Project Derivation is a general term that refers to the starting point of a new project to symbolize creation and existence of this project. It can be regarded as the very first (pre-project or preliminary) step in the project initiation process to identify the reason(s) for project startup and explain possible sources of project investment.
The derivation step of a project aims to create a general understanding of the project’s concept, rationale and benefits. If both the sponsor and customer share this understand the project can be agreed and verified for initiation. But it does not mean the project is approved and ready for implementation. It just means that the sponsor preliminarily agrees on making necessary investments and the customer confirms the project produces needed benefits.
When the derivation step is completed, the next step is to perform an analysis of feasibility and cost-effectiveness. It is the step of the initiation process that aims to identify the problem and solution(s) of the project and then evaluate every solution for feasibility and cost-effectiveness.