1. Project Management
What is project ?
• an individual or collaborative enterprise that is carefully planned to achieve a
particular aim.
• A project is any undertaking, carried out individually or collaboratively and
possibly involving research or design, that is carefully planned to achieve a
particular aim
What is Project Management ?
• In project management, a project consists of a temporary endeavor undertaken to
create a unique product, service or result
• Another definition is a management environment that is created for the purpose of
delivering one or more business products according to a specified business
case, Projects can also be seen as temporary organizations.[
2. • Project management involves the planning and organization of a
company's resources to move a specific task, event, or duty towards
completion. It can involve a one-time project or an ongoing activity,
and resources managed include personnel, finances, technology,
and intellectual property.
• On a very basic level, project management includes the planning,
initiation, execution, monitoring, and closing of a project.
• Many different types of project management methodologies and
techniques exist, including traditional, waterfall, agile, and lean.
• Project management is used across industries and is an important part
of the success of construction, engineering, and IT companies.
3.
4. Characteristics of a Project
• Projects Are Bound by Time : As we have already seen, projects are temporary in nature. It means
that all projects have defined start and end times within which the project concept is birthed, planned,
executed, and delivered. Once project objectives have been met, the project comes to a close. In
addition to the time resource, projects are also bound within the constraints of scope, quality, and cost.
Project goals are thus formulated within the available resources.
• Projects Are Purposeful: The Project Management Institute (PMI) defines a project as a pool of
human and non-human resources in a temporary undertaking to achieve a specific purpose.
Projects are initiated to accomplish specific objectives against the available resources. After the project’s
purpose has been achieved, a project will be brought to a close. The insights that have been drawn from
it are documented for reference. As the project progresses through the predefined phases, monitoring
and evaluation are done to ensure that the project’s cause for existence and objectives are fulfilled
accordingly.
• Projects Progress Through a Life Cycle to Accomplish Goals: The project life cycle represents the
different phases that a project goes through from start to completion. All projects typically go through
four phases which are:
1. Initiation
2. Planning
3. Implementation
4. Closure
Just as projects are limited to available resources, different phases in a project should have resources
allocated to them in advance. A project’s requirements may change, which is bound to impact the
resources allocated to it. For this reason, project managers ought to ensure that the project is practically
flexible to accommodate changes and still remain viable.
5. • Projects Are Unique: By PMBOK Guide standards, projects are temporary and
undertaken to create a unique project service or result. Projects are unique in
purpose, goals, location, structure, resources, activities, and other project variables
to make each project different from the others.
• Projects Are Channels Used to Venture Into the Unfamiliar: Every project has
a level of risk and uncertainty. It is because not much is known about the outcome
of activities through the project life cycle until they are actually executed. Hence,
projects are usually based on projections of outcomes. However, the level of risk
differs from one project to another. This will depend on how well the project is
planned and steered through the project life cycle phases, resources available, or
the toolset adopted to execute the project, among other factors.
• Projects Require Cross-Departmental Collaboration: Projects require teams or
individuals with different skills, roles, and responsibilities in various departments
to collaborate to achieve a common purpose or solution. Collaboration presents
immense benefits in project management as it pools together valuable ideas, skills,
and expertise needed to deliver value.
• A Project Is a Single Entity: Even though a single project will bring together
diverse skills, functions, roles, participants, and even disciplines, it remains a
single entity. This is because all these components unite towards achieving the
project goals.
8. BMRED
6 Main Types of Need-Based Projects | Project Management
Type # 1. Balancing Projects:
• There are situations when the production process in a plant passes through different stages
and/or through different machineries. The maximum production at a particular stage (or by a
particular machine) is the ultimate optimum production of the plant as a whole. This particular
stage may be called the ‘Key Factor’ with respect to the volume of production.
• It may also be noted that installation of additional capacity and/or additional machineries at
that particular stage—within the entire chain of production process—would increase the plant’s
total volume of production.
• In reality, the capacities of the different stages in the production centers are not harmonized
and lesser production of some components at some stage is limiting the volume production of
ultimate finished product.
• Under this situation, when the organisation likes to optimise its business by increasing the
volume of production of the said finished products, the organisation needs to increase the
production capacity of the particular stage/machineries which was the ‘key factor’ for the
limitation of the production volume. A project is drawn for the installation of additional capacity
in the key factor area.
• Such a project for augmenting/strengthening the capacity of a particular area or areas within
the chain of entire production plant—so that the production capacity of all the production
centres within the plant is harmonised—is called “Balancing Project”.
9. • These projects are undertaken to remove the underutilization of capacity of certain production
centres as the volume of ‘input’ to such centre is not to the level of its capacity.
• ADVERTISEMENTS:
• Accordingly, the project, as such, optimises the production, reducing inefficiency in the production
plant and thus increases the profitability.
• An extension of the Balancing Project is ‘Integration’ of the production; such integration can be
‘backward’ as well as ‘forward’ as illustrated hereinafter.
1 Balancing Project with Backward Integration:
• An organisation procures materials and components to be consumed in the process of
manufacturing a finished product.
• The organisation finds that:
• i. The supply of some components is irregular in nature and not to the level (volume- wise) of its
plant’s capacity. At the same time, it is uneconomic to increase the volume of procurement from
different sources. This situation is hampering the regular manufacture of the ultimate finished
product in its plant and/or
• ii. The long lead time for supply of certain costly basic components requires some components in
the store at a very high inventory level. Which means large inventory carrying cost, and/or
• iii. The supplier of such components commands undue large profit and thus erodes the profitability
of the organisation itself.
10. • Under this situation, the organisation looks for installation of capacity in its own
plant for the production of such components primarily for its own captive
consumption and, thus, brings in a harmony of the plant capacity utilisation. No
doubt this increases the efficiency in production and profitability of the
organisation.
• A project for installation of capacity to manufacture components etc., as
mentioned above, for its own captive consumption is called Balancing Project
with Backward Integration.
• The project shows the necessary investments for the installation of the capacity
within its chain of production process, to produce such components, including the
required machineries, space cost etc. as against the monetary benefits derived from
manufacturing the components in its own plant instead of procurements from
external suppliers.
11. 2. Balancing project with forward integration:
• There may be a situation where a company would like to install
additional capacity for further processing of its currently produced
finished products. The new capacity to install should be in balance
with the volume of the finished products as output of the present plant.
• In such case, the company with the aim of further value additions and
growth (in sales turnover) as well as in profitability is to prepare a
balancing project with forward integration. Of course, the project can
be implemented with a thorough market research, satisfying the
possibility of selling the proposed ultimate product.
12. Type # 2. Modernisation Project:
• We find a situation when an organisation is carrying out its activities with its plant setup long back. As a
result, while the company was running efficiently and profitably in the past, it started facing problems in its
plant leading to erosion of its profitability.
• This is mainly because:
i. The old age of the plant causing very high maintenance cost and increasing breakdown;
ii. The modernisation elsewhere in the plants for the same industry (and obsolescence of its own plant) is
creating difficulties in competition.
• This scenario was faced by the steel manufacturing industry in USA when steel industry was referred to as
“sunset industry”. In recent years, new, cost effective steel manufacturing units in the United States have
again become globally competitive. This situation was apprehended years back by Tata Iron and Steel
Company in India (TISCO) and the company undertook a massive modernisation project divided into 4
phases.
• Phases I, II and III have already been completed and the company undertook the Phase IV modernisation
programme in 1996 which should double the capacity of hot rolled coils and triple the output of bars and rods,
thus raising the overall capacity of the plant to 3.2 million tonnes of saleable steel per annum.
• No doubt, with the lowest ore costs and own captive mines, together with the modernisation, the company’s
output should be extremely competitive.
• The modernisation projects are aimed at the improvement of the plants and process (by new machineries, new
techniques and process) and are not meant for changes in the line of activities / products.
• The National Textile Corporation (NTC) has been suffering losses due to various reasons including
obsolescence of machineries. The government has approved, in July 1996, a modernisation project of Rs.
2,006 crores to modernise 79 mills and restructuring of 36 unviable units.
13. Type # 3. Replacement Project:
• An organisation carrying out its manufacturing activities in its plant may face some
problems with some machinery installed in the plant. The situation arises due to
ageing, wear and tear leading to break-down, and lower output. Mounting up of such
problems even lead to a situation where the maintenance costs become too high and
uneconomic and, at the same time, a reduction in the volume of output.
• In such a situation, the organisation must consider replacing the particular
machine/machines causing such problem.
• By ‘replacement’ in such a situation we mean that the assets currently in use is
replaced by a new one with almost the same capacity (as the old one being replaced)
and does not include new machine with much larger capacity as, otherwise, it would be
a type of ‘expansion project’ and not a ‘replacement project’.
• The management implements the replacement project, as such, with the expectation to
reduce the cost of maintenance of the old machine, get rid of the hindrances to smooth
flow of production and, thus, maintain the scheduled delivery to customers.
• This type of project is generally cost based and does not have enough scope to estimate
additional revenues from the projected investment. The appraisal of the project is made
with the expected benefits from such investment mainly in the area of saving the
maintenance cost and achieving the sales target by timely deliveries.
14. Type # 4. Expansion Project:
• An organisation carrying out certain volume of activities may like to increase its volume
of activities with the same products or services and grow. When such an organisation
intends to install extra capacities by adding, inter alia, new set of machineries etc. for
larger volumes, the project for such investments is called Expansion Project.
• The expansion project is undertaken primarily for the growth of the organisation with
confidence that the organisation is likely to maintain its market share in the estimated
increase in the market size, or, that the organisation is driving for an increase in the
market share.
• The expansion plan, as such, can be achieved by one or more of the following steps:
i. By establishing additional capacity in its plant and thus increase its volume of output;
ii. By acquisition of another organisation relating to the same industry and
iii. By modernisation of its plant, which may also include installation of capacity within the
plant to boost the volume of production.
15. • Examples of such expansion:
(a) A leading industry for batteries with Rs. 360 crore turnovers is in the process of its
expansion projects:
(i) For batteries in the two-wheeler segment with an expansion project of Rs. 35 crore to raise the
capacity from 8, 00,000 batteries a year to 20, 00,000 at the end of 1996; and
(ii) In the automotive segment, with a project cost of Rs. 65 crore to expand the capacity from 2.2
million to 3.8 million in 1997-98 and then to 5 million by 1998- 99.
(b) A leading company in Tea with sales turnover of Rs. 519 crore is in the process of
investment for its expansion projects by:
• (i) Acquiring two plantation estates in Assam and one in Dooars; and
• (ii) Acquiring a group of 20 estates in Sri Lanka in partnership with a Sri Lankan organisation.
• (c) A large paper and boards manufacturing company, with a sales turnover of Rs. 156 crore in
1995-96 has embarked upon a major Expansion/Modernisation Project to double its production
capacity from 60,000 tonnes per annum to 1,20,000 tonnes per annum.
16. Type # 5. Diversification Project:
• The project initiated by an organisation with the idea of carrying out new activity, a new
business dealing with new products/services in addition to its existing activities, is known
as Diversification Project.
• It must be ensured that the new products/services are fully marketable by the organisation.
Type # 6. Rehabilitation/Reconstruction Project:
• There may be a situation when a large organisation has for some years incurred loss and
the accumulated loss have exceeded the company’s Shareholders’ Fund, which leads to a
negative Net Tangible Asset (NTA). The company, in such case, is declared sick.
• Detailed scrutiny of the company’s operation may show that the company has well-
equipped plant, a good product and there is also a good market for such a product but the
company is suffering losses due to continuous increased borrowings leading to
abnormally high finance cost. In such cases, the company also faces acute cash crunch.
• Under this situation, the company may find a project by completely changing the existing
financial structure. The company or the project owner draws a project—Rehabilitation-
cum-Reconstruction project—which is discussed with the Board of Industrial and
Financial Reconstruction (BIFR).
17. • What Is a Cost-Benefit Analysis?
• A cost-benefit analysis is a systematic process that businesses use to analyze
which decisions to make and which to forgo. The cost-benefit analyst sums the
potential rewards expected from a situation or action and then subtracts the
total costs associated with taking that action. Some consultants or analysts also
build models to assign a dollar value on intangible items, such as the benefits
and costs associated with living in a certain town.
• A cost-benefit analysis is the process used to measure the benefits of a decision
or taking action minus the costs associated with taking that action.
• A cost-benefit analysis involves measurable financial metrics such as revenue
earned or costs saved as a result of the decision to pursue a project.
• A cost-benefit analysis can also include intangible benefits and costs or effects
from a decision such as employees morale and customer satisfaction.
• More complex cost-benefit analysis may incorporate sensitivity analysis,
discounting of cashflows, and what-if scenario analysis for multiple options.
• All else being equal, an analysis that results in more benefits than costs will
generally be a favorable project for the company to undertake.
18. • Social CBA
• Social cost-benefit analysis is an extension of economic cost-benefit
analysis, adjusted to take into account the full spectrum of costs and
benefits (including social and environmental effects) borne by society as a
whole as a result of an intervention. However, to compare like-for-like these
different types of costs and benefits with economic costs and benefits, they
must first be monetarily valued. Once all impacts are translated into the
same metric, then the condition for a project or intervention to be
undertaken is that the sum of economic, social and environmental benefits
outweighs the sum of economic, social and environmental costs.
19. • In general, an SCBA leads to the following results:
• Integral overview of all social effects of a project (or programme). In the SCBA, all relevant
advantages and disadvantages of an (investment) project are identified and quantified. These
effects are also ‘appreciated’ so that they can easily be compared with each other. Effects that
cannot be expressed in monetary terms are always stated separately and clearly described in an
SCBA.
• The analysis focuses on the distribution of the social costs and benefits of a project. In other
words, which parties benefit from it; but also who may be inconvenienced by it. As in the case of
infrastructure projects, for example; these can lead to inconvenience for local residents, while
the benefits of such projects accrue to other parties involved, such as road users. In addition, it is
important whether the effects are regional or, in particular, national.
• Comparison of different alternatives of the project in question. The cost-benefit analysis is
eminently suitable for clearly comparing different project alternatives so that a trade-off between
different project alternatives is also possible.
• Identifying any uncertainties and risks. The SCBA takes into account possible economic
uncertainties and risks
The way in which the process in the execution of an (M)CBA is shaped can also contribute to a
high degree of consensus and support among all stakeholders of a project.
20. • What Is Social Cost-Benefit Analysis In Project Management?
• The primary goal of all businesses is to get maximum return on investments. Thus, the
promoters prefer to assess commercial viability. However, some ventures may not give
appealing results for business profitability, so such programs are executed because they
have social consequences. These are infrastructure works, including roadway, rail,
bridges, and certain other construction works, irrigation, electricity initiatives, etc., that
have a major role in socio-economic concerns instead of merely commercial prosperity.
Therefore, such initiatives are assessed for the net socio-economic advantages and cost
control that is nothing other than the national survey of potential socio-economic costs.
• So, SCBA, often known as Social Cost-Benefit Analysis in project management, has
become a tool for effective financial evaluation. It is an approach to assessing
infrastructure investments from a social (or economic) perspective. Get to know more
from PMP training, which is the most prominent credential in project
planning worldwide.
• What is a social cost-benefit analysis? It is a technique used for determining the value of
money, specifically public investments, and it is becoming extremely popular. In addition,
it helps in decision-making regarding the numerous parts of the organization and closely
related project design programs.
21. • Benefits of SCBA in Project Management
• Social cost-benefit analysis in project management enables a complete comparison of several project options.
This is not merely a financial concern. Even so, an SCBA recognizes non-financial consequences as well. For
instance, consider the effects of increased accessibility on the environment, the economy, and other factors.
• Social cost-benefit analysis helps governments to pursue innovative initiatives that benefit all, not just a
selected few. Additionally, it aids in the entire development of an economy by assisting in decision-making
that increases job, investment, savings, and consumption, increasing a country's economic activity.
• Social cost advantages can be used for both investments. Thus, public investment is vital for a developing
nation's economic progress.
• 1. Market Instability
• A private corporation would evaluate a deal based on productivity and relevant market prices. However, the
government must consider additional variables. Determining social costs in the event of market inefficiency
and when market pricing cannot specify them. These hidden social costs are referred to as shadow prices.
• 2. Investments & Savings
• A venture that results in increased savings is considered an investment in a market.
22. • 3. Income is distributed and redistributed
• The initiative should not lead to revenue accumulation in the control of a few and the
distribution of income.
• 4. Career and Living Standards
• The impact of a program on employment and level of livelihood will also be considered.
Therefore, the contract should result in a rise in employment and living standards.
• 5. Externalities
• Externalities can be detrimental and advantageous to an enterprise. As a result, both
impacts must be considered before approving a deal. For example, positive externalities
can take the shape of technological advances, while negative externalities might take the
form of rapid urbanization and ecological degradation.
23. • 6. Subsidy and Taxation
• Taxation and subsidies are treated as expenses and revenue, respectively. However, taxation
and subsidy are regarded as transfer payments for social cost-benefit analysis.
• What is the scope of SCBA?
• SCBA's purpose is to establish the financial benefits of each venture in perspective of shadow
prices because initiatives impact people's savings and investments and the development's
impact on the revenue sharing in society. Additionally, it is critical to consider how certain
factors like employment and self-sufficiency will be achieved if the strategy is delivered.
• SCBA can be used to engage both in the public and private sectors.
• 1. Public investment: conducting social cost analysis for economic infrastructure
development is critical for the developing world. When the national government contributes
to shaping that country's economy, it is essential to analyze the development's social impact.
• 2. Private investment: Evaluating the social impact of private development initiatives is vital
as federal and quasi-government authorities authorize these initiatives.
24. Economic Rate Of Return (err)
• Interest rate at which the cost and benefits of a project, discounted over its
life, are equal. ERR differs from the financial rate of return in that it takes
into account the effects of factors such as price controls, subsidies, and tax
breaks to compute the actual cost the project to the economy.
• An ERR provides a convenient metric, produced from a cost-benefit
analysis, that compares the economic costs and benefits of a program. In
MCC’s cost-benefit analyses, the costs of a project include all necessary
economic costs—financial expenses covered by MCC and other parties, as
well as opportunity costs of non-financial resources expended. Benefits
include the increased income of a country’s population or the increased
value-added generated by producers (firms and households) that can be
attributed to the proposed project. [Value-added is defined as the value of
gross production (or sales) minus the cost of intermediate inputs produced
(and purchased from) outside the firm.]
• Economic Rates of Return (ERRs) provide a single metric showing how a
project's economic benefits compare to its costs
25. Calculating ERRs
Every ERR calculation considers two scenarios:
• The expected outcome with the project; and
• The expected outcome without the project.
Scenario 1:
Expected Outcome with Project
• This scenario reflects the increases in income or value-added generated by the
proposed program, as well as the full costs related to the program.
Scenario 2:
Expected Outcome without Project
• The second scenario, called the counterfactual, reflects an estimate of what is likely
to happen in the future if the project does not take place. While this may be
considered a “status quo” scenario, the estimation of future economic outcomes
without the project also accounts for dynamic trends. For example, a growing
economy would be expected to continue on its recent (or projected) growth
trajectory without the project, and private investments would likely be made. In
other cases, investments could be expected to decline in the counterfactual, for
example if electrical outages would be expected to increase without the project.
26. • ECONOMIC RATE OF RETURN EXAMPLE
• Consider a company that invests $100 into three different projects.
Each project ends up being worth $300 at the end of its life, meaning
each project would have the same ROI. However, if project X returned
$300 in two years, project Y returned $300 in five years and project Z
returned $300 in 10 years, then that’s a significant difference in project
performance that isn’t necessarily captured in the ROI. This is why
businesses use the internal rate of return as well.