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MANAGEMENT OF PROJECTS IN LOCAL GOVERNMENT
Whatever project a particular organisation embarks upon depends on the set objectives
and the measures that would lead to the attainment of the objectives. At the Local
Government level, the most appropriate objectives would be:
• Provision of social services at minimum cost; and
• Provision of economic project to generate fund to be able to increase its
internally generated revenue.
Stages in carrying out a project:
The stages involved in carrying out a project include:
I. Project Development;
II. Project Execution
III. Project Monitoring and Control
I. Project Development:
For any Local Government or any organisation whatsoever to embark on a
project, there is the need to carry out:
a. A preliminary of the available resources, needs and market;
b. Consider the technical feasibility;
c. Consider the economic feasibility;
d. Location and financing mix.
a) A preliminary study of the available resources, needs and market;
The first step in project development is to take an honest look at all the
resources available to the organisation and also think about what will be
needed in order to complete the project: The factors to consider are the
availability of enough money, personnel with adequate background,
training and expertise, time and the political situation in the country is such
that the project would succeed.
b) Consideration of the technical feasibility ;
This includes the consideration for the type of plant and machinery to be
used, the rate of depreciation, the availability of spare parts,
replacements, obsolescence and capital output ratio. Also to be
considered at this stage is the incidence of structural changes and the
possibility of substitution. The technical feasibility affords the opportunity
of having an insight into the initial outlay and annual costs
c) Consideration of the economic feasibility;
2
The service and market demand and the technical feasibility would supply
information on cost and revenue on the project. The next thing is to carry
out a project evaluation process through which the decisions to accept or
reject the project is reached. Various methods of project evaluation
techniques include:
i. Payback Period
This considers the time when the Local Government initial outlay
will be recouped, the shorter the payback period the more
acceptable the project.
ii. Net Present Value (NPV)
This considers the value of money ignored by the payback period.
Projects should be acceptable if the Net Present Value of the future
cash inflows is positive. The Higher the Net present value the more
acceptable the project.
iii. Internal Rate of Return (IRR)
3
This considers the rate of returns to the capital outlay that will make
the project breakeven. Project is acceptable as long as the internal
rate of return is higher than the cost of capital.
iv. Benefit / Cost Ratio (BCR)
The BCR is the discounted net revenues divided by the initial
investment. The preferred option is that with the ratio greatest in
excess of 1. In any event, a project with a benefit cost ratio of less
than one should generally not proceed.
v. Multi Criteria Analysis (MCA)
Multi-criteria analysis (MCA) establishes preferences between
project options by reference to a clear set of criteria and objectives.
These would normally reflect policy, programme and project
objectives, such as value for money, costs, social, environmental,
equality, security, political etc. MCA is often used as an alternative
to appraisal techniques because it incorporates multiple criteria and
does not focus solely on monetary values.
A typical example of this is will be the recent 114 road projects
jointly funded by the Lagos State Government and Local
Government and LCDAs. The road projects had no future revenue
attached to them for which financial appraisal could be carried out.
However, there are lots of social and political benefits attached to
the projects. Also relevant here is the billions of Naira spent on
4
purchasing police security equipment for the Lagos State Police
command.
d) Location and financing method or mix
Having accepted the project as being both technically and economically
feasible, the financing method or mix would have to be considered. The
financing methods available to a local government in Nigeria include:
 Internal Sources
a. Internally generated funds, e.g. motor parks, rent, rate,
licences, fines, etc.
b. Revenue from various capital projects
 External Sources
a. Federal Government Grants
b. State Government Grants
c. Contractor Finance
d. Bank Overdraft (limited)
The Consideration for both internal and external sources will depend on the nature of
the project.
While location factors for a commercial project include:
5
 Availability of raw materials
 Transportation
 Geographical factors
 Availability of market
 Availability of power
The location factors of projects undertaken by local government while
considering the above factors will place greater premium on political
consideration which may include social justice.
II. Project Execution i.e. Implementation
A.L. Romanoff once said that thorough implementation of project is an open road
to great accomplishment. Project implementation then requires adequate
preparation and planning which are pre – requisites for thorough implementation.
There are two major ways by which these could be done.
a) Direct Method
b) Contract Method
a) Direct Method
6
This is the process in which the members of staff of the Local Government carry out
the implementation of the project. It has the following merits:
 Quicker implementation and supervision for non-technical jobs;
 Provide training ground for the staff of the local government, especially
the professionals to widen their horizon and improve their job
competence;
 It minimises costs if wisely used.
However, it has the following demerits:
 There is need for greater supervision
 It presupposes adequate staff
 It presupposes availability of competent, honest, thorough and
professional staff who can plan, coordinate and control
If all these are lacking, costs are bound to be higher rather than being lower.
b) Contract Method
This is a method where the project is given to outsiders to execute, depending on the
technicalities of the projects and the strengths and weakness of the Local Government
in carrying out the project on Direct Labour. Such contract method may involve the
following stages:
7
i. The Tender Stage: The Secretary to the Tender’s Committee
issues out tender notices either by advertisement or to the existing
contractors already registered with the Local Government. The
tender notice should contain adequate information on the project
and where necessary, the amount of non-refundable payment
required and other relevant procurement procedures. The
Tenderers submit their application in sealed envelopes to the
Secretary within a specific time already mentioned in the tender’s
notice.
ii. The Award Stage: The tender’s committee meets on a schedule
date to open the tenders and award to the ‘BEST’ tenderer after
examining the tender papers thoroughly. Later, the successful
tenderer signs the award agreement.
iii. The Supervision and Inspection Stage: This goes on while the
contractor executes the project and it is done by the members of
staff of the Local Government or occasionally, by an outsider (e.g.
Architect), where the Local Government does not have the
expertise. The inspector is to ensure that the contract is carried on
according to specification given and for early discovery of deviation
from the specification.
8
iv. The payment to Contractors Stage; Payments to the contractors
are made at various stages of the project. Occasionally,
mobilisation fees are paid. Further payments are made on the
production of ‘certificates’ by the supervisor or the engineer who
inspects the project regularly. The certificate is an evidence of
performance on the part of the contractor. Depending on the type of
project, retention fees are withheld until the expiration of stated time
after the completion of the project.
The Contact Method has the following advantages:
a. It ensures highly technical projects are handled by professionals who
are not available in the Local Government;
b. It minimises internal fraud, by the use of standard contract award
procedure;
c. It allows for many projects to carried on simultaneously by the Local
Government
The disadvantages of the Contract Method:
a. Contract procedure can be time wasting as a lot of bureaucracy can be
brought into it;
9
b. If the award stage is not thoroughly controlled, it could lead to the
project being executed by incompetent hands as bribery and corruption
could be involved;
c. It could lead to higher cost as project cost can be inflated.
III. Project Monitoring and Control
Monitoring of projects involves comparing the actual performance with the plan,
so that any deviation from the plan may be investigated and corrected in time
before it is too late, or the original altered or replaced.
Methods of project Monitoring and Control include:
a. Establishment of Internal Control System
b. The use of Critical Path Analysis (CPA) and Project Evaluation and
Review Techniques (PERT) to mention a few.
(a) Establishment of Internal Control System
10
Internal Control System in project monitoring and control should aim at providing
sufficient and timely information that will lead the management of the Local Government
to quick management decision. The essential features of such internal control system
should include the segregation as far as practicable and duties of custody, recording
and authorisation. There should be effective management supervision by the
introduction of internal audit and internal checks. The plan of organisation must be such
that duties, responsibilities and authorities are well defined and documented. These
could be contained in organisational charts and job description manuals.
(b) The use of Critical Path Analysis & Project Evaluation and Review Techniques:
As mentioned earlier, the successful implementation of a project involves careful
planning. One of the ways of planning is programming. Programming requires common
sense and a clear understanding of both administrative and physical arrangements
necessary in carrying out the plan. Such programme when drawn up informs and
educates those involved in the implementation of the project and helps in controlling
progress and costs of such projects. Critical Path Analysis (CPA) is one of such
programmes. CPA considers the essential features of any project as the TIME it take to
complete it. Costs may later be attached. Earlier Event Time (EET) and Latest Event
Time (LET) are calculated to know the float, or the slack time when can be regarded as
spare time available during the project period.
11
If the CPA is adhered to during the implementation period is controlled, materials and
labour will thus be judiciously utilised. The actual time taken for an event during the
project implementation period can be compared with the plan, any deviation from the
plan investigated for corrective actions.
Conclusion:
The Local Government Administration as the third-tier of government in Nigeria has its
own constitution functions, such functions are mainly the provisions of social and
economic services for the people at the grassroots. In the provision of such services,
there is the need to compare social costs with social benefits and also economic costs
with economic benefits. One major problem is however, that some of the social benefits
cannot be quantified in terms of Naira and Kobo, this does not mean that project
evaluation should be abandon as it indicates social loss even when the political
consideration will be the overriding factor. The major problems of project evaluation and
implementation in Local Government Administration in Nigeria emanated from:
- Lack of technical staff
- Lack of honest and dedicated staff
- Poor financing, etc.
The future is however not bleak as increase in the quality of staff is now noticed with
effect from 1976 when graduates are employed in key areas.
12
The present civilian administration since inception has continued to take steps to
improve the financing of local government. For example the present 114 roads being
constructed by the 20 Local Governments and 37 Local government Development
Areas is jointly financed by the State and Local Governments. The State contributing
70% while the Local Governments and the LCDAs contributing 30%.
13

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MANAGEMENT OF PROJECTS IN LOCAL GOVERNMENT

  • 1. MANAGEMENT OF PROJECTS IN LOCAL GOVERNMENT Whatever project a particular organisation embarks upon depends on the set objectives and the measures that would lead to the attainment of the objectives. At the Local Government level, the most appropriate objectives would be: • Provision of social services at minimum cost; and • Provision of economic project to generate fund to be able to increase its internally generated revenue. Stages in carrying out a project: The stages involved in carrying out a project include: I. Project Development; II. Project Execution III. Project Monitoring and Control I. Project Development: For any Local Government or any organisation whatsoever to embark on a project, there is the need to carry out: a. A preliminary of the available resources, needs and market;
  • 2. b. Consider the technical feasibility; c. Consider the economic feasibility; d. Location and financing mix. a) A preliminary study of the available resources, needs and market; The first step in project development is to take an honest look at all the resources available to the organisation and also think about what will be needed in order to complete the project: The factors to consider are the availability of enough money, personnel with adequate background, training and expertise, time and the political situation in the country is such that the project would succeed. b) Consideration of the technical feasibility ; This includes the consideration for the type of plant and machinery to be used, the rate of depreciation, the availability of spare parts, replacements, obsolescence and capital output ratio. Also to be considered at this stage is the incidence of structural changes and the possibility of substitution. The technical feasibility affords the opportunity of having an insight into the initial outlay and annual costs c) Consideration of the economic feasibility; 2
  • 3. The service and market demand and the technical feasibility would supply information on cost and revenue on the project. The next thing is to carry out a project evaluation process through which the decisions to accept or reject the project is reached. Various methods of project evaluation techniques include: i. Payback Period This considers the time when the Local Government initial outlay will be recouped, the shorter the payback period the more acceptable the project. ii. Net Present Value (NPV) This considers the value of money ignored by the payback period. Projects should be acceptable if the Net Present Value of the future cash inflows is positive. The Higher the Net present value the more acceptable the project. iii. Internal Rate of Return (IRR) 3
  • 4. This considers the rate of returns to the capital outlay that will make the project breakeven. Project is acceptable as long as the internal rate of return is higher than the cost of capital. iv. Benefit / Cost Ratio (BCR) The BCR is the discounted net revenues divided by the initial investment. The preferred option is that with the ratio greatest in excess of 1. In any event, a project with a benefit cost ratio of less than one should generally not proceed. v. Multi Criteria Analysis (MCA) Multi-criteria analysis (MCA) establishes preferences between project options by reference to a clear set of criteria and objectives. These would normally reflect policy, programme and project objectives, such as value for money, costs, social, environmental, equality, security, political etc. MCA is often used as an alternative to appraisal techniques because it incorporates multiple criteria and does not focus solely on monetary values. A typical example of this is will be the recent 114 road projects jointly funded by the Lagos State Government and Local Government and LCDAs. The road projects had no future revenue attached to them for which financial appraisal could be carried out. However, there are lots of social and political benefits attached to the projects. Also relevant here is the billions of Naira spent on 4
  • 5. purchasing police security equipment for the Lagos State Police command. d) Location and financing method or mix Having accepted the project as being both technically and economically feasible, the financing method or mix would have to be considered. The financing methods available to a local government in Nigeria include:  Internal Sources a. Internally generated funds, e.g. motor parks, rent, rate, licences, fines, etc. b. Revenue from various capital projects  External Sources a. Federal Government Grants b. State Government Grants c. Contractor Finance d. Bank Overdraft (limited) The Consideration for both internal and external sources will depend on the nature of the project. While location factors for a commercial project include: 5
  • 6.  Availability of raw materials  Transportation  Geographical factors  Availability of market  Availability of power The location factors of projects undertaken by local government while considering the above factors will place greater premium on political consideration which may include social justice. II. Project Execution i.e. Implementation A.L. Romanoff once said that thorough implementation of project is an open road to great accomplishment. Project implementation then requires adequate preparation and planning which are pre – requisites for thorough implementation. There are two major ways by which these could be done. a) Direct Method b) Contract Method a) Direct Method 6
  • 7. This is the process in which the members of staff of the Local Government carry out the implementation of the project. It has the following merits:  Quicker implementation and supervision for non-technical jobs;  Provide training ground for the staff of the local government, especially the professionals to widen their horizon and improve their job competence;  It minimises costs if wisely used. However, it has the following demerits:  There is need for greater supervision  It presupposes adequate staff  It presupposes availability of competent, honest, thorough and professional staff who can plan, coordinate and control If all these are lacking, costs are bound to be higher rather than being lower. b) Contract Method This is a method where the project is given to outsiders to execute, depending on the technicalities of the projects and the strengths and weakness of the Local Government in carrying out the project on Direct Labour. Such contract method may involve the following stages: 7
  • 8. i. The Tender Stage: The Secretary to the Tender’s Committee issues out tender notices either by advertisement or to the existing contractors already registered with the Local Government. The tender notice should contain adequate information on the project and where necessary, the amount of non-refundable payment required and other relevant procurement procedures. The Tenderers submit their application in sealed envelopes to the Secretary within a specific time already mentioned in the tender’s notice. ii. The Award Stage: The tender’s committee meets on a schedule date to open the tenders and award to the ‘BEST’ tenderer after examining the tender papers thoroughly. Later, the successful tenderer signs the award agreement. iii. The Supervision and Inspection Stage: This goes on while the contractor executes the project and it is done by the members of staff of the Local Government or occasionally, by an outsider (e.g. Architect), where the Local Government does not have the expertise. The inspector is to ensure that the contract is carried on according to specification given and for early discovery of deviation from the specification. 8
  • 9. iv. The payment to Contractors Stage; Payments to the contractors are made at various stages of the project. Occasionally, mobilisation fees are paid. Further payments are made on the production of ‘certificates’ by the supervisor or the engineer who inspects the project regularly. The certificate is an evidence of performance on the part of the contractor. Depending on the type of project, retention fees are withheld until the expiration of stated time after the completion of the project. The Contact Method has the following advantages: a. It ensures highly technical projects are handled by professionals who are not available in the Local Government; b. It minimises internal fraud, by the use of standard contract award procedure; c. It allows for many projects to carried on simultaneously by the Local Government The disadvantages of the Contract Method: a. Contract procedure can be time wasting as a lot of bureaucracy can be brought into it; 9
  • 10. b. If the award stage is not thoroughly controlled, it could lead to the project being executed by incompetent hands as bribery and corruption could be involved; c. It could lead to higher cost as project cost can be inflated. III. Project Monitoring and Control Monitoring of projects involves comparing the actual performance with the plan, so that any deviation from the plan may be investigated and corrected in time before it is too late, or the original altered or replaced. Methods of project Monitoring and Control include: a. Establishment of Internal Control System b. The use of Critical Path Analysis (CPA) and Project Evaluation and Review Techniques (PERT) to mention a few. (a) Establishment of Internal Control System 10
  • 11. Internal Control System in project monitoring and control should aim at providing sufficient and timely information that will lead the management of the Local Government to quick management decision. The essential features of such internal control system should include the segregation as far as practicable and duties of custody, recording and authorisation. There should be effective management supervision by the introduction of internal audit and internal checks. The plan of organisation must be such that duties, responsibilities and authorities are well defined and documented. These could be contained in organisational charts and job description manuals. (b) The use of Critical Path Analysis & Project Evaluation and Review Techniques: As mentioned earlier, the successful implementation of a project involves careful planning. One of the ways of planning is programming. Programming requires common sense and a clear understanding of both administrative and physical arrangements necessary in carrying out the plan. Such programme when drawn up informs and educates those involved in the implementation of the project and helps in controlling progress and costs of such projects. Critical Path Analysis (CPA) is one of such programmes. CPA considers the essential features of any project as the TIME it take to complete it. Costs may later be attached. Earlier Event Time (EET) and Latest Event Time (LET) are calculated to know the float, or the slack time when can be regarded as spare time available during the project period. 11
  • 12. If the CPA is adhered to during the implementation period is controlled, materials and labour will thus be judiciously utilised. The actual time taken for an event during the project implementation period can be compared with the plan, any deviation from the plan investigated for corrective actions. Conclusion: The Local Government Administration as the third-tier of government in Nigeria has its own constitution functions, such functions are mainly the provisions of social and economic services for the people at the grassroots. In the provision of such services, there is the need to compare social costs with social benefits and also economic costs with economic benefits. One major problem is however, that some of the social benefits cannot be quantified in terms of Naira and Kobo, this does not mean that project evaluation should be abandon as it indicates social loss even when the political consideration will be the overriding factor. The major problems of project evaluation and implementation in Local Government Administration in Nigeria emanated from: - Lack of technical staff - Lack of honest and dedicated staff - Poor financing, etc. The future is however not bleak as increase in the quality of staff is now noticed with effect from 1976 when graduates are employed in key areas. 12
  • 13. The present civilian administration since inception has continued to take steps to improve the financing of local government. For example the present 114 roads being constructed by the 20 Local Governments and 37 Local government Development Areas is jointly financed by the State and Local Governments. The State contributing 70% while the Local Governments and the LCDAs contributing 30%. 13