Project Life Cycle

Meaning
The Project Lifecycle is the sequence of
phases through which a project progresses. It
includes initiation, planning, execution, and
closure.

The Project Lifecycle is the sequence of

phases through which a project progresses.

Regardless of what project management

methodology or framework you’re using,
every project follows the same life cycle.
 1. Initiation Phase

 In the initiation phase, the project objective or need is identified;

this can be a business problem or opportunity. An appropriate
response to the need is documented in a business case with
recommended solution options.

 A feasibility study is conducted to investigate whether each option

addresses the project objective and a final recommended solution is
determined. Issues of feasibility (“can we do the project?”) and
justification (“should we do the project?”) are addressed.

 Once the recommended solution is approved, a project is initiated to

deliver the approved solution and a project manager is appointed.
The major deliverables and the participating work groups are
identified, and the project team begins to take shape. Approval is
then sought by the project manager to move onto the detailed
planning phase.
 2. Planning Phase
 The planning phase is where the project solution is
further developed in as much detail as possible and
the steps necessary to meet the project’s objective
are planned. In this step, the team identifies all of
the work to be done. The project’s tasks and
resource requirements are identified, along with
the strategy for producing them.

 A project plan is created outlining the activities,

tasks, dependencies, and time-frames. The project
manager coordinates the preparation of a project
budget by providing cost estimates for the labor,
equipment, and materials costs. The budget is used
to monitor and control cost expenditures during
 2. Planning Phase
 Once the project team has identified the work, prepared
the schedule, and estimated the costs, the three
fundamental components of the planning process are
complete.

 This is an excellent time to identify and try to deal with

anything that might pose a threat to the successful
completion of the project. This is called risk management.

 In risk management, “high-threat” potential problems are

identified along with the action that is to be taken on each
high-threat potential problem, either to reduce the
probability that the problem will occur or to reduce the
impact on the project if it does occur.
 3. Execution Phase
During the third phase, the implementation phase,
the project plan is put into motion and the work of
the project is performed. It is important to maintain
control and communicate as needed during
implementation. Progress is continuously monitored
and appropriate adjustments are made and recorded
as variances from the original plan.

In any project, a project manager spends most of the

time in this step. During project implementation,
people are carrying out the tasks, and progress
information is being reported through regular team
meetings.
 3. Execution Phase
 The project manager uses this information to maintain control
over the direction of the project by comparing the progress
reports with the project plan to measure the performance of
the project activities and take corrective action as needed.

 Throughout this step, project sponsors and other key

stakeholders should be kept informed of the project’s status
according to the agreed-on frequency and format of
communication. The plan should be updated and published on a
regular basis.

 Status reports should always emphasize the anticipated end

point in terms of cost, schedule, and quality of deliverables.
Once all of the deliverables have been produced and the
customer has accepted the final solution, the project is ready
for closure.
 4. Closing Phase
During the final closure phase, the emphasis is on
releasing the final deliverables to the customer,
handing over project documentation to the
business, terminating supplier contracts, releasing
project resources, and communicating the closure
of the project to all stakeholders.

The last remaining step is to conduct lessons-

learned studies to examine what went well and
what didn’t. Through this type of analysis, the
wisdom of experience is transferred back to the
project organization, which will help future project
teams.
 Case Study
 A U.S. construction company won a contract to design and
build the first copper mine in northern Argentina. There was
no existing infrastructure for either the mining industry or
large construction projects in this part of South America.

 During the initiation phase of the project, the project

manager focused on defining and finding a project leadership
team with the knowledge, skills, and experience to manage a
large complex project in a remote area of the globe.

 The project team set up three offices. One was in Chile,

where large mining construction project infrastructure
existed. The other two were in Argentina. One was in Buenos
Aries to establish relationships and Argentinian expertise,
and the second was in Catamarca—the largest town close to
the mine site.
 Case Study-----
With offices in place, the project start-up team
began developing procedures for getting work
done, acquiring the appropriate permits, and
developing relationships with Chilean and
Argentine partner

During the planning phase, the project team

developed an integrated project schedule that
coordinated the activities of the design,
procurement, and construction teams. The project
controls team also developed a detailed budget
that enabled the project team to track project
expenditures against the expected expenses.
 Case Study-------
The project design team built on the conceptual
design and developed detailed drawings for use by
the procurement team. The procurement team used
the drawings to begin ordering equipment and
materials for the construction team; develop labor
projections; refine the construction schedule; and
set up the construction site.

Although planning is a never-ending process on a

project, the planning phase focused on developing
sufficient details to allow various parts of the project
team to coordinate their work and allow the project
management team to make priority decisions.
 Case Study-----
The implementation phase represents the work done
to meet the requirements of the scope of work and
fulfill the charter. During the implementation phase,
the project team accomplished the work defined in
the plan and made adjustments when the project
factors changed.

Equipment and materials were delivered to the work

site, labor was hired and trained, a construction site
was built, and all the construction activities, from the
arrival of the first dozer to the installation of the final
light switch, were accomplished.
 Case Study-----
 The closeout phase included turning over the newly
constructed plant to the operations team of the
client. A punch list of a few remaining construction
items was developed and those items completed.

 The office in Catamarca was closed, the office in

Buenos Aries archived all the project documents,
and the Chilean office was already working on the
next project.

 The accounting books were reconciled and closed,

final reports written and distributed, and the project
manager started on a new project.
World Bank Project Life Cycle
 UNIDO Project Life Cycle
 According to the UNIDO the project development life cycle
comprises three distinct phases, theyare:1. Pre- investment phase 2.
Investment phase and 3. Operational phase.

 1. Pre- investment phase

 A. Opportunity study (identification of project ideas)

 B. Pre-feasibility study (preliminary project formulation, selection of

alternatives)

 C. Feasibility study (techno-economical project back ground, final

project formulation stage)

 D. Evaluation and appraisal report (decision making about project

availability
 UNIDO Project Life Cycle
2. Investment phase
A. Project design stage
B. Construction stage
C. Pre-production marketing stage
D. Training
E. Start-up stage

3. Operational phase

A. Replacement of equipment
B. Development, invasion or liquidation.
 A. Pre-investment Stage
 It is a usual practice, project ideas must be elaborated in a
more detailed study. However, formulation of the detailed
techno-economic feasibility study, that enables a definite
decision to be made on the project, is a costly and time
consuming task.

 Therefore, before assigning large funds for such a study, a

preliminary assessment of the project idea must be made in a
pre-feasibility study. This is just seeing that whether:

 All possible project alternatives are examined.

 The project concept justifies the detail study.

 All aspects are critical and need in-depth investigation.

 The project idea is viable and attractive or not.

 A. Pre-investment Stage

According to the UNIDO manual, the main stages

of the pre-investment phase are as follows:

Identification of investment opportunities

(opportunity studies).
Analysis of project alternatives and preliminary

project selection.
Project preparation( pre-feasibility and feasibility

studies), and
Project appraisal and investment decision

(appraisal report)
 a. Opportunity Studies
 An opportunity study should identify investment opportunities or
project ideas by analyzing the following factors in detail:

 Natural resources with high potential for processing and

manufacturing.

 Existing agricultural pattern that serves as a basis for agro-based

industries.

 The future demand for certain consumer goods or for newly

developed goods.

 Imports in order to identify areas for import substitution.

 Cost and availability of production factors.

 Possible expansion of existing industrial capacity to attain economies

of scale, and

 Export possibilities.
 b. Pre-feasibility Study
 A Pre-feasibility study should be viewed as an intermediate stage
between a project opportunity study and a detailed feasibility study. In a
practical sense, the main components of the project feasibility report are:
 Executive summary.

 Project back ground and history.

 Market and plant capacity.

 Location and site.

 Project engineering works.

 Factory, administrative and sale overheads.

 Man power.

 Project implementation.

 Financial analysis, and

 Project risk analysis.

c. Support (Functional) Studies
Support or functional studies are required as
prerequisites for, or in support of pre-feasibility
and feasibility studies of particularly large scale
investment proposals. The various aspects in
support or functional studies include:
Market studies of products to be manufactured.
Raw materials, inputs, laboratory tests and
location studies.
Environmental impact assessment.
Economies of scale studies.
Equipment and technological selection studies.
 d. Feasibility Studies
 A feasibility study should provide all data necessary for making the
investment decision.

 The commercial, technical, financial, economic and environment

prerequisites for an investment project should therefore be defined
and critically examined on the basis of alternative solutions already
reviewed in the pre-feasibility study.

 The results of these efforts strengthen a project whose back ground

conditions and aims have been clearly defined, in terms of its control
objective and possible marketing strategies, the possible market
share that can be achieved and the corresponding production
capacities.

 The financial part of the study covers the scope of the investment,
including the net working capital, the production and marketing
costs, sales revenue and the return on capital invested.
 e. Appraisal Report
 When a feasibility study is completed, the various parties will
carry out their own appraisal of the investment project in
accordance with their individual objectives and evaluation of
expected risks, costs and gain. Large investment and
development finance institutions usually have formalized
project appraisal procedures and usually prepare an
appraisal report.

 The appraisal report will prove whether the pre- production

expenditures spent since the initiation of the project idea
were well spent or not. Project appraisal, as carried out by
financial institutions concentrates on the health of the
company to be financed, the returns to be obtained by equity
holders and the protection of its creditors. The techniques
applied to appraise projects in line with these criteria center
around technical, commercial, market, managerial,
organizational, financial aspects of a project.
 B. Investment Phase
The investment phase can be divided into the
following stages:
Technological acquisition and transfer.
Detailed engineering design and contract, including
tendering, evaluation of bids and negotiations.
Acquisition of land, construction work and
installation.
Pre-production marketing, including the securing of
suppliers and setting up the administration of the
firm.
Recruitment and training of personnel, and
Plant commissioning and start-up.
 C. Operational Phase
 The problem of the operational phase needs to be considered
from both short and long term view points. The short term view
relates to the initial or commencement of production when a
number of problems may arise concerning such matters as the
application of production techniques, operation of equipment or
inadequate labor productivity owing to lack of qualified staff and
labor. Most of the problems have their origin in the
implementation phase.

 The long term view relates to chosen strategies and the

associated production and marketing costs as well as sales
revenues. These have a direct relationship with the productions
made at the pre-investment phase. If such strategies and
projections prove faulty and remedial measures will not only be
difficult, but may prove highly expensive.
 DEPSA Model
 In Ethiopia, Development Project Studies Authority
(DEPSA) made certain efforts and developed a model
for Project life cycle which is known as DEPSA’s Project
life cycle. This life cycle comprises three major phases.
They are:

 1. Pre-investment phase
 2. Investment and
 3. Operation

 Each of these three phases may be divided into different

stages. The following is the summary of this
classification of the project life cycle.
 DEPSA Model
 1. Pre- investment Phase
 a. Identification Stage
 b. Formulation Stage
 Pre-feasibility study
 Feasibility study
 c. Appraisal Stage
 Appraisal
 Decision
 2. Investment Phase
 Implementation
 Tendering negotiation and contractual
 Detailed engineering design
 Construction, erection and commissioning
 3. Operation Phase
 Operation
 Ex-post evaluation