23
UNIT IPROJECT DEVELOPMENT AND MANAGEMENT
IN RETROSPECT
Before embarking on the hard core of project development and management, let me first introduce you to the basic project concepts and the processes involving the area of project development. Afterwhich, you will be introduced to a case study of a rural development endeavor in the province of Bulacan to enlighten you to the common problems and controversies of project management. Understanding these (I presume!) will make you a better practitioner (learning from other’s mistakes) once you go along with the planning and implementation phase of the project development cycle.
At the end of Unit I, you should be able to:
q relate the basic project concepts and features as well as its characteristics;
q demonstrate and discuss the different processes and phases involved in project development; and
q identify some common pitfalls of project development and management.
THE PROJECT CONCEPTS
The following paper which I intentionally prepare for you was mainly taken and summarized from the “Project Development Manual” developed by the National Economic Development Authority (NEDA) and “Agricultural Project Analysis Manual” authored by Price Gittinger of the World Bank (WB). Going through it will help you comprehend the basic concepts, characteristics and nature of projects. The processes and phases of project development are likewise presented herein for you to properly understand where we are heading to as we go along with the succeeding topics.
Definition of Project
The term “project” refers to a great variety of endeavors. This range from activities with single-purpose, well-defined structures such as small infrastructure projects, to complex, multicomponent systems such as integrated and area development projects.
Projects may be viewed as an investment, wherein investment encompasses not only the physical infrastructure facilities and equipment but also the development services such as agricultural extension, research and training. To distinguish it from a program, a project is a smaller, separable operational element that lends itself to being planned, financed and implemented independently.
The whole complex of activities using resources to gain benefits constitutes a project. Of course, an enormous variety of agricultural activities may usefully be cast in a project form. The World Bank itself lends for agricultural projects as widely varying as irrigation, livestock, rural credit, land settlement, tree crops, agricultural machinery, agricultural education, etc.
Generally, in agricultural projects we are thinking of an investment activity where we expend financial resources over an extended period of time; we call such as the initial capital outlay or fixed asset investments. In some projects, however, costs are incurred for production expenses or maintenance which are incurred within a year, we call such as operating or working capital investments.
Indeed, the dividing line between an “investment” and “production” expenditure in an agricultural project is not all that clear. Fertilizers, pesticides, and the like are generally thought of as production expenses used up within a single crop season or, in any event, within a year. A dam, a tractor, a building or a breeding herd is generally thought of as fixed asset investment from which we realize a return over several years. But the same kind of activity may well be thought of as a production expenses in one project and an investment in another. Transplanting rice is a production expense. Planting rubber trees is an investment. Agronomically and economically they are not different kinds of activities at all. In both cases we put up young plants in a nursery, from which we expect to receive a benefit when they mature. The only difference is the time span during which the plants grow.
All we can say in general about a project is that it is an activity on which we will spend money in expectation of returns and which logically seems to lend itself to planning, financing, and implementing as a unit. It is the smallest operational element prepared and implemented as a separate entity in a national plan or program. It is a specific activity with a specific starting point and specific ending point intended to accomplish specific objectives. A project is something that you can draw a boundary around, at least a conceptual boundary to say “this is the project”, which will have a specific geographical location or a rather clearly understood area of geographic concentration. Usually, a project has a specific clientele group that it intends to reach. It has also a well-defined sequence of investment and production activities that we can quantify and to which we can normally put a money value for.
A project sometimes has partially or wholly independent administrative structure and set of accounts and is financed through specifically defined financial package.
As a specific activity with defined set of objectives and boundaries, a project usually possesses key elements by which it can be further categorized, namely:
§ Area of coverage or location;
§ Intended beneficiaries and clientele;
§ Specific period of time for implementation;
§ Specific and quantified costs and benefits;
§ Methodology and processes; and
§ Organization/Management structure.
Sometimes people are concerned with the subtle issue of not being able to define a project. There is no need for such a worry. In practice, the definition works itself out; there are much more important aspects of project analysis to grapple with than trying to formulate an academic definition of a project.
Project Categories
Projects are usually categorized as follows:
§ Independent Projects – those that can be implemented without precluding the implementation of other projects;
§ Mutually-Exclusive Projects – those which when implemented preclude the implementation of other projects (single unit versus tenement housing in the same residential space); and
§ Complementary Projects – those that require implementation of other projects to attain certain development objectives (component projects of an integrated area development projects).
Types of Rural Development Projects
To effect developmental change in the rural communities, rural development projects (RDP) may vary depending on the need of its constituents and/or beneficiaries. Nature of RDPs usually includes:
Nature of RDP / FocusA. Technology Transfer
B. Capability Development
C. Institution Building
D. Community Resource
Development / § Technology utilization and commercialization
§ Seminars and Workshops
§ Hands-on Trainings
§ Apprenticeship (On-the-Job)
§ Organization of cooperatives
§ Formation of livelihood enterprises
§ Formation of associations/federations
§ Provision of public service centers (e.g. health, education, etc.)
§ Mobilization and utilization of existing community resources
§ Provision of infrastructure and service projects (e.g. communal dam and irrigation, electric power, potable drinking water, farm-to-market roads, post-harvest facilities, etc.)
Types of Agribusiness Project
Generally, agribusiness projects can be classified as an “on-farm” activity (e.g. production of crops, livestock, fish and forest products) and an “off-farm” activity (e.g. agro-industries and agro-services). Table 1 shows some example of an “on-farm” land intensive and land extensive agribusiness activities.
Tables 2 and 3 on the other hand show the different types of agro-industries based on the nature and extent of processing activity, respectively. Sample agro-services are likewise presented in Table 4.
Table 1. On-Farm Agribusiness Projects
“LAND – EXTENSIVE”Annual
Multiple / Rice, corn, soybeans, vegetables, sugar,
mungo beans, tobacco, cotton, potato
Corn – soybeans, rice – corn,
corn – mungo beans, coconut – pineapple
“LAND – INTENSIVE” Aquaculture
Floriculture
Livestock
Seeds
Nursery
High value
Horticulture / Tilapia, prawn, shrimps, mussels
Roses, carnation, chrysanthemum, orchids
Piggery, poultry, duck-raising, cattle
fattening
All kinds of certified seeds
Planting materials of fruit trees, coconut,
oil palm, rubber, and ornamental plants
Vegetables, strawberries
Table 2. Agro-industry: Levels of Transformation
PROCESSING / EXAMPLESCleaning and grading
Milling
Crushing/Extraction
Mixing
Dehydration
Chemical alteration / Fresh fruits
Fresh vegetables
Eggs
Rice and corn
Coconut
Oil palm
Sugar
Fruit juices
Animal feeds
Rubber
Fruits
Vegetables
Meat
Tires
Instant foods
Adapted from: James Austin, Agro-industrial Project Analysis
Table 3. Categories of Agro-industries
“SIMPLE” / Rice milling Corn millingCocoa drying Sugar milling
Slaughtering Vinegar making
“INTEGRATED” / Cattle and Dairy
Tree Growing and Paper
Poultry Growing and Dressing
Logging and Wood Products
Pineapple Production and Canning
Table 4. Types of Agro-services
Product MarketingAnd Distribution / Wholesale and retail trade
Export marketing
Transportation
Port handling
Packaging
Storage and refrigeration
Advertising
Input Processing / Capital Goods :
Irrigation pumps
Agricultural processing machineries
Sprinkler and drip irrigation equipments
Tractor and other land preparation equipments
Harvesting and threshing machineries
Dyers and sorters
Sprayers
Consumables :
Fertilizer, pesticides, herbicides, flowering
inducers, packaging, feeds, petroleum products,
spare parts
Input Marketing and
Distribution / Wholesale and retail trade
Import firms
Transportation
Packaging
Warehousing/Storage
Advertising
The Project Development Cycle
Regardless of its type or nature, all projects are subject to a similar process: all undergo a salient transition from inception to maturity, which is referred to us as the Project Development Cycle.
The process of project development normally includes the following:
1. Pre-investment Phase
A. Project Identification
B. Project Preparation
C. Project Appraisal and Financing
2. Investment Phase
A. Detailed Engineering Design
B. Project Implementation
3. Post-investment Phase
A. Project Operation
B. Ex-post Project Evaluation
Project development logically starts from generation and/or conceptualization of investment opportunities. Once the identified investment idea is properly justified, preparation of the detailed project plan follows. This then is subject to the tests of project feasibility. Once the project is proven feasible in all aspects, required project financing is arranged and secured. Afterwhich, detailed project engineering for the construction of the project is done. If everything is prepared and readied, project implementation follows.
Operation of the project during the implementation phase, however needs to be effectively supervised, managed and monitored to immediately check any deviation from the original plan. Moreover, the project shall be evaluated to determine whether it really attained its overall project goals and objectives or not. The process is called ex-post project evaluation.
Take note that the project development cycle continues as long as the project exists. The cycle stops however, when the investors decided to divest or abandon the project. Upon completion of project implementation and ex-post evaluation, this signifies the end of one cycle and feeds into pre-investment phase of the next cycle. In this way, the cycle repeats and renews itself as a continuous process. Please refer to Figures 1 and 2 regarding the process of Project Development.
Figure 1
The Project Development Cycle
Source: NEDA, Project Development Manual
Figure 2
The Process of Project Development
Pre- investment
Phase
Investment
Phase
Post - Investment
Phase (Operational Phase)
Source: NEDA, Project Development Manual
1. Before sleeping tonight, please read the case of Sta. Maria Dairy Cooperative, Inc. (attached at the end of Unit I). During your free time the next day, outline your case analysis using the following format:
I. Title of the Case Study
II. Point of View (your name as the Case Analyst)
III. Introduction (provide brief background of the case)
IV. Problem Situation (briefly discuss and prioritize your concern as to urgency and magnitude of the problem)
V. Recommendations (provide your action plan to solve the problem(s) of the firm)
2. After doing the case analysis, please do the following:
A. “As a rural development concept, Farmer’s Cooperatives are oftentimes regarded as vehicle for rural change. The project idea is noble, no doubt about it. Due to management failures, however, most farmer’s cooperatives collapsed.” Please list down five major considerations to effectively manage and implement a rural development project.
B. In general, why do projects fail? What stage(s) of the “project development cycle” are considered critical and most delicate? What should be properly observed in each phase? Please list down at least three pointers for each phase respectively.
3. Please handcarry and/or submit your output immediately through LBC or express mail the following Monday next week. Address it to the Department of Agri-Management, College of Agriculture, Central Luzon State University, Muñoz, Nueva Ecija. I’ll wait for it . . . Okay? You may call me by phone if you have any problem regarding this activity (044-947-1838).
How did you fare in your brainstorming activity? If you were able to answer the above requirements, I’m sure you already have the grasp of what project development and management is. It requires deeper conceptual, analytical and decision-making skill, isn’t it?
Don’t bother with the case anyway, mine is just to introduce you to the realities of project development and management. I hope that your proposed “rural development project” will be better than Sta. Maria Dairy Cooperative, Inc. If you make your Project Feasibility Study, please consider and try to avoid the occurrence of similar problems. This would help you become an effective project planner and manager then. Take this as a piece of advice from me. Okay?
RECAPITULATION
Unit I has introduced you to the basic concepts and processes of project development and management. The key words associated with the definition of a project is herein provided for your comprehension and self-understanding. The stages of project development cycle is likewise incorporated for you to be guided on where we are heading through as we go along with the succeeding topics.
I intentionally included the different types of RDPs for you to be aware of the nature and focus of Rural Development Projects. Likewise, different types of agribusiness projects are herein presented for your consideration if you opt to focus your mind in the preparation of agribusiness or rural livelihood projects. You may use all these things as your basis in your “project idea generation” later.
REFERENCES:
1. Austin, J., Agro-Industrial Analysis
2. Dy, R.T., The Concept of Agribusiness: A Seminar Paper
3. Gittinger, P., Agricultural Project Analysis
4. NEDA, Project Development Manual
5. Velasco, C.V., Introduction to the Project Concepts: A Seminar Paper
6. Velasco and Parungao, Sta. Maria Dairy Cooperative, Inc.: A Case Study
TRAINING MATERIALS
Department of Agribusiness Management
CASE STUDY: STA. MARIA DAIRY FARMERS MULTI-PURPOSE
COOPERATIVE, INC.
“Agricultural cooperation is normally conceived to effect developmental change in the rural communities. Despite the government’s effort to promote and support this rural development concept, however, many agricultural cooperatives have still failed.”