UNIT 1: GENERAL INTRODUCTION

Meaning and definition of project

What is project?
• It is a temporary but interrelated tasks
undertaken to give a unique product or
service or result.
• It is a temporary endeavor, having a defined
beginning and end
• undertaken to meet unique goals and
objectives.
• A project is a proposal for an investment to
create, expand and/or develop certain
facilities
• Is a one shot, time tested, goal directed,
required varied skills and resources
• It is a complex set of activities where
resources are used in expectation of return
• Every project converts the given inputs into
outputs through a process of implementation.

• Outputs in the short run lead to outcomes,

which, in the long run, should result in impact.
• It is a complex of non-routine activities that
must be completed with a set amount of
resources and time limit.
• in contrast to a business operations are
repetitive, permanent or semi-permanent
functional work to produce products or
services goals.
What is Project Management?
• is the discipline of Planning; Organizing;
Securing; and Managing resources to achieve
project goals.

• PM is the application of knowledge, skills,

tools and techniques to project activities to
meet project objectives.
• Management in any project is concerned with
productivity.
• This refers to efficiency and effectiveness.
• Efficiency is “doing things right”. Where as,
• Effectiveness is “doing right things” that is
getting activities completed.
• efficiency is concerned with means and
effectiveness with ends.
• They are interrelated. but
• It is easier to be effective if one ignores
efficiency and vice verse.
• Project management, then, is the application
of knowledge, skills and techniques to execute
projects effectively and efficiently.
According to the Project Management Institute,
there are five stages in PM:
• Initiating
• Planning
• Executing
• Monitoring and Controlling
• Closing

PM can be applied to almost any type of project.

• A major misconception about a project is
relating it to only construction of physical
facilities like buildings, roads and dams.
• However, it may involve intangible things such
as
creation of awareness (e.g. about HIV/AIDS),
eradication of diseases (e.g. polio vaccination),
combating harmful practices (e.g. genital
mutilation) and
capacity building (e.g. training).
• Thus, projects may be
physical or technical (construction of physical
facilities)
 mixed (involving both physical and
nonphysical things)
 nonphysical (dealing purely with behavioral
aspects of an organization).
Features of a project
Temporary- Projects are temporary in nature.
• Every project has a beginning and end.
• The word ‘temporary’ here may refer to an
hour, a day, a week, a month or a year.
• But operations are ongoing efforts which are
being executed to sustain the business.
• When a project is come to an end?
when the project’s objectives have been
achieved or
when the project is completed or
When the project discontinued.
• Only projects are temporary in characteristic
and not the project’s outcomes/impacts which
are long lasting.
Definite Beginning and Completion
Project is completed when its objectives have
been achieved. Or
When its objectives will not or cannot be met,
it becomes terminated.
Thus, projects are not ongoing efforts.
Definite Objective/Scope and Unique
• Every projects have their own
scopes/objectives and unique outcomes.
• Eg. Hundreds of housing construction projects
exist but thy differ by owner, design, resource,
location, contractors, purpose…
Defined Time and Resources
• As each project has definite beginning and
end, they are to be carried out within the time
and resources constraints.
• Each project will have defined time and
resources for its execution.
project goals should be stated in a SMART way
• Specific – well defined and clear
• Measurable – how do we know how far away
completion is and when it has been achieved?
• Action-oriented – indicate what should be
done to achieve the objective
• Reliable/achievable –Is the objective
achievable with the available resources and
timeframe, and
• Time-based – it should identify a definite
target date for completion.
 Classification of projects
Ownership
• private sector projects undertaken by investors
with the main objective of earning profit
• public sector projects undertaken by national,
regional or local government entities or NGOs
promote development projects
• non-institutional projects undertaken by
individuals including marriage, getting driving
license, etc.
Source of fund
• whether the project is financed by equity,
loan and/or grant.
• most projects undertaken by public sector
entities are financed by external assistance
and loan
• while projects undertaken by private sector
entities use some combination of equity and
loan financing.
Time horizon
• based on the time period the project takes
• highly subjective
short-term projects cover less than 5-year
period of time;
medium-term projects cover between 5 to 10
years; and
long-term projects cover above 10-year period
of time.
Sectoral
• based on the economic sector the project is
involved in
 agriculture,
 industry,
 mining,
 health,
 education,
 transport and communication,
 financial service,
 defense, etc.
Types of major resource required
• capital intensive which highly depend on
physical facilities and technology (e.g.
chemical and steel industries)
• labor intensive which highly depend on
human capital (e.g. service and agricultural
projects in developing countries)
Amount of resources required
• in terms of the amount of resources (e.g.
financial and human) deployed
 small,
 medium and
 large-scale.
Assessment of benefits
• Quantifiable projects- plausible assessment of
benefits can be made (e.g. industrial and
mining projects)
• Non-quantifiable projects- application of
plausible quantitative assessments of benefits
is not possible (e.g. health and education
projects).
How resources are committed
• new investment project which involve
establishment of new production unit;
• expansion investment which involves
repeating or extending an existing production
unit; and
• updating investment which involves replacing
or changing some elements of an existing
production unit to modernize and improve it.
The linkage between projects and programs
• A program is usually larger in scope, is activity-
oriented, and is not necessarily time bound.
• May consist of one or more fertilizer projects,
and so on.
• While program objectives may be broader,
and project objectives are more specific and
focused.
• The project objective must aim at meeting the
program objectives.
• While a project refers to an investment
activity where resources are used to create
capital assets,
• a program is an ongoing development effort
or plan involving a number of projects.
• Programs may or may not necessarily be time
bounded.
• Yet programs cannot live forever, they have
limited life cycle, which however, may or may
not be explicitly stated.
• policies → development plans → programs →
projects.
• Note that projects can stand alone without
being part of certain program
• Projects, which are not linked with others to
form a program, are called “stand alone”
projects.
Projects and Plans
• Plan is a scheme or method worked out
beforehand for the accomplishment of an
objective
• Project planning is a set of procedures and
techniques that can be applied in the process
leading up to a decision whether or not to
invest and in the implementing and organizing
of the project.
 Chapter 2. PROJECT CYCLE

2.1 Meaning and Definition of Project Cycle

• the different stages through which project
planning proceeds from inception to
implementation.
• it advances from infancy to maturity.
• The main features of this process are
information gathering, analysis, and decision
making.
• The commonly known models
i. World Bank project life cycle or sometimes
called Baum Cycle
ii. UNIDO project life cycle
i. World Bank project life cycle
It consists
1. Identification
2. Preparation
3. Appraisal and Selection
4. Implementation
5. Evaluation
Actually, the division into stages is artificial, but
it helps us to understand
1. Identification
• The first stage in the cycle is to find potential
projects. Some sources of projects are given
here.
 Some may be “resource based”
 Some projects may be “market based”
 Others may be “need-based”
 Ideas also come from proposals to extend
existing programs.
2. Preparation (pre – feasibility or feasibility
studies)
• At this stage the project is being seriously
considered as a definite investment action.
• covers technical, economic and financial
feasibility.
• Decisions have to be made on the scope of the
project, location and site, soil and hydrological
requirements, project etc.
• The project now exists as a set of tangible
proposals.
• It is an area in which local and international
consultants are very active especially for big
project.
3. Appraisal
• it is a critical review or an independent
appraisal of a project prepared.
• re-examine every aspect of the project
proposal to assess whether it is appropriate
and sound before large sums are committed.
seven aspects of a project appraisal:
• Technical –whether what is proposed will
work in the way suggested or not.
• Financial –if the money needed calculated
property, their sources are all identified
• financial returns, costs, and risks associated
with the project.
• Commercial – the way the necessary inputs
for the project are conceived to be supplied is
examined.
• Incentive –whether stakeholders interest
considered, at least to the extent envisaged in
the plan.
• Economic –whether what is proposed is good
from the viewpoint of the national economic
development interest.
• Managerial –if the capacity exists for operating
the project and can operate it satisfactorily.
• Organizational –if it is organized internally and
externally into units, contract policy institution,
• Based on specialized appraisal report
produced, financial decisions are made.
4. Implementation
• Here, funds are actually disbursed.
• A major priority, ensure that the project is
carried out in the way it was planned.
• Problems frequently occur when the
economic and financial environment differs
• Frequently original proposals are modified
• recording, monitoring and progress reporting
are important activities
• Two important aspects of implementation
i. the better and more realistic a project plan
is, the more likely it is that the plan can be
carried out
ii. project implementation must be flexible
5. Evaluation
• The final phase in the project cycle is
evaluation.
• to look back over what took place, to compare
actual progress with the plans.
• It is not limited only to completed projects but
also for ongoing projects or projects in trouble
Evaluation may be carried out by
• Project management
• Sponsoring agency or
• Separate evaluation unit
 2. UNIDO Project Cycle
• It comprising three distinct phases
i. The pre investment phase
ii. Investment phase and
iii. Operational phase phases.
i. The pre- investment phase comprises:
• Project identification,
• Project preparation and
• Appraisal of project studies
ii. The investment phase constitutes
• negotiation and contracting,
• engineering design,
• construction and preproduction marketing.
iii. the operational phase
It includes commissioning and starts up of
production, replacement and rehabilitation, and
expansion and innovation.
 CHAPTER 3
Project Identification
Project Identification
It is finding potential projects that will result in
positive net present value or that provide benefits
for the society.
Project conception is forming or developing ideas
regarding a required intervention in a specific area
to address a problem or take advantage of
opportunities.
• Identification of project idea requires:
– imagination,
– sensitivity to environmental changes and
– Realistic assessment of what the firm can do.
It is interrelated with the government policies,
infrastructural developments and skill of people.
It involves identifying environmental /societal/
economic problems to be addressed and the
needs and interests of possible beneficiaries and
stakeholders.
 Sources of project ideas
It can be categorized into:
• Macro Source of Project Idea
• Micro Sources of Project Idea
 Macro sources
It is otherwise called Sector Sources.
 In this level, it will require an analysis of the
overall investment potential in developing
countries
It refers to the source of project idea, which is
reflected from national, regional and Sectorial
level sources
For example
• Lack of foreign exchange (trade deficit) requires
export-oriented projects or import substitution-
oriented projects
• Natural disaster such as drought, earthquake or
flood requires resettlement projects and flood
control projects like dam
General opportunity study or Macro study may be
divided into the following three categories:
A. Area Study
B. Industry Study
C. Resource Based Study
A. Area Study
• Area study is made to identify opportunities in a
given area such as administrative province; a
back ward region etc.
The following factors should be considered while making
area studies.
i) Size of the area and physical features of the area.
ii) Population occupational pattern, per capita income
and social background
iii) Infrastructure facilities like transport, power,
telecommunication etc.
iv) Exploited and unexploited factors of production and
elements of production, mainly labor and capital and
other natural resources.
v) Labor laws, minimum wages, and holiday, facilities
required in factory, bonus rules, and pension rules,
working hours.
vi) Level of completion
vi) Government concessions include, tax holidays,
subsided power and water.
vii) Location of market, it covers nearness to
domestic and international market.
viii) Export potential, if focuses on possibilities of
export.
ix) Climate requirements for workers, companies,
product etc.
x) Estimated cost of a project
xi) Availability of raw materials depends upon
nature of the product.
xii) Availability of cheap labor.
B. Industry Studies: (Sub Sector studies)
• It is made to identify opportunities in industrial
branches like building material or food processing.
 The rate of sub sector in the industry of the country.
 Size and growth rate of industry.
 Present size and growth rate of demands for items
that are not imported and for those which are fully or
partially imported for each item.
 Rough projections of demand for each item.
 Identification of the items in short supply that have
growth or export potential.
 A broad survey of raw materials; locally available.
 Transport cost and available infrastructure facilities.
C. Resource Based Studies:
• It is made to reveal opportunities based on the
utilization of natural resources, agricultural or
industrial products such as forest based, petrol
chemical industries.
 Features of the resources (Size, shape etc.) past
rate of growth (mainly agricultural) and potential
for future growth.
The role of the resources in the national economy
in the country and export potential.
  Micro Approach /Specific Opportunities studies / Enterprise Approach:
• It is mainly concerned with a review of investment ideas of
industries, investment offices and financial institutions in both
developing and developed countries.
• A specific project opportunity study, is more common than the
general opportunity study, may be defined as the transformation of
project into a broad investment position.
 Natural resource available
 Existing agriculture pattern
 Future demand
 Imports in order to identify area for import substitution
 Environment impact
 Possibilities for diversification.
 The general investment climate
 Industry policy Availability of cost of production factors
 Export possibilities
 Possible inter linkage with other industries.
Opportunity Studies and Preliminary Screening
Compatibility with the Promoter
Compatible with Governmental Priorities
Availability of Inputs
Adequacy of Markets
Reasonableness of Costs
Acceptability of Risk Level
 Pre-feasibility Studies

It is an intermediate stage between the project

identification and a detailed feasibility study.
The principal objectives of it are to determine
 All possible project alternatives are examined
 The project concept justifies a detailed analysis of a
feasibility study
 The project idea on the basis of available information
should be considered either non-viable or attractive
enough
 The environmental situation at the planned site and
the potential impact of the projected production
process are in line with national standards.
The difference between the feasibility study and
the pre-feasibility study is in the extent of detail of
the information obtained.
The structure of the pre-feasibility study should be
the same as the structure of the feasibility study.
However, detailed review of the available
alternatives must take place at this stage since it is
costly and time consuming to do this in the
feasibility stage.
The review should cover the various alternatives
identified in terms of:
Project or corporate strategies and scope of the
project
Market and marketing concept
Raw materials and factory supplies
 Location, site and environment
Engineering and technology
Organization and overhead costs
Human resource
Project implementation schedule and budgeting
• In general, the pre-feasibility study involves subjective
judgment of the project in terms of:
• Availability of an adequate market
• Project growth potential
• Investment costs
• Demand and supply factors
• Social and environmental considerations
• The individuals who can initiate project ideas from the
above sources include:
 Technical specialists
 Local leaders
 Entrepreneurs
 Governments