University of Gondar

College of Business & Economics

Department OF management

Masters of Business Administration Program

Project Management

Note summery for the project cycle models. World Bank Project Cycle (Baum cycle),
(UNIDO) Project Cycle, (IPPMC), (DEPSA) Life cycle

By:mekuant mulat

Submitted to Yihays F. (PhD)

Project Cycle Models
A project life cycle is the step-by-step process by which a project is formulated, identified,
evaluated, implemented and completed.
The Project Life Cycle refers to a logical sequence of phases to accomplish project goals or
objectives.

there are different project life cycle models which Differ in their perspective, emphasis and level

of detail.

The Four common models are:

 World Bank Project Cycle (Baum cycle)

 United Nation Industrial Development Organization (UNIDO) Project Cycle

 Integrated Project Planning and Management Cycle (IPPMC)

 Development Project Studies Authority (DEPSA) Life cycle

World Bank Project Cycle (Baum cycle)

The project cycle is the framework used by the World Bank (‘the Bank’) to design, prepare,
implement, and supervise projects. In practice, the Bank and the Borrower work closely
throughout the project cycle, although they have different roles and responsibilities.
The six stages in the World Bank's project cycle are: Identification; Preparation; Appraisal;
Negotiation and Board Presentation; Implementation and Evaluation. Some project ideas never
make it past the early phase of identification. Others are reworked during the preparation and
appraisal phases, and end up looking quite different from their original design. The Bank
approves over 200 projects in the course of a year.

Identification

Identification of the right business opportunity is the key to enterprise success and the first step in
the project cycle is to identify an issue that a project could address. Opportunity ensing is
essential for new as well as existing entrepreneurs; once existing entrepreneurs reach the comfort
stage in their project, new business opportunities need to be identified for enterprise sustenance,
growth and development

The first stage in the project life cycle is to find potentially promising projects which are
worthwhile for investment. The task of identifying and proposing projects for World Bank financing
lies mainly with borrowing governments. On some occasions, a project may be identified as a result of
general economic or more specific sector work carried out by Bank staff. Ideas for development projects
can come from both new project proposals and requests to expand existing programs. Project
identification is the idea stage and it involves activities concerned with surveying, reviewing and
inventor zing existing data and information. These include:

 natural resource data

 human resource data

 socio-economic data

 resource availability

 market gap

 need gap

Preparation

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 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. Though the Bank will often help, the
borrowing country is responsible for examining the technical, economic, social, and
environmental aspects of the project. It defines the available options, the feasibility of each, and

their costs and benefits. Contents to be included in feasibility study document:

 Pre-feasibility studies

 Concrete proposal

 Detailed designs

 Objectives

 Market conditions

 Technical conditions

 Financial conditions
  Economic conditions

 Environmental conditions, etc.

 Project report/final design and work plan

Appraisal

The Bank must first make its own independent assessment of the project--the appraisal. A team
of Bank staff and consultants Public Disclosure Authorized Public Disclosure Authorized Public
Disclosure Authorized Public Disclosure Authorized review the studies made by the borrower
and undertake their own analysis of four major areas: technical, institutional, economic, and
financial. Negotiation and Board Presentation;

The Bank appraisal report summarizing its recommendations for a loan's conditions forms the
basis for negotiations with the borrower. The negotiations bring World Bank staff and the
borrower together to agree on the measures necessary for a successful project. Through a give-
and-take process, the Bank and the borrower review all the issues that have arisen during
preparation and appraisal. Appraisal involves carefully reviewing all aspects of the project vis-à-
vis the project objectives. The proposal is subjected to sensitivity analysis at this stage. Some
explicit appraisal is a necessary part of the decision-making process before funds are
committed .It may be advisable to let a separate group of people to conduct project appraisal.

Project appraisal encompasses

 Project appraisal encompasses:

 Detailed review of the feasibility

 Relevance of the project objectives

 Technical Appraisal

 Financial Appraisal

 Economic Feasibility (Appraisal)

 Social Appraisal

 Environmental Appraisal

Institutional Appraisal
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
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
Implementation

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.

Evaluation

An independent department within the World Bank, the Operations Evaluation Department
(OED) is responsible for assessing the results of projects. To ensure its impartiality, OED reports
directly to the board of executive directors and to the Bank's president. The evaluation compares
project costs, benefits, timetable, and efficiency with what had been expected at the time of
appraisal. It also suggests how to improve project performance in the future

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.

The following phases are the project life cycles according to UNIDO:

1. Pre-investment phase

I) Opportunity studies (project identification)

II) pre-selection(pre-feasibility study)

III) preparation (feasibility)Iv) Appraisal

2. Investment Phase

3. Evaluation and Operating phase

1. Pre-investment phase
 It is customary to require further study and elaboration of project concepts. However, it is an
expensive and time-consuming effort to formulate the detailed techno-economic feasibility
assessment that permits a firm decision to be taken on the project. Therefore, a preliminary
evaluation of the project proposal must be done in a pre-feasibility study before allocating
big funding for such a study. Simply determining 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.
I) Opportunity studies (project identification)

The first step in a number of investment-related activities is to identify investment possibilities.

The opportunity study is the primary tool used to quantify the factors, facts, and data needed to
transform a project idea into a proposal. By carefully examining the following elements, an
opportunity analysis should be able to pinpoint potential investment possibilities or project ideas.

 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.

II) pre-selection(pre-feasibility study)

It is similar to a detailed feasibility study but more focused on the alternatives and the intensity
with which project alternatives are examined.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

III) preparation (feasibility)Iv) Appraisal

The commercial, technical, financial, economic and environment prerequisites for an investment
project should be defined and critically examined. A feasibility study should provide all data
necessary for making an investment decision. The results of these efforts should strengthen a
project whose back ground conditions and aims have been clearly defined. There is no uniform
approach or pattern to cover all industrial projects of whatever type, size or category. For most
industrial projects, however, there is a broad format of general application. The emphasis on the
components varies from project to project and from company to company.

2. Investment 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
 Plant commissioning and start-up

It 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. 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. Evaluation and Operating phase

Both short-term and long-term perspectives need to be taken into account when solving the
operational phase's challenge. The initial stage or beginning of production is where a number of
issues, such as the use of production processes, equipment operation, or inadequate labor
productivity due to a lack of skilled employees and labor, may develop. The implementation
stage is where the majority of the issues started. The long-term perspective involves both the
chosen methods' production and marketing expenditures as well as their corresponding sales
earnings. These are directly related to the productions that were made during the pre-investment
stage. If these plans and estimates turn out to be inaccurate, taking corrective action would not
only be challenging but also potentially very expensive.

Integrated Project Planning and Management Cycle (IPPMC)

Integrated Project Planning and Management Cycle (IPPMC) is a conceptual tool for observing
and analyzing the single process that constitutes the life of a development project. The self-
renewing IPPMC may be divided into four major phases:

(1) Planning, appraisal and design;

(2) Selection, approval, and activization;

(3) Operation, control, and handover; and

(4) Evaluation and refinement.

Development Project Studies Authority (DEPSA) Life cycle

DPSA'S PROJECT CYCLE: According to the Guidelines to Project Planning in Ethiopia (1990)
of Development Project Studies Authority (DEPSA), a project cycle comprises three major
phase. They are:

I) Pre-investment phase

II) Investment and

III) Operation

I) Pre- investment Phase

1,Identification Stage
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. Sources of project ideas
We can distinguish two level where projects ideas are born: the macro level and the micro level.
Project inspiration, on a larger scale, derives from:
Plans and strategies at the national, sectoral, or regional levels may be complemented by special
studies, sometimes known as opportunity studies, that have the stated goal of turning national
and sectoral programs into particular initiatives.
limitations to development caused by a lack of vital infrastructural facilities, balance of payments
issues, etc.
At the small scale, project ideas come from:
determination of unmet demand or necessity.
Natural or human resources that are untapped or underdeveloped, as well as the sense of
opportunities for their effective application
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.

2,Formulation Stage

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

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,
economical 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.

3,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.
Appraisals should cover at least seven aspects of a project, each of which must have been given
special consideration during the project preparation phase: Technical ,Financial ,Commercial,
Incentives ,Economic Managerial, Organizational

II) Investment Phase

 Implementation
 Tendering negotiation and contractual
 Detailed engineering design
 construction, erection and commissioning

 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.

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

 Operation
 Ex-post evaluation

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
program/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.s

.