CHAPTER ONE

INTRODUCTION TO PROJECT
Project analysis and management plays a key role in the economic development of the
country. Since the introduction of planning, countries of the world, especially,
developing countries have been investing large amounts of money in projects related to
industry, minerals, power, transpiration, irrigation, education etc with a view to
improve the socio-economic conditions of the people. The money invested both in
industrial and social projects keeps increasing. These projects are designed with the
aim of earning adequate returns to provide for future development. But, experience
shows that there are several shortcomings in the ultimate success of achieving the
objectives of the proposed projects. One of the main reasons for the failure of many
projects in the developing countries is the inadequacy of managerial skill for project
implementation and imperfect planning and control of projects.

 Concept and Definition of a Project

A project is a complex of economic activities in which we commit scarce resources in
expectation of benefits that exceed these resources. A project is an investment made on
a package of interrelated time-bound activities; consequently, a project becomes a time-
bound task.

Project planning deals with specified tasks and operations of activities, which must be
performed to achieve the project goals. Any project that we may consider has an
objective and has to be operated within a given set of rules, regulations, constraints and
restrictions. Implementation of projects needs resources or inputs. Every project
converts the given inputs into output through a process of implementation. The outputs
in the short run, lead to outcomes which, in the long run, should result in impact.
Thus a project can also be defined as a complex of non-routine activates that must be
completed with a set amount of resources and within a set of time limit.

 Classification of Projects

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Projects can be classified based on several criteria.
1. Ownership
a. Private sector- mostly projects undertaken by business enterprises.
b. Public sector- projects undertaken by national and local government body.
c. NGO’s – development projects undertaken by non-government and not
for profit organizations.
2. Based on the sources of finance
a. Government treasury
b. Government treasury and external sources
c. External sources of finance.
3. Based on the forces behind
a. Demand driven/need driven- based on identified unsatisfied demand
project can be created or on unsatisfied basic needs like food, water, and
shelter..
b. Donor driven- the force behind the financing organization.
c. Political driven
 Project Management
Is planning, scheduling, controlling and monitoring the complex non-routine activities
that must be completed to reach the predetermined objectives of the project. It involves
the coordination of a group activity, wherein the manager plans, organizes staffs,
directs, and controls to achieve an objective, with constraints on time, cost and
performance of the end product.

Planning is the process of preparing for the commitment of resources in the most
economical manner. Controlling is the process of making events conforms to schedules
by coordinating the action of all parts of the project to achieve the objective.

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Projects analysis involves estimation and comparing the beneficial effects of an
investment with its costs. Though it originated many years ago, it has been extensively
used in the last years. The basic ideas of project analysis became clear only after their
applications. In 1830s a problem was formulated in the U.S. in relation to water
resource investments. The costs of investment could easily be estimated. But the
benefits were not that much easy to compute because there was no established price to
value water. Thus, guidelines were established for estimating the benefits and costs of
water resource projects. The first use of project analysis was made in the Soviet Union
in 1930s. The emphasis was on expanding material production than social service
sectors.
The application of project analysis has been considerably increasing in developing
countries. India provides an example where project analysis has been extensively
applied over a long period in both commercial and non-commercial investments and in
the assessment of private investment proposals. In Jamaica, a committee primarily
assesses the project proposals. Since most of the projects in Sri Lanka are externally
funded, assistance agencies carry out the analysis work, which will be renewed by
managerial planning staff.
Even socialist countries such as China and Mozambique have adapted project analysis
as part of a process of reform. The last two decades have witnessed serious applications
of project analysis in Africa and Asia. Internationalization (globalization) of products,
privatization policies and invitation of foreign investment has enhanced the
applications of project analysis and management techniques.

 Projects and Plans

Clearly, projects are inevitable for the overall development of the country. Project
planning should always focus on the overall development plans of the government.
The development plan of the government is materialized through designing various
projects. If the development plans of the government are elaborate, the work of the
project planner will be easy. As a minimum, they should outline the socio-economic
pattern of development and should specify the major objectives.

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Such objectives as promotion of employment, elimination of poverty etc can serve as
guidelines to project selection. The project analysis should always verify that the
selected project contributes towards attaining those objectives.
Drafting developmental plans is, in a way, a careful assessment of development
potentials in various sectors of the economy. In other words, it is identifying and
evaluating specific projects. Projects, thus, contribute towards the formulation of
macro-plans of the country. However, planning the economy and planning projects
can proceed in parallel, reinforcing and refining each other. But, a drive from the
government to direct investment to those sectors where it will yield the most benefits to
the economy will be more encouraging to design projects.

It is necessary to formulate projects through proper planning. Project planning is

usually done in a series of stages. These stages include identification of investment
possibilities, their preliminary investigation through a pre-feasibility study, a more
detailed investigation and implementation plan through a feasibility study, and a
decision process accepting or rejecting the project. If the project is accepted detailed
planning becomes necessary for detailed design, financial negotiations and
commissioning the project. A mistake committed any where in the project planning
will have its adverse impact on attaining the goals of the project.