Unit One: Introduction to Project

Unit Objective
Dear learners at the end of this unit you will be able to:
 Define the project and explain the nature and classification of project.
 Explain the concepts project planning, analysis and management in view of National
development scenarios
 Identify the general feature of project management environment and the role of project
managers in particular

1.1. Meaning and Definitions of a Project

Projects are a group of activities that have to be performed with limited resources to yield
specific objectives, in a specific time, and in a specific locality. The term project has a wider
meaning. Projects range in size, scope, cost and time from mega international projects to small
domestic projects. To mention few examples: designing and constructing a building, a house,
launching a new product (advertising and marketing project); planning and conducting an audit
(quality management project); disaster recovering (limiting the damages of fire, floods or any
type of accident); Olympics ( a sports project.

Project can thus be defined as” a temporary endeavor (run with a set period of start and finish
time) undertaken to create a unique product or service, in which of a set of coordinated,
controlled and non-routine activities are directed towards achieving a specific objective
conforming to requirements, within the constraints of time, cost, and resources. J. M. Juran
defined that “a project is a problem scheduled for solution. “Problem refers to the gap between
where you are and where you want to be, with an obstacle that prevents easy movement to close
the gap. A project is a one-time, multitask job with a definite starting point, definite ending point,
a clearly defined scope of work, a budget, and usually a temporary team.

These definitions denote that projects focus on a single goal as compared to a program. They
have customers who are affected by the end results. They have to be completed within specified
time frame (completion date), within budget (limited resources including, people, money,
machines) and should be according to the specifications (with a certain level of functionality and
quality).
Why Projects are initiated? Projects are usually initiated, chartered and authorized external to
the project organization by an enterprise, a government agency, a company, a program
organization , or a portfolio organization , as a result of one or more of the following scenarios:

 When starting a new business: A market demand (e.g., a consumer product company
authorizing a project to develop a new fruit drink for kids with less sugar in response to an
increased health awareness)
 To introduce new equipment, tools or techniques. A customer request(e.g., an amusement
park authorizing a company to develop a new roller coaster).
 For implementing a new system or process. A technological advance (e.g., an electronics
firm authorizing a new project to develop a faster, cheaper, and smaller net book).
 In order to develop/ modify a product or service: A business need (e.g., a publisher
authorizing a project to write a new book to increase its revenues).
 For regulatory mandate: A legal requirement (e.g., Ethiopian federal government authorizes
a project to establish laws for controlling the home loan system).
 For some community issues: A social need(e.g., a non-governmental organization authorizing
a project to raise the awareness of donating blood)
 In order to re-engineer the process so as to reduce complaints, reduce cycle time, and
eliminate errors.
 For relocating and/or closing a facility.
1.2 Characteristics of a project

Generally, all projects are characterized by a certain features which may be common to all. Thus,
the following are typical features of a project:

 Temporary signifies that there is a discrete and definable commencement and conclusion;
and, as such, a key indicator of project success is how it performs against its schedule—that
is, does is start and end on time?
 Uniqueness does not mean that there are not similarities to other projects, but that the scope
for a particular project has deliverables that must be produced within constraints, through
risks, with specific resources, at a specific place, and within a certain period; therefore, the
process to produce the deliverable as well as the deliverable itself is unique. Every project is
 unique and no two projects are similar. Setting up a cement plant and construction of a
highway are two different projects having unique features.
 Non – repetitive. A repetitive job is not a project. Neither is performing a single task over
and over. The uniqueness of the deliverable, whether it is a product, service, or result,
requires a special approach in that there may not be a pre-existing blueprint for the project’s
execution and there may not be a need to repeat the project once it is completed.
 Objectives: Directed towards achieving a specific result or has a single goal or a set of goals.
Once the objectives are achieved the project is treated as completed.
 Life cycle: a project has a life cycle. The life cycle consists of five stages i.e. Conception
stage, definition stage, planning & organizing stage, implementation stage and
commissioning stage.
 Risk and Uncertainty: risk and uncertainty go hand in hand with project. A risk-free, it only
means that the element is not apparently visible on the surface and it will be hidden
underneath.
 Budget: usually during the planning adequate budget allocation is mandatory for the smooth
flow of all project related activities.
 Use of Resources. In a project undertaking resources are quite necessary for successful
accomplishment activities. The resources i.e. Material, human, financial may be coordinated
from various sources.
 Customer specific nature: A project is always customer specific. It is the customer who
decides upon the product to be produced or services to be offered and hence it is the
responsibility of any organization to go for projects/services that are suited to customer
needs.
 Change: Changes occur throughout the life span of a project as a natural outcome of many
environmental factors. The changes may vary from minor changes, which may have very
little impact on the project, to major changes which may have a big impact or even may
change the very nature of the project.
 Optimality: A project is always aimed at optimum utilization of resources for the overall
development of the economy.
 Unity in diversity: A project is a complex set of thousands of varieties. The varieties are in
terms of technology, equipment and materials, machinery and people, work, culture and
others.
 Teamwork: Project is a team work and it normally consists of diverse areas. There will be
personnel specialized in their respective areas and co-ordination among the diverse areas
calls for team work

1.3. Classification of a project

Projects can be classified based on several criteria. The location, type, technology, size,
scope and speed are normally the factors which determine the effort needed in executing a
project. Project can be classified under:

1. Project Life-span
a. Short Range Projects: They are completed within one year, and are focused towards
achieving the tactical objectives. They are less rigorous; require less or no risk. They
are not cross functional. These projects require limited project management tools, and
have low level of complexity. It is easy to obtain approval, funding and
organizational support for short range projects. For example, reduce defect in shop
number two from 6 to 4 percent.
b. Long Range Projects: These projects involve higher risk and a proper feasibility
analysis is essential before starting such projects. They are most often cross
functional. Their major impact is over long period of time, on internal as well as
external organization. Large numbers of resources are required to undertake long
range projects and they require breakthrough initiatives from the members.
2. Ownership
a. Private sector- mostly projects undertaken by business enterprises.
b. Public sector- projects undertaken by national and local government body.
c. NGO‟s – development projects undertaken by non-government and not for profit
organizations.
2. Based on the sources of finance

a. Government treasury
b. Government treasury and external sources
 c. External sources of finance.
3. Based on the forces behind
a. Demand driven/need driven- based on identified unsatisfied demand project can be
created or on unsatisfied basic needs like food, water, and shelter.
b. Donor driven- the force behind the financing organization.
c. Political driven
4. Based on the level relating to a particular area of the country/the whole of the country:
a. National and
b. International level
Why projects are undertaken-

The purpose/goals to a project depend on the nature of the project. Development projects
(usually undertaken by government or NGOs) may have the following objective.

 Projects are very powerful and efficient means to achieve development /growth, “cutting
edge of development.
 They are mechanisms for improving income distribution. Ex. Implementing a project
that enhance the income of the poor people/ that benefit the poor.
 They are mechanisms to solve immediate problems. Ex. Implementing a project to solve
a specific problem in the society such as project to eradicate malaria, prevent the
spreading of HIV, project to eliminate poverty.
Project undertaken by business organization have a primary objective of maximizing the wealth
of current shareholders. Other objectives may include maximization of profit, maximization of
earning per share or maximization of return on equity.

1.4. National Development Planning and Project Analysis

National planning is the mechanism by which governments set up their proprieties,
objectives and demonstrates their intension. Project analysis and national development planning
are closely related;
Project Family Tree: A project normally originates from a plan, national plan or corporate plan.
In normal scheme of things, the family tree for a project would be as given below:
 Plan = National/Corporate plan with target for growth.

Programme = health programme, educational programme, R&D programme.

Project = Power plant, hospital, housing project etc.

Work Package = Water supply, power supply and distribution package.

Goals/ Objectives

Strategies

Plans

Program 1 Program 2 Program3

Project 1 Project 2 Project 3

Development Goal/Objectives

 A statement of intention or aspiration of a government to improve the living

conditions of its people – vision of the government. Example, Growth, Equity in income
distribution
 It is a comprehensive statement which guides development.
 It determines the environment or framework within which development is expected
to take place.

Development Strategy

 A general method of achieving specific objectives

 It describes the essential resources, which will be committed to achieve objectives.
 It also explains how these resources will be organized. Ex. how to organize the labor
force?
 It can take different forms such as import substitute, export promotion, ADLI etc.
Development Strategy is likely to involve:

 Establishment of sector goals- for example, what is the goal of the agricultural
sector in the next 5 years, 10 years.., the industry sector…
 Defining the means to achieve the sector goals.
 Determining the feasibility of achieving the stated goals from the political,
technical, organizational and resource point of view.
 Preliminary assessment of costs and benefits
 Setting priorities- which sub sector should be provided more attention in each
sector.
Development Plan

Plans are designed as a means to accomplish development strategies. National plan should
identify priority areas and set a specific objective. The specific objective can be achieved
through various means (fiscal policies and development projects).

Project can, therefore, be seen as policy instruments through which national and sub
national plans are translated in to action. Projects are often referred to as the “cutting edge of
development”.

The national and sub national plans serves as frame of reference for the identification and
evaluation of a project.

Project and plan: since projects commit scarce res, project selection is meaningful only when it
is placed within the broader development-planning framework. The best economic appraisal of
projects cannot be made without referring framework and plans and policies. To choose the right
project one must have an estimate of demand for the product. But the estimation of demand
could be more realistic if the plan is also realistic.

Programs and projects

 Often used interchangeably but are not one and the same
 A project is narrower than a program in terms of technical performance, time and
resources (scope).
 A program may consist of more than one project.
Program Project
Scope/Objectivities Wide/diverse Narrower/limited
Location diffused/wide Specific
Lifetime Non-time bound Time bound
Resources Larger budget Limited budget

Project and Capital Expenditure decision

Almost all projects involve a capital expenditure decision. Capital expenditure decisions often
represent the most important decisions taken by a firm. Their importance stems from three
inter-related reasons:
  Long term effects. The consequence of capital expenditure decisions extend far into the
future. The scope of current manufacturing activities of a firm is governed largely by
capital expenditures in the past. Likewise, current capital expenditure decisions provide
the framework for future activities.
 Irreversibility. Most of the time wrong capital investment decision cannot be reversed
without incurring a substantial loss.
 Substantial outlay. Capital expenditures usually involve substantial outlays.
Reasons for Project Analysis

The basic economic problem facing all countries is that of allocating inherently limited
resources (such as labor, capital, and other natural resources, as well as foreign exchange) to a
variety of different uses (such as current production of consumer goods and public services as
against investment in infrastructure, industry, agriculture, or other sectors of the economy in such
a way that the net benefit to society is as large as possible.

Given the limited resources, choices must be made among the competing uses, and
project analysis is one method of evaluating alternatives in a convenient and
comprehensible fashion.

In essence, project analysis assesses the benefit and costs of a project and reduces them to a
common yardstick (benchmark/standard). If benefits exceed costs, with both measured by the
common yardstick, the project is acceptable; if not, the project should be rejected.

The same justification is used for project analysis made by business organizations. All business
organizations face problem of allocating the scarce resource they have to the alternative
projects available. Project analysis helps them to select the alternative that will bring more
benefits than costs.