--- title: "Necessity and aspects of project appraisal" subject: "Project Engineering" chapter: 2 key: "semester_7/project_engineering:why-appraisal-necessary-aspects" source: https://www.bctengineer.com/q/semester_7/project_engineering/why-appraisal-necessary-aspects site: BCT Engineering --- # Necessity and aspects of project appraisal Project Engineering · Chapter 2: Project Appraisal and Project Formulation - Asked in: 2080 Bhadra, 2+4 marks; 2074 Chaitra, 8 marks; 2082 Baisakh, 8 marks (asked 3 times) - Video: [Project Appraisal in Project Management](https://www.youtube.com/watch?v=l7M38tKDefY) — Management Mantra - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/project_engineering/why-appraisal-necessary-aspects - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-2 ## Question Why is project appraisal necessary for initiating a project? What are the major aspects (analyses) that need to be considered to carry out the appraisal of a project? ## Short answer Project appraisal is a systematic assessment to judge technical soundness, economic and financial viability, environmental and social acceptability before funding. It avoids wasting capital, enables go/no-go decisions, identifies risks early, and builds lender confidence. Aspects: technical, economic, financial, market, managerial, environmental, social, legal/institutional, and risk. ## Answer #### Necessity of appraisal **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. - 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. #### Aspects (analyses) of appraisal | Aspect | Points examined | |---|---| | Technical | Design, technology, site, materials, capacity, construction method, availability of skills | | Economic | Benefit-cost ratio, EIRR, NPV to the nation, shadow prices, contribution to national goals | | Financial | Cost estimate, funding plan, cash flow, NPV, IRR, payback, debt service | | Market / commercial | Demand, supply, price, competition, marketing plan | | Managerial / organisational | Capability of the implementing agency, organisation structure, manpower | | Environmental | Impact on land, water, air, ecology; mitigation measures (IEE/EIA) | | Social | Effect on people, resettlement, gender, employment, community acceptance | | Legal / institutional | Laws, licences, permits, contracts, land | | Risk | Sensitivity and risk analysis of cost, time and demand | ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. What is project appraisal? A. Evaluation after completion only B. Systematic assessment of a proposed project before commitment of funds to judge whether it is worth undertaking C. Accounting of salaries D. Daily site inspection Answer: B. It is done before funds are committed. (Key point: Definition) 2. Why is appraisal necessary? A. To delay all projects B. To increase costs C. To decide go or no-go, avoid wasting capital and find risks early when changes are cheap D. To replace design Answer: C. It helps accept, modify or reject projects and finds risks early. (Key point: Need for appraisal) 3. Which aspect examines benefit-cost ratio, EIRR and shadow prices for the nation? A. Economic B. Market C. Legal D. Financial Answer: A. Economic appraisal uses B/C, EIRR, NPV to the nation and shadow prices. (Key point: Economic vs financial) 4. Which points are examined in financial appraisal? A. Resettlement B. Cost estimate, funding plan, cash flow, NPV, IRR, payback, debt service C. Demand and competition D. Licences Answer: B. Demand and competition are market; resettlement is social. (Key point: Financial aspect) 5. Which aspect covers IEE/EIA and mitigation? A. Environmental B. Technical C. Managerial D. Legal Answer: A. Environmental appraisal studies impacts on land, water, air and ecology with mitigation. (Key point: Environmental aspect) ## Close variants set in other exams - [Appraisal aspects of a hydropower project](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-aspects-hydropower) — Project Engineering, chapter 2, asked 4× ## Related in Project Engineering - [Appraisal aspects; proposal contents (technical, financial)](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-aspects-proposal-contents) — Project Engineering, chapter 2 - [Necessity of appraisal; formulation techniques](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-necessity-formulation-techniques) — Project Engineering, chapter 2, asked 2× - [Comprehensive appraisal and need of proposal](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-necessary-comprehensive-proposal) — Project Engineering, chapter 2 - [Appraisal parameters for civil engineering project](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-parameters-civil-project) — Project Engineering, chapter 2 - [Project appraisal and its importance](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-concept-importance) — Project Engineering, chapter 2 - [Step by step project appraisal process](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aappraisal-steps-process) — Project Engineering, chapter 2