Project Management - Narendra

8/2/2019 Project Management - Narendra

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Use of Dummy Activities

Each activity must be identified by two distinct events &No two or more activitiescan have the same tail and head events.

Dummy activity is a hypothetical activity which takes no resource or time tocomplete. It is represented by broken arrowed line & is used for eitherdistinguishing activities having common starting & finishing events ortoidentify & maintain proper precedence relationship between activities that arenot connected by events.

Distinguishing activities having common starting & finishing events

Following figure shows how a dummy activity can be used to represent twoconcurrent activities, A & B. By definition, a dummy activity, which normally isdepicted by a dashed arrow, consumes no time or resources.

Inserting dummy activity in one four ways in the figure, we maintain the concurrenceof A & B, and provide unique end events for the two activities

To maintain correct precedence relationship, the following questions must beanswered as each activity is added to the network:(a) What activities must be immediately precede the current activity?(b) What activities must follow the current activity?(c) What activities must occur concurrently with the current activity?

The answers to these questions may require the use of dummy activities to ensurecorrect precedence among the activities. For example, consider the following

segment of a project:


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1. Activity C starts immediately after A and B have been completed.2. Activity E starts only after B has been completed.

Part (a) of the figure above, shows the incorrect representation of the precedencerelationship because it requires both A & B to be completed before E can start. In

part (b) the use of dummy rectifies situation.

Write short notes on resource smoothing and resource leveling.

Resource smoothingis a resource scheduling technique used for smoothing peakresource requirement during different periods of project network. Under thistechnique, the constraint may be the total project duration. It helps to estimate theresource requirements for various projects. In resource smoothing, time scaleddiagram of various activities of project and their floats along with their resourcerequirements are used. Floats on non critical activities are utilized & these activities

are rescheduled or shifted (while the project duration remains unchanged) so that auniform demand on resources is achieved.

Resource Levelling(a.k.a. resource allocation) is an operation of resourcescheduling wherein constraint may be availability of certain resources. Here projecttime is varied for maximum utilization of resources i.e. project duration is not treatedas an invariant, but the demand on certain specified resources should not go beyonda specified level. The maximum demand of a resource should not exceed theavailable limit at any point of time. Non critical activities are rescheduled by utilizingtheir floats.


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PROJECT APPRAISAL

Project appraisal is a generic term that refers to the process of assessing, in a

structured way, the case for proceeding with a project or proposal. In short, project

appraisal is the effort of calculating a project's viability. It often involves comparing

various options, using economic appraisal or some other decision analysis technique

1. Market Analysis Assessing as to what would be aggregate demand of proposed

product/services in the future? What would be the market share of the product underappraisal?

Main aspects of Market Analysis while working out the project feasibilityMain aspects to be considered under market analysis while working out the projectfeasibility are(a) Product Features Major uses, scope of market, possible competition fromsubstitute products, special features resulting in consumer preference.(b) Product Demand Past & present demand, forecast of future trends, marketsegmentation by nature of product, consumer groups, geographical division etc,other demographic, sociological, economical, technological factors affecting demand.

(c) Market Share Expected market share and its growth from the projecteddemand(d) Product Pricing Price trends in the past, income and price elasticity of demand(e) Export Possibilities Nature of competition in foreign markets, competitivepricing & costing(f) Distribution & Sales Promotion Methods Distributors, selling agents, sellingorganization for direct selling(g) Government Controls Government controls on pricing, distribution, imports,exports if any.

The main outputs of market analysis useful for financial analysis are

(a) Forecast of sales quantities based on demand projections, expected marketshare and their growth


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(b) Projected selling prices(c) Factors affecting demand / prices and their possible ranges of variation.

2. Technical AnalysisTechnical analysis of the project is concerned primarily with

the following

1. Manufacturing Process & Technology Appropriateness of the chosentechnology and manufacturing process among various alternatives is ascertained.What is the level of automation and flexibility for changing process/product at a laterdate?2. Material Inputs Availability and cost of raw materials, power, and other facilitieslike utilities, etc is assessed.3. Plant Capacity and Product Mix Plant Capacity has a bearing on cost ofproduct and outlay. Can the capacity be cross deployed for changing product mix tobe able to respond to changed market conditions.

4. Machinery & Equipments It is dependant on production technology, processand plant capacity. Whether new machines to be installed or second hand machinesto be fitted? A proper balance has to be obtained between capacities of individualsections or production departments.5. Production System and Plant Layout Plant Layout is guided by ProductionSystem to be followed. Whether flow process, batch process, cellular process orproject process are being used.6. Location and Site Choice of location is decided by factors such as proximity toraw materials and markets, availability of skilled labour and infrastructure,government incentives etc. Specific site or plot to be selected on the basis of itssuitability and cost to develop the same for the particular industry.7. Buildings and Structures Any special requirements for structures to beconsidered. Areas for manufacturing, services, utilities, administration, welfare etc. tobe planned.

3. Financial Analysis

Financial appraisal is meant to assess the financial viability of project. In case ofInfrastructure Projects like highways, dams, power projects, bridges, etc, economicappraisal is the decisive factor and financial appraisal takes the back seat. But incase of commercial projects, financial viability is paramount justification for

undertaking the project. A project should be able to generate adequate ROI to coverthe opportunity cost of capital. Unless this requirement is met, a commercial projectis a non starter.

(a) Initial Investment outlay(b) Subsequent investment outlay(c) Economic life of project(d) Operating cash flows(e) Cost of funds(f) Opportunity cost of funds(g) Rate of taxes

(h) Depreciation(i) Salvage value


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(a) Cost of project / Investment Outlay (progressive requirement of funds)(b) Means of financing(c) Cost of capital(d) Cash flows assessment(e) Break-even point assessment

(f) Profitability assessment(g) Risk assessment(h) Investment worthiness(i) Projected balance sheets.

4. Economic Analysis It is judging the project from social point of view, theanalysis of social costs and benefits, like, jobs it will generate, effect on pollution,convenience of masses, environmental effects, etc. (A bridge, besides earningrevenue for builders, generates jobs for people (directly for people employed inconstruction and indirectly for people employed in cement and steel industry), givesconvenience to people, saves precious fuel and time for people, saves foreign

currency for govt (through savings in fuel), improves environment due to reducedfuel consumption, and so on). Some of the special questions that are analysed are (a) What is the social cost-benefit equation in terms of shadow pricing and notmarket prices (Shadow price is the price which would prevail in a perfect market).(b) How will it affect the market price of the product? Will it make the product moreaffordable? Additional capacities may bring down the prices in the market.(c) Will it affect any other segment of industries? Many small scale industries areadversely affected by the larger projects due to economies of scale enjoyed bybigger projects.(d) Will it trigger further investments? Bigger projects kick start lot of supportingeconomic activities in the vicinity, starting from the tea vendors and hutment grocerystores to schools and so on.

5. Ecological Analysis(a) What are the likely damages caused by the project to the environment?(b) What is the cost of minimising the damages to bring them down to acceptablelimits?

6. Managerial Appraisal Good execution can make a bad idea profitable but anexcellent idea can not survive bad implementation. Success of any project eventuallyrests in the hand of the managers of that project. Managerial capability of promoters

is judged by their resourcefulness, their understanding of the project details and theircommitment to the project.

7. Environmental AnalysisThe growing concern of environment, resource depletion and pollution have forcedthe planners, policy makers to take care of impacts of the project on environment :The appraisal therefore evaluates project impact on :(1) Air(2) Water(3) Monumental resources

(4) Land(5) Sound


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(6) Human inhabitation nearby(7) Animals and Birds

The appraisal often relies upon environmental impact assessment (EIA) conductedby independent body Such studies are conducted to reveal whether there is any

impact of project in a long run on environment If it is revealed that there will be noharmful change in various social economic and physical attributes of environment ofthe project then the project will be considered favourably.

Various methods that financial institutions use to calculate cost of capital.

The cost of capital is a central concept in financial management. It is used for

evaluating investment projects, for determining the capital structure, for assessing

leasing proposals, for setting the rates that regulated organizations like electric

utilities can charged to their customers, so on and so forth.

A firms cost of capital is the weighted average cost of various sources of finance

used by it, viz, equity, preference and debt.

1. Cost of Debt

The cost of debt instrument is the yield to maturity of that instrument

The cost of debt (kd) can be calculated as the weighted average of theeffective cost of the various loan facilities used by the company on which interest isexplicitly charged (net-off after tax rate t).

2. Cost of Preference capital

Preference capital carries a fixed rate of dividend and is redeemable in

nature.

3. Cost of Equity capital

a. CAPM

We assume that the cost of equity can be estimated using the standard

CAPM (capital asset pricing model):

In the equation, the excess return for the stock market is measured by the

expression , in which rm is the return for a general stock exchange index

calculated over a long period and rf is the risk-free rate for government securities.

represents the stock risk.


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b. Dividend Growth Model Approach

A model for determining the intrinsic value of a stock, based on a future seriesof dividends that grow at a constant rate. Given a dividend per share that ispayable in one year, and the assumption that the dividend grows at a constantrate in perpetuity, the model solves for the present value of the infinite seriesof future dividends.

Where:

D = Expected dividend per share one year from now

k = Required rate of return for equity investor

G = Growth rate in dividends (in perpetuity)

c. Bond Yield Plus Risk Premium Approach

This is subjective procedure to estimate the cost of equity whereby the judgmental risk premium is added to the observed yield on the long thermbonds of the firm to get the cost of equity:

Cost of equity = Yield on long term bonds + Risk Premium

What it means is that firms that have risky and consequently high cost debtwill also have risky and consequently high cost equity.

d. Earning Price Ration Approach

According to this approach, the cost of equity is equal to E1 / P0 where E1 is theexpected earnings per share for the next year, and P0 is the current market

price per share

4. Weighted Average Cost of Capital

Given the cost of specific sources of finance and the scheme of weighting, theWACC, the WACC can be readily calculated.

WACC = WE rE + Wp rp + WD rD (1 tc)

Where WE, Wp and WD are the proportion of equity, preference and debtr andrE, rp and rD are the component costs of equity, preference and debt and t c is

the corporate tax rate


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What is Sensitivity Analysis? Discuss the relevance of Risk Analysis for aComprehensive Project Evaluation.

Sensitivity Analysis

Sensitivity analysis seeks to place a value on the effect of change of a singlevariable within a project by analyzing that effect on the project plan. It is thesimplest form of risk analysis. Uncertainty and risk are reflected by defining alikely range of variation for each component of the original base case estimate. Inpractice such an analysis is only done for those variables which have a highimpact on cost, time or economic return, and to which the project is mostsensitive.

Some of the advantages of sensitivity analysis include impressing managementthat there is a range of possible outcomes, decision making is more realistic,though perhaps more complex. And the relative importance of each variableexamined is readily apparent. Some weaknesses are that variables are treatedindividually, limiting the extent to which combinations of variables can beassessed, and a sensitivity diagram gives no indication of anticipated probabilityof occurrence.

It is a technique that measures the change in the profitability of a project caused

by changes in the factors that affect the cash inflows of a project. If a small

change in one factor leads to a major change in the profitability of tile proposed

investment, the project is considered more sensitive to that factor, in other

words, the project is more risky. Other things being equal, a project that is less

sensitive is preferable to projects that are more sensitive.

Sensitivity analysis needs to be carried out in a systematic manner. To meet theabove purposes, the following steps are suggested:

(i) identify key variables to which the project decision may be sensitive;(ii) calculate the effect of likely changes in these variables on the base-caseIRR or NPV, and calculate a sensitivity indicator and/or switching value;(iii) consider possible combinations of variables that may changesimultaneously in an adverse direction;(iv) analyze the direction and scale of likely changes for the key variablesidentified, involving identification of the sources of change.

S Curve and Earned Value Concept -Tools for project monitoring and control

Earned Value ManagementEarned Value Management - Basics


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Earned Value Management is a methodology used to measure and communicate thereal physical progress of a project taking into account the work complete, the timetaken and the costs incurred to complete that work.

Earned Value helps evaluate and control project risk by measuring project progress

in monetary terms.

We spend time and materials in completing a task. If we are efficient we completethe task with time to spare and with minimum wasted materials. If we are inefficientwe take longer and waste materials.

We also plan how we will accomplish the task. How long it will take, the resourceswe need and the estimated costs.

By taking a snap-shot of the project and calculating the Earned Value metrics we cancompare the planned with the actual and make a subjective assessment of the

project progress.

By extrapolating the curves and further calculation we can also estimate the costs toproject completion and the probable completion date.

The basics of Earned Value can best be shown on the ubiquitous 'S-Curve'.

The S-curve in its simplest form is a graph showing how project budget is planned tobe spent over time.We can complicate the graph by showing the actual costs of doing the work over the

same period.And also on the same graph we can show how the value of the product of the projectincreases over the same period.

The three curves on the graph represent:

Budgeted Cost for Work Scheduled (BCWS) - the budgets for all activitiesplanned to be completed.

Actual Cost of Work Performed (ACWP) - the real costs of the work charged

against the completed activities. Budgeted Cost of Work Performed (BCWP) - the planned costs of the work

allocated to the completed activities. This is the Earned Value.

The BCWS curve is derived from the Work Breakdown Structure, the project budgetand the Project Master Schedule. The cost of each Work Package is calculated andthe cumulative cost of completed Works Packages is shown based on the plannedcompletion dates shown in the Master Schedule.

The ACWP curve is found by actual measurement of the work completed. Actualcosts recorded from invoices and workmen's time sheets. This appears a daunting

task but it can be very simple with sufficient planning and organising.


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The BCWP is calculated from the measured work complete and the budgeted costsfor that work.Earned Value = Percentage project complete X Project Budget

Variances

Schedule and cost variances can both be calculated in monetary terms from the dataneeded to produce the S-curves.

Schedule variance is the difference between the Earned Value and the plannedbudget.SV = BCWP - BCWS

Cost Variance is the difference between the Earned Value and the actual costs ofthe works.CV = BCWP - ACWP

Performance Indices

Schedule Performance Index and Cost Performance Index give indications of thehealth of the project. Is the project on time, in budget or what?

Schedule Performance Index is a ratio of Earned Value and the planned value ofcompleted works. A SPI < spi =" BCWP">

Cost Performance Index is a ratio of Earned Value and the actual costs of completed

works. A CPI < cpi =" BCWP">

Constant monitoring and controlling of a project under implementation is one of thekey functions of the Project Manager. This is because, once it gets underway, aproject may or may not perform as planned. Variations in time and cost can takeplace. Where the project managing contracts are on a 'cost-plus' basis, theadherence to time and cost is important, but not critical. In recent times, project-managing companies have to enter into time bound contracts and any slippage willattract penalty.

For this reason it is necessary for the senior team members to have a periodicprogress report. Also, the top management and stakeholders constantly want toknow the progress. They ask crucial questions:

* How much work is actually done?* How much work was planned?* Will the project be completed as scheduled?* Is it delayed?* What is the expected date of completion as at present rate?* How much cost is incurred as on date?

* What is the budgeted cost for the work done?* Is the incurred cost as per the budget?


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* Is there a cost over-run?* What will be the total cost on completion at present rate?

There are other reasons that a project is monitored and controlled. These are:

* Progressive payments to contractors* Project manager's billing to the customer* Decisions of project completion and job closure

So progress monitoring and controlling is vital. And you must measure what you wishto control. Progress measuring is a crucial part of project management. It is here thatthe "S" curve and the earned values concept are used.

What is an "S" Curve?For "S" curve, let us understand WBS. WBS (Work Breakdown Structure) is thebreakdown of the work into systematic and logical component packages. Each

package is further sub divided. This process is continued up to manageable suitablecomponent packages are decided. Each final component is called an activity. Whenall activities are complete, the project is complete.

Each activity is then assigned the following parameters.

1. Start date2. End date3. Cost4. Weightage (Its contribution to the project progress. The sum of wieghtages of allactivities is 100%)5. Responsible agency6. Resources

After WBS, draw the "S" curve for the project. The curve shows the time duration onthe horizontal axis and the cumulative per cent progress of the project on the verticalaxis. The curve begins at 'Project start date, 0%' point and completes on 'Project enddate, 100%' point. It is observed that, in a project, the work progresses slowly in thebeginning, picks up speed somewhere 1/3 the duration and then slows down againcreeping to 100%. The curve looks like an "S" and is popularly known as Project "S"Curve.

How to use the "S" curve Select a day for the report. This date is generally month end. Measure the work actually preformed on each activity. Then calculate the progressachieved on each activity. Calculate the contribution of each activity to the project progress, using theweightage value. Sum up activity contributions and find the total project progress. Read from the "S" curve the work scheduled as on the report day.

So you know the work performed versus work scheduled. That tells whether the

project is on the schedule, early or delayed. You may plot the actual work done


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curve along side the "S" curve. That will be Actual curve. Then plot the remainingwork along the actual curve and you have the forecast.

1.1 Venture capital

Venture capital is long-term capital provided to small and medium-sized businesses

wishing to grow but which do not have ready access to stock markets. The supply of

venture capital (or private equitycapital as it is sometimes called) has increased

rapidly over recent years since both government and corporate financiers have

shown greater commitment to entrepreneurial activity. The main types of

investments those are likely to be of interest to venture capitalists and the process by

which investments are undertaken are considered below.

Venture capital (VC) is financial capital provided to early-stage, high-potential, highrisk, growth startup companies. The venture capital fund makes money by owning

equity in the companies it invests in, which usually have a novel technology orbusiness model in high technology industries, such as biotechnology, IT, software,etc. The typical venture capital investment occurs after the seed funding round asgrowth funding round (also referred to as Series A round) in the interest ofgenerating a return through an eventual realization event, such as an IPO or tradesale of the company. Venture capital is a subset of private equity. Therefore, allventure capital is private equity, but not all private equity is venture capital

Venture capitalists provide share capital and loan finance for different types of

business situations, including the following:
http://en.wikipedia.org/wiki/Growth_investinghttp://en.wikipedia.org/wiki/Growth_investing


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Start-up capital: This is available to businesses that are still at the conceptstage of development through to those businesses that are ready to commencetrading. The finance provided is usually to help design, develop or market newproducts and services. Other early stage capital: This is available to businesses that have

undertaken their development work and are ready to begin operations. Expansion (development) capital: This aims to provide funding for growingbusinesses for additional working capital, new equipment, and so on. It may alsoinclude rescue finance, which is used to turn around a business after a period ofpoor performance. Refinancing bank borrowings: This is aimed at reducing the level ofgearing. Secondary purchases: This refers to finance used to purchase shares inorder to buy out part of the ownership of a business or to buy out another venturecapitalist. Buy-out capital: This is capital available to acquire an existing business. A

management buy-out (MBO) is where the funds are used to help the existingmanagement team to acquire the business, and an institutional buy-out (IBO) iswhere the venture capitalist acquires the business and installs a managementteam of its choice. Buy-in capital: This is capital available to acquire an existing business by anexternal management team. This kind of acquisition is known as a managementbuy-in (MBI). Buy-outs/buy-ins often occur when a large business wishes to divestitself of one of its operating units or when a family business wishes to sell outbecause of succession problems.

Project Management and its scope

Project management is the application of knowledge, skills, tools, and techniques toproject activities to meet project requirements. Project management is accomplishedthrough the appropriate application and integration of the forty-two logically groupedproject management processes comprising the five process groups. These fiveprocess groups are:

Initiating,

Planning, Executing,

Monitoring and Controlling, and

Closing.

SCOPE OF PROJECT MANAGEMENT

The project management covers:(i) Idea generation, analysis & finalization of one or more ideas for implementation,(ii) Preparation of feasibility reports for various projects ( ideas), working out facilities& finance requirements, benefits & long-term viability as well as profitability.(iii) Identification of partners needed.(iv) Technology requirements.


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(v) Organisational requirements.(vi) Probable sites & building requirements.(vii) Commercial aspects.(viii) Environmental effects & action required.(ix) Govt. concessions available etc.

Define a Project. What are the characteristics of a Project?

A project is a temporary endeavour undertaken to create a unique product, service,or result. The temporary nature of projects indicates a definite beginning and end.The end is reached when the projects objectives have been achieved or when theproject is terminated because its objectives will not or cannot be met, or when theneed for the project no longer exists. Temporary does not necessarily mean short induration. Temporary does not generally apply to the product, service, or resultcreated by the project; most projects are undertaken to create a lasting outcome. Forexample, a project to build a national monument will create a result expected to lastcenturies.

A project is a temporary endeavour with a defined beginning and end (usually time-constrained, and often constrained by funding or deliverables),undertaken to meetunique goals and objectives,typically to bring about beneficial change or addedvalue.


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Human Aspect of Project Management

It is an old saying that man behind the machine is more important than the machine.This saying is even more valid in an unstructured set up like projects. All the projectplanning and control tools can only assist the Project Manager in planning andforecasting. But eventually those plans have to be executed by people. How

effectively is the execution is largely a function of performance of people on groundexecuting various activities

Interpersonal conflicts are inevitable part of projects but minimising them is the keyto successful completion of projects. It is, therefore, very important to understandhuman nature and to achieve satisfactory human relations among the project team.Project manager has to handle problems and challenges relating to following issues

(a)Authority Project managers very often have to be content with split authorityand dual subordination in their set-up (with the exception of Divisional form ofOrganisation). In addition, with all the criss-cross and overlap of responsibilities and

paucity of resources and its sharing, assigning blame is rather difficult.

In such a difficult situation, a project manager has to rely on the informal authority, ie,his rapport with project personnel. His skills in resolution of conflicts, skills ofcommunication and persuasion ability and ability to act as a link between technical,engineering, financial and commercial personnel is what gives him the real authorityover his people.

(b) Personnel Orientation Most of the project managers are engineers who havescience background. In scientific world, most of the things are well defined,structured and with a degree of certainty. Thus, they are accustomed to those wellstructured and defined forms. Human psychology plays very minor role in such set-up.


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Projects are almost diagrammatically opposite world to a typical engineers world. Itis an unstructured world where little is defined and full of uncertainties. And half theuncertainties emanate from peoples mood. An ego hassle over a total non-issuebetween two key personnel can hold up the project for days despite availability of all

the resources.

Thus, personnel management is the key to successful execution of projects.Therefore, project manager has to transform the technical orientation of hismanagers to personnel orientation.

(c) Motivation Performance of people is dependent on their motivation. In anunstructured set-up, where standards of performance are hard to define, motivationassumes further importance. But with split authority and dual subordination, as incase of Matrix Organisational structure, keeping people motivated becomes verydifficult. In a dual subordination set-up, rewarding people is little difficult and handing

punishment is even more difficult. His other superior under whom he works onpermanent basis is always there to provide an alibi to cover up his failures.

Projects give people a chance to perform tasks which are clearly defined and visible.If the project manager is appreciative and gives public applause toperformance/contribution, it motivates the personnel greatly.Participative style of management gives a sense of authority and ownership topersonnel, which keeps them further motivated.

(d) Team Building Most of the project activities are inter-related andinterdependent and most of the problems need inter-disciplinary solutions.Successful management of project therefore is not possible without properteamwork. Development of mutual trust and respect for each other, opencommunication and mutual cooperation have to be achieved at whatever cost.

Work Break Down Structure

Once you have defined the scope of the project, you can start looking at the individualtasks that must be accomplished in order to complete the project. The WorkBreakdown Structure (WBS) is a diagrammatic approach to defining the work to be

undertaken by breaking the project down into a number of tasks and sub-tasks in ahierarchical fashion. The resulting tree structure can be used as a framework forestimating costs and developing a work schedule.

The work is decomposed into successively smaller logical units, until it becomesimpractical to break the work down any further. Each "work package" produced as aresult of this process will be accompanied by a description of the activity to beundertaken and the specific deliverable to be produced as a result of that activity. Thework package should provide the basis for a realistic estimation of the time and costinvolved in carrying out the work, and should result in a specific and measurabledeliverable.


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Task

A task is a further subdivision of a project

Usually not longer than several months in duration and is performed by one group or

organisation

Subtask

A subtask may be used if needed to further subdivide the project into more meaningfulpieces. Task may contain several subtasks.

Work Package

A work package is a group of activities combined to be assigned to a single organisational

unit.

It still falls into the format of all project management

Work Breakdown Structure (WBDS)

Defines the hierarchy of projects tasks, subtasks, and work packages

Completion of one or more work packages results in the completion of a subtask

Completion of one or more subtasks results in the completion of a task

Finally the completion of all tasks is required to complete the project

Keys to good work breakdown structure are

Allow the elements to be worked on independently

Make them manageable in size

Give authority to carry out the program

Monitor and measure the program

Provide the required resources


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Phases of Project Management

Project Management Institute, Inc. (PMI) defines project management as "the application of

knowledge, skills, tools and techniques to a broad range of activities in order to meet the

requirements of a particular project." The process of directing and controlling a project from

start to finish may be further divided into 5 basic phases:

1.21. Project conception and initiation

An idea for a project will be carefully examined to determine whether or not it benefits the

organization. During this phase, a decision making team will identify if the project can

realistically be completed.

1.32. Project definition and planning

A project plan, project charter and/or project scope may be put in writing, outlining the work tobe performed. During this phase, a team should prioritize the project, calculate a budget and

schedule, and determine what resources are needed.

1.43. Project launch or execution

Resources' tasks are distributed and teams are informed of responsibilities. This is a good time

to bring up important project related information.

1.54. Project performance and control

Project managers will compare project status and progress to the actual plan, as resources

perform the scheduled work. During this phase, project managers may need to adjust schedules

or do what is necessary to keep the project on track.

1.65. Project close

After project tasks are completed and the client has approved the outcome, an evaluation is

necessary to highlight project success and/or learn from project history.

Projects and project management processes vary from industry to industry; however, these are

more traditional elements of a project. The overarching goal is typically to offer a product,change a process or to solve a problem in order to benefit the organization.

Detailed Project Report (DPR)

A Detailed Project Report (DPR) is a document containing detailed description of

important aspects of a Project. This is prepared after initial hurdles in the process of

getting the Project cleared, have been crossed and the need for Project has been

established.

A detailed Project Report generally contains the following details:


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1. Background of the Project : The background of the project is described

interms of its basis. This generally include the type of project, the sector of economy

it belongs to, its location, gestation period, brief description, technical details such as

scope, process, scale, maps and designs, target beneficiaries, etc.

2. Objectives of the Projects : The objectives are specified in terms of general

objectives, specific objectives, physical targets to be achieved etc.

3.Justification for the Project : The justification for the Project is based on

technical organizational, marketing, financial, economic and environmental appraisal

of the project.

4. Cost of Project and Sources of Funding : The cost of Project is

determined by considering and including all the items of capital outlay. The

arrangement made for meeting the requirement of funds for the project is specified in

terms of capital structure, sources of funds and amount proposed to be raised from

each source.

5. Salient Features of the Project : The salient features descried included,

foreign exchange requirement and contribution, estimated sales revenue, estimated

production cost, expected return on investment, social cost and benefits, extent of

public participation, role of government, participation of non-governmental

organizations, etc.

6. Project Organization : Regarding the project organization and its personnel,

the details regarding organization chart, line of control, authority-responsibility

structure, extent of delegation, mechanism for monitoring and follow up, project

control mechanism, etc. are given.

7. Implementation Details : The implementation details for a project are given

in terms of sequence of tasks and activities, resource requirement, precautions,

safety requirement, etc. The programme of activities is also given under it. This

includes details regarding the activities covered, such as implementation

requirement, time schedule, activities and events, critical activities, activity-wise

resource requirement management control system, budgeting and budgetary control

system, management information system, etc.


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ROLE OF CONSULTANT IN PROJECT.

Introduction

Most of the project owners use the services of a consultant - An individual consultant

or a consulting firm or a captive consulting organization throughout the project

duration.

Even when the owner has a competent project team, a consultant may be appointed

for the following reasons.

a) The functional experts of various departments who are also the members of the

project team will have many other parallel responsibilities which are bound to divert

their attention from the project.

b) A multi-disciplinary consultant's deep knowledge, rich experience and

concentrated attention to all important aspects of a project will, no doubt, boost its

efficiency, justifying the consultancy cost.

c) An independent consultant will view all matters in an unbiased manner.

Consultant's Role

A consultant can be used either in an "Advisory Role or in a Participatory Role". In

the advisory role, after accomplishing the task of the study phase, he might continue

as an advisor, without involving himself in the implementation.

His assignments in this role will be : -

Pre-Investment investigation

Preparation of feasibility report

Preparation of detailed project report

Preparation of project specifications & tender documents

Giving advice on problems.

He shall play the roles of a planner, an organizer, and effective co-ordinator, an

advisor in decision making, a counselor in overcoming the usual resistance to

change and a multidisciplinary management guide, committed to the client's success

and profitability.


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His role can further be increased to macro and micro- level planning of various

activities such as defining project scope, organizing project team, assisting in

procurement of critical equipments, scheduling & process chasing. Supply of

technology or design is optional.

Types of Consultants

(i) Technical specialists.

(ii) Functional experts.

(iii) Multi-Disciplinary generalists

PROJECT RISK

What is Risk?

A risk is any uncertain event, if it occurs, could prevent the project realizing the

expectations of the stakeholders as stated in the agreed business case, project brief

or agreed definition. A risk that becomes reality is trended as an "Issue".

A Risk always has a cause and, if it occurs, a consequence, Risk can have negative

or positive consequences; success is dependent on maintaining a high commitment

to risk management procedures throughout the project. Two fundamental types of

risks are always present. :-

a) Project Risk

Associated with the technical aspects of the work to achieve the required outcomes

and

b) Process Risk: -

Associated with the project process, procedures, tools & technique employed,

controls, communication, stakeholders and team performance,

Risk V/s Uncertainty

"Risk" can be defined as the variability of return from an investment & the

possibilities of the effect are known, but in uncertainty, the outcome cannot be

predicted.

Kinds of Risks

1. Project Completion Risk:


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Completing a project in time and within the estimated cost itself is a major

achievement. A project that is delayed will result in time over run which will

consequently result in cost overrun. If the promoters are not able to fund the cost

over-run, project gets delayed. There can be technology failures or consultants non

availability may cause delay.

2. Resource Risk:

Manpower, raw materials, power, fuel, P & M etc. form resources. Delay in receipt of

raw materials or P & M etc. will cause delay in project completion.

3. Price Risk:

Price fluctuations of both inputs and outputs will affect the project.

4. Competitors Risk:

The competitors may try to disturb the project by increasing or decreasing prices

which will force us to review the project for calculation of ROI.

5. Technology Risk:

The collaborator may supply us old technology or during the project time, new

technology may have been developed, which may affect the profitability. We have to

have a good consultant to guard against old technology supply.

6. Political Risk:

Suddenly the govt. may impose some new tax or withdraw some facility earlier

extended , such as lesser excise or octroi or no sales tax for 2 yrs or cheaper power

etc. Also import duly changes may affect project.

7. Interest Rate Risk:

Fluctuations in interest rate year after year may bring in adverse effect. Say project is

funded by way of long -term borrowings at a particular rate of interest and if the

interest rate fails down subsequently, there will be bad effect on project. If the

interest rate increases in future, the working capital will be available at higher cost &

will lower the profit.

8. Exchange Rate Risk:

There are currency fluctuations & international currency rate may vary, resultinginto

more projects cost.

9. Open Policy Risk or Risk from Global Competitors:


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The new risk emerged with the 'open door' policy of GOI, has thrown out number of

industries as they cannot sustain the price-war. The project envisaged today may

face such risks in coming days and the project will suffer

10 Risk Due to Trading Activities:

Numbers of entrepreneurs are finding it easy to "assemble" products in producing in

India rather than producing components & making the products ( e.g .computers,

DVDS etc. ) such risks in The project runs future times.

11 Risk of Elimination of Product

Due to fast changing technology & varying customer demand, some of the products

(Now envisaged for project) may not be required, resulting into termination of the

project. (example- TV screen for computer monitor, or plasma monitor in place oftube - technology)

Techniques of Risk Analysis

Though there are many mathematical techniques available for risk analysis, the

following are the simple tools that come handy for analyzing small & medium sized

Projects:

(1) Break - Even analysis

(2) Sensitivity analysis

(3) Decision - Tree analysis

(4) Monte - carlo technique etc.


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Difference Between NPV & IRR

Tradable non tradable commodity

Tradable commodities are those goods and services for which there existinternational markets. Nontradable commodities are those for which there are only

domestic markets. The distinction of goods and services into tradable andnontradable is a distinguishing feature of models of international trade. Certaincommodities may be nontradable either intrinsically (because they do not travel well;land, for example) or because they are unprofitable to trade, given the costs oftransportation or the imposition of tariffs and quotas.

Success of project and entrepreneurshipImpact of interest rate

Project Management - Narendra

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