Chapter-One

General Introduction 1
Projects vs. Operational Work
Organizations perform work to achieve a set of objectives. Generally, work can be
categorized as either projects or operations, although the two sometimes overlap. They
share many of the following characteristics:

Performed by people

Constrained by limited resources

Planned, executed, and controlled.

Projects and operations differ primarily in that operations are ongoing and repetitive,
while projects are temporary and unique.

The objectives of projects and operations are fundamentally different. The purpose of a
project is to attain its objective and then terminate. Conversely, the objective of an
ongoing operation is to sustain the business. Projects are different because the project
concludes when its specific objectives have been attained, while operations adopt a new
set of objectives and the work continues.
Projects are undertaken at all levels of the organization and they can involve a single
person or many thousands. Their duration ranges from a few weeks to several years.
Projects can involve one or many organizational units, such as joint ventures and
partnerships.

1. Definition of Project

It is very difficult to find a single comprehensive definition of project because projects

are different in terms of their nature and objectives. Some of its definitions are:

According to Gittinger (1982), a project is defined as a complex set of activities where

resources are used in expectation of returns and that lead itself to planning, financing,
and implementation as a separate unit.
A project usually has a specific starting point and a specific ending point,
intending to achieve specific objectives.
It usually has a well-defined sequence of investment and production activities
and a specific group of beneficiaries that can be identified, quantified, and
valued, either socially or monetarily.
 Project- is an investment activity in which specific resources are committed within
a given time frame, to create capital assets over an extended period of time in
expectation of benefits that exceed to the committed resource.
Project- is a task of considerable magnitude that must be completed within a
budget and by a specific time; usually but not always carried out at once.
Project- is a non repetitive activity that is goal oriented, that has a particular set of
constraints, the output of which is measurable, and that changes something when
carried out.
Project- is a set of proposal for investment of resources in to a clearly defined set
of actions that are expected to produce future benefits of a fairly specific kind, the
whole series of actions being the subject of individual planning and examination
before being adapted and implemented within a single overall financial and
managerial framework.
2. Common Characteristics of projects.

Though project can be defined in various ways and they differ in many respects, the
following are common features of projects. These are:

Project involves the investment of scarce resources in expectation of future

benefits,
Project is an activity that is capable of being planned, financed and implemented
as a unit,
Project has a defined set of objectives and specific start and end dates,
Project has geographical or organizational boundaries.
It is an activity around which conceptual boundaries can be ascribed,
A project can be seen as an activity which is likely to have a partially or wholly
independent administration.
3. Classification of Projects

Projects can be classified based on several criteria, including: ownership, sources of

finance, and forces behind the projects.

1. Based on Ownership:
a. Private sector- mostly projects undertaken by business enterprise.
b. Public sector- projects undertaken by national and local government body.
c. NGOs development projects are most often undertaken by non-
government and not for profit organizations.

2. Based on the Sources of Finances:

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 government and 50% by
foreign donors.
c. External Sources of Finance- Projects may be financed totally by parties
other than the government but established for the wellbeing 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, etc.
4. Based on their Nature:
a. Civil engineering, Construction, petrochemical, mining, quarrying
projects- projects far away from the contractors home office, and involve
especial risk as well as problems 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, restructuri9ng the organization, etc.

Projects can also be differentiated by the following:

Long-term Vs short term projects

Regional, national, international projects
Agricultural Vs industrial projects.
Capital, labor or energy intensive projects.

4. Project Management
 Project management can be defined as the set of concepts involved in the realization
of goals through efficient, effective, transparent and responsible administration of a
given set of activities, with associated accountability for the outcomes in the process, so
as to meet basic objectives and enhance the satisfaction of stakeholders. In this
process, all stakeholders should be consulted in matters affecting a project to ensure
co-ordination in project activities.

5. Project, Plan and Program

There are some degree of relationships between projects, plans and programs. There
are also significant differences. Their hierarchical relationship is given based on the
following chart.

Development Goal/Objectives

A development goal or objective is a statement of intension or aspiration of a

government to improve living conditions of its people Vision of the government. For
example, growth, equity in income distribution, reduction of unemployment.

It is a comprehensive statement which guides development. It determines the

environment or framework within which development is expected to take place.

Development goals/Objectives

Development Strategy

Developmental Plans
Most forward looking (futuristic)
Broad and require systematic thinking, preparation,
and appraisal
Attempts to bring welfare in the society
 Programs
Derived from developmental plans
Exceptionally large with long term objectives
Explores specific area with broader scope

Projects
Derived from a program
A development activity with specific objectives
A tool for realization of a given set of objectives
Funded by a program
A unique implementation 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
The collection of work packages define a given task

Exhibit 1.2 Hierarchical Relationships

Development Strategy

A strategy is defined in various ways by different authors. But in general it refers to the
general methods of achieving specific objectives at national or organizational levels.

It mainly describes the essential resources which will be committed to achieve

objectives. It also explains how these resources will be organized. Example, it may ask
how to organize the labor force of organization or the object. It can take different forms
such as import substitute, export promotion, ADLI, etc.
Development strategy is likely to involve:

Establishment of sector goals- for example, what is the goal of agriculture

sector in the next 5 years, 10 years; the industry sector in the coming 10
years.
Defining of the means to achieve the sector goals.
Determining of the feasibility of achieving the stated goals from the political,
technical, organizational and resource point of view.
Preliminary assessment of costs and benefits of goals and objectives.
Setting priorities- which sub-sector should be provided more attention in
each sector.

Plans and Projects

Planning can be defined as a continuous process that involves decisions or

choices about alternative ways of using available resources with the aim of
attaining a particular goal or set of goals at some time in the future.

Planning serves as a tool for enhancing the effectiveness in mobilizing

resources and as well enables allocation of resources into priority areas of
development.
In this regard, development planning can be regarded as an attempt to raise
the rationality of decision- making.
Plans are designed as a means to accomplish development strategies; National Plan
should identify priority areas and set a specific objective. The specific objective can be
achieved through various means (fiscal policies and development projects).

As it can be observed from Exhibit 1.2, 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.

In this regard, we can explain the relationships between development plans and
projects as follows:

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.

It is project analysis that provides this information, and the projects

selected for implementation become the vehicles for using resources.

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. Since projects commit scare resources, project selection is meaningful only

when it is placed within a broader development framework.

This framework could be medium or long-term development plans and

policy statements issued by the government.

The best economic appraisal of projects cannot be made without

referring to such plans and policies.
4. 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.

5. Governments must allocate their available financial and administrative

resources among many sectors and many competing programs.

Project analysis can help improve this allocation.

Within the broad strategy, planners have to identify potential projects

that address the policy of production targets and priorities.
6. 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 o b j e c t i v e s c a n i n c l u d e self-sustaining growth, promotion of

employment, income distribution, etc.
7. National plans and elaborated sectoral programs are of great help in
identifying development projects.

A realistic plan should be prepared by assessing the development

potentials in the various sections of the economy.

It is, therefore, obvious that the successful formulation and

implementation of a national development plan depends on the
proper selection of projects and the associated sectoral programs.
Thus, project formulation and evaluation, being a continuous and
integrated process, is one of the basic components of economic
planning.
In order to ensure realistic planning, an iterative process with a sufficient
flow of information, suggestion, and guidance between decision makers
at the macro levels are essential.

8. 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.

9. Projects aim mainly at increasing the production of goods and services, which
are fundamental components of peoples welfare, and the main objective of any
development effort is, of course, to advance social well- being.

Projects and Programs

It is necessary to distinguish and/or understand the difference between projects
and programs because there is sometimes a tendency to use them
interchangeably.
A project, in this regard, refers to an investment activity where resources
 are used to create capital assets that produce benefits over time, having a
beginning and an end, and specific objectives pursued;
Whereas a program is an on-going development effort or plan. A program
is, therefore, a wider concept than a project.
A program may include one or several projects at various times whose specific
objectives are linked to the achievement of higher level of common objectives.
For instance, a health program may include

A water project as well as construction of a health center;

Both are aimed at improving the health of a given community that previously
lacked easy access to these essential facilities.

Projects that are not linked with others to form a program, however, are sometimes
referred to as Stand-Alone" projects.

Said differently, a program is a definite plan or scheme of any sequence

of operations aimed at the attainment of the planned objectives.
This explanation, however, assumes that a program is a plan of activities
with general objectives that would be derived from the development plan.

In general, programs and projects have got their own differences and similarities. For
purpose of clarity, it is important to outline the major differences and similarities
between the two concepts.

In this regard, the following table depicts, comparatively the differences between
projects and programs:

Differences
Projects Have: Programs Have:
 Specific objectives General objectives/wide/diverse
Specific projects area No specific area (location)/diffused
(location)
Specific beneficiaries group No specific beneficiaries group
Clearly determined and No clear and detailed financial
allocated funds resource allocation
Specific lifetime No specific lifetime

Similarities
Projects and programs have similar characteristics in that both are:
Having objectives;
Requiring financial, human, material, and other inputs (or resources)
Generating outputs of value (i.e. goods/services);
Serving as instruments for the execution of development plans and attain
national goals.

1.4 Project Planning

To be effective the project planning should be approached systematically. Some
activities to be done and questions that need to be asked at planning stage of a project
may include the following:

Situational analysis- is identification of the current situations and assessing

the factors that leads to current position. This involves answering questions
such as:
Where are we now?
How we reached to this point?
Why and how we reached to the current position?
Is this where we want to be?
Setting Objective- This involves answering questions such as Where should
we find ourselves in 5 to 10 years time from now?
Identification of alternatives and strategies- How can we reach to the place
that we want to go in the indicated time limit?
Identification of strengths, weakness, opportunities and threats- what
might prevent us from getting there and what might help us to get there?
(SWOT analysis).
Action plans and implementation- What do we need to do, where do we need
to do it, how will we do it and who will do it?
 Monitoring and evaluation- What do we need to do to be on course, can we
do it, and how do we know when we have arrived?
Budgeting- Involves quantification of the costs involved.

Why projects are Undertaken

The principal purposes or goals of undertaking projects depend on the nature of the
project:

Development Project (usually undertaken by government or NGOs) May have

the following objectives:
Projects are very powerful and efficient means to achieve development or
growth. They are said to be cutting edge of development.
They are mechanisms for improving income distribution. For example,
implementing a project that enhance the income of the poor people or that
benefit the majority poor.
They are mechanisms to solve immediate problems. For example,
implementing a project to solve specific problem in the society such as projects
to eradicate malaria such as Anti-Malaria Association, projects to prevent the
spreading of HIV/AIDS such as Tesfa Goh Ethiopia, project to eliminate
poverty.
Project undertaken by Business Organizations- have a primary objective of
maximizing the wealth of current shareholders. Other objectives may include
maximization of profit, maximization of earning per share or maximization of
return on equity. They will also have indirect objectives of creating employment
opportunities, and other social benefits.