1

12/27/21
PROJECT PLANNING AND ANALYSIS

 CHAPTER TWO: THE PROJECT CYCLE

 
PREPARED BY: ABDI SHAKUR M. HUSSEIN ELMI
 2
THE PROJECT CYCLE

 A project cycle is the different stages through which a project passes or it is a sequence of
events, which a project follows.
 There are several models of project cycles. Some of them are:
1. traditional approach
2. process approach of the World Bank project cycle,
3. the European Union project cycle,
4. the Asian Development Bank project cycle,
5. the Integrated Planning and Management project cycle,
6. the UNIDO project cycle etc 12/27/21
 3
Cont…

 The first and most well known model is the traditional version of the World Bank developed in
1970s, with four main stages which further developed into five in 1978 to close the cycle and
known as Baum cycle. The stages are
1. Identification
2. Preparation (pre-feasibility and feasibility studies)
3. Appraisal
4. Implementation
5. Evaluation

12/27/21
 4
Identification

 The first stage in the project cycle is to find potential projects. Identification of promising
investment opportunities requires imagination, sensitivity to environmental changes, and a
realistic assessment of what the firm can do.
 In general, the following are the major sources from which ideas or suggestions for project
may come:
1. Technical specialists,
2. Survey conducted by local government and regional organizations, their policies & plans,
3. Review of past projects,
4. State enterprise, corporate, and cooperatives plans,
12/27/21
 5
CONT…

5. Development banks and donors,

6. Entrepreneurs,
7. Bright ideas etc.

12/27/21
 6
CONT…

 The identification of project ideas is based on several aspects of development.

1. Need - a need assessment survey may show the need for intervention
2. Market demand - domestic or overseas
3. Resource availability - opportunity to make available resources more profitable
4. Technology - to make use of available technology
5. Natural calamity - intervention against natural calamity such as flood or drought
6. Political considerations

12/27/21
 7
Project Preparation and Analysis Phase

 Once project ideas have been identified the process of project preparation and analysis starts.
 Project preparation must cover the full range of technical, institutional, financial and
economic conditions necessary to achieve the project’s objective.
 It involves generally two steps:
1. Pre-feasibility studies
2. Feasibility studies

12/27/21
 8
CONT…

 Pre-feasibility Study: At the pre-feasibility study stage the analyst obtains approximate
valuation of the major components of the projects
 Some of the main components examined during the pre-feasibility study include:
1. Availability of adequate market
2. Project growth potential
3. Investment costs, operational cost and distribution costs
4. Demand and supply factors; and
5. Social and environmental considerations

12/27/21
 9
CONT…

 Using pre-feasibility study, If the project appear viable the analysis will be
carried to the feasibly stage.

12/27/21
 10
CONT…
 The major difference between the pre-feasibility and feasibility studies is the amount of work
required in order to determine whether a project is likely to be viable or not
 Feasibility study provides a comprehensive review of all aspects of the project such as
marketing, technical, financial, economic, and ecological aspects.
 At this stage a team of specialists (Scientists, engineers, economists, sociologists) will need to
work together. At this stage more accurate data need to be obtained and if the project is viable
it should proceed to the project design stage.

12/27/21
 11
CONT…

 The feasibility report should contain the following elements:

1. Market analysis
2. Technical analysis
3. Institutional and organizational analysis
4. Financial analysis
5. Economic analysis
6. Social analysis, and
7. Environmental analysis
12/27/21
 12
Appraisal
 The feasibility study would enable the project analyst to select the most likely project out of
several alternative projects.
 The question - is the project worthwhile or not? Wide ranges of appraisal criteria have been
developed to judge the worthwhile of a project.
 They are divided into two broad categories, non-discounting criteria and discounting criteria.
 To apply the various appraisal criteria suitable cut off values (hurdle rate, target rate, and cost
of capital) have to be specified.
 The level of risk influences the worthwhile of the projects. Risk analysis remains the most
intractable part of the project evaluation exercise.
12/27/21
 13
CONT…

 This exercise also involves the undertaking of detailed engineering design; manpower and
administration requirement as well as marketing procedures should be finalized.

12/27/21
 14
Implementation
 Project implementation is a phenomenon by which project studies are translated into reality
within their specified time and budget.
 The implementation phase is very crucial to the success of the project.
 Project implementation involves a number of activities which are interrelated. This stage
could be divided into, among others, scheduling, financing, negotiation and contracting,
discussing, constructor training, erection, installation and commissioning.
 If any one of these are not undertaken properly, the progress of the implementation will be
affected adversely.

12/27/21
 15
 Activities for implementation stage

First: Project implementation and management:

 Project management represents a vital component of project implementation.
 Enterprises must set up the suitable organizational work structure in order to secure effective and
efficiency management and smooth implementation of the project.
Second: Review of the progress of project implementation:
 During the implementation, it is common to review a number of factors having direct or indirect effect on
successful implementation. For example;
 if the design of constructing, say for building construction is not undertaken properly construction will be
affected bearing a negative multiplier effect on the implementation of the project as a whole and vice-versa.
 Thus, the progress of building construction and procurement and installation of machinery and equipment
determine the progress of project implementation. 12/27/21
 16
CONT…

Third: Implementation schedule:

 The plan or schedule of various activities to be undertaken in the implementation of project
undertaking calls the need for implementation schedule.
 Effective project implementation is impossible without a project schedule setting time goals
for individual activities and events.
 For expeditious implementation at a reasonable time, the following are helpful
1. Critical Path
2. Arrow Diagramming
3. Bar Charts etc.
12/27/21
 17
CONT…

Fourth: The transition from project preparation to implementation:

 Establishing a project management unit prior to project approval is desirable to ensure
continuation of project staff from the earlier stages of project identification and preparation.
 Therefore, promoters must be encouraged to at least a small project cell, preferably with the
prospective project director (manager), to ensure continuity and commitment of the executing
organs at different stages of project processing.

12/27/21
 18
CONT…

Fifth: Assessing implementation capacity:

 Among the principal factors contributing to difficulties in project implementation and
subsequent weaknesses in project quality and viability, are weaknesses or over optimism in the
initial assessment of implementation capacity.
 Projects should be designed to suit the implementation capacity of the project promoter or
capacity of the executing company. Promoters/institutional capacity analysis is required to
ensure efficient implementation sustainability.

12/27/21
 19
CONT…

Sixth: Strengthening/Capacity
o The capability of promoters to undertake project identification, formulation and
implementation is critical to project implementation success.
o Strengthening the capacity of the promoter is as important as the design and formulation of the
project.

12/27/21
 20
CONT…

Seventh: Major causes of delay in project implementation:

1. Quality and caliber of staff and staff incentives. Termination of job before completion of
project
2. Implementation planning and scheduling capacity
3. Budgetary practices and consultant selection practices
4. Constructor selection and contract award practices/inappropriate technology
5. Construct supervision practices
6. Procurement practices
7. Degree of understanding of Bank’s guidelines, procedures practices 12/27/21
 21
CONT…

8. Status, authority, and mandate of executing/implementing agencies

9. Extent of intra/inter agency coordination
10. Inadequate project preparation and over optimistic appraisal.

12/27/21
 22
CONT…

Eight: Reducing costly implementation delays:

 Given the time lag between project inception, project preparation, appraisal and actual
implementation, there is a likelihood that certain key assumptions maintained at project
design would no longer be valid.
 Conditions (whether technical, financial or economic) affecting the project environment
should be reassessed together with the relevance of project implementation, especially during
the initial stages.

12/27/21
 23
Follow-up, Monitoring and Evaluation

 Follow-up: Follow-up is a method by which a project promoter keeps a watch on the progress
or project implementation.
 follow-up is basically necessary for project success.
 Monitoring and Evaluation:
 Monitoring provides project management with information about current and emerging
project, problems and data to assess if the project objectives remain valid.
 Evaluation, in the context of project implementation, is an ongoing activity used to reassess
components necessary to meet project objectives in the light of experience as implementation
proceeds.
12/27/21
 24
CONT…

 Basic definition of dimensions of evaluation can be summarized as economy, efficiency,

effectiveness, equity, environment and ethics.
1. Economy:- is the simplest criterion. It refers to how cheaply the inputs can be purchased.
2. Efficiency:- is the more usual focus of evaluation measurement. It means the relationship
between inputs and outputs; usually expressed as a ration.
3. Effectiveness:- has a wide range of meanings. It means trying to find out whether the
business firm is actually doing what it sets out to do.
4. Equity: is often regarded as a key aspect of evaluation. It refers to whether the business firm
treating its clients, consumers and the society equally when they are in similar situations.
12/27/21
 25
CONT…

THE END
12/27/21