PROJECT ANALYSIS & MANAGEMENT

Chapter-1
General Introduction
Meaning and Definitions
Features of projects
Benefits of projects
Projects Vs programs
Types/classification of projects
The project Life cycle

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Meaning and Definitions

 Origin and Meaning; The Term project came

from Projection means looking into future.
 The term project in general means shoot
forward, or to scheme, or plan something to be
done
 Project means –one time job that has defined
starting and ending dates, a clearly specified
objective, or scope of work to be performed, a
predefined budget, and usually a temporary
organization which disappear once the project
has been completed.
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Meaning and Definitions cont’d

 In other words, project refers to an investment

activity where resources are used to create
capital asset that produce benefits over a
long period of time and has a beginning and
an end with specific objectives.
 According to dictionary, project means a
piece of work that is carefully planned to
achieve a particular aim.
 Projects may be Personal, Industrial, and
National and may be of Business type.

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Examples of some projects:

 Developing a new product or service

 Building a bridge, road, runway, or other structure
 Writing a soft ware
 Installing a new manufacturing process
 Publishing a book
 Developing a new marketing plan
 Obtaining an MBA degree
 Planting a garden
 A wedding plan
 Constructing a house
 Establishing a plant or designing a car or new
machinery etc;
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 Definitions:
 A project is a problem scheduled for solution-
J.M.Juran
 A project is a task of considerable magnitude that
must be completed within a budget and by a specific
time, usually but not always carried at once.
 Project is an investment activity in which specific
resources are committed with in a given time frame,
to create capital assets over an extended period of
time in expectation of benefits that exceed the
committed resource.
 The project management institute, U.S.A defined a
project as a one short time limited and goal directed
major undertaking that requires the commitment of
varied skills and resources.
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 Modern time’s projects are defined as a scientific
and systematic study of a problem which is
intended to be resolved through the application
of management concepts and skills evolving a
work plan devised to achieve a specific set of
objectives with in a specific period of time.
 Any investment opportunity which is to be
exploited for profit.
 It may be therefore consists of a new product,
new service, new organization, new business or
a new process.
 A schedule of activities in which resources are
spent at present for getting certain benefits in the
future.
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Features of projects:

Investment / Commitment of scarce resources

in expectation of future benefits
Is an activity that is capable of being planned,
financed and implemented as a unit
Have a defined set of objectives and specific
start and end times
Non-repetitive
Problem solving
Have geographical or organizational
boundaries
Independent administration
Creation of capital asset
Future benefit

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Benefits of projects; why projects?

 Development or growth of a nation, region,

city, village etc.
 Long term growth of company and resulting
to increased welfare of employees
 Improvement of income distribution
 Solving immediate problems
 Providing employment and transport facilities
 Increase in wealth of suppliers of resources
including owners or shareholders
 Other social benefits like bringing change in
society, accelerate the process of elimination
of poverty, socio-economic development etc.
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 Projects Vs programs

Differences:
Projects Programs
 Scope narrow wider
 Objectives specific general
 Beneficiary groups specific numerous
Financial resources clearly determined not clear and detailed
financial allotted funds
resources
Time time bounded not time bounded


Similarities:
 Both have objectives as well as goals
 Require resources like financial, personnel, material and
other
 Generate outputs of goods and services
 Serve as instruments for the execution of development and
plans to develop the economy of a nation.
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Types and classifications of projects:

1. Quantifiable and non- quantifiable projects:

 those in which a quantitative assessment of
benefits can be made and those who cant be.
 Ex: Industrial projects, power generation
projects, mineral development projects etc.
 Ex: Health, Education, Defense projects etc.

2. Sect oral classification of projects:

 Agricultural and allied sector projects,
 Irrigation and power sector projects,
 Industry and mining sector projects,
 Transport and communication sector projects
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Types….. cont’d
 3. Techno-Economic projects:
 Based on their techno aspect, projects can
be classified into three
 a. Factor intensity- oriented classification-
capital intensive or labor intensive projects
 b. Causation- oriented classification-

demand based or resource based projects.

 c. Magnitude- oriented classification: -
Based on mega scale;
As large-scale, medium-scale, or small scale
projects.
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Types… cont’d
d. Financial institutions based Classification:
 Classifications according to the age, experience
and purpose for which the project is being taken up
as:
New projects
Expansion projects
Modernization projects
Diversification projects

e. Service projects: based of services they deliver

 Welfare or non commercial projects
 Commercial projects
 Research and development projects and
 Educational projects
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Types… cont’d
f. Ownership and Control based classification:
Under this base, projects are classified as
 Corporate projects
 Partnership projects
 Sole-proprietor projects

g. Technology based classification:

Based upon the technology applied, projects can be
classified as;
 High technology projects( most sophisticated
technology)
 Conventional technology projects( out dated
technology)
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Types… cont’d
h. Risk based classification:
 High risk projects
 Medium risk projects
 Small risk projects

i. Country origin based classification;

 Domestic projects/national projects
 Foreign projects/international projects

j. Productivity based classification:

 Directly productive projects: benefits and cost of the
projects are accrued to a single entity
 Indirectly Productive projects: cost but not benefits of
the projects are accrued to a single entity. e.g. road
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The project Life cycle (PLC)
 The different stages/phases through which a
project passes is called the project life
cycle
 The main features and elements of this
process are information gathering, analysis
and decision making
 There are three basic models of PLC:

1.The Baum project life cycle

2.UNIDO project life cycle
3.DEPSA project life cycle

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1.The Baum project life cycle(World Bank procedures)

 Is the first basic model of a project cycle

developed in 1970, and initially recognized
four main stages,
a)Identification
b)Preparation
c)Appraisal and selection
d)Implementation
At a later stage in 1978 the author has added
another stage called “Evaluation” thus
making the stages 5 in number.

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Baum Model- Identification Phase
 finding potentially promising projects which
are worthwhile for investment
 Project idea can come from different
sources;
 available resources
 market based
 need based
 Well informed technical specialists and
local leaders
proposals to extend existing program

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Baum Model - Preparation Phase
 Once projects are identified, next is process of
progressively more detailed analysis of the
projects and preparation of the project plans.
 includes both the prefeasibility and feasibility
study
 is the stage at which the project is being seriously
considered as a definite investment action
 Covers all the technical, economic, social,
financial, institutional and environmental feasibility
analyses
 At this stage, the project exists as asset of
tangible proposals
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Baum Model - Appraisal Phase
 Critical review of the project is to be conducted. This
provides an opportunity to re-examine every aspect of
the project proposal
 only internal institution/government staffs are used for
this work. Projects are appraised both in the field and at
the desk level.
 Should cover these aspects:
1.Technical
2.Financial
3.Commercial
4.Incentive
5.Economic
6.Managerial
7.Organizational
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Baum Model - Implementation Phase
 funds are actually disbursed to get the project
started and keep running. A major priority is to
ensure that the project is carried out in the way
and within the period that was planned.
 Problems frequently occur when the economic and
financial environment at implementation differs
from the situation expected during appraisal
 many of the real problems of projects are first
identified. Because of this feedback effect on the
discovery and design of new projects, and the
deficiencies in the capabilities of the project action
can be revealed
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 Baum Model - Evaluation Phase
 usually closes the project life cycle
 Once a project has been carried out, it is often
useful, to look back over what took place,
 to compare actual progress with the plans,
 to judge whether the decisions and actions
taken were corrective,
 to see whether the results obtained are
optimal in a sense that the resources are
efficiently utilized and whether the project’s
goals and objectives are effectively achieve

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The UNIDO model
 the project development cycle comprises three distinct
phases
A. Pre- investment phase
B. Investment phase and
C. Operational phase
A. Pre- investment phase
 Opportunity study( identification of project ideas)
 Pre-feasibility study (preliminary project formulation ,
selection of alternatives)
 Feasibility study (techno-economical project back
ground, final project formulation stage)
 Evaluation report ( decision making about project
availability)

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The UNIDO model cont’d
B. Investment phase
 Project design stage
 Construction stage
 Pre-production marketing stage
 Training
 Start-up stage

C. Operational phase
 Replacement of equipment
 Development, invasion or liquidation

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 The DEPSA Model

 In Ethiopia, Development Project Studies Authority (DEPSA)

made certain efforts and developed a model for Project life cycle.
 Pre-investment phase
 Investment and
 Operation
 1. Pre- investment Phase
 a. Identification Stage
 b. Formulation Stage
Pre-feasibility study
Feasibility study
 c. Appraisal
Appraisal
Decision
 2. Investment Phase
Implementation
 3. Operation Phase
Operation & Ex-post evaluation
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