Project cycle management

From CEOpedia | Management online

Project Cycle Management is described in the document "Aid Delivery Methods" developed by the European Commission. This methodology has been developed and adopted for use in projects implemented by the EU in 1992 and then updated in subsequent editions of this manual. The aim of the methodology is to harmonize and improve the quality of aid projects carried out by the European Union for development and the benefit of member countries. The methodology consists of 5 basic phases: programming, identification, formulation, implementation, and audit and evaluation.

Project cycle management - I. Programming stage

Programming is the initial phase of the life cycle of the project, involving an agreement between the countries - beneficiaries and the European Union Document of National Strategy. In this step, EU and interested countries determine preliminary conditions for cooperation - general guidelines, principles of cooperation. The arrangements involve extent to which the EU will make available its resources and for what purpose (what areas require support with the help of EU funds).

Project cycle management - II. Identification stage

Identification is the second phase of the project cycle management, its essence is the identification of projects which are consistent with the strategy defined in programming phase. In the identification phase ideas of projects and proposals are pre-analyzed to get an answer to the question of whether their implementation is possible, feasible and profitable. In the identification phase, workshops are often uses with an independent moderator, whose aim is to reach agreement on the issues and goals of the project. Identification phase uses the method of logical matrix to determine the main objectives, current situation and evaluation of the degree of adaptation of the project to objectives and needs.

Fig. 1. General phases of the project life cycle

Project cycle management - III. Formulation stage

The formulation stage is the third stage of the Project Cycle Management. At this stage, EU representatives confirm the feasibility of projects and gives green light to preparation of project plans and the decision regarding funding of the project. In the phase of formulating a main tool used to check the feasibility of the selected priority option is logical matrix. It supports the preparation of the draft plan with clear objectives, measurable results, risk management strategies, and specific levels of management responsibility. Logical matrix is used for planning and justification of the project, and to determine financial needs during the implementation.

This stage begins with a brief overview of the project aims and objectives, and after that project documentation is developed in detail. In this phase, small team composed of major stakeholders should be selected to manage the project.

The use of the logical matrix, allows for structuring project aims and objectives in the form of hierarchy, according to which, assumptions of the project are created and monitoring indicators defined (together with appropriate sources of verification of their value). (After preparation of the logical matrix, project proposal is prepared, as well as the schedule of activities and budget.

The sequence of actions in the formulation stage:

  • translation of objectives into a logical matrix
  • development of objectives and assumptions,
  • evaluation of the relationship between cells in the matrix and adaptation if necessary,
  • preparation of project indicators and sources of verification
  • assessment of the environmental, social, gender, and race matters connected with project. Preparation of final version of the logical matrix
  • completion of construction of logical matrix, identification of project inputs, actions, budget and other data,
  • budget preparation
  • collecting and summarizing all the work obtained during previous stages
  • preparation of a report describing how the project will be implemented

At the end of the formulation stage, budget plan is prepared, which provides information about expenditure, sources of financing and the conditions for obtaining funds from grant. Statement of expenditure should enable the allocation of costs depending on the source of funding, so that each partner knows what contribution is expected from him. Budget plans and proposals for the project are analyzed from the point of view of rationality and efficiency of the expenditure.

Project cycle management - IV. Implementation stage

Logical matrix is used during the implementation as a basis for identification of information needs of stakeholders, project managers and project funding authority. In fact, the required level of detail and frequency of reporting will vary depending on the level of management. For example, project administrators will need information on the daily activities of the contractor, they will report only aggregate summary information in lower frequency or deviations from the plan. Overview of implementation procedures involves the review of what actions will be taken and by whom...

Through a review of the implementation procedures, in consultation with the staff of the partnering institution, project managers obtain clarification on the role, function and responsibility and can clearly define the relationship between information needs and levels of management.

Effective reporting is dependent on whether the users and the creators of the reports in the same way understand why the reports are needed and how they will be used.

Over time both users of information and how they use it changes, the identification of information requirements is in consequence an iterative process, and those responsible for monitoring and evaluation will need to continuously review the user information requirements by:

  • Taking part in meetings devoted to planning and review, to record the common deficiencies or to determine what information is unnecessary for effective decision making.
  • Encouraging users to submit comments and suggestions on the content and format of reports directly to persons preparing the reports.

Project cycle management - V. Evaluation and audit stage

Evaluation and audit stage is the fifth phase of the Project Cycle Management. It involves assessing activities which are the responsibility of another party.

During the project, an assessment is made to ensure that the project proceeds as expected. In government projects periodic audits may be provided as part of the overall contract. In any case, the external audit should provide comfort to the project partners, that efficient project management process is used, and that the project is proceeding according to schedule.

Correct and thorough evaluation of projects apply to all kinds of projects, both long term and short term, requiring greater or lesser commitment of resources.

Key aspects of project evaluation in project cycle management

  • strategic rationale - the purpose of the project must be consistent with the strategic objectives,
  • economic and non-economic objectives - project evaluation must take into account the economic circumstances as well as the non-economic goals and limitations,
  • financial and non-financial criteria - comparison of the results achieved and the required funding and to check whether the relationship meets the requirements of investors,
  • risk and uncertainty - assessment of projects is based on the prediction, and implementation takes place in variable and unpredictable environment. The assessment should take into account the different sources and types of risk and uncertainty
  • quality of the data and their comparability - comparing the costs and benefits in different time periods requires taking into account changes in the value of money over time and the effects of inflation
  • interdependence of projects - should be taken into account whether the analysed projects will be implemented regardless of whether they are complementary or mutually exclusive

Types of evaluations in project cycle management

From the point of view of the objectives and scope of the assessment:

  • absolute assessment - allows to determine whether the project is cost-effective and should be implemented,
  • relative assessment - involve comparing and ranking of multiple projects before deciding on some of them,

Due to the timing of the assessment:

  • prospective evaluation - takes place at the initial stage of project preparation,
  • retrospective assessment - carried out after completion of the project

From the standpoint of execution time:

  • short-term project assessment - for project with duration of less than one year
  • long-term project assessment - requires a more sophisticated methods of assessing the effectiveness, using the so-called. dynamic methods (NPV, IRR, etc.).

Examples of Project cycle management

  • The European Commission's Erasmus+ programme is a good example of project cycle management. This project, which supports educational exchanges between European countries, follows the methodology of project cycle management. This includes the phases of programming, identification, formulation, implementation, and audit and evaluation. The project identifies the needs and objectives of educational exchanges, designs the activities, implements them and evaluates their results.
  • The World Bank is another example of project cycle management. It follows the same five phases to ensure that the projects it supports are successful. The World Bank identifies the need for a project, formulates a solution, implements the project and evaluates its success. The Bank then audits the project to ensure that it is achieving its goals and making a positive impact in its target area.
  • The United Nations Development Programme is another example of project cycle management. It follows the five phases of project cycle management to ensure that the aid it provides is effective. The UNDP identifies the needs of the recipient countries, formulates a plan, implements the project and evaluates its success. The UNDP then audits the project to ensure that it is meeting its goals and making a positive impact.

Advantages of Project cycle management

  • Project Cycle Management (PCM) provides a structured, systematic approach to the development, implementation and monitoring of projects, ensuring proper consideration of all relevant factors, such as the project objectives, available resources, and the local context.
  • PCM helps to ensure that each stage of the project cycle is properly planned and implemented, making it easier to identify and address challenges or problems throughout the project's duration.
  • PCM also helps to ensure that the project is properly evaluated at the end of its cycle, providing valuable insight into the project's successes and failures. This assessment can provide valuable lessons that can be used to inform and improve future projects.
  • PCM helps to ensure that projects are planned and implemented in a coordinated, consistent way, reducing the risk of duplication of effort or confusion between different stakeholders.
  • PCM also helps to ensure that projects are properly monitored and evaluated, allowing for timely adjustments to be made if needed. This allows for more successful projects in the long term.

Limitations of Project cycle management

  • Project Cycle Management is a linear process and often fails to consider the complexities of a project or a program. It tends to oversimplify the challenges that may arise during the course of the project and does not allow for flexibility when dealing with changes in the environment.
  • The methodology does not provide an adequate framework for stakeholder engagement, which can be an important aspect of the project cycle. Stakeholders should be included throughout the process to ensure that their interests are taken into consideration.
  • Project Cycle Management does not provide a mechanism for monitoring and evaluating the progress of the project, which can be critical for successful project completion. Without a monitoring and evaluation system, it can be difficult to determine whether the project is on-track and whether project objectives are being met.
  • Project Cycle Management does not provide a comprehensive framework for risk management. Although the methodology does provide guidance on risk assessment and mitigation, it does not provide a comprehensive framework for managing risks throughout the project. Without an effective risk management system, risks can easily be overlooked or underestimated.

Other approaches related to Project cycle management

  • Planning: Planning involves setting objectives and identifying the most appropriate strategies and methods for achieving them. It requires an assessment of the resources available and how they can be used most effectively to meet the objectives.
  • Design: Designing a project involves developing a detailed plan of action and determining the necessary resources to implement it. It includes the selection of appropriate activities, the definition of the roles of actors, and the identification of the necessary resources.
  • Implementation: During implementation the activities defined during the design stage are put into practice. This includes procuring and managing the resources required, as well as monitoring progress and making any necessary adjustments.
  • Monitoring and Evaluation: Monitoring and evaluation involve assessing the progress and results of the project and making necessary changes if needed. This includes collecting data, analysing it, and making recommendations for future improvement.
  • Reporting: Reporting involves documenting the outcomes of the project and providing feedback to stakeholders.

In summary, Project Cycle Management involves a five-stage process of planning, design, implementation, monitoring and evaluation, and reporting. This approach is useful for ensuring that projects are carried out in an effective and efficient manner and that the expected results are achieved.

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Author: Krzysztof Wozniak