Project Planning Process

Investment Decisions

Project Planning and Analysis

1. Project Planning Process and Investment Decisions

Alemu L.(PhD)

Addis Ababa University

School of Commerce
Department of Economics

March, 2023

Alemu PPA
 Project Planning Process
Investment Decisions

Table of Contents

1 Project Planning Process

What is Project and Project Planning
Dening the Problem
Developing a Mission, Vision, Goals, and Objectives for the
Project
Work Breakdown Structure (WBS)
Work Packages

2 Investment Decisions

Alemu PPA
 Project Planning Process
Investment Decisions

Course Contents

The main contents to be covered in this course:

1 Project Planning Process and Investment Decisions
2 Project Feasibility Studies
3 Cost-Benet Analysis (CBA)
4 Capital Budgeting Evaluation Techniques: NPU, IRR, Cash
Control, Post-Completion Audit (PCA) and
5 Other topics such as Ination and Project Investment.

Alemu PPA
 Project Planning Process
Investment Decisions

Evaluation Methods

Assessement type Grade (%)

Project Work 30
Presentation 10
In-Class Participation 10
Final exam 50

Alemu PPA
 Project Planning Process
Investment Decisions

Reading List
Anthony, E. Boardman, Damid H. Greenbery, Aidan R (2006),
University, Damid L. Waning. Cost Benet analysis concept and
Practices 3rd ed. Pearson: Prentice Hall.
Development Project Study Agency, (198l), Guidelines to Project
Planning in Ethiopia, Addis Ababa.
IMD, Little and Mirrles, JA. (1974), Project Appraisal and
Planning's for Developing Countries, Basic Book Publisher, New
York.
IMD, Little and Mirrless, JHA (1968), Manual of Industrial Project
analysis, Vol. II. Social cost Benet Analysis, OECD.
Price J. Gittingers, (1982), Economic Analysis of Agricultural
Projects. The John Hopkins University Press, London.
Keith, B. Grin and Hohn L. Enos, (1970), Planning Development
Addison, Wesley Publishing Company, London.
Prasanna, C. (1995), Project Planning, analysis, Selection
Implementation and Review, 4th Ed, New Delhi.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

What is a Project

A project is an activity to create a unique product or service,

called project deliverables.
It has a nite duration.
The project is temporary. So, routine, repeated activities
would not form a project.
Example: Building a football stadium is a project as it may
take nite number of durations (say six months to years) to
build it.
The output of the project, the football stadium, will remain
there indenitely.
Maintenance of the stadium would be a routine activity and
not be categorized as a project.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Project Planning

Project planning is iterative in that one starts by planning at a

high level and then repeats the planning in greater detail as
more information becomes available.
Project planning is collaborative since there are many
stakeholders to be satised and a team of workers with various
skills and ideas who need to work together.
Eective project planning lays the groundwork for eective
project execution, monitoring, control, and closeout.
Developing eective team and stakeholder relationships leads
to a foundation of respect and trust, which, in turn, leads to
project success

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Project Planning

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Project Plannin Process

The basic planning steps are as follows. Note that some of these
topics are covered in the next chapter.
1 Dene the problem to be solved by the project.
2 Develop a mission and major objectives statements.
3 Develop a project strategy that will meet all project objectives.
4 Write a scope statement to dene project boundaries (what
will and will not be done).
5 Develop a Work Breakdown Structure (WBS).
6 Using the WBS, estimate activity durations, resource
requirements, and costs (as appropriate for your environment).
7 Prepare the project schedule and budget.
8 Decide on the project organization structure.
9 Get the plan signed o by all project stakeholders.

Be sure the project really satises the customer's needs, rather than
being what the team thinks the customer should get!

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Project Plannin Process

Key Points to Remember

If you have no plan, you have no control.
The people who must execute a plan should participate in
preparing it.
Have the plan signed o in a meeting, not by sending it
through the interoce mail.
Keep all project documentation in a project notebook.
Use exit criteria to determine when a milestone has actually
been achieved.
Require that changes to the project plan be approved before
making them.
Risk management should be part of all project planning.
Planning is answering the who, what, when, and how
questions.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Dening the Problem

Dening the Problem

A problem is a gap between where you are and where you
want to be, with obstacles existing that prevent easy
movement to close the gap.
Every project solves a problem of some kind, but people are
inclined to skip over the denition of the problem. This is a
big mistake.
The way you dene a problem determines how you will solve it,
so it is critical that a proper denition be developed.
For example, too often a problem is dened in terms of a
solution.
To identify and dene problem, use problem tree analysis.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Dening the Problem

Steps in problem analysis:

1 Agree on the main problem
2 Identify the causes of the main problem by asking `But why?'
3 Identify the eects of the main problem by asking `So what?'
until we can go no further.
4 Copy the complete tree on a paper

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Dening the Problem

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Mission, Vision, Goals, and Objectives

Developing a Mission, Vision, Goals, and Objectives for the

Project.
Before a project team does any work, it should spend time
ensuring that it has a shared understanding of where it is
going.
The terms used to dene that destination are mission, vision,
goals, and objectives.
And it is at this very early stage that projects tend to fail,
because everyone takes for granted that we all know what the
mission is.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Developing Project Objectives

Developing Project Objectives

Once a mission statement has been developed, you can write

your project objectives.
Note that objectives are much more specic than the mission
statement itself and dene results that must be achieved in
order for the overall mission to be accomplished.
Also, an objective denes the desired end result.
The objectives must be SMART: Specic Measurable
Attainable Realistic Time-limited.

Notes:
1 An objective species a desired end result to be achieved. A
task is an activity performed to achieve that result. An
objective is usually a noun, whereas a task is a verb.
2 The best way to develop objectives is rewriting the problems in
a postive way.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Developing Project Objectives

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Work Breakdown Structure

Denes the scope of the project and breaks the work down
into components that can be scheduled, estimated, and easily
monitored and controlled.
IDEA : you subdivide a complicated task into smaller tasks,
until you reach a level that cannot be further subdivided.
A hierarchical decomposition of the project into phases,
deliverables, and work packages.
A tree structure, which shows a subdivision of eort required to
achieve an objective (e.g., a program, project, and contract).
How? : identifying the major deliverables to be created and
keep asking what are the components of this deliverable?

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Why Use a WBS?

The WBS is the single most important element because it

provides a common framework from which:
The total program can be described as a summation of
subdivided elements.
Planning can be performed.
Costs and budgets can be established.
Time, cost, and performance can be tracked.
The responsibility assignments for each element can be
established.
The changes that often happen on projects can be handled.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

WBS Formats

There are various formats for constructing a WBS, but they all
have the same purpose.
The major formats for constructing WBS are:
1 Outline format
2 Hierarchical format or org chart (short for organizational chart)
format
3 Free format.

Consider a WBS for a conference project

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

WBS Formats

Conference WBS in Outline Format

CONFERENCE PROJECT
1. PCs
1.1. Obtain PCs
1.2. Set up PCs
2. Brochure
2.1. Prepare brochures
2.2. Mail brochures
3. Trainings
3.1. Prepare content
3.2. Prepare media

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

WBS Formats

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

WBS Formats

Figure 1.2: Conference WBS in Org Format

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Work Packages

Work packages are the deliverables in the lowest level of the

work breakdown structure.
A work package may be divided into the specic activities to
be performed.
In the above conference project, there are three levels as
follows:
a) The rst level, or project title level
b) The intermediate level, or summary level
c) The lowest level, or work package level.

Alemu PPA
 What is Project and Project Planning
Project Planning Process Dening the Problem
Investment Decisions Developing a Mission, Vision, Goals, and Objectives for the P
Work Breakdown Structure (WBS)
Work Packages

Work Packages

What are the work packages in Figure 1.2?

In a WBS, an element at the lowest level is called a work
package.
Hence, work packages occur at levels 3.

The work package is the point from which:

Work activities are dened
The schedule is formed
Resources are assigned

Alemu PPA
 Project Planning Process
Investment Decisions

Investment Decisions

The quest for socio-economic development, inevitably involves

the basic economic problem of scarcity in the face of unlimited
needs and hence the need to make choices on the means and
ends of development, which involves the rational use of limited
resources to attain the economic ends.
Thus investment decisions are an essential part of the
development process.
The more sound the investment decision is the more success
will be in the development endeavor.

Alemu PPA
 Project Planning Process
Investment Decisions

Investment Decisions
The need for project planning (features of investment decisions):
The quest for change: dissatisfaction with the present or
incentive for dierent tomorrow;
Change (investment) involves investment/commitment of
resources to realize the objectives.
The scarcity of investible resources and unlimited
development/business needs;
Since investment schemes involve substantial resources
commitment and are invested for the future, there is an
inherent high risk involved.
In such a situation decision-making is not simple and perfect
as it is assumed in orthodox economics.
These features of investment decisions constitute the reasons that
justify the signicance and relevance of project planning and the
major constraints and challenges faced by any project planner and
decision maker in project viability studies.

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 Project Planning Process
Investment Decisions

Investment Decisions

The major questions to be answered for better investment

decisions include:
1 What is the objective of the project?
2 What will happen if the project proceeds or not?
3 Is the project the best alternative?
4 Winners and losers: who enjoys the music and who pays the
piper?
5 What is the project's scal impact?
6 Is the project nancially sustainable?
7 What is the project's environmental impact?
8 9. Techniques for assessment: is the project worthwhile?
9 Is this a risky project?

The answer for these questions depends on the feasibility

study.
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 Project Planning Process
Investment Decisions

Next

2. Project Feasibility Studies

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