Chapter Three :

Project Identification

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Contents
• Conceptual Clarification
• Sources of project ideas
• Steps in Project Identification and Selection
 Situation analysis

 Stakeholders analysis

 SWOT analysis

 Problem analysis

 Objective analysis

 Alternative Tree Analysis or Project Selection

Group Exercise
Chapter objectives:
At the end this chapter, You will be
able to:
• identify feasible project ideas to
solve a certain problem or exploit
opportunities, and
• apply different tools [problem tree]
in project identification and
selection.
3.1. Project Identification-meaning
- It involves the conceiving of ideas or
intentions to set up a project.
- These ideas are then transformed into a
project.
Project ideas are normally initiated
by a perceived need [PROBLEM or
OPPORTUNITY] in an organization
and converted in to a formal project
proposal.
Project Identification-meaning
The major focus in this step is finding project ideas
or identifying needs or demands for projects.
The activities carried out are generally fact-finding
survey, or review of census or available secondary
data.
 3.2. Sources of project ideas:
 The community, researchers, experts, local leaders, Policy makers,
entrepreneurs, donors, NGOs, Planners, etc.
 Government policy priorities, unusual events, external threats,
unsatisfied demands, under utilized natural resources, etc.
 The business or government development planning document
 Needs of clients
 Individual working in organizations, well informed technical
specialists
 Local leaders
 Government departments,
 Other country's experiences
 Various Chambers of Commerce and Industry
 National Small Industries Corporation, and several other
institutions including the business press,
 They regularly publish valuable data and analytical reports about the
trends of demand, supply, costs in various segments of industry and
business.
Cont …
In general, the sources of project
ideas can be broadly classified into,

1. Macro-level
National policies, strategies, sectoral, sub –
sectoral or regional plans.
General surveys,
◦resource potential surveys,
◦regional studies,
◦master plan and
◦ statistical publications indicate directly
or indirectly investment opportunities.

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Cont …
Constraints on the development process due to
shortage of essential infrastructure facilities.
Unusual events such as,
◦draughts,
◦floods,
◦earth – quakes, hostilities, etc
From multilateral or bilateral
development agencies and as a result
of regional or
international agreements in which the
country participates.

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Sources of … …
2. Micro Level
The identification of unsatisfied
demand or needs.
The need to remove shortages in
◦ essential materials,
◦ services or
◦ facilities that constrain development efforts;
◦ The initiative of private or public enterprises
in response to incentives provided by
the government;

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Cont …
The necessity to complement or
expand investments previously undertaken.
The suggestions of financial institutions and
development agencies.
Study of new Technological Development.

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Approaches to project identification
There are two major approaches to
project identification :
(a) Top-down approach
(b) Bottom-up approach
 Top-Down Approach
Projects are identified based on demands from beyond
the community.
This may include directives from:
international conventions (such as Kyoto
Protocol/climate change)
international institutions that have
determined particular priorities and thus
projects
national policy makers identifying projects
that pertain to party manifestos and/or
national plans.
Advantages of Top-Down Approach
It may be a rapid response to disasters like floods,

war outbreak because there is limited time and

chance to consult the beneficiaries.
It can be effective in providing important services

like education, health, water, roads etc.

It can contribute to wider national or international

objectives and goals

 Limitations of Top-Down Approach
Does not help in modifying strongly established ideas and

beliefs of people.
Assumes external individuals know better than the

beneficiaries of the service.

Communities have little say in planning process rendering

approach devoid of human resource development.

Community develops dependency syndrome on outside

assistance and does not exploit their own potential.

Bottom-Up Approach
In this approach community/

beneficiaries are encouraged to

identify and plan the projects
themselves with or without
outsiders.
 Advantages of Bottom-Up Approach
Interveners accomplish more with limited resources since

people tend to safeguard what they have provided for

themselves.
Develops people’s capacity to identify problems and needs and

to seek possible solutions to them.

Provides opportunities of educating people.

Helps people to work as a team and develop a “WE” attitude -

makes project progressive and sustainable.

Resources are effectively managed; dependence reduces, there

is increased equity, initiative, accountability.

 Limitations of Bottom-Up Approach
Not always effective for projects that require urgency to
implement
Time-consuming and requires patience and tolerance.

People sometimes dislike approach because they do not

want to take responsibility for action.

The agency using this approach is never in control and

cannot guarantee the results it would want.

The priorities of communities may not fit with national

or international priorities that seek to have a broader
impact.
 Project Identification in Both approaches:
Involves needs assessment
- collecting, processing and analyzing data on
problems/needs of communities
Review of secondary data
- Look at books, survey reports/ research papers,
publications, media reports, internet etc.
Collecting and analyzing primary information
• Interviews
• Community mapping
• Focus Group Discussions
• Other methods
3.3. Activities (Steps) in Project identification
and initial screening
Situation analysis

Stakeholders analysis

SWOT analysis

Problem analysis

Objective analysis

Alternative Tree Analysis or project selection

 a) Situation analysis
This is about describing the problem or
situation to be addressed by the project.
This can be ‘problem based’ or ‘opportunity based’.
 e.g. what are the prevalent problem situations or
‘opportunity based’, e.g. is there an opportunity to
serve people with disability? Or is there an
opportunity to establish a Cement Factory (suitable
soil)
The information source is basically a status quo
report from the strategic planning process.
It could also be a status quo report from a
feasibility study, a pre-appraisal report.
B. Stakeholder Analysis
Stakeholder is any individual, group or
organization, community, with an interest in the
outcome of a programme/project.

Key Question
Whose problems or opportunities are we
analyzing? Who will benefit or loose-out,
and how, from a potential project
intervention?

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Stakeholder Analysis _ Cont’d
Purpose: To identify:
 Needs and interest of stakeholders
 Organizations and groups that should be encouraged
to participate in different stages of the project
 Potential risks that could put at risk programme
 Opportunities in implementing a programme

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C. SWOT Analysis-Cont’d
SWOT analysis is a tool for institutional appraisal and a
brainstorming exercise in which the representatives of
the organization participate fully.
Strengths - the positive internal attributes of the
organisation
Weaknesses - the negative internal attributes of the
organisation.
Opportunities - external factors which could improve
the organisation’s prospects
Threats - external factors which could undermine the
organisation’s prospects

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D. Problem Analysis
Problems Analysis visually represents the causes and
effects of existing problems in the project area, in the form
of a Problem Tree. It clarifies the relationships among the
identified problems.

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 Problem Analysis-Cont’d
Relationships of Problems?

Simply connect causes and effects by directly “Because”

EFFECT
I am not motivated to work

I am not sure what My salary is low I get poor respect

to do in this work from the boss

I am lack of My My post is My poor We have

expertise/skills company not high communi different
is not yet cation to ways to
getting boss think
I am lack of
profit
CAUSE
training
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Problem Tree
EFFECT

CAUSE

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Problem Analysis-Cont’d

Steps in Undertaking Problem Tree

1. Identify problems that the project will address.
State problems in negative manner.
2. Group problems by similarity of concerns.
3. Develop the problem tree:
a) Select a Core/Focal problem from the list and relate
other problems to the core/focal problem.
b) If the problem is a cause of the core problem the tree is
placed below the core problem
c) If the problem is an effect of the core problem is goes
above
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Problem Analysis-Cont’d

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 E. Objective Analysis
Objective Analysis clarifies the means-ends
relationship between the desirable situation that
would be attained and the solution for attaining it.
This stage also requires an Objective Tree.

This involves turning a problem tree into an

objectives tree

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F. Project Selection/ Analysis of alternatives.

Project Selection is a process in which specific project

strategies are selected from among the objectives and
means raised in Objectives Analysis, based upon
selection criteria.

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 Project Selection _ cont’d
How to select the project
1. Divide the objective tree into different clusters of
objectives
2. Name all clusters
3. Remove impossible one to achieve
4. Set criteria to make the final selection

Needs, Priority, Gender, Environment,

Difficulty, Budget, Risks, etc,,,,

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Analysis of alternatives.
At this stage, there is a need to assess the alternative
courses of action proposed by each objective tree in
terms of effectiveness, costs, feasibility, impact on
priority groups, risks or other criteria.
Criteria can be:
Technical
Financial
Economic
Institutional
Social/distributional
Environmental
Preliminary screening
Once some project ideas have been put forward, the next step
will be to select one or more of them as a potentially viable.
This requires a quick preliminary screening by experienced
professionals.
 At this stage, the screening criteria are vague and rough
During this stage, the analysts should eliminate project
proposals that are:
 Technically unsound & risky
 Projects that have no market for their outputs
 Have inadequate supply of inputs
 Very costly in relation to benefits
 Assume over ambitious sales and profitability

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Mortality of new project ideas
 No. of ideas
Screening
Appraisal

Selection

Time

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End of Chapter 3

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