Project appraisal and its importance

Concept

Project appraisal is the critical, systematic assessment of a proposed project, before commitment of funds, to judge whether it is technically sound, economically and financially viable, environmentally and socially acceptable, and worth undertaking. It looks at the proposal from all sides (technical, market, management, financial, economic, environmental and social) and ends with a recommendation. It is done by the owner, a lender or an independent agency.

Importance

• Helps decide whether to accept, modify or reject a project (go or no-go).
• Avoids wasting scarce capital on unviable projects.
• Compares alternatives and ranks projects for limited funds.
• Finds risks and weaknesses early, when changes are cheap.
• Checks that technical design, cost and schedule are realistic.
• Ensures economic benefit to the nation and acceptable environmental and social effects.
• Gives lenders and donors confidence; usually a condition for financing.
• Provides a baseline for later monitoring and evaluation.