Module I: Fundamentals and Frame of Reference
The Logic of Investment and the Project
What is Social Project Evaluation (SPE)?
Social Project Evaluation (SPE) is an essential discipline concerned with identifying, measuring, and valuing the social benefits and costs attributable to an investment initiative. This work is developed within an institutional context, often within a National Investment System (NIS) framework, with the primary objective of maximizing net benefits for society as a whole, ensuring an efficient allocation of scarce resources.
1. Introduction to the Project and its Management Cycle
Project Definition
In the field of economics, a project is defined as an investment operation that involves the commitment and consumption of resources with the expectation of generating future benefits over a determined period of time. It is the best technically sound alternative to achieve precise objectives within a defined period, seeking to determine whether an idea is convenient, profitable, or useful for society or for the investor.
The Project as an Instrument of Economic Planning
Projects are considered key planning instruments, intimately integrated into the process of making anticipated decisions about what should be done to achieve desired future objectives. They are the economic planning instrument closest to reality, allowing the country’s growth rate to be increased by allocating available investment resources to the most economically and socially profitable projects.
Project Life Cycle
The project runs through a trajectory of three major successive phases or states: Pre-Investment, Investment, and Operation.
A. Pre-Investment Phase
Process of studies and analyses for identification, preparation, and evaluation, aiming to reduce the degrees of uncertainty regarding the investment decision.
💡 Idea: Generation and preliminary diagnosis of the need.
📄 Profile: Very preliminary study using existing information and global estimates.
📈 Pre-Feasibility: Deeper analysis of market, technology, size, and location.
✅ Feasibility: Final and in-depth analysis to minimize cost/benefit variation. Basis for the execution decision.
B. Investment Phase
Materialization of the chosen solution through physical works.
📐 Design (Detailed Engineering): Detailed elaboration of architecture, engineering, and budget of the works.
🏗️ Execution: Process of constructing the physical work following the established schedule and plan.
C. Operation / Post-Project Phase
Starts with commissioning, generating the projected goods or services and net benefits.
💰 Benefit Generation: The project begins its productive or social function.
🔄 Ex-Post Evaluation: It is recommended to measure objective compliance and provide feedback to the investment system.
2. Project Typology
🔬 According to the Purpose of the Study
- Private Evaluation (Financial): Seeks to maximize investor utility (profitability for them). Values costs and benefits at market prices.
- Social Evaluation (Economic): Seeks to maximize net benefits for society. Measures contribution to well-being and growth. Values at social prices or shadow prices.
🛠️ According to the Investment Objective
- Productive/Industrial Projects: Production of tangible goods (mining, agricultural, energy).
- Infrastructure Projects: Works like roads, drinking water, irrigation, or transport.
- Social Projects: Investment in services like education, health, housing. Evaluated by Cost-Efficiency.
- Modernization in Companies: Outsourcing, replacement, expansion, or business closure.
3. Complementary Tools for Formulation
Although Cost-Benefit Analysis (CBA) is the main method, these tools enrich formulation and evaluation, especially where monetization is difficult (social projects).
Facilitates project structuring by identifying problems, objectives, results, indicators, and risks. Key in international cooperation.
Maps key actors, their interests, and influence to improve the project’s legitimacy, relevance, and sustainability.
Integrates economic, social, environmental, and technical criteria, weighted according to their importance, to compare alternatives where monetization is incomplete.
Used in social projects (health, education). Allows choosing the alternative that achieves the greatest effect (non-monetary units) with the lowest cost.
Uses statistical methods (control groups, quasi-experiments) to estimate the real effects attributable to the intervention.
These tools are vital in the formulation of projects that seek well-being, equity, and sustainability.
