Module 5 Session 6

Notes: Project Appraisal

Summary This session will define project appraisal and introduce dimensions of project appraisal, including issues of social acceptability/desirability, environmental friendliness, technical feasibility/ appropriateness, gender sensitiveness, economic soundness and ability to be sustainable and most importantly financial viability. Introduction Project appraisal is the process of assessing and questioning proposals before resources are committed. It is an essential tool for effective action in community renewal. Its a means by which partnerships can choose the best projects to help them achieve what they want for their community. ut appraisal has been a source of confusion and difficulty for projects in the past. !udits of the operation of "ingle Project udget schemes have highlighted concerns about the design and operation of project appraisal systems, including# $echanistic, infle%ible systems ! lac& of independence and objectivity ! lac& of clear definition of the stages of appraisal and of responsibility for these stages ! lac& of documentary evidence after carrying out the appraisal

Its no surprise that audits or inspections arent impressed with the quality of appraisals, and are specifically found with problems li&e' Individual appraisals which do not cover the necessary information or provide only a superficial analysis of the project Particular problems in dealing with ris&s, options and value for money !ppraisals which are considered too onerous/burdensome for smaller projects (ushed appraisals

Project appraisal is a requirement before funding of programs is done. ut tac&ling problems li&e those outlined above is about more than getting the systems right on paper. )%perience in projects emphasi*es the importance of developing an +appraisal culture which
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involves developing the right system for local circumstances and ensuring that everyone involved recogni*es the value of project appraisal and has the &nowledge and s&ills necessary to play their part in it.

What can Project Appraisal Deliver? Project appraisal helps project initiators and designers to' e consistent and objective in choosing projects $a&e sure their 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 e%plain decisions to local people. Appraisal justifies spending money on a project.

!ppraisal as&s 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. ,etting it right may help a community ma&e its resources go further in meeting local need Appraisal is an important decision making tool.

!ppraisal 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# -ill help a partnership achieve its objectives for its area !re deliverable Involve local people and ta&e proper account of the needs of people from ethnic minorities and other minority groups !re sustainable .ave sensible ways of managing ris&. Appraisal lays the foundations for delivery.

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!ppraisal 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 ris&s and setting milestones against which progress can be judged. Getting the system right The process of project development, appraisal and delivery is comple% and partnerships need systems, which suit local circumstances and organi*ation. ,ood appraisal systems should ensure that# Project application, appraisal and approval functions are separate

!ll the necessary information is gathered for appraisal, often as part of project development in which projects will need support (ace/tribal equality and other equality issues are given proper consideration Those involved in appraisal have appropriate information and training and ma&e appropriate use of technical and other e%pertise There are realistic allowances for time involved in project development and appraisal /ecisions are within a implementers powers There are appropriate arrangements for very small projects There are appropriate arrangements for dealing with novel, contentious or particularly ris&y projects.

Appraising a project Key issues in appraising projects include the following. 0eed, targeting and objectives The starting point for appraisal# applicants should provide a detailed description of the project, identifying the local need it aims to meet. !ppraisal helps show if the project is the right response, and highlight what the project is supposed to do and for whom. Context and connections

!ppraisal should help show that a project is consistent with the objectives of the relevant funding program and with the aims of the local partnership. !re there lin&s between the project and other local programs and projects 1 does it add something, or compete2
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Consultation

3ocal consultation may help determine priorities and secure community consent and ownership. $ore targeted consultation, with potential project users, may help ensure that project plans are viable. ! &ey question in appraisal will be whether there has been appropriate consultation and how it has shaped the project 4ptions 4ptions analysis is concerned with establishing whether there are different ways of achieving objectives. This is a particularly comple% part of project appraisal, and one where guidance varies. It is vital though to review different ways of meeting local need and &ey objectives. Inputs

Its important to ensure that all the necessary people and resources are in place to deliver the project. This may mean thin&ing about funding from various sources and other inputs, such as volunteer help or premises. !ppraisal should include the e%amination of appropriately detailed budgets. Outputs and outcomes

/etailed consideration must be given in appraisal to what a project does and achieves# its outputs and more importantly its longer5term outcomes. enefits to neighborhoods and their residents are reflected in the improved quality of life outcomes 6jobs, better housing, safety, health and so on7, and appraisals consider if these are realistic. ut projects also produce outputs, and we need a more realistic view of output forecasts than in the past. Value for money

This is one of the &ey criteria against which projects are appraised. ! major concern for government, it is also important for local partnerships and it may be necessary to ta&e local factors, which may affect costs, into account. Implementation

!ppraisal will need to scrutini*e the practical plans for delivering the project, as&ing whether staffing will be adequate, the timetable for the wor& is a realistic one and if the organi*ation delivering the project seems capable of doing so.
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Risk and uncertainty

8ou cant avoid ris& 1 but you need to ma&e sure you identify ris& 6is there a ris& and if so what is it27, estimate the scale of ris& 6if there is a ris&, is it a big one27 and evaluate the ris& 6how much does the ris& matter to the project.7 There should also be contingency plans in place to minimi*e the ris& of project failure or of a major gap between whats promised and whats delivered. Forward strategies

The appraisal of forward strategies can be particularly difficult, given inevitable uncertainties about how projects will develop. ut is never too soon to start thin&ing about whether a project should have a fi%ed life span or, if it is to continue beyond a period of regeneration funding, what support it will need to do so. This is often thought about in terms of other funding but, with an increasing emphasis on mainstream services in neighborhood renewal, appraisal should also consider mainstream lin&s and implications from the first. ustaina!ility

In regeneration, sustainability has often been tal&ed about simply in terms of whether a project can be sustained once regeneration funding stops but sustainability has a wider meaning and, under this heading, appraisal should include an assessment of a projects environmental, social and economic impact, its positive and negative effects. -hile appraisal will focus detailed attention on each of these areas, none of them can be considered in isolation. "ome of them must be clearly lin&ed 1 for e%ample, a realistic assessment of outputs may be essential to a calculation of value for money. 0o project will score highly against all these tests and considerations. The final judgment must depend on a balanced consideration of all these important factors. Checklist or project appraisal -hether you are involved in a partnership with an appraisal system in place, or starting to design one from scratch, these questions are worth as&ing. !re appraisals systematic and disciplined with a clear sequence of activities and operating rules2

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Is there an independent assessment of the project by someone who has not been involved with the development of the project2 /oes the appraisal process culminate in clear recommendations that inform approval 6or rejection7 of the project2 Is the approval stage clearly separate2 Is the appraisal process well documented, with &ey documents signed, showing ownership and agreement, and allowing the appraisal documentation to act as a basis for future management, monitoring and evaluation2 /oes the appraisal system comply with any relevant government guidance !re the right people involved at various stages of the process and, if necessary, how can you widen involvement2

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Proposed real li e project Appraisal Case Study: Bor the participants to apply their newly acquired or enhanced project appraisal competencies to a practical case study. 0amely' building :ft by ;<ft and =<ft deep, with five stances, five doors, five windows, school latrine at one of the schools in ?yabarungira sub county 6see 0ew 9ision article in project identification page7

Case study: !uilding a Pit "atrine #ith $ stances at one o the schools in %asese& %ya'arungira Su' County: This case study is sourced from the 0ew 9ision of $onday, !ugust :th ;<<=. "ummary data of the proposed project# >. 0ame# $odern Pit 3atrine in ?asese /istrict, ?yabarungira sub county. ;. 3ocation# ?yabarungira "ub @ounty =. Proposed goal# Improvement of sanitary conditions in ?asese suffering from shortage of 3atrines. :. Project )%ecution# "chool authority, parent associations, civil society and ?yabarungira sub5county authorities. A. Binancing# "chool authorities, ?yabarungira sub county council, ?asese /istrict @oucil, $inistry of )ducation and possibly a donor and international 0,4s. Project description# !ccording to the 0ew 9ision te%t, 6see page ;A7 shortage of latrines has hit ?asese schools. It is revealed that $inistry of )ducations policy stipulates one stance for only ;A pupils. In contrast, the current status in ?asese schools is one stance for >;< pupils. This reveals that there is urgent need for about four e%tra stances for one stance in use. The proposed project is therefore to initially build : pit latrines of =< feet deep, : feet wide and ;< feet long with A separate square stances :C:, A doors and A windows at one of the schools in ?yabarungira sub county.

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"roject #ustification This will immediately improve sanitary conditions at the school, reduce the incidence of terminal sic&ness and enhance learning conditions at the schools. "roject risks There are e%pected to be project ris&s mainly due to lac& of funds, lac& of appropriate building s&ills, bureaucratic corruption, and interferences from local politicians and there may be lac& of space. These aspects are normally presented in a project analysis log frame matri% for a focused appreciation of the main features and their lin&ages. ! typical project log frame matri% is summari*ed below.

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$a!le %. )arrati*e

"roposed project &nalysis 'og frame (atrix Verifia!le Indicat ors +OVI, (eans Of Important Verification &ssumpti +(OV, ons Progress report by' "chool authorities Parent !ssociation ?yabarungira sub county /istrict @ouncil !vailability of funds !vailable space 3ocal councils )ducation policy compliance Bunds uilding s&ills 3ocal politics )%ternal support

ummary

>. ,oal Improvement of sanitary conditions and elimination of total disease in ?asese "chools, ?yabarungira "ub @ounty ;. Purpose @onstruction of : latrines at one of the schools in ?yabarungira sub county >. 4utput of

Provision of one stance latrine for only ;A pupils

/imensions of Progress and : ft wide, ;< ft status report long and =< ft deep with five stances with a loc&able door and window @ompletion report

@ompletion latrines ;. =. !ctivities

: latrines with D five stances Bunds available

(espect of contractual terms and timing Timely follow5 up "chool authorities @ounty council

@ompletion report

.iring builders

Procurement of "pace allocated materials Training staff Binancing "chool @ontributions local $aterials purchased Bunds available Progress report

-illingness to support the project

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@ouncil /istrict 4thers : modern pit latrines @ompletion report 4fficial commissioning

E. @ommissioning

(easi'ility Study /uring the process of project appraisal a feasibility study may be underta&en to establish the justification of the identified project in all of its relevant dimensions, including its technical design, economic and financial viability, environmental compliance and social acceptability' as well as its conformity with the national development objectives and priorities and the relevant policy, legal and regulatory framewor&. The aim of a feasibility study is to initially identify the following aspects# i. /evelopment objectives against which the project proposed conforms ii. Policy framewor& and detailed project objectives iii. Technical soundness of the project iv. !dministrative feasibility of the project v. The economic and financial viability of the project proposal vi. The status of demand for the project beneficiaries vii. @onsiderations of customs and traditions of project benefactors, issues of compatibility viii. 4ther important policy and cross cutting issues 6gender, environment, .I9/!I/"7 The results of a feasibility study influences decisions to commit or not commit scarce resources to a given project proposal !n important analytical tool that underpins the value of underta&ing a feasibility study is the use of production possibility curve. This tool is e%tremely useful in underscoring the efficient allocation of scarce financial and human resources, as e%emplified below by the trade offs between production of mil& and matoo&e. The natural resource bases of districts in Fganda are largely in the conte%t of land and human resources. The process of transforming these resources involves a choice in the use of land and human
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power. In the bac&ground of traditional land use with majority of the population largely rural and with very little education, these factors limit the level of production in the districts. This situation notwithstanding, the government is determined to fight the current high levels of poverty in rural areas through a number of government policies. In particular, poverty reduction policies, FP) and P$!. The implementation of these policies implies ma&ing a choice with respect to the use of available land and human resources. ! tool &nown to illustrate the effect of choice in the use of such resources to bring about the desired change in the social economy is the following Transformation Production Possibility @urve. In other words, a district can choose only to be involved in livestoc& production, only agricultural products, or to produce both at a certain level of output combination as indicated by the curve below. The curve indicates the units that would be sacrificed if one more units of agricultural products are produced 6i.e. the of tradeoffs7 The curve illustrates that the economy would be at an optimal level of production when total output is comprised of D,<<< liters of mil& and >,<<< tones of matoo&e. !t this point, producing one e%tra litre of mil& would cost <.>: tones of matoo&e and vice versa. Transformation Production Possibility @urve5 3itres of $il& 9s Tons of $atoo&e

)ote

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>. Production at# a7 / represents optimal utili*ation of available resources b7 @ is sub5optimal utili*ation of resources, being inside the production possibility curve c7 G is an impossible case as it is outside the production possibility curve ;. Trade offs and 4pportunity costs > litre of mil& H <.>: tons of $atoo&e

> Ton of $atoo&e H D litres of mil& The curve depicts that the economy would be at an optimal level of production when total output is made of D<<< litres of mil& and ><<< tons of $atoo&e. !t this point producing one e%tra litre of mil& would cost <.>: tons of $atoo&e and vice versa.

Project appraisal in relation to technical& economic& inancial& social& and environmental analyses) /uring project appraisal, hard questions will be as&ed and the answers will determine whether the project proposal will be adopted or rejected. The questions raised will include concerns such as the appropriateness of project objectives, si*e, scope, implementation methods and modalities, implementation time scale, and the project technical, financial, economic, institutional, environmental, social and distributional justification of the project. ! well prepared and assessed project preparation and an appraisal consumes large amounts of data and therefore requires an equipped office with computer facilitation as depicted in the figure below' Bigure' ! modern office with computer access

+a,

$echnical analysis
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Technical analyses of a project is aimed at ensuring the following# i. To confirm the source of the project proposal, nature of the studies 1 including feasibility studies underta&en before the proposal, and the nature of decisions ta&en by all relevant authorities involved That the problem or the need to be resolved by the project has been clearly stated That the project has been clearly spelled out with the correct technical design details 6such as si*e, location, timing, and technology7 That the required materials have been correctly determined and their source identified That the costs of the project have been clearly established, e%pected product prices projected, and payment modalities and schedules agreed to -conomic &nalysis

ii. iii.

iv. v.

+!,

The need for economic analysis arises out of the fact that .igher 3ocal ,overnments 6.3,s7 operate within limited resources. !s a result, some difficult choices of where to commit limited resources from a large pool of deserving and competing priorities and needs must be made by .3, officials. The economic costs and benefits of a project are estimated through the application of a cost5benefit analysis, i.e. evaluating both the implicit and social cost5benefits of a project. Bor profit ma&ing projects, profitability tools li&e 0et Present 9alue, Internal financial rate of return, Pay ac& Period and Incremental Profit are used to estimate the viability of the project.

.3,s do not generally operate on profit motivation when considering projects' therefore, social cost5benefit analysis is most applicable for .3,s. In a cost benefit analysis, one must as& basic questions as to what costs and benefits should directly and indirectly accrue to the target beneficiaries in terms of poverty reductions, enhanced savings, improved medical care, educational, water and health services. The figure below illustrates the participatory process including especially the beneficiaries of medical, water and sanitation in the design and discussion of project formulation. The participatory

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process allows for more ideas to be incorporated into the project, and often increases the success of the project. Figure. "articipatory "lanning

6c7 Financial &nalysis ta&es a hard loo& at the funding sources for the project both in terms of completing the project and for its sustained operation. This analysis should question if' i. The .3, would fund the project from internal resources2 ii. The .3, would fund the project from e%ternal resources2 iii. The e%ternal resources would be borrowed funds2 iv. If the funds are to be borrowed, would the .3, be able to pay bac& the loan with accrued interest2 v. -ould the e%ternal resources be a grant from the central government or from any other source2 vi. -ould the .3, co5fund the project with an outside donor, whether it is a central government or another development partner2 vii. -ould effective cost recovery mechanisms aimed recouping the project costs be put in place2 viii. -ould financial management modalities be put in place to record the transactions during implementation and operation of the project2 /ocuments could include cashboo&, assets register, ban& statements, balance sheet 6accruals accounting7, income statements 6or receipt and payment schedules7, etc

d, -n*ironmental &nalysis /epending on the nature of the project, it is important that the project is seen to comply with the various environmental requirements as administered by the 0ational )nvironmental $anagement !uthority 60)$!7. "pecifically, the project should comply with the provisions of the 0ational )nvironment "tatute
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6>IIA7 and the )nvironmental Impact !ssessment 6>IIJ7. )nvironmental aspects that projects would have to address include' Public health and occupational safety @ontrol of air, water and land pollution $anagement of renewable natural resources 6plants and animals7 )fficient use of natural resources through multiple use, recycling and erosion control @onservation of unique habits 6forests, game reserves7 for rare species and cultural preservation

Figure. -n*ironmental pollution and degradation

e,

ocial &nalysis

The validity of the planners assumptions about the social conditions are tested through social analysis. -here necessary, adjustments should be made so that the project goals are e%pressed in terms that have more meaning for both the project population and the implementing agencies. "ocial analysis focuses on four areas indicated below' i. The social5cultural and demographic characteristics of the project population 1 its si*e and social structure, including ethnic, tribal and class composition ii. .ow the project population has organi*ed itself to carry out productive activities, including the structure of households and families, availability of labor, ownership of land, and access to and control of resources iii. The projects cultural acceptability' in other words, its capacity both for adapting to and for bringing about desirable changes in peoples behavior and in how they perceive their needs iv. The strategy necessary to elicit commitment from the project population and to ensure their sustained participation from design through to successful implementation, operation and maintenance

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The figure below depicts a situation still prevailing in certain areas in Fganda where the girl child is relegated parental duties at an early age while the brother goes to school

Figure showing gender discrimination

f, Cross cutting issues The above mentioned principles of social analysis are equally relevant in appraising the impact of cross cutting issues, such as .I9/!I/", environment, and gender issues, on the viability of a project. This is particularly relevant when ma&ing sure that the indirect costs and benefits attributable to crosscutting issues are fully articulated and considered in estimating the overall cost benefit of the proposed project.

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