Unit 1: Project Management Concepts 10 Hours

Concept of a project, categories of projects, Project life cycle phases, Generation and screening of
project ideas, demand analysis, Technical analysis, Economic analysis, formulation of detailed project
reports, importance of project management, types of project, project organizational structure
Statement of Work, Work Breakdown Structure.

(This notes is just to substantiate the classroom discussions. Students are advised to refer multiple
books and correlate the contextual examples discussed in the class. Pay more attention on the
application of the concepts)

Concept of a project
In contemporary business and science, a project is an individual or collaborative enterprise, possibly
involving research or design, that is carefully planned, usually by a project team, to achieve a particular
aim.

A project may also be a set of interrelated tasks to be executed over a fixed period and within certain
cost and other limitations.

It may be a temporary (rather than permanent) social systems as work systems that is constituted by
teams within or across organizations to accomplish particular tasks under time constraints. A project
may be a part of a wider programme management.

In project management a project consists of a temporary endeavor undertaken to create a unique

product, service or result. Another definition is: a management environment that is created for the
purpose of delivering one or more business products according to a specified business case. Projects can
also be seen as temporary organization.

Project objectives define target status at the end of the project, reaching of which is considered
necessary for the achievement of planned benefits. They can be formulated as SMART criteria:
 Specific
 Measurable (or at least evaluable) achievement
 Achievable (recently Agreed to or Acceptable are used[by whom?] regularly as well)
 Realistic (given the current state of organizational resources)
 Time terminated (bounded)

Categories of projects
Projects can be classified in several ways. Some of the classifications involve Mutually exclusive projects,
Independent projects, On-shore projects and Off-shore projects. Other classifications are as follows.

1. Civil Engineering, Construction, Petrochemical, Mining, and Quarrying

Projects in this category are those which spring to mind most readily whenever industrial projects are
mentioned. Once common feature is that the fulfilment phase must be conducted on a site that is
exposed to the elements, and usually remote from the contractor's main office.

These projects incur special risks and problems of organisation. They often require massive capital
investment, and they deserve (but do not always get) rigorous management of progress, finance, and
quality.

For very large industrial projects the funding and resources needed are often too great for one
contractor to risk or even find. The organisation and communications are therefore likely to be
complicated by the participation of many different specialists and contractors, with the main players
possibly acting together as a consortium or joint venture company.

2. Manufacturing Projects
Manufacturing projects aim to produce a piece of equipment or machinery, ship, aircraft, land vehicle or
some other item of specially designed hardware. The finished product might be purpose-built for a
single customer, or the project could be generated and funded from within a company for the design
and development of a new product intended for subsequent manufacture and sale in quantity.

Manufacturing projects are usually conducted in a factory or other home-based environment, where the
company should be able to exercise on-the-spot management and provide an optimum environment.

Of course, these ideal conditions do not always apply. Some manufacturing projects can involve work
away from the home base, for example in installation, commissioning and start-up, initial customer
training and subsequent service and maintenance. More difficult is the case of a complex product (such
as an aircraft) that is developed and manufactured by a consortium of companies, very possibly
overlapping international borders, with all the consequent problems of risk, contractual difficulties,
communication, coordination, and control.

3. Management Projects
This class of projects proves the point that every company, whatever its size, can expect to need project
management expertise at least once in its lifetime. These are the projects that arise when companies
relocate their headquarters, develop and introduce a new computer system, launch a marketing
campaign, prepare for a trade exhibition, produce feasibility or other study report, restructure the
organisation, mount a stage show, or generally engage in any operation that involves the management
and co-ordination of activities to produce an end result that is not identifiable principally as an item of
hardware or construction.

Although management projects might not result in a visible, tangible creation, much often depends on
their successful outcome. There are well-known cases, for instance, where failure to implement a new
computer system correctly has caused serious operational breakdown and has exposed the managers
responsible to public discredit. Effective project management is at least as important for these projects
as it is for the largest construction or manufacturing project.

Project life cycle phases

The project manager and project team have one shared goal: to carry out the work of the project for the
purpose of meeting the project’s objectives. Every project has a beginning, a middle period during which
activities move the project toward completion, and an ending (either successful or unsuccessful). A
standard project typically has the following four major phases (each with its own agenda of tasks and
issues): initiation, planning, implementation, and closure. Taken together, these phases represent the
path a project takes from the beginning to its end and are generally referred to as the project “life
cycle.”

1) Initiation Phase
During the first of these phases, the initiation phase, the project objective or need is identified; this can
be a business problem or opportunity. An appropriate response to the need is documented in a business
case with recommended solution options. A feasibility study is conducted to investigate whether each
option addresses the project objective and a final recommended solution is determined. Issues of
feasibility (“can we do the project?”) and justification (“should we do the project?”) are addressed.

Once the recommended solution is approved, a project is initiated to deliver the approved solution and
a project manager is appointed. The major deliverables and the participating work groups are identified,
and the project team begins to take shape. Approval is then sought by the project manager to move
onto the detailed planning phase.

2) Planning Phase
The next phase, the planning phase, is where the project solution is further developed in as much detail
as possible and the steps necessary to meet the project’s objective are planned. In this step, the team
identifies all of the work to be done. The project’s tasks and resource requirements are identified, along
with the strategy for producing them. This is also referred to as “scope management.” A project plan is
created outlining the activities, tasks, dependencies, and timeframes. The project manager coordinates
the preparation of a project budget by providing cost estimates for the labor, equipment, and materials
costs. The budget is used to monitor and control cost expenditures during project implementation.

Once the project team has identified the work, prepared the schedule, and estimated the costs, the
three fundamental components of the planning process are complete. This is an excellent time to
identify and try to deal with anything that might pose a threat to the successful completion of the
project. This is called risk management. In risk management, “high-threat” potential problems are
identified along with the action that is to be taken on each high-threat potential problem, either to
reduce the probability that the problem will occur or to reduce the impact on the project if it does
occur. This is also a good time to identify all project stakeholders and establish a communication plan
describing the information needed and the delivery method to be used to keep the stakeholders
informed.

Finally, you will want to document a quality plan, providing quality targets, assurance, and control
measures, along with an acceptance plan, listing the criteria to be met to gain customer acceptance. At
this point, the project would have been planned in detail and is ready to be executed.

3) Implementation (Execution) Phase

During the third phase, the implementation phase, the project plan is put into motion and the work of
the project is performed. It is important to maintain control and communicate as needed during
implementation. Progress is continuously monitored and appropriate adjustments are made and
recorded as variances from the original plan. In any project, a project manager spends most of the time
in this step. During project implementation, people are carrying out the tasks, and progress information
is being reported through regular team meetings. The project manager uses this information to maintain
control over the direction of the project by comparing the progress reports with the project plan to
measure the performance of the project activities and take corrective action as needed. The first course
of action should always be to bring the project back on course (i.e., to return it to the original plan). If
that cannot happen, the team should record variations from the original plan and record and publish
modifications to the plan. Throughout this step, project sponsors and other key stakeholders should be
kept informed of the project’s status according to the agreed-on frequency and format of
communication. The plan should be updated and published on a regular basis.

Status reports should always emphasize the anticipated end point in terms of cost, schedule, and quality
of deliverables. Each project deliverable produced should be reviewed for quality and measured against
the acceptance criteria. Once all of the deliverables have been produced and the customer has accepted
the final solution, the project is ready for closure.

4) Project monitoring and Control

Monitoring and control are sometimes combined with execution because they often occur at the same
time. As teams execute their project plan, they must constantly monitor their own progress. To
guarantee delivery of what was promised, teams must monitor tasks to prevent scope creep, calculate
key performance indicators and track variations from allotted cost and time. This constant vigilance
helps keep the project moving ahead smoothly

5) Closing Phase
During the final closure, or completion phase, the emphasis is on releasing the final deliverables to the
customer, handing over project documentation to the business, terminating supplier contracts, releasing
project resources, and communicating the closure of the project to all stakeholders. The last remaining
step is to conduct lessons-learned studies to examine what went well and what didn’t. Through this type
of analysis, the wisdom of experience is transferred back to the project organization, which will help
future project teams.
Generation and screening of project ideas
Generation and screening of a project idea begins when someone with specialized knowledge or
expertise or some other competence feels that he can offer a product or service.

Which can cater to a presently unmet need and demand

To serve a market where demand exceeds supply.
Which can effectively compete with similar products or services due to its better quality/price etc.
An Organization has to identify investment opportunities which are feasible and promising before taking
a full fledged project analysis to know which projects merit further examination and appraisal.

Tasks involved in Generation and Screening of a project idea

A

1) Generation of Ideas
A panel is formed for the purpose of identifying investment opportunities. It involves the
following tasks which must be carried out in order to come up with a creative idea-
a) SWOT analysis- identifying opportunities that can be profitably exploited.
b) Determination of objectives – Setting up operational objectives like cost reduction,
productivity improvement, increase in capacity utilization, improvement in contribution
margin.
c) Creating good envioronment – A good organizational atmosphere motivates employees to
be more crative and encourages techniques like brainstorming, group discussion etc. which
results in development of creative and innovative ideas.

Looking for project ideas

Various Sources to look for good project ideas include

Preliminary Screening
It refers to elimination of project ideas which are not promising. The factors to be considered while
screening for ideas are
 a. Compatibility with the promoter – The idea must be consistent with the interest, personality
and resources of entrepreneur or manager.
b. Consistency with government priorities – The idea must be feasible with national goals and
government regulations.
c. Availability of inputs – Availability of power, raw material, capital requirements, technology
d. Adequacy of market – Growth in market, prospect of adequate sale, reasonable return on
investment.
e. Reasonableness of cost – The project must be able to make reasonable profits with respect to
the costs involved.
f. Acceptability of risk level – The desirability of the project also depends upon risks involved in
executing it. In order to access risk the following factors must be considered
-Project’s vulnerability to business cycles
-Change technology
-Competition from substitutes
-Government’s control over price and distribution
-Competition from imports.

Demand analysis

Market and demand analysis are carried out by the project manager in the process of evaluating a
project idea. There are six steps in the market and demand analysis: situational analysis and objectives
specification, collection of data, market survey, market description, demand forecasting and market
planning. The market and demand analysis helps the project manager to understand how the firm’s
abilities can be synchronized with market requirements. Market analysis studies market needs and
consumer preferences for a given project idea and demand analysis aims at calculating the aggregated
demand for a particular product or service.

Technical analysis
Economic analysis
Project economic analysis aims to ensure that scarce resources are allocated efficiently, and investment
brings benefits to a country and raises the welfare of its citizens.

Objectives of the Economic Analysis

Good management consists primarily of making wise decisions; wise decisions in turn involve making a
choice between alternatives. Engineering considerations determine the possibility of a project being
carried out and point out the alternative ways in which the project could be handled. Economic
considerations also largely determine a project's desirability and dictate how it should be carried out. A
feasibility study determines either the which or the whether of the proposed project: which way to do it,
or whether do it at all.

In an engineering sense, feasibility means that the project being considered is technically possible.
Economic feasibility, in addition to acknowledging the technical possibility of a project, further implies
that it can be justified on an economic basis as well. Economic feasibility measures the overall
desirability of the project in financial terms and indicates the superiority of a single approach over
others that may be equally feasible in a technical sense.
In the study, the project is considered in an engineering sense. The ultimate objective of the economic
analysis is to provide a decision-making tool which can be used not only for the pilot project but also for
demonstration purposes.

Procedure for Economic Analysis

Most engineers can recall the "scientific method", which involves five distinct phases: observation,
problem definition, formulation of hypothesis, experimentation, and verification. A similar sequence of
ten clearly defined steps is involved in carrying out the economic analysis of a project:

a. Understand the problem.

b. Define the energy integrated system.
c. Collect the data
d. Interpret the data.
e. Devise the alternatives.
f. Evaluate the alternatives.
g. Identify the best alternative
h. Suggest the best alternative to the director of the project and get the feedback information.
i. Monitor the results.
j. Determine that the energy integrated system could be disseminated, including where, and under what
conditions.

Formulation of detailed project reports

Detailed project report:
Preparation of detailed project report is further step in firming up the proposal. When an investment
proposal has been approved on the basis functional report and the proposal is a major proposal, it
would be necessary to detailed project report to firm up the proposal for the capital cost as well as the
various facilities. It includes...

 Examination of technological parameters.

 Description of the technology to be used.
 Broad technical specification.
 Evaluation of the existing resources.
 Schedule plan.
 General layout.
 Volume of work.

Hence these reports are to be made before investment is made into project. Thus formulation of
investment is based on the studies is made. These can be considered as pre-investment decision.
Detailed project report is prepared only for the investment decision-making approval, but also execution
of the project and also preparation of the plan. Detailed project report additionally includes that is
contents in addition to Feasibility study reports are.

 Project description.
  Planning and implementation of the project.
 Specifications.
 Layouts and flow diagrams.

Detailed project report is a complete document for investment decision-making, approval, planning
whereas feasibility study report is a base document for investment decision-making. Detailed project
report is base document for planning the project and implementing the project.

Importance of project management

It's often the same stakeholders who believe that project management is easy who question its
importance.
The idea that project management is needless overhead is surprisingly common. This idea is most
prominent in small organizations and organizations that are new to project management.
Stakeholders who are accustomed to cowboy approaches to project management are often resistant to
a comprehensive methodology.
Stakeholders may see project management as bureaucratic nonsense. In other words, that project
management is paperwork that gets in the way of getting things done.
Often the best way to sell the value of project management is with a back-to-basics look at its
importance.
Project management is important for several reasons:

1. Organizing Chaos
Projects are naturally chaotic. The primary business function of project management is organizing &
planning projects to tame this chaos.
It's hard to think of any complex business endeavor that was ever achieved without organization &
planning.
Project management is the organization, planning and control of projects.

2. Managing Risk
Any good project has plenty of risk. After all, the nature of business is taking risks.
Risk is a fundamental part of business strategy. However, risk needs to be managed.
Risk is that chance of a negative event or loss. Uncontrolled risk taking ends in asset destruction and
compliance issues.
Project management identifies, manages and controls risk.

3. Managing Quality
Quality is the value of what you produce. There's not much sense producing something that has no
value.
Leaving quality to chance is analogous to producing something of random value.
Project management identifies, manages and controls quality.
4. Managing Integration
Projects don't happen in a vacuum. They need to be integrated with business processes, systems and
organizations.
You can't build a sales system that doesn't integrate with your sales process and sales organization. It
wouldn't add much value. Integration is often key to project value.
Project management identifies and manages integration.

5. Managing Change
Projects always happen in an environment in which nothing is constant except change. Projects are
always a moving target.
Managing change is a complex and daunting task. It's not optional. Unless you can put your business
universe on pause, change happens whether you manage it or not.
Project management manages change.

6. Clearing Issues
Business initiatives typically encounter regular issues that must be managed to achieve objectives.
Project management plays a critical role in identifying and clearing issues.

7. Retaining and Using Knowledge

Projects generate knowledge — or at least they should.
Knowledge represents a significant asset for most businesses. Left unmanaged, knowledge tends to
quickly fade.
Project management ensures that project knowledge is captured and managed.

8. Learning From Failure

Projects fail. When they do, it's important to learn from the process. Learning from failure is key to
business innovation and quality improvement.
Project management ensures that lessons are learned from project success and failure.

Project organizational structure

A project organization is a structure that facilitates the coordination and implementation of project
activities. Its main reason is to create an environment that fosters interactions among the team
members with a minimum amount of disruptions, overlaps and conflict. One of the important decisions
of project management is the form of organizational structure that will be used for the project.

Each project has its unique characteristics and the design of an organizational structure should consider
the organizational environment, the project characteristics in which it will operate, and the level of
authority the project manager is given. A project structure can take on various forms with each form
having its own advantages and disadvantages.

One of the main objectives of the structure is to reduce uncertainty and confusion that typically occurs
at the project initiation phase. The structure defines the relationships among members of the project
management and the relationships with the external environment. The structure defines the authority
by means of a graphical illustration called an organization chart.

A properly designed project organization chart is essential to project success. An organization chart
shows where each person is placed in the project structure. An organization chart is drawn in pyramid
form where individuals located closer to the top of the pyramid have more authority and responsibility
than members located toward the bottom. It is the relative locations of the individuals on the
organization chart that specifies the working relationships, and the lines connecting the boxes designate
formal supervision and lines of communication between the individuals.

Statement of Work

One of the major sources of cost overruns and failed service projects is the failure of sales and
marketing to obtain a detailed Statement of Work (SOW) at the outset of the project. Research suggests
that the three main causes of failed projects are lack of user input and incomplete requirements and
specifications or changing requirements and specifications. A detailed SOW is the best way to address all
three problems. Sales and marketing may have to be educated to recognize the importance of using a
detailed SOW. This article explains what a SOW is and why it is important, outlines its key elements, and
discusses when it should be developed, who should develop it, and how it can bring improved
profitability and client satisfaction to a company.

Standardized checklist of SOW information categories:

 Scope of work – A detailed description of the work, the software and hardware to be used, and
the exact nature of the work.
 Location of the work – Where the location of the work to be done would be other than a
standard location. This would be applicable to an SOW for work to be performed off-shore.
 Period of performance – The start and finish date for the project, maximum billable hours per
time period, etc.
 Deliverables schedule – Due dates for the deliverables of the project. This would include
completion dates for development, QA testing, User Acceptance Testing, etc.
 Applicable standards – Industry standards or other standards imposed on the project
deliverables. These should include any standards such as ISO, CMM, CMMI, etc.
 Acceptance Criteria – These would include any quality standards that must be met, for example
zero priority 1 defects. They should also include any other conditions that must be met such as
number of test cases, number of test cases executed, etc.
 Specialized Requirements – These will include any special qualifications for the work force, such
as a PMP certified Project Manager.

Work Breakdown Structure.

A work-breakdown structure (WBS), also referred to as "contract work-breakdown structure" or
"CWBS", in project management and systems engineering, is a deliverable-oriented breakdown of a
project into smaller components. A work breakdown structure is a key project deliverable that organizes
the team's work into manageable sections. The Project Management Body of Knowledge defines the
work-breakdown structure as a "A hierarchical decomposition of the total scope of work to be carried
out by the project team to accomplish the project objectives and create the required deliverables."

A work-breakdown structure element may be a product, data, service, or any combination thereof. A
WBS also provides the necessary framework for detailed cost estimating and control along with
providing guidance for schedule development and control.

Misconceptions
 A WBS is not an exhaustive list of work. It is instead a comprehensive classification of project
scope.
 A WBS is neither a project plan, a schedule, nor a chronological listing. It specifies what will be
done, not how or when.
 A WBS is not an organizational hierarchy, although it may be used when assigning
responsibilities.

WBS is a hierarchical and incremental decomposition of the project into phases, deliverables and work
packages. It is a tree structure, which shows a subdivision of effort required to achieve an objective; for
example a program, project, and contract. In a project or contract, the WBS is developed by starting
with the end objective and successively subdividing it into manageable components in terms of size,
duration, and responsibility (e.g., systems, subsystems, components, tasks, subtasks, and work
packages) which include all steps necessary to achieve the objective.

Example of work breakdown structure applied in a NASA reporting structure.

The work-breakdown structure provides a common framework for the natural development of the
overall planning and control of a contract and is the basis for dividing work into definable increments
from which the statement of work can be developed and technical, schedule, cost, and labor hour
reporting can be established.

A work breakdown structure permits summing of subordinate costs for tasks, materials, etc., into their
successively higher level "parent" tasks, materials, etc. For each element of the work breakdown
structure, a description of the task to be performed is generated. This technique (sometimes called a
system breakdown structure) is used to define and organize the total scope of a project.

The WBS is organized around the primary products of the project (or planned outcomes) instead of the
work needed to produce the products (planned actions). Since the planned outcomes are the desired
ends of the project, they form a relatively stable set of categories in which the costs of the planned
actions needed to achieve them can be collected. A well-designed WBS makes it easy to assign each
project activity to one and only one terminal element of the WBS. In addition to its function in cost
accounting, the WBS also helps map requirements from one level of system specification to another, for
example a requirements cross reference matrix mapping functional requirements to high level or low
level design documents. The WBS may be displayed horizontally in outline form, or vertically as a tree
structure (like an organization chart).

The development of the WBS normally occurs at the start of a project and precedes detailed project and
task planning.