2.
3 Project Identification
Project Identification-meaning
- It involves the conceiving of ideas or
intentions to set up a project.
- These ideas are then transformed into a
project.
Project ideas are normally initiated
by a perceived need [PROBLEM or
OPPORTUNITY] in an organization
and converted in to a formal project
proposal.
Project Identification-meaning
The major focus in this step is:
finding project ideas or identifying
needs or demands for projects.
The activities carried out are generally:
fact-finding survey, or review of census
or available secondary data.
Sources of project ideas
The community, researchers, experts, local leaders,
Policy makers, entrepreneurs, donors, NGOs,
Planners, etc.
Government policy priorities, unusual events, external
threats, unsatisfied demands, under utilized natural
resources, etc.
The business or government development planning
document
Needs of clients
Individual working in organizations, well informed
technical specialists
Opportunity studies
Sources of project ideas _Cont’d
By their very nature, opportunity studies are
indicative rather than detailed and hence are
generally based on macro-parameters and rough
estimates.
Such studies may also be carried out in one of the
following three directions:
a given geographical area (Area studies).
a specific sub-sector of economy or industry, like food-
processing, agriculture, or power generation (Sub-sectorial
studies).
exploitation of renewable and non-renewable natural,
agricultural, or industrial produce like minerals, sugarcane,
flash, fish, plants, and even geothermal energy sources, etc.
(Resource-based studies).
Approaches to project identification
There are two major approaches to
project identification :
(a) Top-down approach
(b) Bottom-up approach
Top-Down Approach
Projects are identified based on demands from
beyond the community.
This may include directives from:
international conventions (such as Kyoto
Protocol/climate change)
international institutions that have
determined particular priorities and thus
projects
national policy makers identifying
projects that pertain to party manifestos
and/or national plans.
Advantages of Top-Down Approach
It may be a rapid response to disasters like
floods, war outbreak because there is limited
time and chance to consult the beneficiaries.
It can be effective in providing important
services like education, health, water, roads
etc.
It can contribute to wider national or
international objectives and goals
Limitations of Top-Down Approach
Does not help in modifying strongly established
ideas and beliefs of people.
Assumes external individuals know better than the
beneficiaries of the service.
Communities have little say in planning process
rendering approach devoid of human resource
development.
Community develops dependency syndrome on
outside assistance and does not exploit their own
potential.
Bottom-Up Approach
In this approach, community/
beneficiaries are encouraged to
identify and plan the projects
themselves with or without
outsiders.
Advantages of Bottom-Up Approach
Interveners accomplish more with limited resources
since people tend to safeguard what they have
provided for themselves.
Develops people’s capacity to identify problems and
needs and to seek possible solutions to them.
Provides opportunities of educating people.
Helps people to work as a team and develop a “WE”
attitude - makes project progressive and sustainable.
Resources are effectively managed; dependence
reduces, there is increased equity, initiative,
accountability.
Limitations of Bottom-Up Approach
Not always effective for projects that require
urgency to implement.
Time-consuming and requires patience and
tolerance.
People sometimes dislike approach because
they do not want to take responsibility for
action.
The priorities of communities may not fit
with national or international priorities that
seek to have a broader impact.
Project Identification in Both approaches:
Involves needs assessment
- collecting, processing and analyzing data on
problems/needs of communities
Review of secondary data
- Look at books, survey reports/ research papers,
publications, media reports, internet etc.
Collecting and analyzing primary information
• Interviews
• Community mapping
• Focus Group Discussions
• Other methods
Activities (Steps) in Project
identification and initial screening:
Situation analysis
Stakeholders analysis
SWOT analysis
Problem analysis
Objective analysis
Alternative Tree Analysis or project selection
a) Situation analysis
This is about describing the problem or
situation to be addressed by the project.
This can be ‘problem based’ or ‘opportunity
based’.
e.g. what are the prevalent problem
situations or ‘opportunity based’, e.g. is
there an opportunity to serve people with
disability? Or is there an opportunity to
establish a Cement Factory (suitable soil)
B. Stakeholder Analysis
Stakeholder is any individual, group or
organization, community, with an interest in the
outcome of a program/project.
Key Question
Whose problems or opportunities are we
analyzing? Who will benefit or loose-out,
and how, from a potential project
intervention?
Stakeholder Analysis _ Cont’d
Purpose: To identify:
Needs and interest of stakeholders
Organizations and groups that should be
encouraged to participate in different
stages of the project
Potential risks that could put at risk
program
Opportunities in implementing a
program
Stakeholder Analysis: the power/interest matrix
A B
Context setter
High Keep Key Players
satisfied
POWER
C The Crowd: D Subject: Keep
Minimal informed
Low effort
Low LEVEL OF INTEREST High
C. SWOT Analysis-Cont’d
SWOT analysis is a tool for institutional appraisal and a
brainstorming exercise in which the representatives of
the organization participate fully.
Strengths
SWOT stands for:
Weaknesses
Opportunities
Threats
SWOT analysis of strengths, weaknesses,
opportunities, and threats.
D. Problem Analysis
Problems Analysis visually represents the causes and effects
of existing problems in the project area, in the form of a
Problem Tree. It clarifies the relationships among the
identified problems.
Problem Analysis-Cont’d
Relationships of Problems?
Simply connect causes and effects by directly “Because”
EFFECT
I am not motivated to work
I am not sure My salary is low I get poor respect
what to do in this from the boss
work
I am lack of My My post My poor We have
expertise/skills company is not communi different
is not high yet cation to ways to
getting boss think
I am lack of
profit
training
CAUSE
Problem Analysis-Cont’d
Steps in Undertaking Problem Tree
1. Identify problems that the project will address.
State problems in negative manner.
2. Group problems by similarity of concerns.
3. Develop the problem tree:
a) Select a Core/Focal problem from the list and relate
other problems to the core/focal problem.
b) If the problem is a cause of the core problem the tree is
placed below the core problem
c) If the problem is an effect of the core problem is goes
above
Problem Analysis-Cont’d
E. Objective Analysis
This involves turning a problem tree into an
objectives tree
Objective Analysis clarifies the means-ends
relationship between the desirable situation that
would be attained and the solution for attaining it.
This stage also requires an Objective Tree.
Objective Analysis-Cont’d
How to Make the Objective Tree
Step 1: Reformulate all negative situation of the problem tree into
positive situations that are :
• Desirable
• Realistically achievable
Step 2: Make sure that there is a means – ends (results) relationship (if
this is implemented then this will be achieved)
The causes become the starting point for the objectives.
The effects become the results of the objectives.
Step 3: IF necessary:
• Revise statements
• Add new objectives if these seem to be relevant and necessary
to achieve the objective at the next higher level
• Delete objectives which do not see suitable or necessary
F. Project Selection/ Analysis of alternatives.
Project Selection is a process in which specific project
strategies are selected from among the objectives and
means raised in Objectives Analysis, based upon
selection criteria.
Project Selection
Project selection is the process of evaluating
individual projects or groups of projects,
and then choosing to implement some set of
them so that the objectives of the parent
organization will be achieved
Managers often use decision-aiding models
to extract the relevant issues of a problem from
the details in which the problem is embedded
Models represent the problem’s structure and
can be useful in selecting and evaluating
projects
Criteria for Project Selection
Models
Realism - reality of manager’s decision
Capability- able to simulate different scenarios and optimize the
decision
Flexibility - provide valid results within the range of conditions
Ease of Use - reasonably convenient, easy execution, and easily
understood
Cost - Data gathering and modeling costs should be low relative to
the cost of the project
Easy Computerization - must be easy and convenient to gather,
store and manipulate data in the model
Nature of Project
Selection Models
2 Basic Types of Models
Numeric
Nonnumeric
Two Critical Facts:
Models do not make decisions - People do!
All models, however sophisticated, are only partial
representations of the reality the are meant to
reflect
Nonnumeric Models
Sacred Cow - project is suggested by a senior and powerful
official in the organization
Operating Necessity - the project is required to keep the
system running
Competitive Necessity - project is necessary to sustain a
competitive position
Product Line Extension - projects are judged on how they
fit with current product line, fill a gap, strengthen a weak link, or
extend the line in a new desirable way.
Comparative Benefit Model - several projects are
considered and the one with the most benefit to the firm is selected
Numeric Models:
Profit/Profitability
Payback period - initial fixed investment/estimated annual
cash inflows from the project
Average Rate of Return - average annual
profit/average investment
Discounted Cash Flow - Present Value Method
Internal Rate of Return - Finds rate of return that
equates present value of inflows and outflows
Profitability Index - NPV of all future expected cash
flows/initial cash investment
Numeric Models: Scoring
Unweighted 0-1 Factor Model
Unweighted Factor Scoring Model
Weighted Factor Scoring Model
Constrained Weighted Factor Scoring Model
Goal Programming with Multiple Objectives
Risk Versus Uncertainty
Analysis Under Uncertainty - The Management
of Risk
The difference between risk and uncertainty
Risk - when the decision maker knows the
probability of each and every state of nature and
thus each and every outcome. An expected value
of each alternative action can be determined
Uncertainty - when a decision maker has
information that is not complete and therefore
cannot determine the expected value of each
alternative
Risk Analysis
Principal contribution of risk analysis is to
focus the attention on understanding the
nature and extent of the uncertainty
associated with some variables used in a
decision making process
Usually understood to use financial
measures in determining the desirability
of an investment project
Risk Analysis
Probability distributions are determined or
subjectively estimated for each of the “uncertain”
variables
The probability distribution for the rate of return
(or net present value) is then found by simulation
Both the expectation and its variability are
important criteria in the evaluation of a project
Risk Analysis
Information Base for
Selections
Accounting Data
Measurements
Subjective vs. Objective
Quantitative vs. Qualitative
Reliable vs. Unreliable
Valid vs. Invalid
Technological Shock
Project Proposals
Which projects should be bid on?
How should the proposal-preparation
process be organized and staffed?
How much should be spent on preparing
proposals for bids?
How should the bid prices be set?
What is the bidding strategy? Is it
ethical?
Project Proposal
Contents
Executive Summary
Cover Letter
Nature of the technical problem
Plan for Implementation of Project
Plan for Logistic Support & Administration of the
project
Description of group proposing to do the work
Any relevant past experience that can be
applied
Project Selection
Analysis of alternatives.
At this stage, there is a need to assess the
alternative courses of action proposed by each
objective tree in terms of effectiveness, costs,
feasibility, impact on priority groups, risks or other
criteria.
Criteria can be:
Technical
Financial
Economic
Institutional
Social/distributional
Environmental
Preliminary screening
Once some project ideas have been put forward, the next step
will be to select one or more of them as a potentially viable.
This requires a quick preliminary screening by experienced
professionals.
At this stage, the screening criteria are rough
During this stage, the analysts should eliminate project
proposals that are:
Technically unsound & risky
Projects that have no market for their outputs
Have inadequate supply of inputs
Very costly in relation to benefits
Assume over ambitious sales and profitability
Reading Assignment
Logical Framework Approach (LFA)
for project design & preparation
2.4 Project preparation and
Analysis: An Overview
Project Feasibility study
Feasibility: The reasonable
likelihood that constraints on time
and other resources will not
prevent a project from meeting its
key objectives
Synonym: Achievability
Project Feasibility study
A feasibility study looks at the viability of an idea
with an emphasis on identifying potential problems
and attempts to answer one main question: Will the
idea work and should you proceed with it?
A feasibility study is done in order to minimize risk
and to ascertain the viability of a project.
As soon as it is certain that a specific project could be
carried out profitably, it is only then, that it could be
implemented. It is not merely an investigation but at
the same time a plan or a framework on how the
operation of a project shall be accomplished.
Project Feasibility study
A Project Feasibility Study is an
exercise that involves documenting
each of the potential solutions to a
particular business problem or
opportunity.
Feasibility Studies can be undertaken
by project owners/initiators and is a
critical part of the Project Life Cycle.
Project Feasibility study
The purpose of a Feasibility Study is to identify the
likelihood of one or more solutions meeting the stated
business requirements. In other words, if you are unsure
whether your solution will deliver the outcome you want,
then a Project Feasibility Study will help gain that clarity.
During the Feasibility Study, a variety of 'assessment'
methods are undertaken. The outcome of the Feasibility
Study is a confirmed solution for implementation.
A feasibility study is defined as an evaluation or analysis of
the potential impact of a proposed project or program.
A feasibility study is conducted to assist decision-makers in
determining whether or not to implement a particular
project or program.
Project Feasibility study
An analysis of the ability to complete a
project successfully, taking into account
legal, financial, economic, technological,
scheduling and other factors.
Rather than just diving into a project and
hoping for the best, a feasibility study allows
project managers to investigate the possible
negative and positive outcomes of a project
before investing too much time and money
Project Feasibility study
Feasibility studies are preliminary investigations
into the potential benefits associated with
undertaking a specific project.
The main purpose of the feasibility study is to
consider all factors associated with the project,
and determine if the investment of time and
other resources will yield a desirable result.
While considered a preliminary study, it is not
unusual for a feasibility study to be highly
detailed.
Project Feasibility study
When a business is considering a new operation or the
launch of a new product, the feasibility study is a logical
tool to employ before any resources are invested in the new
project.
One of the most important aspects of the study is to make
sure that the total investment needed to successfully bring
the project to completion is considered. Often, this will
include addressing components such as cash reserves,
labor, construction, production facilities, outsourcing, and
the cost of raw materials.
Only when the feasibility study has addressed the total cost
of completing the project, it can progress to the next level.
Project Feasibility study
As a second major component, the feasibility study will
also address costs and other factors that are indirectly
associated with the project.
In the instance of creating a new product for sale, this
second phase will look into the costs associated with
reaching and cultivating a consumer base for the new
product.
The overall idea of these preliminary studies is to ensure
that there is a reasonable understanding of what will be
required both to create the new product and also
successfully market the finished goods at a profit.
Project Feasibility study
In general feasibility studies contain
comprehensive, detailed information about
your business structure, your products and
services, sources of finance, the market,
logistics of how you will actually deliver a
product or service, the resources you need to
make the business run efficiently, as well as
other information about the business.
Project Feasibility study
A feasibility study is a process in which you look at an idea
to see if it is “feasible,” that is, if and how it will work.
A comprehensive feasibility study looks at the entire
structure, needs, and operations of a business.
project feasibility study looks at one specific task,
program, idea, or problem.
A feasibility study looks at both sides, considering pros
and cons, and troubleshoots potential problems.
A feasibility study is not a business plan, but serves
as a foundation for developing your business plan.
Project Feasibility study
Feasibility Process
Define scope,
Identify Initiate identify
problem or feasibility constraints
opportunity study and objectives
Carry out
Make Evaluate Feasibility
recommendation alternatives study
Accept project
Reject project
Delay project
Refocus project
Outsource project
Components of Feasibility Study
A feasibility study contains six major
components namely:
Marketing feasibility study
Technical feasibility study
Financial feasibility study
Economic feasibility study
Management and organizational
feasibility
Environmental feasibility study
