PROJECT MANAGEMENT

MAY, 2023
 Course Contents
Chapter 1: An Overview

Chapter 2: Concepts and Principles

Chapter 3: Analysis and Selection

Chapter 4: Project Planning

Chapter 5: Project Execution, Monitoring and
Closing
 CHAPTER ONE
AN OVERVIEW
 Introduction
An organization can have operational work and/or project
work.
Organizations are always in transition now to meet the latest
global challenges.
Competition is keen and only the flexible ones will survive.
These business conditions translate directly to the greater
demands for efficient and effective management of
projects.
Projects are undertaken as a means of organising activities
that are impossible to address within the normal
operational limits of the organisation.
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Organizations are increasingly using projects to meet their
goals. They are usually a means to achieve the organisation’s
strategic plan.
Project is a great opportunity for organizations and
individuals to achieve their business and non-business
objectives more efficiently.
Learning project management can help you complete
projects on time, on budget, and on target.

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 What is a Project?
A project is a temporary endeavor undertaken to
create a unique product, service, or result. 
A project is an investment activity in which financial
resources are expected to create capital assets that
produce benefits over an extended period of time.

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Examples:
 Developing a new product or service
 Constructing a road, bridge, dam, hydro-electric
power station
 Construction schools, health centers, hospitals
 Constructing a house
 Developing a new information system
 Developing modified information system
 Conducting research

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A major misconception about a project is relating it to only
construction or creation of such physical facilities as
buildings, roads and dams. However, project may involve
things such as

- Creation of awareness
- Eradication of diseases
- Combating harmful practices
- Capacity building
 Features of a Project
 Temporary
A project has a clear beginning and end. Projects have a
defined start and end date. Each activity and the entire
project has a start and end time.
Once projects have completed, they will be closed.

 Unique
Unique means this is new; this has never been done before.
Maybe it’s been done in a very similar fashion before but never
exactly in this way.
No two projects are the same. Projects differ from each other
with regard to time, site, objective, deliverables, allotted
fund, beneficiary group, and the like.
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 Specific objective.
A project has a fixed set of objectives. Once the objectives have been
achieved, the project ceases to exist.
 Uncertainty
A project involves some degree of uncertainty. A project faces with
a lot of uncertainty as a result of its uniqueness, dependency
on other agencies and its relatively long-term nature.
 Interdependencies of activities
A project consists of a number of interrelated activities that are performed
sequentially or in parallel.
 Teamwork
Projects require a team of people with different skills to get the job done.
 Resources
Projects have resource limits, such as a limited amount of people, money, or
machines that are dedicated to the project.
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 Why a Project?
A project is generally called upon to provide a solution to a
problem or to take advantage of an opportunity.
These needs might have to do with:
 Increasing productivity and efficiency
 Improving services to customers

 Responding to the activities of competitors

 Responding to external changes (new technology)

 Increasing the living standard of people

 Eliminating diseases

 Eliminating waste

 Increasing revenues, Reducing costs

 Resource availability –opportunity to make profitable use of

available resource, and

 Hedging against the adverse effects of natural events as drought or

floods, hostilities
 Project and Operation
A project has distinctive attributes that distinguish it from
operations.
Project is unique and temporary while operation is something
that’s happening all the time in a repeated fashion. Operation
is ongoing work.
The purpose of operations is to keep the organization
functioning while the purpose of a project is to meet its goals.
Which ones are projects?

A. Building an extension on a house.

B. Shelving books at the library.

C. Baking a wedding cake.

D. Designing a new car model.

E. Watering your plants twice a week.

F. Organizing a large conference/Workshop

G. Going to the gym three times a week.

Projects: A, D & F

Operations: B, C, E & G
 Project and Program
They usually serve as instruments for the execution of
development plans.
A project is a temporary endeavor undertaken to create a unique
product, service or result.

Program is a collection of related projects.

Programs larger in scope than a single project. They comprise
multiple related projects.
Examples could be an education program, a health improvement
program, a road development program, etc.

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A health program may include a water project,
construction of a health center, and capacity
building project. All aimed at improving the health of
a given community that previously lacked easy access
to these essential facilities.
Note that projects can stand alone without being
part of certain program. Such type of projects are
“stand alone” projects.

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A health program may include a water project,
construction of a health center, and capacity
building project. All aimed at improving the health of
a given community that previously lacked easy access
to these essential facilities.
Note that projects can stand alone without being
part of certain program. Such type of projects are
“stand alone” projects.

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 What is Project Management?
Project management is an organized manner of
managing a project from its beginning to a defined
ending.
Project management is the discipline of initiating,
planning, executing, controlling, and closing the
work of a team to achieve specific goals at the
specified time.

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 Key People in Project Management
Project Manager
The project manager is the person assigned to manage a
specific project.
The project manager has overall responsibility for
- planning, - organizing,
- integrating, - implementing,
- leading, - controlling,
- decision-making, - communicating,
- building a supportive climate for the project.
Project team members
The people who work with the project manager directly or indirectly
to accomplish project goals and complete project activities.
 Benefits of Good Project Management
Understanding the benefits of good project management is
necessary to reap the benefits of working on various project in
any industry.

 Improved Efficiency
Good project management improves overall project
efficiency. When you have a clear project roadmap in your
hands it will allow you to work smarter not harder.

 Enhanced Service Delivery Effectiveness

The ability to complete one project successfully will
increase your chances of completing the next projects you
undertake successfully also. 20
Improved Growth
Good project management improves your growth and gives you more
opportunities to perform better than others which put you ahead from
the others.

Better Customer Satisfaction

When you complete any project on time and within the budget, the
customer will be happy.

A satisfied customer will come again and again to see you for his or her
other projects. Such customer will also recommend you to others.

Increased Productivity
Better project management will automatically lead to higher
and increased productivity.
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 Competitive Advantage
Your skill in project management is perceived and can secure
you a dignified position in the project management
marketplace.
 Optimized risk assessment

Project management allows to assess and manage project

risk. Any risks or bottlenecks that have a potential to arise throughout
the project are identified in advance. This allows to deal with these
risks effectively and to prepare, which cuts any negative impact they
may have significantly or eliminates them completely.

 Enhanced Morale
Your team becomes more confident due to ongoing success
and strong performance. Effective project managers motivate their
teams by rewarding and motivating top achievers on a regular basis. 22
 A Good Project Manager
Takes ownership of the whole project
Is proactive not reactive
Adequately plans the project
Is Authoritative (NOT Authoritarian)
Is Decisive
Is a Good Communicator
Manages by data and facts
Leads by example
Is a Motivator
Is Diplomatic
Can Delegate
 Critical Success Factors of A project
Factors that are critical to project success:
1. Clearly defined goals and project mission
2. Top management support
3. A competent project manager
4. A competent project team
5. Sufficient resources
6. Customer involvements and consultation
7. Good communication
8. Responsiveness to customers
9. Proper monitoring and feedback
10. Appropriate technology
 CHAPTER TWO
CONCEPTS AND PRINCIPLES
 Project Parameters
During a project life, management focuses attention on four basic
parameters. The set of project parameters includes the following
ones:
1. Scope
2. Time
3. Cost
4. Quality
1. Scope
The scope determines the “boundaries” of the project.
It refers to all the work necessary to complete a project. It refers to
what must be done to produce the project's end result.
If the scope is not properly defined early in the project, it can expand
during the execution phase due to unplanned activities. This is
known as scope creep, and might cause projects to fail. 26
2. Time inconvenience
Time refers to the amount of time available to complete a project.
Project managers must estimate the time required to complete a
project.

3. Cost
The project cost refers to money available for the project.
Money that a project will most likely consume to be
completed. It is the amount the customer has agreed to pay.

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4. Quality
A successfully managed project is the one that is completed at
the specified level of quality (predesigned specification).
Quality factors apply to
 inputs (the raw materials for the project),
 outputs (what the project produces),
 outcomes (the results of the project), and
 processes (the means used to achieve the outputs).

Project managers must pay special attention to these four

project parameters.
A successfully managed project is the one that is completed
within predetermined scope, time, cost and quality.
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 The Scope Triangle (The Project Management
Triangle)
Also known as triple constraint.

The project management triangle is a model of the

constraints of project management.
The three most significant project management constraints
are scope, cost, and time.
The project management triangle is made up of these three
constraints that determine the quality of the project.
There is an interrelationship among these constraints.

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 Project Management Triangle

These three constraints are often competing constraints.

One side of the triangle cannot be changed without
affecting the other sides.
If you choose to increase the scope, you must also increase
the time or/and budget.

If you reduce the cost (budget), you must increase the time
and/or reduce the scope of the project.
If there is a setback in time, then you must increase cost
and/or reduce scope.

Therefore, the Project Manager should aim to maintain a

balance between these factors to make the project
successful.

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For example, let’s say you are working on a startup with a
confirmed product release date, but you fall behind. What
would you do to remain on track?
One option would be to increase cost by adding more
resources to the project to still meet your deadline.
Another option would be to reduce the scope of the release
by reducing the number of features.

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 7S for Project Management
The 7S Framework is a management model developed by
business consultants Robert and Tom Peters in the 1980s.
They identified seven internal elements of an organization
that need to align for it to be successful.
The goal of the model was to show how 7 elements of an
organization can be aligned together to achieve
effectiveness in the organization.
Organizations can apply the 7S model to a project.

It's useful to examine how the various parts of your project

work together.
Let's look at the elements of the model.
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The model categorizes the seven elements as either "hard" and
"soft" elements.
The three hard elements include: 
1. Strategy 

2. Structures

3. Systems

The soft elements cover the following four factors:

4. Shared values

5. Skills

6. Staff

7. Style 34
1. Strategy
Setting project objectives is not enough to achieve success.
An organization should have a strategy about how to be
successful and how to achieve their objectives.

An ideal approach is to establish a strategy that aligns with

the other elements of the model.
The project strategy should be well documented and
communicated to all team members.

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2. Structure
The organizational arrangement that will be used to carry
out the project.
It is organizational chart of the project.
Structure includes the information of who is accountable to
whom.
It is important that the project manager and team members
are clear about who reports to whom.

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3. Systems
Systems are the processes and procedures that staff of the
project use to get the job done.
The system element reflects how the tasks will be completed
and what process will be followed.

Project managers should remove bottlenecks for their teams

to ensure they can fulfil their responsibilities and achieve
better results.

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4. Shared Values
Shared values are the commonly accepted norms within the
organization that both influence the behavior of the entire
staff and management.

They bind the project team members together and foster

teamwork.
Shared value is the common and consistent core that holds
the other six elements together. 

Examples: Quality, innovation, trust, justice, teamwork,

commitment, communication, respect, creativity, loyalty,
intelligence, efficiency, relationship.

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5. Staff
Staff element is concerned with what type and how many
employees a project will need and how they will be
recruited, selected, hired, trained, motivated and
rewarded.

Managing staff efficiently is the core responsibility of a

manager.
This will also help you in retaining your best talent and
reducing the employee turnover rate.

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6. Skills
Skills are the capabilities that enable project employees to
perform very well.
Competencies that enable them to execute plans and
achieve objectives.

The skill element of the 7S model focuses on the number of

skills and levels of skills your team members have.

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7. Style
Style represents the way the project is managed by top-
level managers. This element relates to the styles of
leadership adopted by project managers.

It’s important that you select the style carefully after

assessing the situation. Flex your leadership style as your
project requires.

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 McKinsey 7S model, which divides them into ‘Soft Ss’ and ‘Hard Ss’.

The key point of the model is that all the seven elements are
interconnected. A change in one element will affect the other
elements.
The shape of the model emphasizes interconnectedness of
the elements. 42
Hard elements are easier to identify, define and
understand for project managers. They are easily identified
and influenced by management.

Soft elements are difficult to quantify. They are more

intangible and influenced by culture.
To be successful, it’s important to focus both on the hard
and soft elements of the 7-S Model. Recognize both of them
are important for project success.

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 Project Management Principles
The principles of project management are the fundamental
rules that should be followed for the successful
management of projects.

Project management principles are a general guideline for

how to operate.

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Here are some of the principles of project management:

 Have well-defined project goals and objectives.

One of the most common factors behind a failed project is a
lack of clear goals and objectives. The goals you set for your
project will play a critical role in its success or failure in
projects.
The project goals and objectives must be clearly defined
and should be approved, reviewed and understood by all
key stakeholders

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 Define your deliverables.
A deliverable is any product, service or result that is
produced to complete a process, phase, or project.
Deliverables must be identified, reviewed and approved by
all key stakeholders of the project.

 Create and maintain organizational alignment.

The organization’s purpose, strategy, capabilities, structure,
and systems should all work together.

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 Have clear team roles and responsibilities.
It is important to know who is responsible for what, and what
is expected of them.
When employees don’t know what their roles are or how
those roles relate to other people on the team, boundaries
are crossed and unnecessary conflicts arise.
Therefore, you should clearly define the role of each team
member to help everyone work well together.
RACI chart (R: Responsible  A: Accountable  C: Consulted  I: Involved)
is used to determine duties and expectations of stakeholders.

It's a simple a table that lists all stakeholders on a project and

their level involvement in each task, denoted with the
letters R, A, C or I.
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 Do careful budgeting.

Every project has limited resources. You need to budget

your financial resources carefully.
Give some margin for unexpected expenses, and take
reasonable measures to save costs during the course of
your project.
 Effectively engage with stakeholders
Engaging stakeholders in a mature and respectful way is
so important for project success.

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 Identify priorities and milestones ahead of time.
Priorities tell you what to focus on, and milestones tell you
where you are.

Defining task priorities at the outset of your project enables

you to know where to direct your team’s energy and other
resources.
Recognizing milestone achievements is good for morale
as well. Your team will be more motivated if there’s a tangible
sense of progress on the project.

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 Effective Communication.
Communication is one of the ways to ensure transparency
and to gain support and funding from the stakeholders.
A project’s success requires communication of project
activities, status, risks, and issues to stakeholders.

Ensure that all stakeholders receive the right information at

the right time.

 Be transparent
Transparency refers to openness not just between you and
your team members but also between you and the
stakeholders.
It means creating a system in which all team members can access all
relevant information about a project easily and efficiently. 51
 Do a risk assessment
Risk is part of life, and it’s certainly a part of any project. No
project comes without risks.
A risk assessment is an acknowledgment that
something could go wrong.
It is not enough just to know a risk may arise for a certain
project, you also should have a plan in place to resolve
the issue before it becomes problematic.
It is important to minimize risks or eliminate the potential
impact of a risk to your project. To do so you must
identify areas of risk, evaluate the impacts and monitor
them constantly.
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 Monitor and measure progress.
You should regularly keep track of project progress and check your key
performance indicators and make corrections quickly.

 Manage project changes

Without strong change management, a project could suffer from scope creep.

Team members and stakeholders may want to add additional features to a

project, however, if they don’t carefully control change they could end up
with a project that costs significantly more than the budget.

 Commitment
Commitment is necessary in whatever we do.

Everyone involved in the project must be committed to reaching the project

goals and objectives.

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 Success
As a project manager, before getting into any project, you
need to have a successful mind-set and you should
strive towards project success.
It is not enough to just complete the project on time and
within budget but is all about delivering what the client
expects and of the highest possible quality.

 Culture
A positive work culture supports innovation, growth, and a
positive attitude among the workforces.
Team members should speak without fear and put forth their
ideas and suggestions freely.
Conversely, a negative work environment demotivates the
entire team and increases the chances of project failure.54
 Project Management Life Cycle
A project life cycle is the series of phases that a project
passes through from its initiation to its closure.
It includes the steps required to successfully manage a
project from start to finish.
The project management life cycle is broken down into five
phases:
1. Initiation
2. Planning
3. Execution
4. Monitoring and Controlling
5. Closing.
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Sometimes project life cycle may be divided into four phases
as follows:

1. Initiation

2. Planning

3. Execution

4. Closing

Usually project monitoring and controlling is done together

with implementation.

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Having knowledge and skill about the project management life cycle phases
is essential to keep your project organized and on track from initiation to
closing.

A clear understanding of these phases also allows managers to maintain

control of the project more efficiently.

One of the primary competencies of a project manager is to gain a thorough

understanding of this stages. 

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 1. Project Initiation Phase
Project initiation is the first project management life cycle
phase, where the project starts.
It marks the beginning of a project.
This phase includes all the preliminary work that must be
done before any other project activities can take place.
It is everything that occurs before detailed planning begins.
In the initiation phase, answer the following questions:

 Why this project?

 Is the project feasible?
 Who are going to be potential stakeholders in the
project?
 What are the boundaries of the project?
 How does the end-result look like?

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Possibility to change vs. The cost of a change

100%

Possibility The cost of

to change a change

Start End
Project lifecycle
In the initiation phase of the project, you need to
- develop a business case,
- undertake a feasibility study, and
- create a project charter.
 a) Business Case
A business case is used to explain the reason for starting a project. That is
establishing the purpose of the project.

It explains why the project is necessary.

Reasons may include
Solving a problem,
Meeting a customer need,
Taking advantage of an opportunity, and
Reducing cost, so on.
Identifying the purpose is a crucial step because if the reason is not
important, the project would not be taken on.
This task prevents wasting of money, time, and effort.
 The business case includes:
 Table of contents
 Purpose (why it should be undertaken?).
 A detailed description of the problem or opportunity
 A list of the alternative solutions available
 Comparison of alternatives (costs, benefits, and risks)
 A description of the preferred solution
 Main project requirements
 Conclusion noting what the next steps will be
 Request for Approval

The project sponsor then approves the business case, and the
required funding is allocated to proceed with a feasibility study.
It is a crucial ingredient in planning out the project .
 b) Feasibility Study
Once the business case has been approved, the next step is
taking a feasibility study.
The purpose of feasibility study is to undertake detailed
investigation of the proposed project and recommend
whether implementation is feasible.
Feasibility study is a study to decide whether the identified
project is attractive enough to justify more detailed
preparation and to go for implementation.
A feasibility study is conducted to assist decision-makers in
determining whether or not to implement a particular
project.
The major project aspects that can be considered in the
feasibility study are:
 Market and demand analysis
 Technical analysis
 Location and Site Analysis
 Environmental Analysis
 Financial analysis
 Economic analysis
 Stakeholder analysis
 Cross-cutting issues analysis
 c) Create a Project Charter
Project charter is an essential result of the initiation phase.

The project charter is a document that formally recognizes the

existence of a project.

It is a formal, typically short document that describes your

project in its entirety.
The answer to all your project disputes, concerns, and doubts are
covered in the Project Charter.
The project charter includes
Identification Section (the project name, the sponsor’s name, date
of the current project charter, and the project manager’s name, start
and finish date).
Business vision and mission
Reasons for the project
Project goals, Objectives and Benefits
Scope of the project
Project Stakeholders
Project Deliverables
Project budget and resources
Risks associated with the project
Project Charter Acceptance (Provides the names, titles, and
signature lines of the individuals who will sign off on the project
charter).
A project charter does not contain any technical details that
happen in the planning stage.
Consider the example of an automobile manufacturer
assigned to develop an electric vehicle. The selection of the
design, capacity, and battery power of the vehicle will not be
a part of the initiation phase.
The only certainty would be that an electric vehicle will be
developed within the given timeframe and budget.

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 2. Project Planning Phase
Once the project receives the green light, it needs a solid plan to guide the
team, as well as keep them on time and on budget.

After the project initiation phase is complete you are ready to proceed the
project planning phase.
Project planning is the process of developing your project
management plan to reach your project goals.

The goal of this phase is the creation of the project plan,

which will be the guide for the next phases.

At this point, the project would have been planned in detail

and is ready to be executed.
The plans created during this phase will help you manage
time, cost, quality, changes, risk, and related issues.

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A project plan involves 

— Defining and confirming the project goals and

objectives, how they will be achieved,

— Identifying tasks,

— Determining the resources needed,

— Determining budgets (estimating the cost) and

— Determining timelines (preparing the schedule)

for completion.

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 3. Project Execution (Implementation ) Phase
After you have successfully passed the planning phase,
it is time for real action- to start the project implementation
phase.
The implementation phase turns project plan into
action.

It is the phase where project team actually do the

project work to produce the deliverables.
It is usually the longest phase in the project life cycle
and it typically consumes the most energy and the most
project resources.
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 4. Project Monitoring and Controlling Phase
Project monitoring and control, takes place concurrently with the
execution phase of the project. This phase runs simultaneously with
project execution.

This phase involves monitoring the performance and progress of the

project according to the project plan to ensure it stays on schedule and
within budget with the required quality.

In this phase, you need to check if work goes according to the initial plan,
identify problems, and make adjustments.

Progress is continuously monitored and appropriate adjustments are

made and recorded as variances from the original plan.

The main goal of this phase is to set firm controls on the project to
ensure those three factors- Time, cost and scope - don’t go off track.

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 5. Project Closing Phase
This is the last phase of the project life cycle. It is conclusion
phase.
You can use this stage to say “thank God it’s over.”
Closing is the process of completing the project work and
receiving approval from the stakeholders.
In this phase, final product or service is handed over to the
project customer.

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1. Initiation phase is like preparing the soil. The project
manager will define the project goals, scope, and stakeholders.
2. Planning phase is like planting seeds. The project manager
will create a detailed plan for how the project will be executed,
including tasks, timelines, and resources.
3. Execution phase is like watering and providing sunlight to
the seeds. The project manager will oversee the day-to-day
work of the team and make sure that everyone is moving
forward according to the plan.
4. Monitoring and Controlling phase is like checking the
growth of the plants. The project manager will regularly
assess the progress of the project and make adjustments as
needed to keep it on track.
5. Closing phase is like harvesting the crops. The project
manager will ensure that the project has met its goals and that
all stakeholders are satisfied with the results. 75
The end of each phase is marked by a project milestone.
At the end of each phase, a review is typically conducted on the
performance of the project team.
This helps the team ascertain whether the project proceeds to
the next phase or undergoes revision.

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 CHAPTER THREE
ANALYSIS AND SELECTION
In the initial stage, it is essential to understand the feasibility
of the project.

Feasibility study evaluates the practicality of a project in

order to judge whether or not you're able to move forward
with the project.
The study needs inputs from many professional disciplines
for various areas of the study.

Teams abandon proposed projects that are labeled

unprofitable and/or unfeasible.

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 Why Feasibility Study?
To find if there is adequate demand for the project’s output.

To find if there is sufficient inputs.

To find if there is suitable technology.

To examine the project’s technical, financial and economic

viability.
To answer if the project meets the environmental
regulations and priority of the nations.
To find the best options.
To provide valuable information for a “go/no-go” decision.
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 Initiating the Feasibility Study

Appointment of an experienced manager and selection of study

team members
Scope of the study

External advisers to support study team

Plan of the Study

Starting study as per plan

Controlling study to complete as per plan.

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 Areas of Analysis in Feasibility study
A feasibility study should contain the following analyses:
 Demand and Market Analysis
 Technical Analysis
 Financial Analysis
 Economic Analysis
 Environmental Analysis
 Social Analysis
 Political and legal analysis

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 Market and Demand Analysis
Market and demand analysis is a key activity for determining
the scope of an investment, the possible production program,
the technology required, and the choice of location.
Often project analysis begins with the estimate of the potential
size of the market for the product proposed to be
manufactured or service planned to be offered and get an idea
about the market share that is likely to be captured.
Other analysts can only start their job if the market analysts
have finished their part.
Market and demand analysis aims at determining the aggregate
demand for the product/service and the market share of the
proposed project.
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 Major Dimensions of the Market and Demand Analysis
The analysis mainly covers:
Demand
Sales and orders
Aggregate demand for the product
Buyer’s characteristics
Purchasing power
Supply
- Supply potential
- Local production

- Imports and exports

- Competitor’s position
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Product
Characteristic features
Substitutes and complementary goods

Marketing environment
Price levels and tendencies
Distribution channels
Physical distribution network
Promotion

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First, the analyst should informally talk to the
following parties:
 Customers,
 Competitors

 Middlemen (wholesalers and retailers)

The purpose of contact with the above mentioned ones is to

learn about the preferences and purchasing power of
customers, actions and strategies of competitors, and
practices of middlemen.
The main benefit of such informal contact is to avoid formal
study of the market if adequate and relevant information is
obtained about project demand. If enough data was not
generated at this stage, formal market and demand analysis
should be carried. 85
Formally data can be collected from primary sources (through
survey) and secondary sources.
The following types of information can be collected through
market survey:
- Total demand and rate of growth of demand
- Motives for buying
- Demand in different segments of the market
- Income and price elasticity of demand
- Purchasing plans and intentions
- Satisfaction with existing products
- Attitudes towards various products
- Distribution and price practices
- Socio-economic characteristics of buyers
86
 Technical Analysis
Every project must be technically feasible.
Technical analysis is related to examine whether the project
under study is technically feasible to setup and operate to
produce product or service.
It depends on the nature or type of the project. For instance, in
agriculture project of Apple farming, types of field, soil test,
temperature required in selected location, plantation distance
between plants, variety etc need to be technically analyzed.
Good technical staff are essential for this work, they must be
drawn from consulting firms or technical assistance agencies
abroad, if necessary.
87
Technical aspects to be considered in this analysis are
 Technology

 Material inputs and utilities

 Plant capacity

 Location and site

 Structure and civil works

 Machineries and equipment

 Provision for maintenance of the machineries and
equipment's
 Manufacturing process

 Scale of operations

 Project layouts

88
 Technological Analysis
The advocates of the choice of appropriate technology urge that
the technology should be evaluated in terms of the following
considerations:
Plant Capacity. To meet a given capacity requirement perhaps only a
certain production technology may be viable.
Inputs. The choice of technology depends on the principal inputs
available for the project.
Utilization of local raw materials and manpower.
Latest Developments. The technology adopted must be based on the
latest developments in order to ensure that the likelihood of technological
obsolescence in the near future, at least, is minimized.
Implementers and beneficiaries ability to operate the chosen technology.
The cost-effectiveness of the chosen technology.
Sustainability. There should be adequate services or maintenance
facilities for the selected technology. 89
 Material Inputs and Utilities
Here an important aspect of technical analysis is concerned with defining
the material inputs and utilities required, specifying their properties in
some detail, and setting up their supplies.

Material inputs and utilities include:

 Raw Materials : agricultural products, mineral products, livestock
and forest products, and marine products.
 Processed industrial materials and components.
 Auxiliary materials and factory supplies: Chemicals, additives,
packaging materials, paint, varnishes, oils, grease, cleaning materials,
etc.
 Utilities: Power, water, fuel, communications (telephone, internet),
etc.

90
In studying material inputs and utilities, we should take in to
account the following considerations:
 Their total requirement
 Their properties (quality required)
 The sources of supply.
 The potential availability.
 Quantity available from domestic sources.
 Quantity can be procured from foreign sources.
 Reliability of the supplies.
 Past trend in prices.
 The likely shortages/bottlenecks and measures may be
taken.
91
 Plant Capacity Analysis
Plant capacity (also referred to as production capacity) refers to
the volume or number of units that can be manufactured
during a given period.
Plant capacity may be defined in two ways: feasible normal
capacity (FNC) and nominal maximum capacity (NMC).
The feasible normal capacity refers to the capacity attainable under
normal working conditions. This may be established on the basis of
the installed capacity, normal stoppages, and downtime for
maintenance and tool changes, holidays, and shift patterns.
The nominal maximum capacity is the capacity, which is
technically attainable, and this often corresponds to the installed
capacity guaranteed by the supplier of the plant. The feasibility
study mainly focuses on the feasible normal capacity.
92
Factors considered in the capacity decision:
 Technological requirement
 Input constraints
 Investment cost
 Market conditions
 Resources of the firm
 Governmental policy

93
 Location and Site Analysis
This analysis determines the location and the site suitable
for a project.

Location is fairly broad area like a city, town, an industrial

zone, region, country.

Site is a specific piece of land where the project would be set

up.

94
The choice of location is influenced by a variety of
considerations that need to be assessed carefully.
 Proximity to raw materials
 Proximity to markets

 Availability of infrastructure (power, water, communications,

road)
 Availabilityof Labor (skilled and unskilled)
 Climate conditions

 General living conditions (The cost of living, housing situation,

safety, and facilities for education, health care, transportation and
recreation)
 Incentives
and restrictions
 Governmental policies and other factors

95
The climatic conditions like temperature, humidity, wind,
sunshine, rainfall, snowfall, dust, flooding, and earthquakes
have influence on location decision.
They have a bearing on the cost as they determine the extent
of air-conditioning, de-humidification, refrigeration, special
drainage, and so on required for the project.

96
 The optimal location is where the total cost (raw
material transportation cost plus production cost plus
distribution cost for final product) is minimized.
For example, a resource based project like a cement
factory or a steel mill should be located close to the source of
basic material (limestone in the case of cement plant and iron-
ore in the case of a steel plant).

97
The following factors determine the selection of the final site:
 Cost of land
 Site preparation cost
 Cost of utility lines extension
 Size and shape of the available area
 Suitability for future extension
 Proximity of centers of consumption (market orientation)
 Infrastructure facilities

 Distance to seaport (for import and export based project)

98
 Structure and Civil Works
Structure and civil works may include
 Buildings and structures

 Outdoor works.

99
 Site Preparation and Development
This covers the following:
— Grading and leveling of the site.
— Demolition and removal of existing structures.
— Relocation of existing pipelines, cables, roads, power lines,
etc.
— Connections for the following utilities from the site to the
public network: electric power (high tension and low
tension), water for drinking and other purposes,
communications (telephone, telex, internet, etc.), roads,
railway sidings.
— Other site preparation and development work.

100
 Buildings and Structures
Buildings and structures may be divided into:
—Factory or process buildings.
—Ancillary buildings required for stores, warehouses,
laboratories, utility supply centers, maintenance services,
and others.
—Administrative buildings.
—Staff welfare buildings, cafeteria, and medical service
buildings.
—Residential buildings.

101
 Outdoor Works
Outdoor works cover
—Supply and distribution utilities (water, electric power,
communication, steam, and gas).
—Handling and treatment of emission, wastages, and
effluents.
—Transportation and traffic signals.
—Outdoor lighting.
—Landscaping.
—Enclosure and supervision (boundary wall, fencing, barriers,
gates, doors, security posts, etc.

102
 Financial Analysis
Its objective is to determine the financial viability of the
project.
In the financial analysis, all the initial project costs as well as
the operation costs should be carefully considered.
If it is not profitable, then it will be financially prudent to
consider alternative investments to maximize the use of
resources.

103
Financial viability can be judged on the following
parameters:

 Total estimated cost of the project.

 Sources of project finance.
 Projection of Sales and Cost of Production.
 Projected balance sheet, profitability, and cash flows.
Total cost of project is the sum of the costs on the
following items:

Land and site development costs

Building and civil works costs
Plant/factory costs
Machinery and equipment costs
Technical know-how and engineering fees
Expenses on foreign technicians and training of
technicians abroad
Pre-operative expenses, e.t.c.
Sources of project finance:
 Share Capital: there are two types of share capital, namely equity
capital and preference capital. Equity capital represents the
contribution made by the owners of business, the equity shareholders,
who enjoy the reward and bear the risks of ownership. Preference
capital represents the contribution made by preference shareholders
and the dividend paid on it is generally fixed.
 Term loan: are provided by financial institutions and commercial
banks.
 Debenture capital: debentures are instruments for raising debt
capital.
 Deferred credit: many a time the suppliers of the plant and
machinery offer a deferred credit facility under which payment for the
purchase of the plant and machinery can be made over a period of
time(Hire purchase).
 Incentive source: the government and its agencies may provide
financial support as an incentive for setting up industrial units in
certain locations.
 Other sources
Projection of Sales and Cost of Production
Projected Sales
Typically, the starting point for profitability projections is the
forecast of sales revenue.
Cost of production
The major components of cost of production are:
 Material cost which comprises the cost of raw materials,
chemicals, components, and consumable stores required for
production.
 Labor cost which is the cost of all the manpower employed in
the factory.
 Utility cost consists of power, water and fuel determined based
on norms or consumption standards in the industry.
 Factory overhead cost: the expenses on repairs and
maintenance, rent, taxes, insurance on factory assets, and so on
are collectively referred to as factory overheads.
Balance Sheet, Profitability, Cash Flows Projections
Given the estimates of sales revenue and cost of production as
discussed above, at least it is fair to provide projected
Balance Sheets, Income Statements and cash flow projections
for the life of the project.

Other aspects like loan availability and the ability of

the project management to raise sufficient funds
required to implement the proposed project should
be included in the financial feasibility.
Moreover, financial analysts may use the following
financial evaluation techniques (capital budgeting
techniques):

 Payback period (PBP)

 Accounting rate of return (ARR)
 Net present value (NPV)
 Internal rate of return (IRR)
 Profitability index (PI)
 Economic Analysis
Cost and benefits to the society or to the nation due to
the proposed project are considered in the economic
feasibility analysis.

Economic analysis deals with the benefit the society will

get or the cost the society has to bear.
The following factors also differentiate economic
feasibility from financial feasibility:
- Tax revenue
- Generation of employment
- Foreign earnings
- Savings and investments
- Distribution of income

The government consider the economic

indicators of a project before permitting the project
or financing it.
 Environmental Analysis
(Environmental Impact Assessment)
The word environment emerged in response to the
public health:
1. In sanitary (dirty or germ carrying) dwellings and
streets.
2. Contaminated public water supplies.
3. Drain and sanitation.
4. Public nuisances.
5. Unhygienic food processing.
6. Overcrowding.
7. Refuse dump.
8. Epidemics (wide spread of diseases) 112
Environmental Impact Assessment is concerned with
the identification, prediction and evaluation of the
impact of the proposed project aimed at eliminating
or minimizing damaging impacts and optimizing
beneficial impacts.
EIA will lead to a decision to accept, modify or
reject a project.
EIA report may include the following information:
 Any possible pollution of the soil, of waters of all kinds such
as surface, underground, costal and of the atmosphere.
 The impact of the project on wildlife, the natural habitat and
all other ecological factors.
 The project’s influence on the qualities of life of the local
community.
 Mitigation measures to offset the negative impacts.
 Any other information related to environment deemed
necessary.
 Political Feasibility
Political viability of the area or country where the
project will be established is an important facets of
feasibility study.
There are two types of politics to be considered:
Internal and external.
Internal politics this is related with internal
political stability.
The second type of politics is external politics
related to regional or global political stability.
Regardless of the merit of the project, the political
necessity may be a source of assistance for a project.
Because of political factors, valuable projects may face
uncontrollable opposition.
An evaluation of the objectives of the project with the
current objectives of the political system is required in
the political feasibility analysis.
 Social Feasibility
Social feasibility is a determination of whether a proposed
project will be acceptable to the people or not.
This determination typically examines the probability of the
project being accepted by the group directly affected by the
proposed project.

Management feasibility
It is a determination of whether a proposed project will be
acceptable to management. If management does not accept
a project or gives a negligible support to it, the analyst will tend
to view the project as a non-feasible one.
 Legal Feasibility
The project must meet all the legal requirements.
This assessment investigates whether any aspect of the
proposed project conflicts with legal requirements like
laws, regulations.
Let’s say an organization wants to construct a new office
building in a specific location. A feasibility study might
reveal the organization’s ideal location isn’t zoned for
that type of business. That organization has just saved
considerable time and effort by learning that their
project was not feasible right from the beginning.
 CHAPTER FOUR
PROJECT PLANNING
The Project Planning Phase is the second phase in the
project life cycle.
After the project initiation phase is completed, you are ready
to proceed the project planning phase.
Project planning tells people involved where they are going
and how they are going to get there.
Planning determines in advance
 what need to be done,
 how long it will take,
 who will take the necessary actions , and
 how much it will cost.
This is the phase where the project plan is developed. The main
deliverable of this phase is your project plan.

Without plan, your project may be susceptible to common project

management issues such as missed deadlines, scope creep and
cost overrun.
While writing a project plan is somewhat labor intensive up front, the
effort will pay dividends throughout the project life cycle.
The basic processes of project planning are:

 Setting project goals and objectives

 Scope planning

 Preparation of the work breakdown structure (WBS)

 Project schedule development

 Resource planning

 Budget planning

 Gaining formal approval to begin

 Setting project goals and objectives
The first step in the planning process is to define the project
goals and objectives.
The goals and objectives must be clearly defined and agreed
upon by the customer and the organization or contractor
that will perform the project.

The planning phase refines the project’s objectives, which

were gathered during the initiation phase.
Create smaller goals within the larger project, making sure
each is achievable within the time frame. Smaller goals should
have a high potential for success.
 Scope Planning
The scope determines the “boundaries” of the project.

It defines what work is part of the project and what is not.

The purpose of scope planning is to ensure that all the

required work is clearly identified.
Development of project scope statement is a time-
consuming activity and may require multiple stakeholders
participation including experts from outside the
organization.
 Preparation of the Work Breakdown Structure (WBS)
Work breakdown structure is a hierarchical tree structure
that breaks the project down into smaller, more manageable
portions.
It breaks down the larger project into smaller tasks.

WBS is often used in project management to divide a project

into tasks and subtasks.
The goal of WBS is to make a large project more
manageable.
WBS involves

Break project down into a series of task,

Break each task down into subtasks,

Continue until all items are doable and understandable.

Keep in mind that the tasks should be practical and easy to

accomplish.
 Forms of WBS
A WBS can take different forms.

One can illustrate the WBS by using the following formats:

- Organization Chart Method- Tree structure

- Outline Structure- Text list

- Hierarchical structure

- Tabular view- Table

- WBS Dictionary
Organization Chart Method of WBS
WBS for Building a House
 Outline Structure
          Build a House
                         1. Foundation
                              1.1 Excavate
                                   1.1.1 Dig
                                   1.1.2 Level
                              1.2 Frame
                              1.3 Concrete
                                   1.3.1 Pour
                                   1.3.2 Cure
                         2. Exterior
                         3. Interior
Hierarchical structure
Tabular view
 WBS Dictionary
It includes a brief description of each work package. It helps to clarify
the scope of each task so that all team members understand their
responsibilities.
 Project Scheduling
A schedule is project’s timetable.

It consists of sequenced activities that have to be delivered

under a given deadline.

Time Estimation
Estimating of time is the process of forecasting or
approximating the time of completing a project and an
activity.
Duration Estimate
Duration estimate is an estimate of how long each activity
will take from the time it is started until the time it is finished.

Start and Finish Times Estimate

It is determination of an estimated start time and finish time
for the overall project as well as for each activity.
Increase estimates if workers will be distracted by other
responsibilities or interrupted by other projects.

Increase the estimates when using less-skilled workers or

workers with little experience.
 Scheduling Format
The schedule can be displayed graphically. The most
common form of presentation of schedule are:
- Gantt chart
- Network diagram
 Creating the Gantt Chart
Gantt chart is a visual representation of project schedule.

A Gantt chart is a type of bar chart that illustrates a project schedule.

It includes
The text part on the left.

The graphic part on the right.

 Activity A

Activity B

Activity C

Activity D

Jun Jul Aug Sep O ct N ov

Tim e
T here are m any other acceptable w ays to display project inform ation on a bar chart.
 Network Diagram
The network diagram is a diagram that contains boxes and
arrows.

The project network diagram displays the duration of activities

in the project, their chronological order (sequence) and
logical dependencies between the activities graphically.

It graphically represents the project’s tasks and workflow.

 Network Diagram Terminologies
Parallel activities. Two or more activities that occur at the same time. Also called
concurrent or simultaneous activities.

Sequential activities. Two or more activities that occur one after the other. Also
called consecutive activities.

Diverging Activities (Merge activity): Single predecessor with multiple

successors.

Converging Activities (Burst activity): Multiple predecessors with single

successor.

Critical path: It means the path(s) with the longest duration through the network.
 Formats of network diagram
Activity in the box (AIB)
Each activity is represented by a box in the network
diagram, and the description of the activity written in the
box.
Activity on the arrow (AOA)
In the AOA, an activity is represented by an arrow in the net
diagram, and the activity description is written above the
arrow.
 A, B, C, D, E, F are activities

A B E
Start
C D F Finish

AIB Format

B
A E
Start Finish
C F
D

AOA Format
Basic elements of the network are activity nodes. An activity
node includes the following information:
 Duration (d)
 Activity number

 Earliest start time (EST)

 Latest start time (LST)

 Earliest finish time (EFT)

 Latest Finish time (LFT)

Example: Draw the network diagram

Activity Time(days) Preceded By

A 10 --
B 7 --
C 5 A
D 13 A
E 4 B,C
F 12 D
G 14 E
 Resource Planning
A project need a variety of resources to employ, including
 people,
 money,
 equipment,
 materials,
 place,
 supplies,
 facilities and
 anything else that you need in order to do all of the activities that
you planned for.

People are the predominant resource.

To succeed, a project must have sufficient resources—that
is, both people and things.
Resource planning is determining what resources and what
quantities of each should be used to perform project activities.
Resource planning is the process of optimizing the resources
available to keep the project running smoothly, without delays
or conflicts.
To achieve this, you should think of which resources will need to
be available to complete each task, when and for how long.
Resources should be allocated based on priority.
It’s not enough to know the tasks and the order they come in.
The best project plan cannot be accomplished without allocating
the right people and other resources at the right place at the
right time.
 Consider the following principles when assigning
resources:

 Schedules are meaningless unless the right resources are available

when the activity is scheduled to begin.
 If you cannot get the right resources at the right time, you may need to
replan.
 Do not assign the wrong person to the job just because no one else is
available at that time. Assign the most appropriate people to each
activity.
 Assign scarce resources to activities on the critical path first.
 Obtain firm commitments from team members, functional managers,
and senior management.
 Too few people on a project cannot solve the problems; too many
people can create more problems than they solve.
 It may be necessary to increase the project duration to get the right
resources at the right times.
 Budget Planning
Budget planning determines the required budget. It is
specifying the budgeted cost to be incurred at the
completion of the project.

A project budget is the total amount of monetary

resources that are allocated for the project for a specific
period of time.
 Total Budgeted Cost (TBC)
The amount allocated to each work package represents
the TBC for completing all the activities associated with
the work package.

The sum of budgets for all the work packages cannot

exceed the total budgeted cost of the project .
The total budgeted cost for each work package
 TBC for Packaging Machine

Packaging
Machine
$100,000

Design Build Install & Test

$24,000 $60,000 $16,000
 Developing Cumulative Budgeted Cost

Once a TBC has been established for each work package,

the next step in the project budgeting process is to
distribute each TBC over the duration of its working
package.

Spread out TBC by time period.

 Total Budgeted Cost by period for the packaging machine
project (In thousands)
Work Week
package TBC 1 2 3 4 5 6 7 8 9 10 11 12

Design 24 4 4 8 8
Build 60 8 8 12 12 10 10
Install & Test 16 8 8
Total 100 4 4 8 8 8 8 12 12 10 10 8 8
Cumulative 4 8 16 24 32 40 52 64 74 84 92 100
 Communication Planning
All projects require sound communication plans.

Communication planning identify all project stakeholders and

establish a communication plan describing the information
needed and the delivery method to be used to keep the
stakeholders informed.
The communication plan documents includes

 The types of information that will be communicated,

 Who will communicate them, and
 Who will receive them; 
 The methods used to communicate;
 The timing and frequency of communication;
 The method for updating the plan as the project
progresses.
 Risk Planning
Risk mitigation is another important aspect of project
management that is a part of the planning stage.
It’s important to manage risk to minimize or eliminate its
impact on your projects.
Common risks include unrealistic time and cost estimates,
budget cuts, and lack of resources.
Before starting a project, you need to identify all foreseeable
risks and have a risk management plan to monitor and
respond quickly to them.

161
You may also need to include
Procurement planning
Assess what to purchase and prepare procurement document.

This activity involves evaluating the things that should be bought to facilitate
the successful implementation of the project.

Doing this helps to identify all the items that should be purchased and
prepare the necessary procurement documents.

Procurement document details all the items to be procured including their

budget estimates.

Quality planning

Identify quality criteria to be used for the project and states how quality control
will take place. Lay down certain quality standards to be followed
throughout the project.
This ensures that the quality of the project is not compromised at any
level.
 Project Plan
The end result of your planning phase is a document called
the project plan.
A project plan is "a formal, approved document used to guide both project
execution and project control.
The project plan may be made up of lots of subsidiary plans. These include:

A plan for managing the human resources.

A plan for managing costs and the budgeting.
A plan for procurement
A plan for communications
A risk plan for dealing with project risk
A quality plan that specifies the quality targets for the project.

That’s a lot of documentation.

In reality, it’s rare that you’ll produce these as individual documents.
What you need is a project plan that talks about the important elements of
each of these.
Too little planning causes confusion and frustration; and too much planning
causes a lot of administrative work and not enough time for creative work.
The plan should be updated. If unexpected issues arise (e.g. delivery delays), the
plan can be adjusted by concerned stakeholders.