Project Management:

Text Book: Projects, by Prosanna Chandra

 Definition
 What is Project Management?
 Differences between a project and a program
 Types of Projects
 Project Cycle given by World Bank
 FACETS OF PROJECT ANALYSIS
 Feasibility Study Report and its Content
 Advantages of project management (importance of PM)
 Limitations of project management (challenges of PM)
Definition
 Simply stated, a project presupposes commitment of task(s) to be performed
within well-defined objectives, schedules and budget.
 I. M. D. Little and James A. Mirrlees on their book–“Project Appraisal and
Planning for Developing Countries” defined as “the project means any
scheme or part of scheme for investing resources which can reasonably be
analyzed and evaluated as an independent unit”
 More specific, a project is a specific activity on which money is spent in the
expectation of returns, there is therefore a specific starting point, a specific
end point and it is intended to achieve a specific objective. In addition, a
project has a specific geographic location and would serve a group of
population. The project will have specific authority to implement it.
In addition, a project has a specific geographic location and would serve a group
of population. The project will have specific authority to implement it.
What is Project Management?
“Project Management is the skills, tools and management processes required to
undertake a project successfully”.
Project Management is the application of skills, knowledge, tools and techniques to
meet the needs and expectations of stakeholders for a project
Project Management comprises:
1. A set of skills. Specialist knowledge, skills and experience are required to
reduce the level of risk within a project and thereby enhance its likelihood of
success
2. A suite of tools. Various types of tools are used by project managers to
improve their chances of success. Examples include document templates,
registers, planning software, modeling software, audit checklists and review
forms
3. A series of processes. Various management techniques and processes are
required to monitor and control time, cost, quality and scope on projects.
Examples include time management, cost management, quality management,
change management, risk management and issue management.
Differences between a project and a program
A program is a vehicle for progressing, coordinating and implementing an
organization’s strategy, specifically by linking an often complex combination of
business-as-usual activity and new projects all focused on the delivery of a defined
objective.
Project Program
1. Project has relatively few 1. Program has many sponsors.
sponsors. 2. Program may be a corporate
2. Project will be a contained disaster if it fails.
disaster if it fails. 3. Program is focused on a business
3. Project is focused on a objective.
deliverable. 4. Program will deliver benefit in
4. Project will deliver benefit after phases.
completion. 5. Program has a long-term life
5. Project has a short- to medium- span.
term life span. 6. Program is always high risk.
6. Project has variable risk. 7. Program has a wide scope.
7. Project has a focused scope. 8. Program includes business-as-
8. Project excludes business-as- usual activity.
usual activity
Types of Projects
Business Projects
1. R & D Project
2. Setting up/Launching a new project
3. Business promotion or development project
4. Expansion of existing project
5. Breeding mix
6. Modernization or change in technology
7. Back ward linkage project/Supporting project
8. Balancing of process of factory
9. Product line development/ Rationalization/ Selection of product mix
10. Replacement
Social welfare projects
1. Safety or Emergency
2. Infra structural projects
3. Merit project/goods
4. Social project
5. Structural or Sectorial adjustment project
Planning Commissions of Bangladesh Classification
X – Self-sustaining Project
Y – Productive but Non-revenue Earning Project
Z – Purely Welfare Project
Project Cycle given by World Bank
In respect of developmental projects, the World Bank Procedure goes through the
following phases:
 1. Identification: Selection by the Bank and borrowers of suitable projects that
support national and sectorial development.
2. Preparation or formulation: It includes technical, organizational economic
and financial aspects of the proposed project.
3. Appraisal: The Bank conducts field investigation in respect of the technical,
institutional and financial/economic aspect of the project and estimates costs
and benefits of the project over the lifetime of the project.
4. Negotiations: At this stage, discussions take place between the borrowing
country and the World Bank. The agreements reached are codified in loan
documents. After the approval of a loan an agreement is signed.
5. Implementation and supervision: Implementation of the project is the
responsibility of the borrowing country and the World Bank supervises the
implementation.
6. Evaluation: World Bank officers evaluate the project and prepare their
performance audit. Evaluation provides lessons of experience which are
incorporated into subsequent identification, preparation or appraisal work.

FACETS OF PROJECT ANALYSIS

The important facets of project analysis are:
1. Market analysis
2. Technical analysis
3. Financial analysis
4. Economic analysis
5. Ecological analysis
6. Organizational analysis
7. Managerial analysis

Market Analysis
Market analysis is concerned primarily with two questions:
 1. What would be the aggregate demand of the proposed product/service in the
future?
2. What would be the market share of the project under appraisal?
To answer the above questions, the market analyst requires a wide variety of
information and appropriate forecasting methods. The kinds of information required
are:
 Consumption trends in the past and the present consumption level
 Past and present supply position
 Production possibilities and constraints
 Imports and exports
 Structure of competition
 Cost structure
 Elasticity of demand
 Consumer behavior, intentions, motivations, attitudes, preferences, and
requirements
 Distribution channels and marketing policies in use
 Administrative, technical, and legal constraints
Technical Analysis
Analysis of the technical and engineering aspects of a project needs to be done
continually when a project is formulated. Technical analysis seeks to determine
whether the prerequisites for the successful commissioning of the project have been
considered and reasonably good choices have been made with respect to location,
size, process, etc. The important questions raised in technical analysis are:
 Whether the preliminary tests and studies have been done or provided for?
 Whether the availability of raw materials, power and other inputs has been
established?
 Whether the selected scale of operation is optimal?
 Whether the production process chosen is suitable?
 Whether the equipment and machines chosen are appropriate?
  Whether the auxiliary equipment and supplementary engineering works have
been provided for?
 Whether provision has been made for the treatment of effluents?
 Whether the proposed layout of the site, buildings, and plant is sound?
 Whether work schedules have been realistically drawn up?
 Whether the technology proposed to be employed is appropriate from the
social point of view?
Financial Analysis
Financial analysis seeks to ascertain whether the proposed project will be financially
viable in the sense of being able to meet the burden of servicing debt and whether
the proposed project will satisfy the return expectations of those who provide the
capital. The aspects which have to be looked into while conducting financial analysis
are:
 Investment outlay and cost of project
 Means of financing
 Cost of capital
 Projected profitability
 Break-even point
 Cash flows of the project
 Investment worthwhile ness judged in terms of various criteria of merit
 Projected financial position
 Level of risk
Economic Analysis
Economic analysis, also referred to as social cost benefit analysis, is concerned with
judging a project from the larger social point of view. In such an evaluation the focus
is on the social costs and benefits of a project which may often be different from its
monetary costs and benefits. The questions sought to be answered in social cost
benefit analysis are:
  What are the direct economic benefits and costs of the project measured in
terms of shadow (efficiency) prices and not in terms of market prices?
 What would be the impact of the project on the distribution of income in the
society?
 What would be the impact of the project on the level of savings and investment
in the society?
 What would be the contribution of the project towards the fulfillment of
certain merit wants like self-sufficiency, employment, and social order?
Ecological Analysis
In recent years, environmental concerns have assumed a great deal of significance—
and rightly so. Ecological analysis should be done particularly for major projects
which have significant ecological implications like power plants and irrigation
schemes, and environment-polluting industries (like bulk drugs, chemicals, and
leather processing). The key questions raised in ecological analysis are:
 What is the likely damage caused by the project to the environment?
 What is the cost of restoration measures required to ensure that the damage to
the environment is contained within acceptable limits?
Organizational analysis
The important questions raised in organizational analysis are:
 Is the organizational structure of the project sound to carry out and to operate
the project successfully?
 Has the organizational structure has devised in a way that inter-departmental
co-ordination becomes easy
 Would outside help be needed?
Managerial analysis
The importance of sound management for the success of a project needs no
elaboration. Managerial aspects concerned with the following questions:
 What is the quality of the proposed management? Is it likely to be adequate to
ensure performance not inferior to that to be expected from the appraisal?
 Whether existing procedures are adequate to control and direct the project?
  Do the top managerial personnel possess sufficient experience in the line of
production in which the project falls?
 Has the supervisory staff been chosen with exclusive consideration of
expertise and ability?
 Has due balance been maintained in the employment of supervisory staff and
production workers?
Feasibility Study Report and its Content
A feasibility study report of any investment proposal is meant to provide the
information that is required for purposes of appraising the proposal. It is a very
detailed study in which all elements are presented in such a way that it helps the
decision makers to decide whether the projects should be taken up, postponed or
cancelled altogether.
Contents of Feasibility Report:
General Information:
 Examination of public/Govt. policy with respect to the industry.
 Past performance of the industry.
 The description of the type of industry
 Information about the enterprise submitting the feasibility report.
A. Preliminary Analysis of Alternatives
1. Present data or give statistical report on the gap between demand and supply
for the outputs which are to be produced.
2. Data on the capacity that would be available from projects that are in
production or under implementation at the time the report is prepared.
3. A complete list of all existing plants in the industry, giving their capacity and
level of production actually attained.
4. A list of all projects for which license have been issued.
5. A list of all proposed projects.
6. All options that are technically feasible should be considered. e.g. in case of
Textile Industrial Project – Spinning, Dying, Finishing etc.
7. Information about the location of the project
8. An account of the foreign exchange requirement should be taken.
B. Project Description:
1. A brief description of the technology/process chosen for the project.
2. Information relevant to determining the optimality of the location chosen
should also be included.
3. Assessment of the environmental effects of the project on specific points, i.e.
a) Effect on the people of the site of the project.
b) Effects on water, air, and land pollution.
c) Other environmental disruption.
4. A list of important items of capital equipment and also a list of operational
requirements of the plant.
5. Requirements of water and power i.e. Fuel consumption.
6. Requirements of personnel.
7. Information about organizational structure and transport costs etc.
C. Marketing Plan
This stage includes the following:
1. Data on the marketing plan i.e. information about demand and supply.
2. The methods and the data used for making estimates of domestic supply
and selection of the market areas.
3. Analysis of past trends in prices.
D. Capital Requirements and Costs:
 Information about total capital requirement.
 Information on all items of cost.
 Operating Requirements and Costs
 Information about all items of operating costs
E. Financial Analysis
This is done to assess the financial viability of the project. It includes——
 A pro forma balance sheet and Income Statement for the project.
  Depreciation method and rate should be mentioned.
 Income tax rebates for priority industries, incentives for backward areas etc.
should also be included.
 The sensitivity analysis.
F. Economic Analysis
 Social profitability analysis — for this it is needs to made some adjustment
i.e. correction in input and costs in terms of shadow price to reflect the true
value of foreign exchange, labor and capital.
 Impact of project operations on foreign trade.
 Indirect costs and benefits should also be included in the report. If they cannot
be quantified they should be analyzed and their importance emphasized.
F. Ecological Analysis
 In recent years, environmental concerns have assumed a great deal of
significance—and rightly so. Ecological analysis should be done particularly
for major projects which have significant ecological implications like power
plants and irrigation schemes, and environment-polluting industries (like bulk
drugs, chemicals, and leather processing). The key questions raised in
ecological analysis are:
 What is the likely damage caused by the project to the environment?
 What is the cost of restoration measures required to ensure that the damage to
the environment is contained within acceptable limits?
Advantages of project management (importance of PM)
1. PM is indispensable for economic development or growth of a country or an
enterprise.
2. PM ensures effective and efficient resources utilization and management.
3. PM leads to GDP growth.
4. PM leads to increase of per capita income and enhancement of standard of living.
5. PM helps to overcome the problems of time and cost overruns.
6. PM leads to optimum use of available resources.
7. PM should commensurate with national development strategies.
8. PM involves substantial outlay.
9. Cost of prediction error is very high which may lead of bankruptcy and
threatens the existence of project.
10. PM increases international competitiveness.
11. PM is the key to cost management of producing goods and services.
12. PM is an essential condition for getting assistance and loan.
13. PM impacts have been long term and hence has a temporal spread.
14. PM helps to achieve self-reliance in the country.
15. PM is base to implementing national development strategies.
16. PM is a precondition of transfer of technology.
17. PM may lead to a balanced growth of agriculture and industry.
18. Helpful towards exploration of resources, innovations and researchers and
discoveries.
19. Brings not only economic prosperity but also honor and prestige to a nation
because economic prosperity means economic power.
20. Economic prosperity of the country will lead to a capacity to render financial
assistance to other poor and least developed countries.
Limitations of project management (challenges of PM):
1. Lack of clear-cut economic goals and development strategies.
2. Scarcity of skilled manpower for PM.
3. Dearth of economic resources.
4. Absence of will of the government – good governance.
5. Inadequacy of quality manpower and low rate of literacy.
6. Imbalance of development of agriculture and industry.
7. Inadequacy of infrastructural facilities.
8. Paucity of domestic savings and domestic resources mobilization.
9. Development of local entrepreneurs.
10. Growth in export earnings and reduction in import to improve balance of trade
and payment positions.
11. Unacceptable laws and order situation.
12. Lack of incentives and at tractability towards FDI.
13. Too much interference by the government in trade, commerce and industry.
14. Unreliable data bank.
15. Inefficient money and capital market and banking structure.
16. High rate of inflation.
17. Inefficient project planning and appraisal procedures.
18. Unfriendly administrative and bureaucratic machinery.
19. Ineffective and inefficient legal system.
20. Environment pollution and ecological imbalance.
21. Problems of cultural difference, multicultural communications and managerial
behavior.
22. Problem of identifying and measuring cost and benefits of a project including
indirect cost and benefits.
23. Cost of prediction error is very high, mistake in calculating various parameters
for the project will lead to bankruptcy.
24. Irreversibility of projects signifies point of ‘no return’ that is once we start the
project we shall have it carry it out.
25. High political risk.
26. Country risk being very high.
27. Scarcity of foreign exchange reserve, currency valuation policies and balance of
payments position.

Thank You