Introduction to Projects

Concept

• Capital Expenditure, also referred to as capital investment, capital

project or projects, typically involves a current outlay of funds in the
expectation of a stream of benefits extending far into future.
Capital expenditure decisions represent the most important decisions
taken by a firm. Thea reasons for importance being:
• Long-term effects
• Irreversibility
• Substantial Outlays
Capital expenditure decisions represent the most important decisions
taken by a firm. Thea reasons for importance being:
• Measurement Problems
• Uncertainty
• Temporal Spread
Concept of Project and Project Management

• The term project has a wider meaning. A project is accomplished by

performing a set of activities. Another aspect of project is the non-
routine nature of activities. Each project is unique in the sense that
the activities of a project are unique and non routine. A project
consumes resources. The resources required for completing a project
are men, material, money and time. Thus, we can define a project as
an organized programme of pre determined group of activities that
are non-routine in nature and that must be completed using the
available resources within the given time limit.
• According to the Encyclopedia of Management, “project is an
organized unit dedicated to the attainment of goal, the successful
completion of a development project on time, within budget, in
conformance with predetermined programme specification.”
• Newman et. al define that “a project typically has a distinct mission
that it is designed to achieve and a clear termination point the
achievement of the mission”.
• Gillinger defines “project” as the whole complex of activities involved
in using resources to gain benefits. Project management institute,
USA defined project as “a system involving the co-ordination of a
number of separate department entities throughout organization, in
a way it must be completed with prescribed schedules and time
constraints”.
• Project management is an organised venture for managing projects,
involves scientific application of modern tools and techniques in
planning, financing, implementing, monitoring, controlling and
coordinating unique activities or task produce desirable outputs in
accordance with the determined objectives with in the constraints of
time and cost.
 CHARACTERISTICS OF PROJECT
(1) Specific Objectives : A project has a set of objectives or a mission. Once the
objectives are achieved the project is treated as completed.

(2) Approved Budget: Each project starts with a predetermined budget according
to which the resources should be allocated. The project has to be accomplished
within the scope of the budget

(3) Uniqueness : Every project is unique and no two projects are similar. Setting up
a cement plant and construction of a highway are two different projects having
unique features.

(4) Team Work : Project is a team work and it normally consists of diverseareas.
There will be personnel specialized in their respective areas andco-ordination
among the diverse areas calls for team work.

(5) Complexity : A project is a complex set of activities relating to diverse

(6) Risk and uncertainty : Risk and uncertainty go hand in hand with project. A risk-free, it only
means that the element is not apparently visible on the surface and it will be hidden
underneath.

(7) Customer specific nature : A project is always customer specific. It is the customer who
decides upon the product to be produced or services to be offered and hence it is the
responsibility of any organization to go for projects/services that are suited to customer needs.

(8) Change : Changes occur through out the life span of a project as a natural outcome of many
environmental factors. The changes may very from minor changes, which may have very little
impact on the project, to major changes which may have a big impact or even may change the
very nature of the project.

(9) Optimality : A project is always aimed at optimum utilization of resources for the overall
development of the economy.

(10)Unity in diversity : A project is a complex set of thousands of varieties. The varieties are in
terms of technology, equipment and materials, machinery and people, work, culture and
others.
CLASSIFICATION OF PROJECTS

The location, type, technology, size, scope and speed are normally the
factors which determine the effort needed in executing a project.
Project can be classified under different heads.
TYPES OF PROJECTS
 

• The projects can be classified as: International and national projects

a)International projects are those that’s not confined to the borders of
the country but spread across different nations. A project when
undertaken in another country can be termed as international project
b)National projects are those that is confined within the boundaries of
the country which can be further classified as industrial and non-
industrial projects. If a project is undertaken for a non-industrial
purpose like constructing of a house, or purchase of a new car,
conducting a marriage etc can be included in non-industrial projects
Industrial projects are undertaken by the industry for commercial benefits,
such projects can be further classified as follows:
• Mandatory projects comes as in a statutory requirement or as per
Government requirement or specification for eg: pollution control, fire
fighting equipment, crèche in factory premises and so on. They are often
non revenue producing investments so the focus is mainly on finding the
most cost-effective way of fulfilling a given statutory need.
• Replacement project is to replace obsolete and inefficient equipments,
even though they may be in serviceable condition. The objective is to
reduce cost labour or power consumption as well as to increase yields
and improve quality.
• Expansion project are meant to increase capacity or widen the
distribution network. Such investments call for an explicit forecast of
growth, since its very risky and complex. Decision regarding to such
• Diversification project are aimed at producing new products or
services or entering into entirely new markets. Often diversification
projects entails substantial risk and involve large outlays so it requires
proper planning before undertaking such projects.
• Research and development projects traditionally absorbs a very
small proportion of capital budget in most Indian companies,
however things are changing. R& D projects are characterised by
numerous uncertainties and risk and typically involve sequential
decision making before taking up any project
• Miscellaneous projects is a catch all category that includes items like
interior designing of the office, decoration, recreational activities and
so on. There is no standard approach for evaluating these types of
projects and decision regarding them is made by the top
management.
PROJECT FAMILY TREE
• A project family tree is a hierarchy of project broken down into
different stages. A project normally originates from a plan, national
plan or corporate plan. In normal scheme of things, the family tree for
a project would be as given below
 Plan = National/Corporate plan with target for growth.

Programme = Health prog., educational prog., R&D prog.

Project = Power plant, hospital, housing project etc.

Work Package = Water supply, power supply and distribution package.

Task = Award of water supply contract, construction & foundation.

Activity = Excavation, laying of cable, preparation of drawing.

Life Cycle Phases
• Project Incubation ( idea generation, pre-project planning, feasilbility study,
swot analysis, risk and return study)
• Starting the project (concept, authorization, initiation, identification, selection,
project charter and business case, planning, scheduling.)
• Organizing and Preparing (definition, feasibility confirmation, development,
demonstration, design prototype, quantification.)
• Carrying out the work (execution, implementation, realization, production and
deployment, design/construct/ commission, installation and test.)
• Closing the project (handover of the project results to the user, project
termination)
• Project evaluation (post project study, measuring budget, scope
time,inevitable for project driven organization)
• Project evaluation (post project study, measuring budget, scope time,
inevitable for project driven organization)

Each of these phases contain critical decision points (proceed, cancel,

revise /scope/cost/schedule/quality.)