UNIT TWO

PROJECT CIRCLE
a) Introduction
Welcome to the second unit of project management. In this unit you will be introduced to a
project cycle and a detailed review of each stage of the project cycle.
Overview of a Project
A project can be defined as an investment activity where resources are used in order to achieve
preset objectives within a specific period of time. It represents an investment because resources,
which could have gone towards present consumption, are instead channeled into activities for
producing items for the future, the intention being to raise people’s living conditions above what
they otherwise would be or to achieve a qualitatively different pattern of consumption.
Investment projects are the core of development plans – the “building bricks” of economic
expansion. Integration of plans and projects thus becomes all the more important, as the project
grows larger relative to the total economy.
If the project alone is likely to have a significant effect on the availability of resources and on the
prices in the economy as a whole, then it needs to be carefully planned in coordination with other
investments within an appropriate policy framework and included in national development plans.
The total investment programme would then show the magnitude of domestic and foreign
savings, which the planning authorities are expecting to be able to use. Within the broad targets
for investment laid down in sectoral development plans, there are, at anyone moment of time,
many different ways of using investible resources.
The process of choosing which ones to follow, drawing up the necessary plans and then making
the actual investment is commonly referred to as the project "cycle".

Project Cycle
A better understanding of project management also comes in understanding the different stages
of a project. Different forms of the project cycle exist with stages ranging from five to eight. For
the purpose of our study of project management we shall use a five-stage project cycle. The
project cycle (under review) has five stages, each stage links with the preceding one and leads
forward to the next one.
Definition of a Project Cycle
The project cycle is the natural sequence in the way projects are planned and activities carried
out. It can also be defined as a natural sequence of phases through which a project passes from
start to end.

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 • The cycle here is divided into five stages namely: identification, preparation,
appraisal, implementation (monitoring) and evaluation.

Figure 1: The figure below shows the five stages of a project cycle.

IDENTIFICATION
NEW PROJECT STARTS
STAGE 1

CYCLE END

EVALUATION PREPARATION

STAGE 5 STAGE 2
SS
PROJECT CYCLE

APPRAISAL

IMPLEMENTATION STAGE 3

(Monitoring)
STAGE 4

A. Identification
This is the initial process of deciding what kind of project is most needed given development
requirements at a particular time and place.

B. Preparation
The designing of the identified project in detail so that all the necessary inputs it requires are
properly specified.

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 C. Appraisal
Close analysis/critical review of the prepared project to ensure that it meets relevant planning and
investment criteria and that adequate arrangements for its implementation have been made.
D. Implementation (monitoring)
The physical putting into effect of the project design/plan as appraised. It is during the
implementation stage that most of the capital notionally committed to the project during earlier
stages is actually invested through the physical transfer of material resources (cement, iron bars,
machinery, skilled personnel, etc) into the project.
Monitoring: Monitoring is an integral part of day-to-day management which involves the
provision of regular feedback on the progress of project implementation and the problems faced
during implementation.

E. Evaluation
This is the tracking of progress made with project implementation and the assessment of the impact
of the project. During this stage, an assessment of project results against the objectives is
conducted.

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 COMPONENTS OF A PROJECT CYCLE

Stage 1: Identification
This is the first stage of the cycle. The purpose of this stage is to select potentially feasible projects
that address problems facing the communities or felt needs, that are in line with policy priorities
or that could achieve predetermined production or service delivery targets.
Usually, project suggestions may come from well-informed technical specialists and/or local
communities through their leaders. Project ideas arise from deficit areas where new
investment/expansion might be profitable. Ideas for new projects may also come from proposals
to extend or scale-up existing programmes. For example, a programme to develop water resources
will probably lead to suggestions of additional areas for irrigation. An existing land settlement
programme will probably generate suggestions of new settlement areas. Where inputs are in short
supply, new projects may arise because existing projects become unsuccessful. In this regard the
projects in question must become part of the overall development strategy and a broader planning
process, and as such they must fit in appropriately.
Possible sources of project ideas are the following:
• Well- informed technical specialists and local leaders
• Demand and supply statistics- market trends
• Imports and exports statistics
• National priorities: national development plans and Sustainable Development Goals
(SDGs)
• Sector surveys
• Research findings

Stage 2: Preparation
Once projects have been identified, there begins a process of progressively more detailed
preparation and analysis of project plans/design. Detailed preparation of project plans begins when
ideas have been identified and the basic structure of the project has been agreed on in terms of
specified objectives to be achieved, who the beneficiaries are, geographical coverage,
duration and the estimated cost.
The usual first step in project preparation and analysis is to undertake a pre-feasibility study and
feasibility study that will provide enough information for deciding whether to begin more
advanced planning. A feasibility study is a detailed study undertaken to assess the practicality of
the project. It answers the question “is it doable or is it achievable”. The detail of the feasibility
study will depend on the complexity of the project and on how much is already known about the

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proposal. The feasibility study should define the objectives of the project clearly. It should
explicitly address the question of whether alternative ways to achieve the same objectives may be
preferable, and it will enable project planners to exclude poor alternatives. The feasibility study
will provide the opportunity to shape the project to fit its physical and social environment and to
ensure that it will be high yielding.
Once the feasibility studies have indicated which proposed project will likely be worthwhile,
detailed planning and analysis of the project plan/design may begin. By this time the less promising
alternatives will have been eliminated, but even at this point the selected project will continue to
be redefined and shaped as more and more becomes known.
This is the stage at which detailed studies will commence-the carefully done soil surveys, the
detailed hydrological analyses, the thorough examination of cropping patterns, the month by-
month estimates of labour requirements, the detailed farm budgets, and so forth. Again, all the
aspects of analysis noted in the last section must be considered and correlated so that realistic
estimates can be made of how the project might be implemented and of its likely income-
generating capacity.
Preparation of the plan should itself be planned so that delays can be avoided and resources
conserved. The timing of special studies needs to be considered, and the services of outside
consultants should be scheduled so they will be available when needed-but not before the
consultants' specialized knowledge can be used. The project may be prepared by a special team
assembled for the purpose and given sufficient time and resources, or it may be prepared by a
consulting firm or a technical assistance agency such as the Investment Centre of the Food and
Agriculture Organization (FAO).

Stage 3: Project Appraisal

After a project has been prepared, it is generally appropriate for a critical review or an independent
appraisal to be conducted. Project appraisal is a critical review of the project design/plan to ensure
that it is sound before large amounts of resources are committed. This stage provides an
opportunity to re-examine every aspect of the project design/plan to assess whether the proposal
is appropriate before large amounts of resources are committed. At this stage, costs and benefits
are compered using economic techniques. These techniques help to choose the best project that
will beneficial to the society. The appraisal process builds on the project proposal generated at end
of the design phase but it may involve additional information if the specialist(s) on the team feels
that some of the data are in questionable or strategy is not well thought out or it is not feasible, or
some of the assumptions are erroneous or faulty.
If the appraisal team concludes that the project proposal is sound or feasible the investment/project
may proceed upon a decision to fund the project by the sponsor being reached on the basis of the
appraisal report. But if the appraisal team finds serious flaws in the design it may be necessary for
the appraisal team in consultation with the formulation team to alter the plan or develop an entirely
new plan altogether.

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 It is imperative that the team conducting the appraisal should be separate from the team that
designed the project. The World Bank, for instance, sends separate programming mission at
identification and preparation stages and later an appraisal mission to appraise the proposed
projects that are submitted for funding by member states.
Stage 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 society.
To implement a project means to physically put into effect the project plan in its design, size,
location, cost and timing for the benefit of the society
“The implementation stage covers the actual development or construction of the project up to the
point it becomes fully operational. (Baum and Tolbert, 1995)
Project implementation should be flexible to accommodate events that were not foreseen at design
stage. The project manager must be able to respond intelligibly and timely to these changes because
uncertainties may affect the success of a project.
Changes may be made or not depending on the circumstances. Technical changes are almost
inevitable as the project progresses and more is known about its operating environment or the
effects it is producing. Even as project implementation is underway, project management will need
to reshape and re-plan parts or the entire project. Therefore, Implementation may be viewed as
process of refinement of learning from experience – in fact it is a kind of “mini-cycle” within the
larger project cycle we have outlined.
During this stage, monitoring of all aspects of project activities will be conducted. Monitoring is
continuous process of measuring, recording, processing and communicating information to assist
project management as well as funding agencies and other key stakeholders in decision-making.
It is an integral part of day-to-day management which involves the provision of regular feedback
on the progress of project implementation and the problems faced during implementation.
Monitoring must be undertaken regularly and timely, whether daily (e.g. funds flows), weekly or
monthly or quarterly etc. during the life of the project. Complete data should collect and
documented for current use and future use to assess the impact of the project.

Stage 5: Evaluation
This is the final stage of the project cycle. During this stage, an assessment of project results against
the objectives is conducted. It is the critical examination of an on-going and completed project,
experience, results and actual or potential effectiveness in project implementation. At this stage
you tend to compare the situation before the project and after the project in a particular society or
community. At this stage the analysts look systematically at the elements of success and failure in
the project experience to learn how better to plan for the future.

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Evaluation takes many forms depending on the objectives of the authority that have initiated this
exercise. Evaluation may be undertaken when the project is in trouble as the first step in planning
effort. This type of evaluation is referred to as the Project Audit. Evaluation should also be
undertaken when a project is terminated (Terminal Evaluation). Evaluation is usually undertaken
during project implementation (mid-term/on-going evaluation) and at the end or years after the
end of the project (Ex-post Evaluation).

The objectives will vary depending whether the evaluation is to be carried out by persons outside
or inside the organization. Persons outside the project who are not closely associated with its
formulation and/or implementation (including its monitoring) are often required by the
funding/donor agency to evaluate the use of its investment resources in both physical and financial
terms.
Each objective should be examined to determine whether it was considered carefully and whether
appropriate provision was made. Other questions that should be asked during evaluation include
the following:
• Was the proposed technology appropriate?
• Were the institutional, organizational and managerial arrangements suited to the
conditions?
• Were the commercial aspects properly considered?
• Were the financial aspects carefully worked out on the basis of realistic technical
specifications and assumptions?
• Were the estimates of costs and benefits realistic?
• Were the economic implications properly explored?
• How did the project in practice compare with each aspect of project analysis?
The evaluation should also consider the response of project management and the sponsoring
agencies to changing circumstances:
• Did management respond quickly enough to changes?
• Was its response carefully considered and appropriate?
• Did the institutional and organizational structure in the project offer a flexible response?
• How could the project structure be altered to make the response to change more flexible
and appropriate in the future?

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NOTE: Most donor agencies and central government financing agencies request for a project
completion report from the project implementers. The project completion report describes and
evaluates each component of project identification, appraisal and implementation. The results of
the studies, as presented in the project completion report are often used to determine how benefits
are distributed among various social economic groups and identify new projects. From evaluation
should come carefully considered recommendation about how much to improve the
appropriateness of each aspect of the project design so that the plans for the future can be better?
In addition to this, the project completion report would also provide lessons learnt which are
important for implementation of future projects.

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