PM 2

CHAPTER TWO
Project Life Cycle

Introduction
A project life cycle is a collection of project phases;

these phases vary from one industry to another, but in
general they include an initiation, planning,
implementation, monitoring and closing phase.
Defining project life cycle
Project cycle is logical sequence of activities to accomplish the project’s

goals and objectives.
The different stages/phases through which a project passes is
called the project life cycle.
The general Phases of project life cycle

1. Initiation phase
2. Planning phase
3. Implementation phase
4. Closing phase
A clear understanding of these phases allows managers and executives to

maintain control of the project more efficiently.
1. Initiation Phase
In this stage we have to investigate the environment, identify
problems, solution/projects ideas from different source,
evaluating/ conducting pre-feasibility and feasibility study
Identify the problem to be solved by the project. What client need is being
satisfied by the project? Will the development of a project solve that
problem?
Develop Solution Options. Of the available alternatives, which do you think

will best solve the problem?
e.g. shortage of class rooms due to the entrance of remedial students is a

problem. We can develop many project ideas (lease of primary and
secondary schools and buildings, construction of buildings) to overcome
this problem.
This is also the phase where the project’s value
and feasibility are measured.
Teams abandon proposed projects that are

labeled unprofitable and/or unfeasible.
It is the stage of accepting and rejecting the

project ideas
2. Planning Phase
Once the project receives the green light, it needs a solid plan to guide
the team, as well as keep them on time and on budget.
It is the phase where a project plan is to be developed.
In this phase, the project team identifies all of the

work to be done,
prepared the schedule, and
estimated the costs.
Adequate planning leads to the correct completion of work. Inadequate

planning leads to frustration towards the end of the project and poor
project performance.
3. Implementation Phase
This can also be referred to as the Execution Phase.
Once the plan is developed, it must be implemented.
During project implementation, people are carrying out

the tasks, and progress information is being reported
regularly.
Progress is continuously monitored and appropriate
adjustments are made and recorded as variances from the
original plan.
4. Closing Phase
The final phase is also called Termination Phase
Conclude a project efficiently and effectively.

During this phase, the emphasis is on
• Passing on the project to customer
• Handing over project documentation
• Terminating contracts
• Reassigning project resources
• Communicating the closure of the project to all
stakeholders and
• Preparing the lessons learned document.
Project Life Cycle
Initiation Planning Implementation Closing
20% 60%
5% 15%
Percentages and graph refer to the amount of effort expended.
9
Models Of Project Life Cycles
There are three basic models of project life cycles they are:
1. The Baum project life cycle
2. UNIDO project life cycle
3. DPSA project life cycle- the model developed by Ethiopia
1. The world Bank (Baum) Project Cycle

The World Bank lends to different countries to Projects ranging from infrastructure,
education, health and government financial management.
In practice, the World Bank and the borrowing country work closely throughout the
project cycle although they have different roles and responsibilities.
The world bank suggested the following stages:
1. Identification
2. Preparation
3. Appraisal
4. Negotiation and approval
5. Implementation
6. Evaluation
1. Identification
The borrower and Bank analyze development strategies
and generate project ideas.
Based on sector work and country strategies, the World

Bank and borrowing countries jointly identify projects that
support their development goals.
Projects are identified that are financially, economically,

socially, and environmentally sound.
2. Preparation
The borrowing country is responsible for project
preparation. Clients conduct studies and impact
assessments that refine the objectives, components,
schedule, institutional responsibility and prepare final
project documentation.
For the Bank to be satisfied the project will have positive

economic, financial, social and environmental impacts.
3. Appraisal
The Bank is solely responsible for project appraisal.
Bank staff review the work done during identification
and preparation. They will review all the studies
conducted in previous stages.
4. Negotiations and Board approval

During this phase, the bank and borrower come to an
agreement on the terms of the loan and the project is
presented to the Board for approval.
5. Implementation
Project implementation is the responsibility of the
borrowing country, while the Bank is responsible for
supervision.
The World Bank’s role is to monitor project

implementation to ensure that the terms of the
loan/credit agreement are followed and that
procurement is conducted according to the World
Bank’s guidelines.
6. Evaluation
Following completion of the project, the Bank’s
Independent Evaluation Group conducts an audit
of the project, where the project's outcome is
measured against its original objectives.
Reports are then submitted to the executive

directors and the borrower.
2. The UNIDO Project Life Cycle
The United Nations Industrial Development organization
(UNIDO) is the specialized agency of the United Nations that
promotes industrial development for poverty reduction,
inclusive globalization and environmental sustainability.
The following phases are the project life cycles according to

UNIDO:
1. Pre-investment phase
2. Investment Phase
3. Operation phase
1. Pre- Investment Phase
Project Identification: Identifying and conceptualizing the project idea or
opportunity.
Feasibility Study: Conducting a detailed analysis to determine if the project
is technically, economically, and financially viable.
Market Research: Assessing the market demand, competition, and
potential risks associated with the project.
Financial Planning: Estimating the initial investment required, projected
revenues, and financial returns.
Risk Assessment: Identifying and evaluating potential risks and developing
risk management strategies.
Legal and Regulatory Compliance: Ensuring compliance with relevant laws,
regulations, and permits.
2. Investment Phase
Investment (implementation) phase involves
Implementation can be defined as a project stage which covers the actual development or
construction of the project up to the point at which it becomes fully operational.
Implementation stages begins immediately after the final decision on the project and ends
when it starts rendering the benefit envisaged. The following are activities of this stage.
• Financing: Raising capital or securing investment from stakeholders, including banks,
venture capitalists, or other sources.
• Contracting: Negotiating and finalizing agreements with contractors, suppliers, and other
parties involved in the project.
• Technological acquisition and transfer
• Detailed engineering design and contract, including tendering, evaluation of bids and
negotiations
• Acquisition of land, construction work and installation
• Recruitment and training of personnel and
• Start-up
3. Operation phase
• Once the project is completed and commissioned, it enters the operation
phase, where the focus shifts to the day-to-day management and
maintenance of the project.
Operation activities
• Project Management: Overseeing and managing the operations, personnel,
and finances of the project.
• Production or Service Delivery: manufacturing products or delivering
services
• Maintenance and Repairs: Conducting regular maintenance and repairs to
ensure the project infrastructure or equipment remains in optimal
condition.
• Monitoring and Evaluation
3. DPSA Project Life Cycle Model
• In Ethiopia, Development Project Studies Authority (DPSA)
made certain efforts and developed a model for project life
cycle which is known as DPSA‘s Project life cycle. This life
cycle comprises three major phases. They are:
1. Pre-investment phase
2. Investment phase and
3. Operation phase
Similar with UNIDO project life cycle
Cont…
Each of these three phases may be divided into different
stages.
1. Pre- investment Phase
a. Identification Stage
b. Formulation Stage
Pre-feasibility study
Feasibility study
c. Appraisal
Appraisal
Decision
Cont…..
2. Investment Phase
Implementation
 Tendering negotiation and contractual agreement with
others
Detailed engineering design
Construction, erection/production and commissioning
3. Evaluation and Operation Phase
Operation
Ex-post evaluation
End of Ch -2

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CHAPTER TWO

Project Life Cycle

A project life cycle is a collection of project phases;

Project cycle is logical sequence of activities to accomplish the project’s

The general Phases of project life cycle

A clear understanding of these phases allows managers and executives to

Develop Solution Options. Of the available alternatives, which do you think

e.g. shortage of class rooms due to the entrance of remedial students is a

Teams abandon proposed projects that are

It is the stage of accepting and rejecting the

It is the phase where a project plan is to be developed.

In this phase, the project team identifies all of the

Adequate planning leads to the correct completion of work. Inadequate

This can also be referred to as the Execution Phase.

Once the plan is developed, it must be implemented.

During project implementation, people are carrying out

Conclude a project efficiently and effectively.

Initiation Planning Implementation Closing

Percentages and graph refer to the amount of effort expended.

1. The world Bank (Baum) Project Cycle

Based on sector work and country strategies, the World

Projects are identified that are financially, economically,

For the Bank to be satisfied the project will have positive

4. Negotiations and Board approval

The World Bank’s role is to monitor project

Reports are then submitted to the executive

The following phases are the project life cycles according to

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