Project Evaluation Techniques

1. Project Evaluation Techniques
By
Dr.Venkateswarlu Gogana

2. To Do
• If Optimistic Time of activities A, B, C, D and E is 9, 4, 7, 6 and
16 days. Pessimistic Time of activities A, B, C, D and E is 14, 12,
10, 16 and 30 days whereas Most likely time of activities A, B,
C, D and E is 12, 8, 9, 9 and 20 days respectively. Predecessor
of activities C, D and E is A, B and B respectively. What is the
expected duration for the project and Critical Path?

3. Profitability Index (PI) or Benefit-Cost
Ratio
• A benefit-cost ratio (BCR) is an indicator used in cost-
benefit analysis to show the relationship between the
relative costs and benefits of a proposed project,
expressed in monetary or qualitative terms. If a project
has a BCR greater than 1.0, the project is expected to
deliver a positive net present value to a firm and its
investors.
• Profitability Index is a ratio of discounted cash inflow to
the discounted cash outflow. Discounted cash inflow is
our benefit in the project and the initial investment is
our cost, which is why we also call it benefit to cost
ratio.

4. Operational steps
1. Find the expected cash inflows of the project
2. Find the cash outflows of the project (Initial
Investment + any other cash outflow)
3. Decide an appropriate discount rate
4. Discount the expected cash inflows using the
discount rate
5. Discount the future cash outflows and add to
initial investment
6. Divide step 4 by step 5

5. Example

7. Goals Achievement Technique
• A Process of determining appropriate future action by
utilizing scarce resources in such a way as to maximize
the attainment of ends held by the system
• Basic approach is to determine the extent to which
alternative plans will achieve a predetermined set of
goals and objectives. The progress towards the
specified objectives represent respectively the
advantages and disadvantages with alternative plan.
• This is an exante approach i.e, appraisal performed
before the selection and implementation of the final
plans.

8. Case
• Objectives
• 1) to minimize journey to work cost
• 2) to maximize residential amenity
• 3) to maximize provision of services
• Zones Chosen: 3
• Matrix A: Zone X Objective = Extent of achieving objective
• Matrix B: Zone X Policy = Extent of application of policies in each zone
1 2 3
1 12 12 6
2 15 10 12
3 5 8 8
1 2 3
1 10 7 5
2 4 5 1
3 3 5 11
Matrix Objectives
Zones
Matrix Objectives
Zones

9. • Matrix C: (A X B)
• Goal X Policy = Extent of satisfying the objective by each of the
alternative policies
• = (Goal X Zone) X (Zone X Policy)
1 2 3
1 195 184 180
2 184 174 158
3 132 142 130
Policy
Objective
• Matrix D: Weighing values are applied to objectives as the desire targets
by different groups of decision takers
1 2 3
1 1 1 1
2 2 1 2
3 3 2 1
Weighatge
Objective

10. • Matrix E (C X D)
• Policy X Desire target as weighted objectives
• =( Policy X Objective) X (Objective X weights)
1 2 3
1 959 643 695=2297
2 950 642 674=2274
3 936 548 576=2060
Weighted Objectives
Policy

11. Operational steps of Goals
Achievement Technique
• The relative importance of objectives are established by assigning a
set of numerical values
• The level of achievement of plans are estimated for each objective
interim
• Weighted by the respective values of the objectives, presented in a
matrix
• The relative weighatge set is prepared by the groups of different
classes of decision takers and representatives of different desire
targets who have given to put opinion to arrange the objectives in
preference basis in regard to quantify the qualitative aspects and
different inclinations
• These are then summed up to give an overall index of objective
achievement for each plan
• Finally this index value would be adjusted to take account of equity
of the resulting distribution of gains and losses, giving the
conclusion of the evaluation.

12. merits and demerits of Goals
Achievement Technique
• Merits
– Quantify the qualitative aspects
– Helps to take decision
– Mutual agreement
• Demerits
– Desires of the communities and groups are not taken
into account
– Lack of stated principles of Plan assessment
– Lack of rationality in selecting the numerical
– Doesn’t help in preparing a new plan

13. Thank You