PROJECTMANAGEMENT(As per the Revised Syllabus 2016 -17 of Mumbai University for T.Y.BMS, Semester – VI)

Pawan JhabakP.G.D.Ed.M., M.Com. (Finance)

Ex. Vice Principal, Rustomjee Business School,Dahisar (West), Mumbai – 68.

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PREFACE

“Genius is the ability to reduce the complicated to the simple”…Albert Einstien

I earnestly hope that the book will make the complicated subject of Project Management simpleto understand and score high marks in exams.

I look forward for constructive suggestions from the readers and teachers.

I am thankful to one and all who have contributed directly or indirectly to make the New editionpossible.

This book is user-friendly and different. As one goes through the book, one will feel thedifference, and this will help to master PM in an enjoyable manner, with lifetime utility.

The book covers ‘University’ prescribed syllabus with practical dimension!! Let’s L-Earn!!

Best Wishes!!

Million Thanks.

Pawan V. Jhabak

Visiting Faculty Amity Business School. Aditya Institute of Management Studies & Research. Mumbai Educational Trust. Lala Lajpatrai College.

Ex. Visiting Faculty Vivekanand Education Society. Rajiv Gandhi Institute of Technology. S.K Somaiya Narsee Monjee College. Usha Pravin Gandhi. Bhavan’s College (Andheri). Rizvi College. Akbar Peerbhoy. Bhurani College. Poddar College etc.

Ex. Vice Principal Rustomjee Business School.

ACKNOWLEDGEMENTS

I have benefited from scores of books and hundreds of articles. As it is impossible to list all ofthem, only the overall reference book are mentioned:

Prasanna Chandra, Projects, Tata McGraw-Hill, 2009. The Economist Pocket World in Figures, 2010.

I would like to express my gratitude to:

Students for providing the stimulus for writing this book. Deepak Kap, my support staff and staff of Himalaya Publication House. My Grandmother Jhamkudevi, Wife Bharati and Daughter Param.

Pawan Jhabak

SYLLABUSBachelor of Management Studies Programme of Semester VI with effect

from the Academic Year 2016-2017

Course Code: UBMSFSVI.7

Project ManagementModules at a Glance

Sr. No. Modules No. ofLectures

1 Introduction to Traditional Financial Services 152 Issue Management and Securitization 153 Financial Services and its Mechanism 154 Consumer Finance and Credit Rating 15

Total 60

ObjectiveSr. No. Objectives

1 The objectives of this course is to familiarize the learners with the fundamental aspects of various issuesassociated with Project Management

2 To give a comprehensive overview of Project Management as a separate area of Management3 To introduce the basic concepts, functions, process, techniques and create an awareness of the role,

functions and functioning of Project Management

Sr. No. Modules/Units

1 Introduction to Project Management and Project Initiation(a) Introduction to Project Management:

Meaning/Definition of Project and Project Management, Classification of Projects, Why ProjectManagement?, Characteristics/Importance of Project Management, Need for Project Management(Objectives), History of Project Management.

(b) Organizational Structure (Project Organization):Meaning/Definition of Organizational Structure, Organizational Work Flow, Developing WorkIntegration Positions, Types of Organizational Structure, Forms of Organization, Strategic BusinessUnits (SBU) in Project Management.

(c) Project Initiation:Project Selection – Meaning of Project Selection, Importance of Project Selection, Criteria of ProjectSelection (Models), Types of Project Selection, Understanding Risk and Uncertainty in Project Selection.Project Manager – Meaning of Project Manager, Role of Project Manager, Importance of ProjectManager, Role of Consultants in Project Management, Selecting Criteria for Project Manager.Project Planning – Importance of Project Planning, Functions of Project Planning, System

Integration, Project Management Life Cycle, Conflicts and Negotiation Handling in ProjectManagement, Planning Cycle and Master Production Scheduling.

2 Analyzing Project Feasibility(a) Project Feasibility Analysis:

Meaning/Definition of Project Feasibility, Importance of Project Feasibility, Scope of ProjectFeasibility.Types of Project Feasibility – Market Feasibility, Technical Feasibility, Financial Feasibility,Economic Viability, Operational Feasibility.SWOT Analysis (Environment Impact Assessment, Social Cost Benefit Analysis).

(b) Market Analysis:Meaning of Market Analysis, Demand Forecasting, Product Mix Analysis, Customer RequirementAnalysis.

(c) Technical Analysis:Meaning of Technical Analysis, Use of Various Informational Tools for Analyzing, Advancement inthe Era of E-Commerce in Project Management.

(d) Operational Analysis:Meaning of Operation Management, Importance of Operation Management Operation Strategy –Levels of Decisions, Production Planning and Control, Material Management – Work Study andMethod Study, Lean Operations.

3 Budgeting, Cost and Risk Estimation in Project Management(a) Funds Estimation in Project:

Means of Financing, Types of Financing, Sources of Finance, Government Assistance towardsProject Management for Start-ups, Cost Control (Operating Cycle, Budgets and Allocations),Determining Financial Needs for Projects, Impact of Leveraging on Cost of Finance.

(b) Risk Management in Projects:What is Risk?, Types of Risk in Projects, Risk Management Process, Risk Analysis andIdentification, Impact of Risk Handling Measures, Work Breakdown Structure, New VentureValuation (Asset Based, Earning Based, Discounted Cash Flow Models).

(c) Cost Benefit Analysis in ProjectIntroduction to Cost Benefit Analysis, Efficient Investment Analysis, Cash Flow Projections,Financial Criteria for Capital Allocation, Strategic Investment Decisions.

4 New Dimension in Project Management

(a) Modern Development in Project Management:Introduction to Modern Development in Project Management, Project Management Maturity Model(PMMM), Continuous Improvement, Developing Effective Procedural Documentation, CapacityPlanning.

(b) Project Monitoring and Controlling:Introduction to Project Monitoring and Controlling, The Planning-Monitoring-Controlling Cycle,Computerized Project Management Information System (PMIS), Balance in Control System inProject Management, Project Auditing – Life Cycle.

(c) Project Termination and Solving Project Management Problems:Meaning of Project Termination, Reasons for Termination of Projects, Process for TerminatingProjects, Strategy/Ways to Solve Project Management Problems, Project Review and AdministrativeAspects, Execution Tools for Closing of Projects.

QUESTION PAPER PATTERN

Duration: 2.5 Hours Max. Marks: 75 MarksN.B: 5 questions of 15 Marks each.

All questions are compulsory.

Attempt any 2Q.1 (a) Theory – Introduction to Project Management 7.5 MarksQ.1 (b) Theory – Organizational Structure 7.5 MarksQ.1 (c) Theory – Project Initiation 7.5 Marks

Attempt any 2Q.2 (a) Numerical – Project Feasibility Analysis 7.5 MarksQ.2 (b) Theory – Market/Technical Analysis 7.5 MarksQ.2 (c) Numerical – Operational Analysis 7.5 Marks

Attempt any 2Q.3 (a) Numerical – Funds Estimation in Project 7.5 MarksQ.3 (b) Theory – Risk Management in Projects 7.5 MarksQ.3 (c) Numerical – Cost Benefit Analysis in Projects 7.5 Marks

Attempt any 2Q.4 (a) Theory – Modern Development in Project Management 7.5 MarksQ.4 (b) Theory – Project Monitoring and Controlling 7.5 MarksQ.4 (c) Theory – Project Termination 7.5 Marks

Q.5 Case Study from UNIT III Cost Benefit Analysis in Projects 15 Marks

Note: For updates on sums and theory, send email 2 weeks before exam to scorejhabak@gmail.com

CONTENTS

Sr. No. UNIT I Page Nos.

1 INTRODUCTION TO PROJECT MANAGEMENT 1 – 7

2 ORGANIZATIONAL STRUCTURE (PROJECT ORGANIZATION) 8 – 16

3 PROJECT INITIATION 17 – 36

UNIT II

4 PROJECT FEASIBILITY ANALYSIS 37 – 44

5 MARKET ANALYSIS 45 – 51

6 TECHNICAL ANALYSIS 52 – 59

7 OPERATIONAL ANALYSIS 60 – 66

UNIT III

8 FUNDS ESTIMATION IN PROJECT 67 – 97

9 RISK MANAGEMENT IN PROJECTS 98 – 106

10 COST BENEFIT ANALYSIS IN PROJECTS 107 – 160

UNIT IV

11 MODERN DEVELOPMENT IN PROJECT MANAGEMENT 161 – 170

12 PROJECT MONITORING AND CONTROLLING 171 – 176

13 PROJECT TERMINATION AND SOLVING PROJECTMANAGEMENT PROBLEMS

177 – 187

Structure:

Meaning / Definition of Project and Project Management

Classification of Projects

Why Study Project Management?

Characteristics / Importance of Project Management

Need for Project Management (Objectives)

History of Project Management

1(A)Introduction to Project

Management

2 PROJECT MANAGEMENT

Meaning / Definition of Project and Project Management“A temporary endeavor undertaken to create unique product or service.”

– PMI

A project in any organisation is collaboration across departments to achieve a single well definedobjective. The process of planning, organizing and managing resources to achieve the organisationalobjective is called Project Management.

Project ManagementThe term Project Management constitutes two words ‘project’ and ‘management’. We are aware

of the definition of project. Management has various definitions. The functions of management areplanning, organizing, staffing, coordinating, controlling and directing. Management is known as adiscipline i.e, it is an organized body of knowledge.

Project Management is the “application of skills, tools and techniques to project activities inorder to meet or exceeds stakeholder needs and expectations from activities of the project.”

Project Management is very important in production of goods and services. Idea generation tofinal production of product or service, each step can be categorized as individual projects. Any projectrequires a project manager, who leads the project to its logical conclusion. The Project manager isresponsible for appointing team members with different background but essential in completion of theproject.

Classification of Projects1. Personal Projects:

(a) To obtain a degree of B.Sc.

(b) To plant a garden

(c) To construct a house

(d) To plan a vacation tour

(e) To plan personality development

2. Industrial Projects:

(a) Construction of a building

(b) Provide raw materials to industrial estate

(c) Construction of a motor way

(d) Design a new machine

3. Business Projects:

(a) To develop a new product

(b) To introduce a new product

INTRODUCTION TO PROJECT MANAGEMENT 3

(c) To setup a new institution

(d) To design a new machine

Projects have size and duration. The size and duration of each project varies depending on thekind of project is concern.

Generally, project are made up of:

(a) a definite well defined beginning

(b) multiple activities which are well defined

(c) a definite well defined end

Why Project Management?Project Management plays a very important role in the success of each project. As we saw in

project model, time, quality and cost constraints are associated with every project. Also, various otherfactors are associated with every project which may adversely affect the ongoing project.

There are more chances of failure of a project. There are various things which may go wrong.

1. Completion of a project may be delayed, i.e., project gets implemented after the givendeadline.

2. Project cost may increase than the actual budget.

3. Project may not meet the functionality requirements of the client, i.e, unable to provide whatis expected by the customer or client.

4. Projects are always associated with various kinds of risks.

The things which are mentioned in the previous part are responsible for failure of the project.Also, these things may cause the incompletion of the project.

To complete any project successfully Project Management process must be carried out. ProjectManagement is a special branch which deals with application of knowledge of management to everyaspect of the project. Project Management framework consists of different knowledge areas whichhelps in managing cost, time, quality, human resources, risks etc.

Characteristics / Importance of Project ManagementProject Management has its importance in managing the project in following manners:

1. Project Management defines the work in appropriate manner to avoid confusion and no-worklater, i.e., Project Management defines the framework which must be done to facilitate thework of a project.

2. Proper Project Management resolves problems more quickly.

3. Project Management defines the appropriate scope of the project which concentrate on thearea of the work.

4. It defines the risks associated with the project and also create the risk investigation plan.

4 PROJECT MANAGEMENT

5. Project Management guides in establishing communication with clients, team members andstakeholders.

6. It helps to adopt a win-win approach and initially building higher quality product.

Project Management is the art of managing the project and its deliverables with a view to producefinished product or service. There are many ways in which a project can be carried out and the way inwhich it is executed is Project Management.

Project Management includes: identifying requirements, establishing clear and achievableobjectives, balancing the competing demands from different stakeholders and ensuring that acommonality of purpose is achieved. It is clear that unless there is a structured and scientific approachto the practice of management, organisations would find themselves adrift in the ocean calledorganisational development and hence would be unable to meet the myriad challenges that the modernera throws at them. Hence, the importance of Project Management to organisations cannot beemphasized more and the succeeding paragraphs provide some reasons why organisations must takethe practice of Project Management seriously.

Without a scientific approach to the task of managing the projects and achieving objectives, itwould be very difficult for the organisations to successfully execute the projects within the constraintsof time, scope and quality and deliver the required result. In other words, there has to be a frameworkand a defined way of doing things to ensure that there is a structure to the art of Project Management.

Thus, Project Management is about creating structure and managing the project commitmentsand the delivery of agreed upon results. By using the methods of Project Management as described inthe PMBOK and allied technical journals, organisations can seek to achieve control over the projectenvironment and ensure that the project deliverables are being managed. Managers face what is knownas the “triple constraint”. That is the competing demands of time, scope and quality upon the projectmanager’s list of things to do and how well the project manager manages these constraints goes a longway in determining the success of the project. Without the use of Project Management, managers andorganisations would find themselves facing an unpredictable and chaotic environment over which theyhave little control. Thus, Project Management is both necessary and essential to the success of theproject.

Project Management is too big an area to be covered in a few pages and the attempt is to provideconcise and lucid definitions of the various terms and terminologies associated with a project. It isimportant to note that Project Management provides a framework within which subsequent actions bythe organisation can be taken and in this way, it is essential for organisations to adopt the frameworkprovided by the practice of Project Management.

ConclusionIn conclusion, Project Management and the practice of the same have become indispensable to

the modern day project manager and they form the basis of much of what is achieved during thecourse of a project. Thus, the idea of a project being managed professionally lends itself to theconcepts and processes laid out for the practitioners of the art of Project Management.

INTRODUCTION TO PROJECT MANAGEMENT 5

Need for Project Management (Objectives)We all follow Project Management processes in our projects. Mostly, they are tailored to meet

the requirements of the project. Some projects need tighter control and more stringent processes thatmight have been mandated in the contract, while some need processes sufficient to self manage andexecute the project to meet the deadlines and quality standards. Whatever be the reasons, if we don’tfollow certain processes, it will definitely jeopardize the project.

Here are top 5 reasons why we need to follow processes:

1. To meet the deadlines: This is first and foremost. Many times, there are delays in deployingthe project at the client’s place only because there is no process defined for uploading thesoftware or patches in the customer’s environment. Important steps like build packaging,testing the smooth installation are left out if these are not mentioned in a standard to dochecklist, this can cause the team to run around for last minute activities that may result inmore problems identified at the last minute. This inadvertently delays the final delivery of theproject or product to the customer.

2. To maintain the right quality: This one also tops the list and is again related to point 1. Thedifference is when certain processes or tasks are missed out and the team goes ahead to installthe software/ product at the customer’s site. This ends up with high number of defects beingraised at the customer end. Some of them can be precarious such as an interactive website notopening at all for the end user, or incorrect amount of cash being dispensed by the ATMmachine.

3. To ensure productivity: If processes are not maintained and followed, it can result in tasksor activities being identified in an adhoc manner with managers expecting team to stay lateand complete work that could have been otherwise planned well in advance.

4. To prevent re-work: Many a times, due to lack of process, the communication between teammembers and managers narrow down. Lots of assumptions are made. Tasks are completedwith a different set of objectives in mind. E.g., Software developer ending up writing a codethat result in performance issues in a mission critical product. This can cause the customer towait for a long time, for instance, a financial transaction to happen and can cause a lot ofdissatisfaction to the customer. The team then ends up fixing the problem in the next build orrelease cycle causing more re-work.

5. To avoid blame gaming: All the above points lead to one major effect….Playing the blamegame. Each team puts the blame to the previous team, or puts the blame of bad quality toproduction team. And this goes on in a vicious circle. Add political angle to it, and the projectgoes for a six. While all this could have been easily avoided by simply following rightprocesses.

History of Project ManagementUntil 1900, civil engineering projects were generally managed by creative architects, engineers,

and master builders themselves, for example, Vitruvius (first century BC), Christopher Wren (1632–1723), Thomas Telford (1757–1834) and Isambard Kingdom Brunel (1806–1859). It was in the 1950s

6 PROJECT MANAGEMENT

that organisations started to systematically apply Project Management tools and techniques to complexengineering projects.

As a discipline, Project Management developed from several fields of application including civilconstruction, engineering, and heavy defense activities. Two forefathers of Project Managementare Henry Gantt, called the father of planning and control techniques, who is famous for his use ofthe Gantt chart as a Project Management tool (alternatively Harmonogram first proposed by KarolAdamiecki) and Henri Fayol for his creation of the five management functions that form thefoundation of the body of knowledge associated with project and program management. Both Ganttand Fayol were students of Frederick Winslow Taylor. His work is the forerunner to modern ProjectManagement tools including work breakdown structure (WBS) and resource allocation.

The 1950s marked the beginning of the modern Project Management era where core engineeringfields come together to work as one. Project Management became recognized as a distinct disciplinearising from the management discipline with engineering model. In the United States, prior to the1950s, projects were managed on an ad-hoc basis, using mostly Gantt charts and informal techniquesand tools. At that time, two mathematical project-scheduling models were developed. The “CriticalPath Method” (CPM) was developed as a joint venture between DuPont Corporation and RemingtonRand Corporation for managing plant maintenance projects. And the “Program Evaluation and ReviewTechnique” or PERT, was developed by the United States Navy in conjunction with the LockheedCorporation and Booz Allen Hamilton as part of the Polaris missile submarine program.

PERT and CPM are very similar in their approach but have some differences. CPM is used forprojects that assume deterministic activity times; the times at which each activity will be carried outare known. PERT, on the other hand, allows for stochastic activity times; the times at which eachactivity will be carried out are uncertain or varied. Because of this core difference, CPM and PERT areused in different contexts. These mathematical techniques quickly spread into many private enterprises.

Fig. 1

t = 3 mo

t = 1 mo t = 3 mo

t = 3 mo

D F

E

C

t = 3 mot = 4 mo

A

B

10 30

40

50

20

INTRODUCTION TO PROJECT MANAGEMENT 7

PERT network chart for a seven-month project with five milestones

At the same time, as project-scheduling models were being developed, technology for projectcost estimating, cost management and engineering economics were evolving, with pioneering work byHans Lang and others. In 1956, the American Association of Cost Engineers (nowAACE International;the Association for the Advancement of Cost Engineering) was formed by early practitioners ofProject Management and the associated specialties of planning and scheduling, cost estimating, andcost/schedule control (project control). AACE continued its pioneering work and in 2006 released thefirst integrated process for portfolio, program and Project Management (Total Cost Management Framework).

The International Project Management Association (IPMA) was founded in Europe in 1967, as afederation of several national Project Management associations. IPMA maintains its federal structuretoday and now includes members from on every continent except Antarctica. IPMA offers a FourLevel Certification program based on the IPMA Competence Baseline (ICB). The ICB coverstechnical, contextual, and behavioral competencies.

In 1969, the Project Management Institute (PMI) was formed in the USA. PMI published AGuide to the Project Management Body of Knowledge (PMBOK Guide), which describes ProjectManagement practices that are common to “most projects, most of the time.” PMI also offeredmultiple certifications.

Review QuestionsQ.1. Short Note

(a) Importance of Project Management.

(b) What is Project Management? Explain why it is necessary.

Q.2. Define project and explain its classification.

Q.3. Explain brief history in Project Management.

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