Project Analysis and Management

MSc Hargeisa University

01.04.2024 Prepared by Kedir 1

 What is project?
• Projects can be of any size and duration.
• A project is a means of moving from a problem to a solution via a
series of planned activities.
• A project has a definite beginning and end.
• Projects consist of several activities.
• Two essential features are present in every project no matter how
simple or complicated they are:

– All projects must be planned out in advance

– The execution of the project must be controlled

01.04.2024 Prepared by Kedir 2

 What is a project?...
• A project is a multitask job with a definite starting point, definite
ending point, a clearly defined scope of work, a budget, and
usually a temporary team.

 A project is not a repetitive activity.

• A project is a problem scheduled for solution.

 This definition makes us to realize that a project is conducted to

solve a problem.

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 Common features of a project

 Involves the investment of scarce resources in expectation of future

benefits

 An activity that is capable of being planned, financed and

implemented

 Has a defined set of objectives

 Has specific start and end dates

 Has a well-defined sequence of investment and production activities,

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 Cont…
 Involves risk and uncertainty
 Has geographical or organizational
boundaries
 It is an activity around which conceptual
boundaries can be ascribed.
 It is likely to have a partially or wholly
independent administration.

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 Projects, programmes, plans, policies
• Projects are usually the smallest unit of development
programmes and plans
– Concrete manifestation of the development plans in a specific time and
place.

• Programmes are planned continuous or ongoing development and

investment activities that are not generally time bound.
 The major difference between a project and a program is not so
much in objectives but lies more in scope, the details and the
accuracy.

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 Cont…
• Policy: a definite course or method of action selected (by
gov’t, institutions, groups or individuals) from among
alternatives and in the light of given conditions to guide and,
usually, to determine present and future decisions.

• It is a set of coherent decisions with a common long-term

purpose (s).

 Livestock policy for example:

A coherent set of decisions with a common long-term
objective (s) affecting or relevant to the livestock
subsector.

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 Cont…

• Policies are usually national policies (not district or

provincial) and are not necessarily limited in time:

 one does not usually speak in terms of “ 2-year

policies” as one does of “2-year project” or “5-year
plans”

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 Cont…
Elements in policy
• It is always helpful to distinguish between two elements which
are essential part of any policy:

– Policy objectives
• the “ends” of a policy
• reflect the overall purpose or long-term aim (s)
• Are what the policy intended to achieve

Example: more beef export or fairer access to grazing

lands

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 Cont…
– Policy instruments

• Are the “means” of a policy

• The actions used to carry it out
• The methods by which its objectives are achieved

Example: import tariffs on dairy products or a

subsidy on an artificial insemination service

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 PROJECT

• Implementing development programs via project is the most

challenging problem.

• There are many critical issues for such challenges:

Poor project preparation
Selecting priority areas for investment,
Designing effective price policies, and
Mobilizing resources

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 Cont…
 Careful project preparation is the best available means

– To ensure efficient, and economic use of capital funds and

– To increase the chances of implementation on schedule

• The capacity to prepare and analyze projects lags.

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 Cont…
• Successful project management can then be defined as having
achieved the project objectives:

– Within time
– Within cost
– At the desired performance/technology level
– Utilized the assigned resources effectively and efficiently
– Accepted by the customer/ beneficiaries

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 The potential benefits of project management are:

• Identification of functional responsibilities to ensure that all

activities are accounted for, regardless of personnel turnover

• Minimizing the need for continuous reporting

• Identification of time limits for scheduling

• Identification of a methodology for trade-off analysis

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 Cont…
• Measurement of accomplishment against plans

• Early identification of problems so that corrective

action may follow

• Improved estimating capability for future

planning

• Knowing when objectives cannot be met or will

be exceeded
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 Obstacles of project management

• Project complexity
• Customer's/beneficiary’s special requirements and scope
changes
• Project risks
• Changes in technology
• Forward planning and pricing

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 Defining project management?

• Project management is the:

– planning,
– organizing,
– directing, and controlling of project
resources

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 Cont….
• Classical management is usually considered to have five
functions
or principles:
– Planning
– Organizing
– Staffing
– Controlling
– Directing
• We should also comment on what is meant by a "relatively"
short-term project.

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 Approaches to project planning

The different approaches for project planning include:

a) Top-bottom – Centralized
 focus on national realities
 Participation as a means
b) Bottom- up – Grass root communities
 People Centered
Participation as a end

01.04.2024 Prepared by Kedir 19

 Approaches to project planning…

c) Participatory – Blended

 It balance by taking into account both national and grass root

community level realities in project planning

01.04.2024 Prepared by Kedir 20

 Data Riquired
a) Demographic data
– Target population
– Household characteristics
– Gender issue
– Age group and dependency ratio
– Cross-cutting issues

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 Cont…
b) Economic data
• Non farm data
• Input and output coefficient
• Sectoral, regional, national & international prices

c) Political Stability, good governance and democracy

01.04.2024 Prepared by Kedir 22

 Project Analysis and
Management
CH-2
The Project cycle

01.04.2024 Prepared by Kedir 23

 Project Cycle
• The way in which projects are planned and carried out follows a
sequence that has become known as the project cycle
 The cycle starts with the identification of an idea and develops
that idea into a working plan that can be implemented and
evaluated.
• In operational terms each stage in the project cycle can be
understood as leading to a decision point.

 The project cycle is thus interactive in nature

01.04.2024 Prepared by Kedir 24

 Cont…

• The details of what occurs during each phase differ between

institutions, reflecting differences in procedures.
 Within all institutions the cycle shares three common themes:

1) The cycle defines the key decisions, information requirements and

responsibilities at each phase.

2) The phases in the cycle are progressive – each phase needs to be

completed for the next to be tackled with success.

3) The cycle draws on evaluation to build experience from existing

projects into the design of future programmes and projects.

01.04.2024 Prepared by Kedir 25

 Cont…
• There are several models of project cycle but the most
important ones are:
Traditional approach
Process approach
The Asian Development Bank project cycle
The Integrated project planning & magm’t cycle
(IPPMC)
The United Nation Industrial Development
Organization (UNIDO) project cycle

01.04.2024 Prepared by Kedir 26

 Cont…
• The first two are the models of the World Bank

• The most popular model is the traditional version of the WB

developed in 1970 with four stages and in 1978 transformed to 5
levels and known as Baum Project Cycle Model
• The process approach of the WB (the new approach) was
developed in 1994.
• Emphasis on the issue of participation

• Particularly relevant to projects where beneficiary

participation is critical.

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 Traditional project cycle (the Blueprint Approach)

Evaluation – added after 1978 and involves ex-post

evaluation

Identification

Evaluation Preparation

Implementation Appraisal

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 The Process Approach Project Cycle
Process Approach of the World Bank has four stages: listening,
piloting , demonstration and mainstreaming

Listening

Mainstreaming Piloting

Demonstrating

01.04.2024 Prepared by Kedir 29

 Cont…
• Listening
 Making the project idea or concept originate
• From local communities and other project beneficiaries
• On the needs and priorities of the community
 Piloting:
• Starting small-scale projects with trials of different
techniques in a holistic approach

01.04.2024 Prepared by Kedir 30

 Cont…
• Demonstrating:
• Conducting trials on representative scale (eg. village,
kebele ) through joint participation.

• Mainstreaming:
– This is the process of extending the project to a larger scale (eg.
District, region, etc).

01.04.2024 Prepared by Kedir 31

 The Integrated Project Planning and Management Cycle
(IPPMC)

• Developed to clarify the procedures of project planning and

implementation

• Four major phases

– Phase I - Planning, appraisal and design
– Phase II - Selection, approval and activation
– Phase III - Operation, control and handover
– Phase IV - Evaluation and refinement

01.04.2024 Prepared by Kedir 32

 United Nations Industrial Development Organization (UNIDO)
Project life Cycle

• Refers to the development process of an industrial investment

project
• Covers from initial idea until the plant is operational.

• Three distinct phases :-

• Pre-investment phase

• Investment phase

• Operational phase

01.04.2024 Prepared by Kedir 33

 Project Idea Generation, Sources
& Techniques
Part II

01.04.2024 Prepared by Kedir Jemal 34

 Cont…
• It has become commonplace to state there is no
shortage of good ideas in development.

• As President Bill Clinton put it:

“Nearly every problem has been solved by
someone, some where. The challenge of the 21st
century is to fid out what works and scale it up.

01.04.2024 Prepared by Kedir Jemal 35

 PROJECT SELECTION PROCESS

• Identification of a new project is a complex

problem.
• Project selection process starts with the
generation of project ideas.
• In order to select the most promising project,
the entrepreneur needs to generate a few ideas
about the possible project one can undertake.

01.04.2024 Prepared by Kedir Jemal 36

 Idea Generation
• Project selection process starts with the
generation of a project idea.
• Ideas are based on technological
breakthroughs.
• Most of the project ideas are variant of
present products or services.
• To stimulate the flow of ideas, the following
are helpful:

01.04.2024 Prepared by Kedir Jemal 37

 Cont…
• The project ideas can be generated from various
internal and external sources. These are :-
 Knowledge of market, products, and services.
 Knowledge of potential customer choice.
 Emerging trends in demand for particular
product
 Scope for producing substitute product.
 Market survey & research.

01.04.2024 Prepared by Kedir Jemal 38

 Cont…
 Going through Professional magazines.
 Making visits to trade and exhibitions
 Government guidelines & policy.
 Ideas given by the experienced person.
 Ideas by own experience.
 SWOT analysis.

01.04.2024 Prepared by Kedir Jemal 39

 Cont…
• SWOT Analysis :- SWOT is an acronym for
strengths, weaknesses, opportunities and threats.
• SWOT analysis represents conscious, deliberate
and systematic effort by an organisation to
identify opportunities that can be profitably
exploited by it.
• Periodic SWOT analysis facilitates the
generation of ideas.
• Need Assessment for developmental projects
01.04.2024 Prepared by Kedir Jemal 40
 Idea Generation Techniques
• Active Search: Active search refers to hunting
for a particular solution.

• Attribute List: Attribute listing refers to

taking an existing product or system, breaking
it into parts and then recombining these to
identify new forms of the product or system.

01.04.2024 Prepared by Kedir Jemal 41

 Cont…
• Brainstorm: Brainstorming involves generating
a large number of solutions to a problem (idea)
with a focus on the quantity of ideas.
• During this process, no ideas are evaluated; in
fact unusual ideas are welcomed.
• Ideas are often combined to form a single good
idea as suggested by the slogan “1+1=3”.
– Brainstorming can be used by groups as well as
individuals.
01.04.2024 Prepared by Kedir Jemal 42
 Cont…
• Collaborate: Collaboration refers to two or more
people working together towards a common goal.

• Designers often work in groups and co-create during

the entire creative process.
• Critique: Critique refers to receiving input on current
ideas.
• This could be collaborative such as receiving a design critique
from a colleague or individuals critiquing their own ideas.
• This technique often spurs new thought by finding solutions
to fault within current concepts.

01.04.2024 Prepared by Kedir Jemal 43

 Cont…
• Documenting: Documenting refers to designers writing
down ideas (physically or electronically).

• This includes journaling, writing stories, and taking notes.

• Expert Opinion: Often elicit opinions from
experts to identify potential problems with products or
services before more comprehensive evaluations.
• This occurs when they are looking for an answer to a
problem that is outside their domain knowledge or
when they want to test a new idea.

01.04.2024 Prepared by Kedir Jemal 44

 Cont…
• Incubate: Incubation refers to stepping back
from the problem to let the subconscious mind
work.
• Prototyping: refers to a low fidelity model of
an idea.
• These models can be created with any type of
material (paper, clay, etc.) as they are only
used to conceptualize a thought.

01.04.2024 Prepared by Kedir Jemal 45

 Cont…
• Reflect: Reflection occurs when designers
review their previous work (sketches,
documents, prototypes, etc.)
• Sketching: Sketching refers to a rough
drawing of an idea.
• Socializing: Socializing refers to talking with
others about topics unrelated to the current
project.

01.04.2024 Prepared by Kedir Jemal 46

 Screening project ideas
• A number of possible projects that
would address that need or opportunity are
elaborated and screened.
• The alternative project ideas must adherence to:
– government policies,
– development vision and
– program orientations and
– prioritized on the basis of their benefits and ease of
implementation.
• This leads to an ordered list of possible projects.
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 Cont…

01.04.2024 Prepared by Kedir Jemal 48

 Project Preparation

• Refers to the completion of the feasibility studies on which

financing institutions usually base their appraisal of a project.
• The objective of project preparation is to demonstrate that a
project based on the chosen concept is:
– In accordance with the country's development objectives and
priorities;
– Technically sound and the best of alternatives;
– Attractive to the intended beneficiaries;
– Operationally and managerially workable;
– Economically and financially viable;
– Sustainable and environmentally sound.

01.04.2024 Prepared by Kedir 49

 Cont…
• Feasibility - Detail study of the project
• Background of the project
• Technical Study
• Market Study
• Organisation & Management
• Financial Analysis
• Economic Analysis
• Environmental Analysis
• Cross-cutting Analysis
• Sensitivity Analysis
• Risk Analysis

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 Cont…
SWOT Analysis
• SWOT stands for Strengths, Weaknesses, Opportunities and Threats,
which are the themes under which ideas are catalogued using this
analytical tool.
• SWOT analysis is particularly useful in the project identification
process, appraisal as well as implementation of the project .
• SWOT analysis involves brainstorming sessions with concerned
participants
• Participants are required to list out all their ideas concerning the matter
being reviewed, under each of the four themes .

• All ideas are then reviewed and consensus reached on which are critical
to the success of the matter under review.
01.04.2024 Prepared by Kedir 51
 Project Appraisal

• Appraisal — evaluation of alternative options and actions (ex ante

analysis)
• Strictly apply sensitivity and risk analysis
• Compare with standards or establish standards
• Don’t overlook appraising designs, manpower & marketing
procedures.

01.04.2024 Prepared by Kedir 52

 Project Implementation
• Project implementation is a phenomenon by which project plans
are translated into reality within their specified time and budget.
• It covers the period starting from the time decision is made to
invest the project up to the completion.

• First, the better and more realistic a project plan is, the more
likely it is that the plan can be carried out and the expected
benefit realized.
• Second, project implementation must be flexible
• Circumstances will change, and project managers must be able
to respond intelligently to these changes.

01.04.2024 Prepared by Kedir 53

 Cont…
• Project analysts generally divide the implementation phase
into three different time periods.
– Investment period -when the major project investments are
undertaken
– Development period -when its production builds up
• Once full development is reached, it continues for the
life of the project.

– Monitoring and Completion

• Most important part of project where project fails in most

developing countries

01.04.2024 Prepared by Kedir 54

 What is Project Management?
 The art of organising, leading, reporting and
completing a project through people.

01.04.2024 55
 Cont...
• A project manager is a person who causes things
to happen

• Therefore, project management is causing a

planned undertaking to happen.

01.04.2024 56
 Project Manager Role
• A Good Project Manager
– Takes ownership of the whole project
– Is proactive not reactive
– Adequately plans the project
– Is respected (NOT Authoritarian)
– Is Decisive
– Is a Good Communicator
– Manages by data and facts not uniformed optimism
– Leads by example
– Has sound Judgement
– Is a Motivator
– Is Diplomatic
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 Project Planning
• Adequate planning leads to the correct completion of
work

01.04.2024 58
 Cont...
• Inadequate planning leads to frustration towards the
end of the project & poor project performance

Project Start Project End

01.04.2024 59
 Key Elements of Project Plan
Contractual Aspects
– A complete list and description of all reporting
requirement.
Schedules
– Various schedule and lists of all objective
Resources
a) Budget.
b) Cost monitoring and control.
Personnel
– Personnel requirements
Evaluation Methods
– Be evaluated against the standard.
Potential Problems
– Anticipate potential difficulties.
01.04.2024 Prepared by Kedir Jemal 60
 Common constraints in project
Implementation
• Over optimistic estimate at inception
• Lack of adequate knowledge about the Banks
(Creditors) guidelines on project implementation
procedures, such as
– disbursement,
– procurement and
– selection of contractors

01.04.2024 Prepared by Kedir 61

 Cont…
• Inappropriate technology choice
• Shortage of qualified and experienced
personnel
• Lack of prompt decisions on certain issues,
like selection of sites for carrying out project
activities.
• High cost of input
Example feed shortage for livestock projects
01.04.2024 Prepared by Kedir 62
 Cont….
• Inefficiency of the contracting firms resulting in
delays on finalization of construction/machinery
delivery.
• Change of project personnel (trained personnel
leave jobs before implementation is completed).
• Natural calamities caused by flash floods, road
blots due to landslides, and disruption of the
operation of important service facilities.

01.04.2024 Prepared by Kedir 63

 Cont…
• Lack of proper communication facilities
between the field units, project headquarters
and the creditor/s.
• Unhealthy atmosphere created by political
upheaval in the project area, (labor strike,
change in government etc.).
• Corruption

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 Project Management

Aspects of Project preparation and

Analysis

01.04.2024 Prepared by Kedir 65

 Cont…
 There is a need for projects to be:

• Conceptually coherent,
• Relevant to national needs and capabilities,
• Technically sound,
• Viable in economic and financial terms,
• Attractive to the participants,
• Socially acceptable, and
• Environmentally and fiscally sustainable

01.04.2024 Prepared by Kedir 66

 Aspects of project design and analysis

• There are six important aspects:

1. Technical aspects
2. Institutional-organizational-managerial aspects
3. Social aspects
4. Commercial aspects
5. Financial aspects
6. Economic aspects

01.04.2024 Prepared by Kedir 67

 Technical Aspects

• The technical analysis concerns the project's inputs

(supplies) and outputs (production) of real goods and
services.

• The other aspects of project analysis can only proceed in

light of the technical analysis
• Good technical staff are essential for this work

• The technical analysis will examine the possible technical

relations in a proposed project

01.04.2024 Prepared by Kedir 68

 Cont…
• Example: Dairy camel production enterprise
» Feed availability,
» Disease prevalence,
» Environmental condition
» Climatic variables (Rainfall, temp., relative
humidity)
» Availability of water and land, soil type,
» Production supplies and their availability,
» Availability of different infrastructure, etc
» Overall technical aspect properly addressed

01.04.2024 Prepared by Kedir 69

 Cont…
• On the basis of these and similar considerations, the
technical analysis will determine
– the potential yields in the project area

– the possibilities for diversification.

• The technical analysis will also examine

• the storage facilities

• the processing systems

01.04.2024 Prepared by Kedir 70

 Consequences of poor Technical Analysis

 Under or over estimation of quantities required by and

outputs of the project.

 Spurious cost and benefit estimation

 It will have effect on the project life time

01.04.2024 Prepared by Kedir 71

 Institutional-organizational-managerial Aspect (IOMA)

• Here the emphasis is around the overlapping IOMA,

which clearly have an important effect on project
implementation
• A project must relate properly to the institutional
structure of the country and region
– What will be the arrangements for land tenure?
– What size holding will be encouraged?
– Does the project incorporate local institutions and
use them to further the project?

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 Cont…
– How will the administrative organization of
the project relate to existing agencies?
– Is there to be a separate project authority?
– What will be its links to the relevant
operating ministries?
– Will the staff be able to work with existing
agencies?

01.04.2024 Prepared by Kedir 73

 Cont…
• The organizational proposals should be examined to see that the
project is manageable.
– Is the organization such that lines of authority will be clear?
– 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?
– Is a special monitoring group needed?
– What about training arrangements?
– Does the project have sufficient authority to keep its accounts
in order and to make disbursements promptly?

01.04.2024 Prepared by Kedir 74

 Cont…
 Managerial issues are crucial to good project design and
implementation.
– The analyst must examine the ability of available staff to
judge whether they can administer such large-scale public
sector activities
– When managerial skills are limited, provision may have to be
made for training, especially of middle-level personnel.
– Expatriate managers may have to be hired, but caution should
be taken into account.
• In agricultural projects the analyst should consider the managerial
skills of the farmers and pastoralist who will participate.

01.04.2024 Prepared by Kedir 75

 Social aspects
• The project analysts are expected to examine carefully the
broader social implications of proposed investments.
• Income distribution
• Employment opportunities
• Effects of projects on some groups of the society
• There should be considerations concerning the quality of life.
• consider the issue of adverse environmental impact.

01.04.2024 Prepared by Kedir 76

 Commercial aspects

• Pays attention on the arrangements for marketing the output

produced and supply of inputs needed.
Output side:
• Careful analysis of the proposed market for the project's
production is essential
• Where will the products be sold?
• Is the market large enough to absorb the new production
without affecting the price?
• If the price is likely to be affected, by how much?
• Will the project still be financially viable at the new price?
• What share of the total market will the proposed project
supply?
• Are there suitable facilities for handling the new production?
01.04.2024 Prepared by Kedir 77
 Cont…
• Is the product for domestic consumption or for
export?
• What financing arrangements will be necessary to
market the output, and
• What special provisions need to be made in the
project to finance marketing?
• Since the product must be sold at market
prices, a judgment about future government
price supports or subsidies may be in order.

01.04.2024 Prepared by Kedir 78

 Cont…
• Input side:
• Appropriate arrangements must be made for farmers to secure the
supplies of inputs they need to adopt new technology.

• Do market channels for inputs exist, and

• Do they have enough capacity to supply new inputs on time?

• What about financing for the suppliers of inputs and credit for the
farmers to purchase these supplies?

• Arrangements for the procurement of equipment and supplies:

Bidding and specification preparation.

01.04.2024 Prepared by Kedir 79

 Financial Aspects
• The financial aspects of project preparation and analysis
encompass the financial effects of a proposed project on each
of its various participants.

• In agricultural and pastoral projects the participants include:

– farmer, pastoral and agro-pastoral households,

– private sector firms,
– public corporations,
– project agencies, and
– perhaps the national treasury
• On the basis of these budgets, judgments are formed about the
project's financial efficiency, incentives…

01.04.2024 Prepared by Kedir 80

 Cont…

• The analyst will need budget projections that estimate year by year
future gross receipts and expenditures.

 Including the costs associated with production and the credit

repayments farm families must make,
• To determine what remains to compensate the family for its own labor,
management skills, and capital.

• Part of the income the family will receive may be in food that is
consumed directly in the household, so a judgment must be made about
this quantity and its value.

 Think of the cash to repay the production credit and to make a policy judgment
about how much to subsidize families with very low incomes

01.04.2024 Prepared by Kedir 81

 Cont…
• The analyst must judge whether HHs will need loans:

– To finance on-farm investment

– To meet some production costs
– Whether seasonal short-term credit should be provided for working
capital to finance inputs and pay for hired labor
– Also think of whether HHs have enough income to live on

 The objective of all these judgments is to shape credit terms that

will be generous enough to encourage farmers to participate in
the project.

01.04.2024 Prepared by Kedir 82

 Cont…

• An analysis of the financial aspects of the project‘s must

answer

• What investment funds will the project need and

when?
• What will be the operating expenses when the
project is under way?
• Will these expenses depend on budget
allocations or will the project produce sufficient
revenue to cover its administrative costs?

01.04.2024 Prepared by Kedir 83

 Objectives of Financial Analysis

• Six major objectives for financial analysis occur in

analyzing agricultural, pastoral and agro-pastoral projects.

Assessment of financial impact

Judgment of efficient resource use
Assessment of incentives
Provision of a sound financing plan
Assessment of financial management competence

01.04.2024 Prepared by Kedir 84

 Economic Aspects
The question is:
• Will the proposed project contribute significantly to the
development of the total economy? and

• Will its contribution be great enough to justify using the

scarce resources it will need?

• Consideration taken into account in the economic analysis is

that of the society as a whole.
• The financial and economic analyses are thus complementary
 The financial analysis takes the viewpoint of the individual
participants and
 The economic analysis that of the society.

01.04.2024 Prepared by Kedir 85

 Cont…
• There are very important distinctions between Financial and
Economic analysis.
1. In economic analysis taxes and subsidies are treated as transfer
payments.
In financial analysis taxes are usually treated as a cost and
subsidies as a return.

2. In financial analysis market prices are normally used

 In economic analysis, however, some market prices may be changed so that

they more accurately reflect social or economic values.

These adjusted prices are called "shadow" or "accounting" prices

01.04.2024 Prepared by Kedir 86

 Identifying Project Costs and
Benefits

01.04.2024 Prepared by Kedir 87

 Cont…
• The costs and benefits of a proposed project must be identified.

• Once costs and benefits are known, they must be priced, and
their economic values determined.

• In project analysis, the objectives of the analysis provide the

standard against which costs and benefits are defined.

• A cost is anything that reduces an objective, and a benefit is

anything that contributes to an objective.

01.04.2024 Prepared by Kedir 88

 Approaches in comparing situations in project

• "With" and "Without" Comparisons

• Project analysis tries to identify and value the costs and benefits
that will arise with the proposed project and to compare them with
the situation as it would be without the project.

 The difference is the incremental net benefit arising from the

project investment.

• This approach is not the same as comparing the situation

"before" and "after" the project.

01.04.2024 Prepared by Kedir 89

 Costs of Projects
• In examining costs
– Physical goods
– Labor
– Land
– Contingency allowances
• Physical contingencies are included in the project costs to allow for
uncertainties and to compensate for possible inaccuracies in the estimates of
work quantities.
• Price contingencies may also be estimated to demonstrate the probable
escalating effect of relative price change and inflation on project costs..
– Taxes
– Debt service
– Sunk costs

01.04.2024 Prepared by Kedir 90

 Tangible Benefits of Projects
• Tangible benefits of projects can arise either from an increased
value of production or from reduced costs.

 Increased production
 Quality improvement
 Change in time of sale
 Change in location of sale
 Changes in product form (grading and processing)
 Cost reduction through mechanization
 Reduced transport costs
 Losses avoided
 Other kinds of tangible benefits

01.04.2024 Prepared by Kedir 91

 Intangible Costs and Benefits

• Almost every project has costs and benefits that are intangible.

• Quantification and valuation

• Every project decision will have to take intangible factors into

account through a subjective evaluation:

• Because intangible costs can be significant and

• Because intangible benefits can make an important

contribution to many of the objectives of rural
development.

01.04.2024 Prepared by Kedir 92

 Pricing project costs and benefits

• Once costs and benefits have been identified, if they are to be

compared they must be valued.

• Money value and the proper prices for the costs and benefits

 Underlying all financial and economic analysis is an

assumption that prices reflect value-or can be adjusted to
do so.

01.04.2024 Prepared by Kedir 93

 Cont…
a) The first step in valuing costs and benefits is finding the market
prices for the inputs and outputs
 Points of first sale and farm-gate price

 Predicting future price

• Project analysis is about judging future cost & returns
• Starting point would be to observe the past years trend and
current prices
• Judgment is also important,
• Note that distant future reduce prediction power of a model

01.04.2024 Prepared by Kedir 94

 cont…
 Inflation: an increase in general prices of goods & services

• To overcome this we use constant price in project analysis

assuming inflation affects all equally

01.04.2024 Prepared by Kedir 95

 Economic Analysis

01.04.2024 Prepared by Kedir 96

 Cont…
• Economic and financial analysis are similar, in both we
assess the profit of an investment.

• The concept of financial profit is not the same as social

profit of economic analysis.

The financial –money profit

Social profit measures the effect of a project on

fundamental objectives of the whole economy.

01.04.2024 Prepared by Kedir 97

 Cont…

• Some costs and benefits that may appear in the financial

accounts may not appear in the economic accounts-vise
vera

• Some costs and benefits may be lower (higher) in financial

but higher(lower) in economic analysis even though that
the costs and benefits appear in both economic and
financial accounts.

01.04.2024 Prepared by Kedir 98

 .
 The extent to which economic costs and benefits diverge from their counterpart
financial costs and benefits rests on:

The presence and extents of market imperfections

(Market power, externality and public good (non-excludability), property right,
information asymmetry)
• A market in which individual suppliers or consumers have an impact on
supply or demand.
» For example, a market characterized by a monopoly or
oligopoly is imperfect.

• A market in which information is incomplete.

» Participants in an imperfect market are more likely to make
poor decisions than they would be if information were more
readily available.

01.04.2024 99
Prepared by Kedir
 Cont…

Government interventions of various forms

 taxes, subsidies, bailouts, wage and price controls, and regulations

The fundamental policy objectives

 saving, income distribution, employment, price stabilization, etc

01.04.2024 Prepared by Kedir 100

 Purposes of Economic Analysis
i. Selection of alternatives:
– In this context economic analysis:
• helps to design and select projects that contribute to the welfare
of a country.
• considers the project’s impact on many issues.
• helps to undertake optimal decision by considering the merits of
different aspects.

ii. Identification of winners and losers:

• Who enjoys the music? Who pays the piper?
• Identifying those who will gain and lose helps the analyst to
have insight into the incentives that various project entities have
to see that the project is implemented as planned.

iii. Fiscal impact

vi. Environmental impact
01.04.2024 Prepared by Kedir 101
 Monitoring and Evaluation

01.04.2024 Prepared by Kedir 102

 Cont…
• Monitoring:

 It can be defined as the ongoing process by

which stakeholders obtain regular feedback
on the progress being made towards achieving
their goals and objectives.

01.04.2024 Prepared by Kedir 103

 Cont…
• Evaluation:

– It is a rigorous and independent assessment of either

completed or ongoing activities.

– To determine the extent to which they are achieving stated

objectives .

01.04.2024 Prepared by Kedir 104

 Cont…
• Evaluations, like monitoring, can apply to many things,
including an:
– activity,
 project,
 programme,
– strategy,
– policy,
– topic,
– theme,
– sector or
– organization
01.04.2024 Prepared by Kedir 105
 Cont…
• The key distinction between the two:
– Evaluations are done independently to provide managers
and staff with an objective assessment of whether or not
they are on track.
• They are also more accurate in their procedures,
design and methodology, and generally involve more
extensive analysis.

01.04.2024 Prepared by Kedir 106

 Cont…
• However, the aims of both monitoring and evaluation
are very similar:

– to provide information that can help inform decisions,

improve performance and achieve planned results
 Cont…
• Monitoring provides real-time information required by
management, evaluation provides more in-depth assessment.
 The monitoring process can generate questions to be answered
by evaluation.
• Evaluation draws heavily on data generated through
monitoring during the programme and project cycle, including,
for example:
– baseline data,
– information on the programme or
– project implementation process and measurements of result.

01.04.2024 Prepared by Kedir 108

 Cont…
• Evaluation complements monitoring by
providing an independent and in-depth
assessment of:

– what worked and

– what did not work, and
– why this was the case

01.04.2024 Prepared by Kedir 109

 Cont…

• Without effective planning, monitoring and evaluation, it would be

impossible to judge:

 If work is going in the right direction,

 Whether progress and success can be claimed, and
 How future efforts might be improved

 M&E establish clear links between past, present and future

initiatives and development results

01.04.2024 Prepared by Kedir 110

  M&E help extract relevant information from past and ongoing
activities that can be used as the basis for project or programme:

 modification,
 reorientation and
 future planning.

 Programmes and projects with strong monitoring and evaluation

components:
• Tend to stay on track
• Problems are often detected earlier,
– which reduces the likelihood of having major cost overruns or
time delays later.

01.04.2024 Prepared by Kedir 111

 Cont…

• Good planning helps us focus on the results that matter

• Good monitoring and evaluation:

• Help us learn from past successes and challenges and

• Inform decision making so that current and future

initiatives are better able to improve people’s lives and
expand their choices.

01.04.2024 Prepared by Kedir 112

 Cont…

 Without proper planning and clear articulation of intended

results, it is not clear what should be monitored and how;
hence monitoring cannot be done well.

 Without effective planning clear results frameworks, the basis

for evaluation is weak; hence evaluation cannot be done well.

 Without careful monitoring, the necessary data is not

collected; hence evaluation cannot be done well.

01.04.2024 Prepared by Kedir 113

 Cont…

 Monitoring is necessary, but not sufficient, for evaluation

 Monitoring facilitates evaluation, but evaluation uses additional new

data collection and different frameworks for analysis

 Monitoring and evaluation of a programme or project will often lead

to changes in programme or project plans.

This may mean further changing or modifying data

collection for monitoring purposes

01.04.2024 Prepared by Kedir 114

 Why monitor and evaluate?
 In the absence of effective monitoring and evaluation, it would
be difficult to know:

– whether the intended results are being achieved as planned

– what corrective action may be needed to ensure delivery of
the intended results
– whether initiatives are making positive contributions
towards human development.

 Help determine exactly when a programme or project is on

track and when changes may be needed.

01.04.2024 Prepared by Kedir 115

 Cont…

 Essential in helping managers, planners, implementers, policy

makers and donors acquire the information and understanding
they need to make informed decisions about programme
operations.

 M&E together provide the necessary data to guide strategic

planning, to design and implement programmes and projects,
and to allocate, and re-allocate resources in better ways

 Monitoring and evaluation always relate to pre-identified

results in the development plan.

01.04.2024 Prepared by Kedir 116

 Cont…
 The key questions that monitoring seeks to answer include the following:

• Are the pre-identified outputs being produced as planned and efficiently?

• What are the issues, risks and challenges that we face or foresee that need to be
taken into account to ensure the achievement of results?

• What decisions need to be made concerning changes to the already planned

work in subsequent stages?

• Will the planned and delivered outputs continue to be relevant for the
achievement of the envisioned outcomes?

• Are the outcomes we envisaged remaining relevant and effective for achieving
the overall national priorities, goals and impacts?

• What are we learning?

01.04.2024 Prepared by Kedir 117
 Monitoring and evaluation framework

 A clear framework is essential in order to carry out monitoring and

evaluation systematically.

• This framework serves as a plan for monitoring and evaluation, and should
clarify:

 What is to be monitored and evaluated

 The activities needed to monitor and evaluate
 Who is responsible for monitoring and evaluation activities
 When monitoring and evaluation activities are planned (timing)
 How monitoring and evaluation are carried out (methods)
 What resources are required and where they are committed

01.04.2024 Prepared by Kedir 118

 Cont…
• In general, the M&E framework has main
components:
• Narrative component:

– This describes how the partners will undertake

monitoring and evaluation and the accountabilities
assigned to different individuals and agencies.

01.04.2024 Prepared by Kedir 119

 cont…
• Planning matrices for monitoring and
evaluation. These are strategic and consolidate
the information required for monitoring and
evaluation for easy reference.

01.04.2024 Prepared by Kedir 120

 Follow-up, Monitoring and Evaluation
Follow-up
• Follow-up is a method by which a project promoter keeps a
watch on the progress or project implementation.

• In follow-up of project implementation, there is no need to

hurry.
• What is required is diligence and caution
• to know and analyze the sequential relationship of
activities
• to identify the important and critical ones.

01.04.2024 Prepared by Kedir 121

 Project Monitoring and Evaluation
• The essential first steps of feedback are the processes of
monitoring and evaluation.

• Monitoring provides project management with information

about current and emerging project, problems and data to
assess if the project objectives remain valid.

• Evaluation, in the context of project implementation, is an

ongoing activity used to reassess components necessary to
meet project objectives in the light of experience as
implementation proceeds.
01.04.2024 Prepared by Kedir 122
 Primary issues of monitoring
• Are the right inputs being supplied/delivered at the right time?
• Are the planned inputs producing the planned outputs?
• Are the outputs leading to the achievement of the planned
objectives?
• Is the policy environment consistent with the design
assumptions?
• Are the project objectives still valid?

01.04.2024 Prepared by Kedir 123

 Primary issues of Evaluation

• Were the commitments honored from all sides?

• Did the activities that were planned actually occur?

• What should have been planned (rather than what was actually
planned) to reach the projects objectives more
effectively/efficiently?

• This requires a critique of the planning process, and of the

coherence between program and objectives.

01.04.2024 Prepared by Kedir 124

 Cont…
• What could have been achieved with the same resources
and in the same time if the project had been managed more
efficiently and effectively?

• Here the evaluation makes a judgment as to whether the

project’s objective(s) could have been achieved more
economically or realized more fully.

• Evaluation (ex post analysis) including impact assessment

01.04.2024 Prepared by Kedir 125

 Steeps in Monitoring and Evaluation
• First, a readiness assessment should be
conducted.
• The assessment involves understanding the
needs and characteristics of the area or region
to be targeted.
• As well as the key players
 Cont….
• Second, program evaluators should agree on
specific outcomes to monitor and evaluate.
• As well as key performance indicators to
monitor outcomes.

• Doing so involves collaboration with

stockholders.
– Example :Girls Schooling
 Cont…
• Third, evaluators need to decide how trends in these
outcomes will be measured.
• For example, if Girls schooling were an important
outcome for a program.
• How schooling achievement be measured by the:
– proportion of girls enrolled in school
– test scores,
– school attendance, or another metric?
 Qualitative and quantitative assessments can be
conducted to address this issue.
 Cont…
• Fourth, the instruments to collect information
need to be determined.
• Base line survey etc
• Fifth, targets need to be established; these
targets can also be used to monitor results.
 Cont…
• This effort includes setting periodic targets
over time (for example, annually or every two
years).
• Considering the duration of the likely effects
of the program.
• Other factors that might affect program
implementation political considerations is
also important.
 Cont…
• The seventh step relates to the timing of monitoring.
• The eighth step involves careful consideration of the
means of reporting, including the audience to
whom the results will be presented.
• The ninth step involves using the results to create
avenues for feedback such as input from:
– independent agencies, local authorities, and targeted and
nontargeted communities
 Cont…
• Effective M&E systems will endure and are
based on, among other things:
– continued demand;
– transparency and
– Accountability in evaluation procedures;
– effective management of budgets; and
– well-defined responsibilities among program staff
members
 Cost Control
• The goal is to detect and correct deviation
from desired „ Budget.

• The early detection of actual or potential cost

overruns is vital to management.

• It provides the opportunity to initiate remedial

action.
 Cost…
• Project cost control includes:-
– Monitor cost performance
– Comparing “budgeted” and “actual”
– Determine the appropriate project changes to
be included in a revised cost baseline
– Inform project stakeholders of authorized changes
to the project that will affect costs.
 Cost…
• Cost reporting and control responsibilities:-

 Identifying and allocating responsibilities in

cost reporting is required.
 Elements to Control
 Manpower-related control
 Machinery-related control
 Money-related control
 Material-related control
 Manpower
• Also referred to as ”Human Resource
Control”
- Lay-off/fire any under-performing staff
- Hire staff with needed skills
- Assign staff with specific skills to specific
activities
• Fix problems without blaming people
 Machinery
• Also referred to as ”Physical Asset Control”

- Change any under-performing equipment

- Bring in equipment with appropriate
capabilities
- Re-assign specific equipment to specific
activities
 Cont…
• Also referred to as ”Financial Resource Control”
• How much money should be spent?
• How should it be spent?
Project Manager assisted by:
- Project accountant
- Project Finance Manager
 Evaluation of Activities
• Weekly review of activity status and estimates.
• Each current activity will be reviewed.

• Weekly review of unplanned requirements

such as equipment, staff, or consulting
resources.
 Cont…
• The adequacy of current resources, human and
equipment, must be reviewed.

• A potential cost increase occurs when the need

for additional resources is identified.
• Weekly review of risks and changes to risks.
– The current status of risks will be reviewed as
described in the Risk Management Plan.
 Cont…
• A potential cost increase occurs when existing
risks have become riskier or when new risks
have been identified.
• Weekly review of changes to scope, approved.
• A potential cost increase occurs when
unapproved scope changes are being carried
out.
 Impact Evaluation

Ch-9

01.04.2024 Prepared by Kedir 143

 Cont…
• Evaluation approaches for development
programs have evolved considerably over the
past two decades.

01.04.2024 Prepared by Kedir 144

 Cont…
• Comparing program effects across different
regions and countries is also receiving greater
attention.

• As programs target larger populations and

become more ambitious in scope, and
researchers acquire enough data to be able to
test specific policy questions across localities.

01.04.2024 Prepared by Kedir 145

 Cont…
• Public programs/Projects are designed to reach
certain goals and beneficiaries.

• Methods to understand whether such

programs actually work, as well as the level
and nature of impacts on intended
beneficiaries.

01.04.2024 Prepared by Kedir 146

 Cont…
• Programs might appear potentially promising
before implementation yet fail to generate
expected impacts or benefits.

• The obvious need for impact evaluation is to

help policy makers decide:
– whether programs are generating intended effects

01.04.2024 Prepared by Kedir 147

 Cont…
• In the context of development, impact
evaluations have been defined as:
– “systematic identification of the effects . . . on
individuals, households, institutions, and the
environment caused by a given development
activity such as a program or project.”

(World Bank 2002, pg. 20).

01.04.2024 Prepared by Kedir 148

 Cont…

– Impact evaluation studies whether the changes in

well-being are indeed due to the program
intervention and not to other factors.
 Cont…
• Impact evaluation span qualitative and quantitative
methods, as well as ex ante and ex post methods.
• The mechanisms of such impacts, and the extent of
benefits to recipients from in-depth and group-based
interviews.
• Whereas quantitative results can be generalizable,
the qualitative results may not be.

01.04.2024 Prepared by Kedir 150

 Cont…
• A qualitative assessment on its own cannot assess
outcomes against relevant alternatives or
counterfactual outcomes.

– It cannot really indicate what might happen in the

absence of the program.

01.04.2024 Prepared by Kedir 151

 The Problem of the Counterfactual

• The main challenge of an impact evaluation is

to determine what would have happened to the
beneficiaries if the program had not existed.

• A beneficiary’s outcome in the absence of the

intervention would be its counterfactual.

01.04.2024 Prepared by Kedir 152

 Cont…
• A mixture of qualitative and quantitative methods (a
mixed-methods approach) might therefore be useful in
gaining a comprehensive view of the program’s
effectiveness.

• Quantitative techniques attempt to determine whether

impacts occurred.

• Qualitative methods can add rich detail and permit a

grounded analysis of the underlying causes of outcomes.
 Cont…
• Impact evaluation can be distinguished from other
approaches to evaluation, such as M&E.

• M&E does not spell out whether the impact indicators

are a result of program intervention.

• Impact evaluations often depend on knowing how the

program is designed, how it is intended to help the
target audience.

01.04.2024 Prepared by Kedir 154

 It answers Questions like…..
 Can conditional cash-transfer programs in Somaliland improve
health outcomes for poor women Girls?
 Can conditional cash-transfer programs in Somaliland improve
schooling outcomes for Girls?
 Does a new road actually raise welfare in a remote area in
Somaliland or is it a “highway to nowhere”?
 Do community-based programs in Somaliland project create
long-lasting improvements in employment and income for the
poor?

01.04.2024 Prepared by Kedir 155

 Cont…
• Impact evaluation studies whether the changes
in well-being are indeed due to:-

– Program/project intervention and

– Not to other factors

01.04.2024 Prepared by Kedir 156

 Cont…

• The aim is to compare what was planned with what was

actually delivered.

• Operation evaluation can be based on interviews with

program beneficiaries and with officials responsible for
implementation.

01.04.2024 Prepared by Kedir 157

 Impact evaluation

01.04.2024 Prepared by Kedir 158

 Approaches to impact evaluation: an
overview
• Quantitative impact evaluation: analysis based
on a representative survey.
• It has both treatment group and a comparison
group, preferably both before and after the
intervention.

 Participatory impact evaluation: analysis based

on participatory methods amongst
beneficiaries.
01.04.2024 Prepared by Kedir 159
 Quantitative impact evaluation
• The cornerstone of quantitative impact
evaluation is data collection from a statistically
representative sample using a structured
questionnaire.
• It is strongly preferable that data are collected
both before the intervention (baseline) and after
(endline).

• A midterm survey is also an advantage.

01.04.2024 Prepared by Kedir 160
Different Evaluation Approaches
1. Randomized evaluations
2. Matching methods, specifically propensity
score matching (PSM)
3. Double-difference (DD) methods
4. Instrumental variable (IV) methods
5. Regression discontinuity (RD) design and
pipeline methods
6. Distributional impacts
7. Structural and other modeling approaches
 Designing and Implementing Impact
Evaluations
• Data availability and quality are also integral
to assessing program/ project effects.

• Data requirements will depend on whether

evaluators are applying a:-
– quantitative or
– qualitative approach or
– both
 Cont…
• Data should be collected from both the
affected population (the treatment group) and
a comparison group.

• Project impact is then calculated as either a

single difference.

01.04.2024 Prepared by Kedir 163

 Cont…
• Selection of an appropriate comparison group
is one of the main challenges in impact
evaluation:

– They should be identical to the treatment group

except that the latter receive the intervention and
the former do not.

01.04.2024 Prepared by Kedir 164

 Cont…
• Propensity score matching: Selection may be
based on a set of characteristics rather than just
one.
• Hence the comparison group need be matched
on all these characteristics.
• PSM uses statistical modeling to identify a
group of individuals, households or firms with
the same observable characteristics as those
participating in the project.
01.04.2024 Prepared by Kedir 165
 Cont…

• Participants are then matched on the basis of

this probability, or propensity score, to
nonparticipants.

01.04.2024 Prepared by Kedir 166

 Cont….
• Regression-based approach: The regression
based approach models the determinants of
outcomes.

• The approach has the advantage of flexibility

it does not lump different activities under the
single heading of the intervention.
 Cont…

Yi = αXi + βTi + εi

• Here, T is a dummy equal to 1 for those who

participate and 0 for those who do not
participate.
• X is set of other observed characteristics of the
individual and perhaps of his or her household
and local environment.
 Cont…
• ε is an error term reflecting unobserved
characteristics that also affect Y.
• The equation reflects an approach commonly
used in impact evaluations.

• It is to measure the direct effect of the program

T on outcomes Y .
How is an Impact Evaluation Conducted?

• Conducting a successful impact evaluation

requires advance planning.
• Insufficient planning can unnecessarily
compromise an evaluation effort, weakening
findings and their subsequent policy value.
• A good evaluation plan will:
(i) establish evaluation objectives;
(ii) determine appropriate evaluation methods;
 Cont…
(iii) provide a data collection strategy and
identify available sources; and
(iv) establish a timeline for producing and
disseminating findings
• Each of the elements is discussed below, with
attention to the pros and cons associated with
the available choices.
 Cont…
Objectives
• The principal objective is always to determine
whether the program is helping beneficiaries.
• Therefore, the program objectives are central.
• Some examination of available data and
measurable indicators should be conducted.
 Thank you !!!

01.04.2024 Prepared by Kedir 173