PROJECT MANAGEMENT SKILLS UNIT-3

3.1 Introduction

Every project has a beginning, a middle period (during which activities move the
project toward completion) and an ending (either successful or unsuccessful). These
different phase of development in a project is called project life cycle. A clear
understanding of these phases helps entrepreneurs and project managers to have
better control over existing resources to achieve the desired goals.

3.2 Phases of Project Life Cycle

Project life cycle is a complex process consisting of different steps arranged in a
sequential order. By definition, a project has a beginning and an end and passes
through several phases of development known as life cycle phases.
The number of phases and sequence of the cycle are determined by the
management and various other factors like, needs of the organization involved in the
project, the nature of the project, and its area of application. The phases have a
definite start, end, and control point and are constrained by time. The project lifecycle
can be defined and modified as per the needs of the organization. The lifecycle
provides the basic foundation of the actions that has to be performed in the project,
irrespective of the specific work involved.
Definition: A project life cycle is the series of phases that a project passes through
from its start to its completion.

General Project Life Cycle:

1. Starting of the project - The Initiation Phase.
2. Organizing and Preparing - The Planning Phase.
3. Carrying out the project - The Execution Phase.
4. Closing the project - The Termination Phase.

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Project Management Skills UNIT-3: Project Life Cycle

1. Starting of the project: (The Initiation Phase)

In this phase the project objectives are defined and the conceptual aspects of
the project are agreed. In this phase a problem is identified and potential solutions
suggested. The project manager takes the given information and creates a Project
Charter. A project charter is a short document that explains the project in clear, concise
wording for high level management. The Project Charter includes information such as:
1. Project’s purpose, vision, and mission
2. Measurable objectives and success criteria
3. Elaborated project description, conditions, and risks
4. Name and authority of the project sponsor
5. Concerned stakeholders like project managers, investors, company owners etc.

2. Organizing and Preparing: (The Planning Phase)

The purpose of planning phase is to lay down a detailed strategy of how the
project has to be performed and how to make it a success. 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.

This phase is where the project is broken down into manageable areas of work
and planned in terms of time, cost and resources. This is a continuous process and will
extend throughout the execution phase of the project.

3. Carrying out the project: (The Execution Phase)

In the execution phase, the decisions and activities defined during the planning
phase are implemented. During this phase, the project manager has to supervise the
project and prevent any errors from taking place. This process is also termed as

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Project Management Skills UNIT-3: Project Life Cycle

monitoring and controlling. After satisfaction from the customer, sponsor, and
stakeholder’s end, he takes the process to the next step.

4. Closing the project: (The Termination Phase)

The Termination Phase: This is the last phase of any project, and it marks the
official closure of the project. The project is handed over to the customer and the post-
project review is carried out.

3.3 Project Management Life Cycle — General

The project management life cycle describes high-level processes for delivering
a successful project. A project management life cycle as defined in the PMBOK (Project
Management Body of Knowledge) by Project Management Institute (PMI) consists of
5 phases:

1. Project Initiation
2. Project Planning
3. Project Execution
4. Project Monitoring and control
5. Project Closure

1. Project Initiation: (Defining what needs to be done)

In this phase the initial work necessary to create and authorize the project are
defined.

Key project management steps for initiating a project:

1. Make a Project Charter – What is the vision, objective, and goals of this project?
2. Identify the High-level Scope and Deliverables – What is the product or service
that needs to be provided?

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3. Conduct a Feasibility Study – What is the primary problem and its possible
solutions?
4. Estimate the overall Cost and create a Business Case – What are the costs and
benefits of the solution?
5. Identify Stakeholders – Who are the people this project affects, how, and what
are their needs?

2. Project Planning: (Defining how to do, what needs to be done)

It involves creating the planning documents to guide the team throughout the
project delivery.

Key project management steps for planning a project:

1. Create a Project Plan – Identify the phases, activities, constraints and schedule
and create a project timeline with a Work Breakdown Schedule and Gantt chart.
2. Create a Financial Plan – Create a project budget and cost estimate and a plan
to meet the maximum cost, complete with allocations across resources and
departments.
3. Create a Resource Plan – Build a great team, recruit and schedule the resources
and materials needed to deliver the project.
4. Create a Quality Plan – Set project quality targets and measures.
5. Create a Risk Plan – Identify the possible risks, assumptions, issues and
dependencies, assign an owner, and develop a mitigation plan for how to
avoid/overcome them.
6. Create an Acceptance Plan – Assign criteria for what constitutes ‘done’ and
‘delivered’.
7. Create a Communication Plan – List your stakeholders, and plan the frequency
of communication between stakeholders.
8. Create a Procurement Plan – Find any 3rd party suppliers required and agree
terms.

3. Project Execution: (Making a project happen)

In the execution phase project plan is executed and planning gets turned into
action. The project manager directs and manages project work, and the project team
carries out the work. The project deliverables are produced and delivered.

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Key project management steps for executing a project:

1. Team Leadership – Set a vision for success and enable the team to deliver on it.
2. Creating Tasks – Clearly define what needs to be done and the criteria for the
task.
3. Task Briefing – Ensuring the team is clear about what they need to do, by when.
4. Client Management – Working with the client to ensure deliverables are
acceptable.
5. Communications – Ensure you are informing and updating the right people at
the right time through the right channel.

4. Project Monitoring and control: (Keeping a project on track)

In this phase, the monitoring of the project life is done to ensure the project is
going according to plan, and if it isn’t, controlling it by working out solutions to get it
back on track. In reality, a project manager is monitoring and controlling a project in
some way throughout the phases.

Key project management steps for monitoring and controlling a project:

1. Cost & Time Management – Review timesheets and expenses to record, control
and track against the project’s budget, timeline and tasks.
2. Quality Management – Reviewing deliverables and ensuring they meet the
defined acceptance criteria.
3. Risk Management – Monitor, control, manage and reduce potential risks and
issues.
4. Acceptance Management – Conduct user acceptance testing and create a
reviewing system, ensuring that all deliverables meet the needs of the client.
5. Change Management – When the project doesn’t go as per the plan, managing
the process of acceptable changes with the client to ensure they’re happy with
necessary changes.

5. Project Closure: (Ending a project)

Project closure is the last phase of the project life cycle, which formally closes
the project and reports the overall achievements of the project in terms of defined
performance measures.

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Project Management Skills UNIT-3: Project Life Cycle

Key project management steps for closing a project:

1. Project Performance Analysis – This is an overall look at how well the project
was managed.
2. Team Analysis – Did everyone do, what they were assigned to do?
3. Project Closure – Document the tasks needed to bring the project life to an
official end.
4. Post-Implementation Review – Write down a formal analysis of successes and
failure, and resulting lessons learned and suggestions for the future.

3.7 Project Risks

Definition of Risk:
Risk is defined as the possibility of an outcome being different from the
expected outcome.
It refers to the possibility of adverse results flowing from the uncertainty
involved in carrying out the activities.

Project Risks:
The element of risk is inherent in every activity of a project. All projects are
exposed to various types of risks like technical risks, economic risks, social risks,
production risks, financial risks and human risks.
Since all risks cannot be eliminated or avoided, it is the job of the project
manager to ensure that risks do not have adverse consequences. Every project
manager follows a specialised risk management methodology that normally consists
of four processes: risk identification, risk quantification, risk response and risk control.

3.8 Types of Risks:

Risks can be classified as technical risks, social risks, economic risks, political
risks, production risks, marketing risks, financial risks and human risks.

Figure below shows the types of risks in a project.

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Project Management Skills UNIT-3: Project Life Cycle

1.Technical Risks:
Technical risks refer to changes in technical specifications of the product results in loss.
2. Social Risks:
Social risks refer to risks arising from changes in the needs and preferences of
customers. Lack of necessary natural resources, labour unrest, agitations and social
movements against the project also constitute social risks.
3. Economic Risks:
Economic risks refer to an increase in the rate of inflation, changes in the economic
policies of governments.

4. Political Risks:
Nationalisation or privatisation of a particular industry, political instability, and trade
restriction are some examples of political risks. The project manager should ensure
that the project does not go against the political interests of the country.
5. Production Risks:
Production risks refer to the shortage of necessary raw materials, sudden breakdown
of key machinery and huge rise in installation and maintenance costs.
6. Marketing Risks:
Marketing risks refer to failure of the developed product or service in the market due
to changes in market demand, errors in forecasting of demand, or difficulties in
distribution.

7. Financial Risks:
Financial risks refer to bad debts, change in the interest rate, wrong choice of
investments and mistakes in the accounting procedures.
8. Human Risks:
Human risks refer to the sudden demise of key employee, limited availability of skilled
employees, inter-group politics, etc.
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Project Management Skills UNIT-3: Project Life Cycle

Project risk management:

Project risk management is the process of identifying, analysing and responding
to any risk that arises over the life cycle of a project. This is to help the project remain
on track and meet its goal.

3.9 Risk Assessment Techniques with Illustrations

There are two Risk Assessment Techniques. They are,

1. Severity x frequency x number people affected.

“Rodney Turner” suggests a method for prioritising risk which assesses the loss
severity of a risk with the frequency at which it could occur and the number of persons
who could be affected.

The result is the Risk Potential which can be used to prioritise risks and guide decisions
on mitigating actions and contingency plans.

2. The Risk Assessment Matrix:

“Cooke” and “Williams” describe a simpler risk assessment calculation: Severity

× Likelihood. Both severity and likelihood can be rated on a scale of 1 to 3 giving a
priority.
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Project Management Skills UNIT-3: Project Life Cycle

Risk Analysis:

(a) Sensitivity Analysis:

Sensitivity Analysis is a method that measures how the impact of uncertainties
of one or more input variables can affect the output. This analysis improves the
prediction of the model, by improving the response of model to change in input
variables. In sensitivity analysis, typically one variable is changed at a time.

(b) Scenario Analysis:

Scenario analysis is a process of analysing future events by considering
alternative possible outcomes. Scenario analysis is conducted, to analyse the impacts
of possible future events on the system performance.

(c) Best-case and Worst-Case Analysis:

The objective of best-case and worst-case scenario analysis is to get a feel of what
happens under the most favourable or the most adverse configuration of key variables,
without bothering much about the internal consistency of such configurations.

Best Scenario High demand, high selling price, low variable cost, and so on.
Normal Scenario Average demand, average selling price, average variable cost,
and so on.
Worst Scenario Low demand, low selling price, high variable cost, and so on.

(d) Simulation Analysis:

The Simulation Analysis is a method, wherein the infinite calculations are made
to obtain the possible outcomes and probabilities for any choice of action. The role of
simulation analysis is to summarize and analyse the results, in a way that will yield
maximum insight and help with decision-making.

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3.10 Project Cost Risk Analysis

Future estimates are not facts but statements of probabilities about how things
will turn out. Hence, actual costs may be higher or lower than estimates made by even
experts.
Cost risk analysis considers the different costs associated with a project (labour,
materials, equipment, administration, etc) and focuses on the uncertainties and risks
that may affect these costs.

3.11 Estimating Time and Cost Overrun Risks

Time and cost overrun are the most common and most serious risks in project
completion in especially the complex and big projects. Over estimating the time
requirements or providing contingencies are the remedies commonly used to take care
of the situation. However, statistical tools are available to simulate the project time
more accurately.

3.12 Reasons for Project Cost Overruns

A cost overrun is the amount by which actual expenditures exceed the planned
amount. It is the sum of unpredicted expenses that exceeds initial budget estimates at
any point throughout the course of project realization.

Reasons for Project Cost Overruns:

1. Unplanned expansion of the project scope.
2. Inaccurate initial cost estimation.
3. Failures in project performance.
4. Errors in project design.
5. Improper risk management.
6. Improper project team building.
7. Wrong choice of equipment.
8. Incompetent material suppliers.

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3.13 Time Overruns

Poor planning and failure to meet time schedules result in time overruns. The
project manager prepares a “time overruns analysis sheet” to understand where
delays have occurred and the reasons for delays. The Chart given below shows a time
analysis sheet.

Reasons for
Event Scheduled Actual Time % of time
Time
Name Time Time Overrun Overrun
Overrun
1

Time overruns occur due to,

1. A change in the scope of the project.
2. Ineffective project time management.
3. Delays in starting and executing some of the project activities.
4. A delay in one project, results in delays in subsequent projects.
5. Use of outdated technology.
6. Political interference.
7. Poor administration.

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Project Management Skills UNIT-3: Project Life Cycle

Questions:
Remember:

1. List the phases of project management life cycle.

2. List the phases of project life cycle.
3. Define risk.
4. What is project risk?
5. List the types of risk.
6. What is project initiation?
7. What is project planning?
8. What is resource plan?
9. What is communication plan?
10.Define project execution.
11.List the steps of project execution.
12.Define project closure.

Understanding:

1. Explain the phases of project management life cycle.

2. Explain the phases of project life cycle.
3. Explain the types of risk.
4. Explain the Risk Assessment Techniques.
5. Explain the risk analysis methods.
6. Explain the reasons for Project Cost Overruns.
7. Explain the reasons for Project time Overruns.
8. Explain financial plan.
9. Explain quality plan.
10.Explain procurement plan.
11.Explain the processes of project execution phase.

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