ROYAL COLLEGE

CHAPTER ONE
1. OVERVIEW OF PROJECT AND PROJECT LIFE CYCLE
Chapter content:
1.1. Introduction
1.2. Project Concept/Definition
1.3. Features and Some important factors of project
1.4. Types of Project
1.5. The linkage between projects and programs
1.6. Project Analysis and Management
1.7. Chapter summary
1.1. Introduction
Project is a means of implementing the firm’s plans. As a means of plan implementation, project
involves a complex process. Before discussing the complex process of project, it is reasonable to
introduce basic concepts of projects. This unit highlights the nature of project, types of projects,
importance of projects, difficulties in projects, objectives of projects, the phases of projects.
1.2. Project Concept/Definition
The term ‘project’ may be defined as a complex of economic activities in which scarce resources
are committed in expectation of benefits that exceed the costs of resources consumed. Projects
require resources. They are also expected to derive benefits. Projects are said to desirable if their
benefits are greater than the costs incurred on them. A project can also be referred to as a non-
repetitive activity. A project is viewed as a conversion process. This implies that a project
involves a transformation of some form of inputs into an output. (see the following diagram).
Constraints

Inputs Project Output

Mechanisms

In the above diagram, we observe that project is a conversion process which serves in
transforming inputs into outputs. Inputs represent want or need whereas outputs represent
satisfied need. Constraints consist of factors such as financial, legal, ethical, environmental, time,
and quality. Mechanisms include people, knowledge of expertise, capital, tools and techniques,
and technology. Similarly project also defines as:
- A project is defined as an intervention that consists of a set of planned interrelated activities,
designed to achieve defined objectives within a given budget and a specified period of time.
- A project is an investment of resources with predetermined objectives that must be achieved
according to its master plans or plans of activities. Planning has to be initiated when
potential business exists.
- A project is a set of /complex set of/activities where resources are used in expectation of
return and which lent it to planning, financing and implementing as a unit.

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- A project is a problem scheduled for solution. J.M. Juran
- A project is a multitask job that has performance, cost, time, and scope requirements and that
is done only one time.
Typical examples are: Building construction, International Airport, Gas Station, Computer
Manufacturer, Mobiles; and infrastructures such as schools, universities, health centers, road,
hydro-electric power station, irrigation canals, housing projects or any other similar project
which involves resources outlay whether small, medium, or large scale business.
A project has a good project techniques and sound principles as well as appropriately structured,
a project will run smoothly, stimulating, and enjoyable towards success. Since most projects
have scarce resources. It should be well planned and defined accordingly in details (plan of
activities) in order to meet the project designs, and having a good project management.
Generally, projects are considered long term investments.
1.3. Features and Some important factors of project
1.3.1. Some basic Features of project
- Simplicity of purpose: The project is easily understood its goals and objectives
- Clarity of purpose and scope: To clearly describe its objectives, scope, limitations, resources,
management, quality of results, and so on.
- Independent control: The project can be protected from market or other fluctuations affecting
routing operations.
- Ease of measurement: Project progress can be measured against clear targets and
performance standards.
- Flexibility of employment: The project management can employ an expert of high caliber for
limited periods without prejudice to long term staffing arrangements.
- Conducive to team motivation and morale: having self-motivated team and due respect
within the team managers.
- Sensitivity to management and leadership style: employees and hired experts sometimes
react critically to some styles of leadership.
- Helpful to individual development: work with an effective project team is conducive to
accelerated personal development and capability.
- Conducive to secrecy and security: Project has its secrecy and security to protect them from
hostile action or intelligence activity.
- Portability: as separate entities, projects may be carried out in remote locations, foreign
countries, and so on.
- Ease of allocation: Project may be get into contract with sufficient or adequate resources.
For example, space exploration, building an international airport, sports stadium, etc.
3.2.2. Some important factors to be known about a given project are:
- What should exactly be achieved
- Which outcomes are important (needs), which are desirable but less important?; what should
be included and what should not be included?
- How could be the project “Vision” best be achieved?
- How long will it take to achieve results and when would it be sensitive to start?

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- How much will it cost and who would pay for it?
- What opposition might be encountered, why and from whom?
1.4 Types of Project
Projects may be classified in to three depending on how new resources committed to them
relate to the existing economic activities. These are:
I. The Large Project: Which involves new investment that can establish new productive
process and it is independent of previous lines of projects. They often include new
organization financially independent of the existing organization. Such projects were
dominant in 1990’s and 1970’s; especially in developing countries.
II. Expansion Projects: these types of projects involve repeating; or extending an existing
economic entity with the same output, technology and organization.
III.Upgrading Projects: Involves replacing or changing some elements in an existing activity
without major changes of output. Such projects involve some changes in technology, but
within the context of an existing one, though there is a possibility of reformulating
organization within the changing economic condition
Project may also be classified in to two based on the possibility of estimating the cost and
benefit associated with them as:
I. Directly productive projects: In directly productive projects, the benefits and costs are
accruing to a single large organization. This organization will be able to calculate the
surplus.
II. Indirectly productive projects: indirectly productive projects are those where the benefits
derived from a new project do not accrue to the organization responsible for carrying out the
costs. Hence, the resulting surplus is not concentrated in the hands of a single organization.
In the case of indirectly productive projects, the calculation of benefits is difficult. Eg.
Infrastructural projects such as roads, schools, health centers, where the benefits accrues to
the users, Such large projects are usually carried out by government because ( i) there is
high investment requirement (2) the gestation period i.e. the period between investment and
accrual of benefits is too long.
1.5. The linkage between projects and programs
It is necessary to distinguish between projects and programs because there is sometimes a
tendency to use them interchangeably. While a project refers to an investment activity where
resources are used to create capital assets, which produce benefits over time and has a beginning
and an end with specific objectives, a program is an ongoing development effort or plan which
may not necessarily be time bounded. Examples could be a road development program, a health
improvement program, a nutritional improvement program, a rural electrification program, etc. A
development plan is a general statement of economic policy. National development plans are
further disaggregated into a set of pectoral plans.
A development plan or a program is therefore a wider concept than a project. It may include one
or several projects at various times whose specific objectives are linked to the achievement of
higher level of common objectives. For instance, a health program may include a water project
as well as a construction of health centers both aimed at improving the health of a given

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community, which previously lacked easy access to these essential facilities. Projects, which are
not linked with others to form a program, are sometimes referred to as “stand alone” projects.
Projects in such context are the concrete manifestations of the development plans in a specific
place and time. One can think of projects as subunits and bricks of programs, which constitute
the national plan (usually the direction is from plans to projects). We have to note that projects
could be either public or private. It is the smallest operational element prepared and implemented
as a separate entity in a national plan or program.
From the above discussion it can be seen that the major difference between a project and a
program is not so much in objectives stated but lies more in scope, the details and accuracy. A
project is designed with a high degree of precision and details as regards its objectives, features,
calculation of returns and implementation plan. A program by contrast is general, lacks details
and precision and aims at a broader goal often related to a sectorial policy of a country or
departmental policy of an organization. The following are the similarities and differences
between PROJECTS and PROGRAMS:
I. The differences between PROJECTS and PROGRAMS:
PROJECTS PROGRAMS:
- Specific Objectives - General Objectives
- Specific Project Area - No Specific Project Area
- Specific Beneficiary Group - No Specific Beneficiary Group
- Clearly Determined and Allotted Fund - No Clear and Detailed Financial Allocation
- Specific Lifetime (Duration Period) - No Specific Lifetime (Infinite)
Perhaps the distinction between projects and programs would be clear if we see the basic
characteristics of projects. Projects in general need to be SMART.
S - Specific
A project needs to be specific in its objective. A project is designed to meet a specific objective
as opposed to a program, which is broad. A project has also specific activities. Projects have well
defined sequence of investment and production activities and a specific group of benefits. A
project is also designed to benefit a specific group of people.
M - Measurable
Projects are designed in such a way that investment and production activities and benefits
expected should be identified and if possible be valued (expressed in monetary terms) in
financial, economic and if possible social terms. Though it is sometimes difficult to value
especially secondary costs and benefits of a project, attempt should be made to measure them.
Measure costs and benefits must lend themselves for valuation and general projects are thought
to be measurable.
A - Area bounded
As projects have specific and identifiable group of beneficiaries, so also have to have boundaries.
In designing a project, its area of operation must clearly be identified and delineated. Though
some secondary costs and benefits may go beyond the boundary, its major area of operation must
be identified. Hence projects are said to be area bounded.

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R - Real
Planning of a project and its analysis must be made based on real information. Planner must
make sure whether the project fits with real social, economic political, technical, etc situations.
This requires detail analysis of different aspects of a project.
T - Time bounded
A project has a clear starting and ending point. The overall life of the project must be
determined. Moreover, investment and production activities have their own time sequence. Every
cost and benefit streams must be identified, quantified and valued and be presented year-by-year.
II. Similarities between PROJECTS and PROGRAMS:
- Having Both Objectives or Goals
- Requiring Financial, Personnel, Material and other resources
- Generating Outputs of Goods and/or Services
- Serving as instruments for the execution of development
- Plans in order to be able to develop the National Economy
1.6. Project Analysis and Management
1.6.1. Project Analysis
All countries, but particularly the developing countries, are faced with the basic economic
problem of allocating resources such as labor at all levels of skill, management and
administrative capacity, capital, land and administrative and other natural resources and foreign
exchange, to many different uses such as current production of consumer goods and public
services or investment on infrastructure, industry, agriculture, education and other sectors. These
different uses of resources, however, are not the final aim of the allocate process; rather they are
the means by which an economy can marshal its resources in the pursuit of more fundamental
objectives such as the removal of poverty, the promotion of growth and the reduction of
inequality in income. Pursuit of one objective (better income distribution) however, may involve
a sacrifice in other objective (rapids growth).
A choice therefore has to be made among competing uses of resources based on the extent to
which they help the country achieve its fundamental objectives. If a country consistently chooses
allocations of resources that achieve most in terms of these objectives, it ensures that its limited
resources are put to their best possible use.
Project analysis is a method of presenting this choice between competing uses of resources in a
convenient and comprehensible fashion. In essence, project analysis assesses the benefits and
costs of a project and reduces them to a common denominator.
1.6.2. Project Management
The traditional form or organization is quite appropriate for handling established operations
which are characterized by a continuous flow of repetitive work, with each department attending
to its specific functions- in such a setting, relatively stable inter departmental and inter-personal
relationships emerge.
However, the traditional form or organization is not suitable for project management. This is
because of the following reasons:
- A project is a non-routine, non-repetitive undertaking often plagued with many uncertainties;

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- The relationships in a project setting are dynamic, temporary, and flexible; and
- A project requires a coordination of the efforts of persons drawn from different functional
areas and contributions of external agencies. Due to these reasons, project management calls
for a different form of organization, sharper tools of planning and control, and improved
means of coping with human problems.
1.7. Chapter summary
Project is a complex of economic activities in which scarce resources are committed in
expectation of benefits that are expected to be greater than the costs of resources consumed. A
project is viewed as a conversion process in which inputs (want or need) are converted to outputs
(satisfied need or want) using people, knowledge of expertise, capital, tools, and technology
under constraints such as financial, legal, ethical, environmental, time, and quality.
Projects may be classified in various ways. They may be classified into cost reduction, revenue
expansion, and mandatory projects. On the other hand, projects may be classified into physical
monetary, and intangible. Projects may also be classified into industrial projects and
development projects.
The importance of project is their long-term effects, their irreversibility and their requirement for
huge investments. Some of the difficulties of projects are measurement problems, uncertainty,
and temporal spread. The objective of capital investment decision is the maximization of the
wealth of equity shareholders. Projects involve six major phases; namely, planning, analysis,
selection, financing, implementation, and review.

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