Project analysis and finance

CHAPTER ONE

INTRODUCTION TO
PROJECT
a project is “a unique set of co-ordinated activities, with definite starting
and finishing points, undertaken by an individual or organization to meet specific
objectives within defined schedule, cost and performance parameters.”
 What is a Project?
2

A project is
a one-time, multitask job with a definite starting point, definite
ending point,
has clearly defined scope of work, a budget, and usually a
temporary team.

A project is a problem scheduled for solution

It is defined as a unique set of co-ordinated a ctivities,

with definite sta rting and finishing points, undertaken by
a n individua l or orga niza tion to meet specific objectives
within defined schedule, cost and performance
parameters.’
 Cont...
3

It is a temporary endeavor undertaken to create

unique product or service
Thus, projects are designed to bring about a product,
service, or result that didn’t exist before.

Projects are temporary in nature and have definitive

start dates and definitive end dates. Thus, a project is
completed when its goals and objectives are
accomplished to the satisfaction of the stakeholders.
 Cont...
4

Sometimes projects terminate when it’s

determined that the goals and objectives cannot be
accomplished or when the product, service, or
result of the project is no longer needed.
 Important concepts in the definition a project
6

1. Sequence of activities: a project is comprised of a series of

activities that are follow one after the other
2. Unique activities: activities in a project are typical to
the project
3. Complex activities: The activities that make up the project
are not simple and repetitive actions
4. Connected activities: logical or technical relationship
between pairs of activities.
5. Specific goal: the goal of a particular project is specific to it.
Multipurpose projects are normally called programs.
6. Specific duration/completion time
7. Within a budget
8. According to specification
Why a Project?
 A project is generally called upon to provide a solution to a problem

or to take advantage of an opportunity.

These needs might have to do with:
 Reducing costs
 Increasing revenues
 Eliminating waste,
 Increasing productivity and efficiency
 Taking advantage of market opportunities
 Filling social needs; improving service to customers or clients
 Responding to the activities of competitors
 Responding to external changes (e.g. development of new technology)
 Responding to government initiatives or new laws or political consideration
 Resource availability –opportunity to make profitable use of available
resource, and
 Natural calamity –planting against the adverse effects of natural events as
drought or floods
1.2. Concepts and Definitions of Project
and Project Management
What is a project?
• As a working definition, several authors have
provided various definitions of a project. Some of the
widely accepted definitions of project are as follows:

• A Project is:
– a Problem Scheduled for Solution.
– a temporary endeavor undertaken to create a
unique product/service.
 Cont…
• An endeavor in which human, machine material and
financial resources are organized in a novel way, to
undertake a unique scope of work, of given
specification, within constraints of cost and time, so
as to deliver beneficial change defined by qualitative
and quantitative objects.
• we can also define project as an organized program
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.
• A project uses one or more scarce resources during a
specific time for the purpose of producing some economic
returns or outputs at a later date.
 Features of a project
1. Specific and Unique:
• Every project is unique in that it requires doing
something different than was done previously.
• Each project is unique in the sense that the activities
of a project are non routine.
• A project is a one-time activity, never to be exactly
repeated again. They do not involve repetitive
processes.
• Projects involve doing something that has not been
done before in the same environment: having
different location, different design, different
circumstances and situations and so on.
No two projects, even projects with the same general
objectives, are ever identical in planning or implementation.
 Cont…
2. Temporary
• A project has a definite beginning and definite end(finite
duration).
• Temporary does not necessarily mean the duration of the
project is short.
• It refers to the project’s engagement, it can be a
3month project or 25 years project or …
• Temporary does not typically apply to the product, or
service created by the project;
•Most projects are undertaken to create a lasting
outcome.
Projects are temporary activities as an ad hoc organization
of personnel, material, and facilities is assembled to
accomplish a goal, usually within a scheduled time frame.
3. Progressive Elaboration

• Continuously improving the plan as more information

becomes available as the project progresses.

• The characteristics of the product/service of the project

are determined incrementally and continually refined
and worked out in detail as the project progresses.

• Planning and documentation are ongoing activities.

 Cont…

4. Requires Resources

• Project have resource limits, such as a limited amount

of budget, human, equipment and materials that are
dedicated to the project.
5. Risk
• Projects involve an element of risk i.e. Projects entail a
level of uncertainty regarding cost, schedule or
performance outcome and therefore carry project risk.
 Cont…

6. Definable objective
• Project involves a definable objective usually specified in
terms of cost, schedule, and performance requirements.
7. Project has life cycle:
• Project is the process of working to achieve a goal; during
the process, projects pass through several distinct
phases, called the project life cycle. The tasks, people,
organizations, and other resources change as the project
moves from one phase to the next.
 Cont…

8. Team Work
• Project is a team work and it normally consists of diverse
areas. There will be personnel specialized in their
respective areas and co-ordination among the diverse
areas calls for team work.

9. Complexity
• A project is a complex set of activities relating to diverse
areas.
 Key features

 Is unique set of coordinated activities

 Has definite starting and finishing points

 Is designed to meet specific objectives

 Has a defined schedule, cost and performance parameters

 It has a long-term effect: impact extends far into the future. Present outlays

generate benefits in the future.

 It is irreversible: a project once implemented may not be reversed. , the time

and cost spent on an ill-conceived project may not be recovered at all or

without a substantial loss.

 It results in substantial outlay: a project often demands a substantial outlay implying that any

fault in its design or implementation leads to a huge loss

 Projects can be classified based on several criteria.
1. Ownership
a) Private sector- mostly projects undertaken by business enterprises.
b) Public sector- projects undertaken by national and local government body.
c) NGO’s – development projects undertaken by non-government and not for
profit organizations.
2. Based on the forces behind
a) Demand driven/need driven- based on identified unsatisfied demand project
can be created or on unsatisfied basic needs like food, water, and shelter..
b) Donor driven- the force behind the financing organization.
c) Political driven
3. Based on the Nature of the projects
a. civil engineering, construction, petrochemical, mining
b. Manufacturing
c. Management
d. Pure scientific researches

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 Cont…

Program
• A group of related projects, subsidiary programs, and
program activities managed in a coordinated manner
to obtain benefits not available from managing
them individually.

• Programs are larger initiatives that are broken up

into a set of smaller projects and subprograms and
then coordinated centrally. The projects in a
program are related to each other.
 Project and Programs

• Project is differentiated from program how ever

people use them interchangeably.
• Policies are implemented through programs
usually overall lengthy time scale of five to ten
years.
• Programs unlike projects are open ended means
they do not have a well defined finish date.
• A series of related projects make programs.
• A project is a means by which national, regional
local, etc plans are made operational.
 Project and Programs
Project Program
 Is specific in objectives/purpose  Has got general
Differences  Has specific area/geographic objectives
unit  May not have specific
 Has specific target groups area
 Has clearly determined and  May not have specific
allocated fund. target groups
 Has specific life  May not have clear
and detailed financial
allocation
 May not have specific
time of ending.

Similarities  Have purpose/objectives

 Require input (financial, manpower, material, etc).
 Generate output(goods and/or services)
 Operate over space and time.
 Project Management

• Project Management is the skills, tools and

management processes required to undertake a
project successfully”.

• Project management is a set of principles, practices,

and techniques applied to lead project teams and
control project schedule, cost, and performance risks
to result in delighted customers.

• It is a temporary endeavor that involves

management functions to achieve certain pre defined
objectives.
• Project management involves a series of management
techniques and processes required to monitor and
control time, cost, quality and scope of projects.

• Project management is the discipline of planning,

organizing, securing, and controlling resources to
bring about the successful completion of specific
project goals.

• All the management functions are required to

effectively and efficiently manage resources required
to complete the project. These are :
Project planning involves:
 Looking ahead and charting out future course of
operation for projects
 Formulation of Objectives, policies, procedure, rules,
schedules and budgets
 In the planning stage, managers establish
organizational goals and create a course of action to
achieve them.
 During the planning phase, management makes
strategic decisions to set a direction for the
organization
Project organizing involves
 Bringing resources together and tying them together
in the pursuit of common objectives.
 Enumeration and identification of activities,
classification of activities, fitting individuals into
functions and assignment of authority for action.
 A project manager's organizational skills can help to
ensure a company or departmental unit runs
smoothly.
 Knowing which employees or teams are best suited
for specific tasks.
 Organization isn't just about delegating tasks
efficiently and making sure employees have what
Project directing involves
 Guiding, overseeing and leading people
 Motivation, leadership, decision making.
 Directing/Leading consists of motivating employees and
influencing their behavior to achieve organizational
objectives.
 Though managers may direct team members by giving
orders and directing to their team, managers who are
successful leaders usually connect with their employees
by using interpersonal skills to encourage, inspire and
motivate team members to perform to the best of their
abilities.
Project Controlling
 Laying standards, comparing actual performance
against standards and correcting deviation-achieve
objectives according to plans.
 To ensure all of the above functions are working
toward the success of a company, managers should
consistently monitor employee performance, quality
of work, and the efficiency and reliability of
completed projects.
 Controlling is the process of evaluating the execution
of the plan and making adjustments to ensure that the
organizational goal is achieved.
 Project Objectives

There are three basic and common objectives

of any project:
• The project must meet the prescribed quality
requirements,

• The project must be accomplished within the

budgeted cost,

• The project must be completed on time.

 Cont…
• A key point to note in relation to project goals is that they should be
stated in a way that facilitates measurement of achievements.
• The general rule is that project goals should be SMART – an
acronym for:
– Specific :
well defined and clear to anyone that has a basic
knowledge of the project,
– Measurable :
How do we know how far away completion is and when
it has been achieved,
– Action-oriented:
Indicate what should be done to achieve the objective,
 Cont…

• Reliable/achievable :
Do we have the resources (human, financial, material,
information, time) to make the goal happen? Is the
objective achievable with the available resources and
timeframe.
• Time-based :
It should identify a definite target date for completion
and/or frequencies for specific action steps that are
important for achieving the goal on/within a specific
time period.
 Key stakeholders of a project
Key stakeholders who are directly linked to most
projects are;
1. Project manager:
• The project manager has primary responsibility for the quality of a
project's deliverables and its successful completion.

• Project managers can have the responsibility of the planning,

execution, and closing of any project and ensuring that the project is
successfully completed on time and within budget.

• Key project management responsibilities include creating clear and

attainable project objectives, building the project requirements,
and managing the triple constraint for projects, which is cost, time,
and scope.
2. Project Sponsor

• The project sponsor can be a public or private entity

and should have the influence to ensure that the project
has sufficient priority to enable success.

• The sponsors are responsible for providing the funding

and staffing resources to complete the project
successfully.

• The project sponsor usually represents the recipient of

the project’s end result.
3. The user
• The user is the person or organization using the product
of the project.
• End users are responsible for ensuring that their needs
are expressed and verifying that a completed project
meets those expressed needs.
4. The contractor:
• Typically builds a unique project in a very competitive
environment.
 Project Management Process
• A process is a series of actions directed toward
a particular result.
• Project management can be viewed as a
number of interlinked processes.
• The project management process groups
include:
– Initiating processes
– Planning processes
– Executing processes
– Monitoring and controlling processes
– Closing processes

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 Initiating
This stage defines and authorizes the project. The project manager is named,
and the project is officially launched through a signed document called the
project charter, which contains items such as the purpose of the project, a
high-level product description, a summary of the milestone schedule, and a
business case for the project.
Project charter
1.
defines what is to be done to meet the requirements of project
customers.
2.
3.
should be used to authorize work on the project;
defines the authority, responsibility, and accountability of the project
4.
team; and
Establishes the scope boundaries for the job.

Another outcome of this stage is a document called the stakeholder register,

which identifies the project stakeholders and important information about
them.
 Planning
36

In this stage, the project manager, along with the project

management team, refine the project objectives and
requirements and develop the project management plan,
which is a collection of several plans that constitute a
course of actions required to achieve the objectives and
meet the requirements of the project. The project scope is
finalized with the project scope statement.

The project management plan, the outcome of this

stage, contains subsidiary plans, such as a:
project scope management plan,
schedule management plan, and
quality management plan.
 Executing
37

In this stage, the project manager, implement the project management

plan, and the project team performs the work scheduled in the
planning stage.

The project manager coordinates all the activities being performed to

achieve the project objectives and meet the project requirements. Of
course, the main output of this project is the project deliverables.

Approved changes, recommendations, and defect repairs are also

implemented in this stage. But where do these changes and
recommendations come from? They arise from monitoring and
controlling the project.

The stakeholders can also suggest changes, which must go through an

approval process before implementation.
 Monitoring and controlling
38

You monitor and control the project through its

lifecycle, including the executing stage.
Monitoring and controlling includes:
Monitoring the project progress and performance to identify variance
from the plan, and recommending preventive and corrective actions to
bring the project in line with the planned expectations in the
approved project management plan.

Requests for changes, such as change to the project

scope, are also included in this stage.
The changes must go through an approval process, and only the
approved changes are implemented.
 Closing
39

In this stage, you manage the formal acceptance of the

project’s product, close any contracts involved, and bring the
project to an end by disbanding the project team.

Closing the project includes conducting a project review

for lessons learned and possibly turning over the outcome
of the project to another group, such as the maintenance or
operations group.

At the closing stage celebration is important.

Terminated projects (that is, projects cancelled before

completion) should also go through the closing stage.
Initiating Planning Executing Monitoring and Closing
Controlling

•Project definition •Refine objectives •Implement the •Defending the •Getting

•Project and requirements
• developing project
plan project scope acceptance
authorization •Coordination •Checking for •Project review
management plan.
•Project manger •Deciding course of different progress for lessons to be
appointment actions to realize
•Project charter objectives and
activities •Identify the learned
•Stakeholder requirements •deliverables variance with •Celebration
register • Project the plan
management Plan
include subsidiary
plans like Scope plan
•Schedule plan
•Requirement plan

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 Factors Affecting Project Success
• Coordination and relations
• Adequacy of structure and control
• Project uniqueness, importance, and public
exposure
• Success criteria analysis and consensus
• Competitive and budgetary pressure
• Initial over-optimism, conceptual difficulty
• Internal capabilities buildup
Chapter End!