Chapter One: General Introduction

1.1. Meaning and Definition of Project

Defining a Project in Relative Sense:

According to Gittinger (1982), a project is defined as a complex set of activities where resources
are used in expectation of returns and which lends itself to planning, financing, and
implementing as a unit. A project usually has a specific starting point and a specific ending point
intending to achieve specific objectives. It usually has a well-defined sequence of investment and
production activities and a specific group of beneficiaries that can be identified, quantified, and
valued, either socially or monetarily.

Broadly speaking, if development can be thought of a progression (with many dimensions:

temporal, spatial, socio- cultural, financial, and economic), meant to improve the quality of life
of people, projects are temporal and spatial units. Each with a financial and economic value and
a social impact that make up the continuum. Projects also have boundaries, which make them
distinguishable from each other. In addition to its time sequence of investment, production, and
benefits, the project normally has a specific geographic location with identifiable targets and
beneficiaries (Little and Mir lees 1974).

Defining Project Management:

Project Management: - is a project management just a variant on general management? Yes and
no. There are a lot of similarities, but there are enough differences to treat project management as
a discipline separate from general management. For one thing, projects are more schedule
intensive than most of the activities that general managers handle. And the people in a project
team often do not report directly to the project manager, whereas they do report to most general
managers.

Project management institute defines project management as “a temporary endeavor undertaken

to produce a unique product, service or result. This means that a project is done only one time. If
it is repetitive, it is not a project. A project should have definite starting and ending points (time),
a budget (cost), a clearly defined scope -or magnitude - of work to be done, and specific
performance requirements that must be met. I say “should” because seldom does a project
conform to the desired definition. These constraints on a project, by the way, will be referred to
throughout this handout as the PCTS targets.

Project management is application of knowledge, skill, tools, and techniques to project activities
to achieve project requirements. Project management is accomplished through the application
and integration of the project management processes of initiating, planning, executing,
monitoring and controlling, and closing.
1.2. Features of a Project
As Gittinger (1982) states, projects are the cutting edge of development, which is indicating the
significant importance of projects as the means to bring development. Of course, such
development projects involve huge capital investment in real assets. The basic characteristic of a
capital expenditure (capital investment or capital project or simply a project) is that it typically
involves a current outlay (or current and future outlay) of funds in the expectation of a stream of
benefits far into the future.

Although, a simple, precise definition is not easy to give, nor is it necessary, a few characteristics
of projects can be easily identified as part of the definitions given above. In this regard,

 A project constitutes the whole complex of activities in the undertaking that uses
resources to gain benefits that exceed the costs of the resources.
 Projects involve the commitment of scarce resources to a specific line of action, which
prevents the use of those resources elsewhere. These resources include not only financial
capital, but also, more importantly, raw materials, the product of manufacturing and
services capacity elsewhere in the economy, labor of various kinds, managers and
organizers, and so on. Almost all of these are certain to have alternative possible uses
elsewhere.
 Project resources are committed for a long period to produce benefits that are usually
quite clearly identifiable but which may not occur or be clearly felt for several years.
Their effects are usually gradual and lasting, but involve waiting for results. This waiting
obviously has a cost.
 Projects are usually the subject of special arrangements and procedures for their planning,
appraisal, and so on because of the shortage of resources usable for development, the
large amount of resources that they can absorb, and the need to wait for benefits.
 Frequently, projects involve special financial arrangements, including loans from
overseas, development banks, and other agencies. As relatively few projects are financed
simply from government allocations, the financing arrangements for a project refer to
closely defined actions. This financial definition tends to give projects a clear boundary
and individual identity.
 The pattern of resources commitment in projects is usually for capital investments to be
made to establish productive capacity or physical works, which then have a long life of
operation or use.
 Projects to which the above points apply are frequently those planned for the public
sector. The planning and examination referred to are usually carried out by government
or public agencies. Private sector projects are also the subject of this kind of planning,
especially if they involve government participation. Within the public sector, systematic
planning procedures can be applied to both directly productive and constraint-removing
projects, to infrastructural and social services projects, as well as those concerned with
industrial and agricultural development.
 In general, in light of the above characteristics, the definition of a project, thus, might go
something like this:

“A project is a set of proposals for the investment of resources in to a clearly identified set of
actions that are expected to produce future benefits of a fairly specific kind, the whole series
of actions being the subject of individual planning and examination before being adapted
and implemented within a single overall financial and managerial framework.”

Project Format

To enable the analysis of projects under the scope of the above definitions, a project format
as a tool is conventionally used. This format provides an analytical framework for a proposed
investment in which the cost and benefit accounts are prepared year by year in the form of a
project cost and benefit stream. Information from a wide range of sources feed into the
framework. Since a good plan depends on accurate information, the framework enables
various specialists to judge accuracy of the information provided, and the appropriateness of
the assumptions. The format gives an idea of costs, year by year, so that those responsible for
providing the necessary resources can do their own planning.

The administrative and organizational problems likely to be encountered during

implementation are also detailed in the project format. This enables the planners to make
arrangements for strengthening the project management if it appears weak. At the same time,
managers, planners and stakeholders are given better criteria for monitoring progress of
implementation as the objectives, targets, and work plans are set out at the onset of
implementation.

The project format facilitates systematic and objective examination of results of alternatives.
For instance, the effects of a proposed project on national income and other objectives can be
compared with the effects of projects in other sectors or other projects in the same sector, or
alternative formulations and design of the same project including not undertaking the project
altogether.

Once national objectives are known, unreliability of available data at the national level can
be overcome by confining the project meant to achieve a national objective in a specific
location with a specific target and beneficiaries. Thus, local information on which to base the
analysis can be efficiently gathered, field trials undertaken, and judgment can be made about
social and cultural institutions that might influence the choice of project design and its pace
of implementation.

1.3. Projects and Plans

All countries have national plans, which spell a range of economic and social objectives and
strategies meant to enhance growth and development. In this regard, projects provide an
important means by which investment and other development expenditures foreseen in the plans
can be clarified, justified, and realized. Development plans and projects are closely interlinked
since sound development plans require good projects as just good projects require sound
planning.

For effective planning, availability and access to a wide range of information on existing and
potential investments and their likely effects on growth and other national objectives is crucial.
To this end, project analysis seeks and provides the necessary information, and the projects
selected for implementation then become vehicles for using resources to create new income or
wealth.

Actually, the financial and administrative resources available to governments are always limited.
These resources must be allocated among many sectors and many competing demands. Project
analysis becomes handy in establishing the optimal allocation of resources, given the objectives.
Through project analysis, it is possible to prioritize activities. So that, the higher priority projects,
with greater payoffs both financially and socially are undertaken first before the lower priority
activities and projects.

Planning can be defined as a “continuous process that involves decisions or choices about
alternative ways of using available resources with the aim of achieving a particular goal or set
of goals at some time in the future.” The rationale for planning is that it serves as a tool that
enhances the effectiveness in mobilizing resources and enables allocation of resources into
priority areas of development. In this regard, development planning can be regarded as an
attempt to raise the rationality of decision-making. The hierarchical relationship among
development plans, programs, tasks, and work packages is depicted below:

Development plans

Programs

Projects

Tasks

Work packages

Figure: Hierarchical Relationships

Development plans:
  Most forward looking (futuristic)
 Broad and require systematic thinking, preparation and appraisal
 Attempts to bring welfare in the society

Programs:

 Derived from development plans

 Exceptionally large with long term objectives
 Explores specific area with broader scope

Projects:

 Derived from a program

 Unique investigative tool
 A development activity with specific objectives
 Funded by a program
 An implementation element (entity)

Tasks:

 Work elements under a project

 Specific approaches for doing things
 Set of activities comprising a project

Work packages:

 Sub elements of a given task (or undertaking)

 Something accomplished stage by stage
 Collection of work packages defines a given task

As it can be observed from the above framework, in general, the essence of development
planning is futuristic, i.e., it is most forward looking and involves systematic thought and
preparation. Virtually, every nation, be it developed or developing, should have a systematically
elaborated national plan to hasten economic growth and further a range of social objectives.
Therefore:

1. Projects provide an important means by which investment and other development

expenditures foreseen in plans can be clarified and realized. Sound development plans
require good projects, just as good projects require sound planning. The two are
interdependent.
2. A sound plan requires a great deal of knowledge about existing and potential projects.
Sound planning rests on the availability of a wide range of information about existing and
potential investments and their likely effects on growth and other national objectives.
Thus, plans require projects. Realistic planning involves knowing the amount that can be
 spent on development activities each year and the resources that will be required for
particular kind of project.
3. Effective project preparation and analysis must be set in the framework of a broader
development plan. Projects are part of an overall development strategy and a broader
planning process.
4. The more elaborated the plans and policies of the governments are, the easier becomes
the work of the project planner. For example, the project planner will have to refer to
such plans and policies to see whether the project being considered fits well in the plan
and contributes most to the fundamental objectives of the government. These objectives
can include self-sustaining growth, promotion of employment, income distribution, etc.
5. As projects rightly called the “Cutting Edge” of development, they are powerful means
to achieve the development objectives; they are the crucial building blocks of a
development structure.
6. Projects aim mainly at increasing the production of goods and services, which are
fundamental components of people’s welfare, and the main objective of any development
effort is, of course, to advance social well-being.

Projects and Programs

It is necessary to distinguish and/or understand the difference between projects and programs
because there is sometimes a tendency to use them interchangeably. A project, in this regard,
refers to an investment activity where resources are used to create capital assets that produce
benefits over time, having a beginning and an end, and specific objectives pursued; whereas a
program is an on-going development effort or plan. A program is, therefore, a wider concept than
a project. It may include one or several projects at various times whose specific objectives are
linked to achievement of higher level of common objectives.

For instance, a health program may include a water project as well as construction of a health
center; both aimed a t improving the health of a given community that previously lacked easy
access to these essential facilities.

Projects that are not linked with others to forma program are sometimes referred to as “Stand
Alone” projects

Differences:

Projects Programs
specific objectives General objectives
Specific project areas No specific project areas
Specific beneficiaries group No Specific beneficiaries group
Clearly determined and allocated funds No clear and detailed financial resource allocation
Specific lifetime No specific lifetime
Similarities:

Projects and programs have similar characteristics in a way that both are:

 Having objectives;
 Requiring financial, human, material, etc inputs (or resources);
 Generating outputs, (goods/services), of value;
 Serving as instruments for the execution of development plans in order to boost the
national economy.

Project Parameters

During a project’s life, management focuses on three basic parameters: quality, cost, and time. A
successfully managed project is one that is completed at the specified level of quality; on or
before the deadline; and within the budget. In addition, client satisfaction indicates success and
possibility for replication or sustainability.

Each of the parameters is specified in detail during the planning phase of the project. These
specifications then form the basis for controlling the project during the implementation phase.
Below is a framework showing the interrelations among these parameters.

Project Parameters

Quality Cost Time

Performance Budget Schedule

Figure: Hierarchical Relationships

Project Cycle Management [PCM]

Project management

 Covers the whole set of concepts, techniques, and tools involved in the effective
realization of project goals
  Through dynamically coordinating and/or administrating the human, material,
and financial resources and
 By creating conducive environment for properly doing things along with
efficient utilization of resources.
 In this process, every one having stake in the project implementation and/or realization
need be regularly consulted in matters affecting the project in order to ensure proper co-
ordination of resources and project activities.
 More to this, in the process of project management, the project manager (or the
coordinator) should be given commensurate authority and responsibility in order to
enable him/her make decisions consistent with the project goals and objectives, being
responsible for it, without delay and as required.
 This smoothen the process of implementation as well as enhances the achievement of
basic objectives and the satisfaction of stakeholders.
 Project cycle management, therefore, implies a process-oriented project management
system covering the whole project cycle from project conception to project completion.
 It involves a combination of the various project cycle phases with corresponding
management task.
 It is an effective decision-making process to ensure certain actions occur at the right time
within the life of a project in order to attain the desired and specified quality output
within the budget.

The basic tasks involved in project cycle management are

Creating (or building) capabilities for implementation,

Planning the tasks for implementation,
Follow-up of the progress in implementation (referred to as monitoring), and
Conduct performance evaluations periodically (i.e. on-going) as well as final evaluation
after full implementation of the project.

To this effect, the concerned (for instance, the project promoters) need to comprehend, as early
as the initiation of the project, the importance of designing and/or building sound project
organization.

o In general, a sound project organization enables the project implementation team to

overcome diverse obstacles that potentially encounter in the process of implementation.
o It also helps to mitigate the complexities (or difficulties) involved in managing the
project activities.
o Such an organization, therefore, enhances the likelihoods for successfully implementing
the project as well as ensures the ultimate realization of project goals and objectives.

The next few sections deals with important features of implementation planning, process of
implementation, monitoring & reporting, and final evaluation.
Planning for Implementation

This is a stage either before actual implementation begins or before the start of a new
implementation phase of a project.

 The exercise is conducted at the level of the project and involves the implementers, the
beneficiaries, and the funding agency, or all stakeholders.
 The exercise involves enabling the project management to address the important
implementation issues including the realism of project objectives, scope, financial
arrangements, and implementation schedule, given the overall resource structure of the
project and the working environment.
 The likelihood of further changes occurring either in design or physical and policy
environment to affect the project are also considered. During the exercise, the team
should define, as clearly as possible, the objectives and hierarchy of objectives.
 One technique for defining and analyzing the objectives is the Logical Framework
Approach (LFA) or Goal Oriented Project Planning (GOPP).
 It allows definition of activities, or inputs, outputs, and objectives with corresponding
verifiable indicators and assumptions to attain the goals of the project.
 A plan of operation for a specified period is usually desirable to form a basis for
activities to be undertaken during the plan period.

Implementation

This is a crucial concern in any project planning process since the ultimate objective is to see
projects being implemented on the ground as planned and the long-term goals would be realized
in the continuum.

 During implementation, the basic activities required for physically realizing projects are
actually carried out and funds are actually disbursed to enhance the process.
 The project management team, in this regard, need to ensure whether the project is
carried out according to the design.
 Monitoring of progress in implementation and reporting, therefore, becomes a crucial
concern at this stage.
 In general, depending on the physical and policy environment, there may be a need for
flexibility in the implementation process as required in order to respond to the changes on
the ground or go with the reality.
 Implementation, thus, is a process of refinement or learning from experience and can
actually be considered as a "mini - cycle" within the larger project cycle.

The implementation period usually involves three phases. These are the investment period, the
development period, and full development period.
  The investment phase, in this regard, refers to period over which major project
implementation activities are undertaken, which might take one to three years depending
on the nature of the project.
 The development period occurs as the production builds up; while full development is
reached when the production peaks up and continues until the project ends.

These phases form the life of the project and hence, both financial and economic analysis of
projects relate to this time horizon.

Monitoring and Reporting

This should be an on-going activity during implementation.

 The beneficiaries, the implementing staff, supervisory staff, and the project management
staff can carry out monitoring.
 The aim should be to ensure the activities of the project are being undertaken on schedule
and as well to facilitate the process of implementation as specified in the project design.
 In the course of monitoring, any constraint in operational zing the project design can
quickly be detected as well as corrective actions can be taken.
 Monitoring, therefore, enables the management to be proactive rather than being reactive
in correcting mistakes during implementation.
 In this regard, relevant actions would be taken and the barriers to implementation should
be monitored for smooth implementation.
 The channels of communication & reporting should also be clear and easy to allow
transparency and accountability for all staff involved.

Evaluation/Control

Evaluation involves a systematic review or examination of the elements of success and failure in
the project experience during the project life, which helps to learn how better to plan for the
future.

 This implies that evaluation is a continuous exercise during the project life and is much
related to project monitoring.
 Monitoring provides the data on which the evaluation is based.
 However, formalized evaluation is undertaken at specified periods.
 There is usually a mid-term and a terminal evaluation.
 Evaluation can also be undertaken when the project is in trouble as the first step in a re-
planning effort.
 Careful evaluation is also undertaken before any subsequent project. Evaluation can be
done internally or by external reviewers. Some organizations have monitoring and
evaluation unit.
  Such a unit can provide management with useful information to ensure efficient
implementation of projects, especially if it operates independently and objectively,
because what the unit needs is to judge projects on the basis of objectives, original project
design, and the reality on the ground (i.e. the operating, physical, and policy
environment).
 With no free hand, the feedback mechanism will be stifled and information may be “held-
back" instead of being “fed-back".
 Some projects may even be subjected to external evaluation.
 In general, the aim of evaluation is to determine the extent to which the objectives are
being realized.

A summary of the monitoring and evaluation aspects is presented in graph below:

Project Evaluation

Monitoring Control (characteristics)

(characteristics)

 Emphasize on preventive mechanisms

 Follow up the progress of the actual activities (ongoing evaluation)
 Anticipate deviations from implementation plans
 Analyze emerging problems (Proactive feedbacks)

Considerations (in Monitoring)

 Focus on critical aspects

 Emphasize on physical milestones and not on financial targets
 Keep the control system relatively simple (should not be complicated)
 Unless it leads to:
 Redundant paper work
 Diversion of resources
 It may become an end in itself rather than a means to implementation

Control Characteristics

 Focuses on corrective mechanisms (often at latter times)

 Regular comparison of performance against targets
 Anticipate deviations from implementation plans
  Search for causes of deviations (variance analysis)
 Commitment to check adverse out comes (or variances)
 Feedbacks for future projects

Apart from this, you need to comprehend the fact that, as there are diverse obstacles in the course
of project management, which are impeding the achievement of project's objectives, project
planners need to ensure whether a sound project organization is designed and/or realized in order
to mitigate, at least, some of the project related (or internal) constraints for implementation.

 A sound project organization, among others, gives a critical attention to the human
element, as they are the forefront players that actually realize what is prepared and
presented in a form of project document.
 The understandings, experiences, skills, and motives of the human element in general and
of those involving in the project implementation team in particular, among other things,
are very important variables as they are influencing the realization of project ideas.
 In other words, the overall quality, in terms of the above variables, of the individuals
involving in the implementation process has important implications in ultimately defining
the success or failure of the project as a whole.
 Together with this, individuals (i.e. members of the project implementation team) and/or
institutions that are responsible for implementing the project would better identify in
advance the dimensions (and/or the relevant criteria) that define the success of project
implementation.

Organization Sound Project

Lead by a competent leader who is accountable for project

Commensurate authority and responsibility (given to project leader and team)
Attention to the human side of the project
Performance related rewards and penalties

Obstacles in Project Management

Projects complexity
Customers’ specific requirements
Technology changes and obsolescence
Economic policy changes
Supply difficulties (supplier problems) associated with rise of raw materials prices,
delay by suppliers, likely defaults of suppliers, etc
Availability of inputs such as raw materials, utilities, labor, etc
Project risks (political or local society actions)
Design and civil works problem

Successful Projects (Dimensions)

 Completed within the allocated time, cost, and performance specifications
Minimal or mutually agreed upon scope changes (financial, size, coverage, etc)
upon scope changes (financial, size, coverage, etc)
Creating positive images for future images
Minimal restructuring (without disturbing the main work flows in the organization)
Without changing corporate culture

OVERVIEW OF PROJECT PLANNING IN ETHIOPIA

Types of plans and Tools to attain development goals

 Long-term/ Middle-term Plans: it consists of development plans, broader programs,

and bundle of projects.
 Short-term Plan: It is largely composed of projects, tasks, and work packages.

The following are some of the tools used, in addition to basic development plans & programs, in
order to attain development objectives:

 Fiscal policies and Measures (Taxes, Custom duties, Government Expenditures, etc)
 Monetary policy (money supply and demand)
 Price policy/control
 Credit policy (interest rate)
 Trade regulation

Generally, a combination of the development programs, projects and various tools and measures
are used to attain development objectives.

The Planning Cycle in Ethiopia

 The Multi Year Planning Cycle for developmental plans focuses on long-term goals and
objectives to be achieved. The Ministry of Finance and Economic Development
(MOFED), in this regard, plays an important role in providing macro economic forecasts
of:
 Economic growth;
 GDP;
 Public Sector Expenditure;
 Sources of Finance; etc
 The MOFED releases Indicative Planning Figures (IPF) that would be used in the
preparation of multiyear programming by the public bodies (the spending units) such as
Ministries, Authorities, Agencies, and Commissions.

 Using the IPF, the public bodies, in collaboration with MOFED, prepare a multiyear
program of the capital expenditures on a priority basis as follows:
 1) On-going, 2) Approved, and 3) Planned
 The whole document comprises the Public Investment Program (PIP) of the spending
units. The PIP is a three-year rolling financial plan of capital expenditures that
should include all such items in the planning cycle.
 MOFED issues directives on PIP calendar. It coordinates the preparation and then
consolidates the PIP. Upon completion of evaluation, MOFED presents the PIP to the
Council of Ministries for review and recommendation.
 Using approval by the council, the first year portion of the PIP will be included in the
annual budget as a capital budget of the following year and submitted, along with the
budget for recurrent expenditures, to the HOPR for final approval and enactment.
 At the same time, the PIP of each spending bodies will further be broken down into
Regional, Sectoral, Sub-regional, and Sub-sectoral components. The ultimate outcome
will be small, clear, and unique implementation and operational entity called project
plan. (The chart on page 15 depicts the planning framework in Ethiopia).

Political process

(Interactions)

Long-term Economic Regulatory Framework

s Strategy

Multi year Multi year planning

programming (development plans)
(Development MOFED-IPF (PIP
programs) Calendar)
 Long-term
development budget
for capital
expenditures

Sectoral plans,
Regional plans,
programs, and Budgets
programs, and
Budgets Regulatory planning

Sectoral plans,
Regional plans,
programs, and Budgets
programs, and
Budgets

Corporate plans:
Sub Regional plans Sub Sectoral plans and
and programs. programs.  Private sector
 Cooperatives
 NGOs

Project Plans (Unique, Manageable, Implementation and Operational Entity)

Classification of Projects

Projects are classified based on several criteria, including: ownership, source of finance,
and forces behind the projects.

1. Based on ownership:
a. Private sector- mostly projects undertaken by business enterprises.
b. Public sector- projects undertaken by national and local government bodies.
c. NGOs- development projects are most often undertaken by non-government and non-
for profit organizations.
2. Based on the Sources of Finance:
a. Government treasury- projects may be entirely financed by government budget as
per its priority. For instance, construction of regional airport.
b. Government treasury and external sources- most projects are financed by the joint
partnership of the government and donor groups. For example, a road project may be
financed 50% by the government and 50% by a foreign donor.
c. External sources of Finance- projects may be financed totally by parties other than
the government but established for the well being of the citizens and the ownership
may be for the government or the public.

3. Based on the forces Behind:

a. Demand driven/need driven- based on identified unsatisfied demand project can be
created or on unsatisfied basic needs like food, water and shelter.
b. Donor driven- the force behind the financing organization. Donors will have their
own say and influence the types of projects to be established.
c. Political Driven- Projects may be established in response to some political situation
such as for example because of national elections, projects by religious organizations.

4. Based on their nature:

a. Civil engineering, construction, petrochemical, mining, quarrying, projects far away
from the contractor’s home office, and involve special risk as well as problems of
organizational communication.
b. Manufacturing projects- conducted in a factory or other home based environment
and enable exercising on the spot management.
c. Research projects- established for pure research consuming large sum of money and
lasting over years resulting in dramatic profitable discovery or proving waste of
money.
d. Management projects- that require the employment of an external project manager
or managing contractor for issues such as relocating head quarters, developing and
introducing a new computer system, preparing for a trade exhibition, producing a
feasibility or other study report, restructuring the organization etc.