Formulation, appraisal, proposal procedure, CBA drawbacks

Definitions

Project formulation is the process of developing a project idea into a detailed plan by defining objectives, scope, technical design, cost, benefits and implementation arrangements so that it can be appraised and implemented. Project appraisal is the independent assessment of the formulated project to decide whether it should be accepted.

Procedure for developing a project proposal

1. Identify the need or problem and the client's requirement (read the terms of reference).
2. Collect data and study the site, background, existing studies and standards.
3. Define objectives and scope clearly.
4. Generate and compare alternatives; select the best technical option.
5. Prepare the technical part: methodology, design approach, work plan, schedule, team and equipment.
6. Estimate resources and cost: quantities, rates, manpower, overhead and profit; prepare the financial part.
7. Analyse feasibility and risk: economic and financial indicators, environmental and social aspects.
8. Write the draft proposal in the required format.
9. Review internally, check for completeness and errors, obtain approvals.
10. Submit before the deadline with the required security and forms; present or clarify if asked.
11. Negotiate and revise after evaluation.

Drawbacks of cost-benefit analysis

• Intangible items (environment, human life, aesthetics, time) are hard to value in money.
• Results are sensitive to the discount rate and project life chosen.
• Forecasts of costs and benefits are uncertain; costs are often underestimated and benefits overstated.
• Externalities and indirect effects may be missed.
• It ignores who gains and who loses (income distribution and equity).
• Shadow prices are difficult to determine and can be manipulated.
• Not suitable alone where the effects are large, irreversible or non-economic.
• Needs large data, time and expert skill.