INTRODUCTION TO PROJECT

MANAGEMENT

DR SAMYADIP CHAKRABORTY

SESSION :1 & 2
Objectives
• To provide participants with:
• An awareness of the importance of applying good practice
Project Management in projects of any size.

• An understanding of essential elements, including the

Leadership Role of the Project Manager, Project Planning,
Risk Management and Stakeholder Engagement.

• An understanding of the principle elements of design

control to be applied within projects.
Usual Challenges
• Project environment
• requirements may be hard to define and may change
• producing one or a few items rather than production line

• Uncertainties of leading edge R&D ⇒

• solutions may have to be developed, including possibly new
technologies
• ‘first of a kind’ so planning and estimating is difficult

• Need to balance the desire to get maximum performance

versus achieving acceptable reliability/availability
What is a Project?
“Unique process consisting of a set of coordinated and controlled activities with
start and finish dates, undertaken to achieve an objective conforming to
specific requirements, including constraints of time, cost, quality and
resources”
• A Project is a planned set of activities
• A Project has a scope
• A Project has time, cost, quality and resource constraints

• A project has a definable goal or purpose, and well-defined end-items,

deliverables, or results, usually specified in terms of cost, schedule, and
performance requirements.
• Every project is unique; often an one-time activity, never to be exactly
repeated again.
• Projects are temporary activities: ad hoc organizations of personnel, material,
and facilities organized to accomplish a goal within a scheduled time frame.
• Projects cut across organizational and functional lines because they need
skills and talents from different functions, professions, and organizations.
• The organization doing the project usually has something at stake, failing at
which would jeopardize the organization or its goals.
• Project passes through several distinct phases in the project life cycle. Often,
the tasks, people, organizations, and resources change as the project moves
from one phase to the next.
What is Project Management?
• The art of organising, leading, reporting and completing a
project through people
• A project is a planned undertaking
• A project manager is a person who causes things to happen
• Therefore, project management is causing a planned
undertaking to happen.
 Well Known projects Internationally
• Two examples of activities that required project organization and management are the
Manhattan Project to develop the first atomic bomb, and the Pathfinder Mission to land and
operate a rover vehicle on the surface of Mars.

• Projects such as these are unparalleled not only in terms of technical difficulty and
organizational complexity, but also in terms of the requirements circumscribing them.

• In ancient times, project requirements were more flexible. If the Pharaohs needed more
workers, then more slaves or more of the general population were conscripted.

• If builders ran out of funding during construction of a Renaissance cathedral, the work was
stopped until more funds could be raised (one reason why some cathedrals took decades
or centuries to complete).

• If a king ran out of money while building a palace, he simply raised taxes. In other cases
where additional money could not be raised, more workers could not be found, or the
project could not be delayed, then the scale of effort or the quality of workmanship was
simply reduced to accommodate the constraints.

• In the Manhattan and Pathfinder projects, the requirements were not so flexible. First, both
projects were subject to severe time constraints. Manhattan, undertaken during World War
II, required developing the atomic bomb in the shortest time possible to end the war. For
Pathfinder, the mission team was challenged with developing and landing a vehicle on Mars
in less than 3 years’ time and on a $150 million budget.
Exercise 1
• Write down three attributes of a good Project Manager
Project Manager Role
• A Good Project Manager
• Takes ownership of the whole project
• Is proactive not reactive
• Adequately plans the project
• Is Authoritative (NOT Authoritarian)
• Is Decisive
• Is a Good Communicator
• Manages by data and facts not uniformed optimism
• Leads by example
• Has sound Judgement
• Is a Motivator
• Is Diplomatic
• Can Delegate
Stakeholder Engagement
Stakeholder
“A person or group of people who have a vested interest in
the success of an organization and the environment in
which the organization operates”
Exercise 2
• Write down three typical project stakeholders
Major aspects to be optimized
• Cost
• Time
• Quality
 Typical Stakeholders
• Sponsor
• Funding Body
• Customer
• Suppliers
• End User
• HSE/Environmental Agency
• Maintenance Team
• Neighbours/Community/Shareholders
• Fusion Community
• Interfaces
Stakeholder Engagement process
• Identify Stakeholders
• Assess needs
• Define actions
• Establish communication channels
• Gather feedback
• Monitor and review
Key Points in Project Set-up and Definition

■ Create Project Management Plan (PMP)

■ Be clear of scope and objectives
■ Establish clear statement of what is to be
done (WBS)
■ Establish Risks to be Managed
■ Establish Costs and Durations
■ Establish Resources Required
Project management Plan - PMP
■ Highlights of major aspects
⇨ Project Objectives, Scope, Deliverables
⇨ Stakeholders (Internal & External)
⇨ Work to be done (WBS)
⇨ Project Organisation and Resources (OBS)
⇨ Project Costings (CBS)
⇨ Project Schedule
⇨ Procurement/Contract Strategy
⇨ Risk Management
⇨ Quality management
⇨ Change Management
Project Planning
Project Planning
• Adequate planning leads to the correct
completion of work
Planning
• Inadequate planning leads to frustration towards the end of
the project & poor project performance

Project Start Project End

Project Risk Management
Project Risk
“Project risk is an uncertain event or condition that, if it
occurs, has a positive or negative effect on a project
objective”
Risk Impact
Threat → Scope → Poor Quality Product
Threat → Schedule → Late Delivery
Threat → Cost → Overspend

• In addition there are health, safety and environmental

threats that must be managed (CDM Regulations)
Project Monitoring and Control
Project Monitoring
• Typical Monitoring Activities
• regular reviews of progress against schedule using WBS as basis
(Plan against Baseline)
• regular review of actual costs (O/P from SAP) against budgeted costs
and Earned Value at WBS level
• regular review of resource loading
• regular progress meetings with project team
• regular meetings with contractors
• production of periodic progress reports
• risk reviews
• inspections/ audits
 Project Control
• Typical Control Activities
• assign responsibilities at Work Package level
• staged authorisation of work to be done
• staged release of budgets (staged release of WBS(e) numbers)
• ensure PM has a ‘Management Reserve’ under his control
• seek corrective action reports when WPs go ‘off track’ (overrunning or
overspending)
• release Management Reserve carefully
Confirm Completion
• Ensure design records are complete and accurate
• Ensure any outstanding actions or issues are addressed
• Ensure Maintenance Records are produced
• Ensure User Manuals are produced
• Hold a formal Post Project review
Cost Estimation
and Budgeting
 Cost management
• Data collection & cost estimation
• Cost accounting
• Cost controll

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 Common Sources of Project Cost

§ Labor

§ Materials

§ Subcontractors

§ Equipment & facilities

§ Travel

§ …
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 Types of Costs

v Direct Vs. Indirect

vDirect: clearly assigned
vIndirect: overhead, administration, marketing

v Recurring Vs. Nonrecurring

v Fixed Vs. Variable

v Normal Vs. Expedited

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 Developing direct labor cost
Total direct labor cost =
= (hourly rate) x (hours needed) x (overhead charge) x (personal time)

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 Cost Classifications

Non-recurring

Expedited
Recurring

Variable
Normal
Indirect
Direct

Fixed
Costs
Direct Labor X X X X
Building Lease X X X X
Expedite X X X X
Material X X X X

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 Cost estimation
• Clear definition of project costs at the beginning
decreases the possibility of estimation errors.
• With greater initial accuracy the likelihood of
completing within budget estimates is greater.

• To be able to create good estimations the project

must be broken down by deliverables, work
packages and tasks.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 8-33

 Cost Estimation Methods

Ø Ballpark (order of magnitude) ±30%: preliminary

Ø Comparative ±15%:
historical data, parameter estimation

Ø Feasibility ±10%: real data, after planning

Ø Definitive ±5%: after design, known prices

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 Learning Curves
Learning curve theory states that as the quantity
of items produced doubles, costs decrease at a
predictable rate. The unit curve:

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 Problems with Cost Estimation

ü Low initial estimates

ü Unexpected technical difficulties

ü Lack of definition

ü Specification changes

ü External factors

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 Budgeting

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 Creating a Project Budget
Statement
of WBS The budget is a plan
Work that identifies the
resources, goals and
Project
schedule that allows
Plan
a firm to achieve
Scheduling Budgeting those goals

• Top-down: from overall project costs to major wp-s

• Bottom-up: from work packages to overall project cost
• Activity-based costing (ABC)

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 Activity-Based Costing
Projects use activities & activities use resources

1. Assign costs to activities that use resources

2. Identify cost drivers associated with this activity
3. Compute a cost rate per cost driver unit or
transaction
4. Multiply the cost driver rate times the volume of
cost driver units used by the project

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 Budget Contingencies
The allocation of extra funds to cover
uncertainties and improve the chance of
finishing on time.

Contingencies are needed because

• Project scope may change
• Murphy’s Law is present
• Cost estimation must anticipate interaction costs
• Normal conditions are rarely encountered
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 8-40
 Planned and actual costs
• Planned cost – Committed cost = Cost variance
• Variance can be positive or negative
• Negative variance is always bad, but the positive
is not necessarily good.
 Examples
• What is the variance if the budgeted cost is 200
and the actual cost is 250?
200 – 150 = variance thus
Variance = -50

• What is the actual cost if the budgeted cost

is 2000 and the variance is 500?
2000 – actual cost = 500 thus
Actual cost = 1500

• What is the planned cost, if the actual cost

is 120 and the variance is -30?
Planned cost – 120 = -30 thus
Planned cost = 90
 3+1 alternative sources of a
positive variance
• Good control 
• Some outgoing not recorded 
• Some activity costs overestimated
planning:
costs:
+
• Activities for the period in question are not
finished

3 alternative sources of a negative
variance
• Poor control 
• Extra unbudgeted work was included 
• Some activity costs were underestimated

 Example
• There is a project with three activites planned for a year
– ‘a’ with a planned cost of 1000,
– ‘b’ with a planned cost of 500 and
– ‘c’ with a planned cost of 1500.
• ‘a’ activity turned out to be more expensive (with an
additional 200).
• ‘b’ was done as budgeted.
• ‘c’ is not finished in the year, and only 1000 was spent on
it.
• An additional ‘d’ activity was needed and performed with
a cost of 300.

• What is the cost variance for the given year?

(1000+500+1500) – (1200+500+1000+300) = 0
• What is the conclusion on the cost performance?
 How to find out the true reason?

• Improving the data :

percentage of activity remaining
percentage of activity completed
• Variance analysis:
– Variance can be broken down into a set of subbudget
variances (like labour, overhead etc.)
– A subbudget variance may be split into:
• Volume/quantity variance
• Rates/prices variance
 Cost & schedule variances
• For any instant we can calculate:
– BCWS: budgeted cost of work scheduled
– BCWP: budgeted cost of work performed
– ACWP: actual cost of work performed
• From these, two variances can be derived:
– Schedule variance in cost terms = BCWP – BCWS
– Cost variance = BCWP – ACWP
 Cost & schedule variances

Cost variance

negative zero
Schedule
variance

negative Running late Running late

with overspent but no overspent
zero On time On time
but overspent and no overspent
 Example
Project data:
• Representative survey project with 300 given addresses and
3 interviewers
• Interviewers are paid as follows:
– 1000 HUF per day per interviewer as a fixed pay
– 400 HUF per interview as a variable pay
• Time schedule:
– 10 interviews per day per interviewer
– Work packages: 30 interviews per day

a) Calculate the BCWS for every work package & day.

b) Given the following progress report for the first 6 days,
calculate the percentages of activity completed, the
BCWP and the ACWP.
 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day10
A 15000
B 15000
C 15000
D 15000
E 15000
F 15000
G 15000
H 15000
I 15000
J 15000
BCWS 15000 30000 45000 60000 75000 90000 105000 120000 135000 150000
BCWP
ACWP
 Progress report
Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day
10
A 18 8 4
B 16 10 4
C 14 10 0 0
D 12 6 6
E 16 8
F 12
G
H
I
J
BCWS 15000 30000 45000 60000 75000 90000 105000 120000 135000 150000
BCWP

ACWP
 Progress report
Day 1 Day 2 Day 3 Day 4 Day 5 Day 6
A 18 60% 8 87% 4 100%
B 16 53% 10 87% 4 100%
C 14 47% 10 80% 0 80% 0 80%
D 12 40% 6 60% 6 80%
E 16 53% 8 80%
F 12 40%
G
H
I
J
BCWS 15000 30000 45000 60000 75000 90000
BCWP 9000 21000 35100 48000 59000 72000
ACWP 10200 22800 37000 50400 62800 75600
 Calculate the variances for day 6
Schedule variance in cost terms = BCWP – BCWS
72000 – 90000 = -18000

Cost variance = BCWP – ACWP

72000 – 75600 = -3600

The project is running late and overspent.

 Forecasting and comparison of
projects
• Schedule performance index (SPI) = BCWP/BCWS
• Cost performance index (CPI) = BCWP/ACWP
• Budgeted cost to complete (BCC) = BAC - BCWP
• Estimated cost to complete (ECC) = BCC/CPI
• Forecast cost at completition (FCC) = ACWP+ECC

• Calculate these for the previous example.

 Solution
• BAC = 150 000
• CPI = 72 000 / 75 600 = 95.24%
• SPI = 72 000 / 90 000 = 80.00%
• BCC = 150 000 – 72 000 = 78 000
• ECC = 78 000 / (720/756) = 81 900
• FCC = 75 600 + 81 900 = 157 500
 Problem solving
• There is a small project with the following network
diagram: a b d e

• The following table contains the information on the

activity durations and costs:
Activity label Duration (day) Cost of the
activity
a 1 100
b 1 50
c 2 60
d 3 90
e 2 40
• Plot a Gantt chart from the information above and calculate
the BCWS for every day of the project.
 Solution
task Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7
A 100
B 50
C 30 30
D 30 30 30
E 20 20
BCWS 100 180 240 270 300 320 340
 Problem solving
• In the previous project, the project manager
receives a progress report of the first 4 days,
with the following information:
– Activity ‘a’ is completed
– Activity ‘b’ is completed
– Activity ‘c’ is 50% completed
– Activity ‘d’ is 33.33% completed
– Costs are calculated with completition ratio
• Calculate BCWP and ACWP for the first 4
days
• Calculate CPI, SPI, BCC, ECC and FCC
 Solution
• BCWP = ACWP = 100 + 50 + 0.5(60) + 0.33(90) =
= 210
• CPI = BCWP / ACWP = 1
• SPI = BCWP / BCWS = 210 / 270 = 0.78
• BCC = BAC – BCWP = 340 – 210 = 130
• ECC = BCC / CPI = 130
• FCC = ACWP + ECC = BAC / CPI = 340
 Thanks for the attention

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 8-61

Project Life Cycle
 Project
Execution
 Project Management
Project Risk management

09/10/2021
Project Risk
• Likelihood of an event
• Impact of event on project

• Risk = f(likelihood, impact)

• Risk Management The process involved with identifying, analyzing,
and responding to risk. It includes maximizing the results of positive
risks and minimizing the consequences of negative events
Why Project Risk Management
• A proactive rather than reactive approach.
• Reduces surprises and negative consequences.
• Prepares the project manager to take advantage
of appropriate risks.
• Provides better control over the future.
• Improves chances of reaching project performance objectives within budget and on time.
• Project problems can be reduced as much as 90% by using risk analysis
• Positives:
• More info available during planning
• Improved probability of success/optimum project
• Negatives:
• Belief that all risks are accounted for
• Project cut due to risk level
Key Terms
• Risk Tolerance – The amount of acceptable risk
• Risk Adverse – Someone that does not want to take risks
• Risk Factors
• Probability of occurrence
• Impact of event
• Range of outcomes
• Timing of event
What is a Risk Management Plan?
• Methodology – Approach, tools, & data
• Roles & Responsibilities
• Budgeting – Resources to be put into risk management
• Timing – When and how often
• Risk Categories – Risk Breakdown Structure (RBS)
• Definitions – Risk probabilities and impact
• Probability and Impact Matrix
• Stakeholder tolerances
• Reporting formats
• Tracking
Risk Management Plan
Risk Management Process
• Risk Identification
• Risk Assessment
• Risk Response Planning
• Risk Monitoring and Control
STEP 1: RISK IDENTIFICATION
Internal Sources
• Market Risk
• Assumption Risk
• People risk
• Structure/process risk
• Financial Risk
• Technical Risk
Rate the project/process based on the following features to assess the technical
risk,
1. Maturity
2. Complexity
3. Quality
4. Dependency or Concurrency
RISK IDENTIFICATION
External Sources

• Market conditions
• Labor availability
• Competitors actions
• Government regulations
• Interest rates
• Customer needs & behavior
• Supplier relations
• Weather
RISK IDENTIFICATION
Risk Identification Techniques

• Analogy
• Checklist
• WBS Analysis
• Process flow diagram
• Brain storming (Fish Bone)
• Delphi technique
• Interviewing
Risk Checklist
Cause and Effect Diagram (Ishikawa and fishbone)

Testing Inadequate Project

Time Prioritization

Product
Delivered
Late

Personnel Materials Insufficient Bad Specs

Resources

Potential Causes Effect

Risk Breakdown Structure
RBS for an IT project
Risk Register
• The main output of the risk identification process is a list of identified risks and
other information needed to begin creating a risk register
• A risk register is:
• A document that contains the results of various risk management processes and that
is often displayed in a table or spreadsheet format
• A tool for documenting potential risk events and related information
• Risk events refer to specific, uncertain events that may occur to the detriment or
enhancement of the project
Risk Register Contents
• An identification number for each risk event
• A rank for each risk event
• The name of each risk event
• A description of each risk event
• The category under which each risk event falls
• The root cause of each risk
Risk Register Contents (cont’d)
• Triggers for each risk; triggers are indicators or symptoms of actual
risk events
• Potential responses to each risk
• The risk owner or person who will own or take responsibility for each
risk
• The probability and impact of each risk occurring.
• The status of each risk
Sample Risk Register

• No.: R44
• Rank: 1
• Risk: New customer
• Description: We have never done a project for this organization before and don’t know
too much about them. One of our company’s strengths is building good customer
relationships, which often leads to further projects with that customer. We might have
trouble working with this customer because they are new to us.
• Category: People risk
• Etc.
2. Risk Assessment
• Scenario analysis for event probability and impact
• Risk assessment matrix
• Failure Mode and Effects Analysis (FMEA)
• Probability analysis
• Decision trees, NPV, and PERT
• Semiquantitative scenario analysis
Risk Assessment
• Risk likelihood
• Composite Likelihood Factor (CLF)
• Risk Impact
• Risk Impact: Composite impact Factor (CIF)
• Risk Consequence:
• Risk Consequence Rating: RCR = CLF + CIF – CLF(CIF)
CLF
Impact Scales of a Risk & Major Project Objectives
(Examples for negative impacts only) for CIF
Probability and Impact Matrix
• Define Probability Scale & Impact Scale

Impact Scale Probability Scale

Consequence Health and Safety Likelihood of Occurrence
Likelihood Class (events/year)
Fatality or multiple fatalities
Extreme expected <0.01% chance of
Not Likely (NL) occurrence
Severe injury or disability likely; or
High some potential for fatality 0.01 - 0.1% chance of
Low (L) occurrence
Lost time or injury likely; or some
potential for serious injuries; or 0.1 - 1% chance of
Moderate small risk of fatality Moderate (M) occurrence
First aid required; or small risk of 1 - 10% chance of
Low serious injury High (H) occurrence
Negligible No concern Expected (E) >10% chance of occurrence
Probability and Impact Plots
Rate each
risk on
scales
then plot
on matrix
Develop
mitigation
technique
for risks
above
tolerance
Probability and Impact Matrix
FMEA

Failure Mode and Effects Analysis (FMEA)

Impact × Probability × Detection = Risk Value
Risk Register Update
• Add
• Probability and Impact Matrix results
• Perform quality check on results
• Categorize the risks to make them easier to handle
• Perform urgency assessment to determine which risk need immediate
attention
Risk
Register
3: Risk response Development
• Mitigating Risk
• Reducing the likelihood an adverse event will occur.
• Reducing impact of adverse event.
• Avoiding Risk
• Changing the project plan to eliminate the risk or condition.
• Transferring Risk
• Paying a premium to pass the risk to another party.
• Requiring Build-Own-Operate-Transfer (BOOT) provisions.
• Retaining Risk
• Making a conscious decision to accept the risk.

7–105
Contingency Planning
• Contingency Plan
• An alternative plan that will be used if a possible foreseen risk event actually
occurs.
• A plan of actions that will reduce or mitigate the negative impact
(consequences) of a risk event.
• Risks of Not Having a Contingency Plan
• Having no plan may slow managerial response.
• Decisions made under pressure can be potentially dangerous and costly.

7–106