CHAPTER ONE

1. INTRODUCTION TO PROJECT MANAGEMENT

LEARNING OBJECTIVES:
After you have completed this chapter of the course, you will be able to:
 Define project and project management
 List and explain the reasons for establishing projects
 Identify the characteristics of a project and attributes of good project manager
 Present the parameters of projects
 Present the classification of project
 Differentiate program and project with their interrelationship
 Understand the overall concepts of project cycle management
 Realize the project planning system in Ethiopia context

Chapter Introduction

Today you are about to start exploring all fascinating

issues of project management and to understand the value of project management, it
is necessary to understand the fundamental nature of a project; the core
characteristics of project management processes; how success is evaluated, the roles,
responsibilities, and activities of a project manager and the expertise required; and the
context in which projects are performed? Many people and organizations today have a new
or renewed interest in project management. In the past, project management primarily
focused on providing schedule and resource data to top management in just a few industries,
such as the military and construction industries. Today‘s project management involves much
more, and people in every industry and every country manage projects.
This chapter introduces the learner to the meanings of projects and project management,
pinpoints the characteristics of a project and reasons for establishing project, discourse the
classification of projects and defines format and parameters of projects and the differences
between project, program, and plan with their interrelationship and the chapter also host the

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learner to know the overall project cycle management and methods of project planning in our
country setting.
1.1 Concept of Project and Project Management

1.1.1 What Is A Project

You might have heard the term project in you daily life/work place. Even you may have
some knowhow from the previous management courses. The term ―Project‖ has a wider
meaning. A project is accomplished by performing a set of activities. For example,
construction of a house is a project. The construction of a house consists of many activities
like digging of foundation pits, construction of foundations, construction of walls,
construction of roof, fixing of doors and windows, fixing of sanitary fittings, wiring etc. The
construction of a house is accomplished by performing the set of activities. Another aspect of
―project‖ is the non-routine nature of activities. Each project is unique in the sense that the
activities of a project are unique and non-routine. There are almost as many definitions of
project.

 The dictionary meaning of project is that is a scheme, design a proposal of something

intended or devised to be achieved.
 According to Encyclopedia of management, ―a project is an organized unit dedicated
to the attainment of goal—the successful completion of a development project on
time, within budget, in conformance with predetermined programme specifications.‖
 Newman and his associates define that ―a project has typically has a distinct mission
that it is designed to achieve and clear termination point, the achievement of the
mission.
 Gillinger defines project ―as a whole complex of activities involved in using
resources to gain benefits‖.

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  According to Harison, a project can be defined as a non-routine, non-repetitive, one-
off undertaking, normally with discrete time, financial and technical performance
goals.
 According to Little & Mirrless, a project is any scheme or part of a scheme for
investing resources which can be reasonably analyzed and evaluated as an
independent unit.
 Project Management Institute, USA defines project as ‗a system involving the co-
ordination of a number of separate department entities throughout the organization
and which must be completed within prescribed schedules and time constraints.
 Project Management Vocabulary, which states that a project is:
„A unique process, consisting of a set of co-ordinated and controlled activities with
start and finish dates, undertaken to achieve an objectives conforming to specific
requirements, including constraints of time, cost and resources.‟
 Now, a project can be defined as a scientifically evolved work plan devised to
achieve a specific objective within a specified period of time.

Project can differ in their size, nature of objectives, scope cost, time duration and complexity.
However all projects partake of the following basic attributes:
 A start and a finish
 A life cycle involving a series of phases in between the beginning and end
 A budget
 A set of activities which are sequential, unique and non-repetitive
 Use of resources which may require coordinating
 Centralized responsibilities for management and implementation
 Defined roles and relationships for participants in the project

1.1.2 What Is Project Management?

Project Management in recent years has proliferated, reaching new heights of sophistication.
It has emerged as a distinct area of management practices to meet the challenges of new
economic environment, globalization process, rapid technological advancement, and quality

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concerns of the stakeholders. Project management is the application of knowledge, skills,
tools and techniques to project activities to meet project requirements.
Project management is an organized venture for managing projects, involves scientific
application of modern tools and techniques in planning, financing, implementing,
monitoring, controlling and coordinating unique activities or task produce desirable outputs
in accordance with the determined objectives within the constraints of time and cost.
The PMBOK® Guide definition of project management is the ―application of knowledge,
skills, tools, and techniques to project activities to achieve project requirements. Project
management is accomplished through the application and integration of the project
management processes of initiating, planning, executing, monitoring and controlling, and
closing.‖
Project management is the art of matching a project's goals, tasks, and resources to
accomplish a goal as needed. We say "as needed" because one has limited time, money, and
resources (human and machinery) with which to accomplish a goal. One can think of a
project as a process. Figure 1 shows this process as a simplified block diagram.

Input: Outputs:
Goal
Team Deliverables
$ Project Product/ services
Time
Equipment
Figure 1.1: Simple Project Management System
The process involves inputs and outputs. Successful projects "do the right things, with the
right tools, and in the right way".
Project management is a methodical approach to planning and guiding project
processes from start to finish. It is the method of planning the plan. It starts from
project definitions and ends with goal achievement.
1.2 Project Characteristics

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Despite above diversities, projects share the following common characteristics. Major project
characteristics are as below:
a. Objectives:
A project has a set of objectives or a mission. Once the objectives are achieved, the project
is treated as completed. For example the objective of a project may be construction of a
highway connecting two cities ‗A‘ & ‗B‘, covering a distance of 20 kilometers. Once the
construction of the highway is completed the project comes to an end.

b. Life cycle
A project has a life cycle. The life cycle consists of the following stages:
Conception stage : Where project ideas are conceived.
Design stage : Where detailed design of different project areas are worked out.
Implementation stage : Where the project is implemented as per the design.
Commissioning stage : Where the project is commissioned after implementation.
Commissioning of a project indicates the end of its life cycle.

c. Definite Time Limit

A project has a definite time limit. It cannot continue forever. Construction of a highway
connecting two cities is a project which is to be completed within a given time limit.
Maintenance of the highway is an ongoing process and it will continue forever. Hence
highway maintenance will not come under the purview of project.
d. Uniqueness
Every project is unique and no two projects are similar. Setting up a Cement plant and
construction of a highway are no doubt two different projects having unique characteristics.
Constructing a highway between cities A&B and constructing another highway between
cities C&D are also unique in themselves, in view of the differences existing in the
organization, infrastructure, location, technical specifications and the people behind the
projects.
e. Team work

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A project normally consists of diverse areas. There will be personnel specialized in their
respective areas. Any project calls for the services of experts from a host of disciplines. Co-
ordination among the diverse areas calls for teamwork. Hence a project can be implemented
only with teamwork.
f. Complexity
A project is a complex set of activities relating to diverse areas. Technology survey,
choosing the appropriate technology, procuring the appropriate machinery and equipment,
hiring the right kind of people, arranging for financial resources, execution of the project in
time by proper scheduling of the different activities etc. contribute to the complexity of the
project.

g. Sub-contracting
This characteristic stems forth in view of the complexity of functions and activities of a
project. Some of the activities are entrusted to sub-contractors to reduce the complexity of
the project. Subcontracting will be advantageous if it reduces the complexity of the project
so that the project manager can coordinate the remaining activities of the project more
effectively. In general, the greater the complexity of the project, the larger will be the extent
to which sub-contracting will be resorted to. Sub-contracting is also helpful if the sub-
contractors are specialized in their field of activity since this will improve the quality of the
project.

h. Risk and Uncertainty

Risk and uncertainty go hand in hand with project. A risk free project cannot be thought of.
Even if a project appears to be risk free, it only means that the risk element is not apparently
visible on the surface and it will be hidden underneath. The risk factor will come to surface
when conditions become conducive to it. Some of the risk elements can be foreseen and the
project can be strengthened to encounter the risk as and when it emerges. Some other risk
elements cannot be foreseen. For example, assume that putting up a cotton yarn-spinning
mill is the project on hand. If during the project feasibility study it is learnt that there has
been a gradual shift among consumers from the usage of cotton yarn to the usage of
synthetic yarn, and if it is apprehended that at one stage synthetic yarn will rule over, the

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machinery can be so chosen that they can be used for both types of yarns. If this is not
entirely possible, the choice of machinery can be so done as to avoid major conversion cost
while switching over from the manufacture of cotton yarn to the manufacture of synthetic
yarn in case the need arises. Such eventualities can be foreseen and planned for. On the
other hand the sudden entry of a strong competitor who can upset all our forecasts and
projections cannot be anticipated. Sudden fall of Government in a country, which is not
anticipated may turn the calculations wrong and make the forecasts/projections meaningless.
i. Customer Specific Nature
A project is always customer specific. This is because the products produced or services
offered by the project are necessarily to be customer oriented. It is the customer who decides
upon the product to be produced or services to be offered and hence it is the responsibility
of any organization to go for projects/services that are suited to customer needs.
j. Change
A project is not rigid in its life span. Changes occur throughout the life span of a project as a
natural outcome of many environmental factors. The changes may vary from minor changes
which may have very little impact on the project to major changes which may have a big
impact or even may change the very nature of the project.
During the course of implementation, the technology would have improved further and
equipment‘s with the latest technology would have already started arriving. In such a case, if
the equipment originally planned had not yet been procured, it would be wise to switch over
to the equipment with the latest technology. There could also be latest technological
innovations in the manufacturing process which may deserve a switch over. All such
changes are necessitated in order to keep the project update.
k. Responses to Environments
Projects take shape in response to environments. Indian Government soon after
independence set up major projects in the public sector, in the sectors of iron and steel, coal,
power generation, heavy equipment‘s manufacture etc. This was in tune with the then need
for the development of infrastructure and heavy industries.
l. Forecasting
Forecasting the demand for any product/service that the project is going to produce is an
important aspect. Only if the forecast gives positive indications, the project is taken up for

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 further study. Thus, all projects involve forecasts and in view of the importance attached to
forecasts, they must be accurate and based on sound fundamentals.
m. Rational Choice
Since a project is a scheme for investing resources, the choice of a project is done after
making a study of all the available avenues for investing resources and a rational choice
among the available avenues is made.
n. Optimality
A project is always aimed at optimum utilization of resources for the overall development of
the organization/economy. Resources are scarce and resources have a cost. Hence, optimum
utilization of resources is a must for any project. Many project management concepts have
evolved with the aim of achieving optimum utilization of available resources.

o. Control Mechanism
All projects will have pre-designed control mechanisms in order to ensure completion of
projects within the time schedule, within the estimated cost and at the same time achieving
the desired level of quality and reliability.

1.3 Attributes of a Good Project Manager

Traditionally, the project manager has been trained in skills such as developing and
managing the project scope, estimating, scheduling, decision making, and team building.
Although the level of skills needed by the project manager depends largely on the project
profile, increasingly the people skills of the project manager are becoming more important.
The skills to build a high-performing team, manage client expectations, and develop a clear
vision of project success are the type of skills needed by project managers on more complex
projects. ―To say Joe is a good project manager except he lacks good people skills is like
saying he‘s a good electrical engineer but doesn‘t really understand electricity.
Because project managers generally operate in a project environment that is more time
sensitive and goal driven, the successful project manager requires additional knowledge,
skills, and abilities. An effective project manager is one who should have the following
skills/capacities.

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Strategic Management handout 2020

 Planning and organizational skills  Effective time management

 Personnel management skills  Capacity to relate current events to
 Communication skills the project/project management
 Change orientation  Ability to handle project
 Ability to solve problems in their management software tools/packages
totality  Flair for sense of humor
 High energy levels  Solving issues/problems immediately
 Ambition for achievement without postponing them
 Ability to take suggestion  Initiative and risk taking ability
 Understanding the views of project  Familiarity with the organization
team members and having a  Tolerance for difference of opinion,
sympathetic attitude towards them delay, ambiguity
 Ability to develop alternative actions  Knowledge of technology
quickly  Conflict resolving capacity
 Knowledge of project management  Team building skills
methods and tools  Resource allocation skills
 Ability to make self-evaluation  Entrepreneurial skills

1.4 Reasons for Establishing Projects

Projects are generally established for one of two reasons. In one case, there is an
opportunity for the company. It could be an opportunity to get into a new market, to offer a
better service to customers, to introduce a new capability, etc. This could be an enhancement,
or something brand-new. But an opportunity exists to do something better or to do something
different. We can establish a project to take advantage of this opportunity.
Or, a project might be established to solve a problem. Possibly some equipment is not
meeting service requirements, or some process is not as efficient as desired, or does not

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produce the customer satisfaction it should. Maybe someone just cut a major backbone fibre,
which now has to be repaired. Or the data collected by the billing system is not consistent
with the billing in the network-provisioning database. Or the process used to assess the
results of trouble reports is not providing information quickly enough to allow proactive
solutions. Something is wrong and a project is established to find and implement a solution to
the problem.

1.5 Project Parameters

Three major dimensions that define the project performance are scope, time, and resource or
costs. These parameters are interrelated and interactive. The relationship generally
represented as an equilateral triangle. The relationship is shown in figure 1.2.

Time Cost

Performance

Scope
Figure 1.2: Project Parameters Dimensions
It is evident that any change in any one of dimensions would affect the other. For example,
if the scope is enlarged, project would require more time for completion and the cost would
also go up. If time is reduced the scope and cost would also be required to be reduced.
Similarly any change in cost would be reflected in scope and time. Successful completion of
the project would require accomplishment of specified goals within scheduled time and
budget. In recent years a fourth dimension, stakeholder satisfaction, is added to the project.
However, the other school of management argues that this dimension is an inherent part of
the scope of the project that defines the specifications to which the project is required to be
implemented. Thus the performance of a project is measured by the degree to which these
three parameters (scope, time and cost) are achieved.
Mathematically
Performance = f (Scope, Cost, Time)
P = f ( S, C,T)

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Strategic Management handout 2020

In management literature, this equilateral triangle is also referred as the ―Quality triangle‖ of
the project.
1.6 Project Classifications

The term ‗taxonomy‘ refers to the science of classifying things by naming and identifying
them. Projects can be classified under different heads; this project classification helps in
expressing and highlighting the essential features of project. Different authorities have
classified projects differently. The following are some of the important classification of
projects.

(1) Quantifiable and Non-Quantifiable Projects

Quantifiable projects are those in which possible quantitative assessment of benefits can
be made. Non-quantifiable projects are those where such assessment is not possible.
Projects concerned with industrial development, power generation, mineral development
fall in the first category while projects involving health, education and defense fall in
the second category.
(2) Based on the Type of Activity
Under this category, projects can be classified as industrial projects and non-industrial
projects. Industrial projects are set up for the production of some goods. Projects like health
care projects, educational projects, irrigation projects, soil conservation projects, pollution
control projects; highway projects, water supply projects etc. come under the category of
non-industrial projects. Investments in non-industrial projects are made by the Government
and the benefits from such projects are enjoyed by the entire society of people. It is also
difficult to quantify the benefits enjoyed by the society out of non-industrial projects.

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 (3) Based on the Location of the Project
Under the category, projects can be classified as national projects and international projects.
National projects are those set up with in the national boundaries of a country, while
international projects are set up in other countries. International projects may be either
project set up by the Government or by the private sector. The following are the major forms
of international projects.
 Setting up of fully owned subsidiaries abroad
 Setting up of joint ventures abroad
 Setting up of projects abroad by way of mergers & acquisitions
Handling of international projects needs more expertise and greater efforts in view of
higher risk proportion and procedural formalities involved.
(4) Based on Project Completion Time
Based on the constraints on project completion time, projects can be classified into two types,
viz., normal projects and crash projects. Normal projects are those for which there is no
constraint on time. Crash projects are those which are to be completed within a stipulated
time, even at the cost of ending up with a higher project cost. For example, construction of
canal lining with the condition that the work should be completed before the monsoon starts
is a crash project.
(5) Based on Ownership
Based on ownership, projects can be classified into private sector projects, public sector
projects and joint sector projects.
A private sector project is one in which the ownership is completely in the hands of the
project promoters and investors. Profit maximization is the prime objective of private sector
projects since the investors invest their money in such projects only with the sole idea of
earning better returns.
Public sector projects are those that are owned by the state. The evolution and growth of
public sector enterprises is the natural consequences of the efforts of Governments for
undertaking development in a country. The growth of public sector enterprises varies from
country to country. In a country that follows only the system of private enterprises (USA, for
example) there is hardly any public sector enterprise except for essential sectors like defense
sectors, public utility services etc. In socialist countries (China, for example) public

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enterprises dominate the economy and they have become public property. In countries that
follow a system of mixed economy (India, for example) both private and public sector
enterprises exist.
Joint sector projects are those in which the ownership is shared by the Government and by
private entrepreneurs. The main consideration for the Government‘s investment in joint
sector projects is to make use of the managerial talents, entrepreneurial capabilities and
marketing skills of the private entrepreneurs. Joint sector offers hope to the private
entrepreneurs since the Government shares the investment required for the project.
(6) Sectional Projects
Here the classification is based on various sectors like:
 Agriculture and allied sector
 Irrigation and power sector
 Industry and mining sector
 Transport and communication sector
 Information technology sector
 Miscellaneous
This system of classification has been found useful in resource allocation at macro
level.
(7) Techno-Economic Projects
Classification of projects based on techno-economic characteristic fall in this category. This
type of classification includes factors intensity-oriented classification, causation oriented
classification as discussed below.
(a) Factor intensity-oriented classification: Based on this projects may be classified
as capital intensive or labor intensive if large investment is made in plant and
machinery the project will be termed as capital intensive. On the other hand
project involving large number of human resources will be termed as ―labor
intensive‖.
(b) Causation-oriented classification: On the basis of causation, projects can be
classified as demand based and raw material based projects. The availability of
certain raw materials, skills or other inputs makes the project raw-material based

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 and the very existence of demand for certain goods or services make the project
demand-based.
(c) Magnitude-oriented classification: This is based on the size of investment
involved in the projects, accordingly project are classified into large scale,
medium-scale or small-scale projects. The size is normally expressed in terms of
the amount of investment required. The investment limit for the different
categories of projects are announced by the Government and this undergoes
periodical changes keeping in view the inflation, the decision to offer certain
incentives to projects categorized as ‗small‘ scale projects etc. Projects with
investment limit between these two categories are ‗medium scale projects‘.
(8) Based on Need
Projects can be classified under the following groups, based on the need for project.
a) New project.
b) Balancing project.
c) Expansion project.
d) Modernization project.
e) Replacement project.
f) Diversification project.
g) Backward integration project.
h) Forward integration project.
1.7 Projects versus Program

In practice the terms project and program cause confusion. They are often used
synonymously. The term ―project‖ could be taken to mean a group of activities undertaken to
produce a project purpose in a fixed time frame. In development terms a ―program‖ is taken
___________________________________________________________________
to mean a series of projects whose objectives together contribute to a common overall
_________________________________________________.
objective, at sector, country or even multi‐country level.

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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. Program management is the process of managing a
group of ongoing, interdependent, related projects in a coordinated way to achieve strategic
objectives.
For example, a construction firm has programs for building single-family homes, apartment
buildings, and office buildings. Each home, apartment building, and office building is a
separate project for a specific sponsor, but each type of building is part of a program. There
would be several benefits to managing these projects under one program. For example, for
the single-family homes, the program manager could try to get planning approvals for all the
homes at once, advertise them together, and purchase common materials in bulk to earn
discounts.
Similarities between Projects and Programs
 They both have objectives.
 Require financial, human, and material inputs (resources).
 Generate outputs of value (i.e. goods/services).
 Serve as instruments for the execution of development plans and attain national goals.
 Both involve future.
In practice the terms project and program cause confusion. They are often used
synonymously. A development plan or a program is therefore a wider concept than a project.
Table 1.1: Summary of Project and Program Difference
Bases of difference Project Program
Scope/Objective Narrower/Limited Wide/Diverse
Location Specific project area Wide/Diffused area
Life - time Specific lifetime Non-time bound
Beneficiaries Specific beneficiaries group No –specific beneficiaries groups
Resources Limited budget Large budget

1.7.1 Project Family Tree

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A project normally originates from a plan, national plan or corporate plan. In normal scheme
of things, the family tree for a project would be as given below.
Plan =
National/Corporate plan with target for growth

Programme =
Health Programme, Educational Programme, R&D Programme, etc

Project =
Power plant, hospital, housing project etc

Work Package =
Water supply, power supply and distribution package, etc

Task =
Award of water supply contract, construction & foundation

Activity =
Excavation, laying of cable, preparation of drawing.
Figure 1.3: Project Family Tree

1.8 Factors for Project Success or Failure

Projects, of course, are not operated in a vacuum. Most project managers are expected to
complete their projects so that they satisfy the three primary objectives of time, performance
and cost. These are usually the most important factors that drive the project contractor and
they should align with the foremost expectations of the project owner. The manager of a
typical project would consider the task well done if the project finished on time, according to
its specified performance and within its budgeted cost. These three objectives (time,
performance and cost) are traditionally the basic parameters for measuring project success or
failure. However, although important, they relate principally to the execution or fulfillment

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stage of a project, which is the period of most direct interest to the project manager and the
principal contractor. Other people (not least the customer) might have quite different views
about the ultimate success or failure of a project.

A project that is delivered on time, within budget and in line with its specification might
provide the contractor with a good profit, beneficial publicity and a warm glow of
satisfaction. However, a customer who subsequently discovers that the project fails to live up
to its initial promise and does not deliver its expected return on investment will perceive the
result as a failure. Other stakeholders might have their own, quite different, parameters for
measuring success. Project success factors are elements of the project or its management that
can be influenced to increase the chance of achieving a successful outcome. The reverse,
pitfalls, are management mistakes which increase the chance of failure.

___________________________________________________________________
Table 1.2: Summary of Reasons for Project Failures and Successes
_________________________________________________.
Reasons for Project Failures
Classical Behavioral
Ill-defined work breakdown structure Inappropriate leadership style
High-level schedule No common vision
No reporting infrastructure Unrealistic expectations
Too pessimistic or optimistic estimates Poor informal communications and
interpersonal relationships
No change management discipline No "buy-in" or commitment from customer
or people doing work
Inadequate formal communications Low morale
Inefficient allocation of resources Lack of training
No accountability and responsibility for Poor teaming
results
Poor role definition Culture not conducive to project management
Inadequacy of tools Lack of trust among participants
Ill-defined scope False or unrealistic expectations
Unclear requirements No or weak executive sponsorship
Too high, too long, or too short time frame Mediocre knowledge transfer
Reasons for Project Successes
Classical Behavioral

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Well-defined goals and objectives Agreement over goals and objectives
Detailed work breakdown structure Commitment to achieving goals and
objectives
Clear reporting relationships High morale
Formal change management disciplines in Good teaming
place
Channels of communication exist Cooperation among all participants
Adherence to scope Receptivity to positive and negative feedback
Reliable estimating Receptive culture to project management
Reliable monitoring and tracking techniques Realistic expectations
Clear requirements Good conflict resolution
Reasonable time frame Executive sponsorship
Broad distribution of work Good customer-supplier relationship

1.9 Projects Cycle Management (PCM)

A project is not a one shot activity. Even a shooting star has a time and life span. Project
lifecycle is spread over a period of time. There is an unavoidable gestation period for the
complex of activities involved to attain the objectives in view. This gestation period,
however, varies from project to project but it is possible to describe, in general term, the time
phasing of project planning activities common to most projects.
Another way of illustrating the unique nature of project work is in terms of the project life
cycle. Some project managers find it useful to use the project life cycle as the cornerstone for
managing projects. The life cycle recognizes that projects have a limited life span and that
there are predictable changes in level of effort and focus over the life of the project. There are
a number of different life-cycle models in project management literature. Many are unique to
a specific industry or type of project. For example, a new software development project may
consist of five phases: definition, design, code, integration/test, and maintenance.
The project life cycle typically passes sequentially through four stages: defining, planning,
executing, and delivering. The starting point begins the moment the project is given the go-
ahead. Project effort starts slowly, builds to a peak, and then declines to delivery of the
project to the customer.
Projects Cycle Management (PCM): The way in which projects are planned and carried out
follows a sequence beginning with an agreed strategy which leads to an idea for a
specific action oriented towards achieving a set of objectives which then is formulated,
implemented, and evaluated with a view to improving the strategy and further action.

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Project cycle management is an approach to managing projects. It determines particular
phases of the project and outlines specific actions and approaches to be taken within these
phases. The PCM approach provides for planning and review processes throughout a cycle,
and allows for multiple project cycles to be supported. The project cycle also provides a
structure to ensure that stakeholders are consulted and relevant information is available
throughout the life of the project, so that informed decisions can be made at key stages in the
life of a project. The principal stages in the life of a project are:

Figure 1.4: The Generic Project Cycle within EC

In practice, the duration and importance of each phase may vary for different projects. The
phases in the cycle are progressive – each phase needs to be completed for the next to be
tackled with success. A key decisions, information requirements and responsibilities are
defined at each phase. PCM is intended to ensure that the stakeholders support the
decisions made within projects, and that decisions are based on relevant and sufficient
information. The basic tasks involved in PCM include:
 Creating (building) capabilities for implementation
 Planning the tasks for implementation,
 Follow-up of the progress in implementation(monitoring),and
 Conduct periodic and final performance evaluation.

1.10 Overviews of Project Planning in Ethiopia

The post-1974 development plan indicated the general development objectives, and defined
the various projects to be implemented during the plan period. The principle used was that

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development plans served as the basic framework, and development projects had to be
prepared and selected as a means of implementing the national plan. According to this
principle, the project planner has the responsibility of choosing among the projects that are
being considered the ones that fit well with the development plan and contribute most to the
fundamental objectives of the economy.
The feasibility of development projects should be assured before the implementation of
operation stages by using project planning techniques. This helps not only in ensuring
investment efficiency but also in mobilizing scarce resources. However, the experience of
project preparation activities in Ethiopia before 1974 showed that plans were not set on the
capability to undertake sound project studies. This leads to the establishment of the
organization Development Project Studies Agency (DPSA) in 1980. This agency was
established, among other things, to:
a. Identify, study and prepare projects as required;
b. Provide consultancy services to agencies, mass and private organizations in project
identification and preparation; and
c. Organize seminars, workshops and courses which enhance project identification,
preparation, implementation and evaluation.
In general, DPSA acts as an instrument that strengthens the efforts of different organizations
in the field of project planning. It has prepared a project planning guideline to be used in
conducting training programs and to standardize the methodology and procedures followed
in project planning in the country. A paper on the concept, function and estimation of
national parameters used in economic evaluation of projects was also prepared in 1981.
The DPSA was later named the Development Project Studies Authority (DEPSA) and
provided the institutional framework for project planning along with the Ethiopian Valleys
Development Studies Authority (EVDSA), the Water Resources Development Authority
(WRDA) and the Building and Transport Construction Design Authority (BTCDA).
However, in the preparation of development projects, the largest responsibility was given to
DEPSA, whose major objectives were defined to be:
i. To undertake development project studies that help realize the national plan; and
ii. To develop and organize national capability in development projects studies and in
providing consultancy services.

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To accomplish these tasks, the authority established three project service enterprises, namely,
the Agricultural Project Service (APS), the Industrial project Service (IPS) and the
Infrastructure Project Services (INPS). Moreover, the authority revised and updated an
earlier study of DPSA on guidelines for project planning prepared for Ethiopia and the
national economic parameters.

 SUMMARY

 All projects are temporary and undertaken to create a product, service, or result.
Projects can contain smaller projects.
 Project management is the application of knowledge, skills, tools and techniques to
project activities to meet project requirements.
 Projects differ in size, scope cost and time, but all have the following characteristics:
such as a start and a finish time/ point, a life cycle, a budget, a set of activities , use of
resources, and defined roles and relationships for participants in the project
 Project managers need the same skills as an operations manager, such as good
communications, team building, planning, expediting, motivating, and political
sensitivity. Project managers need additional skills in managing and running project well.
 Projects are generally established for one of two reasons. One is for exploit
opportunities and the other is for solving a problems.
 Three major dimensions that define the project performance are scope, time, and
resource or costs. These parameters are interrelated and interactive.
 Projects can be classified under different heads; this project classification helps in
expressing and highlighting the essential features of project. Different authorities have
classified projects differently.
 In practice the terms project and program cause confusion. They are often used
synonymously. In practice the terms project and program cause confusion. They are often
used synonymously.
 Project success factors are elements of the project or its management that can be
influenced to increase the chance of achieving a successful outcome. The reverse, pitfalls,
are management mistakes which increase the chance of failure.

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Strategic Management handout 2020

 Project cycle management is an approach to managing projects. It determines

particular phases of the project and outlines specific actions and approaches to be taken
within these phases.
 In Ethiopia DEPSA acts as an instrument that strengthens the efforts of different
organizations in the field of project planning.
 CHAPTER TWO
2. PROJECT CYCLE

LEARNING OBJECTIVES:
After you have completed this chapter of the course, you will be able to:
 Define project life cycle
 Present the different project cycle models
 Differentiate Baum Cycle and UNIDO Project Cycle
 Understand the DEPSA‘s project model of Ethiopia

Chapter Introduction

Projects, by definition, have a beginning and an end.

They also have defined phases between the project kickoff and project closeout. A
phase represents a grouping of similar activities that has a very loosely defined beginning and
end. Phases are also typically sequential, where the prior phase is essentially complete before
the beginning of the next phase. Phases do not have clear-cut end dates and some activities in
an early phase of the project will continue into the later phases. This is in contrast to project
beginning and ending dates and milestone dates, which do have clearly defined dates with the
expectation that these dates will be met.
This chapter hosts the learner to know the meaning of project cycle and tasks undertaking in
each phases of project cycle and also it introduce the different models of project cycles even
in our country setting.
2.1 Overviews of Project Cycle

Every project, from conception to completion, passes through various phases of a life cycle
synonym to life cycle of living beings. There is no universal consensus on the number of
phases in a project cycle. An understanding of the life cycle is important to successful
completion of the project as it facilitates to understand the logical sequence of

25
events in the continuum of progress from start to finish. Typical project consists of four
phases- Conceptualization, Planning, Execution and Termination. Each phase is marked by
one or more deliverables such as Concept note, Feasibility report, Implementation Plan, HRD
plan, Resource allocation plan, Evaluation report etc.
2.1.1 What is Project Life Cycle
The project lifecycle can be defined and modified as per the needs and aspects of the
organization. Even though every project has a definite start and end, the particular objectives,
deliverables, and activities vary widely. The phases have a definite start, end, and control
point and are constrained by time. The lifecycle provides the basic foundation of the actions
that has to be performed in the project, irrespective of the specific work involved. The project
life cycle provides a framework for managing any type of project within a business.
The followings are some common meaning given to project cycle:
 A project life cycle is a collection of project phases; these phases vary from one
industry to another, but in general they include an initiation, planning,
implementation, monitoring and close phase.
 The project cycle is the framework used to design, prepare, implement, and supervise
projects.
 The ‗project cycle‘ is a way of viewing the main elements that projects have in
common, and how they relate to each other in sequence.
 The project life cycle is the standard process by which teams achieve project success.
 A project life cycle is the sequence of phases that a project goes through from its
initiation to its closure.
 The path a project takes from the beginning to its end and is generally referred to as
the ―project life cycle.‖
 The different stages/phases through which a project passes is called the project life
cycle.

2.1.2 Project Life Cycle and Its Phases

Project life cycle divides the sequence of operations of project in to different phases.
Regardless of scope or complexity, any project goes through a series of stages during its life.

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Project activities must be grouped into phases to facilitate project manager and his team to
plan and organize various inputs effectively. It also helps in identifying deviations and thus
helps in decision making with regard to continuation or termination of the project.
The life cycle of a project from start to completion follows either an ―S‖ shaped path or a ―J‖
shaped path (Figure 2.1 and 2.2). In ―S‖ shape path the progress is slow at the starting and
terminal phase and is fast in the implementation phase. For example; implementation of a
watershed project; at the beginning detailed sectorial planning and coordination among
various implementing agencies etc. makes progress slow and similarly towards termination,
creating institutional arrangement for transfer and maintenance of assets to the stakeholders
progresses slowly.

Figure 2.1: Project Life Path –―S‖ Shape

In ―J‖ type cycle path the progress in beginning is slow and as the time moves on the
progress of the project improves at fast rate. For example; in a developing an energy
plantation; the land preparation progresses slowly and as soon as the land and seedling are
transplantation is under taken. This is shown in figure 2.2.

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 Figure 2.2: Project Life Cycle Path - ―J‖ Shape

2.2 Type of Project Cycle Models

The main features and elements of this process are information gathering, analysis and
decision making. The project cycle consist of various stages in which each stage, not only is
grown out of the preceding ones, but also leads into the subsequent ones.
There is no single way of devising the different phases of a project there are many equally
valid ways in which the project cycle may be divided. There are three basic models of project
life cycles they are:

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 1. The Baum project life cycle
2. UNIDO project life cycle
3. DEPSA project life cycle

2.2.1 The Baum Project Life Cycle (World Bank Project Cycle)

The first basic model of a project cycle was that of Warren C Baum developed in 1970,
which has been adopted by the World Bank and initially recognized four main stages, namely
1. Identification
2. Preparation
3. Appraisal and selection
4. Implementation
At a later stage in 1978 the author has added another stage called ―Evaluation ―thus making
the stages 5 in number.
1. Identification Phase:
The first stage in the project life cycle is to find potentially promising projects which are
worthwhile for investment. Some of the sources of such projects are listed below:
 Some projects are resource based and stem from the opportunity to make profitable
use of available resources.
 Some may be market based arising from an identified demand in home or overseas
markets.
 Others may be need based and initiated to make available certain basic material
requirements and services to all people in an area at minimal amounts.
 Well informed technical specialists and local leaders are also common source of
projects. Technical specialists will identify many areas where they feel new
investment might be profitable, while local leaders may have suggestions about where
investment might be carried out.
 Ideas for new projects also come from proposals to extend existing program.
2. Preparation Phase:
Once projects are identified, there begins a process of progressively more detailed analysis of
the projects and preparation of the project plans. This phase of the project life cycle which

29
normally includes both the prefeasibility and feasibility study .This is the stage at which the
project is being seriously considered as a definite investment action. Project preparation
covers the establishment of all the technical, economic, social, financial, institutional and
environmental feasibility analyses. From the inferences of such analysis, decisions have to be
made on the scope of the project, location and site, soil and hydrological requirements,
project size etc. At this stage the project exists as asset of tangible proposals.
3. Appraisal Phase (An Assessment of the Quality or Value of Something)
At this stage critical review of the project is to be conducted. This provides an opportunity to
re-examine every aspect of the project proposal (project plan) to assess whether the proposal
is appropriate and sound before large sums are invested. Generally only internal
institution/government staffs are used for this work. Projects are appraised both in the field
and at the desk level. Appraisals should cover at least seven aspects of the project, each of
which must have been given special consideration during the project preparation stage. Those
seven aspects are:
 Technical- here the appraisals concentrate on verifying whether the proposed project
will work in the way suggested or not.
 Financial- In this, the appraisals try to see whether requirements for money needed by
the project have been calculated properly, their sources are all identified and
reasonable plans for their repayment are made where necessary.
 Commercial-the way the necessary inputs for the project are conceived to be supplied
is examined here and also the arrangements for the disposal of the products are
verified.
 Incentive- the appraisals here will see into it whether things are arranged in such a
way that all those whose participation is required will find it in their interest to take
part in the project, at least to the extent envisaged in the plan.
 Economic- the appraisal here tries to see that what is proposed is good from the view
point of the national economic development interest when all project effects (positive
and negative are taken into account and check whether all are correctly valued.
 Managerial- this aspect of the appraisal examines whether the capacity exists for
operating the project and the people who were assigned responsibilities can operate it

30
 satisfactorily or not. Moreover, it tries to see whether the responsible persons are
given sufficient power and scope to do what is required.
 Organizational- this appraisal examines the project if it is organized internally and
externally into units, contract policy institution, etc., to allow the proposals to be
carried out properly and to allow for change as the project develops.
The above issues are the subjects of specialized appraisal report. On the basis of this report,
financial decisions are made- whether to go ahead with the project or not. In practice, there
can be quite a sequence of project selection decisions. Following appraisal, some projects
may be discarded. If the project involves loan finance, the lender will almost certainly wish
to carry out his own appraisal before completing negotiations with the borrower. Comments
made at the appraisal stage frequently give rise to alterations in the project plan.
4. Implementation Phase:
The clear objective of any effort in project planning and analysis is to have a project that can
be implemented to the benefit of the society. Thus implementation is perhaps the most
important part of the project cycle. In this stage, funds are actually disbursed to get the
project started and keep running. A major priority during this stage is to ensure that the
project is carried out in the way and within the period that was planned. Problems frequently
occur when the economic and financial environment at implementation differs from the
situation expected during appraisal.
It is during implementation stage that many of the real problems of projects are first
identified. Because of this feedback effect on the discovery and design of new projects, and
the deficiencies in the capabilities of the project action can be revealed. Therefore to allow
the management to become aware of the difficulties that might arise, in recording,
monitoring and progress reporting are important activities during the implementation stage.
5. Evaluation Phase:
At later stage that is in 1978, BAUM has added an additional stage called Evaluation which
usually closes the project life cycle. Once a project has been carried out, it is often useful, to
look back over what took place, to compare actual progress with the plans, to judge whether
the decisions and actions taken were corrective, to see whether the results obtained are
optimal in a sense that the resources are efficiently utilized and whether the project‘s goals
and objectives are effectively achieved. The extent to which the objectives of a project are

31
being realized provides the primary criterion for an evaluation. The analysts look
systematically at the elements of success and failure in the project experience to obtain
insights about how to plan more productive projects in future.

Evaluation is not limited only to completed projects. It is the most important managerial tool
in ongoing projects and rather formalized evaluation may take place at several times in the
life of project. Evaluation may be undertaken when a project is in trouble, as the first step in
a re-planning effort. Careful evaluation of the project should precede any effort to plan
follow-up projects. Finally, evaluation should be undertaken when a project is terminated or
as well in routine operation. Different people may do evaluation like:
 Project management will be continuously evaluating its experience as implementation
proceeds.
 The sponsoring agency, the operating ministry, the planning agency or an external
assistance agency may undertake evaluation.
 In large and innovative projects, the project‘s administrative structure may provide a
separate evaluation until responsible for monitoring the projects implementation and
for bringing problems to the attention of the project‘s management.
Evaluation can help not only in the management of the project after the initial phase but also
in the planning of the future projects.

2.2.2 The UNIDO Project Life Cycle Model

The United Nations Industrial Development Organization (UNIDO) is the most devoted
institution towards the development and the standardization of the concept, context and
content (CCC) of industrial project management system. According to the UNIDO approach
documented in the UNIDO manual, the project development cycle comprises three distinct
phases, they are:
1. Pre- investment phase
2. Investment phase and
3. Operational phase
Each of these three phases is divided into several stages, some of which constitute important
consultancy, engineering and industrial activities as shown below:

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1. Pre- investment Phase
 Opportunity study ( identification of project ideas)
 Pre-feasibility study (preliminary project formulation , selection of alternatives)
 Feasibility study (techno-economical project back ground, final project formulation
stage)
 Evaluation report ( decision making about project availability)
2. Investment Phase
 Project design stage
 Construction stage
 Pre-production marketing stage
 Training
 Start-up stage
3. Operational Phase
 Replacement of equipment
 Development, invasion or liquidation
Before dealing with pre –investment phase, the various stages of the investment and
operational phases are considered since these impacts on the nature and scope of pre-
investment studies. The project investment or implementation phase for a large industrial
business project will be different as compared to that of a small non- industrial project.
Assuming that a projected industrial activity involves the construction of a factory and the
installation of machinery and equipment, the project investment phase could be divided in to
the following stages:
 Project engineering designs
 Negotiations and contracting
 Construction and training and
 Plant start up
An adequate importance should be given to the pre investment phase, because the success or
failure of an industrial project ultimately depends upon the marketing, technical, financial
and economic feasibility study findings and their interpretation. To reduce wastage of scarce
resources, a clear comprehension of the sequence of events is required when developing an
investment proposal from the conceptual stage by way of active promotional efforts to the
operational stage.

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 1. Pre-investment stage
It is a usual practice, project ideas must be elaborated in a more detailed study. However,
formulation of the detail techno-economic feasibility study, that enables a definite decision to
be made on the project, is a costly and time consuming task. Therefore, before assigning
large funds for such a study, a preliminary assessment of the project idea must be made in a
pre-feasibility study. This is just seeing that whether:
 All possible project alternatives are examined
 The project concept justifies the detail study
 All aspects are critical and need in-depth investigation
 The project idea is viable and attractive or not
According to the UNIDO manual, the main stages of the pre-investment phase are as follows:
 Identification of investment opportunities (opportunity studies)
 Analysis of project alternatives and preliminary project selection
 Project preparation( pre-feasibility and feasibility studies ) and
 Project appraisal and investment decision (appraisal report)
These stages assist a potential investor in the decision making process and provide the base
for project decision and implementation.
a. Opportunities Studies
Identification of investment opportunities is the starting point in a series of investment
related activities when potential investors (private or public) are interested in obtaining
information on newly identified viable investment opportunities. The main instrument used
to quantify the parameters, information and data required to develop a project idea into a
proposal is the opportunity study. An opportunity study should identify investment
opportunities or project ideas by analyzing the following factors in detail:
 Natural resources with high potential for processing and manufacture:
 Existing agricultural pattern that serves as a basis for agro-based industries:
 The future demand for certain consumer goods or for newly developed goods:
 Imports in order to identify areas for import substitution:
 Cost and availability of production factors:
 Possible expansion of existing industrial capacity to attain economies of scale and
 Export possibilities.

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 b. Pre-feasibility Studies
A Pre-feasibility study should be viewed as an intermediate stage between a project
opportunity study and a detailed feasibility study. And the intensity with which project
alternatives is examined. The structure of a prefeasibility study should be the same as that of
the detailed feasibility study. These two studies basically compile the information on the
justification of the project. In a practical sense, the main components of the project feasibility
report are:
 Executive summary
 Project back ground and history
 Market and plant capacity
 Location and site
 Project engineering works
 Factory, administrative and sale overheads
 Man power
 Project implementation
 Financial analysis and
 Project risk analysis
c. Feasibility Studies
A feasibility study should provide all data necessary for making the investment decision. The
commercial, technical, financial, economic and environment prerequisites for an investment
project should therefore be defined and critically examined on the basis of alternative
solutions already reviewed in the pre-feasibility study. The results of these efforts strengthen
a project whose back ground conditions and aims have been clearly defined, in terms of its
control objective and possible marketing strategies, the possible market share that can be
achieved, the corresponding production capacities, the plant location existing raw materials,
appropriate technology and mechanical equipment and, location, existing raw materials,
appropriate technology and mechanical equipment and if required an environmental impact
assessment.
The financial part of the study covers the scope of the investment, including the net working
capital, the production and marketing costs, sales revenue and the return on capital invested.
The final estimates on investment and production costs and its subsequent calculations of

35
financial and economic profitability are only meaningful if the scope of the project is defined
in order not to omit any essential part and its related cost. However, there is no uniform
approach or pattern to cover all industrial projects of whatever type, size or category. The
emphasis on the components varies from project to project. For most industrial projects,
however, there is a broad format of general application-bearing in mind the larger the project
the more complex will be the information required.
d. Appraisal Report
When a feasibility study is completed, the various parties will carry out their own appraisal
of the investment project in accordance with their individual objectives and evaluation of
expected risks, costs and gain. Large investment and development finance institutions usually
have formalized project appraisal procedures and usually prepare an appraisal report. This is
the reason why project appraisal should be considered an independent stage of the pre-
investment phase, marked by the final investment and financing decisions taken by the
project promoters.
The appraisal report will prove whether the pre-production expenditures spent since the
initiation of the project idea were well spent or not. Project appraisal, as carried out by
financial institutions concentrates on the health of the company to be financed, the returns to
be obtained by equity holders and the protection of its creditors. The techniques applied to
appraise projects in line with these criteria center around technical, commercial, market,
managerial, organizational, financial and if possible economic aspects of project.
2. Investment (Implementation) Phase
The investment or implementation phase of a project provides a wide scope for consultancy
and engineering work, first and foremost, in the field of project management. The investment
phase can be divided into the following stages:
 Technological acquisition and transfer
 Detailed engineering design and contract, including tendering, evaluation of bids and
negotiations
 Acquisition of land, construction work and installation
 Pre-production marketing, including the securing of suppliers and setting up the
administration of the firm
 Recruitment and training of personnel and

36
  Plant commissioning and start-up
Detailed engineering design comprises preparatory work for site preparation, the final
selection of construction planning and time scheduling of factory construction, as well as the
preparation of flow charts, scale drawing and a wide variety of layouts. During the stage of
tendering and evaluation of bids, it is chiefly important to receive comprehensive tenders for
goods and services for the project from a sufficiently large number of national and
international supplies of proven efficiency and with good delivery capacity.
This stage covers the signing of contracts between the investor on the one hand, and the
financing institutions, consultants, architects and supplies of raw materials and required
inputs on the other.
The construction stage involves site preparation, construction of buildings and other civil
works, together with the erection and installation of equipment in accordance with proper
programming and scheduling. The personnel recruitment and training stage, which should
proceed simultaneously with the construction stage, may prove very crucial for the expected
growth of productivity and efficiency in plant operations. Plant commissioning and start up is
usually a brief, but technically critical span in project implementation.
3. Operational Phase
The problem of the operational phase needs to be considered from both short and long term
viewpoints. The short term view relates to the initial or commencement of production when a
number of problems may arise concerning such matters as the application of production
techniques, operation of equipment or inadequate labor productivity owing to lack of
qualified staff and labor. Most of the problems have their origin in the implementation phase.
The long term view relates to chosen strategies and the associated production and marketing
costs as well as sales revenues. These have a direct relationship with the productions made at
the pre-investment phase. If such strategies and projections prove faulty and remedial
measures will not only be difficult, but may prove highly expensive.

2.2.3 The DEPSA Project Life Cycle Model

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 In Ethiopia, Development Project Studies Authority (DEPSA) made certain efforts and
developed a model for project life cycle which is known as DEPSA‘s Project life cycle. This
life cycle comprises three major phases. They are:
1. Pre-investment phase
2. Investment phase and
3. Operation phase
Each of these three phases may be divided into different stages.
The following is the summary of this classification of the project life cycle.
1. Pre- investment Phase
a. Identification Stage
b. Formulation Stage
 Pre-feasibility study
 Feasibility study
c. Appraisal
 Appraisal
 Decision
2. Investment Phase
 Implementation
 Tendering negotiation and contractual
 Detailed engineering design
 Construction, erection and commissioning
3. Operation Phase
 Operation
 Ex-post evaluation
I. Pre-investment Phase
A. Project Identification
Projects identification amounts to finding projects, which could contribute toward achieving,
specified development objectives. Or the first stage in project cycle is to identify an idea,
which enables to launch a project. The question at this stage is where do project ideas come
from?

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  Sources of project ideas
We can distinguish two levels where projects ideas are born: the macro level and the micro
level.
At the macro level project idea comes from:
 National, sectorial or regional plans and strategies supplemented by special studies
often called opportunity studies, conducted with the explicit aim of translating
national and sectorial programmes into specific projects.
 Constraints in the development process due to shortage of essential infrastructure
facilities, problems in the balance of payments, etc.
 A government's decision to correct social and regional inequalities or to satisfy basic
needs of the people through development projects.
 Unusual events such as drought, floods, earthquake, etc.
 A possible external threat that necessitate projects aiming at achieving, for example,
self-sufficiency in basic materials, energy, transportation etc.
 Multi or bilateral agreement
At the micro level, project idea emanate from:
 The identification of unsatisfied demand or need
 The existence of unused or underutilized natural or human resources and the
perception of opportunities for their efficient use
 The initiative of private or public enterprise in response to incentives provided by the
government
 The necessity to complement or expand investment previously undertaken: and
 The desire of local groups or organization to enhance their economic independence
and improve their welfare.
Once to some project ideas have been put forward, the first step is to select one or more of
them as potentially viable. This calls for a quick preliminary screening by experienced
professional who could also modify some of the proposal. Following the preliminary
screening, promising project options should be investigated in a systematic manner. This
requires the preparation of brief reports that clearly indicates in sufficient and details those
project versions that are promising and suggests those projects options that should be
eliminated. Reports of this type are often called pre-feasibility or pre investment studies.

39
 B. Project Formulation
(a) Content of the pre-feasibility study
The pre-feasibility study should briefly discuss
 The objectives of the project
 The nature and size of the demands for the output or the needs that it would satisfy,
together with the foreseen beneficiary groups
 The availability of the most important materials and human inputs
 Basic alternative technologies available and their merits and weakness
 Approximate investments and operation costs as hell as expected revenue
 Rough estimate of financial and economic return
 Any major factors that is likely to have an important effect on the project

(b) Feasibility study

If the pre-feasibility study indicates that the project is, prima facie, promising and further
work is justified, the project enter the stage of preparation. The project is now being seriously
considered as a definite investment action and detailed planning of the idea can begin project
preparation (sometimes called project formulation) covers the establishment of technical,
economic and financial feasibility. Decisions have to be made on the scope of the project,
location, and site etc. Complete technical specifications of distinct proposals accompanied by
full details of financial and economic costs and benefits are the outcomes of the project
preparation stage. The project now exists as set tangible proposals.
C. Project Appraisal
Project appraisal can be defined as second look at a project report by a person or an
institution that is in no way involved in its preparation. It helps in taking an entirely
independent view of the project. Appraisal is the comprehensive and systematic assessment
of all aspects of the proposed projects.
Appraisal highlights wide area in the project with the ultimate objective of strengthening
them adequately so as to ensure final success of the project. The main objective of the
appraisal is to improve and renovate the project with the cooperation of the promoter
(financing agencies). It's in this stage that the bank will judge whether the project is
acceptable or unacceptable.

40
 Appraisals should cover at least seven aspects of a project, each of which must have been
given special consideration during the project preparation phase:
1. Technical: does the proposed project work in the way suggested?
2. Financial: have the financial requirement of the project been properly calculated, their
sources identified and reasonable plans made for their repayment? Where this is
necessary?
3. Commercial: how will the necessary inputs for the project be supplied and are the
arrangements for the disposal of the product satisfactory?
4. Incentives: does things go as they are planned?
5. Economic: does the proposed project consistent from the view point of national
development?
6. Managerial: does their capable manager to run the planned project successfully and
are they given sufficient power and scope to do what is required?
7. Organizational: is the project organized internally and externally into units, etc so as
to allow the proposals to be carried out properly, and to allow for change as the
project develops?
Frequently these questions are the subjects of a specialized appraised report. On the basis of
this report, final decisions are made about whether to go ahead with the project or not.
Following appraisal, some projects may be discarded.
II. Investment phase
a. Project Implementation
In this stage, funds are actually disbursed to get the project set up and running. Translating
project plan into actual investment and operation is one of the most critical and difficult task.
No matter how sophisticated or detail the project preparation work, it has no value unless it is
transformed into action or implemented.

Implementation can be defined as a project stage which covers the actual development or
construction of the project up to the point at which it becomes fully operational. It includes
monitoring of all aspects of the work or activity as it proceeds. It's where the earlier
preparations and designs, plans and analysis are tested in the highlight of reality. The
project's objectives are realized only when it is successfully implemented.

41
 Implementation stages begins immediately after the final decision on the project and ends
when it starts rendering the benefit envisaged. While in earlier stages of project planning
there was more thinking and less action, in this stage more actions and less thinking is
needed.

Project implementation, even though it may involve complex decisions, is essentially a

logical and systematic approach. Now a days planning the implementation stage of a project
explicitly is one of the activity in project preparation. The better and more realistic a project
implementation plan is, the more likely it is that the plan can be carried out effectively and
the expected output or benefit realized. Project analysts generally divide the implementation
phase into three different time periods. These are:
1.The investment period: when the major project investments are undertaken.
2.The development period: when the project's production builds up.
3.The life of a project: when full development is reached.

III. Project Evaluation and operational phase

Once a project has been carried out, it is often useful (but not always done) to look back over
what took place, to compare actual progress with the plans, and to judge whether the
decisions and actions taken were reasonable and useful. This we call evaluation. Evaluation
can be defined as a systematic and periodical gathering, analyzing and interpreting of inputs,
information to see the effects and impacts of a development programme/project in order it
may be adjusted where necessary.

This kind of analysis can help not only in the management of the project after the initial
construction phase, but will also help in the planning of future project. Experience with one
project can give rise to new ideas for extension of the project. Generally evaluation of a
project helps to determine whether the objectives sets were realistic, given the capacities with
which and the circumstances in which they had to be fulfilled, to assess the impact of the
project activities.

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  SUMMARY

 Every project, from conception to completion, passes through various phases of a life
cycle synonym to life cycle of living beings.
 There is no universal consensus on the number of phases in a project cycle.
 An understanding of the life cycle is important to successful completion of the project
as it facilitates to understand the logical sequence of events in the continuum of progress
from start to finish.
 The project cycle of any projects has to considers at various stages are:
 Each stage comes out of the preceding activities, and also leads into subsequent ones.
 The planning process does not contain such a stringent (inflexible) sequence of events
since all the aspects of the project have to be considered simultaneously and, if
necessary adjusted to one another.
 The life cycle of a project from start to completion follows either an ―S‖ shaped path
or a ―J ―shaped path.
 There are many equally valid ways in which the project cycle may be divided. Project
cycle models. These are:
1. The Baum Cycle (recognized the World Bank Project Cycle)
2. The UNIDO Project Cycle
3. The DEPSA‘s Model (Development Projects Studies Authority‘s Model) –
developed in Ethiopia in 1990.
 The Baum project cycle model: is the first basic model of a project cycle was that of W.
C. Baum developed in 1970, which has been adopted by the World Bank and initially
recognized four main stages, namely
1. Identification phase
2. Preparation phase
3. Appraisal and selection phase
4. Implementation phase

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 At a later stage in 1978 the author has added another stage called ―Evaluation ―thus
making the stages 5 in number.
 The UNIDO project cycle model: the project development cycle comprises three distinct
phases, they are:
1. Pre- investment phase
2. Investment phase and
3. Operational phase
 Each of these three phases is divided into several stages, some of which constitute
important consultancy, engineering and industrial activities.
 The DEPSA‘s project cycle model: this life cycle comprises three major phases. They
are:
1. Pre-investment phase
2. Investment and
3. Operation
 Each of these three phases may be divided into different stages.

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