QUES.1.Explain the various phases of the project life cycle with suitable diagram?

Ans. The Five Steps in the PM Life Cycle

Project Management Life Cycle

Planning involves setting out the roadmap for the project by creating the following plans:
project plan, resource plan, financial plan, quality plan, acceptance plan and communications
plan.

Execution involves building the deliverables and controlling the project delivery, scope,
costs, quality, risks and issues.

Closure involves winding-down the project by releasing staff, handing over deliverables to
the customer and completing a post implementation review.

Project Initiation

Project Initiation is the first phase in the Project Life Cycle and essentially involves starting
up the project. You initiate a project by defining its purpose and scope, the justification for
initiating it and the solution to be implemented. You will also need to recruit a suitably
skilled project team, set up a Project Office and perform an end of Phase Review. The Project
Initiation phase involves the following six key steps:
Project Planning

After defining the project and appointing the project team, you're ready to enter the detailed
Project Planning phase. This involves creating a suite of planning documents to help guide
the team throughout the project delivery. The Planning Phase involves completing the
following 10 key steps:

Project Execution

With a clear definition of the project and a suite of detailed project plans, you are now ready
to enter the Execution phase of the project.

This is the phase in which the deliverables are physically built and presented to the customer
for acceptance.

While each deliverable is being constructed, a suite of management processes are undertaken
to monitor and control the deliverables being output by the project.

These processes include managing time, cost, quality, change, risks, issues, suppliers,
customers and communication.
 Project Closure

Project Closure involves releasing the final

deliverables to the customer, handing over project
documentation to the business, terminating supplier
contracts, releasing project resources and
communicating project closure to all stakeholders. The last remaining step is to undertake a
Post Implementation Review to identify the level of project success and note any lessons
learned for future projects.

QUES.2. What are the causes for industrial sickness in SSI. Also explain the remedial
measures to cope with it?

Ans. Industrial Sickness in India: Meaning, Causes and Suggested Remedies!

Meaning:
One of the adverse trends observable in the corporate private sector of India is the growing
incidence of sickness. It is causing considerable concern to planners and policymakers. It is
also putting a severe strain on the economic system, particularly on the banks.

There are various criteria of sickness. According to the criteria accepted by the Reserve Bank
of India “a sick unit is one which has reported cash loss for the year of its operation and
in the judgment of the financing bank is likely to incur cash loss for the current year as
also in the following year.”
A major symptom of sickness is a steady fall in debt-equity ratio and an imbalance in the
financial position of the unit. Simply put, a sick unit is one which is unable to support itself
through the operation of internal resources (that is, earnings plough-back). As a general rule,
the sick units continue to operate below the break-even point (at which total revenue = total
cost) and are, thus, forced to depend on external sources for funds of their long-term survival.

Industrial sickness creates various socio-economic problems. When an industrial unit falls
sick those who depend on it have to face an uncertain future. They fear loss of jobs. Even if
they do not lose jobs they do not get their wages and compensation in time and are, thus,
forced to live in extreme hardship.
Of course, sickness is not a special problem of India. It is, undoubtedly, a global
phenomenon. Even in industrially advanced countries there are numerous cases of bankruptcy
or liquidation. These sick units are nursed back to health through mergers, amalgamations,
takeovers, purchase of assets, or outright nationalisation. When the-problem becomes really
alarming or unmanageable, the unit is permitted to die its natural death.

Causes:
Industrial sickness has become a major problem of the India’s corporate private sector. Of
late, it has assumed serious proportions. A close look reveals that there are, at least, five ma-
jor causes of industrial sickness, viz., promotional, managerial, technical, financial and
political.

An industrial unit may become sick at its nascent stage or after working for quite some time.
For instance, two major traditional industries of India, viz., cotton textiles and sugar, have
fallen sick largely due to short-sighted financial and depreciation policies. Heavy capital cost
escalation arising out of price inflation accentuates the problem. The historical method of cost
depreciation is highly inadequate when assets are to be replaced at current cost during
inflation.

External vs. Internal Causes:

The factors leading to sickness can be due to reasons of finance, technical issues, mismanage-
ment, non-availability of raw materials, power or natural calamities or disasters such, as fire
or earthquake or a combination of such factors.

The causes of industrial sickness may be divided into two broad categories:
An industrial unit may become sick at its nascent stage or after working for quite some time.
For instance, two major traditional industries of India, viz., cotton textiles and sugar, have
fallen sick largely due to short-sighted financial and depreciation policies. Heavy capital cost
escalation arising out of price inflation accentuates the problem. The historical method of cost
depreciation is highly inadequate when assets are to be replaced at current cost during
inflation.
Moreover, since the depreciation funds are often used to meet working capital needs, it does
not become readily available for replacement of worn-out plant and equipment. The end
result is that the industrial unit is constrained to operate with old and obsolete equipment, its
profitability is eroded and, sooner or later, the unit is driven out of the market by the forces of
competition.

External vs. Internal Causes:

The factors leading to sickness can be due to reasons of finance, technical issues, mismanage-
ment, non-availability of raw materials, power or natural calamities or disasters such, as fire
or earthquake or a combination of such factors.

(a) external and

(b) internal.

External causes are those which are beyond the control of its management and seen to be
relatively more important than internal causes.

The causes which have been identified so far include:

(a) Delay in land acquisition and building construction(b) Delay in obtaining financial as-
sistance from public financial institutions(c) Delayed supply of machinery by the
manufacturers(d) Problems related to recruitment of technical and managerial staff(e) Delay
on the part of the Government in sanctioning licences,

An industrial unit may become sick at its nascent stage or after working for quite some time.
For instance, two major traditional industries of India, viz., cotton textiles and sugar, have
fallen sick largely due to short-sighted financial and depreciation policies. Heavy capital cost
escalation arising out of price inflation accentuates the problem. The historical method of cost
depreciation is highly inadequate when assets are to be replaced at current cost during
inflation.
Moreover, since the depreciation funds are often used to meet working capital needs, it does
not become readily available for replacement of worn-out plant and equipment. The end
result is that the industrial unit is constrained to operate with old and obsolete equipment, its
profitability is eroded and, sooner or later, the unit is driven out of the market by the forces of
competition.

External vs. Internal Causes:

The factors leading to sickness can be due to reasons of finance, technical issues, mismanage-
ment, non-availability of raw materials, power or natural calamities or disasters such, as fire
or earthquake or a combination of such factors.

The causes of industrial sickness may be divided into two broad categories:
(a)external and

(ii) internal.

External causes are those which are beyond the control of its management and seen to be
relatively more important than internal causes.

The causes which have been identified so far include:

(a) Delay in land acquisition and building construction

(b) Delay in obtaining financial assistance from public financial institutions

(c) Delayed supply of machinery by the manufacturers

(d) Problems related to recruitment of technical and managerial staff

(e) Delay on the part of the Government in sanctioning licences, permits, etc.

The other causes are:

(ii) Differences among various persons associated with the promotion and management of the
enterprise
(iii) Mechanical defects and breakdown

(iv) Inability to purchase raw materials at an economic price and at the right time

Incidence:
In Dec. 1980 the total number of sick units was 24,550, involving outstanding bank credit of
Rs. 1,809 crores. As at the end of March 2000, the total number of sick units stood at 307,399
involving an outstanding bank credit of about Rs. 23,656 crores. Of these 14,793 were po-
tentially viable, 278,423 were non-viable and the viability of the remaining 14,183 has not
been decided.

Three major industries affected by industrial sickness are jute, engineering goods and textiles.
Some of the industries such as the real estate, light consumer goods, automobile, diamonds
and many others are reeling under the impact of steep fall in demand, inadequate supply of
finance, large proportion of non-performing assets and constraints of finance due to huge
amounts of funds getting blocked in ageing receivables

Government Policy:
A number of measures have been taken to tackle the problem of industrial sickness. The
importance of detection of sickness at the incipient stage has been emphasised by the RBI.
The policy framework in respect of measures to deal with the problem of industrial sickness
has been laid down in the guidelines issued on October 1981 (which were subsequently modi-
fied in February 1982) for guidance of administrative ministries of the Central Government,
State Governments and financial institutions.

The salient features of these guidelines are the following:

(a) The administrative ministries in the Government will have specific responsibility for pre-
vention and remedial action in relation to sickness in industrial sector within their respective
charges. They will have a central role in monitoring sickness and coordinating action for
revival and rehabilitation of sick units. In suitable cases, they will also establish standing
committees for major industrial sectors where sickness is widespread;
(b) The financial institutions will strengthen the monitoring system so that it is possible to
take timely corrective action to prevent incipient sickness. They will obtain periodical returns
from the assisted units and from the Directors nominated by them on the Boards of such
units. These will be analysed by the Industrial Development Bank of India and results of such
analyses conveyed to the financial institutions concerned and the Government.

(c) The financial institutions and banks will initiate necessary corrective action for sick or in-
cipient sick unit based on a diagnostic study. In case of growing sickness, the financial
institutions will also consider taking of management responsibility where they are confident
of restoring a unit to health. The Ministry of Finance will have to issue suitable guidelines for
management;

(d) Where the banks and financial institutions are unable to prevent sickness or ensure revival
of a sick unit, they will deal with their outstanding dues to the unit in accordance with the
normal banking procedures. However, before doing so, they will report the matter to the
Government which will decide whether the unit should be nationalised or whether any other
alternative- including workers’ participation in management— can revive the undertaking.

QUES.3Do IIR & NPV Methods always give the same result in evaluations of mutually
exclusive Project? If not. State the reason for the deviation in the result?

Ans. Internal Rate of Return (IRR) Definition

What Is the Internal Rate of Return (IRR)?

The internal rate of return (IRR) is a metric used in capital budgeting to estimate the
profitability of potential investments. The internal rate of return is a discount rate that makes
the net present value (NPV) of all cash flows from a particular project equal to zero. IRR
calculations rely on the same formula as NPV does.

The Formula for IRR Is

IRR=NPV=∑t=1TCt(1+r)t−C0=0where:Ct=net cash inflow during the period tC0=total initia
l investment costsr=the discount rate, andt=the number of time periods\begin{aligned}
&\text{IRR}=\text{NPV}=\sum_{t=1}^{T}\frac{C_t}{\left(1+r\right)^t}-C_0=0\\
&\textbf{where:}\\ &C_t=\text{net cash inflow during the period t}\\ &C_0=\text{total initial
investment costs}\\ &r=\text{the discount rate, and}\\ &t=\text{the number of time periods}\\
\end{aligned}IRR=NPV=t=1∑T(1+r)tCt−C0=0where:Ct
=net cash inflow during the period tC0
=total initial investment costsr=the discount rate, andt=the number of time periods

Internal Rate of Return (IRR) Definition

What Is the Internal Rate of Return (IRR)?

The internal rate of return (IRR) is a metric used in capital budgeting to estimate the
profitability of potential investments. The internal rate of return is a discount rate that makes
the net present value (NPV) of all cash flows from a particular project equal to zero. IRR
calculations rely on the same formula as NPV does.

The Formula for IRR Is

IRR=NPV=∑t=1TCt(1+r)t−C0=0where:Ct=net cash inflow during the period tC0=total initia

l investment costsr=the discount rate, andt=the number of time periods\begin{aligned}
&\text{IRR}=\text{NPV}=\sum_{t=1}^{T}\frac{C_t}{\left(1+r\right)^t}-C_0=0\\
&\textbf{where:}\\ &C_t=\text{net cash inflow during the period t}\\ &C_0=\text{total initial
investment costs}\\ &r=\text{the discount rate, and}\\ &t=\text{the number of time periods}\\
\end{aligned}IRR=NPV=t=1∑T(1+r)tCt−C0=0where:Ct
=net cash inflow during the period tC0
=total initial investment costsr=the discount rate, andt=the number of time periods

How to Calculate IRR

To calculate IRR using the formula, one would set NPV equal to zero and solve for the
discount rate (r), which is the IRR. Because of the nature of the formula, however, IRR
cannot be calculated analytically and must instead be calculated either through trial-and-error
or using software programmed to calculate IRR.

IRR is sometimes referred to as "economic rate of return" or "discounted cash flow rate of
return." The use of "internal" refers to the omission of external factors, such as the cost of
capital or inflation, from the calculation.

Net present value (NPV) is the difference between the present value of cash inflows and the
present value of cash outflows over a period of time. By contrast, internal rate of return (IRR)
is a calculation used to estimate the profitability of potential investments.

Both of these measurements are primarily used in capital budgeting, the process by which
companies determine whether a new investment or expansion opportunity is worthwhile.
Given an investment opportunity, a firm needs to decide whether undertaking the investment
will generate net economic profits or losses for the company.

Determining Net Present Value

To do this, the firm estimates the future cash flows of the project and discounts them into
present value amounts using a discount rate that represents the project's cost of capital and its
risk. Next, all of the investment's future positive cash flows are reduced into one present
value number. Subtracting this number from the initial cash outlay required for the
investment provides the net present value of the investment.

Determining Internal Rate of Return

So, JKL Media's project has a positive NPV, but from a business perspective, the firm should
also know what rate of return will be generated by this investment. To do this, the firm would
simply recalculate the NPV equation, this time setting the NPV factor to zero, and solve for
the now unknown discount rate. The rate that is produced by the solution is the project's
internal rate of return (IRR).

For this example, the project's IRR could, depending on the timing and proportions of cash
flow distributions, be equal to 17.15 percent. Thus, JKL Media, given its projected cash
flows, has a project with a 17.15 percent return. If there were a project that JKL could
undertake with a higher IRR, it would probably pursue the higher-yielding project instead.
Thus, you can see that the usefulness of the IRR measurement lies in its ability to represent
any investment opportunity's possible return and compare it with other alternative
investments.

QUES.4. Define SCBA. Discuss the UNIDO and LM approach of SCBA?

Ans. INTRODUCTION Some members of the industrial marketing profession may not
realise that their efforts in creating new markets and facilitating communication between
producers and consumers are grist to the mill of economic theory. One example is that
observed market prices are very often taken as measures of social value in benefit/cost
analyses which purport to balance economic and social benefits against economic and social
disbenefits. Furthermore benefit/cost analysis is often used when a decision is to be made on
the internalisation of social cost within an enterprise. For example, should a manufacturer be
asked to pay for the cost of pollution to his neighbourhood - even though he is a provider _
Nearly half a century has passed since Pigou (1924) demonstrated the possibility of a
divergence between private and social costs and benefits. The extent to which social costs can
actually pervade a competitive market economy was first examined in a comprehensive but
much-neglected study written by Kapp (1950).

Social cost benefit analysis (SCBA)

A social cost benefit analysis is a systematic and cohesive method to survey all the impacts
caused by an (urban) development project or other policy measure. It comprises not just the
financial effects (investment costs, direct benefits like profits, taxes and fees, et cetera), but
all the societal effects, like: pollution, environment, safety, travel times, spatial quality,
health, indirect (i.e. labour or real estate) market impacts, 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
an opinion about the net social welfare effects of a project.

Compare different project alternatives

A major advantage of a social cost benefit analysis is that it enables investors (mostly public
parties) to systematically and cohesively compare different project alternatives. Hence, these
alternatives will not just be compared intrinsically, but will also be set against the “null
alternative hypothesis”. This hypothesis describes “the most likely” scenario development in
case a project will not be executed. Put differently, investments on a smaller scale will be
included in the null alternative hypothesis in order to make a realistic comparison in a
situation without “huge” investments.

Calculate direct, indirect and external effects

The social cost benefit analysis calculates the direct (primary), indirect (secondary) and
external effects:
 Direct effects are the costs and benefits that can be directly linked to the owners/users of
the project properties (e.g., the users and the owner of a building, recreational area, wind
energy park, or highway).
 Indirect effects are the costs and benefits that are passed on to the producers and
consumers outside the market with which the project is involved (e.g., the owner of a
bakery nearby the new building, or a business company located near the newly planned
highway, recreational area, indirect tax incomes, etc.).
 External effects are the costs and benefits that cannot be passed on to any existing
markets because they relate to issues like the environment (noise, emission of CO2, etc.),
safety (traffic, external security) and nature (biodiversity, dehydration, etc.).

Monetizing effects
As model engineers, we at Decisio try to quantify and monetize as much effects as possible.
Effects that cannot be monetized are presented in a such a way that they can be compared.
This way, policymakers can include these effects in their final judgment if an urban planning
project (or a particular variation) is worth investing in, which components of the project are
causing positive or negative impacts on society and how costs and benefits are divided
amongst stakeholders. The method of monetizing effects can also influence the outcome of a
social cost benefit analysis and predictions will always remain uncertain. Therefore, the
results of a social cost benefit analysis are not absolute. Nevertheless, it is a good instrument
to investigate the strong and weak points of the different alternatives. We also always give
insights in the impact of changes in the most influential assumptions to stress the robustness
of outcomes.

The result of a social cost benefit analysis

The result of a social cost benefit analysis are:
 An integrated way of comparing the different effects. All relevant costs and benefits of
the different project implementations (alternatives) are identified and monetized as far as
 possible. Effects that cannot be monetized are described and quantified as much as
possible.
 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.
 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.
 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.

Decisio’s SCBA expertise

Some recent examples of social cost benefit

studies performed by Decision are:
Cycling
 Analysis on public and private investment in cycling. Assigned by the Borough of
Merton (within the EU-program Cycle Cities)
 Workshop on social cost benefit analysis for cycling investments in Piraeus, Greece.
Assigned by the EU Cycle Cities program
 Developing a social cost benefit analysis methodology for cycling investments. Assigned
by the Dutch Ministry of Infrastructure and the Environment
 Social cost benefit analysis of a bicycle high way between Nijmegen, Mook and Cuijk in
the east of the Netherlands. Assigned by the City region of Arnhem & Nijmegen.

QUES.5. What is project management? Explain in detail the project management

framework?

Ans. Project management is the practice of initiating, planning, executing, controlling, and
closing the work of a team to achieve specific goals and meet specific success criteria at the
specified time.
The primary challenge of project management is to achieve all of the project goals within the
given constraints.[1] This information is usually described in project documentation, created at
the beginning of the development process. The primary constraints are scope, time, quality
and budget.[2] The secondary – and more ambitious – challenge is
to optimize the allocation of necessary inputs and apply them to meet pre-defined objectives.
A project is a temporary end designed to produce a unique product, service or result with a
defined beginning and end (usually time-constrained, and often constrained by funding or
staffing) undertaken to meet unique goals and objectives, typically to bring about beneficial
change or added value.[3][4] The temporary nature of projects stands in contrast with business
as usual (or operations),[5] which are repetitive, permanent, or semi-permanent functional
activities to produce products or services. In practice, the management of such distinct
production approaches requires the development of distinct technical skills and management
strategies.[6]

Project management types

Project management can apply to any project, but it is often tailored to accommodate the
specific needs of different and highly specialized industries. For example, the construction
industry, which focuses on the delivery of things like buildings, roads, and bridges, has
developed its own specialized form of project management that it refers to as construction
project management and in which project managers can become trained and certified.[16] The
information technology industry has also evolved to develop its own form of project
management that is referred to as IT project management and which specializes in the
delivery of technical assets and services that are required to pass through various lifecycle
phases such as planning, design, development, testing, and deployment. Biotechnology
project management focuses on the intricacies of biotechnology research and
development.[17] Localization project management includes many standard project
management practices even though many consider this type of management to be a very
different discipline. It focuses on three important goals: time, quality and budget. Successful
projects are completed on schedule, within budget, and according to previously agreed
quality standards.[18]
For each type of project management, project managers develop and utilize repeatable
templates that are specific to the industry they're dealing with. This allows project plans to
become very thorough and highly repeatable, with the specific intent to increase quality,
lower delivery costs, and lower time to deliver project results.

Approaches
A 2017 study suggested that the success of any project depends on how well four key aspects
are aligned with the contextual dynamics affecting the project, these are referred to as
the four P's:[19]

 Plan: The planning and forecasting activities.

 Process: The overall approach to all activities and project governance.
 People: Including dynamics of how they collaborate and communicate.
 Power: Lines of authority, decision-makers, organograms, policies for implementation
and the like.
There are a number of approaches to organizing and completing project activities, including:
phased, lean, iterative, and incremental. There are also several extensions to project planning,
for example based on outcomes (product-based) or activities (process-based).
Regardless of the methodology employed, careful consideration must be given to the overall
project objectives, timeline, and cost, as well as the roles and responsibilities of all
participants and stakeholders.[20]
Benefits realization management
Benefits realization management (BRM) enhances normal project management techniques
through a focus on outcomes (benefits) of a project rather than products or outputs, and then
measuring the degree to which that is happening to keep a project on track. This can help to
reduce the risk of a completed project being a failure by delivering agreed upon
requirements/outputs but failing to deliver the benefits of those requirements.
In addition, BRM practices aim to ensure the alignment between project outcomes and
business strategies. The effectiveness of these practices is supported by recent research
evidencing BRM practices influencing project success from a strategic perspective across
different countries and industries.[21]
An example of delivering a project to requirements might be agreeing to deliver a computer
system that will process staff data and manage payroll, holiday and staff personnel records.
Under BRM the agreement might be to achieve a specified reduction in staff hours required
to process and maintain staff data.
Critical chain project management
Critical chain project management (CCPM) is an application of the theory of
constraints (TOC) to planning and managing projects, and is designed to deal with the
uncertainties inherent in managing projects, while taking into consideration limited
availability of resources (physical, human skills, as well as management & support capacity)
needed to execute projects.
The goal is to increase the flow of projects in an organization (throughput). Applying the first
three of the five focusing steps of TOC, the system constraint for all projects, as well as the
resources, are identified.

Process groups

The project development stages

Traditionally (depending on what project management methodology is being used), project
management includes a number of elements: four to five project management process groups,
and a control system. Regardless of the methodology or terminology used, the same basic
project management processes or stages of development will be used. Major process groups
generally include:

 Initiation
 Planning
 Production or execution
 Monitoring and controlling
 Closing
In project environments with a significant exploratory element (e.g., research and
development), these stages may be supplemented with decision points (go/no go decisions) at
which the project's continuation is debated and decided. An example is the Phase–gate model.
Initiating

Initiating process group processes

The initiating processes determine the nature and scope of the project.[35] If this stage is not
performed well, it is unlikely that the project will be successful in meeting the business’
needs. The key project controls needed here are an understanding of the business
environment and making sure that all necessary controls are incorporated into the project.
Any deficiencies should be reported and a recommendation should be made to fix them.
The initiating stage should include a plan that encompasses the following areas. These areas
can be recorded in a series of documents called Project Initiation documents. Project
Initiation documents are a series of planned documents used to create order for the duration
of the project. These tend to include:

RACI(Q) chart. At least one Responsible and exactly one Accountable person are designated
for each project and planning activity.

 project proposal (idea behind project, overall goal, duration)

 project scope (project direction and track)
 product breakdown structure (PBS) (a hierarchy of deliverables / outcomes and
components thereof)
 work breakdown structure (WBS) (a hierarchy of the work to be done, down to daily
tasks)
 responsibility assignment matrix (RACI) (roles and responsibilities aligned to
deliverables / outcomes)
 tentative project schedule (milestones, important dates, deadlines)
 analysis of business needs and requirements against measurable goals
 review of the current operations
 financial analysis of the costs and benefits, including a budget
 stakeholder analysis, including users and support personnel for the project
 project charter including costs, tasks, deliverables, and schedules
 SWOT analysis: strengths, weaknesses, opportunities, and threats to the business
Planning
After the initiation stage, the project is planned to an appropriate level of detail (see example
of a flow-chart).[34] The main purpose is to plan time, cost and resources adequately to
estimate the work needed and to effectively manage risk during project execution. As with
the Initiation process group, a failure to adequately plan greatly reduces the project's chances
of successfully accomplishing its goals.
Project planning generally consists of

 determining the project management methodology to follow (e.g. whether the plan will
be defined wholly up front, iteratively, or in rolling waves);
 developing the scope statement;
 selecting the planning team;
 identifying deliverables and creating the product and work breakdown structures;
 identifying the activities needed to complete those deliverables and networking the
activities in their logical sequence;
 estimating the resource requirements for the activities;
 estimating time and cost for activities;
 developing the schedule;
 developing the budget;
 risk planning;
 developing quality assurance measures;
 gaining formal approval to begin work.
Additional processes, such as planning for communications and for scope management,
identifying roles and responsibilities, determining what to purchase for the project and
holding a kick-off meeting are also generally advisable.
For new product development projects, conceptual design of the operation of the final
product may be performed concurrent with the project planning activities, and may help to
inform the planning team when identifying deliverables and planning activities.Executing

Executing process group processes

While executing we must know what are the planned terms that need to be executed.
The execution/implementation phase ensures that the project management plan's deliverables
are executed accordingly. This phase involves proper allocation, co-ordination and
management of human resources and any other resources such as material and budgets. The
output of this phase is the project deliverables.
Project Documentation
Documenting everything within a project is key to being successful. In order to maintain
budget, scope, effectiveness and pace a project must have physical documents pertaining to
each specific task. With correct documentation, it is easy to see whether or not a project's
requirement has been met. To go along with that, documentation provides information
regarding what has already been completed for that project. Documentation throughout a
project provides a paper trail for anyone who needs to go back and reference the work in the
past. In most cases, documentation is the most successful way to monitor and control the
specific phases of a project. With the correct documentation, a project's success can be
tracked and observed as the project goes on. If performed correctly documentation can be the
backbone to a project's success.
Monitoring and controlling

Monitoring and controlling process group processes

Monitoring and controlling consists of those processes performed to observe project
execution so that potential problems can be identified in a timely manner and corrective
action can be taken, when necessary, to control the execution of the project. The key benefit
is that project performance is observed and measured regularly to identify variances from the
project management plan.
Monitoring and controlling includes:[37]
 Measuring the ongoing project activities ('where we are');
 Monitoring the project variables (cost, effort, scope, etc.) against the project management
plan and the project performance baseline (where we should be);
 Identifying corrective actions to address issues and risks properly (How can we get on
track again);
 Influencing the factors that could circumvent integrated change control so only approved
changes are implemented.
In multi-phase projects, the monitoring and control process also provides feedback between
project phases, in order to implement corrective or preventive actions to bring the project into
compliance with the project management plan.
Project maintenance is an on going process, and it includes:[2]

 Continuing support of end-users

 Correction of errors
 Updates to the product over time

Monitoring and controlling cycle

In this stage, auditors should pay attention to how effectively and quickly user problems are
resolved.
Over the course of any construction project, the work scope may change. Change is a normal
and expected part of the construction process. Changes can be the result of necessary design
modifications, differing site conditions, material availability, contractor-requested changes,
value engineering and impacts from third parties, to name a few. Beyond executing the
change in the field, the change normally needs to be documented to show what was actually
constructed. This is referred to as change management. Hence, the owner usually requires a
final record to show all changes or, more specifically, any change that modifies the tangible
portions of the finished work. The record is made on the contract documents – usually, but
not necessarily limited to, the design drawings. The end product of this effort is what the
industry terms as-built drawings, or more simply, "as built." The requirement for providing
them is a norm in construction contracts. Construction document management is a highly
important task undertaken with the aid an online or desktop software system, or maintained
through physical documentation. The increasing legality pertaining to the construction
industry's maintenance of correct documentation has caused the increase in the need for
document management systems.
When changes are introduced to the project, the viability of the project has to be re-assessed.
It is important not to lose sight of the initial goals and targets of the projects. When the
changes accumulate, the forecasted result may not justify the original proposed investment in
the project. Successful project management identifies these components, and tracks and
monitors progress so as to stay within time and budget frames already outlined at the
commencement of the project.
Closing

Closing process group processes.[34]

Closing includes the formal acceptance of the project and the ending thereof. Administrative
activities include the archiving of the files and documenting lessons learned.
This phase consists of:[2]

 Contract closure: Complete and settle each contract (including the resolution of any
open items) and close each contract applicable to the project or project phase.
 Project close: Finalize all activities across all of the process groups to formally close the
project or a project phase
Also included in this phase is the Post Implementation Review. This is a vital phase of the
project for the project team to learn from experiences and apply to future projects. Normally a
Post Implementation Review consists of looking at things that went well and analyzing things
that went badly on the project to come up with lessons learned.
Project controlling and project control systems
Project controlling (also known as Cost Engineering) should be established as an
independent function in project management. It implements verification and controlling
function during the processing of a project in order to reinforce the defined performance and
formal goals.[39] The tasks of project controlling are also:

 the creation of infrastructure for the supply of the right information and its update
 the establishment of a way to communicate disparities of project parameters
 the development of project information technology based on an intranet or the
determination of a project key performance indicator system (KPI)
 divergence analyses and generation of proposals for potential project regulations[40]
 the establishment of methods to accomplish an appropriate project structure, project
workflow organization, project control and governance
 creation of transparency among the project parameters[41]
Fulfillment and implementation of these tasks can be achieved by applying specific methods
and instruments of project controlling. The following methods of project controlling can be
applied:

 investment analysis
 cost–benefit analysis
 value benefit analysis
 expert surveys
 simulation calculations
 risk-profile analysis
 surcharge calculations
 milestone trend analysis
 cost trend analysis
 target/actual-comparison
Project control is that element of a project that keeps it on track, on-time and within
budget.[37] Project control begins early in the project with planning and ends late in the
project with post-implementation review, having a thorough involvement of each step in the
process. Projects may be audited or reviewed while the project is in progress. Formal audits
are generally risk or compliance-based and management will direct the objectives of the
audit. An examination may include a comparison of approved project management processes
with how the project is actually being managed.[43] Each project should be assessed for the
appropriate level of control needed: too much control is too time consuming, too little control
is very risky. If project control is not implemented correctly, the cost to the business should
be clarified in terms of errors and fixes.
Control systems are needed for cost, risk, quality, communication, time, change,
procurement, and human resources. In addition, auditors should consider how important the
projects are to the financial statements, how reliant the stakeholders are on controls, and how
many controls exist. Auditors should review the development process and procedures for how
they are implemented. Businesses sometimes use formal systems development processes.
These help assure systems are developed successfully. A formal process is more effective in
creating strong controls, and auditors should review this process to confirm that it is well
designed and is followed in practice. A good formal systems development plan outlines:

 A strategy to align development with the organization's broader objectives

 Standards for new systems
 Project management policies for timing and budgeting
 Procedures describing the process
 Evaluation of quality of change

Characteristics of projects
There are five important characteristics of a project. (i) It should always have a specific start
and end dates. (ii) They are performed and completed by a group of people. (iii) The output is
delivery on unique product or service. (iv) They are temporary in nature. (v) It is
progressively elaborated. example: Designing a new car, writing a book.
Project Complexity
Complexity and its nature plays an important role in the area of project management. Despite
having number of debates on this subject matter, studies suggest lack of definition and
reasonable understanding of complexity in relation to management of complex
projects.[44] As it is considered that project complexity and project performance are closely
related, it is important to define and measure complexity of the project for project
management to be effective.[45]
By applying the discovery in measuring work complexity described in Requisite
Organization and Stratified Systems Theory, Dr Elliott Jaques classifies projects and project
work (stages, tasks) into basic 7 levels of project complexity based on such criteria as time-
span of discretion and complexity of a project's output:[46][47]
 Level 1 Project – improve the direct output of an activity (quantity, quality, time) within
a business process with targeted completion time up to 3 months.
 Level 2 Project – develop and improve compliance to a business process with targeted
completion time from 3 months to 1 year.
 Level 3 Project – develop, change and improve a business process with targeted
completion time from 1 to 2 years.
 Level 4 Project – develop, change and improve a functional system with targeted
completion time from 2 to 5 years.
 Level 5 Project – develop, change and improve a group of functional systems / business
function with targeted completion time from 5 to 10 years.
 Level 6 Project – develop, change and improve a whole single value chain of a company
with targeted completion time from 10 to 20 years.
 Level 7 Project – develop, change and improve multiple value chains of a company with
target completion time from 20 to 50 years.[48]
Benefits from measuring Project Complexity is to improve project people feasibility by:[49]

 Match the level of a project's complexity with effective targeted completion time of a
project
 Match the level of a project's complexity with the respective capability level of the
project manager
 Match the level of a project task's complexity with the respective capability of the project
members

Project managers
A project manager is a professional in the field of project management. Project managers are
in charge of the people in a project. People are the key to any successful project. Without the
correct people in the right place and at the right time a project cannot be successful. Project
managers can have the responsibility of the planning, execution, controlling, and closing of
any project typically relating to the construction industry, engineering,
architecture, computing, and telecommunications. Many other fields of production
engineering, design engineering, and heavy industrial have project managers.
A project manager is often a client representative and has to determine and implement the
exact needs of the client, based on knowledge of the firm they are representing. The ability to
adapt to the various internal procedures of the contracting party, and to form close links with
the nominated representatives, is essential in ensuring that the key issues of cost, time, quality
and above all, client satisfaction, can be realized.

Project management success criteria

There is a tendency to confuse the project success with project management success. They
are two different things. Project management success criteria is different from project success
criteria. The project management is said to be successful if the given project is completed
within the agreed upon time, met the agreed upon scope and within the agreed upon budget.
Meanwhile, a project is said to be successful, when it succeeds in achieving the expected
business case.

Risk management
An example of the Risk Register that includes 4 steps: Identify, Analyze, Plan Response,
Monitor and Control.[50]
The United States Department of Defense states; "Cost, Schedule, Performance, and Risk"
are the four elements through which Department of Defense acquisition professionals make
trade-offs and track program status.[51] There are also international standards. Risk
management applies proactive identification (see tools) of future problems and understanding
of their consequences allowing predictive decisions about projects.
Work breakdown structure
The work breakdown structure (WBS) is a tree structure that shows a subdivision of the
activities required to achieve an objective – for example a program, project, and contract. The
WBS may be hardware-, product-, service-, or process-oriented (see an example in a NASA
reporting structure (2001)).[52]
A WBS can be developed by starting with the end objective and successively subdividing it
into manageable components in terms of size, duration, and responsibility (e.g., systems,
subsystems, components, tasks, sub-tasks, and work packages), which include all steps
necessary to achieve the objective.[30]
The work breakdown structure provides a common framework for the natural development of
the overall planning and control of a contract and is the basis for dividing work into definable
increments from which the statement of work can be developed and technical, schedule, cost,
and labor hour reporting can be established.[52] The work breakdown structure can be
displayed in two forms, as a table with subdivision of tasks or as an organisational chart
whose lowest nodes are referred to as "work packages".
QUES.6.What are the method used in to evaluating auditing and terminating a project
.Explain?
Ans. 1. EVALUATION
The term “evaluate” means to set the value of or appraise. A project evaluation appraises the
progress and performance relative to the project’s initial or revised plan. The evaluation also
appraises the project against the goals and objectives set for it during the selection process.
1.1 Evaluation Criteria
There are many different measures that may be applied in a project evaluation. Project
management team may have particular areas that they want to evaluate for future planning
and decisions. One study identified four important dimensions of project success.
1.2 Evaluation Methods
1.2.1 PROJECT AUDITING
Objective:
 The project audit is a thorough examination of the management of a project, its
methodology and procedures, its records, properties, budgets, expenditures, progress,
and so on.
 The project audit is not a financial audit but is far broader in scope and may deal with the
whole or any part of the project.
Typical steps in a project audit are:

1.2.2 Audit Levels:

An audit can be conducted at three levels:

1.3 Project Termination

Eventually the project is terminated, either quickly or slowly, but the manner in which it is
closed out will have a major impact on the quality of life in the organization. Occasionally,
the way project termination is managed can have an impact on the success of the project. As
part of the project termination, contracts will be closed with all the service providers.

2.Project Contract
A contract is an exchange of promises between two or more parties to do, or refrain from
doing an act, which resulting contract is enforceable in a court of law. In the project or
program context, contracts typically involve the exchange of money in return for goods or
services.
If an organization decides to “buy” from one or more outside sources, it must select the type
of contract it needs. In selecting what type of contract to use, the primary objective is to have
risk distributed between the buyer and seller so that both parties have motivation and
incentives for meeting the contract goal.
Factors of Influence:
 Type and complexity of requirement.
 The extent of price competition.
 Cost and price analysis.
 Urgency of requirement or performance period.
 A frequency of expected changes.
 Industry standards of types of contracts used.
 Whether or not there is a well-defined statement of work.
 Overall degree of cost and schedule risk

2.1 Type of Contracts:

2.1.1 Turnkey Contracts:
A Turnkey Contract is one under which the contractor is responsible for both the designand
construction of a facility. The basic concept is that in a Turnkey Contract the contractor shall
provide the works ready for use at the agreed price and by a fixed date
2.1.2 Non-turnkey Contracts:
This contract is handled by the in house team of the organization which is floating the
contract. That means the overall supervision and responsibility lies with the in house
department.
There are multiple type of contracts in this category.
2.1.2.1 Cost reimbursable (or Cost Plus) Cost reimbursable (CR) contracts involve
payment based on sellers’ actual costs as well as a fee or incentive for meeting or exceeding
project objectives. Therefore, the buyer bears the highest cost risk.
2.1.2.2 Fixed Price Contracts Fixed price (FP) contracts (also called lump-sum contracts)
involve a predetermined fixed price for the product and are used when the product is well
defined. Therefore, the seller bears a higher burden of the cost risk than the buyer.
2.1.2.3 Time and Material Contracts
Time and material (T&M) contracts (sometimes called Unit Price Contracts) contain
characteristics of both fixed price and cost reimbursable contracts and are generally used for
small project cost amounts. These contracts may be priced on a per-hour or per-item basis
(fixed price) but the total number of hours or items is not determined (open-ended cost type
arrangements like CR contracts)

Miscellaneous Topics

Enterprise Resource Planning

Definition
Enterprise Resource Planning (ERP) is business process management software that allows
an organization to use a system of integrated applications to manage the business and
automate many back office functions related to technology, services and human resources.
Characteristics:
 ERP software typically integrates — including product planning, development,
manufacturing, sales and marketing — in a single database, application and user
interface.
 Small business ERP applications are lightweight business management software
solutions, often customized for a specific business industry or vertical.
 The basic goal is to provide one central repository for all information that is shared by all
teams across the organization.
Finance – gathers financial data and generates reports such as ledgers, trial balance data,
overall balance sheets and quarterly financial statements.
Human resource management – gathers data and generates reports about such things as
employee recruitment, performance reviews, training and professional development,
performance reviews, mediation and exit interviews.
Inventory management – gathers data and generates reports about non-capitalized assets
and stock items.
Supply chain management – gathers data and generates reports about materials,
information, and finances as they move in a process from supplier to manufacturer to
wholesaler to retailer to consumer.

Business Value of ERP

 From real-time information generated by reports
Improved business insight

Through defined and more streamlined business processe

Lower operational costs

From users sharing data in contracts, requisitions, and pur

Enhanced collaboration

Through a common user experience across many bus

Improved efficiency business processes

From the back office to the front office, all business acti
Consistent infrastructure feel

Through uniform and integrated systems

Lower management and operational costs

Through improved data integrity and financial controls

Reduced risk

ABC Analysis
Objective:
The ABC analysis helps to focus control efforts in areas where it is most needed. The basis of
classification is usage value of the items and not their physical quantities. This classification
will help the organization to identify the items which are of high importance.
ABC analysis is an inventory categorization method which consists in dividing items into
three categories (A, B, C): A being the most valuable items, C being the least valuable ones.
This method aims to draw managers’ attention on the critical few (A-items) not on the trivial
many (C-items). The classification can be extended to D,E,F etc., if needed.

Economic Order Quantity

Definition:
EOQ is the amount of inventory to be ordered at one time for the purpose of minimizing the
annual inventory cost.
Assumptions:
1. Known & constant demand
2. Known & constant lead time
3. Instantaneous receipt of material
4. No quantity discounts
5. Only order (setup) cost & holding cost
6. No stockouts
If A = Demand for the year,
Cp = Cost to place a single order
Ch = Cost to hold one unit inventory for a year
Q = Order Quantity

Total Cost = Yearly Holding Cost + Yearly Ordering Cost =

Below figure shows the relationship between various costs

EOQ is calculated as

Example: Sam runs a business for gym equipment. Annual demand for the TricoFlexers is
16,000. The annual holding cost per unit is $2.50 and the cost to place an order is $50. What
is the economic order quantity?

QUES.7.How to decide a cost of a project. Briefly explain various means of financing a

Project?
Ans. Project finance is the long-term financing of infrastructure and industrial projects
based upon the projected cash flows of the project rather than the balance sheets of its
sponsors. Usually, a project financing structure involves a number of equity investors, known
as 'sponsors', a 'syndicate' of banks or other lending institutions that provide loans to the
operation. They are most commonly non-recourse loans, which are secured by the project
assets and paid entirely from project cash flow, rather than from the general assets or
creditworthiness of the project sponsors, a decision in part supported by financial
modeling.[1] The financing is typically secured by all of the project assets, including the
revenue-producing contracts. Project lenders are given a lien on all of these assets and are
able to assume control of a project if the project company has difficulties complying with the
loan terms.
Generally, a special purpose entity is created for each project, thereby shielding other assets
owned by a project sponsor from the detrimental effects of a project failure. As a special
purpose entity, the project company has no assets other than the project. Capital contribution
commitments by the owners of the project company are sometimes necessary to ensure that
the project is financially sound or to assure the lenders of the sponsors' commitment. Project
finance is often more complicated than alternative financing methods. Traditionally, project
financing has been most commonly used in the extractive
(mining), transportation, telecommunications, power industries as well as sports and
entertainment venues.

A riskier or more expensive project may require limited recourse financing secured by
a surety from sponsors. A complex project finance structure may incorporate corporate
finance, securitization, options (derivatives), insurance provisions or other types of collateral
enhancement to mitigate unallocated risk.[2]

Limited recourse lending was used to finance maritime voyages in

ancient Greece and Rome. Its use in infrastructure projects dates to the development of
the Panama Canal, and was widespread in the US oil and gas industry during the early 20th
century. However, project finance for high-risk infrastructure schemes originated with the
development of the North Sea oil fields in the 1970s and 1980s. Such projects were
previously accomplished through utility or government bond issuances, or other traditional
corporate finance structures.
Project financing in the developing world peaked around the time of the Asian financial
crisis, but the subsequent downturn in industrializing countries was offset by growth in
the OECDcountries, causing worldwide project financing to peak around 2000. The need for
project financing remains high throughout the world as more countries require increasing
supplies of public utilities and infrastructure. In recent years, project finance schemes have
become increasingly common in the Middle East, some incorporating Islamic finance.
The new project finance structures emerged primarily in response to the opportunity
presented by long term power purchase contracts available from utilities and government
entities. These long term revenue streams were required by rules implementing PURPA, the
Policy resulted in further deregulation of electric generation and, significantly, international
privatization following amendments to the Public Utilities Holding Company Act in 1994.
The structure has evolved and forms the basis for energy and other projects throughout the
world.

Parties to a project financing[

There are several parties in a project financing depending on the type and the scale of a
project. The most usual parties to a project financing are;

1. Sponsor (typically also an Equity Investor)

2. Lenders (including senior lenders and/or mezzanine)
3. Off-taker(s)
4. Contractor and equipment supplier
5. Operator
6. Financial Advisors
7. Technical Advisors
8. Legal Advisors
9. Equity Investors
10. Regulatory Agencies
11. Multilateral Agencies / Export Credit Agencies
12. Insurance Providers
13. Hedge providers

Project development
Main article: Stages of project finance

Project development is the process of preparing a new project for commercial operations. The
process can be divided into three distinct phases:

 Pre-bid stage
 Contract negotiation stage
 Money-raising stage

Financial model
A financial model is constructed by the sponsor as a tool to conduct negotiations with the
investor and prepare a project appraisal report. It is usually a computer spreadsheet designed
to process a comprehensive list of input assumptions and to provide outputs that reflect the
anticipated real life interaction between data and calculated values for a particular project.
Properly designed, the financial model is capable of sensitivity analysis, i.e. calculating new
outputs based on a range of data variations.

Contractual framework[
The typical project finance documentation can be reconducted to four main types:

 Shareholder/sponsor documents
 Project documents
 Finance documents
 Security documents
 Other project documents
 Director/promotor Contribution
Engineering, procurement and construction (EPC) contract
The most common project finance construction contract is the engineering, procurement and
construction (EPC) contract. An EPC contract generally provides for the obligation of the
contractor to build and deliver the project facilities on a fixed price, turnkey basis, i.e., at a
certain pre-determined fixed price, by a certain date, in accordance with certain
specifications, and with certain performance warranties. The EPC contract is quite
complicated in terms of legal issue, therefore the project company and the EPC contractor
need sufficient experience and knowledge of the nature of project to avoid their faults and
minimize the risks during contract execution.
The terms EPC contract and turnkey contract are interchangeable. EPC stands for engineering
(design), procurement and construction. Turnkey is based on the idea that when the owner
takes responsibility for the facility all it will need to do is turn the key and the facility will
function as intended. Alternative forms of construction contract are a project management
approach and alliance contracting. Basic contents of an EPC contract are:

 Description of the project

 Price
 Payment (typically by milestones)
 Completion date
 Completion guarantee and Liquidated Damages (LDs):
 Performance guarantee and LDs
 Cap under LDs
Operation and maintenance agreement[edit]
An operation and maintenance (O&M) agreement is an agreement between the project
company and the operator. The project company delegates the operation, maintenance and
often performance management of the project to a reputable operator with expertise in the
industry under the terms of the O&M agreement. The operator could be one of the sponsors
of the project company or third-party operator. In other cases the project company may carry
out by itself the operation and maintenance of the project and may eventually arrange for the
technical assistance of an experienced company under a technical assistance agreement. Basic
contents of an O&M contract are:

 Definition of the service

 Operator responsibility
 Provision regarding the services rendered
 Liquidated damages
 Fee provisions
Concession deed[edit]
An agreement between the project company and a public-sector entity (the contracting
authority) is called a concession deed. The concession agreement concedes the use of a
government asset (such as a plot of land or river crossing) to the project company for a
specified period. A concession deed would be found in most projects which involve
government such as in infrastructure projects. The concession agreement may be signed by a
national/regional government, a municipality, or a special purpose entity set up by the state to
grant the concession. Examples of concession agreements include contracts for the following:
 A toll-road or tunnel for which the concession agreement giving a right to collect
tolls/fares from the public or where payments are made by the contracting authority based
on usage by the public.
 A transportation system (e.g., a railway / metro) for which the public pays fares to a
private company)
 Utility projects where payments are made by a municipality or by end-users.
 Ports and airports where payments are usually made by airlines or shipping companies.
 Other public sector projects such as schools, hospitals, government buildings, where
payments are made by the contracting authority.
Shareholders Agreement[edit]
The shareholders agreement (SHA) is an agreement between the project sponsors to form
a special purpose company (SPC) in relation to the project development. This is the most
basic of structures held by the sponsors in a project finance transaction. This is an agreement
between the sponsors and deals with:

 Injection of share capital

 Voting requirements
 Resolution of force one
 Dividend policy
 Management of the SPC
 Disposal and pre-emption rights
Off-take agreement
An off-take agreement is an agreement between the project company and the offtaker (the
party who is buying the product / service that the project produces / delivers). In a project
financing the revenue is often contracted (rather than being sold on a merchant basis). The
off-take agreement governs mechanism of price and volume which make up revenue. The
intention of this agreement is to provide the project company with stable and sufficient
revenue to pay its project debt obligation, cover the operating costs and provide certain
required return to the sponsors.
The main off-take agreements are:

 Take-or-pay contract: under this contract the off-taker – on an agreed price basis – is
obligated to pay for product on a regular basis whether or not the off-taker actually takes
the product.
 Power purchase agreement: commonly used in power projects in emerging markets. The
purchasing entity is usually a government entity.
 Take-and-pay contract: the off-taker only pays for the product taken on an agreed price
basis.
 Long-term sales contract: the off-taker agrees to take agreed-upon quantities of the
product from the project. The price is however paid based on market prices at the time of
purchase or an agreed market index, subject to certain floor (minimum) price. Commonly
used in mining, oil and gas, and petrochemical projects where the project company wants
to ensure that its product can easily be sold in international markets, but off-takers not
willing to take the price risk
 Hedging contract: found in the commodity markets such as in an oilfield project.
 Contract for Differences: the project company sells its product into the market and not to
the off-taker or hedging counterpart. If however the market price is below an agreed
 level, the offtaker pays the difference to the project company, and vice versa if it is above
an agreed level.
 Throughput contract: a user of the pipeline agrees to use it to carry not less than a certain
volume of product and to pay a minimum price for this.
Supply agreement
A supply agreement is between the project company and the supplier of the required
feedstock / fuel.
If a project company has an off-take contract, the supply contract is usually structured to
match the general terms of the off-take contract such as the length of the contract, force
majeure provisions, etc. The volume of input supplies required by the project company is
usually linked to the project’s output. Example under a PPA the power purchaser who does
not require power can ask the project to shut down the power plant and continue to pay the
capacity payment – in such case the project company needs to ensure its obligations to buy
fuel can be reduced in parallel. The degree of commitment by the supplier can vary.
The main supply agreements are:
1. Fixed or variable supply: the supplier agrees to provide a fixed quantity of supplies to the
project company on an agreed schedule, or a variable supply between an agreed maximum
and minimum. The supply may be under a take-or-pay or take-and-pay.
2.Output / reserve dedication: the supplier dedicates the entire output from a specific source,
e.g., a coal mine, its own plant. However the supplier may have no obligation to produce any
output unless agreed otherwise. The supply can also be under a take-or-pay or take-and-pay
3.Interruptible supply: some supplies such as gas are offered on a lower-cost interruptible
basis – often via a pipeline also supplying other users.
4.Tolling contract: the supplier has no commitment to supply at all, and may choose not to do
so if the supplies can be used more profitably elsewhere. However the availability charge
must be paid to the project company.
Loan agreement
A loan agreement is made between the project company (borrower) and the lenders. Loan
agreement governs relationship between the lenders and the borrowers. It determines the
basis on which the loan can be drawn and repaid, and contains the usual provisions found in a
corporate loan agreement. It also contains the additional clauses to cover specific
requirements of the project and project documents.
Basic terms of a loan agreement include the following provisions.

 General conditions precedent

 Conditions precedent to each drawdown
 Availability period, during which the borrower is obliged to pay a commitment fee
 Drawdown mechanics
 An interest clause, charged at a margin over base rate
 A repayment clause
 Financial covenants - calculation of key project metrics / ratios and covenants
 Dividend restrictions
 Representations and warranties
 The illegality clause
Inter creditor agreement
Inter creditor agreement is agreed between the main creditors of the project company. This is
the agreement between the main creditors in connection with the project financing. The main
creditors often enter into the Inter creditor Agreement to govern the common terms and
relationships among the lenders in respect of the borrower’s obligations.
Inter creditor agreement will specify provisions including the following.

 Common terms
 Order of drawdown
 Cash flow waterfall
 Limitation on ability of creditors to vary their rights
 Voting rights
 Notification of defaults
 Order of applying the proceeds of debt recovery
 If there is a mezzanine funding component, the terms of subordination and other
principles to apply as between the senior debt providers and the mezzanine debt
providers.
Tripartite deed
The financiers will usually require that a direct relationship between itself and the
counterparty to that contract be established which is achieved through the use of a tripartite
deed (sometimes called a consent deed, direct agreement or side agreement). The tripartite
deed sets out the circumstances in which the financiers may “step in” under the project
contracts in order to remedy any default.
A tripartite deed would normally contain the following provision.

 Acknowledgement of security: confirmation by the contractor or relevant party that it

consents to the financier taking security over the relevant project contracts.
 Notice of default: obligation on the relevant project counterparty to notify the lenders
directly of defaults by the project company under the relevant contract.
 Step-in rights and extended periods: to ensure that the lenders will have sufficient notice
/period to enable it to remedy any breach by the borrower.
 Receivership: acknowledgement by the relevant party regarding the appointment of a
receiver by the lenders under the relevant contract and that the receiver may continue the
borrower’s performance under the contract
 Sale of asset: terms and conditions upon which the lenders may transfer the borrower’s
entitlements under the relevant contract.
Tripartite deed can give rise to difficult issues for negotiation but is a critical document in
project financing.
Common Terms Agreement
An agreement between the financing parties and the project company which sets out the
terms that are common to all the financing instruments and the relationship between them
(including definitions, conditions, order of drawdowns, project accounts, voting powers for
waivers and amendments). A common terms agreement greatly clarifies and simplifies the
multi-sourcing of finance for a project and ensures that the parties have a common
understanding of key definitions and critical events.
Terms Sheet
Agreement between the borrower and the lender for the cost, provision and repayment of
debt. The term sheet outlines the key terms and conditions of the financing. The term sheet
provides the basis for the lead arrangers to complete the credit approval to underwrite the
debt, usually by signing the agreed term sheet. Generally the final term sheet is attached to
the mandate letter and is used by the lead arrangers to syndicate the debt. The commitment by
the lenders is usually subject to further detailed due diligence and negotiation of project
agreements and finance documents including the security documents. The next phase in the
financing is the negotiation of finance documents and the term sheet will eventually be
replaced by the definitive finance documents when the project reaches financial close.

Basic scheme

Hypothetical project finance scheme

For example, the Acme Coal Co. imports coal. Energen Inc. supplies energy to consumers.
The two companies agree to build a power plant to accomplish their respective goals.
Typically, the first step would be to sign a memorandum of understanding to set out the
intentions of the two parties. This would be followed by an agreement to form a joint venture.
Acme Coal and Energen form an SPC (Special Purpose Corporation) called Power Holdings
Inc. and divide the shares between them according to their contributions. Acme Coal, being
more established, contributes more capital and takes 70% of the shares. Energen is a smaller
company and takes the remaining 30%. The new company has no assets.
Power Holdings then signs a construction contract with Acme Construction to build a power
plant. Acme Construction is an affiliate of Acme Coal and the only company with the know-
how to construct a power plant in accordance with Acme's delivery specification.
A power plant can cost hundreds of millions of dollars. To pay Acme Construction, Power
Holdings receives financing from a development bank and a commercial bank. These banks
provide a guarantee to Acme Construction's financier that the company can pay for the
completion of construction. Payment for construction is generally paid as such: 10% up front,
10% midway through construction, 10% shortly before completion, and 70% upon transfer of
title to Power Holdings, which becomes the owner of the power plant.
Acme Coal and Energen form Power Manage Inc., another SPC, to manage the facility. The
ultimate purpose of the two SPCs (Power Holding and Power Manage) is primarily to protect
Acme Coal and Energen. If a disaster happens at the plant, prospective plaintiffs cannot sue
Acme Coal or Energen and target their assets because neither company owns or operates the
plant. However project financiers may recognize this and require some sort of parent
guarantee for up to negotiated amounts of operational liabilities.
A Sale and Purchase Agreement (SPA) between Power Manage and Acme Coal supplies raw
materials to the power plant. Electricity is then delivered to Energen using a wholesale
delivery contract. The net cash flow of the SPC Power Holdings (sales proceeds less costs)
will be used to repay the financiers.

Complicating factors
The above is a simple explanation which does not cover the mining, shipping, and delivery
contracts involved in importing the coal (which in itself could be more complex than the
financing scheme), nor the contracts for delivering the power to consumers. In developing
countries, it is not unusual for one or more government entities to be the primary consumers
of the project, undertaking the "last mile distribution" to the consuming population. The
relevant purchase agreements between the government agencies and the project may contain
clauses guaranteeing a minimum offtake and thereby guarantee a certain level of revenues. In
other sectors including road transportation, the government may toll the roads and collect the
revenues, while providing a guaranteed annual sum (along with clearly specified upside and
downside conditions) to the project. This serves to minimise or eliminate the risks associated
with traffic demand for the project investors and the lenders.
Minority owners of a project may wish to use "off-balance-sheet" financing, in which they
disclose their participation in the project as an investment, and excludes the debt from
financial statements by disclosing it as a footnote related to the investment. In the United
States, this eligibility is determined by the Financial Accounting Standards Board. Many
projects in developing countries must also be covered with war risk insurance, which covers
acts of hostile attack, derelict mines and torpedoes, and civil unrest which are not generally
included in "standard" insurance policies. Today, some altered policies that include terrorism
are called Terrorism Insurance or Political Risk Insurance. In many cases, an outside insurer
will issue a performance bond to guarantee timely completion of the project by the
contractor.
Publicly funded projects may also use additional financing methods such as tax increment
financing or private finance initiative (PFI). Such projects are often governed by a capital
improvement plan which adds certain auditing capabilities and restrictions to the process.
Project financing in transitional and emerging market countries are particularly risky because
of cross-border issues such as political, currency and legal system risks.[4] Therefore, mostly
requires active facilitation by the government.
QUES.8.What do you mean by project management? Explain its importance and types
of project?

Ans. Project management is the practice of initiating, planning, executing, controlling, and
closing the work of a team to achieve specific goals and meet specific success criteria at the
specified time.
A project is a temporary endeavor designed to produce a unique product, service or result
with a defined beginning and end (usually time-constrained, and often constrained by funding
or staffing) undertaken to meet unique goals and objectives, typically to bring about
beneficial change or added value.[3][4] The temporary nature of projects stands in contrast
with business as usual (or operations),[5] which are repetitive, permanent, or semi-permanent
functional activities to produce products or services. In practice, the management of such
distinct production approaches requires the development of distinct technical skills and
management strategies.

Project management types

Project management can apply to any project, but it is often tailored to accommodate the
specific needs of different and highly specialized industries. For example, the construction
industry, which focuses on the delivery of things like buildings, roads, and bridges, has
developed its own specialized form of project management that it refers to as construction
project management and in which project managers can become trained and certified.[16] The
information technology industry has also evolved to develop its own form of project
management that is referred to as IT project management and which specializes in the
delivery of technical assets and services that are required to pass through various lifecycle
phases such as planning, design, development, testing, and deployment. Biotechnology
project management focuses on the intricacies of biotechnology research and
development.[17] Localization project management includes many standard project
management practices even though many consider this type of management to be a very
different discipline. It focuses on three important goals: time, quality and budget. Successful
projects are completed on schedule, within budget, and according to previously agreed
quality standards.[18]
For each type of project management, project managers develop and utilize repeatable
templates that are specific to the industry they're dealing with. This allows project plans to
become very thorough and highly repeatable, with the specific intent to increase quality,
lower delivery costs, and lower time to deliver project results.

Approaches
A 2017 study suggested that the success of any project depends on how well four key aspects
are aligned with the contextual dynamics affecting the project, these are referred to as
the four P's:[19]

 Plan: The planning and forecasting activities.

 Process: The overall approach to all activities and project governance.
 People: Including dynamics of how they collaborate and communicate.
 Power: Lines of authority, decision-makers, organograms, policies for implementation
and the like.
There are a number of approaches to organizing and completing project activities, including:
phased, lean, iterative, and incremental. There are also several extensions to project planning,
for example based on outcomes (product-based) or activities (process-based).
Regardless of the methodology employed, careful consideration must be given to the overall
project objectives, timeline, and cost, as well as the roles and responsibilities of all
participants and stakeholders.[20]
Benefits realization management
Benefits realization management (BRM) enhances normal project management techniques
through a focus on outcomes (benefits) of a project rather than products or outputs, and then
measuring the degree to which that is happening to keep a project on track. This can help to
reduce the risk of a completed project being a failure by delivering agreed upon
requirements/outputs but failing to deliver the benefits of those requirements.
In addition, BRM practices aim to ensure the alignment between project outcomes and
business strategies. The effectiveness of these practices is supported by recent research
evidencing BRM practices influencing project success from a strategic perspective across
different countries and industries.[21]
An example of delivering a project to requirements might be agreeing to deliver a computer
system that will process staff data and manage payroll, holiday and staff personnel records.
Under BRM the agreement might be to achieve a specified reduction in staff hours required
to process and maintain staff data.
Critical chain project management
Critical chain project management (CCPM) is an application of the theory of
constraints (TOC) to planning and managing projects, and is designed to deal with the
uncertainties inherent in managing projects, while taking into consideration limited
availability of resources (physical, human skills, as well as management & support capacity)
needed to execute projects.
The goal is to increase the flow of projects in an organization (throughput). Applying the first
three of the five focusing steps of TOC, the system constraint for all projects, as well as the
resources, are identified. To exploit the constraint, tasks on the critical chain are given
priority over all other activities. Finally, projects are planned and managed to ensure that the
resources are ready when the critical chain tasks must start, subordinating all other resources
to the critical chain.
Earned value management

Earned Value chart shows Planned Value, Earned Value, Actual Cost, and their variances in
percent. The approach is used in project management simulation SimulTrain.
Earned value management (EVM) extends project management with techniques to improve
project monitoring. It illustrates project progress towards completion in terms of work and
value (cost). Earned Schedule is an extension to the theory and practice of EVM. forcasting at
completion is newest theory than Earned Schedule. This theory is introduced in 2019 . [22]
Iterative and incremental project management
In critical studies of project management it has been noted that phased approaches are not
well suited for projects which are large-scale and multi-company,[23] with undefined,
ambiguous, or fast-changing requirements,[24] or those with high degrees of risk, dependency,
and fast-changing technologies.[25] The cone of uncertainty explains some of this as the
planning made on the initial phase of the project suffers from a high degree of uncertainty.
This becomes especially true as software development is often the realization of a new or
novel product.
These complexities are better handled with a more exploratory or iterative and incremental
approach.[26] Several models of iterative and incremental project management have evolved,
including agile project management, dynamic systems development method, extreme project
management, and Innovation Engineering®.[27]
Lean project management
Lean project management uses the principles from lean manufacturing to focus on delivering
value with less waste and reduced time
Phased approach
The phased (or staged) approach breaks down and manages the work through a series of
distinct steps to be completed, and is often referred to as "traditional"[28] or
"waterfall".[29]Although it can vary, it typically consists of five process areas, four phases
plus control:

Typical development phases of an engineering project

1. initiation
2. planning and design
3. construction
4. monitoring and controlling
5. completion or closing
Many industries use variations of these project stages and it is not uncommon for the stages
to be renamed in order to better suit the organization. For example, when working on a brick-
and-mortar design and construction, projects will typically progress through stages like pre-
planning, conceptual design, schematic design, design development, construction drawings
(or contract documents), and construction administration.
While the phased approach works well for small, well-defined projects, it often results in
challenge or failure on larger projects, or those that are more complex or have more
ambiguities, issues and risk.[30]
Process-based management
The incorporation of process-based management has been driven by the use of maturity
models such as the OPM3 and the CMMI (capability maturity model integration; see this
exampleof a predecessor) and ISO/IEC 15504 (SPICE – software process improvement and
capability estimation). Unlike SEI's CMM, the OPM3 maturity model describes how to make
project management processes capable of performing successfully, consistently, and
predictably in order to enact the strategies of an organization.
Project production management
Project production management is the application of operations management to the delivery
of capital projects. The Project production management framework is based on a project as a
production system view, in which a project transforms inputs (raw materials, information,
labor, plant & machinery) into outputs (goods and services).[31]
Product-based planning
Product-based planning is a structured approach to project management, based on identifying
all of the products (project deliverables) that contribute to achieving the project objectives.
As such, it defines a successful project as output-oriented rather than activity- or task-
oriented.[32] The most common implementation of this approach is PRINCE2.[33]

Process groups

The project development stages[34]

Traditionally (depending on what project management methodology is being used), project
management includes a number of elements: four to five project management process groups,
and a control system. Regardless of the methodology or terminology used, the same basic
project management processes or stages of development will be used. Major process groups
generally include:[2]

 Initiation
 Planning
 Production or execution
 Monitoring and controlling
 Closing
In project environments with a significant exploratory element (e.g., research and
development), these stages may be supplemented with decision points (go/no go decisions) at
which the project's continuation is debated and decided. An example is the Phase–gate model.
Initiating

Initiating process group processes[34]

The initiating processes determine the nature and scope of the project.[35] If this stage is not
performed well, it is unlikely that the project will be successful in meeting the business’
needs. The key project controls needed here are an understanding of the business
environment and making sure that all necessary controls are incorporated into the project.
Any deficiencies should be reported and a recommendation should be made to fix them.
The initiating stage should include a plan that encompasses the following areas. These areas
can be recorded in a series of documents called Project Initiation documents. Project
Initiation documents are a series of planned documents used to create order for the duration
of the project. These tend to include:

RACI(Q) chart. At least one Responsible and exactly one Accountable person are designated
for each project and planning activity.

 project proposal (idea behind project, overall goal, duration)

 project scope (project direction and track)
 product breakdown structure (PBS) (a hierarchy of deliverables / outcomes and
components thereof)
 work breakdown structure (WBS) (a hierarchy of the work to be done, down to daily
tasks)
 responsibility assignment matrix (RACI) (roles and responsibilities aligned to
deliverables / outcomes)
 tentative project schedule (milestones, important dates, deadlines)
 analysis of business needs and requirements against measurable goals
 review of the current operations
 financial analysis of the costs and benefits, including a budget
 stakeholder analysis, including users and support personnel for the project
 project charter including costs, tasks, deliverables, and schedules
 SWOT analysis: strengths, weaknesses, opportunities, and threats to the business
Planning
After the initiation stage, the project is planned to an appropriate level of detail (see example
of a flow-chart).[34] The main purpose is to plan time, cost and resources adequately to
estimate the work needed and to effectively manage risk during project execution. As with
the Initiation process group, a failure to adequately plan greatly reduces the project's chances
of successfully accomplishing its goals.
Project planning generally consists of[36]

 determining the project management methodology to follow (e.g. whether the plan will
be defined wholly up front, iteratively, or in rolling waves);
 developing the scope statement;
 selecting the planning team;
 identifying deliverables and creating the product and work breakdown structures;
 identifying the activities needed to complete those deliverables and networking the
activities in their logical sequence;
 estimating the resource requirements for the activities;
 estimating time and cost for activities;
 developing the schedule;
 developing the budget;
 risk planning;
 developing quality assurance measures;
 gaining formal approval to begin work.
Additional processes, such as planning for communications and for scope management,
identifying roles and responsibilities, determining what to purchase for the project and
holding a kick-off meeting are also generally advisable.
For new product development projects, conceptual design of the operation of the final
product may be performed concurrent with the project planning activities, and may help to
inform the planning team when identifying deliverables and planning activities.
Executing

Executing process group processes[34]

While executing we must know what are the planned terms that need to be executed.
The execution/implementation phase ensures that the project management plan's deliverables
are executed accordingly. This phase involves proper allocation, co-ordination and
management of human resources and any other resources such as material and budgets. The
output of this phase is the project deliverables.
Project Documentation
Documenting everything within a project is key to being successful. In order to maintain
budget, scope, effectiveness and pace a project must have physical documents pertaining to
each specific task. With correct documentation, it is easy to see whether or not a project's
requirement has been met. To go along with that, documentation provides information
regarding what has already been completed for that project. Documentation throughout a
project provides a paper trail for anyone who needs to go back and reference the work in the
past. In most cases, documentation is the most successful way to monitor and control the
specific phases of a project. With the correct documentation, a project's success can be
tracked and observed as the project goes on. If performed correctly documentation can be the
backbone to a project's success.
Monitoring and controlling

Monitoring and controlling process group processes[34]

Monitoring and controlling consists of those processes performed to observe project
execution so that potential problems can be identified in a timely manner and corrective
action can be taken, when necessary, to control the execution of the project. The key benefit
is that project performance is observed and measured regularly to identify variances from the
project management plan.
Monitoring and controlling includes:[37]

 Measuring the ongoing project activities ('where we are');

 Monitoring the project variables (cost, effort, scope, etc.) against the project management
plan and the project performance baseline (where we should be);
 Identifying corrective actions to address issues and risks properly (How can we get on
track again);
 Influencing the factors that could circumvent integrated change control so only approved
changes are implemented.
In multi-phase projects, the monitoring and control process also provides feedback between
project phases, in order to implement corrective or preventive actions to bring the project into
compliance with the project management plan.
Project maintenance is an ongoing process, and it includes:[2]

 Continuing support of end-users

 Correction of errors
 Updates to the product over time

Monitoring and controlling cycle

In this stage, auditors should pay attention to how effectively and quickly user problems are
resolved.
Over the course of any construction project, the work scope may change. Change is a normal
and expected part of the construction process. Changes can be the result of necessary design
modifications, differing site conditions, material availability, contractor-requested changes,
value engineering and impacts from third parties, to name a few. Beyond executing the
change in the field, the change normally needs to be documented to show what was actually
constructed. This is referred to as change management. Hence, the owner usually requires a
final record to show all changes or, more specifically, any change that modifies the tangible
portions of the finished work. The record is made on the contract documents – usually, but
not necessarily limited to, the design drawings. The end product of this effort is what the
industry terms as-built drawings, or more simply, "as built." The requirement for providing
them is a norm in construction contracts. Construction document management is a highly
important task undertaken with the aid an online or desktop software system, or maintained
through physical documentation. The increasing legality pertaining to the construction
industry's maintenance of correct documentation has caused the increase in the need for
document management systems.
When changes are introduced to the project, the viability of the project has to be re-assessed.
It is important not to lose sight of the initial goals and targets of the projects. When the
changes accumulate, the forecasted result may not justify the original proposed investment in
the project. Successful project management identifies these components, and tracks and
monitors progress so as to stay within time and budget frames already outlined at the
commencement of the project.
Closing

Closing process group processes.[34]

Closing includes the formal acceptance of the project and the ending thereof. Administrative
activities include the archiving of the files and documenting lessons learned.
This phase consists of:[2]
 Contract closure: Complete and settle each contract (including the resolution of any
open items) and close each contract applicable to the project or project phase.
 Project close: Finalize all activities across all of the process groups to formally close the
project or a project phase
Also included in this phase is the Post Implementation Review. This is a vital phase of the
project for the project team to learn from experiences and apply to future projects. Normally a
Post Implementation Review consists of looking at things that went well and analyzing things
that went badly on the project to come up with lessons learned.
Project controlling and project control systems
Project controlling (also known as Cost Engineering) [38] should be established as an
independent function in project management. It implements verification and controlling
function during the processing of a project in order to reinforce the defined performance and
formal goals.[39] The tasks of project controlling are also:

 the creation of infrastructure for the supply of the right information and its update
 the establishment of a way to communicate disparities of project parameters
 the development of project information technology based on an intranet or the
determination of a project key performance indicator system (KPI)
 divergence analyses and generation of proposals for potential project regulations[40]
 the establishment of methods to accomplish an appropriate project structure, project
workflow organization, project control and governance
 creation of transparency among the project parameters[41]
Fulfillment and implementation of these tasks can be achieved by applying specific methods
and instruments of project controlling. The following methods of project controlling can be
applied:

 investment analysis
 cost–benefit analysis
 value benefit analysis
 expert surveys
 simulation calculations
 risk-profile analysis
 surcharge calculations
 milestone trend analysis
 cost trend analysis
 target/actual-comparison[42]
Project control is that element of a project that keeps it on track, on-time and within
budget.[37] Project control begins early in the project with planning and ends late in the
project with post-implementation review, having a thorough involvement of each step in the
process. Projects may be audited or reviewed while the project is in progress. Formal audits
are generally risk or compliance-based and management will direct the objectives of the
audit. An examination may include a comparison of approved project management processes
with how the project is actually being managed.[43] Each project should be assessed for the
appropriate level of control needed: too much control is too time consuming, too little control
is very risky. If project control is not implemented correctly, the cost to the business should
be clarified in terms of errors and fixes.
Control systems are needed for cost, risk, quality, communication, time, change,
procurement, and human resources. In addition, auditors should consider how important the
projects are to the financial statements, how reliant the stakeholders are on controls, and how
many controls exist. Auditors should review the development process and procedures for how
they are implemented. The process of development and the quality of the final product may
also be assessed if needed or requested. A business may want the auditing firm to be involved
throughout the process to catch problems earlier on so that they can be fixed more easily. An
auditor can serve as a controls consultant as part of the development team or as an
independent auditor as part of an audit.
Businesses sometimes use formal systems development processes. These help assure systems
are developed successfully. A formal process is more effective in creating strong controls,
and auditors should review this process to confirm that it is well designed and is followed in
practice. A good formal systems development plan outlines:

 A strategy to align development with the organization's broader objectives

 Standards for new systems
 Project management policies for timing and budgeting
 Procedures describing the process
 Evaluation of quality of change

Characteristics of projects
There are five important characteristics of a project. (i) It should always have a specific start
and end dates. (ii) They are performed and completed by a group of people. (iii) The output is
delivery on unique product or service. (iv) They are temporary in nature. (v) It is
progressively elaborated. example: Designing a new car, writing a book.
Project Complexity
Complexity and its nature plays an important role in the area of project management. Despite
having number of debates on this subject matter, studies suggest lack of definition and
reasonable understanding of complexity in relation to management of complex
projects.[44] As it is considered that project complexity and project performance are closely
related, it is important to define and measure complexity of the project for project
management to be effective.[45]
By applying the discovery in measuring work complexity described in Requisite
Organization and Stratified Systems Theory, Dr Elliott Jaques classifies projects and project
work (stages, tasks) into basic 7 levels of project complexity based on such criteria as time-
span of discretion and complexity of a project's output:

 Level 1 Project – improve the direct output of an activity (quantity, quality, time) within
a business process with targeted completion time up to 3 months.
 Level 2 Project – develop and improve compliance to a business process with targeted
completion time from 3 months to 1 year.
 Level 3 Project – develop, change and improve a business process with targeted
completion time from 1 to 2 years.
 Level 4 Project – develop, change and improve a functional system with targeted
completion time from 2 to 5 years.
 Level 5 Project – develop, change and improve a group of functional systems / business
function with targeted completion time from 5 to 10 years.
 Level 6 Project – develop, change and improve a whole single value chain of a company
with targeted completion time from 10 to 20 years.
 Level 7 Project – develop, change and improve multiple value chains of a company with
target completion time from 20 to 50 years.[48]
Benefits from measuring Project Complexity is to improve project people feasibility by:[49]

 Match the level of a project's complexity with effective targeted completion time of a
project
 Match the level of a project's complexity with the respective capability level of the
project manager
 Match the level of a project task's complexity with the respective capability of the project
members

Project managers
A project manager is a professional in the field of project management. Project managers are
in charge of the people in a project. People are the key to any successful project. Without the
correct people in the right place and at the right time a project cannot be successful. Project
managers can have the responsibility of the planning, execution, controlling, and closing of
any project typically relating to the construction industry, engineering,
architecture, computing, and telecommunications. Many other fields of production
engineering, design engineering, and heavy industrial have project managers.
A project manager needs to understand the order of execution of a project to schedule the
project correctly as well as the time necessary to accomplish each individual task within the
project. A project manager is the person accountable for accomplishing the stated project
objectives. Project Managers tend to have multiple years’ experience in their field. A project
manager is required to know the project in and out while supervising the workers along with
the project. Typically in most construction, engineering, architecture and industrial projects, a
project manager has another manager working alongside of them who is typically responsible
for the execution of task on a daily basis. This position in some cases is known as a
superintendent. A superintendent and project manager work hand in hand in completing daily
project task. Key project management responsibilities include creating clear and attainable
project objectives, building the project requirements, and managing the triple constraint (now
including more constraints and calling it competing constraints) for projects, which is cost,
time, and scope for the first three but about three additional ones in current project
management. A typical project is composed of a team of workers who work under the project
manager to complete the assignment. A project manager normally reports directly to someone
of higher stature on the completion and success of the project.
A project manager is often a client representative and has to determine and implement the
exact needs of the client, based on knowledge of the firm they are representing. The ability to
adapt to the various internal procedures of the contracting party, and to form close links with
the nominated representatives, is essential in ensuring that the key issues of cost, time, quality
and above all, client satisfaction, can be realized.

Project management success criteria

There is a tendency to confuse the project success with project management success. They
are two different things. Project management success criteria is different from project success
criteria. The project management is said to be successful if the given project is completed
within the agreed upon time, met the agreed upon scope and within the agreed upon budget.
Meanwhile, a project is said to be successful, when it succeeds in achieving the expected
business case.

Risk management

An example of the Risk Register that includes 4 steps: Identify, Analyze, Plan Response,
Monitor and Control.[50]
The United States Department of Defense states; "Cost, Schedule, Performance, and Risk"
are the four elements through which Department of Defense acquisition professionals make
trade-offs and track program status.[51] There are also international standards. Risk
management applies proactive identification (see tools) of future problems and understanding
of their consequences allowing predictive decisions about projects.
Work breakdown structure
Main article: Work breakdown structure

The work breakdown structure (WBS) is a tree structure that shows a subdivision of the
activities required to achieve an objective – for example a program, project, and contract. The
WBS may be hardware-, product-, service-, or process-oriented (see an example in a NASA
reporting structure (2001)).[52]
A WBS can be developed by starting with the end objective and successively subdividing it
into manageable components in terms of size, duration, and responsibility (e.g., systems,
subsystems, components, tasks, sub-tasks, and work packages), which include all steps
necessary to achieve the objective.[30]
The work breakdown structure provides a common framework for the natural development of
the overall planning and control of a contract and is the basis for dividing work into definable
increments from which the statement of work can be developed and technical, schedule, cost,
and labor hour reporting can be established.[52] The work breakdown structure can be
displayed in two forms, as a table with subdivision of tasks or as an organisational chart
whose lowest nodes are referred to as "work packages".
It is an essential element in assessing the quality of a plan, and an initial element used during
the planning of the project. For example, a WBS is used when the project is scheduled, so
that the use of work packages can be recorded and tracked.

International standards
There are several project management standards, including:

 The ISO standards ISO 9000, a family of standards for quality management systems, and
the ISO 10006:2003, for Quality management systems and guidelines for quality
management in projects.
 ISO 21500:2012 – Guidance on project management. This is the first International
Standard related to project management published by ISO. Other standards in the 21500
family include 21503:2017 Guidance on programme management; 21504:2015 Guidance
 on portfolio management; 21505:2017 Guidance on governance;
21506:2018 Vocabulary; 21508:2018 Earned value management in project and
programme management; and 21511:2018 Work breakdown structures for project and
programme management.
 ISO 31000:2009 – Risk management.
 ISO/IEC/IEEE 16326:2009 – Systems and Software Engineering—Life Cycle
Processes—Project Management[53]

 Association for Project Management Body of Knowledge[54]

 Australian Institute of Project Management (AIPM) has 4 levels of certification; CPPP,
CPPM, CPPD & CPPE for Certified Practicing Project ... Partner, Manager, Director and
Executive.
 Capability Maturity Model from the Software Engineering Institute.
 A Guide to the Project Management Body of Knowledge (PMBOK Guide) from
the Project Management Institute (PMI)
 GAPPS, Global Alliance for Project Performance Standards – an open source standard
describing COMPETENCIES for project and program managers.
 HERMES method, Swiss general project management method, selected for use in
Luxembourg and international organizations.
 International Project Management Association Individual Competence Baseline[55]
 The logical framework approach, which is popular in international development
organizations.
 PRINCE2 (Projects in Controlled Environments).
 Team Software Process (TSP) from the Software Engineering Institute.
 Total Cost Management Framework, AACE International's Methodology for Integrated
Portfolio, Program and Project Management.
 V-Model, an original systems development method.
Project portfolio management[edit]
Main article: Project portfolio management

An increasing number of organizations are using what is referred to as project portfolio

management (PPM) as a means of selecting the right projects and then using project
management techniques[56] as the means for delivering the outcomes in the form of benefits to
the performing private or not-for-profit organization. PPM is usually performed by a
dedicated team of managers organized by within a Project Management Office (PMO),
usually based within the organization.
Project management software[edit]
Main articles: Project management software and Project management information system

Project management software is software used to help plan, organize, and manage resource
pools, develop resource estimates and implement plans. Depending on the sophistication of
the software, functionality may include estimation and planning, scheduling, cost
control and budget management, resource allocation, collaboration
software, communication, decision-making, workflow, risk, quality, documentation and/or
administration systems.[57][58]
Virtual project management[edit]
Main article: Virtual team
Virtual program management (VPM) is management of a project done by a virtual team,
though it rarely may refer to a project implementing a virtual environment[59] It is noted that
managing a virtual project is fundamentally different from managing traditional
projects,[60] combining concerns of telecommuting and global collaboration (culture,
timezones, language).[
QUES.9.Explain the various methods of project evalulation detail?

Ans. Evaluation of the project involves a comprehensive assessment of the given project,
policy, program or investments, taking into account all its stages: planning, implementation,
and monitoring of results. It provides information used in the decision-making process.

Evaluations can be divided from the point of view of the project goals (evaluation of action in
relation to the objectives, national or community) and operational aspects (monitoring of
project activities).

There is also the separation due to the moment of performing evaluation: evaluation ex
ante (before implementation), current evaluation (during implementation) and ex
post evaluation (after implementation).

To achieve goal of cost-effective allocation of capital, investors use different methods to

assess the rationality of investment. From the point of view of the time factor, techniques
profitability of investment projects are divided into: static methods, (also known as simple)
and dynamic methods (so called the discount methods).

Static methods of project evaluation

A characteristic feature of static methods in assessing the effectiveness of investment projects

by defining the relationship of annual (medium or target) proceeds from investments and the
total nominal expenditure required for its implementation. These methods do not take into
account the effect of the time, which means that the individual values are not differentiated in
the following years, and the calculation involves the sum of the expected costs and benefits,
or average values selected from a specified period. These methods only approximate capture
the project life cycle and the level of commitment of capital expenditures.

It is proposed that simple method should be used only:

 In the initial stages of the process of preparation of projects, when there is not enough
detailed and extensive information about the investment project,
 In the case of projects with relatively short economic life cycle, in which the different
timing of inputs and the effects do not affect in a decisive way calculation of the
profitability of the project,
 In the case of projects of small scale, when both the inputs and the effects are minor and
do not affect the market position and the financial situation of the company implementing
the investment project.

The most frequently mentioned and described static methods of investment projects
evaluation include:

 The payback period

 Account of comparative costs
 Account of comparative profit
 Account of comparative profitability
 The average rate of return on investment
 Test of the first year

Advantages and disadvantages of static methods of project appraisaledit

Their advantages include:

 Simplicity.
 Ease of communication,
 accessibility for every manager,
 clear mathematical formula,
 ease of interpretation of the results.

Criticism of these methods include:

 Not taking into account the distribution of payments over time,

 Uncertainty as to obtain future revenues (they are only expected values).
 The cost of unused opportunities associated with generating future revenue,
 Not taking into account inflation, which reduce real incomes.

Dynamic methods of project appraisal

For evaluation of investment projects, more common is the tendency to use the dynamic
methods.

 NPV - net present value

 IRR - Internal rate of return
 MIRR - Modified Internal Rate of Return
 Annuity method
 The profitability index
 NPVR - Indicator revised of net present value

QUES.10. What is project evaluations? Explain in detail the various steps in set up a
project?

Ans. Project management is the key to sticking to your budget and deadline, whilst
keeping the most important tasks at the forefront of your company. Without it, you
leave the future of your business at the mercy of your teams and employees (which, in
case you weren’t aware, is not a good business model).

For such an important process, the project management steps are a little muddy, with
sources citing differing numbers of steps, timelines, etc. Then again, it’s a massive topic
with a huge margin for error; how the hell do you convey these steps when the p roject
could be anything from “get winter clothes in stock” to “grow to $220,000 monthly
recurring revenue”

Well, we here at Process Street hate making things complicated, so we’ve simplified the
project management steps of any and every undertaking to five easy stages.

 Conception and Initiation

 Definition and Planning

 Launch and Execution

 Performance and Control

 Project Close

If you’re looking to structure your next big push, or you just want to set and track
realistic deadlines, then this is the process for you. Then again, feel free to skip ahead to
any particular step you’re after.

Project Conception and Initiation

The first of our project management steps is to settle on the idea of a project; to scratch
out the concept and agree that it will be taken further than the drawing board. You’ll
have an idea, do a little research to see how it would be completed, then pitch it to the
relevant powers for examination and approval.

This stage will change a lot depending on the idea which is being developed. For
example, if you want to implement a new feature then you’ll need to consult the head of
your development team. On top of the relevant team heads, you’ll also be consulting
with your shareholders in order to keep them informed of where their money is being
spent.
Is it feasible, and is it valuable?

The key with the conception stage is to examine your project for both its feasibility
and value to the organization; an easy project will be useless if it does not benefit
the company, and a useful project will just waste resources if you aren’t certain
that it’s plausible in the first place.

Have SMART and CLEAR goals

Two popular methods of creating goals for a project are SMART and CLEAR. SMART
stands for:

 Specific – Setting goals to cover who, what, where, when, which and why

 Measurable – Making sure that you know how to measure the progress to and
success of a goal

 Attainable – Lay out how to achieve your most important goals

 Realistic – Ensure that everyone is willing and able to achieve your goals

 Timely – Making sure that you can a timeline in which you can hit your goals

Meanwhile CLEAR ensures goals are:

 Collaborative – Check that your team is encouraged to work together

 Limited – The scope of your goals should be limited enough to make them
manageable

 Emotional – Your employees should be able to form an emotional connection to

your goals by tapping into their passions.

 Appreciable – Large tasks need to be broken down to make them more

achievable
  Refinable – Goals need to be flexible to adapt and be refined as new situations
arise

Whichever method you choose, the basic principles which need to be set out are the cost
of the project, the quality of the end result, the resources which are available (or which
will be diverted), and a reasonable timeline for each task to be completed.

Project Launch and Execution

The project launch and execution phase is next, and this is where things kick into
overdrive. As the title would suggest, this is where work begins on the project, although
one or two tasks must be completed before your team gets stuck into the meat of the
topic.

First, you need to ensure that you have the deliverables of the project set in stone – you
should know what needs to be completed, how it should be done, who needs to work on
it, and when it has to be complete by (with some flexibility, depending on the risks
you’ve identified). Once you’re sure that you have this collected and approved, the
kickoff meeting will take place.

The project kickoff meeting is vital. Here is where you will meet with the teams
involved and distribute the necessary resources, tasks, timeline, responsibilities, and any
other important information related to the project.

Not only do you have to convey all that, but (going back to your CLEAR goals) you
need to make sure that your team understands exactly what the project is and why they
should both care and be enthusiastic about it. Yes, I’m aware of how corny that sounds.

Assign tasks to the employees that fit them

Put it this way; if you know that John from marketing is a whizz with data and enjoys
that kind of work, consider assigning him a data-crunching task, as your goal will not
only be achieved quicker (from his experience) but to a higher quality (from his passion
for the work). If you were to assign him the task of researching and writing on a topic
which he both knows nothing about and contains no data backing whatsoever, the end
result will both take longer and be of an inferior quality.

During this midpoint in our project management steps it’s also vit al to set up some sort
of tracking and communication system or standard. You need to be able to quantify the
progress of your individual teams at any point in the project, and also regularly touch
base with (at least) the team managers in order to make sure that everything is running
smoothly.