Session 4

Project Identification and formulation

The learning objective of the lesson 4 is to understand the activities to be performed

under project identification and project preparation or formulation of the project.
Thus the session 4 would focus on identifying a project through problem analysis,
need assessment and identification test ant formulation of the project by conducting
feasibility study and logical framework analysis. So, learning outcome of the session
is that to apply planning techniques for formulation of good project document.

4.1 Project identification

Project identification starts from an understanding of the mandate, vision and
objectives. It involves
Identifying environmental problems to be addressed and the needs and interests of
possible beneficiaries and Stakeholders.
The problems and the most realistic and effective interventions are analyzed, and
ideas for Projects and other actions are identified and screened.
1. Situation analysis/ problem Analysis
An environmental situation needs to be assessed and analyzed. This objective
analysis enhances understanding of the likely causes and linkages between existing
problems and the needed actions. A Situational analysis based on a scientifically
sound conceptual framework generates key actions and strategies
To be applied for the intended project intervention. Latest country reports and
statistics prepared by Governments, researchers, or international organizations on
the relevant environmental, social and economic issues, including gender and
poverty, can be facilitated the assessment.
A situation analysis should include analyses of needs, interests, strengths and
weaknesses of key stakeholders and beneficiaries.

These analysis are depend on the levels of projects wether i.e. it

implements at national, provincial or the divisional levels.
The identification test
A proposal may be considered to have passed the identification test and be ready
for detailed preparation when: Major options and alternatives have been identified
and some initial choices made;
1. The principal institutional and policy issues affecting project outcome
have been identified and deemed amenable to solution;
2. The project options selected are expected to be justified, given rough
estimates of the expected costs and benefits;
3. There is justifiable expectation that the project will have adequate
support from the relevant political authorities, other stakeholders and
the intended beneficiaries;
Preparation of concept proposal for sponsorship
Project formulation begins with the drafting of a proposal for sponsorship (a short
concept proposal of 4–5 pages) that lays out preliminary ideas, objectives, results,
strategies, outputs and activities. This proposal issued as the basis for consultations
with implementing partners and Governments. Section IV details the format and
procedures for preparing concept proposals for sponsorship.
Some technical project may adopt particular approach to identify all the
requirements. It includes

Functional Decomposition: each components should be decomposed (disintegrate)

until all the requirements are met
Gap Analysis: Compare the present state and the desired state
Reverse Engineering: Use existing object Steps in Selecting Best projects

4.2 Preparation and Formulation

Preparation of a good project proposal is not an easy task. It should fulfill all the
requirements of the stakeholders particularly beneficiaries, donors and the
government while achieving project goals. Thus, project formulation is linked with
a compressive work related to testing viability of technical, economic, institutional
and environmental aspects.
4.2.1 Feasibility study

A feasibility study should form the core of the project proposal preparation process.
Its purpose is to provide stakeholders with the basis for deciding whether or not to
proceed with the project and for choosing the most desirable options. It is expected
to judge feasibility in terms of cost and benefits to be attained from the project. The
feasibility study must provide answers to the following basic questions:
 Does the project conform to the development and environmental objectives
and priorities of the specific country and or region?
 Is the project technically and scientifically sound, and is the methodology the
best among the available alternatives?
 Is the project administratively manageable?
 Is there adequate demand for the project’s outputs?
 Is the project financially justifiable and feasible?
 Is the project compatible with the customs and traditions of the beneficiaries?
 Is the project likely to be sustained beyond the intervention period?

Basically, there are two type of feasibility studies (Mollett, J.A.1984 and Pathirage, P. 2013).

4.2.3 Pre-feasibility Study:

Pre-feasibility study is conducted at the project identification stage in order to assess

needs, interests, strengths and weaknesses of the project. It helps project
implementers, stakeholders and sponsors to understand the viability of the project.
If the project is not viable then it could be rejected or changed as the requirements.
If it viable then policy planners hope to implement it by conducting a detailed
feasibility study.

4.2.3 Detailed Feasibility Study:

Thus a detailed feasibility is a comprehensive and in-depth analysis that explore

the, market feasibility, technical feasibility, Economic feasibility, and financial
feasibility, environmental and legal feasibilities of the project. Following is a
description of the various feasibilities to be conducted (Pathirage, 2013, www.
project feasibility, 2017).
Market feasibility

Market feasibility is a study conducted for assessing marketability of the project.

Particularly it involves testing geographic locations for a real estate development
project related to parcels of real estate land. Market Feasibility takes into account
the importance of the business in view of demand, market segments, periphery and
alternative products etc. Basically two issues are addressed by a market study.

 What is the expected aggregate demand for the proposed good or service?
 What is the market for the proposed good or service?

Most market feasibility studies include five aspects (ttps://www.quora.com, 2018)

1. Current Market Analysis

2. Competition or presence of competing products.
3. Anticipated future market potential.
4. Potential buyers and sources of revenues.
5. Sales projections.

Technical feasibility

Technical feasibility is an assessment about technical viability of input, processes,

output, fields, programs and procedures related to proposed project or the product.
Thus the assessment is based on an outline design of system requirements, to
determine whether the company has the technical ability to handle the project. At
this level, it concerns whether the project is viable in terms of technical and legal
aspects.+

The technical assessment is focused on gaining use of existing technical resources

of the organization and their applicability to the expected needs of the proposed
system. It is an evaluation of the hardware and software and how it meets the need
of the proposed project. When writing a technical feasibility report, following
aspects are considered mainly.

1. Location of the project

2. Availability of raw materials
 3. Power
4. Man Power
5. Management
6. Technical Knowhow

Financial feasibility

The financial feasibility is an assessing commercial profitability of the project in

order to determine whether the financial investment is profitable or not. Financial
feasibility is calculated by two approaches and methods.

1. Static Analysis
• Pay Back Period
• Average Rate of Return
2. Dynamic Analysis
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Benefit Costs Ratio (BCR)

Thus, financial viability can be judged on the following parameters:

• Total estimated cost of the project

• Sources of financing of the project in terms of its capital structure, debt to
equity ratio and promoter's share of total cost
• Existing investment by the promoter in any other business
• Projected cash flow and profitability

Economic feasibility

The purpose of assessing economic feasibility is to determine the effects and

impact of the project on the society both in terms of economic and social values,
particularly in terms of social costs and benefits. It includes quantitative and
qualitative assessment on the costs and benefits. Two methods applied to measure
social values. It includes
UNIDO Method

OECD Method

Legal feasibility]

Determines whether the proposed system conflicts with legal requirements, e.g. a
data processing system must comply with the local data protection regulations.

Environment (Resource feasibility)

This involves questions such as how much time is available to build the new
system, when it can be built, whether it interferes with normal business operations,
type and amount of resources required, dependencies, and developmental issues.

Operational feasibility is a measure of how well a proposed system solves the

problems, and takes advantage of the opportunities identified during scope
definition and how it satisfies the requirements identified in the requirements
analysis phase of system development.

The operational feasibility assessment focuses on the degree to which the proposed
development projects fits in with the existing business environment and objectives
with regard to development schedule, delivery date, corporate culture, and existing
business processes.

To ensure success, desired operational outcomes must be informed during design

and development. These include such design-dependent parameters such as
reliability, maintainability, supportability, usability, reducibility, disposability,
sustainability, affordability and others. These parameters are required to be
considered at the early stages of design if desired operational behaviors are to be
realized. A system design and development requires appropriate and timely
application of engineering and management efforts to meet the said parameters. A
system may serve its intended purpose most effectively when its technical and
operating characteristics are engineered into the design. Thus, operational feasibility
is a critical aspect in determining sustainable design of project.
4.3 Project document formulation
Project preparation, formulation and project document formulation are
simultaneous processes. Once the feasibility study has taken place and
implementation arrangements are agreed upon, the concept proposal (which would
have been revised throughout the process) is transformed and expanded into a project
document throughout the project preparation and formulation phase.
The project document is a summary of the situation assessment, justification of
objectives, methodology and strategies for achieving the targeted changes, which
come from each step taken through project cycle phases 1 and 2. Since project
formulation is an iterative process, it is important to consult again with selected
partners and colleagues as the document is formulated.
 The Session 5

Logical Framework Analysis and Project Planning

5.1 The Logical Framework

The logical framework is an important technique used in project formulation.

According to Wikipedia, it defined as a methodology that used for designing,
monitoring and evaluation of international projects. It developed in 1969 by the
USAID for guiding its projects implemented in developing countries, as a method
of Practical Concepts guidance. Thus Logical Framework Approach (LFA) was
designed to improve its project planning and evaluation system. Basically it
concerns three aspects in project design.
1. Project planning is too vague without clearly defined objectives and
indicators that could be used to objectively monitor and evaluate the success
(or failure) of a project;
2. Management responsibilities and tasks were unclear.
3. Evaluation of project implementation was often an adversarial process,
because there was no common agreement as to what the project was really
trying to achieve.
The LFA has been adopted as a project planning and management tool by most
multilateral and bilateral development agencies. The European Commission has
required the use of LFA as part of its Project Cycle Management (PCM) system
since 1993, and it provides a core set of tools with which to undertake assessments
of project quality based upon the LFA (see separate document and for further
details refer to European Commission, Project Cycle Management Guidelines,
Volume 1, 2004).

5.1.1 Logical Framework Matrix (Log frame Matrix or LFM)

LFM is consisted of four-by-four project table. The rows represent goal, purposes,
outcome and activities and the column represent Objectively Verifiable Indicators
(OVIs, Means of Verification (MoV) and Assumptions Thus Log frame matrix
comprises 16 “boxes” (see fig 4.1), but establishing a Log frame matrix doesn’t
mean to “fill in the boxes” only. Behind every “box” there is careful analysis
and logical reasoning that has to be pursued before filling in the boxes which
is only the final activity, the product. If this process is not carried out during idea
and project development, it applies to project development in general.
The log frame matrix as its principal outcome: flexibility in its use is essential as it
based on the analysis of an existing situation, and situations or circumstances can
change as the project develops. Those changes might have to be taken up by
reviewing and adapting the project design – and the matrix consequently. A log
frame matrix should reflect a project strategy derived from the careful analysis of
an existing situation – not vice versa.
Within the vertical logic (Axis) of the matrix (first column = project strategy) it
can be identified what the project intends to achieve and how (clarifying the causal
relationships between the different levels of objectives), specifying important
underlying assumptions and risks (fourth column of the matrix).
Within the horizontal logic (Axis) of the matrix indicators to measure progress
and impact are specified and the sources or means by which the indicators will be
verified. The matrix serves as a summary of the key information on the project. It
provides an easy overview that allows a quick assessment of the consistency and
coherence of the project logic.

5 .2 Benefits associated to the application of the LFA

According Project Cycle Management manual adopted by the European
Commission, benefits of Using LFA in project planning was recognized as
improving the project design, fostering the project performance and facilitating
project management (www.dfid.gov.uk/pubs/files/toolsfordevelopment.pdf, 2016):
It also shows that the LFA can help to achieve:
A structured project design process. LFA suggests a logical sequence,
interlinking the individual steps in the design process.
Transparency. The reasons why a certain project is meant to be implemented are
determine on what are the problems and whose problems are they? and the
internal logic of project design that expected to achieve and how?.
Participation of the stakeholders involved in the project design and management,
A consistent project strategy. The LFA provides tools to clearly link causes and
effects. It also takes into account risk as external factors that are crucial for the
success of the project, but lie outside the control of the project.
Objectively verifiable indicators. Indicators describe objectives in measurable
“empirically observable” terms and provide the basis for performance
measurement and project monitoring and evaluation.
Flexibility in adapting to changing conditions (that are of relevance for the
project). The LFA establishes a framework that makes the underlying rationales
and assumptions transparent and helps to react to changes by, e.g., revising the
design.
The most important benefit however has to be the coherence and compatibility of
the LFA as a design approach for EU projects with the Project Cycle Management
adopted by the European Commission in the early nineties. The structure of the
LFA is matching the PCM-derived structure of the EC evaluation criteria which is
also applied during the evaluation of proposals submitted in EU.

5.2 .1 Advantages of the Logical Framework approach

According to Centre for International Development and Training of the University

Of Wolver Hampton UK; the advantages of using LFA was summarized as
follows.
*It brings together in one place a statement of all key components of the
project or programme.
Having all key components of projects or programme in a systematic, concise and
coherent way helps you clarify and demonstrate the logic of how projects and
programmes are expected to work. It can also help you separate the various levels
in the hierarchy of objectives, and consequently ensure that inputs and outputs are
not confused with each other or with objectives. This can be particularly helpful
when there is a change of staff.
* It meets the requirements of good project design and enables possible
responses to past weaknesses in many designs.
It can help ensure that fundamental questions are asked and weaknesses are
analyzed in order to provide decision makers with better and more relevant
information. It can also guide you in systematically and logically analyzing the
inter-related key elements which constitute a well-designed project. This approach
can help you improve planning by highlighting linkages between project elements
and important external factors.
* It is easy to learn and use.
Effective training in the basics of the Logical Framework approach can be given in
a few days. If this is combined with follow-up training and process consultancy to
sort out difficulties a key group of project staff can be trained effectively in a short
period of time.
* It does not add time or effort to project management, but reduces it.
Like many other management tools the Logical Framework approach has to be
learnt before it can be effectively used. Once learnt however, it can save you a lot
of time. Many project staff report that they are often short of time and work against
the clock on a regular basis. Any time saved in relation to project management
work would be of great value.
* It can be used internally for design and appraisal process and can be used
externally with consultants working for development organizations.
The Logical Framework approach can be used to help both design and appraise
projects internally. Likewise it can be used with external consultants who may be
involved with design and appraisal processes. In addition the Logical Framework
approach encourages a multidisciplinary approach to project design and
supervision.
* It anticipates implementation.
The Logical Framework approach helps sets up project activities with a clear
purpose. The approach facilitates common understanding and better
communication between decision makers, managers and other parties involved in
projects. Likewise the use of Logical Frameworks, with systematic monitoring,
ensures continuity of approach if and when any original project staff move or are
replaced.
* It sets up a framework for monitoring and evaluation where planned and
actual results can be compared.
By having objectives and indicators of success clearly stated before the project
starts the approach helps you set up a framework for evaluation. It is notoriously
difficult to evaluate projects retrospectively if the original objectives are not clearly
stated. The Logical Framework approach can help clarify the relationships which
underlie judgments about the likely efficiency and effectiveness of projects,
likewise it can help identify the main factors related to the success of the project.
* It assists communications between project donors and implementers.
As more and more institutions adopt the Logical Framework concept
Communications between project implementers and donors will be facilitated. This
will have major advantages for organizations who are continually presenting
projects to donors for funding. In earlier times, budgets seemingly grew more
easily and rapidly than now is often the case.4
5.2.2 Limitations to the Logical Framework approach
It also observed certain limitations of using LFA. It includes;
It is not a substitute for other technical, economic, social and environmental
analyses. It cannot replace the use of professionally qualified and experienced
staff.
I. The Logical Framework approach can help project design, Implementation
and evaluation, but clearly does not do away with the need for other
project tools especially those related to technical, economic, social and
environmental analyses. Similarly, the approach does not replace the need
for professional expertise and experience.
II. Rigidity in project management may arise when objectives and external
factors specified during design are over emphasized.
III. Rigidity in project administration and management can sometimes arise
when Logical Framework objectives and external factors specified during
design are over emphasized.

5.3 The LFA as a tool to improve project implementation and management

The applicability of the LFA is not restricted to project design but also
encompasses the project management during the implementation phase and allows
strategic monitoring and evaluation. One of the major tasks of project management
during implementation is to verify that a project is actually achieving the intended
objectives. An important means to do that is monitoring.
The logical sequence laid down in the LFA between activities (that, carried out
lead to) – outputs (that lead to the achievement) and immediate objective helps to
choose monitoring indicators. The milestones defined in the activity schedule
(based on the LFM) form part of the basis for monitoring.
Monitoring helps to see whether objectives are achieved as intended, or whether
there are deviations from the initial plan. If this is the case it can be analyzed why
there are deviations, what the problems are in implementing the project as intended
and what could be done to either keep the project on the planned track or, if
necessary, what could be alternatives to the original plan. The transparency and
structure provided through the application of the LFA during project design, laying
open the basis for the planned action (analysis of initial situation) and the rationale
behind the project design (logical sequence between different levels of objectives).
It is a participatory Planning, Monitoring & Evaluation tool that highlights
the full range of views of intended beneficiaries and others who have a stake in the
programme design. It is a tool for summarizing the key features of a programme
and is best used to help programme designers and stakeholders.
The main components of LFA is presented in figure 5.1. Meaning of components
in the vertical axis describe as follows;
• The GOAL is a bottom line condition of well-being of individuals, families,
or communities. It is usually described in terms of quality of life
improvement towards which the country programme will contribute
• The PURPOSE is determined by asking the question “how will this goal
be achieved”
• The OUTPUTS are the deliverables through which the purpose will be
achieved.
• The ACTIVITIES are the main elements of component projects through
which the outputs are achieved
Meaning of components in the vertical axis describe as follows;
Narrative Summary: is a summary statements of goal, purpose, outputs and
activities
Verifiable Indicators: it defines main indicators that could describe by goal,
purpose, outputs and activities
Means of Verification It describes type and source of data that describe by goal,
purpose, outputs and activities
Important Assumptions: It is an assumptions about the possible situation that
would predict under the scenarios i. e. optimistic, pessimistic and normal.

Fig. 5 .1: Logical framework Matrix

Narrative Verifiable Means of Important
Summary Indicators Verification Assumptions
(OVI) (MOV)

GOAL

PURPOSE

OUTPUTS

ACTIVITIES Inputs
Thus LFM is a "temporal logic model" that runs through the matrix that connected
with hypothetical views as shown below.
• If these Activities are implemented, and these Assumptions hold, then these
Outputs will be delivered.
• If these Outputs are delivered, and these Assumptions hold, then this
Purpose will be achieved.
• If this Purpose is achieved, and these Assumptions hold, then this Goal will
be achieved.
These are viewed as a hierarchy of hypotheses
(https://en.wikipedia.org/wiki/Logical_framework, Down loaded 03.04.17)

5.4 Preparation of project Document

Considering the conceptual base of project planning it is not an easy task to

prepare a good plan document. Following are the main ingredients to be included
in a project document irrespective of either public or private sector plans.

Vision – Expected Outcome

Mission- Action to be taken to achieve the vision
Goal- The end result of the project/program or policy/plan
Objectives- Intended actions to realize the vision and the mission. To be SMART
Strategy- The method and the Policy to be taken to achieve mission
Rationale – Justification of the plan and the activities
Outputs –intended product or activities
Activities – Actions to be taken to realize objectives (outputs)
Resources (Inputs)
Stakeholders- Beneficiaries, project staff, suppliers and
Time Horizon- Gannet chart
Budget