Project Appraisal

After a project has been prepared, it is generally appropriate for a critical review or an independent appraisal to be conducted. This provides an opportunity to re-examine every aspect of the project plan to assess whether the proposal is appropriate and sound before large sums are committed. Development projects impose a series of costs and benefits on recipient communities or countries. Those costs and benefits can be social, environmental, or economic in nature, but may often involve all three. Public investment typically occurs through the selection, design and implementation of specific projects to achieve the goals of policy. Why are some project proposals accepted and rejected, and how? What are the considerations in appraisal other than the economic rate of return?

5/28/2012

Project Apprisal by Gardachew Worku

Project Appraisal
In addition to being financially viable, a development project cannot usually be considered acceptable unless it is economically, technically and institutionally sound. It should be the least-cost feasible solution to the problem being solved and should expect to produce net economic and/or social benefits. For example, irrigation projects may facilitate the growing of cash crops in one locality, but cause water shortages, and hence economic, social and environmental pressures in another.
5/28/2012 Project Apprisal by Gardachew Worku

Project Appraisal
Project appraisal is the analysis of a proposed project to determine its merit and acceptability in accordance with established criteria. This is the final step before a project is agreed for financing. It checks that the project is feasible against the situation on the ground, that the objectives set remain appropriate and that costs are reasonable.
5/28/2012 Project Apprisal by Gardachew Worku

Project Appraisal
This is probably the best-known stage of the cycle, which is the responsibility and primary concern of the lender. Its purpose is to establish the worthwhileness of a prepared project in the light of its resource commitments and expected benefits. Project appraisal is concerned with assessing, in advance, whether a project is worthwhile and therefore if it should be proceeded with. Appraisal and Evaluation deal with similar issues, but have a different purpose and are performed in completely different phases of a project. Appraisal is done before, and as such is a predictive/ prospective action. It is related to redefining objectives, ways to reach them, risks involved and re-estimation of costs/benefits of each available option. Evaluation is done after, and involves analysis of the past and looking at what was done and means to improve it.

5/28/2012

Project Apprisal by Gardachew Worku

Project Appraisal
Project appraisal is the effort of calculating a project's viability. Appraisal involves a careful checking of the basic data, assumptions and methodology used in project preparation, an in-depth review of the work plan, cost estimates and proposed financing, an assessment of the project's organizational and management aspects, and finally the viability of project.
5/28/2012 Project Apprisal by Gardachew Worku

Project Appraisal
This is probably the best-known stage of the cycle, which is the responsibility and primary concern of the lender. Its purpose is to establish the worthwhileness of a prepared project in the light of its resource commitments and expected benefits. Project appraisal is the process of detailed examination of various aspects of a given project for recommending it for implementation. The institution that is going to fund the project has to satisfy itself before providing financial assistance for the project

5/28/2012

Project Apprisal by Gardachew Worku

Project Appraisal
Project appraisal depends on the feasibility report of the project and involves commercial, technical, financial, economic, ecological and management appraisal.

5/28/2012

Project Apprisal by Gardachew Worku

Market and commercial appraisal

It covers all the commercial considerations and arrangements for procurement of supplies and the marketing of output. It is concerned with market for product or service produced by a project. Any error/omission in market demand and supply would be very costly to the organization. The study and examination of probable of market risk is also very important and the backbone of the investment decision making process. A proposal should be commercially sound and before the approval of a proposal the following aspects are examined. Demand and availability of the product on global level requirement and sources of raw materials continuity of demand and availability of the product should be on a realistic basis

5/28/2012

Project Apprisal by Gardachew Worku

TECHNICAL APPRAISAL
This is mainly concerned with issues related to physical scale, layout, location of facilities, technology to be used, and their relation to engineering or other data on which they are based, proposed procurement arrangements, procedures for obtaining engineering, architectural or other professional services, the potential impact on the human and physical environment, and a host of other similar concerns related to the technical adequacy and soundness of the project.
5/28/2012 Project Apprisal by Gardachew Worku

TECHNICAL APPRAISAL
Clearly, every project must be technically feasible. Technical Appraisal provides a comprehensive review of all technical aspects of the project such as rendering judgment on merits of technical proposals and operating costs. Here is a checklist that can be used: Is the technology proven or tested? If not, has it ever been successful elsewhere and can that success be replicated in current context and conditions? Does the technology/ process/ equipment technically fit with the facilitys existing technology/process/ equipment & machinery? If not, what aspects of the technology / process do not fit and what measures is the implementing agency planning to take in this regard? List of equipments and machinery to be installed with cost and specifications of the equipment. Equipment capacity & whether it is as per requirement? List of recommended equipment suppliers.

5/28/2012

Project Apprisal by Gardachew Worku

TECHNICAL APPRAISAL
Who is implementing the project? Does the project implementation team have adequate skills and experience? Terms for supply and installation of the equipment by the suppliers. Is there any performance guarantees from the equipment suppliers? Time period required to implement the project
5/28/2012 Project Apprisal by Gardachew Worku

TECHNICAL APPRAISAL
In general technical appraisal involves critical study of the project in terms of the following aspects. Manufacturing process and technology Selection of process know-how Fixation of the capacity of the plant as a whole Selection and procurement of plant and machinery Evaluation of the existing transport and facilities General layout, material flow and location Structures and civil works (project implementation schedule)
Project Apprisal by Gardachew Worku

5/28/2012

Financial appraisal
Financial appraisal concerns such questions as the adequacy of funds, the financial viability of the project, the borrowers ability to service debt, procedures for recovering investment and operating costs, etc. This is different from economic appraisal, which addresses the viability and worthwhileness of the project from the broader point of view of its contribution to aggregate or national economic and social welfare.
5/28/2012 Project Apprisal by Gardachew Worku

Financial appraisal
Financial appraisal techniques The project appraisal criteria can be divided under two heads as discounted and non discounted cash flow techniques

5/28/2012

Project Apprisal by Gardachew Worku

Economic Appraisal
Economic appraisal addresses the projects impact and its worthwhileness from the viewpoint of the whole society. It is different from financial appraisal in that it goes beyond the concerns of participating agents alone. Economic appraisal measures the effect of the project on the whole economy (economic return, employment opportunities, contribution of the project to GDP etc)
5/28/2012 Project Apprisal by Gardachew Worku