Chapter One

Introduction
1.1. What is a project?
Organizations perform work. Work generally could be classified into either operations or
projects, although in some cases both of them may overlap. Both operations and projects share
many characteristics in common like:
 People perform both the activities.
 Both are constrained by limited resources.
 Both are planned, executed, and controlled.
However, operations and projects differ primarily in their repeatability. Operations are ongoing
and repetitive whereas projects are temporary and unique.
A project is a unique endeavor to produce a set of deliverables within clearly specified time, cost
and quality constraints.
Projects are different from standard business operational activities as they:
 Are unique in nature: They don’t involve repetitive processes. Every project undertaken
is different from the last, whereas operational activities often involve undertaking
repetitive (identical) process.
 Have a defined timescale: projects have a clearly specified start and end date within
which the deliverables must be produced to meet specified customer requirement.
 Have an approved budget: projects are allocated a level of financial expenditure within
which the deliverables must be produced to meet specified customer requirement.
 Have limited resources: at the start of a project an agreed amount of labor, equipment
and materials is allocated to the project.
 Involve an element of risk: projects entail a level of uncertainty and therefore carry
business risk.
 Achieve beneficial change: the purpose of a project, typically, is to improve an
organization through the implementation of business change.
For many organizations, projects are a means to respond to requests that cannot be addressed
within the organization’s normal operational limits.

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Projects are undertaken at all levels of the organization. They may involve a single person or
many thousands. Their duration ranges from a few weeks to a few years.
Projects may involve a single unit of one organization or may cross-organizational boundaries.
As projects are often implemented as a means of achieving an organization’s strategic plan they
are critical for the organizations growth. Examples of projects could include:
 Developing a new product or service.
 Effecting a change in structure, staffing, or style of an organization.
 Developing a new or modified information system.
 Implementing a new business procedure or process.

Project management is the application of knowledge, skills, tools, and techniques to project
activities to meet project requirements.
Project management is accomplished through the use of the following 5 processes:
 Initiation
 Planning
 Execution
 Controlling and
 Closure
1.2. Features of a project
Projects are classified based on several criteria, including: ownership, source of finance,
and forces behind the projects.

1. Based on ownership:
a. Private sector- mostly projects undertaken by business enterprises.
b. Public sector- projects undertaken by national and local government bodies.
c. NGOs- development projects are most often undertaken by non-government and non-
for profit organizations.

2. Based on the Sources of Finance:

a. Government treasury- projects may be entirely financed by government budget as
per its priority. For instance, construction of regional airport.
b. Government treasury and external sources- most projects are financed by the joint
partnership of the government and donor groups. For example, a road project may be
financed 50% by the government and 50% by a foreign donor.

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 c. External sources of Finance- projects may be financed totally by parties other than
the government but established for the well being of the citizens and the ownership
may be for the government or the public.

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. Donors will have their
own say and influence the types of projects to be established.
c. Political Driven- Projects may be established in response to some political situation
such as for example because of national elections, projects by religious organizations.

4. Based on their nature:

a. Civil engineering, construction, petrochemical, mining, quarrying, projects far away
from the contractor’s home office, and involve special risk as well as problems of
organizational communication.
b. Manufacturing projects- conducted in a factory or other home based environment
and enable exercising on the spot management.
c. Research projects- established for pure research consuming large sum of money and
lasting over years resulting in dramatic profitable discovery or proving waste of
money.
d. Management projects- projects that require the employment of an external project
manager or managing contractor for issues such as relocating head quarters,
developing and introducing a new computer system, preparing for a trade exhibition,
producing a feasibility or other study report, restructuring the organization etc.

Project exhibits the following basic characteristics.

1. A project involves the investment of scarce resources in the expectation of future benefits;
2. The project will have a measurable Objectives. Projects have specific of benefits that can
be identified, quantified and valued, either socially or monetarily/commercially/.
3. Related to the specificity of objectives, the projects have specific beneficiaries or clientele
group, which needs to be specifically spelt out during project planning studies.
4. A project is the smallest operational element unit. A project can be planned, financed and
implemented as a unit. Often projects are the subject of special financial arrangements and
have their own management.
5. The boundaries of projects make them distinguishable from each other.
 Projects are conceptually bounded. The problem and specific objective (need) that
justify the project involves conceptual delimitations.

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  Projects are geographically bounded. Projects exist in space and we say that projects
are geographically (locationally) bounded.
6.
 Projects are organizationally bounded. Projects require the establishment of a special
organization or the crossing of traditional organizational boundaries, meaning there
should be certain organizational unit responsible for project implementation.
 Projects are time bounded. One factor that makes projects bounded is the time (life
cycle) of a project. Projects have specific lifetime, with a specific start and end time in
which a clearly defined set of objectives are expected to be achieved.
7. Uncertainty and risks is inherent in any project. Achieving project objectives cannot be
predicted in advance with accuracy. The factors that make project risk are:
 Significant and multiple types of scarce resources committed today
expecting outcome in the future;
 Benefits are expected to be generated in the future, which is less
predictable;
 Capital investments are irreversible; therefore, perfect exit
assumption of the perfect competition model is refuted.
8. It has a scope that can be categorized into definable tasks. Projects usually have well defined
sequence of investment and production activities
9. It may require the use of multiple resources. This has an implication on management of
project implementation. The more diverse the types of resources are mobilized the more
complex will the management be. The outcome of project and hence development endeavor
is sensitive to the management of each type of resources. Ill managed resource can contribute
more to cost than to benefit.

1.3. Project and Plan

Planning can be defined as a “continuous process that involves decisions or choices about
alternative ways of using available resources with the aim of achieving a particular goal or set
of goals at some time in the future.”
The rationale for planning is that it serves as a tool that enhances the effectiveness in mobilizing
resources and enables allocation of resources into priority areas of development. In this regard,
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development planning can be regarded as an attempt to raise the rationality of decision-making.
The hierarchical relationship among development plans, programs, tasks, and work packages is
depicted below:

Development Plans

Programs

Projects

Tasks

Work Packages

Figure: Hierarchical Relationships

It is necessary to distinguish between projects and programs because there is sometimes a

tendency to use them interchangeably. A project refers to an investment activity where resources
are used to create capital assets, which produce benefits over time and has a beginning and an
end with specific objectives, while a program is an ongoing development effort (plan) involving
a number of projects. Programs may or may not necessarily be time bounded. Yet programs
cannot live forever, they have limited life cycle, which however, may or may not be explicitly
stated. So in effect in terms of time delimitation, there is only relative difference between
programs and projects. For instance, a health program may include a water project as well as

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construction of a health center; both aimed at improving the health of a given community that
previously lacked easy access to these essential facilities.

Note that projects can stand alone without being part of certain program. So, one can visualize
that the linkage of policies, development plans, and projects. Projects, which are not linked with
others to form a program, are sometimes referred to as “stand alone” projects.

Development plans:

 Most forward looking (futuristic)

 Broad and require systematic thinking, preparation and appraisal
 Attempts to bring welfare in the society

Programs:

 Derived from development plans

 Exceptionally large with long term objectives
 Explores specific area with broader scope

Projects:

 Derived from a program

 Unique investigative tool
 A development activity with specific objectives
 Funded by a program
 An implementation element (entity)

Tasks:

 Work elements under a project

 Specific approaches for doing things
 Set of activities comprising a project

Work packages:

 Sub elements of a given task (or undertaking)

 Something accomplished stage by stage
 Collection of work packages defines a given task

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As it can be observed from the above framework, in general, the essence of development
planning is futuristic, i.e., it is most forward looking and involves systematic thought and
preparation. Virtually, every nation, be it developed or developing, should have a systematically
elaborated national plan to hasten economic growth and further a range of social objectives.
Therefore:

1. Projects provide an important means by which investment and other development

expenditures foreseen in plans can be clarified and realized. Sound development plans
require good projects, just as good projects require sound planning. The two are
interdependent.
2. A sound plan requires a great deal of knowledge about existing and potential projects.
Sound planning rests on the availability of a wide range of information about existing and
potential investments and their likely effects on growth and other national objectives.
Thus, plans require projects. Realistic planning involves knowing the amount that can be
spent on development activities each year and the resources that will be required for
particular kind of project.
3. Effective project preparation and analysis must be set in the framework of a broader
development plan. Projects are part of an overall development strategy and a broader
planning process.
4. The more elaborated the plans and policies of the governments are, the easier becomes
the work of the project planner. For example, the project planner will have to refer to
such plans and policies to see whether the project being considered fits well in the plan
and contributes most to the fundamental objectives of the government. These objectives
can include self-sustaining growth, promotion of employment, income distribution, etc.
5. As projects rightly called the “Cutting Edge” of development, they are powerful means
to achieve the development objectives; they are the crucial building blocks of a
development structure.
6. Projects aim mainly at increasing the production of goods and services, which are
fundamental components of people’s welfare, and the main objective of any development
effort is, of course, to advance social well-being.

Differences:

PROJECTS PROGRAMS

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specific objectives General objectives

Specific project areas No specific project areas

Specific beneficiaries group No Specific beneficiaries group

Clearly determined and allocated funds No clear and detailed financial resource allocation

Specific lifetime No specific lifetime

Similarities:
Projects and programs have similar characteristics in a way that both are:
 Having objectives;
 Requiring financial, human, material, etc inputs (or resources);
 Generating outputs, (goods/services), of value;
 Serving as instruments for the execution of development plans in order to boost the
national economy.

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