Project Topics: Meaning and Definition of Project

• Characteristics of Project
• Classification of Projects
• Parameters of Project
• Project Life Cycle
• Phases of Project Life Cycle

Meaning and Definition of Project

A Project is a group of unique, interrelated activities that are planned and executed in a
certain sequence to create a unique product and/ or service, within a specific time frame,
budget and the client’s specifications.

According to the Project Management Institute’s (PMI) Publication, “A Guide to the

Project Management Body of Knowledge’ (PMBOK), a project is defined as, “a
temporary endeavor undertaken to create a unique product or service.”

According to F. L. Harrison, “A project can be defined as a non- repetitive, one- off

undertaking, normally with discrete time, financial and technical performance goals.”

According to the British Standard , a project is define as, “ a unique set of co-ordinated
activities, with definite starting and finishing points, undertaken by an individual or
organization to meet specific objectives.

Broadly these objectives, which are usually defined as part of the business case and set
out in the project brief, must meet three fundamental criteria:

1. The project must be completed on time;

2. The project must be accomplished within the budgeted cost;

3. The project must meet the prescribed quality requirement.

Characteristics of Project

Some characteristics of projects are:

1. Focus: A project has a fixed set of objectives/mission/goal. Once these objectives,
goals, or missions’ targets have been achieved, the project will become extinct from the
organizational pyramid.

2. Life Span: A project cannot continue indefinitely. It is either executed, terminated, or

dead. Every project is invariably time bound. The time limits are well defined through
schedules.

3. Team Spirit: Every project encourages team spirit among the group of people who
participate in it and are instrumental in achieving its goal. This team consists of different
individuals from varied disciplines who give their knowledge, experience, and credence
towards a total performance.

4. Lifecycle: Like any other product, a project is also reflected and influenced by the
lifecycle phases and to which the success or failure of the project can be ascribed.
Unswervingly, from conception to commission, a project has to run through six phases
that are intertwined with various stages.

5. Unique Activities: Every project has a set of activities that are unique, which means it
is the first time that an organization handles that type of activity. These activities do not
repeat in the project under similar circumstances, i.e., there will be something different in
every activity or even if the activity is repeated, the variables influencing it change every
time. For example, consider a ship building yard that builds ships for international clients.
Even though the organization builds many ships, each time there will be a difference in
some variable such as the vessel’s design, time allowed for construction, etc.

6. Attainment of Specific Goal: Organizations take up projects to perform a particular

task or attain a specific goal. These tasks differ from project. The projects in an
organization could be constructing a new facility, computerizing the accounts department
or studying the demand for a new product that the organization plans to launch in the
market. All these projects have a specific goal or result to attain and hence it can be said
that every project is goal-oriented.

7. Sequence of Activities: A project consists of various activities that are to be performed

in a particular sequence to deliver the end-product. This sequence depends on the
technical requirements and interdependency of each of the activities.

8. Specified Time: very project has a specified start date and completion date. This time
limit is either self- imposed or it is specified by the client. The life span of a project and
run from a few hours to a few years. A project coms to a close when it delivers the
product and/ or service as per the client’s requirements or when it is confirmed that it is
no longer possible for the project to deliver the final product and/or service as required by
the client.

9. Interrelated Activities: Projects consists of various technically interrelated activities.

These activities are considered interrelated as the deliverable (Output) of one activity
becomes the input for another activity of the project. For example, the project of building
a multi- storied luxury hotel. This project consists of various activities such as making a
building plan, landscaping, constructing the building, designing the interiors, furnishing
the rooms, etc. All these activities are interrelated and are equally important for the
completion of the project.

10. Transience creates Urgency: To be worthwhile and to repay the investment, the
development objectives must be achieved by a certain time. Sometimes those time
constraints are very tight; there is a very narrow market window for the output from the
project. If the market window is missed, the project has no value. However, more often,
the market window is broader and though the project will be worth less if it is late, the
loss in value from later delivery has to be balanced against a potential greater value if
more time is spent developing the project’s output. Unfortunately, the timescale often
receives undue emphasis. There are time pressures in routine operations. However,
because they are routine, it is known how much can be done in a given time, and so there
is less likelihood of committing to impossibly tight timescales.

11. Uniqueness Create risk and Uncertainty: The project must have a plan. As the work is
unique, it will only be done once; the planning effort will only be received once. It is
essential to coordinate the input of resources and ensure that the product is delivered at
such a time and cost as to make a profit. However, the plan needs to be more strategic,
focusing on the coordination and integration. The detail levels of the plan need to be
almost flexibly defined as the project progresses. And necessarily, the uncertainty and the
risk must be overtly managed as part of the complete project management process.

The features of transience, uniqueness and the stresses they create, urgency, integration
and uncertainty, define projects and project management. Project and project
management are not defined by the so called ‘triple constraint’ of time, cost and
functionality; all managers have to manage those, from both projects and operations.

12. Subcontracting: This is not a frill in the life of a project. Subcontracting is a subset of
every project and without which no project can be completed unless it is of proprietary
from or tiny in nature. Subcontracting is an inescapable fact of projects and is one of the
healthy antidotes for fruitful completion of the project, if dosage appropriately, well in
time. For example, DDA, HUDA< etc., undertake to construct housing colonies for the
general public.

Objectives and Functions of Project

Project execution must be directed to achieve the project objectives. There are three
primary objectives of a project to be met, which include:

1) Performance: This is to satisfy the specified standards of performance/ function,

reliability and safety.

2) Within Budget: Containment of expenditure within budgets to ensure smooth running.

3) Time Scale: Timely Implementation of project to be proven at time of launch.

The last two objectives are linked to the resources, which are limited. But this may
represent an over simplification of real intent of project objectives. A project may have
many objectives, which must be clear to both project manager and the owner. Prioritizing
the objectives is necessary for knowing the primary and secondary objectives.

Some of the typical objectives, not listed in any particular order, include:

1) Quality of product, 2) Fastest completion time,

3) Avoiding unproven equipment, 4) High level of automation,

5) Safety during construction, 6) Lowest capital investment,

7) Designing for particular project life, 8) Lowest operational costs,

9) Safety for maintenance, 10) Reliability of information,

11) Minimizing start-up time, 12) Security of information,

13) Safety during operation, 14) Use of local suppliers

Project Management Institute (PMI) identifies six basic functions that project
management must address, these are:

1) Manage the project‘s scope to define the goals and the work to be done, in sufficient
detail to facilitate understanding and correct performance by participants.
2) Manage the human resources involved in a project effectively.

3) Managing communications to see that appropriate parties are informed and have
sufficient information to keep the project coordinated.

4) Manage time by planning and meeting schedules.

5) Manage quality so that project results are satisfactory.

6) Manage costs to see that project is performed at the minimum possible cost and within
the budget, if possible.

Classification of Projects

i) National and International projects: Just as Indian companies invite collaboration from
foreign companies to set up plants in India, in the same way, Indian entrepreneurs extend
their skills outside their skills outside the country to set up plants in other host countries.
The projects set up by large industrial houses or government undertakings in other
countries are known as international projects. In order to participate in international
projects, much greater efforts by the entrepreneur are required to understand the
conditions in that country and evaluate the project opportunities more carefully. The risks
associated with these projects are much higher and of a different nature.

ii) Industrial and Non-Industrial Projects: The national projects can be classified into
industrial and non-industrial projects. The examples of non-industrial projects are:
healthcare projects, educational projects, irrigation projects, agricultural development
projects, soil conservation projects, etc. In case of non-industrial projects, the benefits are
not easy to qualify as the main purpose of these projects is social service. The
investments in non-industrial projects are made by the Central or State governments.
Allocations are made in the annual budget and development plants are included in the
Five Year Plans.

On the other hand, projects with money- making mission belonging to business
organizations are undertaken to ensure generation of wealth and are known as industrial
projects.

iii) Projects Board on Level of Technology: On the basis of technology, industrial

projects can be classified into high technology, conventional technology and low
technology projects. High technology projects involve very huge amount of investments.
The examples of high technology projects are; space projects, nuclear power projects and
sophisticated electronic projects. The projects which use traditional or known
technologies in the process industries such as steel, sugar, cement, chemicals, etc., are
known as conventional technology projects. Most of the products which are produced for
use in other industries or the final products which are used directly by people come from
these conventional technology projects. Investment in these projects is of a sizeable
amount though not very huge.

Project which produces products of daily use, e.g., soap, detergents, cosmetics, etc.,
belongs to low-technology projects. Several products which are reserved for the small
scale belong to low technology type. Investment requirement of such projects is not high.

iv) Projects Based on Size: Projects based on size of investment and plant capacity are
classified as large, medium and small projects. Projects with a capital outlay of less than
s. 5 Crore are regarded as small-scale projects, projects requiring an investment of more
than Rs. 100 crore are treated as large-scale projects and projects those falling between
these two limits are considered as medium-sized projects. While large and medium size
projects are given financial assistance by All India Financial Institutions like IDBI, IFCI
and ICICI and commercial banks, small size projects receive financial assistance from
State Financial Corporations. Small size projects are also assisted by State Industrial
Development Corporations in obtaining their raw materials, equipment’s, etc.

v) Projects Based on Ownership: Projects based on ownership can be classified into three
categories; public sector projects, private sector projects and joint sector projects.

• Public Sector: Projects which are owned by the government—Central or Stat or both—
are known as public sector projects. These projects may be controlled either directly by
the administrative ministries/ departments or through public sector Enterprises/ Public
Sector Undertakings ( PSE or PSU) which are owned by the government railways,
Airlines, State Transport Corporations, SBI and Other Nationalized Banks, LIC, Steel
Plants—Rourkela, Bhilai and Durgapur, etc., are some of the examples of public sector
projects.

• Private Sector Projects: projects with complete ownership in the hands of promoters and
investors are known as private sector projects. The owners of such projects are
individuals, partnership firm or a company (private or public but not PSU). While the
profit motive is not the primary consideration of public sector projects, it is an important
consideration in private sector projects. No entrepreneur would like to invest in a project
which does not give him adequate returns.
• Joint Sector Projects: Projects where ownership belongs to partnership between thee
State and private entrepreneurs are known as joint sector projects, in such projects,
normally the management expertise is from the private sector and the partner representing
the government helps in liaison with various government authorities including large scale
funding. The main consideration for investment in joint sector projects is the desire on
the part of the State to utilize managerial talents and marketing capabilities of thee private
entrepreneur. From the entrepreneur’s point of view, joint sector is attractive because he
does not have to make all the contribution for its investment.

6) Infrastructure Projects: Projects which are undertaken to provide infrastructure

facilities in the country are known as infrastructure projects. These projects strong
stimulus to the infrastructure through huge amount of investment and generally belongs
to power, roads, telecom and ports. Infrastructure projects differ from conventional
projects for manufacture of goods and services and needs substantial resources with long
implementation schedule.

7) Need Based Projects: Any project undertaken for implementation by an organization

must have some specific purpose or need. The recognition of such specific need is
important for successful management of the project. A new industrial project which is
implemented by a well-established organization may be categorized out of the following
group of projects:

i) Balancing Project: A project for augmenting or strengthening capacity of a particular

area or areas within the chain of entire production plant, with the purpose to harmonize
production capacity of all the production centers within the plant, is known as a balancing
project.

Balancing projects are undertaken in order to harmonize capacities of different

production shops within the plant, so that ultimately the plan production of the final
product in increased.

ii) Modernization Project: due to continuous up gradation of technology and production

processes, modernization becomes inevitable for any organization to take advantage of
new technologies/ processes, new input materials, new production methods, etc. To
remain competitive and produce at reasonable price, the company cannot afford to
continue with obsolete technology.

Modernization projects are undertaken with the objective of improvement in plants and
processes by new machineries, new techniques and new processes and are not meant for
changes in the line of activities/ products of the organization. This type of projects results
in higher output and also brings in economy in operations with ultimate effect in the form
of increased profitability of the organization.

iii) Expansion Project: Project undertaken by an organization with the goal for major
increase in the volume of output of the existing products or services is known as an
expansion project. A large organization manufacturing television sets with installed
capacity of 1,00,000 sets per annum may have a project for increase its capacity to
1,50,000 sets per annum by installing another plant, such a project is called ‘ expansion
project’ of the organization. An important consideration for undertaking expansion
projects is the intention of the firm to meet an anticipated growth in demand for the
product or to increase its market share for the product.

iv) Replacement Project: Replacement project is undertaken to replace certain part of the
plant which is creating problems/ breakdowns due to age and wear and tear. Such
problems lead to increase in maintenance cost and reduction in plant output. With the
help of a replacement project, the relevant part of the plant including the old machineries
by new one is replaced which reduces the maintenance cost and increases the level of
output of the organization.

Replacement project is generally cost based and does not have enough scope to expect
additional revenues from the projected investment. The appraisal is made with the
estimated benefits from such investment in the shape of saving the maintenance cost and
achieving the sales target by timely deliveries.

v) Diversification Project: Project undertaken by an organization for activities completely

different from its current activities is considered as diversification project.

A company may seek profitable investment opportunities in altogether new areas. When
a company undertakes a project to enter into a new area, it is called a diversification
project.

vi) Rehabilitation / Reconstruction project: When a project is undertaken to revive a sick

company, it is called a rehabilitation project.

vii) Plant Relocation Project: When an organization feels the need to shift its existing
plant from the present location to any other suitable place, a project for such shifting is
undertaken known as plant relocation project. Similarly, when a company purchases an
existing plant within the country or from outside and re-erect/re- install it at its place of
business, the project undertaken for the re-erection/ r- installation is considered a plant
relocation project.
Parameters of Project

The primary aim of a project is to deliver a product and/or service to a client within the
specified time, budget (resources and cost) and according to the quality and performance
specifications. Usually, the clients ask for too much to be delivered within limited
resources. Therefore, it is important for the project manager to make the clients aware of
the limitations pertaining to time, budget, technicalities, etc., that he/she is working
under. The success of a project depends on the project manager’s ability to strike a
balance between these interrelated variables or constraints. Some common constraints
that influence a project are:

1) Scope: Scope is a brief and accurate description of the end – products or deliverables
to be expected from the project that meet the requirements. Scope describes all the
activities that are to be performed, resources that will be consumed and the end- products
from the successful completion of the project, including the quality standards. The scope
also includes the target outcomes, prospective customers, outputs, work, financial and
human resources required to complete the project.

2) Quality: Every project has to satisfy the quality requirements at two levels—products
quality and process quality. The first quality requirement relates to products resulting
from the project. A comprehensive quality management system ensures effective
utilization of scare resources to achieve the project objective of delivering products
and/or services to the client’s satisfaction.

3) Time: Time is one of the important resources available to a project manager. At the
same time, it is one of the major constraints within which a project has to be completed.
Generally, thee client or the sponsor of the project specifies the time for the completion
of the project. The time required to complete a project is inversely related to the cost of
the project. Therefore, the cost of a project increases as the time available for its
completion decreases. Since time cannot be stored as an inventory, it is the duty of the
project manager to manage time by carefully scheduling the various activities on time.

4) Cost: Cost plays a major role in the various stages of a project life cycle. Project costs
include the monetary resources required to complete the activities mentioned in the scope
of the project. Project costs are costs associated with all the activities in the planning and
implementation phases. The client or the sponsor of the project prepares a budget based
on the estimated costs of various project activities, within which the project manager has
to deliver the product.
5) Resources: Resources includes thee people, finances and the physical and information
resources required to perform the project activities.

Factors Affecting Project

1) General Factors

i) Lick-outs/ strikes/labor unrest,

ii) Power cuts,

iii) Vagaries of weather conditions.

2) Government –Related Factors

i) Clearances for projects and for imports,

ii) Availability of finances,

iii) Statutory clearances, approvals, inspection, testing and other requirements.

3) Site-Related Problems

i) Land acquisitions and local problems,

ii) Inadequate infrastructure facilities.

4) Drawings –Related and Work-front -Related Factors

i) Delay in release of drawings or release of work-front,

ii) Frequent changes and modifications.

5) Problems due to Shortage of

i) Construction materials such as cement, steel, bricks, etc.,

ii) Consumables. Gas and welding electrodes,

iii) Skilled/ unskilled manpower.

6) Vendors/materials-related factors

i) Delay in supply of vendor’s information for engineering,

ii) Delayed deliveries,

iii) Abnormal transportation time/damages during transportation,

iv) Shortages/damages on receipt at site,

v) Effects in materials identified at site, such as cracks, laminations, leakages, etc.,

vi) Mismatching/failure/ non-performance at site,

vii) Spoilage of material during erection and/or storages.

7) Contractors -Related Factors

i) Lack of previous experience,

ii) Inadequate mobilization, supervision, construction tools/ tackles,

iii) Lack of financial capabilities,

iv) Poor site organization,

v) Substantial increase in quantities, changes and modifications.

8) Delay due to Interphasing Activities

i) Obstructions/ interferences,

ii) Holds due to erection requirement not visualized during initial planning,

iii) Dependence on other contractors work.

9) Problems due to Mid-Stream Changes

i) Changes in process design,

ii) Changes in project formulation,

iii) Mid-stream requirements stipulated by the owner, licensor, etc.

10) Owners- Related Factors

i) Delay in approval of drawings documents,

ii) Delay in release of orders,

iii) Financial problems,

iv) Inadequate set-up, and lack of experience,

v) Delay in fulfilling owner’s obligations.

Project Life Cycle

The project life cycle is a collection of generally sequential project phases. The number
of project phases is determined by the control needs of the project organization. The
project life represents the linear progression of a project, from defining the project,
through developing a plan, implementing the plan and closing the project.

A project life cycle usually specifies:

1) The technical work that must be carried out in various phases of the project.

2) The list of individuals and their roles in each phase of the project.

Projects are “born” when a need is identified by the customer – the people or the
organization willing to provide funds to have the need satisfied.

The customer must first identify the need or problem. Sometimes the problem is
identified quickly, as in the case of a disaster such as an earthquake or explosion. In other
situation. In other situations, it may take months for a customer to clearly identify a need,
gather data on the problem and define certain requirements that must be met by the
persons, project team or contractor who will solve the problem.

Phases of Project Life Cycle

There are four phases of project life cycle:

1) First Phase: In this phase project life cycle involves the identification of a need,
problem or opportunity and can results in the costumers requesting proposals from
individuals, a project team or organization (contractors) to address the identified need or
solve the problem. The need and requirements are usually written up by the customer in a
document called a Request for proposal (RFP). Through the RFP, the customer asks
individuals or contractors to submit proposals on how they might solve the problem,
along with the associated cost and schedule.

Not all situations involve a formal RFP, however, Needs often are defined informally
during a meeting or discussion among a group of individuals. Some of the individuals
may then volunteer or be asked to prepare a proposal to determine whether a project
should be undertaken to address the need. It is important to define the right need.

2) Second Phase: The second phase of the project life cycle is the development of a
proposed solution to the need or problem. This phase results in the submission of a
proposal to the customer by one or more individuals or organizations ( contractors) who
would like to have the customer pay them to implement the proposed solution. In this
phase, the contractor effort is dominant. Contractors interested in responding to the RFP
may spend several weeks developing approaches to solving the problem, estimating the
types and amounts of resources that would be needed as well as the time it would take to
design and implement the proposed solution. In many situations, a request for proposal
may not involve soliciting competitive proposals from external contractors. A company’s
own internal project team may develop a proposal in response to a management defined
need or request. In this case, the project would be performed by the company’s own
employees rather than by an external contractor.

3) Third Phase: The third phase of the project life cycle is the implementation of the
proposed solution. This phase begins after the customer decides which of the proposed
solutions will best fulfill the need and an agreement is reached between the customer and
the individual or contractor who submitted the proposal. This phase, referred to as
performing the project, involves doing the detailed planning for the project and then
implementing that plan to accomplish the project objective.

4) Fourth and Final Phase: The final phase of the project life cycle is terminating the
project. When a project is completed, certain close-out activities need to be performed,
such as confirming that all deliverables have been provided to and accepted by the
customer, that all payments have been collected and that all invoices have been paid. An
important task during this phase is evaluating performance of the project in order to learn
what could be improved, if a similar project were to be carried out in the future. This
phase should include obtaining feedback from the customer to determine the level of the
customer’s satisfaction and whether the project met the customer’s expectations. Also,
feedback should be obtained from the project team in the form of recommendations for
improving performance of projects in the future.

Project Management Topics: Meaning and Definition of Project Management

» Functions of Project Management

» Importance of Project Management

» Project Management Process

» Project Management Tools

Meaning and Definition of Project Management

Project management is the discipline of planning, organizing and managing resources to

bring about the successful completion of specific project goals and objectives.

The primary challenge of project management is to achieve all of the project goals and
objectives while honoring the project constraints. Typical constraints are scope, time and
budget. The secondary- and more ambitions- challenge is to optimize the allocation and
integration of inputs necessary to meet pre-defined objectives. A project is a carefully
defined set of activities that use resources (money, people, materials, energy, space,
provisions, communication, motivation, etc.) to achieve the project goals and objectives.

According to Project management institute, “Project management is the application of

knowledge, skills, tools and techniques to project activities in order to meet or exceed
stakeholder needs and expectations.”

The PMBOK (A Guide to the Project Management body of Knowledge) definition of

Project Management is “application of knowledge, skills, tools and techniques to project
activities to achieve project requirements. Project management is accomplished through
the application and integration of the project management processes of initiating,
planning, executing, monitoring and controlling and closing.”

Project management is a carefully planned and organized effort to accomplish a specific

(and usually) one-time effort, e.g., constructing a residential complex or implementing a
new computerized banking system. Project management includes developing a project
plan that includes defining project goals, specifying how the goals will be accomplished,
what resources are needed and relating budgets and time for completion. It also includes
implementing the project plan, along with careful controls to ensure that the project is
being managed according to the plan.

Functions of Project Management

Setting realistic expectations, fostering agreement among all parties and then delivering
the product is frequently challenging and always requires a wide array of techniques,
from a high level, these techniques can be grouped into three project management
functions:

1) Project Definition: Project definition lays out the foundation for a project. There are
two activities involved in this groundwork:

i) The project manager must determine the purpose, goals and constraints of the project.
He or she must answer questions like, “Why are they doing this”? and “What does it
mean to be successful?” The answers become the foundation for making all project
decisions because they describe the cost-schedule – quality equilibrium and connect the
project to the mission of the organization.

ii) The manager must establish basic project management controls. He or she must get
agreement on which people and organizations are involved in the project and what their
roles will be. The manager also needs to clarify the chain of command, communication
strategy and change control process. The documented acceptance of these decisions and
strategies communicates expectations about the way the project will be managed. It also
becomes an agreement to which they can refer to keep everyone accountable to their
responsibilities in the project.
2) Project Planning: Project planning puts together the details of how to meet the
project’s goals, given the constraints. Common estimating and scheduling techniques will
lay out just how much work the project entails, which will do the work, when it will be
accomplished and how much it will cost. Along the way, risk management activities will
identify the areas of greatest uncertainty and create strategies to manage them. The
detailed strategy laid out in the plan becomes a reality check for the cost- schedule-
quality equilibrium developed during project definition.

3) Project Control: Project control includes all the activities that keep the project moving
toward the goal. These activities include.

i) Progress Measurement: Measuring progress frequently identifies any problems early,

making them easier to solve Progress measurement is also a feedback mechanism,
validating the estimates in the plan and the cost- schedule- quality equilibrium.

ii) Communication: Communication is critical in controlling a project, because it keeps

all the participants co-ordinated and aware of project progress and changes.

iii) Corrective Action: This consists of the day-to-day responses to all the obstacles and
problems a project may encounter.

These functions sum up the responsibilities of the project manager. The functions are
sequential; a project must begin with definition, then proceed to planning and finally to
control. And the functions must be repeated time and again, because planning will
inevitably lead to modifications in the definition and controlling actions will require
constant changes to the plan and, occasionally, changes to the definition. During an
ongoing project, a manager may spend time everyday defining, planning and controlling
the project.

Importance of Project Management

Project management is no longer a special- need management. It is rapidly becoming a

standard way of doing business. An increasing percentage of the typical firm’s effort is
being devoted to projects.

1) Compression of Product Life Cycle: One of the most significant driving forces behind
the demand for project management is the shortening of the product life cycle. Time to
market for new products with short life cycles has become increasingly important. A
common rule of thumb in the world of high-tech product development is that a six-month
project delay can result in a 33 per cent loss in product revenue share. Speed, therefore,
becomes a competitive advantage; more and more organizations are relying on cross-
functional project teams to get new products and services to the market as quickly as
possible.

2) Global Competition: Today’s open market demands not only cheaper products and
services but also better products and service. This has led to the emergence of the quality
movement across the world with ISO 9000 certification a requirement for doing business.
Quality management and improvement invariably involve project management. For
many, their first exposure to project management techniques has been in quality
workshops.

Project management, with its triple focus on time, cost and performance, is proving to be
an efficient, flexible way to get things done.

3) Knowledge Explosion: The growth in new knowledge has increased the complexity of
projects because projects encompass the latest advances. For example, building a road 30
years ago was a somewhat simple process. Today, each area has increased in complexity,
including materials, specifications, codes, aesthetics, equipment and required specialists.
Similarly, in today’s digital, electronic age it is becoming hard to find a new product that
does not contain at least one microchip. Product complexity has increased the need to
integrate divergent technologies. Project management has emerged as an important
discipline for achieving this task.

4) Corporate Downsizing: The last decade has seen a dramatic restructuring of

organizational life. Downsizing and sticking to core competencies have become
necessary for survival for many firms. Middle management is a skeleton of the past. In
today’s flatter and leaner organizations, where change is a constant, project management
is replacing middle management as a way of ensuring that things get done. Corporate
downsizing has also led to a change in the way organizations approach projects.
Companies outsource significant segments of project work and project managers have to
manage not only their own people but also their counter- parts in different organizations.

5) Increased Customer Focus: Increased competition has placed a premium on customer

satisfaction. Customers no longer simply settle for generic products and services. They
want customized products and services that cater to their specific needs. This mandate
requires a much closer working relationship between the provider and the receiver.
Account executives and sales representatives are assuming more of a project manager’s
role as thy work with their organization to satisfy the unique needs and requests of
clients.

Increased customer attention has also prompted the development of customized products
and services.

6) Rapid Development of Third World and Closed Economies: The collapse of the Soviet
Empire and the gradual opening of Asian Communist countries have created an explosion
of pent-up demand within these societies for all manner of consumer goods and
infrastructure development. Western firms are scrambling to introduce their products and
services to these new markets and many firms are using project management techniques
to establish distribution channels and foreign bass of operations. These historical changes
have created a tremendous market for core project work in the areas of heavy
construction and telecommunications as Eastern European and Asian countries strive to
revitalize their inefficient industries and decrepit infrastructures.

Project Management Process

Project management processes can be split into five groups each consisting of one or
more processes. They are:

1) Initiation Process,

2) Planning Process,

3) Implementation Process,

4) Controlling Process,

5) Closing Process.

All these processes are interrelated as the output of one process becomes the input for the
others. In the central process groups (Planning, implementation and control), all the links
are looped. The planning process provides a documented project plan to the
implementation process which in turn provides documented updates to the planning
processes as the project progresses.

1) Initiation Process: Initiation is the process of formally identifying the presence of a

new project or the passing of the ongoing project to the next phase. This phase relates the
project to the ongoing work of the project organization.
2) Planning Process: Project planning is one of the most significant activities
management because it includes activities that were not included earlier, as a result of
which it contains more processes than others. The process of planning is not specific- a
single project can get different plans from different teams. There ear two kinds of
planning processes:

• Core Process: These are the processes that are interdependent and must be performed in
a sequence in almost all the projects.

• Facilitating Process: These are intermittent processes that are performed as and when
they are required in the project planning phase.

3) Implementation Process: Implementation process also involves core processes and

facilitating processes.

i) Core Process

Project Plan Implementation: It is the process of implementing the project plan. A major
portion of the project budget is spent on this process. This process requires the project
manager, the top management and the project team to support one another and co-
ordinate their activities.

ii) Facilitating Process

a) Scope verification: It is the process of getting the project scope formally approved by
the key stakeholders of the project. It ensures the satisfactory accomplishment of all the
project deliverables. When the project is terminated before schedule, the scope
verification should contain the extent and level of completion.

b) Quality Assurance: It is the process of evaluating the total performance of the project
regularly, in order to ensure that the project confirms to thee quality standards. Quality
assurance goes on throughout the project life cycle. It is usually conducted by the quality
assurance department or any other department responsible for quality. Quality assurance
is generally done by the major stakeholders of the project.

c) Team Development: It is the process of making the required information available to

project stakeholders’ ability to contribute as individuals and at the same time increasing
the efficiency of the tam to function as a group.

d) Information Distribution: It is the process of making the required information available

to project stakeholders. It involves executing the communications management plan and
also meeting unexpected requests for information.
e) Solicitation: It is the process of gathering information in the form of bids, quotations
and proposals from qualified vendors to satisfy the project needs. Usually, it is the
vendors who put in a majority of the effort in this process. The process requires
procurement documents and a list of qualified vendors.

f) Vendor selection: It is the process of accepting bids, quotations or proposals and

evaluating vendors.

g) Contract Administration: It is the process of ensuring that the vendors deliver materials
as per the requirements of the contract. When the projects is big and involve more than
one vendor, managing communications and interactions among vendors becomes crucial.

4) Controlling Process: Controlling is important in project management because it helps

to measure project performance regularly so as to determine the deviations from the plan
and rectify the problems. This minimizes cost over-runs, time lapse, schedule slippages
and maintains the overall quality of products. Controlling processes too involve core
processes and facilitating processes.

5) Closing Process: Closing a project is also a major activity in the life cycle. Every
project has to come to an end after it has attained its objectives. Closing has special
significance in project management because it marks the formal acceptance of the project
by the client and the archiving of the project reports for future reference. The closing
process involves administrative closure and contract closure, Administrative closure is
the process of generating, collecting and conveying all project related information to
formally complete the project. Contract closure of final settlement of contract along with
the resolution of any open issues.

Project Management Tools

1) PERT: The program (or project) Evaluation and review Technique commonly
abbreviated PERT , is a model for project management designed to analyze and represent
the tasks involved in completing a given project . It was developed primarily to simplify
the planning and scheduling of large and complex projects. It was able to incorporate
uncertainty by possible to schedule a project while not knowing precisely the detailed and
durations of all the activities. It is more of an event- oriented technique rather than start
and completion- oriented and is used more in R&D type projects where time, rather than
cost, is the major factor. It is intended for very large- scale, one-time, complex, non-
routine projects.
2) CPM: CPM (Critical Path Method) is another technique closely allied to PERT. The
methodology of CPM and PERT are, to a large extent, similar although two techniques
are developed independent of each other and their objective are, by and large different.
CPM is applied where the activity times are more or less certain, e.g., projects of
recurring nature, viz., construction of building or highways, planning and launching of
new product, scheduling ship construction and repairs, etc. In case of CPM time for each
activity can be ascertained with certainty, no concept “Crashing” is applied in CPM
which refers to use of extra resources to shorten the project completion time.

3) Gantt Chart: A Gantt chart is a type of bar chart that illustrates a project schedule.
Gantt charts illustrate the start and finish dates of the terminal elements and summary
elements of a project. Terminal elements and summary elements comprise the work
breakdown structure of the project. Some Gantt charts also show the dependency (i.e.,
precedence network) relationships between activities. Gantt charts can be used to show
current schedule status using percent-complete shadings.

Project Feasibility Analysis Topics:» Meaning and Definition of Project Feasibility

Analysis

» Content of Feasibility Analysis

» Application of Feasibility Analysis

» Steps/Dimensions of Feasibility Analysis

» Type of Feasibility Analysis

Meaning and Definition of Project Feasibility Analysis

Feasibility literally means whether some idea will work or not. It knows beforehand
whether there exists a sizeable market for the proposed product/ service, what would be
the investment requirements and where to get the funding from, whether and wherefrom
thee necessary technical know- how to convert the idea into a tangible product may be
available and so on. In other words, feasibility study involves an examination of the
operations, financial, HR and marketing aspects of a business on ex ante (before the
venture comes into existence) basis.
Project Feasibility Analysis results in a reasonably adequate formulation of the project in
terms of location, production technology, production capacity, material inputs etc., and
contains fairly specific estimates of project cost, means of financing, sales revenues,
production costs, financial profitability and social benefits.

Various dimensions of project feasibility study are analyzed throughout different stages
of feasibility study in varying degrees of detail, both separately and in relation to others.
Thus, a multi–dimensional feasibility analysis is a vital exercise.

If a project is seen to be feasible from the results of the study, the next logical step is to
proceed with it. The research and information uncovered in the feasibility study will
support the detailed planning and reduce the research time.

Content of Feasibility Analysis

The sources for content in a feasibility analysis come through extensive research,
discussion and assessment and may incorporate the use of advanced computer modeling
to determine the long-term impact of a project on the environment around it. Other
feasibility analyses may be rooted only in anecdotal evidence as provided by those who
have worked on similar efforts or those who will ultimately be affected by the project’s
outcome.

A basic pre-project feasibility analysis might include the following:

1) Executive Summary/Project Goal: Overview or description of the impact of the project

on its environment and the potential for success (or failure) based on the analysis. This
may also include brief mention of the alternatives considered and their relative viability.

2) Project Description

i) Anticipated As–Built Condition: This section is a description of the project as

envisioned, including magnitude, location, community impact and market change.

ii) Anticipated Outputs: In this section, both intended and consequential outputs of the
project should be incorporated, without comment as to their relative or detriment to the
world around them.

3) Project Environment
i) Financial: This section describes the financial climate in which the project will be
developed and implemented. This may include assessments of the relative magnitude of
the project within the overall organizational budget and the potential drain on available
resources.

ii) Physical Environment: A feasibility analysis should include a description of the

environment surrounding the project, including the physical locations for development
and implementation.

iii) Societal/Cultural environment: Descriptions of the culture and society in and around
the project community are another aspect to a feasibility analysis. This may include an
emphasis on those social and cultural issues that will be directly affected by project
development and implementation.

4) Similar Efforts

i) Scenarios: The section provides an outline of similar efforts and a synopsis of their
effects on the finances and physical and social environments of their project
organizations and communities.

ii) Similarities and Implications: Determination of the degree of similarity between the
scenarios outlined and the project(s) under scrutiny in the feasibility analysis is covered.

5) Sensitivity Analyses

i) Financial: A “what – if” analysis of finances to determine if the project is deemed

viable is an important aspect of a feasibility analysis. An assessment of other
organizational areas affected is included. This analysis may also examine the potential
range of financial possibilities if the project fares extremely well or poor.

ii) Physical Environment: It involves a “what-if” analysis of the physical environment if

the project is deemed viable. It includes an assessment of physical effects to the
organization and thee areas around the project. This analysis may also examine the
potential range of physical manifestations if the project fares extremely well or poor.

6) Marketing/Public Relations

i) Market Analysis: The market analysis includes an assessment of the potential market
for the project or its outputs, including ( but not limited to) the financial buying power of
the market, interest in or demand for the project and the life span of the market’s
members.
ii) Forecasts: Predictions regarding sales, returns and buying trends related to the project
and its outputs are included in the forecasting section. Ideally, the forecast includes the
timing of the market entry and the relative impact of early or late into the marketplace.

iii) Competitive Environment: The competitive environment section contains information

on other organizations capable of conducting the project and/or producing its deliverables
(or their equivalent).This may also incorporate some assessment of how potentially fickle
the market may be based and the potential market impact if those risks come to pass.

7) Conclusions and Recommendations: Based on the information from the analysis, it

explains the conclusions that can be drawn regarding the viability (or non-viability) of the
project , given the environment in which it will be developed and implemented. This
normally includes a go/no-go decision and the implications of both of those decisions.

Application of Feasibility Analysis

Feasibility analyses are used to present an approach or a series of alternatives and to offer
decision- making guidance based on the climate in which the project will evolve. They
often defend a single or primary approach, incorporating extensive forecasts on the
project’s development, as well as its evolution after implementation. Because a feasibility
analysis may focus on one or many aspects of a project, it may be a very short (one to
two- page) or long (multi-volume) document. In any case, it generally begins with an
executive summary and a description of the project outputs in their as-built condition.

Steps/Dimensions of Feasibility Analysis

In general terms, the elements of a feasibility analysis for a STEP should cover the
following items:

1) Need Analysis: This indicates the recognition of a need for the project. The need may
affect the organization itself, another organization, the public, or the government. A
preliminary study should be conducted to confirm and evaluate the need. A proposal of
how the need may be satisfied is then developed. Pertinent questions that should be asked
include;

i) Is the need significant enough to justify the proposed project?

ii) Will the need still exist by the time the project is completed?
iii) What art h alternate means of satisfying the need?

iv) What is the economic impact of the need?

2) Process work: This is the preliminary analysis done to determine what will be required
to satisfy the need. The work may be performed by a consultant who is a subject matter
expert in the project field. The preliminary study often involves system models or
prototypes. For STEPs, artist’s conception and scaled down models may be used for
illustrating the general characteristics of a process.

3) Engineering and Design: This involves a detailed technical study of the proposed
project. Written quotations are obtained from suppliers and sub-contractors as needed.
Technology capabilities are evaluated as needed. Product design, if needed, should be
done at this stage.

4) Cost Estimate: This involves estimating project cost to an acceptable level of accuracy.
Levels of around 5% to +15% are common at this level of a project plan.

Both the initial and operating costs are included in the cost estimation. Estimate of capital
investment, recurring and non-recurring costs should also be contained in the cost
estimate document.

5) Financial Analysis: This involves an analysis of the cash flow profile of the project.
The analysis should consider r-capitalization requirements, return on investment,
inflation, sources of capital, pay-back periods, break-even point, residual values, market
volatility and sensitivity. This is a critical analysis since it determines whether or not and
when funds will be available to the project. The project cash flow profile helps to support
the economic and financial feasibility of the project.

6) Project Impacts: This portion of scope feasibility analysis provides an assessment of

the impact of the proposed project. Environmental, social, cultural and economic impacts
may be some of the factors that will determine how a STEP is perceived by stakeholders.
The value- added potential of the project should also be assessed. A value tax may be
assessed based on the price of a product and the cost of thee raw material used in
marketing the product. Thee tax so collected may be viewed as a contribution to
government coffers for re-investment in the science, technology and engineering
infrastructure of the nation.

7) Conclusions and Recommendations: Scope feasibility analysis should end with the
overall outcome of the project analysis. This may indicate an endorsement or disapproval
of the project. If disapproved, potential remedied to make it right should be presented.
Recommendations on what should be done should be included in the scope feasibility
report.

Type of Feasibility Analysis

The feasibility study includes the following types of feasibility analysis:

1) Technical Feasibility: The technical feasibility refers to the ability of the process to
take advantage of the current state of art technology in pursuing further improvement.
The technical capability of the personnel as well as the capability of the available
technology in relation to the requirements of the proposed project idea should be
considered and the extent of compatibility should be studied.

2) Managerial Feasibility: The managerial feasibility involves the capability of the

infrastructure of a process to achieve and sustain process improvement. Management
support, employee involvement and commitment are the key elements required to
ascertain managerial feasibility.

3) Economic Feasibility: The economic feasibility analyzes sis, the feasibility of the
proposed project to generate economic benefits. A cost-benefit analysis and a break-even
analysis are used while evaluating the economic feasibility of new industrial projects. In a
cost – benefit analysis, all tangible benefits and costs as well as intangible benefits and
costs are identified before obtaining the B_C ratio. The break- even analysis helps to find
the break- even quantity at which the project has no loss or gain.

4) Financial Feasibility: The financial feasibility attempts to assess the capability of the
project organization to raise the appropriate funds needed to implement the proposed
project. Loan availability, credit worthiness, equity and loan schedule are important
aspects of financial feasibility analysis.

5) Cultural Feasibility: The cultural feasibility deals with the compatibility of the
proposed project with the cultural set-up of the project environment. In labor intensive
projects, planned functions must be integrated with the local cultural practices and
benefits. Some examples of cultural factors are religion, custom- life style, etc.

6) Political Feasibility: The political feasibility deals with the initial acceptance of the
project and sustenance of the project in the long-run by the prevailing political system.
This is particularly true for the large projects with national visibility that may have
significant government inputs and political implications. The issues on which political
intervention may arise are conversion of land from agricultural use to industrial us,
anticipated health hazard if the project is implemented, possible air pollution and water
pollution, possible unemployment due to hi-tech projects, etc.

7) Environmental Feasibility: The environmental feasibility is very much important. If

the commissioning of the project results with any kind of pollution, it will be visible to
the public, administrators and politicians. If necessary corrections and preventive
measures are not taken by the project firm to prevent/curtail pollution, the project will be
forced to meet certain problems in terms of opposition from different circles. As a result,
sometime, the project firm may be pushed to the corner of closure/re-location of the
project itself which will cost the organization more.

Market and Demand Analysis

In most cases, the first step in project analysis is to estimate the potential size of the
market for the product proposed to be manufactured (or service planned to b offered) and
get an idea about the market share that is likely to be captured. Put differently, market
and demand analysis is concerned with two broad issues:

1) What is the likely aggregate demand for the product/service?

2) What share of the market will the proposed project enjoy?

Given the importance of market and demand analysis, it should be carried-out in an

orderly and systematic manner:

1) Situational analysis and specification of objectives,

2) Collection of secondary information,

3) Conduct of market survey,

4) Characterization of the market,

5) Demand forecasting,

6) Market planning.

1) Situational Analysis and Specification of Objectives: In order to get a “feel” of the

relationship between the product and its market, the project may informally talk to
customers, competitors, middlemen, and others in the industry. Wherever possible, h may
look at the experience of the company to learn about the performances and purchasing
power of customers, actions and strategies of competitors and practices of the
middlemen.

If such a situational analysis generates enough data to measure the market and get a
reliable handle over projected demand and revenues, a formal study need not be carried-
out, particularly when cost and time considerations so suggest.

2) Collection of Secondary Information: Secondary information is the information that

has been gathered in some other context and is already available. Primary information, on
the other hand, represents information that is collected for the first time to meet the
specific purpose on hand. Secondary information provides the base and the starting point
for the market analysis.

General Sources of Secondary Information

i) Census of India,

ii) National sample survey reports,

iii) Plan reports,

iv) Statistical abstract of the Indian union,

v) India year book,

vi) Statistical year book,

vii) Economic survey of industries,

viii) Annual survey of industries,

ix) Annual reports of the development wing, Ministry of Commerce and Industry, etc.

3) Conduct of Market Survey: Secondary information, though useful, often does not
provide a comprehensive basis for market and demand analysis. It needs to be
supplemented with primary information gathered through a market survey, specific to the
project being appraised.

The market survey may be census survey or a sample survey. In a census survey, the
entire population is covered. The word ‘population’ is used here in a particular sense. It
refers to the totality of all units under consideration in a specific study.
The market survey, in practice, is typically a sample survey. In such a survey a sample of
population is contacted or observed and relevant information is gathered. On the basis of
such information, inferences about the population may be drawn.

The information sought in a market survey may relate to one or more of the
following:

i) Total demand and rate of growth of demand,

ii) Demand in different segments of the market,

iii) Income and price elasticities of demand,

iv) Motives for buying,

v) Purchasing plans and intentions,

vi) Satisfaction with existing products,

vii) Unsatisfied needs,

viii) Attitudes toward various products,

ix) Distributive trade practices and preferences,

x) Socio-economic characteristics of buyers.

4) Characterization of the Market: Based on the information gathered from secondary

sources and through the market survey, the market for the product/ service may be
described in terms of the following:

i) Effective Demand in the Past and Present: To gauge the effective demand in the past
and present, the starting point typically is apparent consumption which is deemed as:

Production + Imports - Exports - Changes in stock level

The figure of apparent consumption has to be adjusted for consumption of the product by
the producers and the effect of abnormal factors. The consumption series, after such
adjustments, may be obtained for several years.

ii) Break-down of Demand: To get a deeper insight into the nature of demand, the
aggregate (total) market demand may be broken-down into demand for different
segments of the market. Market segments may be defined by:

a) Nature of product.

b) Consumer group, and

c) Geographical division.

iii) Price: Price statics must be gathered along with statistics pertaining to physical
quantities. It may be helpful to distinguish the following types of prices.

a) Manufacturer’s price quoted as FOB (Free on Board) price or CIF (Cost, Insurance and
Freight) price,

b) Landed price for imported goods,

c) Average wholesale price and

d) Average retail price.

iv) Methods of Distribution and Sales Promotion: The method of distribution may vary
with the nature of the product. Capital goods, industrial raw materials or intermediates
and consumer products tend to have different distribution channels. Likewise, methods
used for sales promotion (advertising, discounts, gift schemes, etc.) may vary from
product to product.

v) Consumers: Consumers may be characterized along two dimensions as follows:

Demographic and Sociological Attitudinal

Age Preferences

Sex Intentions

Income Habits

Profession Attitudes

Residence Responses

Social background

vi) Supply and Competition: It is necessary to know the existing sources of supply and
whether they are foreign or domestic. For domestic sources of supply, information along
the following lines may be gathered;

a) Location,

b) Present production capacity,

c) Planned expansion,

d) Capacity utilization level,

e) Bottlenecks in production and

f) Cost structure.

Competition from substitutes and near-substitutes should be specified because almost any
product may be replaced by some other product as a result of relative changes in price,
quality, availability, promotional effort and so on.

vii) Government policy: Thee role of the government in influencing the demand and
market for a product may be significant. Governmental plans, policies, and legislations,
which have a bearing on the market and demand of the product under examination,
should be spell-out. These are reflected in:

a) Production targets in national plans,

b) Import and export trade controls,

c) Import duties,

d) Export incentives,

e) Excise duties,

f) Sales tax,

g) Industrial licensing,

h) Preferential purchases,

i) Credit controls, financial regulations and

j) Subsides/ penalties of various kinds.

5) Demand Forecasting: On the basis of analysis and interpretation of information

gathered about various aspects of market and demand from primary and secondary
sources, an attempt is made to forecast the future demand of the proposed product or
service. There are various methods of demand forecasting available to the market analyst.

Methods of Demand Analysis

The various methods of forecasting demand may be grouped under the following
categories:

1) Opinion Polling Method: In this method, the opinion of the buyers, sales force and
experts could be gathered to determine the emerging trend in the market. The opinion
polling methods of demand forecasting are of three kinds:

i) Consumers Survey Methods: The most direct method of forecasting demand in the
short-run is survey method. Surveys are conducted to collect information about future
purchase plans of the probable buyers of the product. Survey methods include:
a) Complete Enumeration Survey: Under the Complete Enumeration Survey, the firm has
to go for a door to door survey for the forecast period by contacting all the households in
the area.

b) Sample Survey and Test Marketing: Under this method some representative
households are selected on random basis as samples and their opinion is taken as the
generalized opinion. This method on random basis as samples and their opinion is taken
as the generalized opinion. This method is based on the basic assumption that the sample
truly represents the population. A variant of sample survey technique is test marketing.
Product testing essentially involves placing the product with a number of users for a set
period. Their reactions to the product are noted after a period of time and an estimate of
likely demand is mad from the result.

c) End–use Method: In this method, the sale of the product under consideration is
projecting on the basis of demand survey of the industries using this product and
intermediate product. In other words, demand for the final product is the end use demand
of the intermediate product used in the production of this final product.

ii) Sales Force Opinion Method: This is also known as Collective Opinion Method. In
this method, instead of consumers, the opinion of the salesman is sought. It is sometimes
referred as the “grass roots approach” as it is a bottom-up method that requires each sales
person in the company to make an individual forecast for his or her particular sales
territory. These individual forecasts are discussed and agreed with the sales manager. The
composite of all forecasts then constitutes the sales forecast for the organization.

iii) Delphi Method: This method is also known as Expert opinion method of
investigation. In this method instead of depending upon the opinions of buyers and
salesmen, firms can obtain views of the specialists or experts in their respective fields.
Opinions of different experts are sought and their identity is kept secret. These opinions
are than exchanged among the various experts and their reactions are sought and
analyzed. The process goes on until some sort of unanimity is arrived at among all the
experts. This method is best suited in circumstances where intractable changes are
occurring.

2) Statistical or Analytical Methods: Statistical methods are considered to be superior

techniques of demand estimation because:

i) The element of subjectivity in this method is minimum,

ii) Method of estimation is scientific,

iii) Estimation is based on the theoretical relationship between the dependents and
independents variables,

iv) Estimates are relatively more reliable and

v) Estimation involves smaller cost.

The statistical methods, which are frequently used, for making demand projections
are:

i) Thread Projection Method: An old firm can use its data of past years regarding its sales
in past years. These data are known as time series of sales. A trend line can be fitted by
graphic method or by algebraic equations. Equations method is more appropriate. The
trend can be estimated by using any one of the following methods.

a) Graphical Method: A trend line can be fitted through a series graphically. Old values
of sales for different areas are plotted on a graph and a free hand curve is drawn passing
through as many points as possible. The direction of this free hand curve shows the trend.
The main draw back of this method is that it may show the trend but not measure it.

b) Least Square Method: The least square method is based on the assumption that the past
rate of change of the variable under study will continue in the future. It is a mathematical
procedure for fitting a line to a set of observed data points in such a manner that the sum
of the squared difference between the calculated and observed value is minimized. This
technique is used to find a trend line which best fit the available data. The trend is then
used to project department variable in the future. This method is very popular because it
is simple and in expensive.

c) Time Series Methods: Time series forecasting methods are based on analysis of
historical data (time series; a set of observations measured at successive times or over
successive periods). They make the assumption that past patterns in data can be used to
forecast future data points.
Moving averages (simple moving average, weighed moving average); forecast is based
on arithmetic average of a given number of past data points.

Components of Time series Demand

• Average: The mean of the observations over time.

• Trend: A gradual increase or decrease in the average over time.

• Seasonal Influence: Predictable short-term cycling behavior due to time of day, week,
month, season, year, etc.

• Cyclical Movement: Unpredictable long-term cycling behavior due to business cycle or

product/service life cycle.

• Random Error: Remaining variation that cannot be explained by the other four
components.

d) Exponential Smoothing: It is one of the methods of trend projection methods.

Exponential smoothing is distinguishable by the special way it weights ach past demand.
The pattern of weights is exponential in form. Demand for the most recent period is
weighted most heavily; the weights placed on successively older periods decrease
exponentially. In other words , the weights decrease in magnitude the future back in time
the data are weighted ; the decrease is non-linear (exponential).

ii) Regression method: This is a very common method of forecasting demand. Under this
method a relationship is established between quantity demanded (dependent variable) and
independent variables such as income, price of the good, prices of the related goods etc.
Once the relationship is established, we drive regression equation assuming relationship
between dependent and independent variables. Once the regression equation is derived
the value of Y i.e. quantity demanded can be estimated for any given value of X.

iii) Simultaneous equations Methods of Forecasting: The econometric model forecasting

involves estimating several simultaneous equations, which are, generally, behavioral
equations, mathematical identities and market-clearing equations.
The econometric model technique is also known as simultaneous equations method and
complete system approach to forecasting. This technique uses sophisticated mathematical
and statistical tools.

iv) Barometric Method: It is also known as ‘leading indicators forecasting’. National

bureau of Economic Research of U.S.A. has identified three types of indicators,
coincidental indicators and Lagging indicators.

The analyst should establish relationship between the sales of the product and the
economic indicators to project the correct sales and to measure to what extent these
indicators affect the sales. To establish relationship is not easy task especially in case of
new product where there is no past record.

6) Market Planning: The market plans usually have the following components:

i) Current Marketing Situation: This part of the marketing plan deals with the different
dimensions of the current situation. It examines the market situation, competitive
situation, distribution situation and the macro-environment. In other words, it paints a
pen-picture of the present.

ii) Opportunity and Issue Analysis: In this section a SWOT (Strength, Weakness,
Opportunity, Threat Analysis) is conducted for Alpha and the core issues before the
product are identified.

iii) Objectives: Objectives have to be clear cut, specific and achievable.

iv) Marketing Strategy: The marketing strategy covers the following: target segment,
positioning, product line, price, distribution, sales force, sales promotion and advertising.
v) Action Programme: The last component of market planning is the action programme.
Action programmes operationalize the strategy.

Technical Analysis
Technical aspects relate to the production or generation of the project output in the
form of goods and services from the projects inputs. Technical analysis represents
study of the project to evaluate technical and engineering aspects when a project is
being examined and formulated. It is a continuous process in the project appraisal
system which determines the prerequisites for meaningful commissioning of the
project.

Aspects of Technical Analysis

Technical analysis broadly involves a critical study of the following aspects, viz.,

1) Selection of Process/ Technology: For manufacturing a product, more than one

process/technology may be available. For example, steel can be manufactured either
by the Bessemer process or by the open-health process. Cement can be manufactured
either by the wet process or by the dry process.

The choice of technology also depends upon the quantity of the product proposed to
be manufactured. It the quantity to be produced is large, mass production techniques
should be followed and the relevant technology is to be adopted. The quality of the
product depends upon the use to which it is relevant technology is to be adopted. The
quality of the product depends upon the use to which it is meant for. A product of
pharmaceutical grade or laboratory grade should have high quality and hence
sophisticated production technology is required to achieve the desired quality.
Products of commercial grad do not need such high quality and the technology can
been chosen accordingly.

A new technology that is protected by patent rights, etc., can be obtained either by
licensing arrangement or the technology can be purchased outright. Appropriate
technology: A technology appropriate for one country may not be the ideal one for
another country. Even within a country, depending upon the location of the project
and other features, two different technology may be ideal for two similar projects set
up by two different firms at two different locations. The choice of a suitable
technology for a project calls for identifying what is called the ‘appropriate
technology’.

The term ‘appropriate technology’ refers that technology that is suitable for the local
economic, social and cultural conditions.

2) Scale of operations: Scale of operations is signified by the size of the plant. The
plant size mainly depends on the market for the output of the project. Economic size
of the plant varies from project to project. Economic size of the plant for a given
project can be arrived at by an analysis of capital and operating costs as a function of
the plant size. Though the economic size of the plant for a given for a given project
can be theoretically arrived at by above process, the final decision on the plant size is
circumscribed by a number of factors, the main factor being the promoter’s ability to
raise the funds required to implement the project. If the funds required implementing
the project as its economic size is beyond the promoter’s capacity to arrange for and if
the economic size is too big a size for the promoter to manage, the promoter is bound
to limit the size of the project that will suit his finance and managerial capabilities.
Whenever a project is proposed to be to be set up at a size blow its economic size, it
must be analyzed carefully as to whether the project will survive at the proposed size
(which is below the economic size). Performance of existing units operating at blow
economic size will throw some light on this aspect.

3) Raw Material: A product can be manufactured using alternative raw materials and
with alternative process. The process of manufacture may sometimes vary with the
raw material chosen. If a product can be manufactured by using alternative raw
materials, the raw material that is locally available may be chosen. Since the
manufacturing process and the machinery/requirement to be used also to a larger
extent depend upon the raw material, the type of raw material to be used should be
chosen carefully after analyzing various factors like the cost of different raw materials
available, the transportation cost involved, the continuous availability of raw material
, etc. Since the process of manufacture and the machinery/ equipments required
depend upon the raw material used, the investment on plant and machinery will also
to some extent depend upon the raw material used, the investment on plant and
machinery will also to some extent depend upon the raw material chosen. Hence the
cost of capital investments required on plant and machinery should also be studied
before arriving at a decision on the choice of raw material.

4) Technical Know-How: When technical know-how for the project is provided by

expert consultants, it must be ascertained whether thee consultant has the requisite
knowledge and experience and whether he has already executed similar projects
successfully. Care should be exercised to avoid self-styled, inexperienced consultants.
Necessary agreement should be executed between the project promoter and the know-
how supplier incorporating all essential features of the know-how transfer. The
agreement should be specific as to the part played by the know-how supplier (like
taking out successful trial run, acceptable quality of final product, imparting necessary
training to employees in the production process, taking out successful commercial
production, performance guarantee for a specified number of years after the start of
commercial production, etc). The agreement should also include penalty clauses for
non-performance of any of the conditions stipulated in the agreement.

5) Collaboration Agreements: If the project promoters have entered into agreement

with foreign collaborators, the terms and conditions of the agreement may be studied
as explained above for know-how supply agreement.
Apart from this, the following additional points the deserve consideration:
(i) The competence and reputation of the collaborators needs to be ascertained through
possible sources including the Indian embassies and the collaborator’s bankers.
(ii) The technology proposed to be imported should suit to the local conditions. A
highly sophisticated technology, which does not suit local conditions, will be
detrimental to the project.
(iii) The collaboration agreement should have necessary approval of the Government
of India.
(iv) There should not be any restrictive clause in the agreement that import of
equipment/machinery required for the project should be channelized through the
collaborators.
(v) The design of the machinery should be made available to the project promoter to
facilitate future procurement and/or fabrication for machinery in India at a later stage.
(vi) The agreement should provide a clause that any dispute arising out of
interpretation of the agreement, failure to, comply with the clauses contained in the
agreement, etc., shall be decided only by courts within India.
(vii) It must be ensured that the collaboration agreement does not infringe upon any
patent rights.
(viii) It is better to have a buy–back arrangement with the technical collaborator. This
is to ensure that the collaborator would be serious about the transfer of correct know-
how and would ensure quality of the output.

6) Product Mix: Customers differ in their needs and preferences. Hence, variations in
size and quality of products are necessary to satisfy the varying needs and preferences
of customers, the production facilities should be planned with an element of
flexibility. Such flexibility in the production facilities will help the organization to
change the product mix as per customer requirements, which is very essential for the
survival and growth of any organization.

For example, a plastic container manufacturing industry can be produced according to

the market requirement. This will give the unit a competitive edge.

7) Selection and Procurement of Plant and machinery

Selection of machinery: The machinery and equipment required for a project depends
upon the production technology proposed to be adopted and the size of the proposed.
Capacity of each machinery is to be decided by making a rough estimate, as under;
thumb rules should be avoided.

i) Take into consideration the output planned.

ii) Arrive at the machine hours required for each type of operation.
iii) Arrive at the machine capacity after giving necessary allowances for machinery
maintenance/breakdown, rest time for workers, set up time for machines, time lost
during change of shifts, etc.
iv) After having arrived at the capacity of the machinery as above, make a survey of
the machinery available in the market with regard to capacity and choose that capacity
which is either equal to or just above the capacity theoretically arrived at.

In case of process industries, the capacity of the machines used in various stages
should be so selected that they are properly balanced.

Procurement of Machinery
Plant and machinery form the backbone of any industry. The quality of output
depends upon the quality of machinery used in processing the raw materials (apart
from the quality of raw material itself). Uninterrupted production is again ensured
only by high quality machines that do not breakdown so often. Hence no compromise
should be made on the quality of the machinery and the project promoter should be on
the lookout for the best brand of machinery available in the market. The performance
of the machinery functioning elsewhere may be studied to have a firsthand
information before deciding upon the machinery supplier.

Plant Layout

The efficiency of a manufacturing operation depends upon the layout of the plant and
machinery. Plant layout is the arrangement of the various production facilities within
the production area. Plant layout should be so arranged that it ensured steady flow
production and minimizes the overall cost.

The following factors should be considered while deciding plant-layout:

i) The layout should be such that future expansion can be done without much
alteration of the existing layout.
ii) The layout should facilitate effective supervision of work.
iii) Equipments causing pollution should be arranged to be located away from other
plant and machinery. For example, generator is a major source of noise pollution.
iv) There should be adequate clearance between adjacent machinery and between the
wall and machinery to enable undertaking of regular inspection and maintenance
work.
v) The plant layout should ensure smooth flow of men and material from on stage to
another.
vi) The plant layout should be one that offers maximum safety to the personnel
working inside the plant.
vii) The plant layout should provide for proper lighting and ventilation.
viii) The plant layout should properly accommodate utilities like power and water
connections and provisions for effluent disposal.

8) Location of Projects: Choosing the location for a new project is to be done taking
many factors into account. The study for plant location is done in two phases. First a
particular region/ territory is chosen that is best suited for the project. Then, within the
chosen region, the particular site is selected. Thus, we may say that there are two
major factors, viz., Regional factors and site factors, to be considered.

i) Regional Factors
a) Raw Materials: Raw materials normally constitute about 50to 60 per cent of the
cost of the final product. Hence, it is important that the cost of the raw material should
be minimum. To procure raw material at minimum cost, the plant must be located
nearer to the place where raw material is available, so that transportation cost will be
reduced and the number of middle men involved in the procurement process also will
be reduced.

b) Proximity to Market: If transportation of the finished product is more difficult (due

to the special nature of the finished product) than transporting the raw material and
also if the cost of transporting the finished product is more as compared to the
transporting the raw material and also if the cost of transporting the finished product is
more as compared to the transportation cost of transporting the finished product is
more as compared to the transportation cost of raw material, it is advantageous to
locate the plant nearer to the consumers, i.e., nearer to the market.

c) Availability of Labor: Though unemployed people are in plenty in our country, this
does not mean that there will be no problem in getting the labor-force required for the
project. Availability of skilled labor is what is the criterion rather than availability of
unemployed who are unemployable. If the project needs skills of general nature,
getting adequate skilled labor will not pose any problem if the plant is located in areas
where skilled labor-force is available. People in different areas develop special skills
in different activities by virtue of the work culture prevailing in their respective areas.

d) Availability of Supporting Industries: If a firm has proposed to get some of the

production operations done from outside, there must be suitable industries existing in
the surrounding areas to undertake such sub-contracting works. This can be seen by
the existence of many ancillary industrial units surrounding major industrial
establishments like BHEL, NTPC, etc.

e) Availability of Infrastructural Facilities: availability of power, water and transport

facilities are the important aspects to be considered for availability of infrastructural
facilities.
ii) Site Factors: After having chosen region that is comparatively more advantageous
for the location of a project. For choosing a particular sit in the chosen region,
considerations like cost of land, suitability of land, availability and suitability of
ground water, facilities for effluent disposal, etc., are to be taken into account.

In general, industrial projects require considerable extent of land. If the unit cost of
land is high, the investment required to be made on land may become prohibitively
high which should be looked into.
a) Choice of Location: Decision on the choice the location for the given project is to
be made after considering the points enumerated above. In view of the number of
factors involved, deciding upon the project location is a complex problem. The
problem is compounded further because of the existence of both tangible and
intangible factors. If there are only tangible factors, the solution to the problem can be
arrived at mathematical means. Arriving at a decision combining the tangible and
intangible factors involve subjective estimate.
b) Choice of Location based on Tangible Factors: When tangible factors alone are
considered, an ideal location is on for which the cost of setting up the project, cost of
procuring raw materials, cost of processing the raw material into finished product and
cost of distributing the finished product to the customers are minimum.

9) Project Scheduling: Scheduling is nothing but the arrangement of activities of the

project in the order of time in which they are to be performed.

The schedule which broadly indicates the logical sequence of events would be as
under:
i) Land acquisition,
ii) Sit development,
iii) Preparing building plants, estimates, designs, getting necessary approvals and
entrusting the construction work to contractors,
iv) Construction of building, machinery foundation and other related civil works and
completion of the same,
v) Placing order for machinery,
vi) Receipt of machinery at site,
vii) Erection of machinery,
viii) Commissioning of plant and taking trial runs,
ix) Commencement of regular commercial production.

Each of the above mentioned activities consume resources, viz., time, money and
effort. The sequence of activities should be so planned as to minimize the resource
consumption.

Financial analysis

The primary objective of any firm is to maximize profits; the financial aspects of a
project idea must be studied carefully. Even if the project is marketable and technically
feasible, it cannot be implemented if it is not financially viable in the medium to long-
term. To assess the financial feasibility of a project idea, the project manager must
examine the capital costs, operating costs and revenues of the proposed project.

Financial analysis is largely an effort to assess financial performance, i.e., how well or
how poorly a firm performed with money entrusted to it. Financial analysis is considered
a part of firm’s accountability. Exactly how financial reporting is done depends in part on
the model selected. In addition, many types of financial reports can be generated but a
considerable amount of attention is given to the quantitative financial statements, which
are one type of report, but usually the major consists of financial, sources, budgeted
estimates and expenditures.

Assumptions in Financial Analysis

Demand and price estimates are derived from the market feasibility study. Project costs
and operating costs are derived from the technical feasibility study. The estimates need to
be supplemented with:

1) Tax implications depending upon the prevailing tax laws, and

2) Financial costs enacting from the financing alternative are considered for the project.
That provides enough information for the calculation of the financial bottom-line of the
project. The financial feasibility check involves a detailed financial analysis.

The financial analysis includes quite a few assumptions, workings and calculations. They
are follows:

i) Projections: Projections are made for prices of products, the cost of various resources
required for manufacturing goods and capacity utilization. Use of the thumb rule or actual
data of some comparable projects are generally included in the estimates.

ii) Period of Estimation: The period of estimation id determined and the value of the
project at the terminal period of estimation is forecast. The period of estimation should be
justified by factors like the product life cycle, business cycle, ability to forecast, period of
debt funds, etc.

iii) Financing: financing alternatives are considered and a tentative choice of financing
mix is made together with assumptions regarding the cost of funds and repayment
schedules.

iv) Basic workings: Basic workings are shown in different statements. Some of the
schedules made for this purpose include:

• An interest and repayment schedule,

• The working capital schedule,

• The working capital loan, interest and repayment schedule,

• The depreciation schedule for income tax purposes,

• The depreciation schedule for the purpose of reporting under Companies Act, 1956 (if
depreciation policy is different than income tax rules).

V) Financial Statements: Some financial statements are prepared in the project feasibility
report. They include:

• Profit and Loss accounts of the company,

• Balance-Sheets of the Company,

• Cash flow statements for the proposed project.

vi) Financial Indicators: Financial indicators are calculated using data derived in various
financial statements. Two basic financial parameters are used for judging the viability of
the project:

• Debt-Service coverage ratio (DSCR): Debt- Service Coverage Ratio (DSCR) uses the
same numerator as the interest cover ratio, but that is compared with the interest payment
and principal sum repayment in a particular year. The formula is DSCR=PAT +
Depreciation + Interest/Interest+ Principal Sum Repayment

Academically and according to many lading financial institutions and average DSCR of
1.5 is considered very well. This is also the safety indicator for lender of money. A
project that generates enough funds during the period of loan taken for the project is
considered good from the business prudence angle.

** Net Present Value Method: The net present value method is a modern method of
evaluating investment proposals. This method takes into consideration the time value of
money and attempts to calculate the return on investments by introducing the factor of
time element. It recognized the fact that a rupee earned today is worth more than the
same rupee earned tomorrow. The net present value of all inflows and outflows of each
occurring during the entire life of the project is determined separately for each year by
discounting these flows by the firm’s cost of capital or pre-determined rate.

Some firms also prefer to calculate:

• Payback Period: The payback period is defined as the number of years required for the
proposal’s cumulative cash inflows to be equal to its cash outflows. In other words , the
payback period is the length of time required to recover the initial cost of the project. The
payback period therefore, can be looked upon as the length of time required for a
proposal to ‘break even’ on its net investment.
• Interest Cover Ratio: The interest cover ratio indicates the safety and timely payment of
interest to lenders of money. It is calculated with the help of the following formula:
Interest cover ratio = PAT + Depreciation + interest/Interest

This shows how many times the operating cash flow before interest is earned against the
interest liability. However, this is not a very important indicator of project viability.

Environmental Analysis

The performance of a project may not only be influenced by the financial factors stated
earlier. Other external environmental factors, which may be economical, social or
cultural. May have a positive as well. The larger projects may be critically evaluated by
lending institutions by taking into consideration the following factors:

1) Employment potential.

2) Utilization of domestically available raw material and other facilities.

3) Development of an industrially backward area as per government policy.

4) Effect of the project on the environment, with particular emphasis on the pollution of
water and air that will be caused by it.

5) The arrangements for effective disposal of effluent, as per government policy.

6) Energy conservation devices, etc., employed for the project.

Meaning and Definition of Environmental Impact Assessment (EIA)

Environmental Impact Assessment (EIA) and the Environmental Impact Statement (EIS)
are said to be the instrument through which the environmental management tries to
accomplish its objective. The basic premise behind the EIS/ EIA is that no one has any
right to use the precious environmental resources resulting in greater loss than gain to
society. From this, it follows that the aim of EIS is to seek ways by which the project can
proceed without any irreparable losses to environment and minimum losses if any, so that
the net effect will be a desirable gain.

Environmental Impact Assessment (EIA is defined as, “An activity designed to identify,
predict, interpret and communicate information about the impact of an action on man’s
health and well-being (including the well-being of ecosystems on which man’s survival
depends). In turn, the action is defined to include any engineering project, legislative
proposal, policy program, or operational procedure with environmental implications.”

An EIA, therefore, is a study of the probable changes in the various socio-economic and
bio-physical attributes of the environment, which result from a proposed action.

On the other hand, Environmental Impact statement (EIS) is defined as: A report, based
on studies, disclosing the likely or certain environmental consequences of a proposed
action, this altering the decision-maker, the public and the government to environmental
risks involved; the finding enable better informed decisions to be made, perhaps to reject
or defer the proposed action or permit it subject to compliance with specific conditions.

The EIS is a document prepared by an expert agency on the environmental impact of a

proposed action/project that significantly affects the quality of environment. The EIS is
used mainly as a tool for decision- making. At times, the EIA and EIS are used
interchangeably as synonyms. But both are difference between the two is that the EIA is
carried-out by the expert agency while the EIS as a tool is given to the decision-makers in
different formats. As a matter of fact, the EIS is the outcome of EIA.

Objectives of EIA

1) To identify and describe (in as quantified manner as possible) the Environmental

Resources/ values (ER/Vs) or the environmental Attributes (EA) which will be affected
by the proposed project, under existing or “with or without project” conditions.
2) To describe, measure and assess the environmental effect that the proposed project will
have on the ER/Vs (again, in as quantified manner as possible), including positive effects
which enhance ER/Vs as well as the negative effects which impair them. Direct or
indirect and short-term or long-term effects are to be considered. This would also include
the description of the specific ways by which the project plan or design will minimize the
adverse effects and maximize positive effects.

3) To describe the alternatives to the proposed project which could accomplish the same
result but with a different set of environmental effects. Energy generation by thermal,
hydel and nuclear would explain the case in point. Further, alternative locations are also
considered.

Guidelines on the Scope and Contents of EIA

The following are the accepted points to be covered in an EIA study / report:

1) A description of the project proposed action; a statement of its purpose and a

description of all relevant technical details to give a complete understanding of the
proposed action, including the kinds of materials, manpower/resources, etc., involved.

2) The relationship of the proposed action to the land-use plans, policies and controls in
the affected area or the project- vicinity. It is necessary to gain a complete understanding
of the affected environment.

3) The probable impacts of the proposed project on environment are a very important
aspect to be considered in details. It is necessary to project the proposed action into the
future and to determine the possible impacts on the environmental attributes. The changes
are to be quantified wherever possible.

4) Alternatives to the proposed action, including those not within the existing authority/
agency.

5) Any probable adverse environmental effect that cannot be avoided and stating how
each avoidable impact will be mitigated.

6) The relationship between local short-term uses of man’s environment and thee
maintenance of and enhancement of long-term productivity.
7) Any irreversible and irretrievable commitments of resources (including natural,
cultural, labor and materials).

8) An indication of what other interests and considerations of government policy or

program are through to off-set the adverse effect identified.

Process of EIA

The EIA process makes sure that environmental issues are raised when a project or plan
is first discussed and that all concerns are addressed as a project gains momentum
through to implementation. Recommendations made by the EIA may necessitate thee re-
design of some project components, require further studies, and suggest changes which
alter the economic viability of the project or cause a delay in project implementation. To
be of most benefit it is essential that an environmental assessment is carried out to
determine significant impacts early in the project cycle so that recommendations can be
built into the design and cost- benefit analysis without causing major delays or increased
design costs. To be effective once implementation has commenced, the EIA should lead
to a mechanism whereby adequate monitoring is undertaken to realize environmental
management. An important output from the EIA process should be thee delineation of
enabling mechanism for such effective management.

The way in which an EIA is carried-out is not rigid: it is a process comprising a series of
steps. These steps are outlined below:

1) Screening,

2) Scoping,

3) Prediction and mitigation,

4) Management and monitoring,

5) Audit,

1) Screening: Screening is the process of deciding on whether an EIA is required. This

may be determined by size (e.g., greater than a predetermined surface area of irrigated
land that would be affected, more than a certain percentage or flow to be diverted or more
than a certain capital expenditure).Alternatively it may be based on site-specific
information. The output from the screening process is often a document called an Initial
Environmental Examination or evaluation (IEE). The main conclusion will be a
classification of the project according to its likely environmental sensitivity. This will
determine whether an EIA is needed and if so to what detail.

2) Scoping: Scoping occurs early in the project cycle at the same time as outline planning
and pre-feasibility studies. Scoping is the process of identifying the key environmental
issues and is perhaps the most important step in an EIA. Scoping is important for two
reasons:

i) So that problems can be pinpointed early allowing mitigating design changes to be

made before expensive detailed work is carried out.

ii) To ensure that detailed prediction work is only carried-out for important issues.

It is not the purpose of an EIA to carry-out exhaustive studies on all environmental

impacts for all projects. If key issues are identified and a full EIA considered necessary
then the scoping should include terms of reference for these further studies.

3) Predictions and Mitigation: Once the scoping exercise is complete and the major
impacts to be studied have been identified, prediction work can start. This stage forms the
central part of an EIA. Several major options are likely to have been proposed either at
the scoping stage or before and each option may require separate prediction studies.
Realistic and affordable mitigating measures cannot be proposed without first estimating
the scope of the impacts, which should be in monetary terms wherever possible. It then
becomes important to quantify the impact of thee suggested improvements by further
prediction work. Clearly, options need to be discarded as soon as their unsuitability can
be proved or alternatives shown to be superior in environmental or economic terms, or
both. It is also important to test the “without project” scenario.

An important outcome of this stage will be recommendations for mitigating measures.

This would be contained in the Environmental Impact Statement. Clearly, the aim will be
to introduce measures which minimize any identified adverse impacts and enhance
positive impacts. Formal and informal communication links are needed to be established
with tams carrying-out feasibility studies so that their work can take proposals into
account.

4) Management and Monitoring: The part of the EIS covering monitoring and
management is often referred to as the Environmental Action Plan or Environmental
management plan. It not only sets-out the mitigation measures needed for environmental
management, both in the short and long-term, but also the institutional requirements for
implementation. The term ‘institutional’ is used here in its broadest context to encompass
relationships:

i) Established by law between individuals and government,

ii) Between individuals and groups involved in economic transactions,

iii) Developed to articulate legal, financial and administrative links among public
agencies,

iv) Motivated by socio-psychological stimuli among groups and individuals.

The purpose of monitoring is to compare predicted and actual impacts, particularly if the
impacts are either very important or the scale of the impact cannot be very accurately
predicted. The results of monitoring can be used to manage the environment, particularly
to highlight problems early so that action can be taken. The range of parameters requiring
monitoring may be broad or narrow and will be dictated by the ‘prediction and
mitigation’ stag of the EIA. Typical areas of concern where monitoring is weak are:
water quality, both inflow and outflow; stress in sensitive ecosystems; soil fertility; water
related health hazards; equity of water distributions; groundwater levels.

5) Auditing: In order to capitalize on the experience and knowledge gained, the last stage
of an EIA is to carry-out an Environmental Audit sometime after completion of the
project or implementation of a program. It will therefore usually be done by a separate
team of specialists to that working on the bulk of the EIA. The audit should include an
analysis of the technical, procedural and decision- making aspects of the EIA.
Technical aspects include:

i) The adequacy of the base-line studies,

ii) The accuracy of predictions and the suitability of mitigation measures.

Procedural aspects include:

i) The efficiency of the procedure,

ii) The fairness of the public involvement measures, and

iii) The degree of coordination of roles and responsibilities.

Decision-making aspects include:

i) The utility of the process for decision–making, and

ii) The implications for developments.

Impact Assessment Methodologies

The impact identification and assessment can be made through several ways. There are
six different methodologies in the literature based on the way the impacts are identified
and assessed.

1) Ad Hoc: These methodologies provide a minimum guidance for impact for impact
assessment. They merely suggest broad areas of possible impacts (e.g., impacts on lakes,
forests, etc.), rather than defining specific parameters to be investigated. This is given
exogenously to the analyst.

2) Overlays: These methodologies depend upon a set of maps on the environmental

characteristics (Physical, social, ecological and aesthetic) of the proposed project’s
vicinity. These maps are overlaid to produce a composite characterization of the proposed
project’s vicinity. These maps are overlaid to produce a composite characterization of the
regional environment. Impacts are then identified by noting thee impacted environmental
attributes within the project boundaries.

3) Checklists: The methodologies present a specific list of environmental attributes to be

investigated for possible impacts. They need not necessarily attempt to establish the
cause-effect links to project activities. They may or may not include guidelines about
how attribute data are to measured and interpreted.

4) Matrices: These methodologies incorporate a list of project activities with a checklist

of potentially impacted environmental attributes. Then the two lists are related in a matrix
form, which identifies the cause-effect relationship between specific activities and
impacts. The matrix methodologies may either specify which actions affect, which
attributes, or may simply list the range of project activities and environmental attributes
in an open matrix to be completed by the analyst.

5) Networks: These methodologies work from a list of project activities to establish

cause- condition-effect relationship. It is generally felt that a series of impacts may be
triggered by a project action. They define a set of possible and allow the user to identify
impacts by selecting and tracing- networks out the appropriate project actions.

6) Combination Computer-Aided: These methodologies use a combination of matrices,

networks, analytical models and a computer-aided systematic approach. Since, this is a
combination of difficult methodologies, it is a multiple-objective approach to:

i) Identify activities associated with the governmental policies and programs,

ii) Identify potential environmental impacts at different levels,

iii) Provide guidance for abatement and mitigation techniques,

iv) Provide, analytical models to establish cause-effect relationships and to quantitatively

determine potential environmental impacts and
v) Provide a methodology and a procedure to utilize this comprehensive information in
decision-making.

Detailed Project Report (DPR)

Contents:

Meaning of Detailed Project Report (DPR)

Objectives of Detailed Project Report (DPR)

Background of Detailed Project Report (DPR)

1. Meaning of Detailed Project Report (DPR):

As the identification and intention for the implementation of the project grow, the depth
of the study for the probable project increases. Further analyses of the details relevant to
such a project become imperative.

We know that the feasibility report contains sufficient detailed information. It is from the
study of the pre-feasibility or feasibility report that approval is made by the project owner
(an individual or a project director/manager or the management of a company) for the
investment on the project or for a request to prepare the DPR.
Preparation of DPR is a costly and time-taking job (which may even extend to one year)
when reports of specialists from different streams like market research, engineering
(civil, mechanical, metallurgical, electrical, electronics), finance etc.—as relevant to the
project itself—are considered in the DPR.

2. Objectives of Detailed Project Report (DPR):

The objectives in preparation of the DPR should ensure that:

(a) the report should be with sufficient details to indicate the possible fate of the project
when implemented.

(b) the report should meet the questions raised during the project appraisals, i.e. the
various types of analyses—be it financial, economic, technical, social etc.—should also
be taken care of in the DPR.

The DPR should be punctilious of all possible details to serve the objectives and should
also reflect, amongst other points, the followings aspects:

a. Technology and Design Aspects of Detailed Project Report (DPR):

Experience suggests that some projects are launched with clear objectives but with
considerable uncertainty as to whether or how they will be technically achievable, not
leading to project overruns. The DPR should deal with minimum technical uncertainties
and the specialists’ findings/report in this area becomes helpful.

Innovative designs are found to be tougher than even the technical uncertainties—
designs, as such, may appear innocuous and less costly but later, in reality, may be found
completely different. Hence the DPR should deal with Technology and Design which
have already been tested, thus minimising the technical risk.
Before going to overseas technical collaborator the repertoire of established technology
available within the country should be explored. It would be both cheaper and
nationalistic!

Economic Aspects:

The DPR should emphasize the economic aspects of the project, which include:

1. the location of the plant, the benefit for such location including the available
infrastructure facilities;

2. the volume of the project, the capacity installed;

3. the availability of the resources and the utilisation of such resources in a comparatively
beneficial manner, e.g. the ‘internal rate of return’ projected as compared to the possible
rate of return on investment from the market without inherent risks.

Social and Political Aspects:

Public attitude towards a project is becoming increasingly important—the displacement

of people (Joint venture project for a major port at Gopalpur, TISCO’s expansion project
at Gopalpur) and the concerned public attitude towards, the implementation of such a
project can be very serious.

The environmental pollution, the ecological balance (or imbalance?), the potential
employment all are of important considerations in the DPR.

The importance of ‘politics’ in a major project cannot be ignored—where the political

considerations dominate. The ideal condition is that the project owners/management
should be left to manage while the government should provide the necessary conditions
to make it a success.

But, in reality, the assurance/commitments are often politically motivated even before the
finalisation of the DPR. Accordingly, the DPR should recognise this risky game.

Financial Aspects:

The prime importance of a project is the assurance of the timely availability of funds/
resources. The availability of funds is to be ensured throughout, i.e. during the
implementation period as well as during the second part of the project when it is
supposed to start generating income/benefit.

Whether such generation of income/benefit will be sufficient for the servicing of the
borrowed funds to pay interest and also the repayment of principal as also the expected
income from the owner’s capital invested in the project; whether such return on
investment is adequate and, also, in excess of other possible incomes from such funds
without taking the risk—these are the valid questions to be answered by the DPR.

The report also provides the ‘Break-even point’ level of workings.

3. Background of Detailed Project Report (DPR):

When the project is found definitely feasible, the DPR should stand with a background
dealing with the recommendation for the project, as supported by the forecasted details
for the coming years when the project is put into operation.

The background should also include details of the product, sizes with capacity,
organisation and the technical know-how involved:

1. Project at a glance,

2. Market Report,
3. Technical details with the process involved and the plant layout,

4. Plant and Machinery and other equipment as required for the project,

5. Project Schedule and

6. Organisation.

Total strength of personnel with their grades and the required training:

1. Financial details of project costs, source of financing,

2. Cost of Production,

3. Projected Profit and Loss Account,

4. Projected Balance Sheet,

5. Fund Flow Statement,

6. Interest and Commitment Charges,

7. Working Capital Requirements and

8. Debt Service Coverage.

9. Break-even analysis:

As an illustration of a Detailed Project Report we would like to produce a DPR in a

summarised form. The contents of this DPR is partly quoted from an actual report and is
partly descriptive in nature indicating, in a summarised form, what should be the contents
as under the relevant headings.

The product names, the amounts in quality and value are for illustration only with the
idea to describe a model DPR. Some points are narrated by way of description within
brackets, instead of the actual contents of the report. All descriptions and figures are for
illustration of a DPR.
Detailed Project Report: Meaning and its contents

Meaning of detailed project report

After the planning and the designing part of a project are completed, a detailed project
report is prepared. A detailed project report is a very extensive and elaborative outline of
a project, which includes essential information such as the resources and tasks to be
carried out in order to make the project turn into a success. It can also be said that it is the
final blueprint of a project after which the implementation and operational process can
occur. In this comprehensive project report, the roles and responsibilities are highlighted
along with the safety measures if any issue arises while carrying out the plan.

The following points play an essential role in deciding whether a project turns into
success:

• Completion of the project within the stipulated period

• Priority to client satisfaction by delivering quality product after the completion of
the project
• Completion of the project within the set limits of escalation of cost

The blueprint design's focus has to be to convert the corporate investment into a project
idea that gives good monetary returns. A detailed project report depicts a practical
viewpoint for the implementation of the project. The requirements and risks should also
be highlighted in a detailed manner to prevent any troubles that can delay or halt the
execution of the project. Hence effective measures must also be stated so that the
execution of the project can be carried out hassle-free.

Contents of a detailed project report

A detailed project report must include the following information:

• Brief information about the project

• Experience and skills of the people involved in the promotion of the project
• Details and practical results of the industrial concerns of the promoters of the
project
• Project finance and sources of financing
• Government approvals
 • Raw material requirement
• Details of the requisite securities to be given to various financial organizations
• Other important details of the proffered project idea include information about
management teams for the project, details about the building, plant, machinery,
etc.

A detailed project report is extremely important in order to turn the idea of your project
into a reality. A DPR acts as a ladder towards success to make your project reach great
heights. If the project report is prepared by putting a tremendous amount of effort into
details, you will surely get good results later.

• Managing the budget - Managing the budget or expenditure is not an easy task,
especially when you have to look at so many aspects of your project. Hence a DPR
comes to your rescue and helps your plan and manage your budget in such a
manner that you do not go over your set budget.
• Minimizing risks - Sometimes, despite giving great attention to details, risks, and
issues arise during the implementation of the project. Hence it is crucial to identify
and reduce these risks as much as possible so that the project is implemented
without any hassles. It is reporting the risks to the project manager before the
implementation that makes room for improvement.
• Project progress follow up - One of the most important aspects of a detailed
project report is to have a control on the project progress. Accordingly, one can
keep track of the schedule of the project and eliminate the problems, if any.
• Holdover the project - Project reporting maintains hold of the higher authority,
such as managers, over the project so that they can keep a check on progress and
eliminate factors that cause a halt in the progress of the project. The performance
of the team members and their quality of work is also checked.

A detailed project report has innumerable benefits in order to drive a project towards the
path of success. Hence it is vital to get a DPR prepared from an experienced person/firm
that holds relevant experience and skill set to leave no stone unturned. It is also important
that the person who is a part of the team for the project has relevant expertise in the field
so as to take up the task of handling the project. Putting the DPR's preparation task into
the hands of an inexperienced person can also cause you to lose a lot of money, so choose
wisely.