Project development cycle

1. Project initiation

2. Project preparation

3. Appraisal and financing

4. Engg and detailed design

Initiation Phase of Construction Project

We have to create and evaluate the project in order to determine if it is feasible and if it should be
undertaken, at the beginning of the project. Here the project objective or need is identified; this can be
a business problem or opportunity.

A suitable response to the need is documented in a business case with recommended solution options.
A feasibility study is conducted to examine whether each option clearly identifies the project objective
and a final recommended solution is determined.

Many questions related to the issues of feasibility i.e. “can we do the project?” and justification like
“should we do the project?” are mentioned and faced.

When a solution is approved, a project is initiated to implement the approved solution. For this, a
project manager is appointed. At this stage, the major deliverables and the participating work groups
are identified. This is the time when the project team begins to take shape. Approval is then required by
the project manager to move onto the detailed planning phase.

This module examines demand for the goods and services of a project in thedomestic or foreign market
and the supply condition expected to prevail duringthe project’s life.2)

Technical or engineering moduleThis module is concerned with a project’s input parameters, quantities
and pricesof inputs by type required for project construction, inputs required for theproject’s operation
by year, and the propriety of the technology adopted. It is alsoconcerned with issues such as project
size, design and location, and thetechnology to be adopted including equipment and processes to be
used.Assessment of the environmental impact caused by inputs, outputs or technologyshould be a
central component of this module.3)

Manpower and administrative support moduleThis module reconciles the project’s technical and
administrative requirementswith the supply constraints on manpower. Whether future financial and
economicbenefits materialize depend on whether there is sufficient administrativecapability within an
agency in charge to put the project in place.4)
Financial moduleThis module provides the first integration of financial and technical variablesestimated
in the marketing, technical and manpower modules. A cashflow profileof the project is constructed,
which identifies all receipts and expendituresexpected to occur during a project’s lifetime.5)

Economic moduleEconomic appraisal examines the project from the entire economy’s point of viewto
determine whether or not its implementation will improve the economicwelfare of the country or the
region. Benefits and costs are measured usingtechniques to determine the economic prices of goods
and services, foreignexchange and the cost of capital and labor. True economic values of costs
andbenefits are not reflected in market prices in the presence of various distortionssuch as trade
restrictions, price control, taxes, subsidies and minimum wages.6)

Social moduleThis module deals with the identification and quantification of the project’simpacts on its
stakeholders, including the well-being of particular groups insociety.7)

Institutional moduleThis module addresses the following issues:

Is the entity supposed to manage the project properly organized and itsmanagement equipped to
handle the project?-

Are local capabilities and facilities being properly utilized?-

Are changes needed in the policy and institutional setup outside this localentity?8)

Environmental moduleThis module should address the following issues:-

What impact will the project have on the environment?-

What equipment or facilities will be required to reduce or eliminate thepollution from the project and
what will be their cost?-
What will be the cost of providing remedies to the adverse impact createdby the project?

Project approval and financing negotiations

After all modules in the feasibility phase have been completed, the project mustbe examined to see if it
can meet the financial, economic and social criteria set by thegovernment (e.g., the NEDA ICC) for
investment expenditures. This is the final part of project appraisal and is meant to improve the accuracy
of the measures of key variables if the project shows potential for success. More primary research will
have to be undertakenand perhaps a second opinion sought on other variables. Since estimates of costs
andbenefits may be subject to error, the sensitivity of the project’s outcome to variations inthe values of
key variables must be analyzed.Cost estimates should at this point be very accurate and the sources and
nature of financing identified. Identification of financing at this stage will ensure that the projectcan
proceed to the next phase. Also, the implication on the project costing of each type of financing will be
established.At the end of this stage, the decision to approve or disapprove a project must be made.
If the feasibility study convinces decision-makers to approve a project, the next major stepsare tying up
the financing and developing a detailed project design.

Investment PhaseDetailed design

In this point in the project cycle, preliminary design criteria must be establishedwhen the project is
identified and appraised, but expenditures on detailed technicalspecifications are usually not warranted
at this time. Once the project has been approvedfor implementation, the design task should be
completed in more detail. Details of thebasic programs should be provided, tasks allocated, resources to
be determined andfunctions to be carried out along with their priorities set down in operational
form.Technical requirements, such as manpower needs by skill class, should also be completedat this
stage. After the blueprints and specifications for construction of facilities andequipment are completed,
operating plans and schedules along with contingency plansmust be prepared and brought
together.When this process is completed, the project is again reviewed against the criteriafor approval
and implementation. If it is unable to meet the criteria, the result must bepassed onto the appropriate
authorities for final disapproval or acceptance.

Project Implementation

This stage covers both the completion of construction activities and thesubsequent operations.
Implementation is generally divided into three time periods: aninvestment period when the major
investments are made; a development period whenproduction capacity is gradually built up; and the
period of full implementation.Resources are allocated and coordinated to make the project operational.
Proper planningat this stage is essential to prevent undue delays and administrative procedures have to
bedesigned for the smooth coordination of the activities required in project implementation.All projects
face implementation problems, usually due to planning flaws or changes inthe economic and political
environment. Thus, monitoring and supervision systems haveto be evolved to ensure that
implementation is completed successfully and on time.

Post-Investment PhaseProject Operation

A project reaches the operation stage after investments have been made. It iswhen the expected project
benefits start to be generated. As soon as the project isoperational, it is essential that the skills, plans
and controlling organization be availableto carry on with the function of the project in order to avoid
excessive start-up costs.

Mid-Term and Ex-Post Project Evaluation

For the development of the operational techniques of project appraisal andimprovement in the
accuracy of evaluations, it is useful to compare the projects predictedwith its actual performance. In an
ex-post evaluation, elements of success or failure areanalyzed. A project evaluation is a must before any
follow-up project is planned. A finaldetailed ex post evaluation must be undertaken once the project is
terminated.