Kashan Pirzada

What is a Project?

A project is

 complex, unique, one-time effort

 limited by time, budget, resources,
 And performance specifications designed to meet the objectives

Major characteristics:

 An established Objective
 Unique
 Time frame
 Cost

PROJECT MANAGEMENT (PM)

 PM is the process of planning and directing

 Project from its inception to its completion
 Given time, given cost, given end product.

BUT IT MUST BE REMEMBER THAT

 All time and cost are based on assumptions made at the original planning.
 Actual time and cost would vary from estimated ones because of many internal
factors
(Effect individual) and external factor (effects everyone)
 Time, cost and scope (boundaries, limit, and coverage) can be traded off against each
other.
 Human elements are involved.
PM redefined:

PM plans and directs the process of completion of a project to enable it to reach, in the best
possible way and with best possible returns, the intended objective of the project.

Trade OFF
 Inverse relation / Negative correlation

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 Sacrifice one thing for the sake of other.

PROJECT CYCLE
 IDENTIFICATION
APPRAISAL /APPROVAL

 Objectives  Market Appraisal

 Resources  Technical Appraisal
 Business  Financial Appraisal
 Environments  Management Appraisal
EVALUATION  Economic Appraisal
 Social Appraisal
Comparing Estimates With
Actual For:

 Performance
Assessment 
 Accountability &
Responsibility
IMPLEMENTATION

 Time Management
 Cost Management
 Objective Attainment

The importance of Project Management

 Product life is very short

 Global Competition e.g. China bike
 Customer focused
 Organization leaner & flatter
 Knowledge explosion
 Standard way of doing business

Project Management Today, an integrative approach

Effective PM Begins With Selecting And Prioritizing Projects That
Support The Firm's Mission And Strategy.
This Calls for Integration of both Technical and Social Skills

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TECHNICAL SOCIAL
Scope Leadership
WBS Problem Solving
Schedules Teamwork
Resource Allocation Negotiation
Base Line Budget Politics
Status Report Customer Expectation

PROJECT SELECTION
 Financial
 NPV at RRR
 IRR rate
 Payback period

 Non Financial
 Market
 Transfer of technology
 Self sufficient

Three Types of Project

 Must to
 Operational
 Strategic

Project Idea

 Import
 Export

IDENTYFY APPRAISAL

Market Tec. Finance Management Socio-economic

Consumption= Production + Import – Export ± Stock

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Supply = Existing +in the pipeline

Time Series Analysis

IMPLEMENTING PROJECT

 Green Field (new)

 High Cost
 Every thing is new

 Part of Existing set-up

 Low cost
 Easy to start immediately.

FACTORS OF IMPLEMENTING THE PROJECT

 Size of Investment

 Relevance
 Product
 New Technology
 Culture
 Time
 MIS
FACTORS OF CHOICE FORMS

 Resources
 Liabilities
 Control
 Taxation

STRUCTURE

Something made up of number parts that are put together in a particular day. An org structure
defines how job tasks are formally, divided, grouped and coordinated. 1) work specialization
2) chain of command 3) span of control 3) Degree of centralization

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MECANISTIC/PROCESS/FUNCTIONAL MODEL
 High Specialization
 Clear Chain of command
 Right Departmentalization
 Narrow span of control
 High formalization
 Centralization

ORGANIC/PRODUCT/REGIONAL MODEL

 Multifunctional jobs
 Multi Disciplinary jobs
 Cross functional team
 Lateral communication
 Free flow of information
 Wide span of control
 Decentralization
 Low formalization

PROCESS STRUCTURE

ADVANTAGES DIS-ADVANTAGE
Specialization Slow response to change

Low cost due economies of scale Coordination Problems

Internal Check Less innovative
Training for Experts No body exclusively responsible

PRODUCT STRUCTURE

 Forces Coordination Emphasis on Short Run

 Accountability Costly (duplication)

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 No Sharing Problems

 Training for GMs

MATRIX: Are two dimensioned; matrix is the mixture of product & process structure. The
work is done by team and each dep’t give items for making product.

MATRIX STRUCTURE

 One Individual Responsible Dual Subordination

 Specialized Knowledge Excessive Reliance on Team
 Break Barriers

 Training for Strategic Mgr

MODERN\NEW TRENDS –

 Leaner, Flatter And Decentralized Structures

 Multi-Skilled And Multi-Disciplinary Work Force

 Partnership With Key Suppliers (Just-In-Time)

 Out-Sourcing

 Enterprise Resource Planning

 Mass Customerization

PROJECT DEFINATION

 Scope -- Boundaries / limitation

Turn key project: Both construction and operation by one firm and then handover to
the other firm.
BOOT: build own operate and transfer. (Financing is involved)
BOT: build operates and transfers (No financing)

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BT: build and transfer (only construction)

• Express: written, black and white document.
• Implied: Taken for granted eg. ( library book understood to return)

• Functional: definition indicates that in which environment work is to be

done. , like job Description.
• Technical: Features , job specification , qualification, experience

• Change with proper Authority: Its can be particular by anyone.

 Priorities
• Cost
• Time
• Quantity
All three things cannot fulfill same time; we can give them priorities which is the best for this
time. E.g. OHP, 30 Rooms & 10 OHP Abnormal situations, we can give priority to Qty in
this situation.

 WBS: divides the project into 6 layers

• Project
• Sub project
• Groups
• Tasks
• Sub Tasks
• Work Package

E.g. Smoke Control Equipment

________________________________________________ LEVELS

Formalization Develop Deliver Project

______________________________________ Sub Project

Design Build Test Groups

Content of a work package

Detail work Description Boundary wall around University

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Specification 400 running meter, 2m high, G10 Quality

Schedule task mile stones Excavate, 1-june 08, Raising 3 June 08

Budget 240,000 Rupees

Time phased budget Total time 30 days, end 30 June 08

 Project Roll Up: Two things in it Task one side & Responsibility on another
side.

• Summary
• Regular updates
• Feed back of the work
MBE: There is something not exception

MBWA: check by monitoring itself.

Random Differences: Difference in estimates and Actual

Systematic Errors:

• Low standard set:50 is set & actual is 70, 80, 90

• High standard set: 100 is set & actual is 98, 85, 70

 BUDGET
• Capital Budget
• For Fixed Asset
• Large investment
• Long term benefit
• Irreversibility
• Operational Budget
• For Current Asset
• Less investment
• Annual benefit
• Short term
• Easy Marketability

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 Assessment/ Evaluation Technique

a) IRR against bench mark a) Profitability
• Mkt rate of interest b) Liquidity ratio
• Req rate of return c)Efficiency ratio
• Opportunity cost d) Solvency ratio
• Cost of fund
b) NPV at a desire rate of discount
c) Payback against useful life

 Business Risk: Presence of fixed cost, High automatic, high R & D deptt. 1) Dep exp
2) Interest exp. Where manual work is greater than automation than less business risk.
Risk is inherent (Unavoidable).
 Financial Risk: If borrowing than risk but risk is not inherent.
IRR: Reinvest on IRR
MIRR: Reinvest on cost of fund

 ESTIMATION TECHNIQUE
MACRO Top down Approach

1. Consensus method
• Expert opinion
• Delphi opinion
2. Ratio Method
• Input & output (E.g. Kala bagh dam)
• Need Assessment
• Common size ratio
3. Incremental
Actual of the past plus budget your current plan
4. Zero Base Budget
• Start from zero
• Forget the previous budget
• And make new budget according to your need

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5. Base Package Budget

• First give budget for survival
• If manager wants to increase in budget than justify that he can earn or return
more than this.

MICRO Bottom up approach

1. Template Method
In the template method format is given for making budget and we can easily
make the budget on the contrary if we cannot follow the budget might be we can
missed out any of the activity. E.g. I/S format, B/S format, R/E format.

2. Sum of total of individual budget

We can add individual budget & make a budget.

3. Task Analysis
4. Time Series Analysis
We can follow the previous trend

05. Parametric

 THREE ASPECTS OF BUDGET

1. Input ---- Construction material
2. Output ---- Bridge is output
3. Outcome Effectiveness

 LINEAR REGRESSION
In LR straight line graph made, Cause and effect relationship exist Y=a+bx

 CURVI LINEAR
In CL curve shape line is create, Y=a+bx + b1 X1

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Increasing at increase, decreasing at decrease

FOUR TYPES OF RELATIONSHIP

TIMEMANAGEMENTTECHNIQUES

SIMPLE REFINED
1 2 3 4 5

OUTLINES WORK BAR PROJECT CRITICAL

BREAK CHART EVALU ATION PATH
DOW N & METHOD
STRUCTURE REVIEW
TECH NIQUE

PRESENTATION
Activity-On-Arrow
Activity-On-Node
TIME-BASED

Simple
1. Outlines:

An outline or hierarchical outline is a list of related items arranged hierarchically to depict

their relationships. An outline is like a table of contents.

Example:

1. Formalize

1.1 Identify problem

1.2 Specify requirements

1.3 Define solution

2. Develop

2.1 Design

2.2 Build

2.3 Test

3. Deliver

3.1 Accept

3.2 Install

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3.3 Transfer

2. WBS:

3. Bar Chart/Gantt Chart:

Redefined
4. PERT:

• Only time estimate

• First time projects
• Ask the knowledgeable persons to give time-estimates for each activity
CPM:

Network analysis technique used in complex project plans with a large number of activities.

• Both time & cost estimate

• Repeated projects: realistic/deterministic estimates
• There is a track-record or database of previous projects.

Presentation of PERT & CPM

AON (Activity on Node)

ES ID EF • New
FF DESC TF • Software
LS Dur. LF • Finish to start
• Start to start

AOA (Activity on Arrow)

• Traditional
ID Duration ID
ID ID • Only one dependency relationship
ES
ES EE LS
EF LF • Default
• Finish to start

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Delayed Projects

1. Loss of Market.
2. Obsolete –Product machinery.
3. Over investment.
4. Loss of concession.

Critical Path & Non-Critical Path

• Critical path has no safety margin; work is done neck to neck, no flexibility,
longest path
• Non-Critical path has safety margin, flexibility.

Four types of Dependency Relationships

1. Finish – to – Start

B
e.g.
2. Start – toPurchase
– Start
Land
A
Build
B

e.g.
Check resume Paint room Cake

Paint another Cake

Interview
room Decoration

3. Finish – to – Finish

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e.g.
Bus driver Salesman

Bus conductor Backup staff

4. Start – to – Finish

e.g.
Power
breakdown
Generator start

Serve Ice-cream

Demand event

Paint
Time-Phased Budgets do not coincide. A cost estimate is not a budget unless it is time-
phased. TimeMix paintbegins with the time estimate for a project. Time-phased budgets mirror
phasing
how the project’s cash needs (costs) will occur or when cash flows from the project can be
expected.

Budget variances occur when actual and forecast events do

Merge Event/Burst Event

Merg
Ceme e Success

Mixtur
nt or
Event
Sand of
Cement

e
, Sand
Water and
Water
Burst
Event 14
Predecessor
of Mixture Buildi Recepti
Tank
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What’s a resource?
A resource is any factor that contributes to the accomplishment of project activities.

Personnel Space
Equipment Materials
Contractors

RESOURCES PROCUREMENT
• Job Analysis

• Recruitment

• Culture

• Conflicts

(1 out 4ms) Manpower

Job Analysis
Job Description, Duties &

Responsibility Job Specification

• Qualification

• Educational

• Performance Test

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• Physical & mental

experience

Job Evaluation

Commonly use 4 ms 5m 6m
• Man

• Money

• Material

• Machinery

Method
Market
Job Description
• defines What the job does

• a profile of the job

A job Specification
describes what the job demands of those who do it

describes the human factors that are required

Requirements Include:

• Experience

• Training

• Education

• Physical & Mental Demands

Subjectivity:
There is no benchmark or standard, your perception or opinion.

Objectivity
Measurement through an impartial instrument or if you set the criteria of job is objectivity.
E.g. T/F

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Evaluation
Systametic method of appraising worth of each job in relation to other jobs in the same
organization.

Valuation -------------Action------------------- Evaluation

(Pre-Action) ( Post-Action)

• Judgement Historicall

• Assesment feedback

Reality
Emperical evidence
Ranking & Rating
Ranking : on the basis of perception or personal biasness.

Rating : on the basis of their product quality , indiviual specification

RECRUITMENT:

has two sources 1) Internal source: First we check internal teacher for HOD position because
of track record is available.

2) External source: If internally no competent person for specific position than we recruit
externally.

Advantages & Disadvatages of internal & External Recruitment sources.

INTERNAL ADVANTAGES & DISADVANTAGES

• Candidate well oriented Fewert new ideas

• Track Record Office politics & favoritisim

• Lower recruitment cost Disruption of current work

• Motivational aspect May have to be trained

(promotion, growth)

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External advantages & disadvantages of recruitment

• Candidate with new ideas lesser reliable information

• Already trained for Bad impact on exsisting employees

Sourcaes Of Recruitment

1) 1) Agencies 2) Advertising 3) Placement test

What is culture?
Visible culture: customs, clothing, rituals, material culture, physical habits.

Invisible culture-Psychological Structures: thoughts, beliefs, superstitions, values,

expectations and assumptions about what is “normal” or “common sense”.

Conflict: Discord, Dissent, Friction

Functional & Dys functional

Functional : working

Dys functional: Not working or working against the policy of the company (E.g. fan gives
hot air,this is against it purpose.)

Traditional view Contemporary view

• Caused by trouble makers
• Often beneficial
• Bad
• Natural result of change
• Should be avoided
• Can and should be managed
• Must be suppressed
• Inevitable between humans

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PARTIES

Stock holder Stake holder

1. Sponsor

Enterprenuer Develpor Direct Indirect

Project related Community
2. Equity – participants Emoployees Neighbouhood

3. Under- writers Bankers Special interest group

Machinery supplier Religious leader

Insurance companies social & ethnic group
Contractors Envoirmentalist
Indutry related PARASITIC
Raw material supplier Oppourtunist
Consumers Activist

Media

Sponsor: Orignal worker brings idea.

Investor: set a side if project goes in loss.
Parasite: people Create problem at the end time or we say when the project is near to
complishment.
Investment bank: deals with share

Development bank: deals with loan

Discount house: discount your security in present

Venture capital: it is too much risky investment

Difference Between Venture Capital And Ordinary Investment

• high risky calculated risk

• high growth assurance of return

• new ideas

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(2 out of 4ms) MONEY Public Sector

Financial
• PIA
1. Lease
• Railway
Operating
2. Modarba • SSGC

3. Stock exchange
• WAPDA

4. Insurance

Operating
Financial Market

SBP SECP Financial Division

Commercial bank

Private micro finance

NBFI

TECHNICAL ANALYSIS

FINALIZE LIST OF MACHINERY & EQUIPMENT

OFF THE SHELF CUSTOM MADE

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Standard product Bids for making

Easily available Built specially

Operating Lease & Financial Lease

• Transferable if not suit Lease but not return ownership

• Maintainence bearing by owner only investment

Three ways to calculate

I. Statement

II. Graph

III. Formula

MACHINERY PROCUREMENT

TECHNICAL FINANCIAL COMMERCIAL

Production Capacity
Wastage
Operating Costs
Maintenance Cost
Environmental
Consideration

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Validity Of Offer
Delivery Period
Track Record
After Sale Services
Bid Bond
Performance Bond

PRICE
CURRENCY OF QUOTATION
ESCALATION CLAUSE
DAMAGES / INCENTIVES

• Three types of analysis to accept the bid

ABC of inventory
1. A manager cannot watch each & every item.

2. A manager cannot leave all to general staff.

3. As in parteow law, a few items Cost most, so 120 rule

4. All iems classified in A, B & C

5. Manager should wath A leave B & C to staff.

Carring cost: Cost of funds tied up Ordering cost: Cost of preparing purchase order

• Storage • Funds tied up

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• Insurance • Selection
• Up- keeping • Transportation
• Obsolesence • Inspection
• Perception • Un-loading
(Positive correlation) (Negative correlation)
PROCUREMENT SYSTEM

EOQ JIT system

• Ordering cost

• Carring cost

• Re-order point

• Safety stock

Re-order Point : When the quantity on hand of an item drops to this amount, the item is
reordered.
– Lead time X consumption per unit of Lead Time
2 weeks X 500 unit per week = 1,000 units

Safety stocks:
• Stock that is held in excess of expected demand due to variable demand rate and/or
lead time.
– Lead Time from alternative source X consumption per unit of such time.

Just-In-Time Purchasing

Just-in-time (JIT) purchasing is the purchase of goods or materials such that a delivery
immediately precedes demand or use.

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Just-In-Time Production Systems

Just-in-time (JIT) production systems take a “demand pull” approach in which goods are only
manufactured to satisfy customer orders.

Just-In-Time
1. Theoritically no inventory

2. Pus approach: made to stock vs pull approach: made to order (JIT)

3. Interfacing compter with supplier

4. Supplier located in incinity

5. Stable production process.

Major Features of a JIT System

1. Organizing production in manufacturing cells

2. Hiring and retaining multi-skilled workers

3. .Emphasizing total quality management

4. Reducing manufacturing lead time and setup time

5. Building strong supplier relationships.

Resource loading:
Resource loading involves specifying the types and quantities of resources required to
complete each activity in a project

Resource leveling:
• Slip: We potpond the things (within slack on Non critical activity), Eg.
Seminar postpond for 3days)

• Split: break the task in small items(Seminar postpond for 1 day)

• Crash: trade off b/w time and cost.

Direct cost in crashing: It is the cost which is conveniently & traceable for product.

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Indirect cost in crashing: It is the cost which is inconveniently & traceable for
product.

Construction trade off cost

Direct cost has trade off if we want to do work earlier 50,000 – 70,000
Indirect cost/fixed cost is pending cost nop trade off.

STEPS INVOLVED IN CRASHING

1. Identify Critical Path For Both Normal Network Plus Crash Network

2. Calculate Cost Of Crashing per day/ week

Per day cost = crash cost – normal cost/ normal time – crash time
3. Crash the least cost activity (reduce any activity which has atleast cost.)

4. Redraw the network

5. Carry on till crash time

CRASH RULE
1. If two activity have identical per day crash the activity which has
maximum time

2. If time is also equal than check the higher Id.

CONTROL SYSTEM

1. Estimate budget (firsrt)

2. observing performance (second)

• project monitor

• supervision

3. Compare actual performance with standards (third)

4. Taking corrective action (fourth)

1) Establishing Standards (All below words are future orented) what happen in
future

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• Target • Scope ( Limitation)

• Forecast • Budget

• Benchmar (set • Time frame

standards)
• Quality
• Objectives

• Schedules ( Time
frame)

Observation
Formal:
• Report • Industrial Surveys

• Accounts Informal:
• Unobtrusive observation
• Review meeting
(hidden cammeras
• Visits
• Grapevine Filer, create
harasment (Eg. Taliban)

Grapevine: rumor, harasment, (listen & analysis) called grapvine because plant
of which is present as a parasite.

Project Monitor : Just oberve the things and collect the information and not take
any action .

Supervision:You can control the things and take corrective action.

Compare Actual With Standards

• Varianc analysis – Internal = controllable/
avoidable
• Earned value
– Externaln = uncontrollable/
• Deviations Unavoidable

• Reasons • Timing = narrow down the things

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• Location = Elimination • Responsibility = Part of control

who is responsible

Corrective Action

 Adopt

• Feed back for future action

 C hange

– Resources

• Emplouees

• Material

• Machine

– Standards

What’s is more important?

• Knowning where you are on schedul?e

• Knowning where you are on budget?

• Knowning where you are on work accomplishment?

Basic Terms
• BCWS : Budgeted cost of work schedule (SQ x SP)

• BCWP : Budgeted cost of work performed = Earned value (AQx SP)

• ACWP: Actual cost of work performed (AQ x AP)

• BAC : Budget at cost completion

• EAC: Estimate at cost completion

Formulas

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Cost over run: ACWP - BCWP

Time over run: BCWS –BCWP/ Daily work

Total cost = ACWP + Further cost

Further cost = ACWP/each month area x Remining area

Further Time = Remaining area/ Efficiency

Efficiency = area of each month / working days

Status index = BCWP / ACWP x BCWP / BCWS

BCWS in days = BCWP / Daily work

Modernization:

• Replacing old technology with new technology

• Replacing OHOP with multimedia

• Replacing white board with electric board

• Replacing manual gear with automatic gear

Modernization:

To discard existing technology for modern technology. It results in quality and lesser cost,
clean environment.

PROJECT

Successful Challenged Abondened

Self Suffcien Excess meeting objective

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meeting all obligation Adequate liquidity Employment

to lender and owner for future improvement Foreign
Regional development

Delayed Cost overrun not meeting objectives

Lost of market Low RoI case Noons pak ltd

Technological obsolescence unable to meet case Pakistan papers ltd

cost of fund

Fiscal anomalies Bad location Dis integrate mgt.

Change in concept

Injustice location is not suitable mgt is not

interested

Project concept -- idea – original – plan

Project concept

BM-R Expansion Addition

New/ Green field

Balancing modernization replacement

Balancing:
To make up the short fall or to remove the bottle neck in operation. It result
inefficiency.

Replacing: Replacing one asset with similar other it result in sustainability.

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1. PROCESS Executive vice president project

Project promotion project evaluation project mgt.

1. Market

2. Technology implementation

3. Finance :owner

4. Management

Sponsor

identify professional

5. Economic :country

6. Social :common man

2. PRODUCT Executive vice president project

Sindh Punjab NWFP Baluchistan

Sugar division Textile division chemical division

Structure : 1) process 2) matrix 3) product

INCENTIVE

Direct indirect

individual overall project base

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single Team base Total co. consideration

An Affective Incentive Plan

1. Cash incentive would be 30% of the project.

2. Incentive would start after 70% work has been done

3. Incentive would be given in two forms: 1) for individual basis 2) Group basis

4. Each work would be given weighted after discussion with the workforce.

Advantages & Dis advantages of incentives

Advantages

• Create interest

• Gives winner a physiological boost

Dis advantages

• Once introduce cannot be withdraw

• If strict criteria is not followed result is mistrust & rifts

• Create more losers than winners

• Can lead to dys functional behavior.

SCHEME
First 70% job no bonus

Next 1% --- 1%

Than 30% --- 30%

INCENTIVES

cash non cash

pays

perks Positive negative

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bonus Fringe benefit isolation

all are perks lunch + transport warning

News paper Group pressure

Positive non cash incentive: job enrichment & job challenged

Negative non cash incentive: team pressure & isolation warning

Job enrichment: assign higher responsibility but not promote (up-ward position) vertical
movement. Eg. (Take lunch at executive canteen)

Job enlargement: Assign different task (horizontal movement)

Shadow price/true price: justifiable price – economic price, society bears production

Project Appraisal
Focus Financial Financiers Economic Country Social Common Man

time frame payback useful life future generation

valuation mkt price shadow price social wt

coverage cost & benefit analysis c& b both

indicators profitability internal & external income dis. impact

efficiency Net benefit

social wt: prefer the project who covers the necessities

Poorest man definition: 1) criteria $ 2 per day earn

2) 80% of earning is used for foods

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