GITAM

Deemed to be University

Topic for the class: Concept of Project

Module 1 : Title: PROJECT MANAGEMENT(EHS 401)
Date & Time :20-Aug-2020

M A Razack
Assistant Professor
Department of Mechanical Engineering
GITAM Institute of Technology (GIT)
Visakhapatnam – 530045
Email: amohamma@gitam.edu

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 SECTION-REG NO-NAME

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 PROJECT MANAGEMENT

Module I Module II
Concept of Project Project Identification
Number of classes:08 Number of classes:08

Module III Module V

Social Cost
Technical Module IV Benefit Analysis
Analysis Financial Number of
Number of classes:08 classes:08
Estimation
Number of classes:08

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 Module 1: Concept of Project

• Basic concepts

• Classification of projects

• Characteristics of project

• Project life cycle

• Tools and techniques of project management

• Project organization.
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Course objectives:
• To make them understand the concepts of Project Management for
planning to execution of projects.

• To make them understand the feasibility analysis in Project

Management and network analysis tools for cost and time estimation.

• To enable them to comprehend the fundamentals of Contract

Administration, Costing and Budgeting.

• Make them capable to analyze, apply and appreciate contemporary

project management tools and methodologies in Indian context

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 INTRODUCTION

Projects have a major role to play in the economic

development of a country. Since the introduction of planning
in our economy, we have been investing large amount of
money in projects related to industry, minerals, power,
transportation, irrigation, education etc. with a view to
improve the socio-economic conditions of the people. These
projects are designed with the aim of efficient management,
earning adequate return to provide for future development
with their own resources. But experience shows that there are
several shortcomings in the ultimate success of achieving the
objectives of the proposed project.
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Gillinger defines “project” as the whole complex of activities involved in
using resources to gain benefits

Definitions of ‘project’. Newman et. al define that “a project typically

has a distinct mission that it is designed to achieve and a clear
termination point the achievement of the mission”.

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 What is a Project?

• PMI Definition
– A project is a temporary endeavor undertaken to create a unique
product, service, or result.

– The temporary nature of projects indicates that a project has a definite

beginning and end.

– The end is reached when the project’s objectives have been achieved
or when the project is terminated because its objectives will not or
cannot be met, or when the need for the project no longer exists.

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 Professional and conscientious
project management is critical
to a successful outcome!

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 PM Triple Constraints

• Time

• Cost

• Scope
Manage these or they will
manage you!
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CONCEPT OF PROJECT AND PROJECT MANAGEMENT

A project is accomplished by performing a set of activities.

For example, construction of a house is a project:

House

construction construction
digging of construction
of walls of roof
foundation pits of foundation

fixing of doors and fixing of sanitary

windows fitting wiring

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 CHARACTERISTICS OF PROJECT
• Objectives
• Life cycle
• Unique
• Team Work
• Complexity
• Risk and uncertainty
• Customer specific nature
• Change
• Optimality
• Sub-contracting
• Unity in diversity
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 CLASSIFICATION OF PROJECTS

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DIFFERENT PROJECTS HANDLING BY GOVERNMENT OF
INDIA

1. CONSTRUCTION OF BORDER ROAD / FENCE

ALONG INDOBANGLADESH BORDER,
MIZORAM.

2.AUGMENTATION OF FUEL & FLUX

CRUSHING FACILITIES OF BHILAI STEEL
PLANT, BHILAI.

3.DESIGN, CONSTRUCTION, SUPPLY,

INSTALLATION AND COMMISSIONING OF
5.00 LLDP DAIRY PLANT AND 30 MTPD
POWDER PLANT AT DAIRY-ON-SORE, BIHAR.
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 PROJECT SELECTION PROCESS
The process of project selection consists of following stages :
• Idea generation
• Environment appraisal
• Corporate appraisal
• Scouting for project ideas
• Preliminary screening
• Project rating index
• Sources of positive Net Present Value
• Entrepreneur qualities.

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 Idea Generation
Project selection process starts with the generation of a project idea.
Ideas are based on technological breakthroughs and most of the
project ideas are variants of present products or services. To stimulate
the flow of ideas, the following are helpful:
SWOT Analysis
SWOT is an acronym for strengths, weaknesses, opportunities and threats.
SWOT analysis represents conscious, deliberate and systematic effort by an
organization to identify opportunities that can be profitably exploited by it.
Periodic SWOT analysis facilitates the generation of ideas.
Operational objectives of a firm may be one or more of the following.
• Cost reduction.
• Productivity improvement.
• Increase in capacity utilization.
• Improvement in contribution margin.
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 Environment appraisal
Economic Sector Government Sector Socio-demographic
• State of the economy • Industrial policy Sector
• Overall rate of • Government • Population trends
growth programmes and • Age shifts in
• Cyclical fluctuations projects population
• Inflation rate • Tax structure • Income
• EXIM policy distribution
• Growth rate of
primary, secondary and • Financing norms • Educational
territory sector profile
• Subsidies incentives
• Growth rate of world and concessions • Employment of
economy women
• Monetary policy
• Trade surplus and • Attitudes toward
deficits • Balance of consumption and
Payment
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 Competition Sector Supplier Sector Marketing and
Distribution
• Availability and • Market Image
•Number of firms in the
cost of raw • Product Line
industry and the market
• Product Mix
share of the top few material
• Distribution
• Degree of • Availability and Channels
homogeneity and cost of energy • Customer loyalty
differentiation among • Availability and • Marketing &
the products cost of capital distribution costs
• Entry barrier
• Comparison with
substitutes in term of
quality and price
• Marketing polices and
practices
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 Production and Research and Corporate Resources
Operations Development and Personnel
• Condition and • Research • Corporate image
capacity of plant capabilities of the • Dynamism of top
and machinery firm management
• Availability of • Track record of • Relation with
raw material and new product government and
power developments regulatory agencies
• Degree of • Laboratories and • State of industry
vertical integration testing facilities relations
• Locational • Coordination
advantage between research
• Cost structure and operations

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 Project rating Index

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 Construction of a rating index

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 Net Present Value
Net present value (NPV) is the difference between the present value of
cash inflows and the present value of cash outflows over a period of time.
NPV is used in capital budgeting and investment planning to analyze the
profitability of a projected investment or project.

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 Sources of positive Net Present Value

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 PROJECT REPORT
In simple words project report or business plan is a written statement of what
an entrepreneur proposes to take up. It is a kind of course of action what the
entrepreneur hopes to achieve in his business and how he is going to achieve
it. In other words, project report serves like a road map to reach the
destination determined by the entrepreneur.
Contents of Project Report
• General Information • Promoter • Location
• Land and Building • Plant and Machinery
• Production process • Utilities
• Transport and communication • Raw material
• Manpower • Product • Market

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Different approaches to the management of the project life cycle lead to
different emphasis being put on design. There are two fundamentally
different types of project life cycle. They are differentiated by what is
considered to be the work of project management.

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 PROJECT LIFE CYCLE
The principal stages in the life of a project are :

• Identification

• Initial formulation

• Ealuatvion (selection or rejection)

• Final formulation (or selection)

• Implementation

• Completion and operation

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 Machkund Hydro Electric (Joint) Scheme is an Inter-State Project of Government of Andhra
Pradesh and Government of Orissa.The Project is located on the western slopes of the Eastern
Ghats near the well know Duduma falls on Machkund River. As per the Inter State Agreement,
Andhra Pradesh and Orissa share the capital expenditure and power benefits in the ratio of
70:30 respectively.
A storage reservoir of 34 TMCft gross capacity at Jalaput to impound the flow in the
Machkund River. Diversion dam is constructed, 17 miles downstream of Jalaput dam, to divert
the water into the power canal.

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 PROJECT APPRAISAL
Method of Project Appraisal of a proposed project includes the following
analyses :
1) Economic analysis
2 ) Financial analysis
3 ) Market analysis
4 ) Technical analysis
5 ) Managerial competence
6 ) Ecological analysis

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 Economic Analysis
Under economic analysis the aspects highlighted include
• Requirements for raw material
• Level of capacity utilization
• Anticipated sales
• Anticipated expenses
• Proposed profits
• Estimated demand

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 Financial Analysis
In order to analyse the financial viability of the project, the
following aspects need to be taken into consideration:
• Cost of capital
• Means of finance
• Estimates of sales and production
• Cost of production
• Working capital requirement and its financing
• Estimates of working results
• Break-even point
• Projected cash flow
• Projected balance sheet.
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Pay-back Period
This is the simplest of all methods and calculates the time required to
recover the initial project investment out of the subsequent cash flow. It
is computed by dividing the investment amount by the sum of the annual
returns (income – expenditure) until it is equal to the capital cost.

Example1. (Uniform annual return)

A farmer has invested about Rs. 20000/- in constructing a fish pond and
gets annual net return of Rs.5000/- (difference between annual income
and expenditure). The pay back period for the project is 4 years (20000/
5000).

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 Example 2.(Varying annual return)
In a project Rs.1,00,000/- an initial investment of establishing a
horticultural orchard. The annual cash flow is as under.

The drawback in this method is that it ignores any return received after the payback
period and assumes equal value for the income and expenditure irrespective of the
time.
It is also possible that projects with high return on investments beyond the pay-back
period may not get the deserved importance i.e., two projects having same pay-back
period – one giving no return and the other providing large return after pay-back
period will be treated equally, which is logically not correct.

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 Technical Analysis
The following inputs taken into consideration:
•Availability of Land and site
•Availability of Water Power, transport, communication
facilities.
•Availability of servicing facilities like machine shop, electric
repair shop etc.
•Coping with anti pollution law
•Availability of work force
•Availability of required raw material as per quantity and
quality.
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 Market Analysis
Before the production actually starts, the entrepreneur
needs to anticipate the possible market for the product.
He has to anticipate who will be the possible customer for
his product and where his product will be sold. This is
because production has no value for the producer unless
it is sold. In fact, the potential of the market constitutes
the determinant of possible reward from entrepreneurial
career.
The commonly used methods to estimate the demand for
a product are as follows:
1. Opinion polling method
2. Life Cycle Segmentation Analysis
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Opinion polling method

In this method, the opinion of the ultimate users. This may be

attempted with the help of either a complete survey of all customers
or by selecting a few consuming units out of the relevant population.
Life Cycle Segmentation Analysis
It is well established that like a man, every product has its own life
span. In practice, a product sells slowly in the beginning. Barked by
sales promotion strategies over period its sales pick up. In the due
course of time the peak sale is reached. After that point the sales
begins to decline. After sometime, the product loses its demand and
dies. This is natural death of a product. Thus, every product passes
through its life cycle.

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The product life cycle has been divided into the following five
stage : Introduction, Growth, Maturity, Saturation and Decline.

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 SELF ASSESSMENT QUESTIONS
1. Define Project Management and outline its features clearly.

2. Discuss the process of generating and screening the project ideas.

3. What can a firm do to stimulate the flow of Project Ideas?
4. Discuss the concept of project life cycle.
5. What factors influence the project ideas?. Discuss their implications.
6. Define the term ‘Project’. How will you classify the projects ?
7. What do you understand by project identification? Discuss, with
examples, the process involved in project identification.
9. How are projects classified ? In your view which criterion seems to be
more rational and acceptable for classification of a project?
 Ecological Analysis
In recent years, environmental concerns have assumed
great deal of significance. Ecological analysis should also
be done particularly for major projects which have
significant implication like power plant and irrigation
schemes, and environmental pollution industries like bulk-
drugs, chemical and leather processing. The key factors
considered for ecological analysis are :
1.Environmental damage
2. Restoration measure

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 Key issues in project analysis

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 TOOLS AND TECHNIQUES FOR PROJECT
MANAGEMENT
1. Project selection techniques
• Cost benefit analysis and
• Risk and sensitivity analysis
2. Project execution planning techniques
• Work breakdown structure (WBS)
• project execution plan (PEP)
• Project responsibility matrix and
• Project management manual
3. Project scheduling and coordinating techniques
• Bar charts
• Life cycle curves
• Line of balance (LOB) and
• Networking techniques (PERT/CPM)
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4. Project monitoring and progressing techniques
• Progress measurement technique (PROMPT)
• Performance monitoring technique (PERMIT) and
• Updating, reviewing and reporting technique (URT)

5. Project cost and productivity control techniques

• Productivity budgeting techniques
• Value engineering (VE) and
• COST/WBS

6. Project communication and clean-up techniques

• Control room and
• Computerized information systems

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 What makes this all work?

A good, solid professional project

manager

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 A good project team can be the
key to a successful project!

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 Who is a Project Manager

“ A Person responsible to plan, communicate, execute, control,

supervise all the aspects till the desired result in alignment with
the strategic and operational objectives are realized within the
defined time and cost”

“A Person who takes care of SCOPE, QUALITY, TIME, COST and

RESOURCES while achieving the strategic and operational
objectives of a project.”

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 Skills of a Project Manager
• Leadership
• Team Building
• Motivation
• Communication
• Influencing
• Decision making
• Political and cultural awareness
• Negotiation
• Trust building
• Conflict management
• Coaching.

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THE PROJECT MANAGER’S ROLES & RESPONSIBILITIES
1) Defining and maintaining the integrity of a project;
2) Development of project execution plan;
3) Organization for execution of the plan;
4) Setting of targets and development of systems and procedures for
accomplishment of project objectives and targets;
5) Negotiation for commitments;
6) Direction, coordination and control of project activities;
7) Contract management;
8) Non-human resource management including fiscal matters;
9) Problem-solving;
10) Man management;
11) Satisfaction of customer, Government and the public; and
12) Achievement of project objectives, cash surplus and higher
productivity.
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 Basic Rule of failure

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 Think Big, Think Fast, Think Ahead

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 A Close Look at Project Life Cycle

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• Why is Project Management Important for engineers?
The ability to manage complex technology projects is a major
requirement for engineering leaders.

• Many projects are plagued by:

• Quality issues
• Cost overruns
• Schedule overruns
• Programmatic misalignment

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 Functions of Project Management

• Scoping :-
– Define the Boundaries of the project
• Planning :-
– Identify the Tasks required to complete the project
• Estimation :_
– Identify the resources (human & Non-human)
• Schedule :-
– A plan to complete the project
• Organizing :-
– Make sure each resource understand their role and responsibilities
• Directing :-
– Coordinate and Synchronize
• Controlling :-
– Constantly Oversee and measure and readjust
• Closing :-
– Assess success or failure

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 Project Controls
• Management action, either preplanned to achieve the
desired result or taken as a corrective measure
prompted by the monitoring process
• mainly concerned with the metrics of the project,
such as quantities, time, cost, and other resources;
however, also project revenues and cash flow can be
part of the project metrics under control
• encompass the people, processes and tools used to
plan, manage and mitigate cost and schedule issues
and any risk events that may impact a project.

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 How to Select an Organization

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 What is Project Management

• The application of knowledge, skills, tools and techniques to

project activities to meet project requirements

• Organizing and managing resources so the project is

completed within defined scope, quality, time and cost
constraints

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 Project organization

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 Functional Organization

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 Functional Organization

• Examples:
Software updates
Concept Studies
 Project Definition Studies
• Small organizations with limited resources
• Simple projects
• Small projects
• Projects that are very similar to previous projects
• Low cost / low risk

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 Cons
Pros
• No one person is responsible
• Resources are optimized
• Coordination is more complex
• Improved technical control
• No customer focal point
• Communication and
procedures established • Functional priorities govern
over project priorities
• Job security for team
members • Project activities can easily
get siloed
• Distributed budget and
schedule authority

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 Projectized Organization

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 Projectized Organization
• Examples:
• Large Scale Public Works
• NASA Space Station
• Grass Roots Refinery Design and Construction
• Major offshore developments
• Large Projects in large organizations
• High risk ventures
• Complex projects requiring a lot of coordination
• Projects in a Project focused organization
• Projects which will have a major impact on the organization
• Challenging Projects
• Schedule driven Projects
• Multi-year projects
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 Pros
Cons
• Clear single point of
• Resource use is less efficient
responsibility
• Lower technical interchange
• Strong lines of authority
among projects
• Dedicated staff focused on
• Issues with reintegration of
project
staff at project conclusion
• Flexibility in schedules and to
• Technical oversight of project
changes
is weaker
• Strongest customer focus
• Strongest reporting and
control

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 Weak Matrix Organization

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 Weak Matrix Organization

• Examples:
• Maintenance projects
• Task force to develop recommendations
• Concept Selection Study
• Technology Strategy Development
• Small projects of limited duration
• Relatively simple scopes
• Projects with limited changes relative to previous projects
• Projects of limited significance
• Low risk, low cost
• Low to moderate schedule pressure
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 Pros Cons
• Some Project coordination is • No one person is responsible
provided • Coordination is more complex
• Improved reporting • No customer focal point
• Communication improved • Functional priorities govern
• Resources optimized over project priorities
• Job security for team • Project activities can easily get
members siloed
• Distributed budget and
schedule authority

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 Balanced Matrix Organization

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 Balanced Matrix Organization

• Examples:
• Relocation Operations
• Cross functional Reorganization Projects
• Projects with moderate scope and duration
• Projects that are not too complex and the organization has
experience with
• Moderate cost, risk and limited schedule pressure

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 Pros
Cons
• Single point of responsibility
• Unclear budget and schedule
identified
authority
• Improved customer focus
• Potential conflicts between
• Improved communication among Functional
team members
• Managers and Project Managers
• Improved reporting
• Potential priority conflicts
• Resource flexibility
• Job security for team members

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 Strong Matrix Organization

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 Strong Matrix Organization
• Examples:
• Feasibility Studies for large projects
• Design Projects for construction projects
• New software development
• Plant Turnarounds
• Medium to Large Projects where resource efficiency is
important
• Non-schedule driven projects
• Moderate duration projects
• Unique projects with limited challenges
• Projects where functional input is important
• Managed risk projects

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 Pros Cons
• Single point of responsibility • Dual reporting for team
• Budget and schedule • Resources not dedicated
management is clearer • Potential conflicts between
• Reporting is improved Functional
• Customer focus is improved • Managers and Project
• Resource flexibility Managers
• Job security for team • Potential priority conflicts
members

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 Project Organizational Structures
• Projectized Organization
• Team members work 100% for the project
• Empowered project manager
• Organizationally recognized unit for a certain time

• Matrix Organization (Weak, Balanced, Strong)

• Balance between Project manager and function authority varies by project
• Project manager has tasking and budget authority
• Line manager has functional authority, promotions
• Team members remain in their functional organizations (have 2 bosses)
• Potential for conflicts

• Functional Organization
• Weakest form of project organization
• “pure functional” organization
• Project coordinator has no budget or tasking authority
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