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project management

Project Management Context (Addis Ababa University)

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UNIT 1: PROJECT AND PLANNING CONCEPT

Contents
1.0 Aims and Objectives
1.1 Introduction
1.2 Development: Concepts & Contents
1.2.1 National Planning
1.2.2 Sectoral, (Sub-Sectoral) Planning
1.2.3 Project Planning
1.3 The Concept of a Project
1.4 Types of Projects
1.5 Projects & Plans (Relationship)
1.6 Project & Program
1.7 The Project Cycle
1.7.1 Project Identification
1.7.2 Project Preparation
1.7.3 Project Appraisal
1.7.4 Project Implementation
1.7.5 Project Evaluation
1.8 Summary
1.9 Answer to Check Your Progress Exercise

1.0 AIMS & OBJECTIVES

The main objectives of this unit is to:


- understand general consideration in development
- understand the concept of a project
- understand the relationship between plan and project, program and project
- identify types of project
- identify stage of project planning process i.e., project cycle.

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1.1 INTRODUCTION

Projects are one of the several instruments to achieve particular objectives in a process of
development. Thus, projects have to be discussed as an integral part of the national
development strategy for they have to be evaluated in close reference to the overall
development policy of a country. Projects have been described as "the cutting edge" of
development, they embody the policy choices flowing from development objectives and acts
as the vehicle or the medium of the described social changes.

As such then, projects are the means through which development targets are achieved and are
considered to be a tangible benefit for the project beneficiaries. Without visible projects on
the ground, policies, strategies, and plans for development are simply administrative.

1.2 DEVELOPMENT: CONCEPTS AND CONTENTS

Development is of utmost significance for all countries. It is especially so for the


underdeveloped economies which accounts for more than three fourth of the world's
population. To grasp the process that involves initiations and sustenance of development of it
is necessary as a first step that we understand as to what it implies and how to indicate the
economic progress that it makes possible. In the broadest sense, development aims at an
improvement in the quality of life. This involves progress in the economic sphere as also the
non-economic fields.

Economic development encompasses growth i.e., rise in per capita income of the people and
all that goes to improve the essential elements that make for a better quality of life such as
progress in education, health and nutrition and a cleaner natural environment. Development
planning is concerned with many decisions most of which are related to capital expenditure
on projects and their financing.

There are three distinct stages through which development planning is carried out:
- National Planning
- Sectoral Planning

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- Project Planning

1.2.1 National Planning


National planning refers to the drawing of a national plan indicating projection of the
economy on a macro economic basis. It requires the formulation of overall economic and
social objectives (called development strategy) identifying the constraints such as shortage of
investment, foreign exchange or skilled labour, and maintaining consistent inter relation
between the various sectors and regions of the economy. Marco economic planning is
concerned with the rate of economic growth, establishing regional balance and priorities and
with the formulation of investment policies and programs, which will achieve the target set.

The national economy is divided into sectors such as


- agriculture
- manufacturing industries
- service industries
- infrastructure
- social service

1.2.2 Sectoral, (Sub-Sectoral) Planning


Once the national planning is done, planning will be developed on sub-sectoral basis. The
analysis of each sector will provide an indication for investment, employment, export etc.
Before embarking on an individual project, it is frequently necessary to possess detailed
knowledge of the sector concerned (e.g., chemical, textile, engineering, iron and seet, these
referred to as sub-sector with manufacturing sector) especially when the project is fairly large
in relation to the sector. Such sectoral planning should provide area where new investment
may be made, and as such, play an essential part in project identification. In addition, it
provides an important framework in which to analyze new projects and to assess their
ramifications.

1.2.3 Project Planning


Once a sectoral (sub-sectoral) plan has been drawn up, the way is clear for project planning.
This consists of two states.

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A. A pre-feasibility study, which concentrates on the market identification and on the


costing of a project to satisfy the market, and a rough financial plan and economic
analysis.
B. A detailed feasibility study, it will be undertaken when the investor are known, and the
availability of finance will be discussed and will consists of a very detailed description
and analysis of the project.

1.3 THE CONCEPT OF A PROJECT

In most cases, it's easier to describe than to define a project. However, a project is referred to
as:
"It is a proposed undertaking involving a complex set of economic activities in which
scarce resources are committed in expectation of benefits that exceed the resources in
order that investment decisions are wisely carried out in the area of development plan,
formulation implementation." Or

"Project is a set of proposal for the investment of resources into clearly identified set
of action that are expected to proejce future benefit of fairly a specifi kind, the whole
series of action be the subject of individual plan, and examination before begin
adopted and implemented within a single overall managerial and financial
framework".

In a brief statement, a project is just a proposal to invest money in certain activities with the
expectation of return in the future.

The easiest way to define a project is to outline the common characteristics that it might be
expected to have:
A. a project involves the investment of scarce resources in the expectation of future
benefits.
B. a project can be planned, financed and implemented as a unit. Often projects are the
subject of special financial arrangement and have their own management.

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C. a project has a specific starting and finishing time in which a clearly defined set of
objectives is expected to be achieved. Usually achievement of those objectives can be
measured.
D. a project has a conceptual boundary, usually geographical but sometimes
organizational.

In general, a project is a specific activity with specific starting point and specific ending point
intended to accomplish a specific objectives and with a pre-determined input resources.

1.4 TYPES OF PROJECTS

One can identify four major types of projects; experimental project, pilot project,
demonstration project and production project.

A. Experimental project: attempt to address a problem in an innovative manner using the


alternative approaches. E.g., crop innovation.
B. Pilot project: the pilot project strengths the applicability of the experience derived
from experimental project to local level. It can highlight the problem of
implementation: test the effectiveness of the approach adopted and can provide
valuable training experiences for personnel. An important function of a pilot project is
to test the replicability of the project to other areas and to other beneficiaries.
C. Demonstration project: it's basically a form to exhibit new techniques or approaches of
a pre-tested experiment. E.g., Demonstration farms used to disseminate new crop
varieties among farmers.
D. Production project: the production project has the role of increasing productivity,
adjusting to scale requirements and a high degree of replicability.

1.5 PROJECTS AND PLANS (RELATIONSHIP)

Planning in general is a conscious effort to direct human energy for the purpose of securing a
rationally desirable end. Planning is a means to an end. It's a guide to achieving certain
objectives in an optimum manner by means of an orderly sequencing of activities. In other

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words, planning is a form of decision making in using scare resources in selective and
economical ways to achieve a pre-determined objectives or goals.

Planning is necessary because:


- it helps to make necessary arrangements in advance of possible challenge
- it helps an organization to think ahead and anticipate future events
- it gives clear picture of future events to measure and control actual activities
- it helps to identify operational problems of past performance and future corrections

 Plan requires projects: a sound plan require a great deal of knowledge about
existing and potential project. Since a plan lay down growth rate target, for Gross
Domestic Product (GDP), investment, employment etc, a realistic assumption must be
established with regard to such growth. This pre-suppose a knowledge of the rate at which
good projects can be planned.

Thus, good and realistic plan cannot be formulated in the absence of a great deal of project
planning and without proper economic appraisal of projects.
 Project requires plan: since projects commit scarce res, project selection is
meaningful only when it is placed within the broader development-planning framework.
The best economic appraisal of projects cannot be made without referring framework and
plans and policies. To choose the right project one must have an estimate of demand for
the product. But the estimation of demand could be more realistic if the plan is also
realistic.

1.6 PROJECTS AND PROGRAM

Policies are implemented through programs usually overall lengthy time scale of five to ten
years. Programs have broadly expressed development objectives. while projects are the
building blocks of programs and are usually of shorter duration. A project is a means by
which national, regional local, etc plans are made operational. This means the plan has to be
elaborated into "package of action".

The package of action can be divided into two broad categories. These are:
A. Program: which is the first step in plan elaboration and

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B. Project: the second step in plan elaboration.

Program, which is a bigger package of action is composed of a number of projects aiming at


attaining one or more related objectives of plan. Project on the other hand achieve goals
which lead to the accomplishment of specific objectives within program.

The following are the basic difference between program and project.
 A program is broader in scope than a project.
 A program is a domain out of which project can be found.
For example, if we think of extension program under this program we could identify
different projects like irrigation, crop production, Honey production etc.
 A program has general objective while projects have a specific objectives. For
example, if the objective of the extension program is self food efficiency, the objective
of the project could be increasing crop production, milk production, honey production
etc which are more specification than being general.
 Project has a specific project area while program don't have a specific program area.
 Projects have specific beneficiary groups. For example, if one establishes a cattle
raring project at Somalia region, that doesn't mean that every Somalia will be willing
to buy your product rather there will be a specific client who will purchase your
product like Yemen etc.

The difference and similarities between project and program can be summarized in the
following table:

Project Program
Difference - It is specific in objectives - Has got general objectives
- Has specific areal/geographic unit - May not have specific area
- Has clearly determined and allocated - May not have specific target group
fund - May not have clear and detailed
- Has specific life financial allocation
- May not have specific time of
ending

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- Has purpose/objectives
Similarities - Require input (financial, manpower, material)
- Generate output (goods or services)
- Operate over space and time
1.7 THE PROJECT CYCLE

Projects usually go through a series of identifiable stages. The various stages through which
project planning proceeds from inception to implementation are often called "the project
cycle." It is the project's life cycle through which the project advances from infancy to
maturity. There are a number of models of the project cycle. One of the most known models
of project is developed by Mr. W.C. Baum of the world Bank has coined the term "project
cycle" in 1970, and his model of project cycle refer Baum's model of project cycle.

However it is naïve to think that a project cycle as a successive stages overtime. There are in
fact, much feedback between the project cycle stages, and sometimes, some stages have to be
undertaken simultaneously. It is preferable, therefore, to think of the project cycle in the form
a computer program, which describes the process more accurately.

The separate stage of project planning are:


- Identification
- Preparation
- Appraisal
- Implementation and
- Evaluation

1.7.1 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 enable to launch a project. The question at this stage is where do project ideas come
from?

Sources of project ideas


We can distinguish two level where projects ideas are born: the macro level and the micro
level.

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At the macro level project idea comes from:


 National, sectoral or regional plans and strategies supplemented by special studies
often called opportunity studies, conducted with the explicit aim of translating national
and sectoral 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 detail 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.

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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

1.7.2 Project Preparation


If the pre-feasibility study indicates that the projects 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. Decision 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 a set tangible
proposals.

Project preparation is probably the most important stage in project planning. Crucial choices
relating to the structure of the project are made at this stage and some of them are virtually
irreversible. Crucial choices at the stage of preparation should be made properly by
employing the right criteria.

1.7.3 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

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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:
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 exist 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.

1.7.4 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.

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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.

1.7.5 Project 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 programme/project in
order it may be adjusted where necessary.

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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.

Check Your Progress Exercise?


1. What is a project?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. What is the relationship between project and plan, and project and program?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. What are the different sources of project idea at a macro and micro level?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
4. Write what project lifecycle mean and the various stages through which the project
passes.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
5. Argue on the issue of "It would be naïve to think that a project cycle as a successive
stage overtime".
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
6. Why companies undertake project evaluation?

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___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

1.8 SUMMARY

A project is a proposal by individual or organization to invest money in a certain activities


with the expectation of return in the future. However, it could be better to define a project in
terms of the common characteristics that might be expected to have.

We may identify four types of projects: experimental, pilot, demonstration and production
types of project. To undertake project in a good manner it requires realistic plan and for
effective planning to exist it requires good and realistic project planning proceeds from
inception to implementation referred to as the 'project cycle'. Mr. W.C.Baum has coined the
term project cycle and develop a model of project cycle which advances from infancy to
maturity. The separate stages of project planning are: Identification, preparation, appraisal,
implementation and evaluation.

Sometimes it may be difficult to think that a project cycle as a successive stage overtime,
since there is much feedback between each stage in project cycle and as some stages are
undertaken simultaneously.

1.9 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1. Refer to Section 1.4


2. Refer to Sections 1.5 & 1.6
3. Refer to Section 1.7.1
4. Refer to Section 1.7
5. Refer to Section 1.7
6. Refer to Section 1.7.5

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