Welcome to Training on Project

Management

By
Dr. Bersisa Kacho

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Introduction
Name
Position
Educational
background
Work experience
What I like most
What I hate most
Future plan
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 Time manager (s)
1.
2.

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 Day 2=
 Day 3=
 Day 4=
 Day 5=
 Day 6=
 Day 7=
 Day 8=
 Day 9=
 Day 10=

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 Team leader
Team 1. ......................
Team 2. ......................
Team 3. .......................
Team 4. .......................

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Session1:Overview of Development Project Concepts
Session 2: Participation in project planning and management
Session 3: Project Identification
Session 4: Project formulation
Session 5: Logical framework (logfram) concept and its
application
Session 6: Project Proposal writing

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 Content….
Session8: Project implementation
Session 9: Project M&E

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 is to enhance the capacity of project planners
and managers and enable them to use the
techniques and tools in planning and
managing development projects.

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By the end of the training you will be able to:
 Describe the conceptual framework on project and
project cycle
 Illustrate methods used in project idea generation
 Formulate a project proposal
 Explain the concept and importance of stakeholders
and community participation.
 Explain approaches and techniques that have been
effective in managing project cycle
 Conduct project monitoring, evaluation and
reporting

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“Our current problems cannot be solved
with the same level of thinking which
created them.”

Albert Einstein

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Quote

If you can’t fly, then run,

If you can’t run, then walk,
If you can’t walk, then crawl,
But whatever you do,
You have to keep moving forward.

Martin Luther King Jr.

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1. Concepts of Development project

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1.1. Introduction
 The basic principle of development project planning
is to:
 maximize the benefits of individuals and
 society through efficient allocation of scarce resources.

 Resources can be utilized in the form of:

 private investment and
 public investment.

 The scarce resources are mostly committed through

projects, which require systematic preparation and
appraisal to ensure efficient use of resources.

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Introduction…..

 Projects are powerful means to achieve blocks of

development structure.

 Projects aim mainly at increasing the production of

goods and provision of services which are
fundamental components of people’s
welfare….advance social well-being.

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Introduction …..
 The current development agenda of
Ethiopia is poverty eradication … and
reach the level of middle income
countries.

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 Economic development vision of Ethiopia is:
 “ building an economy which has a modern and
productive agricultural sector with enhanced
technology and an industrial sector that plays a
leading role in the economy, sustaining economic
development and securing social justice and
increasing per capital income of the citizens so as
to reach the level of those middle – income
countries.”

 How can we achieve this?

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By Designing appropriate Development Plan
and strategy

Development planning involves decisions or choice

about alternative ways of using available resources
with the aim of achieving particular goals at some time
in the future.

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Cont’d…..
 Policies and strategies of the government are
geared towards this end…
 Previous and current Plans of the country
1. Sustainable Development and Poverty
Reduction Program (SDPRP) - (2002/03 –
2004/05)
2. Plan for Accelerated and Sustained
Development to End Poverty (PASDEP) -
(2005/06 – 2009/10)
3. Growth and Transformation Plan I (GTP- I) -
(2010/11-2014/15)
4. GTP II – 2015/16-2019/20

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Development Plans….

 the GTP gives special emphasis to

agricultural and rural development, industry, infrastructure,
social and human development, good governance and
democratization.

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GTP…
 The overall objective of the GTP is to sustain broad
based, fast, and equitable economic growth so as to
eradicate poverty in due course.
The major objectives are:
 Real GDP growth rate of 11%
 Attain MDGs
 Expand and ensure the qualities of education and
health services and achieve MDGs in the social sector
 Establish suitable conditions for sustainable nation
building through the creation of a stable democratic
and developmental state; and
 Ensure the sustainability of growth

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The strategic pillars of the GTP II
a) Sustaining the rapid, broad based and equitable economic growth
and development witnessed during the last decade including GTP
I;
b) Increase productive capacity and efficiency to reach the
economy’s productive possibility frontier through rapidly
improving quality, productivity and competitiveness of productive
sectors(agriculture and manufacturing industries);
c) Enhance the transformation of domestic private sector to enable
them become capable development force;
d) Build the capacity of the domestic construction industry, bridge
critical infrastructure gaps with particular focus on ensuring
quality provision of infrastructure services;
e) Proactively manage the on-going rapid urbanization to
unlock/open its potential for sustained rapid growth and structural
transformation of the economy;

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Cont’d….
f) Accelerate human development and
technological capacity building and ensure its
sustainability;
g) Build democratic and good governance
through enhancing implementation capacity of
public institutions and actively engaging the
citizens;
h) Promote women and youth empowerment,
ensure their effective participation in the
development and democratization process and
enable them equitably benefit from the
outcomes of development;
i) Building climate resilient green economy;

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GTP …..
 To fulfill the GTP, the Ethiopian government
is implementing mega projects in different
strategic economic sectors.

 What are these sectors?

…….................................................................
.........................

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Introduction….
 Hydroelectric projects
 the sugar development projects
 Cement projects
 Rail way projects
 Road projects
 Housing development projects
 Higher education projects
 Irrigation projects etc .. …
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 Your reflection!
 What is your organization’s role in the
development effort exerted by the
government?

 What are the vision, mission, major

goals and objectives of your
organization?

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 Vision/ራዕይ
 Your vision:

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 Mission/ተልዕኮ
 Your Mission:

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 Key values /ዕሴቶች

 Your Values:

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 Goals and Objectives /ዓላማዎችና
ግቦች

 Major Goals and Objectives

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1.2. Basic Concepts Related to
Development Project Planning

 Your understanding First!

 What is development?
 How can we achieve development?

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I. Development
 is the process of positive change in the entire social system
of a given society. It is a transformation of society, a
movement from traditional way of thinking, a movement
from traditional way of dealing with health and education,
and a movement from traditional methods of production to
more modern ways.
 In 1950s & 60s development was conceived in terms of growth targets
such as: GNP and GDP
 But the concept of development involves something more than
economic growth.
 Growth in GDP is not an end in itself. It is a means to improve living
standards and better society with less poverty, better health and
improved educational level.
 Increased GDP per capita should be accompanied by reduction in
poverty.

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Cont’d…
 During the 1970s development came to be redefined in - terms of
multidimensional concept such as:
 Reduction/elimination of poverty,

 Reduction of inequality, and

 Reduction/elimination of unemployment,

 Thus, the wider meaning of development is conceived as a process

involving major upward changes in social and economic structure
as well as meeting the following three main objectives.
 Life sustenance (food, shelter, cloth… )
 Self-esteem (getting jobs, better education, health…)
 Freedom (expanded , politica, social and economic choices)

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Cont’d…..

 Development should be Sustainable which

can be defined as development that ‘meets
the needs of the present generation without
compromising the ability of future
generations to meet their needs”.

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II. National Development Policy
National development policies are statements of
intention or aspiration of a government may be to
improve the living standard of its people.
 Projects are identified and formulated based on clear
government policy statements.
 Example: Reduction of poverty,

illiteracy and diseases;

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III. Development Strategy

 is a general method of achieving specific

objectives.
 It explains how resources will be organized and the
guiding principles that will be applied for the
management of and use of those resources.

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IV. Development Plan
 is defined as a consciously directed activity with
predetermined goals and predetermined means
to carry them out.
 It involves decisions or choice about alternative
ways of using available resources with aim of
achieving particular goals at some time in the
future.
 Example of Development Plans: Plan for
Accelerated and Sustained Development to End
Poverty (PASDEP) I and II, GTP I (2010/11 –
2014/15) and GTP II (2015/16-2019/20)

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V. Development Program

 is a frame of development activities with

more or less general development objectives
and derived from an economic development
plan.

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 VI. Development Project
 Projects are planned, formulated and
implemented to realize development policy
objectives and ….. is called policy instruments
and they are:
 Powerful and efficient means to achieve a
development objective,
 Mechanisms with which income distribution is
improved,
 Crucial building blocks of development structure to
create productive assets,
 Mechanisms to solve immediate problems,

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Your Reflection!!
 What Is a Project?
 What is the difference between
project and program?
 Why project?

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 What Is a Project?
“A project is a temporary
endeavor undertaken to
create a unique product or
service.”
service
Source: PMI

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What is project?

 A project is a unique set of coordinated activities, with

defined starting and finishing points, undertaken by an
individual or organization to meet specific objectives
within a defined schedule, cost, and performance
parameters.

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Characteristics of projects
1. A project has a unique Purpose
2. A project is a one-time or temporary activity
3. A projects is unique activity and non- routine
4. A project has a definite beginning and end.
5. Projects have time, cost and quality constraints.
6. A project has a life cycle
7. A projects have a primary customer or sponsor.
8. A project involves uncertainty.

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Examples of projects …..
 Construction of dam for irrigation
 Constructing a building or facility
 Developing a new product or service
 Effecting a change in structure, staffing, or style of an
organization.
 Designing a new transportation vehicle
 Developing or acquiring a new or modified
information system
 Running a campaign for political office
 Implementing a new business procedure or process.
 Implementing different development community
projects (health, education, water and sanitation, .)

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Types of projects
1. experimental,
2. pilot project,
3. demonstration project and
4. production project.
or
1. New project
2. Expansion project
3. Up dating project
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Agricultural projects…..

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Road project

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Water project

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Housing project

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Approaches for the Implementation of
Development Projects
 Strategies for the implementation of development objectives
generally follow either:
 a sectoral approach (example agriculture, industry,
health, etc.) or
 an area/spacial based approach (example: region,
woreda or kebele, etc.)
 or both.
 the ultimate meeting point between plan and people is in the
project.
 Therefore, the project gives life and is the visual and concrete
representation of policy, strategy, plan and program.
 It is for this reason that projects are considered as the tangible
benefits for the target groups.

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 Activity:

 What is the difference between the

project and program?

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Programs Vs Projects
Project Program
• has specific in objective/  has got general objective;
purpose;
• has specific location(i.e.,  may not have specific
area/geographical unit; location;
• has a specific target group  may not have specific target
or beneficiaries group or beneficiaries;
• has clearly determined and  may not have cleared and
allocated fund with detail detailed cost breakdown of
cost breakdown; the allocated fund;
• has specific life time  may not have specific time
of ending;
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Project Cycle Management (PCM)
 PCM is the term given to the process of planning and
managing projects, programs and organizations.
 It is used in the business sector and development
organizations.
 Development projects sometimes fail because they are
badly planned and do not take account of some important
factors, particularly the needs and views of stakeholders.
 PCM is based around a project cycle, which ensures that all
aspects of projects are considered

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 Project Cycle …
Project cycle….
 The project cycle concept aims to
emphasis two main points:
 project development should pass
through a series of consecutive steps
to help ensure that projects are well
planned, properly appraised,
adequately resourced and efficiently
implemented; and that
 lessons learned during implementation
should be feed back into the planning
process to improve the design and
implementation of future initiatives;

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Stages of Project cycle (UNDO Model)

Phases Stages
I. Pre-investment 1. Identification
2. Preparation
3. Appraisal/Selection
II. Investment 4. Implementation
III. Operation 5. Operation
6. Ex-post Evaluation

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Phases of the Project Cycle (World Bank)
1. Identification
2. Formulation/preparation/feasibility study
3. Appraisal
4. Implementation
5. Monitoring and Evaluation

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Project Management

 What it is?
 Why project management?

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Definition

“Project management is the application of

knowledge, skills, tools, and techniques to
project activities in order to meet or exceed
stakeholder needs and expectations.”
expectations

Source: Project Management Institute

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Cont’d…

 Project management typically consists of

balancing different factors, which limits
the projects success… constraints

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Constraints of PM

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Knowledge area/Category
• Scope Management
• Time Management
• Cost Management
• Quality Management
• Human resources management
• Communications management
• Risk management
• Procurement management
• 80Integration management
  Whose responsibility is it?

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Project Manager
“The person who is responsible for the
project and will be held accountable for its
success or failure.”

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 Role of the Project Manager
 Providing direction, leadership, and support to
project team members.
 Monitors progress of implementation
 Manages resources efficiently
 Motivates staff
 Ensures communication (internal and external)
 Providing teams with advice and input on tasks
of the project
 Resolving conflicts affecting the project’s
resources, schedules, etc.

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Discussion questions:
1. The Oromia Health Bureau presents a capital
budget (investment) request of Birr 5,000,000 to
purchase spare parts to different medical
equipments with the objective of replacing the
damaged ones and to keep a stock for its future
requirement of XYZ Hospital. Note that the
Hospital was established with an investment of
Br. 100 million five years ago. Is it justifiable to
accept this capital budget request as a project idea
and finance it? Comment.

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Discussion questions:
2. A college allocated Birr 5,000,000 to reorganize
and build a certain part of the vacant space in the
compound of the college for different out-door
sport activities for its students and teachers. The
plan of this scheme includes the construction of
playgrounds for basketball and volleyball games,
and also the preparation of a soccer (foot-ball)
field. Do you consider this scheme as an
investment project? If your answer is yes justify it
from conceptual point of view. If your answer is
no, why?

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 Discussion questions:
3. One of the duties and responsibilities of The
Woreda Industry and Trade Bureau is to register
annually the small-scale enterprises by types of
economic activities they are engaged in the woreda
and update the information whenever necessary.
To accomplish this task, the Bureau yearly
prepares a capital budget (investment) plan in the
form of a project. If you are a member of the
Capital Budget Approval Committee do you
accept this project idea and approve the capital
budget request?

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 Discussion questions …..
4. ABC, a charity organization, has a hospital
in kebele xx, ABC city. The hospital has
the capacity to serve only 150 patients per
day, but the demand for the various services
of the hospital is 500 people per day. As a
result the organization has planned to
expand the Hospital so that it can serve
more patients, and allocated Birr 1.5
million for this purpose. Is this scheme of
the charity organization a project? Explain.

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Session 2

Participation in Project Planning

and Management

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Learning Objective
 to enhance capacity of project planners to
use participatory approach in planning and
managing programs & projects.

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Discussion Question …..
Form a group and answer the following questions and
present to plenary.

1. Who are stakeholders?

2. Why participation of stakeholders/community is
required?
3. In which stage of the project cycle
community/stakeholders’ participation is important?
4. What should be the degree of
Community/stakeholder Participation in each stage of
the PCM?

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Definition
 A stakeholder is someone who has an interest in
the project.
 Any person, group of people or organization who
has a vested interest in the project now or in the
future

 Anybody who is affected by or can affect the

project (… individual, community, group,
organization etc...)

 Includes a much wider set of actors than the

immediate beneficiaries of the project.

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Types of stakeholders
 Primary Stakeholders: are the direct-targeted
participants and institutions in the development
program/project.
 Secondary Stakeholders: are the intermediary
participants.
 Internal
 External Stakeholders: are individuals and
groups not formally and directly involved but
who may impact or be impacted by the project.

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 Stakeholder analysis
 is a process of systematically gathering and
analyzing qualitative information to
determine whose interests should be taken
into account when developing and/or
implementing a policy or program.

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Stakeholder analysis Matrix
Stakeholders Interests Potential Project Relative
Impact Priorities
(+, -, ?) (1-5)
Primary
-----------
-----------
Secondary
-----------
-----------
External
-----------
-----------

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Group Discussion Questions
 Purpose: To clarify stakeholder concept with practical
exercise
 Time: 30 minutes
 Discussion Questions:
 Select one project from your organization and
discuss in your group and identify the
stakeholders. It is preferable if you select a
project currently on progress (at planning or
implementation stage).
 Categorize them in at least two groups
(primary and secondary) and elaborate your
justification for the grouping

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Identifying stakeholders
 Questions that are helpful to identify relevant
stakeholders:
 Who are likely to be affected by the project?
 Who is responsible for what is intended to be done?
 Who is likely to mobilize for or against what is
intended?
 Who can make what is intended more effective
through their participation or less effective by their
non-participation or outright opposition?
 Who can contribute financial and technical
resources?
 Whose behavior has to change for the effort to
succeed?

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Examples of common stakeholders group
 Project managers
 project user groups/community
 affected groups/community (if any)
 community based organizations /CBOs/
 project financers and implementers
 concerned local, national and international governmental
organizations and NGOs
 religious and traditional leaders
 informal social net-works which may mobilize or
contribute resources to the project and serve as channels of
communication about the project
 political parties
 the private sector and professional bodies, which may
mobilize or contribute resources to the project; and other
groups who may have an interest on the project.
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Participation in development comprises:
 the involvement of stakeholders in any or all
stages of a project cycle,
 promotion of the role of community and local
agencies,
 facilitation methodologies and techniques, and
 Decentralized decision makings

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Need for CP
 To get acceptance
 To make projects sustainable
 To mobilize resources
 To identify needs
 To increase commitment
 To raise awareness

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Cont’d …

Procedures to be followed in need identification

1. Approach the community carefully
2. Clearly discuss together with the community
3. Use different techniques of participatory methods
such as:
 Interview (sECSU structured/structured)
 Group discussion
 Secondary data from NGOs, community records
 Direct observation
 Key informants discussion

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Ways/levels of participation
 To be informed
 To be consulted
 To work as partnership
 To be delegated
 To be controlled

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Level of participation
1. Informing: telling people about your
project. This might be one of the first
things you do and you should view it as
preparation for more active involvement.
2. Consulting: giving people choices about
what happens in your project and a chance
to shape it.

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Level of communication …..
3. Deciding together: creating opportunities for people
to make decisions about and influence the direction
of your project.
4. Acting together: creating opportunities for people to
develop and deliver your project, taking a role in
heritage conservation and/or learning activities.
5. Control (Supporting others to take the lead):
empowering people to have ownership of the
project, make final decisions and deliver activities
with some independence.

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Participation Matrix
Infor Consult Partnership Delegate Control
Stage m

Identification

Planning
Implementation

M&E

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Major Factors Which Influence Participation
 Nature of problem being addressed i.e. severity of
the problem and felt needs addressed or to be
addressed enhance or limit participation
 Quality of leadership i.e. existence of committed
and understanding leadership
 Attitude of development workers i.e. respect for
peoples ideas, culture and felt needs.
 Timing of intervention i.e. in rural areas during
critical farming seasons you will not get the local
people particularly the farmers.

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Some Suggestions for Effective Participation
 Establish rapport/cooperation with the concerned body and
community concerned.
 Use of team approach and co-operation with other agencies
 Go for interdisciplinary or multidisciplinary approach.
Development is multifaceted.
 Promote capacity building.
 Go for low-cost, replicable and sustainable programs/projects.
 Go for smaller and appropriate technology.
 Start where there are no impositions on people.
 Use local resources.
 Ensure local contributions to project (Use influential leaders,
ensure that women's concerns are addressed through participation)

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Examples:
 A water project ….
 Latrine around awash constructed in
response to diarrhea
 Tendaho sugar project...canal
construction..the community cuts the
technology during the night
 Wolkaite sugar project
 Leather manufacturing plant around Sulultta
 Any other?

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Project Identification

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 Session Objectives
After this training participants will be able to:
 identify feasible project ideas to solve a certain
problem or exploit opportunities, and

 apply different tools to identify and select

feasible project idea.

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Contents
 Concepts of project identification
 Sources of project ideas
 Steps in Project Identification and Selection
 Stakeholders analysis
 Problem analysis

 Objective analysis

 Alternative Tree Analysis or Project Selection

 Logical framework

120
 Group discussion
 Consider a project which you Know well.
From where did the idea for this project come
from?
 How can potential projects be identified?
 Is problem identification the same as project
identification?
 Who identify projects?
 Identify the major stakeholders for low cost
housing projects
121
 Project Identification
Project identification is the initial phase of the
project cycle.
- It begins with the conceiving of ideas or
intentions to set up a project.
- These ideas are then transformed into a
project.
In this stage, national development plans and
strategies are translated in to specific
investment projects based on felt human needs.

122
 Project ideas are normally initiated by a perceived
need [PROBLEM or OPPORTUNITY].
 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

123
 Who identifies projects?
 Various organizations, whether local or foreign, state
owned or private, government ministries,
development banks, interest groups, CBOs, NGOs
and of course individuals can identify projects.
Approaches to project identification
(a) Top-down approach
(b) Bottom-up approach

124
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.
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 Bottom-Up Approach
 In this approach community/ beneficiaries are
encouraged to identify and plan the projects themselves
with or without outsiders.
 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 via
interviews, focus group discussions and other methods

128
Wherever initial project ideas come from we
must ensure that:
 They are consistent with Government’s
policy plan and strategy
 They are consistent with the strategy and
policy of the donor(s) from whom we hope
to attract funds
 They are agreed as priorities by the direct
beneficiaries of the assistance

131
Steps in Project identification and
selection:
 Stakeholders analysis
 Problem analysis

 Objective analysis

 Alternative tree analysis

 Log frame analysis

132
1. Stakeholders Analysis

133
1. Stakeholders Analysis
A stakeholder is an individual, group, or
organization who may affect, be affected by, or
perceive itself to be affected by a decision,
activity, or outcome of a project

 Stakeholderanalysis is a technique of gathering

and analyzing quantitative and qualitative
information to determine whose interests should
be given priority throughout the project.

134
Analysis cont’d
 It identifies the interests,
interests expectations,
expectations and
influence of the stakeholders and relates them
to the purpose of the project
Uses of stakeholder analysis is to identify:
 Stakeholders who may affect or be affected
(have interest) by the project;
 Potential conflicts or risks that could
jeopardize the initiative

135
Use continued
 Groups that should be encouraged to participate in
different stages of the project;

 Those who are powerful actors in ensuring the

project’s success or failure

 Interest and views that should be given priority when

analysing the problems

 Strategies to tap the potential of stakeholders who are

in favour of the project and minimise negative impacts
on vulnerable and disadvantaged groups.
136
Process of Stakeholder Analysis:

Step 1: Group organization

Step2: Detailed analysis
Step 3: Impact Assessment

137
Step1: Group organization
Identify all people, group and institution who:
has an interest (positively or negative),
contributes to or is affected by or influence the
project as follows:
 Target Groups (Beneficiaries): for which

positive change is desired

 Negatively Affected Groups: groups
adversely affected by the project
 Decision Makers: decision making authorities

138
Stakeholder’s analysis cont’d
 Funding agencies: group which can bear expenses
 Implementing agencies: contractors,
 Community leaders: groups representing the
community
 Potential opponents: groups which may oppose or
obstruct a project
 Supporting groups: groups likely to cooperate with
the expected project

139
Step2: Make a more detailed analysis
Make a more detailed analysis of each stakeholder in
terms of :
 Specific interests these stakeholders have in the
project( project’s benefit, damage or conflict for the
stakeholder).
 Powers of the stakeholder: the ability of the
Stakeholder to take effective action.
Step 3: Conduct Impact Assessment
 Estimate the value each stakeholders place on their
stake or interest in the project. The value can be
positive or negative

140
Stakeholder’s analysis cont’d
 Assign value 5 for very high, 4 for high, 3 for
moderate, 2 for low and 1 for not very important

 Assign a power level to each stakeholder. This rates

the ability of the Stakeholder to take effective action
 Assign value 5 for very high, 4 for high, 3 for
moderate, 2 for low and 1 for not very important

 Multiply the value of the stake to the stakeholder by the

power to take action. The result is an indication of the
stakeholder’s ability to secure their stake in the project

141
Stakeholder’s analysis cont’d
 Consider the kind of things you could do to get
stakeholders support and reduce opposition.
 How you approach stakeholders?
 What kind of support will they need?
 How important is to involve stakeholders?

142
 Tool for stakeholders analysis
 The following worksheet can be used to conduct full
stakeholders analysis
stakeholders interest Potenti value power value impact Relativ strategy
al e
impact priorit
y

143
Stakeholder’s Analysis Grid
High
Keep satisfied Mange closely

power
Monitor Keep informed
(minimum effort)

Low Interest High

144
Stakeholder’s Analysis Grid cont’d
Guidance for stakeholders map
 High power, high interest: fully engage these people
and make the greatest effort to satisfy them

 High power, less interest: make enough work to satisfy

these people

 Low power, high interest: keep these people adequately

informed, and talk to them to ensure that no major issues are
arising.
 Less power and less effort: monitor these people but
do not bore them with excessive communication

145
Activity 2:1 (25 minutes)
Identify project ideas (by examining problems and
opportunities in the area) related to your business.
[Link] unemployment in Addis
[Link] mortality in Ethiopia
[Link] abuse
[Link] in Addis Abeba
[Link] unemployment
[Link] and sanitation project in Addis
7.---------------( any idea you may feel is important)
Required:
[Link] stakeholders analysis
[Link] the priority interest needs to be given
emphasis during designing and project
implementation. 146
2. Problem Tree Analysis

Identifying a problem is half of the solution

147
148
149
 2. Problem Tree Analysis
Purpose:
-to identify major problems and their main causal
relationships.
Output:
-a graphical arrangement of problems differentiated
according to ‘causes’ and ‘effects’

150
Steps in undertaking problem Tree
1. Identify a “core” or central problem
2. List all the problems related to or
stemming from the core problem
3. Determine which related problems are
causes and which are effects of the core
problem
4. Arrange the problems in a cause-effect
heirarchy around the core problem

151
152
Problem Tree
EFFECT

CAUSE

153
Example: Subject of the workshop is food security, the
possible problems mentioned in relation to this subject are:
 Food production on hills  Dikes are degraded
decreasing  Soil fertility on hill slopes is
 Ethnic clashes in neighboring decreasing
districts  Soil erosion on hill slopes
 Food shortages  Irregular supply of inputs for
 High incidence of malnutrition rice production
 Canals are blocked  High immigration rates
 Rice production in low lands  Irrigation water does not reach
decreasing fields in desired quantity
 Poor maintenance of irrigation
facilities

154
 High incidence of
Problem Tree malnutrition

Food shortages

Rice production Food production

in low lands High immigration
on hills decreasing rates
decreasing

Irrigation water does Irregular supply of Soil fertility Ethnic clashes in

not reach field in inputs for rice on hill slopes neighboring
Effect
desired quantity production is decreasing districts

Canals are Dikes are Soil erosion on

blocked degraded hill slopes

Cause

Poor maintenance
system for irrigation
facilities
155
3. Objective Tree Analysis

156
Objective tree
 An objective tree is a technique for identifying the
objectives that will be achieved as a result of solving
the problems cited in the problem tree.

 The objectives are also displayed as a series of cause

and effect relationships.

157
 Incidence of
Malnutrition reduced
Diagram of objectives
Improved Food
situation

Rice production Food production

in low lands Lower
on hills increased immigration
increased
rates

Sufficient irrigation Regular supply of Soil fertility on Less ethnic

water reaches the inputs for rice hill slopes clashes in End
fields production increased neighboring
districts

Canals Dikes are Soil erosion on hill

cleared upgraded slopes reduced

Means

Maintenance
irrigation facilities
improved

158
Alternative Tree Analysis
 is a technique for identifying alternative solutions
or course of action that can be used to achieve the
same or alternative objectives and the display of this
information in a simple format.

159
 Incidence of
Malnutrition reduced
Diagram of Alternatives
Improved Food
situation

Rice production Food production

in low lands Lower
on hills increased immigration
increased
rates

Soil fertility on
Sufficient irrigation Regular supply of hill slopes
water reaches the inputs for rice increased
fields production
Less ethnic
clashes in
neighboring
districts
Canals Dikes are
cleared upgraded Soil erosion on hill
slopes reduced

Maintenance
irrigation facilities
improved
160
Project Concept Note/ Profile Preparation
 Once a project idea has been conceived, the next stage is to
describe the idea so that it can be prioritized and move on
to the next stage in the process.
 This may involve the preparation of a project identification
report or project concept or profile.
 Depending on the type of project it should include the
following components:-
 Justification and purpose
 Beneficiaries and stakeholders
 Resources and institutions
 Polices and plans
 Impacts
 Support
 Risks & Assumptions

161
Prioritization and Ranking
 The limited resources available enforce that
effective project identification and selection
at various levels will be essential.
 To decide which projects to support it will be
necessary to set priority. This calls for the
ranking of projects using a set of criteria
(which varies from organization to
organization)
 Potential criteria for ranking projects are
given below:
162
Criteria for ranking projects
1. Extent
 Number of people affected by the project
 Geographic area affected by the project
2. Economic and financial benefit
 Potential economic benefits to the country or
region, community etc

163
[Link]
 Conservation of natural resources and more
sustainable land use
 Protection of natural resources such as forests

4. Social
 Poverty alleviation
 Assistance to disadvantaged groups

164
5. Policy
 Is the project in line with national and
regional policies?
6. Resources
 Availabilityof human and other resources
to implement projects
 Likely availability of funding from
government, NGO and /or donors

165
7. Success or failure (Risk..)
 What are the chances of project successfully
meeting its objectives?
 What degree of risk are associated with the
project that may affect its implementation?
8. Support
 Government and community support and
demand for project

166
Project Rating Index

 When a firm evaluates a large number of

project ideas regularly, it may be helpful to
streamline the process of preliminary
screening by employing a project rating
index.

167
Steps in determining the project rating index

 Identify factors relevant for project rating

 Assign weights to these factors
 Rate the project proposal on various factors, using
the suitable rating scale.(Typically a 5-point or 7-
point scale is used)
 For each factor multiply the factor rating with the
factor weight to get the factor score
 Add all the factor scores to get the overall project
rating index.

168
 Rating
VG G A P VP Factor
Factor
5 4 3 2 1
Factors Weight Score
Input availability 0.25  0.75
Technical know-how 0.10  0.40
Reasonableness of cost 0.05  0.20
Adequacy of market 0.15  0.75
Complementary relationship with 0.05 0.20

other products
Stability 0.10  0.40
Dependence on firm's strength 0.20  1.00
Consistency with governmental 0.10 0.30

priorities
Rating Index 4.00
169
 Activity 2.2 ( 25 minutes)
Take a moment and consider the project idea you
identified in the prvious section to conduct the
following analysises
Required:
Identify the central or the core problem
Prepare problem and objective trees
Generate as many alternative as possible to solve the
root causes of each problem
Based on sound evaluation select one alternative
project .
Prepare a Logical framework for the selected project.

170
 4: Logical Framework Approach (LFA)

Now that the project has been identified and detailed

information has been collected, we can start to plan
exactly how the project will function.

A useful way of doing this may be to use a logical

framework (log frame).

The process of completing the log frame helps to think

through all the factors that should be considered for
planning a successful project.

171
What is a log frame?
The log frame is a tool used to help strengthen project
design, implementation and evaluation. Although it is
constructed during the planning stage of a project, the
log frame is a living document, which should be
consulted and altered throughout the project’s life cycle.

172
The log frame is a table of four rows and four columns,
where all the key parts of a project can be inserted as a
clear set of statements: the project goal, purpose, outputs
and activities, with their indicators, evidence and
assumptions.
It shows the project’s structure and describes the project
logically. The log frame does not show every detail of
the project. It is an overview of the key factors.

173
 Logical Framework Analysis
Often referred to as a log frame, this is a tool for planning and managing development
projects. It is drawn up as a table/grid and aims to present information about the key
components of a project in a clear, concise, logical way. A log frame provides a useful
summary of a project which can be used to inform project staff, donors, beneficiaries and
stakeholders of what the project aims to do and how. Log frames are required for
applications to many major sources of funding, including DFID and the EC, although their
format and terms used may differ.
Log frames set out the goal, purpose, outputs and activities of a project alongside
measurable indicators, means of verification and important assumptions underlying the
project. Definitions of each of these can be found below:
Goal – the ultimate result to which your project is contributing
Purpose (Outcome) – the change that occurs if the project outputs are achieved (i.e. the
effect of the project)
Outputs (Results) – the specifically intended results of the project activities
Activities – the actual tasks required to produce the desired outputs/results
Indicators – quantitative and qualitative ways of measuring progress and whether project
outputs, purpose and goal have been achieved
Means of verification – the information/data required to asses progress against indicators
and their sources
Assumptions – external factors which are likely to influence the work of the project, over
which implementing project staff have little control
174
 SUMMARY INDICATORS MEANS OF VERIFICATION ASSUMPTIONS

GOAL

PURPOSE

OUTPUTS

ACTIVITIES

175
 Why use a log frame?
Log frames are useful because they:
 help people to organize their thinking
 help people to think logically
 help identify weaknesses in project design
 ensure key indicators are identified from the start of the project
so that monitoring and evaluation are easier
 ensure that people involved in the project use the same
terminology
 help people to summarize a project plan on a few sides of
paper. This helps them to communicate their plan simply with
others, although a log frame is no substitute for writing a full
plan.
 Most donors request it

176
 How to fill in?
 Work down the Summary column
 Work upwards through the Assumption
column
 Work across each row to identify
Indicators and Evidence

177
 Risk Assessment
 Risk is the potential for unwanted
happenings.
 Every activity involves risks. If they
happen, some risks will affect the
activity more than others.
 Risk assessment helps to identify
them and consider the likelihood of
them happening and their likely
impact.
 The risks can then be managed by
changing the project plans to ensure
the risks are minimized

178
 Possible risks include:
 climatic – rainfall
 human – labor strikes, beneficiaries unwilling to
try new techniques, project staff leaving the
organization
 Economic – crop prices being unstable
 Political – government policies
 Projects by other agencies not remaining on
schedule.

179
Risks & Assumptions:
 Once we have considered the risks, we can turn them into
assumptions. Risks are negative statements about what might go
wrong.
 Assumptions turn risks into positive statements. They are the
conditions that need to be met if the project is to continue. For
example, consider a risk in an agricultural extension project. By
rewording the sentence to make it positive rather than negative, the
risk can be changed into an assumption:
 RISK Farmers might not be willing to try out new varieties of rice.
 ASSUMPTION Farmers are willing to try out new varieties of rice.

180
For each objective in the log frame, consider what assumptions
need to be made in order for that objective to lead to the objective
at the next level. Test the logic using the ‘If-And-Then’ test:

181
For example:
 If we train members of the community to maintain and repair
hand pumps (activities), and an effective supply chain for
spare parts exists (assumption), then sources of safe water will
be improved (output).
 If sources of safe water are improved (output), and an adequate
quantity of water is available (assumption), then access to safe
water will be improved (purpose).
 If access to safe water is improved (purpose) and incidence of
diarrhea disease is due to unsafe water (assumption), then the
incidence and impact of diarrhea disease will decrease (goal).
As external conditions may change, it is vital that we carry out
further risk assessments throughout the course of the project to
ensure that we take account of all threats to its success.

182
 Setting Indicators
 Indicators are targets that show
progress towards achieving
objectives.
 They answer the question ‘How
do we know whether or not what
we planned is happening, or has
happened?’
 Indicators help us to monitor,
review and evaluate the project.
 They enable us to know whether
the project plans need adjusting.
 They help us to learn lessons from
a project in order to avoid making
the same mistakes in other
projects.

183
 Log frames sometimes call indicators ‘Objectively Verifiable
Indicators’ (OVI).
 The term ‘objectively’ is used because indicators should not depend
on the point of view of the person measuring them. It should not
matter who measures them – the same result should be reached.
 So it is better to ask two people to measure attendance at a meeting
by counting the number of people there, than to ask them to grade
attendance on a scale of very poor, poor, adequate, good or very
good. One person might think attendance is very good while another
might think it is only adequate. This would depend on their past
experience of meetings and their own expectations of how many
people might attend this one.

184
 It is important to think about who should identify and
measure the indicators. Primary stakeholders should have
an opportunity to set indicators because:
 it enhances the ownership and transparency of the project
 primary stakeholders might be able to think of appropriate
indicators that project staff based outside the community
would not have considered
 some things are most easily measured by the primary
stakeholders themselves
 primary stakeholders can be encouraged and empowered
by the progress of the project

185
 Types of Indicators
 There are many different types of indicators to consider. Try to be
creative and use a mixture in order to ensure that the objectives can
be measured effectively and that monitoring and evaluation needs
can be met.
 DIRECT indicators measure the objective directly, such as the
number of children attending school.
 INDIRECT indicators (also called Proxy indicators) are used if
direct indicators are not appropriate or possible if, for example:
• Results cannot be measured directly, such as quality of life
• Direct indicators are too expensive to measure
• Direct indicators can only be measured after the project has
ended.

186
 QUANTITATIVE indicators can be analyzed in numerical form –
who, what, when, where, how much, how many, how often? This
might include:
_ how often things happen
_ number of people involved or affected
_ growth rates
_ uptake, for example, school enrolment, visits to clinic, adoption of
new seed varieties.
 QUALITATIVE indicators measure things that cannot be counted,
like:
_ satisfaction, opinions
_ decision-making ability
_ changes in attitude.
Try to use a mixture of quantitative and qualitative indicators so that we
can be sure to capture the real progress and impact of the project.

187
 Imagination is very important when setting indicators. It
can help to ask a group of stakeholders setting indicators
to close their eyes and imagine how the situation will be
improved by the end of the project.
 What do they hear, see, touch, feel and smell that will be
different when the main problem has been addressed? If
we are aiming for holistic development, then our impact
on spiritual well-being should be as great as that on
physical well-being.
 Moral indicators are particularly difficult to set. Indirect
indicators might have to be used.

188
ECONOMIC: Yield per hectare, production per labourer, eggs per day, production of handicraft items
per month, average income, land area per household, cattle per household, percentage of people with
bank accounts, percentage of people above or below the poverty line, percentage of people without land,
rate of migration.
SOCIAL: Infant mortality rate, number of deaths, literacy rate, average years in formal schooling,
number of students entering secondary education, difference between male and female wages, percentage
of women receiving training, percentage of people attending meetings, representation of disadvantaged
groups on committees

ENVIRONMENTAL: Fish harvested per year, length of fallow, forest cleared each year, water
availability in soil, erosion, percentage of households practising composting, average time to collect fuel
wood each day.

MORAL: Crime rate, divorce rate, church membership, attendance at church meetings.

189
 Indicators should be:
 RELEVANT: Is the indicator relevant to the objective it is measuring? For
example, if an objective is to increase handpump use’, measuring the number
of handpumps produced would not a good indicator because it does not
measure how many are actually being used.
 SUFFICIENT: Is more than one indicator needed?
 SPECIFIC: Quality, quantity, time
 MEASURABLE: Can the indicator realistically be measured?
 SENSITIVE TO THE CHANGES: that will be happening as a result of the
project or program if the planned changes happen, will the indicator still be
appropriate and measurable?
 COST-EFFECTIVE: Can the indicators be measured with reasonable cost
and effort? Is the cost of measuring the indicators proportionate to the total
project cost?
 AVAILABLE: Can the indicator be measured at the planned time? For
example, consider seasonal climatic change.

190
 Means of Verification
 Evidence is called ‘Means of Verification’
in some log frames. It describes the
sources of information we will use to
measure the indicator. For example, body
temperature is an indicator of health. A
thermometer provides the evidence.
For the log frame, consider:
 the type of data needed, such as a survey
 the source of the data – whether secondary
(collected by someone else) or primary
(collected by our organisation)
 who will collect and document the data
 frequency and dates of data collection. For
example, monthly, quarterly, annually.

191
 If the evidence is not available at low cost at the
right time, the indicator should be changed to
one, which can be measured more effectively.
 Try to build on existing systems and sources of
information before establishing new ones.
 But make sure the information used can be
trusted. If primary data needs to be collected,
make sure this is added to the activity objectives
and to the activity list and budget.

192
Project Design/ Preparation

193
Contents
 Pre-feasibility study
 Feasibility study
 Proposal writing

194
Session Objective:
 After the session, the participants will be able to
identify feasibility study components and prepare
feasibility report/ project proposal/.
 Reflection
 What is feasibility study? Is it required
for all projects?
 Is there any difference between
feasibility study and project proposal?
 Pre-feasibility Study
A preliminary selection stage of a project on the basis
of their market, technical, social, environmental,
economic and financial soundness.

At this stage, the screening criteria are rough and

becoming specific and refined as project planning
advances.
Sophisticated analysis of the technical, economic,
social and institutional aspects of the project is
postponed to a later stage and environmental
considerations
197
 Objectives of pre-feasibility study are to
determine whether:
 A detailed analysis through feasibility study is
required.
 Functional or support studies are necessary.
 The investment opportunity is viable or not.
 The environmental situation at the planned site and
the potential impact is inline with the national
standards

198
 Pre-feasibility is an intermediate stage
between opportunity/problem identification
and a detailed feasibility study.

 If the opportunity study [problem identification

stage] is well-prepared and comprehensive
enough, the pre-feasibility stage could be by-
passed.

 Hence, it is not always necessary to undertake the

pre-feasibility study.

199
 Support study
 Support or functional studies cover specific
aspects of an investment project.
 Required as prerequisites for, or in support of,
pre-feasibility and feasibility studies
 Examples of these studies are:
 Market studies
 Raw material and factory supply studies
 Laboratory and pilot-plant tests
 Location studies
 Equipment selection studies
 Environment impact assessment

200
 Feasibility study
 Feasibility study provides a comprehensive review
of all aspects of the project (marketing, technical,
financial, economic, and ecological)

 lays the foundation for implementing the project and

evaluating it when completed

 Focus on gathering, preparing and summarizing

relevant information about various projects aspects

201
 A feasibility study should form the core
of the proposal preparation process. Its
purpose is to provide stakeholders with
the basis for deciding whether or not to
proceed with the project and for
choosing the most desirable options.
Why in LDCs only few projects did
feasibility study?

Some of the reasons could be:

 Lack of enough skilled people;
 Unwillingness to spend;
 The use of non-numeric selection models
like:
 Officials decision
• Operating necessity, to keep the system in
operation
• Other reasons

203
Elements of feasibility study
 Market analysis
 Technical analysis

 Organizational analysis

Political-legal analysis
 Financial analysis

 Economic analysis

 Social analysis, and

 Environmental analysis

 Cross –cutting issues

204
Market analysis
 indicates the demand potential of the output of
the project:
• Demographic statistics

• Income levels of the people

 Market analysis should address the following

questions:
 Is the product for domestic or export consumption?
 Is the market large-enough to absorb the new product
without affecting the price?
 What share of the total market will the proposed product
have?
 What marketing strategies and distribution channels are
required?

205
Technical analysis
 Is concerned with the projects inputs
(supplies) and outputs of real goods and
services and the technology of production
and processing
 Its objective is to evaluate:
 The type of technology and its capacity,
 degree of integration (flexibility of

manufacturing system),
 the production processes involved,

 the inputs and infrastructure facilities

206
Organizational analysis
 Institutional/ organizational structure
 Management of the project:
 Is focused on the following questions:
 Are authority and responsibility properly linked?
 Does the organizational design encourage

delegation of authority or do too many people

report directly to the project director?
 Does the project have sufficient authority to

keep its accounts in order and to make

disbursements promptly?
 is the project manageable? Team building,

motivation of employees and managers etc

207
Political-legal Analysis
 A politically feasible project may be referred to
as a "politically correct project." Political
considerations often dictate direction for a
proposed project. This is particularly true for
large projects with national visibility that may
have significant government inputs and political
implications.

 Political feasibility analysis requires an

evaluation of the compatibility of project goals
with the prevailing goals of the political system.
All projects must also face legal scrutiny.

208
Financial analysis
 Financial viability of the project is
analyzed based on:
 Sources of funds/ estimates of cost of the
project,
 Return of the project /profitability,

 Financial analysis is based on market price of

goods and services
 It aims to see the feasibility from the view point
of entrepreneurs, investors and financiers
(from private costs and benefits)

209
Economic analysis
Economic analysis is basically concerned
with the following:
 how to identify effects of the project on
the society ;
 qualification of the effects of the proposed

projects; and
 pricing of costs and benefits to reflect their

values to society, shadow price

210
 Social analysis
 Examine the social implication of the project:
 income distribution to the low income

group
 adverse effects of a project on

particular groups
 The impact of the project on improving

the quality of life.

 Considering the contribution of

alternative projects in furthering the

same objectives.
211
Environmental Analysis
 The impact of the project on nature and its
habitat such as plants (forests), water, air,
wild and domestic animals, human beings,
etc.
 Some of the examples of the questions to be
asked are:
 What chemicals and wastes are emitted from
the project that will pollute air and water?
 What hazardous chemicals are used that will
harm the health of employees and the people
living around the project area?

212
Cross- cutting issues Analysis
 Cross- cutting issues, recently, have received great
attention in preparing any development projects.

 Underestimation of these issues have resulted in

undesirable outcomes which include the lose of active
‘human labour, reduced productivity, under utilization
of the intended output/inputs, social disruption etc.

 Currently project promoters are shown increasing

concerns about the effects of these factors on the
development project
In this context, cross-cutting
impacts have come to play a
determinant roll in the project
formulation exercises. These
cross cutting issues could be:
HIV/AIDS

Population

Gender issues
Who Conducts the Feasibility
Study?
 The government
 Donor agencies
 Consultants
 Any interested person who can afford to
do it

215
Feasibility study Vs Project Proposal
 Feasibility study-is required to make a
decision whether the project proposal is
technically and economically feasible?

 After finalization of project feasibility

study by the experts, the decision for going
ahead for preparation of the project
proposal will be made

216
 Project Proposal writing
 A project proposal is a detailed description of a
series of activities aimed at solving a certain
problem.
 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.

217
Elements of Project Proposal
 Title page: indicate the
 project title,
 the name of the lead organization ,
 the place and date of project preparation and
 the name of the donor agency to whom the
proposal is addressed.

218
 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..

219
 Abstract (Executive Summary):
The abstract provides a brief
summary of the project and 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.

220
 Context (Project background):
describe the social,
social economic,
economic
political and cultural background
from which the project is initiated.
 Beneficiaries (Target Groups): In
this part define the target groups and
show how they will benefit from the
project.

221
Project justification: Rationale should
be provided for the project. It
includes
 The implementing organization
 Problem statement
 Priority needs

222
 Project Goals and Objectives :
Project goals, purpose and desired
outcome along with objectively
verifiable indicators

223
 Project Description: This part shall
include the specific detailed
description of each activity.

224
 Human Resources: This part of the
project should describe the management
and implementation teams, their
experience and responsibilities.
 Project feasibility: This part of the
project shows the feasibility of the
project.
 Overall project value: This part shows
the added value of the project to different
institutions and the other beneficiaries.

225
 Risks of the Project: include the
main risks (may occur) and the tools
could be used to overcome them.
 . Implementation Plan: describe
activities and resource allocation
in as much detail as possible.
 Activity plan (schedule) based on a
simple table or Gantt chart.
 Resource plan/based on budgetary
format/:
226
 Project Performance indicators: In
this part, specify the major project
performance indicators (SMART and
Measurable project performance
indicators).
 Monitoring and Evaluation (M&E)
Plan: 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

227
 Reporting: The schedule of project
progress and financial report could be set in
the project proposal.
 Annexes [if any]: for additional detailed
information

228
 Group Exercise :
Exercise on Project Proposal Writing
 Prepare a project proposal with respect
to the following elements of proposal
1. Title of the project
2. Goal, purpose, outcome and major
activities
3. Risk and assumptions

229
 Project Appraisal:
Financial and Economic
analysis

230
Contents
Financial Appraisal
 The Costs and Benefit of a Project
 Means of finance
 Cash Flows
 Project Appraisal methods

Economic Appraisal
Risk Analysis

231
 Session Objectives:
 After the session, you will be able to:
 Identify the basic financial requirements of a
project ;
 Identify the economic requirements of a project.
 Appraise projects financially and economically
based on payback period, NPV, BCR and IRR;
 Identify and manage risks related to projects.

232
 Project Appraisal
 Projects can be appraised:
 From the view point of their beneficiaries or
losers [financial analysis] or

 From the viewpoint of the entire society

[economic analysis]
analysis

233
 Financial analysis answers the question “is the
project financially profitable to a given
individual, group or business? costs and benefits
are valued at market prices
 Economic analysis answers the question- “is the
project profitable to the society or to a target
population as a whole? what is its impact ( in terms
of job creation and linkages with the other sectors)
on the whole economy? In economic analysis costs
and benefits are valued at shadow prices 234
 4.1 Financial Analysis
The starting points for financial analysis of
projects are:

 Cost estimation: based on information

collected during technical analysis

 Revenue estimation: based on information

collected during market analysis

235
Cost Estimation
The two basic cost components of a project are investment and

operational cost

 The initial investment Costs of a Project

 Land and site Development

 Buildings and Civil Works

 Plant and Machinery

 Miscellaneous Fixed Assets

 Capital issue expenses

 Provision for contingencies

236
 Operation Costs of a project

 Direct costs are directly attributable to the

production
 Indirect costs are incurred to facilitate the
production process but are not the direct inputs
of production.

237
Cost of production comprises of three main factors:
 Cost of materials,
 Labor cost and
 Overhead Cost

Cost of production = Material cost + labor cost +

overhead cost.

238
Estimates of Sales and Production
Year 1 2 3 4
Installed capacity (Qty)
Estimated output as % of plant
capacity (Qty)
Estimated annual production (Qty)
Value of sales or benefit (SP * Qty)

After estimating the quantity of production,

the cost of production or operation has to be
estimated.
239
Profitability Projection

• After the estimates of sales revenue and the cost

of production are made, the next step is to prepare

the profitability projection.

• This is done by preparing a projected cash flow

statement .

240
Cash Flows
It is a process of reviewing costs and benefits, measured in
terms of cash outflows and cash inflows.
 The cash inflow of a project includes:
 the project revenues,
 government grants,/ subsidy
 resale/scrap values of assets,
 tax receipts and other cash inflows as a result of accepting a project.
 The cash outflow of a project includes:
 initial investments in acquiring the assets,
 project operational costs (labour, materials, etc.),
 working capital investments,
 tax payments and any other cash outflows as a result of accepting the
project.

241
Purpose of cash flow statement
 To identify shortage of finance, so
that the manager plans to borrow

 To identify overage of finance, so that

the manager plans to lend or invest the
money

242
Projected Cash Flow Statements
Year 0 1st 2nd 3rd 4th
Cash in flow
Capital 50
Loans 50
Salvage Value 8
Sales Revenue 0 60 120 120 120
Annual cash inflow (a ) 100 60 120 120 128
Cash outflow
Investment 100
Working Capital 0 20 10 -30
operating costs 0 32 64 64 64
Overhead costs 0 4 4 4 4
Tax 0 2.8 8.8 9.2 9.6
Annual Cash Outflow (b) 100 66.8 104.8 81.2 49.6
Annual Cash Flow Balance (a-b) 0 (6.8) 15.2 38.8 78.4

243
 Project Appraisal methods

The most common methods of analysing

the financial feasibility of a project are:
are
 Return on investment
 Payback period
 Net present value
 Benefit cost ratio
 Discounted pay back period 244
 Non discounted methods
Return on investment
 Payback period

 Discounted methods
Net present value method
 Benefit cost ratio

 Discounted Payback Period

245
Return on Investment (ROI)
 Rate of return is the ratio of average
annual profits, to the capital invested. It
is the measure of profitability which
relates income to investment.
 The formula for computing the ROI is:

ROI = Average annual net income X 100%

Total Investment

 Decision criterion: the higher the ROI, the better

the project is.

246
 Exercise
Cash flow statement
Year 1st 2nd 3rd 4th
Net Cash flow balance 11.2 35.2 36.8 38.4
Cumulative balance 11.2 46.4 83.2 121.6

Initial investment is 100 million

ROI = Average annual net income X 100%
Total Investment

Average yearly income = 121.6 million = 30.4 million/year.

4
ROI = 30.4 million X 100% = 30.4 %
100 million
Therefore, the return on investment is 30.4 % per year.

247
Payback Period
The payback period is the length of time
required to recover the initial investment.
 According to the payback criterion, the
shorter the payback period, the more
desirable the project is
 If the net cash inflow is uniform each
year, then,
IntialInvestment
Payback Period 
AnnualUniformCashInflow

248
 Exercise
 A project whose investment outlay is
100 million is expected to have a
uniform annual net cash inflow of 25
million for five years
IntialInvestment
Payback Period 
AnnualUniformCashInflow

100million
PaybackPeriod 4Yrs.
25million

249
 If the cash flows of a project are not uniform, the
payback period is calculated by accumulating a
series of cash flows until the amount reaches the
initial investment.
 Example,
Year 0 1 2 3 4 5
Cash flow p1 -30000 5,000 12,000 12,000 6,000 8,000
Cumulative -30000 -25000 -13000 -1000
Cash flow of P2 -30000 10000 10000 10000 10000 10000
Cumulative -30000 -20000 -10000 0

The payback period of p1 = 3 years + 1000 * 12 = 3 yrs and 2 months

6000
Payback period of p2 = 3 years

250
 Net Present Value (NPV)
NPV is the difference between the present values of
the yearly net cash inflows and the initial
investment outlay
It is calculated using the following equation
CF1 CF2 CFn
NPV   2
 ...  n
 I0
1 k (1  k ) (1  k )

 n CFt 
  (1  k ) t
NPV  
  I0
 t 1 
 CFt = cash flow of the t th period, k is the discount
rate, t is the number of periods between 1 and n.

251
 Decision : accept or reject and Ranking
 If the NPV is positive, accept the project.
 If the NPV is negative, reject the project.
 If the NPV is zero, be indifferent
 The higher the NPV, the better the project

252
Example:
The initial investment of the project is 60,000 Ethiopian Birr.
Find the NPV of the project if the discount rate is 10%.

Year (t) Cash flow Discount factor Present Value

1
(in Birr) (1  k) t
(In Birr)

0 -60,000 1 -60,000
1 6,000 0.909 5454
2 20,000 0.826 16520
3 30,000 0.751 22530
4 40,000 0.683 27320
4,000 0.621 2484
Total NPV 14308

Decision: accept the project because the

result is positive
253
Benefit Cost Ratio (BCR)
Benefit – cost ratio is also referred to as profitability index. It
is an extension of the NPV approach to compare the
profitability of investment alternatives before arriving at
investment decision.

There are two ways of defining the benefit cost ratio:

a) PV to initial investment
BCR =PV
I
Where PV is present value of benefits and I is initial investment.
b) NPV to initial investment
NPV
NBCR = BCR – 1 or I

254
Decision rules:
 When BCR > 1 or NBCR > 0, accept the
project
 When BCR < 1 or NBCR < 0, reject the
project
 When BCR = 1 or NBCR = 0, be
indifferent
 if we compare two or more projects, the
higher the BCR/NBCR, the better the
project is
255
 Example: Consider a project with initial investment of Birr
50,000 and the following Cash inflows. Discounting rate is
12%
Year 1 2 3 4
A) BCR Cash inflow 12500 10000 30000 25000
PV
BCR 
I
12500 10000 30000 25000
(    ) 50000
(1.12) (1.12) 2 (1.12) 3 (1.12) 4

11160  8000  21428  15924

50000
56512
1.13
50000

b) NBCR = 1.13 –1 = 0.13

Decision: ???
256
 Discounted Payback Period
To overcome the limitations of the payback
period, the discounted payback period method
has been suggested

The decision is similar with payback

period. The difference is multiplying
each cash flow by discount factor.

257
Exercise
Year Cash Flow
1 5000
2 6000
3 8000
4 7000
5 6000
Initial investment 10,000
Discount rate 10%
Calculate the payback period of the project ?

258
 Exercise
Project Year Cash In flow PV of $1 at PV of cash Cumulative cash
10% inflow savings

0 -10000 1.000 -10000 -10000

1 5000 0.909 4545 -5455

2 6000 0.826 4956 -499

3 8000 0.751 6008 5509

4 7000 0.683 4781 10290
5 6000 0.621 3726 14016

Payback Pd = 2 Yrs +  499 

 
 6008 
= 2 Yrs + .083 Yr = 2.083 Yrs or 2 yrs and
one month

259
Group Activity
1. Can you mention some of cash inflows and
cash outflows for the project you have
identified in the previous sections?

2. Which of these are initial investment cost and

which one these are operational cost?

3. Prepare Cash flow statement for the project by

assuming a 10 years useful life and calculate
the payback period of the project.
260
4.2 Economic Analysis
 Developed for evaluating investment projects
from the view point of the society as a whole.
 Economic analysis is basically concerned with:
 how to identify effects of the project on the
society ;
 pricing of costs and benefits to reflect their
values to society

261
Rationale for Economic Analysis
Market imperfection
Externalities

Taxes and subsidies

Concern for savings

Concern for redistribution

 Therefore, market prices distorted due to these
factors must be adjusted to reflect social value of
the project i.e., shadow price

262
 Shadow price is an adjusted market price which
measures the value of commodity from point of view of
the society or the economy of a nation. .
 After estimating the shadow prices, we measure the
viability of the project through the normal process of
calculating NPV, IRR or CBR.

 We used conversion factor developed by legitimate

body to change the market price in to shadow price.

263
 In economic analysis we consider the benefits of
the project to the society such as:
 Employment creation

 Foreign Exchange generation or saving

 Contribution to different sectors: such as

health, education, etc.

 Multiplier effect (on other economic

variables in the economy)

 Linkages (both forward and backward

linkages)
 Externalities, etc.

 Contribution to reinvestment ( investment)

264
 Contribution to interpersonal and regional
Income distribution
 Impact of the project on government revenue
and expenditures

265
 Risk /Sensitivity Analysis
 The techniques of project analysis have been
considered so far as if the basic data which they have
used are known with certainty.

 However, both technical and economic information is

used in the form of forecasts and is subject to
considerable uncertainty.

266
 There are a number of areas which might account for
the faulty prediction of economic performance,
i.e., sources of error may be in any of the following:
 Problems in Prediction of technical performance:
 Underestimation of the project life time
 Wrong estimation on cost of investment

 " " about the volume of demand

 " " of cost of inputs
 " " of operating costs

" " the value of output
" " the quality & quantity of raw materials,
" " Supply of imported inputs and spare parts
 Problem with the quality of the management skills.

267
There are several ways of incorporating
uncertainty:
 Adding an item called "Contingency" (in %)
 Adding "a risk premium" to the
discount rate, i.e. use a higher
discounting rate (NPV decreases)
 Shorten the "life of the project"

268
Risk management
It includes, either alternatively or in
combination, one or more of the following
conditions:
 the transfer of the risk;

 the exclusion of the risk;

 the reduction of the risk;

 the acceptance of the risk or an amount

of the risk.

269
Project Implementation

270
 Activity Schedule
 Milestones

 Gantt chart

 Work breakdown Structure

 Network Techniques

 The Critical Path Method (CPM) or Critical

Path Scheduling(CPS)
 Program Evaluation and Review

Techniques/PERT/
 Project Time- Cost Analysis

 Resource plan
 Cost Plan
271
  Quality Plan
 Issue Management Plan
 Change Management Plan
 Risk Plan
 Setting up Performance Indicators
 Communication Plan

272
Activity Scheduling
 A schedule is a list of things usually to do with
times when should be done.
 Activities Schedule is the backbone of every
project and is essential for a successful outcome.
 It gives all personnel involved in the project
common understanding of what is required, how
this will be achieved, when it will be achieved and
who will be responsible for the successful
outcome of each activity.

273
Activity Scheduling Involves:
 Application of Work Breakdown Structure in
order to subdivide the major project
deliverables into smaller, more manageable
component based on the project scope.
 Identification of the activities needed in order to
produce the project deliverables and if
necessary breaking down the activities into
more manageable tasks which can then be
assigned to individuals

274
 Determination of activities’ sequence (i.e. in what
order should related activities be undertaken?) and
dependencies (i.e. is the activity dependent on the
start up or completion of any other activity?)-
Network
 Estimation of activities/ tasks duration
 Scheduling of activities by defining the start up and
completion dates of each activity/task.

275
A. Milestones
 In this technique we simply use a tabular format to
show the project activities in the first column, the
starting and finishing times in the subsequent
columns.
 Example:
Work Item Start Finish
A. Clear Site March 28 April 2
B. Level Site April 2 April 10
C. Excavate Foundation April 10 April 16

276
B. Work Breakdown Structure (WBS)
 It represents a systematic and logical breakdown
of the project into its component parts.
 It is constructed by dividing the project in to its
major parts, with each of these being further
divided in to sub parts.
 This is continued till a breakdown is done in terms
of manageable units of work for which
responsibility can be defined.

277
Thus, the work breakdown structure helps in:
 Effective planning by dividing the work in

to manageable elements which can be

planned, budgeted and controlled.
 Assignment of responsibility for work

elements to project personnel and outside

agencies.
 Development of control and information

system.

278
 Illustrative WBS for Construction Projects

Foundation Exterior Interior Finish

Heating/air
Frame & conditioning Electrical Paint Fixtures
Layout Form install Roof
windows

Pour & Finish

insulate Dry wall Floor Clean up
Install siding Painting covering
Doors & trim

279
C. Gantt Chart
 A Gantt chart is a graphical representation of the
duration of tasks against the progression of time.
 A Gantt chart is a useful tool for planning,
scheduling and monitoring projects.
The advantages of the bar chart are:
• It is simple to understand

• It can be used to show progress

• It can be used for human resource planning

280
Bar or Gantt Chart

281
The disadvantages of the bar chart are:
 It cannot show interrelationship among

activities on large , complex projects;

 There may be a physical limit to the size of

the bar chart, which may limit the size of

the project; and
 It cannot easily cope with frequent changes

or updating.

282
D. Network Techniques
 In this technique, the
• activities,

• events, and

• their relationships

are presented by a network diagram, also

called an arrow diagram.

283
 Why Project Network?
 It is a convenient way to show activities and
precedence in relation to the whole project.
 It is a basis of project planning:
 responsibility allocation
 definition of subcontracting units
 role of different players
 It is the base for scheduling and establishment of
work time tables

284
• Facilitate critical path determination for
management control
– deterministic Vs probabilistic activity times
• Facilitates resource planning for projects
– Project crashing with time cost trade offs
– Resource aggregation
– Resource leveling
– Limited resource allocation
• It can handle very large and complex projects
and it can be easily computerized and updated

285
 Uses for project implementation
 Time table for implementation
 Monitoring and reporting progress
 updating schedules and resources
 Coordination of work with different agencies
 The project network is thus a common vehicle for
planning, communicating and implementing the
right from inception.

286
Drawbacks of network technique

 Being more complicated than the traditional bar

chart it is not easily understood by the project
personnel, and
 It does not define an operational schedule which
tells who does what and when.

287
Basic Network terminologies
 An activity is a task or a job that takes time and
resources
 It is represented in a network by an arrow.
 The arrow doesn’t have any relationship with a
scale.
 Example: Excavate the land, Dig foundations, Lay
foundations, Build a wall, etc.

288
In a network analysis, it is important to establish:
 The activities involved in the project,

 Their logical relationship, e.g. Building a

wall comes after laying the foundation.

 An estimate of the time that an activity is

going to take

289
 An event is a point in time and indicates the start
or finish of an activity or activities, e.g. wall built,
foundations dug, etc.
 An event is represented in a network by a circle.

 The establishment of activities automatically

determines events because they are the start and
finish of activities.

290
 Dummy activity: an activity that does not
consume time or resources.
 It shows merely the dependencies or proper
relationship between activities.
 A dotted arrow represents dummy.

291
Network: this is the combination of activities,
dummy activities and events in logical sequence
according to the rules of drawing networks. Example:

292
Rules for drawing networks:
 A complete network should have one point of
entry – a start event, and one point of exit – a
finish event.
 Each activity must have one preceding (tail)
event and one succeeding or head event.
 Many activities may have the same tail event
and many may have the same head event.
 No activity can start until its tail event is
reached.

293
 An event is not complete until all activities
leading in to it are complete.
 A series of activities which lead back to the same
event are not allowed.
 All activities must be tied in to the network; all
must contribute to the progress of the project,
danglers are not allowed.

294
Activity Identification
 Short description: example, Lay foundation, erect
frame, etc.
 Alphabetic or numeric code: example, A, B, C,
etc., or 100, 101, 108 etc.
 Using tail and head event numbers: example, 1-2,
2-3, 3-4, 3-6, etc

295
Example 1: Organizing a one day seminar
Generate the list of jobs to be done:
a. Decide date, budget , venue for seminar
b. Identify speakers, participants
c. Contact and finalize speakers
d. Print seminar brochure
e. Mail brochures to tentative participants
f. Estimate number of participants
g. Decide menu for lunch, tea and coffee
h. Arrange for catering
i. Arrange projection facilities at venue
j. Receive guests at registration
k. Conduct seminar as per brochure
l. See off guests
296
Code Activity Predecessors
A Decide date, budget , venue for seminar -
B Identify speakers, participants -
C Contact and finalize speakers B
D Print seminar brochure A, C
E Mail brochures to tentative participants D
F Estimate number of participants E
G Decide menu for lunch, tea and coffee F
H Arrange for catering G
I Arrange projection facilities at venue F
J Receive guests at registration E
K Conduct seminar as per brochure H, I, J
L See off guests K

297
 Network of A one day
seminar on PM
10
L

K
9
J 8
A D E
1 4 5
3 I H
B F 6
2 C 7
G

298
Activity Duration
 Deterministic [as in CPM]
 When previous experience yields fairly
accurate estimates of activity duration, [e.g.,
construction activity, market surveys]
 Probabilistic [as in PERT]
 when there is uncertainty in times, as for
instance in R & D activities, new activities
being carried out for the first time.

299
 Deterministic time estimate:
 A single time estimate is used for each
activity. This is taken from experts who have
prior knowledge and experience of the activity.
 Probabilistic time estimate:
 Multiple time estimates -Three time estimates
[Optimistic, Most Likely and Pessimistic] are
commonly used for each activity based on the
consensus of the group.

O  4 ML  P
ExpectedTime
6

300
Critical path
 Is the longest path in the network
 Lower bound on the project duration [the shortest
time in which the whole project can be completed]
 Selective control for management of the project
 Can be determined by:
 Enumeration of all paths in the network
 Event based computations [forward pass and
backward pass]

301
 There may be two critical paths and the critical
path can pass through a dummy.
 The Critical path is determined by selecting the
chain of activities where their ESTs are equal to
their LSTs.
 The other activities with differences in their ESTs
and LSTs are non-critical activities.

302
 Earliest start time (EST): the earliest possible time
at which a succeeding activity start. Calculating
the EST is called the forward pass.

 Latest start times (LST): is the latest possible time

at which a preceding activity can finish without
increasing the project duration. Notes on
calculating LST (termed the backward pass)

303
 Example
Activity Preceding Activity Activity durations (Weeks)
A - 9
B _ 3
C A 8
D A 2
E A 3
F C 2
G C 6
H C 1
J B, D 4
K F, J 1
L E, H, G, K 2
M E, H 3
N L, M 4

Required: Find the critical path and the duration for this project.

304
 Answer 3
M (3)

7
E (3) 8

N (4)
A (9) H (1)
1
L (2)
C (8)
G (6)
4 6
D (2)

B (3) F (2)

2
K (1)
J (4)
5

Critical path : A, C, G, L and N

Project duration : 29 Weeks

305
Exercise 1
Activity Predecessors Duration (days)

A - 2
B - 3
C A 1
D A, B 4
E D 5
F D 8
G C, E 6
H C, E 4
I F, G, H 3

Draw the network and find the critical path?

306
 Float: Float or spare time is associated with non-
critical activities. There are three types of floats:
total floats, free float and independent float.
float
 Total float is the amount of time a path of
activities could be delayed with out affecting the
overall project durations.
 Total Float = Latest finish time – Earliest Start
time – Activity duration
 For example total float for activity C and E is 7-1-
4 = 2 days.

307
 Free float is the amount of time an activity can be
delayed without affecting the commencement of a
subsequent activity at its earliest start time, but may
affect float of a previous activity.
 Free float = Earliest Finish Time- Earliest Start
Time – Activity Duration
 For example free float for activity E is 7-4-1 = 2
days

308
 Independent Float is the amount of time an activity
can be delayed when all preceding activities are
completed as late as possible and all succeeding
activities completed as early as possible.
Independent float therefore does not affect the
float of either preceding or subsequent activities.
 Independent Float= Earliest Finish Time-latest
Start Time-activity Duration
 Example, Independent float for activity E is 7-6-1
= 0 days.

309
Activity Duration EST LST EFT LFT TF FF IF

A 1 0 0 1 1 - - -

B 2 1 1 3 3 - - -

C 3 1 1 4 6 2 - -

D 4 3 3 7 7 - - -

E 1 4 6 7 7 2 2 -

F 2 7 7 9 9 - - -

310
Uncertain activity duration [PERT]
 For each activity in the project three time
estimates are obtained:
 Optimistic times, a
 Most likely time, m
 Pessimistic time, b

311
 PERT time estimates
• Mean of activity duration:
= (a + 4m + b)/6
• Variance of activity duration:
=( (b-a) /6 )2
• Standard deviation of activity duration:
= sq. roots of variance = (b-a )/6

312
Basic PERT Procedure
 Compute mean and variance of all jobs
 Conduct forward and backward pass on the project
network with expected times of all activities
 Identify the critical path
 Obtain variance of critical path by adding variance
of activities.
 Obtain the distribution of the project duration

313
 Make probability statements about the project
 Chances of meeting the target date
 Probability of exceeding a given ceiling date
 Probability that the project duration is confined
to an interval of time.
 Z (standard normal deviate) = [x-q]/SD

314
Multiple time estimate
1
3

C
A D F

0.5, 1, 1.5
2, 3.5, 4 5.6, 7, 15 3, 4.5, 5.4

2
0 4
E
B

5,6,8
4,5,6

315
Activity Expected duration
 a  4m  b 
 ED 
 6 

A 3.33
B 5.00
C 1.00
D 8.10
E 6.17
F 4.40

The critical path B, D and F

Project duration = 5+8.1+4.4 = 17.5

316
Cost scheduling

 The overall objective is to calculate the cost of

various project durations and to find the cheapest
way of reducing the overall duration

317
Multiple Objectives
 Project cost and time are undoubtedly the two
major objectives that project managers strive to
minimize and control.
 Project performance (in terms of both quantum
and quality of work done)needs to be monitored
and controlled.
 There could be a number of attributes that reflect
project performance, time and cost.

318
Conflicting objectives:
 Meeting a certain contracted date
 Minimizing the total project cost
 Direct activity cost
 Indirect activity cost
 Penalties for project delays
 Ensuring that certain activities are not crashed
for quality reasons
 Confining the expenses to a fixed budget

319
 With expenditure of additional resources it is
generally possible to accomplish the activity in a
shorter duration
 The minimum possible duration of the activity is
its crash duration, when its cost is the highest.
 For technological reasons it is not possible to
shorten duration below the crash limit even by
spending more money or resources.

320
• project schedules influence both the direct costs of
activities and indirect costs associated with the
project.
• Activity direct costs:
– Costs associated with the performance of the
specific activity, such as:
 cost of planning and design
 raw materials procurement
 Labor costs
 Manufacturing or processing costs
 Travel, communication and transportation
 Consultation fees, etc

321
Project indirect costs
 Overhead costs such as:
 Managerial services
 Indirect supplies
 Equipment rentals
 Allocation of fixed expenses
 Site office maintenance
 Indirect costs increase with the duration of the
project
322
 Project cost comprises direct costs and indirect
project costs.
 As we shorten project duration, direct costs
increase whereas indirect costs decrease.
 Therefore, there is optimal project duration where
the total project cost becomes the minimum.

323
 Project direct cost- time relationship

 Normal cost: The costs associated with a normal

time estimate for an activity.
 Crash cost: they are caused by extra wages,
overtime and extra facility costs.
 Crash time: the minimum possible time that an
activity is planned to take. Applying extra
resources usually brings this about.

324
 Cost slope: this is the average cost of shortening an
activity by one time unit.

CrashCost  NormalCost
Cost Slope 
NormalTime  CrashTime
 Least cost scheduling or crashing: The process by
which we can find the least cost method of
reducing the overall duration of a project.

325
Heuristic solution procedure:
 Start with the normal project duration
 Obtain the critical paths
 Choose that activity on the critical path which is
cheapest to crash
 Crash that activity till either another path
becomes critical or the activity is fully crashed

326
 Determine the most economical set of activities to
be crashed or relaxed to reduce the durations all
critical paths
 No further crashing is possible when at least one
critical path can not be reduced
 When two or more activities on any path are
simultaneously crashed, some previously crashed
activity on the path may be relaxed.

327
Example: Given the information below, find the maximum length of the
schedule and the minimum cost schedule when the indirect cost is Birr70
per day.

Preceding
Time Cost
Activity
Activity
Normal Crash Normal Crash Slope *

A - 4 2 150 350 100

B - 8 6 100 200 50
C A 2 1 50 90 40
D B 10 5 100 400 60
E B 5 1 100 200 25
F C, E 3 1 80 100 10
Total Direct Cost 580

* Average cost of shortening an activity by one time unit

328
 2

4 13
C (2)
A (4) 4
F(3)
0 5
13 15
18 18
0 0 E (5)

B (8) 3 D (10)

8 8

The critical paths are B and D

Normal project duration is 18 days

329
Step 1: The first is to determine the normal costs and
normal durations of the project.
 The critical paths are B and D

 Normal project duration is 18 days

 Direct Cost = Birr580

 Indirect cost = 70X18= 1260

 Total project cost = Birr1840

330
Step 2: Reduce the least cost slope critical activity B by
two days
 The critical paths B and D (Not changed)

 Project duration 16 days

 Direct cost = normal cost + crush cost =

580+100 = 680
 Indirect Cost = 70X16 = 1120

 Total project cost = 1120 + 680 = 1800

331
Step 3: Since we have fully used the crash time for B,
now crash critical activity D by two days
 Two Critical paths: the first is B and D; and

the second is B, E and F.

 Project duration 14 days

 Direct cost = Cost of step 2 + crash cost =

680+(60*2=120) = 800
 Indirect Cost = 70X14 = 980

 Total project cost = 980 + 800 = 1780

332
Step 4: Three crashing days remain from activity D.
We select one either E or F with the least cost
slope to crash it together with activity D.
Therefore, we can crash two days of activity D and
only two days of Activity F.
 Two Critical paths: the first is B and D; and

the second is B, E and F.

 Project duration is 12 days

 Direct cost = Cost of step 3 + crash cost

(crash cost of D + Crash cost of F) = 800 +

(60+10)*2 days = 940
 Indirect Cost = 70X12 = 840

 Total project cost = 940 + 840 = 1780

333
Step 5: We can further crash by one more day activity D
and E but not activity F
 Two Critical paths. The first is B and D; and

the second is B, E and F.

 Project duration is 11 days

 Direct cost = Cost of step 4 + crash cost

(crash cost of D + Crash cost of E) = 940 +

(60+25)*1 days = Birr1025
 Indirect Cost = 70X11 = 770

 Total project cost = 1025+ 770 = 1795.

334
 Conclusion: The student should note that the total
project cost starts to increase at step 5 when
compared to step 4. Then the optimal solution for
this project is the values of step 6 as follows.
 Project duration = 12 days; Total project cost =
1780

335
Successful Project Implementation
 Project implementation success has been defined
in many ways to include a large variety of
criteria.
 However, in its simplest terms, project success
can be thought of as incorporating four basic
facets.

336
 A project is generally considered to be successfully
implemented if it:
 Comes in on-schedule (time criterion).
 Comes in on-budget (monetary criterion).
 Achieves basically all the goals originally set
for it (effectiveness criterion).
 Is accepted and used by the clients for whom
the project is intended (client satisfaction
criterion).

337
338
Reasons for Project Failure
1. Poor project and program management
discipline
2. Lack of executive-level support
3. No linkage to the business strategy
4. Wrong team members
5. No measures for evaluating the success of the
project
6. No risk management
7. Inability to manage change

339
Success in Project Implementation
1. Commitment
2. Simplicity of Design
3. Careful Preparation
4. Good Management

340
Problems in Project Implementation
1. Financial Problems
2. Management Problems
3. Technical Problems
4. Political Problems

341
Session 9

Project Human Resource

Management

342
 መልመጃ -4
1. ግቦቹ በምክንያት-ውጤት መተሳሰራቸዉን በማረጋገጥ
ለየትኩረት መስኩ የስትራቴጂ ማፕ አዘጋጁ፤
2. ሁሉንም የትኩረት መስክ ግቦች ያጠቃለሉ የተቋም
ስትራቴጂያዊ ግቦች ቅረጹ፣
3. የተጠቃለሉ የተቋም ግቦች መግለጫ /Objective
commentary/ አዘጋጁ፤

343
Reflection
1. What is Human Resource Management?
2. What do you think are the major areas of Project
Human Resource Management?
3. Can you list some of the problems related to Project
Human Resource Management and what do you
think are the reasons for this problems? Suggest
solutions to solve the problems.

344
What is HRM?
HRM is the management of people working in an


organization, it is a subject related to humans.

It is the management of humans or people.


HRM is a managerial function that tries to match



an organization’s needs to the skills and abilities

of its employees.
People are important part of a project’s success.


345
Process of Project HRM
 Project Human resource management includes the processes
required to coordinate the human resources on a project.
The main processes involved in a project human resource


management are:
a) Human resource planning: identifying, documenting, and
assigning project roles, responsibilities, and reporting
relationships.
b) Acquiring the project team: getting the human resources
needed assigned to and working on the project.
c) Developing the project team: developing individual and
group skills to enhance project performance.
d) Managing the team: managing the whole process of the
project team

346
Major Activities of Project HRM
1. Human Resource Planning
2. Acquiring the project staff
3. Developing the Project Team
4. Managing the Project Team

347
Human Resource Planning
 The process of analyzing staffing needs and
identifying actions to satisfy these needs over
time.
 It must support the implementation of strategies
and advance the accomplishment of key
objectives.

348
Human Resource Planning
 It is having the right people available to do the
required work essential to the success of any
strategy, and
 It is the responsibility of all managers to ensure
that all jobs in their work units are filled with
people who can best perform the required tasks.

349
 Steps in the HR Planning Process
 Review organizational strategies and
objectives.
 Establish and refine HR objectives and
policies to compliment the strategic plans.
 Establish HR needs……..via
 Job Analysis which results:
1. Job Description
2. Job Specifications.
350
Steps in the HR Planning Process
 Forecast....Project future staffing requirements
and anticipate internal and external supply.
 HR Audit
 Replacement Charts
 Succession Tables
 Take action…recruit - terminate - transfer -
promote - whatever….

351
Attracting A Quality Workforce
 The Recruiting Process
 Advertising of job vacancy.
 Preliminary contact with potential job

candidate.
 Initial screening to create a pool of
candidates.

352
Attracting a Quality Workforce
 Recruiting Practices
 External
 Internal
 Traditional
 Realistic

353
Attracting a Quality Workforce
 Making Selection Decisions
 Application Forms
 Interview or Site Visit
 Employment Tests (Validity and Reliability)
 Reference Checks
 Physical Examinations
 Analysis and Decision

354
Developing a Quality Workforce
 SOCIALIZATION
 A process of systematically changing the
expectations, behavior, and attitudes of a new
employee in a manner considered desirable
by the organization.

355
Developing a Quality Workforce
 SOCIALIZATION
 It begins with the initial Employee
Orientation and continues during later
training and development activities as well as
day-to-day supervisor-subordinate relations.

356
Developing A Quality Workforce

 Training and Development

 A set of activities that provides learning
opportunities through which people
acquire and improve job related skills.

357
 Developing a Quality Workforce
 Types of Training
 On-the-Job
 Job Rotation - Coaching - Apprenticeship

Modeling - Mentoring
 Off-the-Job
 Management Development

 Management Simulation Games

358
 Developing a Quality Workforce
The Role of Performance Appraisal

 The process of formally assessing someone's

work and providing feedback on performance.

359
 Developing a Quality Workforce
 Purposes of Performance Appraisal
 Evaluation: Letting people know where they
stand relative to objectives and standards.
 Development: Assisting in the training and
continued personal development of people.

360
Developing a Quality Workforce
 Performance Appraisal Methods
1. Graphic Rating Scales
2. Narrative Technique
3. Behaviorally Anchored Rating Scales
4. Critical-Incident Techniques
5. Multi-person Comparison
6. 360 degree appraisal
7. BSC

361
Developing a Quality Workforce
 Problems in Performance Appraisal
1. Recency bias
2. The same as to me
3. Different from me
4. Central tendency
5. Bias
6. Leniency
7. Strictness

362
Maintaining a Quality Workforce
 Career Development
 A Career is a sequence of jobs and
work pursuits constituting what a
person does for a living.
 A Career Path
 A sequence of jobs held over time
during a career.

363
Maintaining a Quality Workforce
 Career Planning
 Is the process of systematically
matching career goals and individual
capabilities with opportunities for their
fulfillment.

364
Maintaining a Quality Workforce
 Career Stages
 The Move to Early Adulthood
 Mid-life Transition
 Middle and Later Adulthood
 A Career Plateau

365
Maintaining a Quality Workforce
 Retention and Turnover
 Promotions
 Transfers
 Layoffs
 Retirements
 Early Retirements
 Firings

366
367
Maintaining a Quality Workforce
 Managing Compensation and Benefits
 Base Compensation
 Fringe Benefits
 Competitive Structures
 Flexible Programs

368
 Maintaining a Quality Workforce
 Labor-Management Relations
 Labor unions are organizations to which
workers belong and which collectively deal
with employers on their behalf.
 Typical Provisions of a Union Contract
 Job Specification and Work Rules
 Seniority Provisions
 Compensation
 Grievance Mechanisms

369
 Project Team Building and Conflict
Management

370
Contents
 Team Building (Human Resource)
 Conflict management

371
What is Team?
 “A team is a group of people working together
towards a common goal.” (Clark, 1994)
 A team is a small number of people with
complementary skills who are committed to a
common purpose, performance, goals, and
approach for which they hold mutually
accountable.
 Teams have become an essential part of the way
business is being done.
 Synergy is the property where the whole is greater
than the sum of its parts.

372
 Teamwork in projects
Projects are managed by people working together
as a team.
In a team,
 People depend on each other;

 May or may not work in the same physical

location,
 Combine to achieve something together

373
Team Building
 The process of working with a team to clarify its
task and how team members can work together to
achieve it.
 A strategy that can help groups to develop into a
real team is “team building”

374
 Setting and maintaining the teams objectives and
Key actions in Team Building
standards
 Involving the team as a whole in the achievement
of objectives
 Maintaining the unity of the team
 Communicating efficiently with the team
 Consulting the team – members before taking any
decisions

375
 Nature
The of project
project team a new, temporary group
team is usually
with out previous experience of working together.
 Complex projects require complex teams with a set
of work rules and norms.
 High degree of learning and interdependency
requires well functioning and cohesive teams.

376
Team building processes
 Initial project team assembly
 introductions
 goal explained
 rough network proposed
 Some issues debated
 who else should be on the team?
 without concern for budget restrictions, what
would each member contribute?

377
 The group would construct an idealized network
(one they would implement if they could do what
they wanted)
 This would be done with the participation of team
members, giving them an opportunity to know
each other’s views.
 Involvement of people right from the goal setting
stage nurtures commitment & continuity.

378
 Iterate towards a realistic plan negotiations with
each other and the project team
 Here the practical constraints and limitations
would be brought up by the members from their
own areas of expertise and experience
 This is the participative process
 Continue the process of negotiation until a
feasible solution is found (operationally viable
and within the budget)
 This network becomes the initial project plan
with which project execution begins.

379
 Aspects offrom
When people Team Development
different departments are
assembled for a project they form a temporary social
system and as it is new there is no system of customs
that indicate proper behavior while working on that
project.
 Each person brings him/her own set of customs,
beliefs and perceptions to the project.

380
Operating culture
 Group “mind”
 Common set of objectives and motives
 Explicit Vs implicit contract
 Heterogeneous group has no communality of
motives
 The initial project plan is the explicit contract for
the team. Working towards building that network
helps to develop the implicit contracts which are
necessary for a smooth working team.

381
Group attributes
 Members perceive themselves as in a group and
they know who is in the group and who is not.
 There is at least one objective that all the members
agree upon, although each individual member may
have a multitude of other objectives.
 There is a need for interaction because of the
interdependencies of the people in the group as they
work towards the agreed upon objective.

382
 Group performance
Studies indicate that heterogonous groups tend to
be more productive than homogenous groups.
 A team is a heterogeneous group with
complementary rather than competing skills in the
members.
 It is a temporary alliance created for a specific
purpose or objective.

383
Key factors to successful performance of a
team – S.C.O.R.E

 Strategy
 Clear Roles and Responsibility
 Open Communication
 Rapid Response
 Effective Leadership

384
Strategy:
 Shared purpose
 Clearly articulated values and ground rules
 Understanding of risks and opportunities facing the
team
 Clear categorization of the overall responsibilities
of the team

385
Clear Roles and Responsibilities:
 Clear definition of roles and responsibilities
 Responsibility shared by all members
 Specific objectives to measure individual results

386
 Open communication:
 Respect for individual differences
 Open communication environment among team
members
 Rapid response:
 Rapid response to the team’s problems
 Effective management to change in the internal
and external environment

387
• Effective Leadership:
 Team leader who is able to help members achieve
the objective and build the team
 Team leader who can draw out and free up the
skills of all team members, develop individuals

388
“Coming together is a beginning
Keeping together is progress; and
Working together is success” Henry Ford

389
Stages in Team Building
Forming

Storming
Norming

Performing

Adjourning

390
Stages in team building ...
 Forming: Provide clear direction to establish the
team’s purpose, setting goals, etc.,
 Storming: Provide strong, hands-on leadership to
keep people talking and task-focused
 Norming: Codes of behavior becomes established
and an identifiable group culture emerges. People
begin to enjoy each other’s company and appreciate
each other’s contributions.

391
 Performing: Teams that reach this stage achieve
results easily and enjoyably. People work together
well and can improve systems, solve problems and
provide excellent customer service.
 Adjourning: Temporary project team reaches this
stage; celebrate their team’s achievements.

392
393
Characteristics of an Effective Team
 Interdependence
 Team leaders have good people’s skills
 Common vision
 Willingness for contribution
 Relaxed climate for communication
 Readiness to take risk
 Clear objectives
 Clear definition of members’ roles
 Open communication and information flow
 Motivation
 Trust, acceptance and support among members

394
Characteristics of an Effective Team…
 Defined roles
 No personal attack
 Creating new idea
 Ability to influence
 Shared leadership

395
Team Problems
 Drop in productivity or quality
 Plops formation: Litter interaction with new
members
 Pinches: frustrations when expectations are not met.
 The Abilene Paradox: lack of consensus.
 Clique formation
 Groupthink: members feel invulnerable to error

396
Causes for Team Problems
 The goal is not specific enough
 Absence of clearly defined roles
 Absence of a charter or Poor team charter
 Poor team leadership
 Unclear working agreements
 Mismanaged conflict
 Lack of resources
 Failure to integrate the work of the team with the
organization

397
Understanding Team Members:
The four Johari Window
perspectives

398
Leadership roles in team work
 Project Management is more of the mgt of
the team than the management of the tasks.
 The team goes through various stages in its
development and maturity

399
Task relevant maturity levels
M1 Less maturity level
M4 Maximum maturity level

M1= group can not accomplish the task without

direct supervision
M4= group has matured to accomplish the task with
a minimum of supervision

400
Leadership style
 Style 1 :Structuring:
• Organize and direct the work of others
• make each person accountable
• demonstrate
 Style 2 : Coaching:
• tutoring
• Joint effort
• Role model
401
 Style 3 : Encouraging
• greater responsibility with doer
• recognize and praise good work
 Style 4 : Delegating
• assign task responsibilities and let others carry
it out
• motivate by giving control and respect

402
 Task relevant maturity level Vs
leadership style.
M1 S1 [ less matured employees need
structuring]

M4 S4 [ more matured staff need

delegation]

403
Conflict Management
 Conflict is the contest between people with opposing
needs, ideas, beliefs, values, or goals.
 It occurs within all organizations.
 It is an important element of an organization’s
development, and can serve as a means to build
organizational capacity, and to generate creative
ideas.

404
 Actually, conflict can have both positive and
negative outcomes.
 Conflict is positive when it causes a broadening of
ideas, stimulates innovation and creativity, and
leads to improved results of a project.
 Conflict can be negative when it leads to tension,
frustration, confusion, and less quality and
productivity of a project.

405
In general, all potential conflict fits one of three
categories:
 Goal-oriented conflicts are associated with end
results, performance specifications and criteria,
priorities, and objectives.
 Administrative conflicts refer to the
management structure and philosophy and are
mainly based on definition of roles and
reporting relationships and on responsibilities
and authority for tasks, functions, and decisions.
 Interpersonal conflicts result from differences
in work ethics, styles, egos, and personalities of
the participants.
406
 Sources of Conflict and their Definitions
Sources of Conflict Definitions

Conflict over Project

View of project participants differ over
Priorities sequence of activities and tasks.
Conflict over Administration
Managerial and administrative oriented
Procedures conflicts over how the project will be
managed
Conflict over Technical Disagreements over technical issues,
Opinions and Performance performance specifications, technical trade-
Trade- offs offs.
Conflict over Human Power Conflicts concerning staffing of project team
Resources with personnel from other areas.
Conflict over Cost Conflict over cost estimates from support
areas regarding work breakdown structures.
Conflict over Schedules Disagreements about the timing, sequencing,
and scheduling of project-related tasks. 407
 Effective conflict management involves analyzing a
conflict, understanding the dynamics between the
parties in conflict, and determining the appropriate
method of conflict resolution.
 In the absence of confidence and skill in conflict
management, most public officials resort, often
counterproductively, to the use of power,
manipulation and control. Possessing confidence
and skill, one can effectively exercise the available
options for managing conflict.

408
 Conflict Management Style
Style Description Effect
Avoiding Retreats from an actual or Does not solve the
potential conflict situation problem
Smoothing Emphasizes areas of agreement Provides only short-
rather than areas of difference term solution
Compromising Searches for and bargains for Provides definitive
solutions that bring some degree resolution
of satisfaction to all parties
Forcing Pushes one’s viewpoint at the Hard feelings may
expense of others; offers only come back in other
win-lose situations forms
Collaborating Incorporates multiple viewpoints Provides long-term
and resolution
insights from differing
perspectives; leads to consensus
and commitment
Problem Solving Treats conflict as a problem to be Provides ultimate
solved by examining alternatives; resolution
requires give-and take attitude 409
 Conflict can be healthy if it is managed effectively.
Conflict management requires a combination of
analytical and human skills.
 Every project participant should learn to resolve
project conflicts effectively. Good conflict
managers work at the source of conflict.
 To resolve it permanently, they must address the
cause of the conflict and not just the symptoms of
it.

410
Recapitulate
Session 1: Concept of Project
Session 2: Stakeholder and Community Participation in Project Planning and
Management
Session 3:Project Identification
Session 4:Logical Framework Analysis
Session 5:Project Proposal Formulation
Session 6:Project Preparation (pre-feasibility and feasibility study)
Session 7: Mainstreaming Cross Cutting Issues in project Planning and Management
Session 8: Project Organization and Implementation
Session 9: Project Human Resource Mgt. and Team Building
Session 10: Project Procurement and Contract Administration
Session 11: Monitoring and Evaluation

411
412
What do you learn from this?

413
 Session 10
Project Procurement and Contract
Administration

414
Contents
Procurement


Contract


E-procurement


Ethics in Procurement


Sustainable procurement


415
 Investigative Questions
1. What is procurement? Purchasing? What is the
difference between the two?
2. Explain the procedures of project procurement in
your organization or any organization you are
familiar with?
3. Discuss the major risks in project procurement?
4. Compare and contrast international project
procurement and domestic project procurement.

416
Procurement
 Procurement: obtaining goods, works, consultancy or other
services through purchasing, hiring or by any other
contractual means.
 Public procurement: procurement by a public body by
public fund .
 Public procurement in modern times is an engine for
economic growth and development as it stimulates domestic,
regional and international trade.
 Procurement reform is also a crucial factor in good
governance.
 Well-functioning, competitive, transparent and fair public
procurement systems give satisfaction to suppliers and
contractors.

417
Procurement…
1. Goods: raw materials, products and equipment and
commodities in solid, liquid or gaseous form, marketable
software and live animals as well as installation, transport,
maintenance services
2. Works: construction, reconstruction, demolition, repair or
renovation of a building, road, or structure
3. Consultancy service: a service of an intellectual and
advisory nature provided by consultants using their
professional skills to study and organize specific projects,
advise client, conduct training and transfer knowledge
4. Other services: maintenance, security, janitorial, electricity,
telecommunication and water supply services.

418
Procurement Cycle and Process
 The procurement cycle in government financed projects and
programs consist of the following:
1. Procurement Plan
2. Selecting methods and tools
3. Bidding process and contract agreement
4. Contract management
5. Storage
6. Issue/ Distribution
7. Counting and Disposal
8. Evaluation

419
 The procurement process consists of the following major
steps.
1. Procurement Planning
2. Requirement Definition
3. Sourcing
4. Selection of a procurement method
5. Preparation and issuance of bidding document
6. Receipt and Opening of offers
7. Evaluation
8. Contract award and finalization
9. Contract management

420
 Basic Principles of Public Procurement
The procurement principles are in most of the cases


follow international best standards.

The World Bank procurement guideline sets four


general considerations that guide Bank procurement

policy:
1. Economy and efficiency
2. Equal opportunity to compete for all eligible bidders
from all countries
3. Development of domestic contracting and
manufacturing in borrowing countries
4. Transparency in procurement process

421
Basic Principles of Public Procurement
Procurement in the UN system is also guided by the


following principles:
1. Promotion of UN objectives
2. Fairness, integrity and transparency through competition
3. Economy and effectiveness
4. Best value for money.
N.B. The ultimate objective of procurement in the UN
system is to add value to the organization in fulfilling its
mandate, goals and objectives. To a large extent the
other three principles contribute to this overarching
principle.

422
 The principles and objectives pursued by the
procurement reform process in COMESA countries
have included: economy and efficiency; value for
money; enhanced participation and competition;
economic development; fairness; transparency; and
accountability.

423
 The following are the major principles of
Ethiopian Federal Government procurement:
1. Economy and efficiency in use of public funds:
VFM principles
2. Non discrimination
3. Transparency
4. Accountability

424
Basic Public Procurement Rules and
Procedures

 The Ethiopian Federal Government Procurement and

property Administration Proclamation No 649/2009 Articles
22-34 contains basic public procurement procedures such as
the following.
 Procurement plan
 Records of procurement
 Non-discrimination
 Preference
 Form of communications
 Language
 Qualification of candidates
 Technical specification

425
 Rejection of bids, proposals and quotations
 E-procurement
 Rules of ethics:
 Conflict of interest
 Equal opportunity of competition
 Any gift or offer
 Concern for public resources
 Keep in secret any confidential information
 Methods of procurement
 Public private partnership

426
Procurement Planning
 Procurement planning is a critical element in the procurement
process.
 Many procurement problems arise at the time of selecting
contractors or contract administration because of the failures
of procurement planning at the outset. Proper procurement
planning must be fully integrated with the strategic planning
and budgeting process of the public administration.
 Procurement planning is specifically designed to assure that
funds are available for the procurement.
 Procurement planning is an annual event and the procurement
plans must be approved together with the budget estimates in
the context of long-term strategic development plans and
multi-year demand planning.

427
 For project procurement (e.g., works contracting, consulting
services) the planning process is more complicated.
 Planning for projects involves careful attention to the choice
of procurement method, the types of contract to be utilized,
and the schedule for project implementation, all coordinated
with the availability of funds to pay contractors on a timely
basis. The annual procurement planning process should be
strongly linked to the annual budget preparation process. The
annual procurement plan should be published in the
newspaper or on a website to alert the community of
suppliers and contractors to the procurement opportunities
anticipated in the upcoming year.

428
Key activities in a Procurement Cycle

429
Steps/stages of the bidding process

430
Procurement Methods
 The differences between the methods are significant
in terms of formality, level of competition, duration,
and complexity for bidders and the procuring entity.
 According to the World Bank procurement guideline, open
competition is the basis for efficient public procurement.
 The bank requires its borrowers to obtain goods, works and
non-consultancy services through International Competitive
Bidding.

431
 Proclamation No 649/2009 Article 33 contains six
approved methods of public procurement:
1. Open Bidding
2. Restricted Tendering
3. Request for Proposal
4. Two stage Bidding
5. Request for Quotation
6. Direct procurement

432
Open Bidding

 Except as otherwise provided in the proclamation,

public bodies shall use open bidding as the preferred
method of procurement
 Public bodies shall not split procurement
requirements for a given quantity of goods, works or
services with the intention of avoiding the preferred
method
 It may be National Competitive Bidding (NCB) or
International Competitive Bidding (ICB)

433
Restricted Tendering

 It includes both national and international.

 Selected or limited tendering is used when the
goods, works or services by reason of the highly
complex or specialized nature, are only available
from a limited number of suppliers.

434
 Contract administration
What is Contract Administration?
Contract is an agreement between two or more
parties where by each party promise to do, or not to
do something .
A transaction involving two or more individuals,
where each has reciprocal rights to demand
performance of what is promised.

435
Contract administration… cont’d
 It begins when the notice of contract award has been
given to the selected contractor and the procurement
contract signed.
 The award must be notified to the successful bidder prior
to the expiry of the period of bid validity.

436
Contract administration… cont’d
 Contract administration includes the organizational
dimension to :
 contract management;
 contract terms(the things you agree to do);
 payment and monitoring;
 the resolution of disputes;
 contract modification, termination, breach and record-
keeping.
 The important practices of effective contract management
are nonetheless critical to the successful completion of the
procurement objective.

437
Contract administration … cont’d
 Contract management refers to the performance
of the contract by the contractor and the
procuring entity, during which the contractor
performs the agreed upon scope of work and the
procuring entity, monitoring that performance,
provides payments on timely basis.
 Contract management is critical importance to
the proper functioning of the procurement system
and is essential to the achievement of the
purposes of the particular procurement action.

438
Contract administration…
 Contract administration is one of the most
neglected areas in public contracting.
 The majority of the focus is placed on the
procurement process.
 After the contract is awarded that the real benefits
of undertaking the procurement process can be
obtained, so more attention needs to be placed on
ensuring that the contract is implemented as
intended and agreed.

439
Contract administration… cont’d
 Contract award marks the beginning of the contract
administration phase.
 Contract administration deals primarily with the
management of risks in the post award period.
 Its main purpose is to monitor performance to
ensure that the objectives of the contract are met on
time and within budget and also to detect anything
that might go wrong and find a remedy (including
suspension or termination of the contract) before it’s
too late.

440
Contract administration… cont’d
 It is misleading and risky to believe that only
procurement practitioners (through the procuring
entity) are responsible for contract
administration.
 In fact, once a contract is awarded, the procuring
entity is too far removed from where the actual
implementation of the contract takes place to
effectively monitor the performance of suppliers,
contractors and service providers.

441
Contract administration…cont’d
 To be effective, contract administration should be a joint
effort and not the responsibility of only one entity.
 The procuring entity processes requests for goods and
services before the contract is awarded.
 Contract administration reduce the risk of failure to
successfully complete the contract and to fulfill the
corresponding need.

442
Contract administration… cont’d
 The bulk of contract administration (overseeing
performance) responsibility should be with the
entity that is closest to where the contract is
executed because: it is there that the opportunity
exists for early detection of any breach of contract,
substandard performance of goods received or
services rendered.

443
Challenges of contract administration
 The main challenge for the government in
contract management is to properly be grateful
for the importance of it.
 Often procuring entities give full attention to the
contract selection process, but then walk away
from the procurement once the contractor is in
place.
 The government should employ adequate staff
and resources to the phase of contract
management, unless this happens the
government fails at a risks in procurement and
the additional time and money to go through the
process again.
444
Types of contracts for consultancy services
1. Lump Sum (fixed price)
2. Time Based
3. Percentage contract
4. Framework agreement

445
Types of contract for works

Factors affecting the choice of Contract Type:

[Link] nature and complexity of the works
[Link] size and duration of the contract
[Link] degree of risk
[Link] constraints
[Link] previous experience of the Employer

446
 Lump sum
 All-inclusive price contracts
 Used for small, short duration( 1-2 years)
 Well defined, detailed works and building
constructions
 Not subject to large quantity variation or
conditions of high risk
Examples: small bridges, rural schools, clinics,
housing

447
 Lump sum… cont’d

Advantages of LS contract:
1. Fixed sum for budgeting
2. Easy to administer
3. Little or no measurement
4. Less documentation
Disadvantages:
•Inflexible to changes/ high risk

448
 Unit rate
• Unit Rate (admeasurements)
• Most common for infrastructure construction of
short or long
Examples: transportation, power, irrigation, water
supply)
Advantages:
• Equitable basis for bidding
• Periodic payments follow contractor’s cash flow
• Normally little difference between estimates, bids
and final cost

449
 Unit rate … cont’d

Disadvantages:
Preparing and monitoring detailed BOQ
Cost Reimbursable plus fee(Cost Plus)
Open-ended emergency situations( earthquakes,
floods)
High risk

450
Contract Administration…cont’d

Contract Administration: Best Practices

To implement projects/ to satisfy needs
To control performance/ outputs, quality, budget, time
To control key elements of the contract such as plan
performance, duties and responsibilities, risks,
standards, payments and securities, inspections,
reports, forecasting of problems

451
Contract Administration: Best Practices
Methodology: systematic, proactive, teamwork
Public bodies have to record the date on which the actual
implementation of the contract has began upon fulfillment of
precondition set forth in the contract for the actual
implementation of the contract
Payment for construction works shall be made on the basis of
the progress of work against payment certificate to be verified
by the consulting engineer supervising the work.

452
Contract Administration: Best Practices
 For all construction work 5% shall be retained from
payment indicated in each payment certificate.
 50% of the amount retained pursuant to the above, shall be
released up on completion of the works and issuance of
provisional acceptance certificate.
 The remaining 50% shall continue to be retained for one
year period of warranty.
 The consulting engineer shall complete verification of the
payment certificate prepared and submitted by the
contractor within seven days of its receipt.

453
 Contract Administration…

Contract Administration: Best Practices

The Public Body shall effect the payment within 14 working
days of receipt of the payment certificate verified by the
consulting engineer.
The consulting engineer shall be responsible for any request
made by the contractor to receive additional payment from the
procuring entity due to the consulting engineer’s failure to verify
the payment certificate within prescribed period.

454
Risk Management in Procurement
and
E-procurement

455
456
What is Risk?
 It is possibility that something bad or
dangerous may happen.
 It is the possibility that an expected outcome
will not occur, or that an unforeseen event
usually deleterious will occur.
 It can arise from limited information,
experience and knowledge on which to base
decisions, or uncertainty of future event.

457
What is Risk Management?
 Risk management is the process of identifying risks,
analyzing their consequences, and devising and
implementing responses to ensure that procurement and
service delivery goals are achieved.
 The aim is to achieve more reliable planning, improved
decision making and greater certainty of outcomes.
 By managing risk, agencies or government bodies can
identify potential problem areas that may adversely
affect the desired procurement outcomes, and try to
reduce the uncertainty of outcomes and economic losses.

458
The main areas that give rise to procurement risk and ethical
concerns are:
1. Gifts and benefits
2. Consistency and continuity of process
3. Communication with bidders
4. Conditions of bid and deadlines
5. Invitation to bid documentation
6. Finalizing the contract
7. Briefing sessions
8. Documentation
9. Conflict of interest
10. Supplier ethics
459
The main areas that give rise to procurement risk and ethical
concerns are:
1. Gifts and benefits
2. Consistency and continuity of process
3. Communication with bidders
4. Conditions of bid and deadlines
5. Invitation to bid documentation
6. Finalizing the contract
7. Briefing sessions
8. Documentation
9. Conflict of interest
10. Supplier ethics
460
 1. Gifts and benefits:
 Public officials who involve in any aspect of a procurement
process are strongly advised not to accept gifts or benefits,
for the reason that it can be or may be seen as a means of
influence to compromise or appear to compromise
integrity and impartiality.
 Potential suppliers should be aware of that public body’s
officers (and consultants, advisors and sub-agents) must not
solicit and generally may not accept a gift or benefit.

461
2. Consistency and continuity of process:
 Application of the principles of competitive neutrality and
equity requires that all bidders be given the same access to
commercial information, and the same guidance and
instructions on the conduct of the bid/offer process.
 Bidding procedures and evaluation processes should be
applied consistently so as to prevent any actual or
perceived discrimination.

462
3. Communication with bidders:
Clear procedures need to be established for meetings with
bidders to ensure a uniform approach that sends the same
messages to all participants.
Best practice procurement uses detailed meeting agendas and
authorizes particular procurement personnel to speak on
specific subjects.
Procedures should be in place to ensure that written
communications with bidders are prepared and signed off at an
appropriately senior level.

463
4. Conditions of bid and deadlines:
 Adherence to established conditions of bid and closing
date deadlines is essential in maintaining the integrity of
the procurement process.
 Bidders can be seen to obtain an unfair advantage if they
are given more time to prepare their offer.
 If bids are opened and distributed ahead of the closing
date, there will be the risk that details of those offers
could be passed to other potential bidders.
 Offers should be held securely until the deadline for
receipt has passed.

464
 5. Invitation to bid documentation:
 Documentation including conditions of offer and supply,
specification, and evaluation criteria should not be changed
during the course of a procurement process, particularly if no
likelihood of change has been indicated in the
documentation.
 In the invitation documentation the underlying principle is
that suppliers are entitled to submit proposals on the same
supply and evaluation basis, and get the same information on
which to structure their offers.
 Where changes are proposed, these should be authorized by
appropriate procurement staff or committee following full
consideration of all aspects.
465
6. Finalizing the contract:
During the evaluation of offers, procurement staff are likely to
be in frequent contact with members of the front-running
offering teams.
To prevent any risk of ‘drifting into a contract’ through
discussions with a bidder , nothing must be communicated,
explicitly or implicitly, to indicate where they stand or that they
are successful until all relevant evaluation activities, sign-offs
and approvals have been obtained.
Clear procedures for handling communications with bidders
are needed.
The Request for Offer should also specify how and when the
contract will be concluded.

466
7. Briefing sessions:
Briefing sessions may be held at different times during the
course of procurement.
Such meetings should be conducted with appropriate notice
and other arrangements to enable effective participation.
All bidders should be notified of the outcome at the same time
the result of a procurement process is announced.
At all times the procurement team must avoid revealing
information which may be seen to compromise the
confidentiality or commercial interests of any stakeholder.

467
8. Documentation:
Good record keeping is essential throughout the procurement
process.
The outcomes of key discussions and data must be documented
and filed in a form which allows those undertaking subsequent
reviews of the process to clearly understand how, why, when
and by whom the key decisions were made.

468
 9. Conflict of interest:
 Conflict of interest is any personal business or professional activity that would
create a conflict between personal interests and the interests of the employer.
 It is also important to note that employees, (and directors and members of the
board of directors) should also avoid any activity that may be perceived as a
conflict of interest.
 Managing conflicts of interest are vital in any procurement activity.
 Family or personal relationship and investment pose potential conflicts of interest
that are especially relevant to procurement.
 Family/personal relationships is a conflict of interest takes place if a family
member or personal friend has a financial stake in, or is part of the management
of, a company that is a supplier or potential supplier.
 Investments: If an employee is a purchaser for an organization and is also an
investor in a company that is a supplier for goods and services to the same
organization, a conflict of interest arises.

469
 10. Supplier ethics:
 A focus on internal ethical issues should not overshadow the
importance of external ethical issues related to the business
practices, past conduct and performance of bidders.
 Regardless of how well the procurement process is conducted,
a contract should not be awarded to a firm which has a record
of illegal or unethical activity.
 Depending on the significance of the contract, consideration
should be given as to whether it would be appropriate to
conduct probity checks on suppliers.
 Some of the unethical practice on the supplier side includes:
fixing prices, collusion among bidders, and upgrading product
samples with the intention of supplying lower grade products.

470
Risk Management has Seven stages:
1. Establishing the risk context
2. Identifying potential risk
3. Analyzing the risk
4. Assessing and prioritizing the risk
5. Treating the Risk
6. Preparing and implementing treatment plans
7. Monitoring and reviewing

471
1. Defining the nature and scope of procurement
2. Relevant goals and strategies
3. PESTLE factors:
a. Political consideration, such as government policies in the countries
from which they are buying.
b. Economic considerations, regarding the employment of finite
resources and the effect on supply and demand.
c. Socio-cultural considerations, for the people employed to produce
and manufacture the materials and products along with the
customer base.
d. Technological advancements and the possibility of alternatives
e. Legal requirements and contractual documentation and processes.
f. Environmental considerations and policies of the suppliers and the
procurement organization.

472
4. Expectations of stakeholders such as beneficiaries, local
communities,
 government agencies and service providers
 Developing risk criteria such as strategic concern,
efficient completion, cost control, quality, compliance,
delivering on time, budget
 Break down the procurement activity into key element

473
 What can happen? Compile a list of the possible events that
could have an unwanted or unintended effect on the
procurement.
 Consider the full life-cycle.
 How and why could it happen? Explore the events
identified in the first question for their possible causes and
implications.
 Checklist developed through brainstorming or workshops
are useful for procurement involving new or unusual risks
 Use all the available data sources to understand the risk ,
historical performance.

474
 How likely is the event?
 What are the consequences of the event?
 What is the overall risk level?

475
 Categorization of risks as;
 Low risks,

 Moderate, and

 High risks.

 The output is a prioritized list of risks to be treated, risks to

be accepted and monitored, and acceptable risks for the
procurement

476
 Avoid the risk
 Transfer the risk to another party or insurance
 Accept the risk
 Reduce the likelihood of occurrence
 Reduce the consequences by contingency planning, contract
terms and conditions, inspections and checks to detect
compliance, and recovery programs
 Evaluate and select the appropriate options

477
 Actions and expected outcomes
 Timetables
 Resource budgets
 Responsibilities
 Reporting requirements
 Monitoring requirements

478
 Few risks remain static.
 Ensure its ongoing relevance and amend if circumstances
change.
 If the procurement is of high value, strategic or complex, the
risk management plan should specify and detail the review
process.

479
No. Procurement Process Potential Risk Likely Possible
Consequences Action

1
2
3
4
5
6
7
8
9
10

480
481
 E-procurement involves electronic data transfers to support operational,
tactical and strategic procurement.
 E-procurement serve as a means of improving procurement efficiency
and effectiveness.
 Procurement officers and managers can make contribution to decisions
about investments in, and configuration and use of e-procurement tools
by:
1. having an understanding of the various e-procurement applications;
2. identifying the procurement processes that are effectively
supported;
3. understanding the sources of benefit of e-procurement;
4. identifying the risks associated with the adoption of e-procurement;
5. contributing to the development of e-procurement tools.

482
Some of the tools and applications in e-procurement include:
a) electronic systems to support traditional procurement;
b) EDI (electronic data interchange);
c) Enterprise Resource Planning (ERP) systems;
d) electronic mail (e-mail);
e) extensible markup language (XML);
f) world wide web (www).

483
Some of the internet tools that replace traditional procurement are:
1. E-sourcing
2. E-tendering
3. E- auctioning
4. E-ordering and web-based ERP
5. E-information

484
 The potential benefits we may obtain from e-procurement in terms of the
public procurement principles and objectives are:
1. Value for money: by attracting many bidders procuring organizations can
optimize both price and quality of what they buy;
2. Economic development: by taking up e-commerce itself, the public sector
can drive the uptake by the private sector, especially small and medium
enterprises of e-commerce. Thus it helps to propel the economy into areas
of growth and modernization;
3. Transparency: one of the main advantages of e-procurement is that it boosts
transparency in a procurement system, since the inherent nature of e-
procurement is openness and maximization of publicity and access to
information;

485
4. Accountability: by promoting transparency and record keeping, e-
procurement helps to promote accountability of participants for the
action that they take;
5. Economy and efficiency: by reducing transaction costs, e-procurement can
decrease the costs of conducting procurement transactions in terms of
money that we spend to run the proceedings (e.g., avoidance of
expensive print-media advertisements, replaced by web publication), as
well as time and human resources required ; and
6. Integration and mainstreaming of the procurement system with other key
systems: a prime example of this is the potential for linking procurement
processes with integrated financial management information systems.

486
Electronic Data Interchange
EDI is an application whereby electronic messages can be


exchanged between computer programs of two separate

organizations.
Some features of EDI include:


1. Messages are exchanged in groups, known as batches.

2. Messages can automatically be sent, transmitted and
stored between computers without retyping or keying
data.
EDI has to be implemented by each pair of organizations


(sender and receiver) who wish to use it.

487
Enterprise Resource Planning system
ERP systems are management information systems that


integrate and automate many of the business practices

associated with the operations of a company or
organization.
ERP system typically handle the manufacturing, logistics,


distribution, inventory, shipping, invoicing, accounting for

a company or organization.
ERPs aid in the control of many business activities like


sales, delivery, billing, production, procurement, inventory

management, and human resources management.

488
Application of e-procurement

Electronic functional equivalents of submission of bids: the technology



exists and is already increasingly in use around the world to provide

secure means of submitting bids electronically (into a secure
“electronic bid box”), over the internet, and keeping them from being
opened prematurely;
Electronic public bid opening


Purchase cards: including possible security measures, which allows



credit-card type of cards to be used by designated purchasing officials,

as well as by officials during their business travel;
E-purchasing: including the concept of “Purchase-to-Pay” integrated


e-procurement systems (P2P), and the related use of

Electronic means in contract administration: a good example of how


electronic means can facilitate improved contract implementation and

administration is the use of electronic means of payment.

489
 Ethics in Procurement

490
What is Ethics?
 Ethics is the basis on which most of the procurement related
principles, such as fairness, integrity, and transparency, are
based.
 A set of moral principles that mature and decent people feel
should guide behavior.
 Is doing the right thing.
 Is the imbibed value system – may vary from culture to
culture, place to place, but there are certain universally
accepted values.
 Is what money cannot buy.
 Best when internalized and comes from within.
 Can be forced- but true ethics is doing the right thing, even
when not watched.

491
 Ethics are the principles which define behavior as right, good
and appropriate.
 Employees in public service are bound to uphold certain
values.
 Ethical procurement best practice starts with the employees
in procurement following an ethical code which dictates their
behavior and actions while conducting business.
 Ethical procurement practices should be extended to all
stakeholders in the procurement cycle.
 Ethical procurement should also include an understanding of
suppliers’ operations and the procurement professional
should offer guidance and
 Support when improvement is necessary or appropriate.

492
493
 Government employees and organizations,
maintaining ethical behaviour involves more than simply
avoiding corrupt or dishonest conduct.
 It involves applying public sector values such as
impartiality, accountability and transparency.
 Ensuring ethical standards in public sector activities is part
of every public official’s duty to adopt processes, practices
and behaviours that enhance and promote public sector
values and interests.
 Achieving an ethical, transparent approach requires that the
procurement rules be clear, open, well understood and
applied equally to all parties to the process.

494
The broad objectives of ethical behavior in procurement are to:
1. Provide accountability;
2. Maintain public sector integrity;
3. Ensure compliance with processes;
4. Ensure that all offers will be evaluated against the same criteria;
5. Preserve public and supplier confidence in Government processes;
6. Minimize potential conflicts and the potential for litigation;
7. Ensure the procurement activity provides the best outcome; and
8. Avoid the potential for misconduct, fraud and corruption.

495
Professional standards of ethical conduct, no matter what the
organization, contain typical characteristics, including
commitments to:
1. behave honorably in all aspects of work;
2. maintain trust and confidence in the integrity of the acquisition
process;
3. uphold the organization’s standards and policies and all relevant
legislation;
4. avoid conflicts of interest;
5. appearance of impropriety;
6. avoid engaging in personal business with any supplier;
7. avoid lending money to or borrowing money from any supplier;
8. avoid any and all potential for nepotism;
9. avoid any overlap of duties in the procurement process;
10. safeguard the procurement process from political influence.

496
 Business dealings with suppliers must be fair and
transparent. Procurement shall:
1. Refrain from showing favoritism or being influenced by suppliers
through the acceptance of gifts, gratuities, loans or favors;
2. Safeguard supplier confidentiality;
3. Refrain from requiring suppliers to pay to be included on an
approved or preferred supplier list;
4. Refrain from requesting donations of goods or services to the public
entity;
5. Select suppliers on the basis of meeting appropriate and fair criteria;
6. Discourage the arbitrary or unfair use of purchasing leverage or
influence when dealing with suppliers;
7. Avoid the exertion of undue influence or abuses of power
8. Treat all suppliers fair and equal.

497
 Some ethical concepts and principles that relate to the
procurement process are:
1. Loyalty and respect for rules and regulations;
2. Integrity: the quality of being honest and having high quality of
moral principles;
3. Impartiality and fairness;
4. Transparency;
5. Confidentiality;
6. Avoidance of appearance of impropriety/bad behavior;
7. Due diligence: try hard enough to avoid harming another person or
property;
8. Makes everyone's life pleasant.

498
 Rules of ethics formulated in the public procurement law of
our country:
1. Conflict of interest;

2. Equal opportunity of competition;

3. Any gift or offer;

4. Concern for public resources;

5. Keep in secret any confidential information.

499
 Effects of procurement
 As procurement is prone/suffer from/ to corrupt practices, it
has many effects:
1. It distorts the market mechanism;
2. It represents a high cost to the procurer;
3. It results in poor quality of goods and services;
4. It erodes public faith.

500
 Any sound procurement procedure should be based on
principles of ethics, fairness, equity and transparency.
 In brief, the canons(generally accepted rule) of public
procurement are:
1. Right Place – Need / scope

2. Right material - Quality

3. Right Time - Time

4. Right Price - Value for money

5. Right Vendor – Fairness & Transparency

501
Sustainable Procurement

502
 What is sustainable? an action or process that can continue
or last for a long time.
 It is about taking social and environmental factors into
consideration alongside financial factors in making
procurement decisions.
 It is the process by which organizations buy assets, supplies
or services by taking into account a number of factors
including:
1. Value for money considerations such as, price, quality,
availability, functionality;
2. The entire life cycle of products;
3. Environmental aspects; ("green procurement");
4. Social aspects: effects on issues such as poverty eradication,
inequality, labor conditions, human rights, fair-trade;
5. Sustainable or recycled materials/products.

503
 It is a concept whereby companies integrate social and
environmental concerns in their business operations and in
their interactions with their stakeholders on a voluntary
basis.
 Values of CSR:
1. Seeks to understand and meet the needs of stakeholders;
2. Integrity of individual and collective action;
3. Honor;
4. Fairness
5. Respect;
6. Participation;
7. Individual and collective responsibility to others.

504
 Elements of CSR Process:
Elements Description
No-harm The firm should not engage in any action that
leads to harm.
Transparency Full disclosure and provision of information
to all parties.
Voice Stakeholders’ interests are protected.
Equity Ensure the exists of a perceived equity in the
action of business.
Benefit What are the gains and losses?
Integrity Truthfulness of actions.
Liberty The right of individual to engage in or
disengage from transactions with the firm.
Care Focuses on protection and promotion of
positive rights by the firm. 505
 The word “green procurement” refers to practices that are implemented
in a procurement system and its various processes which aimed at
minimizing the negative environmental impact attributable to the
manufacture, transport, operation and disposal of what the public
purchaser acquires.
Green procurement has the following objectives:
1. Restoration of the environment, and curtailing of negative environmental
impact, in public procurement activities by procurement of goods, works
and services that:
a. require less resources for production or application;
b. reduce or eliminate toxins in their production, composition or
provision;
c. are more fuel efficient to operate;
d. are more durable;
e. result in less waste and pollution over their lifetime and at disposal;
and
f. made from recycled materials in appropriate cases and recyclable at
the end of their lifetime. 506
2. Ensure compliance in the public procurement process with
applicable national and international environmental protection rules;
3. Promote innovative, environmentally friendly techniques and
technologies including alternatives and renewable sources of energy;
4. Identify various possible ways of expressing green procurement
policies, and translating them into action in planning and
implementing procurement proceedings;
5. Identify ways in which economy and efficiency in procurement, and
value for money can be promoted by green procurement policies;
and
6. Implementation of government environmental policies.

507
 Environmental concerns are reflected in reducing waste.
 The “making waste work” initiate has identified the Four
“Rs” for the reduction of waste:
1. Reduce the amount of waste;

2. Reuse items i.e. plastic reusable packaging rather than

cardboard;
3. Recycle items i.e. at recycling depots or recycling
companies;
4. Repair items i.e. increase maintenance and avoid
scrapping.

508
1. Avoiding unnecessary consumption and management of demand;
2. Emphasizing the procurement of green goods, works and services like,
energy efficient goods and vehicles, as part of the overall strategy of
reducing greenhouse gas ECSUssions;
3. Utilization of renewable energy;
4. Reduced water consumption ;
5. Reduction and prevention of waste and promoting diversion of material
from the solid waste stream (e.g., by promoting use of recycled
materials in manufacture, reuse, and recycling at disposal);
6. Vehicle fleet management policies and practices that stress fuel
efficiency and alternative fuels; and
7. Fostering a culture of corporate responsibility which includes not only
environmentally friendly practices, processes and products, but also
“social performance” (e.g., working conditions, transparency), “civic
performance” (dialogue with civil society, NGOs, etc.) and “economic
performance” (good prices and quality, good commercial relations with clients
and suppliers).
509
1. Long-term efficiency saving;
2. More efficient and effective use of natural resources;
3. Reducing the harmful impact of pollution and waste;
4. Reducing the impact of hazardous substances on human health
and the environment;
5. Encouraging innovation;
6. Providing strong signals to the sustainable products market;
7. Practical expression of organizations’ commitment to
sustainable development.

510
 Sustainable procurement should incorporate a number of
safeguards and checks in the procurement process to
positively assist in the following areas:
1. human rights;

2. labor rights;

3. environmental impacts;

4. local entrepreneurship;

5. Empowerment of women;

6. poverty eradication;

7. governance.

511
 Exercise
How do you see the practice of procurement in your


organization or any organization you are familiar with?

What do you think are the challenges and prospects of
procurement?
Evaluate the of practices public procurement ethics in your


organization or any organization you are familiar with.

Elucidate your evaluation with practical examples. Suggest
solutions for the identified problems.
Evaluate sustainable procurement practices in your


organization or any organization you are familiar with.

Elucidate your evaluation with practical examples.

512
 Session 11
Monitoring and Evaluation

513
Monitoring and Evaluation
What is Monitoring?
 Monitoring is the systematic and continuous assessment of the
progress of a piece of work over time.
 It is a continuous process of gathering, analysing and
interpreting of information of the daily use of inputs and their
conversion into outputs.
 It is the systematic and routine collection of information from
projects and programmes for four main purposes:
1. To learn from experiences to improve practices and activities in the
future;
2. To have internal and external accountability of the resources used and
the results obtained;
3. To take informed decisions on the future of the initiative;
4. To promote empowerment of beneficiaries of the initiative.

514
Monitoring

and Evaluation --- cont’d
Monitoring is a periodically recurring task already beginning in the
planning stage of a project or programme.
 Monitoring allows results, processes and experiences to be documented
and used as a basis to steer decision-making and learning processes.
 Monitoring is checking progress against plans.
 The data acquired through monitoring is used for evaluation.
What is Evaluation?
 It is a systematic and periodic gathering, analyzing and interpreting of
information on the overall project performance and objective
achievement in light of relevance, efficiency, effectiveness, impact and
sustainability.
 Evaluations appraise data and information that inform strategic
decisions, thus improving the project or programme in the future.
 An assessment of the extent to which a project is achieving or has
achieved its stated outcome goals .

515
Monitoring and Evaluation --- cont’d
What is M&E?
 M&E is an embedded concept and constitutive part of every
project or programme design (“must be”).
 M&E is not an imposed control instrument by the donor or
an optional accessory (“nice to have”) of any project or
programme.
 M&E is ideally understood as dialogue on development and
its progress between all stakeholders.
 M&E can help one to:

1. Identify problems and their causes;

2. Recommend possible solutions to problems;
3. Raise questions about project assumptions;
4. Reflect on where the project is going, and on how best to
accomplish its aims and objects.
516
Monitoring and Evaluation --- cont’d
 The power of measuring results:
 If you do not measure results, you cannot tell success
from failure.
 If you cannot see success, you cannot reward it.
 If you cannot reward success, you are probably rewarding
failure.
 If you cannot see success, you cannot learn from it.
 If you cannot recognize failure, you cannot correct it.
 If you can demonstrate results, you can win public
support and donor interests.

517
Monitoring and Evaluation --- cont’d
 Why undertaking M&E?
1. To check whether our project meets its objectives.
2. To generate data about the project’s progress.
3. To build greater transparency and accountability.
4. To improve day-to-day decision-making.
5. Inform us about the strengths and weakness of the project.
6. To detect unexpected and unintended results and effects of the
project.
7. To provide early warning of problems.
8. Explain the reasons why project activities succeed or fail.
9. To build understanding and capacity.
10. To stimulate learning.
11. To demonstrate & strengthen accountability

518
 There are different ways to perform an evaluation:
1.
Monitoring and Evaluation --- cont’d
Self-evaluation
2. Participatory evaluation
3. Rapid participatory evaluation
4. External evaluation
5. Interactive evaluation

519
Traditional vs result based monitoring and evaluation (RBME)
Elements of traditional M & E Elements of result based M & E
Description of the problem or situation Baseline data to describe the problem
before the intervention; or situation before the intervention;
Indicators are for activities and Indicators are for outcomes and
immediate outputs; impact;
Data collection focuses on inputs, Data collection focuses on outputs and
activities and immediate outputs; how/whether they contribute towards
achievement of outcomes
Systematic reporting on provision of More focus on change among
input and attainment of output ; stakeholders by indicating the
performance trend over time
Directly linked to a discrete intervention Systematic reporting with more
(or series of interventions); qualitative and quantitative information
on the progress of outcomes
Designed to provide information on Captures information on success or
administrative, implementation. failure of the project partnership
520
Reaching Results

Later in the life of the project

Early in the life of the project
Strategic
Objective(S
Outcomes O)
Outputs

Inputs
Activity Level

521
Monitoring and Evaluation --- cont’d
Types of evaluation
 Evaluation can be characterized as being either formative or
summative.
1. Formative evaluation
 It takes place in the lead up to the project, as well as during
the project in order to improve the project design as it is
being implemented (continual improvement).
 Formative evaluation often lends itself to qualitative methods
of inquiry.
 Is conducted at mid-term (also called periodic evaluation) or
sECSU-annually ( also called process evaluation)

522
Monitoring and Evaluation --- cont’d
2. Summative evaluation
 It takes place during and following the project
implementation, and is associated with more objective,
quantitative methods.
 Is conducted only when the project has been completed.
 Summative evaluation is also called terminal, final, outcome,
or impact evaluations.
 Summative evaluation falls into two categories: end
evaluation and ex-post evaluation.

523
Monitoring and Evaluation --- cont’d
Difference between Monitoring and Evaluation

Item Monitoring Evaluation

Frequency Periodic, regular Episodic /not regular

Main action Keeping track/oversight Assessment

Basic Purpose Improve achievement, Improve effectiveness,

Adjust work plan impact, future
programming
Focus Inputs, outputs, process, Outcome, relevance,
work plan sustainability, impact

Information Sources Routine or sentinel systems, Same, plus surveys and

field observation, progress studies
Undertaken by Internal staff, community, Internal staff, stakeholders,
funder/donors funders/donors, external
evaluators, community
524
Complementary Features Monitoring and Evaluation

Monitoring Evaluation
1. Implementation oriented 1. Policy oriented
2. Tracks results/output 2. Explain results/output, outcome,
3. Assess intermediate results and impact
4. Focus on timeliness 3. Assess attributes
5. Emphasis on multi-level results 4. Focus in rigor
6. Informs Budgeting 5. Emphasis on final results
7. Strengthens accountability for 6. Informs broad resources
managing results allocation
8. Essential for programme 7. Strengthens accountability for
implementation & improvements results themselves
9. Can use disaggregated data 8. Essential for strategy
development
9. May need aggregated data

525
Project Monitoring: What, When and How to Monitor?
 Monitoring, supervision and control are tools for
project managers to use in judging and influencing the
progress of project from inception to
operation/implementation.
 Control is verifying whether everything occurs (quality,
cost, and time) in conformity with the plans adopted,
the instructions issued and the principles established.
 Control includes reporting on any deviations from the
plan, the reasons for the deviations and the corrective
actions that need to be taken.

526
Project Monitoring: What, When and How to Monitor?
 Supervision on the other hand, involves keeping a finger
on pulse of the program/project, diagnosing problems as
they arise and advising on their solution.
 It is watching and assessing the environment for factors
and situations which may have an adverse effect on the
project, anticipation of problems before they overwhelm
the project and coming up with suitable proposals to solve
them.

527
Project Monitoring: What to Monitor?

There are two types of monitoring and a distinction has to be

made between these - process monitoring and impact
monitoring.
 Process Monitoring: considers the use of resources, the
progress of activities, and the way these are carried out. It is
a means for reviewing and planning work on a regular
basis.
 Impact Monitoring: Helps to monitor changes brought as a
result of the project/program intervention while the project
is still on progress. This might be economic aspect, social,
organizational, technological, attitude, etc. or other
intended and unintended results over a longer period. This
is different from impact evaluation or assessment which is
expected to be done sometime after the project is
completed.
528
The following are among the major items that have to be
closely monitored in any development programme/project
in process monitoring:
1. Project Physical Progress (inputs, activities, and outputs)
2. Finance Progress (expenditure)
3. Project Quality Monitoring /service & products/
4. Assumption and Risk Monitoring
5. Beneficiary Contact Monitoring (BCM)
6. Management related issues

529
Steps in Developing Monitoring Tools (How to monitor)

1. Review expected inputs, activities and outputs

2. Determine information needs for monitoring
3. Decide on key elements to be monitored
4. Identify key factors
5. Identify key indicators to be used to measure key factors
6. Decide on the key indicators which should be used in
developing the monitoring tool
7. Use key indicators to formulate key questions
8. Check the relevance and validity of the questions
9. Pre-test the monitoring tools and improve according to
feedback obtained
10. Distribute the monitoring tools for application and improve
further on the basis of field application results
530
Steps in Developing Monitoring Tools (How to monitor)

 The most widely used means of communication tools

employed in project monitoring and control are:
a. reports,
b. meetings, and
c. site visits(observations).

531
Project Evaluation: When, What, and How to Evaluate?

 Evaluation can be seen in two ways i.e. on periods of

evaluation and persons conducting the evaluation.
 In terms of the periods of evaluation, four types of
evaluation are commonly distinguished. These are;
1. Ex-ante Evaluation (Start up Evaluation),
2. Mid-term Evaluation or On-going Evaluation/ Formative
Evaluation/
3. Terminal Evaluation (Summative Evaluation); and
4. Ex-post Evaluation (Impact Assessment).

532
Project Evaluation: When, What, and How to Evaluate?

 Based on persons involved in the evaluation process we

have:
1. Internal and
2. External evaluation
3. Interactive/joint evaluation
 Internal Evaluation: It is performed by persons who have a
direct role in the programme/[Link]-going or formative
evaluation can be done by the management team or persons
assigned from the implementing agency.
 External Evaluation: Here the evaluation is carried out by
persons from outside the programme/project. Terminal is
often conducted by external evaluators. In most cases it is
conducted by the funding/ sponsoring/ agencies with
formally designated persons outside the project at fixed
points in time.
533
 Most of the basic evaluations criteria and concepts are
universally accepted and used by all organisations as well
as by the donors’ community.
 The criteria for evaluation address five major sets of issues.
These are:
1. Relevance
2. Efficiency
3. Effectiveness
4. Impact
5. Sustainability

534
 The commonly used evaluation methods are;
1. Physical Measurement: like height, weight, length, etc.
2. Verbal questions
3. Survey (questionnaires)
4. Analysis of existing information: such as regular records; reports;
diaries
5. Field visits or observation
6. Meetings and discussions

535
1. Review project objectives
2. Convert project objectives into evaluation objectives
3. Identify and list down key factors
4. Select indicators for key factors
5. Determine the key factor that should be used for
developing the evaluation tools
6. Decide the method(s) used for evaluation
7. Determine the tools to be used
8. Utilize the key indicators in formulating key questions
9. Check the relevance of the key questions to the
information needs
10. Pre-test evaluation tools, orient evaluators on the tools
and put the tools to use
536
 Activity: Form a small group and discuss the
1. following
Evaluate thepoints:
monitoring and evaluation practices of
your organization.
2. What methods, tools and approaches you have been
using in your organization? Which tools, methods,
and approaches do you think is appropriate for your
organization? Why?

537
Setting Up Monitoring and
Evaluation System

538
 M & E instruments design has five
[Link]:
Clear statements of measurable objectives
e.g. Providing more equitable access to health
services.
2. A structured set of Indicators
Types of Indicators:
a. Input Indicators- are quantified and time-
bound statements of resources to be provided.
E.g. Vehicle operating costs for the crop
extension service.

539
 Designing Monitoring and
[Link] Instruments
Process indicators -measure what happens during
implementation.
e.g. latest date for delivery of fertilizer to farm stores.
c. Output indicators- show the immediate physical
and financial outputs of the project: physical
quantities, organizational strengthening, and initial
flows of services. E.g. cost per kilometer of road
construction.

540
 Designing
d. Impact refers toMonitoring
medium or and Evaluation
long-term Instruments
developmental change.
e.g. (education) continuation rates from primary to secondary
education by sex, proportion of girls completing secondary
education
e. Exogenous indicators are those that cover factors outside the
control of the project but which might affect its outcome. e.g.
currency exchange rates.

541
 Designing
3. Provision Monitoring
for Collecting Dataand
and Evaluation Instruments
Managing Project Records
-so that the data required for indicators are compatible with
existing statistics, and are available at reasonable cost.
 Indicators of inputs and processes will come from project
management records originating from field sites.
 To measure output and impact may require the collection of
data from sample surveys or special studies.

542
 Designing Monitoring and
Evaluation Instruments
4. Institutional arrangements for gathering, analyzing, and
reporting project data, and for investing in capacity
building, to sustain the M&E service.
5. Proposals for the ways in which M&E findings will be
fed back into decision making.

543
Monitoring and Evaluation Report

544
 TheMonitoring
M & E Report andcould
Evaluation Report
be presented …forms:
in two cont’d
1. Narrative Report
The following information should be addressed in a narrative
report:
 Introduction. Significant developments in the reporting
period.
 Objectives and planned activities for the period.
 Were the objectives and the activities of the project
achieved?
 Did you meet any bottlenecks and/or problems? (If not,
why? What was done to deal with them?)
 Were you able to carry out the activities according to
schedule? (If not, why? What was done to adapt the
activities? )
545
Functional structure:
 In this type of structure, the division of
work is considered.
 Similar jobs and activities are grouped
together.
 Staff can specialize
specializ in a particular business
area such as production or marketing and
follow well-defined career paths.

546
 Monitoring
Has and Evaluation
the target group been reached?Report … cont’d
 Copies or samples of every material produced during
the project implementation, like posters, leaflets, study
reports, newspaper articles, publications, training
lessons and programs, etc.
 Objectives and planned activities for the next period.
 Specific recommendations for any action necessary to
ensure that the project achieves its objectives.

547
 Monitoring
2. Financial and Evaluation Report … cont’d
Reports
Financial reports should address the following information:
 An account of the progress made towards the
achievement of the project objective.
 An overview of expenditures during the reporting
period.
 An explanation of any deviation from the budget and
links to actual progress.
 An overview of the budget required for financial
activities and expected output over the next 12
months.

548
 Activities: Form a small group and discuss the
following points:

 Assess the reporting practice of your organization and

indicate the major components of the report.

549
Questions and/or comments

550
 Thank you!
Wishing you continued success
on your project management
journey!
551