Chapter Five

Project Organization and Management

After completing this chapter, you should be able to:
 Identify the forms of project organization
 Analyze project team building and quality of project managers
 See the project planning , implementation and control processes
 Identify the planning and monitoring tools like WBS, CPM and PERT
 See the ways of project evaluation and closing out of projects

1. Forms of Project Organization

The basic building blocks of the traditional forms of organization are a functional
division of management and a well defined hierarchical structure. Typically a firm is
organized in to various departments, such as production, purchasing, marketing, finance,
personnel, engineering and, research and development. Some of those departments have
line function and the others a staff function. Line managers have the principal
responsibility for achieving the goals of the firm and are vested with decision making
authority. Staff managers primarily serve in an advisory capacity –of course, within the
staff departments they enjoy administrative powers.

The traditional form of organization is quite appropriate for handling established

operations which are characterized by a continuous flow of repetitive work, with each
department attending to its specific functions- in such a setting , relatively stable inter
departmental and inter personal relationships emerge. However, the traditional form of
organization is not suitable for project management because of the following reasons:
 Project is a non routine, non repetitive undertaking often plagued with many
uncertainties; the relationships in project setting are dynamic, temporary, and
flexible, and a project requires a coordination of the efforts of persons drawn from
different functional areas and contributions of external agencies. However, the
traditional form has no means of integrating different departments at levels below
the top management, and it doesn’t facilitate effective communication,
coordination control when several functional departments, with different
professional backgrounds and orientations are involved in the project work under
time and cost pressures, which often call overlap, at least partial, of the
development, design, procurement, construction and commissioning work.

Hence there is a need for entrusting an individual (group) with the responsibility for
integrating the activities and functions of the various departments and external
organizations involved in the project work. Such an individual may be called the project
manager or project coordinator. Depending on the authority that is given to the person
responsible for the project, the project organization may take one of the following three
forms:
 Line and staff organization

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  Divisional organization
 Matrix organization
Line and staff organization
In this form of project organization, a person is appointed with the primary responsibility
of coordinating the work of the people in the functional departments. Such a person,
referred to commonly as the project coordinator, acts essentially in a staff position to
facilitate the coordination of line management in functional departments. The project
coordinator doesn’t have authority and direct responsibility of the line management. He
serves as a focal point for receiving project related information and seeks to promote the
cause of the project by rendering advice, sharing information, and providing assistance.
He may gently coax line executives to strive for the fulfillment of project goals. Deprived
of formal organizational authority, he may find it difficult to exert leadership and feel
unsure of his role. His influence would depend on his professional competence, closeness
to top management, and persuasive abilities. Clearly, this is a week form of organization
which may be employed mostly for small projects- it is certainly not suitable for large
projects.

Divisional organization
Under this form of project organization, a separate division is set up to implement the
project. Headed by the project manager, this division has its complement of personnel
over whom the project manager has full line authority. In effect, this form of organization
implies the creation of a separate goal oriented division of the company, with its own
functional departments. While the project manger still has the problem of coordinating
the inputs of other organizations involved in the project, he has total formal control over
the division he heads.

A very strong form, the divisional project organization facilitates the process of planning
and control, brings about better integration of efforts, and strengthens the commitment of
project related personnel to the objectives of the project. It considerably improves the
prospect of fulfilling the time and budget targets.

This form of organization, however, may entail an inefficient use of resources of the firm.
It may result in an unnecessary duplication of specialists in the company, because of the
necessity to allocate them in total to each project. further it may be difficult to achieve a
higher degree of specialization of expertise because the divisional project organization
may have to manage with , say, one mechanical engineer, rather than two specialists.

Matrix organization
The line and functional form of organization is conducive to an efficient use of resources
but is not suitable for an effective realization of project objectives. The divisional form of
organization, on the other hand, is suitable for an effective realization of project
objectives but is not conducive to an efficient use of resources. The matrix form of
project organization seeks to achieve the twin objectives of effect use of resources and
effective realization of project objectives- at the cost of greater organizational
complexity, of course.

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In a matrix organization, the personnel working on the project have a responsibility to
their functional superior as well to the project manager. This means that the authority is
shared between the project manger and the functional managers. The authority and
influence of the project manager cut across the traditional vertical line of command.

The matrix form of organization is incongruent with the traditional organization theory:
there is dual subordination, responsibility and authorities are not commensurate; the
hierarchical principle is ignored. This clearly implies that the matrix form of organization
involves greater organizational complexity and creates an inherently conflict full
situation. Yet it seems to be better vehicle for the simultaneous pursuit of the twin
objectives-efficient utilization of resources and effective attainment of project objectives.

2. Project Contract

A proposal or offer, when accepted is a promise; a promise and every set of promises
forming the consideration for each other is an agreement; an agreement if made with free
consent of parties competent to contract, for a lawful consideration and with a lawful
object is a contract. A contract is an agreement enforceable by law, and is made between
two or more parties. Mutual assent of offer an acceptance, consideration, competence of
parties and a legal object are the essential elements of a contract.

From the viewpoint of a project, contracting is the process of establishing a relation

between the owner and the contractors to execute the project work, especially
construction. It is essential that both the parties sign the contract so that the requirements
of the parties can be communicated each other. Usually, the contents of a contract
include name and address of both the parties, subject of the agreement, deadlines for the
different stages of fulfillment of the agreement, financial aspects and other necessary
conditions such as violation of contract etc.

There are several approaches in contracting. Some of them are :

1) Entrust the total responsibility for engineering, procurement and construction to

consortium of contractors who may divide the total responsibility among them selves.
2) Divide the project into engineering, construction, supplies etc. and entrust the
responsibilities to suitable suppliers and contractors.
3) Accomplish a portion of the work yourself with your own departmental
organization and contract out the balance to one or more agencies.

Contracting Schedule
A carefully worked out contract schedule will reduce the extend of project overruns that
take place due to the related award of contracts. Contract should be awarded sufficiently
in advance of the starting date of the work so that the contractor is able to mobilize his
resources and move in before the starting date without any emergency. Any crisis
situation will reduced the overall efficiency of the work. A contracting schedule
contains:
 the work code

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  work packages; volume of main activities and budget estimate
 starting and finishing dates and
 the names of people who prepared the bid documents and awarded the contract.

Contracts for supplies also should be scheduled to have timely supply of materials, giving
consideration to lead time delivery time.

Contracting Procedure
There may be directive from the government with regard to the contracting procedures
The World Bank , Asian Development Bank, UNDP etc. have their own detailed
procedures. Some of the financing institutions require particular procedure for
contracting these procedures are designed with clear objectives to achieve. These
objectives are:
 to elicit competitive bids
 to provide equal opportunity and equal treatment to all eligible tenderers
 to accept the tender at the lowest cost.

The following are the usual steps in contracting :

1. Work packaging and scheduling

The total work of the project is expected to be divided into separate packages. So that
they could be awarded to contractors. It may be divided into either specialized Activity
Packages like construction, civil engineering works, painting etc. or unit packages like
administration building, by - product plant, steel melting shop etc. What should be kept
in mind while doing work packaging is that as far as possible, one work package must be
independent of other packages. Each package must be well-defined with their scope.
Specialized nature of the work, especially form the angle of technology, should be paid
attention in packaging the work. Size of each package should be neither too large nor too
small for one or more reputed contractors to handle.

Every package should be scheduled with reference to all activities involved in its
accomplishment and to suit the overall schedule of the project. The schedule must
clearly show the starting and finishing time of each individual package. Each package of
work should be contracted in advance so that it could be completed within the specified
time.

2. Preparation of Tender Documents

The preparation of tender documents requires serious attention because it aims at
furnishing the prospective contractors with the details of the contract. Contractors must
be able to understand the scope of the contract fully and to fill in the bid documents
without any mistake. Tender documents usually contain the following.

a) Instruction to tenderers
Instructions to tenderers may cover; tenderer's qualifications, guidelines for
preparation of the tender, the number of copies to be submitted, price basis to be

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 adopted, tender evaluation criteria, bid bond requirement, dates for closing the tender
sale, submission of bids, and opening the bids.

b) Model Form of tender

The prescribed form of tender should be included in the tender documents.

c) Drawings and specifications

They are the most important parts of tender documents. Specifications should be
complete and unambiguous and set out the way in which all work should be done.
With respect to goods, they should specify physical and chemical properties regarding
work, they should specify standards, methods, quality and quantity. Specifications
should cover also site conditions soil conditions etc. Which are very important in
determining the work volume and cost. The documents which are clear and complete
can avoid a lot of unpleasant disputes during the execution of work.

d) Schedule of Rates:
Albeit irrelevant in certain types of contract, the tender documents generally include a
schedule of owner's rates for different types of work. These rates are meant for
tender's guidance.

e) General conditions of contract

It is a document like the standard form of contract and contains the general terms and
conditions of the contract such as terms of payment, rights and obligations of parties,
procedure for settling claims and disputes, performance security and other conditions
which are generally applicable to all contractors.

f) Special conditions of contract

The conditions those are specially applicable to a particular package and not generally
to all packages are referred to as special conditions of contract. They may include
procedure for inspection and testing , special requirements of insurance, specific
terms of payment, etc.

g) Specimen of Bank guarantee

Tender documents usually include specimens of Earnest Money Bank Guarantee, or
Security Deposit Bank Guarantee or Advance Payment Bank Guarantee. Sometimes
only SDBG will accompany the tender documents.

3. Determination of Contractor's Qualifications

One of the modern contracting approaches is to invite submissions for
prequalification before issuing a tender. The criteria for qualification of contractors
for every work package should be determined in advance. The contract will be given
only to a party possessing those qualifications. This technique is employed with a
view of avoiding incapable contractors. However, prequalification is not compulsory.
The minimum qualifying requirements should include a contractor's qualification,
experience, employees, financial stability and plant and equipment. For example, the

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World Bank's criteria for prequalification and the points for each criterion are given
below.

Factors Points

Organization and Planning 10

 Management Structure
 General Implementation programme
 Plans for subcontracting
 History of Default

Personnel 15
 Experience/ qualification of key personnel
 Adequacy of specialized staffing

Major plant and equipment 15

 Adequacy
 Age/condition
 Source of availability

Experience 30
 Technical references
 Value of completed contracts of similar type
 Average percent of work under subcontractor

Financial Condition 30
 Bank reference
 Average annual turnover
 Working capital
 Quick Ratio
 Value of contracts completed in last 5 years

A contractor who is interested in participating in the prequalification invitation, can

have a self- check based on the above criteria. If prequalification is included in the
contracting procedure advertisement should be made for submission of application.
After the evaluation of applications, the contractors will be short-listed. Such a list
will help the organization for inviting tenders only from the short-listed contractors
thereby avoiding incapable contractors.

4. Tender Invitation
If contractors are short-listed through prequalification procedures, send them equerry
letters to understand their interest in participating in the tender. An open tender may
be advertised in the absence of such a list. The invitation to tender should be properly
worded and should not give room for any dispute or disadvantage.

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5. Tender submission
Tender is usually submitted in sealed envelopes. The required number of copies of
tender documents together with all other necessary documents will be submitted by
tenderers on or before the last date for submission. The invitation to tender or the
tender documents will clearly say the requirements and last date for submitting a
tender.

6. Tender Opening
Unless a justifiable confidentiality is to be maintained, like in a national defense
project, tenders should be opened in the presence of renderers or their authorized
representatives. The date and time of tender opening will be notified to the renderers
in advance either through separate notice.

7. Evaluation and recommendation

The Project Manager and the interested department heads have to participate in the
evaluation of tenders. One of the very important tasks in the evaluation process is to
add the costs of the elements that the renderers have not included, with the renderer’s
prices. Such costs may be insurance costs, shipping costs, taxes, special packing
charges, inspection fees etc. Costs of excluded components shall be added at the
maximum market price. The other areas of observation in the evaluation process are
the quantity, the quality and the other technical specifications. Sometimes, the
project will have a preprinted bid comparison and evaluation form designed,
including all requirements of all the departments.

8. Award of contract
Usually contract is awarded to the renderer who offers the lowest price. In certain
projects, the bidders may be called by the project manager for negotiations with a
view to bringing down the price or lettering the conditions quoted. However, in
projects, financed by the World Bank, negotiation is not encouraged. The World
Bank enters into negotiations in the appointment of consultants.

9. Signing of Agreement with detailed contract conditions.

A contract agreement is a document by which the contractor covenants with the
project to execute the defined work and the project covenants with the contractor to
pay the agreed contract price. The details of the contract and all major and minor
conditions will be contained in the annexure or appendices. These annexure include
the tender invitations, tender documents, the tender specifications, general and special
conditions of contract and the contractor's acceptance.

The content of the contract may differ from project to project. However, the
executives who prepare the contract agreement must bear in mind that harsh
conditions and pitfalls can harm the project.

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 Thus the contracting procedure plays the key role in the success of contract
management. Unless much attention is in each step in the contracting procedure
unnecessary conflict may occur between the project and the contractors. Such a
conflict may lead to the project to its premature death.

Performance Guarantee
When a contractor signs a contract agreement with the project, he undertakes the
responsibility to complete a piece work according to the terms and conditions agreed
upon. He assures the project of specified performance with two types of guarantee.

1. Monetary Performance Guarantee

It is furnished by a banker of the contractor in the form of a bank guarantee,
undertaking to pay the owner, money a stated limit if the contractor fails to perform
the contract. If the contract is with an international company, the MPGs are letters
of credit.

2. Monetary Performance Bond

It is a guarantee to fulfill the contract in regard to completion of work,
workmanship, defect- free working of the plant and the quality and the quantity of
the output. The PB would envisage rectification of defects during the guarantee
period either by removal of defects or by payment f costs incurred by the project for
repairs or replacement. The PB will be for a specific monetary value. The penalty
or compensation for shortfall in the quantity or quality is usually recovered from the
final bill and is not included in the PB. The final 5 - 10 percent of the contract
price is paid only when a guarantor furnishes to the project an acceptable PB with a
situation for payment of money in the event of the project's failure to perform. The
guarantor may be a bank or an insurance company.

TYPES OF CONTRACTS

1. Fixed price
A price is quoted and accepted for the work specified in the contract. The price will
only be varied if the customer varies the contract or if the contract condition allow for
a price increase to be negotiated under particular circumstances.

2. Target price
Target price contracts are similar to fixed price contracts, but they are used when
there is some justifiable uncertainty about the likely costs for carrying out project as it
has been defined. The contract allows for price adjustment if the audited final project
costs either exceed estimates or show a saving, so that the risks and benefits are
shared to some extent between the customer and the contractor.

3. Guaranteed maximum price

A guaranteed maximum price arrangement is a target price contract in which although
cost savings can be shared, the contractor is limited in the extent to which excess
costs may be added to the target price.

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 4. Simple reimbursable
A simple cost reimbursable arrangement means that the contractor is reimbursed for
costs and expenses, but makes no profit. This type of payment sometime occurs
when work is performed by a company for its parent company, or another company
which is wholly owned within the same group of company’s formal contract might
not be used in such cases.

5. Cost-plus
Cost-plus is a common form of reimbursable contract, as in simple reimbursable
contracts, the contractor charges for materials used and for time recorded against the
project on time sheets. But the charging rates agreed with the customer are at levels,
which are intended not only to recover direct costs, and overheads, but are marked up
to yield profit.

6. Schedule of rates
Contracts with scheduled rates are reimbursable contracts (usually cost-plus), charge
according to the number of work units performed. A specific work unit charging will
be agreed with the customer beforehand for each trade or type of work involved.

7. Reimbursable plus management fee.

This is a form of reimbursable contract in which the contractors profit element is
charged as a fixed fee, instead of being built in as a plus element in the agreed rates.
Unlike cost plus the contractors profit revenue does not increase with costs but
instead decreases proportionally as total project costs rises. This is to force the
contractor to keep the costs low.

8. Bill of quantities with scheduled rates.

A bill of quantities contract is reimbursable, operating with an agreed schedule of
rates, but the total number of work units expected in each trade or type of work is
estimated or quoted beforehand.

3. Building Project Team

Project human resource management involves all the processes that are required to make
the most effective use of the individuals associated with the project. Good leaders are
essential for the successful management of projects. To effectively manage a project,
these leaders require a group of dedicated individuals, committed to achieving project
goals. While selecting good staff is important, it is equally important to assign them the
right jobs. The project manager plays a key role in the success of a project. Project
managers should be able to analyze project risk and uncertainty. Generally, the project
organization establishes a committee to screen candidates for the post of project manager.

The project office is the entity in an organization that helps the project manager carries
out his tasks. The people in this office are dedicated to the achievement of the project
goals. It is also their responsibility to maintain a good working relationship between the
project and functional managers.

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Team building can be defined as the "process of planning and encouraging working
practices that are effective and which minimize the difficulties that obstruct the
team's competence and resourcefulness.” Complex projects involve multifunctional
tasks that demand a high level of innovation and state-of-the-art technology. Such
projects require teams of specialists with diverse skills. The benefits of team
building are: Effective use of time, improved job satisfaction and improved self
esteem and well being. The team building process is based on the type of the
project, the leadership style of the project manager and on the type of individuals
involved in the team.

Stages in team building:

There are four major stages:
 Forming (collection): The team starts as a collection of people when
individuals come together either at once or over a period of time. At this
stage, members look polite towards each other, and somewhat guarded and
trying to find out more about the others.
 Storming (grouping): Individuals become more open and trustworthy
towards each other; and they start to know the interests, personalities, values
and skills of each other. The openness is helpful in providing positive
criticisms on the leadership style, and this openness may result in conflict,
confrontation and feelings of frustration.
 Norming (developing team): If positive leadership emerge (whether
designated, volunteered, shared or otherwise) the group may move from stage
II to stage III. At this stage members begin to establish norms, goals, roles
and procedures within the group. Decision-making and problem solving may
be stressful or laborious but more successful than the previous stages.
 Performing (High performance team): Fully formed teams with established
standards. Very few members make it to this stage. They work out problems,
goals, issues and difficulties together. They move forward to high
performance. Members in the team are aware of the potentials that may
accrue through the application of teamwork, self-study, shared leadership and
effort, high moral and excellent productivity. Conflict may occur but
members value resolution of conflicts and want to remain loyal to the team.

Ground rules for an effective team building:

 The purpose of the team is known and understood by all members;
 High transparency on the problems of the performance of the team;
 Effective leadership,
 Member roles are known to each other and there is high coordination of
roles in the team.
 Availability of adequate financial and human resources for the team to
function properly;
 Awareness and full participation of members in the decision making
process of the team;

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  Provision of help to each other, even if it requires overtime,
inconveniences or extra effort;
 Voluntary provision of skills, experiences, ideas and information to other
team members; and the ability of members to listen and try to understand
the opinions, ideas and needs rather being unnecessarily critical and
defensive;
 Good system of information sharing and feedback mechanism so as to
keep members on new developments and changes;
 Commitment and trust among team members to develop consensus on an
issue, even if it takes a little more time.
 The ability of developing synergy (the whole is greater than the sum of its
parts) in the team.
These five stages of team formation mirror the four stages of the project life cycle,
although all five can take place within a single project stage. There are several group
working techniques, which the manager can use to shorten the forming, storming and
norming stages, such as the application of the start-up workshops.

Having formed the group, the manager’s role is to ensure it continues to operate at the
plateau of effectiveness. First the manager must be able to determine just how effective
the team really is. On a simple level, this can be assessed by the way in which the team
achieves its agreed targets, and by the way in which the individual’s and group’s
aspirations and motivational needs have been satisfied. The team leader and the line
management of the organization must ensure that both corporate and personal objectives
are met. If only the corporate goal is met, with time there will be an erosion of morale
and effectiveness followed by staff attrition. Often, however, it is only possible to
measure achievement of these objectives at the end of the project, when it is too late to
take corrective action. Hence, we must also have measures by which to judge the
cohesion and strength of a group during the project indicators of team effectiveness
include:

 Attendance: low absenteeism, sickness, accident rates, work interruptions and labour
turnover
 Goal clarity: Individual targets are set, understood and achieved; the aims of the
group are understood; each member of the team has a clear knowledge of the role of
the group
 High outputs: Commitment to goal achievement, a search for real solutions,
analytical, critical problem solving using knowledge and skill, the search for widely
tested and supported solutions.
 Strong group cohesion: openness and trust among members, sharing of ideas and
knowledge, lively and constructive meetings, shared goal.

Leading Projects
One of the most elusive of topics, often authors start off by saying they are going to
discuss leadership, and end up describing management. Leadership is different from
management. Somebody can be a good, effective manager, without being and

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inspirational leader; and yet other people can be inspirational leaders, while being fairly
chaotic managers.

Covey said that there are three elements of leadership, which he called ethos, pathos and
logos. Unfortunately the majority of Western managers use only the last of these. They
try to persuade their subordinates by the logic of the situation. However, this is not
totally effective, without the other two. The effective manager is good on the logos, but
to be an inspirational leader, he or she must first convince with ethos and pathos.

1. Ethos is the leader’s basic value set. The leader must demonstrate to the team that he
or she has values and beliefs worth working for. The leader must communicate his
or her values to the team, to motivate them to work towards the project’s goals.
2. Pathos is the leader’s relationship with the team. Once the leader has demonstrated to
the team inclusive ethical, moral and cultural values, he or she then needs to win
their backing and support. Once the leader has convinced the team with his or her
value set, and once he or she has developed a relationship with the team, then the
team are ready to be persuaded by logic. Without the ethos and the pathos, the logos
will flow off the team like water off a duck’s back. Logos remains a necessary
condition for inspirational leadership, but on its own it is an insufficient condition.

What this might mean for project manager is as follows. Ethos can work on several
levels. First, the project manager must convince the wider team (Primary, secondly, he or
she must gain commitment of the team to overall management approach, and gain
support for it as a way to deliver a successful outcome for the organization. Thirdly, the
project manager must demonstrate their overall ethical and cultural values, showing an
inclusive style that recognizes the contributions of others, and convinces the team that
they will be properly rewarded. Then the manager needs to build the pathos that is
relationships, between themselves and the project team members, and between the
individual members of the team. Both the ethos and the pathos can be achieved through a
well-designed start-up process. Once the manager has won support for his or her
personal values and values for the project, and once people are working well together as a
team, then the team members will be open to persuasion on individual issues that need
resolving on the project.

The Effective Project Manager

Now let us consider what makes an effective project manager. Handy, suggests that there
are three possible criteria for effective leaders:
 Leadership traits: Effective managers have certain common traits
 Leadership style: Effective managers adopt certain styles
 A contingent approach: Effective manager adapt their styles to suit the circumstances.

Traits of Effective Project Manager

There are six traits of effective project managers:
 Problem –solving ability and results orientation
 Energy and initiative

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 Self-assured leader
 Perspective
 Communication
 Negotiating ability

Problem-solving ability and results orientation

Effective managers are usually of above-average intelligence, and able to solve complex
problems, by analyzing the current situation and recognizing patterns, Problem solving
pervades project management. The achievement of the project’s purpose is a problem, as
is the completion of each stage of the life cycle. Furthermore, the control processes is
also one of problem solving, planning recovery to overcome variances from the plan.
Without a problem solving ability a project manager would be lost. This ability at
problem solving should be coupled with results orientation. The purpose is not to
complete work for work’s sake, but to achieve the desired ends. The solution to the
problems should deliver the planned objectives and defined purpose not necessarily
complete the originally agreed work. The end justifies the means or All’s well that ends
well.

Energy and initiative

The project manager must also have the ability to continue working and managing under
considerable pressure and against considerable odds. This requires the manager to be
energetic and fit. This energy will be coupled with initiative to see the need for action,
and have the resolve to take it.

Self-assured leader
Managers must have the self-assurance to know that what they are doing is right. This
does not mean they must be extrovert or brash; a manager can be self-effacing while still
self-assured. They must take action resolutely, confident in their opinions and judgment.
Sometimes it is better to take action, based on incomplete information, being ready to
modify the action as new information comes to light, than to dither endlessly looking for
the perfect solution. Self-assured managers also delegate readily to their project team,
confident in the ability of the team’s members, and their own ability to motivate the
team. Sometimes, especially in the IT industry, you see good technologists promoted
into managerial positions who are very reluctant to delegate, because they believe, quite
rightly, that they can do the work better than any else. They work themselves into an
early grave, while their team members are idle and consequently de-motivated.

Perspective
Managers need to be able to look beyond the team, and to see how they fit into the
organization as a whole. This need for perspective extends to the project work. The
manager must be able to move freely through all three levels of the project hierarchy, and
above as well, to understand the detail work of the project and how it will deliver the
project’s objectives, and to understand how the project’s objectives will meet the needs of
the parent organization. This ability is known as a helicopter mind.

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Communication
Similarly, the manager must be able to communicate at all levels of the organization,
from managing director down to the janitor. They must be the project’s ambassadors,
selling it to senior managers to win their support; they must be able to talk to their
peers, functional managers and resource providers to win their cooperation. They must
brief and motivate the team; and they must talk to the janitor, because often the latter
knows better than anyone how the project is progressing.

Negotiating ability
In Parts Two and Three the project plan was said to be a contract. It is a contract between
the project manager (showing what the manager and the team will deliver to the
organization), and the project’s sponsor (showing the support that person or group will
give to enable the project manager to deliver the contracted result). Like all contracts this
must be negotiated through bipartite discussions. Project managers rely on their ability to
negotiate, because they do not have the direct line authority over their resources as
functional managers do. They must win and maintain the commitment and cooperation
of other people through their ability to negotiate and persuade.

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Style of Effective Project Managers
Project managers can adopt four styles. The table below shows the appropriate
management styles and team structures at different project stages.

Stage Style Team

Feasibility Laissez-faire Egoless

Design Democratic Matrix

Implementation Autocratic Task hierarchy

Clouse –out Bureaucratic Task force

Laissez-faire: Laissez-faire managers allow the team to mange themselves. They behave
like all the other members of the team, and are there to advice if required. This style is
appropriate during the early developmental or feasibility stages of a project, or on
research projects.

Democratic: Democratic managers consult their team, and then decide the best course of
action. Note that this style is different from the laissez-faire style above, which is almost
anarchic, not democratic. This style may be appropriate during the feasibility and
planning stages of a project, when you want to encourage people to contribute their ideas.

Autocratic: Autocratic manager dictate to the team what should be done and how. This
style may be appropriate during the execution and close-out stages of a project, when
the specification and design of the facility has been decide, real money is being spent,
and so early completion is required at achieve the returns.

Bureaucratic: Bureaucratic manager through rules and procedures. This style is

appropriate on projects with low risk, for which there will be little change, because the
bureaucratic manager is unable to respond to change. This means it will also be
appropriate during the closeout stages of a project.

4. Project Planning
Project involves few activities, resources, constraints and inter-relationships can be
visualized easily by the human mind and planned informally. However, when a project
crosses a certain threshold level of size and complexity, informal planning has to be
substituted by formal planning. The need for formal planning is indeed much greater for
project work than for normal operations. Without effective planning, there may be chaos.

Areas of planning
Comprehensive project planning covers the following:
 Planning the project work: the activities relating to the project must be spelt out
in detail. They should be properly scheduled and sequenced.

15
  Planning the manpower and organization: the manpower required for the
project (managers, technologists, operators and others) must be estimated and the
responsibility for carrying out the project work must be allocated.
 Planning the money: the expenditure of money in a time- phased manner must
be budgeted
 Planning the information system: the information required for monitoring the
project must be defined.

Project objectives and policies

Often the focus of project planning is on questions like who does what and when. Before
such operational planning is done, the objectives and policies guiding the project
planning exercise must be articulated. The questions to be answered in this context are:
 What are the technical and performance objectives?
 What are the time and cost goals?
 To what extent should the work be given to outside contractors?
 How many contractors should be employed?
 What should be the terms of contract?

Well defined objectives and policies serve as the framework for the decisions to be made
by the project manager. Throughout the life of the project, he has to seek a compromise
between the conflicting goals of technical performance, cost standard and time target. A
clear articulation of priorities of management will enable the project manager to take
expeditious actions.

Work breakdown structure

The work breakdown structure, as its name suggests, represents a systematic and logical
breakdown of the project into its component parts. It is constructed by dividing the
project in to its major parts, with each of these being further divided in to sub parts. This
is continued till a breakdown is done in terms of manageable units of work for which
responsibility can be defined. Thus the work breakdown structure helps in:
 Effective planning by dividing the work in to manageable elements which can be
planned, budgeted and controlled.
 Assignment of responsibility for work elements to project personnel and outside
agencies.
 Development of control and information system.

WBS and project organizations

The project organization represents formally how the project personnel and outside
agencies are going to work. The work breakdown structure defines the works to be done
in a detailed manner. To assign responsibility for the tasks to be done, the work
breakdown structure has to be integrated with the project organization structure. This
calls for blending the vertical breakdown of the work with the project organization
structure. This results in delineation of project tasks which are the specific
responsibilities of organizational units/managers.

16
The technical name given to such a project task is cost account. A cost account represents
a unit of work (i) which is defined in fairly concrete terms, (ii) for which a single person
is responsible, and (iii) for which a budget of expenditure and manpower requirement can
be prepared meaningfully.

Tools of planning
The oldest formal planning tool is the bar chart, also referred to the Gantt chart or the
multiple activity charts. In the last five decades, network techniques have received
considerable attention. This section briefly describes the nature of these tools of planning.

Bar chart: this is a pictorial device in which the activities are represented by horizontal
bars on the time axis. The left hand end of the bar shows the beginning time, the right
hand end the ending time. The duration of the activity is indicated by the length of the
bar. The manpower required for the activity is shown by a number on the bar.

An illustrative Bar Chart

Time in weeks from project start

10 20 30 40

Design

Purchase of
parts

Fabrication

Assembly

A Gantt chart is a graphical representation of the duration of tasks against the progression
of time. A Gantt chart is a useful tool for planning and scheduling projects. A Gantt
chart is helpful when monitoring a project's progress.

The advantages of the bar chart are:

 It is simple to understand
 It can be used to show progress
 It can e used for manpower planning
The bar chart, however, suffers from some disadvantages which limit its usefulness:
 It cannot show interrelationship among activities on large , complex projects;
 There may be a physical limit to the size of the bar chart, which may limit the size
of the project that can be planned with this technique; and
 It cannot easily cope with frequent changes or updating.

17
Network techniques
These are more sophisticated the traditional bar chart. In these techniques, the activities,
events, and their relationships are presented by a network diagram, also called an arrow
diagram.

The advantages of network techniques are:

 They can effectively handle inter relationships among project activities
 They identify the activities which are critical to the completion of the project on
time ad indicate the float (spare time ) for other activities
 They can handle very large and complex projects and
 They can be easily computerized and updated
While the network techniques are a superior tool for project planning, they suffer from
several drawbacks:
 Being more complicated than the traditional bar chart they are not easily
understood by the project personnel, and
 They do not define an operational schedule which tells who does what and when.

Basic Network terminologies

Activities and Events:
a) An activity is a task or a job that takes time and resources: Example: Excavate
the land, Dig foundations, Lay foundations, Build a wall, etc. It is represented in a
network by an arrow.
The tail of the arrow shows where the task begins and the head of the arrow shows
where the task ends. The arrow doesn’t have any relationship with a scale.
In a network analysis, it is important to establish:
 The activities involved in the project,
 Their logical relationship, ex. Building a wall comes after laying the
foundation.
 An estimate of the time that an activity is going to take

b) An event is a point in time and indicates the start or finish of an activity or

activities, e.g. wall built, foundations dug, etc. An event is represented in a network
by a circle.

The establishment of activities automatically determines events because they are

the start and finish of activities.
Dummy activity: an activity that does not consume time or resources. It shows
merely the dependencies or proper relationship between activities. A dotted arrow
represents it.

18
Network: this is the combination of activities, dummy activities and events in
logical sequence according to the rules of drawing networks. Example:

Rules for drawing networks:

 A complete network should have one point of entry – a start event, and one
point of exit – a finish event.
 Each activity must have one preceding (tail) event and one succeeding or
head event. Many activities may have the same tail event and many may
have the same head event.
 No activity can start until its tail event is reached.
 An event is not complete until all activities leading in to it are complete.
 A series of activities which lead back to the same event are not allowed.
 All activities must be tied in to the network; all must contribute to the
progress of the project, danglers are not allowed.

Activity Identification
 Short description: example, Lay foundation, erect frame, etc.
 Alphabetic or numeric code: example, A, B, C, etc., or 100, 101, 108 etc.
 Using tail and head event numbers: example, 1-2, 2-3, 3-4, 3-6, etc

Example,
A building project consists of the following activities:
 A = Lay foundation
 B = Erect framework
 C = install millwork
 D = install wiring
 E = install plumbing
 F = plaster walls
 G = install siding
 H = decorate the interior
 I = finish the exterior
The interrelationship among these activities is as follows:
1. A should precede B
2. B should precede C, D, E, F, and G
3. C, D, E and F should precede H
4. G should precede I

19
Given the above interrelationship the network diagram for the project is:
A Network Diagram
4

H
1 A 2 3 7 9
B D
E
F 5

G 6
I

Network Exercise 1:

Activity Preceding Activity

A -
B _
C A
D A
E A
F C
G C
H C
J B, D
K F, J
L E, H, G, K
M E, H
N L, M

Answer:
3 M
E 7
8
A 1 H
L N
0 C
4 G 6
D
B F
2
J 5 K

20
Time analysis:
Time can be estimated in two ways:
 Single time estimates for each activity: this can be based on the judgment of
individual responsible or by technical calculations using data from similar
projects.
 Multiple time estimates for each activity: three time estimates are made for
each activity. They are Optimistic (O), most likely (ML) and pessimistic
(P). These three estimates are combined to give an expected time as
follows:
O  4ML  P
ExpectedTime
6
For example if O is 6 days, ML is 10 days and P is 15 days then the
expected time is calculated as follows.
6  4 * 10  15
ExpectedTime  10.17days
6
Used of time estimates: estimating the probability of completing the project by a
scheduled date using the multiple estimates.
Time units: all time estimates should be in the same units.

The Critical Path Method (CPM)

The Critical path of a network gives the shortest time in which the whole project
can be completed; it is the chain of activities with the longest duration times. There
may be two critical paths and the critical path can pass through a dummy.
Earliest start time (EST): the earliest possible time at which a succeeding activity
start. Calculating the EST is called the forward pass.
 Start from event 0 and add the duration to get the earliest start time of the
subsequent activity
 Where two activities arrive at an event, the largest route must be taken.
 The EST of the exit event is the shortest time to finish a project.
Latest start times (LST): is the latest possible time at which a preceding activity
can finish without increasing the project duration. Notes on calculating LST
(termed the backward pass)
 Start at the finish (exit) event and insert the LST (the total project duration)
and work backward through the network deducting each activity duration
from the previously calculated LST.
 The lowest number is taken as LST if the tails of two activities share the same
event.
The Critical path is determined by selecting the chain of activities where their
ESTs are equal to their LSTs. The other activities with differences in their ESTs
and LSTs are non-critical activities.

21
 2

3 3
B D
2 4

0 1 3 4 5
A C E F
0 0 1 1 1 3 4 6 1 7 7 2 9 9

The Critical paths of this project are A, B, D and F. the total duration of this project
is 9 days. The non-critical paths are C and E.
Float: Float or spare time is associated with non- critical activities. There are three
types of floats: total floats, free float and independent float.
 Total float is the amount of time a path of activities could be delayed with out
affecting the overall project durations.
Total Float = Latest finish time – Earliest Start time – Activity duration
For example total float for activity C and E is 7-1-4 = 2 days.
 Free float is the amount of time an activity can be delayed without affecting
the commencement of a subsequent activity at its earliest start time, but may
affect float of a previous activity.
Free float = Earliest finish time- earliest start time – activity duration
For example free float for activity E is 7-4-1 = 2 days
 Independent Float is the amount of time an activity can be delayed when all
preceding activities are completed as late as possible and all succeeding
activities completed as early as possible. Independent float therefore does not
affect the float of either preceding or subsequent activities.
Independent float=earliest finish time-latest start time-activity duration
Example, Independent float for activity E is 7-6-1 = 0 days.
Activit Duration E S L S E F L F T F I F
y T T T T F F
A 1 0 0 1 1 - - -
B 2 1 1 3 3 - - -
C 3 1 1 4 6 2 - -
D 4 3 3 7 7 - - -
E 1 4 6 7 7 2 2 -
F 2 7 7 9 9 - - -

22
Multiple time analysis

1
3

C
A D F
0.5,1,1.5
2,3.5,4 5.6,7,15 3,4.5,5.
4
0 2 4
E
B
5,6,8
4,5,6

Activity Expected duration

O  4ml  p
ED
6
A 3.33
B 5.00
C 1.00
D 8.10
E 6.17
F 4.40

The critical path B, D and F. Project duration = 5+8.1+4.4 = 17.5

To calculate the probability that the project can be completed within 19 days:
1. Calculate the SD of each activity on the critical path using the formula:
PessimisticTime OptimisticTime
6
64
a. Activity B =  0.33
6
15  5.6
b. Activity D = 1.57
6
5. 4  3
c. Activity F = 0.4
6
2. Find the combined standard deviation of all activities on the critical path.
0.33 2  1.57 2  0.4 2 1.65weeks
3. Find the number of standard deviations that the scheduled date is away from the
expected duration.
19  17.5
 0.91
1.65
4. Look up this value in a table of areas under the normal curve to find the
probability. In this case the probability of achieving the scheduled date of week
19 is 82%.

23
Exercise 2
Activity Preceding Activity durations (Weeks)
Activity
A - 9
B _ 3
C A 8
D A 2
E A 3
F C 2
G C 6
H C 1
J B, D 4
K F, J 1
L E, H, G, K 2
M E, H 3
N L, M 4

Required: Find the critical path and the duration for this project.

Cost scheduling
Cost analysis objective:
 To calculate the cost of various project durations
 To find the cheapest way of reducing the overall duration
Penalties and bonuses: a common feature of many projects a penalty clause for
delayed completion and/or a bonus for earlier completion.

Costs and networks- basic definitions

Project cost comprises direct costs and indirect project costs. As we shorten project
duration, direct costs increase whereas indirect costs decrease. Therefore, there is
optimal project duration where the total project cost becomes the minimum.

Project direct cost- time relationship

The following are the definitions and explanation of terminologies used in the
direct cost-project time relationship.
a) Normal cost: The costs associated with a normal time estimate for an
activity. Often the normal time estimate is set at the point where resources
(men, machines, etc) are used in a most efficient way.
b) Crash cost: they are caused by extra wages, overtime premiums and extra
facility costs. They are associated with minimum possible time for an
activity.
c) Crash time: the minimum possible time that an activity is planned to take.
Applying extra resources usually brings this about.
d) Cost slope: this is the average cost of shortening an activity by one time
unit.
CrashCost NormalCost
CostSlope 
NormalTime  CrashTime

24
 e) Least cost scheduling or crashing: The process by which we can find the
least cost method of reducing the overall duration of a project.
Example: Given the information below, find the maximum length of the
schedule and the minimum cost schedule when the indirect cost is Birr70 per
day.

Preceding Time Cost

Activit y Slope
Activity Normal Crash Normal Crash
A - 4 2 150 350 100
B - 8 6 100 200 50
C A 2 1 50 90 40
D B 10 5 100 400 60
E B 5 1 100 200 25
F C, E 3 1 80 100 10
Total Direct Cost 580

Solution:
Step one: Draw the network and determine the critical path.
2
4 13
A (4) C (2)
4
F(3)
0 5
13 15
18 18
0 0 E (5)
B (8) 1 D (10)
8 8

Step 1: The first is to determine the normal costs and normal durations of the
project.
 The critical paths are B and D
 Normal project duration is 18 days
 Direct Cost = Birr580
 indirect cost = 70X18= 1260
 Total project cost = Birr1840
Step 2 Reduce the least cost slope Critical Activity B by two days (NB: you have to
identify the new critical paths in each of the following steps).
 The critical paths B and D (Not changed)
 Project duration 16 days
 Direct cost = normal cost + crush cost = 580+100 = 680
 Indirect Cost = 70X16 = 1120
 Total project cost = 1120 + 680 = 1800
Step 3: Since we have fully used the crash time for B, now crash critical activity D
by two days (NB we cant crash activity D by more than two days because
the two days crash on activity D has made activities E and F critical paths)

25
  Two Critical paths. The first is B and D; and the second is B, E and F.
 Project duration 14 days
 Direct cost = Cost of step 2 + crash cost = 680+(60*2=120) = 800
 Indirect Cost = 70X14 = 980
 Total project cost = 980 + 800 = 1780
Step 4: Three crashing days remain from activity D. We select one either E or F
with the least cost slope to crash it together with activity D. Therefore, we
can crash two days of activity D and only two days of Activity F. (NB:
whenever you crash, check if the non-critical activities become critical
activities).
 Two Critical paths. The first is B and D; and the second is B, E and F.
 Project duration is 12 days
 Direct cost = Cost of step 3 + crash cost (crash cost of D + Crash cost of
F) = 800 + (60+10)*2 days = 940
 Indirect Cost = 70X12 = 840
 Total project cost = 940 + 840 = 1780
Step 5: We can further crash by one more day activity D but not activity F (Activity
F is fully crashed). Activity D can be crashed together with activity E and
gives the following result.
 Two Critical paths. The first is B and D; and the second is B, E and F.
 Project duration is 11 days
 Direct cost = Cost of step 4 + crash cost (crash cost of D + Crash cost of
E) = 940 + (60+25)*1 days = Birr1025
 Indirect Cost = 70X11 = 770
 Total project cost = 1025+ 770 = 1795.

Conclusion: The student should note that the total project cost starts to increase at
step 5 when compared to step 4. Then the optimal solution for this project is the
values of step 6 as follows.
Project duration = 12 days; Total project cost = 1780

Exercise:
Given the following table of information, find the maximum length of the
schedule and the minimum cost schedule when the indirect cost is Birr120 per
day.

26
 Preceding Time Cost
Activit y Slope
Activity Normal Crash Normal Crash
A - 4 3 360 420 60
B - 8 5 300 510 70
C A 5 3 170 270 50
D A 9 7 220 300 40
E B, C 5 3 200 360 80
1250

5. Project Implementation and Monitoring

Project implementation refers to the execution of all tasks that are necessary to make the
project operational. The duration of the implementation phase stretches from the decision
to invest in a project to the commencement of operations. The project implementation
stage brings the project from the feasibility study stage to the execution stage.

The implementation planning of the project is part of the feasibility study. The
responsibility for implementing the project is usually entrusted with an implementation
team. The team comprises of a number of experts in various fields such as finance,
technology, law and engineering, etc.

Once the decision for implementing the project is taken, it is necessary that the
preparation for starting the project is made. The preparation includes obtaining
government approvals, fulfilling legal processes, collecting and planning finance,
construction and installation, supply of materials, making the organizational set up,
acquisition of land and technology and so on.

Pre-requisites for successful project implementation

Time and cost over- runs are very common in a number of projects, especially in
developing countries. In addition to such run-over’s, many government projects fail in
attaining their goals. Some of these social projects do not reach its completion stage.
Luck of fund and other necessary facilities force the projects to stop their operations after
a certain period of commencement. What can be done to minimize time and cost over
runs and to prevent the projects from their premature death thereby improve the prospects
of successful completion of projects? While a lot of things can be done to achieve this
goal, the most important ones appear to be the following:
 Adequate formation
 sound project organization
 proper implementation planning
 timely available of funds
 judicious equipment tendering and procurement
 efficient contract management
 effective monitoring
Project monitoring
A well designed project does not guarantee its successful implementation unless
complemented by sound monitoring and evaluation. Monitoring is an internal activity of
project management, the purpose of which is to determine whether project activities have

27
been implemented as planned. It seeks to oversee whether resources are being mobilized
as intended and products are being delivered on schedule. It involves the provision of
regular feedback on the progress of project implementation and the problems faced
during implementation. Monitoring consists of operational and administrative activities
that track resource acquisition and allocation, delivery of services and cost records. It
helps to pinpoint problems requiring corrective and timely action and it is also important
in the context of coping with uncertainty in implementation.

There are two types of monitoring: namely performance monitoring and process
monitoring. The purpose of performance monitoring is to assess the extent to which
project inputs are being used in accordance with the approved budget and timetable and
whether the intended outputs are being produced in a timely and cost effective manner. It
may also assess whether project benefits are reaching the intended target group. It is
intended to improve project supervision, and it is essential that management receive
constant feedback on key indicators of project performance so that problems can be
detected and corrections made.

There are a number of techniques that help us undertake performance monitoring of a

given project. The main ones include:
 Project breakdown structure
 Bar charts (Gantt charts)
 Network techniques (PERT and CPM)

6. Project Control
Project control is the process of collecting information related to the performance of the
system, comparing it with the desired level of performance and taking corrective action to
decrease the gap between the actual and the desired performance levels. Control is aimed
at managing the deviations in cost, time and performance of a project. The basic purpose
of control is to regulate and control the firm's core assets such as physical, financial and
human resources. A control system should be cost effective. Since it is closely related
with the behavior of the humans involved in the project it should be designed in such a
way that it balances the degree of control exercised and the risks involved. The reasons
for measuring duration and cost deviations are to identify deviations from the curve early,
dampen oscillation, facilitate early corrective action, and estimate weekly schedule
variance and to determine weekly effort variance. There are three types of control
processes, cybernetic controls, go/no-go controls and post controls.

The most important reason for deviations from the budget is scope creep. One factor that
causes scope creep is the absence of a detailed definition of scope. Repeated attempts by
the project team and the client to improve the product/service is another. Depending on
the degree of detail and the frequency of reporting, project status reports can be classified
into five categories. They are current period reports, cumulative reports, exception
reports, stoplight reports and variance reports. A project undergoes the different kinds of
reviews during its life-cycle. They are Status reviews that review the status of cost,
performance, schedule and scope of the project, A design review that reviews the design

28
of a product or service to ensure that it meets client requirements and a process review
that reviews the processes and checks for the possibility of any improvements.

Therefore, the project manager mainly focuses on controlling three categories of a project
during implementation.

Cost control: Cost is the simplest measurable component in a project. Cost components
are plants and assets, labor, material, overhead costs, interest paid for borrowed money,
inflation, contingency, insurance, salaries paid to project management staff and experts
and other coverage’s. During implementation project cost information is collected,
classified and summarized by the project accounting section if the project is large enough
to have its accounting section or by the accounting section of the main organization if it is
small size.

Performance Control: Performance includes the amount of human effort expended in

accomplishing a project. The involvement of the human element makes difficult to
control the performance of the project easily. Therefore, the project manager should have
the communication skill essential to lead, coordinate, and motivate project staffs so that
staffs can exert their maximum effort for the success of the project.

Time control: Time has only one direction. It is moving in to the future. The project
manager doesn’t have the power to control the passage of time. The project manager
can’t recover lost time. However, an effective project manager pays much attention on
how he can wisely manage his time. As regards to projects, we use durations to measure
the time between the starting and completion of a project. The project manager can
control the duration of a project using schedule of activities prepared using PERT
(Program Evaluation and Review Technique), CPM (Critical Path monitor Method) and
Gant chart diagrams. PERT and CPM contain the duration estimate of each activity.
These techniques help project managers to pay more managerial attention to the critical
activities of the project than to the non-critical activities. The actual duration taken by
each activity is measured and compared to the estimated duration. If the deviation is too
large, it may dictate re-planning the activities. Re-planning here should be understood as
continuity to the original plans but not to substitute them. The original plans are the
baseline for comparison and they should remain at least in the document so as not to lose
the track of controlling the project.

The steps of Project controlling

Traditionally, the phrase project control has been used to mean project implementation
planning and control. Thus, the above sequences of activities of planning and controlling
can be summarized using the following steps of control.

1. Setting standards: standards are set based on cost, schedule, and performances. In
any project control system, the objective would be to bring perfect correlation of the
costs incurred, time utilized, and performance attained with that of the estimates of
costs, durations and performance. There are different standards such as schedule
standards, technical performance standards, standard costs, budgets, etc. Setting

29
 standards help us to identify the indicators that enable us to monitor the progress of
the project.

2. Monitoring progress: Monitoring is the measurement through time that indicates the
movement toward the objective or away from it. It has the objective of creating data,
which are to be compared to an explicit standard. There are different techniques of
monitoring the progress of a project towards its objective. For example, the work
value method is useful to measure the relationship of performance achieved with the
budget used. We don’t discuss work value method in this section.

3. Evaluating progress: Evaluation is putting the monitored data to use and thus giving
them value. Evaluation is the process of comparing the actual cost, time and
performance information with the estimated cost, time and performance set during the
first step of controlling. By doing so, we determine the deviations or the gap between
the actual and the estimate. Evaluation is where the learning occurs, questions
answered, recommendations made, and improvements suggested. However it is
important to note that evaluation doesn’t have any foundation without monitoring.

This is because monitoring creates the raw data that is useful for evaluation. Without
monitoring, evaluation remains the domain of speculation.

4. Taking actions: based on the results of the evaluation, there are three options of
decisions. If there are no or little deviations between the standards and the actual,
then the decision is to maintain the existing performance. If the standard is
significantly less than the actual, then the decision can be to modify the standards. If
the standard is significantly higher than the actual then the decision may be to
increase momentum or to modify the standard if the standard is believed unattainable.

7. Project Auditing and Closing

Project Auditing
Project auditing can be defined as the process of detailed inspection of the management
of a project, its methodology, its techniques, its procedures, its documents, its properties,
its budgets, its expenses and its level of completion. A project audit is designed to
eliminate many of the common errors that can mar a project plan and jeopardize its
ultimate prospects for success.
A project audit is a key step in the process of closing a project. This audit evaluates the
total project processes and outcomes. In this chapter we discussed the purpose of
evaluation and the various measurement parameters used in a project audit. We also
discussed the life-cycle of a project audit.
The life cycle of an audit contains six phases: audit initiation, project baseline definition,
establishing a database, preliminary project analysis, preparing final report and
terminating the project.

Auditing the project involves some of the following steps:

 Checking on the project definition
 Questioning duration estimate

30
  Validating costing
 Examining risk assessment and response strategies
 Ensuring that the sequence is correct
 Probing for redundancies
 Challenging date constraints
 Highlighting critical tasks
 Searching for overloads
 Resolving over-commitments
 Looking for gaps in reporting

An audit report discusses the present status of the project, the expected future status,
status of the critical tasks, risk analysis, information related to other projects and
limitations of the report. To be effective, accurate, credible and acceptable to top
management, project team and the client, an audit has to be carried out by a competent
audit team that has access to all the records and files of the project.

Project Closing
In this section, we discussed the need for project closing and the ways in which a
successful or an unsuccessful project can be terminated. We focused on situations, under
which a project can be closed, the process of closing and preparing a final project report.
A successful project can be closed either by extinction or by addition or by integration;
whereas an unsuccessful project can be terminated by starvation. A project can be said to
be closed successfully only when it has a proper final report in place. A final report
contains all the knowledge gained from the processes of the project. Project final report
along with the project records is the best source to gain experience from previous projects
and improve the way future projects are handled.

A final project report contains a section on performance of the project wherein the
delivered output is compared with the planned output, a section on the performance or the
administration of the project, a section on the organizational structure adopted and its
implications on the performance of the project and finally a section on the confidential
information to be reported to the top management and the recommendations of the
project manager on ways of improving the processes.

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