project formulation chapter 2

8/6/2019 Project Formulation Chapter 2

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Project identification formulation

and implementation



� Government the regulator- projects generallyselected within the overall framework laid by thegovernment ±

Fiscal policy ± Monetary policy

± Other regulatory measures� Licensing

� Control over capital issues

� Control on foreign exchange� Export promotion and import controls

� MRTP

� Pricing and distribution controls



Project Identification

� Performance of existing industries

� Availability of raw material

� Availability of skilled labour� Import/export statistics

� Price trend

� Data from various sources



� Research laboratories

� Consumption abroad

� Identifying unfulfilled psychological needs� Plan outlays and government guidelines

� Analysis of economic and social trends

� Possibility of reviving sick units



Project preparation/formulation

� Pre-feasibility study

� Functional or support studies

� Feasibility studies� Detailed project analysis



Prefeasibility Studies

� Plant location

� Plant capacity

�

Man-power requirement, availability and cost� Investment required, return, financing, cost

and commercial profitability

� Availability, cost and sources of raw material

� Technologies availability

� Market potential



Support Studies

� Market study(fierce competition)

� Raw material input study(wide variability)

� Project location study� Plant size study

� Equipment selection study



Feasibility Study

� Technical feasibility

± Is it latest

±

Is there a likelihood of it becoming obsolete in thenear future

± Proven technology

± Indigenously available

± If imported, is it permitted



� Economic viability; return to economy

� Commercial viability

�Financial viability: sources of finance andreturns from the project



Detailed Project Report(DPR)

� General information about the project

� Background and work experience of the project promoters

� Details of already owned business

� Details of proposed project

± Plant capacity ± Manufacturing process

± Technical know-how

± Management team

± Details of land, and other fixed assets

± Details of infrastructural facilities

± Raw material requirement/availability

± Effluents of the project

± Labour requirements/availability



� Schedule of implementation

� Project cost

� Means of financing project

� Working capital requirements� Marketing and selling arrangements

� Profitability and cash flow estimates

� Mode of repayment of term loan

� Government approvals, local bodies and otherstatutory permissions

� Details of collateral security that can be offered



Tax incentives and project investment

decisions

� Fiscal policy

� Monetary policy

�Commercial policy



Fiscal policy

� Depreciation

� Tax holiday

�Investment allowance

� Amortization of preliminary expenses



Monetary Policy

� Interest rate concession

� Repayment moratorium

�Participation in risk capital

� Reduced safety margin

� Refinancing facilities



Establishing the

Project/Implementation

� Initiating

� Planning

�Organizing

� Executing

� Directing

� Controlling� Closing



Initiating

� Identification of project

� Generation and development of project ideas

�Formulating project proposal

� Appraisal of the project proposal

� Getting organizations commitment

� Authorization of the project



Organizing

Organizing is a process of defining and analyzingactivities, grouping activities into departmentsand establishing authority and responsibility

� Arranging for financial resources� Building up a project organization

� Team formation

�

Tying up of material resources, service providers,contractors

� Dissemination of information



Executing

� Process of carrying out the project activities as

per plans.

�

Changes, modifications required to beincorporated

� Execution should be dynamic and flexible

�

Overall objective should be achieved



Directing

� Guiding, issuing orders, instructions,

directives, commands

�

Helps subordinates know what they aresupposed to do

� Motivate them to move towards the

organizational objectives



Controlling

� Comparing the actual performance with the

plans

�

Check the progress for any deviations� Analyze the causes for deviations

� Take suitable remedial measures

�

Control involves time, cost and resourcequality



Closing

� When the objectives are fulfilled

� Formal process of closing

�Closure of contracts, settlement of dues andoutstanding issues

� Passing the information to all stakeholders,

employees, executives and all others involvedin the project

� Reallocating the resources to other project



Process of Project Management

1 Initiating

2 Planning

3 Organizing

4 Executing

5 Directing

6 Controlling



Organizing human resource

� Special skills and wisdom

� Project manager

�Personnel of project office

� Functional managers



Project manager

� Key person

� Selection of the right person

± Personality traits

± Internal candidate always better than external one

± Leadership, commitment, honesty, sincerity etc.

± Negotiation skills

±Responsibility with authority

± On-the-job training in finance, production,purchase, planning dept is a must



Staff requirements and plan

� How many full time people, skills required

� When will the people be required

� Sourcing-internal or external

� How long will they be attached

� Manpower planning

� Recruitment

� Selection

� Training



Project office

� Dedicated to the project exclusively

� Gather data and disseminate

� Collect project related information

� Monitoring progress, controlling time, cost,performance, quality etc.

� Follow contract guidelines

� Documentation

� Obtain authorization

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