Chapter 3

Project Identification

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3.1. Project Identification
• Project identification is the initial phase of the
project development cycle.
• It begins with the conceiving of ideas or intentions
to set up a project.
• These ideas are then transformed into a project.
• Project ideas conceived by:
– Individuals
– Groups of individuals (community)
– Local leaders
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 – NGOs

– Policy makers

– Planners

– International development agencies

– Government pronouncements

• Project ideas may be due to:

• prevailing problems in a given area.

• availability of resources in a given location.

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Approaches to project identification

 There are two major approaches to project

identification

(a) Top-down approach

(b) Bottom-up approach

Top-Down Approach

• Projects are identified based on demands from

beyond the community.

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• This may include directives from:

 international conventions (such as climate

change)

 international institutions or NGOs 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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Advantages of Top-Down Approach
a. It may be a rapid response to disasters like
floods, war outbreak because there is limited
time and chance to consult the beneficiaries.
b. It can be effective in providing important
services like education, health, water, roads etc.
c. It can contribute to wider national or
international objectives and goals and therefore
potentially be part of a wider benefit

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Limitations of Top-Down Approach

a. Does not help in modifying strongly established

ideas and beliefs of people.

b. Assumes external individuals know better than the

beneficiaries of the service.

c. Communities have little say in planning process.

d. Community develops dependency syndrome on

outside assistance and does not exploit their own
potential.
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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.
Advantages of Bottom-Up Approach
a. Interveners accomplish more with limited resources
since people tend to safeguard what they have
provided for themselves.
b. Develops people’s capacity to identify problems
and needs and to seek possible solutions to them.
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c. Provides opportunities of educating people.

d. Helps people to work as a team and develop a

“WE” attitude - makes project progressive and
sustainable.

Limitations of Bottom-Up Approach

a. Not always effective for projects that require

urgency to implement

b. Time-consuming and requires patience and

tolerance.
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c. People sometimes dislike this approach
because they do not want to take responsibility
for action.
d. The agency using this approach is never in
control and cannot guarantee the results it
would want.
e. The priorities of communities may not fit with
national or international priorities that seek to
have a broader impact

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 Phases of Project Identification
There are four key phases of project identification. These
are:
 Actual Project Identification: The generation of
project ideas by formal and informal institutions and
individuals.

 Description of Project Idea: An actual written

description of the project idea or concept, summarizing
the main elements of the proposed project to use in the
screening, ranking and prioritization of project ideas.
 Screening: An initial review of project ideas and
concepts to see if they should be advanced or
abandoned at an early stage.

• Prioritization: The ranking and selection of projects

against a set of criteria to identify the “best projects” to
move actively into the designed
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 I. Project Identification (generation of
project idea)
Usually there are two major levels where project ideas are
originate: the macro and micro level.
1. Macro level, Project ideas emanate from, among
others:
 National, sector or regional plans,
 Unusual events such as droughts, floods, earthquakes,
etc
 Multilateral or bilateral development agencies,
 Regional or international agreements in which a
country participates, etc

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 Cont’d
2. Micro level project ideas can emerge from;

 Existence of unused or under utilized natural and

human resources and the perception of opportunities
for their efficient use.
 Identification of unsatisfied demand or needs
 Need to remove shortage in essential materials,
services, or facilities that constrain the development
effort etc

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 Stakeholder Analysis
• A basic premise behind stakeholder analysis is that
different groups have different concerns, capacities and
interests, and that these need to be explicitly understood
and recognized in the process of problem identification,
objective setting and strategy selection.
• The key questions asked in stakeholder analysis are :
 ‘Whose problems or opportunities are we analysing’ and,
 ‘Who will benefit or loose-out, and how, from a proposed
project intervention’?

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 Cont’d
• The ultimate aim of stakeholder analysis is to
help:

 maximize the social, economic and institutional

benefits of the project to target groups and
ultimate beneficiaries, and

 minimise its potential negative impacts (including

stakeholder conflicts).

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 Cont’d
• The main steps involved in stakeholder analysis are:
1. Identify the general problem or opportunity being addressed
and considered;
2. Identify and write down all persons, groups and institutions
who are affected by the problem environment and have a
significant interest in the (potential) project.
3. Categorize them (e.g. interest groups, individuals,
organizations, authorities, etc) and discuss whose interests
and views are to be given priority when analyzing the
problems

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 Cont’d
4. Select the most important stakeholders, investigate their
respective roles, different interests, relative power and
capacity to participate, in a more detailed analysis e.g. in
terms of:
a) Problems: The main problems affecting or facing
the group (economic, ecological, cultural, etc.)
b) Interests: The main needs and interests as seen
from the group's point of view
c) Potential: The strengths and weaknesses of the
group

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 Cont’d
5. Identify linkages: extent of cooperation or conflict of

interests in the relationships between stakeholders;

patterns of cooperation or dependency with other

stakeholders

6. Interpret the findings of the analysis and decide

whose interests and views are to be given priority

when the analysis of problems is carried out.

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 Cont’d
7. Incorporate relevant information into project design to
help ensure that

(i) Resources are appropriately targeted to meet objectives and the

needs of priority groups,
(ii) Management and coordination arrangements are appropriate
to promote stakeholder ownership and participation;
(iii) Conflicts of stakeholder interest are recognized and explicitly
addressed in project design.

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 Cont’d
Tools for conducting stakeholder analysis
• The stakeholder analysis matrix and SWOT analysis are the
most widely used stakeholder analysis tools.
Stakeholder analysis matrix
• The stakeholder analysis matrix describes:
 the basic characteristics of the stakeholders
 their interests and how they are affected in the
problem/potential project
 their capacity and motivation to bring about change
 the possible action to address their interest

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 Sample of Stakeholder Analysis Matrix

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 SWOT Analysis

 This represents a conscious, deliberate, and

systematic effort by an organization to
identify opportunities that can be
profitability exploited by it. Periodic SWOT
analysis facilitates the generation of ideas.

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 Strength
• It is something the organization does well relative to
competitors. It arises from resources and competencies
available in an organization. It create strategic advantage.

 Patents

 Good Reputation

 Cost advantages

 Exclusive access to high grade natural resources

 Favorable access to distribution networks

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 Weakness
 It is something the organization does poorly relative to
competitors. It arises from deficiency in resources and
competencies. It creates strategic disadvantage.

 Lack of strong protection

 A weak brand name

 Poor reputation among customers

 High cost structure

 Lack of access to the best natural resources

 Lack of access to key distribution channels

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 Opportunities
 It is the major favorable situation in an
organizations/groups externally environment. It
provides position of superiority.

 An unfulfilled customer need

 Arrival of new technologies

 Loosening(relaxing) of regulations

 Removal of international trade barriers

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 Threats
 It is a major unfavorable situation in a
group’s/organization's external environment. It
provides position of inferiority.
 Shifts in consumer tastes away from the
firm’s products
 Emergence of substitute products
 New regulations
 Increased trade business

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ii. Project Concepts and Profiles
• 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.

• Whenever it is developed it is essential to have

a clear idea of what the proposed project is
supported to be and what are hopes to achieve.
• It should include answers relating to the
following:

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 Cont’d
• Justification and purpose
• Beneficiaries and Stakeholders Best regards
• Resource and Institutions
• Policies and Plans
• Impacts
• Support
• Risks

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 III. Screening
• At identification stage an initial screening of
project idea will take place, with some projects
ideas being abandoned as impractical or of a low
propriety. A prelude to the full blown feasibility
study, these exercises is meant to assess:
 Whether the project is prima facie worthwhile to
justify a feasibility study, and
 What aspects of the project are critical to its
viability and hence warrant an in – depth
investigation.

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 Cont’d
For this the following factors should be
considered:
• Compatibility with the promoter
• Consistency with government Proprieties
• Availability of Inputs
• Adequacy of the Market
• Reasonableness of Costs
• Acceptability of Risk Level
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 Cont’d
Finally based on the above assessment, the analyst
should eliminate project proposals that:
 Are technically unsound and risky
 Have no market for the output
 Have inadequate supply of inputs
 Are very costly in relation to benefits
 Assume over ambitious sales and profitability, etc.
• As a result, some of the project alternatives will be
rejected and those are promising will be advanced to
the next stage called project preparation.

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IV. Prioritization & Ranking
• The limited resources available mean that effective
project identification and selection at various levels
will be essential.

• There will be more ideas for potential projects than

resources available.
• Potential criteria for ranking projects are given in
the table below.

• During selection process, each project can be

assessed against each of the criteria to give a
rating.
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 Project Rating Index
• When a firm evaluates a large number of project
ideas regularly, it may be helpful streamline the
process of preliminary screening.
• For this purpose, a preliminary evaluation may
be translated into a project rating index.
• The steps involved in determining the project
rating index are as follows:
1. Identify factors relevant for project rating
2. Assign weights to these factors (the weights are
supposed to reflect their relative importance).

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 Cont’d
1.Rate the project proposal on various factors,
using a suitable rating scale (Typically a 5 –
point scale or a 7 – point scale is used for
this purpose.)
2.For each factor multiply the factor rating with
the factor weight to get the factor score.
3.Add all the factor scores to get the overall
project rating index.

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 Construction of a Rating Index
Factors Factor Rating (Step 3 &4) Factor Score
(Step 1 Weight VG G A P NP (Step 5)
(Step) 5 4 3 2 1

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 other products 0.15 0.20

Stability 0.10 0.40

Dependence on firm’s

Strength 0.20 1.00

Consistency with

Governmental priorities 0.10 0.30

1.00 Rating Index 4.00

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 Cont’d
• The above table illustrates the
determination of the project rating index.
• Once the project rating index is determined,
it is compared with a pre – determined hurdle
value to judge whether the project is prima
facie worthwhile or not.

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 Thank You!

End of Chapter Three!

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