chapter 1 edited.pdf

RIFT VALLEY UNIVERSITY
MBA
5 June 2021 project management 1
By
Chala Dechassa (PhD, Assistant
Professor)
Chapter One
Project management overview

Essence of Project Analysis and Evaluation
 All countries have national plans, which spell a range of
economic and social objectives and strategies meant to
enhance Growth and Development.
• In this regard, projects provide an important means by which
investment and other development expenditures foreseen
in the plans can be clarified, justified, and realized.
 Development plans and projects are closely interlinked since
sound development plans require good projects as just good
projects require sound planning.
2
5 June 2021 project management

Project Defined
• A project is defined as a complex set of activities where
resources are used in expectation of returns and which
lends itself to planning, financing, and implementing as a unit
( Gittinger, 1982), .
• A project usually has a specific starting point and a specific
ending point intending to achieve specific objectives.
• It usually has a well-defined sequence of investment and
production activities and a specific group of beneficiaries that
can be identified, quantified, and valued, either socially or
monetarily.
3

Cont’d
• project as “….a temporary endeavor undertaken to create a unique
product of service.
• Temporary means that every project has a defined end.
• Unique means that the product or service is different in some
distinguishing way from all similar products or services.”(A project
can be defined as a non-repetitive activity (HarveyMaylor ).
• It constitutes the whole complex of activities in the undertaking that
uses resources to gain benefits that exceed the costs of the
resources.
• It involve the commitment of scarce resources to a specific line of
action, which prevents the use of those resources elsewhere.

Project ……. Defined
A project is an activity that require resource,
time, objective, with fixed deliverables.
A project is accomplished by performing a set of
activities.
– For example, construction of a house is a project. It
consists of many activities like digging of foundation pits,
construction of foundations, construction of walls,
construction of roof, fixing of doors and windows, fixing of
sanitary fittings, wiring, etc.
5

Cont’d
• Projects are usually the subject of special arrangements and
procedures for their planning, appraisal, and so on.
• Involve special financial arrangements, including loans from
overseas, development banks, and other agencies.
• The pattern of resources commitment in projects is usually for
capital investments to be made to establish productive
capacity or physical works, which then have a long life of
operation or use.
• Therefore, a project can be considered to be any series of
activities and characterstics
6

project management
Project Characteristics
Major project characteristics are as below:
1. Specific Objectives (It is goal oriented)
– A project has a set of objectives or a mission. For
example, the objective of a project may be
construction of a highway connecting two cities “A”
and “B”, covering a distance of 200 km. Once the
construction of the highway is completed the project
comes to an end.
– The objective is specified in terms of cost, schedule,
and performance requirements.
5 June 2021 7

project management
.. …Cont’d
2. Life Cycle
 A project has a life cycle. The life cycle consists of the
following stages:
a) Project Initiation
b) Project Planning
c) Project Execution, and
d) Project Closure
 The task, people, organizations, and other resources
change as the project moves from one phase to the next.
5 June 2021 8

project management
a) Project Initiation
 It is the first phase in the project
 In this phase a business problem (or opportunity) is
identified and a business case which provides various
solution options is defined.
 A feasibility study is then conducted to investigate the
likelihood of each solution option addressing the
business problem and a final recommendation is put
forwarded
5 June 2021 9

Project Initiation… Cont’d
 Once the recommended solution is approved, a project is
initiated to deliver the approved solution
 A “Term of Reference” is completed, which outlines the vision,
objectives, scope, deliverables and structure of the new
project, and a Project Manager is appointed.
 Then the Project Manager begins recruiting a project team and
establishes a Project Office environment.
 Approval is then sought to move into the detail planning phase.
project management
5 June 2021 10

project management
b) Project Planning
• Once the scope of the project has been defined in the “Terms
of Reference”, the project enters the detailed planning phase.
This involves the creation of a:
 Project Plan (Outlining the activities, tasks, dependencies
and timeframes)
 Resource Plan (listing the labour, equipment and materials
required)
 Financial Plan (identifying the labour, equipment and
materials costs)
5 June 2021 11

Project Planning, Cont’d
 Quality Plan (providing quality targets, assurance and
control measures)
 Risk Plan (highlighting potential risks and actions taken to
mitigate them).
 Procurement Plan (identifying products to be acquired
from external suppliers).
 Communications Plan (listing the information needed to
inform stakeholders)
project management
5 June 2021 12

project management
c) Project Execution
• This phase involves the implementation of each activity and
tasks listed in the Project Plan.
• While executing the activities and tasks, a series of
management processes are undertaken to monitor and
control the deliverables being produced by the project.
• Once all the deliverables have been produced and the
customer has accepted the final solution, the project is ready
for closure.
5 June 2021 13

project management
d) Project Closure ( conclusion)
• Project closure involves:-
 releasing the final deliverables to the customers,
 Handing over project documentation,
 Terminating supplier contracts,
 Releasing project resources and communicating the closure of the
project to all stakeholders.
 The last remaining step is to undertake a Post Implementation Review to
quantify the overall success of the project and list any lessons learnt for
future project.
5 June 2021 14

project management
…Cont’d
3. Definite Time Limit (Temporary)
• Have defined start and end dates
– A project has a definite time limit. It cannot continue forever.
– Have funding limits (if applicable)
4. Uniqueness
– Every project is unique and no two projects are similar.
Constructing a highway connecting two cities A & B and
constructing another highway between cities C & D are
unique in themselves. In view of the differences existing in
the organization, infrastructure, location, technical
specifications and the people behind the projects.
5 June 2021 15

project management
…Cont’d
5. Teamwork
Any project calls for the services of experts from a host
of disciplines. Coordination among the diverse areas
call for teamwork. Hence, a project can be
implemented only with teamwork.
Perhaps more than any other human endeavor, project
work is teamwork.
5 June 2021 16

project management
…Cont’d
6. Complexity
A project is complex set of activities relating to diverse areas.
 Technology survey,
 choosing the appropriate technology,
 procuring the appropriate machinery and equipment,
 hiring the right kind of people,
 arranging for financial resources,
 execution of the project in time by proper scheduling of
the different activities, etc.
contribute to the complexity of the project.
5 June 2021 17

project management
…Cont’d
8. Risk and Uncertainty- a risk free project cannot be
thought of.
9. Sub-contracting- to give a contract to somebody else to
do part of the work.
10. The output of the project is measurable
– Something has changed through the project being carried
out
5 June 2021 18

project management
…Cont’d
 Four key considerations always are involved in a project:
(1) What will it cost?
(2) What time is required to complete the project?
(3) What technical performance capability will it provide?
(4) How will the project results fit into the design and
implementation of organizational strategies?
5 June 2021 19

…Cont’d
Typical Project Examples
(a) Construction projects
(b) Development projects
(c) Weddings, remodeling a home, and moving to another
house are certainly projects for the families involved
(d) Company audits, major litigations, corporate relocations,
and mergers are also projects.
project management
5 June 2021 20

…Cont’d
Project Goals
 Virtually every project has three overriding goals: to
accomplish work for a client or end-user in accordance with
budget, schedule, and performance requirements.
(i) Budget: the budget is the specified or allowable cost for
the project.
• It is the target cost of the work to be done.
project management
5 June 2021 21

…Cont’d
 The above goals can be met in two ways:
 By using project management disciplines and project
management tools, and
 By following project management processes.
project management
5 June 2021 22

…Cont’d
• (ii) Schedule: the schedule includes the time period over
which the work will be done and the target date for when it
will be completed.
(iii) Performance Requirements: Specify what is to be done
to reach the end- item or final result.
• Note: The three goals are interrelated and must be addressed
simultaneously; exclusive emphasis on any one goal is likely to
detract from the others.
project management
5 June 2021 23

project management
Project Management
 Project management is an organized venture for managing projects.
 It involves scientific application of modern tools and techniques in
planning, financing, implementing, monitoring, controlling and
coordinating unique activities or tasks or produce desirable outputs
in accordance with the pre-determined objectives within the
constraints of time and cost.
5 June 2021 24

Project Mgt. … Cont’d
• “Project management is the skills, tools and
management processes required to undertake a project
successfully”.
 Project management comprises:
A set of Skills. Specialist skills and experience are required
to reduce the level of risk within a project and thereby
enhance its likelihood of success.
A Suit of Tools. Various types of tools are used by project
managers to improve their chances of success. Examples
include registers, planning software, modelling software,
audit checklist and review forms.
project management
5 June 2021 25

project management
... Cont’d
A Series of Processes. Various management techniques and
processes are required to monitor and control time, cost,
quality and scope of projects.
Examples include time management, quality management,
change management, risk management, etc.
5 June 2021 26

project management
…Cont’d
Every person, every organization and every nation
is concerned with project management.
– An individual builds a house. It is a project to him.
– An organization sets up new factory. It is a project for
the organization.
– The government of a country builds high ways, dams,
thermal power plants, hydropower plants, airports, etc.
These are all projects that a country undertakes.
5 June 2021 27

Cont’d
• Successful project management can then be defined as having
achieved the project objectives:
– Within time
– Within cost
– At the desired performance/technology level
– While utilizing the assigned resources effectively and efficiently
– Accepted by the customer

CLASSIFICATION OF PROJECTS:
Based on
– ownership,
– source of finance, and
– forces behind the projects.
1. Based on ownership:
– Private sector- mostly projects undertaken by business enterprises.
– Public sector- projects undertaken by national and local government
bodies.
– NGOs- development projects are most often undertaken by non-
government and non-for profit organizations.
29

Cont’d
2. Based on the Sources of Finance:
• Government treasury- projects may be entirely financed by
government budget as per its priority. For instance,
construction of regional airport.
• Government treasury and external sources- most projects
are financed by the joint partnership of the government and
donor groups. For example, a road project may be financed
50% by the government and 50% by a foreign donor.
• External sources of Finance- projects may be financed totally
by parties other than the government but established for the
well being of the citizens and the ownership may be for the
government or the public.
30

Cont’d
3. Based on the forces Behind:
• Demand driven/need driven- based on identified
unsatisfied demand project can be created or on
unsatisfied basic needs like food, water and shelter.
• Donor driven- the force behind the financing
organization. Donors will have their own say and
influence the types of projects to be established.
• Political Driven- Projects may be established in
response to some political situation such as for example
because of national elections, projects by religious
organizations.
31

Cont’d
4. Based on their nature:
• Civil engineering, construction, petrochemical, mining, quarrying,
projects far away from the contractor’s home office, and involve
special risk as well as problems of organizational communication.
• Manufacturing projects- conducted in a factory or other home
based environment and enable exercising on the spot management.
• Research projects- established for pure research consuming large
sum of money and lasting over years resulting in dramatic profitable
discovery or proving waste of money.
• Management projects- projects that require the employment of an
external project manager or managing contractor for issues such as
relocating head quarters, developing and introducing a new
computer system, preparing for a trade exhibition, producing a
feasibility or other study report, restructuring the organization etc.
32

PROJECT PARAMETERS
• During a project’s life, management focuses on three basic
parameters:
– quality,
– cost, and
– time.
– deadline;
– the budget.
In addition, client satisfaction indicates success and possibility
for replication or sustainability.
– Each of the parameters is specified in detail during the planning phase
of the project.
– These specifications then form the basis for controlling the project
during the implementation phase
33

Project Parameters
Quality
cost, and time
Performance
Budget
Schedule
34

HIERARCHICAL RELATIONSHIPS
• Plans and Projects
• Planning can be defined as a “continuous process that involves
decisions or choices about alternative ways of using
available resources with the aim of achieving a particular
goal or set of goals at some time in the future.”
• The rationale for planning is that it serves as a tool that
enhances the effectiveness in mobilizing resources and
enables allocation of resources into priority areas of
development.
35

The hierarchy’s are
Development plans
Programs
Projects
Tasks
Work packages
36

Continued
• Development plans:
– Most forward looking (futuristic)
– Broad and require systematic thinking, preparation and appraisal
– Attempts to bring welfare in the society
• Programs:
– Derived from development plans
– Exceptionally large with long term objectives
– Explores specific area with broader scope
37

Cont’d
• Projects:
– Derived from a program
– Unique investigative tool
– A development activity with specific objectives
– Funded by a program
– An implementation element (entity)
• Tasks:
– Work elements under a project
– Specific approaches for doing things
– Set of activities comprising a project
• Work packages:
– Sub elements of a given task (or undertaking)
– Something accomplished stage by stage
– Collection of work packages defines a given task
38

Projects and programs
• Difference
PROJECTS PROGRAMS
specific objectives General objectives
Specific project areas No specific project areas
Specific beneficiaries group No Specific beneficiaries group
Clearly determined and allocated funds No clear and detailed financial resource
allocation
Specific lifetime No specific lifetime
39

SIMILARITIES:
• Projects and programs have similar characteristics in a way
that both are:
• Having objectives;
• Requiring financial, human, material, etc inputs (or
resources);
• Generating outputs, (goods/services), of value;
• Serving as instruments for the execution of development plans
in order to boost the national economy.
40

Strategic Project Management:
as a competitive advantage
• Why Project Managers Need to Understand Strategy:
• Changes in the organization’s mission and strategy
– Project managers must respond to changes with appropriate
decisions about future projects and adjustments to
current projects.
– Project managers who understand their organization’s
strategy can become effective advocates of projects
aligned with the firm’s mission.

Projects and Strategy
• Mistakes caused by not understanding the role of projects in
accomplishing strategy:
– Focusing on problems or solutions with low strategic priority.
– Focusing on the immediate customer rather than the whole market
place and value chain.
– Overemphasizing technology that results in projects that pursue
exotic technology that does not fit the strategy or customer need
– Trying to solve customer issues with a product or service rather than
focusing on the 20% with 80% of the value (Pareto’s Law).
2–42

3. The Strategic Management Process:
An Overview
• Strategic Management
– Requires every project to be clearly linked to strategy.
– Provides theme and focus of firm’s future direction.
• Responding to changes in the external environment—
environmental scanning
• Allocating scarce resources of the firm to improve its
competitive position—internal responses to new programs
– Requires strong links among mission, goals, objectives, strategy,
and implementation.
2–43

Strategic project management Framework
• Review and define the organizational mission.
• Set long-range goals and objectives.
• Analyze and formulate strategies to reach
objectives.
• Implement strategies through projects
2–44

Strategic
Management
Process
2–45
FIGURE 1.1

• Project life cycle

What is a project cycle and why?”
– To answer these basic questions, we need to see and
understand the general features of project planning and
the identifiable tasks therein.
– In this regards, there tends to be a natural sequence in the
way projects arte planned and carried out.
– Before any project is actually realized, it goes through
various planning phases.
– Therefore, the different phases through which a project
passes constitute what is often called “the project cycle”.
– The main features of this process are information
gathering, analysis and decision-making.

-
• The project cycle considers various stages in which each stage
not only is grown out of the proceeding one/those that are
under way/but also leads into the subsequent ones.
• Therefore, a project cycle is a self-renewing cycle in that new
projects may grow out of the old ones in a continuous process
and self-sustaining cycle of activity.

THREE BASIC MODELS OF PROJECT CYCLES
1. “The Baum Cycle (also called the World Bank Project
Cycle)”
2. “The UNIDO Project Cycle”.
3. In addition to these two, a third model developed by
Development projects Studies Authority in Ethiopia (called
“The DEPSAs Model”),

1. THE BAUM CYCLE (WORLD BANK PROJECT CYCLE)
• developed by Warren. C. Baum in 1970 was by then adopted by the
World Bank as a project cycle.
• Initially, this model had recognized only four main stages in the
project cycle, namely:
1. Identification
2. Preparation
3. Appraisal and Selection
4. Implementation
• Later in 1978, the author has added additional two stages called
“Negotiation” and “Evaluation”.
• This model, therefore, includes a total of six identifiable stages in
the project cycle.

.
Baum’s main stages
1.Identification :
• Based on
• Some may be “resource based” and stem from the opportunity to
make profitable use of available resources.
• Some projects may be “market based” arising from an identified
demand in home or overseas markets.
• Others may be “need-based” where the purpose is to try to make
available to all people in an area of minimal amounts of certain
basic material requirements and services.
• Well-informed “technical specialists” and “local leaders” are also
common sources of projects.
• Ideas for new projects also come from “proposals to extend and/or
expand existing programs and projects” as well as from
identifying technological alternatives.

2. Preparation:
– Once projects have been identified, there begins a process
of progressively more detailed preparation and analysis of
project plans. At this stage, the project is being seriously
considered as a definite investment action.
– Project preparation,(also called project formulation),
involves pre-feasibility and feasibility studies and covers
the establishment of commercial, technical, institutional,
financial, and socio-economic feasibility.
– Resource based investigations are undertaken and
alternative forms of projects are explored.

3. Appraisal and Selection:
• project preparation phase:
• Technical: here the appraisers concentrate in verifying
whether what is proposed will work in the way suggested or
not.
• Financial : the appraisers try to see if the requirements of
money needed by the project have been calculated properly,
their sources are all identified, and reasonable plans for their
repayment are made where necessary.
• Commercial: the way the necessary inputs for the project are
conceived to be supplied is examined and the arrangements for
the disposal of the products are verified.

-
• Incentive: the appraisers see to it whether things are arranged in such a
way that all those whose participation is required will find it in their
interest to take part in the project, at least to the extent envisaged in the
plan.
• Economic: the appraisers here try to see whether what is proposed is good
from the viewpoint of the national economic development interest, all
project effects (positive as well as negative) are taken into account, and
check if all are correctly valued.
• Managerial: this aspect of the appraisal examines if the capacity exists for
operating the project and see if those responsible ones can operate it
satisfactorily. Moreover, it tries to see if the responsible are given sufficient
power and scope to do what is required.
• Organizational: the appraisers examine the project it is organized
internally and externally into units, contract, policy, institution, etc so as to
allow the proposals to be carried out properly and to allow for change as
the project develops.

4. Negotiation and Financing :
• Once the project to be implemented is agreed on, for donor
funded projects, discussions are held on funding and
associated aspects of funding such as conditions for grants,
repayment period, interest rates on loans, flow of funds,
contributions from stakeholders, and whether there is co-
financing or not.
• This culminates into an “Agreement Document” for the
project, which binds all the parties involved during
implementation of the project.

5. Implementation:
• Some of the aspects of implementation that are of particular
relevance to project planning and analysis are the following:
• The first is that, the better and more realistic a project plan is,
the more likely it is that the plan can be carried out and the
expected benefits realized.
– The second is that, project implementation must be flexible.
– But there are factors that alter the ways in which projects should be
implemented.
The common ones are:
– technical changes (soils, water logging, and nitrogen application);
– price changes;
– economic policy and environmental changes;
– political changes, etc. and these all will

6. Evaluation
• The final phase in the project cycle is evaluation. Once a project has been
carried out, it is often useful, (though not always done), to look back over
what took place, to compare actual progress with the plans,
•
• The extent to which the objectives of a project are being realized provides
the primary criterion for an evaluation.
• The analyst looks systematically at the elements of success and failure in
the project experience to learn how better to plan for the future.
• Evaluation is not limited only to completed projects. It is a most important
managerial tool in on-going projects and rather, formalized evaluation may
take place at several times in the life of a project.

-
• Different groups or units may do the evaluation of projects.
Among others,
• Project’s management unit often continuously evaluates its
experience as implementation proceeds.
• The sponsoring agency, perhaps, the operating ministry, the
planning agency, or an external assistance agency may
undertake evaluation.

2. THE UNIDO PROJECT CYCLE
• The UNIDO has established a project cycle comprising the
following three distinct phases:
1. The pre-investment phase
2. The investment phase, and
3. The operating phase.
• Each of these three phases is divided into stages, some of
which constitute important consultancy, engineering, and
industrial (manufacturing) activities.

1. The pre-investment phase:
• According to the UNIDO manual, the pre-investment phase
comprises several stages:
• opportunity studies)
• pre-feasibility and feasibility studies, and
• Project appraisal and investment decision specialized
appraisal reports
• Support or functional studies are also part of the project
preparation stage and are usually conducted separately, for
later incorporation in a pre-feasibility study or feasibility study
as appropriate.

-
A. Opportunity Studies
• The main instrument used to quantify the parameters,
information, and data required to develop a project idea into a
proposal is the opportunity study, which should analyze:
– Natural resources
– The existing agricultural base (it may be the basis for agro-industries)
– Future demand for consumer goods
– Imports substitution and export possibilities
– Environmental impacts (mandatory or non-revenue producing projects)
– Expansions of existing capacity
– Manufacturing sectors (successful in other countries)
– Diversification

B. Pre-Feasibility Studies
– The project idea must be elaborated in a more detailed
study.
a further assessment of the project idea might be made in a
pre-feasibility study. This is to see if:
– All possible project alternatives are examined,
– The project concept justifies detail study,
– All aspects are critical and need in-depth investigation, and
– The project idea is viable and attractive or not.

C. Support/Functional/Studies
– This may include:
– Market studies of products
– Raw material and factory supply studies
– Laboratory and pilot plant tests
– Location studies
– Environmental impact assessment.
– Economies of scale studies
– Equipment selection studies

D. Feasibility Studies
• A feasibility study should provide all data necessary for an
investment decision.
• The commercial, technical, financial, economic, and
environment prerequisites for an investment project should,
therefore, be defined, refined and critically examined based
on alternative solutions already reviewed in the pre-feasibility
study

(E)Appraisal Report
• When a feasibility study is completed, the various parties will
carry out their own evaluation of expected risks, costs, and
gains.
• Large investment and development finance institutions have a
formalized project appraisal procedure and usually prepare
appraisal reports.
• The appraisal report will prove whether the pre-production
expenditures spent since the initiation of the project idea were
well spent or not.

2. The Investment/implementation Phase
investment phase can be divided into the following stages:
• Establishing the legal, financial, and organizational framework
• Tendering, evaluation of bids, and negotiations
• Technology acquisition and transfer
• Detailed engineering design and contract, including tendering,
evaluation of bids and negotiations
• Acquisition of land, construction work and installation
• Pre-production marketing, including the securing of supplies and
suppliers and setting up the administration of the firm.
• Recruitment and training of personnel
• Plant commissioning and start-up

3. The Operating Phase
The problem of the operating phase needs to be considered
from both a short and a long-term view point.
• The short-term view relates to the initial after
commencement of production when a number of problems
may arise concerning such matters as the applications of
production techniques, operation of equipment, or
inadequate labor productivity owing to lack of qualified
staff and labor. Most of these problems have their origin in
the implementation phase.
• The long-term view relates to chosen strategies and the
associated production and marketing costs as well as sales
revenues

3. The DEPSAs Project Cycle
• According to the Guidelines to project planning in Ethiopia (1990)
of Development Project Studies Authority (DEPSA), the project
cycle comprises three major phases,
– Pre-investment
– Investment, and
– Operating phase.
• Each of these three phases may be divided into stages. The
Guidelines has divided the Project cycle into six stages as follows:
– Identification
– Preparation
– Appraisal/decision
– Implementation
– Operation
– Ex-post evaluation.

-
• The pre-investment phase consists of the first three stages, the
investment phase includes the fourth stage, and the operation
phase covers the last two stages.
• The project cycle means the various stages of information
gathering and decision-making, which take place between a
project’s inception and completion.

-
Thank you!!!
70

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