated in its design and are involved so that it can have their support
and be sustainable after the end of the EC financing.
b. Policy support – the quality of the relevant sector policy, and the extent to
which the partner government has demonstrated support for the
continuation of project services beyond the period of donor support.
c. Appropriate technology – whether the technologies applied by the project
can continue to operate in the longer run (e.g. availability of spare parts;
sufficiency of safety regulations; local capabilities of women and men in
operation and maintenance).
d. Socio-cultural issues – how the project will take into account local socio-
cultural norms and attitudes, and which measures have been taken to ensure
that all beneficiary groups will have appropriate access to project services and
benefits during and after implementation.
e. Gender equality – how the project will take into account the specific needs
and interests of women and men and will lead to sustained and equitable ac-
cess by women and men to the services and infrastructures, as well as con-
tribute to reduced gender inequalities in the longer term.

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 f. Environmental protection – the extent to which the project will preserve or
damage the environment and therefore support or undermine achievement
of longer term benefits
g. Institutional and management capacity – the ability and commitment of the
implementing agencies to deliver the project / programme, and to continue
to provide services beyond the period of donor support.
h. Economic and financial viability – whether the incremental benefits of the
project / programme outweigh its cost, and the project represents a viable
long-term investment.
i. The substance and relative importance of these factors will depend on the
context and on the specific features of the project / programme.
Consideration of these is-sues may lead to changes in the project design.
The basic questions to address to ensure sustainability include;
1. Ownership by What evidence is there that all target groups, including both women
beneficiaries and men, support the project? How actively are and will they be
involved / consulted in project preparation and implementation?
How far do they agree and commit them-selves to achieve the
objectives of the project?

2. Policy support Is there a comprehensive, appropriate sector policy by the

Government? Is there evidence of sufficient support by the
responsible authorities to put in place the necessary supporting
policies and resource allocations (human, financial, material) during
and following implementation?

3. Appropriate technology Is there sufficient evidence that the chosen technologies can be used
at affordable cost and within the local conditions and capabilities of
all types of users, during and after implementation?

4. Environmental protection Have harmful environmental effects which may result from use of
project infrastructure or services been adequately identified? Have
measures been taken to ensure that any harmful effects are mitigated
during and after project implementation?

5. Socio-cultural issues Does the project take into account local socio-cultural norms and
attitudes, also those of indigenous people? Will the project promote a
more equitable distribution of access and benefits?

Have sufficient measures been taken to ensure that the project will
meet the needs and interests of both women and men and will lead to

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6. Gender equality sustained and equitable access by women and men to the services and
infrastructures, as well as contribute to reduced gender inequalities in
the longer term?

Is there sufficient evidence that the implementing authorities will

have the capacity and resources (human and financial) to manage the
7. Institutional and project effectively, and to continue service delivery in the longer
management capacity term? If capacity is lacking, what measures have been incorporated to
build capacity during project implementation?

8. Economic and financial Is there sufficient evidence that the benefits of the project will justify
viability the cost involved, and that the project represents the most viable way
to addressing the needs of women and men in the target groups?

Note:

 This check is an important part of project design, and not taking it into
account could undermine both the feasibility and the sustainability of the
project.
o How to Identify Indicators (OVIs) and Sources of Verification (SOV)?

Indicators (“Objectively Verifiable Indicators”) describe the project’s objectives in

operationally measurable terms (quantity, quality, target group(s), time, place). Specifying
OVIs helps checking the viability of objectives and forms the basis of the project monitoring
system. OVIs should be measurable in a consistent way and at an acceptable cost.
Sources of Verification are documents, reports and other sources providing information that
makes it possible to check the Indicators.

A good OVI should be SMART:

o Specific: measure what it is supposed to measure
o Measurable and
o Available at an acceptable cost
o Relevant with regard to the objective concerned
o Time-bound

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In addition, Indicators should be independent of each other, each one relating to only one
objective in the Intervention Logic, i.e. to one of the Overall Objectives, to the Project
Purpose or to one Result. Indicators at the level of the Results should not be a summary of
what has been stated at the Activity level, but should describe the consequences. Often, it is
necessary to establish several indicators for one objective, if the single indicator does not
provide a full picture of the change expected. Together, these will provide reliable
information on the achievement of objectives. At the same time, the trap of including too
many indicators should be avoided.

Also, the measurement and interpretation of OVIs should be identical if determined by

different persons, i.e. that different persons using the indicator would obtain the same
measurements. This is more easily done for quantitative measures than for those that aim at
measuring qualitative change. OVIs should already be defined during identification and
appraisal, but they often need to be specified in greater detail during implementation when
additional information is available and the demands for monitoring become apparent.

Care should be taken to ensure that the OVIs for the Project Purpose - the project’s “center
of gravity” - do in practice incorporate the notion of ‘sustainable benefits for the target
group’. When Indicators are formulated, the Source of Verification should be specified at the
same time. This will help to test whether or not the Indicators can be realistically measured
at the expense of a reasonable amount of time, money and effort.

The SOV should specify:

o The format in which the information should be made available (e.g. progress re-
ports, project accounts, project records, official statistics etc.)
o Who should provide the information
o How regularly it should be provided. (e.g. monthly, quarterly, annually, etc.)

Sources outside the project should be assessed for accessibility, reliability and relevance. The
work and cost of collecting information to be produced by the project it-self should also be
estimated and adequate means provided. There is often a direct relationship between the
complexity of the SOV (i.e. ease of data collection and analysis) and its cost.

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If an OVI is found too expensive or complicated to collect, it should be replaced by a
simpler, cheaper and often indirect (proxy) OVI: e.g. instead of conducting a detailed survey
on incomes of farm households, the changes of household expenditure may be assessed, e.g.
sales of veterinary suppliers and pharmacies, or of tools or household goods (clothes, energy
saving stoves, etc.) might be counted.

How to define OVIs?

1. Specify for each Result, the Project Purpose, and the Overall Objectives:
 the quantity= how much?
 the quality= what?
 The target groups= who?
 The time/period= starting when and for how long?
2. The place=where? Check whether the Indicators or Indicators describe the Overall
Objectives, Purpose or Results accurately. If not, other Indicators should be added or
new ones found.
3. Care should be taken to ensure that the OVIs for the Project Purpose - the project’s
“center of gravity” - do in practice incorporate the notion of ‘sustainable benefits for
the target group’.
How to choose SOV?
1. Decide what Sources of Verification are needed to obtain the information on OVIs.
2. Identify which sources are to be collected, processed and kept within the project, and
which are outside (existing sources).
3. Check sources outside the project to ensure that:
(a) their form/presentation is appropriate;
(b) they are specific enough;
(c) they are reliable;
(d) they are accessible (where and when);
(e) the cost of obtaining the information are reasonable.
4. Replace OVls for which no suitable sources can be found by others
Note:
Use existing resources as much as possible to avoid additional cost, time and effort to be
deployed.

 How to Identify Means and Cost?

The boxes “Means” and “Cost” replace OVIs and SOV at the level of Activities. OVIs and
SOV are thus not specified for Activities in the Logframe, but may be specified later when
preparing an Activity Schedule.

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Means are physical and non-physical resources (often referred to as “Inputs”) that are
necessary to carry out the planned Activities and manage the project. A distinction can be
drawn between: human resources and material resources.

Costs are the translation into financial terms of all the identified resources (Means). They
should be presented in a standardized format, which will specify the contribution of the EC,
the Government and any other party, such as target groups and beneficiaries. The Activities
should therefore be worked out sufficiently to enable estimates of the necessary physical and
non-physical means. This will include the means and cost required for management support
activities. An area for particular attention is the cost of collecting data on OVIs. This
estimate should be completed at the end of the appraisal phase.

 How to Establish Means and Cost?

1. Work out the human, material and financial means necessary to carry out the planned
Activities under each Result. Classify them according to the requirements of the co-
operation mechanism.
2. Work out the human, material and financial means needed for management and
support activities not included in the Logical Framework (e.g. building of a co-
ordination office, administrative and accounting staff, etc.). For transparency reasons,
you may just summarizes all these activities as a reminder at the bottom of the logframe.
You can then identify the means required and link them to the respective cost.
3. Calculate the cost of the resources thus established and shared among the financing
partners; prepare the total budget.
4. Classify the Cost by budget origin: EC, Government, target group or other donors.
nd
5. List a summary of Means in the 2 column behind the Activities in the Logical
rd
Framework and summarizes the cost by budget origin in the 3 column behind the
Activities.

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  Final Quality Check of the Logframe
Once the Means and Cost have been established, the logical framework matrix is complete.
It should now be reviewed one last time to check, whether:
o the vertical logic is complete and accurate;
o Indicators and Sources of Verification are accessible and reliable;
o the Pre-conditions are realistic;
o the Assumptions are realistic and complete;
o the risks are acceptable;
o the likelihood of success is reasonably strong;
o quality issues have been taken into account and, where appropriate, translated into
Activities, Results or Assumptions;
o the benefits justify the cost;
o additional studies are needed.

Individual Project
Based on assignment2-6 prepare the full-fledged Logfrmae for your project.
Note:
 This assignment should be computer typed, font: times new romans, siz2 12, 1.5
spacing
 Minimum page number3, maximum 5

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8.7 Chapter Summary
Logical Framework Approach (LFA is the core tool used within PCM for project planning
and management. It is a technique to identify and analyze a given situation and to define
objectives and activities which should be undertaken to improve the situation. After program
and project preparation, the LFA is a key management tool for monitoring during
implementation and evaluation. It provides the basis for Activity Schedules and the
development of a monitoring sys-tem, and a framework for evaluation. It thus plays a crucial
role in each phase of the cycle. Stakeholders should be involved into planning as much as
possible. This requires teamwork and facilitation skills on part of project planners. To be used
effectively, tools for technical, economic, social and environmental analysis support the LFA.
The nucleus of LFA is well described in this same chapter.

References

PCM Manual and Handbook EC http://europa.eu.int/comm/europeaid

/evaluation/methods/pcm.htm
PCM Guidelines (in English, GTZ http://www.gtz.de/pcm/deutsch/pcml
French, German, Spanish) eit.htm
PCM Guidelines, M&E, etc. UNDP/GEF http://www.gefweb.org/Operational_
Policies/Operational_Strategy/operatio
nal_strategy.html

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 POST TEST
1. The PERT in project management means program evaluation and _____ technique.
(A) resource
(B) reconciliation
(C) reconsideration
(D) review

2. “Risk” is usually _______ as the project progresses.

(A) increases
(B) reduces
(C) remains same
(D) becomes negligible

3. Assembling project team and assigning their responsibilities are done during which phase of a project
management?
(A) Initiation
(B) Planning
(C) Execution
(D) Closure

4. Which from the following statement(s) is/are NOT true?

I. Projects have defined objectives
II. Programs have a larger scope than projects
III. The projects and programs in a portfolio must be directly related
(A) I only
(B) II only
(C) III only
(D) II and III only

5. Projects management is divided in _____ process groups.

(A) 5
(B) 7
(C) 9
(D) 11

6. If any one factor of a project changes, _____ other factor(s) is/are likely to be affected.
(A) all
(B) one
(C) at least one
(D) at most one

7. Business Value =
(A) Tangible Elements
(B) Intangible Elements
(C) Tangible Elements – Intangible Elements
(D) Tangible Elements + Intangible Elements

8. Which from the following is NOT a tangible element?

(A) Fixtures
(B) Trademarks
(C) Monetary assets
(D) Stockholder equity

9. Which from the following is NOT an intangible element?

(A) Utility
(B) Public benefit
(C) Brand recognition
(D) Good will

10. Which from the following represents the correct project cycle?
(A) Planning→Initiating→Executing→Closing
(B) Planning→Executing→Initiating→Closing
(C) Initiating→Planning→Executing→Closing
(D) Initiating→Executing→Planning→Closing

11. The strategy used to correct resource over-allocations by balancing demand for resources and the
available supply is known as
(A) resource assignment
(B) resource leveling
(C) resource splitting
(D) resource scheduling

12. A horizontal bar chart that shows project tasks against a calendar is called
(A) milestone
(B) goal
(C) Gantt chart
(D) PERT chart

13. The statistical tool that depicts a project’s tasks and the relationships between those tasks is known
as
(A) milestone
(B) goal
(C) Gantt chart
(D) PERT chart

14. Which of the following statement(s) is/are true about a Project?

I. It brings change
II. It has risk
III. The outcome is certain
(A) I only
(B) II only
(C) I and II only
(D) I, II, and III

15. Which of the following is NOT a part of project management?

(A) initiating
(B) monitoring
(C) closing
(D) All above are parts

16. The scope of the work is defined in which phase of the project management?
(A) Initiating
(B) Planning
(C) Executing
(D) Closing

17. How the project work will be carried out, monitored, and controlled? These questions are answered
in which phase of the project management?
(A) Initiating
(B) Planning
(C) Executing
(D) Closing
18. The review of the successes and the mistakes is normally held during _____ phase.
(A) initiation
(B) planning
(C) execution
(D) closure

19. The business case and the justification for the project is determined during the _____ phase.
(A) initiation
(B) planning
(C) execution
(D) closure

20. According to Olivier Mesly, the 4 P’s critical for the success of a project are:
(A) plan, processes, people, policy
(B) plan, processes, people, power
(C) plan, processes, potential, policy
(D) plan, processes, potential, power

21. The basic nature of a project is a/an _____ one.

(A) permanent
(B) temporary
(C) (A) or (B)
(D) Both (A) and (B)

22. A process that involves continuously improving and detailing a plan as more detail become available
is termed as
(A) project analysis
(B) project enhancing
(C) progressive deliberation
(D) progressive elaboration

23. A program is usually a group of

(A) plans
(B) people and work
(C) related projects
(D) unrelated projects

24. Which from the following statement(s) is/are NOT true?

I. Projects have defined objectives
II. Programs have a larger scope than projects
III. The projects and programs in a portfolio must be directly related
(A) I only
(B) II only
(C) III only
(D) II and III only

25. Projects management is divided in _____ process groups.

(A) 5
(B) 7
(C) 9
(D) 11