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Project Management: Ideas

selection & technical analysis
Salil Sansare Project Management- 1/31/2010
Session 4
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Project Management- 1/31/2010

Session 4

How to generate ideas?

• Can come from various sources.
• Mainly from customers.
• By pure accident or luck! (vulcanized
rubber..Goodyear)
• The end product i.e. project should compete
effectively.
• Toyota- 35 ideas per employee per year
• Kodak- benefits to employees
• 3M -15% rule
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.. And how to screen (reject) them?

• Product differentiation
• Acceptable risk level
• Government priorities/ policies
• Economies of scale
• Compatibility of promoter
• Availability of inputs
• Adequate market demand
Delhi Metro is a good example.
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Kanter’s 10 rules for stifling innovation

• Regard any new idea with suspicion - because it's new,
and because it's from below.
• Insist that people who need your approval to act first go
through several other layers of management to get their
signatures.
• Ask departments or individuals to challenge or criticise
each other's proposals. (That saves you the trouble of
deciding - you just pick the survivor.)
• Express your criticisms freely, and withhold your praise.
(That keeps people on their toes.) Let them know they
can be fired at any time.
• Treat identification of problems as signs of failure, to
discourage people from letting you know when
something in their area isn't working.
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Kanter’s 10 rules for stifling innovation

(continued…)
• Control everything, carefully. Make sure that people
count everything that can be counted, frequently.
• Make decisions to reorganize or change policies in secret,
and spring them on people unexpectedly. (That also keeps
people on their toes.)
• Make sure that requests for information are fully justified,
and make sure that it is not given out to managers freely.
(You don't want data to fall into the wrong hands.)
• Assign to lower-level managers, in the name of delegation
and participation, responsibility for figuring out how to
cut back, lay off, move people around, or otherwise
implement threatening decisions that you have made.
And get them to do it quickly.
• And above all, never forget that you, the higher-ups,
already know everything important about this business.
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Technical analysis- FI angle

Area Details explained
Product range Main products, Byproducts, Scrap
Process know how Plant outline, building outline, layout structure, vendors
list for critical equipment
Plant location Soil testing, socio-economic conditions, off-site facilities
Plant & machinery Import licenses, installed capacity, inspection & expediting,
guarantee period
Materials Cost availability & quality
Personnel Organization chart, HR policies, training facilities
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Location, location & location

• Why space vehicles are launched from
Sriharikota?
• Why all big bazaars are doing extremely well?
• Why thermal power projects are near a river?
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How to choose a location?

• Availability of skilled workforce
• Proximity to clients and suppliers
• Already available infrastructure
• Labour & material cost
• Future expansion plans
• Climate conditions
• Political scenario (ask Tatas!)
• Government policies
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Effect of government policies

• SEZs- tax breaks

• Backward areas- tax subsidy
• Import restrictions
• Environmental controls
• Capacity capping
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Recently stalled/failed projects

• Enron Power, Ratnagiri

• Dow Chemicals, Pune
• Tata Motors, Singur
• Any others?
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PM- Material Procurement

Management
Salil Sansare Project Management- 1/31/2010
Session 4
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Procurement Management
• Process of acquiring goods and services from a
firm external the performing organization – PMI
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Project procurement planning

• What to procure?
• When to procure?
• How to procure?
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Objectives of procurement planning

• Acquiring all products & services from a single

vendor.
• Acquiring all products & services from different
vendors.
• Acquiring a part of required resources from the
external sources.
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Procurement documents: Terminology

• VIR- Vendor Information Request
• IFB- Invitation For Bid (client very specific
about what it wants. Sealed bidding)
• RFP- Request For Proposal (client not sure what
he wants. Negotiated procurement)
• RFQ- Request For Quotation (only for market
pricing for small purchases)
• IFN- Invitation For Negotiation
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Criterion for judging a vendor

• Need interpretation by vendor
• Total cost of procurement (Purchasing +
operational cost)
• Can the vendor deliver the product at the lowest
possible cost?
• His technical expertise
• His Management style
• Financial position
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3 ‘R’s of contracting
• Responsibility
• Reimbursement
• Risk
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Responsibility
▫ What to parcel out & what to retain
▫ No ambiguous, overlapping, undefined,
unallocated work scope
▫ Relevant performance parameters for contract
fulfillment
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Re-imbursement
• Lump sum contracts
▫ Fixed price
• Cost plus contracts:
▫ Cost plus a fee for services
• Item rate contracts:
▫ Rates are frozen, not quantity
• Convertible contracts:
▫ Cost plus till scope; then lump sum
• Hybrid contracts:
▫ Lump sum + cost plus, Lump sum+ item rate
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Risks
• Risk management
• Project contract- GCC clauses
• Change control- user or supplier
• Progress review meetings- MoMs
• Restrictions on the supplier- confidentiality,
poaching of staff/customers
• Restrictions on the supplier’s liability- Liable for
direct losses with a capping
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Tendering Process
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Tendering & Selection of a contractor

• Pre-qualification of a contractor
• Preparation of tender documents
• Receipt of tenders
• Evaluation of tenders
• Agreement/ Contract
• Guarantee
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Session 4

Let’s call it a day!