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1-Project Appraisal Techniques

Project appraisal is the process of assessing, analyzing, and approving a project to determine if it will meet its objectives. It is an important decision-making tool that justifies the investment and viability of a project. The structured process typically occurs after a project is planned and designed. It systematically reviews economic, environmental, financial, social, technical, and other aspects of a project. The goal is to justify a project's viability, profitability, and determine whether to accept or reject it.

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Pradip Khatri
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40 views32 pages

1-Project Appraisal Techniques

Project appraisal is the process of assessing, analyzing, and approving a project to determine if it will meet its objectives. It is an important decision-making tool that justifies the investment and viability of a project. The structured process typically occurs after a project is planned and designed. It systematically reviews economic, environmental, financial, social, technical, and other aspects of a project. The goal is to justify a project's viability, profitability, and determine whether to accept or reject it.

Uploaded by

Pradip Khatri
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Project

Appraisal Techniques
Prabina Chhetri
Visiting Faculty
Introduction
References
• Projects: Planning, Selection, Implementation and Review, Prasanna
Chandra (Tata McGraw Hill Publishing Company Limited)
• Construction Project Management, KK Chitkara
• Contemporary Engineering Economics by Chan S. Park
• Advance Engineering Economics by Chan S. Park and Gunter P. Sharp-
Bette
• Principles of Engineering Economics, Eugene L Grant, W Grant Ireson
and Richar S. Leavenworth
• Web Pages of ADB, WB and other online sources
Project Appraisal
What is Project Appraisal? (Consists of ‘Project’ and ‘Appraisal’)

• The structured process of assessing, analyzing and approving the project

• Systematic and comprehensive review of the economic, environmental,


financial, social, technical and other such aspects of a project to determine
if it will meet its objectives

• Important to justify project’s viability and profitability, and to decide


whether to accept or reject a project
Why?
• Important decision making tool
• Justifies the investment
• For successful development and completion of a project

When?
• After preparation and design of project
Internal Evaluation
• Attendance: 20%
• Assignments:20%
• Assessment: 40%
• Case study and presentation: 20%
Course Outline
1. Economic Concept

 Difference between financial and economic analysis


 Shadow pricing
 Inflation and escalation
 Discount rate

 Project Cycle will be discussed prior to entering into the main


content.
Course Outline (contd..)
2. Cost and Benefits of Project

 Cost concepts
 Component of project cost
 Assessment of benefits
 Externalities
Course Outline (contd..)
3. Preparation of Project Cash Flow

 Depreciation concepts
 Effect of taxation
 Incremental cash flow
 Cash flow statement
Course Outline (contd..)
4. Project Evaluation Criteria

 Present worth criteria


 Yield criteria (IRR)
 Payback criteria
Course Outline (contd..)
5. Capital Budgeting Decisions

 Method of financing
 Cost of capital
 Choice of minimum attractive rate of return
 Capital budgeting
Course Outline (contd..)
6. Project Risk and Uncertainty

 Origin of project risk


 Method of describing project risk
 Probability concepts for investment decisions
 Probability distribution of NPV
Course Outline (contd..)
7. Decision Tree Analysis

 Structuring a decision tree diagram


 Sequential decision process
 Worth of obtaining additional information
 Decision tree and risk
Course Outline (contd..)
8. Case Study 1: Hydropower Projects
9. Case Study 2: Transmission Line Projects
10. Case Study 3: Rural Electrification Projects
Project Cycle
Project Cycle
A project is initiated to achieve a mission. It is completed as
soon as the mission is fulfilled. The life cycle of project may
be divided into the following phases:

• Definition
• Planning
• Implementation
• Operation and Post Operation
Definition Phase
Definition is the earliest part of a project when the purpose and
requirements are clarified. To ensure the project’s value

• State the project


• Develop objectives
• Develop work breakdown structure
• Identify resource requirements
Definition Phase
• State the project
• Define the purpose and scope of the project
• What needs to be done?
• Why are we doing this?
• When do we need to be finished?
• How much will/can this cost?
Definition Phase
• Develop Objectives
• Define the benefits and measures of success for a project
• At the end of the project, what value will we have?
• What benefits do we want?
• What constraints do we face?
• What requirements must be met?
• How will we know when we satisfy each objective?
Definition Phase
• Develop Work Breakdown Structure
• Establish specific outputs and accomplishments to be completed.
• What do we want to accomplish in this project?
• What are the major outputs?
• What are the component parts?
Definition Phase
• Identify Resource requirements
• Avoid future resource problems
• What knowledge and skills are required?
• What facilities do we need?
• What equipment is required?
• What special resources do we need?
• Identify the type, amount and cost.
Planning Phase
• Planning is the second phase of a project when responsibility is
assigned and work is scheduled.
• Project identification
• Project investigation
• Feasibility study
• Least cost study
• Implementation decision
Implementation Phase
• Implementation is the final phase of a project when
deliverables are produced to meet the project objectives.

• Start to implement
• Monitor the project
• Modify the project
• Closeout and evaluate
Implementation Phase
Start to implement:
• Ensure work begins on time with clear performance standards.
• Review project statement and objectives
• Set ground rules for working together.
• Review initial project assignments
• Confirm performance expectation
Implementation Phase
Monitor the project:
• Keep the project on track.
• These aspects can be monitored:
• Progress against objectives
• Progress against milestones.
• Resource use and cost
• Human performance
Implementation Phase
Modify the project:
• Respond to problems, opportunities or even changes in objectives
• Review and clarify threats and opportunities
• Locate the earliest point in process when each concern has impact.
• Use the Definition and planning Phase steps as required to revise the plan.
Implementation Phase
Closeout and Evaluate:
• Ensure all objectives were met and share lessons learned
• Review success against objectives
• Inform others that the project is finished
• Review lessons learned
• Document a project summary
Implementation Modalities
• Build –own- operate, BOO
• Build –own- operate-transfer, BOOT
• Build-operate-transfer, BOT
• Build-transfer, BT
• Lease-operate-transfer, LOT
Implementation Agencies
• Government
• Public utility
• NGO/INGO
• Development Board
• Private sector
• Public Private Partnership, PPP
Operation Phase
• Energizing
• Testing and commissioning
• Operation and Maintenance contract
• Preventive maintenance schedule and major maintenance fund
(overhauling, refurbishment etc.)
• Duration: 25-50 years as stated in the document
Post-Operation Phase
• Decommissioning
• Handing over
Thank you

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