Project Management Notes

Project Management
UNIT-1 Concept of Project
1.1 Concept of Project
1.2 Types/ Categories of Projects:
1.3 Project Family Tree:
1.4 Characteristics of Project:
1.5 Project Life Cycle
1.6 Project Life Cycle Curve-An Analysis
UNIT-2 Project Life Cycle (Cont)
2.1 Detailed Project Report
2.2 Issues in Termination of Project-When & who, Termination Process
2.3 Project Final Report-Prepration of Final Report
2.4 Work Breakdown Structure-Origin, Concept, types, how to create
2.5 Concept of Earned Value Analysis (EVM) and calculation
2.6 Approaches to Project Management (Framework for Project Management)
UNIT-3: Selection of Projects & Its Analysis
3.1 Scouting for Project Ideas (Discussed)
3.2 Selection of Projects:
3.3 Numeric & Non Numeric Models for Project Selection
3.4 Concept of Uniform Annual Equivalent (UAE)
3.5 Technical Analysis:
3.6 Market Analysis: (self study)
Unit-4: Management of Infrastructure Projects
4.1 Financing Infrastructure Projects-Infrastructure Finance
4.2 Project Configuration & Role of a SPV

4.3 Project Parties & Their Role
4.4 Financing A Power Project
4.5 Managing Risks in Infrastructure Projects &Typical Risk Allocation In India
4.6 PPP Projects (& Cases discussed in class)
Unit-5 Risk Assessment, Contract Management & People Management in Projects
5.1 Risk Management
5.2 Concept of Risk Breakdown Structure & Risk Impact Matrix
5.3 Risk Management in Construction Industry
5.4 Contract Management
5.5 Managing Project Team (Strategies to Build a Cohesive Project Team
& Create Team Charter)
5.6 Qualities of a Project Manager

UNIT-1 Concept of Project
1.2 Concept of Project
1.2 Types/ Categories of Projects:
1.6 Project Life Cycle Curve-An Analysis
1.1 Concept of Project:
Change in the order of the day. In a business set up, for growth or sometimes even for survival or
for the continued running operations, some changes take place. The organization needs to install
equipment, or replace an old machine, or setup a factory, or construct an office building. These
are all instances of projects undertaken by the organization. Every organization big or small, in
service or in manufacturing sector, at some point of the time undertakes some project or the
other. A school organizing its Annual Day, in simple terms, is undertaking a project; or
organizing a seminar by Management Department is also an instance of a project.
Project can be defined as a temporary endeavor undertaken by the organization to create a

unique product or service. It can also be defined as “the planning, organizing, directing and
controlling of the company resources for a relativity short-term objective that has been
established to complete specific goals and objectives.”
According to Project Management Institute (PMI), project can be defined as a one shot, time
limited, goal directed, major undertaking, requiring the commitment of varied skills and
resources. It is also defined as a combination of human and non- human resources pooled
together in a temporary organization to achieve a specific purpose.
On the basis this definition, a project, starts with the achievement of some objective, has a start
and end date, and requires various kind of resources like men, material, machine and money. It is
of temporary nature as with completion of project, the organization also integrates.Organizing
conference by a management department is an instance of project. It begins with the objective of
knowledge sharing and dissemination, has defined dates (eg. 3 rd to 5th of February, 2008), the
various paper presenters are the constituents of the project, the paper presenters and the
organizing secretary and its team members involved in organizing the conference are resources
of the project, the technical sessions are inter-related, and the inauguration and valedictory
sessions mark the start and the end of the project. It is temporary in nature as with end of the
conference all members go back to respective department and carry on with usual work.
For launch of Nano, GirishWagh, the Vice President of Tata Motors was the Project Director.
According to Harold Karzner, Project have specific objectives, have definite start and end, have
funding limits, and consume resources.
Project starts with a generation of idea, has definite objective, and completes when the objectives
are fulfilled. It starts with a definite mission, generates activities involving a variety of human
and non-human resources all directed towards the fulfilment of the mission and stops once the
mission is fulfilled. The purpose and the set of objectives which can achieve that purpose
distinguish one project from other.
A project should be technically feasible, commercially viable, politically suitable and socially
acceptable. The technology required to execute the project should be available in the country, or
one should be able to import it. This is technically feasibility. Further it should not be too costly
for the project party to install – this defines economic feasibility. Project should also be
politically suitable. The Sagarwala Project (development of ports) or the recent Swatch Bharat
Abhivigyan project (initiated by the Modigovt) was initiated by one government. After change in
political power, the present government may or may not be support it; if it does not support, it is
found to be politically unsuitable. Another instance is of project politically suitable is the
Singur(WB) project which faced much resistance and had to be shifted to Sanand in
Gujarat.Projects should be commercially viable. Example is of Concorde Project wherein two
governments France and Britain pooled in resources to create the Concorde. It was technically
feasible but commercially not viable. Project should also be socially acceptable. When a factory
is set up in rural area, fumes and smoke emanates to create pollution. Further there would also be
noise and sound pollution. This is negative social impact of the project. Some benefits also
accrue on setting up on the factory; they could be employment generation of unemployed rural
poor or connectivity of the rural area with nearby town. This is the positive social impact.
Therefore project should also be is socially acceptable.
Further, project should be undertaken with care. Project decisions are of great importance
because of three major reasons:
 Long Term Effect: Consequences of projectdecisions (good or bad) extend far in the
future. Automating a bank would accrue benefits to the organization for a considerable
period of time. Therefore careful thought and analysis have to be undertaken before
committing resources.
 Irreversibility: These decisions are irreversible decisions. If a bank has automated its
operations, and for some reason the computer mal functions or the speed of processing is
not as fast as desired, then it would be too costly to do away with the project.Nano plant
at Singur, is a decision which was not sustainable; as a result Tata Motors made huge
losses because 80% of construction of plant was complete and they had to abandon the
work. Project decisions are irreversible decisions and therefore they should be taken with
care.
 Substantial Outlay: Projects generally involve huge sums of money. Therefore such
decisions require an in-depth analysis before selection and final commitment of funds.
1.2 Types/Categories of Projects:
There are various ways in which a project can be classified.
(A) They may be grouped into two broad categories as national and international projects.
National projects refer to the projects undertaken by the government like the Golden
Quadrilateral. These projects may be industrial or agricultural in nature (that is agro-
based projects). International projects are those that are undertaken by international
bodies like the UNO.
(B) Depending upon the size, project may also be classified as-mega, major, medium and
mini project.
Mega: more or equal to $ 1 billion, more than three years time span, has economic, social and
ecological implications, defence and space projects are examples of such projects.
Major: more or equal to $ 100 million, more than two years time span, many contractors and
consultants involved, airport construction is an example.
Medium: more or equal to $10 million, spans a period of 1-3 years time, industrial or public
work (road construction) are examples of such projects.
Mini: less than $ 10 million, less than 1 year, example are housing or building projects.
(C) Projects may further be classified as Greenfield or Brownfield projects; Greenfield

Projects or Grassroot Project: Grassroot projects start from scratch. In such projects, a
work is not following a prior work. In case of infrastructure projects, the project is set up
on an unused land. In software development, writing a progam for a new business
application are examples of such projects.
A Greenfield site investment would mean when a parent company (say Ford) chooses to
begin operations in a foreign country (say India) and establishes the construction of a new
production facility from scratch including all necessary offices, administrative blocks,
residential apartments for workers the storage and distribution hub, etc.
They are totally new like setting up totally new factory. Singur plant in West Bengal or
Sanand in Gujarat, to be set up by Tatas, is an instance of green field project. A foreign
company, example Ford setting up a plant in India. This would mean acquire land, set up
the plant, lay down electrification lines, lay down connectivity to ports, or nearby main
city and so on. Reliance industries setting up of the refinery at Jamnagar is an instance of
grassroot project. Reliance industries, India’s largest private sector company, have
committed to setup a refinery complex in Kakinada in Andhra Pradesh. The proposed
refinery is expected to bigger in terms of investment than the company’s existing refinery
in Jamnagar (Gujarat). This would be the world’s largest grassroot refinery. Reliance has
promised a scenario bigger than Jamnagar. The Jamnagar refinery project cost was $3.4
billion. This refinery accounts for close to quarter of India’s refining capacity and is one
of the most complex refineries in the world. Also it is the third largest refinery in the
world.
Brownfield Projects: In such projects work is following a prior work This refers to an
expansion or any change being brought about in an existing project. Therefore it involves
demolishing, renovation, upgradation or modernisation of something already existing. It may
be shifting of the existing plant from one place to another. Godrej plans to foray into food
retailing. It may do so through the acquisition route. This is an instance of Brownfield project
as it would acquire an existing set up. Brownfield projects in software development, means to
start a project based on prior work or to re-build (re-engineer) a product from an existing one.
(D) Depending upon the nature of work executed, they may also be classified as replacement
and modernization, integration, diversification or divestment projects.
Modernization-Sails modernization plan
Integration-Vertically integrated projects. Forward integration is a move towards the
market or customer. From oil exploration, to oil refining to distribution is an instance of
forward integration.
Backward integration is a move towards the source of supply- From food retail to
manufacturingis an instance of backward integration.
Diversification- A move into dis-related area of business. For example ITC moved from
manufacturing of cigarettes, to paper to hotel is an instance of diversification.
Divestment projects-where we scale down the business or totally close the business.
(E) According to its speed of impletion, projects may be classified as normal, crash on
disaster projects:
Normal Projects: In these projects, everything goes as desired. That is the project is
completed on time and also with the laid budget. This means that adequate time is provided
for completion of the project and all phase are completed on time. Generally there is no
increase in cost or spillage in time; also the quality is as desired.
Crash projects: In such cases, the focus is to be complete the project in lesser time span than
budgeted. Therefore maximum overlap of phase takes place. There is often an increase in
cost as well as a compromise in quality of project. Example-when you want to lauch a new
product and you come to know that your competitor is also prepared to launch a similar
product, you try to “crash” the time inorder to deliver earlier in the market (before your
competitor.
Disaster Projects: Disaster projects are those where the environmental factors interfere in
smooth completion of projects and nothing much can be done to save the project from
abandonment. Therefore there is only one option-save the project in any way else abandon
the project. Therefore anything needed to gain time is allowed. It is said that any vendor who
can supply yesterday is selected irrespective of cost. There is often a compromise on quality.
Any quality is accepted to gain time and avoid failure. Work is undertaken round the clock.
Therefore, capital cost increases and time is hereby reduced. The Gujarat earthquake or
Orissa flood of late 90’sand early 2000 which disrupted the normal continuity of all projects
in these areas, are instances of crash projects.
Refer to the chart below. It depicts the impact of these projects on cost, time and quality of
the project.
COST TIME QUALITY
Normal
Crash
or
Disaster
A project does not exist in isolation. It is a part or off-shoot of a family which is called
project family tree. A project originates from a higher level activity called a plan. Therefore,
it starts from a plan-a corporate plan for an organization or a national level plan of the
government. The following diagram depicts the project family tree.
PLAN
PROGRAMME
PROJECT
WORK PAKAGE
TASK
ACTIVITY
Plan: This refers to national plan undertaken by the government or a corporate plan undertaken
by a business house. The objectives are broad and not well defined. The objectives are kept
broad to enable a company to move in any direction or tap on any existing business opportunity.
For instance, the government lays down a national plan of upliftment of society. The objective is
kept very broad. A plan answers what of actions.
Programme: This further refines plan laid above. This answers how of actions. At this stage, the
objective defined is refined in terms of how to achieve them. Upliftment of society can be
brought about by a health programme, education programme, science and technology
programme, poverty eradication programme, to name a few. This is different from project as the
scope or boundary is not specified yet and time is also not defined.
Project: A project has well defined objectives. It has a defined start and end date. For instance,
education programme could be achieved either through adult literacy programme or through free
education for every child programme. Similarly, health programme could be through a water and
sanitation scheme or through immunization scheme or free eye operation. These are all instances
of project. Each project has to be converted with in a time frame.
Work Package: This stage decide upon resources (man power and material resources). For
instance an immunization scheme involves identification of material (medicines), equipment
(surgical or others), and manpower (doctors, technicians and nurses) resources too. A work
package is not a project; several work packages make up a project.
Task: This stage defines the responsibility centres; that is, who will do what. Who will hire the
men, purchase (or take on lease) the equipments, who will secure permission from the
government (or local authority where the camp would be set up for free eye operation or
immunization) to name a few.
Activity: This refers to actual implementation of the project. This lays down the activities to be
undertaken and the actual sequence of actions in which they are to be undertaken. For example,
foundation of dispensary, setting up of camps for the free eye operation is the sequence of action
for eye-operation camp.
Another Example: Project Family Tree for “Nano”.
Plan: A plan could be growth or an increase in market share.For a corporate house, project
family tree could be depicted thus.
Programme: This is converted into a programme where they target the bottom of the pyramid
through a new product launch or by entering new geographical territories.
Project: Nano project is an instance of project.
Work Package: Identification of location, resources requirement etc.
Task: Creating responsibilities centers for undertaking each task.
Activity: This refers to setting up the plant at Singur for production of Nano cars.
Family Tree for Initiative of ITC:
Plan: Social Sector Footprint
Programme:Social Farm &Forestry or
Social Moisture Conservation or
Economic Empowerment of Women: Self Help Group orWomen Entrepreneurship, etc
*Saving Land Degradation (and preserving natural resources): Solid Waste Management
Project: WOW initiative (Wealth Out Of Waste) recycle paper
Work Package: Resources needed.
Men who would be engaged in collection of paper.
Bags to be distributed for segregating waste.
Area (residential as well as commercial) to be covered in Hyderabad.
Transport vehicle to take waste collected to segregation center, etc.
Task: Identify who will do what-procuring bags, distributing them …
Activity:Schedule the activities identified
That is identify the area where WOW is to be implemented, identify people who would cover
each area, they would distribute bags, they would collect the segregated wastes, where would
they deposit the wastes, and so on.

The following details the characteristics of project:
1. Objectives: Each project has a fixed objective. It starts from the definition of objectives.
It is define in concrete terms. Once the objective has been achieved, the project stops
existing. Projects are expressed in terms of cost, time and quality (TCQ) parameters. For
constructing an office building, the budgeted cost and time involved is laid down and the
objectives are achieved once the building is set up. For instance, for a flyover the
objective is to reduce traffic congestion by distributing traffic and reducing commuting
time. For organizing a conference, knowledge sharing is the basic objective.
2. Uniqueness: Each project is unique in itself that is each project is different from other. No
two projects are similar. They are different in terms of cost, time and performance
criteria. Even if the cost, time and quality standards are the same, they would be different
in terms of location, people involved, agency or contractors involved, infrastructure,
people or skill required.
3. Single Entity: Every project is a single entity under one responsibility centre. The costs
and profits of each responsibility center are determined separately. Therefore an
organization can undertake many projects at the same time and the costs and profits for
each are arrived separately. A Management Department can have many projects like
starting a new course, organizing a conference, or creating a new building. These are all
separate projects and single entity in themselves.
4. Team Work: Every project needs team work for its successful implementation. It requires
contribution from various departments or disciplines. For instance, referring to the same
example of construction of an office building, people from finance department would be
required to make an estimate of financial requirement, for civil engineering department
for making the design and an accountant would be needed for book-keeping and a
metallurgical engineer would provide an estimate of the metal frame and beam
requirement, an electrical engineer would provide estimate of the cable layout. Therefore
only through effective team work can a project become achievable.
5. Life Cycle: All human beings have a life cycle. They come to being (birth), pass through
adolescence, adulthood, grow old and die. Products also have life cycle. They go through
the stages of introduction, growth, maturity and decline. Project start through
conceptualization, planning and organizing, implementation and termination.
6. Life Span: Projects exist for the period of time. Projects have a start and end date be it 3
months or 7 years. It cannot continue endlessly. It generally starts with setting of
objectives and ends once the objectives have been achieved. For CII holding a conference
is may be of three days while a construction of road network may run over years.
7. Successive Principle: At the beginning of project life cycle, one cannot predict the entire
project processes. Nor can one predict the end. At the very beginning of the project, the
impediment, the hurdles or constraints one will face once the project starts cannot be
visualized. One cannot predict how a project would progress. As and when the project
progresses, things get clearer. For instance, once constructional activity has started, prices
of cement may shoot up. The organization may decide to halt production for a period of
time. If you halt production, what do you do about equipment which you have hired for a
week, ordered for material which is to arrive in a day, and how do handle labour which is
reporting daily. If the work is halted what would be done with the equipment (crane for
instance) which has been hired for a period of one month. How would labour be handled
when no production is taking place are all issues which would arise would need to be
looked into. Therefore as the project progresses details get clearer gradually. This is
called tip-of-ice-berg syndrome. (That is only a fraction -1/8 of it is above the surface-
that is 90% approx under water, and only when one gets closer and on impact, does one
get to know the magnanimity of the ice-berg).
8. Risk of Uncertainty: Every project has an element of uncertainty associated with it. The
more ill defined (unplanned) the projects are, the greater would be the element of
uncertainty involved. Risks are of three kinds-schedule risk, cost risk and also
performance risk. Cost risk result in cost overrun and one uses Work Breakdown
Structure to manage this risk. Schedule risk refers to risk of time overruns taking place
and PERT, CPM, and Gantt Charts and also more recently Monte Carlo techniques are
used to mange this risk. Managing performance risk is most difficult; because methods
used to manage cost and schedule risk remains the same across all industry but they vary
in case of performance risk. Quantifying relationship between different aspects of
performance can be difficult. Therefore to reduce the element of uncertainty, project
should be undertaken after detailed study and analysis.
9. Made-to-Order: Projects are made to order. Each customer defines his requirements.
They are made as per requirements of the customers. The customers also put constrains
with in which projects must be executed. Constraints are in the form of cost and time. For
constructing an office building, how many rooms would be required or how many store
would be required is determined by the users.
10. Sub-contracting: A large percentage of work is done through contractors. The more the
complexities involved in the project, the more the need for sub contracting. Also if the
organization lacks expertise, much of the work would be given to sub contractors.
11. Unity in Diversity: Projects use a mix of many diverse elements –a variety of skills,
people, technology, equipment, machine, and material. All of these are integrated to
achieve the objective of the project.
12. Scope Changes: Many changes occur when the project starts. This is called scope creep.
For instance, a project was to construct a bridge across a river. Once construction activity
has started, one may decide to make it a two way bridge. Further, it was decided to create
pedestrian paths on each side. Further, it was decided to look into electrification and
beatification of the bridge. These are instances of scope creep. This often leads to new
products, new product features in the product; and often emerges when projects are not
completely defined and described in detail; and often not backed by systematic study.
Often therefore it leads to change in overall objective, and often to project overruns.
These refer to intentional changes introduce into a project as the project progresses. This
is different from successive principle, where one had not visualized the changes that
would have come once you moved into implementation face. This is a result of
environmental factors.
13. Long Term decisions: Projects involve long term decision consequences of such
decisions (good or bad) extend far into the future.Automating a bank accrue benefits to
the organization for a considerable period of time.
14. Capital Outlay: Projects generally involve huge sums of money. Therefore such
decisions require an in-depth analysis before selection and final commitment.
15. Irreversibility: Project decisions are irreversible decisions. Every project involves huge
sums of money. Therefore cost of reversing these decisions would be very high.
Therefore careful thought and analysis have to be undertaken before committing
resources.
Human beings have a life cycle. They come to being by birth, pass through the stages of infancy,
adolescence, adulthood and old age and death. Similarly products also have a life cycle starting
with introduction, growth, maturity and decline. Products also have a life cycle. There is no
consensus among the industry as to what constitute project phases or shape of life cycle. Some
define it in term of four, some five; yet some define it in terms of seven phases. This is because
of diverse nature of industry and projects in which they operate.
ENGINEERING
Start-up MANUFACTURING
Definition Formation
Main Build up
Engineering Production
Phase Out
Final Audit
COMPUTER
PROGRAMMING
Conceptual
CONSTRUCTION
Planning
Planning, Data Gathering & Procedure
Definition & Design
Studies & Basic Engineering
Implementation
Major Review
Conversion
Detailed Engineering
Detailed Engineering/ Constructional Overlap
Construction
Most often five phases are used (Refer
chart below). These are conceptualization Testing & Commissioning
phase, definition, planning and
organizing phase, implementation and clean-up phase.
Peak effort
level
Level of effort
Conception* Selection
definition
Pl, Sch, monitor & Control Evaluation &
phase* Termination
Level of Effort
Is in terms of person or hours or resources expended per unit of
time
Number of people working on a project, plotted against time where time

is broken up into several phases of project life.
*Level effort is low and amount of cost is low
Conception Phase:In this phase, the project idea is conceived. It could be conceived by anybody
in the organization- the CEO, an R & D person, or any person in the origination. At this stage a
preliminary evaluation of the idea takes place, in terms of time, cost and performance criteria. In
other words, it is put into black and white, and compared with other competitive project ideas to
test its feasibility or relevance. The idea is examined in the light of objectives and constraints and
what finally becomes acceptable may form the project. For instance, a cement plant’s capacity
may be underutilized or may be consuming more power. This is the problem and solution could
be deploying new technology. Therefore often search for solution of an existing problem
germinates into a project.
Definition Phase: This is basically a refinement of the earlier phase. This develops on the idea
generated during the conception phase. This provides a detail of resources needed along establish
time, cost and performance criteria in realistic terms. For a situation which involves competitive
bidding, the conceptualization phase considers decision between whether to bid or not to bid
(while definition phase develops the complete bid package). This phase clears the ambiguities
and uncertainties associated with conception phase as it produces a document describing the
project in sufficient detail. On the basis of documentation, does a financial institution grant credit
for the project idea. Generally, industry practices make DPR (Detailed Project Report) in such a
way that it readily gets a go signal. Banks lay down strict appraisal procedure for clearance of
projects and on the basis of DPR do projects get cleared.
Planning and Organization Phase: This involves updating of detailed plans conceived and
defined in the earlier phases. This further involves identifying and organizing resources like
material, equipment, labour, etc. This involves organizing and planning for man power,
scheduling of budgets, securing license and government clearance, arranging for finances,
creation of project team and selection of project manager. This phase involves activities for
project to take off smoothly. Therefore at this stage all paper work is over. There is no more
paper work or thinking but organizing or arranging for the needed items.
Implementation Phase: This is a phase which involves hectic activity. The project visibility takes
shape here as some field work start in this phase.If the project involves a new product, then this
phase refers to the product introduction phase. For capital equipment project, it involves its
receipt, placing order for raw material, equipment and machine erection, civil construction,
electrical piping work etc, and trial run and commissioning of the plant in itself. It is observed
that maximum work is done during this phase (Approximately 85% of the work is done here in
this phase). Also this phase involves maximum time. Therefore project managers are keen to
start this phase fast and they often put in efforts to complete it in minimum time span. Therefore
efforts are made to fast track the project by overlapping as many sub-phases are possible. Often
engineering, ordering, receipt, construction, commissioning are the sub-phases that are
overlapped. The amount of fast tracking depends upon who is doing the project. If the design and
construction is by different subcontractors, then the scope of fast tracking would get limited. Else
if design, supply and construction all are as a package with one sub-contractor, fast tracking
would be to the maximum extent possible.
Clean-up Phase: This refers to transition phase during which plant commissioned is handed over
to a different agency (customer) for production. In case of turkey projects, the project is set up by
an agency and handed over for commissioning and operation to the customer. Eg Steel Plant set
up and handed over for production. Eg in a University, the construction of residential
accommodation is undertaken by some builder and on completion is handed over to University
Property (Estate) Department for allotment.
In this stage, the payments are made, dues are cleared and accounts are closed. All the people
associated with the project leave the project organization. They move back to the respective
departments to which they belonged and in most cases, they go in the very way that they had
joined. The design engineers are the first to leave followed by others. However, plan for clean-up
phase must start much before the actual clean up takes place. This is the stage for feedback
where the lessons learnt are noted; like what impact the project had on the image of the
company, technical advancements in the area and the problems faced, if any. These act as
feedback for future projects.
1.6 Project Life Cycle Curve-An Analysis: Most projects go through similar stages from origin
to completion. This is depicted by PLC. Project is born, project team created, project manager
selected, resources assembled, work programme organized, works get underway and momentum
builds up. Project progress is made. The project completion or final stage is time consuming
because number of parts must come together takes time. Therefore it represents slow-rapid-slow
progress. Peak rises and tapers off as projects near completion. This is shown by the S Curve
(Progress curve). It is also called effort curve.
The following table represents the relationship of different stages with cost time and
performance.
Cost (C) Schedule (T) Performance (Q/P)
Formation 1 1 1
Build-up 3 1 2
Main 3 1 1
Phase Out 3 1 1
* 1 indicates high performance
At beginning of project, “p” took precedence over “c ”& “t” during life of project; Cost
important during peak “t” important during “end” as client wants delivery.
Recent review- “t” & ”p” more important than “c” all along
100%
Slow finish
% Project
Completion
Slow Start
Time
In S Curve, percentage of project completion is closely co-related with cost or use of resources.
In J curve, the expenditure of resources has little co relation with progress
Inverse-S
Fast growth Slow down in middle
New technology project have multiple parts, each independent part results in different
incremental benefits.
A company will install that part first which will result in “big bang” for bucks that is which gives
maximum benefits first. Therefore great progress first, slightly less next, and continually
dwindling off as remaining parts installed. This results in “inverse s” curve.
100%
% Project
Completion
J-Curve
J Curve:
 Project is composed of several sub units (sub routines).

 Sub- units have little use in and of themselves.
 Sub-units have great use when put together.
 So from “useless” to “very useful.”
 Transforms output “useless” to “very useful.”
 As the project near completion, continued inputs of time and resources results
successively larger increments of progress increasing marginal returns bounded at 100%
completion
Eg. Manuscript of writing current edition of book:
 Great deal of information is collected.
 Great deal of rewriting.
 Great deal of new material (literature) gathered.
 No visible result is seen until everything is assembled.
 Eg. Computer software project (different application developed by different programmer
and they are integrated to form the total software project)
 Eg. Chemical Engineering Project in which Chemical type reactions occur that
transforms output from useless to useful.
 Eg. From home industry- Goop to cake.
PLC & UNCERTAINITY:
Project
Completion
Time
Fig “a”
Project
Cost
Time
t0 t1 t2
Fig “b”
 Depicts how uncertainty decreases as project moves towards completion

 to: The band of uncertainty grows from beginning to end
 t0-t1-t2: Shows band of uncertainty at the end is small (compare t 1 and t2 of fig “a” and
“b”.
Much
Uncertainty
Task Routine
Little
Concept Def(n) Plann. Execution
Termination
n
Uncertainty
(25-40%) (15-25%) (10-15%) (0-10%)

UNIT-2 Project Life Cycle (Cont)
2.1 Detailed Project Report
2.2 Issues in Termination of Project-When & who, Termination Process
2.3 Project Final Report-Prepration of Final Report
2.4 Work Breakdown Structure-Origin, Concept, types, how to create
2.5 Concept of Earned Value Analysis (EVM) and calculation
2.1 Detailed Project Report (DPR)-what it contains and structure

DPR is a complete document for investment decision making, approval and planning. It is a base
document for planning and implementing the project. It is a document that guides the project
execution and control. It contains a summary of project and project description. It presents a
project profile mentioning the type of project, its objective and purpose, its scope and also its
proposed location. It specifies how the area would benefit by this proposed project. It describes
the project area, district to be covered, location (mentions the latitude and longitude), area,
population, climatic condition, status of development, access to utility services, availability of
infrastructure, etc.
The DPR also mentions the methods of financing proposed. It further also specifies the
equipmentsneeded, the cost of equipment, duties, taxes and excise on them, raw material,
manpower requirements, and their associated costs. Cost benefit analysis is also undertaken
(Payback period method, NPV etc). It also mentions whether clearance has been procured from
local authorities, land is available, forest control clearance obtained, clearance from pollution
control board obtained or not. It also analyses the technological parameters, description of
technology to be used, broad technical specification, evaluation of existing resources, etc. This is
a very important document as appraisal is based on it and banks also grant loans/ financing based
on details of mentioned in the DPR.
The Structure of DPR:
It contains the following details in the manner described below: The first page is the title page.
This contains the name of the project, its affiliation and the date. Then it is followed by these:
The content list
Abbreviations
Executive summary
Introduction and background
Technical Analysis
Financial Analysis
Recommendation
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2.2 ISSUES IN TERMINATION
**When to Terminate, Termination Process, Who Terminates, Prepration of Final Report)

Termination:
We are all mortal beings. Death is the eternal truth. Some death are slow and painful, while
some are fast and quick like a road accident while others are ‘hung’ for years. Projects are also
mortal beings. They also come to an end. Some termination (come to an end) are quick, fast and
clean (which are few), others are slow and prolonged (most often) while others are ‘hung’ that is
exist in name only and no progress is made. It is the skill of a project manager as to how he
manages a project. Termination has an impact on the technical success and failure of projects,
residual attitude after the project is over and one may hold ill feelings or good feeling and it leads
to ‘lessons learnt’ from the project.
For organisations where projects are a recurring feature, the entire project team goes to the next
project. The team remains intact and therefore termination is not stressful. For construction
companies, the entire team takes up a new construction once one project is complete. GMR, for
instance, constructed the Indira Gandhi International Airport (IGIA) in the year 2006 and once
complete they undertook construction of Hyderabad International Airport in 2008. But for
organisations where projects are a non-recurring feature, the entire project team disintegrates and
does not necessarily go to the next project. Members do not know when the next project would
be undertaken and whether they would be part of the new project or not. The team disintegrates
and therefore termination is very stressful. It is akin to a family break-up. It is the skill pf a
project manager as to how he manages the termination- makes it less stressful, terminates with
minimum trouble and administrative dislocation.
A project is said to be terminated when the substance of the project has ceased to exist, when it is
so slow that almost no progress is made, is much delayed, resources get allocated elsewhere and
also project manager and CEO do not see eye to eye.
VARITIES (KINDS) OF TERMINATION:
There are four ways in which projects are terminated. They are
(a) Termination by Extinction: It can be understood by the three cases.
Case-1: Projects are stopped because the objective of the project was achieved. For instance,
a new product was launched or new software was installed and is running successfully.
Case-2: Projects are stopped because the project was unsuccessful. For instance a drug test
failed; it was superseded because a new and cheaper alternative became available or because
it was too costly or took too long.
Case-3: Project was stopped as a result of corporate merger or change in leadership. A

project was terminated because the new leader does not find the project important or
relevant. A change in political leadership may relegate the Swatch Bharat project to be
irrelevant.
In case of termination by extinction, all activity on substance of project ceases to exist. But
much organisation activity needs to be done like release of team member and re-assignment
to other activities. Also property, material and equipment belonging to the project need to be
disbursed according to project contract or in accordance to established procedures of parent
organisation. Finally, the Project Final Report (PFR) needs to be prepared.
(b) Termination by Addition: Such projects are managed in-house. Such projects are carried
by the project team for use in ‘parent organisation’. If successful, it is terminated by
institutionalizing it as a formal part of the organisation. And often a separate SBU
(strategic business unit) is created for such projects. Telco after its ERP implementation
created a separate set up for the skilled IT pool it now had. In a university new courses
and department get created in this manner. In such cases, personnel, property, and
equipment get transferred to the new entity. New staff and budget is also created;
however, the administrative and budgetary practices of the parent organisation prevail.
Also the new entity no more has the political protection that it enjoyed earlier when it
was part of the parent organisation.
(c) Termination by Integration: This is the most common method adopted for dealing with
successful projects. It is also the most complex. All property, material, equipment and
personnel get distributed among the parent organisation. All problems of termination by
additional are also found here. One critical problem is when people get integrated within
the parent organisation, person is seen as an imposter (outsider) and is not welcome in the
parent organisation.
(d) Termination by Starvation: This refers to slow starvation due to budget decrement. This
is a strategy to mask a termination. Here harsh budget cuts are resorted to or there are
many small budget cuts imposed. Also personnel get allocated to other projects so that
ultimately no progress is made. The project exist in name as a legal entity and every year
the secretary issues a ‘no progress’ report.
WHEN TO DETERMINE PROJECT TERMINATION:
The decision to terminate project is a difficult decision particularly with “in house projects. It is
hard to identify and quote reasons standards or mathematical formula on the basis of which one
can say you need to terminate projects.
Buell 1967 put forth a list of questions which may enable one to decide to terminate.These are:
 Goal: Is the project in lines with organization goals?

 Practical: Is it useful /practical?
 Enthusiastic: Is team sufficiently enthusiastic
 Scope: Is scope of project consistent with organizational financial strength.
 Technology: Does it represent a great advancement in technology over the current
(technology) in use.
 Studies: Is it backed by sufficient studies.
 Innovative: Is project team still innovative or gone stale.
 Champion: Has the project lost its current champion, leader or key person.
 Qualified: Is the team qualified to continue the project?
 Skills: Does organization have required skill to achieve full implementation of project.
 Department: Does the project have support of all the departments?
Dean:According to Dean (1968), two most important reasons have been quoted for termination
of projects. They are: Technical and commercial failure. The Concorde project was a technical
success but a commercial failure. It was British-French supersonic jet .**
(**It had a maximum speed over twice the speed of sound at Mach 2.04 (1,354 mph or
2,180 km/h at cruise altitude), with seating for 92 to 128 passengers. It was jointly developed and
manufactured by Aérospatiale and the British Aircraft Corporation (BAC) under an Anglo-
French treaty. Twenty aircraft were built, including six prototypes and development aircraft but
Air France (AF) and British Airways (BA) were the only airlines to purchase and fly Concorde.
The aircraft was primarily used by wealthy passengers who could afford to pay a high price in
exchange for Concorde's speed and luxury service.)
Pinto, etal, 1987, 1988 listed ten critical success factor for projects. They in order of importance
are:
1. Project Mission: Should be clearly defined.

2. Top Management support: Top management should be willing to provide resources.
3. Project Schedule/plan: Constant schedule.
4. Client Consultation: Constant communication listening to all parties involved.
5. Personnel: Recruitment, selection of required people and provide training if need be.
6. Technical Task: Do we have needed technology and skill to use this technology.
7. Client Acceptance: Can we “sell” the project to users.
8. Maintaining & Feedback: Do we have a system to laid down for tracking progress by
generating continued information at each stage of project.
9. Communication: Have we communicated needed information to all concerned parties.
10. Trouble shooting: Do we have ability to handle unexpected crisis, deviation from plans.
Do we have any kind of contingency plan laid down to handle such situations?
According to Baker etal critical success feature different for different industries, different
organisations and types of projects. However, there is consensus on the reasons for failure.
They are :
Project organization is not required:
The company used project form of organization which we not needed for the particular
task.
1) Lack of Top Management Support:
It did not had support of top management in term of finance people and time allocated
often functional departments via for resources which is scares even CEO was not
committed to project.
2) Project Manager:
Project manager had maximum technical skills needed for the project but lacked of
managerial skills so very essential to managing project.
3) Poor Planning:
Lack of planning is often a major cause of failure when there is no systematic plan laid
down often uncertainties associated with project cannot be visualized as a result of which
nothing goes as deserved. Errors creep in mistakes become a part of everyday life, project
go behind the schedule all become “chaotic”.
The causes of failure make one realise the almost need for a careful evaluation of all the stages of
a project before a project is undertaken.
THE TERMINATION PROCESS:
The termination process consist of two part
a) Decision Process
b) Implementation Process
First is the Termination process is a decision of whether to terminate or not to terminate a

project. Its a yes or no decision.
Second is the implementation process; if decision is to terminate, (yes) then termination has to
be executed.
1) Decision Process: In decision process we make use of models which enables one to
decide to terminate or not to terminate projects and these models fall into two categories.
(i) A model which defines a list of factors for successful (or failed) project. This tests
how far your project qualifies to be called successful (or failed) project.
(ii) A model which enables you to assess how for your project was able to meet the
objective and goals of the project.
These are “project selection models” and these are often are used for project termination.
But many do not agree or find this suitable because of many reasons.
i) The data needed for project selection models is too large and too costly to justify this
as a method.
ii) Projects are evaluated at every stage of PLC and evaluation of factors in project
selection model change that is the selection criteria changes over the period (life) of
project. That is may be one set of standards are used when project was started and yet
another set of standards (factors) when project has run over years that is in another
stage of PLC.
For instance technical success of project is more in early PLC stage but reduces as project
progresses therefore such criteria cannot used. This would induce manager to terminate “current
ongoing project” in favour of new ones.In conclusion it can be said that it depends on whether
the organization is willing to invest time and cost needed to complete the project based on what
is “current status” of the project and at the moment what you expect the outcome to be.
2) Implementation Process:
Once it has been decided to terminate a project the process of termination starts. The actual
termination process should not be hurried and haphazard but should be backed by planning,
should be orderly, should be budgeted and scheduled like it is done for any stage of PLC. The
following figure (design for project termination) illustrates it. Often help of a checklist is also
undertaken to identify tasks to do and ensure that they have been done.
Project Close out
Organization Financial Purchasing Site

Closeout meeting Re assignment Plan Personnel Report Personnel Report
Personnel Report
Charge audits Collect receivables Final Report
Compliance document Supplier Notification Final payment
Design for Project Termination
These tasks are: organisational, financial, purchase oriented, engineering or site oriented to name
a few.
Organisational: includes conducting a close-out meeting, release of personnel, and re-assignment

of personnel to new projects, and also performance appraisal of personnel.
Financial: Close financial documents and reports, charge audit, collect receivables, and prepare
the final report.
Purchase: For each purchase order and sub-contractor, prepare compliance and completion
document, supplier be notified of project closure and make all final payment.
Engineering: Compile and store all engineering document, prepare final technical project report.
Site oriented: Close down the facility and dispose of all material and equipment.
Task in Termination Process:
i) Subcontractors: all task related with project should be complete including task
including subcontractors.
ii) Delivery: Project delivery and installation to client.
iii) Final Report: Prepare final report.
iv) Billing & Invoice: Clear all bills
v) Redistribution of All Resources: personal material equipment etc.
vi) Legal Counsel: Clear project with legal counsel / Consultant and file for patent if
any.
vii) Record Keeping: Determine what record to keep where to keep them in right place
and hand over responsibilities to parent organizations.
viii) Product Support Requirement: If any product supportrequirement like spare
services is needed in future decide how that should be met and assign responsibility
for same.
WHO CAN TERMINATE A PROJECT?
(i) Project Manager:
The process of project termination or close out is often conducted under the direct supervision of
the project manager.Many a time this is not resorted to as the project manager tries to prolong the
termination process as it indicates the end of the rule and power of the project leader or simply
because of the love of project.
(ii) Termination Manager:

Sometime termination manager is appointed for such tasks.
However all performance evaluation of individuals are carried by project manager or
supervisor of each individual team member.
(iii) Team Member:
Sometimes technical knowledge is required during the termination process. Often in
such cases a member of project team is upgraded and assigned the responsibility of
termination process.
2.3 THE PROJECT FINAL REPORT (What is it, what it contains, how it is written)
What is it?
The final report is the history of the project. It is the chronicle of the life of the project which
describes the project in detail. It describes what the project went through in different stages
of the life cycle. A list of what went right and a list of what went wrong,is also made.
Further, a list of persons (who all) whowere associated with the project and in what capacity
is also made. It also details how the project was managed, learnigs from the project is also
listed and this also acts as a prelude to new projects.
How it is written?
How the project is written is of less significance; as compared to the content. It is contents of
PFR which is of importance.
i) Chronological Order: Some are organized chronologically as and when events took
place although no specific method is advocated.
ii) Administrative & Technical Section: Sometimes they are divided into two sections-
one devoting to administrative aspects and the other devoting to the technical aspect
of the project.
iii) Narrative: Sometimes they are written in narrative style.
iv) Commentaries: Sometimes they are written as short and small commentaries of
events and are all put together to form the complete PFR.
What is contains?
It is not so much importance as to how it is written but what is of importance of what is

contains (that is its contents). It should contain the elements.
1) Project Performance:
i) Comparison: This compares the project proposal that is what project tries to
achieve with the terminal evaluation that is what the project achieved.
ii) Deviation: This also explains the reason of deviation if any, in as much detail as
possible.
iii) Earned value: this explains “good judgement” (prudent decision) made by
project manager in different situations and reasons for success or future. For
instance although Tata Motors had constructed 85% of the plant at Singur in West
Bengal; yet it decided to shift the plant to Sanand in Gujarat; this was a prudent
decision.
iv) Recommendation: Often a set of recommendation (or learnings) from project is
also listed.
2) Administrative Performance:
a) Substance versus Administration: the substance of project is important but so is the
administrative aspect of the project. But often it is given less importance or even
ignored.
b) Review: Administrative practices should be reviewed and good points highlighted.
c) Reasons: The reason as to why same practice was effective (or ineffective) in light of
the environment of the organization should also be highlighted.
d) Recommendation: On the basis of the above recommendation what will work and
what will not.
3) The Organizational Structure:

a) Organizational forms: Indicate what organizational form the project adopted.
b) Suitability: It should explain whether adopting this form enabled (or helped) or
created obstacles (impeded) inaccomplishment of objective of project.
c) Recommendation: Based on experience of the project recommend whether this form
should be adopted, not adopted, or adopted with minor change etc with reason
thereof.
4) Project and Administrative Team:

a) Technical versus Management skills: Some individual are technically competent
but lack in interpersonal skill and communicational skill and therefore cannot
contribute as a member of team. They are NOT-Name Only Team members and a
note can be given to this effect.Such people may be or may not be part of the future
projects.
There are many others who can contribute to group and are effective in group setting.
A certain set of individuals work well when put together in a team.
b) Recommendations: often recommendation is made in favour of those who can
effective when operating as a part of team.
5) Techniques of the Project Management:

a) Tools: Different tools are used for planning, budgeting, scheduling, allocating
resources, managing risk and control.
b) Recommendation: If there were effective these tools are recommended if effective
new tools should be explored suggested.
Conclusion:
Many informal procedures that speeds up budget prepration, ease scheduling help in improve
forecast are often adopted and decisions are also taken based on faith and hunch of project
manager. This is also listed and made a part of project history. This is often listed in projects.
This is because the purpose of “history” is to make future project successful.
Many a time the project manager maintains a personal diary. This also becomes the part of the
project history. Many a time, later on, this exploits knowledge of project manager which should
not be last. This is a kind of diary that any adolescent maintains. And often valuable insights can
be drawn from these. It is a rich source of unconventional wisdom.
2.4 Work Breakdown Structure (WBS)

We referred to a Work Breakdown Structure (WBS) in controlling the cost overrun (refer back to
-project characteristics-Risks and uncertainty in managing projects).
What is aWork Breakdown Structure (WBS)?
Origin of Work Breakdown Structure (WBS)
The origin of WBS goes back to 1957 when US Department of Defence (DoD) used it in Navy to
support the development of Polaris missile program. Though the term WBS was not used; but it
did organize the task into product-oriented categories. In 1962, DoD, NASA published a
document for PERT/COST system which infact described the WBS approach. This guide was
endorsed by the Secretary of Defence for all services. In 1968, DoD issued a WBS for Defence
Material Items (MIL-STD-881) a military standard requiring the use of WBS across the DoD.
The document has been revised several times and the most recent one was in 2011 and found in
Work Breakdown Structure for Defence Material Item (MIL-STD-881C).
In 1987, the PMI documented the expansion of this technique across non-defence organizations.
A Work Breakdown Structure (WBS) is used by the project manager to break a project into
manageable components. This makes a complex project more manageable by subdividing the
project into smaller work packages.
It helps in
 better estimation of cost
 better estimation of time (scheduling)
 better resource allocation
 assigning responsibilities (and creates accountability and commitment)
 indicates the control points
 indicates the project milestones
 risk management-reducing the risk of missing important tasks and work during the
project period.
 WBS lays the foundation for accurate project costing. This tool helps management carry-
out a bottom-up project costing and estimation which is the most accurate estimating
method.
 It also gives an accurate picture of the project schedule because it includes all the tasks
which are needed to complete the project in time.
Beyond this the WBS also helps the project team to easily manage the tasks and to have a better
overview of the milestones which need identification during the project period. Also it helps in
engaging the project team members because the team members are forced to share their
knowledge within their field with each other in order to develop the WBS. Furthermore, it gives
an overview of the ambiguities and uncertainty within the project and highlights important issues
of the project at an early stage. It helps in defining the scope of the project.
In short, work breakdown structure is a chart or a document which is used to organize project
work into a list of focus areas. It ensures that all work stays on track to meet the project goals.
Types of Work Breakdown Structure:
(i) Deliverable Oriented WBS: Here one identifies the deliverables (or outcomes). One
defines the project work in terms of components (physical or functions) that must be
made. Eg: Module A or Engine. This is also called Product-Breakdown-Structure and
is the preferred type by PMI. This is often used in new product development.
It is then broken into activities that must be executed to achieve the outcome.
Therefore it is sometimes called Task-Oriented WBS as it defines the project work in
terms of action that must be taken. Eg: design an engine, or develop a computer. The
parts of a computer would consist of the VDU (visual display unit), mother board,
key board, etc.
(ii) Process-Centered or Process Oriented WBS: defines the project work in terms of time
phases. They are used for very long projects. This is also called Time-Oriented
WBS.The process- centered WBS includes the Level 2 activities which are phases
within the project. Examples of activities in software development would be phases
such as Initiation, Planning, Design, and so on; Level 3 would include the activities
required in order to complete the second level. The additional levels in the hierarchy
depend on the duration of the phase and the level of details required to reliably make
an estimate of the cost and the schedule of the project.
How to Construct a Work Breakdown Structure
There is no set format for creation of a WBS. It can take a variety of forms that serve a variety of
purposes. However some rules can be followed:

(i) Determines the main deliverables for the project and break the work into small work
packages. The project manager determines the main deliverables for the project. Once
this is completed, he with the help of his team, starts breaking the deliverables they
have identified into successively smaller components of work. We use the word
successively because you would break it down in stages. To what level of detail
would you break it, depends upon the project at hand, the project type and also the
management style.
(ii) Create Rules and apply them: However, some sort of predetermined “rule" should
govern the size and scope of the smallest component of work. For example, there
could be a two weeks rule, where no work is broken down to a component which
would take less than two weeks to complete. Another example is a 8/80 rule, where
no component of work would take less than 8 hours or longer than 80 hours to
complete. (suggestion of PMI) Keeping such rules in mind, a WBS could be created.
(iii) The 100% Rule: A very important WBS design principles is called the 100% Rule.
This states that the WBS includes 100% of the work defined by the project scope and
includes all the deliverables – internal, external, interim – in terms of the work to be
completed. This rule guides us in the development, and decomposition of the WBS.
And this rule applies at all levels within the hierarchy. This means that for any level
the sum of the work at the “child” level must be equal to 100% of the work
represented by the “parent” and further means that for any level the sum of the work
at the “grand-child” level must be equal to 100% of the work represented by its
“parent” and so on. Therefore it implies that the WBS should not include any work
that falls outside the actual scope of the project.
This means that the 100% rule also applies to the activity level. The work represented
by the activities in each work package must add up to 100% of the work necessary to
complete the work package It allows the creativity of individuals to flow to design
and develop the WBS.
(iv) For Levels: Two is minimum breakdown at any level and 20 is maximum breakdown
at any level.
(v) Format: One can use a tabular format or graphics to display the project components as
a hierarchical tree structure or diagram.
A Work Breakdown Structure Diagram:

A WBS diagram expresses the scope of the project scope in graphic terms. The diagram begins
with a single box at the top. This represents the complete entire project. The project is then
divided into main, or disparate, components, with related activities (or elements) listed under
them. We follow a format in which the upper components represent the deliverables and the
lower level elements are the activities which together create the deliverables above.
Often WBS is created for Information technology projects. The project could involve designing
and building desktop computers. These have tasks that can be completed independently of other
project tasks. When tasks in a project do not need to be completed in a linear fashion, then the
project is separated into individual hierarchical components and is allotted to different people.
Within the WBS every item within the hierarchy level has been assigned a unique number so the
work can be identified and tracked over time (to its origin). The numbers have varying numbers
of decomposition levels; one follows a general scheme for numbering for each level. An
illustration is given below: (Distribute the diagram)
 Level 1: Designed by 1.0. This is the first level. This is the top level of the hierarchy of the
WBS and is usually the name of the project. This is assigned the number 1.
 Level 2: This is the second level. This is broken into two components Deliverable- 1 and
Deliverable-2 and have been assigned numbers 1.1 and 1.2.
 Level 3: This is the third level. Deliverable-1 is broken into two component activities and
numbered 1.1.1 and 1.1.2 Deliverable-2 is broken into two component activities and
numbered 1.2.1 and 1.2.2.
 Level 4: This is the fourth level. The first activity is broken into three tasks and assigned a
number 1.1.1.1; 1.1.1.2 and 1.1.1.3 respectively and so on.
For an understanding of the hierarchy of the WBS it is important to understand the main
structure of the management tool.
Areas in Work Breakdown Structure:
The WBS is modelled after four different areas: They are Scope, Time, Cost and Resources. This
is needed to demonstrate how a work breakdown structure is conducted in a project team. Four
different areas of WBS are:
(i) Scope: The scope is the broad strategy of the project which is planned. The scope is
an important step for developing the WBS because it determines a list of specific
projects goals, objectives, main deliverables, tasks, cost and the deadline.
(ii) Time: An estimation of the accurate time is also important. It helps to set the deadline
for the deliverables and the planning process of the project. In this step a WBS
dictionary is created. The WBS dictionary includes entries for each WBS component
that briefly defines the scope or the statement of the work (SOW). The SOW is a
document that defines project- specific activities, deliverables and timelines.
Furthermore, the SOW typically also includes detailed requirements and pricing.
(iii) Cost: Cost is an essential part when planning a project. The cost within WBS involves
budgeting and an integrated earned value management system (EVMS) which is also
known as Earned value management (EVM). EVM is a project management
technique for measuring the project performance and progress. EVM is unique as it
has the ability to combine measurements of the project management triangle that is
scope, time and costs. And therefore, EVM has the ability to provide accurate
forecasts of project performance problems. .Figure: EVM (Discussed in class)
(iv) Resource: The last step of the WBS is identifying the resources required for the
project. The resources are determined with the help of responsibility matrix.
Responsibility Matrix:The responsibility matrix defines or illustrates who in the

organization is responsible for individual work elements during the project period.
This is also called the Responsibility Assignment Matrix (RAM) and sometimes
called (RACI) which is derived from the acronym Responsible, Accountable,
Consulted and Informed-most commonly used terms for describing the kind of
participation in a project. Here, the vertical axis represents the ‘tasks’ and the
horizontal axis represents the ‘roles’.
Responsible- refer to those who do the work (execute) to achieve the task.
Accountable- refer to those who are answerable for completion of the task and who
delegate work to responsible.
Consulted- refer to those whose opinion is sought and here there would be two way
flow of communication.
Informed- refer to those who are updated on progress of work and often on
completion of the task. (Here it involves a two way communication).
It is also call the Staffing Matrix or the Linear Responsibility Chart (LRC). See figure
below:
Figure: Responsibility Matrix (RACI framework)

Function Project Business Project Software
Sponsor Analyst Manager Developer
Initiate Project C ----------- AR -----------
Establish Project Plan I C AR C
Gather User Requirement I R A I
Develop Technical Requirement I R A I
Develop Software Tools I C A R
Test Software I R A C
Deploy Software C R A C
Source: Where the capital letters represent the following (and this can change-use you creativity here for
assigning) Where R – Responsible, A – Accountable, C – Consult, and I – Inform.
They may be defined in different ways using different alphabets to represent responsibility;
or different figures like a circle, or a triangle, or a boxto represent different roles. Different
numbers can also be used.
For clarifying decision roles and improve decision making, Bain & Co has introduced the
RAPID.
R- Recommend Role represents who do 80% of the work in a decision. He gathers inputs
andlays down a course of action.
A- Agree Role represents who give formal approval of a recommendation
P- Perform Role represents who is responsible for execution once a decision is taken.
I- Input Role represents who give relevant information so that ‘R’ and ‘D’ can take decision.
I role is advisory.
D-Decide Role represents is a single person who is ultimately accountable for making the
final decision, committing the group to action and ensuring the decision gets implemented.
Problems in creation of WBS: WBS is prepared to determine the exact nature of tasks
required to complete the project. There are many problems encountered while creating a
WBS.
(i) Problem-1: Some managers want to create according to outcomes while some want
according to specific tasks (activities). And many mix the two. Therefore often a list
of tasks, activities and outcomes are made and each activity leads to which outcome
or which activities are associated with which outcome is first arrived at. These
activities and outcomes are decomposed into sub-activities and sub-divide again
successively
So, WBS is tailored to be used in different ways. But it should reflect how each piece
of project contributes to the whole in terms of performance, budget (cost), schedule
(time) and responsibility. Therefore for each work package one needs to identify
relevant data.
(ii) Problem-2: Senior managers allocate budget for each work package. Junior feels the
budget is insufficient to fulfil the task at hand. So there is intense fight between the
two. Discussion between the two ensues. Senior says our estimate is based on ‘past
experience’ while subordinate says we are executing so we know the fact/the reality.
If subordinate is involved in estimation (budget prepration) then the difference
reduces. In participative management style, the subordinate is more willing to accept
budget as they too were involved in budget-decision-process.
Superior establishes budget as “B” while subordinate estimates it to be “b” and in a
perfect world B=b which does not take place.
Always a deviation is found in estimate of Senior and the subordinate for the following reasons.
(a) It has been observed that the further one moves up the organization hierarchy, away for
immediate responsibility and execution of the task, the easier, the cheaper and the less
time consuming the task appears to him. This is mainly because either the superior does
not know the minute details, or it suits him to forget the details and the problems
associated with implementation of the task.
(b) He wants to project the project to be less cumbersome and less costly to his
superiors.(and more profitable).
(c) Subordinate believe in the operation of Murhy’s Law which lead them to build in some
level of protection against failure and as such they increase the budget or the time needed
to complete the project.
*Named after Captain Edward A Murphy, an engineer working on AIR FORCE PROJECT
MX981. His words were “If anything can go wrong, it will”.
2.5 Earned Value Analysis:
WBS helps in monitoring projects through monitoring of work packages and also the entire
project. Individual task performance must be monitored carefully because the timing and co-
ordination between individual tasks is important. We use the concept of Earned Value (EV) for
this purpose. EV is a project management tool which uses information on cost, schedule and
work performed to establish current state of the project. It combines the concept of the three
critical factors that of time, cost and performance in one tool. It allows a project manager to
extrapolate current trends to predict their likely final effect.
One often faces difficulty in comparing actual expenditures against budgeted expenditure
(baseline expenditure) for any period of time (say T). The comparison often fails to take into
account the amount of work done (work accomplished) relative to cost incurred. The earned
value of work performed (value completed) for those tasks in progress is found by multiplying
the estimated percent physical completion of work for each task by the planned cost for those
tasks. The result is the amount that should have been spent on the task thus far. This can be
compared with the actual amount spent.
For instance, the project task was budgeted to be complete in 6 weeks at ‘x’ cost. We have
completed 6 weeks (the time) and incurred ‘x’ cost (the cost). But maybe only 1/3 of the work is
complete (work accomplished is 1/3). Therefore it is necessary to measure performance also.
The concept of Earned Value takes into accounts all of these-the T, the C, as well as the P.
See diagram below:
The concept of earned value combines cost reporting and aggregate performance reporting into
one comprehensive chart. The baseline cost to completion is called the ‘budget to completion’
(BAC). The actual cost to date can also be projected to completion and is referred to as the
estimated cost at completion (EAC).
A negative variance is ‘bad’ and the cost variances and schedule variances are calculated thus.
The cost variance is the difference between the amount of money we budgeted for the work that
has been performed to date (work accomplished), that is, the earned value (EV) and the actual
cost of that work (AC).
The schedule variance (SV) is the difference between the earned value (EV) and the cost of the
work we scheduled to be performed to date, or the planned value (PV).
The time variance (TV) is the difference in the time schedule for the work that has been
performed (ST) and the actual time used to perform it (AT).
Cost Variance (CV) = Earned Value (EV)-Actual Cost (AC) (CV, overrun is negative)
Schedule Variance (SV)= Earned Value (EV)- Planned Value (PV) (SV, behind is negative)
Time Variance (TV)= (ST)-(AT)
These variances are also formulated in the form of ratios:
The Cost Variance becomes the Cost Performance Index (CPI)= EV/AC
The Schedule Variance becomes the Schedule Performance Index (SPI) = EV/PV
And
The Time Variance becomes the Time Performance Index (TPI) = ST/AT.
Such ratios are very helpful in comparing more than one project; or the same project over
different periods of time.
Illustration 1: The operations on a work package were expected to cost Rs 1, 500 (for the
complete package). The original schedule for completion was 3 days. It was found that on the
third day, Rs 1,350 has been spent. The proportion of work completed is 2/3. What are the cost
and schedule variances?
Cost variance
For 2/3 of the work package Rs 1000 should have been the expenditure.
(that is 2/3 of 1500=1,000)
But total actual spent is Rs 1350.Therefore the Cost variance is difference between budgeted
cost, for that amount of work, and actual cost.
Therefore Cost variance is Rs 1000- 1350=Rs -350 (negative as it is excess spent)
Schedule variance
Total cost associated with three days is Rs 1500.
Cost per day would be 1/3*1500=Rs 500
NOW
2/3 would have been complete in 2/3*3=2 days.
Expenditure for 2 days should have been Rs 1000
Therefore schedule variance (expressed in terms of cost) =Rs 1000-Rs 1500= Rs -500
Time Variance (TV) = ST-AT =
Time to be taken to complete 2/3 of work is 2/3*3=2 days
Actual time taken was 3 days
Therefore TV = ST – AT = 2-3 =-1 day.
Illustration 2: The planned cost of an advertising project was Rs 12,000. The project was for 7
days. But the actual cost (spent) to date (on the 7thday ) was Rs 10,000. But the value of work
completed (accomplished) was only 70 percent. Calculate the cost and schedule variances
If the work was to be completed in a week, find also the time variance.
Cost Variance (CV)= Earned Value (EV)-Actual Cost (AC)
(12,000*70/100) – 10,000 = 8,400 – 10,000 = -1,600
Schedule Variance (SV)= Earned Value (EV)- Planned Value (PV)
(12,000*70/100) – 12,000 = 8,400 – 12,000 = 3,600
Time Variance (TV)= (ST)-(AT)
(70/100*70) – 7 = 4.9 -7 = -2.1
Distribute Sheet on numerical of EV-Filename-project-numerical
(Also refer to numerical distributed on March 11, 2020; when project monitored at end of
project life and when monitored in between. And two page notes with formula)

There are a number of project management methodologies that any project manager has come to
rely on over the years. The common ones are discussed in brief below.
AGILE METHODOLOGY: The credit of this methodology goes to 17 independent software
practitioners in 2001 who gave the agile concept in written form. They met in Utah and
developed the Agile Manifesto of Software Development. This presented a framework for
delivering value and collaborating with customers. Project objectives are made clear by the
customer while the final deliverables can change. Continuous collaborating with customers and
project stakeholders on the other hand were an important part of this approach. Therefore, the
project team works in iterative cycles and evaluates results in the end. Depending upon the
evaluations, the final deliverables are modified in order to better answer the customer’s needs.
The Agile Project Management process suggests that a project be viewed as a set of sub-
processes. Therefore a project gets processed in small phases or cycles. It a very flexible
methodology and very suitable for projects which exhibit dynamic traits; that is; where there is
possibility of changes to occur (like changes often suggested by the customer which you have to
incorporate). It is suitable for projects which require frequent iterations. Here the project
manager treats milestones as sprints. It is suited for small software projects that depend upon
highly collaborative teams.
The Four Values of The Agile Manifesto
The Agile Manifesto is comprised of four (4) foundational values and also twelve (12) supporting
principles which define the Agile approach to software development. These values are:
1. Individuals and Interactions Over Processes and Tools

2. Working Software Over Comprehensive Documentation
3. Customer Collaboration Over Contract Negotiation
4. Responding to Change Over Following a Plan
According to the team of 17, while there is value in the items on the right, they value the items on the
left more.”
1. Individuals and Interactions Over Processes and Tools

The first value is “Individuals and interactions over processes and tools.” According to them, one
should value people more highly than processes or tools because it is the people who respond to
business needs and drive the development process. If the tools and process would drive the individuals,
that is, the individuals would be less responsive to change and less likely to meet customer needs.
Communication with individuals is a critical example; here, communication between individuals can
take place as an when a need arises. In the case of process, communication is scheduled, which takes
place at specific times only and requires specific content.
2. Working Software Over Comprehensive Documentation
Historically, a lot of time was spent on documenting the product for development and ultimate
delivery. Technical specifications, technical requirements, technical prospectus, interface design
documents, test plans, documentation plans, and approvals were required for each. The list was
extensive and was a cause for the long delays in development. Agile does not eliminate
documentation, but it sees it as broad guidelines on the basis of which one should work and identify the
parts which are relevant without getting bogged down in minute and unnecessary details. Agile
documents requirements as user stories, which are sufficient for a software developer to begin the task
of building a new function.
The Agile Manifesto values documentation, but it values working software more.
3. Customer Collaboration Over Contract Negotiation
In the Waterfall model, customers define the requirements for the product or project in great detail
before one starts the project. This mean the customer is involved in the process of development before
development begins and after it was completed, but not during the process of development.
The Agile model lays down that one should collaborate continuous with the customer throughout the
development process. In this way, itwould be easier for development to meet the needs of the
customer. Under this model two alternatives are open: the customer may at periodic intervals suggest
changes or a customer could become a part of the development team and attending all meetings,
ensuring the product meets the business needs of the customer.
4. Responding to Change Over Following a Plan
Earlier, any software development perceived a need for change as an expense and hence it was
avoided. Therefore detailed plans were developed, with a defined set of features. And the team worked
based on the plan. But this system encourages change and it believes change would add value.
In a agile model, short iterations are made; which means requirements can change often and new
features can be added into the next iteration. The agile is based on the belief that changes always
improve a project and adds value.
Agile also laid down twelve (12) Principles of Agile. They are:
1. Customer satisfaction through early and continuous software delivery– Customers are
happier when they receive working software at regular intervals rather than waiting for long
periods of time for the software to be released.
2. Accommodate changing requirements throughout the development process – The agile
suggests change to be incorporated and avoiding delay when a requirement or feature request
changes.
3. Frequent delivery of working software – Customers prefer to receive software at frequent
intervals.
4. Collaboration between the business stakeholders and developers throughout the project –
Better decisions are made when the business and technical team are aligned and work together.
5. Support, trust, and motivate the people involved – Teams should get support, and be
motivated to deliver their best.
6. Enable face-to-face interactions – Communication is more successful when development teams
are co-located.
7. Working software is the primary measure of progress – Delivering functional software to the
customer is the ultimate factor that measures progress.
8. Agile processes to support a consistent development pace – Teams establish a repeatable and
maintainable speed at which they can deliver working software, and they repeat it with each
release.
9. Attention to technical detail and design enhances agility – It is necessary to have right skills
and a good design so that the team can improve the product, and sustain change.
10. Simplicity – Focus should be on simplicity; just having enough to get the work executed.
11. Self-organizing teams encourage great architectures, requirements, and designs – Self
organized teams are highly motivated teams as they are comfortable working with each other and
also can rely and trust each other. Such teams who have decision-making power, take ownership,
communicate regularly, and share ideas that deliver quality products.
12. Regular reflections on how to become more effective – Self-improvement, process
improvement, advancing skills, and techniques help team members to work more efficiently.
The intention of Agile is to align development with business needs, and the success of Agile is
clear. Agile projects are customer focused and encourage customer guidance and participation. As
a result, Agile has come to be accepted as method for software development throughout the
software industry and has taken the position of an industry.
WATERFALL METHODOLOGY:It is a traditional approach to project management. It is

the most common way to plan out a project. It is a linear method or a sequential method. It is
non-iterative. The project progresses in one direction –that is, downwards like a waterfall;
hence the term waterfall. The project is broken into phases and each phase is dependent
upon completion of the earlier phase. This method is used in construction and
manufacturing sectors.
It is also used in software projects-where the phases are idea generation, system design,
implementation, testing & validation and maintenance.
The major disadvantage of this method is that it since the project progresses in a sequence, any
change in customer’s requirements (needs) would disrupt the sequence of tasks and make it
difficult to manage the project.
Business Case
User Requirement
System Specification
.........DECIDE................
System Design
Component Design
...........DESIGN................................................
Construct Component
Test
............DEVELOP.................................................................
............DEMONSTRATE......................................................
WATERFALL METHOD DIAGRAM
Business Case Release Test
User - Requirement Acceptance Test
Sys Specification System Test
Sys Design
Interface Test
Component Design Component Test
Construct Component
BENT WATERFALL DIAGRAM

SCRUM METHODOLOGY:Often the waterfall methodology involves a very lengthy process;
It is a lengthy and time consuming process of planning as well as design. That is the planning
phase itself might take a couple of months before one could move to the next phase that of
design. Then again the design could take a couple of months and thereby delay the actual launch
of the product making it so late that the product might be declared obsolete.
In scrum methodology one combines the waterfall and agile framework and ensures that the
planning phase itself becomes an iterative process and not long. Here the scrum master facilitates
the scrum sessions (which is called sprints) which occur in short time phases of 1-2 weeks. And
this is facilitated by the scrum master. The scrum masters job is to ensure that the work is clear
of obstacles and work gets executed effectively. This results in an iterative process that helps to
save on time as well as money.
PRINCE2:This is an acronym for Projects in Controlled Environments. It originated in the
United Kingdom. The UK accepts this to be the best methodology. Under this method, the output
of the project is well defined and every project has a business justification.
The main characteristics of this method are that every project is defined in terms of time and
costs. And also it defines the roles and responsibilities of each member of the team before the
projects starts. The team members now have greater control over resources and the ability to
mitigate risks in a better manner.
The work gets divided into: High level activities like business justification and resource
allocation which is the responsibility of the Board; and lower level of activities like scheduling
which is the responsibility of the Project Manager.
It is a methodology for managing projects used by the UK Government. It is characterized by
product-based planning approach.
Conclusion: Which is the right approach? There are many approaches to managing projects. We
have discussed four. There are many offshoots of these and hybrids too which have emerged.
One has to identify the best approach. The right approach depends upon what has worked earlier,
what the customer wants, what are the organization goals, what cost the organization can bear
and also the structure of teams whether they are collated or not...
AS THERE IS NO ONE SIZE FITS ALL
ONE HAS TO BE CAREFUL IN SELCETING THE METHODOLOGY
AS IT WOULD DIFFERENTIATE BETWEEN SUCCESS AND FAILURE
(updated on 07 March 2020)
UNIT-3: Selection of Projects & Its Analysis
3.1 Scouting for Project Ideas (Discussed)
3.3 Numeric & Non Numeric Models for Project Selection
3.1 Discussed in Class
Technical Analysis includes the following consideration:
(i) Material Input & Utilities:

(ii) Manufacturing Process Or Technology
(iii) Product Mix
(iv) Plant Capacity
(v) Location & Site
(vi) Machinery &Equipments
(vii) Structures & Civil Works
(viii) Project Charts & Layout
(ix) Work Schedule
(i) Material Input & Utilities: This refers to defining of material and utilities needed,
specifying its properties, and setting up their supply schedule.
It includes that of:
 Raw Material (iron ore for steel)
 Processed Industrial material and components (semi-finished products)
 Auxilary Material & Factory Supplies: chemical, grease, paint, oil, paint,
varnish additives
 Utilities: water, steam, power, fuel
It means determining what of these are needed, in what quanity are they needed, what is their
source of supply, if a shortage is faced; wherefrom would they be arranged for.
(ii) Manufacturing Process Or Technology: This requires determining

 Alternative Technology: (if more than one technology is available
 The Choice of Technology: This is dependent upon
 -Plant capacity
 -Input Used
 -Investment Outlay
 -Use by Other Units
 -Product Mix
 -Latest Development
 -Absorption Capacity
(iii) Product Mix: Dependent upon the needs of the market
(iv) Plant Capacity: This refers to volume or number of units manufactured per unit of
time. This is dependent upon
 Technological Requirements: For many industries, there is a certain minimum
economic size determined by the technological factor.
 Input Constraints-shortage of raw material, power, etc could limit production capacity
 Investment Costs-How far an increase in production would bring about a decrease in
cost.
 Market Conditions-If market is strong and demand is high, one would adopt a
technology which would permit more production capacity and vice versa.
 Resources –how much you can bear
(v) Location & Site: The choice of location is dependent upon certain factors like
 Proximity of Raw Material Source or Proximity to Markets
 Availability of Infrastructure-Power, transport, water
 Government Policies-Incentive to certain state would mobilise one to set up
manufacturing base there to take benefit of (eg) tax holidays, lower power tariff, etc.
 Other Factors
(vi) Machinery &Equipments: This is influenced by the production technology and also
the plant capacity. Many a time some constraints may be faced as a result of limited
availability of power while requirement of power by the technology is immense.
Difficulty ion transportation or restriction on its import may act as a constraint.
(vii) Structures & Civil Works: This involves majorly three activities; they being, site
prepration and development, building and civil works and outdoor works. Site
prepration would involve-grading and levelling of land, demolition and removal of
existing structure (if any), relocation of existing pipes, cables, powerlines, roads, etc;
reclamation of swamps, drainage, removal of standing water; connection of utilities
from site to public network utilities like electric power, water, communication,
railway sidings, etc.
Building and Structures would include creation of factory buildings (for production
processes), ancillary buildings for stores and warehouses, administrative buildings,
staff welfare building like canteen and medical facility and residential buildings too.
Outdoor works would include supply and distribution of utilities, handling and
treatment of emissions and wastages, transport and traffic arrangement, outdoor
lighting and landscaping as well as laying of boundary wall and creation of
enclosures.
(viii) Project Charts & Layout: This includes a general functional layout, material flow
diagram, production line diagram, transport layout, utility consumption layout,
communication layout, organisatuon layout, and also plant layout.
(ix) Work Schedule: Refers to creation of a schedule for work to be executed. This means
making a list of all activities from project planning to commencement of production,
sequencing these activities, allocation of time and also resources for executing these
activities. Various tools like Gantt chart, Pet and CPM are used.
An organisation gets many new projects (multiple projects). There are many problems which
arise in managing projects they being:
Delay in execution of projects-Delay in one project causes delay in other projects too; this is
because all these projects use common resources.
Inefficient utilisation of resources: Leads to peaks and valleys in utilisation of resources.
Bottlenecks in resource availability: also leads to delay in projects.

Research reveals also that many projects are cancelled mid-stream (30%), and even projects
which are completed result in either cost overrun (196%) or in time overruns (220%). Therefore
projects should be selected with care.
If care is taken in selecting projects, the chances of projects being completed successfully would
increase.
What is Project Selection? Project selection is the process of evaluating proposed projects or
group of projects, and then choosing to implement some set of them so that the objective of the
parent organisation is achieved.
Choosing one out of many projects is difficult; but choosing a number of different projects (a
portfolio) is even more difficult and complex too. Several techniques are used. To help us decide
we often make use of models.
3.5 Models-Numeric and Non-Numeric Models
What is a Model? Models extract the relevant issues about a problem from the mass of detail in
which the problem is embedded. It allows to strip away all of the reality from a problem leaving
only the relevant aspects of the ‘real situation’ for us to deal with.
The process of taking away the unwanted reality is called modelling the problem. It is an
idealized version of the problem. A firm should keep these points in mind while selecting a
problem. These are:
Realism: It should reflect the reality of the firm’s decision problem.
Capability: It should have the capability to deal with the relevant aspects of the problem.
Flexibility: It should be able to modify to changing situations.
Ease of Use and ease of implementation: It should be easy to use and implement.
Cost: Cost associated with gathering data and modelling it should not be very high.
The different types of models in use are:
Models
Numeric Models Non Numeric Models
Scoring Based: Profitablity Based: (I) Sacred Cow
1. Unweighted 0-1 1. Net Present

Factor Model Value
2. Unweighted (modified NPV)
Factor Model 2. Internal Rate of
3. Weighted Return
(II) Operating Necessity
(III) Competitive
Necessity
(IV) Product Line
Extension
(V) Comparative Benefit
Model
Non Numeric Models: These models are basically qualitative models which do not undertake
numerical values for assessing projects.
(i) The Sacred Cow: In this the project idea is suggested by a senior official or powerful
person in the organisation. He suggests by using words like “ If you have a chance to
see this proposal...” or “Why don’t you look at this and see if it could be tried out...”.
Such ideas are visibly supported by the powers to be. The idea could be for a new
product launch, entering new market or just about anything. Prime Minister’s Swach
Bharat Abhiyaan or the Nano Project fall under this category. Nano was RatanTata’ s
baby. The project is scared in the sense that it will be maintained unless successfully
concluded or abandoned if the boss declared it as failure. The steel plant at Port
Talbot in UK is a classic example of a project of this nature. Tata steel has 11 plants
in UK in Newport, Crosby, Rotherhamand Warwick to name a few out of which this
Port Talbot plant is the largest with 4000 employees. This is running at losses and
cannot be turned around. It was proposed to be sold off in March 2016. However,
after Mistry’s removal one billion pounds has been invested in the plant.
(ii) Operating Necessity: This refers to those projects which are required in order to
keep the system operating. It ensures that there is no halt in carrying out with daily
operations of the organisation. A project to build a ‘protective dike’ in case of an
impending flood which is expected to disrupt the plant operation falls in this category.
For such projects, no detailed or formal evaluation is undertaken. However, the cost is
kept as low as possible.
(iii) Competitive Necessity: Projects undertaken to maintain competitive position of the
organisation fall in this category. Modernization of plant at SAIL is an instance.
Academic institute undertaking re-structuring of course curriculum is yet another.
Projects falling under operating necessity are given priority over projects falling
under competitive necessity. For these projects also, no detail or numeric analysis is
undertaken.
(iv) Product Line Extension: Such projects are undertaken to fill a gap in the existing
product line or extend a product line. These are based on the foresight of the CEO as
to the likely impact such projects would have on the performance of the total system.
The top five automobile players have 85% of the market share while SKODA has
only 1% market share. The company realized this is because India is a market for
small cars and SKODA does not have a single car in its portfolio. As such it now
plans to launch one. This is an instance of product line extension by ‘fiiling the gap’.
(v) Comparative Benefit: When an organisation has many projects to consider, it would
select a ‘subset’ of these. It is often difficult to decide as to which to select. This is
mainly because the projects differ in terms of nature, benefits, costs and associated
risks involved. For instance, project for new product development, project for
automation of organisational functioning, which machine to select in part fabrication
process, etc are all of different from each other but all needed by the organisation. In
such cases, we can use ‘Q Sort’ method developed by Helin, et al. It involves a set of
steps.
Step-1: Put the projects in three categories; they being good, fair and poor.
Step-2: If any category (group) has eight or more than eight projects; mark each as
fair-plus or fair-minus.
Step-3: So each group should have eight or less than eight projects. Now projects in
each group are ‘ranked’ from best to worst. Any criteria may be used for ranking (or
an overall general criteria may be used).
A committee does this process of ranking of projects. First, members of this
committee individually mark them; this is followed by a consensus arrived at by all
members.
Step-4: Projects selected on the basis of ranking are then evaluated financially before
a final selection.
Numeric Models can be categories as ‘scoring based models’ and profitability based
models’.
Scoring Models: Such models use multiple criteria to evaluate a project. Such
models vary widely in their complexity and information requirements.
(i) Unweighted 0-1 Factor Model: Under this model, a set of relevant factors
are selected by management. These are listed. One or more raters score the
project on these factors. These raters are chosen from senior management
based on
(a) An understanding of organisation’s goals
(b) Knowledge of firm’s potential project portfolio.
The major advantage of this model is that it uses more than one factors in its
decision making process. However, its disadvantage is that it assumes all factors
(criteria) to be of equal importance.
Illustration-1.
Project:............
Rater:............... Date:.........
QualifyDoes Not Qualify
No Increase in Energy Requirement *
Potential Market Size *
Potential Market Share *
No New Facility Needed *
No New Technical Expertise Needed *
Need for External Consultant *
(ii) Unweighted Factor Scoring Model: This removes the disadvantage of the
earlier model. This incorporates the ‘degree’ to which the project meets each
criteria which is listed on a scale of 0-5 where ‘5 represents very good’, ‘4
represents good’, ‘3 represents fair’, ‘2 represents poor’ and ‘1 represents very
poor’.
Illustration-2.
Project:............
Rater:............... Date:.........
5 4 3 2 1
No Increase in Energy Requirement *
Potential Market Size *
Potential Market Share *
No New Facility Needed *
No New Technical Expertise Needed *

Need for External Consultant *
Total Score: (15+6+2)=23
(iii) Weighted Factor Scoring Model: This is an improvement to the above

model wherein weights are assigned to each factor; assuming that each factor
is not of equal importance. It assumes that one factor may be more important
than the other; and these factors are ranked in order (weights assigned) of their
importance. These weights are multiplied with the factor score to get ‘score
for that factor’. These weights are totalled to arrive at ‘total score for the
project’.
The weights are generated using any technique that is accepted by the
organisations policy makers; the most widely used and accepted is the Delhi
method developed by Brown and Dalkey of Rand Corporation in the 50s and
60s.
Illustration-3.
Project:............
Rater:............... Date:.........
(weights) (5 4 3 2 1)
No Increase in Energy Requirement 6 *
Potential Market Size 5 *
Potential Market Share 2 *
No New Facility Needed 1 *
No New Technical Expertise Needed 3 *
Need for External Consultant 4 *
Total Score: (6*4+5*4+2*2+1*2+3*1+4*5)=73
(iv) Analytic Hierarchy Process:

 Multiple Criteria decision making.
 Real world decision problems:
Multiple and diverse criteria
Qualitative as well as quantitative information
 Information is decomposed into a hierarchy of alternatives and criteria
 Information is then synthesized to determine the relative ranking of
alternatives
 Both qualitative and quantitative information can be compared using informed
judgements to derive weights and priorities
 Eg: Selection of a car (an SUV)
 First: Set Objective
Selecting an SUV
Second: Set Criteria
Style, Reliability, Fuel-Economy
Third: Set Alternatives
Mahindra’s XUV-500, Nissan’s Terranno, Ford’s Endevour, or Renault’s Duster
 Construct the Hierarchial Tree*
 Rank the Criteria- How do you determine the relative importance of these
criteria? Style more important than reliability; or reliability more important than
style but less important than fuel economy?
 According to me:
Reliability is twice as important as Style
Reliability is four times as important as Fuel Economy
Style is three times as important as Fuel Economy
 Create a Symmetric Matrix:
Table-1
Style Reliability Fuel Eco
Style 1/1 1/2 3/1
Reliability 2/1 1/1 4/1
Fuel Eco 1/3 1/4 1/1
 Now, Rank the Priorities:
Eigenvector
Iterate
1. Take successive squared power of matrix
2. Normalize the rows
3. Repeat, until difference between the successive row sums is less than a pre-
specified value
Steps to follow:
 Step-1. Set Objective

 Step-2. Set Criteria
 Step-3. Set Alternatives
 Step-4. Construct the Hierarchial Tree*
 Step-5. Rank the Criteria
 Step-5. Make Symmetry Matrix
 Step-6. Convert this to decimal
 Step-7. Multiply rows with columns to get row values
 Step-8. Add row values to get “row sum”
 Step-9. Add “row sums” to get “total of row sums”
 Step-10. Divide each “row sums” with “total of row sums”
 Step-11. Get normalized vector as shown below
 Step-12. Re-iterate. (repeat from step 7 to 11)
Step-5
Style 1/1 1/2 3/1
Reliability 2/1 1/1 4/1
Fuel Eco 1/3 1/4 1/1
Step-6

Style 1 0.5 3
Reliability 2 1 4
Fuel Eco 0.333 0.25 1
 Step-7 Multiply rows with columns to get row values

1 0.5 3
2 1 4
0.333 0.25 1
Row 1: Cell 1: (1*1)+(0.5*2)+(3*0.333)=2.999
Cell 2: (1*.5)+(0.5*1)+(3*0.25)=1.75
Cell 3: (1*3)+(0.5*4)+(3*1)=8, similarly all row values are arrived at.
Squared values are depicted below:
3.0 1.75 8.0

5.3332 3.0 14.0
1.1666 0.6667 3.0
 Step-8 Add row values to get “row sum”. The Row Sums are:
12.750
22.333
04.833
 Step-9. Add “row sums” to get “total of row sums”

12.750+22.333+ 04.833=39.912
 Step-10. Divide each “row sums” with “total of row sums” to get normalized row
sum.
12.750/39.912=0.3194
22.333/39.912=0.5594
04.833/39.912=0.1211
 Step-11. Get normalized vector as shown below.
0.3194
0.5594
0.1211
 Step-12. On re-iteration we get values as:
.3196
.5595
.1211
Next: On subtracting values of step 11 from values of step 12, we get the following
values(-0.0002), (0.0011) and (-0.0009)
We accept these as values showing our preference:
0.3196 for style, for reliability and for fuel economy.
0.5584
0.1220
WE RUN THE SAME FOR “RANKING ALTERNATIVES BASE ON RELIABILITY,

STYLE AND FUEL ECONOMY. (illustrated in class)
Now we rank alternatives as shown below:
Style Relia Fuel

XUV .1160 .3790 .3010 * .3196 = 0.3060
Terr .2470 .2900 .2390 * .5584 = 0.2720
Ende .0600 .0740 .2120 * .1220 = 0.0940
Dust .5770 .2570 .2480 * = 0.3280
Explanation:
(.1160*.3196)+ (3790*.5584) + (.3010*.1220) =0.3060
(.2470*.3196)+ (.2900*.5584) + (.2390*.1220) =0.2720
(.0600*.3196)+ (.0740*.5584) + (.2120*.1220) =0.0940
(.5770*.3196)+ (.2570*.5584) + (.2480*.1220) =0.3280
Profitability Based Models: These models see the return from the project and compare then with
the cost incurred.
These are-Payback Period Method, Net Present Value, Internal Rate of Return, and Profitability
Index Method.
There are also extension of NPV and IRR that is, Modified NPV and Modified IRR. These were
discussed in class.
Problems in AHP.
1. I have to choose between Dell (D), Lenovo (L) and Apple (A). Seeing the hardware
configuration (HC)
Apple is 6 times better than Dell
Apple is 8 times better than Lenovo
Dell is 4 times better than Lenovo
(Priority vectors-0.754, 0.181 and 0.065)
User friendly (UF)
Lenovo is 3 times better than Dell
Hardware Maintainability (HM)
Lenovo is 5 times better than Apple
Financing Availability (FA)
(Priority vectors-0.754 ,0.065 and 0.181)
Find final priority if HC, UF, HM, and FA are 0.553, 0.131, 0.271 and 0.045
respectively.
Ans: .0.680, 0.130 and 0.190
(Feb.10, 2015)
FOR LITERATURE ON NPV (and modified NPV) AND IRR (modified IRR) refer to
PROJECT MANAGEMENT BY PRASANNA CHANDRA. AVAILABLE IN SEMINAR.
So far we have considered independent decisions. We take up mutually exclusive projects and
compare them when project life is different and project size is different. Also both costs that is
capital as well as operating costs are considered.
Here we will focus on cost spread for one year (that is its equivalent cost for a year).
Example: ABC is considering buying a machine. Two alternatives exist-A and B, whose details
are:
Machine-A Machine-B
Capital Cost Rs 75,000 Rs 50,000
Life 5 yrs 3 yrs
Operating Cost Rs 12,000 Rs 15,000
Assuming cost of capital to be 12%, which would you opt for.
Cost of A= 75,000+ 12,000*PVIFA for 5 years at 12%
=75,000+12,000*3.605
=75,000+43,260=1,18,260
Cost of B= 50,000+ 15,000*PVIFA for 3 years at 12%
=50,000+15,000*2.402
=50,000+36,060=86,060
So far B seems to be better alternative.
But we need to spread these costs for the life of the project which is 5 years for A and 3 years for
B.
This we do by dividing the total cost arrived at by PVIFA. This is the UAE.
UAE for A=1,18,260/ PVIFA for 5 years at 12%
= 1,18,260/3.605
=32,804
UAE for B= 86,060/PVIFA for 3 years at 12%
=86,060/*2.402
=35,815
Therefore, A is a cheaper alternative.
REFER/PRACTICE THE PROBLEMS THAT WAS DISTRIBUTED IN CLASS.
Unit-4: Management of Infrastructure Projects
4.1 Financing Infrastructure Projects-Infrastructure Finance
4.2 Project Configuration & Role of a SPV
4.3 Project Parties & Their Role
4.4 Financing A Power Project
4.5 Managing Risks in Infrastructure Projects &Typical Risk Allocation In India
4.6 PPP Projects (& Cases discussed in class)
4.1 Introduction:
Infrastructure financing refers to capital required to produce economic services like electricity,
gas, telecommunication, water and transport works (like road, brides, sea port and air port and is
necessary for economic activity.
Good infrastructure helps in promoting economic services efficiently, promotes competitiveness

and supports high productivity. Poor infrastructure hampers economic growth.
The major characteristics of infrastructure projects are: they are highly capital intensive, involves
sunk cost and have long operating cycle.
It is important that government play an important role in planning and promoting infrastructure
projects because infrastructure is needed for economic development, it is an essential service,
such projects have a social dimension associated with it and also the project size is huge.
In India, infrastructure projects are largely owned and managed by the government or a
government undertaking but because of requirement of huge capital, and they being managed
better by the private sector; private sector participation is being encouraged.
Private initiative can take various forms-they can be in the form of contracted operations of
public utilities to full operation, operation, ownership and maintenance of the facility. Some
projects have significant social value like a low cost transportation; this is more suited for
government ownership while one which has a strong commercial attraction like
telecommunication project, it is more suited for private participation.
Infrastructure financing is different from conventional project financing mainly because most of
them are PPP and therefore they have to be handled carefully. A detailed understanding, analysis
and evaluation of the complexities and risks involved in the project have to be taken.
In developing economies, where infrastructure projects were traditionally planned, developed,

financed implemented and operated by the government but private participation is being
encouraged; it is necessary to support it by a regulatory, financing and legal framework.
What is a PPP?
Also called 3P and P3, is a c-operative arrangement between two or more public and private
sectors for a long term period. Historically, government all across the world has been using this
arrangement; however, it has got up lately. There is no consensus of how to define a PPP; but it
refers to long term arrangement involving infrastructure development. Most PPPs focus on
sharing of risk, long term relationship between public and private, and the use of private finance.
PPP refers to a contractual partnership between the public and private sector agency in which the
private sector is entrusted with the task of providing infrastructure facilities and services that
were traditionally provided by the public sector. Eg: A toll expressway project financed,
constructed and operated by a private developer.
This does not mean that the government is not involved in any way. The government has the
responsibility for ensuring that quality of service is being provided by the private party, and
reasonableness of cost is ensured of. The role of the government is to facilitate, enable and
monitor the service while the role of private partner is to finance, build and operate the service.
The basic characteristics of a PPP are:

The project stems from a government-led planning and prioritisation process. Eg: The Yamuna
Expressway concept was proposed by the then Chief Minister Mayawati in Dec 2007.
There is a genuine sharing of risks between the government and the private sector (Jaypee
Group).
The process of finalising a PPP involves a detailed cost appraisal, risk appraisal, bidding
procedure, stakeholder management and long negotiations before final closure. Therefore it is a
must to have a clear regulatory, legal and financial framework laid down.
Prominent examples of PPP are:
Delhi Noida Toll Bridge Project The DND Flyway
Ports of Mundra and Pipavav
Airport-IGIA, New Delhi
A private electricity generation project which is planned, developed, financed, constructed,

operated and maintained by the private sector has to rely on SEBs (State Electricity Board) for
‘off-take of power’ that is sale of electrical energy and receipt of payment. It sells the electricity
to the SEBs and receives payment. It cannot sell independently to any corporate.
The ownership and operation of infrastructure projects are separable and therefore a variety of
models exist to meet the characteristics of projects. They are: BOOT and BOT.
BOOT: Build, Own, Operate and Transfer.
Noida Toll Bridge Company Limited (NTBCL) was incorporated in 1996. It was promoted by
Infrastructure Leasing and Financial Services (ILFS) and New Okhla Industrial Development
Authority (NOIDA) and Delhi administration, as a SPV (Special Purpose Vehicle) to develop,
construct, operate and maintain the DND Flyway on a BOOT basis.
BOT: A road project the private sector may have been invited to build the facility, operate
during the concession period and finally at the end of the concession period, transfer the facility
back to the government without actually ever owning the same. In this case, ownership of the
road remains with the government and the private sector recovers the investment and a return
thereon by charging a levy on users of the road during the concession period. Yamuna
Expressway in an instance of the BOT project.
4.2 Project Configuration:
Since a number of risks are associated with infrastructure projects, project sponsors follow
some arrangement while implementing these projects. These are discussed under the
heading-SPV, Sponsors Contribution, Project Parties and Debt Equity.
(i) Special Purpose Vehicle (SPV): Projects are implemented in a SPV. SPV is a distinct
corporate entity incorporated with the objective of implementing and operating the
project. This ensures that the risks associated with the project are ‘ring-fenced’ and
does not flow back to the sponsors entities.
(ii) Sponsors Contribution: Project sponsors take an equity stake in the project. The
equity stake depends upon the project cost, sponsors ability, objectives of the project
and also on the lenders requirements.
(iii) Project Parties: The SPV enters into contractual agreements with various parties like
project contractors, off-takers, operators, government and project lenders.
(iv) Debt-Equity: Infrastructure projects can be financed at a relatively higher gearing
ratio (debt-equity ratio) as compared to conventional projects.
Eg: In Indian road projects, where private enterprise would construct, operate, and
maintain the road during the concession period and would earn an assured annuity
from NHAI irrespective of the actual level of traffic, lenders may be willing to
consider a higher gearing of up to 4:1.
In case of power projects, where off-take is assured to the extent of certain Plant Load
Factor (PLF) by the concerned SEB, lenders have traditionally financed on a debt-
equity (DER) of 2.33:1.
For conventional projects, where the project (and therefore the lenders) is exposed to
pure market risks, DER would rarely exceed 2:1.
Conclusion:
In infrastructure projects, each project party ensures that contracts are:
-as iron-clad as possible,
-very little is left to interpretation
-objectives and obligations are clearly laid down
-risks are clearly allocated
-must have financial and legal advisors who would advise the SPV and sponsors on
appropriate risk allocation
-And a legal framework should exist to ensure that risk allocation is correctly defined.
4.3 Key Project Parties & Their Role:

As the project progresses, different parties get associated at different stages of the
project-from development stage to financing stage to construction stage to operations
stage. For instance the financial advisors exit once financing is fully tied up and the
project has drawn loan from the lenders and equity from investors and the EPC
Contractors are associated during construction phase.
(i) Project Sponsors: They are responsible for converting the concept into the
project. They have a role in setting up the SPV. They also identify and recruit
HR to implement the project. They lay down clear guidelines of their
expectations and also subscribe to a significant portion of the equity.
(ii) Project Vehicle: They are responsible for delivery of project during the
financing phase, implementing the project, and also operating the project.
They select and appoint all the project contractors, negotiate contracts,
executes contracts, arranges for finance and finally also supervises
construction, commissioning and operations either directly or through O&M
Contractors.
(iii) Project Lenders: They provide debt to finance the project. A consortium of
project lenders led by a ‘lead bank’ ascertains bankable project cost, develops
pattern of financing, disburses debt, performs monitoring role during the
construction phase and on commissioning of project monitors performance
and operation of project till all debt is repaid. They however do not interfere
in the day to day operations of the project. But in case of default, their rights
increase; and in extreme cases, depending upon what is written in project loan
contract, can take over management of project as well as sponsors equity.
(iv) EPC Contractors: They work on turnkey basis. Their objective is to deliver the
project as per pre-defined parameters, within stipulated time and within
stipulated cost. They provide performance guarantee to the SPV. Further, they
design the project, procure all engineering skills, procure equipment to
construct the project, erect project facilities, ensure a test and trial run and
finally also commissions the project. They may sub contract certain part to
other contractors but still he is solely responsible for delivery.
(v) O & M Contractors: They are responsible for operation and maintenance of
the plant. Performance parameters are pre-defined in the O & M Contract. O
& M Contractors provides the managerial skill.
(vi) Government: The government is a key party. They provide concession to SPV
to set up project. It sees that legislative and regulatory framework exists
within which they operate.
4.4 Financing A Power Project:
SPV PPA SEB

SPV
PP
 Owns the generation assets Purchases all power from SPV
 Enters into a Power Purchase Agreement (PPA) with SEB
PPA is the most important contract that is negotiated and executed.
PPA lays down:
(i) Conditions under which power will be sold to SPV.

(ii) Conditions under which power will be purchased by SEB.
(iii) Conditions under which payments would be made.
(iv) State government guarantees payment obligation of SEBs.
(v) SEB guarantees minimum off-take from SPV:
-if it fails to do so, a minimum payment is made
-minimum payment covers all fixed charges by project
(depr+int on term loan+fixed OM expenses+return on equity)
(vi) Payment mechanism and security mechanism is laid down which ensures that
payment is made on time
(vii) In India, a three-tier security mechanism operates
First tier-L/C
Second tier-Escrow Account
Third tier-Govtguaranatee
(viii) Formula for computing tariff is also laid down
(Fixed charges+variable cost like fuel cost+incentive for performance)
(ix) Responsibility of SEB to lay down grid. (That is the SEB is responsible for
construction of inter-connection facilities to ensure that the energy generated by
the SPV can be sold through the state electricity grid
(x) The conditions of termination-
-sustained default by SPV
-sustained default by SEB
-Force Majeure (Act of God)
If the cost of inter-connection facilities is high and its construction is time
consuming, it is seen as a serious risk by the project lenders. Else, if the inter-
connection facilities are not ready on time, the project, even though it is ready to
generate power, will not be in a position to sell power.
(xi) Exit: PPA allows an exit to the project’s shareholders and lenders in the event it is
terminated by providing for an SEB buyout of the facilities and laying down
different buyout prices that would be payable by the SEB under different
termination conditions. It also ensures that appropriate remedy periods are
available prior to affecting a termination.
For power projects, lenders consider PPA to be a very important project document. The
lenders evaluate the sufficiency of negotiated tariffs especially if the ‘fixed charges’
element is pre-determined and not cost based. The lenders also evaluate the need of inter-
connection facilities. Lenders also evaluate the ability of the SEB to complete
construction of this facility prior to COD (Commercial Operation Date) of the project. A
key provision of the PPA is the security and credit enhancement mechanism and lenders
need to be satisfied with the above.
4.5 Managing Risks in Infrastructure Projects:

All projects have an element of risk involved. But, private infrastructure projects,
particularly in developing countries are characterised by a high degree of risk and
investors perceive them to be more risky because are undertaken by SPV and not by
established utility companies having a strong balance sheet.
Therefore, one needs to first-identify the various kinds of risks and take appropriate
steps to mitigate them. These risks are: Construction Risk, Operating Risk, Market
Risk, Interest Rate Risk, Foreign Exchange Risk, Payment Risk, Regulatory Risk and
Political Risk.
(i) Construction Risk: Due to unexpected developments during the construction
period, there may be time and cost overruns or completed projects may not
fulfil the project performance criteria.
The transportation and power sector is more exposed to construction risk as
compared to telecommunication and urban service.
Construction risk is often shifted to EPC contractor who is given turnkey
responsibility with penalties for any delay or non performance.
However, since penalties is often capped, construction risk cannot be totally
eliminated; and therefore, the investors bear the residual risk.
(ii) Operating Risk: This refers to performance of project. Operating risk tends to
be lower when the project is using an already tested technology; however, it
tends to be higher when the technology is changing rapidly (as is observed in
telecommunication projects).
Operating risk can be mitigated by entrusting the operation to an experienced
and competent O&M contractor with provision for liquidated damages and
taking appropriate insurance cover.
(iii) Market Risk: Market or demand conditions may change and the reality may be
very different from what was expected earlier (what was assumed in
determining the viability of the project).
In such cases risks may be mitigated thus:
Eg may be in power projects.-When a private producer sells to a monopoly
purchaser (SEB), market risk can be mitigated by entering into a power
purchase agreement that guarantees a minimum level of payment.
Eg may be in road projects.-When the private producer sells to, the project
sponsors may ask the government to guarantee a certain minimum payment if
volume of traffic falls below a certain level. Such a guarantee may be
balanced by sharing a portion of revenue when traffic exceeds a certain level.
(iv) Interest Rate Risk: The project company borrows money at a floating interest
rate. Any change in interest rate during the life of the project causes interest
rate risk. This is very true for infrastructure projects because such project are
highly capital intensive, involve long payback period, and have a high gearing
ratio. Such risks can be mitigated by transferring it to consumers through a
traffic formula that treats interest costs as a pass-through cost. Interest rate
risks can be hedged through devices such as interest rate swaps and interest
rate caps and collars.
(v) Foreign Exchange Risk: When projects ely on foreign currency debts,
unfavourable variation in exchange rate results in higher debt servicing burden
in terms of domestic currency.
Foreign exchange risks can be managed by shifting it to consumers through a
formula that automatically provides adjustment for exchange rate changes.
Alternatively, the project company may resort to currency swaps.
(vi) Payment Risk: An infrastructure project may face the risk of not being paid
for services provided. The degree of risk is more in case of power projects,
when the company sells to a monopoly buyer (SEB); and the degree of risk is
less in case of road projects as the project company sells its service to many
and generate revenue in the form of toll. The same is true for a telecom
operator.
In case of power projects, the risks may be mitigated by a mechanism like an
L/C, govt guarantee or an escrow account.
(vii) Regulatory Risk: Infrastructure projects are subject to regulations that covers
tariff determination. A change in regulatory framework becomes a source of
risk.
(viii) Political Risk: Infrastructure projects are highly visible and touch the lives of
public in basic areas; therefore, they are vulnerable to political action which
can affect their financial viability. Political action may lead to cancellation of
licence and nationalisation. Such risks can be mitigated through political risk
insurance offered by multilateral organisations; such as Multilateral
Investment Guarantee Agency, or bilateral investment protection agreement.
Or such risks can be reduced by incorporating into the project agreement a
suitable provision for compensation against arbitrary action subject to
international arbitration. Yet another option is provided by the World Bank.
World Bank’s new partial risk guarantee investment which covers debt service
payments if they are interrupted because the govt does not fulfil its specific
obligation.
Management of Risks
Type of project Cons Oprn Mkt Int Payt Regl
ROAD H L PrSp PrSp M M
PORT H M M PrSp L L
AIRPORT H H H PrSp L M
POWER M L L PrSp H H
H-High, L-Low, M-Medium, PrSp- Project Specific

The developer carries all types of risks in India unlike UK & other Latin
American Countries where govt guarantee minimum revenue and share the
same also in case that exceeds threshold limit.
(Updated April, 2019)
UNIT-5
Unit-5 Risk Assessment, Contract Management & People Management in Projects
5.1 Risk Management
5.2 Concept of Risk Breakdown Structure & Risk Impact Matrix
5.3 Risk Management in Construction Industry
5.5 Managing Project Team (Strategies to Build a Cohesive Project Team
& Create Team Charter)
5.6 Qualities of a Project Manager
5.1 Introduction-Risk Assessment/Management
It goes without saying that every business is subject to numerous risks. We need to identify all
the areas where our business is vulnerable only with the aim of hedging those components.
This is important as only when one knows where the risks are can one think of protecting
oneself from these risks and dangers. Therefore you need an assessment of risk. You need to
assess risk because only then will our business have a higher chance of staying or becoming
successful. Also it would keep one ahead of the competition.
What are the areas which are most vulnerable? They could be ones supply chain, ones
customers or even ones employee.
Supplier: If number of suppliers is few, it is of concern. What if they do not supply on time?
Customer: Another is customer. But if ones company’s products are rare and in great demand;
one does not face much risk. B but if high competition one can run the risk of losing its
customers.
Employee: Our managerial and business structure can also be a huge financial risk. For
instance if one rely on only one individual to keep the company running, what do you do
when that person is no longer available? This is often the case with small businesses, and
some larger ones, where the operations are handled by only one manager.
Therefore a company needs to make an assessment of its risks.
What is 'Risk Assessment'
Risk assessment is a general term used across many industries to determine the likelihood of loss
on a particular asset, investment or loan. The process of assessing risk helps to determine if an
investment is worthwhile, what steps may be taken to mitigate risk and, through specific ratios,
the upside reward compared to the risk profile. It determines what rate of return is necessary to
make a particular investment succeed.
Techniques for Risk Assessment-

We use different techniques for Risk Assessment to reduce the likelihood of incurring large
losses. Eg: credit analysis. This is used by lenders to analyze a potential client's financial data to
determine whether to lend money, and if so, how much and at what interest rate. This is
assessment of his repayment capacity which could include available
investments, collateral property, income or cash on hand.
Risk Assessments for Business

Business risks include various kinds of risks like: new competitors entering the market,
employee theft, data breaches, product recalls, operational, strategic and financial risks, and even
natural disaster risks. Therefore, every business should have a process in place to assess its
current risk levels and put in place procedures to mitigate the worst possible risks.
Risk Management:
Risk management begins with risk identification, Risk Assessment, Risk Response
Development and Risk Response Control.
What Is Risk Identification?
The risk management process on a project consists of four steps: risk identification, risk
assessment, risk response development, and risk response control. A thorough risk management
analysis is necessary to ensure that the project is delivered by an agreed time, and at an agreed
cost and agreed design.
Risk identification is the process of listing potential project risks and their characteristics. This
is documented in a risk register, which also includes the source of risk, potential risk responses,
and risk categories. Identified risks can also be represented in a risk breakdown structure - a
hierarchical structure used to categorize potential project risks by source.
See figure below for RISK BREAKDOWN STRUCTURE
5.2 RISK BREAKDOWN STRUCTURE
Project Risk
Schedul Risk Cost Risks Scope Risks
Poor Estimating Lack of Funding NewTesting

Method Method
Requirements Inflation New Technology

Uncertainities Uncretainities
Insufficient
Labor Rate Scope Creep
Resources
Changes
Sub-contractors Inexperienced Regulation
Performance Estimators Changes
Often risk is seen consisting of four kinds of risk-they being technical risk, external risk,
organizational risk and project management risk.
Project Risk
Tech. Risks External Org. Risks Pr. Mgt.Risks

Riskk
Req-ments Sub-Contraction & Quality of Staff Culture
Suppliers
Technology Regulation Sufficient Staff Planning
Estimators
Control
Communication
Risk identification is usually done in the beginning of a project; but new risks can be identified
throughout the project life cycle as the result of internal or external changes to a project.
Therefore risk identification remains an iterative process and is undertaken throughout the life of
the project.
The main purpose of risk identification is to minimize the negative impact of project, and
to maximize the positive impact of project opportunities. Once risks have been identified, a
project manager tries to control the impact of a risk on a project. If one is aware of the project
risks; it improves the chances of project success.
Risk identification also provides information for the next step of the risk management process:
that is risk analysis.
Risk Identification Procedures-
An effective risk identification process should include the following steps:
1. Creating a systematic process for risk identification- The risk identification process
should begin with identification of project objectives and success factors.
2. Information gathering – One needs to gather reliable and high quality information for
effective risk management.
3. Apply risk identification tools and techniques - The choice of the best suitable
techniques will depend on the types of risks and activities, and also on organizational
maturity.
4. Documenting the risks – The risks identified is documented in a risk register and a risk
breakdown structure is created.
5. Documenting the risk identification process - To bring improvement in the risk
identification process and also make the process easy for future projects, it is important to
record the approach, participants, and scope of the process.
6. Assess the effectiveness of the process – It is necessary to analyse the effectiveness of
the chosen process.
TOOL USED for Risk Identification:
A tool found useful for systematic risk identification is SWOT analysis. It consists of:
 Strengths - Internal organizational characteristics that can help to achieve project

objectives.
 Weaknesses - Internal organizational characteristics that can prevent a project from

achieving its objectives.
 Opportunities - External conditions that can help to achieve project objectives.
 Threats - External conditions that can prevent a project from achieving its objectives.
Both opportunities and threats are risks that can have a positive or negative effect on a project,
and therefore each requires risk responses.
Risk Prioritization-This helps to rank the risks from most critical risk to least critical risk.
Different qualitative and quantitative techniques are used for Risk Impact Assessment and
prioritization.
See below for an example: RISK IMPACT MATRIX
5.2 RISK IMPACT MATRIX
RISK Likelihood Impact Risk Control Effective?**

Score *(response)
Client pays late (C1) 5 2 10 Send reminders
CEO leaves the company (C2) 3 3 09 Comm-n
Supplier not supply on time 1 5 05 ?

(S1)
Emergence of low cost 4 5 20

competitor (E1)
Loss of electricity supply 2 2 04
(Likelihood is measured thus. 1 stands for rare, 2 for occasional, 3 for somewhat frequent, 4 for
frequent and 5 for very frequent).
(Impact is measured thus. 1 stands for v-low, 2 for low, 3 for moderate, 4 for high and 5 for very
high).
Impact matrix can also be created as shown below. C1, C2, E1 etc are codes defined for each
factor.
Vhigh E1 C1
High
Mod C2
Low
Vlow
rare occs sfre freq vfre
Risk Response Development- This helps develop strategic options, and determine action to
enhance opportunities and reduce threats to project objectives.
A member of the project team is assigned the responsibility of each risk response.
The risk response strategy for threats is:
Avoid-Try to eliminate the cause of risk and thus eliminate the threat
Mitigate- All risks cannot be eliminated. Try to reduce the impact and thus mitigate the risk.
Transfer-Try to transfer risk to other party; like in insurance purchase or warranty or guarantee
The risk response strategy for opportunity is:
Exploit-Add work or change the work so that opportunities occur.
Enhance-Increase change of positive impact
Share- Give ownership of opportunities to a third party
ACCEPT-A passive acceptance means what action would be taken is left to the chance or
occurrence of risk. An active acceptance means devising a contingency plan which would be
carried out in case risk occurs.
And therefore it means that cost and time has to be allocated. A decision to accept the `risk must
be communicated to all stakeholders.
Whenever a project manager responds to risk (threats or opportunities); it must be ensured that:
1. The response strategy is decided upon by team leader or any team member.
2. A time is set for its execution.
3. The response is in lines with the severity of risk
4. A single response can address multiple risks
Outputs of Plan Risk Response:
A risk register
Project Management Plans
Project Documents –All these need to be updated as outputs of Plan Risk Response.
Project Management Plan Updates:
Project Management Plans can be updated by new work or activities or work packages that are
added, removed, assigned to different sources.
Risk Register Updates:
Residual Risks- These are risks which remain after completion of risk response planning. These
are those risks that are accepted and contingency plans are developed.
Secondary Risks- Risk which may be created due to implementation of current risk response.
Contingency Plans-If specific risk occurs (x risk), this (y) would be the response.
Risk Response Owner-The risk is assigned to an individual who would develop risk response
and implement them if risk occurs.
Risk Triggers-The events which trigger the contingency response.
Contracts-Contracts issued to deal with risks are to be noted in risk register
Fall Back Plans-If risk response plan fails (Contingency Plans), the action to be taken.
Reserves (Contingency)-Needed for cost and time risk.
Control Response:
Determine likelihood of risk triggers, identify and monitor residual risks, Use risk
identification as an iterative process, evaluate the effectiveness of risk response.
(And this is put as additional columns in the table on risk impact matrix shown above.
*Sending reminders
**It was found to be effective.
----------------
5.3 RISK in CONSTRUCTION PROJECTS
Construction projects are complex. They are full of uncertainties. Therefore, risk analysis and its
management is important. Risks emerge from a number of the different sources.
1. Multiple participants-There are multiple parties involved in construction projects. These

are client, contractor, designers and financiers. (*SEE BELOW for details) These
individuals and organisations have different experience and skills; and also have different
expectations and interests. This creates problems and confusion. And it becomes difficult
for even the most adept and experienced project manager and contractor to manage such
projects. Risk management is therefore essential as it helps the key project participants –
client, contractor or developer, consultant, and supplier – to meet their commitments and
also reduce the negative impacts on construction project performance which is measured
in relation to cost, time and quality objectives.
2. The construction industry is heterogeneous and enormously complex. There are several
major classifications of construction that differ markedly from one another. These could
be housing, non-residential building, heavy, highway, utility, and industrial. Further,
construction projects could include new construction, renovation, and demolition for both
residential and non-residential projects, as well as public works projects, such as streets,
roads, highways, utility plants, bridges, tunnels, and overpasses.
3. Change in the project environment-The problem multiplies with the size of the project as
uncertainties in project outcome increase with size. Large construction projects face more
uncertainities as compared to projects of a smaller size. Large construction projects are
exposed to uncertain environment because of such factors as planning, design and
construction complexity, involvement of various interest groups (owner, consultants,
contractors, suppliers, etc.), resources (manpower, materials, equipment, and funds)
availability, environmental factors, the economic and political environment and statutory
regulations. Construction projects therefore can be very vulnerable to changes in
environment and can be unpredictable.
4. Cost of risk-is one of the largest expense items-. Construction projects are largely
affected by cost escalations. These cost escalation can be with respect to material (cement
and steel) required to name a few.
5. Maintaining relationship with the many parties: There are many parties involved in such
projects and maintaining smooth relationship with so many becomes a big issue.
6. Uniqueness of Construction projects: Construction projects are subject to more risks due
to its unique features, such as long duration, complicated processes, unpredictable
environment, financial intensity and dynamic organisational structures.
Many approaches on risk classification have been suggested particularly for construction
projects.
(i) Risks has been categorized into two groups in accordance with the nature of the
risks, i.e. external and internal risks.
(ii) Risks has also been categorized into into six groups- local, global, economic,
physical, political and technological change.
(iii) The internal risks are relevant to all projects irrespective of whether they are local
or international. International projects tend to be subjected to the external risk
such as unawareness of the social conditions, economic and political scenarios,
unknown and new procedural formalities, regulatory framework and governing
authority, etc.
Most common way to classify the construction risks are into four groups they being- technical,
external, organizational, and project management risks. SEE DAIGRAM BELOW.
Risk
Tech. Risks External Risks Orgal Risks Pr Mgt. Risks
Design Process Contractual

Relations Risks
Construction Risks Force Majeure
Environmental Risks
Social Factors
Environmental
Factors
Technical Risks: Technical risks could be design process risks, construction risks and
environmental risks.
Design Process-Owner involvement in design, Inadequate and complete design, Errors in

completion of structural or foundation, Design errors and omission, Design process takes longer,
Client requests change in design, Failure to carry out work according to contract are some of the
design risks.
Construction Risks-Inaccurate contract time estimates, Work permission, Worker and site safety,
Construction cost overrun, Technology changes are some of the construction risks.
Environmental Risks- Environmental analysis incomplete or wrong, Off-site and on-site

wetlands are some environmental risks.
External Risks: External risks could be contractual relations risks, Force Majeure risks, social
factors and environmental factors.
Contractual Relations Risks-Landowners unwilling to sell is one instance.
Force Majeure-Exchange rate changes, Changes in political climate are some instances of Force
Majeure.
Social Factors-Local communities pose objection is an example of risk associated with social
factors.
Environmental Factors-Historic site
Organisational Risks:-Inconsistent time, cost and quality objectives; Inexperienced staff; loss
of critical staff, project manager heavy workload are instances of organizational risks.
Project Management Risks:-Lack of co-ordination and communication; Project definition not

clear; Too many projects; Consultant or Contractor delay; Communication break-down with
project team, Project team conflict are examples of project management risks.
RISK ASSESSOR MODEL: A Risk Assessor Model (RAM) has been developed which is
concerned with the assessment of risk for major construction activities. Herein, risk has been
defined as a measure of the probability, the severity, and the exposure of all hazards of an
activity. This model helps to determine the risk associated with a particular activity and the
justification factor for a proposed remedy. Knowing the value of risk helps the contractors to
identify the high risk of major construction activities and would enable them to allocate safety
precautions (mitigate the risk) in a more efficient manner.
PARTIES INVOLVED IN CONSTRUCTION PROJECTS:
*There are many parties involved in a construction project. The main parties are
1. Employer/client
Client refers to one who is getting the work done.It is the party procuring the work (typically, a
land owner or land developer). In relation to building contracts, this entity is usually referred to
as the 'employer'. He party is commonly referred to as the 'client'.
2. Contractor
A main building contractor is engaged by the employer to carry out and complete the works. The
contractor engages a number of sub-contractors to carry out and complete separate parts (small
components) of the work.
3. Professional team
Often a team of professional consultants is appointed. These consultants can be broken down
into two categories.
The Designers The Non-designers
Architect of record Quantity surveyor
Civil and structural engineer Contract administrator
Mechanical and electrical (or building Project manager (usually in larger

services) engineer projects only)
4. Financier
Financier is also a party to the contract. This refers to the banks and other institutions and parties
(for example, government organisations in the case of urban infrastructure). They give finance.
Depending on the size of the project, there may be more than one financer, that is may be one
bank or a syndicate of banks.
There are many perspectives from which one can study Contract Management (eg a legal angle).
We will study or approach Management of Contract from the perspective of a Project
Manager. For this we refer to project management as consisting of “processes”; which is
defined as a process of Defination, Planning Implementation, and Close.
Refer diagram-1 below:
Definition Planning Implementation Closure
Usually there are two (or more) different legal parties involved in a project. In most cases, it
is the customer (or client) and the contractor or the contractor and the supplier. So it’s a
customer-contractor relationship or a contractor-supplier relationship.
In dealing with project of a large size,there is a “proposal team” who represents the
contractor, who own the project process and has responsibility of the project till the
planning stage (that is he own the project from definition to planning stage (Eg Architect
involved in design and planning) until the contract is signed. Then they hand over the project
to an implementation team. So in the first two phases, a proposal manager is in charge and he
transfers the project responsibility to a project manager for implementation and closure of the
project.
Definition of a Contract: A contract is any agreement between two or more parties where
one party agrees to provide certain deliveries or services, and the other party agrees to pay
for those deliveries or services. Refer to diagram-2 below:
Offer by the Company + Acceptance byCustomer
Negotiation…
= CONTRACT
Customer Accepts with
Changes
= + Acceptance byCustomer
New offer by Customer
Therefore, a contract can be defined as an offer by a company and acceptance of the offer by
the customer. Some negotiations do take place between the two parties, in most cases, before
one of them accepts the ‘last’ offer of the other party (but this is not reflected in the contract).
Many a time contracts lead to dispute and end up in a legally binding contract situation.
Therefore the offer has to be prepared with a lot f care.
Definition ofContract Management: Contract Management is a continuous process, starting

with analysis and evaluation of the customer’s inquiry, and carrying on until contract
closure, upon fulfillment of all contractual obligations.
See diagram-3 below:
Analyse and Design, Follow-Up Follow-Up

Evaluate Negotiate & Execution of Claim Situations Close the
Project Analyse the the Contract & & Claim Contract
Requirements Contract Contract Mgt. Settlement
Contract management activities are the responsibility of the project manager and the entire
project team. However, in case of larger projects which involve large contracts, the best
practice would be to involve a full-time contract manager who would bring in his
professional expertise and experience, takes responsibility for the process and ensure the
contribution of all team members.
Contract preparation involves analysis and evaluation of the other parties’ requirements, a
clear statement of one’s owns requirements and negotiation in order to reach agreement
between the two parties involved. On signing the contract and handing over of the project, it
is the duty of the implementation team to look into a few things. They need to analyse the
contract to ensure that they understand what has been signed and what needs to be
implemented. When preparing and signing the contract during the definition and planning
phase, one anticipates how one would like to implement the project and this is written in the
planning document. This implies that that all project planning is based on how the project
environment would develop over the implementation and closure phase.
Environment may change and one may have to deviate from what was planned and from the
contract (from what had been specified in the contract). Therefore it is always advisable and
also helpful to prepare a project plans and contracts in such a way so that the necessary
changes can be implemented with mutual agreement of all the parties involved.
Therefore a “change management process” is also integrated into the contract.
Events that lead to deviation in the contract
Records: What happened? When? Who was involved, etc
Notification to all the parties affected or involved; about the event
Analysis: Impact? What are the alternative solutions?
Notification to all the parties affected or involved; about the impact

However, a change is executed to the contract or contract is changed only upon successful
negotiation and mutual agreement of a change order.
In many instances,
Change mutualOffer
requirement: agreement is more
of one or not reached because
alternative of difference
solutions: addressedintowards
interpretation
the of
technical, commercial and contractual requirements. However the execution of the change takes
contract partner
place in order to comply with the higher prioritized project requirements or goals. This is called a
‘claim situation’. And a claim management process is also integrated within the contract.
See flowchart-2 for claim process.

Change Order: Acceptance of that offer
Execution of the Change Order
Payment which is fixed in Change Order

Events that lead to deviation in the contract
Records: What happened? When? Who was involved, etc
Notification to all the parties affected or involved; about the event
Analysis: Impact? What are the alternative solutions?
Notification to all the parties affected or involved; about the impact
Execution of the Change. i.e. of one of the alternative solution
Claim: request for compensation of the execution of the change
Claim settlement, following a claim settlement procedure
Payment agreed upon claim settlement

Disputes do occur while managing contracts; therefore, a contract dispute resolution method
or claim settlement process is also integrated.
These methods are described in brief below:
1. Negotiation between the two contract parties: In most cases, disputes are settled after
negotiation between the two parties.
2. Independent Expert Opinion: Both the parties agree to call a ‘neutral third party’ for
determination of specified elements of the contract, interpreting them, and giving an ‘expert
opinion’ on the case.
3. Mini-Trial or Executive Tribunal: This process is often called a ‘mini-trial’. In this process,
the parties make a formal and a brief presentation of their case to a panel of senior
executives from each party and a mediator (or expert) who acts as a neutral chair-person.
After, the presentations by both the parties, the executives meet (with or without the expert) to
negotiate a settlement on the basis of what was presented.
4. Dispute Review Board: Used in major construction contracts. It is a ‘standing’

adjudication panel. It is appointed at the beginning of the project and stays in close touch with
it, adjudicating disputes as and when they arise.
5. Conciliation or Mediation: These are similar to each other. Conciliation refers to a process in
which the third party takes a more activist role in putting forward terms of settlement or
any opinion on the case between both the parties. In case of mediation, the third party
provides support to the parties during negotiation but does not interfere with the content of
the case or its settlement.
6. Adjudication: In this a neutral party acts as the adjudicator. He makes summary binding
decisions on contractual disputes without adhering to the procedures of arbitration.
7. Arbitration: This is a formal process to which both parties agree. There are three
arbitrators who are neutral and independent. They make a formal and binding decision in
the first instance. On an average the process takes two to three years. It follows the
arbitration clauses set by the International Chamber of Commerce (ICC), Paris, and it
requires support of external lawyers.
8. Court Trial: Arbitration is the first instance. After arbitration as the first instance, one can go
for a formal court trialas second and then third instance.
Steps one to six are not legally binding but as disputes do arise in the course of fulfillment of
contract they have to be kept in mind. Arbitration and court trial have a formal character, is
time consuming (takes years) and also expensive, the first six are advisable options and
therefore the parties should arrive at a consensus on which of the options they would opt for in
case dispute do take place.
Daigram-3 Fundamentals of a successful claim
Claim
Strategy
Record of facts, pictures,

receipts,
Invoices, notifications,
minutes of meetings,
Time sheets, site dairies,
etc.
Everything counts that
provides evidence
Contractual Basis
5.5 Strategies to Build A Cohesive Project Team & Creation of Charter:
A cohesive team could be said to be one that works well together, is able to steer clear of
obstacles, also very amicably resolve differences which arise among team members. A strategy
that a manager can adopt a cohesive team is given below:
1. Diversity: While creating a team, create a diverse team consisting of members of various
generation, functional areas and cultures. That would be a team with many ideas and
perspectives while a team with similarity of thoughts would score low on the ‘idea
scale’.
2. Skill Sets: One great team for one project may be unsuitable for another project as the
requirements of that project may differ. Therefore, consider the skill sets of each team
member and the requirement of the project.
3. Managing Team: Project manager has to be involved all through in managing the
project. Help in the decision making process, resolve conflicts when they arise.
4. Clarity of Goals: Every project has a clear set of goals but those goals should be
understood by all team members. Also define which team member is responsible for
which part of the work.
5. Communication: Project manager must be a good communicator and also a good
listener. All differences get sorted out only by effective communication. If there is no
way one can vent his anger, frustration, disappointments, a member would be
discouraged and spoil the entire project team spirit.
6. Motivation:Motivate team members and ensure that you trust them and rely on them.
7. Brain-Storming: Before a project begins, brain storming sessions are advisable as an
individual’s thoughts can be turned into an idea that everyone gets interested in. Group
think often provides a bonding between team members.
But now the question arises...Does your team know where it is heading??
For this we need to create a Team Charter.
Creation of Team Charter:

Working within a team with team members can be a great experience only when all
team members work together as a cohesive unit and not in different directions. But
individuals have their own agenda and start pursuing their own goals.If no direction
is provided, each would focus on awrong set of objectives and not utilize their time and
resources and ultimately the team will fail to deliver. Team charters are helpful here.
Team charters are documents that define what, when, where and how. They define
the purpose of the team, how it will work, what are its deliverables (outcomes). They
act as ‘roadmaps’ that the team and the sponsors create this at the very beginning of the
project to ensure that all involved are clear about what is expected of them and how
they could achieve them.
It is of great help when the team is in trouble and people need to regain their view of
the ‘big-picture’. It also speeds up the process of ‘forming, storming, norming and
performing’.
The format of the charter differs from project to project from situation to situation
and from team to team.
We begin with defining the Context.
1. Context: This is the introduction to the charter. It answers the ‘WHY’. It lays down
why the team was formed, what problem it is trying to solve, how the problem (the
project) fits in with the broader objectives of the organization and the consequences if
the problem is unchecked.
It answers:
What is the problem?
What are the deliverables?
Why is it important?
Eg: The team has to increase co-operation and cohesion between a multinational
company’s business units in different countries.
2. Mission: Mission is at the heart of the Charter. With the mission the team knows
what it has to achieve. Without mission in their sight, each individual starts to pursue
their individual goals.
Eg: Mission is to develop a plan that increases cohesion between different business
units so that they start selling common product range.
3. Goals & Objectives: The mission is converted into measurable goals and objectives.
These act as targets and milestones. Goals and objectives should be SMART-
Specific, Measurable, Attainable, Relevant and Time-bound. Eg: Find out why
countries are not working in tandem.
4. Composition & Roles: Identify that members have the skills necessary to achieve the
objectives. Also ensure that sufficient number of people is there in the team to pursue
the goals. Ensure that the team is well represented from different functional areas.
Analyse mission and objectives to identify what skills and experience are needed,
who therefore is needed in the team, what each is expected to do to achieve the
objective. Therefore, list each member name, and against his name, list his role. Also
identify who would be the team leader.
5. Authority & Empowerment: Identify team members and what they can do and what
they can not do. Also analyse do they have sufficient resources in terms of time, and
money?
6. Resources: Identify the resources available to the team to accomplish their goals.
This includes money, time, equipment and people. Changes to resource need should
be monitored regularly and new members and additional funds may be deployed if
need be.
7. Operations: This lays down how the team will operate on a daily basis. This may be
very detailed or in brief depending upon the situation or project in hand. Often for
large projects they are very detailed and for small project spanning a short time period
they are in brief.
8. Negotiation and Agreement: A good charter is a result of extensive discussion with
all team members. Discussion is essential to ensure
 Team charter is creditable
 Team charter is achievable
 Sufficient resource is available
Also it is signed by all members and commit to the principles it contains and the roles assigned.
Signing is a symbolic gesture but it ensures that:
 Each understands what are the expectation from the project

 Knows the objectives
 Knows his contribution
 All are committed to its achievement as it was laid by them and PROJECT
STANDS GOOD CHANCE OF SUCCESS
5.6 Qualities of a Project Manager (discussion based and game based)
The project manager must have a number of skills to get the task completed successfully,
on time and within budget.
These are some of the qualities of a project manager.
 Foresight: Vision and foresight is essential. He should be able to see far into the future as to
how the project would evolve overtime and also make contingency plan if he expects something
to go wrong. He should have the ability to see the big picture as well as be able to break it down
into manageable chunks of work through creation of work break down structure..
 Communication and Interpersonal Skills:Members of a project are from diverse area,
background, different departments. Good communication and interpersonal skills are essential
features to bind the members of the project team together. It has been observed that ninety
percent of his time is spent in communicating and interacting with team members.
Communication also means he should keep all members informed and updated about the project
and its progress.
 Ability to Motivate: He should have a positive mindset, be motivated all the time and also have
the ability to motivate his team members to pursue project goals.
 Planning and Budget Management: This is also an essential ingredient. Budget refers to
budgeting of time, money and also people resources. Therefore he should be efficient as well as
organised. He must follow schedules; have time management skills and the ability to meet
deadlines.A good project manager will set achievable deadlines for their team and understands
what steps to take and how to get there.
 Emotional and Practicality: He should be passionate and emotional about the project at hand
but should also be practical to see it through and secure timely funding.
 Empathy: He should be good at managing people, should trust team members and also secure
their trust. He would be able to secure their trust and confidence only when he is empathetic.
 Honest &Transparency: He should be a person team members can rely on. He should be
transparent about his work. A great project manager always means what they say, and approach
everything with honesty so their team members know that they can trust them. He should also
have courage to admit his mistakes.
 Knowledge: He must have technical knowledge and also knowledge about the project at hand.
Then the team members would look up to him. This helps command respect and authority. Often
project managers have lack of understanding of tools and he lacks understanding of how project
management should work. The skill needed for executing a project is often lacking. Often
various tools like PERT, CPM, Gantt charts, leveling diagrams are often lacking in a project
manager.
....................... ....................... ................

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Project Management

UNIT-1 Concept of Project

1.1 Concept of Project

1.2 Types/ Categories of Projects:

1.3 Project Family Tree:

1.4 Characteristics of Project:

1.5 Project Life Cycle

1.6 Project Life Cycle Curve-An Analysis

UNIT-2 Project Life Cycle (Cont)

2.1 Detailed Project Report

2.2 Issues in Termination of Project-When & who, Termination Process

2.3 Project Final Report-Prepration of Final Report

2.4 Work Breakdown Structure-Origin, Concept, types, how to create

2.5 Concept of Earned Value Analysis (EVM) and calculation

2.6 Approaches to Project Management (Framework for Project Management)

UNIT-3: Selection of Projects & Its Analysis

3.1 Scouting for Project Ideas (Discussed)

3.2 Selection of Projects:

3.3 Numeric & Non Numeric Models for Project Selection

3.4 Concept of Uniform Annual Equivalent (UAE)

3.5 Technical Analysis:

3.6 Market Analysis: (self study)

Unit-4: Management of Infrastructure Projects

4.1 Financing Infrastructure Projects-Infrastructure Finance

4.2 Project Configuration & Role of a SPV

4.4 Financing A Power Project

4.5 Managing Risks in Infrastructure Projects &Typical Risk Allocation In India

4.6 PPP Projects (& Cases discussed in class)

Unit-5 Risk Assessment, Contract Management & People Management in Projects

5.1 Risk Management

5.2 Concept of Risk Breakdown Structure & Risk Impact Matrix

5.3 Risk Management in Construction Industry

5.4 Contract Management

5.5 Managing Project Team (Strategies to Build a Cohesive Project Team

& Create Team Charter)

5.6 Qualities of a Project Manager

1.2 Concept of Project

1.2 Types/ Categories of Projects:

1.3 Project Family Tree:

1.4 Characteristics of Project:

1.5 Project Life Cycle

1.6 Project Life Cycle Curve-An Analysis

1.1 Concept of Project:

Project can be defined as a temporary endeavor undertaken by the organization to create a

1.2 Types/Categories of Projects:

There are various ways in which a project can be classified.

(C) Projects may further be classified as Greenfield or Brownfield projects; Greenfield

COST TIME QUALITY

1.3 Project Family Tree:

Project: Nano project is an instance of project.

Work Package: Identification of location, resources requirement etc.

Task: Creating responsibilities centers for undertaking each task.

Family Tree for Initiative of ITC:

Plan: Social Sector Footprint

Programme:Social Farm &Forestry or

Social Moisture Conservation or

Economic Empowerment of Women: Self Help Group orWomen Entrepreneurship, etc

Project: WOW initiative (Wealth Out Of Waste) recycle paper

Work Package: Resources needed.

Men who would be engaged in collection of paper.

Bags to be distributed for segregating waste.

Area (residential as well as commercial) to be covered in Hyderabad.

Transport vehicle to take waste collected to segregation center, etc.

Task: Identify who will do what-procuring bags, distributing them …