Techniques of project formulation.
- Techniques
of project formulation:
The systematic way or technique of converting the concept of project into its
probable planning is called project formulation technique. At first the
necessity of project and its concept is developed . The project is formulated
on the basis of generated idea. After the necessity of the project is felt
different activities are done to materialize it.
Stages of Project Formulation are:
Stages of Project Formulation are:
1. Feasibility Analysis:
It is the First stage in project formulation. Examination is done to see whether to go in for a detailed investment proposal or not, Screening of internal and external constraints are also made. Various aspects of feasibility analysis are
a) Technical analysis: it analysis the feasibility of meeting technical specifications of the project and technical resources required for project implementation.
b) financial analysis: It analysis the capital requirement of project, project's capacity to meet financial obligation and cost aspect of the project
c) Economic analysis: Benefit/cost analysis is done to analyse the net contribution of the project to the economy and the society.
d) Marketing analysis: It analyses project capacity, market demand, sales forecasts, revenue generation and competition.
e) Management analysis: it analyses the adequacy of management system to direct and control the project.
f) Environment analysis: it analyses the impact of project on the environment.
2. Project Design and Network Analysis:
It is the heart of the project entity. It defines the sequence of events of the project. Time is allocated for each activity. It is presented in a form of a network drawing. It helps to identify project inputs, finance needed and cost-benefit profile of the project.
It is the First stage in project formulation. Examination is done to see whether to go in for a detailed investment proposal or not, Screening of internal and external constraints are also made. Various aspects of feasibility analysis are
a) Technical analysis: it analysis the feasibility of meeting technical specifications of the project and technical resources required for project implementation.
b) financial analysis: It analysis the capital requirement of project, project's capacity to meet financial obligation and cost aspect of the project
c) Economic analysis: Benefit/cost analysis is done to analyse the net contribution of the project to the economy and the society.
d) Marketing analysis: It analyses project capacity, market demand, sales forecasts, revenue generation and competition.
e) Management analysis: it analyses the adequacy of management system to direct and control the project.
f) Environment analysis: it analyses the impact of project on the environment.
2. Project Design and Network Analysis:
It is the heart of the project entity. It defines the sequence of events of the project. Time is allocated for each activity. It is presented in a form of a network drawing. It helps to identify project inputs, finance needed and cost-benefit profile of the project.
3. Input Analysis:
Its assesses the input requirements during the construction and operation of the project. It defines the inputs required for each activity. Inputs include materials, human resources. It evaluates the feasibility of the project from the point of view of the availability of necessary resources. This aids in assessing the project cost
4. Financial Analysis: It involves estimating the project costs, operating cost and fund requirements. It helps in comparing various project proposals on a common scale. Analytical tools used are discounted cash flow, cost-volume-profit relationship and ratio analysis. Investment decisions involve commitment of resources in future, with a long time horizon. It needs caution and foresight in developing financial forecasts
5. Cost- Benefit Analysis:
The overall worth of a project is considered. The project design forms the basis of evaluation. It considers costs that all entities have to bear and the benefit connected to it.
6. Pre-investment Analysis:
the results obtained in previous stages are consolidated to arrive at clear conclusions. Helps the project-sponsoring body, the project-implementing body and the external consulting agencies to accept/reject the proposal.
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