Project Appraisal
Although, we are familiar with tools such as Gantt chart, PERT, CPM, IRR, NPV
and
others associated with project management. Yet when it comes to real project
scenarios, we find practical problems which could bring deviations. This is not to
suggest that the tools and techniques are inadequate, but assumptions on which the
project reports are prepared are either invalid or unrealistic. A review of the
Ministry of Programme Implementation
has shown that about 70% of project time or cost overruns are due to unrealistic
a s s u m p t i o n s at the project formulation stage. It is, therefore, necessary to
pay attention to this, often overlooked, but vital aspect of project formulation.
Project appraisal is the process of analyzing the technical feasibility and economic
viability of a project proposal
with a view to financing its costs. Project appraisal enables to take a decision on
investment with long-term effects. During the appraisal stage, measurement of costs
and benefits is difficult as these are spread over a long term with high degree of
uncertainty. The figure below shows types of appraisal generally required for a
project
Meanings of Project Appraisal
Technical Appraisal
Determines whether the technical parameters are soundly conceived, rrealisticc, and
technically feasible. Technical feasibility analysis is the systematic gathering and
analysis of the data pertaining to the technical inputs required and the formation of
conclusions therefrom. The availability of the raw materials, equipment,
hard/software, power, sanitary and sewerage services, transportation facility, skilled
manpower, engineering facilities, maintenance, local people, etc., depending on the
type of project are coming under technical analysis. This feasibility analysis is very
important since its significance lies in planning the exercises, documentation process,
risk minimization process and getting approval.
Checklist
• Physical scale
• Technology used & Type of equipments & Suitability conditions
• How realistic is the implementation schedule
• Labour intensive method or others
• Cost estimates of Engineering Data
• Escalation are taken care of or not
, • Procurement arrangement
• Cost of operation & Maintenance
• Necessary raw material & Inputs
• Potential impact of project on human & physical Environment
-
Financial Appraisal
To determine whether the financial costs and returns are properly estimated and
whether the project is financially viable. Following minimum details are determined
in the financial appraisal;
• Total Cost
• O & M Expenditure
• Opportunity costs
• Other costs
• Returns on Investment over project life
• NPV
• CBR
• IRR
Institutional Appraisal
To determine whether the implementing agencies as identified in the report are
capable for effective implementation, monitoring, and evaluation of the scheme.
Managerial competence, integrity, knowledge of the project, the promoters should
have the knowledge and ability to plan, implement and operate the entire project
effectively. The past record of the promoters is to be appraised to clarify their ability
in handling the projects.
Checklist
• Whether the entity is properly organised do the job
• Strength to use capability and take initiatives to reach the objectives
• Openness to new ideas and willingness to adopt long term approach to
extend over several projects
•
Commercial Appraisal
The demand and scope of the project among the beneficiaries, customer friendly
process and preferences, future demand of the supply, effectiveness of the selling
arrangement, latest information availability on all areas, government control
measures, etc. The appraisal involves the assessment of the current demand/market
scenario, which enables the project to get adequate demand. Estimation, distribution
and advertisement scenario also to be here considered into.
Environmental Appraisal
To see any detrimental environmental impacts and how to minimise the impacts.
Environmental appraisal concerns with the impact of environment on the project. The
factors include the water, air, land, sound, geographical location etc.
Economic Appraisal
How far the project contributes to the development of the sector, industrial
Although, we are familiar with tools such as Gantt chart, PERT, CPM, IRR, NPV
and
others associated with project management. Yet when it comes to real project
scenarios, we find practical problems which could bring deviations. This is not to
suggest that the tools and techniques are inadequate, but assumptions on which the
project reports are prepared are either invalid or unrealistic. A review of the
Ministry of Programme Implementation
has shown that about 70% of project time or cost overruns are due to unrealistic
a s s u m p t i o n s at the project formulation stage. It is, therefore, necessary to
pay attention to this, often overlooked, but vital aspect of project formulation.
Project appraisal is the process of analyzing the technical feasibility and economic
viability of a project proposal
with a view to financing its costs. Project appraisal enables to take a decision on
investment with long-term effects. During the appraisal stage, measurement of costs
and benefits is difficult as these are spread over a long term with high degree of
uncertainty. The figure below shows types of appraisal generally required for a
project
Meanings of Project Appraisal
Technical Appraisal
Determines whether the technical parameters are soundly conceived, rrealisticc, and
technically feasible. Technical feasibility analysis is the systematic gathering and
analysis of the data pertaining to the technical inputs required and the formation of
conclusions therefrom. The availability of the raw materials, equipment,
hard/software, power, sanitary and sewerage services, transportation facility, skilled
manpower, engineering facilities, maintenance, local people, etc., depending on the
type of project are coming under technical analysis. This feasibility analysis is very
important since its significance lies in planning the exercises, documentation process,
risk minimization process and getting approval.
Checklist
• Physical scale
• Technology used & Type of equipments & Suitability conditions
• How realistic is the implementation schedule
• Labour intensive method or others
• Cost estimates of Engineering Data
• Escalation are taken care of or not
, • Procurement arrangement
• Cost of operation & Maintenance
• Necessary raw material & Inputs
• Potential impact of project on human & physical Environment
-
Financial Appraisal
To determine whether the financial costs and returns are properly estimated and
whether the project is financially viable. Following minimum details are determined
in the financial appraisal;
• Total Cost
• O & M Expenditure
• Opportunity costs
• Other costs
• Returns on Investment over project life
• NPV
• CBR
• IRR
Institutional Appraisal
To determine whether the implementing agencies as identified in the report are
capable for effective implementation, monitoring, and evaluation of the scheme.
Managerial competence, integrity, knowledge of the project, the promoters should
have the knowledge and ability to plan, implement and operate the entire project
effectively. The past record of the promoters is to be appraised to clarify their ability
in handling the projects.
Checklist
• Whether the entity is properly organised do the job
• Strength to use capability and take initiatives to reach the objectives
• Openness to new ideas and willingness to adopt long term approach to
extend over several projects
•
Commercial Appraisal
The demand and scope of the project among the beneficiaries, customer friendly
process and preferences, future demand of the supply, effectiveness of the selling
arrangement, latest information availability on all areas, government control
measures, etc. The appraisal involves the assessment of the current demand/market
scenario, which enables the project to get adequate demand. Estimation, distribution
and advertisement scenario also to be here considered into.
Environmental Appraisal
To see any detrimental environmental impacts and how to minimise the impacts.
Environmental appraisal concerns with the impact of environment on the project. The
factors include the water, air, land, sound, geographical location etc.
Economic Appraisal
How far the project contributes to the development of the sector, industrial
