CHAPTER –TWO -

• THE PROJECT CYCLE

There tends to be a natural sequence in the way projects are planned and carried out. Before any
project is actually realized it goes through various planning phases. Therefore, the different
phase through which a project passes constitutes what is often called “the project cycle”. The
main features of this process are information gathering, analysis and decision-making.

2.1. Project Life Cycle Model

A project life cycle is a sequence of stages which a project follows. These stages or phases can be
divided into several equally valid ways, depending on the executing agency or parties involved.

For instance, the Baum Cycle /1970/ (also called World Bank Approach), is perhaps the first
project cycle model, indicates different phases of project cycle such as: Identification,
Preparation, Appraisal and Selection, Implementation, and Evaluation.
On the other hand, the UNIDO approach of project cycle follows three distinct phases. These
are: The Pre-investment, The investment, and the Operational phases.

Similarly, Development Project Study Authority (DEPSA) guideline to project planning in

Ethiopia (1990), indicated three distinct phases: Pre-investment, Investment, and Operation
phases, which in turn reclassified in six phases. These are: Identification, Preparation, Appraisal
and Selection, Implementation, Operation, and Ex-Post Evaluation.

In any case, each phase (stages) has its own needs and characteristics. This project cycle is a
self renewing cycle in that the new projects may grow out of the old ones in a continuous process
and self sustaining cycle of activity. As the project passes through these phases, the cumulative
amount of expended resources and time increase and unexpired time and resources will diminish.
So, this series of plans through phases is known as PROJECT LIFE CYCLE.

The project cycle considers various stages in which each stage not only is grown out of the
proceeding ones, but also leads into the subsequent ones. The planning process does not contain
such a stringent sequence of events since all aspects of the project have to be considered
simultaneously and, if necessary, adjusted to one another.

Therefore, projects cycle is a self – renewing cycle in that new projects may grow out of the old
ones in a continuous process and self – sustaining cycle of activity.

As is in the case with aspects of project analysis, there are many equally valid ways in which the
project cycle may be divided. There are various models that deal with the project cycle.
However, here we give more emphasis on the Basic Models – The Baum’s cycle and other
models suck as DEPSA’s and UNIDO project cycle.

2.1.1. The Baum Cycle (World Bank Procedures)

Project with the characteristics already outlined above typically run through at least several
separable stages of activity which can be thought of as constituting a definite sequence that some
author’s /institutions/ have called a project cycle.

The first basic model of a project cycle is that of Baum (1970), which has been adopted by the
World Bank and initially recognized four main stages, namely.
• Identification
• Preparation
• Appraisal and Selection
• Implementation
At a later stage (in 1978) the author has added an additional stage called “Evaluation” which
usually closes the cycle as it gives rise to the identification of new projects. Thus making the
stages five in number.
These processes can usefully be considered as a comprehensive sequence in the sense that for the
project that is implemented, each stage naturally follows the proceeding one and leads on to the
next. Actually, the division into stages is artificial, but it helps us to understand that project
planning, though a continuous process over time, has distinct phases and stages.
Throughout the project cycle the primary preoccupation of the analyst is to consider alternatives,
evaluate them, and to make decisions as to which of them should be advanced to the next stage.
Thus, each of Baum’s main stages are discussed briefly below
2.1.1.1. Identification
The first stage in the cycle is to find potential projects. Some sources of projects are given here.
• Some may be “resource based” and stem from the opportunity to make profitable use of
available resources.
• Some projects may be “market based” arising from an identified demand in home or
overseas markets.
• Others may be “need-based” where the purpose is to try to make available to all people
in an area of minimal amounts of certain basic material requirements and services.
• Well – informed technical specialists and local leaders are also common sources of
projects. Technical specialists will have identified many areas where they feel new
investment might be profitable, while local leaders may have suggestion about where
investment might be carried out.
• Ideas for new projects also come from proposals to extend existing programs.
In general, most projects start as an elementary idea. Eventually, some simple ideas are
elaborated into a form to which the title “project” can be formally applied.
2.1.1.2. Preparation (Pre – Feasibility and Feasibility Studies)
Once projects have been identified, there begins a process of progressively more detailed
preparation and analysis of project plans. At this stage the project is being seriously considered
as a definite investment action.

Project preparation (project formulation) covers the establishment of technical, economic and
financial feasibility. Decisions have to be made on the scope of the project, location and site, soil
and hydrological requirements, project size (farm or factory size) etc

Resource base investigations are undertaken and alternative forms of projects are explored.
Complete technical specifications of distinct proposals accompanied by full details of financial
and economic costs and benefits are the out come of the project preparation stage. The project
now exists as a set of tangible proposals.
Project design and formulation is an area in which local and international consultants are very
active especially for big project that cover large areas and have big budgets.
2.1.1.3. Appraisal
After a project has been prepared, it is generally appropriate for a critical review or an
independent appraisal to be conducted. This provides an opportunity to re-examine every aspect
of the project plan to assess whether the proposal is appropriate and sound before large sums are
committed.

Generally, internal government staffs only are used for this work and not consultants and projects
are appraised both in the field and at the desk level. Appraisals should cover at least seven
aspects of a project, each of which must have been given special consideration during the project
preparation phase:

• Technical – here the appraisals concentrate in verifying whether what is proposed will
work in the way suggested or not.
• Financial – the appraisals try to see if the requirements for money needed by the project
have been calculated property, their sources are all identified, and reasonable plans for
their repayment are made where necessary.
• Commercial – the way the necessary inputs for the project are conceived to be supplied
is examined and the arrangements for the disposal of the products are verified.
• Incentive – the appraisals see to it whether things are arranged in such a way that all
those whose participation is required will find it in their interest to take part in the
project, at least to the extent envisaged in the plan.
• Economic – the appraisal here tries to see whether what is proposed is good from the
 viewpoint of the national economic development interest when all project effects
(positive and negative) are taken into account and check if all are correctly valued.
• Managerial – this aspect of the appraisal examines if the capacity exists for operating
the project and see if those responsible ones can operate it satisfactorily. Moreover, it
tries to see if the responsible are given sufficient power and scope to do what is required.
• Organizational – the appraisal examines the project if it is organized internally and
externally into units, contract policy institution, etc so as to allow the proposals to be
carried out properly and to allow for change as the project develops.

These issues are the subjects of specialized appraisal report. And on the basis of this report,
financial decisions are made – whether to go ahead with the project or not. In practice, there can
be quite a sequence of project selection decisions. Following appraisal, some projects may be
discarded.

If the project involves loan finance, the lender will almost certainly wish to carry out his own
appraisal before completing negotiations with the borrower. Comments made at the appraisal
stage frequently give rise to alterations in the project plan (project proposal)
2.1.1.4. Implementation
The objective of any effort in project planning and analysis clearly is to have a project that can
be implemented to the benefit of the society. Thus, implementation is perhaps the most
important part of the project cycle.

In this stage, funds are actually disbursed to get the project started and keep running. A major
priority during this stage 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.

Frequently original proposals are modified, though usually only with difficulty, because of the
need to get agreement between the parties involved.
It is during implementation that many of the real problems of projects are first identified.
Because of this, the feedback effect on the discovery and design of new projects and the
deficiencies in the capabilities of the project actor can be revealed.

Therefore, to allow the management to become aware of the difficulties that might arise,
recording, monitoring and progress reporting are important activities during the
implementation stage. There are some aspects of implementation that are of particular relevance
to project planning and analysis.
• The first is that the better and more realistic a project plan is, the more likely it is that
the plan can be carried out and the expected benefit realized. This emphasizes once
again the need for careful attention to each aspect of project planning and analysis.
• The second is that project implementation must be flexible. Circumstances will
change and project managers must be able to respond intelligently to these changes.
The common ones are technical changes (soils, water logging, nitrogen application) price
changes economic changes, political changes and these will alter the ways in which it should be
implemented.
2.1.1.5. Evaluation
The final phase in the project cycle is evaluation. Once a project has been carried out, it is often
useful, (though not always done) to look back over what took place, to compare actual progress
with the plans, and to judge whether the decisions and actions taken were responsible and useful.

The extent to which the objectives of a project are being realized provides the primary criterion
for an evaluation. The analyst looks systematically at the elements of success and failure in the
project experience to learn how better to plan for the future.

Evaluation is not limited only to completed projects. It is a most important managerial tool in
ongoing projects and rather formalized evaluation may take place at several times in the life of a
project.
Evaluation may be undertaken when the project is in trouble, as the first step in a re-planning
effort. Careful evaluation should precede any effort to plan follow – up projects. And, finally,
evaluation should be undertaken when a project is terminated or is well into routine operation.
Many different people may do evaluation.
• Project management will be continuously evaluating its experience as implementation
proceeds.
• The sponsoring agency, perhaps the operating ministry, the planning agency or an
external assistance agency – may undertake evaluation.
• In large and innovative projects, the project’s administrative structure may provide a
separate evaluation unit responsible for monitoring the projects implementation and for
bringing problems to the attention of the projects’ management.

Evaluation can help not only in the management of the project after the initial phase, but will
also help in the planning of future projects.
Experience with one project can give rise to new ideas for extension of the project, repetition, the
need for “vertically” associated projects, which supply, inputs to or process products from this
project, and other ideas which become the seeds or new project proposals.

2.1.2. DEPSA’s Project Cycle

There are various ways in which the project cycle may be viewed and portrayed depending on
the purpose, emphasis and detail required to illustrate.
According to the Guidelines to project planning in Ethiopia (1990) of Development Project
Studies Authority (DEPSA), the project cycle comprises three major phases.
• Pre – investment
• Investment and
• Operation
Each of these three phases may be divided into stages. The Guidelines has divided the Project
cycle into six stages

• Identification
• Preparation
• Appraisal/decision
• Implementation
• Operation
• Ex-post evaluation

PROJECT CYCLE
INVESTMENT
OPERATION
4.1 TENDERING

NEGOTIATION &
CONTRACTUAL
3APPRAISAL

PRE-INVESTMENT
4. IMPLEMENTAION
5. OPERATION

6. EX-POST
EVALUATION
1. IDENTIFICATION
2.1 PRE-FEASIBILITY
 STUDY
2.2 FEASIBILITY
STUDY
3.2 DECISION
4.2 DETAILED
ENGINEERING
DESIGN
4.3 CONSTRUCTION
ERECTION &

COMMISSIONING
2. PREPARATION
(FORMULATION)
3.1 APPRAISAL

The pre – investment phase consists of the first–three stages, the investment phase includes the
fourth stage and the operation phase covers the last two stages.

The project cycle means the various stages of information gathering and decision-making, which
take place between a project’s inception and completion.

In reality, these are somewhat artificial, but do serve to emphasis the need to think of project
planning as a process of decision-making taking place over time. Broadly speaking, what is
important about this process is that it should begin with the identification of a number of
alternatives, suing existing information and gathering new data in such a way as to limit
alternatives under consideration to those few, which are most promising.

Throughout the project cycle the primary preoccupation of the analyst is to consider alternatives,
evaluate them, and to make decisions as to which of them should be advanced to the next stage.

In short, the project planning process is essentially one of eliminating and the planner naturally
hopes that the best alternative will emerge.
In this process:
• The results (output) of a given stage serve as the input or part of the input of the next
stage, if it is decided to proceed to the next stage.
• The output or part of the output of one stage may be used as new input (feedback) to
reconsider or revise, where necessary, the result of a proceeding stages and
• Most importantly, the results of the implementation, operation and ex-post evaluation
stages of a project constitute valuable experience for the preparation of subsequent
projects provided these inputs are systematically documented and analyzed.
2.1.1.3. UNIDO – Project Cycle
UNIDO has established a project cycle comprising three distinct phases.
• The pre – investment
• The investment and
• The operational phases

Each of these three phases is divided into stages, some of which constitute important
consultancy, engineering and industrial activities.

Increasing importance should be attached to the pre – investment phase as a central point of
attention, because the success or failure of an industrial project ultimately depends on the
marketing, technical, financial and economic findings and their interpretation, especially in the
feasibility study.

To reduce wastage of scarce resources, a clear comprehension of the sequence of events is

required when developing an investment proposal from the conceptual stage by way of active
promotional efforts to the operational stage.
2.3.1. The Pre – Investment Phase
According to the UNIDO Manual, the pre – investment phase comprises several stages:
• Identification of investment opportunities (opportunity studies).
• Analysis of project alternatives and preliminary project selection as well as project
preparation (pre – feasibility, and feasibility studies) and
• Project appraisal and investment decision (appraisal repot)

Support or functional studies are also a part of the project preparation stage and are usually
conducted separately, for later incorporation in a pre – feasibility study or feasibility study as
appropriate.

Though it is easier to grasp the scope of an opportunity study, it is not an easy task to
differentiate between a pre – feasibility and a feasibility study in view of the frequently
inaccurate use of these terms.
The division of the pre – investment phase into stages avoids proceeding directly from the
project idea to the final feasibility study without examining the project idea step by step or being
able to present alternative solutions. This cuts out many feasibility studies that would have little
chance of reaching the investment phase.
And finally it ensures that the project appraisal to be made by national or international financing
institution becomes an easier task when based on well – prepared studies.
All too often project appraisal actually amounts to project preparation, given the low quality of
the feasibility study submitted.
A. Opportunity Studies: The identification of investment opportunities is the starting –
point in a series of investment – related activities, when potential investors (private or public) are
interested in obtaining information on newly identified viable investment opportunities.
The main instrument used to quantify the parameters, information and data required to develop a
project idea into a proposal is the opportunity study, which should analyses.
• Natural resources
• The existing agriculture (basis for agro industry)
• Future demand for consumer goods.
• Imports substitution and export possibilities
• Environmental impact
• Expansions of existing capacity
• Manufacturing sectors (successful in other countries)
• Diversification
Opportunity studies are rather sketch in nature and rely more on aggregate estimates than on
detailed analysis. Opportunity studies could be general or specific.
General opportunity studies (sector approach) could be area studies designed to identify
opportunities on a given area (Administrative province, backward region), industry studies to
identify opportunities in delimited industrial branch and resource – based studies to reveal
opportunities based on the utilization of natural, agricultural or industrial.

Specific project opportunity studies (enterprise approach) are seen in the form of products with
potential for domestic manufacture. A specific project opportunity study may be defined as the
transformation of a project idea into a broad investment proposition.

A project opportunity study should not involve any substantial cost in its preparation, as it is
intended primarily to highlight the principal investment aspect of a possible industrial
proposition. The purpose of opportunity study is to arrive at a quick and inexpensive
determination of salient facts of an investment possibility.
B) Pre – feasibility studies: The project idea must be elaborated in a more detailed study.
However, formulation of a feasibility study that enables a definite decision to be made on the
project is a costly and time – consuming task. Therefore, before assigning larger funds for such a
study, a further assessment of the project idea might be made in a pre-feasibility study. This is to
see if:
• All possible project alternatives are examined
• The project concept justifies detail study
• All aspects are critical and need in – depth investigation
• The project idea is viable and attractive or not
A pre – feasibility study should be viewed as an intermediate stage between a project opportunity
study and a detailed feasibility study, the difference being in the degree of detail of the
information obtained and the intensity with which project alternative are discussed.

The structure of a pre – feasibility study should be the same as that of a detailed feasibility
study.
C) Support (functional) studies: Support or functional studies cover aspects of an investment
project, and are required as prerequisites for, or in support of, pre – feasibility and feasibility
studies, particularly large – scale investment proposals.
This may include:
• Market studies of products
• Raw material and factory supply studies
• Laboratory and pilot plant tests
• Location studies
• Environmental impact assessment
• Economics of scale studies
• Equipment selection studies

The contents of a support study vary, depending on its type and nature of the projects. However,
as it relates to a vital aspect of the project, the conclusions could be clear enough to give
directions to the subsequent stage of project preparation. In most cases a support study when
undertaken either before or together with a feasibility study, form an integral part of the latter
and lessen its burden and cost.
D) Feasibility Studies: A feasibility study should provide all data necessary for an investment
decision. The commercial, technical, financial, economic and environment prerequisites for
an investment project should therefore be defined and critically examined on the basis of
alternative solutions already reviewed in the pre – feasibility study.

The results of these efforts is then a project whose background conditions and aims have been
clearly defined in terms of its control objective and possible marketing strategies, the possible
market shares that can be achieved, the corresponding production capacities, the plant location,
existing raw materials, appropriate technology and mechanical equipment and, if required, an
environmental impact assessment.

The financial part of the study covers the scope of the investment, including the net working
capital, the production and marketing costs, sales revenue and the return on capital invested.

Final estimates on investment and production costs and its subsequent calculations of financial
and economic profitability are only meaningful if the scope of the project is defined
unequivocally in order not to omit any essential part and its related cost.

There is no uniform approach or pattern to cover all industrial projects of whatever type, size or
category. The emphasis on the components varies from project to project. For most industrial
projects, however, there is a broad format of general application – bearing in mind that the larger
the project the more complex will be the information required.

Although feasibility studies are similar in content to pre – feasibility studies, the industrial
investment project must be worked out with the greatest accuracy in an iterative optimization
process, with feedback and interlink ages, including the identification of commercial, technical
and entrepreneurial risks.

The sensitive parameters such as the size of the market, the production program or the
mechanical equipment selected should be examined more closely.
A feasibility study should be carried out only if the necessary financing facilities, as determined
by the studies, can be identified with a fair degree of accuracy. There would be little sense in a
feasibility study without the reliable assurance that, in the event of positive study findings, funds
could be made available. For that reason, possible project financing must be considered as early
as the feasibility study stage, because financing conditions have a direct effect on total costs and
thus on the financial feasibility of the project.
E) Appraisal Report: When a feasibility study is completed the various parties will carry out
their own appraisal of the investment project in accordance with their individual objectives
and evaluation of expected risks costs and gain.

Large investment and development finance institutions have formalized project appraisal
procedures and usually prepare an appraisal report. This is the reason why project appraisal
should be considered an independent stage of the pre – investment phase, marked by the final
investment and financing decisions taken by the project promoters.

The appraisal report will prove whether the pre – production expenditures spent since the
initiation of the project idea were well spent or not.

Project appraisal as carried out by financial institutions concentrates on the health of the
company to be financed, the returns to be obtained by equity holders and the protection of its
creditors.

The techniques applied to appraise projects in line with these criteria center around technical,
commercial, market, managerial, organizational, and financial and possibly also economic
aspects.
2.3.2. The investment/implementation Phase
The investment or implementation phase of a project provides wide scope for consultancy and
engineering work, first and foremost in the field of project management.
The investment phase can be divided into the following stages:
• Establishing the legal, financial and organizational, including tendering, evaluation of
bids and negotiations.
• Technology acquisition and transfer.
• Detailed engineering design and contract, including tendering, evaluation of bids and
negotiations.
• Acquisition of land, construction work and installation.
• Pre – production marketing, including the securing of suppliers and setting up the
administration of the firm.
• Recruitment and training of personnel.
• Plant commissioning and start – up.

Detailed engineering design comprises preparatory work for site preparation, the final selection
of construction planning and time – scheduling of factory construction, as well as the preparation
of flow charts, scale drawing and a wide variety of layouts.
During the stage of tendering and evaluation of bids it is especially important to receive
comprehensive tenders for goods and services for the project from a sufficiently large number of
national and international supplies of proven efficiency and with good delivery capacity.
Negotiations and contracting are concerned with the legal obligations arising from the
acquisition of technology the construction of buildings, the purchase and installation of
machinery and equipment and financing. This stage covers the signing of contracts between the
investor or entrepreneur, on the one hand, and the financing institutions, consultants, architects
and suppliers of raw materials and required inputs, on the other.
The construction stage involves site preparation, construction of buildings and other civil works,
together with the erection and installation of equipment in accordance with proper programming
and scheduling.

The personnel recruitment and training stage, which should proceed simultaneously with the
construction stage, may prove very crucial for the expected growth of productivity and efficiency
in plant operations.

Of particular relevance is the timely initiation of marketing arrangements to prepare the market
for the new products (pre – production marketing) and secure critical supplies (supply
marketing).
Plant commissioning and start up is usually a brief but technically critical span in project
implementation. It links the proceeding construction phase and the following operational
(production) phase.

In general, it is to be noted that in the pre – investment phase, the quality and dependability of
the project are more important than the time factor, while in the investment phase, the time factor
is more critical in order to keep the project within the forecast made in the feasibility study.

2.3.3. The Operational Phase

The problem of the operational phase needs to be considered from both a short – and a long –
term viewpoint
The short – term view relates to the initial after commencement of production when a number of
problems may arise concerning such matters as the applications of production techniques,
operation of equipment or inadequate labour productivity owing to a lack of qualified staff and
labour. Most of these problems have their origin in the implementation phase.
The long – term view relates to chosen strategies and the associated production and marketing
costs as well as sales revenues. These have a direct relationship with the projections made at the
pre – investment phase. If such strategies and projection prove faulty, any remedial measures
will not only be difficult but may prove highly expensive.

The given outline of the investment and operational phases of an industrial project is
undoubtedly an oversimplification for many projects, and, in fact, certain other aspects maybe
revealed that even greater short or long term impacts.

Acceptation
Investment
Phase
Ex-Post
Evaluation
Rejection
Opportunity
Study
Operating
Phase
Economic
Analysis
Financial Analysis
Reformulation of
The Project
Project Conception
Pre-Feasibility
Study
Techno-Economic
Analysis
(Technical and Market Analysis)
2.2. Major Phases of Project Life Cycle
A project cycle is a sequence of events, which a project follows. These events, stages or phases
can be divided into several equally valid ways, depending on the executing agency or parties
involved. Some of these stages may overlap. Capital expenditure decision is a complex decision
process, which may be divided into six broad phases:
1. Identification
2. Pre-feasibility Study
3. Feasibility (technical, financial, economic)
4. Selection and project design
5. Implementation
6. Ex-post evaluation

To be able the project to become successful, each phase must be properly planned and managed.
Though some of the stages may overlap, the following stages can be identified for our discussion
purposes as been indicated in chart 1.2 below.

Chart 1.2: Project Life Cycle States

Project Identification
Preparation
Evaluation
(Ex-Post)

Appraisal and
Selection

Monitoring and
Reporting

                                                                                                
Implementation Negotiation and
 Financing

• Identification
The first stage in the project cycle is to find potential projects. Identification of promising
investment opportunities requires imagination, sensitivity to environmental changes, and a
realistic assessment of what the firm can do. This phase may take two forms. If the project is
largely a private venture in a widely market economy context the initiating entity will define the
concept, expectation and objectives of the project. On the other hand the project idea can also
emanate form government agencies in the context of government development plans. In the latter
case sect oral information (i.e. the direct and indirect demands of sectors) is an important source
of identification. In market economy context anticipated demand for the projects output is
important. In addition assessment of appropriate technology, scale of the project, timing of the
project etc. are important. All types of specialists’ input are required at this stage.
The search for promising project ideas is the first step towards establishing a successful venture.
The key to success lies in getting into the right business at the right time. The objective is to
identify investment opportunities, which are prima facie feasible and promising and which merit
further examination and appraisal. At this stage, an idea regarding a required intervention in a
specific area to address identified problems is formed or developed. This idea is usually hatched
through discussion by specialists and local leaders in a community as need-based on issues, and
crystallized into a proposal. The project can therefore be conceived on the basis of:

• Needs- to make available to all peoples in area minimum amounts of certain basic material
requirement or service. A needs assessment survey establishes the urgency for intervention.
• Market Demand- Considering the existing and potential of domestic (local) and/or
overseas (international) market.
• Resource Availability-opportunity to make profitable use of available resources
• Technology- to make use of available technology
• Natural calamity- hedging against the adverse effect of natural events such as drought or
floods, and
• Political considerations.

Project identification consists in finding projects, which could contribute towards achieving
specified development objectives. In principle, project identification should be an integral part
of the macro – planning exercise, with sectoral information and strategies as the main source of
project ideas.

In practice, however, projects do not always derive from national and sectoral plans. Instead,
they may originate from several sources. Irrespective of their origin, project ideas should, in
general, aim at overcoming constraints on the national development effort, be the material,
human or institutional constraints, or at meeting unsatisfied needs, and demand for goods and
services.

Constraints, needs and demand should be interpreted broadly to include, for example, foreign
exchange constraints that might indicate the need to undertake projects for export promotion or
import substitution.

A good project ideas- the key to success-are elusive. So a wide variety of sources should be
tapped to identify them. In general, one can distinguish two levels where project ideas are born:
The macro – level and the micro – level.

1) At macro-level, Project ideas might be obtained from sources some of which are
mentioned below:

• Project Idea from Government Policy and Plan

From time to time, governments produce guidelines such as the national development plans,
session papers which spell out the direction of what the government is likely to do to achieve
certain targets in various sectors of the economy and guidelines to various organizations and
individuals. The information contained in these documents is useful in generating ideas for new
projects. For example, if government intends to start a number of new schools in a given area,
then a number of projects which are related to the requirements of such schools would be
considered.

Most governments in the world are moving away from directly initiating and implements new
projects. The emphasis is on local participation of the people in all development matters. Hence,
project idea can be obtained from government development plan documents such as:
• National policies, strategies and priorities as may be articulated by government from time
to time;
• National, sectoral, sub – sectoral, or regional plans and strategies supplemented by special
studies, sometimes called opportunity studies, conducted with the explicit aim of
translation of national and sectoral, sub– sectoral and regional programs into specific
projects;
• General surveys, resource potential surveys, regional studies, master plan and statistical
publications, which indicate directly or indirectly investment opportunities.
• Government decision to correct social and regional inequalities or to satisfy basic needs of
the people through development projects.
• Government decisions to create project-implementing capacity in such areas as
construction industry, tourism industry, textile industries etc.

For instance government may issue session paper for Industrial Transformation by indicating
issues as indicated in the following table
Criteria Industry Characteristics
• Employment Labor intensive
• Technology Low and medium technology
• Market availability Export oriented
• Input availability Indigenous resources

Sector Immediate Promotion Short Horizon

Agriculture Cotton, sisal and textiles Industrial and edible
skins, hides and leather vegetables oils, papers and
horticultural produce, fish others
sugar, coffee and tea
Building and construction Bricks manufacture Cement
Glass Ceramics timber
Tools and Furniture
Others Tourism and the like

Information contained in such types of session papers provide clear guidelines to individuals or
organizations who wish to start industrial projects, especially small and medium sized ones and
would like to be supported by the government and other national institutions. However,
individual and institutions that are using government policy guidelines as a source for project
ideas must make sure that they operate within the overall national policy framework as contained
in the relevant documents.

B) At macro-Level, project idea can also be obtained from other sources such as general
surveys, resource potential surveys; Constraints on the development process due to shortage of
essential infrastructure facilities, problems in the balance of payments; a possible external threat
that necessitates projects aiming at achieving, for example, self – sufficiency in basic material,
energy, transportation; unusual events such as droughts, floods, earth – quakes, hostilities;
multilateral or bilateral development agencies and as a result of regional or international
agreements in which the country participate and so on.

2) At micro-level Project Ideas could be obtained from various sources among which      are
some are mentioned below.

• Analyze the Performance of Existing Industries- a study of existing industries in terms

of their profitability and capacity utilization can indicate promising investment
opportunities- which are profitable and relatively risk-free. An examination of capacity
utilization of various industries provides information about the potential for further
investment. Such a study becomes more useful if it is done region wise, particularly for
products which have high transportations.

• Examine the Input-Outputs of Various Industries-the analysis of the inputs required for
various industries may throw up project ideas. Opportunities exists when (i) materials,
purchased parts, or supplies are presently being procured from distant sources with
considerable time lag and transportation cost, and (ii) several firms produce internally
some components/ parts which can be supplied at a lower cost by a single manufacture
who can enjoy economies of scale. Similarly a study of the output of the existing
industries may reveal opportunities for adding value through further processing at the
main outputs by products, as well as waste products.

• Review Import and Export- Analysis of import statistics for a period of five to seven
years is helpful in understanding the trend of imports of various goods and the potential
for import substitution. Indigenous manufacture of goods currently imported is
advantageous for several reasons: (i) it improves the balance of payments situation, (ii) it
generates employment, and (iii) it provides a market for the supporting industries and
services. Likewise, an examination of export statistics is useful in learning about the
export possibilities of various products.

• Investigate Local Materials and Resources- A search for project ideas may begin with an
investigation into local resources and skills. Various ways of adding value to locally
available materials may be examined. Similarly, the skills of local artisans may suggest
products that might be profitably produced and marketed. Such assessment may consider
issues such as the human and material resources, infrastructural facilities, and market for
various products.

• Analyzing Economic and Social Changes- A study of economic and social trends is
helpful in projecting demands for various goods and services. Changing economic
conditions and consumer preferences provide new business opportunities. For example a
greater awareness of the value of time is dawning on the public. Hence, the demand for
time-saving products like prepared food items, ovens, and powered vehicles has been
increasing. Another change that can be seen is the increasing desire for leisure and
 recreational activities. This has caused a growth in the market for recreational products
and services.

• Study New Technological Development- New products or new process and technologies
for existing products developed by research laboratories may be examined for profitable
commercialization.

• Draw Clue from Consumption Abroad- Entrepreneurs willing to take higher risks may
identify projects for the manufacture of products or supply of services which are new to
the country but extensively used abroad. Automatic vending machines, entrainment
parks, and fast food restaurants are examples of projects belonging to this category.

• Explore the Possibility of Reviving Sick Units - Industrial sickness is rampant in many
countries. There are innumerable units which have been characterized as sick. These units
are either closed or face the prospect of closure. A significant proportion of sick units,
however, can be nursed back to health by sound management, infusion of further capital,
and provision of complementary inputs. Hence, there is a fairly good scope for
investment in this area. Such investments typically have a shorter gestation period
because one does not have to begin from scratch. Indeed, in many cases marginal efforts
would suffice to revive such units.

• Identify Unfulfilled Psychological Needs- For well- established multi brand products
groups like bathing soap, detergents, cosmetics, and tooth past, the questions to be asked
is not whether there is an opportunity to manufacture something to satisfy an actual
physical need but whether, there are certain psychological needs of the consumers which
are presently unfulfilled. To find out whether such an opportunity exists, the technique of
spectrum analysis is useful. This analysis is done in the following manner (i) important
factors influencing brand choice are identified, (ii) Existing brands in the market are
positioned on a continuum in respect of the factors identified in step (i); (iii)Gaps which
exists in relation to consumer psychological needs are identified.

• Attend Trade Fairs- National and international trade fairs provide an excellent
opportunity to get to know about new products and developments.

• Stimulating Creativity for Generating New Product Line- New product ideas may be
generated by thinking along the following lines: Modification, rearrangements, Reversal,
Magnifications, Reductions, Substitutions, Adaptations and combinations.\

• Project ideas from Technical Specialists

For many industrial projects, ideas will usually tend to come from technical specialists
who by virtue of their experience and/or research findings will give useful information
which may lead to the manufacturing of new products or improving the existing products.

• Project Idea from Local Leaders

For community or social projects, local leaders will usually have important ideas, which
they, together with the local people, have identified as being important in improving the
welfare of the people. In the case of social projects, depending on which one is to
identify, there may be a number of other projects which are linked to the identified
project. For example, a project for constructing a dam for the generation of hydroelectric
power will bring about suggestions for the start of an irrigation project, a fishing project
and other related projects.
 • Project Ideas from Entrepreneurs

For commercial and industrial projects, entrepreneurship is an important source of ideas.

Entrepreneurship, according to Srivastava (1981), includes the characteristics of
perception of managerial competence and motivation to achieve results. Although
entrepreneurship skill have been passed on from one generation to another, along family
and social-economic circles, it has been recognized that programmes for entrepreneurship
development will help individuals to come up with useful ideas which can be translated
into viable projects.
The planning phase of a firm’s capital investment is concerned with the articulation of its broad
investment strategy and the generation and preliminary screening of project proposal. The
investment strategy of the firm delineates the broad areas or types of investment the firm plans to
undertake. This provides the framework, which shapes, guides, and circumscribes the
identification of individual project opportunities.

In general there are four major sources from which ideas or suggestions for project may come:
• Project ideas from technical specialists
• Project ideas from local leaders
• Project ideas from entrepreneurs
• Project ideas from government policy and plans
Note that sometimes at identification stage there could be a number of alternatives that could be
examined. Some of these projects may appear for reasons nothing to do with the national plan. In
such circumstances it’s advantageous to understand the ‘political history’ of the project.
The identification of project ideas is based on several aspects of development.
• Need - a need assessment survey may show the need for intervention
• Market demand - domestic or overseas
• Resource availability - opportunity to make available resources more profitable
• Technology - to make use of available technology
• Natural calamity - intervention against natural calamity such as flood or drought
• Political considerations
Possible alternative project must be adequately assessed.

• Project preparation and analysis phase

This stage involves a more thorough exercise of collection of data and information on the
proposed project. The exercise is conducted by personnel with technical and analytical skills in
consultation with the target and beneficiary community. Project preparation involves a great deal
of technical input by the types of specialists mentioned earlier. So, before launching into this
major undertaking, a preliminary analysis (often called a pre-feasibility study) is in order. The
objective of such a study is to gain sufficient knowledge about the project in a relatively short-
time to learn if it has a reasonable chance for success. For projects passing the pre-feasibility test,
the specific types and amounts of costs and benefits must then be evaluated. This process
requires detailed consideration of alternative project purposes, overall approaches, functions
designs, and operating methods. With these types of information at hand, the project is ready for
the evaluation phase.
The project preparation contains the design of a set of operational proposals that are technically,
financially and economically feasible. Decisions are made on the scope of the project, location,
site, and size among other things. Inline with these, several other factors are considered. This
includes:
• What items should the project produce and in what quantities?;
• Where and how will the items be sold?;
• What type of design is appropriate?;
• Where should the project be located?;
• When and how should the facilities be built or improvements carried out?;
• What methods of operations, maintenance, and repair are the best?;
• What type of technical and management assistance is needed?;
General procedures for evaluating the economic efficiency of these various considerations are
the same as that for evaluating the overall project, which is taken up next. However, the detail of
a feasibility study depends on the complexity of the project and on how much is already known
about the proposals. In fact, a succession of increasingly detailed feasibility studies is sometimes
called for in complex projects. The feasibility studies provide an opportunity to shape the project
to fit its physical and social environments and exclude relatively poor alternative ways of
achieving the project goal.
Once project ideas have been identified the process of project preparation and analysis starts.
Project preparation must cover the full range of technical, institutional, economic, and financial
conditions necessary to achieve the project’s objective. Critical element of project preparation is
identifying and comparing technical and institutional alternatives for achieving the project’s
objectives. Different alternatives may be available and therefore, resource endowment (labor or
capital) would have to be considered in the preparation of projects. Preparation thus require
feasibility studies that identify and prepare preliminary designs of technical and institutional
alternatives, compare their costs and benefits, and investigate in more details the more promising
alternatives until the most satisfactory solution is finally worked out. It involves generally two
steps:
• Pre-feasibility studies
• Feasibility studies

• Pre-feasibility Study
The identification process will give the background information for defining the basic concept of
the project, which leads to the feasibility study stage. Once a project proposal is identified, it
needs to be examined. To begin with, a preliminary project analysis is done. A prelude to the full
blown feasibility study, this exercise is meant to assess (i) whether the project is prima facie
worthwhile to justify a feasibility study and (ii) what aspects of the project are critical to its
variability and hence warrant an in-depth investigation. At the pre-feasibility study stage the
analyst obtains approximate valuation of the major components of the projects costs and benefits.
Some of the main components examined during the pre-feasibility study include:
• Availability of adequate market
• Project growth potential
• Investment costs, operational cost and distribution costs
• Demand and supply factors; and
• Social and environmental considerations
Using this preliminary data supplied by the various discipline specialists a preliminary financial
and economic analysis will be conducted. If the project appear viable form this preliminary
assessment the analysis will be carried to the feasibly stage.

2.2.2.2. Feasibility Study

The major difference between the pre-feasibility and feasibility studies is the amount of work
required in order to determine whether a project is likely to be viable or not. If the preliminary
screening suggests that the project is prima facie worthwhile, a detailed an analysis of the
marketing, technical, financial, economic, and ecological aspects will is undertaken. The focus of
this phase of capital budgeting is on gathering, preparing, and summarizing relevant information
about various project proposals, which are being considered for inclusion in the capital
investment. Based on the information developed in this analysis, the stream of costs and benefits
associated with the project can be defined. At this stage a team of specialists (Scientists,
engineers, economists, sociologists) will need to work together. At this stage more accurate data
need to be obtained and if the project is viable it should proceed to the project design stage.
The final product of this stage is a feasibility report. The feasibility report should contain the
following elements:
• Market analysis
• Technical analysis
• Organizational analysis
• Financial analysis
• Economic analysis
• Social analysis, and
• Environmental analysis

2.2.3. Appraisal and Selection

Project Appraisal - is perhaps the best-known phase of project work ( in part, because it is the
culmination of preparatory work, provides a comprehensive review of all aspects of the project
and lays the foundation for implementing the project and evaluating it when completed. It
involves a further analysis of the proposed project. The systematic and comprehensive review is
usually undertaken by an independent team of experts in consultation with the stakeholders of
the project. The project is appraised in terms of relevancy, effectiveness, efficiency, feasibility
and sustainability issues. This provides an opportunity to re-examine every aspect of the project
plan to assess whether the proposal is justified before large sums of resources are being
committed. Usually, project appraisal covers major issues such as technical, institutional,
economic and financial aspects.

Technical Appraisal- in this case appraisal is made to ensure whether projects are soundly
designed, appropriately engineered, and follow accepted standards. The appraisal mission looks
into technical alternatives considered, solutions proposed, and expected results. More concretely,
technical appraisal is concerned with questions of physical scale, layout, and location of
facilities; what technology is to be used, including types of equipment or processes and their
appropriateness to local conditions; what approach will be followed for the provision of services;
how realistic implementations schedules are; and what the likelihood is of achieving expected
levels of output.

A critical part of technical appraisal is a review of the cost estimates and the engineering or other
data on which they are based to determine whether they are accurate within an acceptable margin
and whether allowances of physical contingencies and expected prices increased during
implementation are adequate. In addition, technical appraisal is concerned with estimating the
costs of operating project facilities and services and with the availability of necessary raw
materials or other inputs. The potential impact of the project on human and physical environment
is examined to make sure that any adverse effect will be controlled or minimized.

For instance, an appraisal of a typical family planning project, the technical appraisal might be
concerned with the number, design and location of maternal and child health clinics and the
appropriateness of the services offered to the needs of the populations being served; in highway
projects, with the width and pavement of the roads in relation to expected traffic and the trade-
offs between initial constructions costs and recurrent costs for maintenance, and between more
or less labor-intensive methods of constructions; in education projects, with whether the
proposed curriculum and the number of layout of classrooms, laboratories, and other facilities
are suited to the country’s educational needs.

Institutional Appraisal-in current terminology, “institutional building” has become perhaps the
most important purpose of financing a project by many agencies and financial institutions. This
means that the transfer of financial resources and the construction of physical facilities, however
valuable in their own right, are less important in the long run than the creation of a sound and
viable local “institution,” interpreted in its broadest sense to cover not only the borrowing entity
itself, its organizations, management, staffing, policies, and procedures but also the whole array
of government policies that conditions the environment in which the institutions operates.

Experience indicates that insufficient attention to the institutional aspects of a project leads to
problems during its implementations and operation. Institutional appraisal is concerned with a
host of questions such as whether the entity is properly organized and its management adequate
to do the job, whether local capabilities and initiatives are being used effectively, and whether
policy or institutional changes are required outside the entity to achieve project objectives.

Economic Appraisal- Through cost benefit analysis of alternative projects designs; the one that
contributes most to the development objectives of the country may be selected. This analysis is
normally done in successive stages during project preparation, but appraisal is the point at which
the final review and assessment are made. During economic appraisal, the project is studied in its
sectoral setting. The investment program for the sector, the strengths and weaknesses of public
and private sectoral institutions, and key government policies are all examined.

For instance, economic appraisal a typical transportation project perhaps consider the
transportation systems as a whole and its contributions to the country’s economic development; a
highway project appraisal may examines the relationship with competing modes of transports
such as railways. In agriculture, which is more diversified and accounts for a much larger share
of a developing country’s economic activity, it is more difficult to formulate a comprehensive
strategy for the sector; attention is given to sectoral issues such as land tenure, the adequacy of
incentives for farmers, marketing arrangements, availability of public services, and government
tax, pricing and subsidy policies.

In economic appraisal of a project, “Shadow Prices” are used when true economic values of
costs are not reflected in market prices as a result of various distortions, such as trade
restrictions, taxes, or subsidies. Whether qualitative or quantitative, the economic analysis of a
project always aims at assessing the contribution of the project to the development objectives of
the country.

Financial Appraisal- financial appraisal has several purposes. One is to ensure that there are
sufficient funds to cover the costs of implementing the project. For revenue producing projects,
financial appraisal is also concerned with financial viability ( i.e. will it be able to meet all its
financial obligations, including debt services; will it be able to generate enough funds from
internal resources to earn a reasonable rate of return on its assets and make a satisfactory
contribution to its future capital requirements?). The finances of enterprises are closely reviewed
through projections of the balance sheet, income statements, and cash flow statements.

Financial appraisal is also concerned with recovering investment and operating costs from
project beneficiaries. For instance, government may expect farmers to pay, over time and out of
their increased production, all of the operating costs and at least a substantial part of the capital
costs of, say an irrigation project.

Project Selection - after appraisal, the viable project proposals are chosen for implementation on
the basis of the priorities of the stakeholders and the available resources. For instance, Treasury
may impose a ceiling on the ministries with a big portfolio of investments, calling for
prioritizations of the core and lower priority projects.

The feasibility study would enable the project analyst to select the most likely project out of
several alternative projects. Selection follows, and often overlaps, analysis. It addresses the
question - is the project worthwhile? Wide ranges of appraisal criteria have been developed to
judge the worthwhile of a project. They are divided into two broad categories, viz., non-
discounting criteria and discounting criteria.

To apply the various appraisal criteria suitable cut off values (hurdle rate, target rate, and cost of
capital) have to be specified. The level of risk pursued influences these. Despite a wide range of
tools and techniques for risk analysis (sensitivity analysis, scenario analysis Monte carol
simulation, decision tree analysis, portfolio theory, capital asset pricing model, and so on), risk
analysis remains the most intractable part of the project evaluation exercise. This exercise also
involves the undertaking of detailed engineering design; manpower and administration
requirement as well as marketing procedures should be finalized.
• Negotiation and Financing
Funds for the project can come from a variety of sources. For donor funded projects, once the
project to be implemented is agreed on, discussions are held on funding and associated aspects of
funding such as conditionals for grants, repayment period, and interest rates of loans, flow of
funds, contributions from stakeholders and if there is co-financing or not. This culminates into an
Agreement Document for the project which binds all the parties involved during implementation
of the project. If investors are from the private sector, financial analysis from their point of view
is needed.

In any case, financial impacts of the project on government revenues, measures in local
currencies and foreign exchange, need to be investigated. Just as with economic analyses,
financial analyses should be carried out from both national and private points of view.
Funds for the project can come from a variety of sources. For donor funded projects, once
the project to be implemented is agreed on, discussions are held on funding and associated
aspects of funding such as conditionals for grants, repayment period, and interest rates of
loans, flow of funds, contributions from stakeholders and if there is co-financing or not.

• Project Implementation
This is the crucial stage of any project since the objective of the earlier effort in the stages above
was to have projects to be undertaken. At this stage, activities of the project are actually carried
out, and funds are disbursed to facilitate the activities. The management should ensure that the
project is carried out according to the design. However, depending on the physical and policy
environment, there may be need for flexibility in response to the reality on the ground.
Monitoring of progress and reporting, therefore, becomes crucial. Implementation is a process of
refinement, or learning from experience and can actually be considered as a “mini cycle” within
the larger project cycle.

Other activities included in the implementation phase are detailed engineering designing
(drawings, materials lists, material and contract specifications, and the like), engineering
supervision, land acquisitions, worker training, establishment of corporate and patent rights,
designing of water rates, and extension.

The implementation period usually has three phases: the investment period, the development
period, and the full development period. This forms the life of the project. The investment period
refers to when the major project investments are undertaken and could take one to three years,
depending on the nature of the project. The development period occurs as the production builds
up, while the full development is reached when the production peaks up and continues until the
project ends. Both financial and economic analyses of the project relate to the time horizon.

• funds are actually disbursed to get the project started and keep running
• At this stage, activities of the project are actually carried out, and funds are disbursed to
facilitate the activities.
• The management should ensure that the project is carried out according to the design
• Major activities of the implementation phase:-

After the project design is prepared negotiations with the funding organization starts and once
source of finance is secured implementation follows. Implementation is the most important part
of the project cycle. The better and more realistic the project plan is the more likely it is that the
plan can be carried out and the expected benefits realized. At the project implementation phase
tenders are let and contracts signed. Project implementation must be flexible since circumstances
change frequently. Technical changes are almost inevitable as the project progresses; price
changes may necessitate adjustments to input and output; political environment may change.
Project analysts generally divide the implementation phase into three time periods.
• The investment phase, where the major investments are made. This may extend from
three to five years.
• The development phase, which may also extend from three to five years.
• The project life
The implementation phase for an industrial project consists of several stages:
1. Project and engineering designs,
2. Negotiations and contracting,
3. Construction
4. Training, and
5. Plant commissioning.
Translating an investment proposal into a concrete project is a complex, time consuming and risk
fraught task. Delays in implementation, which are common, can lead to substantial cost overrun.
• Project Monitoring and Reporting
Monitoring is the periodic review of the project inputs, activities, and outputs undertaken during
implementation. It is an on-going activity during project implementation, and can be carried out
by the beneficiaries, the implementing staff, supervisory staff and the project management staff.
Monitoring includes the review of the procurement and delivery of inputs, the schedules of the
activities, and the extent of progress made in the production of outputs. Monitoring, therefore,
involves the process of collecting information about the actual project performance during
implementation.

The aim of monitoring should be ensuring that the activities of the project are being undertaken
on schedule to facilitate implementation as specified in the project design. The gap between
planned and actual performance/ any constraints in operational zing the design/ can quickly be
detected and corrective action be taken using various control strategies. This would enable the
management to be proactive rather than being reactive in correcting mistakes during
implementation. The channels of communication should also be clear and easy to allow
transparency and accountability for all staff involved. Thus, relevant actions, results and barriers
to implementation should be monitored for smooth implementation.

• Monitoring and Reporting: are we on target if not, what must be done? Should the plan
be changed?
• Monitoring is the periodic review of the project inputs, activities, and outputs undertaken
during implementation
• It is an on-going activity during project implementation, and can be carried out by the
beneficiaries, the implementing staff, supervisory staff and the project management staff.
Monitoring, therefore, involves the process of collecting information about the actual project
performance during implementation
 • The aim of monitoring should be ensuring that the activities of the project are being
undertaken on schedule to facilitate implementation as specified in the project design.
• Project implementation must be flexible. Circumstances will change and project
managers must be able to respond intelligently to these changes such as technical, price,
economic and political changes and these will alter the ways in which it should be
implemented.
• Therefore, to allow the management to become aware of the difficulties that might arise,
recording, monitoring and progress reporting are important activities during the
implementation stage
• Activity: For a project that is already underway in your organisation/environment/,
identify the key areas requiring monitoring and suggest the kind of information and
procedures that would be involved.
2.2.7. Evaluation/impact
Evaluation is basically about the judgment on the effectiveness of a project. Once the project has
been carried out, it is often useful to look back over what took place, to compare actual progress
with the plans and take some corrective measures due to some differences or variances occurred.
In other words, it involves a systematic review or examination of the elements of success and
failure in the project experience during the project life to learn how better to plan for the future.

Evaluation is not limited only to completed projects, but it is also a most important managerial
tool in ongoing projects and rather formalized evaluation may take place at several times in the
life of the project. This implies that evaluation is a continuous exercise during the project life and
is much related to project monitoring. Monitoring provides the data on which the evaluation is
based. However, formalized evaluation is undertaken at specified periods.

There are three types of evaluation. These are:

• Ex-ante evaluation- undertaken before the project starts and it examines the feasibility of
the project;
• On-going( Current) evaluation- undertaken during the project implementation, and it
analyses the relationship between the project outputs and its effects for the purpose of
adapting the project to changes in the environment (i.e. when project face trouble); and
• Ex-post (impact) evaluation- undertaken after the project has been implemented, and it
examines the effectiveness of the project in achieving its stated goals and the types of
changes resulting from the project.

Evaluation prior to a periodic review may consist of financial statement, comparison of planned
and actual results, nature and root cause of problems, effectiveness of remedies, and
communication and control procedures. Some projects are sensitive to external changes whether
due or unrelated to past project activity, for example, political, economic or environmental
developments and their impact on the project environment.

Evaluation can be done internally or by external reviewers. Some organizations have monitoring
and evaluation units. Such units can provide management with useful information to ensure
efficient implementation of projects, especially if it operates independently and objectively,
because what the units needs is to judge projects on the basis of objectives, original project
design and the reality on the ground (the operating physical and policy environment). With no
free hand, the feedback mechanism will be stifled and information be “held –back” instead of
being “fed-back”. Some projects may be subjected to external evaluation. The aim of evaluation
is largely to determine the extent to which the objectives are being realized
• Evaluation/impact/: the process of examining elements of success and failure in the
project experience during the project life to learn how better to plan for the future.
• What was done well? What should
• Be improved? What else did we learn?
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, and to judge whether the decisions and actions
taken were responsible and useful
Evaluation is not limited only to completed projects, but it is also a most important managerial
tool in ongoing projects and rather formalized evaluation may take place at several times in the
life of the project. This implies that evaluation is a continuous exercise during the project life and
is much related to project monitoring.
• Accordingly, There are three types of evaluation.
• Ex-ante evaluation- undertaken before the project starts and it examines the
feasibility of the project;
• On-going( Current) evaluation- undertaken during the project implementation,
and it analyses the relationship between the project outputs and its effects for the
purpose of adapting the project to changes in the environment (i.e. when project
face trouble)
C. Ex-post (impact) evaluation- undertaken after the project has been implemented, and it
examines the effectiveness of the project in achieving its stated goals and the types of changes
resulting from the project.
• Many different people may do evaluation.
• Project management will be continuously evaluating its experience as implementation
proceeds.
• The sponsoring agency, perhaps the operating ministry, the planning agency or an
external assistance agency – may undertake evaluation.
• In large and innovative projects, the project’s administrative structure may provide a
separate evaluation unit responsible for monitoring the projects implementation and for
bringing problems to the attention of the projects’ management.
• The aim of evaluation is largely to determine the extent to which the objectives are being
realized.
Ex-post evaluation
The final phase of the project is the evaluation phase. Many usually neglect this stage. The
project analyst looks carefully at the successes and failures in the project experience to learn how
better to plan for the future. In this stage it is important to examine the project plan and what
really happened. Performance review should be done periodically to compare actual performance
with projected performance. A feedback device is useful in several ways: (i) it throws light on
how realistic were the assumptions underlying the project; (ii) it provides a documented log of
experience that is highly valuable in future decision making; (iii) it suggests corrective action to
be taken in the light of actual performance; (iv) it helps in uncovering judgment biases; (v) it
induces a desired caution among project sponsors. Weakness and strengths should carefully be
noted so as to serve as important lessons for future project analysis undertaking. Evaluation is
not limited only to completed projects. Ongoing projects could also be evaluated to rectify
problems when the project is in trouble. The project management, the sponsoring agency, or
other bodies may do the evaluation.