Project Cycle PDF

Chapter 3 The Project Cycle project cycle is a sequence of events, which a project follows.  These events, stages or phases can be divided into several equally valid ways, depending on the executing agency or parties involved.  Some of these stages may overlap. 2/1/2025...

Chapter 3 The Project Cycle project cycle is a sequence of events, which a project follows.  These events, stages or phases can be divided into several equally valid ways, depending on the executing agency or parties involved.  Some of these stages may overlap. 2/1/2025 By Nigussie D. 2025 1  Cont…  Project cycle refers to the various stages through which project planning proceeds from the inception to implementation.  In other words, it is the life cycle through which a project advances from infancy to maturity. The main features of this cycle are:  Information gathering,  Analysis and  Decision- making 2/1/2025 By Nigussie D. 2025 2  Cont…  Throughout the project the preoccupation of the analysis is to consider alternatives, evaluate them and decisions on which of them should be advanced to the next stage.  There are several approaches to describe project life cycle. The two common approaches are World Bank project life cycle and UNIDO (United Nation Industrial Development Organization) project life cycle. 2/1/2025 By Nigussie D. 2025 3  3.1. project cycle in world bank approach  project cycle may be divided into six broad phases according to world bank approach these are : 1. Identification 2. Pre-feasibility Study 3. Feasibility (technical, financial, economic…) 4. Selection and project design 5. Implementation 6. 2/1/2025 Ex-post evaluation By Nigussie D. 2025 4  project cycle … 2/1/2025 By Nigussie D. 2025 5 3.1.1. Identification  The f irst stage in the project cycle is to f ind potential projects  Identif ic ation of promising investment oppor tunities requires imagination, sensitivity to environmental changes, and a realistic assessment of what the firm can do. 2/1/2025 By Nigussie D. 2025 6 Identification…  This phase may take two forms  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. 2/1/2025 By Nigussie D. 2025 7 Identification… If the project idea emanate form government agencies in the context of government development plans, in this case  sectoral information (i.e. the direct and indirect demands of sectors) is an important source of identification 2/1/2025 By Nigussie D. 2025 8 Identification…  In general there are four major sources from which ideas or suggestions for project may come: 1. Project ideas from technical specialists 2. Project ideas from local leaders 3. Project ideas from entrepreneurs 4. Project ideas from government policy and plans 2/1/2025 By Nigussie D. 2025 9 Identification… At identif ic ation stage there could be a number of alternatives that could be examined. Some of these projects may appear for reasons nothing to do with the national plan. I n such circum stances it is advantageous to understand the ‘political history’ of the project. 2/1/2025 By Nigussie D. 2025 10 Identification… o The identif ic ation of project ideas is based on several aspects of development.  Need - a need assessment survey may show the need for intervention  Market demand - domestic or overseas  Resource availability - opportunity to make available resources more profitable 2/1/2025 By Nigussie D. 2025 11 Identification…  Technology - to make use of available technology  Natural calamity/ disaster - intervention against natural calamity such as flood or drought  Political considerations  Possible alternative project must be adequately assessed. 2/1/2025 By Nigussie D. 2025 12 3.1.2. Project preparation and analysis phase  Once project ideas have been identif ie d the process of project preparation and analysis starts.  Project preparation must cover the full range of technical, institutional, economic, and f in ancial conditions necessary to achieve the project’s objective. 2/1/2025 By Nigussie D. 2025 13 preparation and analysis phase… Critical element of project preparation is  identifying and comparing technical and institutional alternatives for achieving the project’s objectives  Different alternatives may be available and therefore, resource endowment (labor or capital) would have to be considered in the preparation of projects. 2/1/2025 By Nigussie D. 2025 14 preparation and analysis phase…  Preparation thus require feasibility studies that identify and prepare preliminary designs of  Technical and institutional alternatives,  Compare their costs and benefits, and  Investigate in more details the more promising alternatives until the most satisfactory solution is finally worked out. 2/1/2025 By Nigussie D. 2025 15 preparation and analysis phase…  preparation and analysis phase involves generally two steps:  Pre-feasibility studies  Feasibility studies 2/1/2025 By Nigussie D. 2025 16 3.1.2.1. Pre-feasibility Study  The identification process will give  the background information for def ining the basic concept of the project, which leads to the feasibility study stage.  Once a project proposal is identif ied, it needs to be examined. 2/1/2025 By Nigussie D. 2025 17 Pre-feasibility Study… As an introduction to the full blown feasibility study, this exercise is meant to assess (i) whether the project is prima facie attraction while to justify a feasibility study and (ii) what aspects of the project are critical to its v a r i a b i l i t y a n d h e n c e w a r ra n t a n i n d e p t h investigation. 2/1/2025 By Nigussie D. 2025 18 Pre--feasibility Study… At the pre-feasibility study stage the analyst obtains  approximate valuation of the major components of the projects costs and benefits. 2/1/2025 By Nigussie D. 2025 19 Pre--feasibility Study… o Some of the main components examined during the pre-feasibility study include:  Availability of adequate market  Project growth potential  Investment costs,  operational cost and  distribution costs  Demand and supply factors; and  Social and environmental considerations 2/1/2025 By Nigussie D. 2025 20 Pre--feasibility Study… Using this preliminary data supplied by the various discipline specialists, a preliminary f inancial and economic analysis will be conducted. If the project appear viable from this preliminary assessment, the analysis will be carried to the feasibly stage. 2/1/2025 By Nigussie D. 2025 21 3.1.1.2. Feasibility Study The major difference between the prefeasibility and feasibility studies is:  the amount of work required in order to determine whether a project is likely to be viable or not. 2/1/2025 By Nigussie D. 2025 22 Feasibility Study… If the preliminary screening suggests that the project is prima facie worthwhile, a detailed analysis of the marketing, technical, f inancial, economic, and ecological aspects will be undertaken. 2/1/2025 By Nigussie D. 2025 23 Feasibility Study…  At this stage a team of specialists (Scientists, engineers, economists, sociologists) will need to work together.  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 f inal product of this feasibility stage is a feasibility report. 2/1/2025 By Nigussie D. 2025 24 Feasibility Study…  The feasibility report should contain the following elements: Market analysis Technical analysis Organizational analysis Financial analysis Economic analysis Social analysis, and Environmental analysis 2/1/2025 By Nigussie D. 2025 25 3.1.3. Appraisal o The feasibility study would enable the project analyst  to select the most likely project out of several alternative projects.  Selection follows, and often overlaps analysis. 2/1/2025 By Nigussie D. 2025 26 Appraisal… It addresses the question of Is the project worthwhile/profitable? Wide ranges of appraisal criteria have been developed to judge the wor thwhile of a project. 2/1/2025 By Nigussie D. 2025 27 Appraisal… They are divided into two broad categories, viz.,  Non-discounting criteria and  Discounting criteria.  To apply the various appraisal criteria suitable cut off values have to be specified. 2/1/2025 By Nigussie D. 2025 28 Appraisal… The level of risk pursued influences these. Risk analysis remains the most intractable part of the project evaluation exercise. This exercise also involves the undertaking of detailed engineering design; manpower and administration requirement as well as marketing procedures should be finalized. 2/1/2025 By Nigussie D. 2025 29 3.1.4. Implementation A f t e r t h e p r o j e c t d e s i g n i s p r e p a r e d , negotiations with the funding organization starts and once source of finance is secured Implementation follows. Implementation is the most important part of the project cycle. 2/1/2025 By Nigussie D. 2025 30 Implementation…  The better and more realistic the project plan is the more likely it is that the plan can be carried out and the expected benefits realized. 2/1/2025 By Nigussie D. 2025 31 Implementation… o At the project implementation phase tenders are let and contracts signed. Project implementation must be flexible since circumstances change frequently. 2/1/2025 By Nigussie D. 2025 32 Implementation… Technical changes are almost inevitable as the project progresses; price changes may necessitate adjustments to input and output; political environment may change 2/1/2025 By Nigussie D. 2025 33 Implementation…  Project analysts generally divide the implementation phase into three time periods. 1. The investment phase, where the major investments are made. This may extend from three to five years. 2. The development phase, which may also extend from three to f ive years. 3. The project life,: The life span of the project from the beginning to the final end. 2/1/2025 By Nigussie D. 2025 34 Implementation…  Translating an investment proposal into a concrete project is a complex, time consuming and risk fraught task. Delays in implementation, which are common, can lead to substantial cost overrun. 2/1/2025 By Nigussie D. 2025 35 3.1.5. Ex-post evaluation o The f in al phase of the project is the evaluation phase. Many usually neglect this stage. Th e project an alyst looks carefu lly at th e successes and failures in the project experience to learn how better to plan for the future. 2/1/2025 By Nigussie D. 2025 36 Ex--post evaluation…  In this stage it is important to examine the project plan and what really happened.  Performance review should be done periodically to compare actual performance with projected performance. 2/1/2025 By Nigussie D. 2025 37  3.2. Project Life Cycle -UNIDO Approach  According to UNIDO, project cycle involves three major phase. These are: 1. P r e - i n v e s t m e n t p h a s e ( w h i c h i n c l u d e s identification/opportunity study, pre-selection/pre-feasibility study, preparation/feasibility study, and project appraisal), 2. Investment phase (implementation phase) and 3. Operation phase (operation and ex-post evaluation). 2/1/2025 By Nigussie D. 2025 38 3.2.1. Types of decision taken during each pre-investment p h a s e s

2/1/2025 By Nigussie D. 2025 39  3.2.2. Investment Phase (Implementation Phase)  Activities that should be done in this phase  Establish legal, financial and organization basis  Technology acquisition and transfer  Detailed engineering, design, contracting, tending and negotiations  Acquisition of land, construction works and installation  Pre-production marketing, securing supplies, and setting up administration  Recruitment, training and placement of workers  Plant commissioning and startup 2/1/2025 By Nigussie D. 2025 40 3.2.3. Operational Phase  Once activities listed under investment phase are completed, the project will go into actual operation.  The operation involves producing the envisaged goods, and sale to the target market, or delivers the envisage service to the target market.  The project also requires evaluation, which deals with the review of whether the project is being implemented as per expectation.  The necessary corrective actions should also be taken if deviation is identified. 2/1/2025 By Nigussie D. 2025 41 2/1/2025 By Nigussie D. 2025 42  Quiz 1 1. What does it mean by project cycle? (1 pt) 2. Write the cycles of project sequentially (2 pt) 3. What are the approaches of cycles of project (2 pt) 2/1/2025 By Nigussie D. 2025 43