CHAPTER 1_ PROJECT MANAGEMENT a.
a. Agricultural Projects: These are the projects which are related to agricultural sector like
Project: Project is a temporary endeavor undertaken to create a unique product or service or
result. According to Little and Mirrless, “a project is any scheme for investing resources which can
be reasonably analyzed and evaluated as an independent unit”.
Characteristics of a Project
1. Definite Objective/Scope and Unique: All the projects have their own defined
scopes/objectives for which they are carried out. Every project is undertaken to create a
unique product, service, or result.
2. Defined Time and Resources: As the projects have definite beginning and end, they are to be
carried out within the time and resources constraints.
3. Risk &uncertainty: risk and uncertainty are the inherent components of every project. Some
risk elements can be foreseen while some others cannot be foreseen.
4. Change: some changes may have minor impact on projects, while some other changes may
have major impacts
5. Control mechanism: A project are to be completed within a specified time limit and within
the pre0-determined cost, every project has a control mechanism.
6. Optimality: since resources available are limited and they have cost, every projects aims at
optimal utilization of resources
7. Customer-oriented: each projects offers products or services which are best suited to the
interests of the customers. Therefore, projects are customer-oriented.
Classification of Projects
1. Based on Investment
a. Large Scale Project: These projects involve a huge outlay or investments, say, crores. Eg. Real
Estate Projects, Road Construction of manufacturing facilities.
b. Medium Scale Project: These projects involve medium level investment and are technology
oriented. Example: Computer industry and electronic industry.
c. Small Scale Project: These projects involve only a lesser investments. E.g., agricultural
projects, manufacturing projects
2. Based on Ownership
a. Public Projects: These are the projects which are done by public projects. E.g. Construction
of Roads & Bridges
b. Private Projects: These are the projects which are undertaken by private enterprises. Eg.
Software development, marriage contracts, etc.
c. Public Private Partnerships: These projects which are undertaken by both government and
private enterprises together. Eg. Garbage collection
3. Based on Research in Academia
a. Major Projects: this are those projects which involve more than one year to 3 or 5 years and
minimum funding of Rs. 3 lakhs in case of social sciences and Rs. 5 lakh in case of sciences.
b. Minor Projects: this are those projects which will be completed within a year and have a
maximum funding of Rs. 1 lakh in social science and Rs. 3 lakh in case of sciences.
4. Based on Sector
6. Termination Phase: This phase marks the completion of the project wherein the agreed
deliverables are installed and project is put in to operation with arrangements for follow-up and
evaluation.
Project management (PM): Harson has defined PM as, “the achievement of a project’s objectives
through people, and involves organizing, planning and control of the resources assigned to the
project, together with the development of constructive human relations with all those involved,
both in company and with the other companies involved”.
Need for PM: Effective resource allocation, Learning by retrospection, Quality control, Improved
customer satisfaction, It brings leadership and direction to projects, It ensures there is a proper
plan for executing on strategic goals, It ensures proper expectations are set around what can be
delivered, by when, and for how much
Phases of PM
1. Project identification: it refers to identification of business/investment opportunities. It
involves scanning of the environment to find out investment opportunities.
2. Project formulation: it is the translation of the project idea into a concrete project with
scrutiny of its important preliminary aspects. It involves preparation of feasibility reports.
3. Project appraisal: it simply means the assessment of a project in terms of its economic,
social and financial viability.
4. Project selection: it is the process of choosing a project rationally in the light of objectives
and inherent constraints on the basis of appraisal
5. Project implementation: this is the stage of birth of an enterprise. At the end of this stage,
the idea becomes reality.
6. Project follow up and evaluation: it is the process of assessing the performance of the
project after it started functioning. Project evaluation means assessing the progress of the
project.
Benefits of PM
1. It provides a roadmap for easy project competition
2. Helps to identify the responsibilities in respect of each task more easily
3. It enables to reduce the need for continuous reporting
4. Helps to specify the time limits for competition of each task
5. It facilitates the measurement of accomplishment against each plan
6. It enables early identification of objectives that cannot be achieved.
CHAPTER 2_ IDENTIFICATION& FORMULATION OF A PROJECT
Project identification: It is an important step in project formulation. It essentially focuses on
screening the number of project ideas that come up based on information and data available and
based on expert opinions and to come up with a limited number of project options which are
promising.
Sources of project ideas: 1. our own needs. 2. Market survey. 3. Success stories of friends and
relatives. 4. Project profiles. 5. Import/export statistics. 6. Trade fairs and exhibitions. 7. Trade and
professionals journals. 8. Prospective consumers. 9. Development in other nations. 10. Govt
organisations. 11. Research organisations. 12. Items reserved for small scale units. 13. Study of govt
policies. 14. Utilisation of waste materials. 15. Availability of raw materials. 16. Availability of skilled
f. Product mix: it is the total no. of products in all product lines. Product line is the no. of
brands or related products in each product type.
g. Procurement of plant and machinery
h. Selection of site
i. Location of the project: Factors determining plant location:- proximity to raw material,
nearness to market, availability of infrastructure facilities, transport& communication
facilities, effluent disposal, labour, govt policies, climatic condition, environmental
consideration, other factors.
j. Plant layout/ factory layout: it may be defined as “a technique of locating machines,
processes and plant services within the factory in order to secure the greatest possible
output of high quality at the lowest possible total cost of production”.
Objectives of plant layout
• Smooth function of the factory
• Reduction in manufacturing time
• Minimizing production delays
• Better supervision and production control
• Adequate storage and packing facilities
Benefits of a good plant layout: increase in productivity, economical utilization of space, effective
supervision and control, improved safety, high morale, better quality control
Types of layout
1. Product layout: (line layout). It is best suited in mass production. The main idea behind this
type of layout is continuous flow of materials in process toward the finished product stage.
2. Process layout: (functional layout). In this type of layout similar machines are placed in one
place according to the operations or functions they perform.
3. Combined layout: it combines the advantages of both product 7 process layout but without
their disadvantages.
4. Stationary layout: (fixed position layout). Under this, the men and equipments are moved to
the material which remains in one place.
Factors influencing plant layout: Nature of industry, volume of production, type of product,
location, material handling, type of equipment, factory building, service facilities, lighting&
ventilation.
B. Commercial appraisal: It is related with demand for the product or services. The survival and
success of a project depends upon, whether the product or service offered by the project is
commercially successful it is done by studying the commercial aspects of the project
Demand forecasting techniques:- 1. Survey approach: under this, demand forecasting done by
obtaining information about the intention of consumers. Following are the important survey
methods: Jury of expert’s opinion method, Delphi method, consumer’s survey method, and sales
forecast composite. 2. Statistical approach: under this, the past data arranged in a chronological
order and some statistical methods are applied to identify the trend. This are classified in to two:
regression analysis& trend analysis (1. Curve fitting, 2. Moving average method, 3. Weighted
moving average method, 4. Exponential smoothing method)
Industrial projects Developmental projects
irrigation projects, well digging projects
b. Industrial Projects: These are the projects which are related to the industrial manufacturing
sectors like cement industry, steel industry
c. Service Projects: These are the projects which are related to the services sectors like
education, tourism
5. Based on Objective
a. Commercial Projects: These projects are undertaken for commercial purpose and return on
investment is expected out these projects.
b. Social projects: These projects are undertaken for social purposes and welfare of the people
is the aim of these projects.
6. Based on Time
a. Long term projects: These projects are run for many years till the objective is reached. Eg.
Eradication of diseases like Polio, Filaria, etc.
b. Medium term projects: These projects take medium term duration like 3 to 5 years. Eg.
Modernization projects
c. Short term projects: These projects are executed within a short period, normally within a
year. Eg. health camps
d. Very short term projects: these projects are completed within a very short period, say,
within a day. Eg. product launch project.
7. Based on Functions
a. Marketing Projects: which are taken up in the area of marketing a product or service of an
organization.
b. Financial Projects: are undertaken to raise finance or restructure capital structure.
c. Human Resources: are undertaken in the area of HR of an organization.
d. IT and Technology: which are undertaken in the area of IT companies or IT related
requirement of any organization
e. Production Projects: are undertaken in the area of production or operations
f. Strategic Projects: are taken by the organizations to executive a strategy
8. Based on Risk
a. High Risk Projects: it involves a very high degree of risk. Eg. nuclear energy project. High
precautionary measures are to be taken to commission these projects.
b. Low Risk Projects: it does not involve risk and they are carried out in the normal course of
action. Eg. House construction.
9. Based on Output
a. Quantifiable projects: In these projects, the benefits / goals of which are amenable for
measurement. Quantitative expression of the outcomes is possible.
b. Non-quantifiable projects: In these projects quantification of the benefits / outcome may
not always be possible as the impact of the project is spread over a longer period.
Differences b/w industrial projects &Developmental projects
labour. 17. Hobbies. 18. Brainstorming: it is a creative group problem-solving technique that
involves generating a large no. of fresh ideas. It was first developed by Alex F Osborn in 1941, and
gained acceptance by the business world in 1950.
Screening of project ideas: A process of evaluating the project ideas with a view to select the best
and promising idea after eliminating the unprofitable ideas is called screening of project ideas. It is
an attempt to select the more worthwhile ideas from the list of ideas generated.
Criteria for Screening project ideas: Compatibility with the entrepreneur, Consistency with govt
regulations& priorities, Availability of inputs, Marketing facilities, Profitability, Cost of the project,
Level of risks, Other factors (payback period, expected life, environmental impact)
Importance of project identification
1. It maybe corner stone of rapid economic development
2. The commitment of projects cannot be easily reversed
3. It brings necessary changes in the society
4. It involves substantial financial outlays
5. It initiates the development of basic infrastructure facilities
6. It may accelerate the process of socio-cultural development
Environmental Scanning: It is carried out to analyze the prospective strengths, weakness,
opportunities and threats of the business enterprise. The objective for a successful environmental
scanning should be to maximize information.
SWOT analysis: It is an analysis of strengths, weakness, opportunities and threats. It is a framework
used to evaluate a company’s competitive position and to develop strategic planning. SWOT
analysis assesses internal and external factors, as well as current and future potential.
Project formulation: “Project Formulation” is the processes of presenting a project idea in a form
in which it can be subjected to comparative appraisals for the purpose of determining in definite
terms the priority that should be attached to a project under sever resource constraints.
Need for Project Formulation: Selection of appropriate technology, Absence of external
economies, Non-availability of technically qualified personnel, Resource mobilization, Knowledge
about govt regulations
Stages (elements) of Project Formulation
1. Pre-feasibility Study: it is a preliminary examination about the major parameters of the project
like location of the project, production capacity, raw material and other inputs. A rough estimate of
project cost, cost of production, sales revenue, profitability etc can also be understood through
pre-feasibility study.
2. Support Studies: support studies are undertaken before feasibility study. It is also called
functional studies. It may be in the form of market study, plant location study, etc.
3. Feasibility Study (Viability study): it I a detailed study undertaken to get a concrete justification
of the selected project based on technical, economical, commercial and financial aspects of the
project. It’s also called techno-economic feasibility study.
C. Economic appraisal: It deals with the effect of the project on the entire economy. Considered as
a supportive appraisal it reviews economic rate of return, effective rate of protection and domestic
resource cost.
D. Financial appraisal: It refers to evaluate the viability of a proposed project by assessing the
value of net cash flows that result from its implementation. It is a detailed analysis of investment
decisions from the perspective of the org which makes the investment.
E. Management appraisal: It is qualitative and subject in nature. Here, human resources are
evaluated. The person who is to be evaluated depends upon the type of enterprise.
F. Social cost benefit analysis: is undertaken to ascertain the impact on the society as a whole. In
this analysis, greater emphasis is laid on social objectives with lesser motive on profit.
Objectives of SCBA: helps to compare different alternatives for a project in an integrated manner,
economic benefits of the project in terms of shadow prices, the impact of the project on the
distribution of income in the society.
Approaches to SCBA: UNIDO (United Nations International Development Organization) approach,
Little- Mirrlees approach. Under UNIDO method the net benefits of the project are considered in
terms of economic (efficiency) prices also referred to as shadow prices. As per the L-M approach
the outputs and inputs of a project are classified into (1) traded goods and services (2) Non traded
goods and services; and (3) Labor. L-M approach is suggested by I.M.D Little and James A Mirrlees
Numeraire: is the unit of account in which the value of inputs and outputs are expressed.
Shadow prices: if the market prices inputs& outputs of a project do not represent their ‘real’
prices, they are required to be corrected suitably. Such corrected prices inputs and outputs is
known as shadow price.
Differences b/w UNIDO & L-M Approach
UNIDO approach L-M approach
It follows the numeraire ‘aggregate It follows the numeraire ‘uncommitted social
consumption’ income’
It measures shadow price in terms of It measures shadow price in terms of
domestic price international price
It is a stage-by-stage analysis It is an integrated analysis
It is propounded by UNIDO It is propounded by I.M.D Little and James A
Mirrlees
G. Project risk analysis: following are the important areas of assumptions, based upon which
project appraisal is done:-periodic cash inflows, periodic cash outflows, life of machinery, scape
value of machinery.
CHAPTER 6_ PROJECT PLANNING AND SCHEDULING
Project Planning: It is a beginning of the project manager’s effort to ensure that potential problems
are identified timely, they can be assessed easily and based on which further estimations and
resource allocations maybe done comfortably.
Objectives of project planning
Scope of project in very limited Scope of project in very large
It operates on stringent debt-equity norms It operate on higher debt-equity norms
The repayment period is generally 7-10 years The repayment period extends up to 25 years
and even beyond
Interest rate is equal to market rate Interest rate is very low for borrowed funds
Entrepreneurs& corporates are the promoters Govt, public sectors, NGOs are the promoters
Project Family Tree: Generally a project originates from a plan, which maybe a national plan or a
corporate plan. In a normal case, the family tree for a project would be as given below:
PLAN
National plan/Corporate plan with target for growth
PROGRAMME
Health programme, Educational programme, R/D programme
PROJECT
Power plant, Hospital project, housing projects, etc
WORK PACKAGE
Water supply, power supply& distribution package
TASK
Award of water supply contract, construction& foundation
ACTIVITY
Excavation, laying of cable, preparation of drawing
Project Life Cycle(PLC)The various stages through which a project passes are collectively called PLC.
It refers to a logical sequence of activities to accomplish the objectives of the project.
Stages or Phases of project life cycle
1. Conception phase:- starting with the seed of an idea, it covers identification of the product /
service, Pre-feasibility. The project idea is conceptualized with initial considerations of all possible
alternatives for achieving the project objectives.
2. Planning phase:- In this phase the project structure is planned based on project appraisal and
approvals. In the process major tasks need to be performed in this phase are: (• Identification of
activities and their sequencing • Time frame for execution • Estimation and budgeting • Staffing)
3. Organizing phase:- it deals with defining and analyzing the activities of the enterprise, grouping
the similar activities into separate department, determining the authority-responsibility
relationships among various departments and make arrangements for organizing the resources
required for the accomplishment of the organizational objectives.
4. Execution Phase: These phase of the project witnesses the concentrated activity where the plans
are put into operation. Important activities in this phase are: (• Communicating with stakeholders •
Reviewing progress • Monitoring cost and time • Controlling quality • Managing changes)
5. Directing and Controlling: directing deals with guiding the subordinates for timely achievement
of the organizational objectives using the tools such as orders, instructions, supervision, etc.
controlling refers to check the actual performance of the project with the planned performance.
a. Technical feasibility study: is taken up to get a concrete justification about the technical
feasibility of the project.
b. Economic feasibility study: is undertaken to examine whether the investment made on the
project will offer a satisfactory return.
c. Commercial/ Market feasibility study: is undertaken to assess, accurately, the scope for
successful marketing of the product or service
d. Financial feasibility study: is undertaken to examine whether the expected financial benefits
are in excess of the financial costs associated with the proposed project.
4. Detailed Project Analysis & Preparation of DPR: Detailed Project Report (DPR) contains the
same information as in a feasibility study report. The main intention of preparing DPR is to
communicate formally, the project promoter’s decision to start a new project. DPR is an important
document for obtaining financial assistance from banks and for getting approval from various govt
departments
Differences b/w re-feasibility study& Feasibility study
Pre- feasibility study Feasibility study
It is to determine whether the project idea It is to determine the true profitability of the
needs further investigation or not project idea & to decide whether a DPR based
on detailed project analysis is required or not
An overview of project proposal is attempted Maximum coverage of project proposal is
through pre-feasibility reports attempted through feasibility documents
Pre-feasibility study requires minimum cost Feasibility study requires higher costs
The information furnished by a pre-feasibility The information furnished by a feasibility
study maybe accurate to the extent of 60% to study maybe accurate to the extent of 85% to
70% 95%
CHAPTER 3_ PROJECT APPRAISAL
Project Appraisal: is a process of detailed examination of several aspect of a given project before
recommending the same. The important aspects of project appraisal are: Technical appraisal,
commercial/market appraisal, economic appraisal, financial appraisal, management appraisal,
social cost benefit analysis (SCBA), project risk analysis
A) Technical appraisal: It is an attempt to find out how well the technical requirements of the unit
can be met, which location would be most suitable and what the size of plant and machinery
should be.it mainly involves the following aspects.
a. Manufacturing process/technology: it refers to the art of production or the skill required
manufacturing a product in a factory by using machineries, tools and equipment. Factors
influencing the choice of technology are: plant capacity, inputs, investment outlay, use by
other units, product mix, latest developments, ease of absorption, cost
b. Scale of operations: it actually denotes the plant capacity of the project. Plant capacity refers
to the volume of units that can be manufactured during a given period. While deciding the
scale of operations the following factors should be considered: technological requirement,
inputs constraints, investment cost, market conditions, resources of the firm, govt policy.
c. Raw materials
d. Technical Know-how
e. Foreign collaboration
1. It provides a framework that enables the manager to make reasonable estimates of
resources, cost and schedule.
2. Anticipates the risk associated with the project and thereby minimise their effects
3. Determine the resources required for each activity of the project
4. Develop a platform for appropriate estimation and control on time and costs
Benefits of systematic project planning
1. Provides logical basis for decision making
2. Helps to determine the logical sequence of the activity
3. Helps to understand the effects on other systems
4. Provides framework for the assessment of programmes
5. Provides an opportunity to filter futile ideas and activities
Project scheduling: It refers to the process of determine the time required for executing each
operation and the order in which they are to be carried out for better accomplishment of the
project objectives.
Project scheduling technique: It offers the solutions for optimal utilisation of project time. They are
Bar charts and Networks.
1. Bar charts: It is the pictorial representation of various task required to be performed for
accomplishment of the project objectives
a) Gantt chart: it’s a pictorial representation specifying the start and finish time for various task
to be performed in a project on a horizontal time-scale. Limitations: in case of complex
projects, application of Gantt chart is more complicated.
b) Milestone chart: it’s is an improvement over the Gantt chart by introducing the concept of
milestone. It represented by a circle over a task in the bar chart indicates completion of a
specific phase of the task. Limitation: it doesn’t reveal the interdependence among task, this
method is silent regarding critical activities.
2. Networks: It is a logical extension of milestone chart incorporating the modifications so as to
illustrate interrelationship b/w among all the milestones in an entire project. The 2 best known
techniques for network analysis are CPM& PERT. 2types of notations are used in Network diagram:
a) Activity-on-Arrow(AOA): in AOA notation, the arrow represents the work to be done and the
circle represents an event- either the beginning of another activity or completion of previous
one.
b) Activity-on-Node(AON): for AON notation, a box is used to show the task itself and the
arrow simply show the sequence in which work is done.
Network Analysis: It is the general name given to certain specific techniques which can be used for
the planning, management and control of projects. It is a vital technique in project management.
The main objective of NA is to establish the overall completion time of projects by calculating what
is known as the Critical Path.
Event: The beginning and end of activities are called as events. Events are represented by
numbered circles called nodes.
Activity: This is the task or job of work which takes time and resources. An activity is represented in
a network by an arrow. 1.Predecessor activity: Activities that must be completed immediately prior
to the start of another activity are called predecessor activities. 2. Successor activity: The activities It concentrates attention on critical activities It emphasis on time only. It is not giving
that cannot be started until one or more of other activities are completed but immediately succeed of the project importance to cost
them are called successor activities.3. Start activity: it is the first activity in a network diagram. So,
it does not have any preceding activity. It provides a forward looking type of control Developing a clear and logical network is
difficult
Critical path method: CPM is one of several related techniques for doing project planning. CPM is
for projects that are made up of a number of individual "activities." It provides up to date information It is not suitable for routine planning of
recurring events
Advantages Disadvantages
Identifies activities that control the project Does not handle scheduling of project It forces to take right action at right time for There may be errors in time estimation
length the implementation of projects
Determines shortest time for completion The critical path is not always precise It helps to formulate new schedules when it is It does not consider the resources required at
Identifies activities that are critical It is tedious complicated one when projects not possible to implement the existing various stages of the project
are very large schedule
Shows available float for non-critical activities It is useful only when for projects of repetitive
nature Differences b/w CPM &PERT
Allows monitoring& control of fast-track Does not handle the scheduling of the CPM PERT
projects resource allocation
Programme Evaluation &Review Technique(PERT): PERT is designed for scheduling complex It is activity oriented. It is event oriented
projects that involve many interrelated tasks. It is a statistical tool, used in project management
It is a deterministic model with single time It is a probabilistic model with three time
that is designed to analyse and represent the tasks involved in completing a given project.
estimate estimates
Time estimates in PERT: There are three time estimates 1. Optimistic time estimate 2. Most likely
time estimate 3. Pessimistic time estimate. It does not deal with uncertainty in time It deals with uncertainty in time

1. Optimistic time estimate (to): This is the fastest time an activity can be completed. it is the Used for non-repetitive jobs Used for repetitive jobs
estimate of minimum possible time which an activity takes in completion under ideal It considers both aspects of time and cost It is mainly concerned with time only
conditions.
Crashing is applicable in CPM It is not applicable in PERT
2. Most likely time (m or tm): The time which the activity will take most frequently if repeated
number of times. Critical path is determined on the basis of Critical path is determined on the basis of
float slack
3. Pessimistic time (b or tp): The unlikely but possible performance time if whatever could go
wrong, goes wrong in series. In other words it is the longest time the can take. Graphical Evaluation and Review Technique(GERT): It is network technique for project
management. GERT is widely used in research& development projects, particularly, when the
From the above time estimates we can calculate the expected time of each activity by using the events are subjected to changes and allocations are taken on the basis of anticipated status.
following formula. te= to + 4tm +tp
Advantages of GERT: It is more accurate than PERT, Helps to assign multiple resources, It creates
6 loops between tasks, There are no. of computerized packages, Gives more flexibility to project
Steps in PERT calculation planning than PERT &CPM

1. Obtain the 3 time estimates for each of the project activities. Limitations of GERT: The basic drawback associated with the technique of GERT is that it requires
2. Compute the expected time for completion of each project activity a complex programme for modelling.
3. Construct the network diagram.
Expected Time of Activity (te)= to + 4tm +tp
6

Advantages& disadvantages of PERT

Advantages Disadvantages