PROJECT MANAGEMENT

PE 309
MODULE 1
Dr. L N Pattanaik
Assoc. Prof.
Dept. of Prod. Engg.
BIT Mesra
Course Objectives:
This course enables the students to:
1 Comprehend the scope and types of projects
2 Identify the Project Life Cycle and project constraints
3 Construct organizational structure of project management
4 Realize environmental issues and social cost benefit analysis of projects
5 Apply project scheduling tools (PERT and CPM)
Course Outcomes:
After the completion of this course, students will able to:
• CO1 Recognise the project morphology, organizational structure and elements of project
• CO2 Incorporate the importance environmental issues in projects
• CO3 Handle real-life projects as in various organizations
• CO4 Solve complex scheduling problems in project management using PERT/CPM
• CO5 Prepare project report and budget planning
SYLLABUS
Module 1: Definitions and basic terms [7 classes]
• Definition and types of project, Turnkey projects, Scope of project and
creep, Project life cycle, Project constraints
Project Engineering Vs Project Management

• Project Engineering is related to the technical aspects of project

management
• Generally, a Project Manager manages a project (tasks, schedule,
budget, resources, etc.). ... Project Engineer often refers to the
individual supervising technical tasks, on-site - often including project
management as well (think “technical project manager”).
Project Definition
• A project is “a temporary endeavor undertaken to create a unique
product, service, or result”
• A collection of linked activities, carried out in an organised manner,
with a clearly defined START POINT and END POINT to achieve some
specific results desired to satisfy the needs of the organisation
Characteristics:
• Temporary with specific start and end dates
• Unique
• Consumes resources
• Non-repetitive activity
• Non-routine activity
Project Characteristics:
• It has a specific objective (fixed boundary)
• Well defined collection of jobs
• Generally non-repetitive, one time effort
• It has a specific time constraint
• It has a specific cost constraint
• It consumes resources (Manpower, material, machines, money)
• It is unique in nature
• Jobs interrelated through precedence
• It is associated with change and therefore carry considerable risk
Variety of Projects

Project at personal level

• Preparing for an examination
• Writing a book
• A birthday function

Project in local neighbourhood

• A college function
• Running a political campaign
• Producing a documentary film
Organizational projects
• Developing a new product or service
• Developing and marketing a new medicine
• Implementing a change in an organization
• Constructing a building facility, highway, railways
• Launching a new mobile phone
• Designing a new transportation system
• Manufacturing a new machine
• Increasing production capacity by addition of new manufacturing
processes
• Replacing an old manufacturing process by a new one
National projects
• ADHAAR
• Preparation of annual budget
• Launching a satellite

Global projects
• Space Exploration
• Environment protection
• Global Warming
Project Examples

• Developing a vaccine for Covid-19

• Production of a new movie
• Construction of a river bridge
• Construction of a thermal power plant
• Running an election campaign
• Digitalization of a bank
• Extension of an existing plant
• Developing software solution for a new problem
• Performing a heart transplant
• Launching a satellite
• Developing a new product or service
• Developing and marketing a new medicine
• Implementing a change in an organization
• Designing a new transportation system
• Constructing a building facility, highway, railways
• Developing business procedure or process
• Replacing an old manufacturing process by a new one
• Increasing production capacity by addition of new manufacturing
processes
• Building a new manufacturing unit like an integrated steel plant
• Etc.
Projects vs Programs/Process/Production

In contrast to a project, which has a defined beginning and end, a

program is an ongoing operation. It encompass the missions, functions,
operations, activities, laws, rules, and regulations that an agency is
authorized and funded by statute to administer and enforce. Programs
normally provide products and/or services to the public.
• Routine: repetitive cycles
• Known methods/products/materials
• Continual improvement
Classification of Projects
• Based on type of activity: Industrial or Non-industrial (healthcare,
educational, irrigation, pollution control, water supply, etc.)
• Based on location of the project site: National or International (fully
own subsidiaries abroad, joint ventures, by mergers or acquisitions
M&A)
• Based on project completion time: Normal or crash project
• Based on ownership: Private sector, Public sector, Joint sector in PPP
mode (airports, railways, etc.)
• Based on size: Small scale (up to 1 Cr), Medium (up to 100 Cr), Large
scale (above 100 Cr)
• Based on need:
a. New Project
b. Balancing Project
c. Expansion Project
d. Modernization Project
e. Replacement Project
f. Diversification Project
g. Backward integration Project
h. Forward integration Project
i. Turnkey Project
j. Green field Project
k. Brown field Project
Balancing a company project portfolio is difficult but essential for any
success. Investments in projects can be categorized as run, grow or
transform types. In order to balance cost to value and risk to value,
balancing projects are undertaken.
An expansion project is one in which new sales are generated. These are a
type of capital investment project, designed to help a company expand and
grow. When a company invests in an expansion project, they are typically
moving into a new target market.
A replacement project is an undertaking in which the company eliminates
a project at the end of its life and substitutes another investment.
Modernization project means an economic activity that is performed by a
business to retool or upgrade production equipment/facilities to meet
contemporary technology standards and that results in improving existing
employees’ job skills to enhance competitiveness for future growth and
development.
Diversification Project
Diversification is an act of an existing company branching out into a
new business opportunity. This corporate strategy enables it to enter
into a new market segment. Often businesses diversify to manage risk
by minimizing potential harm to the business. If one of their business
enterprises is taking a hit in the market, another business enterprises
will help offset the losses and keep the company viable. A business may
also use diversification as a growth strategy.
• Horizontal Diversification
• Vertical Diversification
• Concentric Diversification
• Conglomerate diversification
• Horizontal Diversification
This strategy of diversification refers to an entity offering new services or developing new
products that appeal to the firm’s current customer base. For example, a dairy company
producing cheese adds a new variety of cheese to its product line.
• Concentric Diversification
In this form of a diversification strategy, the entity introduces new products with an aim to
fully utilize the potential of the prevailing technologies and marketing system. For example,
a bakery making bread starts producing biscuits.
• Vertical Diversification
This form of diversification takes place when a company goes back to a previous or next
stage of its production cycle. For example, a company involved in the construction of
houses starts selling construction materials and paints. It may be forward integration or
backward integration. A Jam producer acquired fruit producers is a backward vertical
diversification. Wine maker having own orchards etc.
• Conglomerate diversification
In this form of diversification, an entity launches new products or services that have no
relation to the current products or distribution channels. A firm may adopt this strategy to
appeal to an all-new group of customers.
Forward and Backward Integration Projects
• Forward integration is a business strategy that involves a form of
downstream vertical integration whereby the company owns and
controls business activities that are ahead in the value chain of its
industry.
• For example, Intel supplies Dell with its processors—that are placed
within Dell's hardware. If Intel wanted to move forward in the supply
chain, it could conduct a merger or acquisition of Dell in order to own
the manufacturing portion of the industry.
• Similarly, if Dell wanted to engage in forward integration, it could seek
to take control of a marketing agency that the company previously
used to market its end-product. Dell can seek to take over Intel if it
wants to integrate backward.
Forward and Backward Integration Projects
An organization opts for backward integration under the following
circumstances.
• The availability of the raw material is irregular in nature, which affects the
production line delivery schedule.
• Storing additional quantity of raw material to avoid stock-out situation
result in heavy inventory carrying out.
• Long lead time for the procurement of certain raw materials.
• High profit margin enjoyed by suppliers of raw material due to wide
demand-supply gap.
While backward integration is done by adding manufacturing/processing
facilities at the beginning stages of a product line, forward integration is
done by adding additional manufacturing/processing facilities at the end of
production line.
-By including additional manufacturing/processing facilities at the end of
production line, the products that are currently produced undergo further
processing resulting in further value addition.
• Example of Backward Integration
• Ford Motor Company created subsidiaries that provided key inputs to
vehicles such as rubber, glass, and metal. This approach ensured that
Ford would not be hurt by suppliers holding out for higher prices or
providing materials of inferior quality.
• Example of Forward Integration
• Disney has pursued forward vertical integration by operating more
than three hundred retail stores that sell merchandise based on
Disney’s characters and movies. This allows Disney to capture profits
that would otherwise be enjoyed by another store.
Some more cases:
• IKEA (furniture giant) is an example of backward integration. Recently
in April 2020, IKEA acquired an AI imaging startup called Geomagical
Labs (provides supercharge room visualization).
• Apple has its own selling distribution channel as well as it has its own
manufacturing process. In this case, Apple uses both the backwards
and forwards integration projects.
• Amazon has its own selling system and it also has its own distribution
channel. In this case, it enhances its business by forward vertical
integration. Similarly, it has its own manufacturing process where
Amazon provides its own branded products. Now, this time it is
integrated backwards.
• A turnkey project is a contract under which a firm agrees to fully
design, construct and equip a manufacturing/ business/ service
facility and turn the project over to the purchaser when it is ready for
operation for a price.
• Turnkey projects for plants involve a complete bouquet of services
right from designing to commissioning of the plant and machinery at
client’s facility.
• In fact, the client should be able “just to turn the key.” Synonyms for
the term turnkey project are a turn-key solution, turn-key delivery, or
ready-to-use.
• Engineering, Procurement and Construction (EPC) solutions is similar
to turnkey solutions
• In a turn-key project, the supplier takes on complete responsibility for
the adherence to delivery dates, the scope, and the cost of the entire
subject of delivery to the customer.
• The customer thus is not affected by any risks inside the project and
the result of the project is covered by one agreement.
• L&T to set up Rs1,300cr turnkey project for ONGC
• L&T Power offers turnkey solutions for large coal-based power plant
projects (up to 1000 MW) based on ultra-supercritical standards.
Greenfield project
• A greenfield project is one that lacks constraints imposed by prior
work on the site. Typically, what a greenfield project entails is
development on a completely vacant site. Architects start completely
from scratch.
• Example. Coal India identifies 15 greenfield projects for investment of
Rs. 34,600 Cr (Sept 2020)
• M&M manufacturing 10,000 tractors annually at its two US-based
greenfield projects in Atlanta and Texas.
• While a project developed on an undeveloped land is a greenfield project,
a brownfield project is one that is developed on land that is already used
• Brownfield is a term used in urban planning, which means land that has
been used previously but is lying vacant or unused now. This land could
have been contaminated by industrial waste or hazardous waste or might
have suspected oil contamination.
• A brownfield site was once a commercially developed parcel but currently
not in use for any purpose. Such brownfield land parcels are found mostly
in western countries, which have been used for oil refineries, railroads, gas
stations or heavy manufacturing plants. E.g GM’s plant at Halol Gujrat is
now owned by SAIC Motors (MG Motors)
• Abandoned oil refineries, chemical factories and heavy manufacturing
units, are some examples of brownfield sites.
• Brownfield project can be cheaper, because vital infrastructure (drainage,
electricity, roads, transport networks, etc.) may already exist.
• In a brownfield investment projects, the company either invests in
existing facilities and infrastructure through a M&A deal or leases
existing facilities in the foreign country.
• Tata Motors in June 2008 acquired Jaguar Land Rover’s businesses in
an all-cash transaction valued at $2.3 billion. Through the acquisition,
the Indian automaker was able to obtain intellectual property rights,
manufacturing plants, two design centers in the United Kingdom, and
a world-renowned network of National Sales Companies.
• Brownfield investment (BI) is a type of foreign direct investment (FDI)
where a company invests in an existing facility to start its operations
in the foreign country. In other words, a brownfield investment is the
lease or purchase of a pre-existing facility in a foreign country.
• Company A is currently based in the United States and is looking to expand
operations into India. Due to uncertainty in the overseas market for their
product, the CEO decided to conduct a brownfield investment to “test the
waters.”
• Vodafone is a telecommunications company headquartered in London and
Newbury, Berkshire. In 2007, the telecom firm completed the acquisition of
a majority stake in India-based Hutchison Essar for $10.9 billion in cash.
Through the acquisition, Vodafone was able to penetrate into the fast-
growing Indian telecommunications industry.

•
Scope of a Project
• Project scope is the part of project planning that involves determining
and documenting a list of specific project goals, deliverables, tasks,
costs and deadlines.
• The documentation of a project's scope, which is called a scope
statement or terms of reference, explains the boundaries of the
project, establishes responsibilities for each team member and sets
up procedures for how completed work will be verified and approved.
• Large projects naturally tend to change as they progress. If a project
has been effectively "scoped" at the beginning, then managing these
changes will be easier. When documenting a project's scope,
stakeholders should be as specific as possible to avoid scope creep, a
situation in which one or more parts of a project end up requiring
more work, time or effort because of poor planning or
miscommunication.
Real world example of scope creep (the Killer of Projects)
• When a project fails to be properly defined, planned or documented, something
called scope creep or requirement creep can occur. This should be avoided if
possible as it can lead to uncontrolled growth of the project.

• BBC Digital Media Initiative (DMI)

Lesson: Have a change control process in place to prevent scope creep
• The DMI project was initiated by BBC in 2008 with an aim to modernize the
company’s production and archiving methods by using connected digital
production and media asset management systems. The project was abandoned in
2013 due to failures of governance and delayed delivery.
• To be specific, a change control process is needed to prevent stakeholders from
continuously asking for changes (scope creep). Not only can it impact the delivery
date, it usually also drives up the cost, resource requirements and deliverables.
• Notorious project failures -- Berlin airport
• Construction started in 2006, and the airport would take five years to
be built. The target opening date was Oct. 30, 2011.
• Scope: Several and major changes (scope creep)
• One instance was when, with construction under way, one of the key
stakeholders, General manager of the airport management company,
seizing on increasing forecasts for air traffic, asked the architect to
add north and south “piers” to the main terminal, turning it from a
rectangle into a “U” and dramatically enlarging the floor space.
• Stakeholders: Too many and with different interests
• Communication: Important to report the real status
Benefits of a project scope

Benefits of a project scope statement :

• articulates what the project entails so that all stakeholders can
understand what's involved;
• provides a roadmap that managers can use to assign tasks, schedule
work and budget appropriately;
• helps focus team members on common objectives; and
• prevents projects, particularly complex ones, from expanding beyond
the established vision.
Writing a project scope statement
• A project scope statement is a written document that includes all the
required information for producing the project deliverables.
• The project scope statement is more detailed than a statement of
work; it helps the project team remain focused and on task.
• The scope statement also provides the project team leader or
facilitator with guidelines for making decisions about change requests
during the project.
Project Life Cycle
Project Initiation Phase
• Initiate the project
• Identify the Project Manager
• Develop the Project Charter
• Conduct a Feasibility Study
• Receptive to new ideas
• Vision of future growth
• Long term objective
• SWOT analysis
• Preliminary project analysis and project appraisal
Detailed Initiation stage
• 1. Create an idea
• 2. Identify the project vision and objectives
• 3. Define the complete scope of the project
• 4. List all of the critical project deliverables
• 5. State the customers and project stakeholders
• 6. List the key roles and their responsibilities
• 7. Create an organizational structure for the project
• 8. Document the overall implementation plan
• 9. List any risks, issues and assumptions
• 10. Appoint the project team
• 11. Set up the project office
• 12. Perform a phase review
Project Planning Phase
• Organize and staff the project
• Develop a Project Plan
• Forming a project team with a leader
• Defining scope and terms of reference
• Work breakdown structure
• Basic scheduling
• Time cost tradeoffs
• Resource considerations
Contd.
• Create a Project Plan
• Create a Resource Plan
• Create a Financial Plan
• Create a Quality Plan
• Create a Communication Plan
• Create a Risk Plan
• Contact the Supplies
Project Execution Phase
• Execute the Project Plan
• Manage the Project Plan
• Implement the project’s results
• Organizing team and work
• Clear cost/time/performance goals
• Project commissioning
• Project monitoring with regards to cost, value of work and time
• Project control
Project Close-out Phase
• Document the lessons learned during the project
• After-implementation review
• Provide performance feedback
• Close-out contracts
• Complete administrative close-out
• Deliver project completion report
• Physical handover to user after commissioning
• Accounting and report writing
• Disbanding of project team
• Learning from the experience
The Triple Constraint
• Every project is constrained in different ways by its:
• Scope goals: What work will be done?
• Time goals: How long should it take to complete?
• Cost goals: What should it cost?
• It is the project manager’s duty to balance these three often-
competing goals.
• Successful project management means meeting all three goals (scope,
time, and cost) – and satisfying the project’s sponsor!
 IIron Triangle of Project Constraints
Managing these constraints is the main responsibility of the project manager.
Each constraint has a specific goal and a project is deemed successful when it
achieves all three. Failure in any of the three has an
impact in the other two, a delay in a project has an impact on its cost, and an
increase in scope has an impact in both time and budget.

When the schedule of a project needs to decrease, the project might need to
increase the budget because more resources are needed to do the same work
in less time. If the budget cannot be increased (the donor doesn’t approve the
increase), then the scope might need to reduce because the resources
available will not be sufficient to complete all the planned work in less time.

When the project scope increases, there is a need for more time or more
resources (budget) to complete the additional work. When the project adds
more work than the originally budgeted it is important that before the new
work is started, there is an approval from the donor for additional funds,
otherwise the project will end up with a budget shortfall that could have an
impact on the expectation of the beneficiaries.
Quality is at the center of the project triangle because it affects every
side of the triangle, any changes made to any side of the triangle are
likely to affect the quality. Quality is not a factor of the triangle; it is a
result of what you do with the schedule, budget, and scope.

For example, the project may find additional time in the schedule that
can allow staff the time to increase the quality of the objectives
without necessarily increasing the scope. On the other hand, a need to
cut activities to meet the budget might result in a decreased scope,
which reduces the opportunities to achieve an acceptable level of
quality; therefore, lower quality results from the need of cutting costs
and reduce planned activities.
Scope, schedule and budget are the three essential elements of any
project. To succeed as a project manager, one has to know about how
all four of these constraints apply to projects.
Benefits and Risk as constraints (new theory)

• The last two elements of the six-constraint model are the newest and
least-familiar ones, and could be considered controversial – except
that they are both already present in projects. We are not creating
them – we are just bringing them to the forefront and demonstrating
how they interact with the “classic” constraints (time, cost, scope,
and quality). When these two new constraints – benefits and risk –
are not considered, they are likely to be neglected and produce a
negative impact on the project and the organization. We will examine
those potential consequences as we discuss each of them.
Benefits as constraint
• Benefits represent the value the project is expected to deliver to the
organization.
• As the project has deliverables that it produces, the benefits
represent the value that those items are expected to have for the
organization (in financial or other terms).
• A clear justification, with measurable, agreed benefits that are
expected to result from the project's outputs. If there is no clear
justification, then the project should not be started, and if the
justification disappears – or is reduced below an agreed-upon limit –
the project should be stopped.
• That “limit” will become a constraint.
Risk as constraint
• Risk on a project needs to be addressed and managed.
• In any project there may be a level of risk that the stakeholders not willing
to live with or “tolerate.” That is known as risk tolerance.
• Its simplest and most common expression is in examining the probability of
significant risks occurring, their potential impact on the project if they do
occur, and the degree of willingness to live with those potential
consequences.
• An Agreement on the level of risk the sponsor/ stakeholders/ Project Board
are willing to live with in the course of the project (their risk tolerance).
• If the project manager cannot control (mitigate/ transfer, etc.) major risks,
then the sponsor/ stakeholders/ Project Board need to decide if they are
willing to live with the greater risk exposure, or want the project to close
down
End of Module I