CH-3

Project Identification in the Project Life Cycle

Introduction
The project life cycle begins with identifying a need, problem, or opportunity, prompting
potential clients to request proposals from project teams or organizations. This initial
stage, known as project identification, seeks to uncover investment opportunities and is
the foundation for a successful project. Project ideas may originate from addressing
social needs, using resources effectively, or solving specific problems. In some cases,
external conditions, like a ready market or unmet demand in a community, can also
stimulate project ideas.
Methods of Project Identification
Identifying project opportunities can be achieved through five main methods:
1. Analyze Major Development Problems: By examining the primary developmental
challenges facing a country, potential projects can be formulated to address these
issues, prioritizing those most impactful.
2. Analyze National Objectives: Governmental objectives, which reflect social needs,
serve as a basis for formulating projects aligned with national priorities and objectives.
3. Economic Analysis: Trade and economic data, such as imports, exports, and trade
balances, provide insights into potential investment opportunities both domestically and
internationally.
4. Natural Resource Survey: Surveys of natural resources help identify underutilized
or untapped resources, which could serve as the basis for projects, particularly in
agriculture and mining.
5. Socio-Spatial Approach: Involving local populations in identifying their development
needs (participatory approach) and conducting area-based analyses to address local
social and economic inequalities.
Phases of Project Identification
The project identification process includes four phases:
1. Actual Project Identification: Generating project ideas by individuals,
organizations, or government entities.
2. Description of Project Idea: Summarizing the project’s main elements in a written
format to assess and prioritize it against other ideas.
3. Screening: Reviewing the project idea to determine whether it should be advanced
or abandoned early in the process.
4. Prioritization: Ranking projects based on a set of criteria to determine the best
projects to move forward.
Project Concepts and Profiles
Once a project idea is conceived, it is documented as a project concept or profile,
covering aspects such as:
• Justification and Purpose: Defines the project’s goals, the problems it addresses,
and its relevance to existing demands or needs.
• Beneficiaries and Stakeholders: Identifies the direct beneficiaries and target
institutions.
• Resources and Institutions: Lists available resources and organizations involved in
planning and implementing the project.
• Policies and Plans: Confirms alignment with sectoral or regional plans and national
policies.
• Impacts: Assesses likely positive and negative social and environmental impacts.
• Support: Gauges political, community, and administrative support.
• Risks: Evaluates the risks and feasibility of the project’s success.
Preliminary Screening
A preliminary screening is conducted to filter unpromising project ideas. Important
factors include:
• Promoter Compatibility: Compatibility with the entrepreneur’s interests and
resources.
• Government Policy Alignment: Consistency with national goals and regulatory
frameworks.
• Availability of Inputs: Assured access to resources and inputs.
• Market Adequacy: Potential market size and competition, with factors like market
share, export potential, and barriers.
• Cost Reasonableness: Ability to deliver profitably at a competitive price, factoring in
material, labor, and operational costs.
• Risk Acceptability: Assessment of project risks such as technological changes or
competition.
Prioritization and Ranking
Given limited resources, projects are prioritized by evaluating them against criteria such
as:
• Extent: Number of people or geographic area affected.
• Economic and Financial Impact: Financial benefits to the country or region.
• Environmental Impact: Contribution to conservation and sustainable land use.
• Social Impact: Contribution to poverty alleviation and support for disadvantaged
groups.
• Policy Alignment: Consistency with national policies.
• Resources: Availability of human and financial resources.
• Success Likelihood and Risks: Project feasibility and associated risks.
• Support: Community and political backing.
Projects are rated against each criterion, often qualitatively, with specific criteria
weighted to reflect their importance.
Identification of Commercial Project Ideas
When identifying commercial or industrial project ideas, six steps are followed:
1. Generation of Ideas: Using tools like SWOT analysis and objective articulation to
brainstorm opportunities.
2. Monitoring the Environment: Analyzing external factors across economic,
governmental, technological, socio-demographic, competitive, and supplier sectors.
3. Corporate Appraisal: Assessing internal strengths