CHAPTER TREE

Project Identification
Part I: Project identification

Project identification is the first and, perhaps, the most crucial stage
among the rest phases of the project cycle in which it is an opportunity
study stage. It is from this perspective that the project will be based,
and unnecessary ideas are likely to lead us to mal-project’s status. At
this stage an initial screening of project ideas will take place, with
some project ideas being abandoned as impractical or of a low priority.
Ideas for projects can be derived from a range of different sources,
such as; government organizations including: Ministries, individuals,
local communities’, non-government organizations and international
donor agencies and others.

Sources of project ideas

One can distinguish two levels where project ideas are born; the macro
and micro level. Macro level project ideas: as the name indicates this
type of the project ideas can emanate from international level or
national level and can have large–scale impact. E.g
Micro level project ideas: this type project idea originates from the
smallest household or neighborhood and local level to solve a problem
and fill need gaps identified at a small territory level. E.g
Project ideas can be generated formally or informally, by an institution
or by individuals.

How to identify projects using the (NPT) model developed By

A.K.Noah(2004)

All projects have one common characteristic- the projection of ideas

and activities into new endeavors. The ever present element of risk
and uncertainty means that the events and tasks leading to completion
can never be foretold with absolute accuracy.Projects can originate
from several places or perceived needs. The NPT model enables
project practitioners to identify projects from three sources.

(1) Needs(N)
(2)Problems(P)
(3) Trend or pattern (T)
It is important for practitioners as well as non practitioners of project
management to know that projects revolve around one basic concept
"need".Human beings are a bundle of needs.
The need for a new project will usually be pretty well defined
before investor institutions will agree to provide the capital
needed to build.

1. NEEDS APPROACH

The need for investment in a project, however, generally arises

from one of three sources:
 Market Demand/community demand for social projects
 Governmental or company mandate
 Cost reduction strategies
(a) Market demand
 This includes the development of new products,
 Seizing opportunities to increase market share of current
products
 Trying to retain current business
(b) Government or Company mandate
 This includes responding to health,
 Safety
 Environmental concerns
(c) Cost reduction strategies
 This includes project to improve efficiency, such as:
 Decreasing maintenance or operating costs,
 Increasing production while holding costs stable

2. PROBLEM SOLVING APPROACH:

All projects are geared towards solving a particular problem or

taking advantage of opportunities.Therefore in identifying projects
one can start by reviewing problems. Problems definitely would
revolve around the following area
 Social issues
 Economic
 Political
 Legal
 Technological
 etc
Problems are normally deviations from the normal.e.g
behavior,increase in drug abuse, project under the category fall
under social problems. Project could be developed towards
tackling these problems, e.g sensitization, education etc.

Economic problems could include unemployment, poverty, relevant

projects in these areas could be developed.
• For e.g demographic factors fall under social, and by looking at
issues,like population, age, sex, several problems can be identified
and projects can be developed

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• Aspect also like education can be reviewed critically and projects
will definitely emerge from this factor. E.g .number of teachers, pupil
to teacher ratio, number of schools etc

Also where there is a problem there is bound to be an opportunity.

Therefore, look for the opportunity. For example if there is a problem
with traffic congestion in Freetown, currently there is a potential for
engineering projects for new roads, bridges,etc.

3. TREND APPROACH

Projects can also be identified by monitoring trends e.g

 Population
 Economic
 Educational
 Health
 Technology
 Etc
For e.g increase in birth rate can indicate the likely hood of more
schools in the primary and secondary sector, need for more
teachers.etc.By monitoring trends we are able to plan for the future.

I) Phases of Project Identification

There are four key phases of project identification. These are:

General description of project idea:- by formal and informal

institutions and individuals.
General description of project idea:- actual written
description of the specific project idea or concept that
summarizes the main elements of the proposed project to use in
the screening, ranking and prioritization of project ideas.
Screening:- an initial review of project ideas and concepts to
see if they should be advanced or abandoned at an early stage.
Prioritization, ranking and selection:- Projects against a set
of criteria to identify the best projects to move actively into the
design stage and development.

Projects can be identified by many different agencies depending on the

type of project under consideration.

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II) How and where do projects come from?

As clearly stipulated in the discussion made in module one, a project is

typically undertaken to meet a specific objective. It involves doing
something new, which means that the end result should be a unique
product or service. These products may be marketed to external
clients, or they may be used internally. But the question is “How and
where do projects come from”.

Every project starts with an idea. Where do you think the idea comes
from? Does it drop from the sky? No. Is it innate in the mind? No.
Obviously an idea comes from people, i.e. individuals, groups,
corporations, and even nations. But under what conditions are these
most likely to foster new ideas? Projects, by their very nature, have a
lot in common. They usually start as an idea. The idea is then
developed into a concept. The concept is then analyzed and probed
through the process of due diligence (an investigation or audit of a
potential investment). Due diligence from the foundation of a project’s
feasibility. The first task of the entire project cycle is, thus, identifying
the project area.

Project ideas are normally initiated by a perceived need in an

organization. That means project ideas can be developed from the
identification of unsatisfied community needs. A need is a desire of the
project customer that focuses on a business problem; its fulfillment is
strategic to organization goals. The problems or constraints may be
caused by shortages of essential facilities and material and human
resources, unutilized or under-utilized material and human resources
and opportunities for their conversion to more productive purposes;
and the need to complement other investments (such as providing
roads and sanitation to a housing project, provision of training to fill a
skill gap etc.) Overall projects are identified in response to a readily
apparent community need or a deficiency in the development of the
local environment (Goodman and Love, 1980).

As indicated earlier one can distinguish two levels where project ideas
are born; the macro and micro level.
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iii) Project Profile, Prioritization and Ranking

a) Pre-Conditions
Justification and purpose:- What goal is the project contributing to?
What is the purpose?

Beneficiaries and Stakeholders:- Who will benefit and who has a

share or stake in the project?

Resources and institutions:- What potential resources may be

available?

Policies and plans:- How does the project proposal fit into plans and
policies at hand,

Impacts:- The likely major positive and negative social and

environmental impacts,

Support:- The level of political and administrative support,

Risks:- The main risks.

b) Prioritization and Ranking

At the national level different agencies and divisions within ministries
will have their own project ideas and will have to compete for support
and resources. To decide which projects to support it will be necessary
to set priority. This calls for the ranking of projects.

Criteria for Ranking Projects

a. Extent:- Number of people and geographic area affected by the

project,
b. Economic and financial:- Potential economic and/or financial
benefits to nation and local communities.
c. Environmental:- Conservation of natural resources and more
sustainable land use and protection of natural resources (e.g
Forests)
d. Social :- Poverty alleviation and assistance to disadvantaged
groups
e. Policy:- Is the project in line with national polices?
f. Organizational and human resources:- Availability of human
resources to implement project likely availability of function from
government, NGO and/or donors
g. Success or failures:- the chances of the project successfully
meeting its objectives and the risks associated with the project that
may affect its implementation,
h. Support :- Political support and Community support and demand
for project,

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During selection process, each project can be assessed against each of
the criteria to give a rating. At this stage of the project cycle it is more
likely to be qualitative than quantitative. Certain criteria can be given
greater weighting to reflect the importance of the criteria in
determining the overall range of the project.

Pre-Feasibility Study

The pre-feasibility study is a preliminary screening of identified

projects on the basis of their technical, social, environmental,
economic and financial viability. If an opportunity study provides
sufficient information, the pre-feasibility stage could be dropped and
the feasibility study should be viewed as an intermediate stage
between a project opportunity study and a detailed feasibility study.
However, the principal objectives of pre-feasibility study are to
determine whether:

All project alternatives have been well-examined;

A detailed analysis through feasibility study is required;
Functional or support studies, such as: market surveys,
laboratory tests or pilot test are necessary; and
The available information justifies the viability of investment
opportunity. However, the viabilities of all alternatives at this
stage are assessed in terms of their costs and benefits to select
few viable solutions for further detail study.

The difference between the pre-feasibility and feasibility lies in the

degree of detail of information obtained and the depth with which
project alternatives are discussed.

Part II: Project Preparation (PP)

Project preparation is a process of carrying out feasibility study,

feasibility study result and initial proposal report which will enable to
se how feasible and viable the project is.

Feasibility studies aim to objectively and rationally uncover the

strengths and
weaknesses of an existing business or proposed venture, opportunities
and threats
present in the environment, the resources required to carry through,
and ultimately
the prospects for success. In its simplest terms, the two criteria to
judge feasibility are
cost required and value to be attained.

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Feasibility study results with the preliminary project proposal
document that contains all the information necessary for an
investment decision for the implementing agency. It also critically
examines economic and environmental factors affecting projects.

I. Market and Demand Analysis

The objective of conducting market analysis is to assess whether there

exists; unsatisfied demand for the product and to determine the share
that can be captured by the project through appropriate market
strategies. Market appraisal requires a description of the product, its
major uses, scope of the market, possible combination from market
substitutes, special features of the product with regard to quality and
price.

II. Raw materials and supplies study (Input Analysis)

In addition to estimating the existing and future demand and supply of
the product, it is important to critically assess the availability of the
appropriate inputs needed to produce the proposed product.
The final result of input analysis is estimates of all kinds of inputs by
quantities and costs.

III. Technical analysis

The following’s are the general technical aspects:-

Technology Package: Involves the identification and

selection of the type of technology applicable for the
project.
Location: This signifies the identification and selection
of proper site and location for the project by considering
compatibility of activities.
Scale of operation: This has a lot to do with the
production program and plant capacity (of the project)
Land use: this simply involves the identification of the
major land use category up on which the project is in
place (commercial, industrial, social, mixed use etc)
Recurrent costs: This involves the process of
estimating the regular budget required by the project for
a defined duration usually per annum.
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 IV. Institutional Feasibility
Many institutional constraints can be tackled through good project
preparation. Some of the salient factors of this analysis include:-

Identification of those things which can be controlled and

those which can be influenced.
Sound internal organizational structure, competent
management and supervisory personnel;
Adequate technical skilled personnel and provision of the
necessary training facilities
Effective channels of communication and good relationship
with contributing agencies with strong network analysis (e.g
national research organizations)
Realistic implementation schedules and ensures whether
policy changes are applicably necessary for effective
success of the project. (e.g. water changes in irrigation
projects).
V. Social analysis
Social analysis includes the study of demographic, social and cultural
characteristics of the population affected by the project and extent of
readiness of the community to accept the cause of the project or to
participate in project design and management in case the project is
social projects.

Demographic characteristics: Involves the indication of the age

structure as well as the sex composition of the section of the
population that are directly as a result of the implementation of the
project.

Social Organization: Assessing the availability as well as the

readiness of social organization for the implementation of the project.

Cultural Acceptability: Involves the assessment of the level of

cultural acceptance of the implementation of the project (insuring
compatibility of the project with the culture of the community)

Community Participation: It depends on the level and extent of

community participation in the various stages of the project from
beginning up to its finalization.

VI. Environmental Analysis

Environmental aspects of a project refers to the impact of the project
on nature and habitat of earth such as plants and forests, water, air,
wild and domestic animals

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human beings, etc. In environmental impact assessment, the feasibility
study discuss in detail the impacts of the proposed projects on the
environment and to choose the equipment and production systems
that minimizes pollution, soil degradations and others. The feasibility
study should include a laboratory details on how to dispose-off the
wastes of the project that pollute air and water. There are a number of
questions that need to be answered during the analysis, such as:

What is the impact of the project?: In using renewable resources

such as air, water, land, etc; and non-renewable resources like
minerals and deposits that deplete through time with more
concern of future generations.
How does the project affect the eco-systems such as soil
erosion, atmosphere, rivers, lakes and desertification?
What is the impact on biological system such as conservation of
unique habitat, endangered species, wild life, overgrazing and
deforestation?
What hazardous chemicals are used that will harm the health of
employees and surrounding people of the project area? What
chemicals and wastes are
emitted from the project that will pollute air and water?
VII. Feasibility Study Result and Initial Proposal Report
study Results
The research and study projects, undertaken by government and non-
governmental organizations, are finalized by producing reports that
contain different investment opportunities. Opportunity studies are
sketchy in nature and rely more on aggregate estimates than on
detailed analysis. Cost data are usually taken from comparable
existing projects not from quotations of sources such as equipment
suppliers. Hence these reports should provide preliminary information
on markets, entrepreneurial input, the business environment and other
factors that affect project implementation.

The major outputs of general opportunity studies are to

Clearly state the problem that we want to address or the

opportunity that we want to take advantage of.
Provide essential information on the external factors
influencing the performance of projects.
Provide background information with emphasis on risks,
competitiveness, profitability and other conditions for
 each opportunity identified in the sector; and enable
investors to screen out and select the most attractive
opportunities for further analysis. If the opportunity
study provides sufficient information, it is possible to
pass the pre-feasibility study.

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 vii) Financial Analysis
The objective of financial analysis is to ascertain whether the proposed
project will be financially viable in the sense of being able to meet the
burden of servicing debt and whether the proposed project will satisfy
the return expectations of those who provide the capital. While
conducting a financial appraisal certain aspects has to be looked into
like:
- Investment outlay and cost of project
- Means of financing
- Projected profitability
- Break- even point
- Cash flows of the project
- Investment worthiness judged in terms of various criteria of
merit
- Projected financial position
Financial feasibility
In case of a new project, financial viability can be judged on the
following parameters:
Total estimated cost of the project
Financing of the project in terms of its capital structure, debt
equity ratio and promoter's share of total cost
Existing investment by the promoter in any
other business Projected cash flow and
profitability

[
The financial viability of a project should provide the following information:

Full details of the assets to be financed and how liquid those assets are.
Rate of conversion to cash-liquidity (i.e. how easily can the various assets be
converted to cash?). Project's funding potential and repayment terms.
Sensitivity in the repayments capability to the following factors:
o Time delays.
o Mild slowing of sales.
 o Acute reduction/slowing of sales.

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 o Small increase in cost.
o Large increase in cost.
o Adverse economic conditions.

viii) Economic Analysis

Economics is the study of costs- and- benefits. In regard to the feasibility of the study the entrepreneur is

concerned whether the capital cost as well as the cost of theproduct is justifiable vis-à-vis the price at

which it will sell at the market place. Forexample, technically, silver can be extracted from silver bromide,

(a chemical used forprocessing the X-ray and photo films); but, the cost of extraction is so high that

itwould not be economically feasible to do so. Likewise, until recently cost ofharnessing solar power was

prohibitively high. This cost-benefit analysis goes intofinancial calculations for profitability analysis that we

discussed under financialanalysis. At this stage it is also useful to distinguish between the economic

andcommercial feasibility; whereas economic feasibility leads one to the unit cost of theproduct,

commercial feasibility informs whether enough units would sell.

Apart from the cost-benefit analysis as above, which we also refer to as private cost benefitanalysis, it is also

useful to dowhat is known as social- cost-benefit- analysis (SCBA). For example, the entrepreneur may be

getting subsidized electricity in which case private cost would be less than social cost. Likewise, exporting units

earn precious foreign exchange resulting into social benefits being more than private earnings. Many a time, a

project that is worthy on SCBA may find greater favour with the support agencies.

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I. What Is a Project Proposal?
A project proposal is a detailed account of a succession of activities meant to
solve a certain problem. In order to be successful, the document should: give
a logical arrangement of a research idea, demonstrate the importance of the
idea, explain the idea's connection to past actions, and express the activities
for the intended project.

II. Types of Proposals and Funding Agreements

A proposal is a request for financial support of a research or training project.
It is sent to a potential funding source in hopes of receiving funding in the
form of a contract, grant, cooperative agreement or other sponsored
research vehicle. Proposals (funding requests) come in several forms:

1. Solicited Proposal:
A solicited proposal is submitted in response to a request by a funding
agency for research or training in a specific subject. The proposal may be in
response to a Request for Proposal (RFP) or a Request for Application (RFA).
A RFA is a solicitation from a funding agency inviting applications from
investigators who are interested in working with the funding agency in
designing and carrying out a specific project.
2. Unsolicited Proposal:
An unsolicited proposal is a proposal on a subject of interest to the faculty
member who makes it, which the targeted funding agency may find of
interest as well because it is in an area it is exploring, needs more
information on, fits with other areas of its interest, or has suddenly deemed a
priority. Many organizations and foundations consider unsolicited proposals,
as do some federal agencies.
3. Renewal:
A competing renewal is a request for additional funding for a project that is
currently funded but the period of performance is ending. Competing
renewals generally include new work based on the results of the existing
grant and are subject to peer review.
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 4. Resubmission:
A resubmission is an effort to secure funding for a proposal which has been
revised in response to critical comments from reviewers when it was
previously submitted. Unless otherwise stated specifically in the funding
opportunity announcement or RFA, just one resubmission is permitted.
5. Revision:
A revision is a request to an agency for additional support for an existing
project to expand the project’s scope or to meet unforeseen expenses. (In
the case of NIH, the former “competing supplemental application” is now
known as a “revision.”) A revision may be submitted to request support for a
significant expansion of a project’s scope or research protocol. An
administrative revision, also known as a “supplement,” requests additional
funding to meet increased costs that are within the scope of the approved
application, but these new costs were not foreseen when the new or
competing renewal application was submitted.
6. Continuation:
A continuation is a non-competing request for additional funding. The
application is not subject to peer review.
If a proposal is accepted, funding may be awarded in one of the following
forms, sometimes called “sponsored research vehicles”:
Contract or Grant:

Contract: The instrument for supporting an activity that is initiated by the

federal government through its agencies, and that performs a specified
service or will yield a particular end or product for the government. The
funding agency exercises considerable direction and control over the
performance and timing of the work. Please note: contractual agreements
with other entities, such as corporations and foundations, use terms
somewhat differently than the federal government. As always, researchers
should consult with ORA about any proposal for any type of funding with any
sponsor.
Grant: The instrument for providing support for an activity initiated by the
applicant, that falls within the guidelines and priorities of the funding
agency.

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Although contracts and grants are both legal agreements, a contract differs
from a grant in the following ways:

Contracts:

Government agencies use contracts to procure specific services or

products from which they will derive some benefit.
The agency, not the investigator, establishes the project specifications
and therefore exercises more direction over the work.
Contracts are more likely to include “strings” that benefit the agency –
for example, some tangible economic return or some degree of control
over patent rights, confidentiality, or publication.

Grants:

Grants support research, with the goal of increasing knowledge and

understanding in a given subject.

For contracts and subcontracts, negotiations are done by the Office of

Research Administration which is the signing authority. Principal
investigators do not have the authority to sign for Tufts.

Cooperative agreement: A cooperative agreement is an undertaking in

which the research or training project is jointly administered by the funding
agency and the recipient institution

Project Proposal Writing

certain problem. A project proposal is a detailed description of a series of

activities aimed at solving a
Project proposal is a document designed to present a plan of action, outline the
reasons why the action is necessary, and convince the reader to agree with and approve the
implementation of the actions recommended in the body of the document.

It is a means of presenting the project to the outside world in a format

that is immediately recognized and accepted. The proposal should
contain a detailed explanation of the justification of the project;
activities and implementation timeline; methodology; and human,
material and financial resources required.

Elements of Project Proposal

Although the format and content of a proposal may vary with the
requirements of the potential sponsor, the proposal will generally
consist of the following elements.
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a. Title page: A title page should appear on proposals longer than
three to four pages. The title page should indicate the project
title, the name of the lead organization (and potential partners, if
any), the place and date of project preparation and the name of
the donor agency to whom the proposal is addressed.
b. Project title: The project title should be short, concise, and
preferably refer to a certain key project result or the leading
project activity. Project titles that are too long or too general fail
to give the reader an effective snapshot of what is inside.
c. Contents page: If the total project proposal is longer than 10
pages, it is helpful to include a table of contents normally at the
start of the document. The contents page enables readers to
quickly find relevant parts of the document. It should contain the
title and beginning page number of each section of the proposal.
d. Abstract (Executive summary): Many readers lack the time
needed to read the whole project proposal. It is therefore useful
to insert a short abstract or a summary. The abstract provides a
brief summary of the project, and in most cases, within a space
limitation specified by the sponsor. The abstract should include
the problem to be addressed, the objectives to be achieved, the
implementing organization, the key project activities and the
total cost (budget) of the project. Although it appears first in the
proposal, the abstract should be written last with the thought that
it may be the only part of the proposal that is read by some
agency reviewers. It should be clear, succinct and effective in
generating interest for the project.
e. Context (Project Impact): This part of the project should
describe the social, economic, political and cultural background
from which the project is initiated. It should contain relevant data
from research carried out in the project planning phase or
collected from other sources. The writer should take into
consideration the need for a balance between the length of this
item and the size of the overall project proposal. Large amounts
of relevant data should be placed in an annex.
f. Beneficiaries (Target Groups): In this part define the target
group and show how it will benefit from the project. Describe the
groups of people that will directly benefit from the project. If
applicable and possible, break down the direct beneficiaries into
categories (e.g. women, youth, and minorities).
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 g. Project justification: Rationale should be provided for the
project. Due to its importance usually this section is divided into
four or more sub-sections. These sub-sections are discussed
below.

Problem statement: This is the most important part of the proposal

because everything revolves around it. It describes the circumstances
or conditions that you want to change. The problem statement
provides a description of the specific problem(s) the project is trying to
solve, in order to “make a case” for the project. Furthermore, the
project proposal should point out why a certain issue is a problem for
the community or society as a whole, i.e what negative implications
affect the target group. There should also be an explanation of the
needs of the target group that appear as a direct consequence of the
described problem.

Priority needs: The needs of the target group that have arisen as a
direct negative impact of the problem should be prioritized. An
explanation as to how this decision was reached (i.e what criteria were
used) must also be included. For example, if the problem is stated as
“…poor infrastructure in the community”, the list of needs associated
with this problem may be: (i) improved water supply in quality and
quantity; (ii) better roads; and (iii) improved solid waste collection.
These three needs would then be given higher or lower priority
according to the level of importance for the community, and a
description would be given of how that decision was reached (e.g a poll
taken from the local population, costs associated with project
intervention, etc.). This procedure provides credibility to the selected
intervention.

The proposed approach (type of intervention): the project proposal

should describe the strategy chosen for solving the problem and
precisely how it will lead to improvement. One way to describe the
approach related to the need previously stated as improved water
supply could be: “intervention to provide basic water supply facilities in
the community,” with some description of the specific features of the
solution proposed.

The implementing organization: This section should describe the

capabilities of your organization by referring to its capacity and
previous project record. Describe why exactly your organization is the
most appropriate to run the project, its connection to the local
community, the constituency behind the organization and what kind or
expertise the organization can provide. If other partners are involved in
implementation provide some information on their capacity as well.

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h. Project Goals and Objectives: Having a goal is like having a
road map. It helps members decide how to get from where they
are to where they want to go. Project goals are tools that help
members look ahead to plan what they want to do. Often one
major “goal” is declared and then broken down into various
objectives. Write SMART goal and objectives.
i. Output (outcomes): Outputs are the goods, services and
change is knowledge and attitudes produced as a result of
project activities which contribute to achieving the objective.
Outputs describe the services or products to be delivered to the
intended beneficiaries, therefore specifying what the project
management is promising to deliver.
j. Project Description and Background: This part shall include
the specific detailed description of each activity. Activities are the
major tasks or steps carried out that lead to achieving the
specified outputs. Link the activities to the objectives. Describe
every detailed aspect including responsibilities of partners and
the institution. There may be more than one activity for every
output. All activities should be associated with an output. You
should not have any activities that do not link up to outputs. To
determine the activities ask: “What does the project need to do in
order to produce the desired outputs?” Activities should be
clearly defined and when possible, quantified. List only the major
activates. You may list up to four activities for each output (you
may list fewer than four activities per output).
k. Human Resources: This part of the project should describe the
management and implementation teams, their experience and
responsibilities.
l. Project feasibility: This part of the project shows the feasibility
of the project.
m. Sustainability: Specify how your project will be
sustainable in the further after the donation has finished.
n. Overall project value: This part shows the added value of the
project to the higher education, institution, and other other
beneficiaries.
o. Risks of the project: This part of the project shall include the
main risks (may occur) and the tools could be used to overcome
them.
p. Monitoring and Evaluation (M&E) plan: In this part specify
how you will monitor the progress of activities and how you will
 be able to evaluate the accomplishment of the overall goal of the
project. Identify the indicators you will measure. Use the following
table.

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Item Indicators Sources of Assumptions M&E
verificatio
n (Risks)
Overall
goal
Objective

Evaluation
1
Objective
2
Objective
3
Outputs
1.1
1.2
2.1
2.2
2.3
Activity
1.1.1
1.1.2
1.1.3

Monitoring
Activity
1.2.1
1.2.2
1.2.3
Activity 3

q. Implementation Plan: The implementation plan should

describe activities and resource allocation in as much detail as
possible. It is exceptionally important to provide a good overview
of who is going to implement the project’s activities, as well as
when and where. The implementation plan may be divided into
two key elements; the activity plan and the resource plan.

Activity plan (schedule): The activity plan should include specific

information and explanations of each of the planned project activities.
The duration of the project should be clearly stated, with considerable
detail on the beginning and the end of the project. In general, two main
formats are used to express the activity plan: a simple table and the
Gantt chart.
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 Resource plan: The resource plan should provide information on the
means necessary to undertaken the project. Cost categories are
established at this stage in order to aggregate and summarize the cost
information for budgeting.

r. Project performance indicators: In this part, specify the major

project performance indicators (Measurable project performance
indicators)
s. Reporting: The schedule of project progress and financial report
could be set in the project proposal. Often these obligations are
determined by the standard requirements of the donor agency.
The project report may be compiled in different versions, with
regard to the audience they are targeting.
Dear student, now prepare a small project proposal of your
interest and discuss it with your friend(s).

V. Some Tips for Writing and Presenting Proposals:

The following tried and tested tips are to encourage the 100%ers to write
more proposals and the low raters to take heart and give it another try.
1. Ask Questions:
Before starting your proposal, take some time to make sure you know
exactly what you are
proposing. If you are unclear about any part of the project, ask your
potential client a few
meaningful questions. If anything seems vague in their description of “what
they want”,
ask for clarification and then give them a list of possible options as to what
you think they
might have meant. For your sake, when preparing to give a price, it is
important that you
and the client both have the same amount of work in mind. Note that if you
decide to
include a list of questions along with your proposal, include an educated
guess as to what
their answers would be. Make it clear that your price is based on you
having made the
correct guesses to the proposed questions and that if anythingneeds
clarifying or if
anything is missed, you can adjust your quote accordingly.
2. Summarize the Project:
Take all the information on the project that you have received from the
client thus far
and summarize it briefly, using your own words, in an opening paragraph.
This not
only helps you get a clearer concept of the project in your own mind but
also gives the

51 | P a g e
client confidence that you have given it thought and you understand
what they want. It also provides a solid opportunity for them to clarify
encase you did not understand.
3. Break Down the Project into a Nice “To Do” List:
After your summary, follow-up with a solid “To Do” list, that is very
useful for both you and your client. List everything that they have
requested so far as well as your standard work on the project. For
designers, this would include listing the initial drafts, etc. For
programmers, this would include planning the database, building it, etc.
Be thorough in your list. It will help give the client a strong sense that
you know what you are doing and that you will do the job well. It will
also help you make sure nothing slips through the cracks. Use the list in
your project updates and cross things off as you move along.
4. Split the Project into Phases:
After your “to do” list split the project up into a number of clearly
defined phases. It is recommended starting out with a minimum of
three. Your first phase might be the “Initial First Draft”. During this
phase, you begin work on the project and end the phase by sending the
client a first draft for testing and revision. Your next phase, in a simple 3
phase project, could be “Bug Squashing and Customizing”. During this
phase the project is tested and revisions are made until the client is
happy with the work and it is ready for action. Your last phase is
“Finalization”. Once the work is finished, you send them an invoice, ask
for referrals, collect payment, and end with a virtual handshake, all
parties satisfied with a job well done. Bonus: A useful strategy to keep in
mind when it comes to pricing is splitting up a long to-do list into
meaningful project phases and then pricing each of the “phases”
individually. This can be especially useful for isolating features that
require additional time and energy and being sure the client recognizes
the work involved when it comes time to give them the price.
5. Give Your Clients a Timeline:
Once you have gone over the project phases, let your clients know
approximately how long you expect the project to take. Be generous
(overestimate if need be, but gently)

52 | P a g e
and then strive to finish up ahead of time. While a project may only
take you a few hours to finish up, keep in mind that there will be
waiting time between the initial drafts and the finished project as the
client reviews the work and provides feedback. If the client is in a rush,
let them know exactly when it can be finished and be sure to go over
in detail exactly what, if anything needs to be done on their part to
make that deadline possible.
6. Estimate Your Time Involved:
While not useful for all project types, giving an estimate of time
involved is useful for most and not only gives the client a sense of what
to expect and that you know what you are doing, but also helps you
know exactly what to plan ahead for. A large design/programming
project, for example, with a high dollar amount, can be an excellent
opportunity to detail the hours involved in each step of the to-do list.
Be generous, but honest. The last thing you want is word getting
around that it takes you several hours to do what takes the average
freelancer 15 minutes.
7. Use the Multiple Choice Price Strategy:
Now that all the details have been clearly laid out and your client is
confident in your understanding of the project and your ability to see it
through, it’s time to give them the price. Calculate your predicted time
involved and be sure that nothing is overlooked. Then, give them the
total number of hours along with your standard hourly rate followed by
a discounted “flat rate”. Let us say you estimate about 5-8 hours
involved in the project and your hourly rate is $40 an hour. Your
proposal would then read something like this: “At around 5-8 hours of
work, you are welcome to my basic hourly rate of $40 an hour or a
discounted flat rate of $250.” 9 times out of 10 the client will choose
the flat rate over the hourly and will be happy with having had the
freedom to choose. Note that as an honest freelance artist whose
abilities are constantly improving, you will often reach a point where
what once took you 5 hours now takes you an hour. Once that
happens, the multiple price strategy is no longer

53 | P a g e
needed. Give them your flat rate and do an excellent job. Be sure that,
along with your price, you give them your options for accepting
payment.
8. Offer a Satisfaction Guarantee:
Once you have given them the price, be sure to include your
satisfaction guarantee. Let them know that you are committed to
working on the project until they are fully satisfied and then, once they
have accepted your proposal, stick to it. There is always the possibility
that it can backfire with a client who just does not ever seem to be
satisfied (we can talk about dealing with them another day), but the
vast majority of the time a solid guarantee will give your clients an
extra vote of confidence and help to close the deal. There is always the
possibility of a project costing you more time than it is worth, but no
matter. Give the project your absolute best and learn everything that
you can. Satisfied customers often end up being repeat customers and
they are more than worth the time spent on those who may not
appreciate your work.
9. End With a Call to Action:
Finally, after all the details have been made clear, and the price and
guarantee given, end with “what happens next.” Let them know
exactly what they need to do to get started. If you require payment
upfront, let them know where to send the money. If everything prior
has gone well, you now have a client who is excited and eager to see
their project come to life and you want to make sure that they know
what needs to happen next.
10. Write and Format Professionally:
Nothing says “unprofessional” like a bunch of “misspellings”,
grammatical errors, and “IM Style” typing. Take the extra time to proof
read your proposal and fix any little errors that may have slipped in.
Use spacing between your paragraphs and divide your various sections
(Project Summary, Timeline, Price Quote, etc.) with subheadings. For
extra points, put your proposal up on a password protected page
(make sure the password works) within your website. Remember if you
are struggling

54 | P a g e
with style or would just like some extra ideas/opinions, put together an
example proposal and share it with family and friends along with a
request for feedback.

Once the proposal has been accepted and the project complete, be
sure to always ask the client if they have any suggestions for how you
can improve and do even better work in the future. Ask them if your
proposal was clear and ask if you were able, what the deciding factor
was in choosing you to do the work. Take note of all you learn and
apply it to the next proposal you write. Although not directly related to
“proposal writing”, here are two other tips that are worth mentioning:
1. Pre-Screen your Clients:
To save both you and your client’s time and energy, it is important to
be sure that they are as informed and as prepared as possible before
they contact you. This is where your website can step in and do its job.
After they have browsed through your portfolio and decided to go for a
price on your services, it is important that you provide a clear path to
follow. Create a page specifically for those interested in working with
you. Outline the types of projects that you do and the processes that
you use. Do not hide your prices. As well as offering an hourly rate and
flat rate estimates for various project types, it is better to mention that
you are always open to creative negotiations. You can often end up
with “free projects” that more than pay what you would have charged
them.
2. Respond Quickly:
While not always possible, when you are able to, respond to your
prospective and active clients immediately. If you have an expected
delay, let them know that you plan to be unavailable. Be punctual with
all your appointments and make sure that you meet your deadlines. If
you miss a deadline and you are at fault, take a hit on your earnings.
This will let the client know that you mean what you say and it will also
help you to make sure it does not happen again.

55 | P a g e
 Part _III

Project Appraisal

Project appraisal: It is clearly not relevant for social service projects,

e.g., in which the social services are considered to be “public goods”
and provided “free” with the costs being met from general revenues.

For all other types of projects there are four ways to look at financial
feasibility from the point of view of:-

The direct project

beneficiaries; Projects as a
whole;
Any financial
intermediaries; and The
government.

In general term “Project Appraisal” is a process of selection of a project

or prioritizing in their financial viability.

Valuation and evaluation are employed in the process in order to know

how much money is required and how effective a project is in
comparison to others.

Basic and advanced techniques are employed in carrying out project

appraisal.

The basic techniques of project selection and the financial viability

appraisal of a project. The basic techniques include:-

- The time value of money,

- Investment criteria which include Net Present Value (NPV),
Benefit cost Ratio (BCR), Internal rate of return (IRR) and urgency
payback period,
- Project Cash Flows,
- The Cost of Capital,

The advanced techniques of project appraisal includes:-

- Risk Analysis,
- Special Decision situation,
- Social Cost Benefit Analysis,
- Multiple Projects and Constraints,
 - Valuation of real Options,
- Judgmental Behavioral Strategic and Organizational
considerations.

56 | P a g e
Comments: As described above project appraisal and its technique
are relevant only for project where goods or services are being
charged for, albeit subsidized in one form or the other

Economic and Financial Analysis

Prior to looking the evaluation techniques used for economic and

financial analysis, it is important to make some points on the
similarities and differences between economic and financial analysis.

The economic analysis of projects is similar in form to financial

analysis: both appraise the profit of an investment. The concept of
financial profit is not the same as economic profit. The financial
analysis of a project estimates the profit accruing to the project-
operating entity or to the project participants, whereas economic
analysis measures the effect of the project on the national economy.
For a project to be economically viable, it must be financially
sustainable, as well as economically efficient. If a project is not
financially sustainable, economic benefits will not be realized. Financial
analysis and economic analysis are therefore two sides of the same
coin and complementary. In addition, both types of analysis are
conducted in monetary terms, the major incurred under the project
and revenues resulting from it are taken into account. This form of
analysis is necessary to assess the degree to which a project will
generate revenues sufficient to meet its financial obligations, assess
the incentives for producers, and ensure demand or output forecasts
on which the economic analysis is based are consistent with financial
charges or available budget resources.

Economic analysis attempts to assess the overall impact of a project

on improving the economic welfare of the citizens of the country
concerned. It assesses a project in the context of the national
economy, rather than for the project participants or the project entity
that implements the project. Economic analysis differs from financial
analysis in terms of both (i) the breadth of the identification and
evaluation of inputs and outputs, and (ii) the measure of benefits and
costs. Economic analysis includes all members of society, and
measures the project’s positive and negative impacts in terms of
willingness to pay for units of increased consumption, and to accept
compensation for foregone units of consumption. Willingness to pay
and willingness to accept compensation are used rather than prices
actually paid or received because many of the project impacts that are
to be included in the economic analysis either will be non-marketed,
for example, biodiversity preservation, or incompletely marketed, such
as, water supply and sanitation benefits Thus, some form of nonmarket
value must be estimated. Many project impacts that are marketed will
be bought and sold in

57 | P a g e
markets where prices are distorted by various government
interventions, by macroeconomic policies, or by imperfect competition.
Shadow prices may be used in estimating the willingness to pay and
willingness to accept compensation values in the face of these market
absences and market imperfections. Shadow prices are used to take
into account the major impacts of a project where economic values
differ from financial values. In the two types of analysis costs for
various considerations are part and parcels. The notable ones are
listed here under.

a) Initial Investment cost

In order to determine or develop the initial budget/cost a project
demand, we must forecast what resources the project will require,
the required quantity of each, when they will be needed, and how
much they will cost-including the effects of potential price inflation.
Uncertainty is involved in any forecast, though some forecasts have
less uncertainty than others. An experienced cost estimator can
forecast the number of bricks the shall be used to construct a brick
wall of known dimension with in 1 to 2 percent. In this case the
estimator knows almost exactly how many bricks are needed to
build the wall and must simply add the a small allowance for broken
or discolored bricks being delivered to the job, plus a few more for
bricks broken during construction work.

In many fields, cost estimation methods are well codified. The office
walls of organizational purchasing departments are lined with
catalogues detailing what materials, services, and machines are
available, from whom, and at what prices. And also on the book
shelves the volumes devoted to the techniques or estimating the
quantities of materials and labor required to accomplish specific jobs.
Every business (or simply project) has its own rule of thumb for
estimation of its cost and obviously of its initial investment cost.

b) Production cost and Marketing cost

Cost of production per unit is the costs associated with production
divided by the number of units produced. The difficulty in
calculating the cost of production is usually thought to be in
assembling all the costs associated with production and there are
 volumes written about the correct procedures. However, the
question of the relationship of the cost of production to the price of
the product (i.e marketing cost) is seldom discussed. One reason for
this is the relationship seems very

58 | P a g e
 straightforward. In single product enterprises, the cost of production
can be compared directly to the price of the product, regardless of
the method used to calculate the cost of production.

Determining the relationship between cost of production and the

product’s price in joint product enterprises is more difficult. A
joint product enterprise in one in which two or more products are
produced from one production practice and the costs associated
with the production of each individual product can not be
measured with existing information.

c) Project of Cash Flows

The techniques of computing cash flow equivalence permits to bring
competing projects cash flows to a common basis for comparison
purpose. Two cash flows that are equivalent at a given interest rate
will not be equivalent at different interest rate. For computing
projection of cash flows under various factors (e.g compound
amount factor, present worth factor, capitalized cost factor etc.)
Understanding the cash flow conversion factors is vital. Cash flow
conversion involves the transfer of project funds from one point in
time into another. The following notation is used for the variables
involved in the conversion process for the aforementioned factors
that shall be dealt following:

i= interest rate, n=number of interest periods, p=a present sum

of money. F= a future sum of money, A= a uniform end of period
cash receipt of disbursement, G= a uniform arithmetic gradient
increase in period by period payment or disbursement.

Now let as see some of the factors with examples;

Compound Amount Factor

The procedure for the single payment compound amount factor finds
the future sum of money, F, which is equivalent to a present sum of
money, p, at a specified interest rate, I, after n periods. This is
calculated as:
n
F=P(1+i)

Example:
A sum of 5,000.00 is deposited in a project account and left to earn
interest for 15 years. If the interest rate per year is 12%, the
compound interest rate after 15 years can be calculated as follows:

59 | P a g e
 15
F=5000(1+0.12)

=27,367.85

Present Worth Factor

The present worth factor computer P when F is given- The present

worth factor is obtained by solving for P in the equation for the
compound amount factor. That is
-n
P= F (1+i)

Suppose it is estimated that 15,000.00 would be needed to complete

the implementation of a project five years from now, how much should
be deposited in a special project fund now so that the fund would
accrue to the required 15,000.00exactly five years from now? If the
special project fund pays interest at 9.2% per year, the required
deposit would be:
-5
P=15,000(1+0.092)

P=9,660.03

Capitalized cost formula

Capitalized cost refers to the present value of a single amount that is

equivalent to a perpetual series of equal end-of-period payments. This
is an extension of the series present worth factor with infinitely large
number periods. Using the limit theorem from calculus as n
approaches infinitely, the series present worth factor reduces to the
following formula for the capitalized cost:

P=A/i

Example:

How much should be deposited in a general fund to service a recurring

public service project to the tune of 6,500.00 per year forever if the
fund yields an annual interest rate of 11%? Using the capitalized cost
formula, the required on time deposit to the general fund can be
calculated as:

P=A/i

P=6,500/0.11
P=59,090.91

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Economic and Financial Evaluation

Financial and economic evaluation techniques can be viewed as a

process used for evaluating individual projects or groups of projects
and then choosing to implement some set of them so that the
objectives of the parent organization are met. As economic and
financial evaluation techniques is one major category under project
selection model, it is important to see here the broad classification of
project selection models.

There are two basic type of project selection models. These are:

i) Nonnumeric models, and

ii) Financial and economic evaluation (Numeric models)
i) Nonnumeric models: Which sometimes referred to as
qualitative model as the name implies do not use numbers as
inputs. This type is older and simpler. Under this category
there is a few subtypes to consider. As such the following sub
types of model are identified.
a) The sacred cow: In this case, a senior and powerful official
in the organization suggests the project. Often the project is
initiated with a simple comment such as “if you have the
chance why don’t’ you look starting that project”. And there
follows an undeveloped idea for a new product, for the
development of a new market, for the design and adoption
of a global data base and information system, or for some
other project requiring an investment of the firms
resources. The immediate result of this ordinary statement
of that official is the creation of a “project” to investigate
whatever the boss has suggested. The project is sacred in
the sense that it will be maintained until successfully
conclude, or until the boss, personally, recognizes the idea
as a failure and termination.
b) The operating necessity: If a flood is threatening the
plant, a project to build a protective dike does not require
much formal evaluation, is an example of this scenario. If
the project is required in order to keep the system
operating, the primary question becomes: Is the system
worth saving at the estimated cost of the project? If the
answer to this question is yes, the project will be funded.
 c) The product line extension: In this case, a project to
develop and distribute new products would be judged on
the degree to which it fits the firms existing product line,
fills a gap, strengthens a weak link, or

61 | P a g e
 extends the line in a new, desirable direction. Some times
careful calculations of profit are not required. Decision
makers can act on their beliefs about what will be the likely
impact on the total system performance if the new product
is added to the line.
d) Comparative benefit model: For this situation assume
that an organization has many projects to consider. Senior
management would like to select a subset of the projects
that would most benefit the firm, but the project do not
seem to be easily comparable. For example some projects
concern potential new products, some concern changes in
the production methods, others concern computerization of
certain records, and still others cover a variety of subjects
not easily categorized (e.g a proposal for creating a daycare
center for employees with small kids). The organization has
no formal method of selecting a project, but members of the
selection committee think that some projects will benefit
the firm more than others even if they have no precise way
to define or to measure benefit. The concept of comparative
benefit, if not formal model, is widely adopted for selection
decision on all sorts or projects.
ii) Financial and Economic evaluation (Numeric models):
which sometimes are called quantitative, do use numbers and
computations, but the criteria being measured may be either
subjective or objective. A large majority of all firms using
project selection models use profit/profitability as the sole
measure of acceptability. Some of these models include:
a) Payback period (PBP): The payback period for a project is
the initial fixed investment in the project divided by the
estimated annual cash inflows from the project. The ratio of
these quantities is the number of years required for the
project to repay its initial fixed investment. For example,
assume project costs 100,000.00 to implement and has
annual net cash inflows of 25,000.00. Then, the payback
period is calculated as follows:

Payback period = 100.000.00/25,000.00 = 4 years

This method assumes that the cash inflows will persist at least long
enough to pay back the investment, and it ignores any cash inflows
beyond the payback period. The method also serves as an inadequate
proxy for risk. The faster the investment is recovered, the less the risk
to which the firm is exposed.

62 | P a g e
 b) Average rate of return: Often mistaken as the reciprocal
of the payback period, the average rate of return is the ratio
of the average annual profit (ether before or after tax) to
the initial or average investment in the project. Because
average annual profits are usually not equivalent to net
cash inflows, the average rate of return does not usually
equal the reciprocal of the payback period. Assume, in the
example just given, that the average annual profits are
15,000.00

Average rate of return = 15,000/100,000 = 0.15

Neither of the aforementioned quantitative evaluation

methods are recommended for project selection though
payback period is widely used and does have a legitimate
value for cash budgeting decisions. The major advantages of
these models are their simplicity, but neither takes into
account the time value of money. Unless interest rates are
extremely low and the rate of inflation is nil, the failure to
reduce future cash flows or profits to their present value will
result in serious evaluation errors.

c) Discounted cash flow: Also referred to as the Net

Present Value (NPV) method, the discounted cash flow
method determines the net present value of all cash flows
by discounting them by the required rate of return (also
known as hurdle rate, cutoff rate) as follows:
NPV (project) = Ao+∑ /(1 + )

Where, Ft= the net cash flow in period t, K=the required rate of return,
Ao = initial cash investment (because this is an out flow, it will be
negative)

To include the impact of inflation (or deflation) where pt is predicted

rate of inflation during period t, we have
NPV (project) = Ao+∑ /(1 + +
)

Early in the life of the project, net cash flow is likely to be negative, the
major out flow being the initial investment in the project, Ao. If the
project is successful, however, cash flows will become positive. The
project is acceptable if the sum of the net present values of all
estimated cash flows over the life of the project is positive. A simple
example will suffice for indicating this. Using our 100,000.00
investment with a net cash inflow of 25,000.00 per year for a period of
eight years, a required rate of return of 15 percent, and an inflation of
rate of 3 percent per year, we have

63 | P a g e
 NPV (project)=100,000.00+∑ 25,000.00/(1 + 0.15 + 0.03) =
1939.00

Because the present value of the inflows is greater than the present
value of the out flow that is, the net present value is positive the
project is deemed acceptable.

d) Internal rate of return (IRR): If we have a set of

expected cash inflows and cash outflows, the internal rate
of return is the discount rate that equates the present
values of the two sets of flows. If at is an expected cash
outflow in the period t and Rt is the expected inflow for the
period t, the internal rate of return is the value of K that
satisfies the following equation (note that the Ao will be
positive in this formulation of the problem):
2 n
Ao+A1/(1+k)+A2/(1+k) +....+An/(1+k) =R1/(1+k)+R2/
2
(1+k) +….+Rn/(1
n
+k)
Where, t=1,2,3….,n, The value of k is found by trial
and error.

e) Profitability Index: Also known as the Benefit-Cost

Ratio (BCR), the profitability index is the net present value
of all future expected cash flows divided by the initial cash
investment. (Some firms do not discount the cash flows in
making this calculation). If this ratio is greater than 1.0, the
project may be accepted.
f) Break-even analysis (BEA): Break-even analysis refers to
the determination of the balance performance level where
project income is equal to project expenditure. The total
cost of an operation is expressed as the sum of the fixed
and variable costs with respect to output quantity. That is,
TC(X)=FC+VC(x)

Where, x is the number of units

produced, TC(x) is the total cost of

producing x units,

FC is the total fixed cost, and VC(x) is the total variable cost
associated with producing x units.
 In this case the total revenue resulting from the sale of x
units is defined as:

64 | P a g e
 TR(x)=px, where p is the price per unit. The profit due to
the production and sale of x units of the product is
calculated as

P(x0=TR(x)-TC(x)

The breakeven point of an operation is defined as the value

of a given parameter that will result in neither profit nor
loss. The parameter of interest may be the number of units
produced, the numbers of hours of operation, the number of
units of a resource type allocated, or any other measure of
interest. At the breakeven point, we have the following
relationships:

At the breakeven point we have the following relationships:

RT(x)=TC(x)or

P(x)=0

In some cases, there may be known mathematical

relationships between cost and the parameter of interests.
For example, there may be a linear cost relationship
between the total cost of a project and the number of units
produced. The cost expressions facilitate straightforward
break even analysis.