Development

Planning and Project

Analysis II
ECON-3212
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 Chapter I. An Overview of
Project and project life cycle
The basic concept of project
The concept of project planning has originated some
70 years ago.
It appeared in USA and former Soviet Union in late
1930s
It has been widely adopted particularly in the
external funding agencies who finance public sector
projects.
The last 40 years an extensive application of
project analysis methods particularly in developing
countries were observed.
Currently managing a project is becoming exciting
new profession.

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 Concepts of Project (con…)
Project managers are in great demand. They are highly
demanded nearly everywhere
 Publishing house
 University
 Agricultural rural development
 Social works
 Individual construction projects and the like
 It appears that they are required wherever there is work
 Any one holding a responsible position in a project is a
project manager
 and if he pursues his own style in discharging his project
management responsibilities, he can hardly be blamed
Because what a project manager does in one company is not the same
as what another does in another company

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 Concepts of Project (con…)
 In order to understand issues related to project, we must
first understand what a project really is.
It is common to hear
 Cement project
 Power project
 Refinery project
 Road project, Etc.
While the term project is common to all of them, the
plants are not.
In each cases the project is for the plant. Which means
as soon as the plant is operational the project is deemed
to be completed.
The same is true for any other projects, say for a project
for method improvement. The project is completed when
method improvement has been achieved.
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 Concepts of Project (Cont…)
For better understanding let us summarize how a project is
conceived first,
In a business setting an organization must grow at least for the
sake of its survival
The organization is therefore, continuously on the look out for
good business idea which ensure growth either on
 Existing line of business or
 Diversified area
However, the idea must be
 Technically feasible
 Economically viable
 Politically suitable and
 Socially acceptable
 Environmentally sustainable
Once the idea pass these test then an investment proposal is
made. When the investment proposal is approved the project
commences.
.

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 The concepts of Project (Cont…)

Thus, a project is initiated to achieve

a particular mission.

 What ever the mission may be, the

project is completed as soon as the
mission is accomplished.

The project lives between these two

cut-off points. The time span is
known as project life cycle.
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 Definition of Project
What is project?
No definition of project will suit every
situation. In other words there are a
number of ways to define a project.

Project is in general a building block of an

investment plan.

A project can be described as a combination

of human and material resources pulled
together in an organization to achieve a
specific objective.

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 Definition of Project (Cont…)
According to USA Project Management Institute,

“Project is a one shot, time limited, goal

directed, major undertaking, requiring the
commitment of varied skills and resources”
It also describes a project as “a combination of human
and non-human resources pooled together in a
temporary organization to achieve a specific purpose.”

“Project is an effort that starts from scratch with a

definite mission, generate activities involving a variety
of human and non-human resources all directed to
words fulfilment of the mission and stops once the
mission is fulfilled.”
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 Def. of Project (Cont…)
ISO-8402. ( ISO document define project as)
“A unique process consisting of a set of
coordinated and controlled activities with
start and finish dates, undertaken to
achieve an objective conforming to
specific requirement including constraints
of time, cost and resources”
A project is neither a physical nor the end
result. It has something to do with the
activities that go on

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 Def. Project (Cont…)
From the above all definitions we can learn that
 A project is an economic/development activity
 It requires a commitment of scarce resources
 It brings some benefit from its accomplishment
 The benefit should exceed its cost
Implementation of a project needs resources or
inputs.
Every project converts the given inputs into outputs
through the process of implementation
The out puts in the short run lead to outcomes
while in the long run it will result in impact

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 Characteristics of Project
A project is a big-work. It is basically a work of one
whole thing

This means that while there may be contribution from

many people, it can be regarded as one whole thing.

A comparison can be made with a book

There may be many chapters in the book sometimes written

by different authors (which can be considered as sub-
project), the book is a single entity and is supposed to serve
a single purpose.

The various work that constitute the whole are inter-related

and together they tell the whole story.
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 Characteristics of Project (cont…)

In the same way all works that are interrelated can

be grouped together and termed as a project

Thus, with project there is a concept of

Wholeness despite diversity of work.
The wholeness concept does exist in a factory or any
organization in any other work. But, in case of a
project the whole has to be completed in one-shot (once
for all)
There is a missionary zeal, an unknown force, pushing
people forward for achievement of something beyond
their immediate work.
.

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 Characteristics of Project (cont…)

The special feature of project that differentiate it

from any other ongoing activities, are
Objective: A project has a fixed set of objectives. Once the
objectives are achieved the project ceases to exist
Life span: A project can not continue endlessly. It has to come an
end at one time.
Single entity: A project is a single entity and is normally entrusted
to one responsibility centre, while participants in the projects are
many.
Team work: Any project calls for team work-. The team members
may be from different
 discipline,
 organization,
 and even country
Life cycle: A project has a life cycle reflected by growth,
maturity and decay.

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 Characteristics of Project (cont…)
Uniqueness: No two projects are exactly similar even if the
plants are exactly identical or are duplicated.
 the location,
 the infrastructure,
 the agencies and
 the people make each project unique.
Change: A project sees many changes through out its life
while some of these changes may not have any major impact,
there can be changes which will change the entire course of
the project.
Unity in diversity: A project is complex set of verities.
Varieties in terms of
 Technology
 Equipments and material
 People and machinery
 Work culture and ethics
But they remain interrelated
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 Characteristics of Project (cont…)

High level of sub contracting : A high

percentage of a work in a project is done
through contractors The more complex is a
project, the more will be the extent of
contracting
Risk and Uncertainty: Every project has a risk
associated with it.
The degree of risk and uncertainty will depend on
how a project has passed through its various
life cycle.

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Project Vs program
A project is normally originated from a plan
which can be a national plan or corporate plan.

In many cases the term project is used for

what should be termed as program or work
package.

Some people use the term ‘project’ and

‘program’ interchangeably. However, there is a
quite difference between the two.

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 Program
Program in general is a groups of related
projects that are managed in a coordinated
ways to achieve certain objective. Any
development plan can be considered as a
program

A program is thus,
larger in scope,
activity oriented
not necessarily time bound and
its objectives are broader
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 Program (Cont …)
Example,
The national goal: Poverty Eradication
Strategy: Increase productivity ( in all sectors)
Development program: Increase agricultural
productivity

This may result in a number of projects like,

Construction of dams ( irrigation infrastructure)
Upgrading the skill of agricultural practices
Construction of training centers
Health program may have a number of projects like,
Construction of hospitals
Training of health officers
Expansion of health centres
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 Program and Projects hierarchy
Plan : National, Regional or company plan with development target

Program: Specific program within the frame of national or regional

plan (health, education)

Project: School project, Power plant or housing project

Work Package : Water supply and distribution package, Power

supply and distribution package

Task: Award of water supply contract, Construction of foundation

Activity
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 Classification of Project
Revenue Vs capital project

Project can come in many size and form. They may be very
simple or complex. Major project types are two. These
are,

Revenue project: Are those which can be carried out within

the normal organizational structure and normally will be
completed within the a single accounting period.

Capital Project: Are those which can not be carried out within
the normal organizational structure and are normally
stretched over a number of accounting periods.
In practice many projects fall between these two broad
categories
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 Classification of Project (cont …)
Capital project always require considerable capital
investment. The main feature of capital projects
are,
 They usually occupy considerable time
 They usually employ huge capital investment

As a result they do not fit readily into conventional

organizational structure but cut across functional
and time boundaries and thus, require an
organizational structure particular to themselves.

When we say project we are mainly referring to the

capital projects.

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 Classification of Project (cont …)

In general projects be it revenue or

capital can be classified from different
perspectives.
a) On the basis of time horizon
project can be
Long term projects : Power plant project
Medium term projects : Construction of a
factory
Short term project: Exhibition, trade fair

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 Classification of Project (cont …)
b) On the basis of the type of output:
Project producing tangible Products : Oil mill
Project providing services: Telecom project,
Education etc.
c) On the basis of the scope of the project:
International project : Euro tunnel project
National Project: Eth Hydro power project
Regional Project: Elementary school project
d) Based on the economic sector:
Agricultural project: Irrigation project
Industry project : Cement Project
Service sector project : Bank projects
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 Classification of Project (cont …)
e) On the basis of technology:
Capital intensive project : Brewery project
Labour intensive project : Textile industry project
f) Based on location :
Rural Projects
Urban project
g) On the basis of the nature of the project
Independent project : Hospital, Hydroelectric
power
Complementary project : Airport project, Run Way
and airport services are different projects which
are complementary to each other.

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 Planning An overview
How project planning differs from
organizational planning?
As we have seen earlier the project comes
from the national / organizational plan
(program).
Where as project planning is one element of
the project management.
One of the major function of project
management is Project planning.
Thus, planning is a broader concept and its
basic concepts are summarize as follows
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 Concept of planning (revisited)
A nation or institution or business organization can
succeed when it determines in advanced
 Its objectives, and
 Methods and resource for achieving them

Planning is one of the function of management

which involves,
 looking into the future,
 Anticipating it,
 and attempting to influence it through anticipatory
decisions, in order to achieve the desired goals.
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 Concept of planning (Cont…)
In other words it involves
determination of objective,
formulations of programs and courses
of actions for their attainment,
development of schedules and time of
action,
and assignment of responsibilities for
their implementation.
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 Concept of planning (Cont…)
Planning is a process through which one attempts to
determine;
1. What will be done? What are the objectives of
things in short run and long run?
2. What resources will be required? This involves
assessing the available resources, estimating
resources required to achievement the objectives,
and filling the gap between them.
3. How it will be done? This involves two things:
a) Determination of tasks, activities, projects,
programs etc required for attainments of
objectivities and

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 Concept of planning (Cont…)
b) Formulations of
 structures,
 policies,
 procedures
 methods,
 standards and budgets for attainment of the above
purpose.
4. Who will do it? It involves assignments of
responsibilities to parties involved.
5. When it will be done? It involves determination of
the time and sequence, for each activity planned to
be carried out
Planning is also essential pre requisite for the
performance control as it provides base line for
evaluating performance.
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 Nature of planning
Planning is continuous and dynamic process. The
essential nature of planning can be understood
by focusing on the following aspects

A. Planning is a continuous process. Planning deals with

future which involve uncertainty. The planner base his
plan on intelligent estimation or prediction. At any point
in time if there is a change the planner adjusts his plan
in response to this changes .

B. Planning concerns all managers and workers.

Planning is not a task of a specific unit. Every unit in
any organization is expected to be involved in the
planning process.

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 Nature of planning (cont…)
C. Plans are arranged in a hierarchy. it is prepared at
organizational level initially and then it broken down
to lower units or components:
 sectors, or (organization),
 departments
 sub section and
 to persons or individual worker.

D. Planning commits an organization into the future.

It commits an organization / country to future, as
past, present and future are tied in a chain. The
present strategies, policies, objectives continue to
have impact in the future.
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 Steps in planning
The planning process comprises of a number of steps.
There are:
i. Forecasting. It is an intelligent estimation and
prediction of the future internal and external
environment.
These forecasts is relate to aspects like,
 economic condition,
 technology,
 population structure and growth,
 social norms and value,
 political and legal conditions
 and so forth.
Forecast only provide data for planning, and do not
produce any plan.
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 Steps in planning (Cont …)
ii. Determination of objectives. Any plan starts with clearly
defined objective

Objectives are broad statements that an organization or

country wants to attaining in the future.
Objective provides rational for the existence of an
institution
Objective provides the basis and direction for the
performances of all other management functions:
Objective uplift the moral of the employees and motivate
them;
Objective serves as criteria for evaluating decisions
Objective provides a basis for control and evaluating
performances against predetermined standards.
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 Steps in planning (Cont …)
The most common objectives:
Survival: The basic objective of all kinds is to survive or
to stay a live,
Growth: This objective provides with opportunities for
advancement, gives the managers a sense of pride and
achievement,.
Profit: For business enterprises making profit is the
principal objective where as for public institutions
maximization of social welfare is the deriving force.
Productivity enhancement: This is related to resources
utilization and reducing input - output ratio.
Innovation: The objective of the organization may be to
come up with the new technologies of production or new
product to the customers.

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 Steps in planning (Cont …)
iii. Means for attainments of planned
objectives
The instruments of planning are
 strategies,
 policies,

 rules,

 procedures,

 Budget

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 Steps in planning (Cont …)
Strategies:
It may be any decision or action taken after taking
into account the probable or actual actions, policies
and strategies of competitors, suppliers, etc
Strategies differ from policies as it focus on action,
where as policies provide guideline for decision and
action
Strategies also differ from tactic. Tactics represent
a spontaneous and short term decision to solve an
unforeseen problem that emerges suddenly, where
as strategies are long-range plans aimed at goal
achievement. Strategies and policies reduce the need
for tactical decision making.

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 Steps in planning (Cont …)
Policies: Policies are a guide to decision making.
They establish the broad framework within
which managers operate at various levels
Policy also set limits within which the decision
maker can operate
It channels all decisions towards the
achievement of predetermined goals by
providing a framework for decision makings.
Moreover, it ensure that all decisions are
consistent, uniform, and viable.
Furthermore, it also provides criteria for
evaluating decision.

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 Steps in planning (Cont …)
Rules:
Rules prescribe behavior, and define what should
and what should not be done.
It does not provide any discretion
It does not provide any exceptions.
It requires no decisions, but only enforcement.

Rules are also associated with penalties for

violation

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 Steps in planning (Cont …)

Procedures: Procedures are sequences

of steps involved in making decisions and
performances of activities.
Like strategies and policies, they aim at
laying down mechanisms for orderly
performances and coordination of
various organizational activities so as to
avoid random actions and operations.
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 Steps in planning (Cont …)
Budget
Budgets are the most widely used instrument of
planning as wall as control.
They are quantitative in nature and usually called
numerical plans.
Budgets are the most precise and important tools of
planning as they show the needs of financial and non
financial resources.
Financial budget:– it is related to expenses for
activities which includes revenue and expenses
Non-financial budget:- includes material budget, sales
budgets, manpower budget, direct-labor hour’s
budgets… etc.
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 Steps in planning (Cont …)
iv. Determination of resources
Once means to achieve the objectives are clearly
specified , the next step in the planning process
is the determination of resources that would be
required for their implementations. These
resources are of four types;

1. Financial resources:- money necessary for the

activities planned. It involves an estimation of ;
 availability of financial resources
 requirement of material resources
 needs for additional resources
 methods of raising needed resources
 allocation of financial resources for the
implementation of various functional plans
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 Determination of resources (Cont…)
2. Equipment and facilities planning. Equipment and
facilities planning related to aspects such as
technology to be used, size of the plant, its
location and layout.

3. Materials and supplies planning: It involves

 identification of the types of materials
required,
 quantities amount required
 availability of materials,
 their costs,
 handling,
 transportation, and so forth.

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 Determination of resources (Cont…)

4. Personnel planning. Personnel planning

related to the requirement and availability
of various types of manpower resources
and it’s up grading system.

It also involves the allocation of manpower

resources for the implementation of
various functional plans

In all cases the realistic resources planning

is critical to the success of the total
planning effort
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 Steps in planning (Cont …)
v. Implementation of plans
Plans will not produce any results if not
implemented effectively.
It only provides directions to effort and the
path for the accomplishment of the desired
goals.
Strategies, policies, programs, project, and
budget, constituting the instruments of
planning, should be implemented effectively in
order to ensure the maximum utilization of
resources for the achievement of
predetermined objectives.
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 Steps in planning (Cont …)
The following steps are suggested for
effective implementation of plan:
a) Planning communication should be done in group in such
a way that every body understands the plan.
b) Participation of all those who are responsible for
implementation of plans should be involved in the
process of their preparation.
c) Review and adjustment
d) Assignment of responsibility and delegation of
authority
e) Measurement of performances
f) Motivation of employee
g) Leadership for implementation

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 Advantage of planning
The major advantages of planning are:
It provides base for cooperative and coordinated
efforts.
It makes coordinated and goal directed effort
possible for formulating strategies, policies, rules,
procedures, budgets, standards and methods etc.
It enables us to capitalize opportunities and face
challenges.
It proved a basis for allocation of resources among
programs, projects and activities and hence promotes
efficiency.
It provides criteria for decision making and
controlled timely execution of tasks.
They provide the framework for making decisions on
problems of a recurrent nature.
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 Disadvantages of planning
The major limitations of planning are:

Uncertainties of the future: This make the plan itself

uncertain
Premium on the present: That is present is always more real
than the future, and present problems seem to be more urgent
than future problems. Many of us are inclined to take care of
today and hope that tomorrow will take care of itself.
Past decisions acts as a barrier to future planning
particularly decisions involving commitment of substantial
financial resource in a fixed assets like building, etc impose
serious limitation on planning.
Administrative problems. The executives’ perception to
planning and reluctance to changes that may adversely affect
planning.

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Disadvantages of planning (Cont…)
External conditions often, impose serious
limitations on planning. Some of external
conditions may be :
 Policies of governments,
 Rapid change in technology
 consumer tastes and preferences are some of
the external factors that may affect the its
realization.

Expense and Timely information. The time

factor puts constraints on comprehensive
planning. Search for information, location of
alterative sources and their comparative
evaluation is costly and time consuming process.
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 Disadvantages of planning (Cont…)

The above limitations of planning

point out the complexities and
problems involved in the planning
process. However, they do not by
any means diminish the
importance or need of planning

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