PROJECT IDENTIFICATION

AND FORMULATION
▪ Project identification starts from an understanding of the mandate, vision and
objectives. It involves Identifying environmental problems to be addressed and
the needs and interests of possible beneficiaries and Stakeholders. The
problems and the most realistic and effective interventions are analyzed, and
ideas for Projects and other actions are identified and screened.
▪ 1. Situation analysis/ problem Analysis

An environmental situation needs to be assessed and analyzed. This objective analysis enhances
understanding of the likely causes and linkages between existing problems and the needed
actions. A Situational analysis based on a scientifically sound conceptual framework generates
key actions and strategies
To be applied for the intended project intervention. Latest country reports and statistics
prepared by Governments, researchers, or international organizations on the relevant
environmental, social and economic issues, including gender and poverty, can be facilitated the
assessment.
A situation analysis should include analyses of needs, interests, strengths and weaknesses of
key stakeholders and beneficiaries.
These analysis are depend on the levels of projects weather i.e. it implements at national,
provincial or the divisional levels.
▪ The identification test

▪ A proposal may be considered to have passed the identification test and be ready for detailed
preparation when: Major options and alternatives have been identified and some initial choices
made;
1. The principal institutional and policy issues affecting project outcome have been
identified and deemed amenable to solution;
2. The project options selected are expected to be justified, given rough estimates of the
expected costs and benefits;
3. There is justifiable expectation that the project will have adequate support from the
relevant political authorities, other stakeholders and the intended beneficiaries;
▪ Preparation of concept proposal for sponsorship

Project formulation begins with the drafting of a proposal for sponsorship (a short concept
proposal of 4–5 pages) that lays out preliminary ideas, objectives, results, strategies, outputs and
activities. This proposal issued as the basis for consultations with implementing partners and
Governments. Section IV details the format and procedures for preparing concept proposals for
sponsorship.
Some technical project may adopt particular approach to identify all the requirements. It
includes
Functional Decomposition: each components should be decomposed (disintegrate) until
all the requirements are met
Gap Analysis: Compare the present state and the desired state
Reverse Engineering: Use existing object Steps in Selecting Best projects
PREPARATION AND FORMULATION

▪ Preparation of a good project proposal is not an easy task. It should fulfill all the requirements
of the stakeholders particularly beneficiaries, donors and the government while achieving
project goals. Thus, project formulation is linked with a compressive work related to testing
viability of technical, economic, institutional and environmental aspects.
▪ Feasibility study
A feasibility study should form the core of the project proposal preparation process. Its purpose
is to provide stakeholders with the basis for deciding whether or not to proceed with the project
and for choosing the most desirable options. It is expected to judge feasibility in terms of cost
and benefits to be attained from the project. The feasibility study must provide answers to the
following basic questions:
 Does the project conform to the development and environmental objectives and
priorities of the specific country and or region?
 Is the project technically and scientifically sound, and is the methodology the best
among the available alternatives?
 Is the project administratively manageable?
 Is there adequate demand for the project’s outputs?
 Is the project financially justifiable and feasible?
 Is the project compatible with the customs and traditions of the beneficiaries?
 Is the project likely to be sustained beyond the intervention period?
▪ Basically, there are two type of feasibility studies

1. Pre-feasibility Study:
Pre-feasibility study is conducted at the project identification stage in order to assess needs,
interests, strengths and weaknesses of the project. It helps project implementers, stakeholders
and sponsors to understand the viability of the project. If the project is not viable then it could
be rejected or changed as the requirements. If it viable then policy planners hope to implement it
by conducting a detailed feasibility study.
2. Detailed Feasibility Study:
Thus a detailed feasibility is a comprehensive and in-depth analysis that explore the, market
feasibility, technical feasibility, Economic feasibility, and financial feasibility, environmental
and legal feasibilities of the project.
▪ Market feasibility
Market feasibility is a study conducted for assessing marketability of the project. Particularly it involves
testing geographic locations for a real estate development project related to parcels of real estate land.
Market Feasibility takes into account the importance of the business in view of demand, market segments,
periphery and alternative products etc.
Basically two issues are addressed by a market study.
 What is the expected aggregate demand for the proposed good or service?
 What is the market for the proposed good or service?
Most market feasibility studies include five aspects
1. Current Market Analysis
2. 2. Competition or presence of competing products.
3. 3. Anticipated future market potential.
4. 4. Potential buyers and sources of revenues.
5. 5. Sales projections.
▪ Technical feasibility
Technical feasibility is an assessment about technical viability of input, processes, output, fields, programs
and procedures related to proposed project or the product. Thus the assessment is based on an outline
design of system requirements, to determine whether the company has the technical ability to handle the
project. At this level, it concerns whether the project is viable in terms of technical and legal aspects.
The technical assessment is focused on gaining use of existing technical resources of the organization and
their applicability to the expected needs of the proposed system. It is an evaluation of the hardware and
software and how it meets the need of the proposed project.
When writing a technical feasibility report, following aspects are considered mainly.
1. Location of the project
2. Availability of raw materials
3. Power
4. Man Power
5. Management
6. Technical Knowhow
▪ Financial feasibility

The financial feasibility is an assessing commercial profitability of the project in order to determine whether
the financial investment is profitable or not. Financial feasibility is calculated by two approaches and
methods.
1. Static Analysis
• Pay Back Period
• Average Rate of Return
2. Dynamic Analysis
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Benefit Costs Ratio (BCR)
Thus, financial viability can be judged on the following parameters:
• Total estimated cost of the project
• Sources of financing of the project in terms of its capital structure, debt to equity ratio and
promoter's share of total cost
• Existing investment by the promoter in any other business
• Projected cash flow and profitability
▪ Economic feasibility
The purpose of assessing economic feasibility is to determine the effects and impact of
the project on the society both in terms of economic and social values, particularly in
terms of social costs and benefits. It includes quantitative and qualitative assessment on
the costs and benefits. Two methods applied to measure social values. It includes
▪ UNIDO Method
▪ OECD Method
▪ Legal feasibility
Determines whether the proposed system conflicts with legal requirements, e.g. a data
processing system must comply with the local data protection regulations.
▪ Environment (Resource feasibility)

This involves questions such as how much time is available to build the new system, when it can be
built, whether it interferes with normal business operations, type and amount of resources required,
dependencies, and developmental issues.
Operational feasibility is a measure of how well a proposed system solves the problems, and takes
advantage of the opportunities identified during scope definition and how it satisfies the requirements
identified in the requirements analysis phase of system development. The operational feasibility
assessment focuses on the degree to which the proposed development projects fits in with the existing
business environment and objectives with regard to development schedule, delivery date, corporate
culture, and existing business processes.
PROJECT DOCUMENT
FORMULATION
▪ Project preparation, formulation and project document formulation are simultaneous processes.
Once the feasibility study has taken place and implementation arrangements are agreed upon, the
concept proposal (which would have been revised throughout the process) is transformed and
expanded into a project document throughout the project preparation and formulation phase.
▪ The project document is a summary of the situation assessment, justification of objectives,
methodology and strategies for achieving the targeted changes, which come from each step taken
through project cycle phases 1 and 2. Since project formulation is an iterative process, it is
important to consult again with selected partners and colleagues as the document is formulated.
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