CHAPTER THREE

PROJECT
PROJECT
IDENTIFICATIONAND
IDENTIFICATION AND
FEASIBILITYSTUDY
FEASIBILITY STUDY
1
 Project Identification /Conception
• The first step in the project cycle is to identify project
ideas and develop project portfolios from which
feasible projects are going to be selected. Therefore,
This is the conception stage in a project’s life cycle.
• Project identification is the first phase in the Project
Life Cycle and essentially involves starting up the
project.

• This is a stage where one project-idea out of several

alternatives is chosen and defined.
2
 Cont….
Generally, Projects ideas are identified because either …
– We see a problem or opportunity
•Problems are undesirable situations that prevent the organization from
fully achieving its purpose, goals and objectives
•Opportunities are chances to improve the organization even in the absence
of specific problems.
Furthermore, project ideas are born at two levels, the micro-level and
macro-level.
•Micro level sources: Project ideas originated at individual or household
level that can be further developed through discussion with friends and
colleagues.
•Macro-level Sources: Project ideas originated by institutions at regional
or federal level.

3
Ways to find good project idea
 Identifying good project ideas that can be translated to
viable project requires looking in to a wide variety of
sources.
 Some of the sources to look in to in finding good
project ideas includes:

A. Analyze the performance of existing industries:

• A study of existing industries in terms of their
profitability and capacity utilizations indicates
promising investment opportunities.
• An examination of capacity utilization of various
industries provides information about the potential for
further investment. 4
B. Examine the inputs and outputs of various industries:
An analysis of the inputs required for various industries
may throw up project ideas.
Opportunities exist when:
a) Materials, purchased parts or supplies are presently being
procured from distant sources with attendant time lag and
transportation cost.
b) Several firms produce internally some components/parts
which can be supplied at a lower cost by a single
manufacturer who can enjoy economies of scale.
c) Similarly, a study of the output of the existing industries
may reveal opportunities for adding value through further
processing of the main outputs. 5
C. Review import and exports:
• An analysis of import statistics for a period of five
and above years is helpful in understanding the
trend of imports of various goods and the potential
for import substitution.
• Indigenous manufacture of goods, which are
currently imported, is advantageous for several
reasons:
(i) it improves the balance of payments situation,
(ii) it generates employment, and
(iii) it provides a market for the supporting industries
and services.
• Likewise an examination of export statistics is useful
in learning about the export possibilities of various
products. 6
D. Analyze Economic and Social Trends:
• A study of economic and social trends is helpful in
projecting demand for various goods and services.
• Changing economic conditions and consumer
performances provide new business opportunities.
• For example, the increasing desire for leisure and
recreational activities. This has caused a growth in the
market for recreational products and services.
E. Draw Clues from Consumption Abroad:
• Entrepreneurs willing to take higher risks may identify
projects for the manufacture of products or supply of
services which are new to the country but extensively
used abroad. 7
F. Attend trade fairs: (trade exhibition):
National and international trade fairs provide an excellent
opportunity to get to know about new products and
developments.
G. Stimulate Creativity for Generating New Product Ideas:
New product ideas may be generated by thinking along the
following lines: Modification, rearrangement, reversal,
magnification, reduction, substitution, adoption and
combination.
H. Government policy:
In the planned economy, the government plays a major role in
the industrial development and spells out priorities for the
economy and lays the framework for development and
resource allocation, which in turn can serve as sources of
project ideas. 8
• Project Identification is often the outcome of a
generating process rather than an analytical
exercise.
• To stimulate the flow of ideas, the following
analysis are very helpful towards the establishing
of a successful venture:
1. Problem analysis
2. Stakeholder analysis
3. Objective analysis
4. Alternative analysis
5. SWOT analysis
9
 1. Problem Analysis (Situation Analysis)
• Problem analysis is a critical step in the project identification
process and is an important sources of project idea.

• On the basis of available information, the existing situation is

analysed: that is, the major problems are identified and the
main causal relationships between these are visualized.

• The problem analysis identifies the negative aspects of an

existing situation and establishes the ‘cause and effect’
relationships between the identified problems.
10
• The problem analysis is the most critical stage of
project planning, as it then guides all subsequent
analysis and decision-making on priorities.
• It is important that all possible options remain open
during the problem analysis. The aim at this early
stage is to establish an overview of the situation, later
in the process, the perspective will be narrowed and
deepened in order to prepare for the design of a
project. 11
• In formulating problems, existing problems should be
identified and will serve as source of project idea. i.e. ...
• Identification of the major problems faced by target
groups and beneficiaries (What is/are the problem/s ?
Whose problems ?); then....
• Visualisation of the problems in form of a diagram,
called a “problem tree” or “hierarchy of problems” to
help analyse and clarify cause–effect relationships.
12
13
 Problem tree- used to analyse river pollution
Catch & income of fishing High prevalence of water
families decline borne disease

River ecosystem under serious Effect

threat including decline fish stock

River water quality is

deteriorating Problem

Wastewater treated in
High level of solid wastes Most households & factories discharge
plant doesn’t meet
dumped in to the river waste water in to the river
Env’tal standards

Polluters are Polluters are not aware 40% of house holds

not controlled of the danger of waste Existing legal regulations are & 20% of businesses Cause
dumping in to the river inadequate to prevent direct not connected to
discharge of waste water sewerage networks

Env’t protection Inadequate level of capital

agency inefficient No public education or Pollution has been low
investment & poor business
& ineffective awareness creation program political priorities
planning within local gov’t
2. Stakeholder Analysis:
• Stakeholder analysis is a useful tool or process for
identifying stakeholder groups and describing the
nature of their stake, roles and interests. Greater
understanding of interest groups and their interest should
result in a better quality project.
• Stakeholders are individuals, groups or organizations
who have an interest or stake in a project. They may be
direct or indirect interests, and positive or negative.
Their stake in the project may be in terms of their rights
or duties or they may be affected by the outcome.
15
• Furthermore, it is also possible to identify if any interest
groups present threats to the success of the projects, and
plans can be put in place to respond to any such events.
• The aim of stakeholder analysis is to:
Identify and define the characteristics of key
stakeholders
Assess the manner in which they might affect or be
affected by the proposed outcomes.
Understand the relationship between stakeholders
Assess the capacity of different stakeholders to
participate.
Ultimately to identify their unfulfilled needs.

16
3. Objective Analysis
 After defining project problems and identifying stakeholders, the

next step is to analyse the objectives.

 The project purpose is developed by restating the core problem

in positive terms. The project goal is created by articulating the
effects of the problem in positive terms.

 The objective analysis is the positive reverse image of the

problem analysis.
 If care has been taken on the problem analysis, the formulation of
objectives shall not result in any difficulties.
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• At objective analysis, the ‘negative situations’ of
the problem-tree are converted into solutions
and expressed as ‘positive achievements’.

• These positive achievements are in fact

objectives, and are presented in a diagram of
objectives showing a means-to-ends hierarchy.

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19
Purposes

Results

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4. Alternative or Strategy Analysis
• The purpose of this analysis is to identify possible
alternative options/strategies, to assess the feasibility
and agree upon one project strategy.

• Project identification is the stage where one project-

idea out of several alternatives is chosen and defined.

• This analytical stage is the most difficult and

challenging, as it involves making a complex
judgment about the best implementation strategy (or
strategies) to pursue.
21
• In practice a number of compromises often have to be made
to balance different stakeholder interests and practical
constraints such as the likely resource availability.
• However, the task is made easier if there is an agreed set of
criteria against which to assess the merits of different
intervention options/alternatives.
• The type of questions that need to be asked and answered at
this stage might include:
a. Should all the identified problems and/or objectives be
tackled, or a selected few?
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b. What are the likely capital and recurrent costs

implications of different possible interventions, and

what can realistically be afforded?

c. What is the most cost effective option(s)?

d. Which strategy will impact most positively on

addressing the needs of the target groups?

e. How can potential negative environmental impacts best

be mitigated or avoided?

f. What benefits will be expected from each option? 23

5. SWOT Analysis
 SWOT is an acronym for strengths, weaknesses, opportunities
and threats.
 A SWOT analysis is a strategic planning technique that
project managers can use to help them analyze their projects'
strengths and weaknesses, as well as any opportunities and
threats they may face.
 It involves specifying the objective of the business venture or
project and identifying the internal and external factors that
are favorable and unfavorable to achieve the objective.
24
 Incorporating SWOT analysis in project management
can help you improve your project planning, reduce
project risk, and increase the likelihood of overall
project success. i.e.
 The purpose of SWOT is to identify risk areas as well
as controllable factors that you need to pay attention
to and monitor throughout the project.
 A SWOT also helps increase your awareness of
weaknesses and potential threats to your project so
that you can defend against them.
 Conducting a SWOT analysis can help you produce
new ideas to help you take advantage of what you and
your team do best and potential opportunities that
might arise.   25
 The ideas which sounds relatively most promising
must be put under SWOT analysis. i.e. Once the
problem is defined and formulated, both internal and
external environment shall be analyzed to define and
set achievable objectives of the project.
 SWOT analysis groups key pieces of information into
two main categories:
 Internal factors: The strengths and
weaknesses internal to the organization.
External factors: The opportunities and
threats presented by the external
environment to the organization.
26
Strength:
• It is something the organization does well relative to competitors.
It arises from resources and competencies available in an
organization. It create strategic advantage.
 Patents
 Good Reputation
 Cost advantages
 Exclusive access to high grade natural resources
 Favorable access to distribution networks
• These are internal factors (factors you can control) that set your
project or business up for success.

• Are the characteristics of the business or team that give it an

advantage over others in the industry. 27
Weakness:
• It is something the organization does poorly relative
to competitors. It arises from deficiency in resources
and competencies. It creates strategic disadvantage.
 Lack of strong protection
 A weak brand name
 Poor reputation among customers
 High cost structure
 Lack of access to the best natural resources
 Lack of access to key distribution channels
• Are characteristics that place the firm at a
disadvantage relative to others. 28
Opportunities:

 It is the major favorable situation in an organizations/groups

externally environment. It provides position of superiority.
 An unfulfilled customer need

 Arrival of new technologies

 Loosening of regulations

 Removal of international trade barriers

 Are external chances to make greater sales or profits in the

environment.
 Opportunities are factors that are outside of your control (external
factors) that could help your project succeed.  29
Threats:
• It is a major unfavorable situation in a group’s/organization's external
environment. It provides position of inferiority.
 Shifts in consumer tastes away from the firm’s products
 Emergence of substitute products
 New regulations
 Increased trade business

• Are external elements in the environment that could cause trouble for
the business.

• These are external factors that could harm your project if they were to
take place. As with opportunities, they can be current or future threats.
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 Assignment-II

• Identify two project ideas of your interest

on existing companies and formulate the
objective and conduct SWOT analysis. (20
pts) try to mention at least five points in each
category.

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 Project Feasibility study
• A feasibility study looks at the viability of an idea with an
emphasis on identifying potential problems and attempts
to answer one main question:
“Will the idea work and should you proceed with it?”
• Feasibility literally means analyzing whether the idea
will work or not. The purpose is to establish the
feasibility or justification of the project.
• A Project Feasibility Study is an exercise that involves
full documenting each of the potential solutions to a
particular business problem or opportunity.
• A feasibility study is defined as an evaluation or analysis
of the potential impact of a proposed project or program. 32
• In other words, if you are unsure During the Feasibility Study, a
variety of 'assessment' methods are undertaken and this justifies
whether your solution will deliver the outcome you want, then a
Project Feasibility Study will help gain that clarity.
• The outcome of the Feasibility Study is a confirmed solution for
implementation.
• In general feasibility studies contain comprehensive, detailed
information about your
 business structure,
 your products and services,
 sources of finance,
 the market,
 logistics of how you will actually deliver a product or service,
 the resources you need to make the business run efficiently,
 as well as other information about the business. 33
• The characteristics of feasibility study are:
• Clear project concepts and criteria
• Comprehensive project design

• Reliable information/often primary data

• Quantified prediction of performance

• Detailed analysis with high confidence
level
34
 Components of Feasibility Study

• A feasibility study contains six major components namely:

1) Marketing feasibility study

2) Technical feasibility study
3) Financial feasibility study
4) Economic feasibility study
5) HRM and organizational feasibility
6) Environmental feasibility study
35
 Market feasibility study
• Some times termed as demand analysis.
• It is study about a description of the industry,
current market, anticipated future market
potential, competition, sales projections,
potential buyers, etc.
• In most cases, the first step in project analysis is
to estimate the potential size of the market for the
product proposed to be manufactured (or service
planned to be offered) and get an idea about the
market share that is likely to be captured. i.e….
• Market and demand analysis is concerned with two
broad issues:
“What is the likely aggregate demand for the
product/service?” and
“What shares of the market will the proposed project enjoy?”
• A market feasibility study is not a marketing plan, but studies
on markets and market potential, and can be used to support
or develop a marketing plan.
• The market analysis should be conducted first because it is
critical to the success of the project.
• Market analysis which is the basis for market
planning should able to address:
Market position
Market objectives
Market structure
Market segments
 Market position

Market Niche –small part of an

existing market, which is not
satisfied by existing supply market.
Market Leader – maintain dominant
position in the market?
Market Follower – Follow the the
A ranking of a brand, market leader – pricing, product
product, or company, in development, etc.
terms of its sales volume Market Challenger – Seek to adopt
relative to the sales volume strategies to challenge market
of its competitors in the leader’s position
same market or industry.
Market Objectives
Market Segments
 Market Structure

Nature of the market structure

determines marketing strategy like:
Pricing strategy
Branding?
Product Differentiation?
Market Penetration?
Market Skimming?
Direct Selling?
 Demand Forecasting
•After gathering information about the various aspects of
the market and demand from primary and secondary
sources, an attempt may be made to estimate future
demand.
•Demand forecasting is the process of making estimations
about future customer demand over a defined period,
using historical data and other information.
 In general unless the following questions cannot be answered
adequately, the project may not feasible. 
1. What is the current or projected demand for your proposed
products or services? In other words, how many units can you
reasonably expect to sell each month? 
2. What are the target markets for this product or service? What
demographic characteristics do these potential customers have in
common? What is the projected supply in your area of the
products or services needed for your project? 
3. What competition exists in this market? Can you establish a
market niche which will enable you to compete effectively with
others providing this product or service? 
4. Is the location of your proposed business or project likely to affect
its success? If so, is the identified site the most appropriate one
available? 
 Technical feasibility study

• The technical analysis is used to establish whether or

not a project is technically feasible and provide tentative
alternatives to achieve the project's objectives.
 The technical feasibility analysis should consider
various aspects and alternatives of a project as
follows:
• Preliminary research and testing;
• Selection of the production process;
• Specification of operating and assembly equipment
• Location, buildings and site layout;
• Plant layout;
• Availability of raw material and labor force
• Proximity of the location to the port
• Supplementary engineering works;
• Efficiency;
• Flexibility of productive capacity;
• Work schedules; and
• Size of project
Preliminary Research and Testing
• All projects require a certain amount of preliminary tests
and research. These tests cover widely varied matters: All
engineering projects require
– Simple strength tests of the site for the construction of
buildings; laboratory or pilot plant tests of the
possibilities of using certain raw materials or processes,
and the conditions under which such uses will be
possible; experiments with new crops; metallurgical
research into the treatment of ores, etc..
• The project itself need a clear summary of the information
regarding these tests and research; the complete text of the
respective reports may attached appendices.
 Selection and Description of the Production Process:
• complexities and alternatives arise which should be
explained together with the solutions offered, in
relation to the preliminary research.
• To provide clarity and better presentation, the process
can be described by the use of simple drawings or flow
diagrams.
Selection and Specification of Equipment:
There are two stages in the selection of equipment:
• Choice of the type, in order to draw up the
specifications for the bids; and
• Selection between the various equipment of the type
chosen in order to decide between the bids.
• Selection of the type of equipment will be influenced by the nature of
the process, the scale of production and the degree of
mechanization, all of which are closely inter-connected.
• It may often happen, for instance, that a certain degree of
mechanization is only applicable above a certain production level, and
similarly certain processes lend themselves better to mechanization
than others.
• The type of production is thus related to the degree of mechanization
and automation. The analysis of bids for a given technology or
engineering is not only a question of choosing the lowest bid in
direct terms, but also entails other considerations such as:
– Specifications or suitability for the type of raw materials;
– Minimum risk of obsolescence;
– Commitments for technical assistance and technology transfer;
– Alternative plant sizes/design flexibility; and
– Cost factors and operating conditions.
 Location, Buildings and Site Layout
• The technical feasibility analysis of a project depends largely
on location, as substantial differences usually exist in the
availability, quality and costs of the various requirements
in an alternative location.
• Projects whose technical requirements could have been well
taken care of in one location sometimes fail because
they are established in another place where conditions are
less favorable.
• In other words, a project situated in a location that is
remote from services and supply sources such as
experienced labor force, market, raw materials, utilities and
other requirements would be operating with disadvantages.
 The choice of project location and site is influenced by the
following factors:
 Proximity to raw materials and markets
 Availability of infrastructure
 Labor situation
 Government policy
 Other factors like(climate condition, living condition,
cultures, etc)
• Estimates of the size and characteristics of the buildings
required for production and site layout.
• Reception areas, stores, central workshops and other
installations must be functionally situated in relation to the
main factory building and transport services.
• Adequate land with acceptable physical characteristics
needed for site layout.
 Plant Layout
• The efficiency of a project such as a manufacturing
operation depends to a great extent on the layout of
the plant and equipment, since this can lead to
economy in movement and the flow of material and
processes thereby saving time and money.
• Some other factors such as storage space for raw
materials and supplies, space for internal transport,
utilities service systems including waste disposal,
interdepartmental communication, future expansion
flexibility and environmental considerations need
attention in plant layout.
Efficiency
• Once the manufacturing method, the size of the plant and the
arrangement of equipment and buildings has been decided, it
will be possible to calculate the volume of each type of input
required by the project, both for installation and operation.
• Once the volume has been determined in physical terms,
operating and input costs can be estimated. Moreover, this
volume serves as a useful element of comparison when
appraising the estimated administrative and operating efficiency
of the enterprise..
• The volume of input according to the physical processes
employed, the quality of the available raw materials and the
experience of other plants can be estimated with the help of
preliminary technical research.
 Flexibility of Productive Capacity
• The need for flexibility in productive capacity is at
times a result of seasonal demand; at others, it may
depend on temporary limitations in the availability of
raw materials, or a tight financial situation, which
means that production has to be started on a limited
scale in the first stage.
• Naturally there are limitations in the approach to
these problems, but if the conditions mentioned
should exist, solutions should be sought which will
tend to facilitate harmonious growth and permit
flexibility of operation with minimum drawbacks,
interference and cost.
 Work Schedules
• The schedule of project implementation from project
preparation through plant start-up and the identification of
potential causes of delay are one aspect of technical
study.
• There must be realistic schedules which not only include
all activities from engineering design through land
purchase/acquisition, construction and procurement, to
testing of equipment and training staff necessary for the
successful completion of the project.
• These schedules should be arranged in a coherent sequence.
• The estimates of realistic schedules in terms of timing and
cost are drawn up from experience with comparable projects
in the same or similar environment.
 Size of Projects
• The size of a project usually means its production capacity during a
normal operating period.
• Size is sometimes expressed in terms of the number of persons
employed, the capital involved, or some other units. However,
whatever unit of measurement this may be, the optimum size and
the best location will be those which will lead to the most favorable
financial result.
• Some important factors in considering the size of projects are:
– The volume of demand to be met;
– The relationship between size (or scale of production) and the technique
and investment;
– The relationship between size and location or the geographical distribution
of the market;
– The problem between size and financing or capital resources for the
project; and
– Administrative experience and capacity.
 Financial Feasibility study
• The financial analysis is one of the analyses conducted
in a feasibility study and is normally undertaken after
the market and technical analysis .
• The objective of the analysis is to determine the financial
viability of the project.
• This analysis examines the opportunity cost of capital
and determines if the project is a justifiable investment,
especially to the individuals or agencies undertaking the
investment. If it is not justifiable, then it will be
financially prudent to consider alternative investments to
maximize the use of capital and other resources.
Financial viability can be judged on the
following parameters:
• Total estimated cost of the project
• Financing of the project in terms of its
capital structure /debt equity ratio.
• Projected cash flow and profitability
Cost of project:
• Conceptually, cost of project represents the total of all items of
outlays associated with a project which are supported by long
term funds. It’s the sum of the outlays on the following:

– land and site development

– building and civil works
– plant and machinery
– technical know-how and engineering fees
– miscellaneous fixed asset
– preliminary and capital issue expenses
– pr-operative expenses
– Provision for contingencies
– Margin Money for Working Capital….e.t.c.
Sources of project finance:
To meet the cost of the project the following means of finance are
available:
• Share Capital: there are two types of share capital, namely equity
capital and preference capital.
 Equity capital represents the contribution made by the owners of
business, the equity shareholders, who enjoy the reward and bear
the risks of ownership. Equity capital being a risk capital carries no
fixed rate of dividend.
 Preference capital represents the contribution made by preference
shareholders and the dividend paid on it is generally fixed.
• Term loan: are provided by financial institutions and commercial
banks. Term loans represents secured borrowing which are very
important source (and often the major source) for financing new
projects as well as the expansion, modernization, and renovation
schemes of existing firms.
• Debenture capital: debentures are instruments for raising
debt capital. There are two broad types of debentures.
Convertible debentures which are convertible, wholly or
partly, into equity share. The conversion price and period are
announced in advance. Non convertible debentures are straight
debt instrument. Typically, they carry a fixed rate of interest
and have a maturity period of 5 to 9 years.
• Deferred credit: many a time the suppliers of the plant and
machinery offer a deferred credit facility under which payment
for the purchase of the plant and machinery can be made over
a period of time(Hire purchase).
• Incentive source: the government and its agencies may
provide financial support as an incentive to certain types of
promoters or for setting up industrial units in certain locations.
• Miscellaneous sources: a small portion of the
project finance may come from miscellaneous
sources like unsecured loans, leasing finance.
Projection of Sales and Cost of Production
A) Projected Sales
Typically, the starting point for profitability projections is
the forecast of sales revenue. In estimating sales revenue
the following consideration should be born in mind.
• It is not advisable to assume a high capacity utilization level
in the first year of operation. Even if the technology is simple
and the company may not face technical problems in
achieving a high rate of capacity utilization in the first year it
self, there are likely to be other constraints like raw materials
shortage, limited market problem, etc, it is sensible to assume
that capacity utilization would be some what low in the first
year and rise there after gradually to reach the maximum level
in the third or fourth year of operation.
• It is not necessary to make adjustments for
stock of finished goods. For practical purposes
it may be assumed that production would be
equal to sales.
• The selling price used may be the present
selling price- it is generally assumed that
changes in selling price will be matched by
proportionate changes in cost of production.
B) Cost of production
Given the estimated production, the cost of production may be
worked out. The major components of cost of production are:
– Direct Material cost
– Direct Labor cost
– Factory overhead cost
C) Profitability, Cash Flows and Balance Sheet Projections
Given the estimates of sales revenue and cost of production as
discussed above, the next step is to prepare: At least it is fair to
provide five years projected Balance Sheets and Income
Statements and cash flow projections for the life of the project.
 Projected income Statement
 Projected cash flow statement
 Projected Balance sheet
Project Decision Making Criteria
The key step involved in determining whether a
project is worthwhile or not is:
– estimate the costs and benefits of the project
– assess the riskiness of the project
– calculate the cost of capital
– compute the criterion of merit and judge whether the
project is good or bad
– There are several criteria that have been suggested to
judge the worth while ness of capital project.
 The important investment criteria are classified
into two:
1. Discounting criteria
2. Non-discounting Criteria
1. Discounting criteria include:
a) Net present value
b) Profitability Index/Benefit cost ratio
c) Internal rate of return
d) Discounted pay back period
2. Non-discounting Criteria
e) Payback period
f) Accounting rate of return
 Economic Feasibility Study
• Cost and benefits to the nation due to the proposed project are
considered in the economic feasibility test. Tax revenue,
generation of employment, savings of foreign exchange and
such other factors.
• This is the study about the effect of the project on the whole
economy (economic return, employment opportunities,
contribution of the project to GDP etc)
• The government and government agencies calculate the
economic indicators of a project before permitting the project or
financing it.
• Economic aspect addresses the project’s impact and its
worthwhileness from the viewpoint of the whole society. It
is different from financial analysis in that it goes beyond the
concerns of participating agents alone.
 Human Resource and Organization
• The human resources requirement at various
levels and during different stages of the project
must be defined as well as their availability and
cost.
• On the basis of the quantitative human resource
requirement of the project, the availability of
personnel and training needs, the cost estimates
for wages, salaries other personnel-related
expenses and training are prepared for the
financial analysis of the project.
 Categories and Functions
• Human resources as required for the
implementation and operation, industrial project
need to be defined by categories such as:
 management as supervision personnel and
 skilled and unskilled workers and
• By functions such as
general management,
production management and supervision,
 administration (accounting, purchase etc.)
 production control,
machine operation and transport
 Socio-Economic and Cultural Environment

• Human resources requirement not only depends on

techno-economic and financial or commercial factors but
also are determined to a certain extent by socio and socio-
economic conditions in the country and location of the
project.
i. Legislation and labor terms
• Labor terms can be regulated by legislation of trade union
contracts or be based on common practice.
• The prevailing rules regarding leave will have an impact
on the effective numbers of working hours and days
per year and therefore affect the human resources
requirement given the production targets and other
conditions.
ii. Labor norms
• A common error in the definition of human resource requirement
is the adoption of labor norms prevailing in industrialized
countries.
• Realistic estimates should instead be made on the basis of
experience of and comparison with similar industrial projects in
the project country and region.
iii. Occupational safety
• In many developing countries minimum standards of
occupational safety have not been established or are not enforced
strictly enough.
• A feasibility study must therefore also assess the relevant
existing regulations on occupations safety including future trends
and analyze their impact on investment and production costs.
 Cont…
iv. Health care and social security
• The project analyst should also identify and
consider necessary plant components regarding
arrangements for health care and social security
for the human resources to be employed.
• The cost of such components will have to be
estimated and include in the cost tables of the
study.
 Organizational Set-Up
• Organization is the means by which the operational functions &
activities of the enterprises are structured and assigned to
organizational units represented by managerial staff, supervisors
and workforce,
• with the objective of coordinating and controlling the performance
of the enterprises and the achievement of its business targets,
Human resource requirements will obviously also depend on:
 the management structure,
 organizational layout,
 operating plan and other factors related to the financial and commercial
features of the project.
• The organizational structure of an enterprise indicates the
delegation of responsibilities to the various functional units of the
company and is normally shown in a diagram.
• Usually, the organization is designed primarily in line
with the different functions in the enterprise such as
finance, marketing, purchasing, and manufacturing.
However, there is no unique organization pattern.
• The organizational planner will then have to consider
some of fundamental aspects in organization setup.
These may include:
i. The span of control that is the numbers of employees reporting
to supervisor.
ii. The number of organization levels
iii. A subdivision of activities by functions, process, equipments,
location, product or classes of customers.
iv. The distribution of responsibilities and authority.
 Environmental feasibility study
• A project may cause environmental pollution in
various ways:
It may throw gaseous emissions
It may produce liquid and solid discharges
It may cause noise, heat and vibrations
• Projects that produce physical goods like
cement, steel, paper and chemicals by
converting natural resource endowments into
saleable products are likely to cause more
environmental damage.
• Hence the environmental aspects of projects
have to be properly examined.
• The key issues that need to be considered in
this respect are:
What are the types of effluents and emissions
generated
What needs to be done for proper disposal of
effluents and treatment of emissions
Will the project be able to secure all environmental
clearances and comply with all statutory
requirements
Project Charter

• Another name for a project charter is a project brief.

• The project charter is the document that formally
authorizes a project.
• A project charter is a formal project authorization
which documents the shared understanding of a project’s
scope, development, and objectives, and also defining
the roles and responsibilities of each party involved.
• A project charter is a formal, typically short document
that describes your project in its entirely — including
what the objectives are, how it will be carried out, and
who the stakeholders are.
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• The key benefits of this process are:
• Provides a direct link between the project and the strategic
objectives of the organization,
• Creates a formal record of the project, and
• Shows the organizational commitment to the project

• In summary, The project charter is the document issued by the

project initiator or sponsor that formally authorizes the existence
of a project and provides the project manager with the authority
to apply organizational resources to project activities. i.e.

• The primary purpose of a project charter is to authorize the

project manager to start the approved project and allow him to
use organizational resources to accomplish the objectives of the
project.
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• The project charter, either directly, or by reference to other documents, should address
the following information:
– Requirements that satisfy customer, sponsor, and other
stakeholder needs, wants and expectations
– Business needs, high-level project description, or product
requirements that the project is undertaken to address
– Project purpose or justification
– Assigned Project Manager and authority level
– Summary milestone schedule
– Stakeholder influences
– Functional organizations and their participation
– Organizational, environmental and external assumptions
– Organizational, environmental and external constraints
– Business case justifying the project, including return on
investment
– Summary budget. 80
• A project isn’t a project until the project charter is
approved, and the project charter cannot be started
until the feasibility study( business case and Project
Statement of Work (SOW)) is approved.

• project-charter-vs-project-proposal-infographi
cs.jpg
• Project_Charter_Sample.pdf

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Chapter End!