A project profile is a simplified description of an eventual project. In addition to defining the purpose and ownership of the project, it presents a first estimate of the activities involved and the total investment that will be required, as well as the annual operating costs and, in the case of income generating projects, the annual income.
It is simplified in a number of senses; costs may still not be well defined, minor items may be excluded, and assumptions as to the demand for the output of the investment, whether it be a childcare facility, a bridge, or canned vegetables, are probably just that - assumptions.
The project profile serves a number of important purposes. These are discussed briefly below.
a) It helps to ensure that the members of the community or group involved understand the probable implications of their proposal in terms of investment and operating costs, labour requirements, scale of operations and other factors. It is often not until the proposed project is debated publicly and written down in front of everyone that these elements really emerge. Up to this point, group members may just have felt that it would be 'good' to have a new access road to the village, without really understanding what that might entail - both for the village as a whole and for them personally.
b) It helps eliminate wasted effort in preparing detailed projects that are incoherent, lacking support among the applicants, or which fail to meet basic tests of viability. If human and financial resources to support project formulation are limited - which is usually the case - this aspect of the profile in acting as a 'filter' is very important. If the community can only receive funds to support one full project preparation per year, it is best not to waste those resources on a project that has no chance of success.
c) The participation of group members in the preparation and assessment of the profile is an important stage in the ownership process for the specific project, as well as increasing the confidence of the participants in their ability to identify and develop real solutions to their problems (or responses to opportunities). For communities and groups, which have always relied on outsiders telling them what should be done, such confidence building is a valuable contribution to the social capital of the community.
d) Together with the other stages in the RuralInvest approach, it contributes to a more successful implementation process. Experience has show that projects developed through RuralInvest, and which have had participatory project profile development exercises, present fewer problems during the subsequent implementation process. In part this seems to occur because the applicants understand more clearly the objectives and operation of the project. Other factors may include their increased confidence and ownership in the project, and the relationship developed with the local technicians.
Although a profile is normally the first step towards the development of a detailed project design, there are important differences between the two. The profile is a simplified view of the eventual project that makes important compromises in order to reduce the complexity of the analysis and render it understandable by rural populations with no previous experience in project design or analysis. Such compromises are not, in themselves, bad, but they can be dangerous if the person leading the participatory sessions at group or community level forgets that they exist, and encourages the participants to think that the profile is the project. The following are key characteristics of a project profile.
A Profile is a 'Snapshot' of the Project: A proper project analysis considers the changes to the project over time. A small plant processing fruits for jams and other preserves may process increased volumes as the years go by, may increase its efficiency of processing (thus reducing costs), or may start to process other fruits harvested at different times of the year, thus staying open more months of the year. The profile, however, takes the simple approach and looks at the results from an average year over the project life.
A Profile Simplifies the Replacement of Equipment and Machinery: In the real world, machinery and equipment are replaced when it is too expensive to keep them functioning. The project will face costs in the year they are replaced. For the project profile, with its 'snapshot' view of the world, this is not possible. The profile, therefore, sets aside funds in the 'average' year selected to contribute to the eventual cost of replacing the machine. While not completely accurate, this does at least provide some allowance for this essential step.
A Profile Includes no Financing Costs: A key simplification made in preparing a profile for income generating projects is to completely ignore the cost of financing as the estimation of such costs requires quite complicated calculations (non-income generating projects will not normally have financing costs, as they use grant funds, rather than loans). In the detailed project analysis financing costs are considered - not only for the investment itself, but also for working capital needed to cover initial operating expenses. Financing costs can be significant and their absence at this stage means that the profile will tend to look more attractive than it would do if these costs were included, and this should be borne in mind.
A Profile Uses Broad Estimations for Costs and Income: In preparing a detailed project it is expected that the applicants will make every reasonable effort to obtain accurate information as to costs and income (including yields and prices). A workshop might be broken down into improving access for vehicles, the concrete base, the major structure (per square meter), the water and power supply, and the equipment to go inside. This is not necessary or even desirable when preparing the profile. It is sufficient at this stage to estimate in general terms that the approximate cost of the workshop will be $12,500.
A Profile Excludes Associated Costs: Projects typically involve a number of associated costs that are largely ignored at the level of the profile. These can include such items as: technical training of staff; establishment of systems (for example book-keeping); fees for sanitary certificates or company registration; design of packaging and labels, and; payments to architects, surveyors or engineers who will oversee works needed for the project. Although each one of these costs may not in itself be very large, together they can add significantly to start-up costs for the new enterprise. However, they require considerable work to estimate accurately and are normally ignored in preparing the profile.
A Profile Pays Limited Attention to Project Organization and Impact: In order to ensure that an investment results in a successful project, it is critical to consider carefully how the eventual project will be managed and operated, and what sort of impact it might have on the social, cultural and environmental setting it is placed in. Determining these factors may often involve considerable discussions among the group, and in the case of environmental impact, may even necessitate bringing in a specialist evaluator. Again, it is not necessary to provide all the answers at the profile stage. However, it is important that the applicants have given some thought to these factors, otherwise arguments may severely damage the groups unity and commitment later in the preparation process.
The project profile, as prepared with the applicants, consists of five parts. The last part has two variations: one exclusively for income generating projects (5a); and the other for non income generating projects (5b). With the exception of Part 1 (the Introduction) it is not essential that the components be completed in the same order as presented. Many groups prefer to define the investment before tackling general costs or income, but this is not required. An example layout for the components is presented in Annex 1 to this manual, and can be used as a guide when drawing out the tables on a blackboard or large sheet of paper.
Part 1: Background Information: This section provides general information about the applicants, the location of the project and its characteristics, as well as a brief summary of the objectives and justification for the investment, including the demand anticipated for the product or service resulting from the project when operating. The purpose of Part 1 is to allow anyone not familiar with the project to understand - preferably in no more than 1 page - the background to the proposal. Agreement should be obtained from the applicants as to the general purpose and characteristics of the eventual project as well as who would likely be involved in its operation and management.
Part 2: Investment. In this section the applicants are asked to list the various elements that will have to be obtained (purchased or supplied by the group) for the investment to be realized. For each item (except land - see Section 4 of this manual) it is also necessary to estimate the average working life of the item and who is to provide it (loan, donation, contribution of the community). A simple calculation is then made to determine the average annual cost of each item.
Part 3: Operating Costs and Income per Activity: This section describes income and costs directly resulting from carrying out activities made possible by the project, and which change according to the scale of activity (i.e. the greater the activity, the greater the costs and income). If the project is a simple one, there may only be a single activity, for example the grinding of grain (in the case of a local mill). However, in other cases there could be several activities; for example a dairy plant may produce cheese, butter and yoghurt. The section is primarily of relevance to income-generating projects, although there are some circumstances where it may prove useful to list operating costs and even income for other types of projects as well (e.g. where there is a user charge for a health clinic). To adequately complete this section, it is necessary for the group to understand the concepts of production units, sales units and production cycles, which are discussed further in Section 4 of this manual.
Part 4: General and Maintenance Costs: Some types of costs are not associated with the scale of production, but are a consequence of the project in general. These may include such expenses as: hiring a manager, nurse, or other employee; operating a vehicle; local land or property taxes; or office expenses. They will also include the costs of maintaining (but not replacing) equipment and other goods purchased or built at the investment stage - for example maintaining an access road, or repairing fences used to protect a reforested area.
Part 5a: Preliminary Estimate of Viability (income generating projects only). This section is used to perform the simple calculations required to make the preliminary estimate of project viability. The key calculations are:
Annual Net Income: To determine if projected income is higher than direct and general costs
Annual Net Income less Annual Investment Costs: To determine if annual net income (above) is sufficient to also cover replacement of the investment as it reaches the end of its useful life
Number of Years of Net Income Needed to Cover the Investment: To determine if the annual net income is high enough to pay back the investment cost within a reasonable period of time.
Part 5b: Preliminary Beneficiary Estimates (non income generating projects). This section relates the overall cost of establishing and running the project to the number of beneficiaries and also considers how operating costs will be paid for. Key calculations are:
Investment Cost per Beneficiary: The total expected investment cost divided by the number of direct beneficiaries (users and suppliers) and indirect beneficiaries (all those potentially affected by the project).
Annual Operating Cost per Beneficiary: The total annual operating cost (including maintenance and repairs) divided by the number of direct and indirect beneficiaries.
The preliminary identification of future sources of funds for project operation and upkeep is also a very important part of profile preparation for non-income generating projects. Obtaining investment funds is often much easier than finding resources to cover annual costs once the project is underway. Any part of this cost not assured from outside sources will have to be met by the users of the project and/or the surrounding community.