Project formulation is the systematic development of a project idea for arriving at an investment decision. It has the built-in mechanism of ringing the danger bell at the earliest possible stage of resource utilization. Project formulation is a process involving the joint efforts of a team of experts. Each member of the team should be familiar with the broad strategy, objectives & other ingredients of the project. Besides being an expert in his area of specialization, he should be able to play his role in the overall scheme of things.
It aims at a systematic analysis of project potential with the ultimate objective of arriving at an investment decision. In this process it makes an objective assessment from all possible angles starting from project identification upto its appraisal stage. Thus, project formulation is the process of examining technical, economic, financial & commercial aspects of a project. It refers to a preliminary project analysis covering all aspects such as technical, financial, commercial, economic & managerial to find out whether it is worthwhile to take project for detailed investigation & evaluation.