Module 5 - Project Management

MANAGEMENT &ENTREPRENEURSHIP
Faculty-Prof Mahak Balani,Dept. of MBA,AIT
MODULE 5
Project Management
Project Management: Meaning of Project, Project Objectives & Characteristics, Project

Identification- Meaning & Importance; Project Life Cycle, Project Scheduling, Capital
Budgeting, Generating an Investment Project Proposal, Project Report-Need and
Significance of Report, Contents, Formulation, Project Analysis-Market, Technical,Financial,
Economic, Ecological, Project Evaluation and Selection, Project Financing,Project
Implementation Phase, Human & Administrative aspects of Project
Management,Prerequisites for Successful Project Implementation.
Control Techniques- PERT and CPM, Steps involved in developing the network,Uses and
Limitations of PERT and CPM.
PROJECT – MEANING :
Project are composed of activities, usually non-repetitive, operating on an interrelated set

of items. It involve multiple resources with unique technologies, skills and traits.
A project is a venture/step by step activities undertaken by a person for a specified period

of time for some specific result or outcome.
A project in business and science is a collaborative enterprise, frequently involving

research or design that is carefully planned to achieve a particular aim.
A good objective for a project is always characterized by the following:
§ Clear
§ Short
§ Complete
§ Comprehensive
§ Measurable
§ Achievable
§ Reasonable
§ Time-dependent
Characteristics of the project :

a) Specific goal or objectives
A project has specific goal or objectives. It is focused on the achievement of an end result. It
ceases to exist when the objectives have been fulfilled. For e.g. the goal of writing project is
to write a new book or something.
B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 1

b) Temporary
Project doesn’t continue endlessly, project ceases to exist when declared objectives are
attained. Thus project has a definite beginning and ending but temporarily doesn’t mean
short in duration.
c) Constraints
A project operates within the constraints of time, cost and quality performance. It has the
time schedule for various activities, own budget to control costs and clearly laid down
quality specifications.
d) Unique
No two projects are absolutely similar to each other i.e. project involves doing something
which has not been done before. For eg, thousands of book have been written but each is
unique- different writer, different language, different subject etc.
e) Specific task not routinely performed
The project doesn’t involve doing same work repeatedly i.e. in different phases of project
life cycle separate task is performed.
f) Rapid expenditure
The project involves the rapid expenditure of resources within a short duration of project
life cycle in comparison to a permanent programme.
g) Resource consumption
Project consumes tremendous quantities of resources. 5M- Money, Material, Manpower,
Machine, Minute are examples of project resources all of which are paid by owner.
h) Risk and uncertainties
Risk and uncertainties go hand in hand with the project. A risk-free project cannot be
thought of. Proper risk management is necessary to ensure achievement of the goal.
i) Team work
Projects work through team work. A project consists of a multi-functional team. Different
team and workers are assigned for the different task.
j) Planning and control
A project requires effective planning and control to ascertain achievement of specified goal
and objectives. Standards set are compared with actual performance to measure deviation
and corrective actions are taken.
k) Contracting and subcontracting

The project work is characterized by high level of contracting and subcontracting.

Complexity increases the need for subcontracting. Proper contract planning is required for
effective project management.
l) Progressive elaboration
Progressive means proceeding in step and elaboration means worked out with care and
detail thoroughly developed.
Project Identification:
Project identification refers to the process of finding out the most appropriate project
among the several available investment opportunities.
Project identification is concerned with collection, compilation and analysis of
economic data of the eventual purpose of locating possible opportunities for
investment, based on opportunities in the market.
The steps involved in project identification are:
Conceiving project ideas.
Choosing the right line of business.
Opportunity seeking.
Decision-making process.
Importance of Project Identification:

ü Validate the business reason for each candidate project.
ü Provide the base information for more informed financial commitments to projects.
ü Establish a more objective ranking of candidate projects.
ü Allow a more effective matching of skilled resources to the right project.
ü Avoid over-allocating limited skilled resources.
ü Anticipate future human resource quantities and skills.
ü Provide a valid basis for staff training.
ü Make Project Initiation faster and more efficient.

Project Life Cycle(Important)
1. Project Initiation
Initiation is the first phase of the project lifecycle. This is where the project’s value and
feasibility are measured. Project managers typically use two evaluation tools to decide
whether or not to pursue a project:
Business Case Document – This document justifies the need for the project, and it includes
an estimate of potential financial benefits.
Feasibility Study – This is an evaluation of the project’s goals, timeline and costs to
determine if the project should be executed. It balances the requirements of the project
with available resources to see if pursuing the project makes sense.
Teams abandon proposed projects that are labeled unprofitable and/or unfeasible.
However, projects that pass these two tests can be assigned to a project team or designated
project office.
2. Project Planning
Once the project receives the green light, it needs a solid plan to guide the team, as well as
keep them on time and on budget. A well-written project plan gives guidance for obtaining
resources, acquiring financing and procuring required materials. The project plan gives the

team direction for producing quality outputs, handling risk, creating acceptance,
communicating benefits to stakeholders and managing suppliers.
The project plan also prepares teams for the obstacles they might encounter over the
course of the project, and helps them understand the cost, scope and timeframe of the
project.
3. Project Execution
This is the phase that is most commonly associated with project management. Execution is
all about building deliverables that satisfy the customer. Team leaders make this happen by
allocating resources and keeping team members focused on their assigned tasks.
Execution relies heavily on the planning phase. The work and efforts of the team during the
execution phase are derived from the project plan.
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. Project Closure
Teams close a project when they deliver the finished project to the customer,
communicating completion to stakeholders and releasing resources to other projects. This
vital step in the project lifecycle allows the team to evaluate and document the project and
move on the next one, using previous project mistakes and successes to build stronger
processes and more successful teams.
Although project management may seem overwhelming at times, breaking it down into
these five distinct cycles can help your team manage even the most complex projects and
use time and resources more wisely.
Project Scheduling(Important)
Project scheduling is concerned with the techniques that can be employed to manage the
activities that need to be undertaken during the development of a project.
Scheduling is carried out in advance of the project commencing and involves:

• identifying the tasks that need to be carried out;
• estimating how long they will take;
• allocating resources (mainly personnel);
• scheduling when the tasks will occur.
Once the project is underway control needs to be exerted to ensure that the plan continues
to represent the best prediction of what will occur in the future:
• based on what occurs during the development;
• often necessitates revision of the plan.
Effective project planning will help to ensure that the systems are delivered:
• within cost;
• within the time constraint;
• to a specific standard of quality.
Two project scheduling techniques will be presented, the Milestone Chart,Gantt

Chart and the Activity Network.
Milestone Charts
Milestones mark significant events in the life of a project, usually critical activities which
must be achieved on time to avoid delay in the project.
Milestones should be truely significant and be reasonable in terms of deadlines (avoid

using intermediate stages).
Examples include:
• installation of equipment;
• completion of phases;
• file conversion;
• cutover to the new system

Diagrammatic representation of Milestone chart is given below in Fig-1
Figure 1-Milestone chart
Gantt Charts(Important)


Diagrammatic representation of Gantt chart is given below in Fig-2
Figure 2-Gantt chart
Activity Networks
The foundation of the approach came from the Special Projects Office of the US Navy in
1958. It developed a technique for evaluating the performance of large development
projects, which became known as PERT - Project Evaluation and Review Technique. Other
variations of the same approach are known as the critical path method (CPM) or critical
path analysis (CPA).
Capital Budgeting:
Capital budgeting (or investment appraisal) is the process of determining the viability to
long-term investments on purchase or replacement of property plant and equipment, new
product line or other projects.
Generating Capital Investment Project Proposals

Ideas for new capital investments can come from many sources, both inside and outside a
firm. Proposals may originate at all levels of the organization —from factory workers up to
the board of directors. Most large and medium -size firms allocate the responsibility
for identifying and analyzing capital expenditures to specific staff groups.
These groups can include cost accounting, industrial engineering, marketing research,
research and development, and corporate planning. In most firms, systematic procedures
are established to assist in the search and analysis steps. For example, many firms provide
detailed forms that the originator of a capital expenditure proposal must complete.
These forms normally request information on the project’s initial cost, the revenues it is
expected to generate, and how it will affect the firm’s overall operating expenses. These
data are then channeled to a reviewer or group of reviewers at a higher level in the firm for
analysis and possible acceptance or rejection.
Where a proposal goes for review often depends on how the particular project is classified.
Classifying Investment Projects

As noted earlier, there are several types of capital expenditures. These can be grouped into
projects generated by growth opportunities, projects generated by cost reduction
opportunities, and projects generated to meet legal requirements and health and safety
standards.
Projects Generated by Growth Opportunities

Assume that a firm produces a particular product that is expected to experience increased
demand during the upcoming years. If the firm’s existing facilities are inadequate to handle
the demand, proposals should be developed for expanding the firm’s capacity such as
Ford’s decision to expand Volvo’s manufacturing facilities. These proposals may come from
the corporate planning staff group, from a divisional staff group, or from some other
source.
Because most existing products eventually become obsolete, a firm’s growth is also
dependent on the development and marketing of new products. This involves the
generation of research and development investment proposals, marketing research
investments, test marketing investments, and perhaps even investments in new plants,
property, and equipment. For example, in order for the mineral extraction industries to
keep growing, they must continually make investments in exploration and development. In
2002, ExxonMobil’s capital and exploration expenditures were $14.0 billion.
Similarly, firms in high-technology industries —such as electronics and pharmaceuticals—
must undertake continuing programs of research and development to compete
successfully. For example, Merck spent over $2.4 billion on research and development in
2002.

Projects Generated by Cost Reduction Opportunities

Just as products become obsolete over time, so do plants, property, equipment, and
production processes. Normal use makes older plants more expensive to operate because
of the higher cost of maintenance and downtime (idle time). In addition, new technological
developments may render existing equipment economically obsolete. These factors create
opportunities for cost reduction investments, which include replacing old, obsolete capital
equipment with newer, more efficient equipment.
Projects Generated to Meet Legal Requirements and Health and Safety Standards
These projects include investment proposals for such things as pollution control,
ventilation, and fire protection equipment. In terms of analysis, this group of projects is
best considered as contingent upon other projects.
To illustrate, suppose USX wishes to build a new steel plant in Cleveland, Ohio. The decision
will be contingent upon the investment in the amount of pollution abatement equipment
required by state and local laws. Thus, the decision to invest in the new plant must be
based upon the total cost of the plant, including the pollution abatement equipment, and
not just the operating equipment alone. In the case of existing facilities, this type of decision
making is sometimes more complex.
For example, suppose a firm is told it must install new pollution abatement equipment in a
plant that has been in operation for some time. The firm first needs to determine the lowest
cost alternative that will meet these legal requirements. “Lowest cost” is normally
measured by the smallest present value of net cash outflows from the project. Then
management must decide whether the remaining stream of cash flows from the plant is
sufficient to justify the expenditure. If it appears as though it will not be, the firm may
consider building a new facility, or it may decide simply to close down the original plant.
Project Size and the Decision-Making Process
The classification of a proposed project influences the capital investment decision-making
process. However, there are other factors to consider —in particular, the size of the
expenditure required to carry out the project. Most firms decentralize the decision-making
function. For example, whereas the approval of the president and the board of directors
may be needed for especially large outlays, such as Ford’s $5 to $6 billion investment in
Volvo discussed earlier in the chapter, a divisional vice president may be the final decision
maker in the case of medium -size outlays.
A plant manager may have responsibility for deciding on smaller outlays, and a department
head in a particular plant may be authorized to approve small outlays. For example, at
Hershey Foods, a corporate -level review is required for all projects of more than $500,000.
Projects below this amount are evaluated at the operating division level only. Hershey is
moving toward a system that will require a corporate-level review for all projects of
$50,000 or more. This chain of command varies with individual companies. In large firms,
however, it is impossible for any one person to make every decision regarding proposed
capital expenditures, and a decentralized system is usually employed.

Project Report(Important)
Project report is a written document prepared by the entrepreneur that describes all
the relevant external and internal elements involved in starting a new venture.
It is prepared by an expert after detailed study and analysis of the various aspects of the
project.
Need and Significance of Report(Important)
1. For refining the business idea and to eliminate shortcomings : project report is
means to put business idea in form of document, evaluate various aspects of the plan
and eliminate shortcomings existing in plan.
2. For justifying viability of the venture : it serves as powerful mechanism to evaluate

viability of report for investors to check as to what extent the investment can yield
profit.
3. For securing the equity venture capital : the investors and silent partners require
business plan in form of a project report before considering the sanction of equity
venture capital for the project.
4. For securing bank finance : SSI go in for borrowing required finance from banking
institution for which it is mandatory on the part of SSI to submit copy of project report
to get required loan sanctioned.
5. For attracting joint venture partner : in certain circumstances some existing firms
may be willing to be partner with SSI as joint venture for which again they require
project report for the purpose of reference.
6. For obtaining clearance and approvals from governmental agencies : in certain

set of industries depending on nature of business they are bound to get clearance from
government for which they have to submit project report for evidence.
7. For securing orders from key potential customers : risk involved in the new
business can be reduced to larger extent by having some regular customers for which
customer loyalty is important and this can be done only when project report of
company is transparent in terms of clarity about business.

8. For providing a road map and direction during implementation : project report
serves as road map for company activities during implementation as main project
serves as standard with which present activities of company can be compared with.
9. For attract the best talent to join as employees in start up ventures: as attracting
candidates towards new organization is difficult task, entrepreneur by presenting
potential project report can make candidate realize opportunity vested for him after
joining the company.
Contents of Project Report(Important)
1. Cover page: page of the project report should contain the title of the project, name,
address so that the readers of the report can easily contact entrepreneur relating to queries
of report.
2. Table of contents: table of content are compiled after the main body of the project
report is finalized. Topics covered in the project report along with the page number should
be mentioned in the project report.
3. Executive summary: should be written after the completion of project report as it gives
brief gist of project. Length of the executive summary should not exceed more than two
pages.
4. Company information and industry: here they should explain the ownership form of
the company, which should contain the reason for venturing into the proposed business
plan, how do you plan to satisfy the needs and expectation of the potential customers and
existing competitors in industry. It should also include SWOT analysis of company.
5. Technical plan: in this part of the report the key aspect analyzed during the technical
feasibility of the report should be highlighted. The choice of the product and service to be
offered should be justified. Report should be able to explain how the product of the
company is creative and innovative as compared to the existing product in the market.
6. Marketing plan: this aspect of the product should focus on the industry and market
feasibility conducted at earlier stage. It should describe about the pricing policy, findings of
market research, how large is the market for the product to be offered by the company,
details about marketing strategy adopted by the company to promote the product, target
Customers Company is focusing on.
7. Operations plan: it describes about the manufacturing and service delivery process to
be utilized for production of chosen product and service. It should explain about the
innovation brought in the process of production which makes it better when compared to
existing competitors. It should also focus on the location, availability of resources required
for production.
8. Organizational plan: it gives information about the management team who are part of
the company. It focuses on the management and technical skills possessed by the
employees in company and how it will prove to be beneficial for the work process to be
carried in the company. It should highlight as though why even after possessing such
efficient skills they prefer joining your organization.

9. Project timeline: this chapter explain about the network diagram which explains about
the time duration required for the project. Diagram explains about the various activities in
the project, which are sequentially organized and the time duration required for the
execution of the project is arrived by estimating time required for completion of every
activity for the formation and later process of the company.
10. Critical risk and assumption: it explain about the various assumption made during
the formation of the company E.g. rather than considering the previous sales forecast for
similar product to be offered by the company, the organization may have gone in for expert
advice, there may be various risks related to the product and kind of service company is
planning to offer in the market all these details should be highlighted in this part of the
report.
11. Social plan: it explains about how company project will benefit the society. It should
highlight how company will generate employment opportunities, lead to skill development
of local people, provision of goods and services to be provided to the local people,
utilization of local resources etc. It should also include various helps provided by the
financial agencies and government to start SSI in country.
12. Exit strategy : this is the negative aspect of the business but the company should
explain how they would close down the business if the company is not able to earn the
expected profitability, the investors will be keen to know as though how their investment
can be recovered in such situation.
13. Financial plan: it is important part of the report which will contain brief content of all
the sections with numbers in monetary terms. It explain about the financial composition of
the company, various sources through which company has raised required finance, total
expenditure incurred by the company which will be effectively explained through the
means of break even analysis and ratio analysis in the company financial report.
14. Conclusion: this summarizes the key aspect of the report in concise manner. It should
end the report on a positive note so that the readers develop positive image about the
report.
15. Appendices: it contains conclusion part of the report and supplement data which is
important part for the report but cannot be included in the initial topics of the report.

Formulation of Project Report:
1. Identify the objectives of the project report: project report can have multiple
objectives. Objectives of the project report will give clarity to the investor’s reason for
establishment of the company and as though why they should invest in the company. The
objective of the report should be identified at the initial stage of formulating project report.
2. Gather data and information: entrepreneur should do the required detailed study
before starting the company, relating to market trends, pricing policies, customers
preference, competitors information etc.
3. Put thoughts on the paper: after gathering all the required information the
entrepreneur should put the tentative thoughts in the paper and structure ideas present in
his mind. The details put in the paper in this stage should be positioned to be critically
evaluated at later stage.
4. Perform data analysis: the data incorporated in the report has to be analyzed using
appropriate tools to convert it into useful information. Break even analysis, revenue
projections, pro forma financial statement, should be done and suitably summarized in the
report.
5. Finalize the business plan: in this stage of formulation all the calculation done relating
to financial analysis, details about various contents of the project should be finalized and
put up in the report. Report should be cross checked for any grammatical mistakes and
various chart and diagrams relating to formation of the project which could not be included
in the body of the report should be included here. At this stage executive summary, table of
content and the cover page of the project should be added.
6. Get the report reviewed by the expert: project report before its submission for
approval should be reviewed by the expert, their suggestion should be taken into
consideration and required changes in the report should be made accordingly.
7. Submit the final report for relevant people: the report should be submitted to the
relevant people whose interest is vested in company such as potential investors,
customers, government agencies etc.

Project Analysis:
Project feasibility study:

Feasibility literally means whether some idea will work or not.It knows before hand
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 where from
the 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 business before the venture comes into
existence.
Market Feasibility Study:

v A market whether a place or not is the arena for interaction among buyers and sellers
From sellers point of view,market analysis is primarily concerned with the aggregate
demand of the proposed product/service in future and the market share expected to be
captured.It is a study of knowing who all comprise of customers and for this the
required information is:
ü Consumption trend.
ü Past and present supply position.
ü Production possibilities and constraints.
ü Imports and exports
ü Competition
ü Elasticity of demand
ü Consumer behavior, intentions, motivations , attitudes ,preferences and requirements.
ü Distribution channels and marketing policies in use.
ü Administrative, technical and legal constraints impinging on the marketing of the
producers.
ü Cost structure
ü If market feasibility study results are positive it indicates that the project involves a
good business idea that will bring a positive return on investment back to the
producers.
Financial Feasibility Study:

One of the most important factors in conducting project feasibility study is the financial
feasibility of the project.This involves the preparation of cost estimates, means of
financing, financial institutions, financial projections, break even point, ratio analysis
etc.The cost of the project includes the land and site development , building , plant and
machinery ,technical know-how fees, pre-operative expenses, contingency expenses.
While conducting a financial appraisal certain aspects has to be looked into like:
v Investment outlay and cost of the project- includes cost of land and building, cost of
installation of plant and machinery, preliminary expenses, contingency expenses.
v Means of financing/ sources of financing- includes own funds, term loans, public
deposits, share capital.
v Projected profitability- it represented through cash flow estimate which establishes
the relationship between net profit and repayment of term loans and interest
thereon.
v Break even analysis- break even point signifies ‘no profit no loss’ level of operation.
Hence it helps the entrepreneur to find out minimum production required, so as to
meet all the liabilities without incurring a loss.
v Investment worthiness judged in terms of various criteria of merit.
v Projected financial position-helps to find out the effect of operations on assets,
liabilities and capital of the organisation.
Technical Feasibility Study/Analysis:

The issue involved in the assessment of technical analysis of the proposed project may
be classified into those pertaining to inputs , throughputs and outputs. It is a systematic
analysis and gathering of the data pertaining to technical inputs required .The
availability of raw materials, power,sanitary and sewage services, transportation
facility, skilled man power, engineering facilities, maintenance , local people etc are
coming under technical analysis.
ü Input analysis: It is mainly concerned with the identification,quantification and
evaluation of project inputs i.e,machinery and materials.
ü Throughput analysis :It refers to the production/operation that would perform on
the inputs to add value.
ü Output analysis :This involves product specification in terms of physical features-
color , weight ,length ,breadth , height, functional features ,chemical material
properties as well as standards to be complied with such as BIS,ISI, and ISO.
v Economic Feasibility Study Or Analysis:

Economics is the study of costs and benefits. Economic feasibility focuses on how far
the project contributes to the development of sector, industrial development,social
development and maximizing the growth of employment etc.
In regard to this feasibility of the study the entrepreneur is concerned whether
the capital cost as well as the cost of the product is justifiable like this the price at
which it will sell at the market place.
v Ecological Feasibility Study /Analysis:

In recent years environmental concerns have assumed a great deal of significance
especially for projects which have significant ecological implications like power
plants irrigation schemes and for environment polluting industries. The concerns
that are usually addressed include water , air , land , sound , geographical location
etc.
Project Evaluation and Selection:
After considering a few project ideas, the entrepreneur finally may select one
project idea most suited to him. For arriving at this decision of selection of a project,
the entrepreneur may analyse his strengths and weaknesses as well as
opportunities and threats offered by each of the project idea. This analysis is called
SWOT analysis.
Before selecting a particular project some of the important criteria are below:
Investment size: investment required is to be studied accurately and rationally,

so that arranging funds becomes easier. The size of investment should be
optimum, so that there is no funds shortage at any point of time during the
project completion.
Location: it is very important. Nearness to raw material, nearness to market,
availability of resources, etc are taken into consideration while selecting the
location for a project.
Technology: it is better to choose indigenous technology than sophisticated
foreign technical collaboration. The technology used by entrepreneur should be
indigenously proven one in which the entrepreneur is well versed.
Plant and machineries: best equipment to be selected by the entrepreneur to get
optimum results from the project. Quality compromise in choosing the best equipment
should never be done to avoid frequent breakdowns and maintenance costs.
Marketing : the success of entire project revolves round the marketing of goods
produced. The demand for the product should be studied carefully and the capacity of
the project should be accordingly designed.
Project Financing:
Project finance is the financing of long-term infrastructure, industrial projects and

public services based upon a non-recourse or limited recourse financial structure, in
which project debt and equity used to finance the project are paid back from the cash
flow generated by the project.
Project financing is usually chosen by project developers in order to inter alia:

• eliminate or reduce the lender's recourse to the sponsors.
• permit an off-balance sheet treatment of the debt financing.
• maximize the leverage of a project.
Project Implementation:
Project implementation can be referred to as a process whereby “project inputs are
converted to project outputs as set out in the project framework”. The process involves
a series of activities, which need to be planned, operated and controlled, and which will
inevitably involve the utilization of resources. The management of these activities is
fundamental to a supervisor or monitor so that the project can be completed on time
and at cost consistent with the project plan.
Project implementation may be looked at as:
• Putting in action the activities of the project.

• Putting into practice what was proposed in the project document i.e. transforming
the project proposal into the actual project.
• Management of the project or executing the project intentions.

Project, implementation is carried out following the already laid down timetable or
work plan. It leads to the realization of project outputs and immediate objectives.
Project implementation is usually done by the organization that prepared the project
and received funding for it. This organization is referred to as the implementing
agency. The implementing agency sets up a project implementation unit, which
carries out the implementation on behalf of the implementing agency.
Other organizations that participate in the implementation of the project by way of

collaboration say by according good working relationship, extending some technical
advice or seconding their staff to the project, are referred to as Co-operating agencies.
Example: If a given sub-county is to implement a sanitation project, the departments of
water, community development and health will act as cooperating agencies.
The Prerequisites for successful project implementation are as follows:

• Adequate formulation.
• Sound project organisation.
• Proper implementation planning.
• Advance action.
• Timely availability of funds.
• Judicious equipment tendering and procurement.
• Better contract management.
• Effective monitoring.
New Controlling Techniques(Important)

Network analysis: diagram presents various activities of project. An event or node marks
the beginning or end of activity and is represented by small circles in network diagram. An
activity is represented by straight line arrows. There can be only one activity taking place
between nodes at a time. This diagram is usually used to depict information relating to
construction activity during process of formation of business.
A number of networking techniques have been developed for project scheduling. They are:
1. Programme evaluation and Review techniques (PERT)
2. Critical path method (CPM)
Programme evaluation and Review techniques (PERT) (Important)
PERT is a project management planning tool used to calculate the amount of time it
will take to realistically finish a project.
PERT stands for Program Evaluation Review Technique.
PERT charts are tools used to plan tasks within a project .
It provides a graphical representation of a project's timeline that allows project
managers to break down each individual task in the project for analysis.

In PERT three time estimates are taken-

1. Optimistic time: minimum time taken to complete the project.
2. Pessimistic time: maximum time taken to complete the project.
3. Most likely time: normal time taken to complete the project.
Using the above three time average expected time of activity is calculated.
Steps in the PERT Planning Process(Important)
PERT planning involves the following steps:
1. Identify the specific activities and milestones.

2. Determine the proper sequence of the activities.
3. Construct a network diagram.
4. Estimate the time required for each activity.
5. Determine the critical path.
6. Update the PERT chart as the project progresses.
1. Identify Activities and Milestones
The activities are the tasks required to complete the project. The milestones are the events
marking the beginning and end of one or more activities. It is helpful to list the tasks in a
table that in later steps can be expanded to include information on sequence and duration.
2. Determine Activity Sequence
This step may be combined with the activity identification step since the activity sequence
is evident for some tasks. Other tasks may require more analysis to determine the exact
order in which they must be performed.
3. Construct the Network Diagram
Using the activity sequence information, a network diagram can be drawn showing the
sequence of the serial and parallel activities. For the original activity-on-arc model, the
activities are depicted by arrowed lines and milestones are depicted by circles or
"bubbles".
If done manually, several drafts may be required to correctly portray the relationships
among activities. Software packages simplify this step by automatically converting tabular
activity information into a network diagram.

4. Estimate Activity Times
Weeks are a commonly used unit of time for activity completion, but any consistent unit of
time can be used.
A distinguishing feature of PERT is its ability to deal with uncertainty in activity completion
times. For each activity, the model usually includes three time estimates:
• Optimistic time - generally the shortest time in which the activity can be completed.
It is common practice to specify optimistic times to be three standard deviations
from the mean so that there is approximately a 1% chance that the activity will be
completed within the optimistic time.
• Most likely time - the completion time having the highest probability. Note that this
time is different from the expected time.
• Pessimistic time - the longest time that an activity might require. Three standard
deviations from the mean is commonly used for the pessimistic time.
5. Determine the Critical Path
The critical path is determined by adding the times for the activities in each sequence and
determining the longest path in the project. The critical path determines the total calendar
time required for the project. If activities outside the critical path speed up or slow down
(within limits), the total project time does not change. The amount of time that a non-
critical path activity can be delayed without delaying the project is referred to as slack time.
If the critical path is not immediately obvious, it may be helpful to determine the following
four quantities for each activity:
• ES - Earliest Start time

• EF - Earliest Finish time
• LS - Latest Start time
• LF - Latest Finish time
These times are calculated using the expected time for the relevant activities. The earliest
start and finish times of each activity are determined by working forward through the
network and determining the earliest time at which an activity can start and finish
considering its predecessor activities. The latest start and finish times are the latest times
that an activity can start and finish without delaying the project. LS and LF are found by
working backward through the network. The difference in the latest and earliest finish of
each activity is that activity's slack. The critical path then is the path through the network
in which none of the activities have slack.
Since the critical path determines the completion date of the project, the project can be
accelerated by adding the resources required to decrease the time for the activities in the
critical path. Such a shortening of the project sometimes is referred to as project crashing.

6. Update as Project Progresses
Make adjustments in the PERT chart as the project progresses. As the project unfolds, the
estimated times can be replaced with actual times. In cases where there are delays,
additional resources may be needed to stay on schedule and the PERT chart may be
modified to reflect the new situation.
Uses of PERT:(Imp)
PERT is useful because it provides the following information:
• The activities of the project are identified along with their interrelationships and
graphically represented using networks.
• The time required for completing each activity is estimated and noted on the network.
• The minimum time required for completing entire project is estimated.
• The critical activities are identified for the efficient allocation of resources in order to
complete the Project earlier,if necessary.
Limitations(Imp)
• Difficult to provide realistic time estimates for new activities in the absence of past data.
• The Probability distribution of total time is assumed to be normal which in real life
situations may not be true.
• The simple PERT technique does not consider the resources required at various stages.
• Effective control of project using PERT calls for frequent updates and calculations
which is a costly affair.
Critical path method: (important)

The critical path method (CPM) is a step-by-step project management technique for
process planning that defines critical and non-critical tasks with the goal of
preventing time-frame problems and process bottlenecks. The CPM is ideally suited
to projects consisting of numerous activities that interact in a complex manner.
Critical path is defined as longest duration path between the first and last nodes of the
project.
Steps in CPM Project Planning(Important)
1. Specify the individual activities.

2. Determine the sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time for each activity.

5. Identify the critical path (the longest path through the network)
6. Update the CPM diagram as the project progresses.
1. Specify the individual activities.
From the Work Breakdown Structure, a listing can be made of all the activities in the
project. This listing can be used as the basis for adding sequence and duration information
in later steps.
2. Determine the sequence of those activities.
Some activities are dependent upon the completion of others. A listing of the immediate
predecessors of each activity is useful for constructing the CPM network diagram.
3. Draw a network diagram.
Once the activities and their sequencing have been defined, the CPM diagram can be
drawn. CPM originally was developed as an activity on node (AON) network, but some
project planners prefer to specify the activities on the arcs.
4. Estimate the completion time for each activity.
The time required to complete each activity can be estimated using past experience or the
estimates of knowledgeable persons. CPM is a deterministic model that does not take into
account variation in the completion time, so only one number can be used for an activity’s
time estimate.
5. Identify the critical path
The critical path is the longest-duration path through the network. The significance of the
critical path is that the activities that lie on it cannot be delayed without delaying the
project. Because of its impact on the entire project, critical path analysis is an important
aspect of project planning.
The critical path can be identified by determining the following four parameters for each
activity:
• ES – earliest start time: the earliest time at which an activity can begin given that its
predecessor activities must be completed first.
• EF – earliest finish time, equal to the earliest start time for the activity plus the time
required to complete the activity.
• LF – latest finish time: the latest time at which an activity can be completed without
delaying the project.
• LS – latest start time, equal to the latest finish time minus the time required to complete the
activity.

The slack or float time for an activity is the time between the earliest and latest start time,
or between the earliest and latest finish time. Slack is the amount of time that an activity
can be delayed past its earliest start or earliest finish without delaying the project.
The critical path is the path through the project network in which none of the activities
have slack, that is, the path for which LS=ES and LF=EF for all activities in the path. A delay
in the critical path delays the project. Similarly, to accelerate the project it is necessary to
reduce the total time required for the activities in the critical path.
6. Update CPM diagram
As the project progresses, the actual task completion times will be known and the diagram
can be updated to include this information. A new critical path may emerge, and structural
changes may be made in the network if project requirements change.
Uses of CPM(Imp)
ü The CPM is generally used to find the optimum Project cost and time.
ü The optimum project cost is the minimum cost at which the project can be
completed.This can be determined by using the concept of crashing of activities.
ü CPM is also used to find minimum time at which a project can be
completed,irrespective of cost which may be necessary under crisis conditions.
Limitations:(Imp)
ü CPM operates on the assumption that there is a precise time known time for each
activity which is not true in real practice.
ü It cannot be used as controlling device since any changes introduced will alter the
entire structure of network.
The underestimation of the project completion time due to alternate paths becoming
critical is perhaps the most serious of these issues. To overcome this limitation, Monte
Carlo simulations can be performed on the network to eliminate this optimistic bias in the
expected project completion time.


Module 5 - Project Management

Uploaded by

Copyright:

Available Formats

Module 5 - Project Management

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Module 5 - Project Management

Uploaded by

Copyright:

Available Formats

MANAGEMENT &ENTREPRENEURSHIP

Faculty-Prof Mahak Balani,Dept. of MBA,AIT

Project Management: Meaning of Project, Project Objectives & Characteristics, Project

Project are composed of activities, usually non-repetitive, operating on an interrelated set

A project is a venture/step by step activities undertaken by a person for a specified period

A project in business and science is a collaborative enterprise, frequently involving

A good objective for a project is always characterized by the following:

Characteristics of the project :

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 1

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 2

The project work is characterized by high level of contracting and subcontracting.

Importance of Project Identification:

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 3

Project Life Cycle(Important)

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 4

4. Project Monitoring and Control

Scheduling is carried out in advance of the project commencing and involves:

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 5

• identifying the tasks that need to be carried out;

• estimating how long they will take;

• allocating resources (mainly personnel);

• scheduling when the tasks will occur.

• based on what occurs during the development;

• often necessitates revision of the plan.

• within the time constraint;

• to a specific standard of quality.

Two project scheduling techniques will be presented, the Milestone Chart,Gantt

Milestones should be truely significant and be reasonable in terms of deadlines (avoid

• cutover to the new system

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 6

Diagrammatic representation of Milestone chart is given below in Fig-1

Figure 1-Milestone chart

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 7

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 8

Diagrammatic representation of Gantt chart is given below in Fig-2

Figure 2-Gantt chart

Generating Capital Investment Project Proposals

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 9

Classifying Investment Projects

Projects Generated by Growth Opportunities

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 10

Projects Generated by Cost Reduction Opportunities

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 11

Need and Significance of Report(Important)

2. For justifying viability of the venture : it serves as powerful mechanism to evaluate

6. For obtaining clearance and approvals from governmental agencies : in certain

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 12

Contents of Project Report(Important)

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 13

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 14

Formulation of Project Report:

B.E (V SEMESTER) SECTION A ELECTRICAL & ELECTRONICS ENGINEERING 15

Project feasibility study:

Market Feasibility Study:

 Financial Feasibility Study:

 Technical Feasibility Study/Analysis:

v Economic Feasibility Study Or Analysis:

v Ecological Feasibility Study /Analysis:

Project Evaluation and Selection:

Financial Feasibility Study:

Technical Feasibility Study/Analysis:

Investment size: investment required is to be studied accurately and rationally,