Part I contained an introduction to the project cycle, and illustrations of the processes of project formulation and implementation. Part II now describes in greater detail the stages within project formulation, that is identification, preparation and appraisal.
It is important to point out at the outset that production-oriented aquaculture development projects differ substantially from those typical of production in agriculture.
Agriculture production projects are often concerned with large-scale development over wide areas of land for which there may be options for different crops, such as sorghum, corn, maize, tobacco, vegetables, etc. Even production projects which perhaps only deal with one type of farming system, such as animal or poultry husbandry, are often not restricted to any one place.
Aquaculture production projects in general are more constrained physically by their need for existing waterbodies, or water resources adjacent to suitable land. Consequently these basic requirements immediately limit options for:
the species which can be farmed (into those which tolerate fresh-water, brackishwater, or marine environments);
the systems which can used (as extensive, semi-intensive, and intensive systems all depend on the availability of resources and inputs); and
the practices which can be used (as all farm units, such as ponds, raceways, floating cages, rafts, etc., each have characteristics which make them particularly applicable in certain conditions).
These physical constraints influence the types of projects which can be formulated. Notably, projects with activities which extend over large areas are, for the most part, not characteristic of aquaculture development; projects are typically relatively small, and highly specific in terms of their objectives.
While the emphasis in this document is on public sector funded projects, it is recognized that in aquaculture, as in agriculture, most investment is made by the private sector, with little or no direct intervention by government. Such investment decisions can be taken within the broad framework of project formulation described here, but the process will differ in the level of attention given to each stage.
As a consequence of the constraints and the limitations noted above, aquaculture projects, by and large, fall into four categories or models, i.e.:
MODEL A: Private sector projects where investment is by a commercial interest. For example, an entrepreneur wants to build a trout farm on his own land; or a shrimp farming company wants to build a new hatchery; or an international corporation wants to convert its low-grade sugarcane plantations into catfish production.
MODEL B: Public sector projects where the investment is in a publicity owned entity. For example, the Ministry of Fisheries wants to build a state hatchery to support its programme to enhance inland fisheries; or the national extension service requires a new farm to demonstrate fresh-water shrimp production; or the Ministry of Technology wishes to build a national research and development centre; or a parastatal organization wants to build a new fish market.
MODEL C: Public sector projects where investment is by private farmers supported by government services. For example, the Ministry of Agriculture wants to increase inland fisheries production; or the Department of Aquaculture wishes to increase national production of molluscs; or the Ministry of Planning and Development seeks to increase national foreign exchange earnings through marine shrimp production.
MODEL D: Public sector projects concerned only with institution building. For example, the Ministry of Agriculture needs to be strengthened to improve its organization and management of the aquaculture sub-sector; or a parastatal body needs training in market research and product promotion; or certain universities want to upgrade their graduate and post-graduate education programmes in aquaculture.
Project identification is the first stage of formulation. It has two phases (I and II). The first concerns the preparation required for project formulation, and the second concerns reconnaissance and preliminary project design.
The purpose of Phase I is to prepare for well-organized project formulation, or, more precisely, to complete all necessary arrangements (administrative, logistical, and financial) to ensure that project formulation makes efficient use of the time and resources it requires.
Four main outputs of this phase are expected:
The project concept or idea is outlined, with basic objectives, possible activities, and boundaries. The original concept is formalized and described in a written statement on the basis of available information. The preliminary project framework is constructed (public sector projects).
Terms of reference (TOR) for the exercise are prepared. They determine the broad scope of work to be carried out. They are used, subsequently, as a yardstick to measure effectiveness of the formulation team.
The work plan for carrying out formulation activities is prepared as far as possible. This requires participation of the team leader and involvement of all team members to ensure that each professional requirement for the work is taken into account.
Specific individuals required in the formulation team, representing the different disciplines required, are identified and recruited. Funds are released to provide operational expenses, and office space, transportation arrangements, resources for communication, and any other logistical support, are all reserved.
The work in the Phase I typically has two steps, namely project inception (called Step 1), and preparation of formulation work plan (Step 2). Activities of both these steps are illustrated in Figure 4, and described in detail in the following text.
For projects financed wholly or partially through official external assistance, a logical framework is often required at this point. This is a planning and management tool which is complementary to the conventional project formulation procedures which are the subject of this document. Table 1 shows a logical framework, written at the project idea stage, of a project for a municipally owned fish farm in China.
Figure 4 Phase I. Preparation for project formulation
For projects financed wholly or partially through official external assistance, a logical framework is often required at this point. This is a planning and management tool which is complementary to the conventional project formulation procedures which are the subject of this document. Table 1 shows a logical framework, written at the project idea stage, of a project for a municipally owned fish farm in China.
The logical framework is a guide to helping those concerned to “think through” the project by taking them through a number of logical steps. Thus, at the first possible point in the formulation process, those responsible for the project are required, after defining sector objectives, to develop the first draft of the framework. This requires the project planners to:
|Narrative summary||Objectively variable indicators||Means of verification||Important assumptions/risks|
|Increase freshwater fish production by X tons, for the domestic market||1) Increase in freshwater fish production||Official statistics||1) Resources are available|
|2) Increase in supplies of fresh water into the market||Official statistics||2) There is a market to absorb the increase|
|Increase employment by x%||Number of new jobs created||Official statistics||Labour of suitable quality is available|
|Increase contribution to GNP by 5%||Value of income generated||Official statistics||Revenues exceed costs|
|Project Purpose/ Immediate Objectives|
|Investment in construction of 100 ha of pond area, hatchery, pumping facility, canals, buildings, access road||1) Investment capital disbursed on schedule||Financial statement||1) Quality of materials and construction are acceptable construction, laboratory|
|2) Farm is constructed and commissioned||(a) Implementation completion report||2) Capital costs are within estimate|
|3) Fish sales||(b) Report by the ve- rification group Sales records||3) Management, technicians and labour of required expertise available|
|Financially profitable||Profit||Accounting records||Revenues greater than costs (capital and operating)|
|Narrative summary||Objectively variable indicators||Means of verification||Important assumptions/risks|
|Sales of fish||Quantity sold||Sales records||1) Demand exists compatible with production|
|Provide on-the-job training for technicians and managers||Number of people trained and moved to new projects||Personnel records at the farm||2) Supply is consistent with esti-for mates of yield and mortality|
|(a) There are managers & technicians available to pro- vide the required training|
|(b) Suitably qualified people are available for on-the- job training|
|Job creation||Number and type of jobs||Personnel records at the farm||(a) Managers, technicians and labour of required skills are available|
|Financial surplus||Profit||Accounts||(b) Successful operation of farming|
|Land||Government will assign land||Land use certificate||Not suitable for other use|
|Water||Government will issue water ease/use permits||Water use certificate||Quantity and quality adequate|
|Access roads Power and services Pond and canal construction||Completion||Acceptance report||Release of funds and work completion are scheduled|
|Raw material for fish feed||Delivery checks||Invoices/receipts||Materials are available|
|Trained personnel||Present||Personnel records||Available|
|Working capital||Bank transfer||Accounts||Available|
set indicators or criteria related to project and sector objectives;
set means of verification of the project objectives;
state the major assumptions and risks affecting the project.
At this point in the formulation process, the information available is likely to be at a general level, as shown in Table 1. Nevertheless, those responsible for developing project ideas, or securing funding to take them through formulation, will find the framework useful. As more information becomes available in project identification and design, more detail can be written into the logical framework.
The framework approach is most useful in projects which have a specific and quantifiable output, for example production projects. It is not so convenient to use for wide ranging projects, or where it is difficult to verify objectives, for example in research, training and institutional strengthening projects where the means of verification are primarily qualitative.
With some donor agencies the decision to proceed to project formulation is made on the basis of the logical framework.
Although procedures vary between countries, agencies, and also between the public and private sectors, it is good practice for the project sponsor (a donor agency or investor in the private sector) to draft preliminary TOR. These will be finalized subsequently, preferably by the formulation team in conjunction with the sponsor.
Step la - Preparation of the logical framework, provisional project description and preliminary Terms of Reference (TOR)
The starting point of the project formulation process is the project idea. The idea may have originated from any of a number of sources, including a previous project, sector studies, and requests from interested parties. It may be brief and broad in scope, or quite precise, and it may already be linked to a particular governmental department, or a funding source.
When the project sponsor has decided that a project should, if possible, be formulated, it is desirable that a brief project description should be prepared, and preliminary TOR written. It is important, when doing so, to maintain the right balance between, on the one hand, the need to keep the project concept flexible (so that any potentially significant area, sector, institutions, or target group are not excluded a priori) and, on the other, the need to keep investigations within constraints of time and resource limitations. For this reason donor agencies usually appoint an experienced staff member to undertake this task.
It is useful when drawing up TOR to set out preliminary options concerning geographical boundaries, institutions which will be involved, and target groups. Based on these options, the preliminary TOR should take into account the following:
the nature of perceived development problems and priorities attached to their solution;
broad project objectives and how they fit the overall development strategy (of the region, country, institution, or company);
decisions already made on main project components, and information on components for consideration by the formulation team; and
decisions already made regarding specific areas, sub-sectors, institutions, and target groups to be involved, or information for the team to consider.
Step 1b - Recruitment and mobilization of the formulation team
The composition of the team, in terms of professional disciplines and technical or vocational experiences respective for the work required, mainly depends on the nature of the project as described in the provisional project description and preliminary TOR. It is advisable to keep the team fairly small (probably a maximum of five persons, including team leader). The individuals within the team, therefore, must cover collectively a broad range of professional disciplines and expertise.
In aquaculture, because it is a new field, it is not always easy to bring together individuals who have the necessary broad experience and can direct their work immediately to the key issues of the proposed project, and it may be difficult to find the specialists who are also required. For example, for a project which has a component of commercial production, it is important at the out set to include one or more individuals who have worked in the commercial side of the sector for a living (such as a farmer or processor), rather than those whose production experience is only information gained as a by-product of technology research and development. Similarly hatchery engineers, who may be experts with certain types of systems for temperate species, are often not familiar with technology for tropical species, but their knowledge can assist in the transfer of technology.
The nomination of team leader is critical. The team leader should be experienced in at least one of the expected project components, well-qualified to command the respect of all team members, and capable of assembling and writing the project report.
Step 1c - Review of assignment (formulation team)
Using the provisional project description and preliminary TOR as a starting point, the assembled formulation team members should make themselves familiar with the assignment prior to commencing work in the field. This would include:
familiarizing themselves with all project criteria;
assembling existing data and documents relevant to the project;
consulting key representatives of the sponsoring organization, government bodies, organizations, and individuals who possess information or knowledge relevant to the project, or who can express points of interest, or policies;
identifying from this information essential development issues and problems which should be given priority during the field work in Phase II.
The attention given to this Step varies considerably. It is not uncommon for teams to go into the field immediately after mobilizing, with little or no briefing beforehand or, indeed, to mobilize in the field. This may be because project sponsors which are development organizations may have considerable “institutional memory” immediately available to draw upon and, very often, the team leader will have recent experience of the area to which the team is going. Even when this is not the case, the Step does not require time consuming schedules for data or preparation of new material; simply, what is necessary is the assembly of existing knowledge and its use to identify the major issues. Going through this process will make project identification easier and more effective.
It is important, however, that the team knows all criteria which the project sponsor has set out for the proposed project. These criteria fall broadly into two types, those dealing with objectives, and those with constraints.
Objective criteria concern aims, such as minimizing foreign expense (for procurement of inputs and equipment), achieving a minimum level of profitability, maximizing hard currency earnings (producing export crops), optimizing manpower usage, increasing food supplies, etc.
Constraint criteria concern predeterminants, such as ceilings on total project cost, costs per beneficiary, maximum technical assistance cost, the location of the project, the selection of cultured species, etc.
Step 1d - Terms of reference
These are TOR for the formulation team as a whole. The preliminary TOR (Step 1a) are now redrafted, having regard to the analysis of the existing information carried out in Step 1c, so that they are a useful guide to the team.
Writing good TOR is not a brief and simple task. In many cases poor project formulation can be traced to carelessly drafted TOR. They should not be too brief and vague, thus leaving the formulation team with a potentially large and endless task. Alternatively, they should not be too detailed and specific, leaving the formulation team little room to manoeuvre or to contribute imagination and creativity to the task.
Good TOR for a project formulation team should:
provide a concise background to the assignment (the origin or rationale behind the project idea),;
state clearly what is expected to result from the work of the formulation team;
specify important or general national or sectoral policies with which the proposals of the team should comply or be consistent;
indicate major project selection and design constraints which should be observed (such as maximum project cost, or target farm incomes);
suggest types of activities which may be included in the project, and which institutions could be involved; and
set a precise date for conclusion of the formulation exercise.
TOR should be restricted to no more than a few pages typed in normal format. They should express a manageable task, the achievement of which is realistic within the permitted time frame.
From this point the team is responsible for organizing its own work.
Differences in public/private sector procedures (Step 1)
While all the tasks of Step 1 are common to all four models of aquaculture projects, there are some differences within each of the tasks between public and private sector procedures. Notably, in Step 1a, the construction of the logical framework is usually omitted in private sector projects, and in Step 1c (review assignment) there could be important differences in criteria for a private sector project (Model A), compared with those of public sector production projects (Models B & C). For example, for the entrepreneur who wishes to use his own land and water source for trout farming, the project criteria will include references to these site constraints. For a government wishing to build a new catfish hatchery to enhance a large reservoir fishery (Model B), the species and production required may be established but not yet the exact location of the hatchery.
With the right TOR the tasks of the leader and his team are manageable, and the schedule and objectives are realistic. During this Step the team plans effective implemention of work in the time allocated. Project formulation is always undertaken within limited time and resources. The work, therefore, has to be carefully oriented and scheduled so that the team completes it on time, within the framework of the project criteria, and within budget.
Step 2a - The project planning meeting
The purpose of the meeting is to prepare team members for their tasks. When possible the meeting should be held in the presence of the project sponsor, whether an individual entrepreneur, a company representative, or a steering committee (in the case of most agencies). It provides an opportunity for ensuring that the individual team members fully understand what is expected of them, and accept and adopt a common approach to their assignments (in terms of method and procedure). The “working documents” for the meeting will be the TOR (Step 1d). At some planning meetings important decision may be taken regarding, for example, scheduling, or the types of project analysis which it is planned to adopt. For the team leader, the meeting should facilitate the preparation of the workplan.
Minutes of the meeting are recorded by the team leader and circulated to the team and the project sponsor.
The planning meeting is often not as rigorous as it should be. In private sector projects it may be no more than a discussion with the client, or company representatives; in the public sector it may be a roundtable gathering with the project sponsor and government departmental staff members.
Step 2b - Preparation of the workplan and allocation of responsibilities
In most cases, aquaculture projects require only a simple workplan which can be illustrated in the form of a bar chart of key tasks. In relatively complex projects, where there are many inputs in the work to be undertaken, the team leader may construct a “logic diagram”. This shows the relationship in time of different tasks and the total time required. It may then be helpful for him to use a “task allocation matrix” by which various tasks can be cross-referenced with individual team members who will thereafter have responsibility for them, whether working alone or with a group. It is essential that the schedule, description of each task, output required, responsibility for the output, and date of delivery, are all accepted and adopted by the team members at this point.
Scheduling is now completed, and there is a precise list of responsibilities for each team member. The team leader should now prepare internal TOR for each team member based on the task allocated. This prevents misunderstandings with regard to what is expected of each member of the team, and when.
In larger and more complex project formulations it is usually necessary to use “critical path analysis” (CPA), a management technique to achieve a manageable workplan, usually through Programme Evaluation and Review Techniques (PERT).
Differences in public/private sector procedures (Step 2)
Both tasks of Step 2 are common to all four Models (A, B, C, & D).
Project 1 - A Commercial Fish Hatchery Project in a Mediterranean Country
This private sector project was initiated by an investor who was already undertaking research and development in cage farming for sea bass and sea bream in the country. After struggling for a few years from an erratic supply of seed, the lack of good feed, and outbreaks of disease, he considered that it should be more profitable to concentrate his business on the production of seed to be sold throughout the Mediterranean region. He had already purchased an area of land adjacent to his site to protect his farming activities, and he believed this would be suitable for a hatchery and nursery.
In discussing his idea with fish culture experts at a Conference and Trade Show (Step 1a), he estimated that a hatchery and nursery producing about 5 million four-month old juveniles each year would be profitable. After visiting a number of consultancy companies exhibiting at the Trade Show, he asked three companies to submit their qualifications and a proposal, with unit costs for professional services, based on written preliminary TOR and background information which he provided (Step 1b).
One month later he received all three proposals in which each company, from available information, identified the key issues as they saw them (Step 1c), together with a general description of the approach proposed (Steps 2a, 2b, and 2c). He selected the firm which had the clearest TOR (Step ld) and a contract was drafted for a three-month preliminary site study, followed by separate price estimates for the complete prefeasibility study and then the feasibility study (Step 1d). The consultants estimated the prefeasibility study could be completed in nine months, if local assistance was provided for a topographical survey, soil data, and water quality analysis, and the feasibility study possibly six months later.
The investor met the consultants (Step 2a) to confirm the time requirements and workplan (Step 2b). After three days of discussions a lump sum contract was agreed for the pre-feasibility study. This included a site study, but the investor agreed to supply separately the survey, and soil and water quality analyses (Step 6b).
The phase of preparation for project formulation took under two months.
Project 2 - A Brackishwater Shrimp Farming Project in a Southeast Asian Country
The external assistance project, as provisionally described in the TOR prepared for the formulation team (Step 1a), envisaged the construction and/or rehabilitation of canals and of existing fish and shrimp ponds to achieve higher yields of shrimp, and the construction of hatcheries, in specified areas. This was to be accompanied by a strengthening of research related to shrimp farming, the provision of extension services to fish-farmers, and the provision of credit to farmers.
Formulation was to be done in two stages: (a) individual schemes would be identified and ranked in order of priority for attention, and preliminary proposals prepared for their implementation; (b) “sub-projects” would be designed to a feasibility level and plans would be prepared for the institutional infrastructure (hatcheries, extension, credit, and research) covering all the sub-projects.
The available funding allowed for a team of five experts to have three weeks in the field and three weeks report writing for Phase II. The team consisted of a team leader/economist, and institutions, civil engineering, and shrimp farming and marketing experts (Step 1b). The team leader and two of the other experts had much recent experience of similar work in the country which substituted for a more formal collection of information about the country (Step 1c).
In this mission the redrafting of the TOR (Step 1d) was omitted.
The team, other than the credit expert who had been delayed, mobilized in the capital where a meeting took place attended by representatives of the Department of Fisheries (DOF) - (Step 2a). At this meeting the objectives of the project were confirmed by DOF, the team's itinerary was discussed and agreed, and the roles of the individual team members. The team leader presented proposals of the lay-out of the interim report and the list of annexes which, at that stage, appeared to be necessary.
The constraints of time available and the itinerary largely determined the workplan and, other than identifying what was expected from each team member, it was not considered necessary to go further into detail (Step 2b).
Project 3 - A Shellfish Farming Enchancement Project in Southeast Asia
In a meeting between EEC and a regional intergovernmental body from Southeast Asia to discuss technical cooperation and development, the general area of improving sanitary control in the production and marketing of farmed shellfish throughout the region was acknowledged to be a priority. It was agreed that a team of EEC consultants would tour the region on the premise that Europe had technical knowledge on shellfish farming and sanitary control which could be transferred to improve these activities in the region. Increased production of shellfish in the region could be sold in national and export markets, and new markets would be opened for European equipment for the sanitary and depuration processes.
Six months later a team of three EEC experts (an economist, who was the leader, a shellfish producer, and a commercial processor) toured the region, discussed the idea with the five respective national Fisheries Departments concerned, and prepared the provisional description of a large, multicomponent, ten-year project (Step la), to be discussed further after a study tour in Europe by a delegation from the region.
Details of the project were circulated to fisheries institutes in the EEC and the region, and the study tour was budgeted and organized. Ten months later a second meeting was held in Brussels. Project objectives, to help small-scale fishermen re-orientate toward shellfish culture, were redefined and accepted.
An EEC tender was prepared, based on preliminary TOR established at the meeting. Administrative arrangements were finalized eight months later to mobilize a six-member project formulation team for a one-year formulation exercise, operating from headquarters in Singapore (Step lb).
In its first month the team met key officials in the region, collected and reviewed the available documentation, and reviewed its assignment (Step lc). It then revised its TOR concluding that 15 months, not 12, were needed to carry out the work. This issue was raised in a project meeting (Step 2a) held in the presence of a Steering Committee which consisted of representatives of participating countries and experts. The Committee agreed in principle to discuss the extra budget needed. Within a month of the project planning meeting, a project logic diagram had been prepared by the team. On the basis of this diagram, time requirements were finalized, workplan validated, and responsibilities and individual work programmes of the team members established (Step 2b).
The phase of preparation for project formulation had taken 16 months.
Points for discussion concerning the above illustrations might include the following:
the factors which contributed to the different time schedules of phase I for the three projects;
the extent to which the procedures for Phase I of each project followed those described in the text and whether any departures were justified;
the extent to which it appears that teams with appropriate multidisciplinary skills were mobilized;
consideration of which project got off to the better start.
Purpose and Outputs
The purpose of this phase is to ‘think through the original project idea’. The team has the opportunity throughout the four Steps of this phase (3–6) to identify and review all the constraints and opportunities, the people likely to be involved, the activities which are going to take place, the technologies which may be used, and the benefits which may be generated.
A distinction should be made at this stage between projects which are specific with regard to location, species, etc. (Models A & B) and projects which are general in nature (Models C & D). The former are characteristic of almost all aquaculture projects in the private sector, and of a number of production-oriented projects in the public sector. The latter are characteristic of most public sector projects, and lack the specificities of the projects referred to above.
Nonetheless, this phase is still important in the formulation of both private and public projects. The difference in its application is one of degree. Clearly, where a project idea is already closely defined in terms of location, activity, people, technology, output, etc., the opportunities to identify further options will be limited. Even so, the phase is important as it provides the opportunity to establish that the original idea was in fact sound. Where a project idea is not closely defined, the team should use this phase to identify and analyse all ways in which project objectives can be met.
Bearing in mind therefore this distinction between the two types of projects, and remembering that even with the first type this phase presents the opportunity to ensure that the project “fits” into the physical, social, and economic environments, the phase has four main outputs. These are:
An understanding of development deficiencies, potentials, and constraints of the project area/sub-sector from an overall perspective and from that of the main agents or interest groups active in the area/sub-sector.
Working assumptions about future changes in the project area/sub-sector expected to occur in the absence of any deliberate action, such as the project idea under consideration.
Identification of broad options for project design relating, for example, to definition of target groups, content of technological packages, location of physical infrastructure, and institutional participation.
Preliminary definition of a suitable project (or projects), including outline specification of project components, cost estimates, and indicative analysis of expected impact.
The work in Phase II has four Steps: (Step 3) analysis and diagnosis of the project situation from an overall perspective; (Step 4) analysis and diagnosis of the project situation from the perspective of the those concerned (the main agents); (Step 5) assessing the future without the project; and (Step 6) outline specification of a possible project. the activities of these Steps are illustrated in Figure 5, and described below. The work in Steps 3 and 4 is usually undertaken concurrently, as will be apparent from the following text.
The purpose of this Step is to understand and explain the nature of the development problems in the area/sub-sector relative to aquaculture, and the possible solutions.
Step 3a - Review of national, regional and sectoral background
It is important that expected outputs of a project are considered in relation to existing and other proposed development plans and programmes for the sector, and related sectors. This usually takes the form of a general review of the broad development context in which the project is being considered. It will include the economic structure and recent trends of the aquaculture sector in the concerned area, important features of the major aquacultural systems in use, markets and price structures, institutions, organizations and management, income and welfare in aquaculture and related sub-sectors, and the government's strategic priorities and policies for aquacultural development.
Often the aquaculture sector may be small or even non-existent. If this is the case, the team should assess the resource base, and review and make analyses of directly comparable activities, such as fisheries (for marketing and price structure information), and an appropriate part of the agriculture sector (for example, small-scale farmers, and farmers engaged in pig or poultry husbandry). This comparative study would include financial and manpower allocations, farming systems and relevant social characteristics. It might also be relevant for the team to summarize briefly a situation in a similar country where the aquaculture sector has attained a level of development as to be self-sustaining and, in particular, the strategies and policies which led to this situation. If, on the other hand, there is an active aquaculture sector in the country, or the area concerned, then the team should already have a good basis of information with which to work.
Step 3b - General evaluation of the project area/sub-sector
After reviewing the broader national and sectoral context of the project idea, the formulation team then concentrates on the particular geographical area or sub-sector within which the project will probably be located. It is important here to select the most appropriate information relevant to the proposed project, and to evaluate its significance. Points of concern typically cover:
Physical features : The degree of importance to the project of climate, geology, soils, topography, water resources available for aquaculture, settlements, and existing land-use. Mapping is often the most convenient way to present this information. Attention should be given also to changes which regularly take place in physical features. For example, regular changes in land use and the extent of flooding and its consequences (such as, in mapping acid sulphate soils, indicating distribution of leachates under flood conditions).
Figure 5 Phase II. Reconnaissance and preliminary project design
Infrastructure: The extent of and availability to the project of infrastructure, such as facilities and services, their general condition or quality, and standards of maintenance. This will also include general utilities, such as energy supplies, but if the electricity service is unreliable or fuel is often in short supply these factors should be noted as they will influence, for example, the choice of pumps for water delivery. Similarly, although at first glance there may be good transportation links to the area or site, bridges may not withstand the weight of loaded trucks which will deliver feed to the site regularly or take out products, or the roads may be impassable at times in the rainy season.
Economic activity: Significant features of existing aquacultural practices, technologies used, levels of productivity being achieved and analyses of trends and long-term outlook, and marketing systems both upstream and downstream of the main production units. When a new technology is developed, many countries may exploit it with the result that market prices fall. Thus, in a project to produce marine fish (say) in the Mediterranean for EEC markets, the team would review the potentials in other countries with similar coastal resources, analyse the possible competition, and forecast the impact of the project on market prices.
As at other stages in project formulation, the information sought by the team at this point will be determined by the situation. For example, where the project is concerned with providing conditions to encourage production, this may only be possible if resources currently used elsewhere in the agriculture sector (land, water, labour, and capital) are diverted in some degree to aquaculture. In this case it will be important to begin establishing costs of farm inputs and farmgate prices of outputs to determine the likely financial attractiveness of fish farming to producers. If an expansion of existing aquacultural activities is planned, then economic systems which provide inputs and the marketing system will both require review and analysis to determine what changes may be needed.
Socio-economic features: These will include household characteristics, land tenure and size of holdings, water use and rights, population and migration, labour supply and employment, income levels and social welfare, and social organization. For production projects it will be necessary to determine broad social parameters related to growing marketable products, such as the availability of labour, possible involvement of women, cultural activities associated with fish and water, etc. Also at this point it may be useful to make a preliminary assessment of the rate of adoption of new technology which might be appropriate.
As aquaculture is primarily dependent on land and water, these will be mapped, competing uses will be logged and, at this point, the legal and social factors of rights to usage - which are of permanent importance in production projects - will be taken into account.
Institutions and development administration: Responsibilities, organization (both at local and national levels), their functions and effectiveness, and how this may affect the project should be clarified. In most countries there are government and other institutions which support different sectors, such as government departments, university departments, training institutes, research centres, etc. At this point institutions which are, or should be, supporting the aquaculture sector should be reviewed so that their strengths and weaknesses are identified. For example, where there is an agriculture extension service in place, its effectiveness needs to be assessed and, also, the feasibility of using it for aquaculture extension.
Policy and strategy: General aspects, which are already known from the previous phase, should not be included here but points of particular relevance to the project should be identified from discussions and visits during the field work.
If the area has no background in aquaculture then it is important to review these features in other parts of the agriculture sector. For example, there may be generous assistance from government to farmers in the form of grants and loans, and a range of support services. These should be reviewed to determine whether they would, or should, be available to the aquaculture sub-sector.
Step 3c - Identification of possible courses of action
In the preceding activities (Steps 3a and 3b) the team was concerned with setting the project idea within the overall context of the aquaculture sector. At this point this information is synthesized and analysed by the team. Using their technical knowledge and experience, the team members should be able to indicate the broad courses of action which could be available.
In area-based projects (Models A and B), the team has to consider the technological options available, together with their organizational implications and environmental constraints.
Technological choices may relate to options for systems and practices and to site selection. The team may consider, for example, a choice between the production of trout in ponds or raceways, or the cultivation of molluscs by raft or rope culture, or between farming shrimp in new or in rehabilitated ponds, or for increasing water exchange pumping through a central canal system. An organizational option in larger commercial projects may be between a central management or separate cost centres and managements for the hatchery, grow-out and marketing functions.
When considering technological systems, the team will also have to take into account the differing organizational needs of various aquaculture systems. For example, if a sub-sector has developed successfully on the basis of earthern ponds, it should not be assumed without further qualification that, because suitable water bodies are available, cage farming could be introduced without difficulty. This system requires a well developed commercial infrastructure which can provide services such as the supply of seed and feed, provision of credit, equipment, research, training and, frequently, the processing and marketing of the product. The team would need to consider in this case whether such support services were likely to be available, or could be made available.
Although the kinds of decision described above will very often have been pre-empted in the project idea, the team should examine them critically to confirm that the project idea is practical, to identify and assess other options, and to take into account potential environmental consequences of any selected option.
Key areas of environmental concern include the following:
nutrient and organic enrichment of the water and bottom sediments as a consequence of cage farming which may result, for example, in the destruction or contamination of bivalve resources;
partial or total ecosystem degradation which may result, for example, from the destruction of coastal mangrove swamps to construct shrimp ponds which may, in turn, reduce the availability of wild shrimp seed for both aquaculture and for recruitment into an offshore fishery;
farm structures which may completely alter the hydrology, flora and fauna of nearby lakes, estuaries or coastal bays resulting, for example, in the damage or destruction of feeding and breeding habitats of many, perhaps also commercially important, food species;
chemicals misused in aquaculture may threaten the health of farmed and wild populations and also of human consumers, emphasizing a need at this point in project formulation to take such possible misuse into account;
introduced exotic species and breeds will alter and may damage local biodiversity and genetic resources.
For sector-based projects the team has to consider all possible courses of action but without going into detail. For example, in a project to increase inland fish production in the country (Model C), the team will be concerned with alternative approaches to the problem, new processes and technologies which might be introduced to achieve various quantified objectives, and also to identify existing economic activities which might be displaced. Within this approach it might consider increasing inland fish production through (i) enchancement of inland water-bodies, (ii) small-scale fish farming, and (iii) a mixture of both. Either of these activities might affect others. With the enhancement programme, which requires fisheries management, the number of fishermen might have to be controlled although those in the fishery may have a better standard of living, while a larger, managed, fishery might create more jobs indirectly than a smaller, commercialized one. With the small-scale fish farming programme, which requires inputs of land and water, it may take away these resources from local rice growers, although fish farming may provide rice growers and millers with a new outlet for their waste products as fish feed. For each option, the team would consider the boundaries of the project (i.e., which inland water-bodies and which watersheds) and make general quantified estimates of how big the project should be, with estimates of the number of fishermen and farmers, facilities required, and operational logistics. These estimates then enable the team to calculate support services required, such as number of hatcheries and nurseries, feed-production plants, ice plants, and possibly market extensions. It may also include manpower services, such as extension and training, and compare differing credit plans. It would also consider various options for the organization and management of the project.
In an institutional strengthening project (Model D) the team may be concerned, for example, with training and research in pathology and would have used Step 3a to carry out a general review of the aquaculture sector and the general constraints on it. In Step 3b the team would have concentrated, perhaps, on fish disease and adaptation of species and systems to local conditions, and on institutions carrying out research, training and extension. In step 3c the team would consider reasons for the existing training and research centre not progressing as planned, and how relevant constraints could be overcome, and how existing institutions responsible for delivering extension services to fish farmers could be improved. The output of Step 3c, in this case, would be a series of proposals to answer these questions - which had arisen from the work done by the team in Steps 3a and 3b.
The formulation team members should discuss these options among themselves and, on an informal basis, with other concerned parties, and agree on a provisional list of the more promising courses of action which are apparent. This list will be reconsidered later in the light of information obtained when individual agents in the project area/sub-sector and their activities and needs are investigated in Step 4c.
Differences in Public/Private Sector Procedures (Step 3)
It will be noted that the work in Step 3 mostly concerns public sector projects which are general in nature (Model C), or deal with institution building (Model D).
Having surveyed the broad features of development in the project area or sub-sector and arrived at a first assessment of project opportunities, the formulation team should now focus attention on understanding how economic and social activities in the area or sub-sector are organized. Questions of concern will include, for example, what do people do? What do they consume and produce? What aquaculture systems are in use? Who controls water, land, credit, and other resources? Which people exercise control or influence decisions, and how?
The approach of the team to these topics is analogous to systems analysis, with people studied not in isolation but with their linkages and interdependencies on others in the “system”.
In practice, many of the activities in step 4 will overlap the field investigations conducted in Step 3.
Step 4a - Identification of the interest groups involved in the project
The provisional specification is an overall view of people who are of concern to the project, and of their activities. It is often helpful to construct a model showing their economic and social relationships. Normally this task will attempt to include all the major groups in the community who are likely to have an interest in the project.
Three main types of interest groups can be described. These groups can be called“agents”, namely:
“Instrument”agents: Individuals, households, and organizations which are prime users of resources made available to the project, including not only those directly involved, such as farmers, but also others, such as suppliers and traders.
“Target”agents: Those whose material conditions and socio-economic status are of prime concern to project management, and by which the impact of the project will be mainly assessed.
“Regulator”agents: Those who control, regulate, intervene in, or otherwise exert substantial influence over the activities and welfare of instrument and target agents.
In dealing with the structure of the system, the formulation team thus considers major interests which link these various agents together. This can be illustrated by constructing flow or process diagrams.
The flow diagram of the economic and social relationships between agents in a system is illustrated in Figure 6 which shows the relationships found in a public sector shrimp-farming project (Model C).
The following agents and their links may be identified:
Instrument agents, including (i) “upstream” agents, such as seed suppliers, feed suppliers (animal feed plants),village money-lenders, credit officers, equipment suppliers, private extension (consultants): (ii) producer agents, such as existing farmers and new farmers, and (iii) “downstream” agents, such as ice plant operators, shrimp processing and trading companies, and fish traders.
Target agents, including farmers (who are also the producer agents referred to above) and their households, fish consumers, potential post-harvest employees (local community households), general economic beneficiaries (national households).
Regulator agents, including the Department of Aquaculture in the Ministry of Fisheries.
The identification of interest groups is more difficult if no aquaculture sector exists as yet, or is small. In this case the project team will first carry out the same sort of system analysis where the proposed activity is to take place to determine how it can best be grafted on to the present socio-economic system.
Step 4b - Detailed study of the agents and their needs
From the provisional specification of the system in the previous Step the formulation team should now extend its field investigations. Field work may generate information which will cause the team to revise the system of economic and social relationships between agents, or to modify some of the criteria used to define agents (Step 4a).
The main purpose of the field work in this step is to:
build up knowledge of behavioural patterns of the principal agents,
assess, where appropriate, their development needs.
Figure 6 Flow diagram of marine shrimp farming and marketing system
Thus, the first task facing the team is gathering, in a short space of time, all the information required to enable it to achieve these two goals. Statistical surveys, based on well-prepared questionnaires, are an ideal method but take time, and may require special training of team members. Alternatively, it may be more practical to use methods of “participatory observation”, that is, relatively long and detailed discussions and interviews with selected key informants, both individuals and groups, for as long a period as possible. Such meetings should include people directly concerned with the project and also those who are not concerned but have special knowledge of the area and people in it.
However, caution is necessary. In a short field trip it is difficult for a team which has no previous knowledge of an area to carry out this exercise successfully. The team leader may have assembled earlier reports, studies, books, etc., about the area (Step 1c) but, whenever possible, a sociologist from the country concerned, familiar with the area and who speaks local languages, should form part of the team. If one is not available then every effort should be made to include someone who knows the area and its people well and can guide the team. Finally, the team should not attempt this “rapid rural appraisal technique” without first referring to the extensive methodology on the subject.
In these discussions and interviews members of the team should avoid pre-conceived ideas of their own. Informants, especially the poorest members of the community, are invariably too polite or shy to contradict opinions advanced by team members. The team should always be primarily concerned with learning from all representative agents concerned, and offer suggestions only when it has a good understanding of local practices, methods, and techniques.
As an illustration of the above, shortage of credit has often been suggested by general observers as one reason why the aquaculture sector has not developed as rapidly as it might in developing countries. A project team might (say) deduce this to be true after talking with existing fish farmers who obtain credit from local money lenders. However, in discussions with credit officers in the local agricultural development banks, the team may learn that a Farmers Loan Programme (which includes fish farmers) is available with fair interest rates but fish farmers do not take advantage of it. Further investigation among farmers may reveal that they do not understand the procedural requirements, or they do not have collateral for credit (as they may not own their ponds and the value of the stock is unacceptable). Similarly, it may be found that the bank's credit officers do not understand the specific cash-flow needs of fish farmers (which differ from agriculturalists as fish are cropped over many months).
Without talking to all three types of agents the team could easily be misled into thinking that their preconceived view was correct, and there was generally a shortage of credit for fish farming. Consequently, in the next Step (Step 4c) the team would have addressed itself to this issue rather than, for example, the familiarization of bank lending officers with the credit requirements of fish farmers.
The team must make certain to include in the discussion all the potential users of natural resources which will be affected by the project. Some of these users may not be readily apparent. For example, in a project for the conversion of fish ponds into shrimp ponds, the team should take care to include those fishermen who harvest an offshore shrimp fishery which is dependent on its annual recruitment from nurseries in the mangrove swamplands, and the coastal communities whose only source of income is catching natural resources of fish seed which are then sold to fish farmers through brokers and middlemen. It is important for the team to discuss the proposed project with all such groups to make sure that it will not compete with their needs, or change their living in an undesirable way.
Again, as with Step 4a, this task is more difficult to carry out for a project where there is not an existing aquaculture sub-sector. Clearly, in such cases, agents do not have any experience from which to estimate their needs if they became involved. Consequently the team has to undertake the delicate task of educating agents, again taking care not to impose their own views, and trying to establish the response in the event of the project being established. For example, almost every production project requires the commitment of government to create appropriate institutional infrastructure. In this situation the team should spend considerable time with senior and middle-level administrators (regulator agents), advising them about typical needs, such as financial incentives (grants, loans and subsidies), and support services (possibly an extension service, hatcheries, research, education, technical training, and published information). similarly the team should spend time talking to potential agents in the private sector, such as those noted earlier.
In summary, throughout this first task it is important for the team not merely to list individual agents' needs but to develop a critical understanding of how the needs link together within a system (in the case of an existing sub-sector), or how they would be linked (where there is not an existing aquaculture sub-sector).
The second task is to locate points within the system where major constraints are operating and the removal of which would have beneficial results. In other words, as well as understanding what is the structure and how it works, the team needs also to understand why, i.e., to develop a behavioural model. The team must think in a precise, systematic, and objective way about what causes things to happen in a particular project area/sub-sector. This process is only a short step away from identifying the constraints on the system.
In approaching this activity, the team should ensure that constraints are defined as closely as possible. For example, typical limiting factors in a shrimp farming system (with reference to Figure 6) may include:
resource deficiencies which limit yield (such as shortages of seed, poor design of ponds, seasonal shortages of water, low quality of water due to acid sulphate soils);
institutional constraints (such as poor extension support, inadequate research, inhibiting land tenure and/or water usage rights);
low performance technology (such as unimproved genetic material, poor quality feed, high cost of feed and/or other basic inputs, unreliable mechanical pumps, filters, and other equipment);
economic constraints (such as lack of access to formal credit, shortage of labour, price fluctuations);
restrictions of a social nature (such as effects on the incomes of others in the community, resistance to new ideas).
At the conclusion of this step the team should be in a position to provide a comprehensive listing of all the system's problems, opportunities, potentials, and constraints. This provides the basis for the next step in the formulation process.
Step 4c - Identification of possible courses of action
In step 3c, which has the same title, the team identified possible courses of action based primarily on a general evaluation of the project area/sub-sector (Step 3b). In that task the team, subject to limitations of time and resources, surveyed aspects such as physical features, economic activity, infrastructure, socio-economic features, institutions, and government policy. In Steps 4a and 4b, on the other hand, the team had to be more concerned with reviewing the socio-economic system in which the project will operate. They addressed such questions as: which people do what? What relationships exist within the socio-economic system in the project area/sub-sector? What are the limiting factors which prevent the system from performing better?
This step can best be described as consisting of four activities. They are:
revision of the possible interventions identified in step 3c in the light of the work done in steps 4a and 4b;
final identification of the different groups of agents to be involved;
identification of complimentary actions within the proposed project which are required elsewhere in the socio-economic system as a result of the primary intervention(s);
discussion of proposed courses of action.
First, in this Step the team synthesizes the work done in step 3- which may be typified as being concerned with “things” - with the work done so far in step 4, which has been concerned with “people”. This is done by “fitting” the “people analysis”, of steps 4a and 4b, to the possible interventions proposed in Step 3c. Thus it is possible that a course of action identified in step 3c might have to be dropped, perhaps because it is now apparent that it would be inimical to the existing social and economic relationships between agents, or perhaps because the analysis in step 4c has identified needs of agents and constraints upon them which give other possible interventions a higher priority.
At this point the team should become aware that the project may not bring about the changes intended, or may bring about other undesired changes. For example, a project for producing fish in net-pens or floating cages in large inland water-bodies may physically obstruct traditional small-scale fishermen and deprive them of their living. Similarly, in the above illustration of the shrimp project, the team may decide that converting all existing fish ponds and fish farmers into shrimp ponds and shrimp farmers would have serious repercussions on the economic and social conditions of the traditional fish seed collectors, and there would be loss of fish to local markets. In this situation it may conclude that it will be desirable that only half the fish ponds available should be converted to shrimp production. Similarly, it may have found that destroying all the mangrove swamplands to make new fish ponds may destroy the offshore fishery on which many fishermen depend, thus new ponds should be constructed just behind the peripheral edge of the mangroves, so preserving natural nursery grounds.
Second, after these adjustments have been made, the team should now be in a position to consider who are to be selected as main “target”agents or beneficiaries, in the case of the shrimp project, or who constitute the active receivers or users of projects designed to improve technology, or receive infrastructure, or a line of credit, etc., depending on what is to be introduced by the project.
At this stage the best the team can do, on the basis of the limited field work it has carried out, is to make a first estimate of the number of target agents. The adoption rate will be influenced by such factors as the attitudes of target agents to new technology, the availability of inputs, the availability of credit, and an estimate of the number of agents prepared to make the commitment of time required.
Third, clearly because intervention in one part of the socio-economic system is likely to have consequences elsewhere within it, the team may be required to identify additional courses of action. For example, intervention in the form of private sector investment in shrimp production may require new investments in ice plants and a cold storage facility for the shrimp, destined for exports, to maintain quality control, and possibly a small unit in the Department of Public Health to monitor it; or a project to encourage pond farming may result in a need by farmers for some form of cooperative or association which, initially, might receive government support. These additional interventions elsewhere in the system will form new components of projects.
The need for such institutional changes, as a consequence of the introduction, say, of the production and marketing components of a project, may be immediately apparent, through the need for extension services, demonstration farms, study tours, etc. In contrast some required changes may not be so apparent, and the team therefore should have a good understanding of the responsibilities and functions of institutions, particularly in government. For example, if a team is poorly informed, it may not realise that where a project is concerned with the introduction of non-indigenous species of fish into the country, or the movement of adults, eggs, and juveniles, then the government should have a policy, complete with regulations, towards introductions and transfers, and possibly a small government veterinary unit, complete with quarantine station, to authorize and monitor such activities.
Fourth, the members of the formulation team should discuss these ideas among themselves and rank them in order of importance and in terms of their impact on agents. They should then discuss their preliminary conclusions with appropriate parties outside the team who are able to comment and give advice.
Differences in Public/Private Sector Procedures (Step 4)
In private sector production projects (Model A), the three tasks of Step 4 may be omitted altogether, or they may be included when useful to the project sponsor. For example, the project sponsor may be concerned that his production project (which, say, requires low-cost labour) fits into the local socio-economic system and that no constraints will be imposed on the project. Sometimes this Step will be fully developed by the team or, on other occasions, the project sponsor will be fully aware of the socio-economic structure in the project area; for example, the international corporation converting its sugarcane lands to catfish production.
In public sector projects (Models B, C, & D), however, it will be clear that all three tasks in the Step are usually very important. Where it may not be so important is in projects which are analagous to private sector projects, such as a state-owned farm.
The team should now have a comprehensive understanding of the current development situation in the project area/sub-sector. It will have ideas not only of what could be done to improve it, but also on what could happen either independently of the project (whether it is implemented or not), or in the absence of the project. These prospective changes which will take place if there is no intervention with a project are now analysed and evaluated so that the impact of the project can be assessed.
Step 5a - Projection of demographic change
The purpose of this activity is to consider how the population in the project area, or in areas relevant to the main activities of the project, is likely to grow and change over the life of the project, paying careful attention to complicating factors, such as migration and employment.
Demographic changes are particularly important in the planning of aquaculture projects because of the finite nature of land and water resources, the two principal needs of aquaculture. For example, a significant increase in population in the project area may result in increased competition for relatively scarce freshwater supplies. On the other hand a project may induce such changes. If a new area is developed, such as man-grove swamplands described in the illustration, greater access to coastal beaches may be offered which may encourage tourism and subsequently hotel development.
Step 5b - Projection of demand, supply and price changes
A fundamental requirement at this stage is to assess the level of demand for the outputs of the project. This assessment requires clear distinction between the need for a commodity or service (that is, a requirement determined by non-market criteria, such as minimum food energy intake), and the demand for that commodity or service (that is, the quantity or level which consumers are willing and able to acquire at the particular price offered).
There is an established methodology for assessing demand. The main determinants of demand are population growth and changes in per caput income. If anticipated changes in demand have not been estimated in a sector study, the formulation team will usually be able to obtain forecasts of population growth - in larger countries on a regional basis - from the central planners. The extent to which changes in income will affect the demand for fish is often a complex issue. Very often, however, the application of a broad estimate of income elasticity of demand - the amount by which demand will change in response to a given change in income (which may also be obtainable from the central planners), will provide a crude but usually satisfactory measure of the likely magnitude of demand. In those areas where there is a combination of low incomes and a high reliance on fish in the diet, the income elasticity of demand can be quite high. For example, for every 10% increase in family income, demand for fish may increase by 5%, assuming no increase in the price of fish relative to other goods.
Projections of supply will be dependent on the particular circumstances of the project. In some cases it will be appropriate to take into consideration the supply of fish from all sources and in others only from aquaculture. Other factors may include types/species of fish, fish products, and consumer attitudes.
Once demand and supply projections have been made, it is necessary to bring them into balance. In many instances it will be found that there is a widening gap between demand (fuelled in many of the poorer countries by increasing population rather than incomes) and supply. Where this occurs, the real price of fish (that is, its price relative to other goods) will rise.
A comparison between projections of demand and supply in the absence of the project results in price projections in a without-the-project situation. These enable the formulation team to assess the future size of markets for outputs of the project and to indicate the directions and magnitudes of change in market prices with and without the project.
In projects which have the objective of producing product for export, for example marine shrimp in the illustration given above, projections of demand, supply, and price changes are important elements in determining the financial feasibility of the project. However, it is very unlikely that the incremental supply of shrimps by the project will influence world supply and price levels. However, where a project is to supply fish to a relatively small local market, it will be important to determine whether that market could absorb all the project's output without a fall in price.
Step 5c - Projection of the impact of other projects
In this task it is important that the team is aware of other projects (ongoing or planned) which may have a possible impact on the project which is being formulated. This is particularly necessary for any projects which compete for land and water resources. Also not to be overlooked are projects which absorb human resources and skills in the counterpart institutions which might be associated with the project. Experience shows that many governments often overcommit themselves to development projects without taking on additional staff, or releasing staff from other responsibilities.
Taking other projects into account usually presents little difficulty for the team when they are already ongoing, but it is often more difficult to learn of pipeline and proposed projects. Furthermore, it is often uncertain whether such projects will ever be implemented fully, in part, or after some delay. In such cases there may be no other option but to postulate alternatives of the without-project situation, either with or without one or more of those other ongoing or potential projects.
Step 5d - Definition of the “without project” situation
It is implicitly assumed that any project will result in additional outputs from the project area/sub-sector concerned, that is, a greater quantity and/or better quality of goods and services will be produced than would otherwise be forthcoming. Thus a clear and precise assumption of what is “otherwise forthcoming” is particularly important.
For this task the team must avoid the temptation to jump quickly to the convenient but often erroneous conclusion that the situation will remain much as it is in the absence of the project. Moreover, it should consider that if the project under formulation is not implemented another project might eventually be implemented in its place. The effect of the other project is also part of the “without project” situation.
Consequently, it is important at this point to produce a practical statement which represents the team's best forecast as to what may happen in the project area/sub-sector if the project under formulation is not implemented. This forecast serves as the base line for evaluating project results. For example, if there are no foreign earnings from shrimp exports in the next five years without the project, then all earnings from exports as a result of the project (say, US$ 20 million) can be claimed as a project benefit. However, without the project fish production in the area may remain at its current level of 5,000 tonnes per annum. With the project this would be halved. Similarly, these kind of calculations may be made for farmers' incomes and employment figures, etc., and presented as “results”.
Differences in Public/Private Sector Procedures (Step 5)
All four tasks within this Step are common to the four aquaculture project Models described earlier. Clearly, the tasks are likely to be more complex in multicomponent public sector projects (Models C) concerning many agents in different groups.
While in the previous Steps there has been a relatively close parallel between the formulation procedure normally adopted for both public sector and private sector projects, in Step 6 there is, in almost every case, a wide divergence in approach.
In private sector project formulation quite definite answers will have emerged to the following questions during the work in Phase I (Steps 1 and 2) and the early parts of Phase II (Steps 3 and 4) about the project:
Where should the project be located?
Who should participate in the project?
What should the project be doing?
How big should the project be?
When should the project start?
Which organization should manage the project?
In these projects the degree of detail in the outline specification is considerable, and therefore the cost estimations which form part of this Step are in similar detail. The end product, the interim project document, is therefore the prefeasibility study report.
In public sector project formulation the team has not yet been able to answer the questions listed above. It is still at the stage of sifting and sorting the different courses of action which will achieve the project objectives, and which were identified in Steps 3c and 4c.
In Step 6, therefore, the team will:
clarify all possible options;
identify which options appear to be superior to others;
present the selected options in the form of a specific project proposal.
The end product, as with private sector projects, is the interim project document which, reflecting the formulation process in public sector projects, is frequently called the identification report, or the reconnais- sance report.
Step 6a - Clarification of project options
As noted above, this Step is undertaken in public sector projects, and not usually by those in the private sector.
The six questions posed above have now to be given fairly definite answers at this point. These should result, collectively, in the outline specification of the project options. The sequence of the questions is not significant, as all answers must be considered in parallel, but different combinations of answers collectively form different possible project outlines.
The options have to be considered by the team within the context of the project objectives (Step 1), the criteria under which the project is being formulated (Step 2), the project area (Step 3), and target agents (Step 4). Factors which will be taken into account when answering each of the questions may include the following:
Location of the project. The larger boundaries of production related projects are usually defined geographically in the context of activities to be carried out, availability of inputs, and possibly in terms of institutional responsibilities. For example, in a project to develop culture-based fisheries, the team will compare locations having regard to such factors as the sizes of different water-bodies and potentials to support fisheries, existing and potential future fishing effort, siting and operation of hatcheries, prospects for introducing effective management practices, availability of fishery inputs (boats, nets, engines, fuel), and environmental impact. Or, in a project to enhance national capabilities in national research and training, the team will compare locations for such factors as existing institutional strength, proximity to the sub-sector, policy issues (at national, state, and local levels) and physical facilities (research laboratories, information resources, accessibility, accommodation).
Participants in the project. There may be options concerning who should participate in the project. For example, in a project to increase mollusc production, the team may compare options for new producers in new areas, assisting existing producers to expand in established areas, or a combination of both. Alternatively, the team may consider that increased production could be achieved by reducing waste in the transportation and marketing networks, and “downstream” agents must be involved.
Activities of the project. For production-oriented projects, the options may be few, as the production systems and practices will be determined, to a very large extent, by external factors. While the options may be limited in number, they do nonetheless exist. For example, to increase mollusc production, the first consideration may relate to the choice of species, namely oysters or mussels, or both. With regard to technological options to increase yield, the options may be to produce them on floating or fixed structures in the sea, or to improve management of any existing beds, or both. Similarly, attention may be given to the post-harvest stages, such as the introduction of depuration and processing to prolong shelf-life. In some production projects, say to increase fish production in certain areas of developing country, there may be no alternatives to simple pond culture other than increasing levels of intensity. Other projects have more easily identified options. For example, in a project to introduce new hatchery technology, alternatives may be to train hatchery managers in national training courses, or on-the-job training courses; in a project to advance education options may relate to introducing graduate courses at national universities, or taking advantage of graduate programmes overseas.
The size of the project. The maximum size of the project may be constrained by external factors, such as a national plan for development, or internal factors, such as total allowable cost or designated area. For production-oriented projects, options will be quantified production goals. Factors which will influence these options may include constraints referred to above (location of the project and participants), and perceived risk. Thus, options may be developed relating to the size of the project and, furthermore, there may be options relating to its phasing. For example, where there is perceived to be a relatively high level of risk the formulation team may array as options (a) a relatively large project without a pilot stage, (b) a pilot stage within a larger project, or (c) a pilot project only. For other types of projects, such as institutional strengthening, options may be severely limited by predetermined numbers of graduates required, or by institutional resources available. Options may be increased, however, when, in the absence of any sector development plan, the formulation team proposes different scenarios for institutional building based on a range of estimates of production by an aquaculture industry.
Coordination and scheduling of project activities. Once again, under almost all circumstances, the options for production-oriented projects are limited by the reproductive life-cycles of the species concerned. Thus it is easy for a project schedule to slip a year if an activity which anticipates a breeding season, such as hatchery construction, is delayed. In a project to enhance production through culture-based fisheries, where it is apparent at this stage that a substantial amount of time may be lost due to unavoidable delays in construction of hatcheries and other facilities, an option may be to consider purchase of juveniles elsewhere and implementation of improved management practices prior to hatchery operation. Available options are also likely to be limited in other projects, such as institution building. In research and training projects, for example, principal options may concern specific timing of activities under the project, which may have cost implications.
Organization of the project. In small aquaculture projects there are few if any options for organization and the project must fit within the existing government structure. In large projects identification of the right management institution is often a sensitive question, as the most appropriate may not have participated in project conceptualization at all. This is particularly true of inland aquaculture projects which may have been developed through (say) the Ministry or Department of Fisheries but, because of their potential involvement with water resources, farming cooperatives, and interior extension services, are best placed within the Ministry of Agriculture. Alternatively, if the agriculture sector is already large and dominant in the country, it may be preferable to use an existing parastatal body, such as a regional development authority, to manage the aquaculture project to give it some independence and a specific identity.
Step 6b - Quantification of options
In private sector projects the team will have omitted Step 6a and proceeded directly to this task. Here the team will quantify quite accurately the main technical and biological criteria used to define the physical design of the commercial facility. By comparison, in public sector projects the team having only established a number of possible options, will now quantify them to a degree by that a judgement can be made about them later. The purpose of this task for these types of projects is therefore to make preliminary estimates of the costs and benefits of each one as a prerequisite to making that judgement.
Private sector projects
In private sector projects quantification of the technical and biological criteria is called bioprogramming. It involves assembly of all the design features, and quantification of all components which describe functions and operations. Bioprogramming can be simple or detailed, depending on the nature or purpose of the project. Its elements are as follows:
Biological design criteria. These identify the basic environmental requirements to be fulfilled in the design of the facility for the species to be cultured, and the optimum conditions. Careful research of facts is necessary, usually with reference to research studies, reports of other facilities, and trends in culture techniques. The key biological criteria include species description, behavioural characteristics, culture techniques, environmental requirements (in terms of density, water exchange, water quality), nutritional requirements, growth rates, mortality rates, diseases, etc.
Facility characterization. This activity integrates the biological design criteria and production goals with the proposed site of the project and transposes them into a functional physical and operational plan. The characterization of the facility is based on production schedules (taking into account all stages of development as well as at harvest) and the number of units required. Several iterations may be necessary until a realistic project is developed in terms of biological, engineering, and financial constraints. For example, the site may be limited in size, and therefore with standard engineering design its production capacity is limited and possibly not profitable. If a higher technical level of engineering is employed, at additional cost and risk, increased production is possible through intensification, and increased profit. Alternatively, the site may not be limited in size, in which case it is necessary to develop sufficient of the site to meet production and profits for the least cost in construction and future operation. Thus the task is to characterize facilities which optimize all these factors.
Programming infrastructure. This element deals with specifications of the infrastructure, in particular the water system for the site and all production units, and all production and support spaces. For water requirements, a water process diagram is developed which indicates the volume of each type of water required by each production unit and support space, and any seasonal variations. Production spaces will include the number, size, and other features of all grow-out spaces, and the hatchery, nursery, brood ponds, spawn tanks, quarantine tanks, etc. Support spaces will include dimensions and services required of all features, such as research laboratories, offices, storage rooms, feed stores, workshops, freezer equipment, boat ramps, etc.
Site studies. This activity identifies the characteristics of the site. Primary site criteria include land availability, land ownership, and cost, as well as its topography, water availability, water quality and temperatures, water rights, and other competitors for the water. The other primary criteria are the qualities of the soil (chemistry, permeability, and compaction properties). Other features of the site are also important, such as proximity to supporting infrastructure (towns, utilities, markets), and access (roads and bridges).
The site can also be described by its local political and socio-economic factors (Step 4b), the climate and its potential for major disturbances (earthquakes, floods), and adjacent land uses (Step 3b). It is also necessary to be aware of any leases or permits required for developing the site and use of water, and other environmental constraints which might be impacted by the project. Finally, it is useful to know if the site has natural predators of the species to be cultured, or if there are other pathogenic organisms in numbers to add further risk to the project.
Schematic design. This element translates the criteria into a workable design. It identifies, assesses, and recommends the design which meets production goals optimizing the features of the site. The schematic design assembles information which:
describes the facility design concept selected;
a site lay-out, showing location of all major components on the site and reflects topography and operational relationships;
floor plans for all major support buildings;
a schematic diagram of the hydraulics of all water requirements for each component complete with elevations;
a topographic survey.
Sketches are prepared to illustrate the concepts. This information is then used for estimating preliminary construction and operating costs, and developing a project construction schedule.
Two further elements are then included:
Financial analysis. This element provides a preliminary financial analysis of the proposed project, based on the objectives and the cost/benefit requirements of the project sponsor. Reference here is also made to the original market assessment and marketing strategy for the products. Invariably the analysis is made in the form of financial spread-sheets, complete with calculations for internal rate of return.
Environmental analysis. The last element considers the relationship of the project to the environment, and considers both positive and negative impacts which may follow. In some cases the team may be required to research national laws and local regulations regarding the environment, to make sure that the project does not conflict.
This Step concludes with the production of a prefeasibility study report, which is a compilation of the elements (e), (f), and (g) above. This report is complete in as much as the project sponsor can agree to financing, or can use it to secure financing. In addition, the document is an accurate record of the project, which may become a guide for all subsequent stages of construction and operation.
It should be noted, however, that during schematic design (e) above, the team may conclude that there is more than one way to lay out the site. There may be simple options for design but with alternative costs and risks. For example, a pumphouse could be located on the coast for maximum efficiency but this would require costly coastal shoreline construction to resist wave forces and lengthy transmission lines for electricity and large pipelines for water. Alternatively the pumphouse could be located near other facilities inland where it would not be as efficient but there would be no electrical transmission lines and tidal water would be brought in cheaply through a simple canal. It may also be that large ponds would be cheaper to construct and operate but when harvested the volume of fresh product from each could exceed the projected market demand at any one time. Alternatively, smaller ponds could be constructed at greater costs, but future management and harvesting might be better geared to local market patterns.
When such options arise, as they invariably do, the project formulation team will then follow, but to a lesser degree, the process of dealing with options which, as noted in Step 6a, are typical of public sector projects.
Public sector projects
The quantification of options in public sector projects which have components of production deals in effect with these same elements of bioprogramming and, where possible, uses the same criteria. It is unlikely to be as detailed, however, as the information required can be restricted to that permitting the analysis of each option in Step 6c before one is chosen for further development.
This can be demonstrated by reference to the illustration, used in Steps 3–5 to (Figure 6), which deals with a project to produce marine shrimp to earn foreign exchange by constructing new ponds in coastal mangrove swamplands and/or converting existing fish ponds. In Steps 3c and 4c the team had identified possible courses of action, namely options for constructing new ponds in the mangrove swamplands, converting existing fish ponds into shrimp ponds by making them deeper and increasing water flow, or a mixture of both. The team should undertake bioprogramming for each option as if it were an independent private-sector project. In other words, it will assemble:
biological design criteria,
As with the private sector projects, the team should also estimate capital costs and operating costs but a lower level of accuracy is acceptable. Information on yields and prices will enable estimates to be made of revenues and foreign exchange earnings for each option. Profits can then be calculated on a year-by-year basis, and a preliminary financial internal rate of return (FIRR) be estimated.
Preliminary estimates can then be made of net economic and social benefits. In calculating the economic internal rate of return (EIRR) there might be taken into account, for example, the number of new jobs created and incremental increases in incomes generated by the project. A preliminary estimate might also be made of economic costs, for example, shadow price of labour and opportunity cost of foregone fish production. Judgements can also be made about other benefits and costs, such as diversification of economic activity, creation of self-reliance and management skills, and even transfer of skills and technology. Similarly, qualitative judgements may be possible with regard to other costs and benefits, such as possible reduction of the shrimp fishery, or loss of biological diversity through destruction of mangroves.
The analysis of the three options, in the light of all this information, is then carried out in Step 6c.
Step 6c - Analysis of alternatives and selection
Whether the project is in the private or the public sector, each quantification and qualification derived above constitutes, in outline, a different project. In principle each option may be feasible, but at this point the team must decide which is the best.
The basic reasoning behind each design option is reviewed once more to determine if it conforms with the objectives of the project. Once this is done each design is submitted to performance tests concerned with four particular criteria, namely:
Financial criteria. Money is the unit of account. For example, what will be the project cost? How will it be financed? Are the financial incentives likely to induce the responses required?
Economic criteria. Financial aspects concerning individual agents are integrated in resource utilization as a whole. For example, would the resources invested in the project be better utilized there than elsewhere?
Social criteria. These account for the distribution of benefits among various groups of society. Would the project contribute to achievement of the country's social policy objectives?
Environmental criteria. The need to exploit natural resources must be balanced against its effects and impact in the future.
In public sector projects, providing answers to the many questions appropriate within the four criteria is one of the most difficult tasks of the team. There is no obvious answer to weigh the performance of one design option against another. The team therefore has to use its judgement. One useful tool to assist the process is the decision matrix. This is a two-way table by which the different project designs considered are entered against specific objectives and design criteria, forming cells where the performance of the corresponding combination is noted.
The way in which the matrix is interpreted depends on the type of project and its objectives. If, for example, a country's sectoral objectives include the promotion of living standards and employment in rural areas as a means of slowing urban drift, the number of householders benefiting from the project is the important criterion; in a project to earn foreign exchange, financial and economic criteria are more important.
All projects carry a degree of risk, some more than others. The team has also to make a judgement on the level of risk for each option proposed.
Table 2 shows a decision matrix for the shrimp-farming project developing new ponds in coastal mangroves, and converting existing fish ponds into shrimp ponds by making them deeper and increasing water flow. The matrix lists the criteria most appropriate to the project. This table shows the way that it might have been constructed by project formulation team.
|Option A: Construction of new shrimp ponds.|
|Option B: Conversion of existing fish ponds into shrimp ponds.|
|Option C: Combination of new ponds and existing ponds for shrimp production.|
|Objective/Design Criteria||Option A||Option B||Option C|
|EIRR (% pa)||27||24||25|
|Project exchange rate (local currency)||5||4||4|
|FIRR (% pa)||12||20||17|
|Capital costs to Government (US $ mill)||3||1||2|
|Government recovery of costs (%)||85||85||85|
|External capital assistance||Yes||Yes||Yes|
|Employment (Management, clerical, & labour)|
|Construction (man/years)||3 000||500||2 000|
|New self-employment householders||250||0||100|
|Households with enhanced income||250||600||400|
|Geographic dispersion of activities||0||++||+|
|Self-reliance in economic management||+++||+||++|
|Transfer of skills and technology||+++||++||++|
|Market effects (local fish consumption)||0||---||-|
|Destruction of ecosystem||---||0||--|
|Possible affect on fisheries||---||0||--|
|Possible physical/chemical effects||--||0||-|
|Positive level of risk||+++||+||++|
|Scale: 0 = neutral: - = negative factor (low to high): + = positive factor (low to high).|
As the project was finally formulated, there were three options. These are summarized below.
Option A: Construction of 2 500 ha of new shrimp ponds in reclaimed coastal mangrove swamplands with an annual yield of 10 000 t in two cycles, together with a hatchery. The major part (80%) of the capital required for construction for the ponds originates from external assistance with the balance povided by the national government; the balance of the capital requirements for financing construction of a hatchery and technical assistance is also provided by external assistance. The financial support from the donor is provided through a line of credit to the Agriculture Development Bank for on-lending to 250 individual farmers, and to the parastatal corporation which will build and operate the hatchery. New farmers will be recruited from the households of traditional fish farmers in the area.
Option B: Conversion of 4 000 ha of existing fish ponds to shrimp ponds with an annual yield of 10 000 t in two cycles, together with a hatchery. The capital arrangements are as before but, as the fish ponds are widely dispersed (among 600 farms), there is an additional credit component for three ice plants.
Option C: A mixture of the above, with 1 000 ha of new ponds (100 farmers from existing fish farming households) and 2 000 ha of existing fish ponds (300 farmers) with combined production of 10 000 t. Capital arrangements are as before but only one new ice plant is required.
An interpretation of the project decision matrix (Table 2)
Economic: All options have high and similar EIRRs, with the highest in Option B because of the higher self-employment benefits generated by the project. Option a generates economic benefits through a higher employment in construction. All require some domestic capital, which is estimated to to generate US$ 1 for every 4-5 units of local currency. Note, however, that these EIRRs are subject to further qualification in the Environmental Impact Analysis (see below).
Financial: Option B has a rather higher FIRR than either of the other two projects because of the lower construction costs.
Social: Option B has higher benefits than the other two options because of the higher level of participation by self-employed householders (600) in the project. Employment in the ice plants under Options B and C would be seasonal, and employment in construction in Option A will occur only once. These may be disadvantages in attracting labour, and some problems may arise if labour is imported. Overall, Option B provides the greater flow of benefits, as well as upgrading self-reliance in the local community by introducing new skills into it. Option A provides the lowest social benefits. Option B, and to a lesser extent Option C, results in the loss of fish to the local markets. The source of new farmers for Option A (250) and Option B (100) is assumed to be from among traditional fishpond households. The investigations carried out by the team (Step 4b) have indicated that (a) here should be little difficulty in recruiting young farmers with the necessary aptitudes and skills, and (b) their recruitment should have no adverse affect on the existing traditional fish farming activity.
Environmental: Option A has the greatest environmental impact as it requires the greatest destruction of coastal mangroves. In addition to this loss of a coastal ecosystem lands, the loss of the nursery grounds for young shrimp may affect both the artisanal and industrial shrimp fisheries. This would have a significant impact on the EIRR of Option A, and to a lesser extent in Option C. Options A and C might enhance local productivity by the discharge of nutrient-laden water from the new farm complexes, but Option A, because of the size and associated greater use of water, may result in scouring and coastal erosion.
Risk: There is a risk for all three Options associated with the “take-up rate” of the new technology. In Option B, however, it would be expected that this risk is lower as the existing fish farmers can use the technology in some of their traditional activities. Both Options A and C might be considered to have high risk associated with the construction of large new areas of shrimp ponds because it adds significantly to the complexity of the project.
Conclusion: All three Options have similar EIRRs and FIRRs, and the government recovery of costs is estimated to be similar. Militating against the selections of Options A and C would be the high level of risk associated with them, compared with Option B; a significantly higher environmental impact, and possibly greater adverse social repercussions which might accompany the employment of a large labour force for construction. In favour of Option B is that it has the largest number of beneficiaries (implying the largest distribution of benefits). In favour of Options A and C would be the generation of new self-employment, and larger benefits in the form of increased self-reliance in economic management, and increase in the transfer of skills and technology. Option A would have no consequent loss of fish to local markets, Option C would incur some loss, and in Option B the loss would be significant.
After balancing the arguments in favour and against each of the Options, the team would probably select Option B on technical grounds, as the ponds are already in place and operated by traditional fish pond farmers. It has a low level of risk so far as cost over-runs and low “take-up rate” are concerned; neutral environmental impact, and avoids, to a very large extent, possible adverse social repercussions during construction.
However, the government and the external assistance donor, when reviewing the options, might prefer Option C on the grounds that the loss of fish to local markets is reduced, while only slightly fewer households (450 compared with 600) are beneficially affected.
Step 6d - Preparation of interim project document
The outline specification of the formulation team's preferred project design (or designs) is now presented in proper form to the project sponsor.
Referring back to the beginning of Step 6, it will be recalled that the end product, the interim project document, was called the “prefeasibility study report” in the private sector, and the “identification report” or “reconnaissance report” for projects in the public sector. In the discussion of this Step, attention has been directed to the differences in approach and level of work undertaken between the two sectors. Clearly, interim reports reflect these differences in their contents.
A prefeasibility report would describe a properly evaluated and functional facility with the projections of costs, and construction and operations schedule, made in sufficient detail. In relatively small or simple projects, where the overall cost is, say, up to US$ 500 000 (in 1990 prices), a decision might be made by the project sponsor to proceed immediately to implementation. In larger and more complex projects there would almost always be a requirement on the part of the project sponsor for the formulation process to proceed to the Project Design Stage (Phase III).
The identification report or reconnaissance report usually takes the form of a clear description of the project's nature, structure, dimensions, and impact with all the choices concerning project variables being explained and, if necessary, justified. The lay-out of the report might be described in terms of the reverse of the procedure which has been followed by the team through Steps 3–6, described above, that is the report would highlight for the reader why the project is the best, and for what reasons.
At times, as noted above in Step 6c, there may be more than one possible project design. The team may also conclude that either more detailed design work is required (Phase III) or, simply, no project properly satisfies the TOR. Provided that the team has done its work correctly and professionally no failure is associated with such a conclusion.
Each report ends, whatever its evaluation, with clear recommendations whether to proceed, or not. If the former, specifications and TOR of the next phase are given.
Differences in Public/Private Sector Procedures (Step 6)
The four tasks of this Step are quite different for private sector projects and public sector projects. The private sector project (Model A) is more concerned with accurate quantification (Step 6b) and financial analysis (Step 6c). In public sector projects (Models B,C, & D) the emphasis is usually on the evaluation of all the alternatives identified, and makes use of all Steps. While this includes quantification and financial analysis where possible, it is not usually carried out to the same degree in private sector project formulation.