Chapter 2

Project Life Cycle

Project Life cycle
Every programme, project or product has certain phases of development. The different phases of
development in an investment proposal or project are called life cycle. A clear understanding of
these phases permits entrepreneurs, development agent, managers and executives to have better
control over existing and potential resources in the achievement of the desired goals.
Project cycle refers to the various stages through which project planning proceeds from the
inception to implementation. In other words, it is the life cycle through which a project advances
from infancy to maturity. The main features of this cycle are information gathering, analysis, and
decisionmaking
Phases of project life cycle
Project life cycle is complex process consisting of different steps arranged in a sequential order.
Different authors have described these steps in different sequential manner but the concept of the
cycle is almost similar in each case. We discuss Project Life Cycle models of
1. BAUMs Project Cycle (BAUMs Model, 1978) also known as world banks model
2. UNIDOs Project Cycle (UNIDO Model)
3. Sadhan Choudhurys Project Life Cycle (1988)
1. BAUMs Project Cycle (BAUMs Model, 1978) also known as world banks model
According to World Bank, project cycle involves five stages; namely, project identification,
project preparation, project appraisal, project implementation, and project evaluation. See the
following diagram:
Project identification
Project preparation
Project Appraisal
Project Implementation
Project evaluation

1. Project identification
This stage is also called pre-feasibility studies. In this stage, projects that can contribute towards
achieving the specified objectives are identified (listed). Project ideas may come from:

New experiments from previous project failures

New experiments from expansion
Replication of successful project tested elsewhere
New experiments from shortages or excess of resources
External threats
Opportunities
Internal strengths and/or weaknesses
Other sources

Project identification is also concerned with elimination of inferior alternatives (projects) from
the identified ones. The output of this stage is project that is prima-facie (at first sight or based on
first impression) promising and further work is justified. Chapter three will present prefeasibility study in more detail.
2. Project preparation
Project preparation is the most important stage in project planning. Project preparation stage,
also called feasibility study, is concerned with the detailed study of all aspects of the projects.
Project feasibility study is the center of this course and will be explored in detail in chapter four
to seven.
3. Project Appraisal
Appraisal is the comprehensive and systematic assessment of all aspects of the proposed project.
The project is reviewed (appraised) to confirm that it accords with the broad objectives. It is to
ensure that the project represents a high priority use of the firms resources. What aspects of the
project should be appraised? The project is appraised from different perspectives: technical,
commercial (market), financial, economic and ecological.
4. Project implementation
It is the stage at which the conclusions are reached & decisions made are put into action. What
activities should be done during project implementation? Some of the major activities in during
project implementation phase include:

Detailed designs and specifications are drawn;

Tender documents are prepared;
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Bids are invited and evaluated,

Orders for imputes are placed;
Contracts are signed; workers are hired, trained and put to work;
Materials are moved to sites etc.

5. Project Evaluation
What is the major focus of project evaluation phase? Where it begins? Implementation phase is
followed by supervision and follow up. The execution of the project should be supervised closely
and progress should be reported regularly to ensure that the implementation is progressing
without deviating from the envisaged path and the objectives of the project have been reached.
Project evaluation is a monitoring (checking) activity in order to:

Find out how things are going

Encourage the project team
Check that promised resources are in fact working on project tasks
Rapidly learn about concerns and difficulties
Show concern for the success of the project
Take corrective action if things go wrong

2. UNIDOs Project Cycle (UNIDO Model)

According to United Nations Guidelines for Rural Centre Planning, there are 7 steps in the
project life cycle such as project identification and appraisal, pre-feasibility study, feasibility
study detailed design project implementation, operation maintenance, monitoring and evaluation.
These steps can be reorganized into three phases
1. Pre-investment phase (consisting of identification, preparation and appraisal)
2. Implementation phase and
3. Operational phase
A brief description of each of these phases is given below:
a. Pre-investment phase
The first phase of the cycle describes the preliminary evaluation of an idea. It consists of
identification of investment opportunities, preliminary project analysis, feasibility study and
decision-making. Project idea emanates from the following problems; potential and the needs of
the people of an area; plan priorities when planning is done by the government demand and
supply projection of various goods and services; Pattern of imports and exports over a period of
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time; natural resources which can serve as the base for potential manufacturing activity; scope of
extending existing lines of activity; consumption pattern in other countries at comparable stages
of economic stages of economic development.
On the basis of the investment opportunities, it is possible to conceive a number of projects out
of which a particular project may be consistent with development objectives of the area. During
this phase, the following aspects of a project must be carefully designed so as to enable
implementation.

Project infrastructure and enabling services

System design and basic engineering packages
Organization and manpower
Schedule and budgets
Licensing and government clearances
Finance
Systems and procedure
Identification of project manager
Design basis, general condition for purchase and contracts
Constriction resources and materials
Work packaging

This phase is involved with preparation for the project to take out smoothly. Once a project
opportunity is conceived, it needs to be examined. Preliminary project analysis concerns with
marketing, technical, financial and economic aspects of the project. It seeks to determine whether
the project is prima facie worthwhile to justify a feasibility study and what aspects of the projects
are critical to its viability and hence call for an in depth investigation.
More details, through and complete feasibility study results in a reasonably adequate formulation
of the projects in terms of location, production capacity production technology and material
inputs. The feasibility study contains fairly specific estimates of projects cost, means of financing
sales revenues, production costs, financial profitability and social profitability.
Based on the thorough feasibility study the project owner or sponsors or financiers can decide
whether to accept or reject particular project. In other words, the decision whether investment on
the project should be made or not has to made at this stage.
b. Implementation phase
The implementation phase of an industrial project involves setting up of manufacturing facilities.
After judging the worthiness, project needs to be designed for implementation. Drawing, blue
prints and the sequences in which the various activities concerning the project need to be carried
out. The main activities under this phase are:
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i.
ii.

iii.
iv.
v.

Project and engineering design: It consists of site probing and prospecting, preparation of
blue prints, plant design, plant engineering, selection of machinery, equipment.
Negotiations and contractions: It covers the activities like project financing, acquisition
of technology, construction of building and civil works, provision of utilities supply of
machine and equipment, marketing arrangement etc.
Construction: This step involves the activities like site preparation, construction of
building, erection and installation of machinery and equipment.
Training engineers, technicians and workers.
Plant commissioning

c. Operation phase
It is the longest phase in terms of time span. It begins when the project is commissioned and ends
when the project is wound up. This is a transition phase in which the hardware built with the
active involvement of various agencies is physically handed over for production. This phase is
basically a clean up phase for project personnel. The main concern of this phase is on smooth
and uninterrupted operation of machinery and plant, development of suitable norms of
productivity, establishment of a good quality for the product and securing the market acceptance
of the product. It aims to realize the projection made in the project regarding sales, production,
cost and profits. Project monitoring and project evaluation are two vital activities under this
phase.
Project monitoring is a step towards achieving properly identified objectives through a carefully
laid down strategy. Each activity in the project implementation should be carefully watched so
that, the progress may be measured and any deviation from the expected progress be identified in
time.
Project evaluation refers to post-investment analysis. It aims at finding out whether the project
has achieved the objectives for which it was taken up and whether it has created the anticipated
or intended impact. This helps in developing an insight for future investment and better planning.
Thus the life cycle of a project narrates the methodology of developing, maintaining nd
controlling an investment proposal at its various phases in the life cycle. The various steps in the
project life cycle are given in the following diagram

3. Sadhan Choudhurys Project Life Cycle (1988)

Project Life Cycle Phases
Projects have to pass through the following five phases according to model proposed by Sadhan
Couldhury. Accordingly project life cycle goes through five phases.
1. Conception Phase
2. Definition Phase
3. Planning and organising Phase
4. Implementation Phase
5. Project Clean up Phase
Ideally these phases should follow one another in sequence, this rarely happens in real life. Not
only do the succeeding phases overlap with the preceeding ones, it is also not too uncommon to

find complete overlap of all the phases. Sometimes this overlap is done deliberately in the
interests of compressing overall project schedules.
1. Conception Phase This is the phase during which the project idea germinates. The idea may
first come to the mind when one is seriously trying to overcome certain problems. The problems
may be non utilisation of either the available funds, plant capacity, expertise or simply unfulfilled
aspirations. When one is seized with the problems he looks in and around to find out ways of
overcoming them. If may so happen that an idea will suddenly come to his mind as he surveys
the environment. It is also possible that ideas will be put to him by his well wishers or those
working on the problems for him. Whatever may be the case the ideas need to be put in black
and white and given some shape before they can be considered and compared with competitive
ideas.
An operating cement plant may be having low capacity utilisation, high power consumption and
consequently higher cost of production. In such a situation it might be a good idea to introduce
new technology, replace some critical items selectively or scrap the plant altogether. There may
be financial constraints, the existing staff may need to be on roll, limestone deposits may last for
limited number of and son on. The ideas need to be examined in light of objectives and
constraints and what finally becomes acceptable may form the future project. All projects are
usually conceived this way.
It is easy to understand that if this phase is avoided or truncated, the project will have innate
defects and may eventually become a liability for the investors. In this phase how ever it is not
supposed to be considered as to how the project will be implemented. Consideration of later
phases of the project life when the project is not even born will not only prolong this period but
may end up in unnecessary arguments. It is like considering which medical college your child
will be admitted to when the child is yet to be born.
A well conceived project will go a long way for successful implementation and operation of a
project. It is quite possible that ideas may undergo some changes as the project progresses. This
is understandable since at the conception stage all pertinent data are not available and also the
real life scenario may undergo considerable change compared to what may have been assumed
initially.
2. Definition Phase the definition phase of the project will develop the idea generated during the
conception phase and produce a document describing the project in sufficient details covering all
aspects necessary for the customer and/or financial institutions to make up their minds on the
project idea. The areas to be examined during this phase say for a cement plant may be as
follows:
1. Raw materials Qualitative and Quantitative evaluation of lime stone reserves

2. Plant size/ capacity Enumeration of plant capacity for the entire plant and for teh
main departments
3. Location and site Description of location supported by a map.
4. Technology/process selection selection of optimum technology, reasons for selection
and description of the selected technology.
5. Project layout selection of optimum layout, reasons for selection and appropriate
drawings.
6. Plant and Machinery Selection of optimum equipment, reasons for selection,
description of selected equipment and machinery, stating number, type, specifications,
capacity, source and cost.
7. Electrical and instrumentation works listing the broad features of the major
electrical and instrumentation items, suggesting a broad scheme for power
distribution and power grid map.
8. Civil engineering works selection of optimum civil works, reasons for selection ,
description of selected civil work and cost estimates.
9. Utilities fuel, power and water selection and description of utilities stating
qualitative properties, quantities, source, availability and unit costs.
10. Manpower and organisational pattern selection of labour and staff considering
organisational structure/ layout, skill requirement and level of training, availability
and cost estimates.
11. Financial analysis Total investment costs, sources of finance, total production costs
and evaluation of financiaal viability.
12. Implementation schedule This phase therefore, clears some of teh ambiguities and
uncertainities associated witht the formation made during the conceptual phase. This
phase also establishes the risk involved in going ahead witht the project in clear
terms. A project can either be accepted or get dropped at this stage itself. In most
cases it may be seen that the effort during this phase is concentrated in protecting the
project conceived during the conceptual stage.
3. Planning and organising phase This phase can effectively start only after definition phase but
in practice it starts much earlier, almost immediately after the conception phase. This phase
overlaps so much with the definition and also implementation phases that no formal recognition
is given to this by most organisations. Some organisations however, prepare documents such as
project execution plan mark this phase. By and large organisations, during this phase deal with
the following and in most cases take necessary section for realisation of the same.
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1. Project infrastructure and enabling services

2. System design and basic engineering package
3. Organisation and manpower
4. Schedules and budgets
5. Licensing and governmental clearances
6. Finance
7. Systems and procedure
8. Identification of project manager
9. Design basis, general conditions for purchase and contracts
10. Site preparation and investigations
11. Construction resource and materials
12. Work packaging
Thus, this phase is involved with preparation for the project to take off smoothly. This phase is
often taken as a part of the implementation phase since it does not limit itself to paper work and
thinking but many activities, including field work are undertaken during this phase.
Planning as it is often defined is making a decision in advance. If this is not done, we will only
be resolving crisis after crisis. It is therefore, essential that this phase is completely gone through
before the next phase, namely the implementation phase starts. Many of the decisions an actions
taken during this phase relate to project basics, and if the project jumps into the implementation
phase without freezing the basics the project is bound to falter and flounder if not fail altogether.
4. Implementation Phase This is a period of hectic activity for the project. It is during this
period that something starts growing in the field and people for the first time can see the project.
Preparation of specifications for equipment and machinery, ordering of equipment, lining up
construction contractors, issue of construction drawings, civil construction and construction of
equipment foundations, equipment and machinery erection, plant electrical, piping,
instrumentation, testing, checking, trial run and commissioning of the plant take place during this
phase. As far as the volume of work is considered, 80 -85% of project work is dome in this
phase only . Naturally therefore people want to start this phase as early as they can. Since bulk of
the work in a project is done during this phase only, people will always want this phase to be
completed in as short a time as possible. All technologies of project management therefore are
applied to this area essentially.
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This phase being more or less the whole project, every attempt is made to fast track, i.e, overlap
the various sub phases such as engineering, procurement, construction and commission to the
maximum extent. This is besides starting the implementation stage itself in parallel with the
earlier phases of the project life cycle. Hardly any project can afford the luxury of completing
one implementation sub phase fully before moving on to the next.
The amount of fast tracking will however depend on who is doing the project. If design is done
by one agency and construction by another then the scope for fast tracking becomes very limited.
If on the other hand design, supply and construction is contracted out as a total package, then the
contractor is in a position to use fast tracking to the maximum extent possible. It is this and many
such requirements of this phase that have given birth to what is considered modern project
management.
This phase because of its peculiarities, has high need for coordination and control. People may
take months and years in taking decision on the project but once the project is cleared and enters
the implementation phase everyone will like the time lost in the earlier phases to be made up
during this phase.
5. Project clean up phase This is the transition phase in which the hardware built with the active
involvement of various agencies is physically handed over for production to a different agency
who was not so involved earlier. For project personnel this phase is basically a clean up task.
Drawings and documents, files, operation and maintenance manuals are catalogued and handed
over to the customer. The customer has to be satisfied with guarantee test runs. Any change
required at the last minute for fulfilment of contractual obligations in respect of performance and
therefore, to be completed during this phase tot eh satisfaction of the customer. Projects accounts
are closed, materials reconciliation carried out, outstanding payments made and dues collected
during this phase.
The most important issue during this phase is planning of the staff and workers involved in
execution of the project. All project personnel cannot be suddenly asked to go. Preparation for
project clean up has therefore to start a long time before actual physical handover. The first to go
are design engineers and in their place few design engineers may be posted at field for residual
engineering. This will ne followed by other engineers most of the time in the order in which
they came in. Their places will be taken by customers engineers who may be either for
production of maintenance. The same people will never be required again in that site till new
project comes up.

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