PROJECT CYCLE

03/11/25 1
What is a project life cycle?
A project passes through a number of life cycles called
project cycle.
The d/t activities that can be undertaken throughout the
project process is often termed as a project cycle.

03/11/25 2
Project Cycle: Is the various stage through which project
proceed from inception to implementation.
 It is a stage which project advance/move ahead from
inception to maturity stage

03/11/25 3
A project cycle covers all the steps necessary to bring a project
to the point where

Its technical,
Economic and
Financial feasibilities have been established
and
Ready for appraisal.
03/11/25 4
 Each stage follows the proceeding one and leads to the next
 These different phases may be identified by different
institutions and authors.
 Some of the phases as identified by different authors are,

03/11/25 5
 There are three commonly known models for a project.
These are:
1. The Baum’s model: Identification, Preparation, Appraisal &
Selection and Implementation and lately added was
Evaluation
2. DEPSA’s model; Pre-Investment, Investment and Operation
3. UNIDO model: similar to DEPSA’s model

03/11/25 6
The Baum Cycle (World Bank Procedures)
 Baum (1970) model is the first basic/formalized model of a
project cycle which has been adopted by the World Bank.
 According to this model a project cycle consists of the
following five stages

03/11/25 7
1. Identification: preparing in idea form
2. Preparation: preparing in a paper form
3. Appraisal and Selection: selecting more feasible one
4. Implementation: putting project idea into practice &
most important

03/11/25 8
5. Evaluation: final phase & used to compare actual
progress with the plans & judge whether the decisions &
actions were responsible & useful.

03/11/25 9
 According to the guidelines of project planning in Ethiopia
(1990) of Development Project Studies Authority the project
cycle comprises three major phases.
 1. Pre-inv’t, 2. Investment, and 3. Operation phases
 Each of these phases comprises of further stages

03/11/25 10
03/11/25 11
 According to the UN Industrial Development Organization
a project cycle encompassing three distinct phases.
1. Pre-inv’t, 2. Investment, and 3. Operational phases
Each of these phases are divided into stages, some of which
constitute important Consultancy, Engineering & Industrial
activities.

03/11/25 12
 According to an Indian scholar, Choudhury (1988), the
project life cycle has five phases: Conception, Definition,
Planning and Organizing, Implementation and Clean-Up.

03/11/25 13
Conception

Definition

Clean-Up

Planning & Organizing

Implementation

03/11/25 14
However, in most literature and guide books the stages or
phases of projects are divided into six phases and this
approach is preferred for discussion in this course:

03/11/25 15
1) Identification
2) Pre-feasibility study
3) Feasibility study
4) Selection and project design
5) Implementation.
6) Ex-post evaluation

03/11/25 16
Project starts by generating potential idea that can be converted
into a meaningful project.
 Project identification involves finding project’s idea, which
could contribute towards achieving specified
business/development objectives
 In many cases many projects start as a simple idea and later
on it may grown up into a full-fledged project

03/11/25 17
 Identification of promising investment opportunities
(projects) requires

imagination,
sensitivity to environmental changes,
And a realistic assessment of what the firm
can do

03/11/25 18
Generally, the idea for project may come from the
following sources
 From the need to make profitable use of
available resources (this is for resources based
projects) Eg. minerals like gold, Coffee in
Jimma, keffa, …

03/11/25 19
 Market based projects arise from an identified
demand in home or overseas market.
Example Cloths, Shoes (by making survey)
 Need based project may arise from the need of
community (company) to make available some
basic materials (services) requirements.
 Eg. Areas with shortage of water.
03/11/25 20
In general, the sources of project ideas can be
broadly classified into,
1. Macro-level
 National policies, strategies, sectoral, sub–
sectoral or regional plans

03/11/25 21
 General surveys,
◦resource potential surveys,
◦ regional studies,
◦master plan and
◦statistical publications, which indicate directly
or indirectly investment opportunities.

03/11/25 22
 Constraints on the development process due to
shortage of essential infrastructure facilities
 Unusual events such as,
◦ droughts, floods, earth–quakes, hostilities, etc

03/11/25 23
2. Micro Level
 The identification of unsatisfied demand or needs
 The need to remove shortages in
◦ essential materials,
◦ services or
◦ facilities that constrain development efforts;

03/11/25 24
 The necessity to complement or expand
investments previously undertaken.
 The suggestions of financial institutions and
development agencies
 Studyof new Technological Development
The initiative of private or public enterprises

in response to incentives provided by the

government; 03/11/25 25
After we have identified project ideas the next step is project
preparation and analysis.
 Project preparation includes both Pre-feasibility and
Feasibility studies
 Once a project idea is identified a preliminary project analysis will
be done ( i.e., pre-feasibility study).

03/11/25 26
 Which means the project idea must be elaborated in
sort of study.
 Why pre-feasibility study?
 Because, undertaking a feasibility study that
enables a definite decision to be made on the
project is a costly and time – consuming task.

03/11/25 27
 Therefore, before assigning larger funds for such
a study, preliminary assessment of the project
idea might be made in a pre-feasibility study.
 In the pre-feasibility study stage the analyst
obtains rough estimation of the major
components of the project’s costs and benefits.

03/11/25 28
 Some of the main components examined during
the pre-feasibility study include:
◦Availability of adequate market (or
beneficiaries)
◦project growth potential
◦investment costs, operational cost and
distribution costs
03/11/25 29
◦demand and supply factors; and
◦social and environmental considerations
 If the project is appeared to be sound the next
sages is a feasibly stage

03/11/25 30
Pre – feasibility study should be viewed as an
intermediate stage.
A feasibility study should provide all data necessary
for an investment decision.
 The commercial,
 Technical,
 Financial,
03/11/25 31
 Economic and
 Environment

for an investment project should be defined and

critically examined.

03/11/25 32
 Therefore, the structure of a pre – feasibility study
should be the same as that of a detailed feasibility
study.
 The major difference between them lies on the
amount of work required in order to determine
whether a project is likely to be viable or not.

03/11/25 33
 Once the project is decided as viable using pre-
feasibility study, a detailed analysis of issues like,
◦marketing,
◦technical,
◦financial,
◦economic, and
◦ecological aspects is undertaken in the
feasibility stage. 03/11/25 34
If the project is viable, the next step is project
design stage
Which means, in the feasibility stage more
accurate data need to be obtained in order to
proceed to the next stage

03/11/25 35
 Finally, the feasibility report should include (but not
limited) the following analysis:
 Market analysis
 Technical analysis
 Organizational analysis
 Financial analysis
 Social – economic analysis, and
 Environmental analysis

03/11/25 36
 The feasibility study would enable the project
analyst to select the most likely project out of
several alternative projects.
 Selection follows, and often overlaps with the
feasibility analysis.
 It addresses the question
 is the project worthwhile?

03/11/25 37
A wide range of appraisal criteria have been
developed to judge the benefits of a project.
 The criteria are divided into two broad
categories.
 non-discounting criteria and
 discounting criteria.

03/11/25 38
 After a project has been prepared, it is appropriate
to forward for a critical review (external review)
 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 projects, appraisals cover the
following aspects,
03/11/25 39
a)Technical – here the appraisal concentrate in verifying
whether the proposal will work in the way suggested or not.
b) Financial – this will try to see
◦ if money needed for the project have been calculated
property,
◦ their sources are all identified,
◦ and reasonable plans for their repayment are made where
necessary.

03/11/25 40
c) Commercial –
◦ the way the necessary inputs for the project are
supplied
◦ and the arrangements for the supply of the
products are verified
d) Incentive – whether things are arranged in such
a way that all those whose participation is
required will find it in their interest to take part
in the project, at least to the extent envisaged in
the plan. 03/11/25 41
e) Economic – the appraisal here tries to see whether
what is proposed is good from the perspective of the
national economic development.
◦The effects (positive and negative) are taken
into account and check if all are correctly
valued

03/11/25 42
f) Managerial – this aspect of the appraisal examines
if the capacity exists for operating the project and
see if those responsible ones can operate it
satisfactorily.
Moreover, it tries to see if the responsible are given
sufficient power and scope to do what is required.

03/11/25 43
g) Organizational – the appraisal examines the
project how it is organized internally and
externally
This helps to if arrangement and its organization allow
the proposals to be carried out properly and to
allow for change as the project develops.

03/11/25 44
The objective of any effort in project planning
and analysis is to have a project that can be
implemented to the benefit of the society.
 After the project prepared and evaluated the next

step is implementing the project

 Implementation is the most important part of the

project cycle.

03/11/25 45
 In this stage,
 funds are actually disbursed to start the project
and keep running
 contracts are signed
 A major priority during this stage is to ensure that

the project is carried out in the way and within the

period that was planned.

03/11/25 46
During the project implementation stage, the
following important points should be considered:
 All the stages of implementation should be

completed with in the time schedule allotted.

 The output stream should be the same as

contemplated.
 The physical targets are to be realized with in the

financial allocation.

03/11/25 47
 Project analysts (manager) must keep an eye over
changes in
 technology, taste,
 Price, profitability etc.
 In the case of private investments, profitability is to

be so insured that investment funds are expected

from within.

03/11/25 48
However, Problems frequently occur when the economic
and financial environment at implementation differs from
the situation expected during appraisal.

For example, price or political environment may change

Due to these facts, project implementation must be flexible
and original proposals are modified frequently to
capture these changes.

03/11/25 49
 Generally, project analysts divide the
implementation phase into three time periods
◦The investment phase, where the major
investments are made. This may extend from three
to five years.
◦The development phase which may also extend
from three to five years.
◦The project life.

03/11/25 50
The final phase in the project cycle is evaluation.
 Once a project has been carried out the actual
progress with the plans should be evaluated in
order to judge whether the decisions and actions
taken were responsible and useful.
 However, evaluation is not limited only to
completed projects.
03/11/25 51
Ongoing projects could also be evaluated to find
solutions for problems when the project is in
trouble.

03/11/25 52
 The evaluation may be done by ,
 the project management,
 the sponsoring agency,
 or other bodies.
 Moreover, evaluation should be undertaken when a project is
terminated or is well into routine operation.

03/11/25 53
Some of the benefits which can be obtained from
evaluation are,
 The reality of the assumptions that were made
will be evaluated;
 It provides an experience that is highly valuable
in future decision making;

03/11/25 54
 It suggests corrective action to be taken in the light
of actual performance;
 It helps in uncovering judgment biases;
 It induces a desired caution/ carefulness among

project sponsors.
 Generally, weakness and strengths should
carefully be noted so as to serve as important
lessons for future project analysis undertaking.

03/11/25 55
 Clear system requirement definitions
 Substantial user involvement
 Support from upper management
 Thorough and detailed project plans
 Realistic work schedules and milestones

03/11/25 56
 Incomplete or changing requirements
 Limited user involvement
 Lack of executive support
 Lack of technical support
 Poor project planning
 Unclear objectives
 Lack of required resources
03/11/25 57