Management Control and

Information Systems
Chapter 17
Project Operation and Management Control

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

1
School (IBS) Hyderabad
 The Concept of Project
Project:

A project is a set of activities intended to accomplish a specified end

result of sufficient importance to be of interest to the management.
Thus a project has limited purpose. Its object may or may not be
related to the on-going operations. Depending on the nature of the
project, its duration may be a few weeks to a number of years. Cost-
wise, a simple project may cost a few thousand rupees, while a project
like New Banking Software Development extending over a few years gets
a sanctioned huge amount. Projects can vary to this extent.

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

2
School (IBS) Hyderabad
Phases in the Operations of an Ongoing Organization:

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

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School (IBS) Hyderabad
Phases in the Project:

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

4
School (IBS) Hyderabad
Management control of a project vs. On-going Operation
Management control of a project is different from an ongoing operation due to one or more of the
following reasons:

Objectives:
A project has a single objective, while operations have multiple objectives. In an ongoing operation,
the manager of a responsibility center has to supervise day-to-day operation, look forward to the
requirement for tomorrow and near future.

Effect on organization:
Although projects are handled by independent managers they remain within ongoing operations and
often need to keep close relationship with operational managers for the successful completion of the
project.

Emphasis of control:
Control is emphasized on the project, so that the same can be satisfactorily completed within the
project time limit and at an optimum cost, preferably without cost overrun.

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

5
School (IBS) Hyderabad
Management control of a project vs. On-going Operation
Interchangeability:
Projects usually involve trade-off among scope, schedule and cost. Cost can be reduced or increased
by curtailing or increasing the scope of the project.

Cost Standards:
Cost estimates of a project is prepared by collecting data, which may not be accurate or are
unfamiliar at the time of making estimates. Hence, a contingency provision is created for
adjustments.

Environment:
The projects which are undertaken outside the premises of the organization, suffer from numerous
external problems arising out of natural calamity, political disturbance, intereference of local
people., etc.

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

6
School (IBS) Hyderabad
Management control of a project vs. On-going Operation
Difference in rhythm:

The rhythm of a project differs from that of an ongoing operation distinctly.

Most of the projects start slowly, then build up momentum and take the activities to a peak, and
then taper off as completion is in sight. Ongoing activities tend to operate at the same level of
activity, unless there is a seasonal effect or change in activity plan.

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

7
School (IBS) Hyderabad
Project Control:
Project control is a difficult task handled by the project manager with
a team of experts like product managers, architects, engineers,
supervisors, cost accountants, etc. Most of the team members are
assigned to the project, and hence, have a direct link with their
functional heads.
Project control has two aspects:
Control of time schedule
Control of cost

Control of time schedule is done by the use of PERT and CPM. Cost control is a
continuous process.
Project Reports

There are three different types of reports that are

needed by the project managers.

They are :

Trouble Reports
Progress Reports
Financial Reports
Project Reports

Trouble Reports:
a. Trouble reports deal with trouble that has already happened and
also anticipated future trouble.
b. Critical problems are highlighted. Precision is sacrificed, in these
cases, for speed.

Progress Reports:
These Reports compare actual schedule and costs with the planned
schedule and costs for the work done, using variance analysis for cost
items.
Project Reports

Financial Reports:

Are accurate reports of project costs, carefully checked and

verified since they will form the basis of accounting entries
and asset records. Besides, they are used for progress
payments, if there is cost reimbursement contract.
Project Revision

A project is revised several times before it is complete. This is obvious

for most of the new projects, of which initial information and
knowledge are not collected exhaustively and accurately.

If the project is complex or extended over a long period, most likely

there may be
• Cost overrun
• Extension of time for completion
• Additional work is added to the project
Project Revision
If the project is revised, then a new set of norms apply for comparison
with actuals. Otherwise, the reports may cover up hidden inefficiencies
for which cost or time overrun occurred.
Project Operation and Management Control

Thank You

Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business

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School (IBS) Hyderabad