1. Project Management Overview ................................................................................1-16
1.14 Performance Indicators
Zero Date of a project may vary from project to project. In order to get project cleared from approving authorities a schedule may be fixed up which may be far from realistic. The vendors and contractors will only add to confusion by promising deliveries, which can make possible any thing on paper. Besides a defective design and subsequent modification / change to suit project requirements also increases time and cost. Anything done in a project, including time overrun would be reflected in the cost.
Time and cost over-runs of projects are common in India, particularly the public sector.
Hence the project tends to become uneconomical and economic development is adversely effected.
One of the reasons is delay in decision-making. In public sector those who make recommendations on extra costs or are dynamic decision makers avoid doing so for fear of harassment and humiliation in form of ‘dreading questions and enquiries’ against them. Also responsible is the cumbersome procedures for the delay.
Financial constraints have caused overrun of certain projects. In general it is pragmatic to start a project implementation only after receiving the required financial sanction with an assured disbursement plan relating to master plan. A delay in budget sanction will cause further delay and also cost over-run. An Annual Report of Ministry of Programmes Implementation for a recent year provides some alarming information about 184 central projects monitored by the Ministry of Programme Implementation.
• 119 Projects (about 65 per cent of total) have suffered time over-runs, which have gone as high as about 200 per cent. The average delay in commissioning these projects was about 3 years.
• 125 Projects (about 68 per cent of total) have suffered cost over-runs, which have been as high as 75 percent.
• Projects for which no time and cost over-runs have been indicated have mostly been taken up recently and it is likely that many of them will suffer from time and cost over-runs.
To prevent these over-runs Adequate formulation, Second project organization, Proper implementation planning, Advance action, Timely availability of funds, Judicious equipment tendering and procurement, Better contract management, Effective monitoring. However revision of time and cost targets should not be frowned upon since they cannot stay if the world around their changes. Instead they should motivate people to move forward. The Ministry of Project Implementation and COPU (Committee on Public Undertaking) have suggested some measures to reduce cost and time overrun. The team must ensure that no member whether a vendor, contractor, sub-contractor or a government department lags behind schedule because this can adversely affect other connected activity. If it occurs there should be no disowning of responsibility or pleading ‘helplessness’. The members who cannot cope with the rest should be removed or pay the price for risk purchase or substitutes.
Diverse areas using Project Management in recent years include Aerospace, Defence Industries, Engineering and Construction, Manufacturing, Electrical Generation and Distribution, Process Plants, Crude Oil and Natural Gas Exploration, Development and Production, Infrastructure for various levels of Government, Research and Development, Data/
Information Processing, Health Care and Biomedicine, Computer Hardware and Software, Educational Institutions and Ad Hoc Management Undertaking.
QUESTIONS
1. Explain why project management is required.
2. Enlist the challenges in any industrial project.
3. Explain the role of liberalization and globalization in context of project management.
4. Discuss various types of international businesses.
5. Compare private and public sector projects.
6. Differentiate between project management and financial management.
7. Enlist the pre-project activities associated with project management.
8. Highlight the importance of performance indicators.
Project Definitions: Project can be defined in the following ways:
Project is an organizational unit dedicated to the allotment of a goal the successful completion of a development product in time, within specified budget, in conformance with the pre-determined performance specifications It is a set of finite activities that are usually prepared only once and have well designed objectives, using a combination of human and non-human resources within limits of time
It consists of a series of non-routine, interrelated activities with a goal that must be completed with a set amount of resources and within a set time limit.
It is a proposal for investment to create and/or develop certain facilities in order to increase the production of goods and/or services in a community during a certain period of time. (UNIDO)
2.1 PROJECT CHARACTERISTICS
The following points are inherent features associated with any project:
1. It is customary to use terms such as cement projects, power projects, refinery projects (not plant), and the term project is replaced by plant as soon as the plant is operational or project is completed. All works that can be interrelated and are being performed to serve a common purpose can be grouped together and termed a project, only if it is a composite affair. The difference from a plant is that project as a whole has to be completed in one shot, once and for all. So project has to achieve one mission, which may not be a physical objective or an end result e.g. holding an election, conducting a war, planning to prevent a riot.
2. Project is managed by a process of ‘Planning-Organizing-Directing-Staffing-Monitoring- Controlling’. Various starting points of project are called sources. A project can have a number of sources but one end or sink.
3. Focus: Project has a fixed set of objectives/mission/goal. Project ceases to exist once the mission is achieved
4. Lifespan: Each project is time bound through the schedules.
5. Unique: No two projects are alike in their execution even if the plans are duplicated and therefore a single time activity.
6. Unity in Diversity: This is a global concept for any type of project since project is considered to be a complex web of things, people and environment.
C ONCEPTS OF P ROJECT M ANAGEMENT
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7. Flexibility: Change and project are synonymous. Project is dynamic in nature and therefore modifications/changes in original plans, programmes and budgets are a normal feature.
8. Team Spirit: This involves coming together of different individuals from varied disciplines to bestow their knowledge, experience and credence towards a total performance.
9. Risk and Uncertainty: Every project has risk and uncertainty associated with it.
The degree of risk and uncertainty will depend on how a project has passed through its various life-cycle phases. An ill-defined project will have extremely high degree of risk and uncertainty. Risk and uncertainty are not only part and parcel of R & D projects only; there simply cannot be a project without any risk and uncertainty in a real life situation.
10. Statement of Work (SOW): Project planning deals with specified tasks, operations or activities, which must be performed to achieve project goals. A project starts with statement of work. It may be a written description of objectives (rules/regulations/
constraints/restriction) to be achieved with a brief statement of work to be done and a proposed schedule specifying the start and completion dates of the project. It could also contain certain performance measures in terms of budget, completion steps (milestones) and written reports to be supplied during the project completion.
11. Implementation: Every project needs resources or inputs where given inputs are to be converted to output through the process of implementation. The output in short run leads to outcomes while in the long run should result in impact.
12. Task: It is further subdivision of a project. It is usually not longer than several months in duration and is performed by one group or organization. Subtask may be used if needed to further subdivide the project into more meaningful pieces.
13. Work Package: These are a group of activities combined to be assignable to a single organization of unit. The package provides a description of what is to be done, when it is to be started and completed, the budget, measures of performance and specific events to be reached at points in time (milestones). Typical milestones may be completion of design, production of a prototype, the completed testing of the prototype and the approval of pilot run.
14. Subcontracting: It is subset of every project without which no project can be completed unless it is proprietary firm or small in nature. The survival of a company depends how wisely it selects its vendors and maintains good relations with them so that project is commissioned without time overrun and cost overrun. If there are several contractors their performance is rated according to quality, delivery, price service, etc. The activities of subcontracting include sending enquiries to subcontractor and placing order after negotiation with them on all relevant parameters. Adequate follow-up of subcontract orders is made by stage wise inspection before dispatch of finished machinery. The shop capacities are scrutinized adequately so that overloading the vendors is avoided. Needless to emphasize that vendor’s facility for prompt delivery of quality items are assessed by techno-economic surveys and plant visits. Industrial directories, trade directories, supplier’s catalogues, trade journals, newspaper advertisements and industrial exhibitions serve as useful source for locating subcontractors.
15. Project Life Cycle: Project life cycle commences when the idea chosen is found technically feasible, economically viable, and politically suitable and investment
proposal is approved. For a company executing projects either regularly or for the first time, it would be necessary for the chief executive to issue what may be called a project charter soon after project manager is appointed. The charter at its minimum may define project scope, project goals, name of project manager, and his directing authority. The project reviewing authority and request co-operation of all concerned in the execution of the project. An elaborate effort in this direction may produce what is known as project manual.
These major events in projects are grouped under various heads.
• Conception / Identification: Acceptance of necessity, Identification of objectives, Project formulation
• Planning phase/Appraisal phase: Preparation of feasibility report, Appraisal of feasibility report, Investment decision.
• Execution phase of project: Issue of executive order, Implementation of project
• Follow up phase/monitoring phase: Project monitoring (data collection information gathering), Preparation of M.I.S. (Management Information system), Time management (time control) of project, Cost management (cost control) of project
• Feedback and analysis :Issue guidelines to future project, Project Clean up 16. Feasibility Study: Feasibility study of the project is the most exhaustive of all the
planning stage. The project is systematically examined in depth at this stage for various aspects like technical, financial, economical, commercial, social, managerial and organizational. The purpose of this study is to examine if the project objectives are realistic, recommendation in preliminary study are technically sound; beneficial from financial, economical, social point of view; feasibility from social, cultural, ecological of view.
2.2 PROJECT OBJECTIVES AND FUNCTIONS
Project execution must be directed to achieve the project objectives. There are three primary objectives of a project to be met, which include:
• Performance: This is to satisfy the specified standards of performance/function, reliability and safety
• Containment of expenditure within budgets to ensure smooth running
• Time Scale: Timely implementation of project to be proven at time of launch The last two objectives are linked to the resources, which are limited. But this may represent an over simplification of real intent of project objectives. A project may have many objectives, which must be clear to both project manager and the owner. Prioritizing the objectives is necessary for knowing the primary and secondary objectives.
Some of the typical objectives, not listed in any particular order, include:
• Quality of product
• Avoiding unproven equipment
• Safety during construction
• Designing for particular project life
• Safety for maintenance
• Minimizing start up time
• Enhanced public image
• Safety during operation
• Fastest completion time
• High level of automation
• Lowest capital investment
• Lowest operational costs
• Reliability of information
• Security of information
• Use of local sub-contractors
• Use of local suppliers
Project Management Institute (PMI) identifies six basic functions that project management must address. These are:
• Manage the project’s scope to define the goals and the work to be done, in sufficient detail to facilitate understanding and correct performance by participants
• Manage the human resources involved in a project effectively
• Managing communications to see that appropriate parties are informed and have sufficient information to keep the project coordinated
• Manage time by planning and meeting schedules
• Manage quality so that project results are satisfactory
• Manage costs to see that project is performed at the minimum possible cost and within the budget, if possible
2.3 PROJECT CLASSIFICATION
The project can be classified in various ways
• Based on Scope and Significance
National Development *Location (Rural and Urban);
*Resources (Infrastructural, Production, Service, Mobilization)
Maintenance *Welfare (Microscopic and Macroscopic) International Foreign Investors (MNC’s)
Joint Ventures
• Based on Size and Scale
Large Scale, Medium Scale, Small Scale
• Based on Ownership and Control
Public Sector, Private Sector, Joint Sector
• Based on Degree of Change
Inventive, Discovery, Innovation, Adaptation
• Based on Technology Involved
Conventional, Non-Conventional/Research and Development Projects/Developing a new Technology, High Technology and Low Technology
• Based on Speed
Normal, Crash, Disaster
• Based on Beneficiary
Industrial, Ancillary, Consumers
• Based on Purpose
New Projects, Mergers, Diversification, Modernization, Replacement/Renewal, Upgradation, Maintenance, Balancing, Rehabilitation/Sick Unit Reorganization, Construction Projects e.g. Construction of house, building, bridges, roads, tunnels, etc., Management Projects, Manufacturing Projects
There are some projects which are difficult to classify into any category like conducting national elections, performing marriage, overhauling a machine, maintenance of machine, launching new weapon system, commissioning of a factory, conducting war, precursor planning to prevent riots.
2.4 PROJECT LIFE CYCLE
As defined by Cleland and King standard pattern of project life cycle passes through the following phases Conception phase, Definition phase, Production, Observation, Divestment and Post-Mortem. The phases one should follow one after another in sequence it really happens it is possible to find succeeding phases overlap of all phases. This overlapping may in fact be beneficial in compressing overall schedule.
The following figure is the original model of project life cycle, which is suitable for any type of project.
Fig.2.1 Model of project life cycle
The Table 2.1 below shows the phases, stages and objectives of various projects
Phase Stage Objective
Preparation or 1.Identification of a project idea Initiation
2. Preliminary selection.
3. Feasibility studies.
4. Evaluation and decision making (post-feasibility)
Project and programme goals are identified and analyzed
Project objectives and preliminary global schedule and cost estimates determined
Ideas for possible solutions developed into alternative concepts; desirable technical solutions identified and classified.
Feasibility of envisaged concepts and relevant alternatives assessed, evaluated and categorized.
Decision on adoption of the most promising alternative solution; funding provided.
Contd...
Market Needs
Definition Proposal Feasibility Studies
Planning Estimating Experimenting
Design Development Prototype Testing
Commissioning
Products (Clear) Concepts (Vague)
Time (Years/ Months/ Days)
Implementation or 5. Initial project planning, scheduling, construction designing and engineering
6. Contracting and Procurement
7. Facility construction and pre-operations
Operation 8. Operations (an interface purpose and programmes continuity)
Source: United Nations Publication: The initiation and implementation of Industrial Projects in developing countries—A System Approach
2.4.1 Project Life Cycle Curve
The curve below shows various phases in sequence and approximate effort involved in each phase, though in real life the phases will overlap. It can be seen that effort build up in a project is very slow but effort withdrawal is sharp. While this pattern is true for all projects, the percent of effort in different phases will not be same for all the projects.
The parabolic life cycle curve here represents the cumulative growth at any time. The parabolic pattern of growth, maturity and decay manifests itself in all phases of the project life. The knowledge of characteristic life cycle curves enables a project manager to ascertain the state of health of a particular project at any point of time. If actual progress in any of the sub-phases falls short of the qualifying work for that sub-phase, then that sub-phase is sick and requires treatment. Life cycle curve along with line of balance is very useful for management of project.
By and large all project have to pass through five phases as shown in the figure. Ideally these phases should follow one another in sequence but it rarely happens. It is possible to find the succeeding phase overlap with preceding ones or complete overlap of all phases. This overlapping may in fact be beneficial in compressing over all schedules.
Phases in Project Life Cycle
The five main phases are as follows:
1. Conception phase 2. Definition phase
3. Planning and organizing phase 4. Implementation phase
5. Project clean-up phase
All detailed drawings, specification, bills of materials, schedules, plans, cost estimates and other relevant documents checked and approved.
Appropriate manpower, machinery, manufacturing and construction facilities, utilities, materials documentation and other relevant infrastructure components mobilized and available.
Complete, tested, ‘debugged’ and accepted product, facility or system (optimum performance, time and cost) Product facility or system operational at all times and at optimum cost.
• Market appraisal Surveys, projection
• Technical appraisal
Product mix (Optimum in nature), Capacity / Plant size for entire plant and equipment, Process of manufacture, Engineering know-how and technical collaboration
• Financial appraisal
Reasonableness of estimate of capital cost, Reasonableness of estimate of working results, Adequacy of rate of return (ROI: Return on Investment), Sources of finance, appropriateness of financing pattern, Evaluation of financial viability
• Economic appraisal
Economic rate of return, Effective rate or protection, Domestic resource cost, SCBA (Social Cost Benefit Analysis), Risk/Sensitivity analysis
• Managerial appraisal
Resourcefulness, Sound understanding of project, Implementation schedule:
Clears some ambiguities of risk involved in going ahead in clear terms which helps in decision of accepting /dropping at this stage itself, Commitment
• Environmental
Safeguard against damage, restoration measures
3. Planning and organizing phase
This phase effectively starts after definition but in actual practice it starts immediately after conception. Generally organizations may not formally identify this phase because of overlap.
However this phase may be marked by preparation of Project Execution Plan. Following activities are mainly involved:
• Project infrastructure and enabling service.
• System design and basic engineering package.
• Organization and manpower.
• Schedules and budget
• Licensing and government clearance.
• Finance.
• Identification of Project Manager
• Design basis, General Condition for Purchase and Contracts.
• Work packaging.
• Site preparation
4. Implementation phase
This phase is marked by execution of project along with its controlling and monitoring.
Major bulk of work (80-85%) of project is done in this phase only, so people want this phase to start early and finish in earliest possible time. There as is greater need for co-ordination, monitoring and control with application of all techniques of project management in this phase.
This phase itself being more or less the whole project, every attempt is made to fast track i.e. overlap the varying sub phases such as engineering, procurement, construction and commissioning to maximum extent (or) parallel running of phases. Fast tracking can be improved