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1. Introduction to Project ManagementIntroduction Realization of these objectives requires systematic planning and careful implementation
To this effect, application of knowledge, skill, tools and techniques in the project environment,refers to project management. Project management in recent years has proliferated, reachingnew heights of sophistication. It has emerged as a distinct area of management practices tomeet the challenges of new economic environment, globalization process, rapid technologicaladvancement, and quality concerns of the stakeholders
Project DefinitionProject in general refers to a new endeavor with specific objective and varies so widely that it isvery difficult to precisely define it. Some of the commonly quoted definitions are as follows
Project is a temporary endeavor undertaken to create a unique product or service or result
(AMERICAN National Standard ANSI/PMI99-001-2004) Project is a unique process, consist of a set of coordinated and controlled activities withstart and finish dates, undertaken to achieve an objective confirming to specific requirements,including the constraints of time cost and resource
(ISO10006) Examples of project include Developing a watershed, Creating irrigation facility,Developing new variety of a crop, Developing new breed of an animal, Developing agro-processing centre, Construction of farm building, sting of a concentrated feed plant etc. It maybe noted that each of these projects differ in composition, type, scope, size and time
Project Characteristics Despite above diversities, projects share the following common characteristics
Unique in nature
Have definite objectives (goals) to achieve
Requires set of resources
Have a specific time frame for completion with a definite start and finish
Involves risk and uncertainty
Requires cross-functional teams and interdisciplinary approach
Project Performance Dimensions Three major dimensions that define the project performance are scope, time, and resource
These parameters are interrelated and interactive. The relationship generally represented as anequilateral triangle. The relationship is shown in figure 1
Time Cost Scope Figure 1. Project performance dimensions It is evident that any change in any one of dimensions would affect the other. For example,if the scope is enlarged, project would require more time for completion and the cost would alsogo up. If time is reduced the scope and cost would also be required to be reduced. Similarly anychange in cost would be reflected in scope and time. Successful completion of the project wouldrequire accomplishment of specified goals within scheduled time and budget. In recent years aforth dimension, stakeholder satisfaction, is added to the project. However, the other school ofmanagement argues that this dimension is an inherent part of the scope of the project thatdefines the specifications to which the project is required to be implemented. Thus theperformance of a project is measured by the degree to which these three parameters (scope,time and cost) are achieved
MathematicallyPerformance = f(Scope, Cost, Time) In management literature, this equilateral triangle is also referred as the “Qualitytriangle” of the project
Project Life Cycle Every project, from conception to completion, passes through various phases of a lifecycle synonym to life cycle of living beings. There is no universal consensus on the number ofphases in a project cycle. An understanding of the life cycle is important to successful completionof the project as it facilitates to understand the logical sequence of events in the continuum ofprogress from start to finish. Typical project consists of four phases- Conceptualization, Planning, 2 Execution and Termination. Each phase is marked by one or more deliverables such as Conceptnote, Feasibility report, Implementation Plan, HRD plan, Resource allocation plan, Evaluationreport etc
Conceptualization Phase Conception phase, starting with the seed of an idea, it covers identification of theproduct / service, Pre-feasibility, Feasibility studies and Appraisal and Approval. The project ideais conceptualized with initial considerations of all possible alternatives for achieving the projectobjectives. As the idea becomes established a proposal is developed setting out rationale,method, estimated costs, benefits and other details for appraisal of the stakeholders. Afterreaching a broad consensus on the proposal the feasibility dimensions are analyzed in detail
Planning Phase In this phase the project structure is planned based on project appraisal and approvals
Detailed plans for activity, finance, and resources are developed and integrated to the qualityparameters. In the process major tasks need to be performed in this phase are • Identification of activities and their sequencing • Time frame for execution • Estimation and budgeting • Staffing A Detailed Project Report (DPR) specifying various aspects of the project is finalized tofacilitate execution in this phase
Execution Phase This phase of the project witnesses the concentrated activity where the plans are putinto operation. Each activity is monitored, controlled and coordinated to achieve projectobjectives. Important activities in this phase are • Communicating with stakeholders • Reviewing progress • Monitoring cost and time • Controlling quality • Managing changes 3 Termination Phase This phase marks the completion of the project wherein the agreed deliverables areinstalled and project is put in to operation with arrangements for follow-up and evaluation
Life Cycle path The life cycle of a project from start to completion follows either a “S” shaped path or a“J “ shaped path (Figure 2 and 3). In “S” shape path the progress is slow at the starting andterminal phase and is fast in the implementation phase. For example, implementation ofwatershed project. At the beginning detailed sectoral planning and coordination among variousimplementing agencies etc. makes progress slow and similarly towards termination, creatinginstitutional arrangement for transfer and maintenance of assets to the stakeholders progressesslowly
Error! 100 Slow finish Percentage completion Quick Momentum Slow start Time Figure 2. Project life path –“S” shape In “J” type cycle path the progress in beginning is slow and as the time moves on theprogress of the project improves at fast rate. Example, in a developing an energy plantation. Inthis the land preparation progresses slowly and as soon as the land and seedling aretransplantation is under taken. This is shown in figure 3
4 Error! 100 % Completion Time Figure 3. Project life cycle path - “J” ShapeProject Classification There is no standard classification of the projects. However considering project goals, thesecan be classified into two broad groups, industrial and developmental. Each of these groups canbe further classified considering nature of work (repetitive, non-repetitive), completion time (longterm, shot term etc), cost (large, small, etc.), level of risk (high, low, no-risk), mode of operation( build, build-operate-transfer etc)
Industrial projects also referred as commercial projects, which are undertaken to providegoods or services for meeting the growing needs of the customers and providing attractivereturns to the investors/stake holders. Following the background, these projects are furthergrouped into two categories i.e., demand based and resource / supply based. The demand basedprojects are designed to satisfy the customers’ felt as well the latent needs such as complexfertilizers, agro-processing infrastructure etc. The resource/ supply based projects are thosewhich take advantage of the available resources like land, water, agricultural produce, rawmaterial, minerals and even human resource. Projects triggered by successful R&D are alsoconsidered as supply based. Examples of resource based projects include food product units,metallurgical industries, oil refineries etc. Examples of projects based on human resource (skilled)availability include projects in IT sector, Clinical Research projects in bio services and others
5 Development projects are undertaken to facilitate the promotion and acceleration of overalleconomic development. These projects act as catalysts for economic development providing acascading effect. Development projects cover sectors like irrigation, agriculture, infrastructurehealth and education
The essential differences between Industrial projects and Developmental project aresumerised in the following table 1
Table 1. Difference between Industrial and Developmental Projects Dimension Industrial Project Developmental Project Scale of Project Limited Large Promoters Entrepreneurs or corporates Government, Public Sectors, NGOs Investment --- High Gestation Period --- High Profitabilty High, Considered on IRR ( Modest, Considered on ERR Internal Rate of Return) (Economic Rate of Return) Finance Stringent debt equity norms Operates on higher debt- equity norms Source of fund National stock markets and International organizations from domestic financial like World Bank, institutions IMF,ADB,DFID and others mostly as loan ,yet times providing for some grants
Interest rates and repayment Market rate and the Very low for borrowed funds period: repayment period is generally and the repayment period 7 to 10 years extends up to 25 years and even beyond
Project management Project management is a distinct area of management that helps in handling projects. Ithas three key features to distinguish it from other forms of management and they include: aproject manager, the project team and the project management system. The projectmanagement system comprises organization structure, information processing and decision-making and the procedures that facilitate integration of horizontal and vertical elements of the 6 project organization. The project management system focuses on integrated planning andcontrol
Benefits of Project Management Approach The rationale for following project management approach is as follows
• Project management approach will help in handling complex, costly and risky assignments by providing interdisciplinary approach in handling the assignments
Example: R&D organizations
• Project management approaches help in handling assignments in a specified time frame with definite start and completion points .Example handling customer orders by Industries involved in production of capital goods
• Project management approaches provide task orientation to personnel in an Organization in handling assignments. Example: Organizations in IT sector handling software development assignments for clients
7 2. Project Identification and FormulationIntroduction A project in the economic sense directly or indirectly adds to the economy of the Nation
However an introspection of the project performance clearly indicates that the situation is farfrom satisfactory. Most of the major and critical projects in public sector that too in crucialsectors like irrigation, agriculture, and infrastructure are plagued by tremendous time and costoverruns. Even in the private sector the performance is not all that satisfactory as is evidentfrom the growing sickness in industry and rapid increase in non-performing assets (NPAS) ofBanks and Financial Institutions. The reasons for time and cost over runs are several and theycan be broadly classified under-technical, financial, procedural and managerial. Most of theseproblems mainly stem from inadequate project formulation and haphazard implementation
Project Identification Project identification is an important step in project formulation. These are conceivedwith the objective of meeting the market demand, exploiting natural resources or creatingwealth. The project ideas for developmental projects come mainly from the national planningprocess, where as industrial projects usually stem from identification of commercial prospectsand profit potential
As projects are a means to achieving certain objectives, there may be several alternativeprojects that will meat these objectives. It is important to indicate all the other alternativesconsidered with justification in favour of the specific project proposed for consideration
Sectoral studies, opportunity studies, support studies, project identification essentiallyfocuses on screening the number of project ideas that come up based on information and dataavailable and based on expert opinions and to come up with a limited number of project optionswhich are promising
Project FormulationProject Formulation Concept “Project Formulation” is the processes of presenting a project idea in aform in which it can be subjected to comparative appraisals for the purpose ofdetermining in definitive terms the priority that should be attached to a project 8 under sever resource constraints. Project Formulation involves the followingsteps (Figure 1)
PROJECT FORMULATION ↓ OPPORTUNITY STUDIES/Support Studies ↓ IDENTIFICATION OF PRODUCT/SERVICE ↓ PREFEASIBILITY STUDY ↓ FEASIBILITY STUDY (TECHNO ECONOMIC FEASIBILITY) ↓ PROJECT APPRAISAL ↓ DETAILED PROJECT REPORT Figure 1. Project Formulation –Schematic viewOpportunity Studies An opportunity study identifies investment opportunities and is normally undertaken atmacro level by agencies involved in economic planning and development. In general opportunitystudies there are three types of study – Area Study, sectoral and Sub-sectoral Studies andResource Based Studies. Opportunity Studies and Support studies provide sound basis for projectidentification
Pre feasibility Studies / Opportunity Studies A pre-feasibility study should be viewed as an intermediate stage between a projectopportunity study and a detailed feasibility study, the difference being primarily the extent ofdetails of the information obtained. It is the process of gathering facts and opinions pertaining tothe project. This information is then vetted for the purpose of tentatively determining whetherthe project idea is worth pursuing furthering. Pre feasibility study lays stress on assessingmarket potential, magnitude of investment, , technical feasibility, financial analysis, risk analysisetc. The breadth and depth of pre feasibility depend upon the time available and the confidenceof the decision maker. Pre feasibility studies help in preparing a project profile for presentationto various stakeholders including funding agencies to solicit their support to the project. It alsothrows light on aspects of the project that are critical in nature and necessitate furtherinvestigation through functional support studies
9 Support studies are carried out before commissioning pre feasibility or a feasibility studyof projects requiring large-scale investments. These studies also form an integral part of thefeasibility studies. They cover one or more critical aspects of project in detail. The contents of theSupport Study vary depending on the nature of the study and the project contemplated. Since itrelates to a vital aspect of the project the conclusions should be clear enough to give a directionto the subsequent stage of project preparation
Feasibility Study Feasibility Study forms the backbone of Project Formulation and presentsa balanced picture incorporating all aspects of possible concern. The studyinvestigates practicalities, ways of achieving objectives, strategy options,methodology, and predict likely outcome, risk and the consequences of eachcourse of action. It becomes the foundation on which project definition andrationale will be based so that the quality is reflected in subsequent projectactivity. A well conducted study provides a sound base for decisions,clarifications of objectives, logical planning, minimal risk, and a successful costeffective project. Assessing feasibility of a proposal requires understanding of theSTEEP factors. These are as under Social, Technological, Ecological, Economic,and Political
A feasibility study is not an end in itself but only a means to arrive at an investmentdecision. The preparation of a feasibility study report is often made difficulty by the number ofalternatives (regarding the choice of technology, plant capacity, location, financing etc.) andassumptions on which the decisions are made. The project feasibility studies focus on - Economic and Market Analysis - Technical Analysis - Market Analysis - Financial Analysis - Economic Benefits - Project Risk and Uncertainty - Management Aspects 10 Economic and Market Analysis In the recent years the market analysis has undergone a paradigm shift. The demandforecast and projection of demand supply gap for products / services can no longer be based onextrapolation of past trends using statistical tools and techniques. One has to look at multipleparameters that influence the market. Demand projections are to be made keeping in view allpossible developments. Review of the projects executed over the years suggests that manyprojects have failed not because of technological and financial problems but mainly because ofthe fact that the projects ignored customer requirements and market forces
In market analysis a number of factors need to be considered covering – productspecifications, pricing, channels of distribution, trade practices, threat of substitutes, domesticand international competition, opportunities for exports etc. It should aim at providing analysis offuture market scenario so that the decision on project investment can be taken in an objectivemanner keeping in view the market risk and uncertainty
Technical Analysis Technical analysis is based on the description of the product and specifications and alsothe requirements of quality standards. The analysis encompasses available alternativetechnologies, selection of the most appropriate technology in terms of optimum combination ofproject components, implications of the acquisition of technology, and contractual aspects oflicensing. Special attention is given to technical dimensions such as in project selection. Thetechnology chosen should also keep in view the requirements of raw materials and other inputsin terms of quality and should ensure that the cost of production would be competitive. In briefthe technical analysis included the following aspects
Technology - Availability - Alternatives - Latest / state-of-art - Other implicationsPlant capacity - Market demand - Technological parametersInputs - Raw materials - Components - Power - Water - Fuel - Others 11 Availability skilled man power\LocationLogisticsEnvironmental consideration – pollution, etc.,Requirement buildings/ foundationOther relevant detailsEnvironmental Impact Studies: All most all projects have some impact on environment. Current concern ofenvironmental quality requires the environmental clearance for all projects. Therefore environimpact analysis needs to be undertaken before commencement of feasibility study
Objectives of Environmental Impact Studies: • To identify and describe the environmental resources/values (ER/Vs) or the environmental attributes (EA) which will be affected by the project (in a quantified manner as far as possible)
• To describe, measure and assess the environmental effects that the proposed project will have on the ER/Vs
• To describe the alternatives to the proposed project which could accomplish the same results but with a different set of environmental effects The environmental impact studies would facilitate providing necessary remedial measuresin terms of the equipments and facilities to be provided in the project to comply with theenvironmental regulation specifications
Financial Analysis The Financial Analysis, examines the viability of the project from financial or commercialconsiderations and indicates the return on the investments. Some of the commonly usedtechniques for financial analysis are as follows
• Pay-back period
• Return on Investment (ROI)• Net Present Value (NPV) 12
Project management is a distinct area of management that helps in handling projects. It has three key features to distinguish it from other forms of management and they include: a project …
Project management is defined as the process of steering a project from the start through its lifecycle. The main objective of project management is to complete a project within the established goals of time, budget, and quality. Projects have life cycles since they aren’t intended to last forever.