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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