note on project management)

8/13/2019 Note on Project Management)

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Lecture No.1

PROJECT MANAGEMENT

I. Project Definition : (Projects are for develo!ent "

#e$ %ord or P&rase' sed to define Project:

a" One )ti!e )onl$ set activities

*" +ecific o*jectivesc" Definite startin, and endin, oint

d" -ife c$cle

e" ni/e rodct or service as an ottf" +ecific ,ro of *enificeries

," Oerates %it&in t&e constraints of ti!e' cost and /alit$ erfor!ance

0. As per (Gittimager, 1985) :A roject is as invest!ent activit$ in %&ic& financial resorces are e1tended to create caital asse

t&at rodce *enifits over e1tended eriod of ti!e.

2. According to Project Management Institute of UA:

A roject is a te!orar$ end over nderta3en to create a ni/e Prodct or +ervice.

4. According to !aro"d #er$ner :A roject is an$ series of activities or tas3s t&at5

i" &ave secific o*jectives to *e co!leted %it&in certain secificationsii" &ave defined start and end tas3

iii" &ave fndin, li!its

iv" cons!e resorces6. According to % &'aud'ar:

A roject starts fro! scratc& %it& a definite !ission' ,enerates activities involvin, a variet$ of

&!an and non)&!an resorces all directed to%ards flfill!ent of t&e !ission and stos once t&e

!ission is flfilled. 5% According to re*or +% oung :

A Project is a collection of lin3ed activities' carried ot in an or,ani7ed !anner %it& a clearl$defined start oint and finis& oint to ac&ieve so!e secific reslts' t&at satisf$ t&e needs of anor,ani7ation as derived fro! t&e crrent *siness lan.

8ased on t&e a*ove definitions of different %riters %e can define t&e roject as *elo% :

A roject is an one)ti!e)onl$ set activities desi,ned to attain:

secific o*jectives %it&in t&e constraints of ti!e' cost and /alit$ erfor!ance in d$na!icenviron!ent

t&ro,& t&e lannin, se and control of a variet$ of resorces

To create a ni/e rodct or service %it&in te!orar$ life san

A roject is an one)ti!e)onl$ set develo!ent activit$ %&ic& &as

+ecific o*jectives Constraints of ti!e' cost and /alit$ erfor!ance

ni/e rodcts or service as an ott

-ife c$cle (*orn and die" +ecific ,ro of *eneficiaries


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&omponent of t'e Project

Peole are t&e one' %&o set o*jectives' reare lan of action %it& cost' and ti!e fra!e and finali7e endover reslts i.e. otts of t&e Project.

pes of Project:

Projects are of different t$es:

a" Researc& and Develo!ent Projects

*" Constrction Projects i.e. En,ineerin, Projectc" Manfactrin, of Aerolanes' 9e&icles etc.

d" +oft%are and %e*site develo!ent Project

e" Prodction of !oviesf" Advertise!ent Ca!ai,n

," Edcation and A%areness Ca!ai,n

&" Trainin, Pro,ra!si" 8oo3 ritin,

j" Corse Manals3" Develoin, ne% services etc.

&'aracteristics of t'e Project:

0. pecific -.jecti*es:

Project !st clearl$ define its o*jectives. it&ot o*jectives t&e Project can not *e t&in3ed ot.

/% +ife pan:

Eac& Project &as its o%n life san. As %e said *efore' t&e Project is an one)ti!e)onl$ set activitie

It &as *e,innin, and end. T&e life san of t&e Project deends on t&e natre. 8ased on t&e natrof t&e Projects' so!e &as lon, life san and so!e &as s&ort.

0% &onstraints:

All Projects &ave constraints. Project oerates %it&in t&e constraints of ti!e' cost' and /alit$

erfor!ance.

Project +c&edle constraints ti!e i.e. it sets deadline

Project 8d,et sets cost li!its Project +ecification sets /alit$ erfor!ance

% Uni2ue:

Eac& Project is different


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5% eam 3or4:

Project is i!le!ented t&ro,& tea! !e!*ers fro! different disciline and e1eriences. T&e

Project Mana,er is t&e leader of t&e tea!.

% 6"e7i.i"it:

T&e Project oerates in d$na!ic environ!ent. And so it needs fle1i*ilit$ to resonse c&an,in,environ!ent.

% esources Integration:

Inte,ration of &$sical' financial' &!an and infor!ation resorces is t&e !st in Project. ProjectMana,er is one %&o inte,rates t&ese resorces %it& !ini!! %aste in t&e Project.

8% P"anning and &ontro":

Project re/ires effective and efficient lannin, and control s$ste!s. +tandards of t&e roject

activities are set t&ro,& Plannin,. T&ese standards are t&e $ardstic3s to !easre roject

erfor!ance.

9% &ontracting, u.&ontracting

Most Projects are contract *ased.

1;%


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+ecture @o% /

Project +ife &c"e:

e &ave alread$ !entioned t&at t&e roject &as its o%n life. It &as *e,innin, and end oints. It &a

fi1ed life san. T&e life san of t&e Project is divided into different &ases.

Cleland divides t&e Project life c$cle into follo%in, five different &ases:

i" Concetal : Preli!inar$ evalation of Project Idea' identification of needs.ii" Definitions : Identification of t&e resorces re/ire!ent and t&e esta*lis&!ent of

ti!e' cost' erfor!ance ara!eters

iii" Prodction : standardi7ation of efforts and co!letion of doc!entation' foroerations5 Project I!le!entation

iv" Oerational: Evalation of t&e Project and its inte,ration into anot&er or,ani7ation

v" Divest!ent : Reallocation of resorces to ot&er Project

Most co!!onl$' t&e follo%in, for &ases are descri*ed in t&e life c$cle of t&e Project.

a" ?or!lation P&ase*" Plannin, P&ase

c" I!le!entation P&ase

d" Ter!ination P&ase

0" Project 6ormu"ation P'ase:T&is is concetion &ase. T&e *asic tas3 in t&is &ase consists of t&e follo%in,:

i" Project Identification:

Project are *orn %it& creative ideas. T&e creative ideas co!e fro! different sitation : Environ!ent :%&at is t&e olitical sitation' socio cltral' econo!ic' le,al and tec&nolo,ical

forces in t&e resective environ!ent are anal$sed.

Internal Resorces of t&e Or,ani7ation:9MG of t&e or,ani7ation' lan @ strate,$ adoted *$ t&eor,ani7ation and +OT anal$sis etc. rovide ne% Project idea.

E1ternal Resorces: Mar3et de!and' donors riorit$' le,al rovision' Co!etators activities andvested interest of t&e olitician rovide Project idea.

ii" Project 6ormu"ation:T%o !ajor activities are i!le!ented drin, Project ?or!lation:

a" tatement of or4: Different ara!eters li3e scoe @ o*jectives of t&e roject' role @resonsi*ilities of roject i!le!enters5 sc&edle' cost and /alit$ of t&e Project etc are

incororated in state!ent of %or3.

*" Project Proposa": Tec&nical @ ?inancial Proosal sed for t&e *iddin, are t&e rodct ofroject roosal. Project roosal is an initial sta,e of roject doc!ent %&ic& is for!ed

after condctin, refeasi*ilit$ std$ and reli!inar$ desi,n of t&e Project.

/) P"anning P'ase (Project ?e*e"opment P'ase) : Prearin, of detailed lan' %it&'

ti!e' cost' and /alit$. T&e follo%in, are t&e t&ree !ajor activities' t&at are i!le!ented drin,

t&is &ase: 6easi.i"it stud:

I!le!enatalilit$ of t&e Project is anal$sed in t&is std$. T&e areas of anal$sis cold *e:

i" Mar3et anal$sisii" Tec&nical Anal$sis ) Tec&nicall$ via*le or not

iii" ?inancial Anal$sis

iv" Mana,e!ent Anal$sis

v" Econo!ic Anal$sis


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vi" Environ!ent Anal$sis Appraisa":

A*ilit$ of t&e roject to ac&ieve its o*jectives.

Co!ara*ilit$ of t&e Project %it& ot&er roject in ter! of invest!ent' cost;*enefits ' jo*creation rofit etc.

Project Aroval

?inali7ation of fndin, roosals' a,ree!ent and contract doc!ent Allocation of t&e resorces to t&e Project' introdction of aroriate rle @ re,lation fo

t&e Project

?esign:

Prearation of *le rints and secificationPrearation of detail i!le!entation lan

4" Imp"ementation P'ase:

I!le!entation Mo*ili7ationProject or,ani7ation is set

Project tea! is for!ed and i!le!entation is carried ot t&ro,& t&is tea!

Project !ana,er is t&e tea! leader and is resonsi*le to !o*ili7e t&e Project activitiesMI+ is develoed

Control:

CPMPERT Pro,ra! Evalation and Revie% Tec&ni/e

6" Ter!ination P&ase

Project Evalation

Project Bandover


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+ecture @o% 0

0.

2.4.

4a.

4*.

4c.

Project Environ!ent

Internal Environ!ent) Project O*jectives

) Constraints

) +trctre) Resorces

Tas3 Environ!ent: +rronds t&e

Project and consists of different sta3e

&olders' %&o affects t&e Projectactivities. T&e ele!ents are:

) Csto!er

) Contractors) Consltants

) +liers

) Govern!ent) ?inanciers

) Co!etitors

) -a*or nion

E1ternal Environ!ent (PE+T"

) Political ) -e,al (P"

) Econo!ic (E") +ocio ) Cltral (+"

) Tec&nolo,ical (T"

Po"itica" Bn*ironment Bconomic ec'no"ogica"

) Political +$ste! ) Econo!ic +$ste! ) -evel of Tec&nolo,$) Political Instittions ) Econo!ic Policies )Tec&nolo,ical C&an,e

) Political P&iloso&$ ) Econo!ic Conditions ) Tec&nolo,$ Transfer

) +ega" Bn*ironment ) Re,ional econo!ic ,ro

) -a%) Corts of la%

) -a% ad!inistrators

ocio &u"tura", ocia"

) De!o,ra&ics

) +ocial Instittional) Pressre ,ro

) +ocial C&an,e

) Cltral Environ!ent


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+ecture @o%

Toics : Goal Oriented Project Plannin,

+.

N.

Descrition Met&od Ti!e

0.2.

General Tis on co!!nicationR

;/nfO{ ;f]Wg]

Actua" Project P"anning P'ase :

0. Project Plannin, Matri1:

) &$(Goal"5 &at (O*jectives"5 Bo% (+trate,$"5 &ic&5 Bo%5 &ere) Goal5 Project Prose5 Ott; Reslt5 O9I+ (alit$' alit$' Ti!e @ Place"5 MO95 I!ortan

Ass!tion

) Project lan of oeration

Genera" ips on &ommunication

0. o are a !edi!

2. 8e natral

4. Avoid distractin, !anneris!6. or classroo! is a sta,e

=. +tron, areas : +ta,e can *e divided in si1 sections5 ?ront is stron,er t&an *ac3 and centre is

stron,er t&an side. -eft side (fro! adience" is stron,er t&an ri,&t.. 8od$ Position: ?acin, t&e fll front is stron,er

F. Move!ent

. #ee it li,&tH. #ee a srrise in store0>. Control attention ' E$e contact

00. #ee si,&t @ sond s$nc&roni7ed


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&apita" P"anning and


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c". e"ection ( In*estment B*a"uation &riteria) :+election follo%s and often overlas anal$sis.A %ide rond Araisal Criteria &ave *een

s,,ested to jd,e t&e %ort&fillnes of a roject. T&e$ are divided into t%o *oard areas:

i" @ondiscounting &riteria:

Pa$)8ac3 Period (P8P": &ic& s&old *e less t&an tar,et eriod.

Accontin, rate of retrn (ARR": &ic& s&old *e ,reater t&an tar,et rate.

ii" ?iscounting &riteria:

Net Present 9ale (NP9": &ic& s&old *e ,reater t&an 7ero(o".

Internal Rate of Retrn (IRR": &ic& s&old *e ,reater t&an t&e cost of caital.

8enifit Cost Ratio (8CR". 6inancing : Once t&e roject is selected' financin, arran,e!ent &as to *e done. T%o !ajor

sorce of financin, are e/it$ and det.

i" B2uit: +&are&olders fnd' or retained earnin,s.ii" ?e.t: -oan fnds

F. Imp"ementation. e*ie


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In*estment &riteria

ec'ni2ue of &>>>>

"0.0(

==>>>>>>

"0.0(

=>>>>>

"0.0(

6=>>>>

"0.>0(

6>>>>>++++

+) 0'>>'>>>;)

444.4L4F0H>>.>2L4F==F.6L4F2===.0

20=H6>F;) )0>>>>>;) =H6>F >. +o acceted.T&e NP9 reresents t&e net *enifit over and a*ove co!ensation for ti!e @ ris3.

2. K

and cas& flo% *$ $ear for 6 $rs are 0='>>>5 2>'>>>5 2>'>>>5 2='>>> t&en

8CR

6420 "0.0(

2=>>>

"0.0(

2>>>>

"0.0(

2>>>>

"0.0(

>>>'0=+++

='>>>>>;)


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0026.>

=>>>>>

H2.E22EE=

reject

8CR 0 ) accet N8CR >

8CR 0 ) indifferent N8CR >8CR 0 ) Reject N8CR >

1 : 9er$ si!le to nderstand in t&e case of one) eriod roject

E1a!le : If $o deosit 0>'>>> and ,et 0>>> after one $ear t&en t&e Rate of Retrn %old *e :

RR >G.>

0>>>>

0>>>>0>G>>=

or K4. Interna" ate of eturn

T&e 0RR is t&e discont Rate %&ic& !a3es its NP9 >5

As !e 3no%5 NP9 n

tr

Ct

"0( + ) Invest!entt 0

As er deffinition 5 OCO Invest!ent

n

tr

Ct

"0( + t 0

Given: Invest!ent Rs. 0>>'>>>: cas& flo%s for for $ears are 4>'>>>;)5 4>'>>>;)5 6>'>>>;)5 6='>>> and

discont rate is 0=K. Calclate IRR.

IRR is calclated *$ t&e rocess of trial @ error *$ ass!in, $&e vale of r

i" sa$ r 0= K

T&en :642"0=.0(

6=>>>

"0=.0(

6>>>>

"0=.0(

4>>>>

0=.0

4>>>>+++

0>>>2

&ic& is 0>>>>>;) 5 so r 0=K

ii" sa$ r 0K

T&en:642"0E.0(

6=>>>

"0E.0(

6>>>>

"0E.0(

4>>>>

0E.0

4>>>>+++

H605 8$ interolatin, t&ese t%o n!*ers actal vale of

can *e identified.

If IRR cost of caital (discont rate " accet

If IRR '' reject

Non discontin, criteria:

6. Pa >>;)5 T&e cas& in flo%s are 2>>'>>>5 4>>'>>>54>>'>>> @

6>>'>>> *$ t&e end of eac& for $ears t&en P8P is 6 $rs.

If P8P Tar,et eriod of roject ) reject

If P8P '' '' '' ) accet


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=. Accounting ate of eturn (A)

ARR is also 3no%n as Retrn On Invest!ent (ROI" ses to !easre t&e rofita*ilit$ of anInvest!ent. T&is is avera,e inco!e after ta1' rofit *$ avera,e Invest!ent.

ARR

estmentAverageInv

omeAverageInc

ARR

+

=

2;(

;"0(0

InIo

nTEBITt

t

n

A Project %ill cost Rs.6>'>>>;) 5 Its strea! of e/ations *efore dereciation' interest and tases

E8DIT drin, 0st $r. t&ro,& 6 $ears is e1ected to *e 0='>>> 5 2>'>>> 5 2='>>> 5 4>'>>>. Ass!e =>K t

rate and 0>'>>> dereciation in strai,&t line.

Period 0 2 4 6 Avera,e

0.Earnin, *efore dereciation 0=>>> 2>>>> 2=>>> 4>>>> 22=>>

interest @ ta1es (E8DIT"

2. Dereciation 0>>>> 0>>>> 0>>>> 0>>>> 0>>>>4. Earnin, *efore

Interest (E8IT" =>>> 0>>>> 0=>>> 2>>>> 02=>>

6. Ta1es =>K 2=>> =>>> F=>> 0>>>>=. Earnin, *efore interest @ after

Ta1 E8IT (0)T"Q 2=>> =>>> F=>> 0>>>> 2=>

. 8oo3 9ale Invest!ent8e,innin, 6>>>> 4>>>> 2>>>> 0>>>>

Endin, 4>>>> 2>>>> 0>>>>

Avera,e 4=>>> 2=>>> 0=>>> 0F=>

ARR

estmentAverageInv

omeAverageInc

0GF=>

E2=>

1 0>> 44.44K

ARR tar,et rate ) accet '' ) reject


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-perationa" C &apita"


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4. Profit P"anning (


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Preparation of profit p"an (' @ 8 is Rs. 2>.iii" +ales forcast in !ont&l$ *asis are as follo%:

Prodct Jan ?e* Marc& Total(No" (No" (No" (No"

A =>> 0>>> 0=>> 4>>>

8 0>>> 2>>> 4>>> >>>

1% a"es


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2. Production > nits 0>>> 0=>>>

Desired closin, stoc3 2>> =>> F>>

Total: F>> 0=>> 22>>

()"Oenin, stoc3: 6>> =>> >>nit A to *e rodced : 4>> 0>>> 06>>

II. Esti!ate sales of 8: 0>>> 2>>> 4>>>

Desired closin, stoc3 =>> 0>>> 0=>>

Total: 0=>> 4>>> 6=>> ()"Oenin, stoc3: =>> 0>>> 0=>>

nit 8 to *e rodced : 0>>> 2>>> 4>>>

4. Purc'asing > 2>>> 2>>*" Materials needed to rodce 8

(0 nit 1 6 nit of !aterials" 6>>> >>> 02>>>Total rodction needed 6>> 0>>>> 06>>

(L" Desired closin, *alance 2>>> =>>> >>>

>> 0=>>> 22>>()" Oenin, *alance 4>>> >>> 0>>>>

Prc&ase (nits" 4>> F>>> 02>>

Cost of rc&ase

Rs.2;) er nit F2>> 06>>> 2=>>

6. +a.our >> 0>>> 06>>'' '' 8 '' '' '' 0>>> 2>>> 4>>>

Total nits 6>>> 4>>> 66>>

Total &ors at 0 &r er nit 6>>> 4>>> 66>>Total la*or cost Rs.=;) er &r (Rs"2>>>> 0=>>> 22>>>


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6. &as'


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U

Ad*antage of


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pes of


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2.0. &as'


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6i7ed and 6"e7i."e


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Audit

Accontin, is !ore an art t&an a science. It is *ased on a set of rinciles on %&ic& t&ere is ,enera,ree!ent' not on rles t&at can *e VrovedW. An accontin, s$ste! is a for!al !ec&anis! for ,at&erin,

or,ani7in, and co!!nicatin, infor!ation a*ot an or,ani7ationXs activities. Eac& and ever$ or,ani7atioadots ,enerall$ acceted accontin, rinciles (GAAP". GAAP incldes *road concets or ,idelinesand detailed ractices' incldin, all conventions' rles' and rocedres t&at to,et&er !a3e acceted

accontin, ractice at a ,iven ti!e. Bo%ever internal accontin, reorts need not *e restricted *$ GAAP

8t in eac& contr$' t&e ,overn!ent &as !ade its o%n s$ste! of accontin,. And *ased on t&e natre of

t&e or,ani7ation' t&e$ are !ade resonsi*le to adot t&e articlar accontin, rinciles.

Adit is a controllin, !ec&anis! sed in accontin, s$ste!. In eac& contr$' t&e ,overn!ent &as

its o%n indeendent *od$' %&ic& is resonsi*le to control t&e accont of all or,ani7ations inside t&econtr$. T&e office of Aditors is t&e central indeendent *od$ in or contr$ for t&is rose.

Adit is an e1a!ination or in det& insection of financial state!ents and co!aniesX records t&ais !ade in accordance %it& ,enerall$ acceted aditin, standards. It cl!inates %it& t&e accontantXs

testi!on$ t&at !ana,e!entXs financial state!ents are in confor!it$ %it& ,eneral acceted accontin,

rinciles. Mostl$ t%o different t$es of adit are in ractice. T&e$ are:

0. Internal Adit

2. E1ternal Adit

note on project management)

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