W E L C O M E

Project analysis and evaluation

BY
ATAKELT HAILU ,
MBA,M.COM & Ph.D.
DEPT. OF MANAGEMEN
ALPHA UNIVERSITY
 SCOPE OF THE COURSE
1. Overview of project analysis and evaluation
2. Project life cycle
3. Project identification and screening
4. project analysis
 Market/demand analysis
 Technical analysis
 Financial analysis
 Economic Analysis
 Environmental impact analysis
5. Project selection, financing and implementation
6. Project management
7. Guideline of Ethiopian investment authority for the preparation of project
profile
Assessment
Project work=30%
Article review=10
Individual assignment=10
Final exam=50
 Chapter One
Chapter Outline:
1. Overview of project analysis and evaluation
1.1 Concept of a project
1.2 Project Parameters
1.3 Characteristics of a project
1.4 Classification of project
1.5 Project analysis
1.5 Project evaluation
1.6 Project management
1.7 Project success /failure
 1.1 Definition of Project
Project is defined as an organized program of pre
determined group of activities that are non-routine in
nature and that must be completed using the available
resources within the given time limit.
Project involves a set of activities to be performed to
accomplish its objectives.
Another aspect of project is the non-routine nature of
activities.
A project consumes resources i,e. materials, human,
finance/money and time are required to complete the
project
Time limit-project typically has a distinct mission that it is
designed to achieve and a clear termination point is the
achievement of the mission”.
• It has starting and end time. Successful project achieve its objective within
 Definition ……..
 It is a temporary endeavour undertaken to create a unique
product or service that has:
 Specific objectives to be completed within a certain
specification
 Defined start & end dates
• Temporary means that every project has a definite end.
 Funding limits and consumes resources
 Unique means that the product or service is different in
some distinguishing way from all similar products or
services.
• It is different from other projects with regarded to
the financial requirements, skill requirements, users,
managers, and technology requirements. Etc
Comprehensive definition:
• Project is a temporary endeavor involving a connected
sequence of activities and a range of resources, which is
designed to achieve a specific and unique outcome,
which operates within time, scope, cost and quality
constraints and which is often used to introduce change
(Lake, 1997).
• Key concepts:
• Purpose-the basic reason for the existence of a project- to solve a
problem, address a need or take the advantage of opportunity.
• Temporary: means that a project is something that has a specific
start date and a specific end date.
• Sequences of Activities: the works and the steps we perform and
the methods and knowledge we use to achieve the project
objective.
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Resources: A project utilizes a variety of resources [human,
financial, material, information, etc] to carry out the
activities or tasks.
Unique Outcome: A project brings about a unique product
or service - something that has not existed in the
organization here-to-fore.
Scope- the extent of the problem or opportunity that the
project needs to address.
Time: any project should be time bounded-it has a start and
end time
Cost: activities consume human, financial and material
resources.
Quality: the project needs to produce quality products to
maximize the satisfaction of the users.
Introduce change: A project is often used as an instrument7
Example of projects
• In Ethiopia, we have been investing large amount of money in projects related to
industry, minerals, power, transportation, irrigation, education etc. with a view to
improve the socio-economic conditions of the people.
1. Governmental projects –Recent Trends
 Roads Projects
• Example. Road to connect Addis to Adama
 Hydropower and Wind energy Projects
 The Grand Ethiopian Renaissance Dam Project
 Gilgel Gibe I, II, and III, Tekeze, Tana Beles, Fincha, etc.
• Wind energy (around Mekele & Adama)
 Buildings projects
 Housing projects at federal & regional state level :-Build low cost/condominium
houses
 building universities and Many health centers
• Water Supply and Irrigation projects
• Railway project
 Addis Ababa city rail ways
2. organizational projects
 New business establishment,
 Expansion of existing business,
 Launching new product,
 A company develops a driverless car
 Cont…
• A major misconception about a project is relating it to only
construction or creation of such physical facilities as
buildings, roads and dams.
• However, project may involve intangible things such as:-
• Creation of awareness (e.g. about HIV/AIDS),
• eradication of diseases (e.g. polio vaccination),
• combating harmful practices (e.g. genital mutilation) and
• capacity building (e.g. training to enhance service
delivery capabilities of public sector employees).
• Thus, projects may range from physical or technical
(construction of physical facilities) to mixed (involving both
physical and nonphysical things) to nonphysical (dealing
purely with behavioral aspects of an organization).
 1.2 Classification of project
• Projects can be classified based on several criteria.
• It can be classified based on the following bases.
1. Based on ownership
2. Based on purpose
3. Based on locality
4. Based on resource use
5. Time horizon
1. Based on ownership
A. Private sector projects-mostly projects undertaken by business
enterprise.
• It is undertaken by investors with the main objective of earning profit
B. Public sector- project undertaken by the national and local
government body with the objective of improving the livelihood of
citizens without expecting any return from citizens consuming the
goods and services of these projects.
C. NGO’s- developmental projects are most often undertaken by non-
government and not for profit organizations.
 Types…Count.
2. Based on purpose
A. New projects: New investment is designed to establish a new
productive process independent of previous lines of
production.
• They often include a new organization financially
independent of existing organization.
B. Expansion projects: they involve repeating or expanding an
existing activities with same output, technology and
organization.
C. Updating projects: they involve replacing or changing some
element in an existing activity without a major change of
output.
• They involve some change in technology but within the context
of an existing through possibly reformulated organization.
 Types..Continued…
3. Based on locality
A. Regional: projects undertaken in particular region and
benefit only that region.
• They are under the control of regional government.
B. National: projects undertaken by the federal
government and all or may stat/regions will get benefits
from them.
• E.g. constructing universities, dams for electric power etc.
C. International: projects that involve many countries.
• E.g. developmental projects undertaken by world bank.
 Types…Continued…
4. Based on resource use:
A. capital intensive projects: projects which largely use machinery in
the manufacturing process.
• It is highly depend on physical facilities and technology (e.g.
chemical, beer factory and steel industries)
B. Labor intensive projects: project which largely use human labor in
the production of output. E.g.
• It is highly depend on human capital (E.g. Salt production ,
service and agricultural projects in developing countries)
C. Energy intensive projects: project which consume large amount of
energy(e.g. electricity power) in the manufacturing process.
• E.g. Marble factory
 Types..contd
5. Time horizon – this is based on the time period
the project takes to become operational.
– short-term projects cover less than 5-year period of
time;
– medium-term projects cover between 5 to 10 years;
and
– long-term projects cover above 10-year period of time.
 1.3 CHARACTERISTICS OF PROJECT
1. Objectives :
 A project has a set of objectives or a mission.
 Once the objectives are achieved the project is treated as completed.
2. Life span:
 the life span representing the start and end of a project are
specified in the objectives.
 It has defined start and end dates so that is why it is temporary
3. Life cycle :
 A project has a life cycle. The life cycle consists of five stages i.e.
conception stage, definition stage, planning & organizing stage,
implementation stage and commissioning stage.
 Cont……
3. Uniqueness :
● Every project is unique and no two projects are similar.
– The input and output of one project is different from other.
● A project is considered to be a unique endeavour in

various terms including its size, complexity, duration,

timing, location, stakeholders, design, objective,
financial requirements, skill requirements, users,
managers, technology requirements and other several
variables.
4. Consume human and nonhuman resources (i.e., money,
people, equipment)
it Involves multiple resources, both human and non human

Resources
 Capital
 Materials
Products
 Equipment Integrated
Inputs  Facilities Processes Services Outputs
 Information Profits
 Personnel
 Count.
5. Risk / uncertainty :
 Risk/ uncertainty go hand in hand with project.
 There is risk /uncertainly associated with a given project.
 There is no risk-free project
 Risks are things that could cause the project to:
 Fail
 Be delayed
 Require additional budget
 Require additional personnel
6. Control mechanism:
 All projects will have pre designed control mechanism to ensure
completion of the project within time schedule , within
estimated cost and achieving the project specifications with
desired level of quality and reliability.
 Cont.. features of a project
7. has a long-term effect: impact extends far into the future.
• Present outlays generate benefits in the future.
8. irreversibility: a project once implemented may not be
reversed. In other words, the time and cost spent on an ill-
conceived project may not be recovered at all or without a
substantial loss.
9. substantial outlay: a project often demands a substantial
outlay implying that any fault in its design or
implementation leads to a huge loss.
 1.4 Project Parameters/constraints
• There are five parameters that constrain the operation of every project:
• Scope
• Quality
• Cost
• Time
• Resources
• These constraints are interdependent set implying that a change in one
can cause a change in another to restore the equilibrium of the project.
Scope
– It is a statement that defines the boundaries of the project.
– It tells not only what will be done to produce the project’s end
result but also what will not be done.
 Continued…
Quality
– Two types of quality are part of every project.
– The first is product quality.
• This refers to the quality of the deliverable from the project.
– The second type of quality is process quality, which is
the quality of the project management process itself.
• The focus is on how well the project management
process works and how can it be improved.
Cost
– The money spend for doing the project is another
variable that defines the project.
– Cost is a major consideration throughout the project
management cycle.
 Continued…
Time
• The time constraint refers to the amount of time available to
complete a project.
• The objective for the project manager is to use the future time
allotted to the project in the most effective and productive ways.
Resources
• Resources are assets, such as people, equipment, physical facilities,
or inventory that have limited availabilities, can be scheduled, or
can be leased from an outside party.
• Some are fixed; others are variable only in the long term.
 1.5 Project life Cycle (discuss in ch 2)
 It is the stages through which the project passes from

inception to its completion.

 A cycle that shows the development of an investment project

from the stage of the initial idea until the project/plant is in

operation
…Project life cycles

Project Life cycle(Chandra)

1.Planning

6. Review 2.Analysis

5.
3.Selection
Implementation

4. Financing
 ….Project life cycles

1. Planning
 involves identifying an economically or
financially worthwhile project idea
 also involves conducting a preliminary
screening
2. Project Analysis
 Project analysis refers to analysing a project from various
perspectives so as to determine its viability and sustainability.
 Project analysis consists of :
 Market/demand analysis: -potential market and market share
 Technical analysis :-technical viability -availability
/affordability/ appropriateness of technology, experts and
material input, suitability of production process, technology,
location,
 Financial analysis:-estimation of project cost, revenue and
funds requirement(risk and return )
 Economic Analysis:- benefit and cost- overall economic
benefits of a proposed project exceed its costs
 Environmental impact analysis (Environmental and social
cost benefit analysis)
 Risk Analysis: source of risk with its consequence will be
analysed
 ….Project life cycles
3. Selection
decision as to whether to accept or reject a
project
4. Financing
 identifying the source of funds for covering
project costs
5. Implementation
translating a project idea into a tangible project
6. Review
assess whether what has been projected
comforms to the reality or not.
 1.6 Project Evaluation
• On-going and final assessment of the success of the project
against original objectives, to learn lessons to help improve
future projects.
• compare actual progress with the plans
• judge whether the decisions and actions taken were reasonable
and useful
• This is a process of determining systematically and objectively
the relevance, efficiency, effectiveness and impact of the project
in light of its objectives.
 1.7 Project Management
• Project management is the process of planning, controlling
and directing a project from its inception to its completion,
in a given time, at given cost, and for a given purpose.

• Project management is the application of knowledge,

skills, tools and techniques to project activities in order to
meet project requirements [PMI, 2008].

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 1.8 Reasons for Project Failure
• These reasons seem to blame the project manager:
– Poor planning
– Insufficient risk management
– Insufficient quality assurance
– Inadequate support
– Reluctance to follow up the project
implementation
• Who is really responsible for these problems?
– The project manager
 Project success is defined as the completion of an
activity within the constraints of time, cost, and
performance/quality.
 Therefore, Successful project management require
completion of the project :
 Within time-doing it quickly or on schedule
 Within cost-doing it cheaply or on budget
 At the desired performance/technology level
 project met scope, time, and cost goals
 And utilizing the assigned resources effectively and
efficiently
 Accepted by the customer/stakeholders(The project
satisfied the customer/sponsor)
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End of chapter one

Copyright 2016 32