project appraial

7/28/2019 Project Appraial

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3 Project Appraisal


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Is a technique that helps in checking whether or not the project undertaken is feasible

.It helps in providing early warning signs of problems ,which may occur during the

project development within an organization.

It also helps in risk management and finding our reasons for the risk when there is a

difference in the parameters of the planned project and goals stated in the project

objective.

Project appraisal involves measuring the difference between the total efforts actually

consumed by a project and the planned efforts.

Project Appraisal is divided into three categories:- technical, environmental andmanagerial appraisals.

A good PA in an organization justifies spending money on a project. It ia an important

tool in decision making that lays the foundation for delivery and evaluation.

The primary purpose of undertaking the design process is to analyze all the possibleall solutions and ensure they are examined.

The design process includes the following aspects:-


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The design process includes the following

aspects:-

Recognizing a problem and need and analyzing it

Identify the inputs, outputs ,parameters and criteria for evaluating the system

Synthesizing solutions

Evaluating their feasibility in terms of technical, financial and economic practicability


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Salient aspects of Project Appraisal

Need:- the new or improved project must be in response to the needs.

Realisability:- the project must be possible in terms of cost and should be

able to realize the cost in terms of benefits

Practicability:-the project must be technically financially and economically

viable Optimality:-the project must be the best alternative available. It must be

optimal, considering the total system outputs, both the desired and undesired.

Implicit in this principle is the need for meaningful design criteria which

appropriately considers all outputs and effects on consumer.producer,worker

etc.

Uncertainty:- most projects are stochastic or probabilistic. at the time of PA,

it is relevant to know the limitations of your understanding of the system and

the cost of information to achieve greater certainty about it. The cost of

information must be balanced against the worth of reducing uncertainty.


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Controllability:- the design process in project appraisal, like any

controllable process, needs a feedback loop to update, correct and

keep the system on the right track. However, redirection and

alteration in the design have costs associated with them , which

gradually increases progressively as the design process advances. Itimplies that the cost of alteration at a later stage of system

development is much higher than the initial stage, say during the

feasibility study.


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Appraisal means Assessment and estimation.

Project define as:

Non routine

Involves number of uncertainties.

Definite period of time. ( starts to end ).

Project is the co ordination of the efforts of personsdrawn from different functional areas and

contribution to external agencies.

Meaning and Overview of Project

Appraisal


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Project Appraisal

When is it done:

After preparation and design of the project

What is project appraisal:

Provides a comprehensive and systematic reviewof all aspects of the project

Why the project Appraisal is Needed:To development and successful completion of

projects


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Project Appraisal (cont.)

Hard questions are asked and the answers determinewhether project proposal is adopted or rejected.

The questions raised rotate around:

appropriateness of project objectives,

size, scope, implementation methods,

modalities, time scale, and

the project technical, financial, economic,institutional, environmental, social anddistributional justification of the project.


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What can a Project Appraisal

deliver?

Be reliable and objective in choosing projects

Make sure their program benefits all sections of the

community

Provide documentation to meet financial and audit

requirements

Appraisal justifies spending money on a project. Appraisal is an important decision making tool.

Appraisal lays the foundations for delivery.


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Good appraisal systems should

ensure that:

Project application, appraisal and approval

functions are separate

All the necessary information is gathered forappraisal

Race/tribal equality and other equality issues are

given proper consideration

Those involved in appraisal have appropriate

technical expertise

There are realistic allowances for time involved.


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Key issues in appraising projects

Need, targeting and objectives

Applicants should provide detailed description ofproject, identifying local needs/ objectives it aims to

meet. Context and connections

Are there links between the project and other localprogrammes and projects.

Consultation

Local consultation determines priorities and securecommunity consent and ownership.


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Options

This is concerned with establishing whether there

are different ways of achieving objectives Inputs

Important to ensure all the necessary people and

resources are in place to deliver project.

Value for money

This is one of the key criteria against which

projects are appraised .


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Implementation

Appraisal scrutinises the practical plans forimplementation, asking whether staffing, timetable

and implementers are okay.

Risk and uncertainty

There should also be contingency plans in place tominimize the estimated risks.


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Eligibility

Regional Development

Environmental protection

Legal Frame Work

Policies, public acceptance

Licensing, safety

Environmental compatibility


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Technology And Design

Project Definition

Viability and performance

Adaptation to technical progress

Local-specific requirements

Appropriate technical capacityLife expectancy


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Time Schedule

Preparation of feasibility studies

Environmental studies Licensing requirements

Time needed for procurement

Local conditions (climatic, etc)


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Environmental and Social

Compatibility

Impact analysis, mitigation measures Direct,

indirect, long-distance effects

Compliance with international standards

Least-polluting technology


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Economic + Financial Viability

Cost effectiveness

Financial international rate of return

Economic international rate of return

Pay-back period, etc

Investment Cost

Local and foreign currencies

Phasing of expenditure

Cost Justification


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Forward strategies

Appraisal should also consider mainstream

links and implications in case the project fundsare over

Sustainability

Appraisal should include an assessment of aprojects environmental, social and economic

impact, its positive and negative effects.


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Checklist for project appraisal

Some Questions worth asking:

Are appraisals systematic and disciplined with aclear sequence of activities and operating rules?

Is there an independent assessment of the project?

Does the appraisal process conclude in clear

recommendations that inform approval (orrejection) of the project?


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Checklist (cont.)

Is the approval stage clearly separate? Is the appraisal process well documented

with key documents signed,

showing ownership and agreement, and

allowing the appraisal documentation to act asbasis for future management, monitoring andevaluation?

Does appraisal system comply with relevantgovernment guidance?

Are right people involved and, if necessary, howcan you widen involvement?


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Feasibility Study

Aim of a feasibility study:

Development objectives

Policy framework and detailed project

objectives

Technical soundness of the project

Administrative feasibility of the project


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Feasibility Study - Aims (cont.)

The economic and financial viability of the

project proposal

The status of demand for the projectbeneficiaries

Other important policy and cross cutting issues

(gender, environment)


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Practical

Appraise your identified projects in terms of thefollowing:

Technical analysis

Economic Analysis

Financial Analysis

Environmental Analysis, and

Social Analysis

Gender Analysis

Ecological Analysis

Political


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Technical Appraisal

Will the project Work?

Availability of the required quality and quantity

of raw material.

Availability of utilities like power and water etc

Follows anti pollution laws


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Factors affecting Technical appraisal

Layout:- the layout of the project includes the description of the

project in terms of what they represent and when they occur, who has

authorized it, no. of people who will handle it, the relevant papers

such as department standards to which the project must conform. It

shall also state where and when the quality control shall be exercised,for example, management reviews format inspections and

walkthroughs are also stated. The method can be used for

categorizing the review comments and ensuring that they are cleared

is also covered.


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Financial Appraisal

Can the project be financed properly?

Will there be sufficient funds to cover the expenditure requirements

during the life of the project?

In financial appraisal, the project analyst performs the following steps

1. Specify the estimate of the funds and amount of resources requires

for a project .

2. Specify the working capital requirements which include raw

materials and stocks of finished goods , for a project

3. Determine the sources of funds which can be share capital, term

loans and debenture capital

4. Determine the cost of production, which includes the cost of raw

materials, utilities and labour requirements for a project


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The financial appraisal of a project can be

performed using the following different methods

Rate of return method:-In this method, the rate of return is estimated

for a project to determine whether the project is financially feasible

or not.

Payback Method:- in this method , the number of years , which is

required for payback of the initial investment, is determined for aproject to financially evaluate it.

Net Present Value Method:-in this method, the investment on project

is compared in a quantitative time based manner. This is called the

net present value of a project. The net present value of a project is

calculated based on a selected rate of interest. Discounted cash flow method: in this method, discounted cash flow

rate of return is calculated to financially evaluate a project. The DCF

rate of return is the rate of return for which the net present value of a

project throughout its life cycle is equal to zero.


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Economic Appraisal

Impact of the project one the distribution of

income in the society

Impact of project on the level savings and

investment in the society and socially desirable

objectives like self sufficiently, employment etc.

Contribution of project


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Social Aspects

What will be the effect of the project on different

groups? At

Individual

Household and

Community levels

How will the project impact on women and men?

Will the social benefits of the project be greater than

the social costs over the life of the investment when

account is taken of time?


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Environmental Appraisal

Will the project have any adverse effect on the

environment?

Have remedial measures been included the project

design?


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Environmental Damage.

Restoration Measures.

Will the project be compatible with government policy,

at both central, regional and local level?

Ecological & Political Appraisal

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