PROJECT PLANNING & ANALYSIS

For MA Project Management

Rift Valley University

By : Zerihu Temsas (PhD)
PROJECT PLANING & ANALYSIS

Chapter One

An Overview of Project
Planning Analysis
 Contents
1. The project concept  Pre-feasibility Study (Pre-selection/
Preliminary Screening)
 Introduction: Why Project Planning?
 Feasibility Study
 Definition: What is a Project?  Opportunity Studies
 Uniqueness of Projects  Appraisal of an investment Decision
2. The Importance of project planning  Selection of projects/investment
alternatives/
3. The linkage between projects and
 Implementation/Investment phase/
programs
 The operational phase
4. The Project Cycle  Ex-post evaluation/part of the
 Identification (Opportunity studies) operational phase/

 Project preparation: Analysis and Appraisal  Replacements/ Rehabilitation

phase  Expansion/Innovation/
5. Major Questions That Economic Analysis
Should Answer
 Section One

The project concept

4
 1. Introduction: Why Project Planning?
Before commencement of any project, the first thing that a project manager
need to do is project planning.
Carefully planned project takes into account necessary aspects of a project (e.g.
tasks, milestone, schedule, risks, communication, quality, etc.) and provide a plan
which project team can refer during execution.
Careful & detailed planning help us to reduces risk and in turn uncertainty in
any given project
It helps to make a provision for potential occurrences of uncertainties in
advance.
 1. Introduction: Why Project Planning?
What is Project Planning?
A project plan expresses the objectives & requirements of the project in terms of:
 Project Scope
 Project Schedule
 Resource Requirement
 project cost estimation
 Project Quality and
 Project Risk Management
A project planning enables project manager to translate project requirement into
 Work breakdown structure (WBS),
 tasks list,
 resource assignment and risk register, etc.
 Elements of Project Planning
1. Project Scope Planning
 Any project is expected to provide its stakeholders with certain outcome, which is
commonly termed as project deliverables.
 It is the definition of what the project is expected to achieve and specify the budget of both
time and cost that needs to be provisioned to create the project deliverables.
 It involves:
 Create work break down structure (WBS)
breakdown/ decomposition of project work into distinct work items .
The project scope is generally constrained, with respect to Time, Quality& Resource
 Elements of Project Planning
2. Delivery Schedule Planning
Involve identifying list of activities to be performed and create
delivery timeline
 Milestones: a significant event in the project.
Generally, project sponsors would refer to list of milestones to trace project delivery in respect of timeline &
cost overrun.
 Gantt chart: visual representation of project schedule
 Five steps to create delivery schedule
 Define Tasks/ Activities
 Tasks/ Activities Sequencing
 Resources Requirement Estimation
 Task Durations Estimation
 Schedule Development
 Elements of Project Planning
3. Project Resources Planning
 Human Resource Plan: we expect from human resource plan
Roles & responsibilities

Organogram for project(team members formation)

Staffing management plan

 Plan for materials and equipment required for successful completion of the project.
 Elements of Project Planning
4. Project Cost Planning
 Identify cost elements to be consumed during the project lifecycles
 Monetary resources requirement (people, machinery, material, equipment, space, etc.)
 Provisions for risk management (people, machinery, material, equipment, space, etc.)
 we expect from Project Cost plan
 Cost estimates per activity

5. Project Quality Planning

 we expect project quality plan to highlight
 Quality Process & Policies
 Cost-Benefit Analysis
 Quality Metrics
 Cost of Quality
 Quality Checklist
 Control Charts
 Elements of Project Planning
6. Supporting Plans: includes
 Risk Management Plan: involves
 Risk identification
 Risk assessment
 Risk response
 Risk plan
 Communication Plan
 Identifying stakeholders
 Plan for communication
 Procurement Plan
 documents purchase policy illustrating purchase process, buy/lease/rent
decisions, vendor selection, negotiation, financial concurrence, duration, legal concurrence, etc.
 What is a Project?
A project is:
a one-time, multitask job with a definite starting point, definite
ending point,
has clearly defined scope of work, a budget, and usually a
temporary team.
A project is a problem scheduled for solution
 It is defined as a unique set of coordinated activities, with
definite starting and ending points, undertaken by an individual
or organization to meet specific objectives within defined
schedule, cost and performance parameters.
 Cont…..
Sometimes projects terminate when it’s determined that the goals and
objectives cannot be accomplished or when the product, service, or result of the
project is no longer needed.
A project is also defined as a sequence of unique, complex, and inter-connected
activities having one goal or purpose and that must be completed by a specific
time, within budget, and according to
specification.
A project is a proposal consisting of collection of activities performed to achieve
a specific purpose so as to get benefits that exceed costs.
 Cont…
A project features the following characteristics;
 Specific start and end date

 Series of tasks to achieve a defined outcome or objective

 Uses people or resources to achieve that objective

 Uniqness of a Project:
A project is unique because it involves :
1. Sequence of activities: a project is comprised of a series of activities that are follow
one after the other
2. Unique activities: activities in a project are typical to the
project
3. Complex activities: The activities that make up the project
are not simple and repetitive actions
4. Connected activities: logical or technical relationship
between pairs of activities.
5. Specific goal: the goal of a particular project is specific to it.
Multipurpose projects are normally called programs.
6. Specific duration/completion time
7. Within a budget
8. According to specification
 Cont …
Important Characteristics of a Project:
1. It has established objectives.
2. It has a defined life span with a beginning and an end.
3. Usually, it involves several departments and professionals.
4. It involves typically doing something that has never been done before (Novel).
5. It has specific time, cost, and performance requirements.
• Unique: accomplishment of specific purpose
• Specific deliverable in terms of outputs
• Specific due date
• Multidisciplinary in nature (involves different types of professionals)
 Cont,,

• Complex in nature (activities are not routine)

• Conflict
• Part of programs
• Needs capital and commitment of other resources
• Collection of activities that generates benefits in the long run
• Associated with risk and uncertainty
 What is not a project?

 Projects should not be confused with everyday routines.

A project is different from daily routines that involve repetitive work!
 Ordinary daily work typically requires doing the same or similar work over and over, while
a project is done only once; a new product or service exists when the project is completed.
 Comparison of daily Routine Work with Projects


 2. The importance of project planning:

The following points can be taken as the importance of project planning.

 to eliminate uncertainties
 to increase the effectiveness and efficiency of the operations.
 to identify and work towards a common goal.
 to establish a means of project monitoring and control.
Planning is obtaining answers to the questions what, when, how, by whom in
order to attain the specified aims and objectives.
 Steps Involved In Proper Project Planning

There are nine steps involved in proper project planning

1. Aims and objectives: The actual aims /objectives/ mile stones to be reached within a
specified time, according to Clint requirements specified

2. Path (strategy) to be followed and actions to be taken to reach the aims and objectives

3. Schedule.: This is a plan showing when individual /group/ activities will start and end.

4. Budget (expenses) involved in order to reach the specified objectives.

 Steps Involved In Proper Project Planning

5. Estimate when each activity will take place.

6. Organizing and assigning specific people to specific objectives, as well as the Specific
responsibilities for each task.

7. Policy and general guidance for decision making and individual actions

8. Strategy and detail plan to execute the actions

9. Standards and determining quality for each action.

 Limitations of a project:
Planned investment decision is also confronted with several difficulties. Few of
them are:
1. Measurement Problem.
 Identifying and measuring the costs and benefits of a capital expenditure proposal tends to be
difficult
2. Uncertainty Issue.
 A capital outlay decision involves cost and benefits that extend far into the future. It is
impossible to predict exactly what will happen in future.
 Hence, there is usually a great deal of uncertainty characterizing the cost and benefits of a
capital expenditure decision.
3. Discounting problem
 The costs and benefits of a capital expenditure decision are spread over a long period of time
especially for industrial and for infrastructural projects.
 Such temporal spread creates some problems in estimating discount rates and establishing
equivalences.
 3. The linkage between projects and programs
In practice the terms project and program cause confusion.
A program is a group of related projects designed to accomplish a common goal over an
extended period of time.
Each project within a program has a project manager.
 The major differences lie in scale and time span.
A program is defined as a group of related projects, which may include related
business-as-usual activities that together achieve a beneficial change of a strategic
nature for an organization.
It is a group of related projects managed in a coordinated way to obtain benefits.
 Programmes may include elements of related work outside the scope of the discrete
projects in a programme
 Program versus Project
A programme is also defined as a temporary flexible organization created to
coordinate, direct and oversee the implementation of a set of related projects
and activities in order to deliver outcomes and benefits related to the
organisation’s strategic objectives.
A programme is likely to have a life that spans for several years.
Program management is the process of managing a group of ongoing,
interdependent, related projects in a coordinated way to achieve strategic
objectives.
 Cont ..
 Projects and programs have similar characteristics in terms of
 Having objectives

 Requiring financial, human, material, etc. inputs

 Generating output (goods/services)

 Serving as instruments for the execution of development plans in order to develop the
national economy.
 Cont …

Project
• Specific objective
• Specific projects area
• Specific beneficiaries group
• Clearly determined and allotted Fund
• Specific lifetime
Program
• General objectives
• No specific project area
• No specific beneficiaries group
• No clear and detailed financial resource
allocation
• No specific lifetime
 Types of Projects
Type 1: civil engineering, construction, petrochemical, mining and quarrying
These types of projects:
 incur special risks and problems of organization.
 they may require massive capital investment, and they deserve (but do not always get)
rigorous management of progress, finance and quality.
 operations are often hazardous so that health and safety
aspects demand special attention, particularly in heavy
work such as construction, tunneling and mining.
 Cont…
Project Type 2: Manufacturing
 Manufacturing projects result in the production of a piece of mechanical or electronic
equipment, a machine, ship, aircraft, land vehicle, or some other product or item of
specially designed hardware.
 The finished product might be purpose-built for a single customer but internal research
and development projects for products to be sold in all market sectors also fall into this
manufacturing category.
 Cont…
Project Type 3: IT projects and projects associated with management change
Every company, whatever its size, need this type of project at least once in its lifetime.
 These are the projects that arise when companies engage in operations that involve the
management and coordination of activities to produce an end result that is not
identifiable principally as an item of hardware or construction. This may happen when:
 companies relocate their headquarters,
 restructure the organization,
 develop and introduce a new computer system,
 launch a marketing campaign,
 produce a feasibility or other study report, and
 prepare for a trade exhibition.
 Cont..
Project Type 4: Pure scientific research projects
 Pure scientific research projects (should not be confused with
research and development projects) are truly a special case. They occasionally result in
dramatically profitable discoveries.
 They can consume vast amounts of money over many years, yet yield no practical or economic
result.
 They carry the highest risk because they attempt to extend the
boundaries of current human knowledge.
 The project objectives are usually difficult or impossible to define and there may be no
awareness of the possible outcome.
 Therefore, pure research projects are not usually amenable to
the project management methods that can be applied to
industrial, manufacturing or management projects.
 Section Two

The project Cycle

33
 Project cycle
The PC is the several stages of activities, through which projects run, and
which constitute a definite sequence.
PC provides: -
 An analytical/logical framework & sequence within which data
can be compiled and analyzed,
 Established investment priorities,
 Alternatives considered and sector policy issues addressed.
PC imposes: -
 A discipline on planners and decision makers,
 Ensures the relevant problems and issues are taken into account and
 Subjected to systematic analysis before decisions are reached and implemented
 Project cycle
 The cycles are closely linked to each other and follow a logical procession.
 There are Different models of the project cycle- usually relate to the
organisational perspective of the authors.
 The first model was drawn up by Baum (1970) for the World Bank.
A. Identification
B. Preparation and Analysis
C. Appraisal and Selection
D. Implementation
E. Evaluation, added later in 1978
 UNIDO Approach (adopted by DEPSA in 1991

I. Pre Investment phase

II. Investment phase
1. Identification(Opportunity studies)
4. Implementation
2. Preparation(Formulation)
a. Tendering, Negotiating and
a. Pre-feasibility Study contracting
b. Support Study b. Detailed Engineering Design
c. Feasibility Study c. Construction Erecting and
Commissioning
3. Appraisal
a. Appraisal III. Operational phase
b. Investment decision for selection 5. Operation
6. Ex-Post Evaluation
 Cont. …
The below classification is based on Guidelines to project planning in Ethiopia
(1990) of Development Project Studies Authority (DEPSA).

1. Identification(Opportunity studies):

 The identification of investment opportunities is the starting – point in a

series of investment – related activities.

 It is the main instrument used to quantify the parameters, information and

data required to develop a project idea into a proposal

 It analyses :
 Cont. …

 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
 Cont.
Opportunity studies could be general or specific.
 General opportunity studies:

 sector approach/area studies designed to identify opportunities on a given

area (Administrative province, backward region), industry studies

 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.
 Cont.
The purpose of opportunity study is to arrive at a quick and inexpensive
determination of salient facts of an investment possibility.

Projects may be:

 “resource based” : stem from the opportunity to make profitable use of available resources.

 “market based”: arising from an identified demand in home or overseas markets.

 “need-based” : 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.
 2. Project preparation/Formulation
a. 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

 Pre – feasibility studies :
 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.
 b. Support/ 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
 cont..
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.

 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.
 C. Feasibility Studies
 A feasibility study should provide all data necessary for an investment decision.

 The feasibility report should contain the following elements:

1. Market analysis

2. Technical analysis(materials & Inputs, Technology and engineering works, construction,

infrastructure)

3. Organizational analysis

4. Financial analysis

5. Economic analysis

6. Social analysis, and

7. Environmental analysis
 4. Appraisal
a. Appraisal of an investment Decision
independent assessment of the project to identify the weaknesses and strengths
of the study that have a bearing on the decision to invest, and/or to finance the
project.
 Independent qualified and experienced team of professionals are needed
Appraisal is the comprehensive and systematic assessment of all aspects of a
project study, addressing particularly issues like:
 Specificity of objectives;
 Clarity of problems;
 Methodology: type and source and appropriateness of data collection techniques and analysis
techniques;
 Project specific factors.
 Cont.…
Two categories of appraisal criteria have been developed to judge the
worthwhile of a project.

 non-discounting criteria

payback period
the accounting rate of return
 discounting criteria

net present value,

the internal rate of return,
the benefit cost ratio
 b. Selection of projects/investment alternatives:
Selection follows, and often overlaps, analysis.
 It addresses the question –
 is the project worthwhile?

 Which of the projects is the best option from the existing competing once?

Helps the owner to choose the best investment opportunity

It involves political, social and economic variables.
After appraisal studies the decision maker will have to select one or a number of
projects on the bases of pre established evaluation/selection criteria.
 4. Implementation/Investment phase:
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 prices; political environment may change.

The investment phase can be divided into the following stages:

1. Establish project management office which involve establishing of the legal, financial
and organizational basis for the implementation of the project

2. Technology acquisition and transfer, including basic and detailed engineering, which
include:
 Con. …
 tender preparation (hence developing the terms of reference), tendering, tender analysis,
selection of a supplier,
 negotiation and contracting;
 Procurement of major technology for installation and other inputs necessary for
construction and installation of the system;

3. Engineering design;
4. Construction work
5. Installation and erection;
6. Pre-production marketing, including the securing of supplies and setting up
the administration of the firm
 Con. …
7. Recruitment and training of personnel, and
8. Plant commissioning and start-up (Alternatively, this function may be
categorized in the operation phase).

This implementation basically involves capability in project management.

Project management is the planning, organizing, directing, and controlling of
resources for a specific time period to meet a specific set of one-time-objectives.
 Con. …
Successful project management can then be defined as having achieved the
project objectives:
 Within time
 Within cost
 At the desired performance/technology level, quality, etc./
 While utilizing the assigned resources effectively and efficiently
 Con. …
For expeditious implementation at a reasonable cost, the following are helpful.
1. Adequate formulation of projects:
preliminary studies and comprehensive and detailed formulation of
projects
2. Use of the principle of responsibility accounting :
 Assigning specific responsibilities to project managers for completing
the project within the defined time frame and cost limits
3. Develop project management competence: Use of network techniques.
For project planning and control two basic techniques are available –
PERT (program evaluation Review Technique) and
CPM (Critical Path Method).
 these techniques makes monitoring easier.
 III. The operational phase
The operational phase involves the following main functions.
1. Commissioning and starting of commercial production;
2. Post-project evaluation
3. Replacement/rehabilitation
4. Expansion /innovation.
1. Ex-post evaluation/part of the operational phase
The final phase of the project is the evaluation phase.
Helps 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.
 Cont. …
A feedback device, it 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. .

Evaluation is not limited only to completed projects.

 Ongoing projects could also be evaluated to rectify problems when the project
is in trouble.
 2. Replacements/ Rehabilitation
Replacement investment is usually neglected in conventional project studies.
However, the economic life of involved machineries and equipment is different.
In fact the economic life of the envisaged firm/plant is determined on the basis
of the economic life of the ‘core’ technology.

A number of other technologies, specifically the hard ware technologies do

have different economic life.

Normally the economic life of an industrial project is projected to be about 20

years.
 2. Replacements/ Rehabilitation
Rehabilitation works are usually undertaken as a project, because not only they
involve substantial investment, but also they have to be rationalized as whether
to rehabilitate the existing facilities, replace the entire plant or consider
alternative ways of rehabilitation.
 3. Expansion/Innovation/
There are different economic forces that justify expansion and innovation.
 Given the nature of the technology is a matured one, without substantial change in the
nature of the need and hence chance of proceeding with the same product, expansion may
be a rational venture.

 On the other hand the industry could be dynamically changing.

 In such a state of changing industry, there is a need for at least keeping up with the truck of
change or the firm may venture to be the setter of the competitive benchmarks of the industry.
 Major Questions That Economic Analysis Should Answer

The major questions that any economic analysis should address are:
1. What is the objective of the project?
2. What will happen if the project proceeds or not?
3. Is the project the best alternative?
4. Does the project have separable components?
5. Winners and losers: who enjoys the music and who pays the piper?
6. What is the project’s fiscal impact?
7. Is the project financially sustainable?
8. What is the project’s environmental impact?
9. Techniques for assessment: is the project worthwhile?
10.Is this a risky project?
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