Programme Management and

Project Evaluation
 To Be Covered

• Programme Management

• Creating Program

• Resource Allocation
• Project Evaluation
• Risk Evaluation
2.7 Programme Management

• One definition:

‘a group of projects that are managed in a

co-ordinated way to gain benefits that would
not be possible where the projects to be
managed independently’
 Programmes may be
• Strategic
• Business cycle programmes
• Infrastructure programmes
• Research and development programmes
• Innovative partnerships

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 Strategic Programmes
• Several projects together can implement a single
strategy.

• For example : Two organizations are merging

• So we have to create unified pay roll and accounting application.

• Physical reorganization of offices

• Training, new org. procedures, re-creating corporate image using media

• All of these projects can be treated as separate project

• But would be coordinated as a program

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 Business cycle programmes

• Portfolio???

• The collection of projects that an organization undertakes

within a particular planning cycle is sometimes refers to as
a portfolio.

• Companies had fixed budget for ICT development.

• Planners needs to assess the comparative value and

urgency of projects within a portfolio.
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•

• ICT (information and communications technology - or

technologies) is an umbrella term that includes any
communication device or application, encompassing:
radio, television, cellular phones, computer and network
hardware and software, satellite systems

• so on, as well as the various services and applications

associated with them, such as videoconferencing and
distance learning.
 Infrastructure programmes
• Some organizations have different departments for different
activities with communication as a basic requirement among
them.

• So it is required to have a uniform infrastructure to share the

information among different departments.

• In this situation infrastructure program setup and maintain

– ICT infrastructure,

– include the networks, workstation and server.

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 Research and development programmes

• A search for knowledge

• R&D programmes are carried out by the innovative

companies.

• These company develops new products for market.

• There is always high risk associated with these type of

programmes.

• Companies doing R&D

– IBM, APPLE ,MS, Google, Yahoo 9

 Innovative partnerships

• Some technological developments benefits

whole industries.
• In these type of programmes companies
comes together to develop new technologies
• Example World wide web, GSM

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 Programme managers versus project
managers

Programme manager Project manager

– Many simultaneous – One project at a time
projects – Minimization of
– Optimization of demand for resources
resource use – Projects tend to be
– Projects tend to be seen as unique
seen as similar

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 2.8 Allocation of Resource
• What is a project?
• Planned Activity
• What is Resource?
• support that may be drawn upon when needed
• Each project needs Resources to achieve there objective.
• Resources may be:
– Programmers
– Skilled resources
– Infrastructure (PC, Network, Server, Work stations etc)
– Mangers

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 Managing the allocation of resources
within programmes
• In company there are many project running concurrently at same time

• But resources are limited in company so they need to be managed within

the organization.

• So we need to manage these resource.

• ICT department has pools of:

– Expertise

– Software Developer

– Database designer

– Network Support Staff

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Projects sharing resources

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• These experts may be needed in number of
projects running in company.
• So it is the responsibility of program manager to
use these resources in optimum way.
• And if program manager have personal
relationship with these skilled resources. i.e.
he/she has the knowledge about these resources

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• One resource may be needed by different
project
• So we need to identify the priority of the
project
• We can delay the start of activity of a project
with least priority.
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2.10 Creating Programme
• Based on OGC approach
– OGC is a UK govt. Agency responsible for introduction programme
management

• Programme triggered by the creation of programme mandate

• Initial planning document is the Programme Mandate describing

– The new services/capabilities that the programme should deliver

– How an organization will be improved

– Fit with existing organizational goals

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• A programme director is appointed for the
program to take leadership
• Programme director is responsible for success
of the programme

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 Next stages/documents

• The programme brief

– equivalent of a feasibility study:
• It will have sections:

– Vision Statement
– Benefits
– Risks and Issues
– Estimation cost, timescale and effort
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 The vision statement
• The vision statement – explains the new capability
that the organization will have
– Provides information to sponsoring that it is worth
moving to more detailed definitions.
– Next Step is team forming
• A small team is formed with a programme manager
• This team will now take the outline vision and prepare a
detailed vision

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 The blueprint
• The blueprint – explains the changes to be made to obtain the
new capability

• It contains:
– Business model outline

– Organizational structure (staff & new system needed )

– The other non-staff resource needed

– Data and information requirements

– Cost, performance and service level requirements

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2.4 Project Evaluation

• Evaluation of individual projects

– How the feasibility of an individual project can be
evaluated.
1. Technical assessment:
– Whether the required functionality can be
achieved with current affordable technologies.
– Organizational policies
– H/W S/W infrastructure limitations
– Cost of technology adapted
2. Cost-benefit analysis:
– Is the proposed project is the best of several
options?
Cost-benefit analysis comprises two steps-
1. Identify costs and benefits of
• Developing costs
• Operating costs
• Benefit expected from the new system
2. Expressing above costs in common units
• Express cost and benefit in terms of a common unit
 Benefits management
• In Benefit management, we

• identify,

• optimise and

• track the benefits.

• To carry this out, you must:

– Define expected benefits

– Analyse balance between costs and benefits

– Plan how benefits will be achieved

– Allocate responsibilities for their achievement

– Monitor achievement of benefits

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 Cash Flow Forecasting
• Which in indicates when expenditure and

income will take place.

• Ex: Spend money on staff salaries

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2.5 Cost-Benefit Evaluation Techniques

• Net Profit

• Payback Period

• Return on Investment(ROI)
• Net Present Value
 Net profit

• Net Profit = (Total income) – (Total cost)

– Over the life of the project

• Estimation for more distant future are less

reliable than short term estimation.

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Net profit

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 Pay back period
• It is time taken to break even or pay back the initial
investment.
• Project with shortest payback period will be chosen on the
basis that an organization will wish

to minimize the time that a project is in debt.

• Advantage: Easy to calculate

• Not sensitive to small forecasting errors

• Disadvantage: Ignores overall profitability
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of project
 Pay back period
Year Cash-flow Accumulated
0 -100,000 -100,000
1 10,000 -90,000
2 10,000 -80,000
3 10,000 -70,000
4 20,000 -50,000
5 100,000 50,000

Accumulated of last year – cash flow of present year

The payback period would be about 4.5 years.
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 Return on investment (ROI)
• Accounting rate of return (ARR)
• Compares net profitability with investment
required.

Average annual profit X 100

ROI =
Total investment

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 ROI
• For project1
• Net Profit = 50000
• Time Duration= 5 years
• Average annual profit is =50000/5=10000
10000 X 100
ROI =
100000

ROI = 10%
 Return on investment (ROI)
In the previous example
Calculate ROI and decide which project is most
worthwhile:

P1: 10%
P2: 20%
P3:10%
P4:15%

We eliminate P3, and consider only from P2 and P4, out

of this P2 is better
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 Net present value
• NPV is a project evaluation technique that takes into
account the profitability and timing of the cash flows.
• Present value = (value in year t)/(1+r)t

t = value in year, r = discount factor

Discount Cash Flow= Cash flow * Present Value

Net Present Value = Sum of the discounted cash flows for all the

years - investment
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t=1
r = 10% = 0.1 Discount Cash Flow = 10000 * 0.9091 = 9091
PV = 1 / (1 + 0.1)1
Year Cash-flow Discount Discounted cash
factor/Present flow
value @10%
0 -100,000 -100,000
1 10,000 0.9091 9,091
2 10,000 0.8264 8,264
3 10,000 0.7513 7,513
4 20,000 0.6830 13,660
5 100,000 0.6209 62,090
Net
Profit
50,000 NPV 618

NPV = (9091 + 8264 + 7513 + 13660 +62090) - 100000 )

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= 618
• If NPV is in +Ve than its discount factor is good

• If NPV is – Ve than its discount factor is bad

• Irr-internal rate of return-

 2.6 Risk Evaluation

Dealing with uncertainty: Risk Evaluation

• Every project involves risk of some form.

• Project A might appear to give a better return than B but
could be riskier
• How to choose ?????

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 Risk Evaluation
1. Risk Identification and Ranking
– One technique is, to draw risk matrix.
• Classify risk into two categories :
– Important (impact)
– Likelihood (probabilty)
• Matrix may be used for project evaluation

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Example of a project risk matrix

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• 2. NPV and Risk
– For riskier projects, could use higher discount
rates.
– We can increase Discount rate for risky projects
by 5 to10%.

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• 3. Cost-benefit Analysis:
– In this approach we consider each possible
outcome and estimate the probability of their
occurrence.
– So instead of single cash flow we will have set of
cash flows and their occurrence.

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 Risk Evaluation(Cont.)
Sales Annual Sales Probability Expected value
Income
High 8,00,000 0.1 80,000
Medium 6,50,000 0.6 390,000
Low 100,000 0.3 30,000
Expected Income 5,00,000

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4. Risk Profile Analysis
• Construction of risk profiles using sensitivity analysis
– We can analyze the risk with project by varying the
parameters of project that affects the cost or benefits of
the project.
– First we do the estimation then we vary it and check it’s
sensitivity.
• For example we are varying the original estimation by
+ or – 5% and then recalculate the cost and benefits.
If the project cost and benefits changes drastically
then that parameter becomes sensitive to project

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5. Decision trees:
• Example:
– Some company is providing payroll service to
their customers.
– Their system is old and number of customers are
increasing. There is a probability that market will
expand more.
– They have two option
• Expand the existing system
• Replace the old with new

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Decision trees

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