PROJECT ANALYSIS AND

EVALUATION
CHAPTER ONE
INTRODUCTION
TO PROJECT

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 Definition of a Project
 A project is an undertaking to accomplish a specific objective or goal, which
requires resources and effort, and which is unique (i.e. it is a non-repetitive
activity)-because it has never been attempted before or because of unique
customer satisfaction .
 A project is a well­defined adhoc activity with clear and specific objective;
and has beginning and end dates.
 It requires allocation of resources and it should be completed on schedule
and within budget with specified quality standards.
 It is an investment activity in which financial resources (the money available to
a business for spending in the form of cash) are expended to create capital
assets that produce benefits over an extended period of time.
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 Characteristics of a Project

A project has a specific objective

 is expected to meet measures of quality and customer satisfaction
A project requires various resources
A project has a schedule and takes place within predefined time

scales
A project requires a budget
A project is a unique undertaking
A project has a customer
A project will involve some degree of uncertainty

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 Cont’d
 Project involves the investment of
scarce resources in expectation of
future benefits
 A project has a risk
 Completed by a team of people –multiple

organisations and professions

 Dynamic in nature-characterized by

constant change, activity, or progress

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The linkage between projects and programs

 National Development Plan (NDP)

 Set the overall growth and development target for a
country ,eg. Growth and Transformation Plan (GTP)
 The national development plan offers a long term
prospective. It defines a desire destination and identifies the
role different sectors of society need to play in reaching the
goal.
 It is a comprehensive statement which guides
development.

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 Cont’d
 Policy
 is a concept written document, whereby the government or a political party
will determine decisions, actions and other matters that will prove advantages
to society in general.
 A course or principle of action adopted or proposed by a government, party,
business, or individual.
 a statement of anticipatory decisions, a detailed proposal for doing or
achieving something

Sector policy
 Agriculture policy: technology-based intensification of smallholder

agriculture, .
 health policy: assurance of accessibility of health care for all segments of the

population

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 Cont’d
 Programs
Programs are planned-continuous or ongoing
development or investment activities that are not
generally time bound.
a program is an ongoing development effort or plan
which may not necessarily be time bounded.

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 Cont’d
 Project

refers to an investment activity where resources

are used to create capital assets, which produce
benefits over time and has a beginning and an
end with specific objectives,
National plan ⇒ Policy ⇒ Sectorial policy
⇒ Programs ⇒ Projects ⇒ Outcomes /
impacts /changes

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 Cont’d
  A program is therefore a wider concept than a project.
 It may include one or several projects at various times

whose specific objectives are linked to the achievement of

higher level of common objectives.
 For instance, a health program may include a water

project as well as a construction of health centers both

aimed at improving the health of a given community.
 Projects in such context are the concrete manifestations of

the development plans in a specific place and time. One

can think of projects as subunits and bricks of programs

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•
Cont’d

 major difference between a project and a program is

not so much in objectives stated but lies more in
scope, the details and accuracy
 A project is designed with a high degree of precision
and details as regards its objectives, features,
calculation of returns and implementation plan.
 A program by contrast is general, lacks details and
precision and aims at a broader goal often related to
a sectorial policy of a country or departmental policy
of an organization

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 Cont’d
PROJECTS PROGRAMS

Specific Objectives General Objectives

Specific Project Area No Specific Project Area

Specific Beneficiary Group No Specific Beneficiary Group

Clearly Determined and Allotted Fund - No Clear and Detailed Financial

Resource Allocation

Specific Lifetime (Duration Period) - No Specific Lifetime (Infinite)

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 Cont’d
Similarities

i. Having Both Objectives or Goals

ii. Requiring Financial, Personnel, Material and other resources
iii. Generating Outputs of Goods and/or Services
iv. Serving as instruments for the execution of development
v. Plans in order to be able to develop the National Economy

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 Cont’d
In general Projects need to be SMART.
 S – Specific

specific in its objective.

specific activities
benefit a specific group of people
 M – Measurable
investment and production activities and benefits
expected should be identified and if possible be valued
(expressed in monetary terms) in financial, economic
and if possible social terms

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 cont’d
A – achievable/Area bounded/assignable
• As projects have specific and identifiable group of

beneficiaries, so also have to have boundaries.

• In designing a project, its area of operation must

clearly be identified and delineated

R – Real
Planning of a project and its analysis must be made
based on real information
Should be achievable given real social, economic,
political, technical, etc situations

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 Cont’d
T – Time bounded
A project has a clear starting and ending point
Project Parameters

Quality: A successfully managed project is the one

that is completed at the specified level of quality and
predesigned specification.
Cost: A successfully managed project is the one that is
completed within predetermined budget
Time: A successfully managed project is the one that is
completed within predetermined time schedule

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 Cont’d
P ro je ct P a ra m e te rs

Q u a lity Cost Tim e

S p e cifi ca ti on Bud ge t S ch e d u le

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 Cont’d
TYPES OF PROJECTS
projects are classified as follows:
 Based on Ownership

◦ Private sector
◦ Public sector
◦ NGO’s
 Based on the Sources of Finance
◦ Project with domestic financing
◦ Project with foreign financing
◦ Project with mixed financing
 Based on the Forces Behind
◦ Demand driven/need driven
◦ Donor Driven
◦ Political Driven
 Based on purpose
◦ New projects
◦ Expansion projects
◦ Updating projects
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 Cont’d
 Based of Sector
◦ Industrial project
◦ Agricultural project
◦ Educational project
◦ Health project
 Based on risk involved in the project
◦ High risks project
◦ Normal risks project
◦ Low risks project
 Based on resources required by the projects
◦ Project with domestic resources
◦ Project with foreign resources

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 Cont’d
 Based on time horizon
◦ Long term projects
◦ Medium term projects
◦ Short term projects
 Based on locality
◦ Regional
◦ National
◦ International
 Based on resource use
◦ Capital intensive projects
◦ Labor intensive projects
◦ Energy intensive projects

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Project Management
 Project management is the planning, organizing,
directing, and controlling of company resources to
achieve a specific goals and objectives.
 Project management is the application of
knowledge, skills, tools and techniques
to project activities to meet project
requirements/objective.

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Suggested Skills for Project Managers

Project managers need both

“hard” and “soft” skills.
◦ Hard skills include product knowledge and knowing how
to use various project management tools and techniques.

◦ Soft skills include being able to work with various types

of people.

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 CONT’D
 Communication skills: Listens, persuades/ convinces.
 Organizational skills: Plans, sets goals, analyzes.
 Team-building skills: Shows responsiveness,
motivates, promotes esprit de corps.
 Leadership skills: Sets examples, provides vision
(big picture), delegates, positive.
 Coping skills: Flexible, creative, patient.
 Technology skills: Experience, project knowledge.

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ROLE OF PROJECT MANAGER
Responsibilities of the Project Manager
Planning: The project manager clearly defines the
project objectives and reaches agreement with the
customer on this objective.
Organizing: Organizing involves securing the
appropriate resources such as capital, material and
human resources to perform the work.
The project manager also assign responsibility and
delegates authority to specific individuals or
subcontractors for the various tasks

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 CONT’D
 Controlling: Project team members monitor the progress
of their assigned tasks and regularly provide data on
progress, schedule, and costs
The project manager plays the leadership role in planning,
organizing, and controlling the project but does not try to do
it alone
Skills of the Project Manager
Effective project managers have strong leadership ability,
the ability to develop people, excellent communication
skills, good interpersonal skills, the ability to handle
stress, problem – solving skills, and time management
skills.

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STAKEHOLDERS OF A PROJECT
 A given project has a number of stakeholders that
are interested in the project and its outcome
 Such stakeholders may include:-

 Beneficiaries

 Adversely affected people or groups

 Decision making groups

 Funding agencies

 Implementing agencies or groups

 Community leaders

 Potential opponents

 Supporting groups

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 Chapter Two
Project Life Cycle

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Definition

 The project life cycle refers to a serious of

activities which are necessary to fulfill project
goals or objectives
 Every project undergoes a series of phases from

its conception to the point of completion.

 A project is “a series of activities aimed at bringing

about clearly specified objectives within a defined

time-period and with a defined budget”
 The project life cycle serves to define the

beginning and the end of a project.

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 definition Cont’d..
 to be able the project to become successful, each
phase must be properly planned and managed.
 therefore, projects life cycle is a self – renewing

cycle in that new projects may grow out of the old

ones in a continuous process and self – sustaining
cycle of activity.
Project life cycles generally define:
 What technical work should be done in each

phase?
 Who should be involved in each phase

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Definition Cont’d
FEATURES OF PROJECT LIFE CYLCE
 Cost and staffing levels are low at the start, higher

toward the end, and drop rapidly as the project

draws to a conclusion.
 The probability of successfully completing the

project is lowest, and hence risk and uncertainty

are highest, at the start of the project. The
probability of successful completion generally gets
progressively higher as the project continues.

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Definition cont’d
 The ability of the stakeholders to influence the final characteristics
of the project’s product and the final cost of the project is highest
at the start and gets progressively lower as the project continues
PROJECT LIFE CYCLE MODELS
There are various models that deal with the project life cycle.
1. Baum Project Cycle (World Bank Procedures)
 The concept of the project cycle was first popularized by a World

Bank publication by Warren Baum in 1970 with five elements:

1) Identification phase
2) Preparation/project formulation and analysis phase
3) Appraisal and selection phase
4) Implementation phase
5) Evaluation phase

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 Cont’d
 Five phases:
 1) identification (finding the project)
 2) preparation/analysis (Does it have merit?)
 3) appraisal (critical review, independent)
 4) implementation (getting it started)
 5) evaluation (success or failure))

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models cont’d
2. UNIDO project life cycle
UNIDO has established a project cycle comprising three distinct
phases.
1) The pre – investment
2) The investment
3) The operational phases
3. Integrated Project Planning and Management Cycle – IPPMC
– (Goodman, 1988)
which is divided the project life cycle into four phases:- phase-1
consisting of planning, appraisal and design; phase-2 consisting of
selection, approval and activation; phase-3 consisting of
operation, control and handover; and phase-4 consisting of
evaluation and refinement

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models cont’d
4. Development Project Study Authority
(DEPSA) guideline to project planning in
Ethiopia (1990), indicated three distinct
phases: Pre-investment, Investment, and
Operation phases, which in turn reclassified in
six phases. These are: Identification,
formulation/Preparation, Appraisal and
decision/selection, Implementation, operation
and Ex-Post Evaluation

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WORLD BANK PROJECT CYCLE (THE
BAUM CYCLE)

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Identification
 The first stage in the project lifecycle is to find potentially
promising projects which are worthwhile for investment.
 Project identification is the systematic process for finding or locating
and screening promising project ideas from their respective sources.
 In other words, project identification is the first stage in any project
cycle which is concerned about germinating or incubation promising
project ideas using appropriate method.
 Project identification consists of searching projects which can contribute
towards achieving specified development objectives.
 The first stage in the project cycle is to find potential projects
(identification of investment opportunities)
 It requires imagination, sensitivity to environmental changes, &
realistic assessment of what the firm can do.

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Identification cont’d…..
 This phase may take two forms.
1. If the project is largely a private venture in a
widely market economy context the initiating entity
will define the concept, expectation and
objectives of the project.

2. If the project is form government agencies,

sectorial information (i.e. the direct and indirect
demands of sectors) is an important source of
identification.

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Identification cont’d…..Cont’d
Some of the sources of such projects are listed
below:
 Some may be “resource-based”
 Some projects may be “market-based”
 Others may be “need-based”
 Well–informed technical specialists and local

leaders
 from proposals to extend existing programs.

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Identification cont’d…..Cont’d
 There are several sources of project idea. These
various sources are broadly classified into two
as:
 a) Macro Level
 b) Micro level

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Identification cont’d…..Cont’d
a)At Macro-level, project ideas emerge from:-
◦ National policies, strategies & priorities as may be enunciated by
government from time to time.

◦ Constraints on the development process due to shortages of essential

infrastructural facilities, etc.

◦ Unusual events such as droughts, flood, earthquakes

◦ Government decision to correct social and regional inequality

◦ A possible external threat

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Identification cont’d…..Cont’d
At Micro-level project ideas emanate from:-
 The existence of unsatisfied demands or needs;
 The existence of unused or underutilized resources;
 The initiative of private or public enterprise in response to
incentives provided by the government;
 Analyze the performance of existing industries;
 Review imports and exports;
 Attend Trade fairs, exhibitions and conferences.

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Identification cont’d…..Cont’d
Steps in project identification
 Situation Analysis
 Problems/needs identification
 Problem analysis
 Prioritization of issues
 Decision on whether a project is appropriate
 Definition of the project idea
 Consultation with stakeholders
 Then identification of potential projects

or

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Identification cont’d…..Cont’d
Opportunity study – a study to identify investment
opportunities/project ideas
identification of investment opportunities
Basis for opportunity studies
 Social
 Cultural
 Economical
 Political
 Technological
 Natural
 Policies/strategies/programs

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2.Project preparation/formulation and
analysis phase
 Once project ideas have been identified and selected for further
examination, the process of project preparation and analysis
starts.
 Generally this stage involves two studies:
 Pre-feasibility studies
 Feasibility studies
Feasibility study is an assessment of the practicality
of proposed project or system
A. Pre-feasibility Study (Pre-selection/ Preliminary Screening)
Once a project proposal is identified, it needs to be examined
to select one or more of
them as potentially promising and worth further study.

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Pre-feasibility study Cont’d
 A prelude to the full blown feasibility study, this
exercise is meant to assess:
i. whether the project is prima facie worthwhile to
justify a feasibility study and
ii. what aspects of the project are critical to its
variability and hence warrant an in-depth
investigation
At this stage, the screening criteria are rough and
vague, becoming specific and refined as project
planning advances

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Pre-feasibility study Cont’d
At the pre-feasibility study stage the analyst obtains
approximate valuation of the major components of the
projects costs and benefits.
 Some kind of preliminary screening is required to

eliminate ideas, which prima facie, are not promising.

For this purpose the following aspects may be looked into
Availability of adequate market
Project growth potential
Investment costs, operational cost and distribution costs
Demand and supply factors; and
Social and environmental considerations

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Pre-feasibility study Cont’d
Compatibility with the promoter
Consistency with government priorities
 Availability of inputs
 Acceptability of risk level
If the project appear viable form this preliminary
assessment the analysis will be carried to the
feasibly stage.

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Pre-feasibility study Cont’d
During preliminary selection, the analyst should
eliminate project proposals that are
 technically unsound and risky,
have no market for their output,
have inadequate supply of inputs,
are very costly in relation to benefits,
 assume over ambitious sales and
profitability, etc.

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Pre-feasibility study Cont’d
B. Feasibility studies
The major difference between the pre-feasibility and
feasibility studies is the amount of work required in
order to determine whether a project is likely to
be viable or not.

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feasibility study Cont’d
 Here a detailed an analysis of all project aspects is
undertaken.
 Feasibility study provides a comprehensive
review of all aspects of the project and lays the
foundation for implementing the project and
evaluating it when completed.
 Based on the information developed in this

analysis, the stream of costs and benefits

associated with the project can be defined

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feasibility study Cont’d
 At this stage more accurate data need to be obtained
and if the project is viable it should proceed to the
project design stage
The final product of this stage is a feasibility report. The
feasibility report should contain the following elements:
 Market analysis
Technical analysis
Organizational analysis
 Financial analysis
 Economic analysis
 Social analysis, and
Environmental analysis

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3. Project Appraisal and selection
 It is a secondary look at the project report by a team of
professionals, who were not participated in the
preparation of the study but qualified and
experienced to evaluate such studies.
 Appraisal is the comprehensive and systematic

assessment or reexamination of all aspects of the

project before implementation
 It is an independent assessment of the project to

identify the weaknesses and strengths of the study

that have a bearing on the decision to invest, and/or
to finance the project.
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Project Appraisal cont’d
 When a feasibility study is completed the various
parties involved in the project will carry out their
own appraisal of the investment project in accordance
with their individual objectives and evaluation of
expected risks, costs and gains.

 The techniques applied to appraise the project center on all

project aspects.

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Project Appraisal cont’d
A widely used project appraisal ( financial) criteria
classified as
1. Non-discounting criteria
 the payback period and
 the accounting rate of return
2. Discounting criteria
 The discounted payback period
 the net present value,
 the internal rate of return, and
 the benefit cost ratio.

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Project Appraisal cont’d
 When the appraisal is completed, the findings and
final recommendations are put together in the
form of an appraisal report.
 The recommendation may be to approve, re-

formulate, postpone, or abandon the project under

review.

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 cont’d
 Critical review, independent evaluation
 re-examines every aspect of the project plan to assess its logic/value prior
to release of big money.
 may involve new information
 Appraisals should cover at least seven aspects of the project,
those seven aspects are:-
 Commercial
 Technical
 Managerial
 Organizational
 Financial
 Economic
 environmental

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4. Implementation
 It is the stage to which the conclusions reached and
decisions made are put into action and the agreed resources
are used to carry out the planned activities and achieve
objectives
 Implementation is the most important part of the project

cycle
 Translating an investment proposal into a concrete

operational unit is a complex, time consuming and risk

fraught task
 Delays in implementation, which are common, can lead to

substantial cost overrun.

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Implementation cont’d
The investment (implementation) phase can be divided into the
following stages:
1. Establish project management office
2. Technology acquirement and transfer, including
• tender preparation
• negotiation and contracting;
• Procurement of major technology for installation and other inputs
3. Engineering design and construction work
4. Installation and erection;
5. Pre-production marketing, including the securing of supplies and
setting up the administration of the firm
6. Recruitment and training of personnel, and
7. Plant commissioning and start-up (operation phase).

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5. Evaluation

 The final phase of the project is the evaluation

phase
 Performance review should be done to compare

actual performance with projected performance.

 The evaluation may be done by the project

management, the sponsoring agency, or other

bodies
 serve as important lessons for future project

analysis undertaking.

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Evaluation cont’d
A feedback device, it is useful in several ways:
 it throws light on how realistic were the

assumptions underlying the project;

 it provides a documented log of experience that is

highly valuable in future decision making;

 it suggests corrective action to be taken in the

light of actual performance;

 it helps in uncovering judgment biases;
 it induces a desired caution among project

sponsors.

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Evaluation cont’d
 This phase regards evaluation of success or failure
elements of a project with relevance to the future
 Compare the actual progress with the plan
 Are the objectives met? If not, were the objectives
realistic?
 Are the decisions or actions made/taken by the
management sound & responsible?
 usually takes place throughout the project, but sometimes
only at the end
 undertaken by management, sponsoring company/
agency, etc.
 some projects have separate internal units for this or use
outsiders

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UNIDO’S Project cycle Model
(United Nations Industrial Development
Organization Model)
According to the UNIDO approach the project
development cycle comprises three distinct phases,
including:
1. pre-investment phase

2. Investment phase
3. Operational phase

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06/26/2023 62
Cont’d
 UNIDO gives emphasis to industrial projects. It is
more practical than conceptual
 The difference between the three stages is

the level of resource commitment

 The pre-investment is generally the study stage,

where the project has to pass through different

levels of refinement so as to increase the level of
information about the project feasibility

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Cont’d
 The investment phase is the stage where the
project initiator/owner gets convinced by the
feasibility of the project and decides to commit
some resources in expectation of high return more
than the cost
 The Operational phase is the stage at which

the project starts to give the production/service

to the beneficiaries

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Pre – Investment Phases
 is generally the study stage, where the project has
to pass through different levels of refinement so
as to increase the level of information about the
project feasibility
 it Includes
 opportunity study

 pre-feasibility study
 Feasibility
 Appraisal

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Pre – Investment Phases cont’d
i. opportunity study (Idea Generation)
Project ideas may be:
Resource based: Stem from the opportunity to make
profitable use of Available resource
Market based: Arise from an identified
demand in home or overseas market.
Need based: To make available to all people
in an area where minimal amounts of certain
basic material requirements and services exist

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Pre – Investment Phases cont’d
i. ii. Pre-feasibility study (preliminary project
selection and Definition)
 A pre-feasibility should be viewed as an

intermediate stage between a project opportunity

study and a detailed feasibility study
 the difference being in the degree of detail ness of

the information obtained and the intensity with

which project alternatives are discussed but they
should follow the same structure

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Pre – Investment Phases cont’d
iii. Feasibility study. Involves detail analysis of
different factors to cheek the project’s:
 market feasibility
 Technical feasibility
 Financial feasibility
 Economic Feasibility
Environmental and social feasibility

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Pre – Investment Phases cont’d
iv. Appraisal and Decision
 The appraisal/audit phase involves a systematic

review of all aspects of the project in order that a

decision can be made as to whether to proceed
 The Decision could involve discarding the

project or alternation of some of the plans or

accepting as it is.

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Pre – Investment Phases cont’d
Areas need to be re-examined:
Institutional
Environmental
Social
Economic
Financial
Technical
 Sustainable

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2. Investment Phases
 The investment phase is the stage where the
project initiator/owner gets convinced by the
feasibility of the project and decides to commit
some resources in expectation of high return more
than the cost
 Under this stage the project would be

transformed from paper work into actual practical

implementation activities.
 includes the following activities

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Investment Phases
Project and engineering design
Negotiation and Contracting
Construction
Recruitment and Training of Worker
 pre production marketing
3. Operational/implementation phase
Is the stage where the expected project
benefits start being generated

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