PROJECT DEVELOPMENT EVALUATION AND FEASIBILITY: (OUTLINE)

Meaning of a Project:
Project starts from scratch with a definite mission, generates activities involving a variety of human and
non-human resources, all directed towards fulfillment of the mission and stops once the mission is
fulfilled.

According to the Project Management Institute, USA, “a project is a one-set, time-limited, goal-
directed, major undertaking requiring the commitment of varied skills and resources”.

It also describes a project as “a combination of human and non-human resources pooled together in a
temporary organization to achieve a specific purpose”. The purpose and the set of activities which can
achieve that purpose distinguish one project from another.

1.1:Characteristic Features of a Project:

The characteristic features of a project are as follows:
1. Objectives:
A project has a fixed set of objectives. Once the objectives have been achieved, the project ceases to
exist.

2. Life Span:
A project cannot continue endlessly. It has to come to an end. What represents the end would normally
be spell out in the set of objectives.

3. Single entity:
A project is one entity and is normally entrusted to one responsibility center while the participants in the
project arc many.

4. Team-work:
A project calls for team-work. The team again is constituted of members belonging to different
disciplines, organizations and even countries.

5. Life-cycle:
A project has a life cycle reflected by growth, maturity and decay. It has naturally a learning component.

6. Uniqueness:
No two projects are exactly similar even if Die plants are exactly identical or are merely duplicated. The
location, the infra-structure, the agencies and the people make each project unique.
7. Change:
A project sees many changes throughout its life while some of these changes may not have any major
impact; then- can be some changes which will change the entire character of course of the project.

8. Successive principle:
What is going to happen during the life cycle of a project is not fully known at any stage. The details get
finalized successively with the passage of time. More is known about a project when it enters the
construction phase than what was known say, during the detailed engineering phase.

10. Unity in diversity:
A project is a complex set of thousands of varieties. The varieties are in terms of technology, equipment
and materials, machinery and people, work culture and ethics. But they remain inter-related and unless
this is so, they either do not belong to the project or will never allow the project to be completed.

11. High level of sub-contracting:

A high percentage of the work in a project is done through contractors. The more the complexity of the
project, the more will be the extent of contracting. Normally around 80% of the work in a project is done
through sub-contractors.

12. Risk and uncertainty:

Every project has risk and uncertainty associated with it. The degree of risk and uncertainty will depend
on how a project has passed through its various life-cycle phases. An ill-defined project will have
extremely high degree of risk and uncertainly Risk and uncertainty are not part and parcel of only R and
h projects—there simply cannot be a project without any risk and uncertainty.

Categories of Projects:
The following figure shows the various categories into which Industrial projects may be fitted:

Normal Projects:
In this category of projects, adequate time is allowed for Implementation of the project. All the phases
in a project are allowed to take the time they should normally take. This type of project will require
minimum capital cost and no sacrifice in terms of quality.

Crash Projects:
In this category of projects, additional capital costs are incurred to gain time. Maximum overlapping of
phases is encouraged and compromises in terms of quality are also not ruled out. Saving in time is
normally achieved in procurement and construction where time is brought from the vendors and
contractors by paying extra money to them.
Disaster Projects:
Anything needed to gain time is allowed in these projects. Engineering is limited to make them work.
Vendors who can supply “yesterday” are selected irrespective of the cost. Quality short of failure level is
accepted. No competitive bidding is resorted to; Round-the-clock work is done at the construction site.
Naturally, capital cost will go up very high, but project time will get drastically reduced.

Capital Budgeting is used for decision making of the long term investment that whether the projects are
fruitful for the business and will provide the required returns in the future years and it is important
because capital expenditure requires huge amount of funds so before doing such expenditure in capital
asset management do capital budgeting to assure themselves that the capital spending will bring profits
in the business.

1.2:Importance of Capital Budgeting

Capital Budgeting is the formal process of investments or expenditure that is huge in amount. It involves
the company’s major decision where to invest the current fund in the development of the organization,
such as for addition, disposition, modification, or replacement of fixed assets. Capital budgeting
becomes vital due to the vast amount of investment that is involved and the risk associated with the
same.

#1 – Long Term Effect on Profitability

For the growth & prosperity of any organization, a long term vision is necessary, because a wrong
decision may severely impact the survival of the firm, which may influence the capital budgeting in the
long run. Not only this, but it also impacts the company’s future cost &
growth. In the long run, capital spending has a significant impact on business profitability. If the
expenditures occurred after preparing a budget appropriately, there are certain chances of increasing
the profitability of an organization.

#2 – Huge Investments
Any organization needs considerable investment to grow as the company has limited resources to grow 
while taking the investment decision; it has to make a wise decision. Because the wrong decision may
blow up the sustainability of the business, it may profoundly impact the purchase of an asset, rebuilding
or replacing existing equipment.

#3 – Decision cannot be Undone

Most of the time, the capital investment decision are irreversible in nature; it caters to vast investment,
and it is difficult to find the market for it. The only way to remains with the company is to scrap the asset
and bear the losses.

#4 – Expenditure Control
Capital budgeting requires more attention to the expenditure and do R&D for an investment project if
needed. A good project turns into bad if the expenses were not done in a controlled manner and not
monitored carefully, while this step is quite crucial in the capital budgeting process.
#5 – Information Flow
The initialization of the project is merely an idea, whether it is accepted or rejected, depends upon the
various level of authority and circumstances. The capital budgeting process facilitates the transfer of
information to appropriate decision-makers so they can make a better decision in the growth of the
organization.

#6 – Helps in Investment Decision

The long-term investment decisions are time-consuming as it takes several years for accomplishment
beyond the current period. Uncertainty defines the involvement of the risk in it. Management loses his
flexibility and liquidity of funds when making an investment decision. It must be considered while
accepting the proposal.

1.3:The five stages of the project life cycle:

The five key process groups are initiating, planning, executing, monitoring and controlling and closing.
Most processes that we can think of will fall under these five basic processes; for example, in the
construction industry, budgeting, costing and estimating falls under planning.

Initiating
This process helps in the visualization of what is to be accomplished. This is where the project is formally
approved by the sponsor/client, initial scope defined, and stakeholders identified. This process is
performed so that projects and programs are not only approved by a sponsoring body, but also so that
projects are aligned with the strategic objectives of the organization. Where this is not performed,
projects may be started and carried out haphazardly, with no real stated goal or objective.

Planning
This is a crucial process in project management. The planning process is at the heart of the project
activity cycle, and gives guidance to stakeholders on where and how to undertake the project. The
planning stage is where the project plans are documented, the project deliverables and requirements
are defined, and the project schedule is created. It involves creating a set of plans to help guide your
team through the implementation and closure phases of the project. The plans created during this
phase will help the project team manage time, cost, quality, changes, risk and related issues.

Executing
This process is also known as the implementation phase, in which the plan designed in the previous
phase of the project activity cycle is put into action. The intent of the execution phase of the project
activity cycle is to bring about the project’s expected results. Normally, this is the longest phase of the
project management life cycle, where most resources are applied. During the project execution, the
execution team utilizes all the schedules, procedures and templates that were prepared and anticipated
during prior phases. Unexpected events and situations will inevitably be encountered, and the project
manager and project team will have to deal with them as they arise.
Monitoring and control
This process oversees all the tasks and metrics needed to guarantee that the agreed and approved
project that is undertaken is within scope, on time and within budget so that the project proceeds with
minimum risk. This process involves comparing actual performance with planned performance and
taking corrective action to yield the desired outcome when significant differences exist.

Closing
This is considered to be the last process of the project activity cycle. In this stage, the project is formally
closed and then a report is produced to the project sponsor/client on the overall level of success of the
completed project. The closing process involves handing over the deliverables to the sponsor/client,
handing over documentation to the owners, cancelling supplier contracts, releasing staff and
equipment, and informing stakeholders of the closure of the project.

1.4: 5 Methods of Project Appraisal 

Some of the methods of project appraisal are as follows:

1. Economic Analysis:
Under economic analysis, the project aspects highlighted include requirements for raw material, level of
capacity utilization, anticipated sales, anticipated expenses and the probable profits. It is said that a
business should have always a volume of profit clearly in view which will govern other economic
variables like sales, purchases, expenses and alike.

It will have to be calculated how much sales would be necessary to earn the targeted profit.
Undoubtedly, demand for the product will be estimated for anticipating sales volume. Therefore,
demand for the product needs to be carefully spelled out as it is, to a great extent, deciding factor of
feasibility of the project concern.

2. Financial Analysis:
Finance is one of the most important pre-requisites to establish an enterprise. It is finance only that
facilitates an entrepreneur to bring together the labor of one, machine of another and raw material of
yet another to combine them to produce goods.

3. Market Analysis:
Before the production actually starts, the entrepreneur needs to anticipate the possible market for the
product. He/she has to anticipate who will be the possible customers for his product and where and
when his product will be sold. There is a trite saying in this regard: “The manufacturer of an iron nails
must know who will buy his iron nails.”

This is because production has no value for the producer unless it is sold. It is said that if the proof of
pudding lies in eating, the proof of all production lies in marketing/ consumption. In fact, the potential of
the market constitutes the determinant of probable rewards from entrepreneurial career.
4. Technical Feasibility:
While making project appraisal, the technical feasibility of the project also needs to be taken into
consideration. In the simplest sense, technical feasibility implies to mean the adequacy of the proposed
plant and equipment to produce the product within the prescribed norms. As regards know-how, it
denotes the availability or otherwise of a fund of knowledge to run the proposed plants and machinery.

It should be ensured whether that know-how is available with the entrepreneur or is to be procured
from elsewhere. In the latter case, arrangement made to procure it should be clearly checked up. If
project requires any collaboration, then, the terms and conditions of the collaboration should also be
spelt out comprehensively and carefully.

In case of foreign technical collaboration, one needs to be aware of the legal provisions in force from
time to time specifying the list of products for which only such collaboration is allowed under specific
terms and conditions. The entrepreneur, therefore, contemplating for foreign collaboration should
check these legal provisions with reference to their projects.

5. Management Competence:
Management ability or competence plays an important role in making an enterprise a success or
otherwise. Strictly speaking, in the absence of managerial competence, the projects which are otherwise
feasible may fail.

On the contrary, even a poor project may become a successful one with good managerial ability. Hence,
while doing project appraisal, the managerial competence or talent of the promoter should be taken
into consideration.

Research studies report that most of the enterprises fall sick because of lack of managerial competence
or mismanagement. This is more so in case of small-scale enterprises where the proprietor is all in all,
i.e., owner as well as manager. Due to his one-man show, he may be jack of all but master of none.

1.5:Understanding Investment Objectives

An investment objective is usually in the form of a questionnaire, and answers to the questions
determine the client’s aversion to risk (risk tolerance) and how long the money is to be invested for
(time horizon). Basically, the information retrieved from the form filled out by the individual or client
sets the goal or objective for the client’s portfolio in terms of what types of security to include in the
portfolio.

What's your estimated annual income and net worth?

What's your average annual expenses?

What's your goal for investing this money?

When would you like to withdraw your money?

Do you want the money to achieve substantial capital growth or are you more interested in maintaining
the principal value?
What's the maximum decrease in the value of your portfolio that you would be comfortable with?

What's your level of knowledge with investment products such as stocks, fixed income, mutual
funds, derivatives, etc.?

Project Cost is the total funds needed to complete the project or work that consists of a Direct Cost
and Indirect Cost. The Project Costs are any expenditures made or estimated to be made, or monetary
obligations incurred or estimated to be incurred to complete the project which are listed in a project
baseline.

What Is Cost in Project Management?

Virtually every project that an organization undertakes will cost money. In fact, cost is traditionally
considered to be one of the three primary constraints of any project, along with time and scope. And it’s
up to the project manager — with input from the project’s other stakeholders — to determine how
much a project will cost, create a reasonable budget to allocate the appropriate resources, and manage
the budget to maximize value and minimize spend. The first step to understanding cost in project
management is to define the types of expenses that a project will likely incur.

They typically fall into two categories:

Direct costs: Examples of direct costs include fixed labor, materials, and equipment. They are
typically one-off costs that come from a single department or the project itself.

Indirect costs: Examples of indirect costs include utilities and quality control. Incurred by the
organization at large, indirect costs occur at the same time as the project, but are not necessarily caused
by it.

Cost estimation factors in elements such as:

 Labor: The cost of team members’ wages and time working on the project

 Materials and equipment: Physical tools, software, legal permits, etc.

 Facilities: The use of external workspaces

 Vendors: Third-party vendors and/or contractors

 Risk: Contingency plans to reduce risk

What Is the Time Value of Money (TVM)?

The time value of money (TVM) is the concept that a sum of money is worth more now than the same
sum will be at a future date due to its earnings potential in the interim.
This is a core principle of finance. A sum of money in the hand has greater value than the same sum to
be paid in the future.

Time value of money is also referred to as present discounted value.

Formula for Time Value of Money

Depending on the exact situation, the formula for the time value of money may change slightly. For
example, in the case of annuity or perpetuity payments, the generalized formula has additional or fewer
factors. But in general, the most fundamental TVM formula takes into account the following variables:

FV = Future value of money

PV = Present value of money

i = interest rate

n = number of compounding periods per year

t = number of years

(4) Plant capacity – It refers to the volume or no. of units that can be manufactured during given
time period. It is also known as production capacity. It is the task of the project manager to determine
the feasible normal capacity and nominal maximum capacity for the project.

(5) Location & Site – Location refers to a broad area within the city and while site means a specific
piece of land where project would be set-up. For the purpose of site selection a critical assessment of
the demand, size of plant and input requirements is conducted which involves examining the following
factors:

Proximity of Land to Markets  Availability of raw materials  Availability of Labor  Existing

Infrastructure i.e. roads, electricity, power, water supply  Cost of land  Government Policies

Primary sources provide raw information and first-hand evidence. Examples include

interview transcripts, statistical data, and works of art. A primary source gives you direct
access to the subject of your research.

Secondary sources provide second-hand information and commentary from other

researchers. Examples include journal articles, reviews, and academic books. A
secondary source describes, interprets, or synthesizes primary sources.

What is a secondary source?

A secondary source is anything that describes, interprets, evaluates, or analyzes information from
primary sources. Common examples include:

Books, articles and documentaries that synthesize information on a topic

Synopses and descriptions of artistic works

Encyclopedias and textbooks that summarize information and ideas

Reviews and essays that evaluate or interpret something

When you cite a secondary source, it’s usually not to analyze it directly. Instead, you’ll probably test its
arguments against new evidence or use its ideas to help formulate your own.

Secondary sources were created by someone who did not experience first-hand or participate in the
events or conditions you’re researching. For a historical research project, secondary sources are
generally scholarly books and articles.

A secondary source interprets and analyzes primary sources. These sources are one or more steps
removed from the event. Secondary sources may contain pictures, quotes or graphics of primary
sources.

Some types of secondary source include:  Textbooks; journal articles; histories; criticisms;
commentaries; encyclopedias.

What is demand forecasting?

Demand forecasting is the process of using predictive analysis of historical data to estimate and predict
customers’ future demand for a product or service. Demand forecasting helps the business make better-
informed supply decisions that estimate the total sales and revenue for a future period of time.

Through demand forecasting, businesses can optimize inventory by predicting future sales from

analyzing historical sales data to make informed business decisions about everything from inventory
planning and warehousing needs to running flash sales and meeting customer expectations.

5 demand forecasting methods:

There are many different ways to create forecasts. Here are five of the top demand forecasting
methods.

1. Trend projection
Trend projection uses your past sales data to project your future sales. It is the simplest and most
straightforward demand forecasting method.

It’s important to adjust future projections to account for historical anomalies. For example, perhaps you
had a sudden spike in demand last year. However, it happened after your product was featured on a
popular television show, so it is unlikely to repeat. Or your ecommerce site got hacked, causing your
sales to plunge. Be sure to note unusual factors in your historical data when you use the trend
projection method. 

2. Market research
Market research demand forecasting is based on data from customer surveys. It requires time and effort
to send out surveys and tabulate data, but it’s worth it. This method can provide valuable insights you
can’t get from internal sales data.

You can do this research on an ongoing basis or during an intensive research period. Market research
can give you a better picture of your typical customer. Your surveys can collect demographic data that
will help you target future marketing efforts. Market research is particularly helpful for young companies
that are just getting to know their customers.

3. Sales force composite

The sales force composite demand forecasting method puts your sales team in the driver’s seat. It uses
feedback from the sales group to forecast customer demand.

Your salespeople have the closest contact with your customers. They hear feedback and take requests.
As a result, they are a great source of data on customer desires, product trends, and what your
competitors are doing. 

This method gathers the sales division with your managers and executives. The group meets to develop
the forecast as a team

4. Delphi method
The Delphi method, or Delphi technique, leverages expert opinions on your market forecast. This
method requires engaging outside experts and a skilled facilitator.

You start by sending a questionnaire to a group of demand forecasting experts. You create a summary of
the responses from the first round and share it with your panel. This process is repeated through
successive rounds. The answers from each round, shared anonymously, influence the next set of
responses. The Delphi method is complete when the group comes to a consensus.

This demand forecasting method allows you to draw on the knowledge of people with different areas of
expertise. The fact that the responses are anonym zed allows each person to provide frank answers.
Because there is no in-person discussion, you can include experts from anywhere in the world on your
panel. The process is designed to allow the group to build on each other’s knowledge and opinions. The
end result is an informed consensus.

5. Econometric
The econometric method requires some number crunching. This technique combines sales data with
information on outside forces that affect demand. Then you create a mathematical formula to predict
future customer demand.

The econometric demand forecasting method accounts for relationships between economic factors. For
example, an increase in personal debt levels might coincide with an increased demand for home repair
services. 

Overview of Forecast Consumption

Forecast consumption replaces forecasted demand with actual sales order demand. Each time you
create a sales order line, you create actual demand. If the actual demand is already forecasted, the
forecast demand must be decremented by the sales order quantity to avoid counting the same demand
twice.

The Planning Manager is a background concurrent process that performs automatic forecast

consumption as you create sales orders.

Forecast consumption relieves forecast items based on the sales order line schedule date. When an
exact date match is found, consumption decrements the forecast entry by the sales order quantity.
Other factors that may affect the forecast consumption process are backward and forward consumption
days and forecast bucket type.

When you create a new forecast -- especially from an external source -- you can also apply consumption
that has already occurred for other forecasts to the new one.

Level Method
The Level Method is a fitness tracking system and method of athletic progression. First, each athlete will
complete initial baseline assessments. Then, Cross Fit Bluestone athletes are provided with a clear
overview of 15 different categories that measure functional fitness movements, absolute and relative
strength and aerobic capacity.

In addition, the Level Method includes a ranking framework that is similar to a martial arts belt system.

What is Production Capacity?

Production capacity is the maximum output that can be achieved in the production of manufactured
goods. It is generally a part-based metric that identifies the most goods that can be created given a set
amount of resources (time, labor, materials).

i.e. Within a week, we can produce 500 widgets.

The ideal for any manufacturer is to operate at full capacity. This means that all equipment is utilized at
the highest percentage and operates with optimized processes to incur no unnecessary downtime. But
capacity in most manufacturing companies is constrained by one of several factors.

Before we can work to increase capacity, it is best to first understand how capacity is hindered via these
losses.

What are Technical Requirements in Project Management?

Technical requirements are the technical issues that must be considered to successfully complete a
project. These can include aspects such as performance, reliability, and availability. In software projects,
technical requirements typically refer to how the software is built, for example: which language it's
programmed in, which operating system it's created for, and which standards it must meet.
 The 8 Key Elements of Effective Project Planning
 Smart Project Objectives. ...
 Clear Deliverables and Deadlines. ...
 A Detailed Project Schedule. ...
 Defined Roles and Responsibilities. ...
 Project Costs That Help Identify Shortfalls. ...
 A Communication Plan That Keeps the Project Moving Forward.

The social cost and benefit analysis is a method to support the decision-making of
the national, provincial and municipal governments. Cost-benefit analyses are
used for infrastructural projects, and also apply to, for example, area
development projects, sustainable energy development and water and nature
issues.

The major steps in a cost-benefit analysis

 Step 1: Specify the set of options. ...
 Step 2: Decide whose costs and benefits count. ...
 Step 3: Identify the impacts and select measurement indicators. ...
 Step 4: Predict the impacts over the life of the proposed regulation. ...
 Step 5: Monetize (place dollar values on) impacts.

A project is defined as a sequence of tasks that must be completed to attain a certain outcome.
According to the Project Management Institute (PMI), the term Project refers to” to any
temporary endeavor with a definite beginning and end”. Depending on its complexity, it can be
managed by a single person or hundreds.
Characteristics of a project:
A clear start and end date – There are projects that last several years but a project cannot go on
forever. It needs to have a clear beginning, a definite end, and an overview of what happens in between.

A project creates something new – Every project is unique, producing something that did not
previously exist. A project is a one-time, once-off activity, never to be repeated exactly the same way
again.

A project has boundaries – A project operates within certain constraints of time, money, quality,
and functionality. We’ll see more about this in later sections.
 A project is not business as usual – Projects are often confused with processes. A Process is a
series of routine, predefined steps to perform a particular function, say, expense reimbursement
approvals. It’s not a one-off activity. It determines how a specific function is performed every single
time.

Types of projects:
Projects can be diverse in the ways in which they are implemented. Here are some
examples of projects:

 Traditional projects: These are run sequentially in phases. These phases are
typically initiation, planning, execution, monitoring, and closure. Most high-cost
infrastructure projects make use of traditional project management.
 Agile projects: These are used mainly in software development. They are people-
focused and adaptive. They also typically have short turnaround times.
 Remote projects: These projects are usually used by distributed teams that
seldom meet in person. Handling freelance contributors is an example of a remote
project.
 Agency projects: Agency projects are outsourced to an agency that is likely to
have projects with multiple clients. Marketing and design projects are commonly
outsourced to agencies.

The boundaries of a project

Every project operates within certain boundaries called constraints:

 Project scope
 Project schedule
 People
 Resources.

How project management helps you manage projects

Projects can be very complex undertakings that require a huge amount of effort and resources. No
matter what the goal is, using the principles of project management will help the initiative run
smoothly. Without proper project management principles, projects will be handled haphazardly and are
at a much higher risk of project failure, delay, and being over budget.

Knowing the fundamentals of project management improves one’s chances of completing a project
successfully. No matter what industry or niche an organization is in, project management
methodologies and frameworks enable them to steer the project in the right direction.

Market Research Questions to Ask Customers

Existing customers can provide great insight about your business, products, and services. Market
research questions to ask clients or customers include:
  How likely are you to recommend our brand to a friend?
 How long have you been a customer?
 What problem does [product/service] solve for you?
 How does the [product/service] fit into your daily workflow?
 How well does [product/service] meet your needs?
 What do you wish the [product/service] had that it currently does not?
 What do you like [most/least] about [product/service]?
 What made you choose us over a competitor?
 How would you rate your last experience with us?

Market Research Questions

General market research aims to help you learn about your market size and potential to connect
with customers. Great qualitative market research questions include:

 How big is our potential market?

 Will this market grow or shrink in the future?
 What other products and services are similar to ours?
 Who are our top competitors?
 What market share do our competitors own?
 What share is available for us to own/take?

Market Research Questions for Competitive Analysis

Once you assess your industry and customers, start asking market research questions about your
competitors. Some questions to ask include:

 How is our brand doing compared to our competitors?

 How do our competitors effectively attract customers?
 How much website traffic do our competitors receive?
 Which keywords are driving traffic to our competitors?
 What sources are driving traffic to our competitors?
 How many inbound links do our competitors have?
 What type of content is performing well for our competitors?