Chapter 5: Project Cycle Management (PCM)

Project Cycle Management (PCM)


Project Management (PM) methodologies in use around the World are definitions of project management processes aiming at standardizing and improving the quality of the project management lifecycle. Quality of the projects can be defined in terms of the relevance, feasibility and effectiveness of the impacts of the investment, including how well they are managed.

A project management methodology consists of process groups and control systems. The PM methodology aims at organising the project cycle structure and defining not only the content of each phase but also how it can be best accomplished.

Typically all project management methodologies imply a flow similar to the “Plan-Do-Check-Act” cycle with phases which are linked together by results – the result of one phase should become the input of another. Although, the way of defining the phases of a project can be subjective and often based on organizational procedures, each project management methodology approach should include well defined phases and the transition from one work phase to another should naturally involve the transfer of some sort of deliverable (a document, piece of software, invoice, report, an approval by committee, etc.)

The word ‘project’ as used in this Toolkit, should be interpreted as broadly as possible including sector planning. The term ‘project’ is primarily used for convenience and simply means the collection of related activities for which a contribution is provided to meet a specified objective.

Different project management methodologies have been adopted by several agencies such as the Asian Development Bank (ADB), the World Bank (WB), the EC, and national governments. In particular, the European Commission (EC) has produced a “Project Cycle Management” (PCM) manual, which has been subsequently adopted by other development partners as one of the systems for project development, funding and evaluation (EC, 2004).

Chapter 5 of the Toolkit focuses on the project management methodology adopted by the EC but aims in general at supporting good management practices and effective decision making throughout the project management processes of any organisation working in the sector.


The approach of the PCM

As mentioned, the way of defining the phases of a project can be subjective and often based on organizational procedures. In the case of the EC PCM, the project cycle presents five phases: Programming, Identification, Formulation, Implementation and Evaluation. In the case of the World Bank the phases would be similarly the following: Identification- Preparation- Appraisal- ApprovalImplementation - Completion- Evaluation. The WB phases are slightly more numerous, and this depends on the interest for highlighting some parts of the project management phases. The WB “Completion” phase, for example, can be found within the EC PCM “Implementation” phase. Besides these methodological procedural differences, the PCM approach is constructed around the idea of carefully planned phases leading logically from one to another with mechanisms of assessment and verification.

Another common analytical and management tool typically used in many project management methodologies and also by the EC PCM is the logical framework, which is prepared for every project in order to show the intervention logic as it evolves gradually through its various stages. The Logical Framework Approach (LFA) is designed to improve and streamline projects, making them more effective in realising their development objectives, including that of producing sustainable benefits. The LFA is used by most governments, multi-lateral and bi-lateral aid agencies, international NGOs, etc.  to prepare sector development plans and/or project proposals. It is the principal tool used for project design during the identification and formulation phases of the project cycle. Using the LFA during identification helps to ensure that project ideas are relevant, while during formulation it helps to ensure feasibility and sustainability. However, it is not a substitute for experience and professional judgment and must also be complemented by the application of other specific tools (such as Economic and Financial Analysis and Environmental Impact Assessment) and through the application of techniques which promote the effective participation of stakeholders

Four Key principles have been identified by PCM practitioners to improve the quality of judgment and decision making at all stages of the project cycle. These key principles interpreted from a perspective of sector development are:

  • Projects are supportive of overarching sector policy objectives;
  • Projects are relevant to an agreed-upon strategy and to the real problems of target groups/beneficiaries;
  • Projects are feasible, meaning that objectives can be realistically achieved within the constraints of the operating environment, the given budget and the capacities of the implementing organisation; and
  • Benefits generated by projects are likely to be sustainable.

These four principles are important measures of the quality of the project, and should provide information for judgements and decisions of managers and advisors not only during the planning stage, but at all moment during the project cycle when amendments and course corrections are indicated.

A particular mention is to be given to the last principle “sustainability”. In order to foster the sustainability of the benefits generated, a careful analysis of the other three principles is fundamental. Sustainability is in fact a delicate issue depending on the coherence with the overarching sector policy objectives, the ownership and the alignment with the target groups needs and capacities and a realistic feasibility assessment. The list of over-ambitious failed projects is long.

To support the achievement of these aims, the PCM:

  • Requires the active participation of key stakeholders and aims to promote local ownership;
  • Uses the Logical Framework Approach (as well as other tools) to support a number of key assessments/analyses (including stakeholders, problems, objectives and strategies);
  • Incorporates key quality assessment criteria into each stage of the project cycle; and
  • Requires the production of good-quality key document(s) in each phase (with commonly understood concepts and definitions) to support well-informed decision-making.


Project management in the context of water sector development

In line with international thinking on the water sector, development is seen nowadays as a process to which sector programmes and projects contribute; sector programmes and projects alone do not themselves necessarily constitute development. A project can be effectively executed in technical terms, but if it is not in line with national policies and plans or with social, economic or environmental realities, it may end up as a costly and unsustainable implementation exercise.

Concerning the macro level of the national policies and strategies, a coherent project management cycle, in order to increase its chances of bringing sustainable benefits to its target groups, has to take into account the sector building blocks and in particular the following elements:

  • Sector policy and strategy: a sector policy is a statement of a government’s long-term vision (ten years or more) for the sector, setting out the government’s objectives for that period. The sector policy also specifies the institutional aspects (roles of different actors in the sector, division of responsibilities, financing, etc.), sets out the main principles of service management (state control, private operator etc.) and the priority action areas (geographical areas, maintenance or extension of the network) and explains which legal and regulatory decisions are deemed necessary. The sector strategy action plan, also known as the master plan, describes how, in terms of the physical and financial execution, the government intends to implement sector policy over a medium-term perspective (3-5 years). It may be necessary to set intermediate targets or priorities to meet policy objectives;
  • The sector budget and its expenditure perspective: these two must form the financial expression, on an annual and multi-annual basis, of the sector strategy. They are drawn up in conjunction with the sector strategy and on the basis of the available resources in the sector;
  • A sector coordination framework, through which the sector policy, action plans and budget are reviewed and updated.


Together with those three core elements, there are also two key components: the monitoring system and the institutional capacity. These two components are of equal importance and often pose major challenges for the sustainable development of the sector. Monitoring systems are common weak points, which can be detrimental to future management and programming, and call into question the use of sector budget support as a financing modality. As regards to institutional capacity, capacity building assistance must be targeted by a good needs assessement but often involves most national partners.

Not all these elements are present in all countries. Approaches and terminology can differ, but this list gives an interesting overview of a series of issues to be considered in the PCM phases.

Concerning the project level, to contribute effectively to development throughout the entire project management cycle, a process of dialogue with stakeholders and beneficiaries is needed in order to foster:


  • Ownership: From a user-beneficiary perspective, the project is viewed as the creation of assets over which they hold responsibility and will yield sustainable benefits after funding has ceased.
  • Stakeholder involvement: ownership cannot be created without the involvement throughout the project cycle of all actual or potential stakeholders whether they are individuals, groups or organisations that have an interest in the project. Beneficiaries and implementing organisations are generally the most important stakeholders, but others of significance can include faith-based organisations, NGOs, traders, developers, the private sector and agencies concerned with complementary or competing activities in the programme or project environment. Stakeholder interests may therefore be positive or negative towards the project. Effective PCM needs to take account of stakeholder interests at every phase of the project cycle, and make adjustments accordingly.
  • Participation: the above elements entail an overall concept: the need for participation. Much water-related development activity depends heavily for its success on active and real participation by the intended beneficiaries. It is recognised that effective participation, as opposed to an exercise in consultation or a communications campaign, can be a long process with less easily predictable results. However participation is regarded as a vital component of the stages of identification and formulation, and should be present to some degree in other stages of the project cycle.


These are amongst the most important concepts that are behind the guiding principles treated in this Toolkit. The application of the PCM tools must be sensitive and flexible to prevent other imperatives and procedures take precedence over the development imperatives of the project or programme. At any time during the project cycle, adaptations can take into account changed circumstances or previously unknown factors. The quality criteria of relevance, feasibility and sustainability should be used when collection information on how judgments and decisions about changes need to be made.