Explain the project life cycle.

Ans. A project is not a one shot activity. Even a shooting star has a time and life span. Project lifecycle is spread over a period of time. There is an unavoidable gestation period for the complex of activities involved to attain the objectives in view. This gestation peri od, however, varies from project to project but it is possible to describe, in general term,

the time phasing of project planning activities common to most projects. The principal

stages in the life of a project are :

• Identification

• Initial formulation

• Evaluation (selection or rejection)

• Final formulation (or selection)

• Implementation

• Completion and operation

Development projects are expressly designed to solve the varied problems of the economics whether in the short or long run. The surveys or in depth studies would locate the problems and the project planner will have to identify the projects that would solve the problems most effectively. At this stage, we are concerned with the kind of action and type of project that would be required in rather broad term. In other words the surveys and studies will give us ideas and throw up suggestions which would be worked out in detail later and then evaluated objectively before being accepted for implementation.

What types of surveys and studies are to be undertaken? The current sociopolitical

economic situation has to be critically assessed. It will also be necessary to review it in its historical perspective necessitating the undertaking of a survey of the behaviour and growth of the economy during the preceding decades. On the basis of past trends, extrapolation may be made of future possible trends and tendencies, short and long term. There are scientific techniques for doing so which can be broadly grouped as forecasting methodology. It is however not sufficient to view the socio-economic panorama on the historical canvas. More detailed investigations from an operational point of view would be called for in respect of each economic sector.

Initial Formulation :- Identification is only the beginning in the lifecycle of a project.

Having identified the prospective projects, the details of each project will have to be

worked out and analysed in order to determine which of them could be reckoned as

suitable for inclusion in the plan, allocate funds and put into execution. As a follow up

to the finding of techno-economic surveys, and number of feasibility study group are

set up, as the name implies to examine the possibility of formulating suitable projects

and to put concrete proposals in sufficient detail to enable authorities concerned to

consider the feasibility of the proposal submitted.

Evaluation or Project Appraisal :- After the socio-economic problems of an economy have been determined and developments objectives and strategies agreed, concrete steps have to be taken. The main form this takes is that of formulating appropriate development projects to achieve plan objectives and meet the development needs of the economy. Proposals relating to them are then put to the plan authorities for consideration and inclusion in the plan. These proposals as pointed out above take the following forms of feasibility studies :

• Commercial viability

• Economic feasibility

• Financial feasibility

• Technical feasibility

• Management

The scope for scrutiny under each of these five heads would necessarily render their careful assessment and the examination of all possible alternative approaches. The process almost invariably involves making decision relating to technology, scale, location, costs and benefits, time of completion (gestation period), degree of risk and

uncertainty, financial viability, organisation and management, availability of inputs, know-how, labour etc. The detailed analysis is set down in what is called a feasibility report.

Formulation :- Once a project has been appraised and approved, next step would logically, appear to that of implementation. This is, however, not necessarily true, if the approval is conditional to certain modifications being affected or for other reasons, such as availability of funds, etc. The implementation stage will be reached only after these pre-conditions have been fulfilled. Project formulation divides the process of project development into eight distinct and sequential stages. These stages are

• General information

• Project description

• Market potential

• Capital costs and sources of finance

• Assessment of working capital requirement

• Other financial aspect

• Economic and social variables.

Project Implementation :- Last but not the least, every entrepreneur should draw an

implementation time table for his project. The network having been prepared, the project

authorities are now ready to embark on the main task of implementation the project. To

begin with successful implementation will depend on how well the network has been

designed. However, during the course of implementation, many factors arise which cannot be anticipated or adequately taken note of in advance and built into the initial

network. A number of network techniques have been developed for project implementation. Some of them are PERT, CPM, Graphical Evaluation and Review Technique (GERT), Workshop Analysis Scheduling Programme (WRSP) and Line of

Balance (LOB).

Project Completion :- It is often debated as to the point at which the project life cycle is completed. The cycle is completed only when the development objectives are

realized.

Q3. What do you understand by  PROJECT APPRAISAL?What are the methods?

Ans.

Project appraisal means the assessment of a project. Project appraisal is made for both proposed and executed projects. In case of former project appraisal is called ex-ante analysis and in case of letter ‘post-ante analysis’. Here, project appraisal is related to a proposed project.

Project appraisal is a cost and benefits analysis of different aspects of proposed project with an objective to adjudge its viability. A project involves employment of scarce resources. An entrepreneur needs to appraise various alternative projects before allocating the scarce resources for the best project. Thus project appraisal helps select

the best project among available alternative projects. For appraising a projects its economic, financial, technical market, managerial and social aspect are analysed. Financial institutions carry out project appraisal to assess its creditworthiness before

extending finance to a project.

Method of Project Appraisal

Appraisal of a proposed project includes the following analyses :

1 Economic analysis

2 Financial analysis

3 Market analysis

4 Technical analysis

5 Managerial competence

6 Ecological analysis

Economic Analysis :

Under economic analysis the aspects highlighted include

• Requirements for raw material

• Level of capacity utilization

• Anticipated sales

• Anticipated expenses

• Proposed profits

• Estimated demand

It is said that a business should have always a volume of profit clearly in view which will govern other economic variable like sales, purchase, expenses and alike.

Financial Analysis

Finance is one of the most important prerequisites to establish an enterprise. It is finance only that facilitates an entrepreneur to bring together the labour, machines and raw materials to combine them to produce goods. In order to adjudge the financial viability of the project, the following aspects need to be carefully analysed :

• Cost of capital

• Means of finance

• Estimates of sales and production

• Cost of production

• Working capital requirement and its financing

• Estimates of working results

• Break-even point

• Projected cash flow

• Projected balance sheet.

The activity level of an enterprise expressed as capacity utilization needs to be well spelled out. However the enterprise sometimes fails to achieve the targeted level of capacity due to various business vicissitudes like unforeseen shortage of raw material,

unexpected disruption in power supply, instability to penetrate the market mechanism

etc.

Market Analysis

Before the production actually starts, the entrepreneur needs to anticipate the possible

market for the product. He has to anticipate who will be the possible customer for his

product and where his product will be sold. This is because production has no value for

the producer unless it is sold. In fact, the potential of the market constitutes the determinant of possible reward from entrepreneurial career. Thus knowing the anticipated market for the product to be produced become an important element in business plan. The commonly used methods to estimate the demand for a product are as follows. :

1 Opinion polling method

In this method, the opinion of the ultimate users. This may be attempted with the help of either a complete survey of all customers or by selecting a few consuming units out of the relevant population.

2. Life Cycle Segmentation Analysis

It is well established that like a man, every product has its own life span. In practice, a product sells slowly in the beginning. Barked by sales promotion strategies over period its sales pick up. In the due course of time the peak sale is reached. After that point the sales begins to decline. After sometime, the product loses its demand and dies. This is natural death of a product. Thus, every product passes through its life cycle. The product life cycle has been divided into the following five stage : Introduction, Growth, Maturity, Saturation and Decline.

The sales of the product varies from stage to stage

Time Period

Considering the above five stages of a product life cycle, the sale at different stages can be anticipated.

Technical Analysis

Technical analysis implies the adequacy of the proposed plant and equipment to prescribed norms. It should be ensured whether the required know how is available with the entrepreneur. The following inputs concerned in the project should also be taken into consideration.

􀂾 Availability of Land and site

􀂾 Availability of Water Power, transport, communication facilities.

􀂾 Availability of servicing facilities like machine shop, electric repair shop etc.

􀂾 Coping with anti pollution law

􀂾 Availability of work force

􀂾 Availability of required raw material as per quantity and quality.

Management Competence

Management ability or competence plays an important role in making an enterprise a success. In the absence of Managerial Competence the project which are otherwise feasible may fail. On the contrary, even a poor project may become a successful one with good managerial ability. Hence, while doing project appraisal, the managerial competence or talent of the promoter should be taken into consideration.

Ecological Analysis

In recent years, environmental concerns have assumed great deal of significance. Ecological analysis should also be done particularly for major projects which have significant implication like power plant and irrigation schemes, and environmental pollution industries like bulk-drugs, chemical and leather processing. The key factors

considered for ecological analysis are :

􀂾 Environmental damage

􀂾 Restoration measure