Project Appraisal

PROJECT APPRAISAL

An Essential Element of Entrepreneurship Development

Project appraisal is.. A consistent process of reviewing a given project and

evaluating its content to approve or reject this project, through analyzing the problem or need to be addressed by the project, generating solution options (alternatives)

for solving the problem, selecting the most feasible option, conducting a feasibility analysis of that option,

creating the solution statement, and identifying all people and organizations concerned with or affected by the

project and its expected outcomes. It is an attempt to justify the project through analysis, which

is a way to determine project feasibility and cost-effectiveness

Project appraisal can be defined as a..

Systematic and comprehensive review of the economic, environmental, financial,

social, technical and other such aspects of a project to determine if it will meet

its objectives.

Scope of Project Appraisal

• When is it done:– After preparation and design of the project

• What is project appraisal:– Provides a comprehensive and systematic review of all

aspects of the project• Why the project Appraisal is Needed:– For development and successful completion of

projects

Scope of Project Appraisal (cont.)• Hard questions are asked and the answers determine

whether 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 and distributional justification of the project.

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.

Good appraisal systems should ensure that:

• Project application, appraisal and approval functions are separate

• All the necessary information is gathered for appraisal      • 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.

Key issues in appraising projects

• Need, targeting and objectives We should provide detailed description of project,

identifying local needs/ objectives it aims to meet. • Context and connections Are there links between the project and other local

programmes and projects. • Consultation Local consultation determines priorities and secure

community consent and ownership.

Key issues in appraising projects

• Implementation Appraisal scrutinises the practical plans for

implementation, asking whether staffing, timetable and implementers are okay.

• Risk and uncertainty There should also be contingency plans in place to

minimize the estimated risks.

Key issues in appraising projects

• Eligibility– Regional Development – Environmental protection

• Legal Frame Work – Policies, public acceptance – Licensing, safety – Environmental compatibility

Key issues in appraising projects

• Technology And Design– Project Definition – Viability and performance – Adaptation to technical progress – Local-specific requirements – Appropriate technical capacity

Key issues in appraising projects

• Time Schedule– Preparation of feasibility studies – Environmental studies Licensing requirements – Time needed for procurement – Local conditions (climatic, etc)

Key issues in appraising projects

• Economic + Financial Viability– Cost effectiveness – Rate of return – Pay-back period, etc

• Investment Cost– Local and foreign currencies– Phasing of expenditure– Cost Justification

Key issues in appraising projects

• Forward strategies Appraisal should also consider mainstream links

and implications in case the project funds are over• Sustainability Appraisal should include an assessment of a

project’s environmental, social and economic impact, its positive and negative effects.

Checklist for project appraisalSome Questions worth asking:

• Are appraisals systematic and disciplined with a clear 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 (or rejection) of the project?

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 as basis for

future management, monitoring and evaluation?• Does appraisal system comply with relevant government

guidance?• Are right people involved and, if necessary, how can you

widen involvement?

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

Financial Appraisal

• Can the project be financed properly?• Will there be sufficient funds to cover the

expenditure requirements during the life of the project?

• Means of financing

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

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?

Environmental Appraisal

• Will the project have any adverse effect on the environment?

• Have remedial measures been included the project design?

Environmental Damage. Restoration Measures.

Will the project be compatible with government policy, at both central, regional and local level?

Ecological & Political Appraisal

Conclusion

• It is seen from the previous discussion that the Project Appraisal can be structured to cover the full range of functionality of the project management process. It is a powerful tool which should not be overlooked but which must be judiciously applied .

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