Project Identification,

Analysis and Appraisal

MAPM6211
 Chapter 1: Introduction

1.1. Meaning and Characteristics

 What is project?

2
o Project is an investment activity in which
specific resources are committed within a given
time frame, to create capital assets over an
extended period of time in expectation of
benefits that exceed the committed
resource.

o A project is a non-repetitive activity that

is goal oriented, that has a particular set of
constraints, the output of which is
measurable and that changes something
when carried out.
Project is a temporary endeavor
undertaken to create a unique product
or service or result.
Project is a unique process, consist of
a set of coordinated and controlled
activities with start and finish dates,
undertaken to achieve an objective
confirming to specific requirements,
including the constraints of time cost
and resource.
 Characteristics of projects
Project involves the investment of scarce
resources in expectation of future
benefits
Involves a single definable purpose
Every project is unique
Has a defined life span with a
beginning and an end.
A project is a temporary activity
A project utilises skills and talents from
multiple organisations and professions
Completed by a team of people – Team
spirit
Involves risk and uncertainty
5
1.2 Project Classification
There is no standard classification of the
projects.
 However considering project goals, these can
be classified into two broad groups, industrial
(commercial) and developmental.
Industrial projects also referred as commercial
projects
 undertaken to provide goods or services for
meeting the growing needs of the customers
and
 providing attractive returns to the
investors/stake holders.
Development projects are
undertaken to facilitate the promotion
and acceleration of overall economic
development.
They act as catalysts for economic
development providing a cascading
effect.
Development projects cover sectors
like irrigation, agriculture, infrastructure
health and education.
 Other sub classifications may also possible
considering various factors such as:
 Ownership (private, public, NGOs)
 Source of finance (government treasury, joint,
external )
 completion time (long term, shot term etc),
 cost (large, small, etc.),
 level of risk (high, low, no-risk),
 mode of operation ( build, build-operate-transfer,
etc.
 Newness (new, expansion, replacement),….
 Demand driven or supply (resource) based
Based on Ownership
• Private sector (commercial)-
mostly projects undertaken by
business enterprises.
• Public sector- projects
undertaken by national and local
government body.
• NGO’s – development projects are
most often undertaken by non-
government and not for profit
organizations.
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• Government treasury- projects may be
entirely financed by government budget as
per its priority. For instance, construction of
regional airport.
• Government treasury and external
sources- most projects are financed by the
joint partnership of the government and
donor groups. For example, a road project
may be financed 50% by the government
and 50% by a foreign donor.
• External sources of finance- projects may
be financed totally by parties other than the
government but established for the
wellbeing of the citizens and the
ownership may be for the government
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• New projects: New investment is designed to
establish a new productive process
independent of previous lines of
production. They often include a new
organization financially independent of existing
organizations.
• Expansion projects: They involve
repeating or expanding an existing
activity with same output, technology and
organization.
• Updating projects: They involve replacing
or changing some elements in an existing
activity without a major change of output.
• They involve some change in technology but
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within the context of an existing through
possibly reformulated organization.
 National Development Planning & Projects

Sectoral plans Dev’t Strategies Dev’t goal

Prog Prog
Progr
am 1
ram ram
2 3

P P P
r r r
o o o Pr Pr Pr Pr
j j j oj oj oj oj
e e e e ec ec ec
c c c ct t t t
t t t 2 1 2
1
1 2 3

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 Development Goal/
objectives
• Statement of intention or aspiration of a
government to improve the living conditions of
its people
• It is a comprehensive statement which guides
development.
• For example, growth, equity in income
distribution, reduction of unemployment.

Development Strategies
• The general methods of achieving specific
objectives at national or organizational levels.
• Describes the essential resources which will be
committed to achieve objectives & how these
resources will be organized.
• Example, it may ask how to organize the labor
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 Sectoral plan
• A statement of anticipatory decisions, their
interrelations and the criteria employed in making them
• Designed as a means to accomplish strategies

Program
• A program is open ended in nature and could be
on going investment activities which are not time
bound.
• A series of coordinated, related, multiple projects
that continue over an extended time and are
intended to achieve a goal.
Project
• A discrete activity aimed at specific objective
with a defined budget and limited timeframe
• Projects often constitute a clear and distinct
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 Project, program , and
portfolio relationship

Any relationship? Explain!

Projects versus Programs cont’d

Program is a set of identifiable projects

aimed at achieving some goal or objective.
program is of longer duration than any
individual project within it.
 Some program might not have any
specified end date and will run until a
decision is taken to stop or replace them
Many projects may be undertaken
under the overall umbrella (program)
 Criteria Program Project
Scope/Objectivities Wide/diverse Narrower/limited

Location Diffused/wide Specific

Life time Non-time bound Time bound

Beneficiaries Not specific Specific

Resources Larger budget Limited budget

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Portfolio

Portfolio a group of programs that are carried

out on a coordinated manner to collectively
generate bigger outcome.

portfolio is also considered as a complex of

projects, programs, subsidiary portfolios, and
operations managed as a group to achieve
strategic objectives

The following figure illustrates a sample portfolio

structure indicating relationships between the
programs, projects, shared resources, and
stakeholders
 1.3. Project Cycle
• Project cycle refers to the sequence of phases
through which the project will evolve
• A project is basically defined by its phases,
according to which a project swims through &
finally reaches to handover stage.
• The main features of this process are
• information gathering,
• analysis and
• decision-making.
• There are various models that deal with the
project cycle.

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 1. Baum Project Cycle
The concept of the project cycle was
first popularized by a World Bank
publication by Warren Baum in 1970
with four elements
Evaluation was added in a later version in
Five phases:
1978.
1) identification (finding the project)
2) preparation/analysis (does it have merit?)
3) appraisal (critical review, independent)
4) implementation (getting it started)
22 5) evaluation (success or failure)
 I-Identification Phase
Involves finding individual projects
Sources:
Resource based
Market based
Need based
Technical specialists & local leaders
Proposals to extend existing projects
Bank reports
Identification of potential stakeholders,
particularly primary stakeholders
Carry out problem assessment and decide
upon key objectives
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 II- Preparation/Analysis Phase
The technical, commercial,
institutional, economic,
environmental, and financial issues
facing the project studied and
addressed
including whether there are alternative
methods for achieving the same objectives.
Assessing feasibility as to whether
and determining whether to carry
out more advanced planning.
Project plan developed which can be
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appraised.
 III- Appraisal Phase
Critical review, Aspects to be
independent covered:
evaluation Technical
Re-examines Financial
every aspect of Commercial
the project plan Incentive
to assess its Economic
logic/value prior Managerial
to release of big Organizational
money. Environmental
May involve new
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 IV- Implementation Phase
Objective of previous phases is to
have a project that can be
implemented to the benefit of
recipients
The better and more realistic the
project plan, the easier to implement
& more likely it will be successful or
beneficial
Implementation needs to be flexible,
though, considering changes in
prices and technology
The greater the uncertainty or
novelty of the project, the more
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 V-Evaluation Phase
This phase regards evaluation of
success or failure elements of a
project
Are or have objectives being/been
met?
If not, were the objectives realistic?
Are the decisions or actions taken by
the management sound & responsible?
Usually takes place throughout the
project, but sometimes only at the
end
Undertaken by management,
sponsoring company, agency, etc.
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 2. UNIDO – Project Cycle
UNIDO has established a project
cycle comprising three distinct
phases.
The pre – investment
The investment
The operational phases
They are presented in to two concentric
circles:
The inner circle consists of the major
phases
The outer circle consists of the detailed
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steps in each phase
29
 I. The pre-investment phase
The pre – investment phase
comprises the following stages:
Opportunity studies
Pre-feasibility study
Support or functional studies
 Feasibility study
Project appraisal and investment
decision

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Opportunity Studies- identification of
investment opportunities
May include examining such as : Natural
resources availability, future demand for
consumer goods, imports substitution
and export possibilities, expansion, etc
Pre – feasibility studies- conducted
to see if
All possible project alternatives are
examined
The project concept justifies detail study
All aspects are critical and need in –
depth investigation

31 The project idea is viable and attractive
Support (functional) studies
 May be undertaken depending on need
 The contents of a support study vary,
depending on its type and nature of the
projects.
 Used to assess in detail specific aspects
of the project feasibility process , for
example-
 Laboratory and pilot-plant tests-
carried out to assess the extent necessary
to determine the suitability of particular
raw materials or products;
 Location studies-for potential projects
where transport costs would be a major
Feasibility Studies
The detailed formulation of the project
The commercial, technical, financial, economic
and environment prerequisites for an
investment project are defined and critically
examined on the basis of alternative solutions
already reviewed in the pre – feasibility study.
should provide all data necessary for an
investment decision.
should be carried out only if the necessary
financing facilities, as determined by the
studies, can be identified with a fair degree of
accuracy.
 Appraisal Report
Various parties will carry out their own critical

33
review of the investment project in accordance
with:
II. The investment/implementation Phase
Include such activities as

Establishing the legal, financial and organizational

basis for the implementation of the project

Technology acquisition and transfer

Detailed engineering design and contracting

Acquisition of land, construction work and installation

Pre-production marketing including the securing of

supplies
Recruitment and training
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 Plant commissioning and start up
III. Operational phase
Initial period after start-up (short-term
view)
Adaptation of production techniques
Operational difficulties with equipment
Low labor productivity
Mostly originated from implementation phase

Full production (long-term view)

Review of chosen strategies and related
production and marketing costs as well as
sales revenues
Comparison of projections made at the pre-
investment phase with reality
35Remedial measure either difficult or expensive
3. PMBOK Project cycle
Initiation
Planning
Execution
Controlling
Closure
Project management
process groups
1.4. Role of Project Manager
and PM management skills
Defining and maintaining the integrity of a
project;
 Development of project execution plan;
Organization for execution of the plan;
 Setting of targets and development of
systems and procedures for
accomplishment of
Project objectives and targets;
Negotiation for commitments;
 Direction, coordination and control of
project activities;
 Contract management;
Skills of the Project
Manager
The project manager is a key ingredient in the success
of a project.
 Strong leadership ability
 Ability to develop people
 Excellent communication skills
 Good interpersonal skills
 Ability to handle stress
 Problem-solving skills
 Time management skills,….
1.5. Project success factors
and criteria

Project success criteria = function of (project

success factors)

 Success factors affect the extent to which

a project meets/exceeds it bottom lines
 The relationship can be modeled in various
ways depending on the learned experience
and extant literature and theories
1.6. History of Project Management

The growth and acceptance of project

management has changed significantly
over the past years

It is interesting to trace its evolution

from the early days of systems
management to what some people call
modern project management
It is argued that project
management is the outgrowth
systems approach
What is systems and systems
approach to management?
 The systems theory approach is based on
the notion that organizations can be
visualized as systems.
 A System is a set of interrelated parts that
operate as a whole in pursuit of common
goals.
 The systems approach to management
views organizations and the environment
within which they operate as sets of
interrelated parts to be managed as a whole
in order to achieve a common goal.
According to the systems
approach, an organizational system
has four major components.
Inputs - are the various human,
financial, equipment and
informational resources required
to produce goods and services.
Transformation process - are
the organization's managerial and
technological abilities that are
 Outputs - are the products,
services and other outcomes
produced by the organization.
Feedback - is information
about results and
organizational status relative
to the environment. It is a key
to system control.
There are two types of
Open systems: characteristics

 Entropy - refers to the tendency of

systems to decay over time

Negative entropy is the ability of

open systems to bring in new energy in
the form of inputs and feedback from
the environment in order to delay or
arrest entropy, the decaying process
Differentiation - is the tendency of open systems
to become more complex (hence increased need
for coordination)
Synergy - the main gist of this concept is "the
whole is greater than the sum of its parts." This
means that an organization ought to be able to
achieve its goals more effectively and efficiently
than would be possible if parts are operated
separately
Subsystems - the parts that make up the whole
of the system. Each system may be a subsystem
of a still larger whole until we reach the larger
supra system.
Coming to project management:

The idea of Project Management is rooted

in the broader systems approach to
management
Is the effect of differentiation, the
need for synergy and integration
management

Today, project management is viewed as

applied systems management.
The History of Project
Management
“Long before there was an institute
for project management, or
updated knowledge books and
guides on how to manage projects,
or even before the existence of
Gantt charts, history offers several
examples of colossal projects
successfully completed.”

The Pyramids of Egypt, Great Wall

When did Project management emerge?
What its evolution look like?

We need to separate two things:

Project management as a practice
and
 project management as a
systematic body of knowledge
Project management has been practiced for
as long as humanity inhabited earth.
 There are many examples, in history, of
challenging projects that were successfully
completed.
Writers argue that:
 Many of these projects necessitated an enormous
workforce, large scope, many years of work,
advanced planning and precise execution.
 And without a good understanding of the
concepts of PM, such projects would’ve never
succeeded
However, there are four misperceptions about
historical projects and project managers’ burden
of those days:
 Historical projects had unlimited budgets
without an economic return;
 Historical projects had a predominant slave
workforce;
 Historical projects had unlimited timelines; and
 Historical projects had used concepts not
associated with modern project
 However, these explanations have been
refuted by researchers on account that:
Project management principles,
concepts, tools , and methods were
there but:

Regrettably, despite all of these

monumental achievements, very
little documentation of their
methods and techniques exists.

Why?
This can be attributed to a
combination of factors.
First, educated upper society was
more interested in the final result
of the project rather than the
methodology of creation and
documentation.
The execution of such projects was
generally the responsibility of
craftsmen who were not
MODERN PROJECT MANAGEMENT:
When did it actually start?
No agreement on when exactly
modern project management
actually started.

Different authors have offered

different opinions as to how and
when modern project management
started.
In his book, An introduction to the
History of Project Management Y. C.
Chiu, proclaims that both Henri Foyal
and Henry Gantt are the forefathers of
Project Management
 As they made significant
contribution to the development of
field of management, they did the
same for the PM

Snyder and Kline (1987), modern project

management era only started in 1958
CPM/PERT have been developed along
two parallel lines in two very different
fields: the navy and the chemical
industry

 In 1958, the U.S. navy led the Polaris

project, the first submarine-launched
ballistic missiles (SLBM) carrying
nuclear warheads.
 The U.S. navy is credited for
developing one of today’s most
widely used technique is Program
The Critical Path Method (CPM) was
invented almost simultaneously with PERT
The creation came as a result of E.I du
Pont de Nemours Company,
The project involved the building of a
major chemical plant.
The CPM came as a result of the
company needing to accurately
estimate the cost and time of the
project.
In an effort to better capture the
history of modern project
management, in 2003 Kwak
identified four periods in the
history of modern project:
 prior to 1958,
 1958 – 1979,
 1980 – 1994, and
 1995 to present
 The four periods of modern
project management
In an effort to better capture the history
of modern project management, in 2003
Kwak identified four periods in the
history of modern project:

 prior to 1958,
 1958 – 1979,
 1980 – 1994 and,
 1995 to present
Prior to 1958:

Kwak asserts that the origins of modern

project management started between 1900s
and 1950s.
Significant developments include :
 Gantt chart- Gantt Chart were first used in
Hoover Dam and then in the Interstate
Highway projects
 concept of job specification, which is
specifying knowledge, skills, and abilities
needed to successfully perform a job emerged:
the outgrowth of the era of classical
management thought
Second period: 1958 – 1979

The main theme in this period is the

application of Management Science
During that period, significant
technological advancements took
place.
One such advancement was the
introduction of the first plain paper
copier by Xerox.
It was also during that time that core
project management tools such as PERT
and CPM commenced.
Another important development during that
time was also mandating the use of Work
Breakdown Structure (WBS) approach for
any future projects bearing the size and scope
of Polaris

On the professional side:

 the institutionalization process of project
management began with the creation of
the world’s first project management
association, now known as the International
Project Management Association (IPMA).
The Project Management Institute
(PMI), which is primarily based in the
U.S.A, was founded.

 PMI is widely known as the publisher

of The Project Management Body of
Knowledge (PMBOK).

The book is a compilation of

processes and knowledge areas
generally accepted as best practice
within the project management
Examples of major projects of this period:
 Polaris and Apollo are considered
significant projects from that period.
 As mentioned earlier, it was during the
Polaris project that the navy developed
PERT, a core project management tool even
today.
 Apollo was NASA’s first formal system of
project management in response to the need
for standards in managing the complex,
expensive and ambitious plan to land a
man on the moon
The third era, 1980 to 1994
More enabling developments observed
including :
 Software capable of handling and organizing
complex data required to manage projects.
 Projects Resource Organization Management
Planning Technique II (PROMPT II) model of
project management, which was later refined into
the PRojects In Controlled Environments
(PRINCE) model and
 Scrum, an agile software development model
encouraging software development by multiple
small teams were developed.
The fourth era: 1995 to
present
In this era technology continues to
be a driving force for change, and
greatly impacts what project
managers do.
In 1996 PRINCE was upgraded to
PRINCE2, and
soon after in 1997 an alternative
method called the Critical Chain
Project Management (CCPM) was
introduced.
CCPM is a method of planning
and managing projects.

Unlike CPM and PERT the method

mainly emphasized resources
required to complete the
project rather than the specific
tasks
Project Management Today
Project management is now used by
numerous different disciplines and has
evolved into an integral management
component for a wide range of industries.

Increasingly, large organizations are setting

up their own project management
development sections.
Project management has evolved into a
global generic profession.

Provided that the correct international

standards are observed, project managers
all over the world speak the same project
‘language’.
Thanks,