CHAPTER – 5

PROJECT CONTROL, REVIEW AND AUDIT

SESSION - 1

5.1 Introduction
Once the project has been launched, it is essential to control the projects to achieve the
desired results. Project control involves a regular comparison of performance against targets,
a search for the causes of deviation and a commitment to check adverse variances.

Project control serves two major functions:

Project Control

It ensures
regular
monitoring
of
performance

it motivates
project
Personnel to
strive forthe
achieving project
objectives
 Steps in Project Control:
There are two important steps in the project control viz;
Steps in project control

On-going controlling activities

Establishment of controls
using Above controls

1. Establishment of controls.
2. On-going controlling activities using above controls
It is nothing but controlling a project when it enters the production period using the controls
established during the initiation period.
Control during the production period involves four steps They are :

1. Setting targets for what should be achieved.

2. Measurement of what is happening
3. Comparison between what should happen and what is happening.
4. Taking corrective actions to make things happen, as they should.

Projected Control Purposes:

1. On the progress of the activities.
2. On the performance of project activities.
On project schedule
3. On projects cost
Problems of Project Control:
There are three main reasons for poor control of projects. Viz.,

1. Characteristics of the ultra-mega project and complexities-Maintenance of non-routine

activities co-ordination and communication problem

2. People Problems.

Managers do not have required experience and training, lack competence but have inclination
to control projects.

3. Poor control and information system: Delay in reporting performance inappropriate

level of inclination to control projects.
Gantt Charts
 Henry Gantt developed it by around 1900. It consists of two coordinate
representing the time elapsed and the other, jobs or activities performed.
The jobs are rep the form of bars.

 The length of a bar indicates the duration the job or activity taken for
completion.

 Generally, any project some jobs can be taken up concurrently and some will
have to be completed before can begin.

 Hence, in a bar chart representing a projects, some of the bars run parallel or
overlap other times-wise (these correspond to concurrent jobs)

 Some run seriallywith one bar beginning after another bar ends (corresponding
to an activity that succeeds a preceding activity).

The Gantt chart for this project is shown in chart. The various activities are shown along
the ordinate or the vertical axis and the time elapsed along the horizontal axis.

The chart is self-explanatory

Preparing a pattern for casting 4 Weeks

Preparing a mould 2 Weeks
Costing the cleaning operation of A 1 Weeks
Heat-treatment of A 7 Weeks
Machining part B 5 Weeks
Assembling part, A and B 3 Weeks
Preparing the test rig 4 Weeks
Testing the assembly 2 Weeks
Packing for dispatch 1 Weeks

Limitation/Demerits/Problems/Weaknesses in Bar(GANTT) Charts,

1) Interdependent of Activities: The bar chart cannot show clearly the independent among
the various efforts or activities even though start concurrently.

2) Project Progress ; A bar chart cannot be used as a control device since it does not show the
progress of work.
3) Uncertainties : Its inability to reflect the uncertainty or tolerances in the duration times estimated
for various activities
Milestone Charts
Because of the shortcoming or the inadequacies of the chart, a link in the evolution of
the Gantt chart into the PERT or CPM network, This modification is called Mile stone
System.
 These are key events or point time, which can be identified when, completed as the project
progresses.
 Here long-term job is broken down to several pieces, each of which stands for an identifiable
major event.

 Each event is numbered and an explanatory table given identifying the number with
the event.

 This work breakdown increases the awareness of the interdependent between tasks.

Limitation/Demerits/Problems/Weaknesses in Milestone Charts

 It did not clearly show the interdependence between events.

 The events are in chronological, but not logical, sequence.

Critical Path Method (CPM)
The critical path analysis is an important tool in production planning and scheduling.
The project is analyzed into different operation or activities and their relationship are
determined and shown on the network diagram,
 The problem with Gantt chart is that the sequence of operation, earliest possible date for
the completion is overcome by this method of Critical Path Analysis.

 A CPM is a route between two or more operations which minimizes (or maximizes)
some measures of performance.

 This can also be defined as the sequence of activities, which will require greatest normal
time to accomplish. It means that the sequences of activities, which require longest.
Duration, are singled out.

 It is called at critical path because longest duration are singled out.

Main Objects of CPM

To find difficulties and obstacles in the course of production process.
To assign time for each operation.
To ascertain the starting and finishing times of the work.
To find the critical path and the minimum duration time for the project as a whole.

Situations where CPM can be effectively used:

(a) In production planning.
(b) Location of and deliveries from a warehouse.
(c) Road systems and traffic schedules.
(d) Communication network.

Advantages of CPM

(i) It provides an analytical approach to the achievement of project objective which are
defined clearly

(ii) It identifies most critical elements and pays more attention to these activities.

(iii) It assists avoiding waste of time, energy and money on unimportant activities.
(iv) It provides a standard method for communicating project plans, schedules and cost.

Thus, CPM technique is a very useful analysis in production planning of very large project.
PERT (Programme Evaluation and Review Technique)
There are so many modern techniques use in various industries especially in defense,
Chemical and construction industries.

It involves that the expected time of any operation can never by determined exactly.

Major feature of PERT or Procedure or Requirement for PERT.

All individual tasks should be shown in a network.

(i) Events are shown by circles.

(ii) Each arrow represents an activity the time-consuming element of a program
(iii) Activity time is the elapsed time required to accomplish element an event
called Estimate Time.

In PERT, three-time values are used as follows:

(a) to (Optimistic time):

It is the best estimate of time if everything goes exceptional well

(b) tm (Most likely time):

It is an estimated time, if the activity is repeated a number of times.

(c) tp (Pessimistic time):

It is also an activity of under adverse conditions. It is the longest time and

rather is more difficult to ascertain.

The estimated time is given by

to + 4tm + tp
te =
6
tp − to
The variance is V(t) =
6
 Advantage of PERT
(i) PERT forces managers and subordinate managers to make a plan for production
(ii) It concentrates attention on critical element that may need correction.
(iii) It enables forwards-working control,
(iv) The network system with its sub-systems, creates a pressure for action at the right
spot and level and at the right event.
(v) PERT can be effectively used for re-scheduling the activities.
Limitations in Using PERT

(i) It is a time-consuming and expensive technique

(ii) It is based on Beta Distribution and the assumption of Beta Distribution may not
always be true.
(iii) PERT is not suitable when programmer is nebulous and a reasonable estimate of
time schedule is not possible.
(iv) It is not useful for routine planning of recurring events such as mass production.
(v) The expected time and the corresponding variance are only estimated values.

Difference in PERT and CPM

Although these techniques (PERT and CPM) use the same yet they in the following
respects differ from each other:
Difference between PERT and CPM

PERT
 PERT is appropriate where time estimate are
uncertain.
 The activities as measured by optimistic time,
most likely time, and pessimistic time,
Is concerned with events, which arethe
beginning or ending points of operation
CPM
 CPM is good when time estimates are found
with certainty.
 CPM assumes that the duration of every
activity is constant and therefore every activity is
critical or not
Is concerned with activities.

Suitable for non-repetitive projects Designed for repetitive projects.

Can be analysed statistically Cannot be analysed
5.7 Construction of a network
Table 1: New Model car - Network Activities

Activity Activity description Preceding Duration (days)

letter activities

A Start Nil 0
B Design A 8
C Build frame B 2
D Build doors B 1
E Fix axles, wheels and fuel tank C 1
F Build body shell B 3
G Fit doors to body shell D, F 1
H Build and test engine B 6
I Assemble and test chassis E, H 3
J Paint body G 2
K Interior J 1
L Mount body to chassis I, K 1`
M Road test the car L 1
N Finishing touch M 1
Network diagram - Car Project
Uses of Network Techniques
PERT and CPM techniques have become useful to management in many ways.

1. The graphic representation of how each activity is dependent on others help in better
scheduling, monitoring and control of project activities.
2. Network diagram helps in identifying critical tasks and critical path
3. It helps diversion of resources to them so that they are not lagging behind schedule.
4. Network techniques help in resource allocation
5. Network techniques help in ascertaining whether or not advisable to crash project time
and the impact of crashing on cost of the project.
6. Helps in cost control
Resource Allocation and Levelling Through Network
 Resource allocation means how much resources be diverted to the project time to time
 Resource Levelling is checking out and balancing the available resource to some extent

Why is levelling needed?

i. Resource constraint can be one of the reasons..
ii. Practically speaking, too much needs on some days and too little needs on other days are
not signs of good planning.

iii. Optimum utilization of permanent/owned facilities, avoiding ideal time,

Resources levelling methods are based on eithera "parallel" or a "serial" approach.

Parallel Scheduling

Imagine a network with several possible start points

Serial Scheduling

Serial scheduling considers each activity in turn one after another of the project

Project Review/Evaluation
 To identify the shortcomings, initiate corrective actions

 It answer questions like: whether the project is implemented in the ways specified;
whether the methods, process, procedures etc.

 Project Review, is not only to help Guide the planners but also help the
administrators, executives. Scholars and academicians.

 In review, the most fundamental task is the formulation and determination of the
time for the study.

 It include Data collection estimation of cost benefits and profitability

 To decide acceptance or non-acceptance of the project.

 Project review is the final phase of Project Management.

The various factors of Project review are

 Initial review.
 Performance Evaluation.
 Abandonment analysis.
 Behavioral issues in project abandonment
 Administrative aspects of capital budgeting
 Evaluating the capital budgeting system of an organization
 Initial Review

The initial review of a project is of two types:

 Control of project in progress
 Post audit

Control of Project in Progress

To ensure that the actual expenditure does not deviate significantly from the authorized
expenditure.
Post Audit

It is the analysis of the outcome of a capital budgeting investment

It assures proper evaluation of the project
It provide proper picture of status of project

Performance Evaluation
It measures how a job can done effectively and efficiently
Performance evaluation may be done in terms of economic rate of return or book rateof
return on investment.

𝐂𝐚𝐬𝐡 𝐟𝐥𝐨𝐰 +𝐂𝐡𝐚𝐧𝐠𝐞𝐬 𝐢𝐧 𝐩𝐫𝐞𝐬𝐞𝐧𝐭 𝐯𝐚𝐥𝐮𝐞

Economic rate of return for a given year = 𝐏𝐫𝐞𝐬𝐞𝐧𝐭 𝐯𝐚𝐥𝐮𝐞 𝐚𝐭 𝐭𝐡𝐞 𝐛𝐞𝐠𝐢𝐧𝐧𝐢𝐧𝐠 𝐨𝐟 𝐭𝐡𝐞 𝐲𝐞𝐚𝐫

𝐂𝐚𝐬𝐡 𝐟𝐥𝐨𝐰 +𝐂𝐡𝐚𝐧𝐠𝐞𝐬 𝐢𝐧 𝐛𝐨𝐨𝐤 𝐯𝐚𝐥𝐮𝐞

Book rate of return for a given year =𝐁𝐨𝐨𝐤 𝐯𝐚𝐥𝐮𝐞 𝐚𝐭 𝐭𝐡𝐞 𝐛𝐞𝐠𝐢𝐧𝐧𝐢𝐧𝐠 𝐨𝐟 𝐭𝐡𝐞 𝐲𝐞𝐚𝐫

Abandonment Analysis

There is a possible to abandon/blocking the project before the specified period.

 The project must be abandoned if the net present value associated with
abandonment is greater than the net present value associated with continuation
 It considered explicitly in project analysis may change the decision itself.

Project Audit
Professional management of project needs a methodology to carry out a regular check as
to whether the project is progressing as scheduled, in scope and in time.
Objectives of Project Audit
 Creating awareness among the project staff to completing the project and producing
quality products, planned volume and at competitive
 Providing a clear picture, from time to time
 Timely spotting of a variety of general problems
 Enabling the base for a proper estimation and costing of the project.
 It suggest requirement to carry out successfully
 To establishing of appropriate standards
 Project auditor has to express his comments deliberately one the following lines:
1. Comment on current status
2. Forecast the future status
3. Highlight critical management issues.
4. Point out exposure to risk and potential losses.
5. Solution on different parameters to avoid project rejection separately.

Functions of Project Auditor

3. The project auditor is an expert in measuring, confirming, investigating, and reportingthe

status of a project

4. He should not be arrogant and see himself in the role of a consultant or technical expert.

3. The project auditor give advice to make recommendations.

4. He evaluate the contract base lines and give his judgement on their adequacy.

Project Audit Program

It is the process with inputs and outputs at each stage as per expectation
and requirements of client or owner
The phase of audit program:

 Preliminary examination of the project's organization, administration, record keeping

controls
 Preparing the statements of project status, current and future,
 Giving a detailed list of completed work as compared with the project's performance
baseline.
 Conduct preliminary analysis and submit audit report

Difficulties in Establishing Audit Purpose and Scope

The purpose of project audit is to clarify the state of the project and clarify uncertainty
issues in execution

Problems or difficulties
1. Requisite number of persons and also qualified persons may not in Project team
2. If the project is on the basis of verbal agreement may create problems.
3. Land acquisition problem
4. Desire outputs may be absent.