Chapter 28 Review Questions Answer Key

1. The word “project” is used in many different ways, but in the context of development planning a project can be thought of as an investment of scarce resources in the expectation of future benefit. If resources are scarce they have to be used effectively, so development projects have to be planned with a clear objective in mind. A project has to have geographical and/or organizational boundaries so that we know what is included in the project and what isn’t. A project is also time bound in that it has both a start and an end. Often, the end of a project as a project does not mean that the activities finish. It just means that they become part of the routine operation of the organization responsible for the project. The association of projects with investment is important because we expect the early stages of the project to incur net costs to society but that these costs will eventually lead to net benefits. The methods used for appraising projects are designed specifically to take account of the comparison of early net costs with later net benefits. These methods include cost-benefit analysis, where project benefits can be measured fairly easily, and cost-effectiveness analysis, where valuation of benefits is more difficult, particularly in the health and education sectors. [p. 508]

2. The “project approach” is perceived to be narrow in focus and failing in terms of overall coherence. The emphasis placed by donors on the planning and appraisal of projects was therefore reduced. However, the idea that a systematic approach to planning could involve both coherent sector strategies and well-planned projects seemed to be overlooked. [p. 510]

3. The development of a project is the “Project Cycle,” originally developed for the World Bank and reflected the processes of that organization. Essentially, a project goes through the processes of identification, preparation, appraisal, implementation, and evaluation. The cycle is completed when the evaluation process leads to a new project idea and the cycle starts over again. There have been many criticisms of the model for its simplicity and rigidity and the fact that it does not recognize the possibility of abandonment or termination. [p. 510]

4. Assuming that a problem (or an opportunity) has been identified, the first stage in OOPP is to identify the relevant stakeholders, that is, the people who are likely to be involved in a potential project or those who might be affected either positively or negatively. The purposes of the exercise are: (1) to ensure that resources are targeted to meet the needs of priority groups; (2) to make appropriate arrangements for co-ordination and participation; (3) to understand and address potential areas of conflict in project design. [p. 511]

5. In this analysis the negative situations indicated in the problem tree are replaced by positive outcomes that are supposed to be “realistic” and “achievable.” The idea is then to determine the measures required to achieve those outcomes. The problem tree is replaced by an objectives tree in which the negative statements are replaced by solutions. In a pure project case this would simply consist of the activities needed in the project. However, in many cases other actions (e.g., policy decisions) may be necessary for the project activities to work. These may become conditions that have to be satisfied before the project planning process can start; otherwise, assumptions that are made, if wrong, might affect project outcomes. The process of objectives analysis might result in multiple strategies to satisfy the intended objectives. It is at this stage that detailed planning of the activities takes place with the purpose of determining the most appropriate set of actions to resolve the identified set of problems. This is described as “alternatives analysis” or “analysis of strategies.” In this stage the possible strategies that could potentially resolve the problem are compared and the most promising approaches are identified for further analysis. [pp. 511-2]

6. To answer that a project is feasible, and that it is a good thing, and avoids too much difficulty we need some of the tools of cost-benefit analysis (CBA). CBA can be done from the point of view of an individual organization, group or enterprise. This is described as financial analysis. It can also be done from the national economic point of view. This is described as economic analysis. Economic analysis can also be adapted to determine who gets the benefits and who pays the costs. This can be described as distribution analysis. [pp. 514-5]

7. The costs and benefits of a project are basically determined by a year-by-year basis in an annual statement. This is sometimes described, for financial analysis, as a cash flow or, in economic analysis, as a resource statement. In this chapter the term “annual statement of costs and benefits” will be used and qualified by factors such as whether it relates to economic or financial costs and benefits and whether it is set out in constant or current prices. Normally, CBA is conducted in constant prices of the year in which the project is planned to avoid any distortion induced by assumptions about inflation. What is now required is a method to determine whether this is a good project. If we simply add up all the net benefits we do not take any account of the timing of the costs and benefits. As indicated earlier, one way of dealing with time is to apply the method of discounting. The most obvious indicator to use if the discount rate is known is the net present value (NPV). [p. 516]

8. A number of alternative and more detailed models have been put forward for the Project Cycle. Picciotto and Weaving (1994) developed a new version for the World Bank that emphasized participation, flexibility, and accounting for the interests of stakeholders. An alternative approach relating project development to the various processes and stages that allows for modification of design as well as termination is the “Project Spiral.” In this model, the process of project development is conceived as a series of concentric circles that may eventually lead to project implementation but may also involve changes in project design or simply abandoning the idea. An emphasis is placed on the various aspects of the project environment in the identification of projects and the process of project development. It is better to abandon or redesign a bad project than to continue to sink more and more resources into something that is likely to fail. [p. 510]

9. The project planning process starts with project identification. Essentially, project ideas are derived from the project environment. At this stage, sector strategies are important. The idea that sector planning should be combined with more detailed project planning is not new. As early as 1965, Singer argued that development projects could not logically be divorced from their planning context. A project is more likely to succeed if it is part of a coherent program that identifies constraints to be overcome and opportunities that can be taken, as well as alternative solutions. Such a program may include a number of related projects that are important if both the program and the constituent projects are to be successful. [pp. 510-1]

10. A project idea has to be based on the existence of either a problem to solve or an opportunity to exploit (e.g., the existence of an underutilized resource). The process of identifying projects is therefore often based on problem-solving techniques or reviews of resource availability. A useful approach to developing project ideas was first introduced by the German development agency GTZ in 1983 and has been used systematically since 1987. The approach was given the German acronym ZOPP, which can be translated as “objective (or goal) oriented project planning (OOPP).” The approach has been combined with a tool originally developed by USAID in 1969 called the logical framework (LF). The combination of OOPP with the LF is often described as the logical framework approach (LFA). A more recent explanation of these processes and their variants is provided in the European Commission’s Project Cycle Management Guidelines. [p. 511]

11. There are various versions of the LF, but the one illustrated here is the approach used by the European Commission, based on the German ZOPP model, originally described as the “Project Planning Matrix.” The LF is a matrix of four columns and four rows. The vertical logic relates to the hierarchy of objectives. Project activities lead to project results that contribute to a development outcome or purpose that contributes to a wider overall objective or development impact. This vertical logic can be examined to ensure that the investment proposed in the project actually contributes to the intended outcome. If a project component does not contribute to the outcome, why is it there? The columns provide a description of the various objective levels, the indicators that show whether objectives have been achieved, the means of verification for the indicators, and the important underlying assumptions that must hold if each level is to be achieved. The indicators column shows the most important things to be monitored during the implementation of the project, and the means of verification column shows where the necessary information can be found. It provides guidance for the development of reporting systems for project management. The assumptions column highlights potential causes of project failure, therefore informing those involved in project appraisal of some of the indicators that may need to be tested through sensitivity analysis. The LF has been used extensively in many variants in many countries and by many development agencies. A number of criticisms have been raised in the literature. Some critics have described the LF as a “lockframe” (Gasper 2000) that restricts creative thinking because of the rigidity of a 4 × 4 matrix. There are also questions about the terminology used for different levels and the number of levels in the vertical hierarchy. It is not always easy to determine what to put into each level. The version of the LF from the Norwegian Agency for Development Co-operation (NORAD 1999) has five levels with “inputs” at the lowest level, and the indicators and means of verification are combined so that there are only three columns. There are also different opinions as to whether the assumptions column should only include factors outside the control of the project management. [p. 513]