Project Life Cycle and Phases

1. By Abigail Pugal Somera
DM 211 Project Development & Management
2
nd
Sem 2013-2014
Prof. Josefina B. Bitonio, DPA

2. To be able to understand the phases of
a Project Life we first have to
understand the different
interpretations of a Project Life Cycle
as interpreted by different global
organizations that deal with
governments.

3. •ADB Project Cycle

Country
Partnership
Strategy /
Regional
Cooperation
Strategy
Preparation
Approval Implementation
Completion
/
Evaluation

4. •World Bank Project Cycle
Country
Assistance
Strategy (1)
Identification (2)
Preparation,
Appraisal and
Board Approval
(3)
Implementation
and Supervision
(4)
Implementation
and Completion
(5)
Evaluation (6)

5. Cycle Order ADB World Bank
1 Country Partnership
Strategy / Regional
Cooperation Strategy
Country Assistance
Strategy
2 Preparation Identification
3 Approval Preparation, Appraisal
and Board Approval
4 Implementation Implementation and
Supervision
5 Completion / Evaluation Implementation and
Completion
6 Evaluation

6. I. Pre – Investment
II. Investment
III. Operations
IV. Evaluation
Support Studies:
•Opportunity Study
•Pre-feasibility Study
•Feasibility Study
•Appraisal and Decision
Negotiation and Contracting
Engineering Design
•Construction and Training
•Start-up

8. •Objective/s:
•Find Promising Business Opportunities
•Screen According to Criteria
•Classify for Further Study or Later Consideration

•Characteristics:
•Preliminary Information from Knowledgeable Individuals and
Promotion Agencies

9. Develop Selection
Criteria
Screen Ideas vs.
Criteria
Acceptable?
Reject
Rework
Later
Reconsider
Further Study
Scan Sources of
Ideas and Lists
Profile Readily
Available Data
YES
NO

10. •Investment
Opportunities
•Demand
•Linkages
•Problems
•Resources
•Development
•Trade
•Technology
•Government Policy
•External Constraints
•Sources of Ideas
•National, Regional
Development Plans
•Sector Studies
•Local Resource Studies
•Other Countries’
Experience
•Product Classification Lists

11. •Size and Growth of Market
•Local Resources
•Plant Size
•Appropriate Technology
•Size of Investment
•Estimated Financial Indicators
•Requirements and Constraints

12. •Varies according to Investigator
•Investor
•Lender

•Risk of All Concerned

13. •Set-up Screening System to Measure Long-Term
Potential

•Concentrate on Best Prospects

•Quick Negative Decision Better than Delay

•Assure Commitment of Potential Sponsor to
Implementation

14. Micro
•Business Concept
•Investors
•Market
•Resources
•Entrepreneur
•Criteria Satisfaction
Macro
•Business Climate
•Business Cycle
•Economic Trend

15. Allocation of Investment Resources

16. SUPPORT STUDIES

PROJECT IDENTIFICATION
OPPORTUNITY STUDY
PRE-FEASIBILITY STUDY
FEASIBILITY STUDY
APPRAISAL

ITERATIONS

IMPLEMENTATION
IDENTICAL SCOPE AT ALL LEVELS,
INCREASING ACCURACY AND
PRECISION

17. •Related to preparation of investment studies
C •Collecting
O •Organizing
P •Processing
A •Analyzing

18. •Executive Summary
•Project Background and Basic Idea
•Market Analysis and Marketing Concept
•Raw Materials and Supplies
•Location, Site and Environment
•Engineering and Technology
•Organization and Overhead Costs
•Human Resources
•Implementation, Planning and Budgeting
•Financial Analysis and Investment Appraisal

19. Objectives:
•Refinement of Business Idea
•Preliminary Evaluation of Alternative Approaches
•Preliminary Assessment of Strengths and Weaknesses of
Concept

Characteristics:
Sketchy, Based more on rough aggregate estimates than on
detailed analysis

20. Objectives:
•Preliminary Project Assessment
•Identify Project Alternatives
•Identify Critical Aspects that Require Special Support Studies

Characteristics:
Intermediate Level of Detail Based Primarily on Secondary Data

21. Objectives:
Provide Commercial, Technical, Financial and Economic Information
Needed for Investment Decision-Making

Characteristics:
•Clear Project Concepts and Criteria
•Comprehensive Project Design
•Reliable Information, Often Primary Data
•Quantified Prediction or Performance
•Detailed Analysis with High Confidence Level
•Consistent and Defensible Conclusion

22. Objectives:
Provide Detailed Technical Analysis of Critical Design Features

Characteristics:
•Limited Scope
•Performed by Technical Experts
•Answer Key Questions
•Degree of Rigor Commensurate with Stage of Project
Development

23. •Markets
•Inputs
•Location
•Technology
•Equipment

24. Comparing Project Characteristics with Criteria

25. •All Sectors of Economy
•Revenue and Non-revenue Projects
•All Types of Projects
•New Investment
•Modernization
•Expansion
•Privatization
•Technology Acquisition
•Equipment Replacement
•Public and Private Investment

26. •Commitment of Scarce Resources

•Expectation of Future Benefits

•Inherent Uncertainties

28. PARTICIPANT INVESTOR FINANCIER REGULATOR GUARANTOR SUPPLIER
Commercial
1 2 2 1 2
Market
1 2 2 1 2
Technology
1 2 2 2 2
Finance
•Return
1 2 2 2 2
•Liquidity
2 1 3 1 1
•Debt
Service
2 1 3 1 2
Economy
3 3 1 3 3
1VERY IMPORTANT
2SOMEWHAT IMPORTANT
3NOT SO IMPORTANT

29. •Is it compatible with other Investment
Activities?

•Is the Project potentially bankable?

•Does the project make the best use of the
Sponsor’s Resources?

•Do I have the capacity to energize the project
and to retain its momentum in the face of
obstacles to growth?

30. Local Partner
(on the ability of Foreign
Partner to contribute more
equity)
•“He can afford it.”

•“The exchange rate is
wrong.”

•“He wants our market.”
Foreign Partner
(on the reason to offer lower
price for participation)
•“Political and Economic Risk”

•“Low Purchasing Power in the
Marketplace”

•“Uncertain Future Earnings”

•“Workers’ Demands”

•“Book Value is Irrelevant”

31. MICRO

Project Level
COMMERCIAL
PROFITABILITY
MACRO

National Level
NATIONAL
PROFITABILITY

32. •Does the Project Make Sense for the Country?

•Consistent with Development Goals?

•Positive Impact on Macro-economic Indicators?

•Satisfy Economic Rate of Return Criterion?

33. •Purpose
•Project Background
•Analysis of
•Commercial / Market
•Technology
•Environmental Impacts
•Institutional / Managerial
•Financial
•Economic and Social
•Conclusion

34. •Is it a Sound Business Concept?
•Is there a Market for Product
/ Service?
•Is the Marketing Strategy Viable?
•Are the Sales Projections Realistic?
•Is the Distribution Plan Viable?

35. •Is the production at a competitive price?
•Is the process technology accessible?
•Are the operating conditions sustainable?
•Will we be able to provide the quality demanded by the
market?
•Are the inputs to the planning reliable?
•Are there adequate technical personnel?

36. •Do process emissions and
effluents meet or exceed
regulated standards?
•Are products environmentally
acceptable?
•Do impacts indicate future
regulatory actions?

37. •Are the following Competent?
•Entrepreneur
•Implementation Management
•Operations Management

•Is the organization capable of executing
necessary functions?

38. •Are the financial resources adequate to
planning?
•Will there be adequate returns to the investor?
•Are the financial criteria of other participants
satisfied?
•Are the financial risks and risk sharing
acceptable?
•Is the financial structure acceptable?

39. •Wrong Timing
•Non-optimal Financing
•Over-estimated Market Potential
•Under-estimated Capital Cost
•Under-estimated Competition
•Planned Capacity Inconsistent with Market
•Unidentified Sources of Skilled Personnel
•Inadequate Infrastructure
•Project Design Alternatives
•Ineffective Planning

41. The process of identification, analysis and either acceptance or
mitigation of uncertainty in investment decision-making.
Essentially, risk management occurs anytime an investor or fund
manager analyzes and attempts to quantify the potential for
losses in an investment and then takes the appropriate action
(or inaction) given their investment objectives and risk tolerance.
Inadequate risk management can result in severe consequences
for companies as well as individuals. For example, the recession
that began in 2008 was largely caused by the loose credit risk
management of financial firms.

42. Any project organization is subject to risks. One which finds itself
in a state of perpetual crisis, is failing to manage risks properly.

Failure to manage risks is characterized by inability to decide
what to do, when to do it, and whether enough has been done.

Risk Management is a facet of Quality, using basic techniques of
analysis and measurement to ensure that risks are properly
identified, classified, and managed.

43. •Identify Uncertainties

Explore the entire project plans and look for areas of uncertainty.

•Analyze Risks

Specify how those areas of uncertainty can impact the performance of the
project, either in duration, cost or meeting the users' requirements.

•Prioritize Risks

Establish which of those Risks should be eliminated completely, because of
potential extreme impact, which should have regular management
attention, and which are sufficiently minor to avoid detailed management
attention.

44. •Mitigate Risks

Take whatever actions are possible in advance to reduce the effect of Risk.
It is better to spend money on mitigation than to include contingency in the
plan.

•Plan for Emergencies

For all those Risks which are deemed to be significant, have an emergency
plan in place before it happens.

•Measure and Control

Track the effects of the risks identified and manage them to a successful
conclusion.

47. •UNIDO Methodology for the Identification, Preparation and
Evaluation of Investment Projects, Costa Rica, Sept 23-27, 2002

•http://www.investopedia.com/terms/r/riskmanagement.asp

•http://www.netcomuk.co.uk/~rtusler/project/principl.html