How to appraise a project proposal?

FAQ sheet on the appraisal of project proposals, prepared by PCWS, The Philippine Center for Water and Sanitation, Manilla, The Philippines.

Introduction

A project is a set of related and specific activities for the purpose of attaining specific objectives. A project proposal should therefore give details about why, what, when and where, as well as how and how much, and whose the project is and whom it is intended to benefit.

This FAQ will cover:

• What to look for in a project proposal
• Evaluation criteria
• Writing an appraisal report

What to look for in a project proposal

A project proposal should answer the following:

1. What is the problem to be addressed or opportunity to be exploited? The objective and the purpose of the project must also be stated. In most cases, it is beneficial to mention first the overall objective (which will be bigger than the project itself), i.e.: What overall improvements in what situation will the project contribute to achieving? After that, the immediate objective(s) should be stated, i.e.: What goals would be achieved by the project itself? All these should be stated in as specific a manner as possible.

The prospective beneficiaries should be clearly identified, especially if the project is a social project. The dimensions of the problem should be quantified as far as possible. It is best for all data, assumptions and projections to be quantified so as to be amenable to cost-benefit analysis.

For example:

The project will improve the water situation in Las Aguas, an urban poor community of 500. At present these people have to walk one kilometre to a privately owned well and pay 7 pesos for every 20-litre bucket of water they get. Because of this expense and effort, each person on average can consume only seven litres of water a day, much lower than the 20 litres considered a decent minimum. In addition, this water is turbid, has the odour of rust, and imparts an undesirable colour to laundry.

2. What are the methods and resources to be used in the project? Why was this set of methods and resources selected, and not another? Will project benefits be worth the costs? What are the measurable outputs?

A good project proposal considers many approaches to the problem, and provides analysis to show why the one that is being proposed maximises net project benefits.

This part should include the activities that comprise the project and their elements:

1. Social preparation
2. Processes and technologies to be employed
3. The organisational structure of the body that will be implementing the project, and capabilities required of it
4. Material resources required and their costs
5. Time schedules and sequences

It should also describe how the selected processes and technologies comply with the requirements, aspirations and capabilities of the target population. Are the institutional requirements and the capacity and skills mix of the responsible authorities appropriate for the planned project?

To continue the example:

The water situation of this community will be improved by either:

a) The provision of a 10 m3 rainwater roof run-off collection and storage system to each of the households there (see attached tank-sizing analysis using rainfall data), or

b) The drilling of two 100-ft-deep community pumpwells (see attached hydrogeologic analysis) as close to the community as may be feasible, i.e . 0.5 km away.

The rainwater to be produced by the first option is expected to be fit to drink. The same is the case for the well water to be produced by the second option.

The roof run-off option will cost 900,000 pesos to implement (see attached bill of materials). Annual depreciation, interest, and maintenance costs will be 45,000 pesos (see attached computation), and the project will displace one livelihood (that of the operator of the present well), which is valued at 6000 pesos a year, giving a total annual cost of 51,000 pesos. In return, the annual benefits will be as follows:

The handpump deep well option will cost 260,000 pesos to implement (see attached bill of materials). Annual depreciation, interest, and maintenance costs will be 18,000 pesos (see attached computation), and the project will also displace the livelihood of the operator of the present well, which is valued at 6000 pesos a year, giving a total annual cost of 24,000 pesos. In return, the annual benefits will be as follows:

Other, unquantified benefits are the skills, attitudes and knowledge transferred to the community.

Both technologies in this situation will result in a net benefit to the project. The roof run-off option will cost 27,000 pesos more annually, but will deliver 81,000 pesos more per year in benefits than the wells, so this will be the chosen option.

The district water authorities are aware of the intended project and have been informed of the methodologies to be used in target population mobilisation and empowerment. The technology choices are in line with the national policy. There is a need to update the social mobilisation skills of the district water office staff. However, it should not be too difficult a process as the initial interest and attitude is favourable towards this adjacent input.

3. What other important project details and supporting data are included in the project proposal? Things to look for include the credentials of the proponent (the track record and reputation of the body proposing the project), project staffing and organisation, and plans for resource mobilisation, training, exit, and sustainability (provisions for operation, maintenance, and financial viability of the scheme in the longer term).

To continue with the example:

The proponent is a small non-governmental organisation (NGO) with a sustained record of project successes in its field. The project will be administratively supported from the NGO’s standing staff, but a project technical officer will be hired, who will be responsible for training and organising the community, purchasing the necessary construction materials and services, and supervising system construction and operationalisation.

The community will be responsible for providing the sites for the systems, general purpose construction labour, organising itself for participating in the project, and collecting a reasonable regular tariff for project cost recovery.

Evaluation criteria

Appraising a project proposal means evaluating:

1. The relevance and importance of its objectives—How substantially does the proposal support the values, policies, programmes and priorities of the appraiser’s clients?
2. The validity of its assumptions—How realistic and accurate are these?
3. The logistics, social acceptability and ethicalness of its methods—How essential are the outlined activities and outcomes to the project and how well do they support each other? How reasonable are the quoted amounts and unit prices of the resource inputs? How adequate will be the quality of the resource inputs? How acceptable will these methods be to other project stakeholders?
4. The risks and consequences of failure and unintended results—How sensitive will project outcomes be to changes in the project environment and how will undesirable factors and outcomes be mitigated?
5. The competence and credibility of its proponents—How capable are the project proponents? What record do they have in doing this kind of project?
6. Project overall efficiency (benefits versus costs)

It is on these evaluation criteria that the merits of the proposal are best measured, and compared to each other for prioritisation purposes. Needless to say, it helps a lot if the appraiser is knowledgeable about the kind of project being proposed and is familiar with economic and socio-economic analysis methods.

In many cases the appraiser’s client provides their own list of criteria. In such instances, the proposal should be measured against how well it meets the client-specified criteria before being rated for the other criteria (listed above), on a points basis. The points are added together, and proposals with high scores get top priority.

Examples of client-specified criteria might be area- or target population-specific (e.g., projects should address rural indigenous peoples in Mindanao island); technology-specific (e.g., rainwater catchments for water supply); or theme-specific (e.g., projects should demonstrate use of appropriate technology, community participation and conscientious transparent implementation).

A well-written project proposal does not mean that the project is likely to be successful. Likewise, a badly-written one does not imply that the project will likely fail. In the latter case, as long as the appraiser is sure of the bona fides of the proponent, and the general project plan is sound, he/she can be more pro-active, and suggest improvements to the content and presentation of the proposal.

Writing a project appraisal report

Many funding agencies will have their own standard formats for project appraisal reports. If they don’t, the following example table of contents may help the appraisal team to report their findings in a systematic way. Please note that the bigger the project is the more thorough the appraisal report must be. The example table of contents will allow various levels of thoroughness to be applied.

1. Executive summary: Main findings and recommendations

2. Subject of the appraisal: Brief history and description of the project and its environment (cultural, natural, economic, social)

3. Background of the appraisal: Purpose, methodology, limitations etc.

4. Appraisal issues

4.1 General appraisal issues:

4.1.1 Correspondence of the project with priority needs, demand responsiveness and relevance

4.1.2 Impact assessment, long term, short term

4.1.3 Assessment of probability of achievement of expected results and effectiveness

4.1.4 Cost-benefit analysis

4.2 Specific appraisal issues [usually mentioned in TOR (terms of reference)]

4.2.1 ……..

4.2.2 ……..

4.2.3 ……..

5. Factors ensuring sustainability and compatibility

5.1 Compatibility with the strategic goals of the policy (both of the funding agency and the target country)

5.2 Policy environment (national, regional and local level in project location)

5.3 Economic and financial sustainability (of the project results)

5.4 Institutional capacity (who is the responsible body after the project implementation is finished?)

5.5 Socio-cultural aspects

5.6 Participation and ownership empowerment of the target population)

5.7 Gender aspects (differential impact of the project on men and women)

5.8 Environmental impact of the project

5.9 Appropriateness of the technology

6. Conclusions and recommendations. Suggestions for operational improvements of the project.

Bibliography and additional reading

Mayer, E. (1986, reprinted 1995). Guide to practical project appraisal: social benefit-cost analysis in developing countries. United Nations Industrial Development Organization, Vienna, Austria

Parry-Jones, S.; Reed, R and Skinner, B. H. (2001). Sustainable handpump projects in Africa: draft guidelines for field evaluation of handpump projects. WEDC, Loughborough University, Leicestershire, UK.

URL: http://www.lboro.ac.uk/departments/cv/wedc/projects/shp/field-evaluation-guide-29-june-rev.doc

PCWS (s.a.)Rehabilitation of Lagonglong (Misamis Occidental) water system: a feasibility study. The Philippine Center for Water and Sanitation, Quezon City, The Philippines. [project document].

Describes present water situation in the municipality; explores possible ways to improve it; recommends rehabilitation and expansion of existing spring-fed pumped system.

Contact persons

• Mr. Carmelo M. Gendrano, Research and Technical Officer, The Philippine Center for Water and Sanitation, Manilla, The Philippines
• Ms. E. Mayer, United Nations Industrial Development Organization, Vienna, Austria

Creation date: 24 October, 2003

Revised date:

Author: Carmelo M. Gendrano, Research and Technical Officer, The Philippine Center for Water and Sanitation, Manilla, The Philippines

Peer reviewer: Heikki Wihuri, IRC International Water and Sanitation Centre, Delft, The Netherlands