Course

Project Management

Course Code

5577

Teacher Name

Mahmood-ul-Hassan

Semester

Spring 2013

Assignment No.

01

Submitted By

Atif Attique

Roll Number

AP508210

Q. 1

(a) Technology and processes play crucial role in certain projects. What the key issues are in regards to choice of technology, equipment and processes at the stage of formulation of DPR?

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The key issues are in regards to choice of technology, equipment and processes at the stage of formulation of DPR are:Estimation of demand and benefits: This task determines the potential benefits that result from the investment. In projects that generate saleable products, the size and nature of market demand is estimated. In the case of nonincome generating projects, the beneficiaries must be identified and the impact of the investment on those beneficiaries estimated. In both cases, the exercise helps define the scope of the investment and its characteristics. Evaluation of the technology: The proposed technology is reviewed in light of the results of the evaluation of demand and benefits, in order to ensure that it is appropriate. The need for maintenance, repairs and machinery replacement and the possibility of alternate technologies is also considered. Sustainability and environmental impact: This task considers the sustainability of the project not only from the perspective of natural resource usage and environmental impact. It is also critical for those projects not generating substantial income streams, where there is a need for operational support once the investment is completed: a school is not sustainable if there is no provision for paying the teachers salary. For investments with the likelihood of a negative environmental impact, impact mitigation measures, or ways to modify the project design to avoid these impacts, must be identified. Estimation of costs and income: The next step is to define and calculate the costs and income associated with the investment and operation of the project. Although this may be a relatively easy step for simple investments, the introduction of variables such as perennial crops, livestock breeding or other complex activities can create significant complications. Financing the investment:

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With costs and income calculated, the financing needs can be considered, both for investments and for the working capital needed for daily operations. Organization and investment management: The most profitable project will fail if it lacks an adequate structure for directing and managing operations. The identification of these management needs is an integral element in the formulation and evaluation effort. Evaluation and preparation of recommendations : With all the individual elements of formulation and evaluation gathered, the full project evaluation can be undertaken. However, the results obtained only tell part of the story. It is also necessary to identify the key factors that will influence the eventual success of the investment and to determine the risk that these factors may differ from those foreseen in the project design, affecting the success of the project. Preparation for the investment: Aspects to be considered here are: task scheduling, negotiations with the financing sources, supervision of construction and other activities essential to the execution of the project. Q.1 (b) What are the phases associated with a project life cycle? Highlight key points of each phase that distinguishes one from another. The Project Life Cycle refers to a logical sequence of activities to accomplish the projects goals or objectives. Regardless of scope or complexity, any project goes through a series of phases during its life. Typically the Project Life Cycle consists of four primary phases, as it is presented in the following diagram:

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Phase 1: Project Initiation. In this phase a business problem or an opportunity is identified and a Business Case which provides alternative solutions is defined. Prior, during or after the development of the Business Case, a Cost/ Benefit Analysis and a feasibility study are usually conducted to identify the alternative with the maximum net benefit and investigate the likelihood of each solution option addressing the business problem. As an outcome of the Business Case a final recommended solution is put forward. Once the recommended solution is approved, the Executive and the Project Manager are appointed in order to participate in the preparation of the Project Fiche, which outlines the scope, objectives, activities, structure, budget, implementation schedule, risks, constraints and assumptions of the project. When the Project Fiche is approved, the remaining members of the Project Management Team are appointed. Phase 2: Project Planning. This phase includes the planning of all the elements/ parameters of the project so to be ready for implementation. In this perspective, the following plans must be developed: Activities Schedule (definition of activities and tasks sequence, time scheduling), Risk Plan (highlighting of possible risks and actions to mitigate them), Resource Plan (determination of the labor, equipment, material needed in each task/stage), Cost Plan (identification of the internal and external costs and their occurrence in time), Quality Plan (setting of quality targets for the project deliverables and definition of processes for quality assurance and control), Issue Management Plan (definition of process for identifying, assessing and resolving issues related to the project), Change Management Plan (definition of process for managing requests for changes that have a direct impact on the -4-

project), Acceptance Plan (setting of acceptance criteria for the project deliverables and definition of the processes for executing the acceptance tests), Communication Plan (definition of information to be distributed to the stakeholders and selection of the appropriate distribution methods). In addition, it is a common practice during this Phase to define the Performance Indicators to be used in a later stage for monitoring the project implementation progress and evaluating the projects performance against predefined objectives and targets. Phase 3: Project Execution & Control. This phase involves the execution of each activity and task defined at the Project Schedule. During the implementation of the activities and tasks a series of management processes are undertaken to monitor and control: time, resources, cost, risks, quality, issues, changes, deliverables acceptance procedure, communication, etc. The Implementing Agency is fully responsible for the achievement of all project outcomes. However, in case that an Implementing Agency decides to subcontract the execution of parts or of the whole project, it assumes the function of and the responsibilities for monitoring and controlling the contractors. Phase 4: Project Closure. This phase includes all activities and tasks that ensure that the project is completely finished and the contract is properly closed. It also includes the evaluation of the processes used in the project and of the outcomes achieved. These phases are sequential and can be broken down into smaller and more manageable activities. In this Chapter we focus on Phase 1: Project Initiation. During this phase three stages can be distinguished: Inception and Prioritizing Stage: This is the stage where the needs are identified and addressed and where the project idea is 1. formulated. Design Stage: This is the intellectual process to develop the project starting from the first idea; the result is a comprehensive description of the project that is technically approved by the project 2. owner. Project Approval and Appointment of Project Management Team Stage: This is the final stage where the project is officially approved, the necessary funds are allocated and the Project Management Team (apart from the Executive and the Project Manager who have been appointed in the Design Stage) is 3. appointed. Q. 2 What are the objectives of project management information systems? What are the types of data sets -5-

used in integrated project management information system. Discuss briefly how these date sets are used for decision making? PMIS, an acronym for Project Management Information System, is a framework or an initiative that measures the success rate of a project and provides necessary information for monitoring and controlling the project. A project management information system (PMIS) can be a framework to guide the progress of a project and help to increase its success rate. It brings accurate and relevant information to management within the required time frame, and helps to speed up the decisionmaking process and any action necessary to ensure that the project is on track in terms of time, budget and objectives.

PMIS must basically identify the information that is needed and its relevance to the project and its implementation. It must be able to compare the present state of affairs on a project to the aims laid down and analyze the differences so that corrective or remedial action can be taken. A PMIS should not lead to any loss of control because of the analysis of the information that has been gathered. There has to be some method of integrating the scope of the project, its quality objectives, and the time and cost that it requires. There should be no duplication of information as this only leads to a waste of scarce resources in terms of time and manpower. Planning the Information

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The information that is gathered has to help the project management team to plan, organize, and control the project. It must have sufficient information which can be of interest to all the people who have a stake in the project. If there is any linkage to other projects within the same organization or out of it, it must have information on the connected milestones so that it provides the right interlinking. It must have a system where any slippages in time or money are highlighted and analyzed so that corrective action can be taken. The information available must not be data alone and must have a relevance to any decision-making that is required for project implementation or monitoring. Unnecessary detailing must be avoided so that any decision-making is not bowed down by the sheer weight of the information given. Integration of PMIS There are several possible ways to create an integrated PMS one obvious would be to write a large system which contains all the functionality described. This however would require an enormous amount of work. The more practical solution is to develop intermediate parts that enable the existing and new tools to share data. The foundation of such an approach is a database and a database access tool. The database holds all data concerning current and former projects. Former projects can be used as cases for the plan builder component. The database access tool provides a common interface for all components of the second layer of the functional model. In addition, the database access tool is used for administration of the data stock and retrieval and preprocessing of reporting data. It should provide features for data retrieval, data modification and data insertion. If a tool form the second layer of the IPMS model has the capability to access databases, as several planning tools have (e.g. the PMsoftware PSDI Project/2 Series X), this feature can be used to directly read data from the database and store data to the database. For components that do not have this capability (e.g. PM-software MSProject) the database access tool has to generate files that can be used as input for these components. It is necessary to harmonize the database structure with the requirements of the components using direct database access. Conflicts concerning the database structure can arise due to the requirements of the different components using direct database access. It can be necessary to use the other form of data exchange for one of the components in order to resolve such a conflict. For the tools communication through files the import and export functions are used to exchange data with the database through the database access tool. The files exported by the components of this -7-

type (files in some format like dBase IV, MPX, ODBS) are interpreted and the content is inserted into the database by the database access tool. To enable dataflow in the opposite direction the database access tool generates files that can be imported into the components. Project management process using IPMS From a more technical perspective we return to the management tasks supported by IPMS and look at the whole picture of the project management process. Unlike management in an on-going enterprise, project management is management of change. The kind and effort of managerial activities as well as the type of computer based tools to support them vary during the course of a project. Figure 7 shows the flow of project management functions supported by IPMS during the project life cycle. In the concept phase, where goals and feasibility of the project are determined, there are tools to support partial work of this phase like tools for effort estimation and risk analysis. In the development phase the project plan has to be established. The basic plan of IPMS contains the work breakdown structure and the sequential relationship of the project activities. The plan builder helps the project planner to look for a plan that is similar to the current project. Then time, costs and resources are attached to the basic plan using the planning tool. The simulation tool enables evaluation of the schedule. During the implementation phase the communication tool is the dominating tool. It supports communication between the project manager and the team members or subcontractors. It also serves in monitoring project progress. If the project does not run as planned, it has to be replanned using the simulation tool and the planning tool. A terminated project is stored in the case base with the plan builder to save documented experiences for later reuse. The reporting tool supports the extraction and visual representation of project data through all phases from the development of the project to the project termination. Benefits and Expectations The PMIS should enable a project team to pinpoint the variances in terms of time, money and resources and see if they can find the reason why these have occurred. It should enable the team to track the status of each part of the project and assess the work that is completed and the work that remains to be done. When this information is available the project team will be able to reallocate the necessary resources to see that each part of the project contributes to the success of the project. It should be able to help the project leaders -8-

to assess the impact on the project from any future risks caused by time and cost overruns, and also to ensure that the quality of the project does not suffer. It should help the team to understand which of the parts of the project require revised guidelines and how they are to be implemented. For an effective PMIS, it is necessary that the preliminary estimates and technical specifications are very precise and all encompassing. Cost control and feedback systems have to be always up to date. Project milestones need to be very clearly identified and linked to the resources that are required to reach them. Vendor selection, materials management, human resources have to be individually looked into to ensure that each of these areas fits within the parameters for the project. Document control including its coding and movement is another vital area of PMIS. Q. 3 a) Write short notes on the following: CMP vs PERT technique

Project Evaluation Review Technique and Critical Path Method (CPM) are scheduling techniques used to plan, schedule, and budget and control the many activities associated with projects. Projects are usually very large, complex, custom products that consist of many interrelated activities to be performed either concurrently or sequentially. The planning horizon for PERT/CPM typically extends beyond the six month time frame of traditional Short range planning used in the other production processes. Utilizing PERT/CPM involves breaking the total project down into many different individual activities with identifiable time requirements. Each activity must be accomplished as part of the total work to be done. Custom products (made to customer specification) are produced with a project process; therefore, the customer's desired completion date is the focal point for scheduling. The time to begin work on the project is determined by working backward from the customers desired completion date. Project managers must coordinate each of the activities so the project can be completed at the desired date and with minimal costs. The PERT/CPM schedule allows for converting the project plans 2 into an operating timetable; thus, provides direction for managing the day today activities of projects. Although application of both PERT and CPM follow the same steps and use network diagrams to schedule and control projects, the primary difference between these two techniques is that PERT is probabilistic where CPM is deterministic. The terms PERT and CPM will be used together or interchangeably in this paper to present the basic principles behind the application of these techniques. In addition, -9-

deterministic activity times in this paper will be used to illustrate the techniques. STEPS INVOLVED IN PERT/CPM There are six steps involved in PERT/CPM that should be completed in chronological order: 1. Identify activities required by the project. 2. Identify the precedence relationships among the activities. 3. Determine the expected time requirements for each activity. 4. Develop a network diagram of activities (arrows) and events or nodes (circles) showing precedence relationships. 5. Determine the earliest and latest feasible event times. 6. Identify the critical path (the minimum time to complete the project). b) Matrix organization

An organizational structure that facilitates the horizontal flow of skills and information. It is used mainly in the management of large projects or product development processes, drawing employees from different functional disciplines for assignment to a team without removing them from their respective positions. Employees in a matrix organization report on day-to-day performance to the project or product manager whose authority flows sideways (horizontally) across departmental boundaries. They also continue to report on their overall performance to the head of their department whose authority flows downwards (vertically) within his or her department. In addition to a multiple command and control structure, a matrix organization necessitates new support mechanisms, organizational culture, and behavior patterns. Developed at the US National Aeronautics & Space Administration (NASA) in association with its suppliers, this structure gets its name from its resemblance to a table (matrix) where every element is included in a row as well as a column.

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c)

Financing of project

Project financing is an innovative and timely financing technique that has been used on many high-profile corporate projects, including Euro Disneyland and the Eurotunnel. Employing a carefully engineered financing mix, it has long been used to fund large-scale natural resource projects, from pipelines and refineries to electric-generating facilities and hydro-electric projects. Increasingly, project financing is emerging as the preferred alternative to conventional methods of financing infrastructure and other large-scale projects worldwide. Project Financing discipline includes understanding the rationale for project financing, how to prepare the financial plan, assess the risks, design the financing mix, and raise the funds. In addition, one must understand the cogent analyses of why some project financing plans have succeeded while others have failed. A knowledge-base is required regarding the design of contractual arrangements to support project financing; issues for the host government legislative provisions, public/private infrastructure partnerships, public/private financing structures; credit requirements of lenders, and how to - 11 -

determine the project's borrowing capacity; how to prepare cash flow projections and use them to measure expected rates of return; tax and accounting considerations; and analytical techniques to validate the project's feasibility Project finance is finance for a particular project, such as a mine, toll road, railway, pipeline, power station, ship, hospital or prison, which is repaid from the cash-flow of that project. Project finance is different from traditional forms of finance because the financier principally looks to the assets and revenue of the project in order to secure and service the loan. In contrast to an ordinary borrowing situation, in a project financing the financier usually has little or no recourse to the non-project assets of the borrower or the sponsors of the project. In this situation, the credit risk associated with the borrower is not as important as in an ordinary loan transaction; what is most important is the identification, analysis, allocation and management of every risk associated with the project. The purpose of this paper is to explain, in a brief and general way, the manner in which risks are approached by financiers in a project finance transaction. Such risk minimization lies at the heart of project finance. In a no recourse or limited recourse project financing, the risks for a financier are great. Since the loan can only be repaid when the project is operational, if a major part of the project fails, the financiers are likely to lose a substantial amount of money. The assets that remain are usually highly specialized and possibly in a remote location. If saleable, they may have little value outside the project. Therefore, it is not surprising that financiers, and their advisers, go to substantial efforts to ensure that the risks associated with the project are reduced or eliminated as far as possible. It is also not surprising that because of the risks involved, the cost of such finance is generally higher and it is more time consuming for such finance to be provided.

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d)

Social Cost benefit Analysis (SCBA) of project

Social cost-benefit analysis is a systematic and cohesive economic tool (method) to survey all the impacts caused by an urban development project. It comprises not just the financial effects (investment costs, direct benefits like tax and fees, et cetera), but all the social effects, like: pollution, safety, indirect (labour) market, legal aspects, et cetera. The main aim of a social cost-benefit analysis is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned heterogeneous effects. As a result, these prices reflect the value a society attaches to the caused effects, enabling the decision maker to form a statement about the net social welfare effects of a project. The result of a social cost-benefit analysis are: 1. An integrated way of comparing the different effects. All relevant costs and benefits of the different project

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implementations (alternatives) are identified and monetized as far as possible. Effects that cannot be monetized are described and quantified as much as possible. 2. Attention for the distribution of costs and benefits. The benefits of a project do not always get to the groups bearing the costs. A social cost-benefit analysis gives insight in who bears the costs and who derives the benefits. 3. Comparison of the project alternatives. A social cost-benefit analysis is a good method to show the differences between project alternatives and provides information to make a well informed decision. 4. Presentation of the uncertainties and risks. A social cost-benefit analysis has several methods to take economic risks and uncertainties into account. The policy decision should be based on calculated risk. Q. 4 (a)Contract planning and contract negotiation stages are usually located in a control project office and contract administration is done at remote construction sites. What are the disadvantages of this distance gap?

The terms contract management and contract administration are often used synonymously. However, contract management is commonly understood as a broader and more strategic concept that covers the whole procurement cycle including planning, formation, execution, administration and close out of a contract and goes beyond the day to day administrative activities in the procurement cycle. Because it is difficult to draw the line between the two terms and because the majority of the UN organizations commonly use contract management when describing the contract administration phase, contract management will be used in this Unit. The purpose of contract management is to ensure that all parties to the contract fully meet their respective obligations as efficiently and effectively as possible, delivering the business and operational outputs required from the contract and providing value for money. It also protects the rights of the parties and ensures required performance when circumstances change. Contract management is similar to project management. Each contract is a mini-project. It has a unique goal, consumes resources, has a beginning and end date, and requires

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coordination and planning of relevant activities, as well as documentation in a contract file throughout the process. Contract management includes monitoring and documenting performance. Depending on the organization and goods or services procured, daily/regular monitoring of the contract may be primarily the responsibility of the requisitioner. In all situations, the procurement officer is responsible for following up and ensuring that the actions of the supplier and the UN organization are in line with the contractual responsibilities, that the contract is amended to reflect agreed changes in circumstances, and that any claim or dispute is resolved amicably according to the terms of the contract. Payment for the goods or services should be handled independently from the procurement function, while contract close out again is the responsibility of the procurement officer. The stages of contract management are intended to ensure that the parties work together to achieve the objectives of the contract. Contract management is based on the idea that the contract is an agreement, a partnership with rights and obligations that must be met by both sides to achieve the goal. Contract management is aimed not at finding fault, but rather at identifying problems and finding solutions together with all contracting parties involved.

When the contract is not being performed properly, there are certain remedies that may be applied by the procurement officer. These include:

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 invoking contract remedies processing/holding payments, as per contract contract termination (for default or convenience). It is also possible that the situation requires dispute resolution (see below). Any of these actions must be approved by the appropriate authority representing each of the parties. Good practice Good practice for choosing the appropriate remedy is to: identify the non-conformance consider the cause (negligence from supplier or the UN organization, force majeure, etc.) consider the contract/type of requirement (goods, services or works) consider the emergency) context (e.g. sole source, competition,

consider the beneficiary/end-user requirements apply principle of proportionality. When considering any contract remedy, seeking feedback from the supplier is prudent. As a practical business matter, the supplier should be given an opportunity to provide evidence against pursuing the remedy. That evidence might point to an excusable delay or impossibility of performance. Such evidence can lead to a remedy that is fair and just for both the UN organization and the supplier. When performance problems are the result of supplier deficiencies, the legal terms and conditions of the contract provide remedies. Such deficiencies may be related to late delivery or to other variances from contract requirements. In case of late / delayed delivery an example would be to accept the late / delayed delivery and to invoke a Liquidated Damages Clause.

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A typical clause in service contracts would be, payment upon completion of certain tasks. Progress payments would only be made once the task has been completed by the supplier and accepted and approved by the UN organization. In case of performance delays (time or quality) the UN organization could withhold payment until the performance failure is cured. Termination is the most serious remedy available to a UN organization. It is the exercise of the UN organizations right to completely or partially discontinue contract performance.

(b) What are the factors, which control the cost of a project? Discuss briefly on each. How does time overrun affect the project cost? Project cost control aims to achieve a business objective on time and within the set budget. In other words, project cost control focuses on maximizing effectiveness and minimizing expense. Business owners can control the costs of a project by carefully planning a suitable budget, monitoring project activities and finding solutions to any shortfalls or miscalculations that jeopardize the projects success.

Budget
A projects budget lays out how much each of the various tasks should cost. Not all costs are predictable -- for example, a client might unexpectedly ask the team to redesign some element, or supply costs might change due to external economic factors. But as much as possible, the budget should detail expected expenses. If there is some unavoidable uncertainty, the budget should also include a buffer to handle unexpected overages. For instance, software development projects often experience glitches that even the best planners could never predict, meaning their budgets must be somewhat flexible to handle shifting requirements.

Monitoring Team Activities

As the project commences, the project manager must monitor each contributor to keep the project on budget and on time. For instance, if a worker fails to complete a necessary task on time, the manager must know about the delay immediately before - 17 -

problems develop down the pipeline. Meeting individually on a regular basis can help the manager stay abreast of progress. Asking for daily or weekly reports is another way to stay in touch. Group meetings also might be necessary to ensure workers aren't working at cross purposes or performing redundant tasks. For instance, some workers might not be aware how strategic shifts have changed project requirements.

Damage Control
No budget can handle every eventuality. The key to effective project cost control is being flexible enough to find solutions to inevitable problems. For example, perhaps a supplier failed to deliver necessary project equipment on time. To minimize the threat to the budget, a project manager must solve the problem quickly or find a workaround. In other words, project cost control requires an ability to repair or abandon doomed strategies as quickly as possible, before they jeopardize the success of the project.

Considerations
A host of factors can threaten a project and its budget, so project managers must be vigilant. Experience handling projects is perhaps the best preparation, but new project managers can take some steps to improve their skills. Documenting every step of the process, for example, helps a manager identify where problems began and form better plans in the future. Periodic reviews of the teams performance by upper management, clients or the business owner also might help by providing an objective take on the teams performance. Q. 5 (a)Detailed Project Report (DPR)forms the foundation on which the entire sperstructure of the project is built if it is weak, the project cannot with stand the turbulent times ahead. Bring out the does and donts of a good DPR.

The inputs for developing a Project Management Plan are: Preliminary Project Scope Statement - The preliminary Project Scope Statement forms the basis of the scope section of the Project Management Plan and includes a description of the scope, its boundaries, and the major deliverables. - 18 -

Project management processes - Project management processes are descriptions of how the project will be managed. For example, communication management at your company might include status updates included in the project bulletin board. Organizational process assets - Organizational process assets are resources, procedures, or processes, from any or all of the organizations involved in the project, that influence the process or outcome of a project. Plans, policies, procedures, and guidelines may be used to develop the Project Management Plan. For example the process of installing net new equipment in the data center is a part of the processes of the organization. Another is the skill set of current employees. Enterprise environmental factors Enterprise environmental factors occur within and outside an organization from any or all of the organizations involved in the project that may affect the project outcome. Factors such as a companys culture and market conditions may be used to develop the Project Management Plan. A key aside is the Project Management Plan needs to consider any conditions or factors that might impact it. Thankfully, there are tools and techniques that can be used when developing the Project Management Plan. These tools and techniques are: Project management methodology - A project management methodology is an organized approach to creating a Project Management Plan. Methodologies can be simple or complex depending on the project type and the needs of the performing organization. Project management information system (PMIS) - A PMIS is typically a computer-driven system that helps a team develop the project plan. It can calculate schedules, costs, probable outcomes, and expectations. It can also publish the approved document. Expert judgment Expert judgement is relied upon to develop technical and managerial details to be included in the Project Management Plan. Expert judgment is the technical and management expertise of the project management team. For example an experienced employee and an organization will have more insights into corporate culture, than a new hire. Now we have the inputs, tools and techniques to use as we create a project management plan. The next step is actually having the plan and its components. The Project Management Plan consists of 11 core components for executing, monitoring, and controlling. There may be

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more, but the 11 is a good place to start. The eleven core components of a Project Management Plan are: The processes determined by the project management team The implementation level of each process chosen by the project management team The descriptions of the tools and techniques to be used for accomplishing those processes The chosen project life cycle and related project phases How the selected processes will be used to manage the specific project How work will be executed to achieve the project objectives How changes will be monitored and controlled How configuration management will be performed How project management baselines will be maintained Communication techniques among stakeholders When management reviews will be scheduled to address issues and pending decisions. Another way to go about developing a project management plan is gathering and collecting all subsidiary plans in the Project Management Plan. Subsidiary plans are the outputted document for planning from a knowledge area. These can also be included in the Project Management Plan. These plans are: The The The The The The The The The Scope Management Plan Schedule Management Plan Cost Management Plan Communication Management Plan Process Improvement Plan Staffing Management Plan Quality Management Plan Risk Management Plan Procurement Management Plan.

When you create and follow a Project Management Plan that is composed of the nine subsidiary plans, youll have a map that will guide your decisions and actions and help you reach your desired destination: a successful project. (b) Discuss the most aspects, which need to be considered at the pre-feasibility study of a project. What factors and issues need to be considered in financial and economic evaluation?

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A feasibility study is an analytical tool used during a business development process to show how a business would operate under a set of assumptions. These assumptions often include such factors as the technology used (the facilities, equipment, production, process, etc.), financing, (capital needs, volume, cost of goods, wages, etc.), marketing (prices, competition, etc.), and so on. The study is usually the first time in a project development process that many key pieces and information about the project are assembled into one over all analysis. The study must show how well all of these pieces fit and perform together. The result will be an overall assessment of whether the proposed business concept is technically and economically feasible. Feasibility studies should also provide sensitivity analyses of the business given changes in key assumptions. One should note that a simulation or projection model, while useful, is not a substitute for a comprehensive feasibility study. This type of model is sometimes used in a pre-feasibility study done early in the project timeline to provide a first-cut evaluation of the proposed business idea. The feasibility study evaluates the project's potential for success. The perceived objectivity of the evaluation is an important factor in the credibility placed on the study by potential members, lenders, and other interested parties. For this reason, it is important to hire a consultant with no formal ties to equipment manufacturers or marketers, for example, so that an unbiased evaluation of operating potential and efficiency can be made. Also, the creation of the study requires a strong background both in the financial and technical aspects of the project. For these reasons, outside consultants conduct most studies, although the project leadership normally has input as well. Feasibility studies for a cooperative are similar to those for other businesses, with one exception. Potential members use the feasibility study to evaluate how a cooperative business idea would enhance their personal businesses rather than to determine the return on investment they would receive on invested stock. A study conducted for an agricultural marketing cooperative, for example, must address the project's potential impact on members' farming operations in addition to analyzing economic performance at the cooperative level. In other cases, such as food cooperatives, the value to the member is access to consumer goods or services, possibly at lower prices, and is not based on the economic return to the cooperative itself. Cooperative businesses are developed first and foremost to serve members' needs and enhance their economic well-being. However, to do so, they must operate efficiently and compete effectively in the marketplace.

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There are four factors involved in feasibility study:Identify economic need Leaders and other potential member-users identify the economic need the cooperative might fulfill. A steering committee of potential member-users is selected to guide the project. Deliberate Develop an overview of proposed business operations. Survey prospective members to determine the potential use of a cooperative. Conduct a feasibility study. - Economic - Marketing - Technical - Financial - Management Develop a business plan. Implement Prepare legal papers and incorporate. Elect a board of directors. Implement the business plan. Conduct a membership drive. Acquire capital and develop a loan application package. Execute Hire the manager. Acquire facilities. Begin operations. Economic feasibility The purpose of the economic feasibility assessment is to determine the positive economic benefits to the organization that the proposed system will provide. It includes quantification and identification of all the benefits expected. This assessment typically involves a cost/ benefits analysis. Financial feasibility In case of a new project, financial viability can be judged on the following parameters:

Total estimated cost of the project Financing of the project in terms of its capital structure, debt equity ratio and promoter's share of total cost Existing investment by the promoter in any other business - 22 -

Projected cash flow and profitability

The financial viability of a project should provide the following information

Full details of the assets to be financed and how liquid those assets are. Rate of conversion to cash-liquidity (i.e. how easily can the various assets be converted to cash?). Project's funding potential and repayment terms. Sensitivity in the repayments capability to the following factors: o Time delays. o Mild slowing of sales. o Acute reduction/slowing of sales. o Small increase in cost. o Large increase in cost. o Adverse economic conditions.

References: http://www.projectmanager.com/ http://www. amazon.com/ http://www. google.com/ http://tutor2u.net/ http://answers.yahoo.com/ http://en.wikipedia.org http://www.netmba.com/ Books Project management by Harold Kerzner Introduction to project management by Kathy schwable Project Management (AIOU)

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