Project analysis is carried out both at the pre-investment and project stages of the investment phase in order to comprehensively study the future project, predict its value and result. In general, the expression is used for this:
Project results (value) = Change in project benefits - Change costs as a result of the project
Project results and costs for one type of resource and one type of product can be determined as follows:
Results for any year = Increase in project output x Unit price of project output
Costs for any year = Increase in the volume of resources for production x Unit value of output
It is customary to distinguish between the following types of project analysis:
- technical;
- financial;
- commercial;
- ecological;
- organizational (institutional);
- social;
- economic.
Before deciding on the implementation of the project, all aspects of the project should be considered throughout the project cycle.
As part of the technical analysis of investment projects, the following are studied:
- technical and technological alternatives;
- location options;
- size (scale, volume) of the project;
- terms of implementation of the project as a whole and its phases;
- availability and sufficiency of sources of raw materials, labor and other resources;
- market capacity for the project products;
- project costs, taking into account unforeseen factors;
- schedule of works on the project.
These tasks are solved with increasing accuracy at the stages of pre-investment research, construction project and creation of working documentation.
In the process of step-by-step technical analysis, the estimate and budget of the project are specified. At the same time, unforeseen factors, physical and price, which lead to unplanned expenses, are specified.
A number of countries are attempting to set levels of such expenditure. So, in the US, this level ranges from 5% for simple, standard projects to 15% for complex, unique ones.
The task of commercial analysis is to evaluate the project from the point of view of the end users of products or services. In general, the tasks to be solved in this case can be reduced to three:
1) marketing;
2) sources and conditions for obtaining resources;
3) conditions of production and sales.
As a result of the commercial analysis, the following questions must be answered:
- Where will the products be sold?
- Does the market have enough capacity to absorb all the products without affecting its price?
- If such an impact on the price is likely, what is it?
- Will the project remain financially viable at the new price?
- What share of the total market capacity can the proposed project provide?
- Are the products intended for local consumption or exported?
- What financial measures will be required to promote products to the market and what reserves should be provided in the project to finance marketing?
- Are existing methods of supply able to guarantee their timeliness and eliminate interruptions?
- Are competitive bidding practiced to establish fair prices?
- Who develops the specifications for the necessary purchases?
Ecological analysis occupies a special place in project analysis, since the impact of human activities on the environment is not sufficiently studied and, most importantly, environmentally imperfect solutions lead to irreversible changes in the environment.
The task of environmental analysis of an investment project is to establish the potential environmental damage caused by the project both in the investment and post-investment periods, as well as to determine the measures necessary to mitigate or prevent such an effect.
The project plan should include appropriate guidance standards as well as measures to ensure compliance with those standards. According to the World Bank, the cost of the necessary measures to protect the environment is no more than 3% of the total cost of the project. Significantly higher costs – up to 10% – are required by those projects that need to include protective measures after their development is completed.
A standard cost-benefit analysis of environmental projects is often not possible, as environmental costs and results are often very difficult to calculate. In these cases, they resort to the so-called qualitative analysis (for example, the effect of some pollutant on vision, smell, taste, corrosion, animals, plants). Nevertheless, qualitative analysis, like quantitative analysis, should show the difference between the situations "with the project" and "without the project".
The purpose of organizational analysis is to assess the organizational, legal, political and administrative situation within which the project should be implemented, as well as to develop the necessary recommendations in terms of management; organizational structure; planning, staffing and training of personnel; financial activities; Policy.
The main directions of organizational analysis:
- definition of the tasks of the project participants in relation to the current legislation and by-laws (instructions, regulations, etc.);
- assessment of the strengths and weaknesses of the project participants in terms of material and technical base, qualifications, structures, financial situation;
- assessment of the possible impact of laws, policies and regulations on the fate of the project, especially in terms of environmental protection, wages, prices, state support, foreign economic relations;
- development of measures to eliminate the shortcomings identified in the analysis process, as well as reducing the negative impact of the project environment (laws, policies, instructions);
- development of proposals for improving the above-mentioned organizational factors affecting the effectiveness of the project.
The purpose of social analysis is to determine the suitability of project plan options for its users. The results of social analysis should provide an opportunity to build a strategy of interaction between the project and its users and the support of the population, which would contribute to the achievement of the project goals.
Social analysis focuses on four main areas:
1) social-cultural and demographic characteristics of the population affected by the project (quantitative characteristics and social structure);
2) organization of the population in the area of the project, including the family structure, the availability of labor resources, access to resource control;
3) the acceptability of the project for the local culture;
4) a strategy for securing the necessary commitments from population groups and organizations benefiting from the project results.
It should be noted that social analysis is very difficult primarily because of the difficulty of applying formal methods and the lack of standard methods and procedures. However, its success contributes to the improvement of the project plan as well as its effectiveness.
Social outcomes are in most cases cost-effective and are included in the overall results of the project as part of the cost-effectiveness determination.
The main types of social results of the project to be reflected in the performance calculations are as follows:
- change in the number of jobs in the region;
- improvement of housing and cultural and living conditions of employees;
- changes in the working conditions of employees;
- change in the structure of production personnel;
- change in the reliability of supplying the population with certain types of goods;
- changes in the level of health of workers and the population;
- saving free time of the population.
The measures envisaged by the project to create normal working and rest conditions for employees, provide them with food, living space and social infrastructure are mandatory conditions for its implementation and are not subject to any independent assessment as part of the project results.
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