A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh

A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh

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A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh

Assignment

“A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh”

Submitted To
Md. Zakir Hossain Course Instructor Stamford University Bangladesh

Course: Project Management

Submitted By Md. Ashiqur Rahman Chy Dipankar Das Dipu ID: MBA 041 11 345 ID: MBA 041 11

Neshat Marjiya

ID: MBA 041 11 346

Md. Ajaj Mahmud Date of

ID: MBA 042 11 553

Submission: 14TH August, 2010
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A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh

Stamford University Bangladesh
Letter of Transmittal
14 August, 2009 Md. Zakir Hossain Crouse Instructor Department of Business Administration, Stamford University Bangladesh. Subject: Submission of Assignment on “A Critical Analysis on the Project Appraisal & Management of Project in Bangladesh” Dear Sir, It gives us immense pleasure in presenting herewith the assignment on “A Critical Analysis on the Project Appraisal & Management of Project in Bangladesh”. This Assignment gave the opportunity to acquire a lot of knowledge about the ‘Appraisal & Management of Project in Bangladesh’. We have tried our level best to follow the instruction of our Crouse instructor in preparing this report, and in completing the report by appropriate information as comprehensively as possible. We sincerely hope that you will enjoy this paper as much as enjoyed while scrutinizing it. If you need any further clarification or information in interpreting this analysis, we will be glad to answer your queries. Sincerely yours

All the member Group X Department of Business Administration Stamford University Bangladesh
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A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh

i Acknowledgment

Firstly, we would like to express our gratitude to almighty Allah to give us the strength to complete the report within the stipulated time. While working on this topic, we learned about real practice of project appraisal in Bangladesh. We have always had a great affinity with analytical topic, so it was obvious that the subject of our assignment would go in the same direction. “A Critical Analysis on the Project Appraisal & Management of Project in Bangladesh” is a sounding title that was suggested to us Md. Zakir Hossain. Special thanks go to him. His infectious enthusiasm and unlimited zeal have been major driving forces during the writing of this assignment. Finally, and definitely not least, we want to thank all the persons who gave their full cooperation with this assignment & the entire participants who take part in the report, their contribution are highly appreciated.

All the Member Group X Department of Business Administration Stamford University Bangladesh

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 Secondly to develop an analysis on the specific performance of project appraisal. Also this assignment is essential to completing our project management course successfully. we have collected the data in two ways Primary Data  Secondary Data We collected Primary data by several methods: Conversation with the different project personnel for collecting data about appraisal of a project. Methodology: To prepare the report. every trimester we submit an assignment on various topics relevant to course.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Introduction ii Origin of the Report: Submit an Assignment is a compulsory part of our study under business faculty of Stamford University Bangladesh. we collected data from various sources that are easily available:- 5 . For the secondary data. This trimester we got the task for “A Critical Analysis on the Project Appraisal & Management of Project in Bangladesh” Objective of the Study: Every work has some specific objective. analysis of the projects & its success trend. The main objective of this report is dividing in two categories: Broad Objective  Specific Objective  Firstly to identify the overall scenario of the project appraisal and management in Bangladesh.

because the given time is not sufficient to prepare an assignment covering all the fact to develop a thriving critical analysis on project appraisal & management.  Taking help from project management books. Limitation of the study:The following limitations are apparent in collecting data and prepare the reportiii ۞ ۞ Time is the first limitation. 6 . and other informational search engine.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh  We collect data from the Website of various companies. Another limitation of this report is the lacking information.

A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh iv 7 .

0 3 1.0 5 2.0 4 1.Letter of Transmittal Acknowledgement Introduction Abstract Table Of Contents A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh i ii iii-iv 1 Chapter 1 Literature Review 1.0 7 Critical Examination of Project Risk Analysis Feasibility Analysis of the Projects Project Appraisal Using Discounted Cash Flow Problems Threaten to Project Success Criteria for the Evaluation of Project Success Project Appraisal under Inflationary Condition Common Causes of Project Failure in Bangladesh Chapter 3 Finding of the Study 8 16-17 18-19 20 21-23 24 25-26 27-31 3.0 8 Definition of Project Definition of Project Appraisal Definition of Project management Role of Project Appraisal Methodology of Project Appraisal Necessary to Conduct Project Management Appraisal (PMA) Use of Project Management Appraisal (PMA) Structural Approach and Typical Issues of Project Management Appraisal Chapter 2 Analysis 3 3-4 4 5 6-7 8 8-9 10-14 2.0 5 1.0 1 1.0 6 1.0 3 2.0 2 1.0 6 2.0 7 1.0 1 2.0 2 2.0 1 Findings 33 .0 4 2.

9 . In fact a project can be defined as a problem scheduled for solution. in a structured way. Project management is the discipline of planning. and managing resources to bring about the successful completion of specific project goals and objectives. cost estimates and proposed financing. Appraisals help ensure that projects will be properly managed. Project management is a carefully planned and organized effort to accomplish a specific one-time objective. that there are contingency plans to deal with risks and setting milestones against which progress can be judged. policy measures. The term projects as a discrete package of investments. institutional other actions designed to achieve specific development objectives. It often involves comparing various options. organizing. Project appraisal therefore cannot be overlooked and goes hand in hand with effective project management. corporations and institutions commit large sums of resources into projects and assure their project success through the use of project appraisals and project management. therefore before undertaking any project it is important to assess its likelihood of success. an assessment of the projects organizational and management aspects. Appraisal involves a careful checking of the basic data. an in-depth review of the work plan. defined cost and performance parameters and clear outputs to support specific business objectives. organizations. and finally the viability of project. the case for proceeding with a project or proposal. In Bangladesh and the world over. by ensuring appropriate financial and monitoring systems are in place. Projects can either be successful or may fail. using economic appraisal or some other decision analysis technique.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Abstract A project is defined as a unique set of co-ordinate activities with a finite duration. Project appraisal is a generic term that refers to the process of assessing. assumptions and methodology used in project preparation.

01 Definition of Project: 10 .A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Chapter – 1 Literature Review 1.

construction of buildings. social. new motorbike. transport and communication etc. financial. clear cut beginning and end Having a desired objective/ outcome. limited or comprehensive. Project appraisal is the process of examining the various dimensions of a project be it Technical. There are projects to develop a new road. Project: can be defined thus as • A scientifically evolved work plan Devised to achieve a specific objectives Within specified time limit Consuming planned resources • • • 1. a project may cover with following characteristics• • • • • A set of well defined activities. A project can be long term or short term. A project is a proposal for an investment to crate and or develop certain facilities in order to increase the production of goods/services in a community certain period of time.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh A project is a specific plan or design presented for consideration. new car. marketing plan. policy measures and institutional and other actions designed to achieve specific development objectives.02 Definition of Project Appraisal: Project Appraisal is the process of analyzing the technical feasibility and economic viability of a project proposal with a view to financing their costs. Consumption of large amounts of money Limitations on resources Not undertaken frequently Projects are common term used by many flexibly to denote specific action plans. Environment and providing an assessment of the projects likelihood for success and its viability. The term projects discrete package of investments. It is the process of assessing and questioning proposals before resources are 11 . single sector concentrated or multi sector concentrated.

which includes defining and confirming the project goals and objectives. and managing resources to bring about the successful completion of specific project goals and objectives. identifying tasks and how goals will be achieved. Typical constraints are scope. time. The proper consideration of each of the components of project appraisal is essential. It evaluates a project’s ability to meet its stated objectives and to provide long term Economic growth in the larger framework of local and National needs. The secondary-and more ambitious-challenge is to optimize the allocation and integration of inputs necessary to meet pre-defined objectives. Project management includes developing a project plan. It also includes managing the implementation of the project plan. to local communities. construct a building or implement a major new computer system. The primary challenge of project management is to achieve all of the project goals and objectives while honoring the preconceived project constraints. along with operating regular 'controls' to ensure that there is accurate and objective information on 12 .03 Definition of Project management: Project management is the discipline of planning. Project management is a carefully planned and organized effort to accomplish a specific (and usually) one-time objective. A good appraisal justifies spending money on a project. and budget. For the following reasons project appraisal is very much important• It is a capital investment decision • It has long term effects • Decision once taken is irreversible • Expenditures are high 1. It is an important tool in decision making and lays the foundation for delivery and evaluation. The project appraisal process is an essential tool in regeneration and neighborhood renewal. most importantly. An effective project appraisal offers significant benefits to partnerships and. and determining budgets and timelines for completion. organizing. Getting the design and operation of appraisal systems right is important. for example. quantifying the resources needed.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh committed.

all of which need adequate evidence. Appraisal is an important decision making tool Appraisal involves the comprehensive analysis of a wide range of data.04 Role of Project Appraisal: Project appraisal helps a partnership’s management to:  Be consistent and objective in choosing projects  Make sure its program benefits all sections of the community. It can give confidence that public money is being put to good use. 1. and help identify other funding to support a project. and the mechanisms to implement recovery actions where necessary.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 'performance' relative to the plan. including those from ethnic groups who have been left out in the past  Provide documentation to meet financial and audit requirements and to explain decisions to local people. • • Appraisal lays the foundations for delivery 13 . Getting it right may help a partnership make its resources go further in meeting local need. judgments and assumptions. This helps ensure that projects selected for funding: • • • Will help a partnership achieve its objectives for its area Are deliverable Involve local people and take proper account of the needs of people from ethnic minorities and other minority groups Are sustainable Have sensible ways of managing risk. Appraisal justifies spending money on a project Appraisal asks fundamental questions about whether funding is required and whether a project offers good value for money.

It is mandatory for the Project Authorities to undertake project appraisal or at least give details of financial. Economic appraisal of a project is concerned with the desirability of carrying out the project from the standpoint of its contribution to the development of the national economy. financially justified and viable from the point of view of the economy as a whole. In the Planning and Development Division.e. Whereas financial analysis deals with only costs and returns to project participants. commercial. The concerned Technical Section in consultation with other technical sections i. Manpower. by ensuring appropriate financial and monitoring systems are in place. economic analysis deals with costs and returns to society as a whole. an assessment of the projects organizational and management aspects. an in-depth review of the work plan. Governance and Environment sections undertake the technical appraisal. that there are contingency plans to deal with risks and setting milestones against which progress can be judged. while the Economic Appraisal Section carries out the pre-sanction appraisal of the development projects from the financial and economic points of view. These projects are examined in the Planning and Development Division from the technical. The techniques of project appraisal can be divided under two heads:1. organizational and managerial aspects. On the basis of such an assessment. The rationale behind the project appraisal is to provide the decision-makers with financial and economic yardsticks for the selection/rejection of projects from among competing alternative proposals for investment. assumptions and methodology used in project preparation.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Appraisal helps ensure that projects will be properly managed. a judgment is reached as to whether the project is technically sound. economic and social benefits and suitably. Physical Planning & Housing. there is a division of labor in the appraisal of projects prepared by the concerned Executing Agencies. wherever necessary. and finally the viability of project. Non-discounted and 14 . institutional/organizational/managerial. This covers engineering. cost estimates and proposed financing. 1.05 Methodology of Project Appraisal: Appraisal involves a careful checking of the basic data.. financial and economic point of view depending on nature of the project.

During the operating life of a project. Non-discounted techniques include A. Many investment projects are addition to existing facilities/activities and thus benefits and costs relevant to the new project are those that are incremental to what would have occurred if the new project had not been added. Net Present Value (NPV). considerable care must be taken in defining a “ base case” which realistically sets out the profile of costs and benefits expected if no additional investment is undertaken 15 . Discounted. in fact. B. It is very common error to assume that all costs and benefits are incremental to the new project when. Discounted techniques take into account the time value of money and include A. it is very important to measure all costs and benefits as the difference between what these variables would be if no project (without project) were undertaken and what they will be should the project be implemented (with project).A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 2. Benefit Cost Ratio (BCR). Internal Rate of Return (IRR) D. Profit & Loss account. they are not. Domestic Resource Cost (Modified Bruno Ratio). Sensitivity Analysis (treatment of uncertainty) and E. Hence. Payback period. C. and B.

06 Necessary to Conduct Project Management Appraisal (PMA): A project management appraisal should be viewed as a useful. In the latter context it can be conducted to ferret out common failings of many project management arrangements. lack sufficient training in project management skills.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 1. rather than being made in the best interests of the final project results • • • Decisions may be similarly biased unduly by corporate policy Short term political expediency may be overwhelming (Crisis management) Key individuals on the project may be under the influence of some form of illegal pressure • Management on the project may simply be naive. inexperienced. constructive and necessary diagnostic tool available for augmenting the capability of the sponsoring organization's project management team. or otherwise ill prepared for the difficult tasks at hand 16 . Decisions may be being unduly biased by contractual commitments already in existence. It can be used to provide information ranging from an informal enquiry to an extensive analysis of the effectiveness of every aspect of the project management process. Some of these common failings include: • • Management on the project may be unable to see the forest for the trees.

solutions and strategies with project team members.07 Use of Project Management Appraisal (PMA): • Identify the strengths of current practices in a project management organization. information. or on an existing project • Establish how various groups within the organization perceive the organization's effectiveness in managing projects • Examine the effectiveness of project communication and documentation. potential difficulties can be identified and brought out into the open for appropriate corrective action. by conducting a PMA in a timely and favorable manner. problems. Better still. potential problems may be circumvented altogether. and the professional growth of project team members Thus. quality.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 1. 17 . time and cost • Identify barriers to better performance. or critical skills needed by project managers or their supporting teams to increase their effectiveness • Identify sooner specific aspects which require improvement and hence speed the achievement of results • Provide for an exchange of ideas. if the concept and timing of a PMA is built into the project plan from the outset. and thus develop a plan of action for carrying out improvements • Help to create a supportive environment focusing on project success. and clarify the relationships between project scope.

contract/procurement and information/communications management. and in the reverse order. The sequence in which these functions are listed above is significant because of their dynamic relationship. For example. time and cost. The sequence parallels both the progressive flow of information as well as the flow of work through the project management process. and four integrative and interactive functions of risk. Each function tends to require a separate skill set. The information flow represents what is managed. while the process flow reflects how it is managed. the latter four functions might be given priority. human resources.08 Structural Approach and Typical Issues of Project Management Appraisal: Modern project management is generally considered to be encompassed by the integration of eight functional areas. Consequently. so that on a larger project. the content of technological questions under a Project Management Appraisal (PMA) conducted early in the implementation phase of a construction project would focus on the 18 . The content of the questions to be raised will also be highly dependent upon the particular phase of the project in which the PMA is being conducted. quality. For projects in the implementation phases. These include the four core or constraint functions of scope. or in the larger project management organization. projects in the planning phases might well have the first four functional areas examined first. on the other hand. the investigative format of a project management appraisal also more readily follows these functional descriptions. responsibilities naturally tend to be grouped accordingly for their proper conduct. and therefore should be structured accordingly. Since projects should be planned moving progressively down the list.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 1.

are generally considered to be the basic functions of project management. In the case of quality: has the project's executive given priority to building the required quality standards into the project planning and execution process right from the outset? Is this standard consistent with production. Even so. technological issues to be raised just prior to commissioning would likely cover quality assurance records.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh availability and adequacy of information to carry out detailed design efficiently. • Scope and Quality If specific technological aspects of the project such as engineering. so that the facility will perform economically during its life time? Indeed will the facility last for its required life time? Have the members of the project team been selected on the basis of their 19 . validation of equipment and system check-off. operation. They therefore represent a set of core parameters which are used to control the project. From the sponsor's point of view. The following discussion is intended to give an indication of the issues that might be looked at. social or safety impacts. • Project Management Core Functions: - As noted earlier. most projects today have some degree of recognizable environmental. then persons with corresponding knowledge and experience must undertake such review. or to commence construction activities productively. dry-runs and so on. both in terms of the function under consideration.e. safety and social acceptability expectations. are to be reviewed. the first four functions: scope. they constitute constraints. i. designer construction. and the phase that the particular project has reached. these four functions embody the project's basic management objectives. In addition. If these have not already been analyzed and arrangements made for monitoring and mitigation. while for those providing services to the project. maintenance. certain general management questions can be formulated with regard to the technical scope and quality of the project. time and cost. such an investigation must clearly be conducted by those thoroughly conversant with the project's technology. quality. manufacturing or constructability. Similarly.

specific questions can be posed regarding schedule and cost. meeting cost and schedule targets. 20 . For example: Do project plan include a milestone schedule indicating major pieces of work to be accomplished. and without causing overruns? And when changes are made during project implementation. If the answers are found to be unsatisfactory. which consist of the management of risk. and likewise will similar considerations be given to those providing detailed design and/or construction services during project execution? Are meeting the end-user's requirements seen as being at least as important as. in order to build in commitment? Are they prepared using a structured breakdown consistent with the work breakdown structure. including both direct and indirect costs of all required resources. human resources. such that cost and schedule can be correlated? Are project schedules allowing sufficient time to get the work done right the first time.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh qualifications for their respective roles. or have any changes taken place since. and will a post project review include a critique of the project's quality attainment? • Schedule and Cost Similarly. quality. then it will be necessary to examine the means to influence them within the remaining time left for the project to run. and the direct impacts on the cost situation of any changes in the schedule also recognized. if not more important than. contract/procurement and information/communication management. The next set of questions therefore investigate the supporting integrative and more dynamic functions of project management. and who will be responsible for each? Are project schedule time estimates and logic developed using input from members of the project team. which might require its reevaluation? • Project Management Integrative Functions As indicated earlier. in terms of the project's parameters or the external environment. Thus typical cost questions should include: Is the estimate realistic. the issues under scope. are corresponding changes made to the schedule to accommodate these changes? The cost situation should be similarly examined. time and cost only really question the status of the project's relatively static objectives.

suitably managed can affect the course of the project and consequent outcome. which deal with project outputs and deliverables. these four functions impact the activities.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Each of these functions influences the success of the project through the performance of people. this area of the PMA may be quite intensive. Therefore. time and cost. the work involved in achieving those outputs and deliverables. Unlike scope. They involve as much art as science. since essentially projects and the degree of their success are achieved through the project's human resource element. • Project Risk Questions under this heading should include: Has the project planning included a program or study of risk identification and analysis with recommendations for mitigate actions? Does the project's management effectively anticipate potential obstacles at each stage in a way that avoids future hindrance? Have adequate contingency planning and allowances been incorporated into the project parameters to provide for major risk factors which may adversely affect project success? • Human Resources Questions which address the issues of people and their motivations are frequently the most significant. quality. are they encouraged or provided with suitable training? Are they rewarded for exceptional effort? Is conflict handled and used constructively. and is it held accountable accordingly? Is this process visible and effective? Are people resources available when needed? And do they have the required levels of technical skills. or if not. in order to sustain a highly motivated team? Will the final project evaluation include a critique of the project team's collective performance? • Contract/Procurement 21 .e. Often. For example: Does the project team enjoy the active and visible support of the project's sponsor. and. i. these areas of review provide a much more illuminating area of investigation. and is the focus consistently on the project's stated objectives? Has the sponsor assigned the leadership of the project the necessary level of authority for it to execute its responsibilities.

the form of contracting must be tailored to suit. Questions in this area might therefore include: Does the project sponsor keep the project manager informed on matters affecting the project. since it will have a significant effect on the way in which the project parameters are expressed. For instance. since adverse reaction could have a damaging affect on the ultimate success of the project. Conversely. or "fast-tracked". while communication is the oil and grease which keeps the whole project progressing smoothly. an external stakeholders' public relations program could be very necessary where the construction and completion of the project is politically sensitive. In each case. is its quality and integrity maintained? Similarly. should require a shorter schedule but will carry significantly higher risks. and in turn does the project manager keep the members of his team similarly informed? Are project team members free to voice their opinions and concerns for the project? In other words. is information flowing satisfactorily through the organizational structure. 22 . the more time taken to improve the definition of the project's scope. construction which is to be accelerated. • Information/Communications Information is best viewed as the data upon which the project is configured and upon which decisions are based. are the necessary mechanisms in place to inform those who are outside of the project organization. and inform them according to their respective interests? For example. and in doing so. the lower should be the project risks.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh The manner in which the project is to be facilitated or procured is an issue which should be dealt with very early in the project planning phase.

A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Chapter – 2 Analysis of the Study 23 .

1. depending on the stage of the project. Difficulties of some areas would affect the ability of practitioners to carry out a project cost or schedule risk analysis. too finegrained a disaggregation of tasks or costs would be enormously burdensome to deal with as experts attempted to determine probability distributions for very small tasks or cost distributions for tiny pieces of hardware.01 Critical Examination of Project Risk Analysis: Here we discuss some issues which could be treated in a critical evaluation of the project subject & how such an evaluation would be carried out. the analyst would be hard pressed to justify the estimate or to answer the next question. Level of Aggregation of Tasks or Costs A first obvious question is what level of aggregation should be used for the components of the schedule or cost. So a critical study of the methods would need to address these issues. This is obviously not credible: when asked how long it would take to complete a complex project or how much it would cost. Cost estimators recommend going down to various levels. If the estimate did not fit.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 2. One could imagine using the highest level available. but in schedule risk analysis there is no similar structure that defines level of detail:  Deciding what tasks go into the schedule network is a matter of experience 24 . that of the whole project. Alternatively. risk analysts would be under severe pressure to produce a number that fits the client’s schedule or budget. which would ask what adjustments could be made to modify the project to fit the constraints.

And for complex projects that are at the cutting edge of technology there simply may not be much data that is directly relevant. and allowing the subject to then modify the distribution based on this information to better reflect their beliefs. may be limited by the type of projects done by a particular company or consulting firm. Virtually all of the advanced texts on project risk analysis recommend that correlations be taken into account when specifying probability distributions for quantities that may be correlated. Feedback Effects 25 . the project management literature has few or no references to this work. Correlations As several authors in the literature have noted. For example. which is technologically immature. 2. let alone their interrelationships or all of the cost elements. Elicitation of Probabilities Assuming that the task network have been assembled at the appropriate level of aggregation. However. 3. the statistical literature includes methods for cross-checking elicited distributions by feeding back the implications of the current distribution to the subject. while the risk analysis literature focuses on matching a few values to a standard distribution. 4. if proprietary.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Added to these issues of aggregation is the simple observation that in a complex project. such data is not available in the open literature. Given that correlations between task durations and cost elements should be assessed the difficulty of doing so is an obstacle to applying quantitative risk methods. it may be impossible to specify individual tasks at the beginning. In this case the pedagogical literature in general recommends that expert opinion be consulted to elicit the required probability distributions for task durations and task and component costs. However. and. the next task is to determine the probability distributions of the times to completion of each task and the probability distribution of each cost element. durations for some related tasks and costs for some related hardware might be correlated because they are affected by common external events or by some common characteristics. One source of such information is from previous experience.

managerial competence of the promoters etc. documentation process. skilled man power. 26 . The promoters should have the knowledge and ability to plan. The behavior with intelligent agents which will formulate and implement adaptive strategies during simulated project histories to get a better cost and schedule projection. local people etc are coming under technical analysis. This kind of adjustment is yet another reason for distrusting initial risk analyses as having predictive validity: if schedules begin to slip or costs rise there are feedback mechanisms that can act to bring the schedule and/or cost back to compliance. they can reallocate resources such as manpower to shorten timelines for some tasks if the project begins to fall behind. The past record of the promoters is to be appraised to clarify their ability in handling the projects.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Although much of the empirical research on cost and schedule changes have documented overruns in both categories. it has also been noted in the risk analysis literature that managers have adaptive strategies available to them in the course of a project. 2. implement and operate the entire project effectively. knowledge of the project. • Technical Feasibility Technical feasibility analysis is the systematic gathering and analysis of the data pertaining to the technical inputs required and formation of conclusion there from. risk minimization process and to get approval. For example. The availability of the raw materials. maintenance. transportation facility. integrity.02 Feasibility Analysis of the Projects:• Management Appraisal Management appraisal is related to the technical and managerial competence. This feasibility analysis is very important since its significance lies in planning the exercises. engineering facilities. sanitary and sewerage services. power.

geographical location etc. which enables the project to get adequate demand. plant and machinery. maximizing the growth of employment. break-even point. latest information availability an all areas. • Economic Appraisal How far the project contributes to the development of the sector. future demand of the supply. sound. The cost of project includes the land and sight development. industrial development. margin money loan etc. The financial projections include the profitability estimates. 27 . The factors include the water. Estimation. etc. contingency expenses etc. customer friendly process and preferences. social development. technical know-how fees. term loan. distribution and advertisement scenario also to be here considered into. The appraisal involves the assessment of the current market scenario. The scope of the project in market or the beneficiaries. financial projections. pre-operative expenses. financial institutions. The ratio analysis will be made on debt equity ratio and current ratio. building. This involves the preparation of cost estimates. ratio analysis etc. cash flow and projected balance sheet. etc. The means of finance includes the share capital. effectiveness of the selling arrangement.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh • Financial feasibility One of the very important factors that a project team should meticulously prepare is the financial viability of the entire project. land. • Commercial Appraisal In the commercial appraisal many factors are coming. special capital assistance. • Environmental Analysis Environmental appraisal concerns with the impact of environment on the project. government control measures. means of financing. are kept in view while evaluating the economic feasibility of the project. air. investment subsidy.

particularly where the connections between the application of financial principles and related financial theory are not easily understood or accepted. The key principles underlying widely accepted good practice are:  When appraising multi-period investments. where expected benefits and costs and related cash inflows and outflows arise over time.  The time value of money should be represented by the opportunity cost of capital. the time value of money should be taken into account. 28 .A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 2. Professional accountants in business have a role in promoting and explaining the importance of these principles in their organizations. A key challenge in using DCF arises from the confusion that often occurs in understanding its theoretical basis and practical application.03 Project Appraisal Using Discounted Cash Flow: DCF analysis and estimating the NPV of cash flows incorporate fundamental principles of finance that support disciplined financial management in organizations.

Provide a personality-based team building experience 5. should be supported by reasoned judgment. DCF analysis should be considered and interpreted in relation to an organization’s strategy. Provide coaching and mentoring to key project personnel 2. there are seven specific intervention tools that have been used to get a project back on track.  A post-completion review or audit of an investment decision should include an assessment of the decision-making process. Make a change in project personnel 3. most likely. even if they had been included in an earlier cash flow analysis. Using techniques such as sensitivity analysis to identify key variables and risks helps to reflect worst. These are: 1. benefits. 2. Use a strong outside facilitator to mediate conflicts 4.  A good decision relies on an understanding of the business and an appropriate DCF methodology. The value of an investment depends on all the additional and relevant cash inflows and outflows that follow from accepting an investment. These seven tools are explained below. and in evaluating proposed investment projects. Provide problem solving-based teambuilding retreats The type of intervention tool used depends on the nature and severity of the people problems that threaten project success.04 Problems Threaten to Project Success: If “people problems” occur once a project is underway. past events and expenditures should be considered irreversible outflows (and not incremental costs) that should be ignored. Provide activity-based teambuilding events 6. and therefore can support a reasoned judgment. and its economic and competitive position. and not the systematic risk of the organization undertaking the project. 29 . and best case scenarios.  All assumptions used in undertaking DCF analysis. and the results. so that a DCF analysis should only consider expected cash flows that could change if the proposed investment is implemented. Provide skills-based teambuilding sessions 7. and outcomes of the decision. particularly where factors are difficult to predict and estimate.  At any decision-making point.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh  The discount rate used to calculate the NPV in the DCF analysis should properly reflect the systematic risk of cash flows attributable to the project being appraised.  Cash flows should be estimated incrementally.

the team learns that many “personality conflicts” 30 .A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 1. 2. Bring in an Outside Facilitator When the project is in jeopardy due to politics. lack of teamwork. or even a respected colleague. the project sponsor. with no connections to the organization. and several attempts to change the behavior have not succeeded. it is often helpful to bring in an experienced third party.” however. lack of ability. The hope is that coaching will help change the behavior or attitudes of the project member who is holding up project success. Many “personality conflicts” on teams result from differences in how team members perceive. Make a Change in Project Personnel This type of action is used only on rare occasions. The purpose of this intervention is to help team members better understand each other. Once these differences are understood. The purpose of this intervention is to remove someone from a project role so that we can quickly get over the problem and move forward on the project. to serve as an arbitrator and facilitator to help mediate conflicts so that the project may move forward.poor attitudes. The point of this intervention is to help the project member become aware of how his/her actions are a hindrance to project completion. There are different possible coaching techniques and tools that can be used in this situation. 3. the emphasis is solely 4. make decisions and interpret and react to the same set of stimuli. Provide Personal Coaching This is the tool of choice when the behavior or attitudes of a particular project member is causing problems that threaten project success. or other “people” problems. the project member’s supervisor. This tool is used when the actions (or inactions). Carry Out Personality-Based Team building This tool is used when a project team or sub-team is not performing well due to personality conflicts on the team. There are four factors that must be considered before taking this type of drastic action. or lack of performance of a particular project member is causing problems that threaten project success. The person doing the coaching can be the project leader. and thus learn how to work more effectively together. This is a form of a“project rescue. and when several attempts to deal with these issues have failed.

and more productive.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh are due to misunderstandings and“projections” of motives that are not necessarily true. and then take ownership in the problems by agreeing on actions they will take to get back on track. 31 . 6. In skills-based teambuilding. back on track. The purpose of this tool is to remove the team from its everyday setting and get the team to agree on the barriers they are having. Carry Out Activity-Based Teambuilding This tool can be applied when a project team is not performing well together due to any number of different symptoms. They then can agree on codes of conduct for communicating and working together more effectively. learning how to give criticism. team members participate in workshop sessions that require them to learn and practice specific teamwork skills (e. and lack of teamwork. The purpose of activity-based teambuilding is to help team members learn how to work together in a series of challenging outdoor group tasks and exercises. and then to apply the lessons learned to working together on the project. 5. reaching group consensus. Several steps must be followed when carrying out this type of intervention.. The purpose of this intervention is to teach team members specific teamwork skills and ground rules for operating more effectively together. Carry Out Problem Solving-Based Teambuilding Problem-solving teambuilding retreats are the most often used interventions on projects. such as “high” ropes courses. “low” ropes courses or various outdoor adventures. or running effective team meetings). In our experience this type of intervention has been quite successful in getting project teams focused. such as lack of trust. Activity-based teambuilding can be carried out in a variety of settings. analyze why. All these exercises require groups to learn to work together to achieve success. Carry Out Skills-Based Teambuilding This tool is the approach of choice when a project team is not performing well together due to a lack of understanding of how teams operate and/or a lack of teamwork skills. 7. poor communication. dealing with conflict.g.

socio-economic and socio-cultural as well as ecological terms)? • Are the funds/expenses that were and are being employed/incurred to reach the objectives appropriate and how can the projects microeconomic and macroeconomic impact be measured? • To the extent that undesired (side) effects occur.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 2.05 Criteria for the Evaluation of Project Success: The evaluation of a project’s “Developmental Effectiveness” and its classification during the final evaluation into one of the various levels of success described in more detail below concentrate on the following fundamental questions: • • Are the project objectives reached to a sufficient degree (aspect of project effectiveness)? Does the project generate sufficient significant developmental effects (project relevance and significance measured by the achievement of the overall development-policy objective defined beforehand and its effects in political. institutional. are these tolerable? 32 .

In a developing country like India. as a separate category of evaluation but instead as a cross-cutting element of all four fundamental questions on project success. organizational and/or technical support has come to an end. a key aspect to consider for project evaluation.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh We do not treat sustainability. During such economy is generated. normal conditions seldom exist and a project is subjected to inflationary pressures from time to time because the project has to be implemented over a period of time ranging from 6 months to more than one or two years. under such circumstances. Besides this. However. In such a situation inflation is bound to affect the project appraisal and implementation process. commercial and financial viability and economic and social considerations and managerial aspects. A project under normal conditions is viewed from different aspects viz. inflation has become a part of life. Therefore. the size and magnitude of the project also varies form organization to organization. A project is sustainable if the project-executing agency and/or the target group are able to continue to use the project facilities that have been built for a period of time that is.06 Project Appraisal under Inflationary Condition: The timing of project appraisal is significant from the point of view of appraisers. 33 . adequate in economic terms or to carry on with the project activities on their own and generate positive results after the financial. it is always prudent to make adequate provision for a probable escalation in the project cost as a cushion to inflationary jerks. technical feasibility. overall. 2.

not only cost of production is but also the projected statement of profitability and cash flows are affected by the change in demand pattern. As already stated inflation causes erosion in the purchasing power of money. banks and financial institutions. labor. Beside this inflationary conditions erode purchasing power of consumers and affect the demand pattern. This also causes problems for the financial decision makers. Under such circumstances. The various sources of finance should be carefully scrutinized with reference to probable revision in the rate of interest by the lenders and the revision which could be effected in the interest bearing securities to be issued. remuneration of technicians and managerial personnel etc. fixed assets such as equipment’s. plant and machinery. Thus. All three factors will push pu the cost of funds for the organization. It is also advisable to examine the financial viability of the project at the revised rates and ashes the same with reference to economic justification of the project. Over 34 . • • It is always advisable to make provisions for cost escalation on all heads of cost. building material. projects having early payback periods should be preferred because projects with long payback period are more risky. raw material. The appropriate measure for this aspect is the economic rate of return for the project which will equate the present value of capital expenditures to net cash flows over the life of the projects. The rate of return should be acceptable which also accommodates the rate of inflation per annum.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh It is a well known fact that during inflationary conditions. keeping in view the rate of inflation during likely period of delay in project implementations. the project cost is bound to increase on all heads viz. The following discussion focuses on investment appraisal techniques under inflationary conditions. • • Adjustments should be made in profitability and cash flow projections to take care of the inflationary pressures affecting future projections. The inflationary pressure does not stop here. This is particularly true while assessing investment decision which can easily rely on predicted cash flows over several years into the future. Financial institutions and banks may revise their lending rates resulting in escalation in financing cost during inflationary conditions. project appraisal has to be done generally keeping in view the following guidelines which are usually followed by Government agencies. • In an inflationary situation.

Why the certain percentage of project cannot success that causes are point out below: • Lack of clear links between the project and the organization’s key strategic priorities. including agreed measures of success • Lack of clear senior management and leadership • Lack of effective engagement with stakeholders 35 .A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh just a few years a fairly moderate rate of inflation can have far reaching implications on the purchasing power of money.07 Common Causes of Project Failure in Bangladesh: In Bangladesh. Specially the inflation-related problems which the investment decision 2. thus distorting investment decision.

the supplier team and the supply chain 1. and contact with the supply industry at senior levels in the organization • Lack of effective project term integration between clients. and indicates the means of benefits realization? • Is the project founded upon realistic timescales. taking account of statutory lead times. • Do we know now the priority of this project compares and aligns with our other delivery and operational activities? project? Have we defined the Critical Success Factors (CSFs) for the • • Have the CSFs been agreed with suppliers and key stakeholders? Do we have a clear project plan that covers the full period of the planned delivery and all business change required. including agreed measures of success. Lack of clear senior management and leadership. 2. and snowing critical dependencies such that any delays can be handled? • • Are the lessons learnt from relevant projects being applied? Has an analysis been undertaken of the effects of any slippage in time.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh • Lack of skills and proven approach to project management and risk management • Too little attention to breaking development and implementation into manageable steps • Too little attention to breaking development and implementation into manageable steps • Lack of understanding of. cost. 36 . scope or quality? In the event of a problem/conflict at least one must be sacrificed. Lack of clear links between the project and the organization’s key strategic priorities.

the benefits. responsibility and authority to ensure that the business change and business benefits are delivered? • Does the SRO have a suitable track record of delivery? Where necessary. identified the rationale for doing so (e. Lack of skills and proven approach to project management and risk management. the when and the how)? • • • Have we secured a common understanding and agreement of stakeholder requirements? Does the business case take account of the views of all stakeholders including users? Do we understand how we will manage stakeholders (e. in order to facilitate successful delivery? • Does the project have the necessary approval to proceed from its nominated minister either directly or through delegated authority to a designated Senior Responsible Owner (SRO)? • Does the SRO have the ability.g. • • Lack of effective engagement with stakeholders. and the criteria against which success will be judged? • If the project traverses organizational boundaries.g. the where. ensure buy—in. the why. overcome resistance to change. Have we identified the right stakeholders? Have we as intelligent customers. the what. allocate risk to the party best able to manage it)? • • Has sufficient account been taken of the subsisting organizational culture? Whilst ensuring that there is clear accountability. decisively. and adhered to. is this being optimized through training? 3. 37 . how can we resolve any conflicting priorities? 4. are there clear governance arrangements to ensure sustainable alignment with the business objectives of all organizations involved? • • Are all proposed commitments and announcements first checked for delivery implications? Are decisions taken early. who.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh • Does the project management team nave a clear view of the interdependencies between projects.

are they accountable and committed to help ensure successful and timely delivery? 5. been allocated to the project. Too little attention to breaking development and implementation into manageable steps. monitoring and controlling the total expenditure on projects? • Do we have effective systems for measuring and tracking the realization of benefits in the business case? • Are the governance arrangements robust enough to ensure that "bad news" is not filtered out of progress reports to senior managers? • If external consultants are used. and Project Manager and/or project team? • Has sufficient resourcing.g. which can benefit those fulfilling the requisite roles? • Are the major risks identified. including an allowance for risk? • Do we have adequate approaches for estimating. weighted and treated by the SRO. is there access to expertise. if changing circumstances mean that the business benefits are no longer achievable or no longer represent value for money? • Is there a business continuity plan in the event of the project delivering late or failing to deliver at all? 38 .A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh • Is there a skilled and experienced project team with clearly defined roles and responsibilities? If not. In IT-enable projects)? Has sufficient time been built-in to allow for planning applications in property & Construction projects for example? • Have we done our best to keep delivery timescales short so that change during development is avoided? • Have enough review points been built-in so that the project can be stopped. financial and otherwise. • • Has the approach been tested to ensure it is not 'big-bang’ (e. the Director.

Evaluation of proposals driven by initial price rather than long term value for money (especially securing delivery of business benefits. taking account of capital. 39 . • Have we tested that the supply industry understands our approach and agrees that it is achievable? • • • Have we asked suppliers to state any assumptions they are making against their proposals? Have we checked that the project will attract sufficient competitive interest? Are senior management sufficiently engaged with the industry to be able to assess supplyside risks? • Do we have a clear strategy for engaging with the industry or are we making sourcing decisions on a piecemeal basis? • Are the processes in place to ensure that all parties have a clear understanding of their roles and responsibilities. Lack of effective project team integration between clients.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh 6. key terms and deadlines? • Do we understand the dynamics of industry to determine whether our acquisition requirements can be met. Lack of understanding of. the supplier team and the supply chain. and a shared understanding of desired outcomes. given potentially competing pressures in other sectors of the economy? 8.) • Is the evaluation based on whole-life value for money. maintenance and service costs? • Do we have a proposed evaluation approach that allows us to balance financial factors against quality and security of delivery? • • Does the evaluation approach take account of business criticality and affordability? Is the evaluation approach business driven? 7. and contact with the supply industry at senior levels in the organization.

40 .A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh • Has a market evaluation been undertaken to test market responsiveness to the requirements being sought? • • Are the procurement routes that allow integration of the project team being used? Is there early supplier involvement to help determine and validate what outputs and outcomes are sought for the project? • • Has a shared risk register been established? Have arrangements tor sharing efficiency gains throughout the supply team been established? Finally if the answers to the above questions are unsatisfactory. projects should not be allowed to proceed until the appropriate assurances are obtained.

00 Findings of the Report: - • Project appraisal & management both analyses based in term of cost and time but in Bangladesh most projects can’t maintain cost & time matters properly in the particular project.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh Chapter – 3 Findings of the Study 3. 41 .

the people who handle the project have no idea and not adequate for the project. • Project appraisal need estimate some significant forecast about cost function of the project but in most case accurate estimates not possible for necessary data that’s why no true picture could be found. • Finally all the projects that have the following problem may abandon the project & some case they need huge fund to solve the project problem or reinvestment in the project. ultimately project is misled. then the findings of the data are not properly applied • In most case. • In some project where the project leader is selected accurately but the project team member not coordinate properly.A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh • In Bangladesh some appraisal are adequate for such project but unable to analysis indepth because of dependable data. • If the necessary data are available. 42 .

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