Project Management

CONTENTS

What is Project?
Project Management
Project Cycle Management
Phases of Project Cycle
Project Identification
Project Selection
Project Appraisal
Case Study
Quiz
Bibliography

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What is project?

According to Nicholas, John M. (2001) some of the characteristics that warrant classifying an
activity as a project centers on the purpose, complexity, uniqueness, unfamiliarity, stake,
impermanence, and life cycle of the activity. Based on these features then project is defined as
follows:
A project involves a single, definable purpose, end-item, or results, usually specified in
terms of costs, schedule, and performance requirements.
Every project is unique, in that it requires doing something different than was done
previously.
Projects are temporary activities.
Projects cuts across organizational lines because they need the skills and talents from
multiple professionals and organizations.
Projects involve unfamiliarity possess significant elements of uncertainty and risk.
The organization has something at stake when doing a project.
Finally, a project is the process of working to achieve a goal.

Finally, a project is the process of working to achieve a goal; during the process, projects
pass through several distinct phases, called the project life cycle.

Westland, Jason (2006):

A project is a unique endeavour to produce a set of deliverables within clearly specified time,
cost and quality constraints. Projects are different from standard business operational activities as
they:
Are unique in nature. They do not involve repetitive processes. Every project undertaken
is different from the last, whereas operational activities often involve undertaking
repetitive (identical) processes.
Have a defined timescale. Projects have a clearly specified start and end date within
which the deliverables must be produced to meet a specified customer requirement.

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Have an approved budget. Projects are allocated a level of financial expenditure within
which the deliverables are produced, to meet a specified customer requirement.
Have limited resources. At the start of a project an agreed amount of labour, equipment
and materials is allocated to the project.
Involve an element of risk. Projects entail a level of uncertainty and therefore carry
business risk.
Achieve beneficial change. The purpose of a project is typically to improve an
organization through the implementation of business change.

GTZ (1996):
A project can be described as a process of providing inputs over a limited period: using the
resources provided, activities are conducted and outputs (results) generated, in order to achieve a
previously defined impact (the project purpose).We talk of programmes when more than one
project in a sector, sub-sector or region are linked together by a clearly defined concept. Projects
and programmes are sustainable if the impact continues to have effect.
RPRLGSP, May 2009:
In RPLGSP document project is defined as follows:
Work that is temporary and produces a unique product or service
An intervention to conduct activities, in order to provide assistance, that will allow the
users to improve their own situation
An undertaking for the purpose of achieving established objectives, within a given
budget and time period
An investment of resources to produce goods or services

Project Management

Westland, Jason (2006):

Project Management is the skills, tools and management processes required to undertake a
project successfully. It incorporates:

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Figure 1: Project management components

A set of skills. Specialist knowledge, skills and experience are required to reduce the level of
risk within a project and thereby enhance its likelihood of success.
A suite of tools. Various types of tools are used by project managers to improve their chances
of success. Examples include document templates, registers, planning software, modelling
software, audit checklists and review forms.
A series of processes. Various processes and techniques are required to monitor and control
time, cost, quality and scope on projects. Examples include time management, cost management,
quality management, change management, risk management and issue management.

RPRLGSP, May 2009:

PMBOK 2008, defines project management as the application of knowledge, skills, tools and
techniques to project activities, to meet specific scope, time, cost and quality goals of projects.

John M. Nicholas (2001): Project management is a system/ contingency approach to organization

and management; it applies elements of classical and behavioral management and uses
organizational forms and management roles best suited to the unique environment of projects.

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Project Cycle Management

In general we can define Project Cycle Management as a tool that describes the management
activities and decision making procedures used during the life-cycle of a project. The following
sections show the definition given to PCM in different documents.

Lucian CIOLAN Trainer- EU Project Cycle Management: The project cycle follows the life of
a project, from the initial idea through its completion. It provides a structure to ensure that
stakeholders are consulted, and defines the key decision, information requirements and
responsibilities at each phase so that informed decision can be made at each phase in the life of
the project.

RPRLGSP, May 2009:

The systematic process of initiating, planning, implementing, managing and evaluating projects
or programmers is known as Project Cycle Management, PCM; it is also defined as an
approach in project management used to guide management activities and decision-making
procedures during the life-cycle of a project, from the first idea until the last ex-post (afterwards)
evaluation.

European Commission (March, 2002): Project Cycle Management defines different phases in the
project life with well-defined management activities and decision making procedures. PCM
provides a structure to ensure that stakeholders are consulted and relevant information is
available, so that informed decisions can be made at key stages in the life of a project.

European Commission (May 1999): The way in which projects are planned and carried out
follows a sequence that has become known as the project cycle. The cycle starts with the
identification of an idea and develops that idea into a working plan that can be implemented and
evaluated. Project Cycle Management integrates the phases in the project cycle so that issues are
examined systematically, by means of an approach and methodology which ensures that
objectives and issues of sustainability remains in focus.

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Phases of the Project Cycle

Westland, Jason (2006):

The project life cycle consists of four phases:

Project initiation: During this phase a business problem or opportunity is identified and a
business case providing various solution options is defined. Next, a feasibility study is conducted
to investigate whether each option addresses the business problem and a final recommended
solution is then put forward.

Project planning: This phase involves outlining the activities, tasks, dependencies and
timeframes; resource plan; financial plan; quality plan; acceptance plan; and procurement plan.

Project execution: This phase involves implementing the plans created during the project
planning phase.

Project closure: Project closure involves releasing the final deliverables to the customer,
handing over project documentation to the business, terminating supplier contracts, releasing
project resources and communicating the closure of the project to all stakeholders

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Figure 2: The four phases of the project life cycle

GTZ (1996):
Categorize Project Cycle into three phases:
Identification phase-asses outset situation, establish system of objectives
Concept phase-establish project concept, prepare decisions to implement the project
Implementation phase- operationalize planning, implement, adjust and update planning,
and terminate project
RPRLGSP, May 2009:
Typically, the project cycle comprises 6 or more standard project stages, phases or
activities, arranged in a logical sequence to accomplish a projects goals or objectives.
Stage 1: Policy setting
Stage 2: Project Identification
Stage 3: Appraisal
Stage 4: Formulation/planning

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Stage 5: Contracting/ commitment

Stage 6: Implementation, monitoring & midterm evaluation
Stage 7: Final evaluation

Lucian CIOLAN (27-29 of September, 2007):

The generic project cycle within EC external aid programmers has six phases.

Project Identification

The purpose of the identification stage is to:

Identify project ideas that are consistent with partner and EC development priorities;

Assess the relevance and likely feasibility of these project ideas;

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Under the Programmed approach, prepare a Financing Proposal (i.e. under the MEDA or
TACIS regulations), or an Identification Fiche for individual projects (i.e. under ACP and ALA
funding arrangements); and

Prepare a financing decision for a Programmed of projects, or determine the scope of further
work required during the formulation stage for individual projects.

Project Selection

It happens many times that you get many choices when selecting the best option. For example,
you may have the option to select which movie you want to see or where you should go for your
next vacation.

In your personal life you may make the decision just randomly, or based upon your experience
and/or suggestions from your family members or friends.

However, in professional life when you have been given options to make a selection, you go by
some rules because here the stakes are high and you cannot afford to make a wrong decision.

Suppose your organization has gotten many projects, but due to resource constraints, your
organization cannot undertake all projects at once. Therefore, your organization has to make the
decision to select a project which is less risky, and could provide them with maximum profit and
recognition.

There are various methods which help you choose your project wisely. These methods can be
divided into two categories:

1. Benefit Measurement Methods, and

2. Constrained Optimization Method
Although there is a difference among methodologies used in each technique, the basic principle
and ultimate goal are the same, which is to provide your organization the maximum profit and
recognition.

In fact, every organization has a defined process that helps them choose the right project aligned
with their strategic objectives.

Generally, this process is performed by upper management; for example, the Steering
Committee, Project Management Office (PMO), Project Selection Committee, etc.

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While evaluating the project they will evaluate many things, such as:

Whether they are capable of doing it or not

If they have all resources required to complete the project
If it will help them achieve their objective (recognition and maximum profit)
Okay, now lets discuss each type of project selection method.

Benefit Measurement Methods

This technique is widely used in the selection of projects, which is based on the present value of
estimated cash inflow and outflow. Here you calculate the cost and benefits, and then compare
them with other projects to make a decision.

Before we move to benefit measurement techniques, we have to understand one important

concept: Discounted Cash Flows.

Discounted Cash Flow

We all know that the worth of money received today is more than the money received in the future. For
example, the value $10,000 USD after 10 years will not be same as today; its worth will be far lower than
the current value of $10,000 USD.

Therefore while calculating the cost invested and return on investment, we have to consider the concept
of discounted cash flow.

Now lets get back to Benefits Measurement Methods.

The following is a list of techniques used in Benefit Measurement Methods:

Benefit/Cost Ratio
Economic Model (Economic Value Added)
Scoring Model
Payback Period
Net Present Value
Discounted Cash Flow
Internal Rate of Return
Opportunity Cost

Benefit/Cost Ratio
This technique is also known as Cost/Benefit Ratio.

As the name suggests, it is the ratio between the present value of inflow (cost invested to the project) and
present value of outflow (value of return form the project). If the budget is not a constraint, the project
with higher Benefit-Cost Ratio (BCR) will be selected.

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Economic Value Added (EVA)

Economic Value Added (EVA) is a performance metric that calculates the worth creation for the
organization, and defines the return on capital (ROC). It is the net profit after deducting all taxes and
capital expenditure.

If you have many projects, the project with the higher Economic Value Added (EVA) will be selected.
Keep in mind that EVA is expressed in dollar value, not in a percentage.

Scoring Model
This is more like an objective technique. Here, the project selection committee will list a few relevant
criteria, weigh them according to their priorities and importance, and then will add all these weighted
values.

Once you complete scoring the projects, the project with highest score will be selected.

Payback Period
This is the ratio of total cash out with average per period cash in. Or you can say that it is the time
required to recover the cost invested in the project.

If other parameters are the same, the project with the minimum payback period will be selected.

Net Present Value (NPV)

This is the difference between the current value of cash inflow and the current value of cash outflow of
the project. Net Present Value (NPV) should always be positive, and the project with the higher NPV will
be a better option.

Internal Rate of Return (IRR)

This is the interest rate at which the Net Present Value becomes zero. In other words you can say that it is
the rate at which the present value of the outflow is equal to the present value of inflows.

If you have many projects to choose from, you will select the project with the higher IRR.

Opportunity Cost
This is the cost that we are giving up by choosing some other project. If you have many projects, you will
choose the project with the lesser opportunity cost.

These are the few Benefits Measurement Techniques used in the selection of projects. In general, for most
organizations benefits measurement methods are enough to lead them to a decision.

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Constrained Optimization Methods

This model is also known as the Mathematical Model of project selection, which is used for large projects
requiring complex mathematical calculations.

The following is the list of techniques used in the Mathematical Model of project selection:

Linear Programming
Non-linear Programming
Integer Programming
Dynamic Programming
A detailed discussion of these topics is out of the scope of the PMP Certification exam. For the exam, all
you need to know is that these are the Mathematical Model techniques and are used in project selection.

Project Appraisal
Project appraisal helps project initiators and designers to;

Be consistent and objective in choosing projects

Make sure their program benefits all sections of the community, including those from ethnic groups
who have been left out in the past
Provide documentation to meet financial and audit requirements and to explain decisions to local
people.

Appraisal justifies spending money on a project.

Appraisal asks fundamental questions about whether funding is required and whether a project offers
good value for money. It can give confidence that public money is being put to good use, and help
identify other funding to support a project. Getting it right may help a community make its resources go
further in meeting local need

Appraisal is an important decision making tool.

Appraisal involves the comprehensive analysis of a wide range of data, judgments and assumptions, all
of which need adequate evidence. This helps ensure that projects selected for funding:

Will help a partnership achieve its objectives for its area

Are deliverable
Involve local people and take proper account of the needs of people from ethnic minorities and other
minority groups
Are sustainable
Have sensible ways of managing risk.

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Appraisal lays the foundations for delivery.

Appraisal helps ensure that projects will be properly managed, by ensuring appropriate financial and
monitoring systems are in place, that there are contingency plans to deal with risks and setting milestones
against which progress can be judged.

Getting the system right

The process of project development, appraisal and delivery is complex and partnerships need systems,
which suit local circumstances and organization. Good appraisal systems should ensure that:

Project application, appraisal and approval functions are separate

All the necessary information is gathered for appraisal, often as part of project development in which
projects will need support

Race/tribal equality and other equality issues are given proper consideration

Those involved in appraisal have appropriate information and training and make appropriate use of
technical and other expertise
There are realistic allowances for time involved in project development and appraisal
Decisions are within a implementers powers
There are appropriate arrangements for very small projects
There are appropriate arrangements for dealing with novel, contentious or particularly risky projects.

Checklist for project appraisal

Whether you are involved in a partnership with an appraisal system in place, or starting to design one
from scratch, these questions are worth asking.

Are appraisals systematic and disciplined with a clear sequence of activities and operating rules?
Is there an independent assessment of the project by someone who has not been involved with the
development of the project?
Does the appraisal process culminate in clear recommendations that inform approval (or rejection) of
the project?
Is the approval stage clearly separate?
Is the appraisal process well documented, with key documents signed, showing ownership and
agreement, and allowing the appraisal documentation to act as a basis for future management,
monitoring and evaluation?
Does the appraisal system comply with any relevant government guidance
Are the right people involved at various stages of the process and, if necessary, how can you widen
involvement?

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Project appraisal in relation to technical, economic, financial, social, and

environmental analyses

During project appraisal, hard questions will be asked and the answers will determine whether the project
proposal will be adopted or rejected. The questions raised will include concerns such as the
appropriateness of project objectives, size, scope, implementation methods and modalities,
implementation time scale, and the project technical, financial, economic, institutional, environmental,
social and distributional justification of the project.

A well prepared and assessed project preparation and an appraisal consume large amounts of data and
therefore require an equipped office with computer facilitation as depicted in the figure below;

Figure; A modern office with computer access

(a) Technical analysis

Technical analyses of a project are aimed at ensuring the following:

i. To confirm the source of the project proposal, nature of the studies including feasibility studies
undertaken before the proposal, and the nature of decisions taken by all relevant authorities
involved
ii. That the problem or the need to be resolved by the project has been clearly stated
iii. That the project has been clearly spelled out with the correct technical design details (such as
size, location, timing, and technology)
iv. That the required materials have been correctly determined and their source identified
v. That the costs of the project have been clearly established, expected product prices projected, and
payment modalities and schedules agreed to

(b) Economic Analysis

The need for economic analysis arises out of the fact that Higher Local Governments (HLGs) operate
within limited resources. As a result, some difficult choices of where to commit limited resources from a
large pool of deserving and competing priorities and needs must be made by HLG officials. The
economic costs and benefits of a project are estimated through the application of a cost-benefit analysis,
i.e. evaluating both the implicit and social cost-benefits of a project. For profit making projects,
profitability tools like Net Present Value, Internal financial rate of return, Pay Back Period and
Incremental Profit are used to estimate the viability of the project.

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The figure below illustrates the participatory process including especially the beneficiaries of medical,
water and sanitation in the design and discussion of project formulation. The participatory process allows
for more ideas to be incorporated into the project, and often increases the success of the project

Figure; Participatory Planning

(c).Financial Analysis
It takes a hard look at the funding sources for the project both in terms of completing the project and
for its sustained operation. This analysis should question if;
i. The HLG would fund the project from internal resources?
ii. The HLG would fund the project from external resources?
iii. The external resources would be borrowed funds?
iv. If the funds are to be borrowed, would the HLG be able to pay back the loan with accrued
interest?
v. Would the external resources be a grant from the central government or from any other source?
vi. Would the HLG co-fund the project with an outside donor, whether it is a central government or
another development partner?
vii. Would effective cost recovery mechanisms aimed recouping the project costs be put in place?
viii. Would financial management modalities be put in place to record the transactions during
implementation and operation of the project? Documents could include cashbook, assets register,
bank statements, balance sheet (accruals accounting), income statements (or receipt and payment
schedules), etc. . . .

d) Environmental Analysis
Depending on the nature of the project, it is important that the project is seen to comply with the various
environmental requirements as administered by the National Environmental Management Authority
(NEMA). Specifically, the project should comply with the provisions of the National Environment Statute
(1995) and the Environmental Impact Assessment (1998). Environmental aspects that projects would
have to address include;

Public health and occupational safety

Control of air, water and land pollution
Management of renewable natural resources (plants and animals)
Efficient use of natural resources through multiple use, recycling and erosion control

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Conservation of unique habits (forests, game reserves) for rare species and cultural preservation

Figure; Environmental pollution and degradation

Case Study
Proposed real life project Appraisal Case Study:
For the participants to apply their newly acquired or enhanced project appraisal competencies
to a practical case study. Namely; building 4ft by 20ft and 30ft deep, with five stances, five
doors, five windows, school latrine at one of the schools in Kyabarungira sub county (see New
Vision article in project identification page)

Case study: Building a Pit Latrine with 4 stances at one of the schools in
Kasese, Kyabarungira Sub County:
This case study is sourced from the New Vision of Monday, August 4th 2003. Summary data of the
proposed project:

1. Name: Modern Pit Latrine in Kasese District, Kyabarungira Sub County.

2. Location: Kyabarungira Sub County
3. Proposed goal: Improvement of sanitary conditions in Kasese suffering from shortage of Latrines.
4. Project Execution: School authority, parent associations, and civil society and Kyabarungira sub-
county authorities.
5. Financing: School authorities, Kyabarungira sub county council, Kasese District Council, Ministry of
Education and possibly a donor and international NGOs.
Project description: According to the New Vision text, (see page 25) shortage of latrines has hit Kasese
schools. It is revealed that Ministry of Educations policy stipulates one stance for only 25 pupils.

In contrast, the current status in Kasese schools is one stance for 120 pupils. This reveals that there is
urgent need for about four extra stances for one stance in use.

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The proposed project is therefore to initially build 4 pit latrines of 30 feet deep, 4 feet wide and 20 feet
long with 5 separate square stances 4*4, 5 doors and 5 windows at one of the schools in Kyabarungira
Sub County.

The Zanzibar Water and Sanitation project is a collaborative initiative of the Government of
Zanzibar, African Development Bank and UN-Habitat. The project is at implementation stage at
the moment. At project identification stage due consideration was given to that of the countrys
strategy and objectives. This is clearly stated in the final appraisal report and the following
statement is taken from the report.

African Development Bank Group (August 2008): Project linkages with country strategy and objectives

The Tanzania mainlands National Strategy for Growth and Reduction of Poverty, known by its Kiswahili
acronym, MKUKUTA covers the period 2005-2010. It identifies three clusters of broad outcomes: i)
economic growth and poverty reduction; ii) improvement of the quality of live and social wellbeing; and
iii) governance and accountability. Goal 3 of Cluster (ii) addresses increased access to clean, affordable
and safe water, sanitation, decent shelter and a safe and sustainable environment.

Zanzibars Strategy for Growth and Reduction of Poverty (MKUZA) has been developed as a response to
similar development needs. Zanzibar Development Vision 2020 provides the over-arching framework to
reduce poverty. The Zanzibar Poverty Reduction Plan (ZPRP 2007-2010), Cluster 2, Social Services and
Well Being, includes amongst others goals for i) increased access to clean, safe and affordable water and
ii) improved sanitation and sustainable environment.

The Joint Assistance Strategy for Tanzania (JAST) is a compact between Government and Development
Partners (DPs) for managing development co-operation. It came into force in 2006. The efforts to
harmonies aid management systems on the mainland with those on Zanzibar are at an advanced stage.

In most of Bank funded projects consideration is given to the linkage of the project to the overall country
strategy. This is taken as the main justification for the identification of a given project as a priority need
of the country. Depending on the countrys strategy alone sometimes may lead to wrong conclusion. The
country strategy may be outdated such that may lack to capture the changes that have occurred since the
time of its formulation. The reality on the ground particularly the conditions in the target community may

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not warrant the feasibility of the project and can lead to the failure of implementation. On the other hand
many NGOs in developing country are focusing on target community needs in the identification of
projects without recognition of the country strategy. This again can lead to the question of sustainability
of the implemented projects due to lack of acceptance of the endeavors by the local and national
governments. Therefore, the identification stage of PCM needs to look at projects both from national and
local perspectives.

Quiz
1. Conformance to the requirements:
[A] Is the condition of the product or service in relation to customers requirements
[B] Is same as customer satisfaction
[C] Is a tool used to measure quality
[D] Gold plating

2. Grade of a product:
[A] Means the same thing as quality
[B] Can be used interchangeably with quality
[C] is the level of a product or service
[D] Depends on the quality of the product

3. The interpretation of Quality can vary from person to person due to differences in:
[A] Culture
[B] Nationality
[C] Economic background
[D] All of the above

4. What is not an example of cost of conformance to quality?

[A]Legal liabilities
[B] Planning
[C] Quality audits
[D] Field testing

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5. The company has to repair or replace a product. This will be taken as a?

[A]Recall cost
[B] Warranty cost
[C] Scrap and rework cost
[D] Inspection and testing cost

6. Cost of quality categories are:

[A] Prevention and appraisal costs
[B] Internal failure and external failure costs
[C] Prevention, appraisal, internal failure and measurement and testing costs
[D] Prevention, appraisal, internal failure and external failure costs

7. Appraisal cost is:

[A] Prevention cost
[B] The cost of evaluating processes to ensure they are error free
[C] Cost of appraising the projects viability
[D] Cost of appraising rework

8. Effective communication is one of the most important skills required by

[A] The project team
[B] The management
[C]The project manager
[D]The project contractor

9. The following are the possible Interfaces:

[A] Organizational, personnel and external
[B] External and internal
[C] Pure internal and contractual
[D] External and organizational

10. Which of the following does not constitute the role of a project manager:
[A] Integrator and coordinator
[B] Business case approval
[C] Project delivery
[D] Project planning and controlling

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11. The three key levels at which responsibility can be defined is at the _______ level, at the _________
level and at the ____________ level.
[A]Project, Strategic, Activity
[B] Project, Activity, WBS
[C] Project, Organization, Team
[D] Team, Organization, contractor

12. The functional manager and project manager have equal power in which organizational structure?
[A]Weak matrix
[B] Functional
[C] Strong matrix
[D] Balanced matrix

13. Mark the option which does not form a component of a communication process model
[A] Arguments
[B]Understanding
[C]Feedback
[D]Body language

14. The ______ allows determination of the early start, early finish, late start and late finish.
[A]Three-point estimates
[B] Flow chart technique
[C] Precedence diagramming method
[D] Critical path method

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Answers

1. A

2. C

3. D

4. A

5. B

6. D

7. B

8. C

9. B

10. B

11. A

12. D

13. A.

14. D

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Bibliography

Westland, Jason (2006): The Project Management Life Cycle a complete step-by-step methodology for
initiating, planning, executing & closing a project successfully, (http://www.netLibrary.com)

European Commission, (March 2002), Project Cycle Management Handbook, PARTICIP GmbH
(http://www.stgm.org.tr)

European Commission (May 1999), Project Cycle Management- Training Handbook- Prepared by ITAD
Ltd, Lion House, Ditching Common Industrial Estate, Hassocks, West Sussex, UK

UN-Habitat (June 2003), Program and Project Cycle Management, (http://www.unhabitat.org)

FAO (2001): Project Cycle Management Technical Guide, (http://www.fao.org)

John M. Nicholas (2001): Project Management for Business and Technology, principle
And Practice 2nd Ed. New Jersey, Prentice Hall

Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ ) GmbH (1996) : Project

Cycle Management (PCM) and Objectives-Oriented Project Planning (ZOPP):
Guidelines

RPRLGSP, May 2009: MANUAL on PROJECT CYCLE MANAGEMENT: Guidelines on

Identification, Design and Implementation of Successful Local Authority Projects:
http://www.rprlgsp.go.ke

Vlaamse Interuniversitaire Raad (VLIR): PROJECT CYCLE MANAGEMENT (PCM) GENERAL VLIR
MANUAL, Brussels, July 2002
Lucian CIOLAN (Trainer)- EU Project Cycle Management- (27-29 of September, 2007): Projects
Development and Management as Tools for Quality Policy Making in Education; (Training Programme
for Senior Staff of the Ministry of Education and Sports)

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EUROPEAN COMMISSION EuropeAid Co-operation Office General Affairs Evaluation (March 2002):
Project Cycle Management Handbook; Prepared by: PARTICIP GmbH Hildastrasse 66 D-79102
Freiburg, Germany
African Development Bank Group (August 2008): Zanzibar Water and Sanitation Project; Project
Appraisal report (unpublished)

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