Project Life Cycle and Phases

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Project Life Cycle and Phases

  1. 1. By Abigail Pugal Somera DM 211 Project Development & Management 2nd Sem 2013-2014 Prof. Josefina B. Bitonio, DPA
  2. 2. To be able to understand the phases of a Project Life we first have to understand the different interpretations of a Project Life Cycle as interpreted by different global organizations that deal with governments.
  3. 3. • ADB Project Cycle Completion / Evaluation Implementation Country Partnership Strategy / Regional Cooperation Strategy Preparation Approval
  4. 4. • World Bank Project Cycle Evaluation (6) Implementation and Completion (5) Implementation and Supervision (4) Country Assistance Strategy (1) Identification (2) Preparation, Appraisal and Board Approval (3)
  5. 5. Cycle Order ADB World Bank 1 Country Partnership Strategy / Regional Cooperation Strategy Country Assistance Strategy 2 Preparation Identification 3 Approval Preparation, Appraisal and Board Approval 4 Implementation Implementation and Supervision 5 Completion / Evaluation Implementation and Completion 6 Evaluation
  6. 6. I. Pre – Investment II. Investment III. Operations IV. Evaluation Support Studies: •Opportunity Study •Pre-feasibility Study •Feasibility Study •Appraisal and Decision Negotiation and Contracting Engineering Design •Construction and Training •Start-up
  7. 7. • Objective/s: • Find Promising Business Opportunities • Screen According to Criteria • Classify for Further Study or Later Consideration • Characteristics: • Preliminary Information from Knowledgeable Individuals and Promotion Agencies
  8. 8. Develop Selection Criteria Screen Ideas vs. Criteria Further Study YES Profile Readily Available Data Acceptable? NO Scan Sources of Ideas and Lists Reject Rework Later Reconsider
  9. 9. • Investment Opportunities • Demand • Linkages • Problems • Resources • Development • Trade • Technology • Government Policy • External Constraints • Sources of Ideas • National, Regional Development Plans • Sector Studies • Local Resource Studies • Other Countries’ Experience • Product Classification Lists
  10. 10. • Size and Growth of Market • Local Resources • Plant Size • Appropriate Technology • Size of Investment • Estimated Financial Indicators • Requirements and Constraints
  11. 11. • Varies according to Investigator •Investor •Lender • Risk of All Concerned
  12. 12. • Set-up Screening System to Measure Long-Term Potential • Concentrate on Best Prospects • Quick Negative Decision Better than Delay • Assure Commitment of Potential Sponsor to Implementation
  13. 13. Micro • Business Concept • Investors • Market • Resources • Entrepreneur • Criteria Satisfaction Macro • Business Climate • Business Cycle • Economic Trend
  14. 14. Allocation of Investment Resources
  15. 15. PRE-FEASIBILITY STUDY ITERATIONS OPPORTUNITY STUDY APPRAISAL SUPPORT STUDIES PROJECT IDENTIFICATION FEASIBILITY STUDY IDENTICAL SCOPE AT ALL LEVELS, INCREASING ACCURACY AND PRECISION IMPLEMENTATION
  16. 16. • Related to preparation of investment studies C • Collecting O • Organizing P • Processing A • Analyzing
  17. 17. • • • • • • • • • • Executive Summary Project Background and Basic Idea Market Analysis and Marketing Concept Raw Materials and Supplies Location, Site and Environment Engineering and Technology Organization and Overhead Costs Human Resources Implementation, Planning and Budgeting Financial Analysis and Investment Appraisal
  18. 18. Objectives: • Refinement of Business Idea • Preliminary Evaluation of Alternative Approaches • Preliminary Assessment of Strengths and Weaknesses of Concept Characteristics: Sketchy, Based more on rough aggregate estimates than on detailed analysis
  19. 19. Objectives: • Preliminary Project Assessment • Identify Project Alternatives • Identify Critical Aspects that Require Special Support Studies Characteristics: Intermediate Level of Detail Based Primarily on Secondary Data
  20. 20. Objectives: Provide Commercial, Technical, Financial and Economic Information Needed for Investment Decision-Making • • • • • • Characteristics: Clear Project Concepts and Criteria Comprehensive Project Design Reliable Information, Often Primary Data Quantified Prediction or Performance Detailed Analysis with High Confidence Level Consistent and Defensible Conclusion
  21. 21. Objectives: Provide Detailed Technical Analysis of Critical Design Features Characteristics: • • • • Limited Scope Performed by Technical Experts Answer Key Questions Degree of Rigor Commensurate with Stage of Project Development
  22. 22. • • • • • Markets Inputs Location Technology Equipment
  23. 23. Comparing Project Characteristics with Criteria
  24. 24. • All Sectors of Economy • Revenue and Non-revenue Projects • All Types of Projects • • • • • • New Investment Modernization Expansion Privatization Technology Acquisition Equipment Replacement • Public and Private Investment
  25. 25. • Commitment of Scarce Resources • Expectation of Future Benefits • Inherent Uncertainties
  26. 26. PARTICIPANT Commercial Market Technology Finance •Return •Liquidity •Debt Service Economy INVESTOR FINANCIER REGULATOR GUARANTOR SUPPLIER 1 2 2 1 2 1 2 2 1 2 1 2 2 2 2 1 2 2 2 2 2 1 3 1 1 2 1 3 1 2 3 3 1 3 3 1 VERY IMPORTANT 2 SOMEWHAT IMPORTANT 3 NOT SO IMPORTANT
  27. 27. • Is it compatible with other Investment Activities? • Is the Project potentially bankable? • Does the project make the best use of the Sponsor’s Resources? • Do I have the capacity to energize the project and to retain its momentum in the face of obstacles to growth?
  28. 28. Local Partner (on the ability of Foreign Partner to contribute more equity) • “He can afford it.” • “The exchange rate is wrong.” • “He wants our market.” Foreign Partner (on the reason to offer lower price for participation) • “Political and Economic Risk” • “Low Purchasing Power in the Marketplace” • “Uncertain Future Earnings” • “Workers’ Demands” • “Book Value is Irrelevant”
  29. 29. MICRO MACRO Project Level National Level COMMERCIAL PROFITABILITY NATIONAL PROFITABILITY
  30. 30. • Does the Project Make Sense for the Country? • Consistent with Development Goals? • Positive Impact on Macro-economic Indicators? • Satisfy Economic Rate of Return Criterion?
  31. 31. • Purpose • Project Background • Analysis of • Commercial / Market • Technology • Environmental Impacts • Institutional / Managerial • Financial • Economic and Social • Conclusion
  32. 32. • Is it a Sound Business Concept? • Is there a Market for Product / Service? • Is the Marketing Strategy Viable? • Are the Sales Projections Realistic? • Is the Distribution Plan Viable?
  33. 33. • Is the production at a competitive price? • Is the process technology accessible? • Are the operating conditions sustainable? • Will we be able to provide the quality demanded by the market? • Are the inputs to the planning reliable? • Are there adequate technical personnel?
  34. 34. • Do process emissions and effluents meet or exceed regulated standards? • Are products environmentally acceptable? • Do impacts indicate future regulatory actions?
  35. 35. • Are the following Competent? • Entrepreneur • Implementation Management • Operations Management • Is the organization capable of executing necessary functions?
  36. 36. • Are the financial resources adequate to planning? • Will there be adequate returns to the investor? • Are the financial criteria of other participants satisfied? • Are the financial risks and risk sharing acceptable? • Is the financial structure acceptable?
  37. 37. • • • • • • • • • • Wrong Timing Non-optimal Financing Over-estimated Market Potential Under-estimated Capital Cost Under-estimated Competition Planned Capacity Inconsistent with Market Unidentified Sources of Skilled Personnel Inadequate Infrastructure Project Design Alternatives Ineffective Planning
  38. 38. The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for companies as well as individuals. For example, the recession that began in 2008 was largely caused by the loose credit risk management of financial firms.
  39. 39. Any project organization is subject to risks. One which finds itself in a state of perpetual crisis, is failing to manage risks properly. Failure to manage risks is characterized by inability to decide what to do, when to do it, and whether enough has been done. Risk Management is a facet of Quality, using basic techniques of analysis and measurement to ensure that risks are properly identified, classified, and managed.
  40. 40. • Identify Uncertainties Explore the entire project plans and look for areas of uncertainty. • Analyze Risks Specify how those areas of uncertainty can impact the performance of the project, either in duration, cost or meeting the users' requirements. • Prioritize Risks Establish which of those Risks should be eliminated completely, because of potential extreme impact, which should have regular management attention, and which are sufficiently minor to avoid detailed management attention.
  41. 41. • Mitigate Risks Take whatever actions are possible in advance to reduce the effect of Risk. It is better to spend money on mitigation than to include contingency in the plan. • Plan for Emergencies For all those Risks which are deemed to be significant, have an emergency plan in place before it happens. • Measure and Control Track the effects of the risks identified and manage them to a successful conclusion.
  42. 42. • UNIDO Methodology for the Identification, Preparation and Evaluation of Investment Projects, Costa Rica, Sept 23-27, 2002 • http://www.investopedia.com/terms/r/riskmanagement.asp • http://www.netcomuk.co.uk/~rtusler/project/principl.html

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