Course Title: Project Design and Management in GeES

Course Code: GeES2072

Department of

Geography and Environmental Studies

HU

Prepared by Mr G/Mariam Araya

Edited By Mamuye Belihu

2024/25
Contents
Unit 1: Introduction to Project and Related Concepts ................................................................................................. 3
1.1 What is a Project? ............................................................................................................................................... 3
1.2. Key Characteristics of a Project ......................................................................................................................... 3

1.3. Project, Program and Operation Difference and similarities ............................................................................ 4

1.4. Types and Nature of Projects............................................................................................................................. 5
1.5. Difficulties of a Project:...................................................................................................................................... 5
1.6. Project Life Cycle ................................................................................................................................................ 5
Unit Two: Need Assessment and Project Development Plan in Development Project ................................................ 7
2.1. Need Assessment............................................................................................................................................... 7
2.2. Capacity Assessment.......................................................................................................................................... 9
2.3 Project Design ................................................................................................................................................... 10
2.3.1 Stakeholder Analysis .................................................................................................................................. 10
2.3.2 The Role of Research on Project Design and Management .......................................................................... 12
2.3.4 Problem Analysis........................................................................................................................................ 12
2.3.5 Project Objectives and Objective Tree....................................................................................................... 14
2.3.6 Logical Framework ..................................................................................................................................... 15
2.3.7 Action Planning .......................................................................................................................................... 17
2.3.8 Budgets ...................................................................................................................................................... 18
2.4 Project Plan ....................................................................................................................................................... 19
2.5 Project Management ........................................................................................................................................ 20
2.5.1 Project Management Knowledge Area ...................................................................................................... 21
2.5.2 Project Management Knowledge Area Functions ..................................................................................... 21
2.5.3 Project Manager ........................................................................................................................................ 21
2.6 Project Implementation and Evaluation ........................................................................................................... 22
Unit 3: Business Project Development ....................................................................................................................... 23
3.1. Business Project Life cycle – World Bank Approach ........................................................................................ 23
3.2 Project Life cycle – UNIDO Approach............................................................................................................... 24
Unit 4: Project Appraisal Techniques .......................................................................................................................... 26
4.1 Market and Demand Analysis ........................................................................................................................... 26
4.2 Technical Analysis ............................................................................................................................................. 28
4.3 Financial Analysis .............................................................................................................................................. 28
4.4 ECONOMIC ANALYSIS OF A PROJECT ................................................................................................................ 35
Unit 5: Project Financing............................................................................................................................................. 35
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 5.1 Sources of Project Financing ............................................................................................................................. 35
5.1.1 Internal sources ......................................................................................................................................... 35
5.1.2 External sources ......................................................................................................................................... 35
Unit 6: Project Management Information System ..................................................................................................... 37
6.1 The Meaning of PMIS ........................................................................................................................................ 37
6.2 VALUE OF THE PMIS .......................................................................................................................................... 39
6.3 Characteristics and attributes of PMIS ............................................................................................................. 42
Unit 7. Project Monitoring and Evaluation ................................................................................................................. 43
7.1 Monitoring

7.2 Evaluation

7.4 steps for Planning for Monitoring & Evaluation

7.5 Types of evaluation

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Unit 1: Introduction to Project and Related Concepts
1.1 What is a Project?
A project is a temporary process, which has a clearly defined start and end time, a set of tasks, and a budget,
that is developed to accomplish a well-defined goal or objective.

A project is a group of inter-related activities, constrained by time, cost, and scope, designed to deliver a
unique purpose. It is a conversion process which serves to transforming inputs in to outputs.

Project design refers to the process of planning and organizing the various aspects of a project to ensure
its successful execution. This involves defining the project's objectives, scope, and deliverables, as well as
outlining the strategies and resources needed to achieve them.

1.2. Key Characteristics of a Project

1. Purpose-the basic reason for the existence of a project- to solve a problem, address a need or
take the advantage of opportunity.

2. Temporary: means that a project is something that has a specific start date and a specific end
date. projects are of a transient nature, with a defined beginning and end. The end is reached
when the project’s objectives have been achieved and effectively handed over to the business

3. Sequences of Activities: the works and the steps we perform and the methods and knowledge
we use to achieve the project objective.

4. Unique Outcome: A project brings about a unique product or service - something that has not
existed in the organization here-to-fore or from some product or service feature that
distinguishes it from all other products or services the organization has produced before.

5. Time: any project should be time bounded-it has a start and end time

6. Cost: Projects utilize various resources, including human, financial, and material, to complete
activities

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 7. Quality: Ensuring that the project delivers high-quality products is essential for maximizing user
satisfaction

8. In general, Projects can vary significantly in size, scope, cost, and duration, from large-scale
international initiatives costing billions and spanning several years to small, low-budget domestic
tasks that can be completed in a few hours.

1.3. Project, Program and Operation Difference and similarities

• Project: A temporary endeavor undertaken to create a unique product, service, or result. Projects
have a defined beginning and end, specific objectives, and constraints such as time, scope, and
resources.

• Program: A group of related projects managed in a coordinated manner to obtain benefits and
control not available from managing them individually. Programs are ongoing and focus on
achieving strategic objectives.

• Operation: Ongoing activities that produce repetitive outputs. Operations are typically continuous
and aim to maintain and improve the efficiency of processes and services.

Differences

Aspect Project Program Operation

Temporary (has a start and Ongoing (may have multiple Continuous (no defined
Duration
end) projects) end)

Specific goals and Strategic objectives and Efficiency and

Objectives
deliverables benefits effectiveness

Limited to specific Broader, encompasses Broad, focuses on routine

Scope
deliverables multiple projects tasks

Managed by a project Managed by a program Managed by operations

Management
manager manager management

Changes can significantly Changes are managed across Changes are incremental
Change
impact scope projects and routine

Similarities

1. Goal-Oriented: All three aim to achieve specific goals or objectives.

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 2. Resource Management: Each requires careful management of resources, including time, money,
and personnel.

3. Stakeholder Involvement: All involve stakeholders who have an interest in the outcomes.

4. Risk Management: Each involves identifying and managing risks that may affect success.

Generally, while projects, programs, and operations are distinct in their structure and purpose, they are
interconnected and often work together to achieve an organization’s strategic goals. Understanding their
differences and similarities helps in effective management and resource allocation.

1.4. Types and Nature of Projects

The location, type, technology, size, scope and speed are normally the factors which determine the effort needed
in executing a project. The Project Management Institute (PMI) defines a project by its two key
characteristics. All projects are temporary and undertaken to create a product, service, or result that is
unique. Projects range in size, scope, cost and time from mega international projects to small domestic
projects. It can be either business or development project.
1.5. Difficulties of a Project:
The major sources of these difficulties are:
1. Measurement problems: difficult to identify and measure the costs and benefits of capital investment
proposals.
2. Uncertainty: The costs and benefits of capital investments are characterized by a great deal of
uncertainty. It is impossible to predict exactly what will happen in the future.
3. Uncertainty:: The costs and benefits with a capital expenditure decision spread out over a long-
period of time, such as 10 – 20 years, or 20 – 40 years this creates problems in estimating the
discount rates and establishing equivalences.

1.6. Project Life Cycle

Imagine a project as a journey. The project lifecycle is the roadmap for that journey, outlining the distinct
phases your project should pass through from its start to completion. Each phase serves a specific purpose,
ensuring you have a clear plan, effectively manage tasks, and ultimately achieve your project goals.

Well, it provides a logical sequence of steps that help you plan, organize, execute, monitor, and close the
project. It also helps you identify the key stakeholders, tasks, resources, risks, and deliverables involved in
each phase.

While there are different models and approaches, one of the most widely used and recognized ones is the
five-phase project lifecycle.

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This model divides a project’s lifecycle into five distinct but interrelated phases:

i. Initiation: To identify what a project will focus on, we need to find out who should benefit and
what their needs are. A need assessment will give an overview of community problems. A capacity
assessment will help identify which problem the project should address.
ii. Planning/Design: This involves carrying out further research in to the people affected by a problem
and how they are affected by a problem and how they are affected by it. We also need to consider
the risks to the project and how we will measure the project’s performance.
iii. Execution/Implementation: During the implementation, it is important to monitor and review the
progress of the project and any outside changes that affect it. The project plans should be adjusted
where necessary.
iv. Monitoring and Evaluation: It should be carried out at or after project completion. Evaluation
could be carried out a few months or years after the project has finished in order to assess its long-
term impact and sustainability.
v. Closing/Lessons Learning: While the project cycle is a useful way of outlining the stages of a
project, it has one drawback: It makes it look as though one tool follows another. In fact, many of
the planning tools can be used at any stage of the project. They should be repeated throughout the
project’s life to ensure that any changes that might affect project.
Basically the purpose of project management is to integrate:

✓ Purpose
✓ People
✓ Process
A project manager’s job is to see that the project team (people) is clear about the purpose of the project, if
everyone is clear on the purpose and vision of the project, then the next important task of a project manager
is to make sure that everyone on the project team is working toward these goals (process).

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Unit Two: Need Assessment and Project Development Plan in
Development Project
2.1. Need Assessment
In development projects, the first step in the project cycle is to identify an issue that a project could address.
This usually involves a ‘need assessment’ which finds out what community needs are.

A needs assessment is a method of finding out the nature and extent of problems and how they can be
solved. In general, a needs assessment is a systematic approach to identifying social problems, determining
their extent, and accurately defining the target population to be served and the nature of their needs. We
might already have a good idea of local needs. They might be quite obvious, or we might have become
aware of them during a past project.

On the other hand, we might have no idea what a community’s needs are. It is important to carry out a needs
assessment before planning development work, whether we think we know what the needs are or not. The
project should come out of what people say they want and not from assumptions that we make. Sometimes
the needs are not immediately clear or cannot be easily understood. By talking to different people, we will
be able to understand how problems affect people differently. Make sure that the people we talk to include
women, men, girls, boys, the elderly, people with disabilities, etc. For example, poor access to clean water
may affect women more than men because women have to walk a long way to fetch water.

Needs assessment gives people an opportunity to prioritize their needs, which leads to a more sustainable
development project.

Why Conduct a Needs Assessment?

The main aims of a needs assessment could be:

✓ To assess the extent and causes of community social problems

✓ To identify the major beneficiaries and target populations of a project.
✓ To prioritize problems based on their significance in the community
✓ To assess the capacities of the community in the project
✓ Identification of a solution for a complex problem or issue.
The needs assessments are a systematic process including several subsequent processes:

✓ Collecting data by means of clearly defined methods and instruments (questionnaires, interviews,
focus groups, document research, etc.)
✓ Identifying priorities and establishing criteria for finding a solution to a problem;
✓ Preparing a project plan based on their priorities
When conducting needs assessment, we need to collect information on:

✓ Population, health, infrastructure,

✓ Social and economic issues, resources,
✓ Education and knowledge
There are many tools that enable communities to identify their needs (How?)
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 ➢ Listing: By listing for the issues about which people have the strongest feelings, it is possible to
identify the issues that they most want addressed and projects which they are most likely to
participate in.
✓ A team of people (development workers or village members) ask a community or group
questions to find out what people are worried, sad, happy, fearful, hopeful or angry about.
✓ The questions should be open-ended.
➢ Interviewing: This tool helps us to gain greater understanding of the issues.
✓ It involves talking to key people in the community (those who are seen as the heart of the
community) in order to discuss their knowledge, experience and understanding of the issues.
✓ Key people include health workers, traders, religious leaders, village chiefs, teachers, etc.
✓ When choosing people to interview, make sure their views and opinions are likely to
represent those of others in the community.
➢ Take care not only to interview the powerful, but also to interview those whose views
are not usually heard.
➢ Use open-ended questions such as:
✓ What are the main problems you face in your area of work?
✓ What are the main pressures that people in the community face?
✓ What simple things could be done to improve the situation?
➢ Focus Groups: This tool is used with a group of 10-20 people.
✓ It helps them to understand and voice some of the problems they face and the needs they
have.
✓ A focus group enables people with different views to discuss their differences, challenge
assumptions and come to a collective understanding of the needs of the community.
❖ Questions to stimulate discussion could include the following:
✓ What are the main pressures that people in the community are facing?
✓ What simple things could be done to improve the situation?
✓ If you could change one thing in this community, what could it be? Why?
Through the assessment, the following is achieved:

✓ Identification of structural and root causes of a problem

✓ Understanding of the situation in its geographic and cultural context
✓ Identification of opportunities, vulnerabilities, capacities, resources

Agreeing Priority Needs

➢ Once the needs have been identified, community members should be given the opportunity to say
which needs they feel are a priority.
➢ Ask them to group their needs in to general issues such as water, health, land, food, etc.
➢ Once the needs have been grouped, community members can decide which of the issues should be
given priority.
➢ Write all of the issues onto separate pieces of paper and place them in order in a line from the most
important to the least important until all agree.

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2.2. Capacity Assessment
➢ Communities should be encouraged to use their own capacities and resources to address the
problems they face.
➢ It is therefore important to carry out a capacity assessment after needs assessment to identify
strengths that the community could use to address the problems they identified earlier.
➢ The project, if needed, should focus on strengthening the community’s capacities to address
their problems.
➢ By doing this, we are facilitating the community to address their problems rather than
addressing their problems for them.
❖ Capacity assessment involves six types of assets:
✓ Human: These enable people to make use of their other resources. They include skills,
knowledge, ability to work and good health.
✓ Social: These are based on relationships and include organizations and groups within
the community, political structures and informal networks.
✓ Natural: These form the local environment and and include land, trees, water, climate,
minerals, etc.
✓ Physical: These are man-made, such as buildings, transport, water supply and
sanitation services, energy sources, telecommunications, etc.
✓ Economic: These are things that people can use to sustain their livelihoods, such as
money and savings, grain stores, livestock, tools and equipment, etc.
✓ Spiritual: These include faith, scripture, guidance and prayer.
❖ Using participatory techniques, such as those used for the needs assessment, ask community members
to identify their capabilities.
Concept Note

Once a need assessment has been identified which a project can address, write a concept note A
concept note outlines the project idea. It does not have to contain a lot of detail and may only be
about two pages in length. The reason for writing a concept note before a full proposal is so that
our organization’s leadership or a donor can gain an idea of what we hope to do. They can ensure
it fits with strategy, check its relevance and quality and give feedback before a lot of time, effort
and resources are spent planning the project. In short, a concept note includes:

✓ Background information
✓ Why the project is necessary
✓ Who will benefit from the project
✓ How they will benefit
✓ An estimate of both the total budget and the resources needed for design.

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2.3 Project Design
Once a priority community need has been identified, we can start to think about how it can be addressed.
Project design consists of:

✓ Stakeholder analysis
✓ Research
✓ Problem analysis
✓ Logical frame (Log frame)
✓ Risk analysis
✓ Action planning, and
✓ Budgeting
❖ Note that the analyses- stakeholder, problem and risk- can be carried out before the design stage.
Stakeholder and risk analyses shoul be carried out on a regular basis throughout the project cycle.

2.3.1 Stakeholder Analysis

Stakeholder analysis is a useful tool for identifying stakeholders and describing the nature of their stake,
roles and interests.

Stakeholder analysis helps to:

✓ Improve the project’s understanding of the needs of those affected by a problem.

✓ Reveal how little we know as outsiders, which encourages those who do know to participate.
✓ Identify potential winners and losers as a result of the project
✓ Reduce, or hopefully remove, potential negative project impacts identify those who have the rights,
interests, resources, skills and abilities to take part in, or influence the course of the project.
✓ Identify who should be encouraged to take part in the project planning and implementation.
✓ Identify useful alliances which can be built upon.
✓ Identify and reduce risks which might involve identifying possible conflicts of interest and
expectation among stakeholders so that conflict is avoided.
❖ There are a number of ways of doing stakeholder analysis.
✓ Ideally, stakeholder analysis should be carried out with representatives of stakeholder groups
as possible.
✓ Stakeholder table
Stakehoders Interests Likely Impact Priority Remark
of the Project (1,2,3,..)
(+/-)
Primary
Secondary
Stakeholders’ are:

✓ People affected by the impact of an activity

✓ People who can influence the impact of an activity

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 ✓ Stakeholders can be individuals, groups, a community or an institution. Stakeholder groups are
made up of people who share a common interest, such as an NGO, church leaders and the
community.
❖ Stakehoders can be divided in to two main types:
i. Primary stakeholders: Who benefit from, or are adversely affected by, an activity.
Primary stakeholders are usually vulnerable. They are the reason why a project is
carriedout- the end users.
ii. Secondary stakeholders: Include all other people and institutions with an interest in the
resources or area being considered.
➢ If stakeholders are not identified at the project planning stage, the project is at risk of failure. This
is because the project cannot take into account the needs and aims of those who will come into
contact with it.
➢ In general, stakeholders include the winners and the losers as a result of the project. While most
stakeholders will benefit from the project, there may be others who will be negatively affected by
the action taken.
➢ Conducting stakeholders’ analysis at the beginning of the project design is important to gain an
understanding of which organizations or groups of people;
✓ Have an interest in the issues,
✓ What that interest is,
✓ Who shares the same goals you have,
✓ Who can help the project and how,
✓ Who can have a negative influence and be a barrier for the project
➢ Stakeholders may change over the course of the project and an updated stakeholders’
analysis can be required at a later stage of the project implementation.
1. Interest: Referes to the stakeholder’s interest in the project. If the stakeholder is directly
involved in activities related to program or project activities, then its interest is primarly, if not
then its interest is secondary.
2. Level of Knowledge: It indicates the stakeholders’ knowledge about the field and issues.
Stakeholders who are internal to the system will be more knowledgeable about the field.
3. Resources Available: Identifies specific resources held by or accessible to the stakeholder, such
as human capital, time, financial and legal resources, technology and general information.
4. Resource mobilization capacity:Estimates how easily groups can mobilize resources in pursuit
of the project’s objective.
5. Proponent/Oponent: Refers to a stakeholder that supports the project’s mission and can help
to fulfill its objectives. An opponent is a stakeholder that does not support the project’s goal and
may hinder its success. A project team should define stakehoders as opponents or proponents
based on their best knowledge and research of the stakeholders.
6. Influence/Authority: Defines the level of authority that the given stakeholder has to implement
change and make final decisions.
7. Priority: Indicates the level of concern that the given stakeholder holds for the project.

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2.3.2 The Role of Research on Project Design and Management
All development work should be based on accurate, reliable, and sufficient information. Good information
is important in order to:

✓ Understand the context in which the project is taking place

✓ Understand the causes and effects of the issue that is being addressed
✓ Understand what others are doing in order to avoid duplication and to work together if appropriate
✓ Ensure that the response takes into account all factors and is the most appropriate and effective for
the situation
✓ Understand how the context is changing so the response can address potential future needs or
prevent problems from arising
✓ Justify the course of action to our organization, beneficiaries, donors, and others we are working
with
✓ Learn from past successes and mistakes
✓ Provide good evidence for the response
In general, research enables us to find out the facts about the need. This will help as to know how best to
address it. Research involves talking to people or accessing written information. Throgh research, we should
look at social, technical, economic, environmental and political factors. This might help to identify new
stakehoders and risks to the project. In conducting a research, consider:

✓ The area’s history

✓ Geography, climate, environment, e.g, main features, map, communication, area, seasonal
problems,
✓ Population-number, age, sex profile, etc.
✓ Social systems and structures- religious divisions, status of women, social institutions
✓ Religion and world view- religious beliefs, groups, and churches
✓ Politics- local political hierarchies; effects of central government, e.g. stability, politics,
✓ Culture- norms and practices, other cultural groups in the area, language
✓ Living conditions- types of housing, water and sanitation
✓ Economics- sources of income, crops, landholdings, average daily wages
✓ Education- schools, literacy rates
✓ Health- mortality rates, cause of dealth and illness, local health services
✓ Services and development programs
Generally, the information collected can be used as a baseline. Use a mixture of primary and secondary
information to insure that what we are told is valid.

2.3.4 Problem Analysis

Problem analysis helps primary stakeholders to identify the causes and effects of the problems they face. It
involves drawing a problem tree, from which project objectives can be identified. Use the stakeholder
analysis to identify those who should help to construct the problem tree, making sure there is mix of people
from the community with local knowledge, technical knowledge, and so on. Problem analysis can be carried
out with different stakeholder groups in order to see how their perspectives vary. To help stakeholders think

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through all the causes and effects, check that they have considered social, environmental, political,
economic and technical factors.

The problem tree should help to reinforce our findings during the research phase of the planning. It might
also raise new issues that we had not previousely considered. After the needs assessment is completed, the
collected information is analyzed and interpreted to determine causes and consequences of identified
problems and link them in a cause-effect relationship.The better the problem is understood, the better a
project can be designed to address it. A problem analysis technique is used to interpret the data and identify
causes and effects.

The Concept of Problem, Causes and Consequences

❖ Problem: A problem is a specific negative situation related to a person or group’s well-being.
❖ Causes: Causes are factors that exist in the households, community, organizations, and countries that
have initiated or perpetuated the problem. There are two levels of causes:
i. Underlying causes: are those that are most visible and recalled first in the process of
problem analysis
ii. Root-causes: are identified by analyzing the problem to its core
➢ One way to think about logical steps in identifying causes of a problem is to ask the
question Why?. In answering this question, a project design team will be moving down
the logical structure towards the underlying causes. Most likely there will be more than
one underlying causes. When there is point at which it is difficult to find new answers,
it means that most of the underlying and root-causes have been identified and it is time
to begin designing the project.
❖ Consequences: Onsequences are social, environmental, political or economic conditions that result
from the problem.

Problem Tree
Problem trees analyze a situation and identify a core problem that you want to focus on.

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 The tree has a stem that represents the core problem, roots that represent the causes of the problem, and
branches that represent the effects. The main steps in problem tree are:

✓ Step-1: Agree on the main problem, usually the one identified during project identification
✓ Step-2: Identify the causes of the main problem by asking ‘but why?’ until we can go no further.
Some problems might have more than one cause.

✓ Step-3: Identify the effects of the main problem by asking ‘So what?’ until we can go no further.

2.3.5 Project Objectives and Objective Tree

To formulate an effective project strategic objective/long-term outcome, a project design team should use
the SMART approach. The most common explanation of SMART is:

✓ S-Specific: to avoid differing interpretations

✓ M-Measurable: to monitor and evaluate progress
✓ A-Achievable: to have realistic targets
✓ R-Relevant: to lead to desired results

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 ✓ T-Time-bounded: to have a specific time period to achieve the results
To formulate a SMART objective or outcome, consider the questions listed below.

❖ Specific: What exactly is the project going to do, where, with or for whom?
❖ Measurable: Are the stated results measurable? Does the organization have the capacity to measure
them?
❖ Achievable: Can we get it done in the time frame? In this political climate? With this amount of
money and resources?
❖ Relevant: Is the objective/outcome important to achieving the desired result? Is it in line with the
organizational strategy?
❖ Time-bounded: When will this objective/outcome be accomplished?
Objective Tree: An objectives tree is similar to a problem tree, except that it looks at objectives rather than
problems. The easiest way to develop an objectives tree is to convert a problem tree. To do this, turn each
of the causes in the problem tree in to positive statements.

Problem Tree and Objective Tree

Proble Tree Objective Tree

Relationship: Cause-Effects Negative Relationship: Means-Ends

Statements are
Branches: Effects rewritten in to Means: Objectives
Trunk: Main Problem positive Trunk: Purpose/Objectives/Outcome
statements
Roots: Causes Ends: Objectives

2.3.6 Logical Framework

Now once the project has been identified and detailed information has been collected, we can start to plan
exactly how the project will function. A useful way of doing this may be to use a logical framework (log
frame). The process of completing the log frame helps to think through all the factors that should be

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considered for planning a successful project. The log frame is a tool used to help strengthen project design,
implementation and evaluation. Although it is constructed during the planning stage of a project, the log
frame is a living document, which should be consulted/checked and altered throughout the project’s life
cycle. The log frame is a table of four rows and four columns, where all the key parts of a project can be
inserted as a clear set of statements:

➢ The project goal

➢ Purposes
➢ Outputs and
➢ Activities, with their indicators, evidence and assumptions.
Logical Framework Table

Intervention Logic Indicators (How to Verfication/Evidences Assumption (What else

(Summary) measure change) (Where and how to get to be aware of) or risks
information) (which could affect the
project implementation)

Goal (the higher order

objective, the longer term
impact, that the project will
contribute to)

Purpose (specific and

immidate results of the
project)

Outputs (what the project

will deliver in order to
achieve the purpose)

Activities (The activities that

have to be undertaken by
project)

Terminology

➢ Goal: it refers to the overall problem we are trying to address. It is some times referred to as the
wider development objective.
➢ Purpose: it is the specific change that we want the project to make to contribute to the achievement
of the goal. It is some times called the immidate project objective.
➢ Outputs: are what we want to see as a result of our activities, in order to fulfill the purpose.
➢ Activities: describe the tasks we will carry out.
➢ Indicators: answer the question_how do we know when we have got there?
Indicators are signs which measure project performance against objectives and play an important
part in monitoring and evaluation.
➢ Evidence: refers to the source of the information needed to measure performance, who will be
responsible for collecting it, and how often.
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 ➢ Assumptions: refer to the conditions that could affect progress, success or long term sustainability
of the project.
✓ There may be external factors which cannot be controlled or which we choose not to control.
✓ It may be possible to reduce the project’s vulnerability to factors which cannot be controlled.
✓ These could include climatic change, price changes and government policies.

The ‘If then’ Test

When we have filled in the objectives for each level, we must make sure the statements are logically linked
to each other. To do this, use the ‘If then’ test.

For example:

If we train members of the community to maintain and repaire handpumps (activities), then sources of safe
water will be improved (output).

If sources of safe water are improved (output), then access to safe water will be improved (purpose).

If access to safe water is improved (purpose), then the incidence and impact of diarroeal disease will
decrease (goal).

Log frames are useful because they:

✓ help people to organize their thinking

✓ help people to think logically
✓ help identify weaknesses in project design
✓ ensure key indicators are identified from the start of the project so that monitoring and evaluation
are easier.
✓ ensure that people involved in the project use the same terminology.
✓ help people to summarize a project plan on a few sides of paper

2.3.7 Action Planning

Once the log frame has been developed, think about the details of how the project will take shape in terms
of timing, resources, budgeting and personnel. Like the log frame, the action plan should be viewed as a
flexible document in which changes can be made later.

The activity planning worksheet is used to help us consider:

✓ who will do what

✓ when this will happen
✓ what types of inputs, besides people, will be needed

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A separate sheet should be used for each output. The activities related to the output are set out, together
with the resources needed, the total cost of these and the name of the person or people who will be
responsible for that activity.

Activity Schedule
The activity schedule enables us to consider when our activities will happen and for how long. This will
help us to think about when would be appropriate to carry out the different activities.

Timing will depend on things such as:

✓ Seasonal weather patterns

✓ Availability of trainers
✓ Availability of materials
The activity schedule helps us to look at the sequencing of activities because some activities will depend
on others being completed first. The activity schedule should be viewed as a flexible document and can be
altered if new circumstances arise. Put the initials of the member of the team who is responsible for the
activity.

2.3.8 Budgets
Whether we are seeking donor funding or using funds we already have, it is important to write a budget for
the project. A budget is necessary for transparent financial management. The donor needs to see a budget
before approving the funds. This means that we must budget very carefully. If we do not consider all the
things we will need to spend money on, we will unable to carry out some of the activities, and the project
may fail. If we budget too much for some things, the donor may question it and be unwilling to fund the
project.

Detailed Budget
A detailed budget is usually for internal use only. Donors require only a summary. However, a detailed
budget is useful for:

✓ Good financial management and accountability: It shows that we are not spending money
unnecessary.
✓ Monitoring our activities: we will know if we have completed each activity if the money has been
spent.
✓ Learning: By keeping a record of our budget (and later, what we actually spend), we will know what
is realistic for future projects.
Project Budget
Donors will require a completed project budget. This is a summary of the detailed budget. Often donors
will say what categories to include in the project budget. All of the costs in the detailed budget should now
have been included in the project budget. Project budget may be running costs (vehicles/project equipment,
office equipment).

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2.4 Project Plan
A project plan is a formal, approved document that is used to manage and control a project.

Project planning defines the project activities and end products that will be performed and describes how
the activities will be accomplished. The purpose of project planning is to define each major task, estimate
the time and resources required, and provide a framework for management review and control.

The project planning activities and goals include defining:

✓ The specific work to be performed and goals that define and bind the project.
✓ Estimates to be documented for planning, tracking, and controlling the project.
✓ Commitments that are planned, documented, and agreed to by affected groups.
✓ Project alternatives, assumptions, and constraints.

The planning process consists of the following basic tasks:

✓ Estimate the size of the project

✓ Identify and access risks, and negotiate commitments
✓ Define the technical approach used to solve the problem
✓ Define and sequence the tasks to be performed and identify all deliverables associated with the
project.
✓ Define the dependency relations between tasks
✓ Estimate the resources required to perform each task
✓ Schedule all tasks to be performed
✓ Define a budget for performing the tasks
✓ Define the organization used to execute the project
✓ Identify the known risks in executing the project
✓ Define the process used for ensuring quality
✓ Define the process used for specifying and controlling requirements
There is a phrase ‘If you fail to plan, you plan to fail’.

Think of examples of when thinks have gone wrong because planning was not carried out adequately. Why
did things go wrong? What was not taken account of?

Planning helps to:

➢ Think ahead and prepare for the future

➢ Ensure the right direction
➢ Identify issues that will need to be addressed
➢ Consider whether a project is possible
➢ Make the best use of resources
➢ Motivate staff
➢ Ensure smooth running of projects
➢ Clarify goals and develop vision

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 ➢ Establish the reason for doing something
➢ Obtain funds and other resources
➢ Allocate resources and responsibilities
➢ Guide implementation of projects
➢ Achieve the best results
There are many barriers to planning. These 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 so uncertain
➢ Wanting to do things immediately because the need is urgent, rather than think about them

2.5 Project Management

Project management is the process of achieving project objectives (Schedule, budget, and performance)
through set activities that start and end at certain points in time and produce quantifiable and qualifiable
deliverables.

Project management is a set of principles, methods and techniques for effective planning of objective-
oriented work, there by establishing a sound basis for effective scheduling, controlling and re-planning in
the management of projects.

It is the process of combining systems, techniques, and knowledge to complete a project within established
goals of time, budget and scope.

Project management is a process of leading a team of capable people in planning and implementing a series
of related activities that need to be accomplished on a specific date with a limited budget.

Project management is the application of knowledge, skills, tools, and techniques to project activities in
order to meet or exceed stakeholders’ needs and expectations.

Successful project management is the art of bringing together the tasks, resources and people necessary to
accomplish the business goals and objectives within the specified time constraints and within the monetary
allowance.

The project management tools and principles provide the means for:

✓ Project breakdown into tasks and sub-tasks

✓ Finding interdependencies between the tasks
✓ Allocating resources, human and material and smoothing resources
✓ Estimation for total project duration and budget
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 ✓ Monitoring more efficiently project progress

2.5.1 Project Management Knowledge Area

i. Project Integration Management: Ensures that the project is properly planned, executed and
controlled.
ii. Project Scope Management: Includes authorizing the job, developing a scope statement that will
define the boundaries of the project, subdividing the work into manageable components with
deliverables.
iii. Project Time Management: Specifically refers to developing a schedule that can met, then
controlling work to ensure that this happens!
iv. Project Cost Management: Involves estimating the cost of resources, including people, equipment,
materials, and such things as travel and others.
v. Project Quality Management: Includes both quality assurance ( planning to meet quality
requirements) and quality control (steps taken to monitor results to see if they conform to
requirements)
vi. Project Human Resource Management: Involves identifying the people needed to do the job,
defining their roles, responsibilities, and reporting relationships; and then managing them.
vii. Project Communications Management: Involves planning, executing, and controlling the
acquisition and dissemination of all information relevant to the needs of all project stakeholders.
This information might include project status, accomplishments, and events that may affect other
stakeholders or projects.
viii. Project Risk Management: Is the systematic process of identifying, quantifying, analyzing, and
responding to project risk.
ix. Project Procurement Management: Procurement of necessary goods and services for the project
is the logistics aspect of managing a job. This includes issuing requests for bids, selecting vendors,
administering contracts.

2.5.2 Project Management Knowledge Area Functions

The four core knowledge areas (scope, time, cost, and quality) lead to specific project objectives.

The four facilitating knowledge areas (human resources, communication, risk and procurement
management) are the means through which the project objectives are achieved.

The one knowledge area (project integration management) affects and is affected by all of the other
knowledge areas.

2.5.3 Project Manager

The project manager is responsible for managing the project’s scope, schedule, and cost to support the
owner’s expectations for the successful completion of the project.

Typical duties of the project manager are:

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I. Monitoring schedule and costs versus project progress to identify problems that could potentially
extend the schedule or overrun costs.
II. Taking, directing, or recommending corrective action when scope, schedule, or cost variances threaten
the project.
A project manager must have a range of skills including:

✓ Leadership
✓ Influencing
✓ Negotiation
✓ Conflict Management
✓ Planning
✓ Contract Management
✓ Estimating
✓ Problem Solving
✓ Creative thinking
✓ Time Management
✓ Effective Communication (verbal and written)

2.6 Project Implementation and Evaluation

During the implementation phase, there are things we must do;

1. Update the stakeholder analysis to check that there are no new stakeholders who might influence
project success or who should be invited to participate.
2. Reassess the risks to the project
3. Monitor and review the progress the project is making towards its objectives
4. Learning from monitoring and reviewing back into the project design.
5. Go back to the log frame and make adjustments or improvements where appropriate.
There are two main reasons for measuring our performance:

✓ Accountability: We need to show those who give us resources and those who benefit from our work
that we are using the resources wisely.
✓ Lesson Learning: By measuring, analyzing and reflecting on our performance, we can learn lessons
that will enable us to either change our project plans or change our approach to other projects.
To measure performance, we need to address:

✓ Relevance: Does the project address needs?

✓ Efficiency: Are we using the available resources wisely?
✓ Effectiveness: Are the desired outputs being achieved?
✓ Impact: Has the wider goal been achieved? What changes have occurred that help beneficiaries?
✓ Sustainability: Will the impact be sustainable?
The difference between monitoring, reviewing and evaluation;
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 ➢ The main difference is that they are carried out at different stages of the project:
✓ Monitoring: is done continuously to make sure the project is on track, for example, every
mouth
✓ Reviewing: is done occasionally to see whether each level of objectives leads to the next one
and whether any changes need to be made to the project plans, for example, every six
months.
✓ Evaluation: is usually done at the end of the project to assess its impact.
➢ Where possible, primary stakeholders should take part in monitoring, reviewing and evaluation.
Celebrating Success and Lesson Learning
When the project is completed, it is worth considering how to celeberate its success. Celebration is a way
of recognizing all the people have contributed to the project. Hopefully, beneficiaries will have been
empowered by participating in the project from start to finish. Holding a celeberation can inspire them to
take on further community development projects in the future.

Lesson Learning: It is important to reflect on problems and learn from them in order to improve projects in
the future. It is also important to share our learning with others, such as the community, local authorities,
donors and agencies. The way to share learning will vary, depending on whom it is being shared with.

Unit 3: Business Project Development

3.1. Business Project Life cycle – World Bank Approach
According to World Bank, project cycle involves five stages; namely,
✓ project identification,
✓ project preparation,
✓ project appraisal,
✓ project implementation, and
✓ Project evaluation.

1. Project identification
This stage is also called pre-feasibility studies. Project ideas may come from:
✓ SWOT Analysis
✓ New experiments from previous project failures
✓ New experiments from expansion
✓ Replication of successful project tested elsewhere
✓ New experiments from shortages or excess of resources
✓ External threats
✓ Opportunities
✓ Internal strengths and/or weaknesses
✓ Other sources
2. Project preparation
Project preparation is the most important stage in project planning. Project preparation stage, also called
feasibility study, is concerned with the detailed study of all aspects of the projects.

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3. Project Appraisal
The project is appraised from different perspectives: technical, commercial (market), financial, economic
and ecological.
4. Project implementation
Major activities in during project implementation phase include:
✓ Detailed designs and specifications are drawn;
✓ Tender documents are prepared;
✓ Bids are invited and evaluated,
✓ Orders for imputes are placed;
✓ Contracts are signed; workers are hired, trained and put to work;
✓ Materials are moved to sites etc.
5. Project Evaluation
Project evaluation is a monitoring (checking) activity in order to:
✓ Find out how things are going
✓ Encourage the project team
✓ Check that promised resources are in fact working on project tasks
✓ Rapidly learn about concerns and difficulties
✓ Show concern for the success of the project
✓ Take corrective action if things go wrong

3.2 Project Life cycle – UNIDO Approach

According to UNIDO, project cycle involves three major phases. These are:
1) Pre-investment phase
2) Investment phase (Implementation phase)
3) Operation phase (operation and ex-post evaluation)
A. Pre-investment phase
It includes four major activities; namely,
I. project identification,
II. pre–selection,
III. project preparation, and
IV. Appraisal.
I. Project Identification / opportunity study/
❖ Availability of resources
❖ Future demand for goods, increasing population and purchasing power.
❖ Import and export substitutions
❖ Environmental impact
❖ Success of similar projects elsewhere
❖ Possible inter-linkage with other industries
❖ Expansion through backward linkages and forward linkages
❖ Industrial policies of the government

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 ❖ General investment climate of the country
❖ Export potentials
❖ Availability and cost of production, etc.
II. Pre-selection /pre-feasibility study/
This phase involves the analysis of the following factors:
1. Examination (investigation) of all possible project alternatives
2. Ensure that the detailed analysis of the project is justified.
3. In-depth investigation of critical areas of the project
4. Examine the attractiveness (viability) of the project
5. Investigate the stability of the environmental situation at the location site
III. Preparation (feasibility study)
This stage provides all data, define, and critically examine the commercial, technical, financial,
economic, and environmental aspects for each project.
The components of feasibility study are:
1. Project Background and history
➢ Examination (investigation) of all possible project alternatives
➢ Ensure that the detailed analysis of the project is justified.
➢ In-depth investigation of critical areas of the project
➢ Examine the attractiveness (viability) of the project
➢ Investigate the stability of the environmental situation at the location site
2. Summary of market analysis and marketing concepts
3. Raw materials and supplies
4. Location, site, and environment
5. Engineering and Technology
6. Organization and Management
7. Implementation planning & budgeting
8. Financial Analysis and investment appraisal
IV. Project Appraisal
After feasibility studies are completed, the projects should be presented to the appraising parties. The
appraisal of project is based on:
a. the objectives set earlier,
b. the expected risk,
c. costs, and
d. gains.
B. Investment Phase
The investment phase, also called implementation phase, includes the following activities:
1. Establish legal, financial and organizational basis

2. Technology acquisition and transfer

3. Detailed engineering, design, contracting, tending & negotiations.

4. Acquisition of land, construction works, and installations

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 5. Pre- production marketing, securing of supplies, and setting up administration.

6. Recruitment, training, and placement of workers.

7. Plant commissioning and startup

C. Operating phase
Once activities listed under investment phase are completed, the project will go in to actual operation. The
operation involves producing the envisaged goods, and sale to the target market, or renders the envisaged
service to the target market.

Unit 4: Project Appraisal Techniques

4.1 Market and Demand Analysis
Market and demand analysis is a key activity for determining
– the scope of an investment,
– the possible production program,
– the technology required, and
– the choice of location.
• The objectives of demand and marketing analysis are:
– To determine the effective demand for the proposed project
– To determine the characteristics of the corresponding market in terms of unsatisfied demand,
competition, imports, exports etc.
Marketing Elements
• Marketing is characterized by the following elements:
• Business philosophy
– Marketing puts the problems, needs, and desires of the existing or potential consumer groups
at the center of business activities of the firm.
• Marketing research
– Marketing research provides information to develop marketing strategies.
• Marketing instruments (marketing mix)
– Use of necessary combination mix marketing mix instruments to successfully implement
marketing strategies
• Marketing plan and budget
– Based on the findings of market research, it is necessary to determine the required means
and to prepare plans of actions in achieving marketing objectives.
Situational Analysis and Specification of Objectives
• The project analyst should be able to establish the relationship between the product and its market.
• To do so, she/he may informally talk to the following parties:
- customers,
- competitors
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 - middlemen (wholesalers and retailers)
• The purpose of contact with the above parties is to:
- learn about the preferences
- Know purchasing power of customers,
- Identify the actions, and strategies of competitors, and
- Understand the practices of middlemen.

Collection of Information
• In order to achieve the market and demand analysis objectives, information should be obtained from
various sources.
• These sources are generally classified into
• primary sources and
• Secondary sources.

Sources of Secondary Information

• Secondary information is information that is gathered in some other context and is already available.
• The important sources of secondary information are:
a) Census-
– CSA gathers and publishes data about
• population,
• demographic characteristics,
• household size and composition and other similar data
b) Economic survey
c) Annual reports on imports and exports
d) Industry specific sources
The reliability, accuracy and relevance of secondary information should be examined carefully in terms
of:
- who gathered the information and the purpose (objective) for which it was gathered
- the time of information gathering and publication
- the relevance of information gather for the period
- target population
- the means of choosing the sample
- the representativeness of the sample
Primary information/Market Survey
Information obtained through secondary sources should be supplemented with primary information
The market survey may be a census, or a sample survey. In a census survey, the entire population is covered.
The term population refers to the totality of all units under consideration in a specific study.
• Example
- All higher private educational institutions
- All firms producing textile
• Census survey may involve high cost and insensible.
When census survey is impractical (all elements of the population are not covered), sample survey is
more useful.
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 The following types of information may be collected through market survey:
• Total demand and rate of growth of demand
• Motives for buying
• Demand in different segments of the market
• Income and price elasticity of demand
• Purchasing plans and intentions
• Satisfaction with existing products
• Unsatisfied needs
• Attitudes towards various products
• Distribution and price practices and preferences
• Socio-economic characteristics of buyers

4.2 Technical Analysis

The broad purpose of technical analysis is (a) to ensure that the project is technically feasible in the sense
that all the inputs required to set up the project are available, and (b) to facilitate the most optimal
formulation of the project in terms of:
➢ Manufacturing process/technology
➢ Technical arrangements
➢ Materials and inputs
➢ Product mix
➢ Plant capacity
➢ Location and site
➢ Machineries and equipments
➢ Structures and civil works
➢ Environmental aspects
➢ Project charts and layouts
➢ Project implementation schedule
➢ Need for considering alternatives

4.3 Financial Analysis

Financial analysis of the project is concerned with the analysis of the profitability of the project based on
monetary costs and benefits. Conceptually, the cost of project represents the total of all items of outlay
associated with a project which are supported by long-term funds. It is the sum of the outlays on the
following:
➢ Land and site development,
➢ Building and civil works,
➢ Plant and machinery,
➢ Technical knowhow and engineering fees,
➢ Expenses on foreign technicians and training local technicians abroad,
➢ Miscellaneous fixed assets,
➢ Pre-operative expenses,
➢ Margin money for working capital and Initial cash losses.

PRODUCTION COSTS
There are three major categories of manufacturing costs. These are:
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 1. Direct materials cost: The acquisition costs of all materials that are identified as part of the cost
object and that may be traced to the cost object in an economically feasible way. Acquisition costs
of direct materials include inward delivery charges, tax, and custom duties.
2. Direct labor. The compensation of all labor that can be identified in an economically feasible way
with a cost object. Examples are the labor of machine operators and assembler. Indirect labor costs
are all factory labor compensation other than direct labor compensation.
3. Indirect manufacturing costs (manufacturing overhead). All manufacturing costs that cannot be
identified specifically with or traced to the cost object in an economically feasible way. Other terms
used are factory overhead, factory burden, manufacturing overhead, and manufacturing expenses.

ESTIMATES OF SALES AND PRODUCTION

A. Estimating Sales
The sales forecast is the starting point for the projections of profitability. In estimating sales revenues, the
following should be taken into account:
1. Economic level (activities)
2. The project’s probable market share in each distribution territory
3. Competitor’s and their capacities
4. Pricing strategies
5. The effect of inflation on prices
6. Advertising campaigns, promotional discounts, and credit terms.
B. Estimating Production
Once sales projections are made, the next step is production estimates. Production may be estimated as
follows:
• Production = sales + Desired ending Inventory – Beginning finished goods inventory
For the first year of operation, there is no beginning inventory. To illustrate, assume that the sales are
projected to be 100,000 units in the first year although the capacity is 180,000 units.
It is estimated that there should be finished goods inventory of 5000 units on hand at the end of the first
year. Estimated production would be:
• Production = 100,000 + 5000 – 0 = 105,000 units
Similar approach can be followed for a period of more than one year. Production can also be estimated in
another way.

C. ESTIMATION OF MATERIAL COSTS

The costs of materials include the cost of raw materials, chemicals, components, and consumable stores
required for production. The following should be considered in estimating the cost of materials:
1. The requirements of various material inputs per unit of output. When materials inputs requirements
are established, it is necessary to consider:
- Theoretical consumption norms
- Experience of the industry
- Performance guarantees
- Specification of machinery suppliers
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2. The total requirements of various inputs:
Total requirements = Requirements per unit X Expected Production
3. The prices of material inputs: The prices of material inputs are defined
in cost, insurance, and freight (CIF)
4. The present costs of various material inputs
5. The seasonal fluctuations in prices
To exemplify, refer to the above example, suppose that each unit of output requires two types of materials:
three units of input x and 2 units of material y. The estimated costs of one unit of material x and one unit of
material y are Br. 5 and Br. 10 respectively. To adjust for estimation error the company allows a 2%
contingency on the costs of materials. The total requirement of each material type is computed as follows:
Estimated cost of Material X

Estimated cost of Material Y

Total material costs are summarized below:

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 D. ESTIMATING LABOR COSTS
Labor cost includes the cost of all the manpower employed in the factory. Labor cost is a function of the
number of employees and the rate of payment. Refer to Addis Company’s example; assume that 3 hours of
direct labor are required to produce one unit of output. It is estimated that direct labor cost per hour is Br.
20 and is expected to increase at the rate of 5% every year. Accordingly, direct labor cost is estimated as
follows:

E. ESTIMATING OVERHEAD COSTS

Overhead cost refers to the ongoing expenses of operating a business that are not directly tied to producing
a specific product or service. These costs are necessary for running the business but do not directly
contribute to the creation of goods or services.
Examples of Overhead Costs:
Rent: The monthly payment for office or factory space.
Utilities: Electricity, water, and gas bills that keep the business running.
Salaries of Non-Production Staff: Wages for employees not directly involved in production, such as
administrative staff, HR, and management.
Depreciation: The gradual reduction in value of equipment and machinery used over time.
Office Supplies: Costs for items like paper, pens, and computers that support daily business operations.
Insurance: Premiums paid for property, liability, and health insurance.

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To illustrate, suppose that (refer to Addis Company’s example) factory overhead costs are estimated to be
60% of direct labor costs.
Then factory overhead costs are estimated as follows:

COMPUTATION OF UNIT COSTS

The computation of unit cost is based on manufacturing costs which is composed of Direct materials, direct
labor, and overhead costs.

The unit cost is computed for each of the five years as shows below:

Once unit cost is determined, the cost of ending inventory and cost of goods sold can be computed. The
following table shows the cost of ending finished goods inventory assuming that FIFO method is used:

Cost of ending inventory = Desired ending inventory X Unit cost. Based on the above data, the cost of
goods sold can also be computed as follows:

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ESTIMATING ADMINISTRATIVE, SELLING, AND OTHER COSTS
Administrative, general, selling and other costs should be estimated in order to prepare projected income
statements. To prepare the projected income statement, based on the foregoing illustration, assume the
following additional data:
A. Administrative and general expenses, including depreciation of Br. 100,000 per year are estimated
at Br. 500,000 in year 1 and expected to increase by Br. 10,000 thereafter.
B. Selling expenses, including depreciation of Br. 60,000 per year are estimated at Br. 400,000 in year
1 and year 2 and are expected to be Br. 420,000 thereafter.
C. The project will be financed fully by equity.
D. Income tax rate is 30% after two years
Accordingly, the projected income statement is prepared as follows:

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ESTIMATIING PROJECT CASH FLOWS FOR REVENUE EXPANSION
The estimation of project cash flows is a key element in investment evaluation but also the most difficult
step in capital budgeting. Forecasting project cash flows involves numerous variables and many parties
participate in this exercise. These parties include:
1. Engineers – estimate capital outlays
2. Marketing group – projects revenues
3. Production people – forecast operating costs.
The forecasting of operating costs also involves cost accountants, purchase managers, personnel executives,
tax experts, and so on. What is the role of finance manager in forecasting project cash flows?
The role of finance manager is to coordinate the efforts of various departments and obtain information from
them, ensure that the forecasts are based on a set of consistent economic assumptions, keep the exercise
focused on relevant variables, and minimize the biases inherent in cash flow forecasting. The key steps
involved in determining whether a project is worthwhile or not are:
- Estimate the cost and benefits (revenues) of the project
- Calculate the cost of capital,( also called the Required Rate of Return)
- Compute the criterion of merit and judge whether the project is good or bad.
The estimation of the costs and revenues was the concern of the preceding sections. The cost of capital is
dealt with in your financial management courses. Similarly, risk assessment was discussed at the end of
unit three and you can also refer to your earlier accounting courses (financial management) and management
courses. There are several project evaluation criteria that have been suggested by economists, accountants,
and others to judge the worthwhileness of capital projects. However, only few of them and the most
common ones are presented in this section. They are classified into two categories. These are:
1. Non-discounting (traditional) criteria
a) Payback Period (PBP)
b) Accounting Rate of Return (ARR)
2. Discounted Cash Flows (DCF) criteria
a) Net Present Value (NPV)
b) Internal Rate of Return (IRR)
c) Profitability Index (Benefit-cost ratio)

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4.4 ECONOMIC ANALYSIS OF A PROJECT
The economic analysis, also called social cost-benefit analysis (SCBA), is a methodology developed for
evaluating investment projects from the point of view of the society or economy as a whole.
➢ Although economic analysis can be applied to both profit oriented (private) projects and public
investments, it is primarily used for evaluating public investments.
➢ Economic analysis helps in evaluating individual projects within the planning framework, which
indicates national economic objectives and broad allocation of resources to various sectors. In other
words, economic analysis is concerned with tactical decision-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 of economic
analysis. These perspectives and parameters are considered as tools for analyzing and appraising
individual projects.

Unit 5: Project Financing

5.1 Sources of Project Financing
Project finance may come from a variety of sources. Based on the source of generation, it is classified as
internal and external sources.
5.1.1 Internal sources: Internal sources of finance delineate the funds raised from existing assets and
day to day operations of the concern. Internal sources of finance include: Founder finance (Personal source
of the entrepreneur), Retained profits, Friends and family, Credit cards and so on.
➢ Entrepreneurs find various personal sources to finance their project such as: fund from
operations, sale of current assets (such as bills receivables and stocks), sale of fixed assets (such
as land, buildings, plants, and machineries), cash and investment, inheritances, personal credit
cards, re-mortgaging and putting time into the business for free.

5.1.2 External sources

➢ External sources of finance refer to the cash flows generated from outside sources of the
organization, whether from private means or from the financial market.
➢ In external financing, the funds are arranged from the sources outside the business.
➢ There are two types of external sources of finance, i.e. debt financing and equity financing
The common forms of debt are:
➢ Commercial loans
➢ Leasing

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 ➢ Commercial Paper
➢ Bridge finance( is a form of temporary financing intended to cover a company's short-term costs )
➢ Trade Credit
➢ Debentures
➢ Bonds and other debt instruments (for borrowing from the capital market)
Subordinate loans(secondary loans that are paid after all first liens have been paid in the event of a default)

Raising Money in an Ethical Way

▪ It is important that our fundraising methods reflect out organization’s values.
▪ We also should not want to offend potential donors or damage our reputation in any way. For
example, Christian organizations might decide not to use any fundraising method that involves
gambling, such as lotteries and raffles
▪ It may be useful to consider marketing principles when developing a fundraising strategy.
▪ However, they should be applied carefully to fundraising for development work because the money
that donors give is all spent on poor people.
▪ It does not bring the donors any financial return for their money. In a sense, poor people become the
‘product’ we are ‘selling’ to donors.
▪ It is important to ensure that we treat both the potential donors, and those we are raising money for,
with respect.
▪ We might be tempted to exaggerate the needs of the beneficiaries in order to obtain more funds.
▪ Photos of unhappy children might be used to increase the donors’ sympathy
▪ Fund rising activity should be ethical interims of all dimensions
Fundraising values document
▪ It can be useful to write a set of fundraising values.
▪ A fundraising values document should be written with our organization’s vision, mission and
values in mind.
The key questions a fundraising values document asks are:
o Are we being truthful in the information we provide about ourselves and the beneficiaries?
o Do we treat our donors with respect?
Key points for fund rising values
There should be a good balance between rationality and emotion in any fundraising proposition.
• Issue large fundraising appeals only in the event of a genuine disaster emergency for which Tear
fund has undertaken a needs assessment and has the capacity to respond.

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 • Believe that money and time as forms of support are of equal importance.
• Thank supporters for each donation, unless a supporter has indicated that they would not like their
gift acknowledged.
• seek to inform supporters of the impact of their giving on beneficiaries
• Seek to provide the best possible service to supporters, irrespective of the value of their donation.
• seek to be truthful in all fundraising propositions
• Honor supporters’ wishes in how their gifts are to be used, whilst making it clear how the greatest
impact on beneficiaries would be achieved.

Unit 6: Project Management Information System

6.1 The Meaning of PMIS
o The project management information system (PMIS) is intended to store information essential to the
effective planning, organizing, directing, and controlling of the project,
o :as well as to provide a repository of information to be used to keep stakeholders informed about the
project’s status.
o All too often projects are characterized by too much data and not enough relevant information on where
the project stands relative to its schedule, cost, and technical performance objectives
o The 80-20 rule tells us that typically there will be the vital few and trivial many, or 20 percent will be
relevant and the remaining 80 percent will be of significantly less importance
o Information is essential to the design and execution of management decisions allocating resources in a
project.
o Decisions coming from project planning, organizing, direction, motivation, and control must be based
on timely and relevant information.
o Motivation of the project team and discharge of leadership responsibilities by all managers associated
with the project require information by which informed decisions can be made and executed.

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 o Information is required for the operation of any enterprise.
o In organizations, making and implementing decisions depend on the character of the information
available to the decision makers.
o Information availability and flow are critical considerations in the speed and eloquence (fluency)
with which the efficient and effective use of resources is carried out in meeting the purposes of the
enterprise.
o Organizations of all sizes need information to design, produce, market, and provide after-sales
support to the products and services that are offered to customers.
o In large organizations, the flow of information can be incomplete and sequential, often not getting
to the people who need the information for their work in time to make the best decisions.
o The organization’s management information system will contain some information that is needed
for the projects, but there is a need for additional project-related information as well as that
information generated as a result of the project’s activities
A project manager might characterize the PMIS as being able to provide information that he or she needs
to do the job and information that the bosses need.

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INFORMATION FAILURES
Not all projects are managed by using a relevant and reliable information system. inadequate information
systems undermine the effectiveness of project controls by compromising data quality, reducing
communication efficiency, limiting monitoring capabilities, and increasing risk exposure. This can
ultimately lead to project delays, increased costs, and failure to meet objectives. Projects are materially
affected by the lack of adequate information with which to make informed decision. Without information,
decisions can be made through“best effort” based on something other than the facts. Managers at all levels
must manage by facts if the enterprise is intended to achieve the best results from projects.

6.2 VALUE OF THE PMIS

▪ The PMIS is a vital part of the communications for the project.
▪ As a store of knowledge, the plans, practices, procedures, standards, guidelines, and methodologies
are readily available to consult prior to making a decision or taking an action.
▪ A single store of information facilitates the collection and recovery of key data at any time—during
planning, project implementation, and post project activities.
▪ computers on the right depict the interaction between the project team and the store of knowledge.
▪ The project team will be populating the PMIS with such information as the project plan, including
all its subordinate documents, schedules, budget, correspondence, specifications, statements of
work, and drawings.
▪ Once the initial data are loaded, the project team will maintain the system through updates.
▪ A fully populated PMIS will be accessed anytime when there is a need for information.
▪ It will be the first source of information for managing the project with the relevant information from
both the enterprise’s information system and the project-generated information.

▪ During post project assessments, the PMIS can provide a wealth of information on what was
accomplished, what should have been accomplished, and how it was accomplished.
▪ The actual performance data for the project provide a record of how well the project
accomplished its purpose.
▪ This written record is more reliable than the memory of individuals.
▪ When individuals typically transit through the project to complete their work, they may not be
available for post project questioning.
▪ One project may generate significant information that has value for future projects.

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 ▪ The PMIS, as the store of knowledge, can be made available at any time to support the enterprise’s
work on another project.
▪ Although the project may be ongoing, there is still valuable information that can support planning
and initiation of new projects.
▪ One may give a value to the PMIS by comparing a current method of managing a project’s
knowledge store with a model of what it could be.

Sometimes comparison should consider the project’s needs for information and the benefits derived for the
enterprise’s other projects, whether they are ongoing, being planned, or being assessed in a post project
audit.
Some questions that could be asked include:
● How are the present project management information needs being met and are they adequate?
● What improvements are needed to support projects in the future?
● What information is provided by completed projects to support
planning and implementation of other projects?
● How are best practices captured and passed on to others?
● How is project information distributed to functional departments?
● What benefits could be derived from an improved PMIS?
● What are the cost and benefits of a PMIS?
DESCRIBING A PMIS
 The PMIS should be a store of knowledge for the project and the first source for information about
the project.

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  It should include background information on the project, current information on project activities,
and information that reflects organizational guidelines.
 The PMIS is a critical area that supports the project and allows it to
be managed by fact.
The PMIS may be divided in to four categories of information.
1. Organizational guidance or support information in the PMIS are:
● Project management manual
● Project management methodologies
● Organizational polices for projects
● Organizational procedures for projects
● Organizational briefings on project capabilities and implementation
2. Historical information in the PMIS could be:
● Files from other projects that contain performance data and best practices
● Proposal, quotes, and bids on this project
● Budgets, schedule, and technical performance measures from prior projects
● Project plans from prior projects
● Marketing presentation for this project
3. Current project information in the PMIS could be:
● Contracts for easy access by the project manager
● Project charter
● Specifications on the project’s product
● Statements of work
● Drawings, schematics, and illustrations related to the project
● Schedules
● Risk assessments
● Risk plans
● Communication plans
● Project correspondence
● Project internal policies and procedures
● Resources lists (human and nonhuman
● Approved vendor list
● Names and addresses of key organization people
● Stakeholder management plan
● Functional or operational plans

● Project diary
● Product standards
● Time cards for project team
● Briefings
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 ● Lessons learned
4. Old files from the current project that are no longer needed for the
project’s ongoing work could contain:
● Old or superseded materials (schedules, briefings, expenditures, plans)
● Records of former project team participants
● Closed out contracts or closed invoices
● Inactive files for correspondence
● Superseded policies, procedures, standards, and decision papers

6.3 Characteristics and attributes of PMIS

These characteristics and attributes are the following:
1. Accurate: Information in the PMIS should be accurate and represent
the situation.
 Erroneous information can lead to wrong decisions and failed projects.
Accurate information provides the best chance for managing by fact.
2. Precise: The precision of the information needs to be only to the level of granularity dictated by the
project decisions.
 For example, there is typically no need to estimate project labor- hours to less than an hour.
 It is a special case where labor estimates are to the nearest minute or nearest 10 minutes
3. Reliable: the information must be derived from a source that gives confidence that it is real and
representative of the situation.
 Information from an unknown source or stated in terms that permit more than one interpretation
should be labeled “questionable.”
4. Level of detail: the information should be at a level of detail that permits easy translation to the current
project.
 Too much detail masks the purpose and too little detail is not supportive of the project team.
5. Graphics, pictures, and illustrations: the use of graphics, pictures, and illustrations can convey
information more quickly than narrative text.
 These items can be supplemented with textual descriptions or highlights.
6. Mathematics and numbers: mathematics and numbers are a precise means of providing information.
 These are especially good to use for performance measures or product performance requirements.
 The PMIS is an essential part of the project and critical to making the project successful.
 It takes an initial effort to provide the organizational and historical information as well as the project
planning data.
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  Once the PMIS is activated for a project, that project assumes responsibility for sustaining the
system.
 It soon becomes outdated and loses its effectiveness if new information is not entered on a timely
basis.
 Files and documents that establish the project baseline should not be deleted, but placed in an
archive when new files or documents supersede them.
 It is important to maintain the superseded copy for reference when questions arise as to why
something was accomplished a certain way.
USES OF THE PMIS
The objective of an information system is:
 To provide the basis to plan, monitor, do integrated project evaluation, and show the
interrelationships among cost, schedule, and technical performance for the entire project and for the
strategic direction of the organization.
 The information should provide a prospective view in order to identify project problems before
they occur, so they can be avoided or their results minimized.
 Information is required so that the project team can continuously monitor, evaluate, and control the
resources used on the project.
 As a clearinghouse for information, the facility provides database searches and assists users in
deciding which products and services to use.

Unit 7. Project Monitoring and Evaluation

Monitoring and evaluation are important management tools to track the project progress and facilitate
decision making. While some funders require some type of evaluative process, the greatest beneficiaries of
an evaluation can be the community of people with whom the organization work
By closely examining the work, an organization can design programs and activities that are effective,
efficient and yield powerful results for the communities.
7.1 Monitoring: It is a continuing function that aims primarily to provide the management and main
stakeholders of an ongoing intervention with early indications of progress or lack thereof, in the
achievement of results. It helps organizations track achievements by a regular collection of information to:
o Assist timely decision making
o Ensure accountability and
o Provide basis for evaluation and learning

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7.2 Evaluation: It is the systematic and objective assessment of an ongoing or completed project, program
or policy, and its design, implementation and results. The aim is to determine the relevance and fulfillment
of objectives, dev’t efficiency, effectiveness, impact and sustainability. It should provide information that
is credible and useful, enabling the incorporation of lessons learnt in to the decision making process of both
recipients and donors.

Strategic questions in Monitoring and Evaluation

❖ Relevance: Do the objectives and goals match the problems or needs that are being addressed?
❖ Efficiency: Is the project delivered in a timely and cost effective manner?
❖ Effectiveness: To what extent does the intervention achieve its objectives? What are the supportive
factors and obstacles encountered during the implementation?
❖ Impact: What happened as a result of the project? This may include intended and unintended
positive and negative effects
❖ Sustainability: Are there lasting benefits after the intervention is completed?
7.3 Importance of monitoring and evaluation
❖ To satisfy commissioners and sponsors
❖ To help you apply for funding
❖ To inform your future work
❖ To boost the profile of your work
❖ Motivation and satisfaction
❖ To add the evidence base
The Measurment & Evaluation system is built on the following key parameters of a project:
❑ The overall goal or desired change or effect
❑ The main beneficiaries or audience that the project seeks to benefit
❑ The hypothesis or assumptions that link the project objectives to specific interventions or activities
❑ The project scope and size
❑ The extent of participation in and capacity for M & E
❑ The project duration
❑ The overall project budget
Key criteria’s to assess the quality of Monitoring and Evaluation
i. Utility : The proposed M & E system will serve the practical information needs of intended
users
ii. Feasibility: The methods, sequence, timing and processing procedures proposed are
realistic, prudent and cost effective
iii. Propriety: The M & E activities will be conducted legally, ethically and with due regard for
the welfare of those affected by its results
iv. Accuracy: The M & E outputs will reveal and convey technically adequate information
Key Principles of Evaluation
Evaluation is most effective when:
➢ It is a continuous (not just one off) process informing planning and delivery as the project
develops
➢ It involves all those with an interest in the project in defining the questions they want
answered
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 ➢ It uses imaginative and creative approaches, which engage those involved;
➢ It helps projects to be more accountable to the wider community
➢ It is used to challenge the discriminatory and oppressive policies and practices, and to
overcome inequality and disadvantage;
➢ It highlights and celebrates success ad achievements ;
It encourages an honest appraisal of progress, so that, you can learn from what has not worked as well as
what has.

Barriers to Monitoring and Evaluation

o It is costly and time consuming
o Less value provided for evaluation and reluctance on the side of stakeholders
o Lack of knowledge to carryout evaluation
o The target audience in work may have difficulty comprehending the evaluation tools that are in use
Planning for Monitoring & Evaluation
o It should be part of project cycle
o Conducting a need assessment
o Developing a research plan
Key stages involved in developing a research plan for Mon & E include:
o Choosing your method of evaluation
o Identifying and deciding on outcomes
o Setting indicators to demonstrate whether or not these outcomes have been met
o Deciding who will conduct the evaluation
o Identifying appropriate research tools for collecting data

7.4 Steps for Planning for Monitoring & Evaluation

1. Identify who will be involved in the design, implementation and reporting
2. Clarify scope, purpose, intended use, audience, and budget for evaluation
3. Develop the questions to answer what you want to learn as a result of your work
4. Select indicators: are meant to provide a clear means of measuring achievement, to help assess the
performance or to reflect the changes and are can be either quantitative and/or qualitative.
5. Determine the data collection methods: Eg, document reviews, questionnaires, surveys and
interviews
6. Analyze and synthesize the information you obtain
7. Interpret these findings, provide feedback, and make recommendations
8. Communicate your findings and insights to stakeholders and decide how to use the results to
strengthen your organizations effort
Putting together a Monitoring & Evaluation plan
There are different kinds of evaluation, depending on what you want to evaluate and the sort of questions
you want the evaluation should answer
Types of evaluation
1. Formative Evaluation
• Examines the formation of program aims, objectives and procedures, including initial needs
assessment
• Used to pilot the project and gain insight in to its appropriateness
• Learning from FE can be used to inform and refine your project
2. Process Evaluation
• Monitors what occurs during the process of program planning and the procedures and tasks involved
in implementing a project
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 • Helps to determine the degree to w/c your project has been implemented as planned and the extent
to w/c it has reached its intended users
3. Outcome Evaluation
• Is the measurement of outcomes and impacts over the short or long term
• It measures the change that occur as a result of a project and is used to determine whether it made a
d/ce and impacted on the factors that you wanted to address
Scheduling data collection: can occur at d/t points during the project cycle: Example
▪ At the beginning of program or during a specific event/activity
▪ During the implementation of the project
▪ Part-way through a project
▪ At the end of the project, or specific event/activity
▪ Periodically, eg, Monthly, quarterly, annually
▪ After a set period of time after the project has ended to determine longer term outcomes.
Evaluation tools and techniques
Once you have decided on your indicators and outcomes, you will need to identify and choose suitable
research tools to collect data.
1. Quantitative methods: involves the systematic collection of numerical data
2. Qualitative methods: The data collected is non-numerical and may include interview transcripts,
photographs or other types of observational material.
Method of data collection
❖ Questionnaires and surveys
❖ Reflective diaries: Useful for facilitators to record their experiences and feelings, w/c can then be
fed back to project managers and used in the development of your project.
❖ Interviews
❖ Focus group discussion
❖ Visual evidence
❖ Anecdotal Evidence: You are likely to receive comments, feedback and have your own impressions
about the impact of your work, satisfaction with the session
❖ Data analysis and sharing findings
Analyzing the evidence: should answer the following questions:
▪ Does the information gathered show that you have reached your goals?
▪ What are the project outcomes? (be aware that outcomes may be both desirable and undesirable)
▪ Does the information gathered highlight any achievements?
▪ Are there any problems or issues that need to be addressed?
Steps in data analysis
1. Reflecting: Think back to your evaluation questions and why you are doing evaluation, which is for, and
what they do want to know about your project?
2. Collating: Involves bringing together information in to a workable format. Quantitative data may need
to be organized through statistical analysis or using basic calculations (eg, total numbers, averages, and

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percentages of the total). Qualitative information needs to be organized thematically; the term ‘Thematic
analysis’ is used to describe the process of identifying key themes or patterns.
3. Describing: You should provide description of the facts which have emerged from the information
gathered. Eg, what was delivered, how much, who to, when and where. Remember to describe both
qualitative and quantitative findings.
4. Interpreting
It goes beyond describing the facts, to try and understand the significance of your data and how things
happened as they did. Look at internal and external factors w/c contributed to the project’s achievement;
also consider any challenges or difficulties encountered.
5. Conclusion and recommendation
Draw out conclusion based on the strengths and weaknesses of the project. Then begin to make
recommendations for building on these strengths and addressing areas of improvement.

References:
o Crawford, J. K., Cabanis-Brewin, J., Bigelow, D., James, C., & Pennypacker, S. (2004). Project
Management Roles and Responsibilities. Center for Business Practices, Havertown PA, USA.
o
o Chandra, P (2006). Project Planning, Analysis, Timing Implementation and Review. Tata McGraw-
Hill Publishing Company Limited, New Delhi.
o Little, I.M.D. and Mirrlees,J.A (1974). Project Appraisal and Planning for Developing Countries.
Basic Books Inc., Publishers, New York.
o Lock, D. (2000) Project Management, Gower Publishing Limited. Hampshire, England.
o Richman, L. L. (2011). Successful project management. AMACOM Div American Mgmt Assn.
o Crawford, J. K., Cabanis-Brewin, J., Bigelow, D., James, C., & Pennypacker, S. (2004). Project
Management Roles and Responsibilities. Center for Business Practices, Havertown PA, USA.
o Schwalbe, K. (2009). Introduction to project management. Boston: Course Technology Cengage
Learning.
o Heagney, J. (2016). Fundamentals of project management. Amacom.

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