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Project appraisal is the evaluation process of a project's viability before resource commitment, focusing on financial and economic assessments to select the best project option. It answers key questions regarding the project's objectives and its comparison with alternatives, emphasizing profitability for private projects and socio-economic development for public projects. Project proposals consist of technical, financial, and management components, detailing the project's scope, objectives, and feasibility through various analyses including cost-benefit and environmental impact assessments.

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4 views

pm2

Project appraisal is the evaluation process of a project's viability before resource commitment, focusing on financial and economic assessments to select the best project option. It answers key questions regarding the project's objectives and its comparison with alternatives, emphasizing profitability for private projects and socio-economic development for public projects. Project proposals consist of technical, financial, and management components, detailing the project's scope, objectives, and feasibility through various analyses including cost-benefit and environmental impact assessments.

Uploaded by

gunacethapa7001
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Project Management Chapter-02

2.1 CONCEPT OF PROJECT APPRASIAL


Appraisal is the evaluation of the ability of the project to succeed. Project appraisal
is the process of assessing and questioning proposals before resources are
committed. This is an evaluation report of proposed project that is prepared before
signing the agreement or memorandum of understanding (MOU). Project appraisal
is a process of detailed examination of several aspects of a given project before
recommending the same. The objective of the project appraisal is to study and
compare the possible feasible project and select the best one.
Project appraisal is systematic analysis of a proposed project's viability using
financial and economic appraisal tools to determine the cost-benefit of proceeding
with the project and its cost-effectiveness in meeting its intended objectives. A
standard criterion is then used to compare several project alternatives.
Appraisal is done systematically to provide an overall assessment of the project's
likelihood for success. The institution that is going to fund the project has to satisfy
itself before providing financial assistance for the project. The lending institution
has to ensure that the investment on the proposed project will generate sufficient
returns on the investments made and that loan amount disbursed for the
implementation of the project will be recovered along with interest within a
reasonable period of time.
Project Appraisal Answers two important Questions
1. Will the project meets its objectives?
2. How does the project compare with other competing projects? (if more than one
project has been found feasible)
The primary function of appraisal is to evaluate a project's ability to · achieve its
objective.
 For private project, profitability is the objective (financial profitability).
 For Public project, socio economic development is objective (economic
profitability).

.
Project Appraisal Document should include the following:
1. Project Introduction
2. Project Objective and Scope
3. Project Description
Project Management Chapter-02

2.2 Types and preparation of project Proposal


Project proposals are documents designed to present a plan of action, outline the
reasons why the action is necessary, and convince the reader to agree with and
approve the implementation of the actions recommended in the body of the
document.
It is extensively used in industrial, governmental and academic circle. From project
management viewpoint, proposal simply means a blue print of project activities. It
is a set of documents needed to evaluate the project, which is under consideration.
The set of documents, submitted for evaluation of project is called proposal.

CONTENTS OF PROJECT PROPOSAL

Every project is unique and different to each other such as establish drinking water
supply, to construct school building, conducting detailed feasibility, study of
hydropower (DPR), to provide some health facilities, to conduct socioeconomic
survey, to conduct training packages etc. may differ to great extent.
d descriptions of the project. Types are :

1. Technical part of project proposal


Technical part of the proposal gives the technical details an
a. Problem statement: description of the project problem
b. Special requirements: any special requirements as specified in TOR by client is
described
c. Test and inspection: procedures related to testing, quality assurance, reliability
and compliance along with specifications are prepared
d. Logistics: details of equipment, facilities, skills and administrative aspects are
listed
e. Reporting: formats, timing and nature of reporting should be highlighted.
f. CV: CV of key persons for the execution of the proposed project is listed along
with details
g. Capability statement: organizational capability and past similar work experience
is focused in this part

2. Financial part of the project proposal


It deals with the financial details of the project. The financial part of proposal covers
the aspects like:
a. Cost of basic materials
b. Statement of work
c. Cost summary
Project Management Chapter-02

d. Supporting schedules
e. Profit statement
f. Elements of cost
g. "Cost break down and work break down structures
h. Cost estimating techniques
In this part generally format of BOQ (provided along with TOR or bid document) is
prepared and rate is quoted for the proposed work.

3. Management part of the proposal

It incorporates the administrative and management capability of the proposing


organization in terms of:
 Organizational structure
 The financial stability
 Financial litigation history
 Accounting system
 Employee safety, health & Labor related aspects
 Cost and schedules
 Past work experiences

Procedure for developing Project Proposal


1. Proposal Brief
2. Pre/feasibility study
3. Preliminary Detail design
4. Proposal Development

BE/ ME thesis report


1. Introduction
1.1 Background
1.2 Objectives
1.3 Statement of Problem
1.4 Scope/ Limitations
2. Literature review
3. Methodology
3.1 Study Area
3.2 Data Collection and Analysis
Project Management Chapter-02

4. Result and Discussion


5. Conclusions
6. References
7. Appendices

1. Project Brief
•The client develops the project idea and prepares the statement of work which
describes the need and requirements. The content includes:
–Need of project
–Scope of project
–Objectives and output of project
–Specification and acceptance criteria
–Estimated budget for the project
–Estimated time tables
•The project brief serves as a starting point of the development of project proposal.
It indicates the need and requirements of the customer

2. Pre/Feasibility Study
•This study is performed to check the implement ability of the project. If detail
feasibility study is required, then pre-feasibility study is done before it.
•The area for which information is collected and analyzed is:
–Technical
–Economical
–Financial
–Market
–Management
–Environment

3. Preliminary/Detail Design
•It is the elaboration of project idea and is based on the requirement of pre/feasibility
study.
•It prepares the conceptual design and architectural drawing for implementation. It
includes:
–Technical aspects consisting of preliminary surveys and engineering design
Project Management Chapter-02

–Preliminary project schedule and implementation


–Estimated project cost

4. Proposal Development
•After collecting the all required information , the final step is developing the project
proposal. It should contain following information:
–Problem Statement
–Objectives and outputs
–Activities
–Project Implementation
–Project Schedule
–Project budget
–Project monitoring and Evaluation

Project Formulation
•Project formulation is the systematic development of a project idea for arriving at
an investment decision.
•It has the built-in mechanism of ringing the danger bell at the earliest possible stage
of resource utilization.
•Project formulation is the process of examining technical, economic, financial &
commercial aspects of a project.
•It refers to a preliminary project analysis covering all aspects such as technical,
financial, commercial, economic & managerial to find out whether it is worthwhile
to take project for detailed investigation & evaluation.

Techniques of Project Formulation


•Project Formulation is a concise , exact statement of a project to set the boundaries
or limits of work to be performed by the project.
•It is formal document that gives a distinctive identity of the project and precise
meaning to the project work to prevent conflict, confusion, overlap. Project
formulation aims to:
–Carefully identify and weight various components of project work
–Analyse project feasibility and cost effectiveness
–Identify the stakeholders and their involvement and contribution
–Define benefits and expectations
Project Management Chapter-02

Techniques of Project Formulation


–Estimate resources needed
–Perform a preliminary analysis of risks
–Make outline of project schedule
–The techniques of project formulation are
–Feasibility analysis
–Cost Benefit analysis
–Input Analysis
–Environment analysis

Feasibility Analysis
•It is used to determine the viability of the idea
•The objective of such analysis is to ensure a project is legally and technically
feasible and economically justifiable
•It evaluates the projects’ potential for success
•Areas of project Feasibility:

1. Technical Feasibility
2. Economic Feasibility
3. Financial Feasibility
4. Market Feasibility
5. Managerial Feasibility
6. Legal Feasibility
Project Management Chapter-02

1. Technical Feasibility

•Centered to the technical resources available to the project.


•Whether technical resources and team is capable of converting the ideas in to
working systems.

2. Economic Feasibility
•Assesses the viability, cost associated with the projects before financial resources
are allocated.
•Helps decision makers determine the positive economic benefits to the organization
that the propose system will provide and help to quantify them

3.Financial feasibility
•Whether the project is viable after the considerations its total cost and probable
revenues.
•If the revenue covers the cost of the project then project is viable

4. Market Feasibility
•Study and analyze the economic, demographic and competitive factors that impact
the development project.
•Determines what type of project would be appropriate for specific location.

5. Managerial Feasibility
•Studies the rationally uncover the strengths and weakness of an existing business ,
opportunities threats which are preset in the environment.
•Management support, employee involvement and commitment are the key element
required to gauge managerial feasibility

6. Legal Feasibility
•Investigates if proposed system conflicts with legal requirements

Cost Benefit Analysis ( CBA )


•It estimates and totals up the equivalent money value of the benefits and cost to the
project to establish whether they are worthwhile
•It evaluates the project from social point of view, also known as Social cost
benefit analysis
•Comprises not only financial effects but also social effects like pollution, safety,
market
Project Management Chapter-02

Advantages
•The ability to identify the project that maximize the welfare of the country
•The ability to objectively assess and quantify the purpose projects in relation to
community needs
•Exposure of the basis for decision making for projects and opportunity for public
criticism
•Ability to rank and prioritize limited resources so that maximum benefit is realized

Disadvantages
•Difficulty in measuring social cost and benefits and converting them into monitory
form
•Complexity
•Conflict between social welfare and financial justification.

Input Analysis
•Project requires various input. It includes 5 M

Environment Analysis
•It is the process of estimating and evaluating significant short term and long term
effects of project on quality of locations environment.
•Identifies ways to minimize , mitigate and eliminate these effects and/or
compensate these impact
•It includes:
Environment suitability
•It is necessary to check whether the project is suitable for existing environment or
not
Project Management Chapter-02

Environment Impact
•It is also necessary to identify the possible adverse effects caused by the
development, industrial, or infrastructural project or release of substance in the
environment
•It can be down in two ways :
Initial Environment Examination
•First review of reasonably foreseeable effects
•Describes the environment condition of project

Environment Impact Assessment


•Process of assessing the likely environment impacts and identifying options to
minimize the environmental damage
•Carried out for large projects

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