Fundamentals of Project Management

Shriram M. Oka

Agenda

• What is a project?• Project Life Cycle• Stakeholders in Project• Key facets:-

– Project Scope & Contract Terms– Project Schedule– Project Cost– Project Quality– Project Safety– Working Capital & Generation of Free Cash– Managing People / Client– Managing Risk

What is a Project?

A collaborative endeavor to develop and deliver a Unique end-product in given time, managing available resources, executing work within set safety regulations & ensuring Internal /External customer satisfaction.

Keywords: Time, Cost, Safety, Quality (PDCA) Plan, Do, Check, Act

Project Lifecycle

Client floats Tender

Bidders submit offers

Bid Evaluation / Award

Detailed Design, Procurement & Execution

Project Close-out

Stakeholders

End user / Client PM Consultant / Design Consultant Contractor Vendors Subcontractors Govt. Bodies / Statutory Authorities Others

Project Management

• The Key facets of a project that need to be managed are:-– Project Scope & Contract Terms– Time / Schedule– Cost– Quality of work & Quality of end product– Safety of staff / labor – Working Capital & Generation of Free Cash– People / Client – Risk

Project Scope

Understanding Contract Scope & Terms Types of Contracts Time Duration Technical Spec Commercial Conditions

Payment Terms Advances & Retention Monies Bank Guarantees (ABG , PBG, EMD)

Special Terms & Conditions , if any Eg – Maintenance of facility post commissioning

Types of Contract

Based on Pricing & Payment Terms Lump-sum Unit Rate (Priced BOQ) Cost Plus Margin BOOT

Based on work scope Turnkey EPC (Total scope with 1 party) Design & Build (3rd party F.E.E.D and/or PMC) Supply Contract / Erection Contract

Managing Time

Project execution is characterized by:- Multiple inter-dependant activities Parallel work fronts Limited available Time Limited Resources

Hence, activity planning is of utmost importance to finish the total scope of work, as per contract, within the given time duration.

Activity Scheduling (Case Study)

ACTIVITY DURATION DEPENDENCYRESOURCE

(labor)

TASK-1 3 WEEKS _  3

TASK-2 4 WEEKS TASK-1  4

TASK-3 5 WEEKS TASK-2  6

TASK-4 4 WEEKS _  4

TASK-5 6 WEEKS TASK-4  6

TASK-6 4 WEEKS TASK-4  3

TASK-7 3 WEEKS TASK-3,5,6  3

Gantt Chart

Critical Path

Typical Problems faced by the project manager

• A project is lagging behind schedule. Manager has two options:-– Work with existing Resources & deliver the

project with Time delays– Increase Resources, use expensive High-end

P&M or highly skilled sub-contractors & crash Activity durations. Deliver on time, but at significantly higher cost!

What does he do?

Cost Control

A project needs to be executed NOT AT ANY COST, but within a defined “BUDGETED COST”

• Budgeted Cost (ACE)• Periodic Monitoring of Cost against ACE (JCR)• Variation Analysis

Software used at site to Transact W.Os / P.Os, Record & Monitor Cost incurred - CeMa.

Software used at RO /HQ to Transact W.Os / P.Os, Record & Monitor Cost incurred - EIP

Allocating Resources - L,M,P, Sc

Each activity consumes resources pertaining to:-

L – Labor M – Supply Materials P – Plant & Machinery Sc – Sub Contractor & Specialized Agency

While preparing ACE, the planning eng allocates a Cost Budget to each activity, that combines all the 4 resource elements L,M,P,Sc.

Monitoring performance

Periodic reports to monitor performance:- Job Cost Report (JCR)

Monitor Cost to date & ETC periodically Analyze variation in Unit Rates

Invoicing Report Collection & Outstanding Statement

Quality

• The lowest project Cost is achieved when every activity is executed at the optimum level of Quality!

• Zero Defects – “Do it right the first time, every time!”How to achieve Exceptional Quality?• Plan Do Check Act

– Excellence of Detail Engg (Team Review of Dwgs)– Selection of Vendor (PQ)– Selection of Subcontractor (PQ)– Stringent Material Inspection & Material Storage Norms– Well-defined Work / Erection Procedures– Qualitative & Regular Audit of Erection Activity– Sharpen the Axe : Regular Training to Staff / Workmen

Safety

Safety encompasses: Health of workmen / staff Safety of workmen / staff (PPE, scaffolding etc.) Environmental Protection

Why is Safety critical to a project? Prevention of Fatal Injuries Prevention of Loss of Work-time Limit damage to environment

Cash Flows

Working Capital Management Net WC = Current Assets – Current Liabilities

Assets LiabilitiesNet O/s Vendor Credit

Retention Unadjusted AdvValued Stock OCLCost > Invoice  Cash & bank

OCA  

Financial Health Check ?

Financials Case 1 Case 2Sales 100 100GM 15 15

Overheads -3 -3Deferred Debts 0 0

PBIT 12 12NO-PAT 8.0004 8.0004

AWC 25 45ANFA 1 2ANFE 26 47

ANFE (% of Sales) 26% 47%CC (13.25% of ANFE) 3.445 6.2275

EVA 4.5554 1.7729ROCE 31% 17%

Site Organization Structure -- Overview

Key People

Critical Project Management Skills

In the Order of Decreasing difficulty

1. People Skills and Goodwill

2. Crisis Management skills

3. Planning skills

S .No 3 is easiest to achieve, failure to implement this skill leads to uncontrollable situations

Managing Risk

Risk Management is

The identification, assessment, and prioritization of risksMinimizing the occurrence and monitoring & controlling the impact of unfortunate events

Risk Assessment Sr. No.

Identified Risk Probability

(a)

Impact

(b)

Risk Rating

(a) * (b)

Risk Mitigation Plan

1 95% will be paid after commissioning of entire SS

Incomer is a 220kV UG Cable(Not in L&T Scope)

In such a situation, the payment may be held up till UG Cable is laid and charged

Most Likely Major Critical 1) Request for amendment in payment terms (Milestone based)

2) Monitor Cost over Invoice

3) Plan Supply such that project cash flow is positive

2 Delay in Delivery of Transformer may affect the completion of substation works

Possible Moderate High To negotiate with vendor and make specific delivery arrangements

Put stringent LD terms on vendor

Risk Assessment Matrix

Impact / Consequence

Pro

bab

ility

Most Likely

Likely

Possible

Unlikely

Rare

ExtremeMajorMinor

1

Insignificant Moderate

Low Medium High Critical Risk Rating

2

25

Thank You