| ESE2018 LUPSC ENGINEERING SERVICES EXAMINATION Preliminary Examin: at Comprehensive Theory with: Practice Questions Gnd ESE Solved Questions[es M Chapter 1 Basic Concepts and Project Life Cycle swan What is Project?.. 1.2 What is Management?. 1.3. Whatis Project Management?.. 14 Project Life Cycle.. 15 Project Management Process ‘ Objective Brain Teasers. Chapter 2 Initiation Process : Project Formulation and Appraisal 2.1 Project Formulation and Development nau:14 22 Project Appraisals. 25. Formulation of Detailed Project Reports (OPR}... send 26 Project Risk Analysis. 36 Objective Bran Teasers. M4 Chapter 3 Project Organisation. 3.1 Introduction. 3.2 Type of Project Organisations... 33. Project Organisation Structure... 58 Objective Brain Teasers... 59 Chapter 4 Planning Process : Project Planning and Scheduling... 2 4. Planning. 42. Scheduling 43 tmplementation and ContTOlecesnnnns61 44 Work Break Down Structute.... 45. Techniques Used for scheduling. 46 Network Diagram 47 Network Scheduling Techniques. Objective Brain Teasers. Chapter 5 Execution Process: Project Monitoring and Control = 5.1 Project Control Systérn.. 5.2 Tips or Efficient implementation of Projects96 5.3. Project information System.. 97 54° Resource Allocation... 98 55 Project Cost Contel.. 101 Objective Brain Teasers. 107 Chapter 6 Closing Process: Project Evaluation Objective Brain Teasers. Chapter 7 Tender and Contract. 4 7.1 Project Contract. 14 72 Project Tender.. M7 73 Project Cost Estimate... 120 7A Types of Cost Estimates... 121 75 Project Sickness. : nen 123 76 — Miscellaneous Topics. 12 7.8 Value Analysis and Value Engineering... 133 Objective Brain Tease.non 137 wv)Chapter 1 Introduction, 1.1 Historical Perspective. 1.2 Material Science 1.3. Classification of Materials. Chapter 2 Chemical Bonding... 24. Fundamental Concepts.. 22 _ Electrons in Atoms.. 23 _ ThePeriodicTable.. 24 — Chemical Bonding... = 25 lonic Bond. 2.6 Covalent Bond. 27 Metallic Bond. 2.8 Comparison of Primary BondS unm 29 Dispersion Bonds. 2.10 2a Dipole Bond Hydrogen Bonds... Objective Brain Teasers Chapter 3 Crystallography wens 3.1 Introduction 3.2 Comparison of Crystalline and Nonerystalline Solids... 51 33. Lattice Points, Space Lattice and Crystal Structures. 152 34 Unit Cell and Primitive Unit Cell 35. Bravais Lattices 3.6 Cubic Crystal Structures. 37 Hexagonal Closed Packing... 38 Miller indice: 39 Planar Density. 3.10 Interplanar Spacing, 3.11 Crystal imperfections 161 3.12 Point imperfections 161 Objective Brain Teasers see 164 Chapter 4 Electronic Matetials.unisueununnsnenonnsnanenen 66. 4.1 Introduction.. 166. 42 Ohm's Lawand Electrical Conductivity... 167 43. Energy Band Structure in Solids. 169 44 Classification of Materials based upon Energy Band Diagram... an 4S Electrical Resistivity of Metal. 172 46 Thermal Conductivity of Metals Wiedemann Franz law. 47 Thermoelectric Phenomenon. 48 Superconductivity. 174 AQ INSUIBtOFSvnnnnnnnne 7 410 Dielectrics... 178 4:1 Electric Dipole Moment and Polarization... 180 4.12. Types of Polarization... 4.13 Phase Difference and Dielectric Loss. 4.4 Polar Molecules. 4.15. Nonpolar Materials... 4.16 Other Electrical Characteristics of Materals...184 4.17 Use of Dielectrics. 4.18 Semiconductor Materials 4.19 Electrons and Holes inan Intrinsic Semiconductor (Pure Semiconductor. 420 Extrinsic Materials : 421 Charge Densities in a Semiconductor 422 Electrical Properties of Semiconductor 423 Hall Effect.. A424 Thettistors enum 425 Photoconductors. Objective Brain Teasers Chapter 5 Magnetic Properties of Materials..... 195 5.1 Introduction oa. sn 195 5.2 Magnetic Parameter 195 53 Classification of Magnetic Materials... 196 54° CurieTemperature... seen 201 (wi)55 Caws of Magnetic Material 202 § 56 Domain Theory. : 203 5.7 Magnetisation Curve and Magnetic Hysteresis Loop. 204 58 Soft Magnetic Materials... 205 59 Hard Magnetic Material. 207 5.10 Magnetic Storage. Objective Brain Teasers 7 210 Chapter 6 Ceramics 6.1 Introduction . 62 Silicate Ceramics. 63. Material Preparation. 64 Thermal Treatments. 55° Electrical Properties of Ceramics: 27 66 Mechanical Properties... 6.7 Thermal Properties of Ceramics. 6B C1255 enn : 69 Carbon... . Objective Brain Teasers. 222 Chapter 7 Polymers nnn 7. Polymers... 7.1 Introduction... 224 7.2 Basic Definitions.. 224 73 General Characterist 7.4 Molecular Structure of Polymers. 75 Classification of Plastics su 7.6 Thermoplastic Materials... 7.7 Thermosetting Materials... 7.8 — Mechanical Behaviour of Plastics 79 Compounding Materials. 7.10 Comparison of Polymers with Ceramics and Metals. 232 Objective Brain Teasers. 233 Chapter 8 5 Composites 8.1 Introduction — 234 82, General Characteristics of Composites .n.234 83. Particle-reinforced CompOSItES.eunnmn 236 84 Fibre Reinforced Composites. 85. Laminar Composites. 8.6 —_Polymer-Matrix Composites (PMCs) Objective rain Teasers... Chapter 9 Mechanical Properties of Materials 9.1. Introduction... 92 Normal stress. 93 SHIA i a 94 Tension Test for Mild Steel... 95 Common Terms of Mechanical Properties. 246 96 Failure of Materials in Tension and Compressio. 97 Fracture. 98 Hooke’ Law. 99. Elastic Constants nnn 9.10 Difference between Linearly and Non-linearly Elastic Materials. Objective Brain Teasers Chapter 10 Ferrous Metals... 10.1 Introduction... 102. Pig iron... 103 Cast ron... 104 105 106 _ Speciat Alloys Steels... Objective Brain Teasers. se 265, Chapter 11 Non-Ferrous Metals and Alloys 1.267 111 Introduction, 267 112 Aluminium... 11.3. Aluminium Alloys. 269 MA Coppet nun +270 115 Lead.. 274 n6 Tin m4 V7 Nickel... 27h 118 Magnesium. = 5 119 “Titanium m5 11.10 Tungsten... — 275 Objective Brain Teasers sane 28 (vii)Chaper 1 Introductio 1.1 Introduction and Different Views on ICT...278 12. Aimsand Objective of ICT by UNESC 13. (CTinaBroader Context. 14 Objectives of ICT... 15 Tin Daily Life. Objective Brain Teasers. Chaper 2 ICT based TOOKSwuwsnninin 5 24. Computer. 22 Mobile 23: Mobile Phone Generations. 24 Television. 25. GPSNavigation System... 302 Objective Brain T2825 en Chaper 3 ICTin Networking. BA Network. 32 Transmission Media.. 33. Classification of Transmi 34 Computer NetWork nnnnnenn 35 Goal ofthe Networking 36. Recent Advancement Related to Networking, 16 37 Cloud Computins 38 Grid Computing 3.9. Transmission Modes in Network, 3.10 World Wide Web (www). 3.41 Network Securit Objective Brain Teasers... Chaper 4 IcTine-Governance... 4.) Introduction... 42. e-Governance Meaning 43. Advantages of &-Governance 44 Objectives of €-Governance.... 45 Stages of e-Governance... 46 Strategies for E-Governance in india 47 MeGovernance. 48 Challengesin e-governance 49° Disadvantages of e-governanc: 4.10 Digital india Programme... 4.11 Government of india Initiatives 4.12, TRENETRA. 4.13 Bharat Bill Payment System (B8PS). Objective Brain Teasers Chaper 5 ‘Technology Based Education. 5.1 © Introduction... 5.2. Objectives of ICT in Education. 53, AContinuum of a Approach 54 Information and Communic Technologies in Schools 380 55 \GTEnabled Teaching-Learning Processes . 381 56. ICTfor Children with Special Needs on 381 5.7 ICTfor Open and Distance Leatting uuu. 382 58 ICT for School Management. 382 5.9 School Management Information System (Schoo! Mis) 5.10 Tools Used For ICT in education. 5.11, ICTin India : Government initiatives. 5.12. Advantage of Tin Education. 5.13 ~ Limitation of (CTin Education. Objective Brain Teasers Chaper 6 Recent Development Related to ICT. 61 Artifical intetigence... 62 Evolved Edge Technology.. 63 Holographic Storage. 64 HVD 65 HTML5O... 66 — Quantum Computing... 67 Struxnet 68 Big Data, 69° Net Neutrality enn Objective Brain TeasersEthics and Values nance ing Profession Chaper 1 47 Responsible Organizational Disobedience. 482 Ethics for Engineers. 48 Confidentiality and Proprietary Information . 482 1.1 Whatisa Profession?, 49° Whistle Blowing (Disobedience by Protest) 483 12 Whatis Ethics . 4.10 Gifts & Bribes Commissioning/Termination/ Transfer The important elements of a project life cycle are: 1. Operations /activities: which should be performed insequence 2. Resources: manpower, material, money machinery a. 3. Constraints and extemal conditions. + Level of Effort (Intensity of Activities) ’s and time: Time = Fig. 1.1 General Studies & Engineering Aptitude The project lifecycle is often presented with its associated level of effort, The level of effort could be any parameter that flows through the project that can be measured, but itis most commonly expressed as man-hours ‘acexpenses/costs. The level of fortis a useful indicator for the project manager to quantify the amount of work to be performed and the amount of work.completed within each phase. These parameters can be presented as a line graph of ‘rate of expenditure’ (or rate of effort) andlor a line graph of ‘cumnulative expenditure Project Phase k Strategy Phase Feasibility | Definition! Phase | Phase { Execution Phase ‘Comm Phase Level of Etfort ‘Swategy r Fig. 1.2 Level of Eltort Beecution The accumulated effort is the sum of the effort to date. This shows a typical ’S curve' profile similar to that used in he earned value calculation, Ths isa useful feature for the project manager to note as similar projects tend to have similar levels of effort profiles,MADE ERSY Project Management : 7 1.4.3 Level of Influence Vs. Cost of Changes (Front-End Importance) ‘Cost of change’ curve plotted against the project itecycle Strategy TY Comm Phase Execution Phase cane ‘Srategy : Feasibiy Comm Fig. 1.3 Level of influence vs. Cost of change 1.4.4 Product Life Cycle (10 Phases) The classic product life cycle Only considers the project trom the feasibility study to the commissioning and handover (four phase). However, ifthe project is considered from the client's (project sponsors} perspective, then the strategy phases and the operational phases need also to be included, as on the next page. Strategy Phase Project Prase Operation Phase k Capote Compare y Buns Fossbiy Pree! Project Comm and Qperaon y Hat von Requrements ) Case) Study) Detntion ) Excouton ) Handover) Stata) Lie ) Disposal A. Strategy Phases 4. Corporate vision and value phase: The corporate vision and values phase establishes the corporate vision and values which outline the purpose and long term aims of the company, together with details of the company’s cullure, philosophy and the way the company intends to do business. 2. Corporate requirement phase: The corporate requirement phase investigales wha! the company needs io do to jraintain competitive advantage to stay in business, and what opportunities the company could exploit to help achieve the long term corporate objectives, 3. Business case phase: The business case phase outlines the corporate strategy indicating how to solve the problems, requirements and opportunities with a number of proposals. The business case seeks t6 justify the use of company resources (0 pursue each course ot action .ESAT General Studies and Engineering Aptitude : Vol.-2 General Studies & Engineering Aptitude DOYOUKNOW? : What is Halo effect?: Halo effect is the assumption that because the person is good at a technology/ Project Phases 4. Project feasibility phase or Initiation phase: The feasibility phase assessés the business case to confirm itis feasible to manufacture and implement. f there are a number of possible business case solutions, the feasibility study ranks the business cases in order of how well they are addressing the client's requirements. 5. Project definition phase: The project definition phase uses the guidelines from the feasibility study to design the project, outline the build-method and develop detailed schedules and plans (baseline plan) for all the knowledge area topics that are required to make the project. 6. Project execution phase. The project execution phase uses the design and project plan from the definition phase to construct the project. An execution strategy is developed to make the best use of corporate resources and outsourcing. 7. Project commissioning and handover or closing phase: The project commissioning and handover pphase inspects and confirms the project has been made to the approved design, then hands over the project to the client for operation. Operation Phases 8. Operation start-up phase: The operation start-up phase implements the new facility, product or service into the operational environment. Itis the project sponsor's responsibilty to ensure the operation of the project realizes benefits for the client organization. From the client's perspective this is the main purpose of the project. 9, Project upgrade phase: The halt-lfe upgrade phase incorporates the latest technology and systems to keep the project running efficiently and competitively 10. Project disposal phase: The disposal phase brings the project to a formal closure by dismanting the facility and restoring the environment to its original staie. Payback Period Investment ‘Suateay : i Project Phase Operation Phase Disposal Fig. 1.4 Project iiecycle Costing technical skils, then he will be a good project manager. It describes an error in thinking in which you make anmane EASY Project Management . 9 Concurrent Engineering Concurrent engineering, or simultaneous engineering or Integrated Product Development or Agile, is a work methodology where the various areas required to bring a product from conceptualization to sales is done in parallel as opposed to step-by-step. The result is decreased time to market resulting in more sales and market ture. Said areas could include research and development, design, manufacturing, testing ete. forthe product, or project. Main challenges in his work methodology is the requirement for increased training for all team members, ‘coordination and high levels of communication between the concurrent work areas. Absence ofthis willresuitin a failed product. © Whats it? eeeeanen ais (firapceaeeetrcaes * Advantages and Disadvantages . Tiiation Process 1.5 PROJECT MANAGEMENT PROCESS eal |_| Panning Process 1. Initiation Process-Initiate the Phase _ The ination process is the fst process within each phase [Licenses ) that formally starts the phase. The project methodology systems * 7 approach subdivides the initiation process of each phase into the coer following sub pro es: Syren of tnt Procees—) Fig. 1.5 Systems approach { Project Management Prooesses ‘The phase over wil typically be the project sponsor or the project manager, but it is important to appreciate that there shouki only beone owner ang tat person és responsible formaking the go!no-go decison Iatiation Process Planning Prosess ‘The goino-go decision is made by the phase ‘oviner and should confirm that the business. ‘case and phase are sill feasible before commiting company resources. Execution Process The project owner develops the project charter, which translates the business case into project objectives and outlines a build method toachieve them. the project charter offdialy appoints the project manager. ‘Closing Process ‘The project charter offcialy assigns the project manager the authority to appoint the project team members and to use company The startup meeting identifies the stakeholders and wolves themin the project ‘management process, I hen communicates the purpose ofthe phase to al the interested parties. Fig. 1.6 Initiation processGeneral Studies and Engineering titude : Vol.-2 ‘General Studies & 10 GE gineering Apti Engineering Aptitude Planning Process-Plan and Schedule The planning process is the second process within each phase which develops a fully integrated plan for the phase. The project methodology systems approach subdivides the planning process into the following sub processes: Project Management Processes PIM The phase objectives (time, cost, quay) and Intation Proces Le Phase oi witon Frees] f deliverables are identified “The bullé- method to make the deliverables is developed rom the PBS and WBS. The execution strategy considers the resource requirement and resources available (in house, contractors and outsourcing), the resource availabilty wil influence the execution strategy andthe projectschedule. “Execution Prooess —_______| —— ‘A project schedule is developed to produce the deliverables, This wil integrate al the knowiedge areas and trade-off where necessay. ‘Gosing Process Fig. 1.7 Planning process Execution Process-Execute the Phase The execution process is the thitd process within each phase that manufactures the phase deliverables. ‘The project methodology subdivides the execution process into the following sub processes: Project Management Processes nation Process Instucions are esued to the proj — workforce in the agreed manner. ‘performane? is monitored, assessed and Conttoled where necessary to meat the project objectives Panning Process ‘Scope changes are logged, assessed by he nominated experts and decisions ‘communicated inthe agreed manner, Exeaiion Prevess Bulld method changes are managed Operational configuration changes are managed. Closing Process A cantiicate of completion is issued by the project manager when te projects ready to be commissioned, Fig. 1.8 Execution processMADE EASY Project Management - ou 4, Closing Process-Close the Phase The closing processis the fourth process within each phase that accepts and confirms that the deliverables have been manufactured to the required condition and then hands them over to the next phase. The project methodology systems approach subdivides the closing process inio the following sub processes: Project Management Processes “The verication process confirms how the Inilation Process dtiverabies wil be transfered, tested and commissioned. ‘The receiving progress physically recoives the deverabies together with the associated Pianning Process aeauomel ‘The commissioning process inspects, tests and commissions the deliverables to confimn they have been made as per the pian, and thal the deliverables wil operat effectively in the operating environment Execution Process: ‘The handover process to the next phase right indude the training of the operators, the as-built drawings, the operator's manuals andthe transfer ofgwnership, The termination process formally ends the ‘work. This cancels all contractors, fnakzes land closes off all accounts, disposes of assets and disbands the team. The phase review assess the phase’s performance and preduces a closeout repo Fig. 1.9 Closing process ‘A golno-go decision can be made at the end of each phase and/or as part of the initiation process of the following phase. ESE 2017 Prelims Questions Q.1 Consider the following statements regarding project management 1._ Itis the process of attaining project objectives ina stipulated time to produce quantified and qualified deliverables 2. Itis the arto bringing together the responsibilities, resources and people necessary to accomplish the business goals and objectives within the specified time limitations and within the financial grant Which of the above statertents is/are correct? (@) 1only (b) 2only (©) Both 1 and 2 (6) Neither 1 nor2 Ans. (6) a 2 Consider the following phases of project management: 1. Identification 2. Formplation 3. Appraisal 4. Implementation ‘Which of the above phases are relevant, sequentially? . (@) 1, 2and3 only (b) 1, 2and 4only (©) 3and4only (d) 1,2,.3and4 ‘Ans. (d)12 EEG General studies and Engineering Aptitude : Vol.-2 General studies & Engineering Aptitude Q.1__ The steps or phases taken by the project from beginning to ending are collectively called its: (@) Hierarchy of steps to be followed on the project (b) The manager's method of completing the project (©) The project Life Cycle (d) A collaborative approach between the Manager and the team to complete the work on the project . Q.2_ The project management process groups are: (2) Initiating, planning, expediting, and control (0) Plan, organize, develop, and control. (0) Plan, do, observe, commit. (6) Initiating, planning, executing, menitoring, controlling, and closing Q.3. Ideally, a project manager should be selected and assigned at which point in the project life cycle? {@)_ During the initiating process or conception stage (©) During the project planning process (©) Atthe end of the design phase of the project life cycle (@)_ Prior to the beginning of the design phase ofthe project lfe cycle Q4. The second largest employment generating industry in the country is (2) Agriculture (b)_Petro-chemical (0) Construction Industry (@) Leatherindustry Q.5 ____ recognizes that a project or phase should begin and commits the organization to do so (@)_Intiating Process (b) Solicitation Process (©) Scoping Process (Gj Planning process Q.6 Projects are initiated in the life of an organization as a result of (2) Animmediate financial need (0). To keep employees busy and productive (©) Toachievea pre-set strategic objective (d) To make products for sale in the market Q.7_ Acollection of generally sequential project phases whose name and number are determined by the control needs of the organization or organizations involved in the project, is called: @) Project life cycle (b) Product life cycle (©) Portfolio management (@)_ Programmanagement Q.8 In which of the following project management [process groups, mostof the time and money are typically spent? (@) Initiating (©) Planning (©) Executing (@) Controling Q.9 _Allofthe following are characteristics of a project except: (@) Temporary (©). Definite beginning and end ()_Interreiated activities (d)_ Repeats itself every month Q.10 What do knowledge, skills, tools and techniques stand for when applied to the activities of a project, ifit also entails effective management of aprocess. (@) Human Resource Management (©). Project Management (©) Financial Management (d)_ Project Management Process Q.11 A project is defined as: (@) A process of considerable scope that implements a plan. (b) An endeavor, which is planned, executed and controlled; performed by people; and constrained by limited resources. (©) Atemporary endeavor undertaken to create a.unique product or service. (@) An objective based effort of temporary nature. Q.12 Which of the following statements is correct? (@) Process Groups are same as Project PhasesMaDe EASY ProjectManagement . 13 (b) Each Process Group has a mapped Project Phase (©). Process Groups are not Project Phases (@) Monitoring and Control Process Group apples oniy in monitoring and control phase () Project scope, objectives, team responsibilities, a project schedule, estimates, procurement schedules, and any limitations that top management wants to apply. Q.13 In case of a project being given by an external client toa company, the client must have provided all the following information except. (a) - Project Statement of Work (b) Agreements (©) Business Case (d) Organizational Process Assets Q.14 In general a project charter covers: (2) Project justification, background, scope, objectives, available resources, & project schedule, estimates, procurement schedule, and any limitations that top management wants to apply. (b) Project justification, background, scope, objectives, available resources, organizational responsibilities, estimates, and detailed procurement schedules responsibilities, and any limitations that top management wants to apply. (¢}_ Project justification, description, details of sponsor and project manager, budget, assumptions and constraints, boundaries to apply. 1.) 2 Wd) 3 @) 4) 5 (a 6 (c) 7. (a) & (c) 9% (@) 10. (o) 11. (0) 12. (c) 13. {d) 14.(0) Explanations: 3. (a) When the project manager is selected and assigned to the project during initiation, several of the usual start-up tasks for a project are simplify () In addition, becoming involved with project activities from the beginning helps the project manager to understand where the project fits within the organisation in terms of its priority relative to other projects and the ongoing work of . the organisation. (a) Creation of project charters the specific activity that is done in the iiating Process.INITIATION PROCESS : Project Formulation and Appraisal 2.1 | PROJECT FORMULATION AND DEVELOPMENT Atypical project would go through a development process having following three phases. 1. Pre-investment Phase: ttis related to authorization of investment decision for particular project idea under prevailing conditions. It involves 4 stages: ‘ (@) Identification of relevant project idea (©) Preliminary fitration of project ideas through pre-feasibility studies (©) Detailed feasibility studies (d)__Finalevaluation and decision 2. Investment Phase: It involves detailed design and actual implementation. This phase involves several inter-disciptinary tasks and has the following 4 phases: (a) Negotiating and contracting (©) Detailed project design and engineering: This stage covers site investigation, design and approval of fay-out, approval of drawings and blue prints preparation of time schedule and PERT charts, final selection of technology and equipments and detailed estimation of costs. (©) Construction and Erection (Execution and control) (6) Tialruns, commissioning and optimization. 3. Operation Phase: It is post commissioning stage when project is run for output or benefits DOYOUKNOW? =Magnitude ofthe risk can be reduced considerebl’| @)* a’sufficiently’ latge number of good-qualty-alter "generated for consideration, (0) reliable and adequate Information is gathered about each alternative including ifs sub-options, ‘and (©) the sub-options and the aliematives are (in that order) subjected to systematic nd objective evatuation in relation to technical, economic, financial and other pertinent parameters for selection of the best courseotacton. : | 2.1.1 Pre-Investment Phase 1. Identification of Project Idea/Conceptualisation of Project Idea/Opportunity Studies NNo investor, whether an individual or an organisation, would like to miss out on profitable opportunities either to enter a new attractive business, or to expand an existing business,MADE EASY ProjectManagement : 15 By their very nature, opportunity studies are indicative rather than detailed and hence are generally based ‘on macro-parameters and rough estimates. Such studies may also be carried out at amore general level to identify ‘opportunities in one of the following three directions. (a) agiven geographical area (Area studies) (b)_aspecific sub-sector of economy or industry, like food-processing, pharmaceuticals or power generation (Sub-sectorial studies.) (©) exploitation of renewable and nonrenewable natural, agricultural, or industrial produce like minerals, sugarcane, flash, plants, and even geothermal energy sources eto. (Resource-based studies) Identifying a new project is a complex problem. It involves careful study from many different angles. Following sources can be used to get ideas for new projects. + Performance of existing industry + Availabilty of aw material + Importexport statistics + Price trend * Datafrom various sources «Research result + Plan outlays and govt plans * Identifying untutfiled needs Analysis of economic & social trends + Review of sick units Questions to be Considered during Project Idea: ‘* Who conceived the project? * What is going to be his/her role in executing the project? ‘© What are the chances that he/she may not be involved in the project execution at al? ‘+ Is the project idea well conceived from the point of view of its scope and objectives? Pre-feasibility Studies After the identification stage, the projact-ideas are subjected to filtration through pre-feasibilty study. In this stage more elaborate study is required than opportunity study stage. This is an intermediate stage between an opportunity study & feasibility study. ‘ ‘* This stage is recommended when project formulation & techno-economic feasibility study are costly and time consuming. * This stage usually should not take more than 3 months. On the bases of this study investor should be able to decide. (Whether project can be accepted or rejected. (b) Project requires a detailed analysis ie. feasibility study or (C)_ Some aspects of the project need to be specially investigated. Outline of Prefeasibility Study for Industrial Projects: (0. Executive summary-brief description and objectives of the proposal (i) Project background and history (ii) Analysis of demand and supply (iv) Analysis of input-requirement of raw material, tools and spares : (v) Location and site () Engineering and technology (vil) Organisation (vil) Manpower Study (x) Execution schedule and methodology () Financial and economic evaluation[ETEETINTY General studies and Engineering Aptitude : Vol-2 Genera Studies Engineering Aptitude 2.2.1 Technical Analysis/Techi Feasibility Studies * Feasibility study is an andlysis of howv successfully a project can be completed. In feasibility analysis, we study Technical feasibility, market demand, financial feasibility, economic feasibilty, social feasibility and environmental impact assessment. * As compared to pre feasibility study, the feasibility study involves much more rigorous study and involves specialized skills of a higher order for techno-economic criteria. * Even though the basic frame work is similar but it is based on more reliable data gathered through survey, research and pilot plant study. + Evenifateasibilty study report has covered all aspects, it may stlllead to an incorrect project decision if (@) Project formulation is based on inadequate data. (b) The data is unrealistic, (©) The report has been deliberately tailored to fail acceptance-criteria. (@)_ Unknown or unpredictable factors occur. PROJECT APPRAISALS | Appraisal Itis distinct from commercial, financial and managerial feasibility and it may vary project to project. The ‘common aspects to be analysed are: 1. Objectives + Project proposal must fall within the domain of stated mission of organisation 2. Location and site ‘* Identify as many as possible locations initially and choose the one which meets most of the requirements. + In-some of the projects like resource oriented projects involve geological analysis also (Ex Mining and Mineral projects) + The location decision should be made after giving due consideration to benefits offered by Govt. and local bodies such as tax concessions, capital ioans, subsiies etc. For this purpose location cost index can be used for different cities, Location Cost Index (LCI) Lc for location Ais = £4 x 100 Ce where Gq = costof setting of plant at location ‘A Gq = cost of setting of plant at location “8 ILCI-< 100, then project location should be preferred, - 3. Plant size ; + Plantsize should be optimum. The size of plant may have impact on break even, loss and profit 4. Technology + Same services/products can be obtained by using different technologies, for example solar energy or Hydel or thermal energy, manual or mechanised services, etc.MADE EASY Project Management - 17 + Atechnology is considered appropriate if itis assessed satisfactorily under specific situation of project. : The important aspects to be considered in selection of technology are: + Specifications of the task + Life or gestation period * Ease or availability * — Adoptability or simplicity * Cost involved * Safety * Operation and maintenance * — Environmental and Social aspects 5. Design, Layout and Machinery + The design should be such that itis viable operating entity which not only works but works harmoniously under minimum cost and sustainable environment. * The selection of machinery and plant layout shoufd meet industrial and safety standards. 6. Construction process This should be considered in feasibility study in terms of five aspects. 2) Methodology to be followed i.e. whether itis capital intensive or otherwise. (6) Itis to be done in house or out-sourced. (c) Procurement method (purchase of material/machinery) (4) Sequence and scheduling of time to form bar chart/PERT network et. (©) Assessment of financial implications. 7. Operation inputs ‘These are related to operation phase but need to be identitfed during feasibility stage to examine technical feasibility ‘The main inputs to be examined are: © Raw material + Processed material ‘+ Components and sub assemblies + Spare parts + Water, gas and fuel supply 8. Infra structural facilities + Make assessment of roads, railways and other transport mechanisms. 9. Man power + Availability + Skills 10. Environmental impact Assessment (EIA) ‘+ Examine the impact of project on local environment. Questions to be Considered in this stage? + Isitproven/state-of-the-art/absolete technology? ‘+ Whether the technology know-how is locally available or likely to be imported? + Doyou visualize any problem with regard to scaling up operations? 2.2.2 Market and Demand Analysis Market and Demand Analysis are required to meet planning and decision making. Following are specifications needed for planning’ 18 — EESHRDINTY General studies and engineering Aptitude : Vol-2 General Sudles 8 — Engineering Aptitude ()_ For short term planning decisions (Less than one year), the data required is specific tems and their demand - (i) For Medium term planning (One'e three years), the data required is aggregate demand of technology and site selection (il) For long term planning (Four years or more), broad data and technology is required. Demand Forecasting Time of demand forecasts varies from 1 to 5 years and demand forecasting can be made at the following levels. 1. Firm level: It is micro-level forecasting based on specific industry. 2. Industry level: itis based on industry as a whole for the region. These forecasts may be taken by group of companies or rade associations. 3. National level: It includes parameters like national income, index of industria/agrioulturs! production. Itis reauired for governmental decisions. 4, International level: itis ‘equired for multinational companies. Criteria for a Good Forecasting ‘A good forecasting should have following attributes: {) Accuracy (i) Piausibiliy (reasonabie and consistent) (iil) Economical (iv) Less time taken {v) User friendly and availability, (vi) Durability (vi) Flexibility Steps Used in Demand Forecast 1. Determine the use of forecast 2. Select the item to be forecast 3. Determine the time horizon of the forecast 4. Select forecasting method 5. Gather data 6. Make forecast 7. Nalidate and implement resuits ucled foc future; Hakina any past Methods of Demand Forecasting To facilitate proper and reliable appraisal of investment proposal, we require a reasonably accurate forecast of demand. Following methods are used for compiling and computing demand forecasts. fa) Qualitative Methods 1. Collective Opinion Survey Method (Sales force composite method) Itis based on market survey ‘¢., opinion based on people of marketing and sales This method forms the basic of market analysis and demand forecasting. Although it is simple, direct, first hand and most acceptable, but it suffers from follewing weaknesses, (@)_Estimates are based on personal judgement hence may be biased. {o) tis difficult at national level.MADE ERSY Project Management - 19 (c)_ There may be error or lack of accuracy. (d)” There may be lack of experience. . Survey of Customer intention method/Consumer Survey method Itis based on ‘what customer intend or prefers to buy’. ft can be done by personal contact of printed questionnaire or mail, This method is preferred when bulk mass is from institutions and industrial buyers and only few of them have to be contacted, because the demand is similar type. Delphi Method : Itis group process, based on panel of experts which may include ordinary employees or industry experts, it aims at achieving a ‘consensus’ of the members. itis based on: + Analysing economic conditions * Carrying out sample surveys * Conducting opinion polls Based on above, demand forecast is done as follows: Step-1: Coordinator sends out a set of questions in writing to all the experts co-opted on the panel who are requested to write back a brief prediction Step-2: Written predictions of experts are collected, edited and summarized together by the Coordinator. Step-3: Based on the summary, Coordinator designs a new set of questions and gives them to the same experts who answer back again in writing, ‘Step-4: Coordinator repeats the process of collecting, editing and summarizing the responses. Step-5: Steps 3 and 4 are repeated by the Coordinator to experts with diverse backgrounds untill consensus is reached. Nominal Group TechniqueA{ury of Executive Opinion {tis an improvement over Delphi method. A panel of 7 to 10 expertsis formed to interact and discuss all the suggestions in descending order as per following procedure. (i) Experts sit around a table in full view of one another and are asked to speak to each other. (i) Facilitator hands over copies of questionnaire needing a forecast and each expertis expected to write down a list of ideas about the questions. (il) After everyone has written down their ideas, facilitator asks each expert to share one idea from his own list with the group. The idea shared is written on the ‘flip chart’ which everyone can see. (iv) Experts give ideas in rotation until all of them are written on the ‘flip chart’. No discussion takes place in this phase and usually 15 to 25 ideas emerge from this format. (v)_ Inthe next phase, experts discuss ideas presented by them. Facilitator ensures that all ideas nave been adequately discussed. During discussions similar ideas are combined and paraphrased appropriately. This reduces the number of ideasGeneral Studies & Engineering Aptitude 20 General Studies and Engineering Aptitud (vi) Alter completing group discussions, experts are asked to give in wrting ranks to ideas according to their perception of proity. (b) Quantitative Methods ‘There are two mode's in quantitative forecasting (a) Time series model (b) Casual model ‘Time series is a evenly spaced numerical data approach which is obtained by observing response at regular interval. Past collected data are used for future forecast. Where asin casual model, mathematical technique known as regression analysis is used that relates dependent variables (ex. demand) to independent variables (ex. price and advertisement) through linear equations. 1. Simple Average Method / Naive approach Simple average of all past data is figured out for every month of the last 12 months. Sum of Demands of all periods 4 Simple average = er of periods 2. Moving Average Method ; Itis better than simple average method because the obsolete and old datais discarded where as the trend for most recent periods. used ‘Sum of Demand of chosen period Moving average = “Number of chosen period 3. Weighted Moving Average Method {tis further improved in which weighted moving average allows to varying weightage for demand in old periods. x Weighted Moving Average = W,-D, + We-D, +... Wy- Dy where W,, Wy... W, are the weightage of the different periods in fraction such that Wy + Wy tot Wye 1 D,, Dp... Dy ate the demand of various periods. 4. Exponential Smoothing Method Ithas become popular due to software invention. itis distinguished from weighted average method - by the way of assigned weightage to each past period. The pattern of weightage is exponential 5 =w)x yf Forecast ofnext period = W%Actualdemandot , (1 w)x Demand forecast of most recent period most recent period Ft = W(Dt- 1) +(1—wW(Ft-1) i) where ‘f is the time period and value of 'W varies between 0 to 1MADE EASY Project Management emi @ Continuing further, we have Ft-1 = wx(Dt-2) + (1-1) (Ft-2) and so on Substituting these values of Ft— 1 into equation (i) above Ft x (Dt+ 1) + m1 —W) (Dt-2}+ w(1— w) (Ft-2) This can be rewritten as Ft = w(t —w) (Dt ~ 1) + w(1—w) (Ot~2) + w(t - w) (DI-3) ‘Successive weightages are m{1—w), w(1~W), etc. For w= 0.3, these successive Coefficients will be 0.3, 0.21, 0.147 etc. When forecast have to be worked out successively for different periods, itis a simple computation as below: 1 200 2 0.7*300+03%200=270 | 350 3 07 *350+03%270=326 | 400 4. | Apa 0.7 * 40) + 0.3 * 326 = 378 2 Choice of coefficient of smoothing is critical: (0) avalue of 0.7 to 0.9 may be mere appropriate for new products or items for which demand is shitting significantly (il) avalue of 0.1 {00.3 denotes stable trend in demand and when demand is somewhat unstable. (il) value of 0.4 to 0.6 may be used for obtaining more accurate forecasts. These methods are simple and with the speed and accuracy of computers, are being increasingly used for determining ‘quick and easy’ forecasts within reasonable budgets. ‘Some Other Methods 1. Adoptive Exponential Smoothing 2. Exponential Smoothing with trend and seasonal data 3. Double exponential smoothing 4, Projection by curve fiting 5. Regression Analysis 6. Economic models 7. End Use Method 8. Leading Indicator Method 9. Chain-Ratio Method Errors in Demand Forecasting * Forecasting error may be defined as the numeric difference between forecasted demand and actual demand. + Any errors that are present in demand forecast will impact on reliability of the economic appraisal. + There canbe three types of errors in demand forecast 1,_- Measurement and data error 2. Model specification error 3. External enor22 FEEEIEITY General studies and Engineering Aptitude : Vol-2 Genegal Studies & Engineering Aptitude (a) {b) cC) @) Following aspects are important in measuring the effectiveness of any method of forecastin; Mean Absolute Deviation * _ Itis measure of the forecast error irrespective of to the direction of the error, ie, negative or positive. Itis given by the expression: ‘Sum of absolute values of forecast errors for all periods “~~ Number of periods ‘+ Values are taken without algebraic signs. Mean Absolute Deviation (MAD) is the average of the Absolute Values of forecast Errors. Forecasts errors are, by themselves, normally distributed and there is a relationship between MAD and Standard Deviation. Ifthe forecast is reasonably accurate, forecast errors will be quite smooth. The above measure is then referred to as Smoothed Mean Absolute Deviation (SMAD). In such events, Standard Deviation = 1.25SMAD Mean absolute deviation = Bias * Bias is less commonly used measure of forecast errors, It takes into account the direction of errors and sum of errors is the algebraic sum of deviating and is expressed as: Algebraic sum of forecast errors of all periods “Number of periods + Hforecasts are repeatedly overestimates, bias will have a positive value. Similarly, if forecasts are consistently underestimates, Bias will have a negative value + For avery accurate forecast, both MAD and bias will be zero. Itis preferable to chose a method of forecasting wherein MAD can be controlled and brought neater to zero. * Lowering MAD will reduce Bias. Bias = Costs of Forecast Errors + Important decisions (short-term, medium and long-term) are based on forecasts. Large errors of forecasts can lead to costly mistakes, particularly, when used for evaluating investment proposals _-Which are long-term and nearly irreversible. 2 * Error may be either in direction or in magnitude. In some situations, errors in direction can be critical while in other cases, error in magnitude may be more damaging, Costs and Accuracy of Forecasts ‘Quantitative ‘approach > costs Qualitative —_ approach (itive Methods) > Pewentage Errors Fig. 2.1MADE ERS Project Management +23 itis possible to establish relationship between percentage error of forecast and the costs involved in selecting, adopting, operating and maintaining that particular method of forecasting. * If we use qualitative methods of forecasting, these would entail less effort and expense but would also yield forecasts with higher percentage error. If we use time-series and other mathematical techniques, costs would increase but it would also reduce the percentage of errors. + Using more sophisticated statistical tools shall further improve the: accuracy of forecasts. Correspondingly, cost of operating and maintaining these forecasting techniques will vary as shown in the graphologists would be low when errors are low but costs would increase i we have to base our planning and decision making on account of larger margin of errors + Optimal region, corresponding to minimum overall costs, would be somewhere in the middle of the Total Cost Curve-usually nestling between simple and sophisticated statistical techniques which can be complied on a computer. ‘ 2.2.3 Financial Analysis/Financial Fea: ity Financial appraisal of project consists of two major areas viz,, aniving at the cost of the project and arriving at the appropriaté means of financing the project. By means of financing, we mean the combination of equity and debt. The proper equity-debt combination or a project depends upon the revenue earning capacity of the project. Though equity does not attract any interest and does not involve any repayment obligation, the debt obtained for financing the project is to be repaid along with interest. Hence, the revenue earning capacity of the project should be sufficient enough to meet the repayment of debt with interest. Moreover, the project should also. generate additional revenue to meet the cost of equity capital. Though equity is contributed by the project promotes, itis not without any cost. An entrepreneur invests his capital in a project with a hope of getting returns on his capital invested apart from meeting debt obligations. Financial Appraisal involves: + Estimation of project cost + Estimation of project operating cost ‘+ Estimation of project funds Methods of Financial Analysis/Criteria Used for Selection of Investment Opportunities 1. Average Rate of Return on Investment (ARR or RO!) or Accounting Rete of Return Thisis an accounting method. There is no agreement on the definition and a number of alternative methods of calculating it are available. The most common ratio is: Average Annual Profit after taxes ARR = Forage Investment over the project ife * Average Annual Profit after taxes is calculated by adding up the after-tax profits for each year of project life and dividing it by the no. of years of estimated useful life (for annuities, after-tax profit is equal to one year's profi), * Average Investment over the project ie is computed by dividing the net investment by two (straight line depreciation is assumed) and adding the salvage value that would be received at the end of the project life (since it remains invested throughout) and full amount of working capital required. ‘Average investment over project lfe 1 = 5 initial cost - Salvage value] + Salvage value + Working capital ¢