PROJECT IDENTIFICATION

AND
PLANNING
 Project identification
A project may be seen as an investment
activity where financial resources are
expended to create capital assets
that produce benefits over extended period of
time.
Project identification is the initial phase of
the project development(Life) cycle.
It begins with the conceiving of ideas or
intentions to set up a project.
These ideas are then transformed into a project.
Some tools used in project
identification:
Situational and Environmental
Analysis
SWOT Analysis
Problem and Opportunity Studies
Resource Analysis
SITUATION ANALYSISBasically “ Situation analysis’’ is same
meaning with “ market audits’’i. Actual and potential market size
ii.Trends iii.Costumer iv.Costumer segment v. Distribution channel
ENVIRONMENTAL ANALYSISRefers to the monitoring, evaluating
and disseminating of information from the external environment with the
objective of identifying threats and opportunities and assessing their
impact given the company’s internal strengths and weaknessesEx:
Customers, Suppliers, Labor unions, Creditors, Competitors, Government,
Community, Demographic, Social, Economic, Technological, Political/Legal
etc.
SWOT ANALYSIS
Resource Analysis where strengths and
weaknesses are identified, indicates what the
firm is capable of doing at the start of the
business.  views the firm as a collection of
resources comprised of tangible and intangible
assets as well as core capabilities.  the
strengths identify distinctive competencies of the
company which can work to its advantage.The
Resource Base View (RBV) theory defines four
broad categories of resources as potential
sources of competitive advantage: -> tangible
assets -> intangible assets -> capabilities, and -
> core competencies.
PROJECT IDENTIFICATION PROCESS
Project portfolio management : the set
of projects that an organization is undertaking at
any given time
The various methods for project selection run
along a continuum from highly
qualitative (judgment-based)
approaches to those that rely on
quantitative analysis.
When a firm is pursuing multiple projects, the
challenges of strategic decision making, resource
management, scheduling, and operational control
are magnified.
 Steps in identification of
Projects
Step 1: Identify & Meet with
Stakeholders
A stakeholder is anyone who is affected by the results
of project plan may include customers and end
users. Identify all stakeholders and keep their
interests while creating project plan. Meet with
the project sponsors and key
stakeholders to discuss their needs
and expectations, and establish
baselines for project scope, budget,
and timeline. Then create a Scope Statement
document to finalize and record project scope details,
get everyone on the same page, and reduce the
Step 2: Set & Prioritize Goals
With a list of stakeholder needs, prioritize
them and set specific project goals.
These should outline project objectives, or
the metrics and benefits to achieve.
Write the goals and the stakeholder needs to address
in the project plan so it's clearly communicated and
easily shareable.
Step 3: Define Deliverables
Identify the deliverables and project planning steps
required to meet the project's goals.
Step 4: Create the Project Schedule:
Go through the each deliverable and define the
series of tasks that must be completed to
accomplish each one. For each task,
determine the amount of time it will
take, the resources necessary, and
who will be responsible for
execution.
Step 5: Identify Issues and Complete
a Risk Assessment :
No project is risk-free. If there any issues, that will
affect the project planning process. So, should know
how to manage risk in a project and consider the
steps you should take to either prevent certain risks
from happening, or limit their negative impact.
Conduct a risk assessment and develop a risk
management strategy.
Step 6: Present the Project Plan to
Stakeholders:
Explain how project plan addresses
stakeholders' expectations, and
present the solutions to any conflicts. Make sure
that presentation isn't one-sided. Have an open
discussion with stakeholders instead. Make
project plan clear and accessible to all
stakeholders. Housing all project plan data in a
single location, like a collaboration tool, makes it
easy to track progress.
 Defining the Project
During the definition stage, projects are “defined” in specific,
actionable terms designed to make execution possible and to
facilitate informed actions and decision making. Definition is
essential to secure stakeholder buy-in and acceptance, to
negotiate priorities and to ensure that proper expectations
have been set regarding the work effort that lies ahead and
the results to be produced.
The best way to summarize the effect of a proper definition
document is to highlight the questions the artifact answers.
This includes:
Why are we doing this project?
How many people are required and what types of
skill will they need?
How much will it cost?
What are the deliverables?
When will we complete it?
How will we do it?
While it can take over (30+) variables to
fully define a project, at a minimum, viable
project definitions should incorporate the
following elements:
Project Vision
Project Scope Project scope is defined
as the body of work (overall tasks,
activities and decisions) that must be
completed in order to ensure that project
goals and deliverables are met. Scope
should be clearly defined and limited to
the work that must be done to meet the
goals at hand.
Planned Deliverables: tangible /
intangible
 important issues in
evaluating/screening models
1. Realism
2. Capability
3. Flexibility
4. Ease of Use
5. Cost
6. Comparability
 1. Realism
An effective model must reflect organizational
objectives, including a firm’s strategic goals and
mission. Criteria must also be reasonable in light of
such constraints on resources as money and personnel.
The model must take into account both
commercial risks and technical risks,
including performance, cost, and time.
1. will the project work as intended?
2. Can we keep to the original budget or is there a high
potential for escalating costs?
3. Is there a strong risk of significant schedule
slippage?
 2. Capability
A model should be under which projects are
carried out. flexible enough to respond
to changes in the conditions
For example, the model should allow the company
to compare different types of
projects (long-term versus short-
term projects, projects of different
technologies or capabilities, projects with different
commercial objectives).
It should be robust enough to accommodate new
criteria and constraints, suggesting that the
screening model must allow the company to use it
as widely as possible in order to cover the greatest
possible range of project types
 3. Flexibility
The model should be easily modified
if trial applications require
changes.
It must, for example, allow for adjustments
due to changes in exchange rates, tax
laws, building codes, and so
forth.
 4. Ease of Use
A model must be simple enough to be used
by people in all areas of the organization, both
those in specific project roles and
those in related functional positions.
Further, the screening model that is applied, the
choices made for project selection, and the
reasons for those choices should be clear and
easily understood by organizational members.
The model should also be timely: It should
generate the screening information rapidly, and
people should be able to assimilate that
information without any special training or skills.
 5. Cost
The screening model should be cost
effective.
A selection approach that is expensive to use in
terms of either time or money is likely to have the
worst possible effect:
causing organizational members to avoid using it
because of the excessive cost of employing the
screening model.
The cost of obtaining selection information and
generating optimal results should be low enough
to encourage use of the models rather than
diminish their applicability
 6. Comparability
It must be broad enough to be
applied to multiple projects
If a model is too narrowly focused, it may be
useless in comparing potential projects or
foster biases toward some over others
A useful model must support general
comparisons of project alternatives.
Project Selection is a process to assess each
project idea and select the project with the
highest priority.
Projects are still just suggestions at this stage, so
the selection is often made based on only brief
descriptions of the project.
Criteria in screening projects
 Investment
 Rate of return
 Risk
 Profit
 Payback
 Similarity to existing business
 Expected life
 Flexibility
 Environment
 Competition
 Steps in Project Selection
1. Identify Potential Projects:
The first step in the project selection process is to
search for projects to shortlist. Here are some ways
to identify potential projects:
Customer feedback: Analyze customer feedback to
identify pain points, needs, and areas where the
organization could improve its products or services.
Market research: It helps identify market trends,
competitors, and potential growth opportunities.
Brainstorming sessions: Internal ideas and
innovations should be encouraged to make new
products, services, or processes that could
improve the organization's operations.
 Industry benchmarks: Comparing industry
standards helps identify potential areas for
improvement and opportunities for growth.
Technology advancements: Search for the
latest developments in tech and identify
opportunities to use them.
2. Compare the Projects
Comparing projects is an important step in the
selection process, as it allows organizations to
evaluate each project's potential benefits, costs,
and risks. By comparing projects using various
selection methods, organizations can select the
projects with the highest potential for success.
3. Analyze Your Findings
Analyzing the findings from a project selection
process involves evaluating the accuracy and
completeness of the data, identifying patterns and
trends, developing (KPIs) Key Performance Indicators,
evaluating risks and benefits, prioritizing projects,
and developing an action plan. By thoroughly
analyzing the findings, organizations can decide
which projects to pursue.
4. Select a Project
Once you have considered these factors, you can
select a project that aligns with your organization's
strategic goals, is feasible, has potential benefits
that outweigh the risks and costs, and addresses a
real need or opportunity in the market.
 Management Focus Areas in
Project Selection
Strategic Alignment: Projects should align
with the organization's overall strategy and
goals.
Feasibility: The proposed projects should be
feasible within the available resources, budget,
and timeline.
Business Benefits: The selected projects
should offer tangible benefits to the
organization, such as increased revenue,
improved customer satisfaction, or cost
savings.
Risk Assessment: The potential risks
associated with each project should be
assessed and managed effectively.
Resource Availability: The availability of
necessary resources, such as personnel,
equipment, and funding, should be evaluated
before selecting a project.
Stakeholder Management: The needs
and expectations of stakeholders should be
considered when selecting a project.
Regulatory Compliance: The projects
should comply with relevant laws, regulations,
and ethical standards.
 APPROACHES TO PROJECT
SCREENING AND SELECTION
A project-screening model that generates useful
information for project choices in a timely and
useful fashion at an acceptable cost can serve as a
valuable tool in helping an organization make
optimal choices among numerous alternatives.
More common project-selection techniques.
I. Checklist Model
II. Simplified Scoring Models
III. The Analytical Hierarchy Process
IV. Profile Models
 1.Checklist Model
Checklist, or a list of criteria that pertain to choice
of projects, and then applying them to different
possible projects
Ex:cost and speed to market
key selection criteria :
Cost of development:
Potential return on investment
Riskiness of the new venture
Stability of the development process
Governmental or stakeholder interference
 2.Simplified Scoring Models
In the simplified scoring model, each criterion
is ranked according to its relative importance.
choice of projects will thus reflect desire to
maximize the impact of certain criteria on the
decision.
In order to score for simplified checklist, assign a
specific weight to each of four criteria: as follows
3.The Analytical Hierarchy Process(AHP)
The Analytical Hierarchy Process (AHP) was
developed by Dr. Thomas Saaty
Addresses many of the technical and
managerial problems frequently associated
with decision making through scoring models.
An increasingly popular method for effective
project selection,
The AHP is a four-step process
In project management, the efficient frontier
is the set of project portfolio options that
offers either a maximum return for every
given level of risk or the minimum risk for
every level of return.
PROJECT PLANNING
 Project planning
Project planning is a rational
determination of how to initiate,
sustain, and terminate a project.
The main purpose is to plan time, cost
and resources adequately to
estimate the work needed and to effectively
manage risk during project execution.
Project Planning generally consists of
Determining how to plan (Ex: By level of detail or
rolling wave);
Developing the scope statement;
selecting the planning team;
Identifying deliverables and creating the work
breakdown structure;
identifying the activities needed to complete those
deliverables and networking the activities in their
logical sequence
Estimating the resource requirements for
the activities
Estimating time and cost for activities;
Developing the schedule;
developing the budget;
risk planning;
gaining formal approval to begin work.
 PROJECT PLANNING STEPS
Project planning generally consists of the
following steps
1) Work Break down structure
2) A schedule for the project
3) Resources required for the activities and
whole project
4) Budgeted cost of each activity, sub group
and whole project
 1) Work Break down structure
Work break down structure of a project is a
process of breaking down the projects into levels
of similar or identical groups up to activity level, so
that duration of an activity can be monitored and
controlled during execution.
2) A schedule for the project :
Schedule for a project is being done in the
following steps
a) Project information is created in which project
start date is finalized.
b) On the activity the duration is considered based on
standard practice and experience.
c) Activity relationship is built-up.
3) Resources required for the activities
and whole project
In the project resources are being used for its execution. These
resources once assigned to activity will indicate the budget cost.
Resources are classified in the following types:
a) Manpower Resources: From the project manager to all
contractors assigned to the project are being treated as manpower
resources. Example : Construction manager, skilled mason,
Carpenter, Labors etc.
b) Material Resource: The items used as consumables in the
project are known as materials resources Example : in the Building
construction project – cement, steel bricks are major material which
are used
c) Equipment Used: The support tools and equipment used in the
project execution fall in this category. Example : Mixer, Scaffolding,
plywood forms etc.
4) Budgeted cost of each activity
Once the resources are assigned to the
activity. It will calculate the budgeted value
based on the rate decided for the resources.
PROJECT CHARTER
 Project charter
“A project charter sets out the scope,
objectives, and people involved in the
project”.
This formal document uses all that
information to authorize the project.
So the charter lets the project manager use
organizational and outsourced resources to
complete the project
 PROJECT CHARTER - ELEMENTS
Introduction
Project business case, goals and scope
Success criteria
Deliverables
Budget
Schedule/milestones
Constraints and assumptions
Summary of risks
Team and organization
Approvals
 PROJECT CHARTER - ELEMENTS

Introduction – explains the project’s

purpose. Includes the project name, a brief
description, and the formal authorization.
Project business case, goals and
scope – sets out the scope of the project
and any unique characteristics.
Success criteria – the critical factors
that determine the project’s success. This is a
list of deliverables expected on project
completion.
 project charter
Deliverables – more detailed primary project
requirements or key deliverables.
Budget – the cost estimate for the project,
including information about who can approve
expenses, both from the allocated budget. Includes
any additional spending the project may require.
Schedule/milestones – a comprehensive
schedule with project milestones, or stages, for
measuring its progress and success.
 project charter - Charter
Constraints and assumptions – detail the known
and unknown parameters of the project.
Summary of risks – summarize any potential or real
major threats to the success of the project.
Team and organization – list the people and
stakeholders who will work on the project (the project team).
Outline their roles and who is appointed the project manager.
An organization chart is a good way to show the project team
framework.
Approvals – finally, set aside a section for the project’s
sponsor/client and stakeholders to record their approval (or
disapproval) of the project charter document.
 How to Develop a Project
Charter

1. Identify the Project Vision (Scope, Objectives,

Deliverables)
2. Identify the Stakeholders and the Customers
3. Create an Organizational Chart
4. Define Project Milestones
5. Create a Resource Plan
6. Set the Budget for the Project
7. List Down the Dependencies, Constraints, and Risks
8. Lay Out the Implementation Plan
FINANCIAL MODELS
 FINANCIAL MODELS
Financial analysis to make project selection
decisions
Financial models are all predicated on the
TIME VALUE OF MONEY
PRINCIPLE
The time value of money suggests that money
earned today is worth more than money we
expect to earn in the future.
A BIRD IN THE HAND IS WORTH TWO
IN THE BUSH
 Financial Models
Based on the time value of money principal
Payback period
Net present value
Internal rate of return
Options models

All of these models use discounted

cash flows
Payback Period
Determines how long it takes for a
project to reach a breakeven point
Cash flows should be discounted
Lower numbers are better (faster
payback)
 Payback Period Example

A project requires an initial investment of

$200,000 and will generate cash savings of
$75,000 each year for the next five years. What is
the payback period? Divide the
cumulative
amount by the
cash flow
amount in the
third year and
subtract from 3
to find out the
moment the
project breaks
even.
Net Present ValueProjects the change in the
firm’s stock value if a project is undertaken
Projects the change in the firm’s stock value if a project
is undertaken.

Higher NPV
values are better!
Should you invest $60,000 in a project that will return
$15,000 per year for five years? You have a minimum
return of 8% and expect inflation to hold steady at 3%
over the next five years.

The NPV
column total is
negative, so
don’t invest!
 Internal Rate of Return
A project must meet a minimum rate of return before it is
worthy of consideration.

Higher IRR values are

better!
 Internal Rate of Return Example
A project that costs $40,000 will generate cash flows of
$14,000 for the next four years. You have a rate of return
requirement of 17%; does this project meet the threshold?

This table
has been
calculated
using a
discount
rate of
15%

The project doesn’t meet our 17% requirement and

should not be considered further.