Project Management

M1
Prof. Madhukar Saxena
 THE DEMOGRAPHICS
Total Population 1.2 billion

Total Area 3.3 million km2

Number of Electors 834,082,814 (compared to

173,212,343 in1951-52)
Male Voters 437,035,372

Female Voters 397,018,915

Third Gender 28,527

Youth (18-19) 13,430,193

Total No. of Polling Stations 9,27,553

Total No. of Assembly Constituencies at 4,120

Present
 Project Akshay Patra…
• As per a study by world bank nearly 8.1 million children
need mid day meal to meet their minimum nutrition need.

• Serves food to over 1.4 million school children from 10,770

schools in 24 locations across 10 states in India.

• 175,000 meals are cooked in just 5 hours.

• Advisors and trustees of the scheme include prominent

names from education, Finance , IT and BPO companies.

• This is one of the cleanest and transparent NGOs of India

today.
 Project Mangalyaan…
• ISRO launched its space engine successfully into Mars orbit
in its first attempt on Wednesday September 24, 2014.

• It’s build with a cost of Rs. 454 crores -The cheapest Mars
mission ever.

• It travelled 650 million kilometers from earth, the cost

comes to 6.7 Rs/Km.

• It’s a marvel not only in space sciences but also in project

management. All aspects of cost, quality and schedule have
been met with excellence.

• Mangalyaan weighs 1350 Kgs and was ready in 15 months

while NASA took 5 years to get Maven ready!
 Project Konkan Railways…
• It is a 755 Km long single railway broad gauge
line connecting Roha in Maharashtra to
Thokur in Karnataka via Ratnagiri (Mah.) and
Madgaon (Goa).

• It was founded in 1990 with E. Sreedharan as

CMD.

• It has 91 tunnels totalling 83 kms, 1998

bridges (179 major and 1819 minor).
 Project Konkan Railways…
• They are all Projects,

• Each of them must have objective or objectives

• Each of them is a unique endeavor, non-routine in nature

• Executed by some team

• has several tasks/subtasks involved

• Involves significant capital involved & technology

• Have target time period to complete

 WHAT IS A PROJECT?
• Any Project is worth doing is worth doing fast and
right.
• Lean Goals
Improve Quality
Eliminate Waste
Reduce Lead Time
Reduce Total Cost

• Project Goals
Complete on Time
Complete in Budget
Meet Performance Requirement
 WHAT IS A PROJECT?
• A project
– Unique Endeavour
– To produce a set of deliverables
– Within clearly specified time,
– Allotted or Agreed Cost and
– Desired quality constraints

• Projects are different from standard business

operational activities
 WHAT IS A PROJECT?
• Are unique in nature.

• They do not involve repetitive processes.

• Every project undertaken is different from the

last, whereas operational activities often
involve undertaking repetitive (identical)
processes.
 WHAT IS A PROJECT?
• Have a defined timescale

• Have an approved budget

• Have limited resources.

– Labour,
– Equipment and
– Materials

• Involve an element of risk.

• Achieve beneficial change.

 WHAT IS PROJECT MANAGEMENT?
• Project management is the science (and art)
of organizing the components of a project,

– Whether the project is development of a new

product,

– The launch of a new service, a marketing

campaign,

– or a Wedding.
 WHAT IS PROJECT MANAGEMENT?
• A project isn't something that's part of normal
business operations.

• It's typically created once,

• it's temporary,

• and it's specific.

 WHAT IS PROJECT MANAGEMENT?
• As one expert notes, "It has a beginning and
an end."

A project consumes resources People,

Cash,
Materials,
or Time),
and it has Funding Limits.
 WHAT IS PROJECT MANAGEMENT?
• The primary challenge of project management
is to achieve all of the project goals and
objectives while honoring the preconceived
constraints.

• Typical constraints are

Scope,
Time, and
Budget.
 WHAT IS PROJECT MANAGEMENT?
• The secondary—and more ambitious—
challenge is to optimize the allocation of
necessary inputs and integrate them to meet
pre-defined objectives.
 Components of PM
• Project Management is the skills, tools and
management processes required to undertake
a project successfully. It incorporates:

• A set of skills. Specialist knowledge, skills and

experience are required to reduce the level of
risk within a project and thereby enhance its
likelihood of success.
 Components of PM
• A suite of tools.
– Various types of tools are used by project managers to
improve their chances of success.
• Examples include
Document Templates
Registers
Planning Software
Modeling software
Audit Checklists and
Review forms
 Components of PM
• A series of processes.
Various processes and techniques are required
to monitor and control time, cost, quality and scope
on projects.

• Examples include
– Time Management,
– Cost Management,
– Quality Management,
– Change Management,
– Risk management and
– Issue management
Components of Project Management

Skills Tools

Processes
 Some more terms…….
• Project Life Cycle

• Phases of a Project

• Phase Exits or Stage Gates

• Stakeholders
 Project Life Cycle
• Project management is about acquiring or
achieving the project goal

• Most projects need to be broken down into a

logical sequence of ‘phases’, known as the project
life cycle.
 Phases of a Project
• Organization's normally break a project down
into several project phases for better
management control

• Collectively, the project phases are known as the

project life cycle

• Each project phase is marked by the completion

of one or more deliverables.
 Stage Gates
• Each phase ends
 With a review of the
 Deliverables and Performance
 To Detect and Correct Errors
 To Decide if the Project should continue into the
next phase.

• The phase end reviews are often called phase

exits or stage gates.
 Challenges or Opportunity
for Project Management
• Rapidly changing technologies

• High entropy of the system

• Squeezed life cycle of products

• Globalization Impact

• Large organizations

• Customer Focus
 4 Phases of a Project

• Project Initiation

• Project Planning

• Project Execution and Control

• Project Closure
4 Phases of a Project
Project
Initiation

Project Project Project

Evaluation Planning
Phase

Project
Execution
& Control
 Project Life Cycle (Span)
PROJECT LIFE SPAN
(cycle)
PROJECT MANAGEMENT CYCLE
(standard or method) (different for every
model)

INITIATE
Analysis
PLAN Design
Develop
EXECUTE
Implement
MONITOR & CONTROL Evaluate
CLOSE
Maintenance
Cost and Staffing Level Project Life Cycle

Initiation Planning Execution and control Closing

Time
Cost and staffing level Project Life Cycle - Ideal v Typical

Initiation Planning Execution and control Closing

time
 Exercise
What does the chart tell you about typical v
ideal project life cycle?
 Answer
• Many projects don’t get adequate resources in
the early stages
• Low resourcing in the planning stage results in
delays in completing the project on time, to
the right quality and within the budget

Cost and staffing level

Initiation Planning Execution and control Closing

time
 Project Life Cycle (PLC) as a Tool
• PLC is a management tool to make it easier to
manage the project sequence

• The choice of phases vary from industry to industry

and the PLC will vary to suit the needs of the
participants

• Different project managers choose different PLC’s,

depending on the nature of the task i.e.
Engineering, software development etc.
 Project Life Cycle (PLC) Uses
• To maintain an overview of the project

• To help identify tasks

• Break the project into manageable parts

• Integrate activities (bite sized chunks)

• To help with the timing of decisions (go/no go)

• To guide the level of contingency needed

 Common characteristics of PLCs
• Cost and staff levels low in early phases of the project

• Probability of failure, risk and uncertainty are highest in the early

phases

• Ability of stakeholders to influence the outcome of the project are

highest at the beginning of the project

• Although many projects have similar phase names, with similar

work requirements, few are identical

• Sub-projects within a project also have distinct project life cycles

 Common characteristics of PLCs
• Cost and staff levels low in early phases of the project

• Probability of failure, risk and uncertainty are highest in the early

phases

• Ability of stakeholders to influence the outcome of the project are

highest at the beginning of the project

• Although many projects have similar phase names, with similar

work requirements, few are identical

• Sub-projects within a project also have distinct project life cycles

Models for Project Selection
 Models for Project Selection

1. Economic Value Added Model:

The performance metric that calculates the worth-
creation of the organization while defining the return
on capital.
EVA = Profit – [ Taxes + Capital Expenditure]
Project that has the highest Economic Value Added is
selected.
 Models for Project Selection
2. Payback Period
• Payback Period is the ratio of the total cash to the average per period
cash.

• It is the time frame that is required for the return on an investment to

repay the original cost that was invested.

Payback Period = Cost of Project / Average Annual Cash Flow

• The project that has the shortest Payback period is preferred since the
organization can regain the original investment faster.

Limitations to this method:

• It does not consider the time value of money.
• it focuses more on the liquidity while profitability is neglected.
• Risks involved in individual projects are neglected.
 Models for Project Selection
3. Discounted cash flow, or DCF,

• This approach to valuing a business, by

calculating the value of its future cash flow
projections.

• Money in the future is not worth as much as

that same money today. That’s referred to as
the time value of money.
 Models for Project Selection
• Discounted cash flow, or DCF,

• DCF = Cash flow/ (1 + current interest rate) years in the

future

• In this example, you would take:

– Rs.10,000,000/(1 + .05)1.
– Rs.10,000,000/1.05 = Rs.9,523809.52

• That means that the value of Rs.10,000,000 a year from

now, at a 5% interest rate, would be Rs.9,523809.52

• The future value of Rs.10,000,000 in two years is even

would be further less i.e. Rs.9,070294.78
 Models for Project Selection
4. Opportunity cost
Opportunity cost is a concept to help you judge
which project(s) to take and which project(s) NOT to take
based on the relative potential returns of the project(s)

It is the loss of potential future return from the second best

unselected project. ...
• For example,
• if Project X has a potential return of Rs.25,00,000
and Project Y has a potential return of Rs.20,00,000
• Selecting Project X for completion over Project Y will result
in an opportunity cost of Rs.20,00,000.
 Models for Project Selection

5. Cost-benefit Analysis:
• The benefits produced by the project would be worth Rs.15,00,000.

• The cost of producing those benefits at Rs.10,00,000.

Cost-Benefit Ratio = Benefits (15,00,000) / Costs (10,00,000)

• The cost-benefit ratio of 1.5

• BCR > 1 Project is profitable, Higher the BCR the better

• BCR = 1 Project will break even
• BCR < 1 Project will cause the organization to lose
 Models for Project Selection
6. Scoring Model

• The Committee being created that lists the

relevant criteria to select a project.

• The committee weighs the list according to the

importance and priorities of each project under
consideration.

• The committee then adds the weighted values

and selects a project with highest score.
 Models for Project Selection
7. Net Present Value
• Net Present Value is the difference between the project’s current
value of cash inflow and the current value of cash outflow.

• It takes into consideration the future value of money & NPV must
always be positive.

• When picking a project, one with a higher NPV is preferred.

However, there are limitations of the NPV, too:

• The NPV does not provide any picture of profit or loss

 Models for Project Selection
8. Internal Rate of Return (IRR)
• The interest rate at which the net present value of all the
cash flows (both positive and negative) from a project or
investment equal zero.

• Internal rate of return is used to evaluate the attractiveness

of a project or investment.

• If the IRR of a new project exceeds a company’s required

rate of return, that project is desirable.

• If IRR falls below the required rate of return, the project

should be rejected.
 Models for Project Selection

• A general rule of thumb is that the IRR value

cannot be derived analytically. Instead,

• IRR must be found by using mathematical trial-

and-error to derive the appropriate rate.

• The IRR is used to select the project with the best

profitability; when picking a project, the one with
the higher IRR is chosen.
 Models for Project Selection
Criteria Accept Reject

Payback Period PBP < Target Period PBP > Target Period

Net Present Value NPV >0 NPV <0

IRR > Cost of IRR < Cost of

IRR
Capital Capital

BCR BCR > 1 BCR < 1