Business System

A business system refers to the total picture of men, machine, materials and paper
work in
in-volved
volved in the implementation of any phase of a project
project. The purchasing system
system,
for example, involves purchase officers, vendors, materials, specifications, general
purchase conditions and purchase order.

P
Procedure
d

A procedure, on the other hand, is a planned sequence of operations for carrying out a
recurring
ecu g worko involved
o ed in a syste
system uuniformly
o ya and
d co
consistently.
s ste t y In tthe
e pu
purchase
c ase syste
system,,
procedures need to be developed for shortlisting vendors, issuing enquiry to them,
evaluation of offer and finally placement of order.
 SYSTEM CHARACTERISTICS

1. It is a set of elements = A system constitutes of a finite number of elements

2. The elements are organized systematically = There is most of the time a pattern
in which the elements are arranged

3. The elements are interrelated = Each element has its own individual function to
perform, it in turn makes other elements perform. The absence of one element in a
system
y will disable another element if the latter depends
p for its input
p on the output
p
of the former.

4. A system refers to a self-sufficient organic whole = The constituent elements do

produce outputs
outputs, they do not have any use value outside the system and cannot
stand on their own.

5. A system has a behaviour characteristic of its own = In a system, individual

elements lose their identity and seek to adjust, cooperate and act or react with the
environment collectively
in pursuance of a common goal.

6. A system has a hierarchy = At a micro-level a system consists of elements, at a

macro-level a system may only be an elemental system of a larger system
constituted by several such systems.
CLASS OF SYSTEMS
1. artificial systems

2. natural system

3. self-regulating system

4. controlled system

5 Information bound system

5.
 DESIGN OF SYSTEMS

1 Th
1. The system
t mustt be
b as natural
t l as possible.
ibl OOne cannott putt a tiger
ti and
d sheep
h
together and hope that they would work harmoniously for a common cause.

2. The system
y must be information bound. The elements in the system
y must
communicate with each other. They must continuously send information and also
receive feed-back information till the system outlives its purpose.

3 There must be provisions for external intervention

3. intervention, if only as an exception
exception. A
system works best when there is least outside interference.
PROJECT WORK SYSTEM DESIGN

The design philosophy is to create a set of inter-related elements so that they can
regulate and control themselves without outside intervention e.g. When a contract is
awarded for a system, say water supply and distribution, not only the number of
coordination and intervention points get reduced but it also offers the system
contractor flexibility in decision making. On the other hand, if for the same system the
consultant does the design, the owner does the procurement, the various vendors
supply the equipment and the contractors of different trades are engaged for civil,
mechani-cal and electrical works, then the controllability of the system would not be as
assured
WORK BREAKDOWN STRUCTURE (WBS)

Work breakdown structure, WBS in short, is a technique which breaks down a work
p
into its components and at the same time establishes the connections between the
components on the lines of a family tree. Work breakdown structure, thus, enables
the integration of people, hardware and software into a total project work system
PROJECT EXECUTION PLAN (PEP)

1. Contracting plan

This is the first step in the preparation of a project execution plan. Owners
invariably need some agencies with whom they can share responsibilities.

2. Work packaging plan

A work package in a project is the smallest division of work where it still

retains the characteristics of a project. When a project is progressively
di id d iinto
divided t systems
t andd th
the systems
t iinto
t subsystems,
b t a stage
t iis
ultimately reached where further division into components will strip it of its
multi-disciplinary character—the work at that stage can be considered to
be a work p package.
g Work p package
g p planning g refers to the identification of
these packages, grouping them or keeping them as they are, in order to
form viable contracts.
3. Organization Plan

Having decided the number of contracts and their scope, the owner is now in a
position to set his own house in order. Normally, the owner's intervention can be
in three ways:

a) Coordinate the various interfaces between the various agencies lined up for
execution.

b) Activate and motivate each agency so that they perform as they should.

c)) Involve directlyy in critical areas to assist the agencies

g in solving
gpproblems.
4. Systems and Procedure Plan

Since project management calls for organization of disorganized work forces, a heavy
emphasis has to be placed on routine systems and procedure so that no intervention
is required in the day-to-day
day to day operation of a system. There are at least eight routine
sub-systems of project management for which appropriate procedures can be
conceived right at the start of the project implementation.

1. Contract management
2. Configuration management
3. Time management
4
4. C t managementt
Cost
5. Fund management
6. Materials management
7. Man management
g
8. Communications management
SUB-SYSTEMS OF PROJECT MANAGEMENT

1. Contracts Management

1. Prequalification procedure
2 General conditions of contract
2.
3. Tendering procedure
4. Procedure for tender evaluation and award of a contract
5. Procedure for signing an agreement
6 Measurement
6. M t procedure
d for
f completed
l t d workk
7. Billing and payment procedure
8. Free issue material reconciliation procedure
9. Change g order pprocedure
10. Work inspection and acceptance procedure
11. Completed work take-over procedure
2
2. C fi
Configuration
ti Management
M t

1 Procedure for the finalization of project scope in terms of work

1.
breakdown structure
2. Procedure for the finalization of basic engineering package
3. Procedure for finalization on engineering design basis
4. Equipment numbering and control procedure
5. Drawing numbering and control procedure
6. Design revision procedure
7 Value engineering procedure
7.
8. Design change control procedure
9. Vendor drawing approval procedure
10. Quality assurance and inspection procedure
11 Technical
11. T h i l audit
dit procedure
d ffor th
the completed
l t d plant
l t
3. Communications Management

1. Procedure for correspondence and distribution of mail

2. Filing procedure
3. Reporting procedure
4
4. P
Procedure
d ffor meeting
ti and d recording
di minutes
i t off meetings
ti
5. Procedure for data logging
6. Project newsletter and general information procedure
7. Procedure for making gppresentations
8. Procedure for project workshops
9. Control-room maintenance procedure
Suggestions scheme
4. Man Management System

1.Manpower requirement forecasting procedure

2.Procedure for requisitioning manpower
3 Recruitment procedure
3.Recruitment
4.Procedure for training or orientation of project staff
5.Procedure for role analysis and goal setting
6.Procedure for performance evaluation
7.Procedure for delegation of authority
8.Counselling procedure
9.Procedure for staff mobilization and demobilization
10 Procedure for establishing a new site
10.Procedure
5. Time Management

1. Procedure for preparation of WBS, workload assessment and numbering

of work packages
2 Procedure
2. P d ffor d
development
l t off project
j t schedules
h d l iincluding
l di estimation
ti ti off
resources
3. Procedure for progress measurement
4. Procedure for p project
j review
5. Procedure for revision of project schedules
6. Procedure for obtaining feedback and updating of schedules
7. Procedure for reporting
8 Procedure for management evaluation of bids to assess capability of
8.
vendors/contrac-tors to adhere to schedules
9. Procedure for management audit
10. Procedure for work tracking and day-to-day follow-up
6. Materials Management

1. Equipment numbering procedure

2. Vendor qualification procedure
3. Procedure for obtaining DGTD clearance and import licence
4 General conditions of purchase
4.
5. Ordering procedure including repeat orders and change orders
6. Purchase order numbering procedure
7. Quality assurance and inspection procedure
8. Vendor evaluation procedure
9. Customs clearance procedure
10. Packing, marking and despatch procedure
11. Insurance and claims procedure
12. Warehouse management procedure
13. Billing and payment procedure
14. Materials status reporting procedure
15 Bulk
15. B lk material
t i l control
t l procedure
d
16. Expediting procedure
7
7. C tM
Cost Managementt

1. Project
1 P j t costt estimation
ti ti procedured
2. Cost coding and cost accumulation structure
3. Procedure for cost updatirg and revision
4. Procedure for manhour control
5. Procedure for value engineering and ongoing cost reduction
6. Procedure for price evaluation of bids
7. Procedure for commitment control
8 Procedure for change control
8.
9. Procedure for cost reporting
10. Procedure for project cost review
11. Procedure for expenditure control
12. Procedure for cost and productivity audits
8
8. Fund Management

1. Procedure for the finalization of expenditure budget

1
2. Procedure for forecasting fund requirement
3. Procedure for mobilization of funds
4. Procedure for opening letter of credit
5. Procedure for ensuring security of advance payments
6. General terms of payment
7. Procedure for processing payment requests
8 Fund control procedure
8.
9. Procedure for expenditure audits
10. Procedure for requisition and approval of additional funds
NETWORK

Structurally, a network is a graphical model depicting the inter-relationship

bet een the various
between ario s elements of the project work
ork ssystem.
stem Thro
Through
gh its graphical
form, the network provides visibility to all concerned not only about their inter-
dependence but also what is ahead of them and what may happen should there
be a change
g in the desired relationship.p
 CPM network
t k

A CPM network is basically a deterministic network. The activities to be carried

out and the time each mayy consume are not likely
y to vary
y from what was reckoned
at the time of development of the network.

scenario it represents is quite realistic, the arithmetics involved are complex.

PERT network

In a PERT network the assumption is different. Activities in a PERT network are, of

course deterministic but time is not.
course, not Time duration is considered probabilistic,
probabilistic and it
is assumed, at the time of development of network, that it will vary according to
some known statistical distribution.
Decision network

A decision network, on the other hand, assumes that the activity itself may vary.
Accordingly, some probability is associated with each possible alternative activity;
the sum of the probabilities for the various alternatives
alternatives, of course
course, equals 1
1.0.
0 The
time duration on each alternative is, however, deterministic.
GERT network

The most complex network is perhaps the GERT network. In a GERT network both
activity and time are considered probabilistic. Further, a GERT network for the first
time provides for repetition of an earlier activity based on feedback
feedback. Though the
scenario it represents is quite realistic, the arithmetics involved are complex.