Concepts of project managementWhat is a project?

It is a blue print for the action oriented activities of an organization. It reflects the plan of action in its totality

It is a scientifically evolved work plan devised to achieve a specific objective within a specified period of time.

Meaning of project

A project is a one-shot, time-bound, goal-directed major undertaking, requiring the commitment of varied skills and resources. It has also been described as a combination of human and non-human resources pooled together in a temporary organization to achieve a specific purpose. The purpose and the set of activities which can achieve that purpose distinguish one project from another’.project management Institute,USA

Definition of project

Fixed set of objectives Specific life span A separate entity Team work It has a life cycle Uniqueness Change Successive principle Specific set of goals with a complex set of diversified activities Sub contraction of work Risk and uncertainty Feasibility and appraisal studies

Features of a project

On the basis of expansion- Project expanding the capacity--project expanding the supply of knowledge

Types of project

Giant projects affecting total economy Big projects affecting one sector of the

economy Medium size projects Small size projects

On the basis of magnitude of the resources to be invested

Industrial project Agricultural project Educational project Health project Social project

On the basis of sector

Social objective project Economic objective project

On the basis of objective

Directively productive project Indirectively productive project

On the basis of productivity

Quantifiable project Non-quantifiable project

On the basis of nature of benefits

Project without specific priorities Project with specific priorities

On the basis of government priorities

Independent project Dependent project

On the basis of dependency

Public-sector project Private sector project Joint sector project

On the basis of ownership

Project with determined location Project where location is open

On the basis of location

Project with present impact Project with future impact

On the basis of social time value of the project

Project determined by inward looking policy Project determined by outward looking policy

On the basis of national policy

High risks project Normal risks project Low risks project

On the basis of risk involved in the project

Long term project Medium term project Short term project

On the basis of economic life of the project

Highly sophisticated technology project Advanced technology project Foreign technology project Indigenous technology project

On the basis of technology involved in the project

Project with domestic resources Project with foreign resources

On the basis of resources

Capital intensive project Labour intensive project

On the basis of employment opportunities

Project with domestic financing Project with foreign financing Project with mixed financing Project with financial institutions

On the basis of sources of finance

Own legal entity Without own legal entity

On the basis of legal entity

Normal project-adequate time,minimumcapital and no compromise on quality

Crash project-additional time and cost Disaster project-round the clock work ,capital

cost is high

On the basis of speed required for execution of the project

Pre-investment phase Implementation phase Operation phase

Project life cycle-phases/stages

Project infrastructure and enabling services System design and basic engineering package Organization and manpower Schedules and budgets Licensing and governmental clearances Finance Systems and procedures Identification of project manager Design basis ,general condition for purchase and contracts Construction resources and materials Work packaging

Pre-investment phase

Project and engineering design-blue print,plant design etc

Negotiation and contractions-construction of building and civil works, supply of machine and equipments etc

Construction-site preparation, building construction, installation of machinery

Training engineers technicians and workers Plant commissioning

Implementation phase

Transition phase Project monitoring Project evaluation

Operation phase

Pre-investment

phase(4-8%)Implementati

on phase(85%)

Operation phase(3%)

Project life cycle curve

CONCEPTION PHASE DEFINITION PLANNING AND ORGANISING IMPLEMENTATION PROJECT CLEAN UP

PROJECT LIFE CYCLE PHASES(FIVE PHASES)

PROJECT may be to overcome existing problems

Develop comparitive ideas

A.PROJECT IDEA GERMINATION

Produce document describing project details Areas examined are raw materials, plant

size,capacity,location and size,technology/process selection,project layout,civil works,utilities,manpower,implementation schedule

B. DEVELOPS THE IDEA GENERATED

Systems design Basic engineering package, Organisation, Manpower,scheudles,budget,licensing and

government clearances,finance,systems and procedures

Site preparation and investigation Construction resource and materials Work packaging

C. INFRASTRUCTURE,ENABLING SERVICES,

PREparation of specification for equipment and machinery

Ordering of equipment Lining up of construction contracts Issue of construction contractors’ drawings Equipment foundations

D.IMPLEMENTATION-80-85%

Physical handover of project hardware to production phase

Handover of drawings Documents,files,operation and maintenance

manuals Project account closed Dues settled etc

Project clean up

INVESTMENT SIZE LOCATION Technology Equipment marketing

CRITERIA FOR SELECTING A PARTICULAR PROJECT-vasant desai pg.72

It is an existing new profession which receives much attention

It is concerned with the management of resources to successfully complete the project

It is designed to manage or control company resources of a given activity within time,cost,performance

Project management

Cost

time

Resources

performance

Overview of project management

Objective-fundamental rationale Requirement-sine qua non or a irreducible Alternative-a surrogate Selection criteria-” a matter of carrying out Constraint-a demarcation point

Components of a project management system

Grouping of activities Single responsibility centre Support and service system Commitment-coordinating and directing

towards goals Follow-up-budgets schedules and controls Deciding what is to be done….maintaining

integrity and making sure it is done.

Steps in project management

Identification of functional responsibilities Minimize the need for reporting Identification of time limits Identification of a proper methodology for trade-

off analysis Measurement of performance Early identification of problems Improved estimating capability for future planning Knowing when objectives cannot be met

Benefits of Project management

Project complexities Execution of customer’s special

requirements Organization restructuring Project risks Changes in technology Forward planning and pricing

Obstacles in P.M

Flexible and adaptable Initiativeness and leadership skills Aggressiveness,confidence,persuasiveness and verbal fluency Ambitious, activity and forcefulness Communicator and integrator Personal interests Enthusiasm in agitation and spontaneity Devotion of time Able to identify problems Willing to make decisions Able to maintain a proper balance in the use of time

Project manager and his role

When a project of new technology is undertaken

When the in-house consultant is incapable of meeting the requirement of the project

When there is no in-house facility available in the organization

Imported technology Expertise

Project consultant/need for a consultant

Assisting the agency in appropriate site investigation and sourcing of materials

Assisting the agency in selecting the appropriate contractor

Check ing the quality of work, supervision control, testing ,monitoring and progress reporting checking measurements and bills.

Job of the consultant

Preparation of feasibility report Preparation of techno-economic report Preparation of detailed project report Detailed engineering and consultancy services Project monitoring and control Supervision of erection and commissioning of

project Provide pre-and post commissioning services.

Main jobs of the consultants are

Tata consultancy services ltd Birla technical services Dastur and co ltd Engineers India ltd Metallurgical and Engineering consultants(India)ltd Kirloskar Consultancy Ltd. Power Consultancy services India Pvt Ltd. Small Industries Service Institute Technical consultancy organization Science and Technology Entrepreneurship Park etc.

Well known Consultancy firms

A variety of sources should be tapped to stimulate their generation.

Project identification-project ideas

Success story of a friend/relative Experience of others in manufacture /sale of product Examining the inputs and outputs of industries Plan outlays and government guidelines Suggestions of financial institutions and developmental agencies Investigation of local materials and resources Economic and social trend of the economy New technological developments Project profiles and industrial potential surveys Visits to trade fairs Unfulfilled psychological needs Possibility of reviving sick units

Sources of project ideas

Conceptual stage Screening stage(compatibility with promoter,

consistency with governmental priorities, availability of inputs, adequacy of market, reasonableness of cost, acceptability of risk level)

Identification stage- Pre-feasibility stage

Steps in project identification

Availability of internal financial resources Capability of raising external financial resources Availability of production facilities Technological capabilities of the company Availab ility of the resources Availability of the infrastructural facilities Technological capabilities Cost structure and profit margins of the company Distribution n network of the company Market share of the company State of industrial relations Impact of corporate laws on the growth of the company Changes in governmental policies Existence and severity of competition Changes in customers preferences tastes etc.

Pre-feasibility stage_SWOT ANALYSIS

It is the investigating process which precedes investment decision.(scientific procedure)

The objectives goals and justification for the acceptance of the project are to be explained.(subjective and objective information is to be presented)

The major task is to assess the financial, technical and managerial involvement and its justification considering the resource constraint.

Project formulation

Feasibility analysis Techno-economic analysis Project design and network analysis Input analysis Financial analysis Cost benefit analysis Pre-investment appraisal

Stages in project formulation

Forecasting Setting up priorities and choosing the goals Searching for alternatives Carrying out detailed studies estimating the needed resources Arranging funds Preparing time schedule for all jobs Distributing the work to various departments Execution and controlling the project Evaluating the performance of each project

Criteria to be followed in project formulation process

It is an investment proposal based on certain information and factual data appraising the project

It is prepared during the definition phase of a project. It lies in between the project formulation stage and appraisal and sanction stage.

It is prepared to present an in-depth techno-commercial analysis carried out on the idea for consideration of the financial institutions and other authorities empowered to take the investment decision.

Feasibility report

Commercial and economic feasibility Technical feasibility Financial feasibility Managerial feasibility Social feasibility or acceptability

Gamut (components) of feasibility study

Earning capacity based on the volume of sales

Sales depends upon the present demand of the goods produced throughout the project

Sales depends upon the future demand Anticipated ROR

Commercial and economic feasibility

Feasibility report should give types of technology to be adopted

Requirements of equipment, labour and other inputs.

Size of the plant,location of the project,pollution caused by the project, production capacity of the project and strength of the project.

Technical feasibility-technician’s angle.

For the existing companies-Preparation of a financial statement such as B/S and Income Statement

For new companies-Statement of total project cost,initial capital requirement etc

Projected income statement and Balance sheet

Financial analysis relating to ROI, BEA,PA

Financial feasibility-to study the financial viability

Heredity skill Skill acquired through training Skill acquired during the course of work.

Managerial feasibility

To generate more employment opportunities and to improve the standard of living of the people small scale projects can be encouraged.

Social feasibility

Introduction Summary and Recommendations Product capacity, chemistry of the product,

specifications, application and uses Market potential Process and know-how Plant and machinery Location of the unit Plot plan and building

Format of feasibility report

Raw materials availability Utilities and requirements Effluents treatment Capital cost Working capital Mode of finance Manufacturing cost Financial analysis Implementation schedule

It is a document which narrates the various aspects of a project in a prescribed form.

It is a post-investment decision exercise

Project Report

General information(name and address Rationale(to check that the project is appropriate and

justified) Project description(location,ownership,site approved or

not,industrial area or not) Market potential Capital expenditure and sources of finance Assessment of working capital requirements Other financial factors Government and other statutory approvals Economic and social variables.

Components of a project report

Name and address of the entrepreneur The qualifications,experience and other

capabilities A small analysis of the industry-present

status,the way of the organisation, the problems

The organisational structure The utility of the product and range of products

General information

To look at the broad rationale of the project to ensure that project is justified and accepted,

Establishment of a modernisation and pollution control may be fully justified

rationale

Input factors Raw materials Labour Power Fuel and water Waste discharge Communication and transportation facilities Capacity and technology Quality control

Project description

Estimation of demand and supply Marketing strategy-before and after the

sales.

Market potential

Cost of the project-level of accuracy required in cost estimates

Means of financing=

C apital expenditure and sources of finance

wc

Assessment of working capital requirements

Product taken up for production should be profitable

Profitable –an estimate projected PL a/c ,B/S and CFs

Other financial aspects

Government and other statutory approvals

Promotes employment opportunities Development of SSIs Overall development of that locality

Economic and social variables

Objective Scope of information management Time span Cost s involved Reliability Depth of analysis

Differences between project and feasibility report

Differences between FR AND PR

Feasibility report

Aims to serve top management in arriving feasible and viable project alternatives.

Information in areas like technical, economic commercial and environmental areas

Project report Focuses on formally

communicating the project sponsor’s decision to the government and financial institutions

70 to 80% information based on which certain reliable forecasts are made and decisions taken by management.

continued

Exploratory research-6 to 15 months

Average of 1.5% and 3% of the project costs

Reliable for short span

Depth and magnitude reflected through costs and time

Official document-1 to 2 years-utility after the decision is made

Total costs 5% and 7.5% of the expected investment.

Long run used as a databank.-major signpost

The depth and magnitude is perfectly maintained by furnishing intricate details of the project.

PROJECT RISKS

TYPES: Design Implementation Operational Environmental Finance Interest risk Structural Human resource Execution Management Technology disruption

Focussing on the constraints Identifying the risks

projects with quantified benefitsprojects with non-quantifiable benefits

No prescribed standard format-based on the appraisal’s missions judgement

PROJECT APPRAISAL•ASSESSMENT OF A PROJECT in terms of economical, social and financial viability•Reshape the project so as to upgrade it.

•Aims at sizing up the quality and long term profitability

•Emphasis on economic and technical soundness and

•Earning potential than the adequacy and liquidity of the security

Appraisal process-scientific tool-Areas of

appraisal•Market and demand appraisal•Technical appraisal•Managerial appraisal•Financial appraisal•Socio-economic appraisal

Marketability of end product Size and prospective growth of the market-

nature of population, purchasing power, educational background, fashion etc

Demand and supply position of the product in national and international market

Nature of competition Export potential-product being an important

substitute

Market and demand appraisal-commercial viability

Justify the goal compatibility with preferred technology

Alternative technology - cost effective and efficiently manageable

Technology –suits the existing skill levels(orientation and training programmes)

TECHNICAL APPRAISAL-project to be found sound from technical and engineering point of view.

Purpose for which it is applied Level at which it is used Nature of skills applied

Technology used in the project can be classified on the basis of:

Manufacturing technology-textiles, iron and steel industries

Extraction technology-oils, petroleum, coal and pig iron

Conversion-cement and sugar Pre-fabricated-construction industries like

roads, bridges, buildings and sheds

On the basis of purpose

Core technology Engineering and design technology Intermediate technology Component technology

On the basis of technology

Availability of critical inputs Capacity of the plant and manufacturing

process and suitability of the technology employed

Plant and machinery Project planning and scheduling

While appraising the following have to be considered:

Character Capacity Credit worthiness Capital Collateral conditions

Managerial appraisal

Principle of three c’s

Attribute Will the borrower repay the

loan according to the schedule? Does the borrower have the

ability to repay the loan Is the borrower credit worthy

for the amount of loan applied? How much liquid assets does

the borrower have.

How is it measured? Previous experience,

credit reference, market integrity

Viability of the project,generation of surplus

Educational and family background

Networth of the borrower.

Is the loan backed by sufficient collateral security

Do the current economic conditions indicate any problems in the borrower’s ability to repay the loan?

Marketability-market value of the collateral

General economic condition of the country: stability of the borrower’s income relative to these conditions

Financial appraisalObjectives:To assess whether the unit will generate sufficient

surplus –to meet the outside obligations

Cost of the project Means of financing cost

Two aspects of financial appraisal

Reasonableness of cost of project Debt-equity ratio Promoter’s contribution Sensitivity study Profitability analysis1. Ratio analysis

Factors for assessment of financial viability which the banker has to examine:

Loan safety ratio=liabilities---------------------owner’s funds

Current ratio=CA/CL(1.5 and 2.21) Debt service coverage

ratio(DCSR)=NP+DEP+INTEREST ON TERM LOAN LIABILITIES/payment of term loans+interest on loans

Margin of security=value of fixed assets-term loans/value 0f fixed assetsx100

Ratio analysis

Productivity ratio=Capital employed to value of output salesCE TO NVAInvestment per workerProductivity per workerProfitability ratio

Percentage of raw material to value of output

Percentage of wages and salaries to value of output

Percentage of interest to value of output Percentage of operating profit to sales Percentage of profit after tax equity

Profitability ratio

Break even point Discounted cash flow techniques

pay back methodARRNPVIRRSCBA

Methodology to assess the utility of the project to society as a whole.

Separates all expected changes Represents inputs and outputs of a project and a

price can be put to each of these inputs and outputs Combines the costs and benefits that arise over the

economic life of the project Methodological guidelines developed by OECD AND

UNIDO

SCBA

The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world.

  The OECD provides a forum in which governments can work together

to share experiences and seek solutions to common problems. We work with governments to understand what drives economic, social and environmental change. We measure productivity and global flows of trade and investment. We analyse and compare data to predict future trends. We set international standards on a wide range of things, from agriculture and tax to the safety of chemicals.

We look, too, at issues that directly affect the lives of ordinary people, like how much they pay in taxes and social security, and how much leisure time they can take. We compare how different countries’ school systems are readying their young people for modern life, and how different countries’ pension systems will look after their citizens in old age.

Drawing on facts and real-life experience, we recommend policies designed to make the lives of ordinary people better. We work with business, through the Business and Industry Advisory Committee to the OECD, and with labour, through the Trade Union Advisory Committee. We have active contacts as well with other civil society organisations. The common thread of our work is a shared commitment to market economies backed by democratic institutions and focused on the wellbeing of all citizens. Along the way, we also set out to make life harder for the terrorists, tax dodgers, crooked businessmen and others whose actions undermine a fair and open society.

 

The United Nations Industrial Development Organization (UNIDO), French/Spanish acronym ONUDI, is a specialized agency in the United Nations system, headquartered in Vienna, Austria. The Organization's primary objective is the promotion and acceleration of industrial development in developing countries and countries with economies in transition and the promotion of international industrial cooperation. It is also a member of the United Nations Development Group.[1]

Benefits costsGain in gross domestic provident

------------------ Social cost of extra GDP to be generated by the project

----------------

Routine radiation in value

----------------

Waste management

--------------

Proliferation -----------------Civil liberties -------------------

----------------- --------------------

SCBA B/S of nuclear power project

OPPORTUNITY COSTBenefit of the best alternative foregone to a particular course of action

Also known as the accounting price Refers to adjusted price of the input/output

so as to reflect its real cost of value Accounting price of an input

viz.capital,labour or foreign exchange represents its opportunity cost or the loss to the economy that would result from a reduction in its supply by one unit.

Shadow prices

SCBA IS A PERFECT NECROPSY where the identification and determination of the best among project alternatives is made with reference to a country economic and social

Position.

Socio-Economic appraisal

Blue print to foresee some predicted goals It is a skeleton which consist of a bundle of

activities with its future prospects Guided activity A predefined and detailed plan of action Helps the managers to perform their task

effectively and efficiently.

Project planning

To eliminate or reduce uncertainty To improve efficiency of the operation To obtain a better understanding of the objectives To provide a basis for monitoring and controlling

the work

Need for project planning

Organization of activities and allocation of responsibilities

Communication and coordination Induces people to look ahead Instills a sense of urgency and time consciousness Basis for monitoring and control (gist: prj mgr should structure the work –

manageable,independent,integratable and measurable in terms of progress)

Functions of project planning

Awareness of the various alternatives Define each alternative Choice between the alternatives

Steps in project planning

Planning the project work Planning the manpower and organization Planning the money Planning the information system

Areas of project planning

One shot-single use-short term Standing or standard use plans-long term

Types of project plan

Traditional tools Network analysis

Tools of project planning

Gantt chart1. oldest formal planning designed by Henry Gantt in

19032. activities are broken down into a series of well-

defined jobs of short duration whose cost and time can be estimated.

3. pictorial device in which the activities are represented by horizontal bars on the time axis

4. The length of the bar-estimated time5. The left hand end of the bar shows the beginning time,

right hand and the ending time

Traditional tools

The Gantt Chart

Merits and demerits of the Gantt chart

merits It is simple to understand Can be used to show

progress Used for manpower

planning

demerits Cannot show relationship

between activities on large complete projects

Physical limit to the size of the bar chart

Cannot easily cope with frequent changes

Sophisticated than the traditional bar chart Activities, events and their relationships are

represented by a network diagram Also called an arrow diagram It is drawn in which lines between the nodes

represent the jobs, the nodes being numbered to identify the jobs.

Network techniques

Merits and demerits of network techniques

merits Effectively handle

relationships among project activities

Identify the activities which are critical

Handle large and complex projects

Computerized and updated

Not easily understood by the project personnel

Do not define an operational schedule

PERT-

ADVANTAGES Gives the management the

ability to plan the best possible use of resources to achieve a given goal within the overall time and cost limitations

Helps the management to handle the uncertainities

It presses for the right action at the right point and at the right time

DISADVANTAGES Basic difficulty comes in

the way of time estimates Does not consider

resources required at various stages

Requires frequent updating and revising the PERT calculation and this costly affair

CPM-CRITICAL PATH METHOD-was developed in 1956 at the E.I.Dupont Nemours & Co USA

Advantages Helps in ascertaining time schedule Control by the management is

made easy Makes better and detailed planning Provides a standard method for

communicating project plans, schedules time and cost performance

Identifies the most critical elements and attention is paid to these activities

Disadvantages Fails to incorporate

statistical analysis Based on the

assumptions that there is a precise known time but not true in reality

Cannot be used as a controlling device especially when changes are introduced

Differences between PERT & CPM

PERT The origin is military(naval) It is event oriented approach There is allowance for

uncertainty It has three time estimates It is probabilistic model with

uncertainty in activity duration It does not demarcate between

critical and non-critical activities It is especially when high

precision is required in time estimates

Time is averaged The concept of crashing is not

applied It lays emphasis on reduction of

the execution time of the project without too much cost implications. It is time based.

CPM The origin is industrial It is an activity oriented system No such allowance There is only one single

estimate of time and the emphasis is on cost.

It is deterministic model Marks critical activities It is suitable when reasonable

precision is required No averaging of time is

involved The concept of crashing is

applied It lays emphasis on the

greatest reduction in completion time with the least increase in project cost. It is cost based.

Essential to fix a time target for each and every activity

Helps to complete the projects as per time schedule

Time estimates

Basic factors involved in time estimates

WorkConstraintsResourcesData available

Optimistic time(to)-time required if no hurdles arise

Most likely time(tm)-activity is most likely to be completed-normal circumstances

Pessimistic time(tp)-if unusual complications arise.

Three time values

Time study approach T=a/pxn Previous project data Estimating approach range estimates Estimates from vendors and contractors Allocated and committed time

Different approaches

When is to be done and how much is to be done

To obtain commitment Communicate the commitments to the

concerned people and ensure coordination through self-regulating first efforts

Project Scheduling-

Successively detail out the schedule to provide physical equivalence with reality

Adopt the schedule to the changed realities Provide intervention when stability of the

work system

Purpose of project scheduling

Scheduling of non-critical activities can be done by two schedules:early start schedulelate start schedule

Bounding schedule-

At zero date During detailed engineering During procurement and subcontracting During construction

Project cost control-cost control methods

Project organisation should have specific objectives,a formal structure of authority with some persons in leadership roles and others in subordinate roles,division of work which entails specialsiation by members in various activities or functions, a formal system of communications,and generally a set of formal procedures and customs that distinguish them from the social entities.

Project organisation

Accomplish the specific project in the most economical,efficient and effective manner within the constraints of time,budget and performance or quality standards

Prime objective of project organisation

Line and staff Divisional Matrix Task force Totally projectised

Forms of organisation

Line and staff organisation modelChief executive

Project manager

commercialfinanceTechnicalPersonnel

purchaseAdministration contract

construction

Engineering

Many projects are co-financed Some of the sources are:

Project financing and project over runs

Multilateral funding agencies Export credit agencies Direct foreign investment Bilateral funding agencies Commercial banks Institutional lenders Leasing companies Contractors countertrade

Common sources of project finance

World bank Regional development banks EDF-European development funds UNDP-united nations development program Advantages:1. long period2. Lower rate of interest3. Participation will endorse credit for interested

parties4. Co-financing is possible

Multilateral funding agencies

Available in two forms:national export-import bankForeign aidWhen tied together they are called mixed credits

1. Export credit and credit guarantees(ECCG)2. OECD

NB:PURCHASE GOODS /SERVICES FROM PRIVATE SECTOR IN THE COUNTRY THAT PROVIDES THE FINANCING

Export credit agenices

Concessional loans or guarantees

LOANS AND GUARANTEES

Credit guaranteed by export credit agency Concessional rate of interest for fixed period Repayment is over a period of 5-10 years Bonds,bank charges,insurance costs are

included in project offer

Supplier’s credit

Arrangement between banks of the country with that of banks of other countries(client)

Lending banks should to make progress payments in cash to the contractor or submission of invoices together with appropriate paper such as BOL

Commonly used in Asian and pacific region.

Buyers credit

Arrangement between selected banks in certain countries

Buyers make cash orders for a variety of different contracts.

Project lines of credit

Major source for industrial plants developed by industrialised countries in developing countries

International manufacturers such as electronics,textiles and automobiles spare parts

Both latin american and asian countries have put major efforts to attract this DFI

MIGA-multilateral Investment guarantee agency in 1988

Direct foreign investment

Inability of the project administration to complete the venture within the stipulated framework of cost and time

Spending more time than the scheduled time Cost overrun is the excess of actual cost

incurred on a project over the budgeted or planned cost.

Project overruns

Internal reasons External reasons

Causes for overrun

Underestimation at the project preparation and evaluation stages unsuitability of the location,changes in the designs of civil

structure,additions and changes in various items of plant and equipment

Effective project implementation requires competent management with ability to forecast problems

Tendency of management to overspend on travel,entertainment ,non-productive activities etc

Incompetent and dishonest management- Delay in recruitment of project implementation staff,excessive

expenditure on foreign technicians,failure to comply with institutional conditions,inadequate contingency provisions for non-firm items ,complex technology etc

Internal reasons

Delay in availability of utilities-power General short supply of materials and escalation in prices Delay in sanction and disbursement of assistance by financial

institutions Delay in development of an industrial area and provision of necessary

infrastructure Changes in government policies Foreign currency fluctuations Unforeseen political developments Inability of domestic machinery to adhere to the delivery schedules due

to over booking,strikes,non-availabilty of components etc Delay in the arrival of foreign technicians Sudden changes in the market conditions

External reasons

Ensures regular monitoring of performance Motivates project personnel to strike for

achieving projects objectives

Project control-two major functions

Establishment of controls On-going controlling activities using the

above controls

Steps in project control

On the progress of the activities On the performance of project activities On project schedule On project cost

Project control purposes

Characteristics of project People problems Poor control and information system

Problems of project control

Gantt charts Bar charts Milestone charts Critical path method PERT

tools

Graphic representation of how each activity is dependent on others help in better scheduling, monitoring and control

Serve as indicators Illustrates the type and extent of coordination required

among several functionaries of the project team Identifying critical tasks and helps in diverting resources Helps in identifying the critical path Helps in resource allocation Helps in resource smoothening Whether or not to crash the project Cost control

USES OF NETWORK TECHNIQUES

Important aspect in the process of planning Important tool to identify the shortcomings during

the implementation period and to develop corrective actions to improve the delivery and administrative function

Final phase of project management

Project review

Initial review Performance evaluation Abandonment analysis Behavioral issues in project abandonment Administrative aspects of capital budgeting Evaluating the capital budgeting system in

org

Facets of project review

Control of project in progress- expenditure authorization specifies how much can be spent by whom and when.

Post audit-an audit after it has been commissioned is referred as post audit or post completion audit

Initial review-two types

It is done periodically On going process Economic rate of return=cash flow+changes in

present value/pv at the beginning of the year

Performance evaluation

Investment decision is guided by NPV criterion.

Applied to a project ‘continuation versus abandonment’decision

Project to be abandoned if the NPV associated with continuation

Abandonment analysis

Identification of promising investment opportunities

Classification of investments Submission of proposals Decision-making Preparation of capital budget and appropriation Implementation Performance review

Administrative aspects of capital budgeting

Reasonableness of the estimate of capital cost

Reasonableness of the estimate of working results

Adequacy of the rate of return Appropriateness of the financing pattern

Financial review-purpose

Internal rate of return-15% Return on Investment-20-25% Debt-service coverage ratio-1.5:2.0

Adequacy of rate of return-general norms

Cash flow stream Debt service coverage ratio

Financial review

Risk analysis Inflation analysis Better monitoring

Refinement in financial evaluation

Project mix Capacity Process of manufacture Engineering know-how and technical collaboration Raw materials and consumables Location and site Building Plant and equipments Break even point

Technical review-by financial institutions

Resourcefulness- Understanding Commitment

Marketing review

Effective rate of protection and Domestic resource cost

World bank

Economic review

When do not have expertise often resort to Turnkey trap

Owner expects that the turnkey contractor can take care

It is single point responsibility, this responsibility is with respect to TIME,PERFORMANCE PARAMETERS AND PROJECT COST

Turnkey Trap

The owner when he is not doing things himself,needs someone who is not working for profit.

These are construction management and design management

CM AND DM companies

Formal and systematic examination of the performance of an ongoing project as compared to its requirements

Independent and authentic source of information and critique

Project audit

Creating awareness among the project staff of the types and magnitude of the problems-producing quality products, in planned volume and at competitive costs

Providing clear picture, from time to time of the actual status of project

Prompt identification of the factors that might cause product quality problems

Identify specific training needs Establishment appropriate standards and systems

objectives

Formalized the experience and expertise in project management

Good information base for proper estimation and costing of the project

Expert on measuring, confirming, investigation and reporting the status of a project

Should not arrogate to himself the role of a consultant

Advised to make recommendations Unsolicited action plans should be made only if

he feels strongly about important changes. Evaluate the contract base lines and give his

judgment on the adequacy

Functions of project auditor

It is a powerful tool for expressing the scope or extent of a project in simple graphic terms

It represents the project in terms of the hierarchy of deliverables and services it will produce.

It starts with a single box at the top which represents the whole project.

The project is then partitioned into its components with lower level boxes

Work breakdown structure

Partition the major project deliverables into smaller components to improve the accuracy of cost estimates

Provide a mechanism for collecting and organising actual costs Provide a mechanism for performance measurement and control Defines the final and intermediate products of a project and their

relationships Uses a tree diagram to show the resolution of overall requirments

into increasing levels of detail. Allws a team to accomplish its general requirements by

partitioning a large task into smaller components and focusing on work that can be more easily accomplished

Advantages of WBS