a critical analysis on the project appraisal & management of project in bangladesh

A Critical Analysis On The Project Appraisal & Management Of Project In Bangladesh

A Critical Analysis On

The Project Appraisal & Management Of Project In Bangladesh

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Assignment

“A Critical Analysis On

The Project Appraisal & Management Of Project In Bangladesh”

Submitted To

Md. Zakir Hossain

Course Instructor

Stamford University Bangladesh

Course: Project Management

Submitted By

Date of

Submission: 14TH August, 2010

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Md. Ashiqur Rahman Chy ID: MBA 041 11 345

Dipankar Das Dipu ID: MBA 041 11

Neshat Marjiya ID: MBA 041 11 346

Md. Ajaj Mahmud ID: MBA 042 11 553



Letter of Transmittal

14 August, 2009

Md. Zakir Hossain

Crouse Instructor

Department of Business Administration,

Stamford University Bangladesh.

Subject: Submission of Assignment on “A Critical Analysis on the Project Appraisal &

Management of Project in Bangladesh”

Dear Sir,

It gives us immense pleasure in presenting herewith the assignment on “A Critical Analysis on

the Project Appraisal & Management of Project in Bangladesh”. This Assignment gave the

opportunity to acquire a lot of knowledge about the ‘Appraisal & Management of Project in

Bangladesh’. We have tried our level best to follow the instruction of our Crouse instructor in

preparing this report, and in completing the report by appropriate information as

comprehensively as possible.

We sincerely hope that you will enjoy this paper as much as enjoyed while scrutinizing it. If you

need any further clarification or information in interpreting this analysis, we will be glad to

answer your queries.

Sincerely yours

All the member

Group X

Department of Business Administration


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Acknowledgment

Firstly, we would like to express our gratitude to almighty Allah to give us the strength to

complete the report within the stipulated time. While working on this topic, we learned about

real practice of project appraisal in Bangladesh.

We have always had a great affinity with analytical topic, so it was obvious that the subject of

our assignment would go in the same direction. “A Critical Analysis on the Project Appraisal

& Management of Project in Bangladesh” is a sounding title that was suggested to us Md.

Zakir Hossain. Special thanks go to him. His infectious enthusiasm and unlimited zeal have

been major driving forces during the writing of this assignment.

Finally, and definitely not least, we want to thank all the persons who gave their full co-

operation with this assignment & the entire participants who take part in the report, their

contribution are highly appreciated.

All the Member

Group X

Department of Business Administration


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Introduction

Origin of the Report: -

Submit an Assignment is a compulsory part of our study under business faculty of Stamford

University Bangladesh, every trimester we submit an assignment on various topics relevant to

course. This trimester we got the task for “A Critical Analysis on the Project Appraisal &

Management of Project in Bangladesh”

Objective of the Study: -

Every work has some specific objective. The main objective of this report is dividing in two

categories:-

Broad Objective

Specific Objective

Firstly to identify the overall scenario of the project appraisal and management in

Bangladesh.

Secondly to develop an analysis on the specific performance of project appraisal, analysis of

the projects & its success trend. Also this assignment is essential to completing our project

management course successfully.

Methodology: -

To prepare the report, we have collected the data in two ways-

Primary Data

Secondary Data

We collected Primary data by several methods:-

Conversation with the different project personnel for collecting data about appraisal of a

project.

For the secondary data, we collected data from various sources that are easily available:-

We collect data from the Website of various companies, and other informational search

engine.

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Taking help from project management books.

Limitation of the study:-

The following limitations are apparent in collecting data and prepare the report-

۞ Time is the first limitation, because the given time is not sufficient to prepare an assignment

covering all the fact to develop a thriving critical analysis on project appraisal &

management.

۞ Another limitation of this report is the lacking information.

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Table Of Contents

Letter of Transmittal i

Acknowledgement ii

Introduction iii-iv

Abstract 1

Chapter 1 Literature Review

1.01 Definition of Project 3

1.02 Definition of Project Appraisal 3-4

1.03 Definition of Project management 4

1.04 Role of Project Appraisal 5

1.05 Methodology of Project Appraisal 6-7

1.06 Necessary to Conduct Project Management Appraisal (PMA) 8

1.07 Use of Project Management Appraisal (PMA) 8-9

1.08 Structural Approach and Typical Issues of Project Management Appraisal

10-14

Chapter 2 Analysis

2.01 Critical Examination of Project Risk Analysis 16-17

2.02 Feasibility Analysis of the Projects 18-19

2.03 Project Appraisal Using Discounted Cash Flow 20

2.04 Problems Threaten to Project Success 21-23

2.05 Criteria for the Evaluation of Project Success 24

2.06 Project Appraisal under Inflationary Condition 25-26

2.07 Common Causes of Project Failure in Bangladesh 27-31

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Chapter 3 Finding of the Study

3.01 Findings 33

Abstract

A project is defined as a unique set of co-ordinate activities with a finite duration, defined cost

and performance parameters and clear outputs to support specific business objectives. The term

projects as a discrete package of investments, policy measures, institutional other actions

designed to achieve specific development objectives.

Appraisal involves a careful checking of the basic data, assumptions and methodology used in

project preparation, an in-depth review of the work plan, cost estimates and proposed financing,

an assessment of the projects organizational and management aspects, and finally the viability of

project. In fact a project can be defined as a problem scheduled for solution. Projects can either

be successful or may fail, therefore before undertaking any project it is important to assess its

likelihood of success.

In Bangladesh and the world over, organizations, corporations and institutions commit large

sums of resources into projects and assure their project success through the use of project

appraisals and project management. Project appraisal is a generic term that refers to the process

of assessing, in a structured way, the case for proceeding with a project or proposal. It often

involves comparing various options, using economic appraisal or some other decision analysis

technique.

Project management is the discipline of planning, organizing, and managing resources to bring

about the successful completion of specific project goals and objectives. Project management is

a carefully planned and organized effort to accomplish a specific one-time objective. Appraisals

help ensure that projects will be properly managed, by ensuring appropriate financial and

monitoring systems are in place, that there are contingency plans to deal with risks and setting

milestones against which progress can be judged. Project appraisal therefore cannot be

overlooked and goes hand in hand with effective project management.

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Chapter – 1

Literature Review

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1.01 Definition of Project: -

A project is a specific plan or design presented for consideration. A project is a proposal for an

investment to crate and or develop certain facilities in order to increase the production of

goods/services in a community certain period of time.

The term projects discrete package of investments, policy measures and institutional and other

actions designed to achieve specific development objectives, a project may cover with following

characteristics-

A set of well defined activities, clear cut beginning and end

Having a desired objective/ outcome.

Consumption of large amounts of money

Limitations on resources

Not undertaken frequently

Projects are common term used by many flexibly to denote specific action plans. There are

projects to develop a new road, new car, new motorbike, marketing plan, construction of

buildings, transport and communication etc. A project can be long term or short term, limited or

comprehensive, single sector concentrated or multi sector concentrated. Project: can be defined

thus as

A scientifically evolved work plan

Devised to achieve a specific objectives

Within specified time limit

Consuming planned resources

1.02 Definition of Project Appraisal: -

Project Appraisal is the process of analyzing the technical feasibility and economic viability of a

project proposal with a view to financing their costs.

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Project appraisal is the process of examining the various dimensions of a project be it Technical,

financial, social, Environment and providing an assessment of the projects likelihood for success

and its viability. It is the process of assessing and questioning proposals before resources are

committed. It evaluates a project’s ability to meet its stated objectives and to provide long term

Economic growth in the larger framework of local and National needs.

The project appraisal process is an essential tool in regeneration and neighborhood renewal. An

effective project appraisal offers significant benefits to partnerships and, most importantly, to

local communities. A good appraisal justifies spending money on a project. It is an important

tool in decision making and lays the foundation for delivery and evaluation. Getting the design

and operation of appraisal systems right is important. The proper consideration of each of the

components of project appraisal is essential. For the following reasons project appraisal is very

much important-

It is a capital investment decision

It has long term effects

Decision once taken is irreversible

Expenditures are high

1.03 Definition of Project management: -

Project management is the discipline of planning, organizing, and managing resources to bring

about the successful completion of specific project goals and objectives.

The primary challenge of project management is to achieve all of the project goals and objectives

while honoring the preconceived project constraints. Typical constraints are scope, time,

and budget. The secondary-and more ambitious-challenge is to optimize the allocation and

integration of inputs necessary to meet pre-defined objectives.

Project management is a carefully planned and organized effort to accomplish a specific (and

usually) one-time objective, for example, construct a building or implement a major new

computer system. Project management includes developing a project plan, which includes

defining and confirming the project goals and objectives, identifying tasks and how goals will be

achieved, quantifying the resources needed, and determining budgets and timelines for

completion. It also includes managing the implementation of the project plan, along with

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operating regular 'controls' to ensure that there is accurate and objective information on

'performance' relative to the plan, and the mechanisms to implement recovery actions where

necessary.

1.04 Role of Project Appraisal: -

Project appraisal helps a partnership’s management to: -

Be consistent and objective in choosing projects

Make sure its program benefits all sections of the community, including those from

ethnic groups who have been left out in the past

Provide documentation to meet financial and audit requirements and to explain decisions

to local people.

Appraisal justifies spending money on a project

Appraisal asks fundamental questions about whether funding is required and whether a project

offers good value for money. It can give confidence that public money is being put to good use,

and help identify other funding to support a project. Getting it right may help a partnership make

its resources go further in meeting local need.

Appraisal is an important decision making tool

Appraisal involves the comprehensive analysis of a wide range of data, judgments and

assumptions, all of which need adequate evidence. This helps ensure that projects selected for

funding:

Will help a partnership achieve its objectives for its area

Are deliverable

Involve local people and take proper account of the needs of people from ethnic

minorities and other minority groups

Are sustainable

Have sensible ways of managing risk.

Appraisal lays the foundations for delivery

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Appraisal helps ensure that projects will be properly managed, by ensuring appropriate financial

and monitoring systems are in place, that there are contingency plans to deal with risks and

setting milestones against which progress can be judged.

1.05 Methodology of Project Appraisal: -

Appraisal involves a careful checking of the basic data, assumptions and methodology used in

project preparation, an in-depth review of the work plan, cost estimates and proposed financing,

an assessment of the projects organizational and management aspects, and finally the viability of

project.

It is mandatory for the Project Authorities to undertake project appraisal or at least give details of

financial, economic and social benefits and suitably. These projects are examined in the Planning

and Development Division from the technical, institutional/organizational/managerial, financial

and economic point of view depending on nature of the project. On the basis of such an

assessment, a judgment is reached as to whether the project is technically sound, financially

justified and viable from the point of view of the economy as a whole.

In the Planning and Development Division, there is a division of labor in the appraisal of projects

prepared by the concerned Executing Agencies. The concerned Technical Section in consultation

with other technical sections i.e.; Physical Planning & Housing, Manpower, Governance and

Environment sections undertake the technical appraisal, wherever necessary. This covers

engineering, commercial, organizational and managerial aspects, while the Economic Appraisal

Section carries out the pre-sanction appraisal of the development projects from the financial and

economic points of view. Economic appraisal of a project is concerned with the desirability of

carrying out the project from the standpoint of its contribution to the development of the national

economy. Whereas financial analysis deals with only costs and returns to project participants,

economic analysis deals with costs and returns to society as a whole. The rationale behind the

project appraisal is to provide the decision-makers with financial and economic yardsticks for the

selection/rejection of projects from among competing alternative proposals for investment.

The techniques of project appraisal can be divided under two heads:-

1. Non-discounted and

2. Discounted.

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Non-discounted techniques include

A. Payback period, and

B. Profit & Loss account.

Discounted techniques take into account the time value of money and include

A. Net Present Value (NPV),

B. Benefit Cost Ratio (BCR),

C. Internal Rate of Return (IRR)

D. Sensitivity Analysis (treatment of uncertainty) and

E. Domestic Resource Cost (Modified Bruno Ratio).

Many investment projects are addition to existing facilities/activities and thus benefits and costs

relevant to the new project are those that are incremental to what would have occurred if the new

project had not been added. During the operating life of a project, it is very important to measure

all costs and benefits as the difference between what these variables would be if no project

(without project) were undertaken and what they will be should the project be implemented (with

project). It is very common error to assume that all costs and benefits are incremental to the new

project when, in fact, they are not. Hence, considerable care must be taken in defining a “ base

case” which realistically sets out the profile of costs and benefits expected if no additional

investment is undertaken

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1.06 Necessary to Conduct Project Management Appraisal (PMA): -

A project management appraisal should be viewed as a useful, constructive and necessary

diagnostic tool available for augmenting the capability of the sponsoring organization's project

management team.

It can be used to provide information ranging from an informal enquiry to an extensive analysis

of the effectiveness of every aspect of the project management process. In the latter context it

can be conducted to ferret out common failings of many project management arrangements.

Some of these common failings include:

Management on the project may be unable to see the forest for the trees.

Decisions may be being unduly biased by contractual commitments already in existence,

rather than being made in the best interests of the final project results

Decisions may be similarly biased unduly by corporate policy

Short term political expediency may be overwhelming (Crisis management)

Key individuals on the project may be under the influence of some form of illegal

pressure

Management on the project may simply be naive, inexperienced, lack sufficient training

in project management skills, or otherwise ill prepared for the difficult tasks at hand

1.07 Use of Project Management Appraisal (PMA): -

Identify the strengths of current practices in a project management organization, or on an

existing project

Establish how various groups within the organization perceive the organization's

effectiveness in managing projects

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Examine the effectiveness of project communication and documentation, and clarify the

relationships between project scope, quality, time and cost

Identify barriers to better performance, or critical skills needed by project managers or

their supporting teams to increase their effectiveness

Identify sooner specific aspects which require improvement and hence speed the

achievement of results

Provide for an exchange of ideas, information, problems, solutions and strategies with

project team members, and thus develop a plan of action for carrying out improvements

Help to create a supportive environment focusing on project success, and the professional

growth of project team members

Thus, by conducting a PMA in a timely and favorable manner, potential difficulties can be

identified and brought out into the open for appropriate corrective action. Better still,

potential problems may be circumvented altogether, if the concept and timing of a PMA is

built into the project plan from the outset.

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1.08 Structural Approach and Typical Issues of Project Management Appraisal: -

Modern project management is generally considered to be encompassed by the integration of

eight functional areas. These include the four core or constraint functions of scope, quality, time

and cost, and four integrative and interactive functions of risk, human resources,

contract/procurement and information/communications management.

Each function tends to require a separate skill set, so that on a larger project, or in the larger

project management organization, responsibilities naturally tend to be grouped accordingly for

their proper conduct. Consequently, the investigative format of a project management appraisal

also more readily follows these functional descriptions.

The sequence in which these functions are listed above is significant because of their dynamic

relationship. The sequence parallels both the progressive flow of information as well as the flow

of work through the project management process. The information flow represents what is

managed, while the process flow reflects how it is managed. Since projects should be planned

moving progressively down the list, projects in the planning phases might well have the first four

functional areas examined first. For projects in the implementation phases, on the other hand, the

latter four functions might be given priority, and in the reverse order.

The content of the questions to be raised will also be highly dependent upon the particular phase

of the project in which the PMA is being conducted, and therefore should be structured

accordingly.

For example, the content of technological questions under a Project Management Appraisal

(PMA) conducted early in the implementation phase of a construction project would focus on the

availability and adequacy of information to carry out detailed design efficiently, or to commence

construction activities productively. Similarly, technological issues to be raised just prior to

commissioning would likely cover quality assurance records, validation of equipment and system

check-off, dry-runs and so on.

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The following discussion is intended to give an indication of the issues that might be looked at,

both in terms of the function under consideration, and the phase that the particular project has

reached.

Project Management Core Functions: -

As noted earlier, the first four functions: scope, quality, time and cost, are generally considered

to be the basic functions of project management. From the sponsor's point of view, these four

functions embody the project's basic management objectives, while for those providing services

to the project, i.e. designer construction, they constitute constraints. They therefore represent a

set of core parameters which are used to control the project.

Scope and Quality

If specific technological aspects of the project such as engineering, manufacturing or

constructability, are to be reviewed, such an investigation must clearly be conducted by those

thoroughly conversant with the project's technology. In addition, most projects today have some

degree of recognizable environmental, social or safety impacts. If these have not already been

analyzed and arrangements made for monitoring and mitigation, then persons with corresponding

knowledge and experience must undertake such review.

Even so, certain general management questions can be formulated with regard to the technical

scope and quality of the project.

In the case of quality: has the project's executive given priority to building the required quality

standards into the project planning and execution process right from the outset? Is this standard

consistent with production, operation, maintenance, safety and social acceptability expectations,

so that the facility will perform economically during its life time? Indeed will the facility last for

its required life time? Have the members of the project team been selected on the basis of their

qualifications for their respective roles, and likewise will similar considerations be given to those

providing detailed design and/or construction services during project execution?

Are meeting the end-user's requirements seen as being at least as important as, if not more

important than, meeting cost and schedule targets, and will a post project review include a

critique of the project's quality attainment?

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Schedule and Cost

Similarly, specific questions can be posed regarding schedule and cost. For example: Do project

plan include a milestone schedule indicating major pieces of work to be accomplished, and who

will be responsible for each?

Are project schedule time estimates and logic developed using input from members of the project

team, in order to build in commitment? Are they prepared using a structured breakdown

consistent with the work breakdown structure, such that cost and schedule can be correlated?

Are project schedules allowing sufficient time to get the work done right the first time, and

without causing overruns? And when changes are made during project implementation, are

corresponding changes made to the schedule to accommodate these changes?

The cost situation should be similarly examined, and the direct impacts on the cost situation of

any changes in the schedule also recognized. Thus typical cost questions should include: Is the

estimate realistic, including both direct and indirect costs of all required resources, or have any

changes taken place since, in terms of the project's parameters or the external environment,

which might require its reevaluation?

Project Management Integrative Functions

As indicated earlier, the issues under scope, quality, time and cost only really question the status

of the project's relatively static objectives. If the answers are found to be unsatisfactory, then it

will be necessary to examine the means to influence them within the remaining time left for the

project to run.

The next set of questions therefore investigate the supporting integrative and more dynamic

functions of project management, which consist of the management of risk, human resources,

contract/procurement and information/communication management.

Each of these functions influences the success of the project through the performance of people.

They involve as much art as science, and, suitably managed can affect the course of the project

and consequent outcome. Unlike scope, quality, time and cost, which deal with project outputs

and deliverables, these four functions impact the activities, i.e. the work involved in achieving

those outputs and deliverables. Often, these areas of review provide a much more illuminating

area of investigation.

Project Risk

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Questions under this heading should include: Has the project planning included a program or

study of risk identification and analysis with recommendations for mitigate actions?

Does the project's management effectively anticipate potential obstacles at each stage in a way

that avoids future hindrance?

Have adequate contingency planning and allowances been incorporated into the project

parameters to provide for major risk factors which may adversely affect project success?

Human Resources

Questions which address the issues of people and their motivations are frequently the most

significant, since essentially projects and the degree of their success are achieved through the

project's human resource element. Therefore, this area of the PMA may be quite intensive.

For example: Does the project team enjoy the active and visible support of the project's sponsor,

and is the focus consistently on the project's stated objectives?

Has the sponsor assigned the leadership of the project the necessary level of authority for it to

execute its responsibilities, and is it held accountable accordingly? Is this process visible and

effective?

Are people resources available when needed? And do they have the required levels of technical

skills, or if not, are they encouraged or provided with suitable training? Are they rewarded for

exceptional effort?

Is conflict handled and used constructively, in order to sustain a highly motivated team? Will the

final project evaluation include a critique of the project team's collective performance?

Contract/Procurement

The manner in which the project is to be facilitated or procured is an issue which should be dealt

with very early in the project planning phase, since it will have a significant effect on the way in

which the project parameters are expressed. For instance, construction which is to be accelerated,

or "fast-tracked", should require a shorter schedule but will carry significantly higher risks.

Conversely, the more time taken to improve the definition of the project's scope, the lower

should be the project risks. In each case, the form of contracting must be tailored to suit.

Information/Communications

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Information is best viewed as the data upon which the project is configured and upon which

decisions are based, while communication is the oil and grease which keeps the whole project

progressing smoothly. Questions in this area might therefore include: Does the project sponsor

keep the project manager informed on matters affecting the project, and in turn does the project

manager keep the members of his team similarly informed? Are project team members free to

voice their opinions and concerns for the project? In other words, is information flowing

satisfactorily through the organizational structure, and in doing so, is its quality and integrity

maintained?

Similarly, are the necessary mechanisms in place to inform those who are outside of the project

organization, and inform them according to their respective interests? For example, an external

stakeholders' public relations program could be very necessary where the construction and

completion of the project is politically sensitive, since adverse reaction could have a damaging

affect on the ultimate success of the project.

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Chapter – 2

Analysis of the Study

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2.01 Critical Examination of Project Risk Analysis: -

Here we discuss some issues which could be treated in a critical evaluation of the project subject

& how such an evaluation would be carried out. Difficulties of some areas would affect the

ability of practitioners to carry out a project cost or schedule risk analysis. So a critical study of

the methods would need to address these issues.

1. Level of Aggregation of Tasks or Costs

A first obvious question is what level of aggregation should be used for the components of the

schedule or cost. One could imagine using the highest level available, that of the whole project.

This is obviously not credible: when asked how long it would take to complete a complex

project or how much it would cost, risk analysts would be under severe pressure to produce a

number that fits the client’s schedule or budget. If the estimate did not fit, the analyst would be

hard pressed to justify the estimate or to answer the next question, which would ask what

adjustments could be made to modify the project to fit the constraints. Alternatively, too fine-

grained a disaggregation of tasks or costs would be enormously burdensome to deal with as

experts attempted to determine probability distributions for very small tasks or cost distributions

for tiny pieces of hardware.

Cost estimators recommend going down to various levels, depending on the stage of the project,

but in schedule risk analysis there is no similar structure that defines level of detail:

Deciding what tasks go into the schedule network is a matter of experience

Added to these issues of aggregation is the simple observation that in a complex project, which is

technologically immature, it may be impossible to specify individual tasks at the beginning, let

alone their interrelationships or all of the cost elements.

2. Elicitation of Probabilities

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Assuming that the task network have been assembled at the appropriate level of aggregation, the

next task is to determine the probability distributions of the times to completion of each task and

the probability distribution of each cost element. One source of such information is from

previous experience. However, such data is not available in the open literature, and, if

proprietary, may be limited by the type of projects done by a particular company or consulting

firm. And for complex projects that are at the cutting edge of technology there simply may not be

much data that is directly relevant. In this case the pedagogical literature in general recommends

that expert opinion be consulted to elicit the required probability distributions for task durations

and task and component costs.

For example, while the risk analysis literature focuses on matching a few values to a standard

distribution, the statistical literature includes methods for cross-checking elicited distributions by

feeding back the implications of the current distribution to the subject, and allowing the subject

to then modify the distribution based on this information to better reflect their beliefs. However,

the project management literature has few or no references to this work.

3. Correlations

As several authors in the literature have noted, durations for some related tasks and costs for

some related hardware might be correlated because they are affected by common external events

or by some common characteristics. Virtually all of the advanced texts on project risk analysis

recommend that correlations be taken into account when specifying probability distributions for

quantities that may be correlated. Given that correlations between task durations and cost

elements should be assessed the difficulty of doing so is an obstacle to applying quantitative risk

methods.

4. Feedback Effects

Although much of the empirical research on cost and schedule changes have documented

overruns in both categories, it has also been noted in the risk analysis literature that managers

have adaptive strategies available to them in the course of a project. For example, they can

reallocate resources such as manpower to shorten timelines for some tasks if the project begins to

fall behind. This kind of adjustment is yet another reason for distrusting initial risk analyses as

having predictive validity: if schedules begin to slip or costs rise there are feedback mechanisms

that can act to bring the schedule and/or cost back to compliance. The behavior with intelligent

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agents which will formulate and implement adaptive strategies during simulated project histories

to get a better cost and schedule projection.

2.02 Feasibility Analysis of the Projects:-

Management Appraisal

Management appraisal is related to the technical and managerial competence, integrity,

knowledge of the project, managerial competence of the promoters etc. 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.

Technical Feasibility

Technical feasibility analysis is the systematic gathering and analysis of the data

pertaining to the technical inputs required and formation of conclusion there from. The

availability of the raw materials, power, sanitary and sewerage services, transportation

facility, skilled man power, engineering facilities, maintenance, local people etc 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 to get approval.

Financial feasibility

One of the very important factors that a project team should meticulously prepare is the

financial viability of the entire project. This involves the preparation of cost estimates,

means of financing, financial institutions, financial projections, break-even point, ratio

analysis etc. The cost of project includes the land and sight development, building, plant

and machinery, technical know-how fees, pre-operative expenses, contingency expenses

etc. The means of finance includes the share capital, term loan, special capital assistance,

investment subsidy, margin money loan etc. The financial projections include the

profitability estimates, cash flow and projected balance sheet. The ratio analysis will be

made on debt equity ratio and current ratio.

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Commercial Appraisal

In the commercial appraisal many factors are coming. The scope of the project in market

or the beneficiaries, customer friendly process and preferences, future demand of the

supply, effectiveness of the selling arrangement, latest information availability an all

areas, government control measures, etc. The appraisal involves the assessment of the

current market scenario, which enables the project to get adequate demand. Estimation,

distribution and advertisement scenario also to be here considered into.

Economic Appraisal

How far the project contributes to the development of the sector, industrial development,

social development, maximizing the growth of employment, etc. are kept in view while

evaluating the economic feasibility of the project.

Environmental Analysis

Environmental appraisal concerns with the impact of environment on the project. The

factors include the water, air, land, sound, geographical location etc.

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2.03 Project Appraisal Using Discounted Cash Flow: -

DCF analysis and estimating the NPV of cash flows incorporate fundamental principles of

finance that support disciplined financial management in organizations. Professional accountants

in business have a role in promoting and explaining the importance of these principles in their

organizations, particularly where the connections between the application of financial principles

and related financial theory are not easily understood or accepted. A key challenge in using DCF

arises from the confusion that often occurs in understanding its theoretical basis and practical

application. The key principles underlying widely accepted good practice are: -

When appraising multi-period investments, where expected benefits and costs and related

cash inflows and outflows arise over time, the time value of money should be taken into

account.

The time value of money should be represented by the opportunity cost of capital.

The discount rate used to calculate the NPV in the DCF analysis should properly reflect the

systematic risk of cash flows attributable to the project being appraised, and not the

systematic risk of the organization undertaking the project.

A good decision relies on an understanding of the business and an appropriate DCF

methodology. DCF analysis should be considered and interpreted in relation to an

organization’s strategy, and its economic and competitive position.

Cash flows should be estimated incrementally, so that a DCF analysis should only consider

expected cash flows that could change if the proposed investment is implemented. The value

of an investment depends on all the additional and relevant cash inflows and outflows that

follow from accepting an investment.

At any decision-making point, past events and expenditures should be considered irreversible

outflows (and not incremental costs) that should be ignored, even if they had been included

in an earlier cash flow analysis.

All assumptions used in undertaking DCF analysis, and in evaluating proposed investment

projects, should be supported by reasoned judgment, particularly where factors are difficult

to predict and estimate. Using techniques such as sensitivity analysis to identify key variables

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and risks helps to reflect worst, most likely, and best case scenarios, and therefore can

support a reasoned judgment.

A post-completion review or audit of an investment decision should include an assessment of

the decision-making process, and the results, benefits, and outcomes of the decision.

2.04 Problems Threaten to Project Success: -

If “people problems” occur once a project is underway, there are seven specific intervention

tools that have been used to get a project back on track. These are:

1. Provide coaching and mentoring to key project personnel

2. Make a change in project personnel

3. Use a strong outside facilitator to mediate conflicts

4. Provide a personality-based team building experience

5. Provide activity-based teambuilding events

6. Provide skills-based teambuilding sessions

7. Provide problem solving-based teambuilding retreats

The type of intervention tool used depends on the nature and severity of the people problems that

threaten project success. These seven tools are explained below.

1. Provide Personal Coaching

This is the tool of choice when the behavior or attitudes of a particular project member is

causing problems that threaten project success. The point of this intervention is to help

the project member become aware of how his/her actions are a hindrance to project

completion. The hope is that coaching will help change the behavior or attitudes of the

project member who is holding up project success. The person doing the coaching can be

the project leader, the project sponsor, the project member’s supervisor, or even a

respected colleague. There are different possible coaching techniques and tools that can

be used in this situation.

2. Make a Change in Project Personnel

This type of action is used only on rare occasions. This tool is used when the actions (or

inactions),poor attitudes, lack of ability, or lack of performance of a particular project

member is causing problems that threaten project success, and several attempts to change

the behavior have not succeeded. The purpose of this intervention is to remove someone

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from a project role so that we can quickly get over the problem and move forward on the

project. There are four factors that must be considered before taking this type of drastic

action.

3. Bring in an Outside Facilitator

When the project is in jeopardy due to politics, lack of teamwork, or other “people”

problems, and when several attempts to deal with these issues have failed, it is often

helpful to bring in an experienced third party, with no connections to the organization, to

serve as an arbitrator and facilitator to help mediate conflicts so that the project may

move forward. This is a form of a“project rescue;” however, the emphasis is solely

4. Carry Out Personality-Based Team building

This tool is used when a project team or sub-team is not performing well due to

personality conflicts on the team. The purpose of this intervention is to help team

members better understand each other, and thus learn how to work more effectively

together. Many “personality conflicts” on teams result from differences in how team

members perceive, make decisions and interpret and react to the same set of stimuli.

Once these differences are understood, the team learns that many “personality conflicts”

are due to misunderstandings and“projections” of motives that are not necessarily true.

They then can agree on codes of conduct for communicating and working together more

effectively.

5. Carry Out Activity-Based Teambuilding

This tool can be applied when a project team is not performing well together due to any

number of different symptoms, such as lack of trust, poor communication, and lack of

teamwork. The purpose of activity-based teambuilding is to help team members learn

how to work together in a series of challenging outdoor group tasks and exercises, and

then to apply the lessons learned to working together on the project. Activity-based

teambuilding can be carried out in a variety of settings, such as “high” ropes courses,

“low” ropes courses or various outdoor adventures. All these exercises require groups to

learn to work together to achieve success.

6. Carry Out Skills-Based Teambuilding

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This tool is the approach of choice when a project team is not performing well together

due to a lack of understanding of how teams operate and/or a lack of teamwork skills.

The purpose of this intervention is to teach team members specific teamwork skills and

ground rules for operating more effectively together. In skills-based teambuilding, team

members participate in workshop sessions that require them to learn and practice specific

teamwork skills (e.g., dealing with conflict, reaching group consensus, learning how to

give criticism, or running effective team meetings).

7. Carry Out Problem Solving-Based Teambuilding

Problem-solving teambuilding retreats are the most often used interventions on projects.

The purpose of this tool is to remove the team from its everyday setting and get the team

to agree on the barriers they are having, analyze why, and then take ownership in the

problems by agreeing on actions they will take to get back on track. In our experience

this type of intervention has been quite successful in getting project teams focused, back

on track, and more productive. Several steps must be followed when carrying out this

type of intervention.

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2.05 Criteria for the Evaluation of Project Success: -

The evaluation of a project’s “Developmental Effectiveness” and its classification during the final

evaluation into one of the various levels of success described in more detail below concentrate

on the following fundamental questions:

Are the project objectives reached to a sufficient degree (aspect of project effectiveness)?

Does the project generate sufficient significant developmental effects (project relevance

and significance measured by the achievement of the overall development-policy

objective defined beforehand and its effects in political, institutional, socio-economic and

socio-cultural as well as ecological terms)?

Are the funds/expenses that were and are being employed/incurred to reach the objectives

appropriate and how can the projects microeconomic and macroeconomic impact be

measured?

To the extent that undesired (side) effects occur, are these tolerable?

We do not treat sustainability, a key aspect to consider for project evaluation, as a separate

category of evaluation but instead as a cross-cutting element of all four fundamental questions on

project success. A project is sustainable if the project-executing agency and/or the target group

are able to continue to use the project facilities that have been built for a period of time that is,

overall, adequate in economic terms or to carry on with the project activities on their own and

generate positive results after the financial, organizational and/or technical support has come to

an end.

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2.06 Project Appraisal under Inflationary Condition: -

The timing of project appraisal is significant from the point of view of appraisers. A project

under normal conditions is viewed from different aspects viz. technical feasibility, commercial

and financial viability and economic and social considerations and managerial aspects. However,

normal conditions seldom exist and a project is subjected to inflationary pressures from time to

time because the project has to be implemented over a period of time ranging from 6 months to

more than one or two years. During such economy is generated. Besides this, the size and

magnitude of the project also varies form organization to organization. In such a situation

inflation is bound to affect the project appraisal and implementation process.

In a developing country like India, inflation has become a part of life. Therefore, under such

circumstances, it is always prudent to make adequate provision for a probable escalation in the

project cost as a cushion to inflationary jerks.

It is a well known fact that during inflationary conditions, the project cost is bound to increase on

all heads viz. labor, raw material, fixed assets such as equipment’s, plant and machinery,

building material, remuneration of technicians and managerial personnel etc.

Beside this inflationary conditions erode purchasing power of consumers and affect the demand

pattern. Thus, not only cost of production is but also the projected statement of profitability and

cash flows are affected by the change in demand pattern. The inflationary pressure does not stop

here. Financial institutions and banks may revise their lending rates resulting in escalation in

financing cost during inflationary conditions. Under such circumstances, project appraisal has

to be done generally keeping in view the following guidelines which are usually followed by

Government agencies, banks and financial institutions.

It is always advisable to make provisions for cost escalation on all heads of cost, keeping in

view the rate of inflation during likely period of delay in project implementations.

The various sources of finance should be carefully scrutinized with reference to probable

revision in the rate of interest by the lenders and the revision which could be effected in the

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interest bearing securities to be issued. All three factors will push pu the cost of funds for the

organization.

Adjustments should be made in profitability and cash flow projections to take care of the

inflationary pressures affecting future projections.

It is also advisable to examine the financial viability of the project at the revised rates and

ashes the same with reference to economic justification of the project. The appropriate

measure for this aspect is the economic rate of return for the project which will equate the

present value of capital expenditures to net cash flows over the life of the projects. The rate

of return should be acceptable which also accommodates the rate of inflation per annum.

In an inflationary situation, projects having early payback periods should be preferred

because projects with long payback period are more risky.

The following discussion focuses on investment appraisal techniques under inflationary

conditions.

As already stated inflation causes erosion in the purchasing power of money. This also causes

problems for the financial decision makers. This is particularly true while assessing investment

decision which can easily rely on predicted cash flows over several years into the future. Over

just a few years a fairly moderate rate of inflation can have far reaching implications on the

purchasing power of money, thus distorting investment decision. Specially the inflation-related

problems which the investment decision

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2.07 Common Causes of Project Failure in Bangladesh: -

In Bangladesh, Why the certain percentage of project cannot success that causes are point out below: -

Lack of clear links between the project and the organization’s key strategic

priorities, including agreed measures of success

Lack of clear senior management and leadership

Lack of effective engagement with stakeholders

Lack of skills and proven approach to project management and risk management

Too little attention to breaking development and implementation into manageable

steps

Too little attention to breaking development and implementation into manageable

steps

Lack of understanding of, and contact with the supply industry at senior levels in

the organization

Lack of effective project term integration between clients, the supplier team and

the supply chain

1. Lack of clear links between the project and the organization’s key strategic priorities,

including agreed measures of success.

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Do we know now the priority of this project compares and aligns with our other delivery and

operational activities? Have we defined the Critical Success Factors (CSFs) for the

project?

Have the CSFs been agreed with suppliers and key stakeholders?

Do we have a clear project plan that covers the full period of the planned delivery and all

business change required, and indicates the means of benefits realization?

Is the project founded upon realistic timescales, taking account of statutory lead times, and

snowing critical dependencies such that any delays can be handled?

Are the lessons learnt from relevant projects being applied?

Has an analysis been undertaken of the effects of any slippage in time, cost, scope or quality?

In the event of a problem/conflict at least one must be sacrificed.

2. Lack of clear senior management and leadership.

Does the project management team nave a clear view of the interdependencies between

projects, the benefits, and the criteria against which success will be judged?

If the project traverses organizational boundaries, are there clear governance arrangements to

ensure sustainable alignment with the business objectives of all organizations involved?

Are all proposed commitments and announcements first checked for delivery implications?

Are decisions taken early, decisively, and adhered to, in order to facilitate successful

delivery?

Does the project have the necessary approval to proceed from its nominated minister either

directly or through delegated authority to a designated Senior Responsible Owner (SRO)?

Does the SRO have the ability, responsibility and authority to ensure that the business change

and business benefits are delivered?

Does the SRO have a suitable track record of delivery? Where necessary, is this being

optimized through training?

3. Lack of effective engagement with stakeholders.

Have we identified the right stakeholders?

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Have we as intelligent customers, identified the rationale for doing so (e.g. the why, the what,

who, the where, the when and the how)?

Have we secured a common understanding and agreement of stakeholder requirements?

Does the business case take account of the views of all stakeholders including users?

Do we understand how we will manage stakeholders (e.g. ensure buy—in, overcome

resistance to change, allocate risk to the party best able to manage it)?

Has sufficient account been taken of the subsisting organizational culture?

Whilst ensuring that there is clear accountability, how can we resolve any conflicting

priorities?

4. Lack of skills and proven approach to project management and risk management.

Is there a skilled and experienced project team with clearly defined roles and responsibilities?

If not, is there access to expertise, which can benefit those fulfilling the requisite roles?

Are the major risks identified, weighted and treated by the SRO, the Director, and Project

Manager and/or project team?

Has sufficient resourcing, financial and otherwise, been allocated to the project, including an

allowance for risk?

Do we have adequate approaches for estimating, monitoring and controlling the total

expenditure on projects?

Do we have effective systems for measuring and tracking the realization of benefits in the

business case?

Are the governance arrangements robust enough to ensure that "bad news" is not filtered out

of progress reports to senior managers?

If external consultants are used, are they accountable and committed to help ensure

successful and timely delivery?

5. Too little attention to breaking development and implementation into manageable

steps.

Has the approach been tested to ensure it is not 'big-bang’ (e.g. In IT-enable projects)?

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Has sufficient time been built-in to allow for planning applications in property &

Construction projects for example?

Have we done our best to keep delivery timescales short so that change during development

is avoided?

Have enough review points been built-in so that the project can be stopped, if changing

circumstances mean that the business benefits are no longer achievable or no longer represent

value for money?

Is there a business continuity plan in the event of the project delivering late or failing to

deliver at all?

6. Evaluation of proposals driven by initial price rather than long term value for money

(especially securing delivery of business benefits.)

Is the evaluation based on whole-life value for money, taking account of capital, maintenance

and service costs?

Do we have a proposed evaluation approach that allows us to balance financial factors

against quality and security of delivery?

Does the evaluation approach take account of business criticality and affordability?

Is the evaluation approach business driven?

7. Lack of understanding of, and contact with the supply industry at senior levels in the

organization.

Have we tested that the supply industry understands our approach and agrees that it is

achievable?

Have we asked suppliers to state any assumptions they are making against their proposals?

Have we checked that the project will attract sufficient competitive interest?

Are senior management sufficiently engaged with the industry to be able to assess supply-

side risks?

Do we have a clear strategy for engaging with the industry or are we making sourcing

decisions on a piecemeal basis?

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Are the processes in place to ensure that all parties have a clear understanding of their roles

and responsibilities, and a shared understanding of desired outcomes, key terms and

deadlines?

Do we understand the dynamics of industry to determine whether our acquisition

requirements can be met, given potentially competing pressures in other sectors of the

economy?

8. Lack of effective project team integration between clients, the supplier team and the

supply chain.

Has a market evaluation been undertaken to test market responsiveness to the requirements

being sought?

Are the procurement routes that allow integration of the project team being used?

Is there early supplier involvement to help determine and validate what outputs and outcomes

are sought for the project?

Has a shared risk register been established?

Have arrangements tor sharing efficiency gains throughout the supply team been established?

Finally if the answers to the above questions are unsatisfactory, projects should not be allowed to

proceed until the appropriate assurances are obtained.

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Chapter – 3

Findings of the Study

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3.00 Findings of the Report: -

Project appraisal & management both analyses based in term of cost and time but in

Bangladesh most projects can’t maintain cost & time matters properly in the particular

project.

In Bangladesh some appraisal are adequate for such project but unable to analysis in-

depth because of dependable data.

Project appraisal need estimate some significant forecast about cost function of the

project but in most case accurate estimates not possible for necessary data that’s why

no true picture could be found.

If the necessary data are available, then the findings of the data are not properly

applied

In most case, the people who handle the project have no idea and not adequate for the

project, ultimately project is misled.

In some project where the project leader is selected accurately but the project team

member not coordinate properly.

Finally all the projects that have the following problem may abandon the project &

some case they need huge fund to solve the project problem or reinvestment in the

project.

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a critical analysis on the project appraisal & management of project in bangladesh

Documents

project management course

project management books

bangladesh assignment

different project personnel

bangladesh objective

thriving critical analysis

bangladesh dear sir

submission of assignment