Project Evaluation and Development: A Comprehensive Guide
Project: Responding to an Idea
Project: Responding to an idea that seeks to either solve a problem or exploit a business opportunity.
Evaluation of Investment Projects
Evaluation of investment projects is the procedure that compares the results obtained through an investment project against a baseline or a priori objective criterion fixed in relation to the desired outcome.
Private vs. Public Projects
Objective:
- Private projects aim to satisfy market needs.
- Public projects aim to meet community and social needs.
Financing:
- Private projects are financed by private contributions (investors or business banking).
- Public projects are financed by the public budget or taxes.
Why Projects Fail?
- Impossibility of perfect prediction: We cannot accurately predict future events or scenarios.
- Poor management: Mechanisms are not defined properly.
- Erroneous evaluation procedures:
Project Viability Analysis
1. Commercial Viability
This study determines if the market is receptive to the good or service, potentially leading to project delay or rejection without incurring the costs of a full economic study.
2. Technical Feasibility
This study examines the material, physical, and chemical possibilities of producing the good or service.
3. Legal Analysis
A project may be viable commercially and technically but face legal obstacles.
4. Organizational Viability
This study determines if the minimum structural and functional conditions are in place to ensure project implementation feasibility.
5. Financial or Economic Viability
5.1 Feasibility Study: Determines project approval or rejection.
5.2 Financial/Economic Viability: Measures investment returns in monetary terms.
Steps to Prepare the Problem Tree
- Analyze and identify the main problems in the situation analysis.
- Establish the central problem affecting the context.
- Define the most important effects of the central problem to understand the severity of its consequences.
- Note the central causes of the problem.
- Diagram the causes and effects associated with the problem (optional).
- Check the validity and integrity of the problem tree.
Logical Framework
Definition: A tool to facilitate project conceptualization, design, implementation, and evaluation.
Purpose:
- Provides structure to the planning process.
- Communicates vital project information.
Usage: Can be used at all project stages.
Benefits:
- Increases the accuracy of project planning.
- Relates objectives to activities.
- Clarifies roles and responsibilities.
- Evaluates expected vs. actual results.
Origin and Importance of the Logical Framework
Challenges addressed by the Logical Framework:
- Vague planning: Multiple objectives and project components not clearly related to activities.
- Ambiguous management liability: Project managers hesitant to be held accountable for project impact.
- Controversial evaluation: Lack of clear goals leading to evaluators using their own criteria.
Meaning of Objective Levels
- FIN (Goal): The ultimate outcome to which the project contributes significantly.
- PURPOSE: Achieved when the project has been executed.
- COMPONENTS/Results: Completed during project implementation.
- ACTIVITIES: Required to produce the components/results.
Indicators for Objective Prioritization
Indicators for Goal and Purpose:
- Temporal Control Indicators: Report on work progress.
- Quality Control: Quantitative control on activities, alongside temporal control (monitoring).
Indicators for Activities: The project budget serves as the activity indicator.
Software Development Plans and Projects
The conception of economic development and planning should serve human needs. Sectoral or regional programs and development projects are intrinsically linked to human activity and its requirements.
Preparation and Development
- Define all characteristics impacting project cash flow (receipts and expenditures) and estimate their magnitude.
- Evaluation: Employs a well-defined methodology to determine investment profitability. The assessment must be neutral, without preconceived outcomes or project preferences.
Project Stages
Pre-Investment Stage
This stage involves project design, preparation, and evaluation (pre-investment analysis) to determine economic feasibility and whether the project should proceed.
Substages:
- Profile study
- Pre-feasibility study
- Feasibility study
Investment Stage
If the project is approved, consider these substages:
- Implementation Plan: Details the activities required to achieve project objectives.
- Execution: Implements activities to establish the administrative and physical infrastructure.
Operation Stage
This stage begins when the project is running.
- Start-up: The project is tested.
- Implementation: The project begins full operation.
Stage Monitoring and Evaluation of Project Results
Two stages follow the ex-ante evaluation:
- Monitoring/Follow-up: Evaluation during the implementation phase.
- Ex-post/Results Evaluation: Assessment upon project completion.
These evaluation aspects are crucial for economic and social development projects.
Location
Project location alternatives should be compared based on locational factors, including:
- Means and transportation costs
- Labor availability and cost
- Proximity to supply sources
- Environmental factors
- Proximity to the market
- Land cost and availability
- Soil topography
- Legal and tax structure
- Availability of water, energy, and other supplies
- Communications