PROJECT CYCLE LECTURE 2 Gittinger (1996 ) • Identification • Preparation and analysis • Appraisal • Implementation • Evaluation Project Management Institute (PMI) • Initiating • Planning • Executing • Controlling • Closing Patel (2000) • Concept • Planning • Execution • Termination Keeling (2000) • Conceptualisation • Planning • Implementation (execution) • Termination World Bank • Identification • Preparation • Appraisal • Negotiations, Board presentations • Implementation and supervision • Evaluation Proposed • Identification • Preparation and Analysis • Appraisal • Selection, Approval and Financing • Implementation • Monitoring and Control • Evaluation Identification Preparation and Analysis Evaluation Appraisal Monitoring and Control Selection, Approval and Implementation Financing Identification • Initial step of the project cycle, • synonymous with the concept stage in the case of Keeling (2000) and Patel (2000) and initiation of the PMI. • This is the birthplace of the project. • Needs preceded projects • The first step in identifying a project is to identify a need Identification • Rao (2004) states that needs could be: – social, – political, – economic, – commercial, – technological – environmental. Identification • Sources: – Auditors – Entrepreneurs – Politicians, – opinion leaders, – consultants and – government employees Identification • Activities Necessitating Projects – review of existing projects, – from national development plans, – situational reports on sectors, – country reports. – Media reports – Shortage of products, – feedback from customers and – market surveys unearths needs. Identification • compare the existing facilities with the proposed needs and wants. • Does needs and wants accommodate proposal? • Discuss with stakeholders • Informally, one may speak to confidants; potential supporters and those who would offer advice. Identification • Keeling (2000) ‘….experience underlines the prudence of selectivity in choosing confidants, for many good ideas have been killed in infancy by hasty rejection or the covert opposition of someone with antipathy to change or situation that might threaten a private agenda.’ Identification • The terminal point of this stage is a problem and a list of alternatives. • In preparation for the next stage; these alternatives may be reduced to a few; three or four. Preparation and Analysis • This stage is also called project formulation or planning. • The first thing to do is to conduct feasibility. • Purpose – provide enough information for deciding on detailed planning Preparation and Analysis • Feasibility considers viability of projects. • Choice between: – modes of transport, – type of plant, – technology, – markets, – plant location, – raw material type and availability Preparation and Analysis • Feasibility views the project in longer terms than Business Plans. • Business plans are often prepared for a five-year period. Preparation and Analysis • Patel (2000) For Profit: • market feasibility, • technical feasibility, • financial feasibility. • Governments and NGOs • economic feasibility • social feasibility Preparation and Analysis • Gittinger (1996) • ‘aspects of project preparation and analysis.’ • technical aspect, • institutional-organisational-managerial aspects, • social aspects, • commercial aspect, • financial aspect • economic aspect. Appraisal • A critical review and a re-examination of the plan prepared. • This builds on the project plan. • Questions are raised on the assumptions upon which the estimates are based. • Ratios are examined – Benefit Cost ratio (BCR), – Benefit Investment Ratio (BIR) – NPV and IRR Appraisal • cashflow should pay be able to pay for: – the loan to be granted – accrued interest – some surplus for the initiator. • Banks would determine whether the project is within their risk profile. • Other donors; Does project fall within the scope of the agency, budgets within the limits to be funded. Appraisal • stage where donors would want to see that the project meets the requirements for support. Financing • critical element in the project cycle • Issues are : – How each of the steps is financed, – the sources of funding, – the cost of each source, – methodology of arrangement of finance – size of financing Implementation • Also called execution • important part of the cycle. • action stage • ‘not until one implements a project, it remains an intention’. • Implementation • Steps: • initiating the execution process of work • coordinating activities and people for the assignment to be done. • three phases: • investment phase, • development phase and • the running phase. Monitoring and Control • Monitoring concerns making observations of what is occurring. • Data is generated from monitoring • Information is collected in a planned, organised and routine way. • Monitoring takes place during implementation • Done by the implementing agency. Monitoring and Control • Control – planning, – information – control. • Planning and the plan are the basis of control. Information is the guide, what offers the opportunity to compare. Monitoring and Control • Action is the essence of control. • The objective of control is correct the mistakes of the past • correct and direct future activities to ensure that expectations are achieved Evaluation • Evaluation is a means of determining success or failure. • Evaluation addresses two important things: – what has been achieved – how well it has been achieved • Done during: – implementation, – at the end or – when the project is in trouble. Evaluation • Evaluation done at the end is called terminal or ex-poste evaluation. • Independent persons or groups of persons often accomplish it. • Independence lies in the person other than parties in the project.