Development Project Planning and

Analysis

Maychew, 2024
 CHAPTER 3
ASPECTS OF PROJECT PREPARATION AND ANALYSIS

• The project analyst must consider several

aspects when carrying project analysis. The major
aspects of project preparation and analysis are
outlined below.
 1. NEED AND DEMAND (MARKET) ANALYSIS

• The primary task is to identify the need and

estimate the nominal and effective demand of the
envisaged product or service.

• This depends upon the nature of the particular

product/service/ under consideration.
 1. NEED AND DEMAND (MARKET) ANALY…

• For private goods, this is usually taken care of

through market and demand analysis.

• For public goods, for which there is no market,

one has to undertake social and institutional
analysis to identify the need of the beneficiary
group of the project.
 1. NEED AND DEMAND (MARKET) ANALY…

• Project analysts are expected to examine the broader

social implications of the proposed project. Sufficient
attention should be given to the social soundness of a
project.
• If the product is private good, the first task is to
determine whether there is sufficient market or not.
• The market analysis is also concerned with the
arrangement for marketing the output to be produced and
the arrangement for the supply of inputs needed to build
and operate the project.
 1. NEED AND DEMAND (MARKET) ANALY…

• Given the importance of market and demand analysis in

project analysis it should be carried out in an orderly and
systematic manner. The key steps in such analysis are as follows.

 Situational analysis and specification of objectives

 Collection of secondary information
 Conduct of market survey
 Characterization of the market
 Demand forecasting
 Market planning
 2. Technical Aspects
• Technical study of a project provides the technical
basis for all other aspects of a project study, since a
technically unfeasible project cannot be promoted.

• The main and challenging task in this technical

analysis is to identify the appropriate technology for
the objective the project is intended to meet.
 2. Technical Aspect…
• The technical analysis is concerned with the projects
inputs (supplies) and outputs of real goods and services
and the technology of production and processing.
• Analysis of the technical and engineering aspects of a
project should done continuously when a project is
formulated.
• Technical analysis seeks to determine whether the
prerequisites for the successful commissioning of the
project have been considered and reasonably good
choices have been made with respect to location, size,
process, etc.
 2. Technical Aspect…
• This is crucial because the rest of the project analysis
cannot be conducted without information form the
technical study.
• In general the technical analysis is primarily concerned
with
1. Material inputs and utilities
2. Location and site
3. Manufacturing process/technology/ and
engineering
 3. Institutional-Organizational-
Managerial Aspects
• This basically incorporates the socio-cultural patterns and
institutions or the population that the project is believed to
serve.
• Does the project takes into account the cultural setup and
customs of the beneficiaries?
• Or will it disturb the accepted pattern?
• If so how should this be included as part of the project
design?
 3. Institutional-Organizational-
Managerial Aspect…
• To have a chance of being carried out, a project
must be related properly to the institutional
structure of the country or region where the
project is to be carried.
• Examples include the land tenure system, use of
local institutions such as Idir or Debbo
 3. Institutional-Organizational-
Managerial Aspect…

• Similarly, managerial issues are critical for

successful completion of projects.
• Thus, the project analyst must examine the
ability of available staff to identify whether they
have the capacity to carry out the managerial needs
of the project.
 4. Financial Aspects
• Financial analysis seeks to ascertain whether the
proposed project will be financially viable in the
sense of being able to meet the burden of
servicing debt and whether the proposed project
will satisfy the return expectations of those who
provide the equity capital.
 4. Financial Aspect…
• The aspects which have to be looked into while conducting financial
appraisal are:
1. Investment outlay and costs of the project
2. Means of financing
3. Cost of capital
4. Projected profitability
5. Break-even point
6. Cash flows of the project
7. Investment worthwhile ness judged in terms of various criteria of
merit
8. Projected financial position
9. Level of financial risk
 5. Economic Aspects
• The economic aspect of project preparation is
primarily concerned with the determination of
the likelihood of the proposed project, and
• hence the committing of scares resources, by
justifying the significance of the project from
the whole economy point of view (the society
as a whole).
 5. Economic Aspect…
• In such evaluation the focus is on the social
costs and benefits of a project, which may often
be different from its monetary costs, and benefits.
• The financial analysis views form the
participants (or owners) point of view, while the
economic analysis form the society’s point of view.
 6. Environmental/Ecological/ analysis

• In recent years environmental concerns

have assumed a great deal of significance.
• Ecological analysis should be done
particularly for major projects, which have
significant ecological implications like
power plants and irrigation schemes, and
environmental polluting industries.
 6. Environmental/Ecological/ analys…

• The key questions raised in ecological analysis are:

o What is the likely damage caused by the project to
the environment?
o What is the cost of restoration measures required
to ensure that the damage to the environment is
contained within acceptable limits?
•END of Chapter 3