Project management Note ~ Study Material

Unit – 1 Introduction

1.1 A project is defined as ‘a non-routine, non-repetitive one-off undertaking normally with—discrete time, financial and technical performance goals.’ The definition is descriptive and, because of the endless variety of projects, most of the definitions are of this nature.

A project can be considered to be any series of activities and tasks that:

(a) Have a specific objective to be completed within certain specifications;

(b) Have defined start and end dates;

c) Have funding limits (if applicable) and

(d) Consume resources (i.e. money, time, equipment).

The project has been defined by Project Management Institute (USA) as ‘Any undertaking with a defined objective by which completion is identified. In practice, most projects depend on finite or limited resources by which objectives are to be accomplished.’—Project Management Body of Knowledge (PMBOK).

1.2. Characteristics of a Project:

Project characteristics include:

(a) Project has a owner, who, in the private sector, can be an individual or a company etc., in the public sector, a government undertaking or a joint sector organisation, representing a partnership between public and private sector.

(b) Project has a set objective to achieve within a distinct time, cost and technical performance.

(c) Project is planned, managed and controlled by an assigned team the project team planted within the owner’s organization to achieve the objectives as per specifications.

(d) Project, in general, is an outcome in response to environments economies and opportunities. As an example, we find that considering the changing pattern of modern living the domestic appliances small e.g. grinders, mixers etc., and large, e.g. refrigerators, washing machines etc. are on ever-increasing demand. This generates responses to avail opportunity to produce such appliances.

(e) project is an undertaking involving future activities for completion of the project within estimates and, «s such, involves complex budgeting procedure with a mission.

1.3 Project management as professional

The term profession has a number of distinct attributes that have changed over time. The starting point for being professional is being paid for your work.

The next element of being professional relates to skill and pride in the quality of the work being produced.

Traditionally, a Profession:

Is an occupationally related social institution concerned with an identified area of knowledge, established and maintained as a means of providing essential services to its individual members and the society in which it operates.

The profession collectively, and individually, possess a body of knowledge and a repertoire of behaviours and skills (professional culture) needed to practice the profession and make decisions in the service of the client. Is organised into one or more professional associations which, within broad limits of social accountability, are granted autonomy in control of the actual work of the profession and the conditions that surround it (admissions, educational standards, examination and licensing, career paths, ethical and performance standards, professional discipline).

So, to answer the question ‘Is project management a profession?’, if your benchmark is the practices of the 19th and 20th centuries, definitely not as the professional associations do not control the right to practice as a project manager.

However, in the paradigm of the 21st century, we are well on the way to being a ‘modern profession’ based on professional associations. And while the ‘right to practice’ project management is never likely to be regulated as we don’t threaten public safety in the way doctors and engineers can, the desire of employers to engage professional project managers—capable, qualified and ethical people—is already becoming apparent.

The challenge for the associations over the next few years will be developing the elements beyond certifications needed to support professional project managers, and to create ways to make this distinction attractive to members and recognisable to employers as simple certifications are unlikely to be enough.

1.4 Project phase

The 5 Phases of Project

The 5 phases of project include initiation, planning, execution, monitoring, and project closure. The Project Management Institute (PMI) originally developed these five phases.

Project Initiation Phase – a project is formally started, named, and defined at a broad level during this phase. Project sponsors and other important stakeholders due diligently decide whether or not to commit to a project. Depending on the nature of the project, feasibility studies are conducted. Or, as it may require, in an IT project – requirement gathering and analysis are performed in this phase. In the construction industry, a project charter is completed in this phase.
Project Planning Phase – a project management plan is developed comprehensively of individual plans for – cost, scope, duration, quality, communication, risk and resources. Some of the important activities that mark this phase are making WBS, development of schedule, milestone charts, GANTT charts, estimating and reserving resources, planning dates, and modes of communication with stakeholders based on milestones, deadlines, and important deliveries. A plan for managing identified and unidentified risks is determined as this may affect aspects of a project later on. Risk management planning includes: risk identification and analysis, risk mitigation approaches, and risk response planning.
Project Execution Phase – a project deliverable is developed and completed, adhering to a mapped-out plan. A lot of tasks during this phase capture project metrics through tasks like status meetings and project status updates, other status reports, human resource needs, and performance reports. This is an important phase, as it will help you understand whether your project will be a success or failure.
Project Monitoring and Control Phase – occurring at the same time as the execution phase, this one mostly deals with measuring the project performance and progression in accordance to the project plan. Scope verification and control occur to check and monitor for scope creep, and change of control to track and manage changes to project requirement. Calculating key performance indicators for cost and time are done to measure the degree of variation, if any, and in which case corrective measures are determined and suggested to keep a project on track. To prevent project failure, consider why projects are likely to fail and the ways to prevent failure.

Project Closure Phase – A project is formally closed. It includes a series of important tasks such as delivering the product, relieving resources, rewarding team members, and formal termination of contractors in case they were employed on the project.

Benefit of project management (describe yourself)

1. Efficient Goal Setting

2. Improved Communication

3. Greater Customer Satisfaction

4. High Level of Expertise

5. Accurate Risk Assessment

Limitation of project management (describe yourself)

1. High Costs

2. Increased Complexity:

Project management is a complex process with multiple stages.

3. Increase Communication Overhead

4. Lack of Creativity:

Sometimes, project management leaves little or no room for creativity.

UNIT 2

2.1 Concept

Projects are classified based on their complexity and resource requirements. For example, a very complex project requiring all available resources (e.g. the implementation of a ERP module) will likely require 12+ weeks, where as a much smaller project may take only 1 week. The maximum number of projects that can be scheduled during each quarter must not exceed 12 weeks. The exception will be “Super Projects” in which case the project must be fully vetted to understand what resources will be required (internal vs. external) and for what duration.

Project is an integrated effort to achieve a certain goal. There are several types of projects. Project classifications mean to group your projects according to categories you define. A project classification includes a class category and a class code. The category is a broad subject within which you can classify projects. The code is a specific value of the category. They are:

1. Labour Intensive project

2. Capital Intensive Project

3. Indigenous Project

4. Joint Venture Project

5. Bilateral Project

6. Multilateral Project

7. Construction Project

2.2 CRITERIA OF PROJECT classification

1. On the basis of Funding Source 5. On the basis of Sponsorship

a. Indigenous Project a. Customer Project

b. Bilateral Project b. Organization Project

c. Multilateral Project c. Government Project

d. Joint Venture Project d. Donor Project

2. On the basis of Technology 6. On the basis of Orientation of Project

a. Labor Intensive Project a. Product Oriented Project

b. Capital Intensive Project b. Process Oriented Project

3. On the basis of Size 7. On the basis of Speed of Project

a. Micro Project a. Normal Project

b. Medium Project b. Crash Project

c. Major Project c. Disaster Project

d. Mega Project d. Individual Project

4. On the basis of Nationality 8. On the basis of Nature of Project

a. National Project a. Staff Project

b. International Project b. Special Project

c. Matrix or Aggregate Project

2.3 Type of project

1. LABOR INTENSIVE PROJECT

 If the activities of a project depend on labor, it is called labor intensive project.

 Labor intensive projects are usually operated in developing countries.

 The success of project depend on the efficiency of labor.

 Skilled and efficient workers are given high priority.

 More wage is given to efficient and skilled workers than inefficient and unskilled

workers.

 Labor intensive projects becomes suitable in the countries, where modern technology

has not been developed.

 But it increases costs and economic growth rate remains low.

2.CAPITAL INTENSIVE PROJECT

 If the activities of a project depend on modern technology or automatic machine, it is called capital intensive project.

 Usually developed countries used huge capital, sophisticated technology and skilled manpower to run projects.

 It produces better quality output with mass production.

 It helps to increase living standard of people and contributes to economic growth of the country.

 But it requires huge amount of capital to invest in sophisticated technology and it

violates principle of social equality

3. INDIGENOUS PROJECT v The project which is operated with a country’s own tradition, vision, thought, and style is called indigenous project. v It is totally local or home country project. v It is free from foreign thoughts, vision, advice and pressure. v Indigenous project helps to protect tradition and culture of the country. v It helps to make maximum utilization of local resources and technology. v But indigenous project is rigid in terms of traditional and cultural system. v Indigenous project is generally of small size and uses appropriate technology available indigenously. Local resources and local people are used in such projects.

5. BILATERAL PROJECT v The project which is operated with special agreement between two countries is called bilateral project. v In principle, bilateral projects become more useful in transportation, irrigation, education, and industrial sectors. GTZ, JICA, DANIDA, USAID, SDC etc. are the key donor agencies funding bilateral project in Nepal. v Bilateral project helps to build bilateral relationship in between two different countries and accelerates economic growth of the country. v But it increases dependency on developed countries.

4. PROJECT FORMULATION/DESIGN

§ The project formulation phase is the preliminary planning phase of the project.

§ The project idea is born

. § The parameters of the identified project idea are defined in outline form.

§ The decision is made about weather “to proceed” or “not to proceed” with the identified project idea.

The project formulation phase involves the following tasks:

1. Project Identification

2. Project Formulation

At first the necessity of a project and its concept is developed. The project is formulated on the basis of generated idea. After the necessity of the project is felt different activities are done to materialize it. All such activities are done stage by stage. In the lifecycle of project, at first related concept is developed, then pre- feasibility and feasibility studies are done for the support of the concept. If the project is found possible, it is analyzed with scientific technique. In this, cost of the project, necessary infrastructures for the project benefit from the project, etc. are evaluated. If the project is found feasible, necessary and beneficial from the study and analysis, full framework of the project is prepared. This is the second stage; project is formulated at this stage. This stage includes the activities such as making of plan for project implementation, development of project concept, preparation of estimated budget necessary for the project implementation, schedule for the implementation of the project etc. Then project implementation becomes able to be implemented. This stage is called project formulation stage. Then steps are taken towards implementation The systematic way or technique of converting the concept of project in probable planning is called o its project formulation technique. At first the necessity of project and its concept is developed. The project is formulated on the basis of generated idea. After necessity of the project is felt different activities are done to materialize.

Stages of Project Formulation are:

1. Feasibility Analysis: It is the first stage in project formulation. Examination is done to see whether to go in for a detailed investment proposal or not. Screening of internal and external constraints are also made. Various aspects of feasibility analysis are:

a. Technical Analysis: It analyses the feasibility of meeting technical specifications of the project and technical resources required for project implementation

. b. Financial Analysis: It analyses the capital requirement of project, project's capacity to meet financial obligation and cost aspect of the project.

c. Economic Analysis: Benefit/cost analysis is done to analyze the net contribution of the project to the economy and the society.

d. Marketing Analysis: It analyses project capacity, market demand, sales forecasts, revenue generation and competition.

e. Management Analysis: It analyses the adequacy of management system to direct and control the project.

f. Environment Analysis: It analyses the impact of project on the environment

. 2. Project Design and Network Analysis: It is the heart of the project entity. It defines the sequence of events of the project. Time is allocated for each activity. It is presented in a form of a network drawings. It helps to identify project inputs, finance needed and cost-benefit profile of the project.

3. Input Analysis: Its assesses the input requirements during the construction and operation of the project. It defines the inputs required for each activity. Inputs include materials, human resources etc. It evaluates the feasibility of the project from the point of view of the availability of necessary resources. This aids in assessing the project cost.

4.Financial Analysis: It involves estimating the project costs, operating cost and fund requirements. It helps in comparing various project proposals on a common scale. Analytical tools used are discounted cash flow, cost-volume-profit relationship and ratio analysis. Investment decisions involve commitment of resources in future, with a long time horizon. It needs caution and foresight in developing financial forecasts.

5. Cost-Benefit Analysis: The overall worth of a project is considered. The project design forms the basis of evaluation. It considers costs that all entities have to bear and the benefit connected to it.

6. Pre-investment Analysis: The results obtained in previous stages are consolidated to arrive at clear conclusions. Helps the project-sponsoring body, the project-implementing body and the external consulting agencies to accept or reject the proposal

CAUSES OF PROJECT OVERRUN

A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred costs. When these costs are in excess of budgeted amounts due to an underestimation of the actual cost during budgeting, they are known by these terms. The results showed that, slow decision making, poor schedule management, increase in material/machine prices, poor contract management, poor design/ delay in providing design, rework due to wrong work, problems in land acquisition, wrong estimation/ estimation method, and long period between design and time of bidding.

1. Estimates: A common reason for cost overruns is the inaccuracy of cost estimates. When the bids for subcontracts or the actual costs come in, they are often higher than anticipated. Such cost overruns are due either to incorrect estimates or to changed conditions in the marketplace. You can review cost estimates before placing orders to identify mistakes or changed conditions. An overall review may find that increases in some areas are compensated by decreases in others. You may be able to adjust requirements o reduce costs or seek out lower-cost suppliers. Advising the business owners or managers of possible higher costs at this stage gives them the option of making changes and maintaining their budgets.

2. Design: Sometimes, the designs or drawings that form the basis of the project are not realistic. You may find that a combination of specified features is difficult to achieve or that drawings show an incorrect arrangement. Executing the project as specified will either cost extra or cause problems that must be resolved later at additional cost. As project manager, you have to continuously compare plans with executed work to find such discrepancies (differences, disagreements, inconsistencies) early and correct them.

3. Planning: The project progresses according to a plan that assigns durations to project tasks. If the projected durations can be too short, the project takes longer than anticipated (Expected, Predicted, Projected, Estimated) and cause cost overruns. Monitoring project tasks on the longest to complete, helps reduce the risk of delays. Project tasks off the critical path have slack times, or free times between tasks, that you can use to compensate for delays.

4. Scope: Changes in the scope of supply within a project frequently cause cost overruns. These changes result from new requirements that the owners introduce and fixes for functions that don’t work as specified. As project manager, you must make sure the owners understand that additional requirements result in higher costs, which you can classify as improvements rather than cost overruns. When you discover that parts of the project don’t work as specified, you must explore different solutions and present them to the owners. Sometimes, you can find acceptable levels of functionality that don’t cause cost overruns.

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