After reading this article you will learn about:- 1. Meaning of Project 2. Feasibility of the Projects 3. Implementation.
Meaning of Project:
A project is a specific plan or design presented for consideration. UNIDO defines a project as a proposal for an investment to create and or develop certain facilities in order to increase the production of goods/services in a community over a certain period of time.
Burns and Tolbert define the term projects discrete package of investments, policy measures and institutional and other actions designed to achieve a specific development objectives. Projects are common term used by many flexibly to denote specific action plans.
There are projects to develop a new road, new car, new motorbike, marketing plan, construction of buildings, transport and communication etc. A project can be long term or short term, limited or comprehensive, single sector concentrated or multi sector concentrated.
While all of these projects have a general goal with macro and micro directives with specific time frame. This particular article concentrates more on the general project management.
Project can be defined as:
1. A scientifically evolved work plan
2. Devised to achieve specific objectives
3. Within specified time limit
4. Consuming planned resources
Before the formulation of project problem, many questions to be asked by the project initiators.
These questions can be summarized as follows:
1. What for: The objectives of the project
2. How: The process, and the internal and external resources
3. Who: For whom, By whom – Project partners, stakeholders
4. When: The time factor
5. Where: The location
6. What: The activity
Project planning: can be defined as:
1. A scientific and systematic process, in which
2. Logical linkages are clearly established, among
3. Various element of projects
Successful implementation of the project lies on effective project plan. Based on the anticipated goals and objectives the project planning to be made. The project plan is the blue-print of the project. Effective planning gives proper direction in the implementation of the project and it further helps in adequate monitoring and evaluation. For the implementation of plan, an activity chart has to be prepared.
The activity chart consists of all the proposed activities in the implementation process, including the start date, calendar for the entire project, dates of monitoring and evaluation periods, finishing stages, series of outputs, slack time, responsible person to coordinate the activities etc.
The project budgeting phase is in the project formulation phase. Two types of budgets are to be made. The prior one is the cost category budget (materials, administration, capital, expenditures etc.) and the later is the activity budget. This project budget is to calculate the cost of each project output.
Keep in mind the cash flow of the project, considering the contingencies like, technical shortage, shortage of raw materials, delays in the activity implementation etc. The estimation of the project cost should be made on fairly realistic sense of financial values. In the multi-year projects the inflation rate also has to be anticipated in advance.
Feasibility of the Projects:
1. Management Appraisal:
Management appraisal is related to the technical and managerial competence, integrity, knowledge of the project, managerial competence of the promoters, etc. The promoters should have the knowledge and ability to plan, implement and operate the entire project effectively. The past record of the promoters is to be appraised to clarify their ability in handling the projects.
2. Technical Feasibility:
Technical feasibility analysis is the systematic gathering and analysis of the data pertaining to the technical inputs required and formation of conclusion therefrom. The availability of the raw materials, power, sanitary and sewerage services, transportation facility, skilled manpower, engineering facilities, maintenance, local people, etc., are coming under technical analysis.
This feasibility analysis is very important since its significance lies in planning the exercises, documentation process, risk minimization process and to get approval.
3. Financial Feasibility:
One of the very important factors that a project team should meticulously prepare is the financial viability of the entire project. This involves the preparation of cost estimates, means of financing, financial institutions, financial projections, breakeven point, ratio analysis etc.
The cost of project includes the land and site development, building, plant and machinery, technical knowhow fees, pre-operative expenses, contingency expenses, etc.
The means of finance includes the share capital, term loan, special capital assistance, investment subsidy, margin money loan etc. The financial projections include the profitability estimates, cash flow and projected balance sheet. The ratio analysis will be made on debt equity ration and current ratio.
4. Commercial Appraisal:
In the commercial appraisal many factors are coming. The scope of the project in market or the beneficiaries, customer friendly process and preferences, future demand of the supply, effectiveness of the selling arrangement, latest information availability in all areas, government control measures, etc.
The appraisal involves the assessment of the current market scenario, which enables the project to get adequate demand. Estimation, distribution and advertisement scenario also has to be considered.
5. Economic Appraisal:
How far the project contributes to the development of the sector, industrial development, social development, maximizing the growth of employment, etc., are kept in view while evaluating the economic feasibility of the project.
6. Environmental Analysis:
Environmental appraisal concerns with the impact of environment on the project. The factors include the water, air, land, sound, geographical location etc.
This is the period in which all the activities that are planned in the initial phases of the project get materialized through operation. Here the role of the project managers comes into the picture. It is the task of the project managers to schedule the activities one by one and establish functional relationship of the project activities in the fulfillment of the project.
The techniques like PERT (Programme Evaluation and Review Technique), CPM (Critical Path Method) etc. are the various network techniques the managers utilize to implement the activities planned in the project considering the cost and time.
Parameters for Appraisal and Evaluation:
At the outset, all the aspects including the latest and advanced appraisal criteria are brought out at one place in a summary form.
Summary of Appraisal and Evaluation Parameters:
I. Basic Parameters:
(vii) Environmental Management and Control.
II. General and Miscellaneous Appraisal Parameters:
(i) Project evaluation under risk and uncertainty
(ii) Examination and review of non-financial aspects
(iii) Project appraisal under normal, inflationary and deflationary conditions
(iv) Macro and micro parameters in project selection
(v) Market and demand analysis together with analysis of firm and market risk
(vi) Special decision situation
(vii) Options and flexibilities
(viii) Qualitative analysis
(ix) Tax burden and appraisal of project
(x) International project appraisal
(xi) Project appraisal and lending decisions
(xii) Appraisal and evaluation of projects by Government
(xiii) Different considerations for projects under
(i) Private sectors
(ii) Public sectors and
(iii) Joint sectors
(xiv) Social costs and benefits
III. Advanced Investment Appraisal Parameters:
(i) Capital investment real options i.e.
a. Option to make follow on investment
b. Option to abandon and
c. The option to wait
(ii) Weighted average cost of capital and its use in appraisal and evaluation
(iii) Adjusting the weighted average cost of capital for the changes in the capital structure
(iv) Single period capital rationing for divisible and non-divisible projects
(v) Valuation of a real option
(vi) Valuation of an option to make a follow on investment
(vii) Judge-mental assessment of options
(viii) International project appraisal and related special aspects such as:
a. The difficulties in appraising a foreign project
b. Issues in cost of capital
c. The adjusted present value approach for foreign project
d. Choice of discount rates
(ix) Qualitative aspects and related special aspects in appraisal of projects:
a. Qualitative factors in capital budgeting
b. Strategic aspects
c. Strategic planning and financial analysis
d. Organisational considerations
(x) Economic variables in business planning vs. project appraisal
(xi) Impact of national budgets on business and project viability
(xii) Structural and strategic analysis
(xiii) Project risk management and sensitivity analysis
(xiv) Preparation of business plan and project appraisal
(xv) Appraisal of infrastructural projects
(xvi) International climates and project appraisal.