PROJECT ANALYSIS AND EVALUATION

ACFN 613 CREDIT=3

M.SC., ACCOUNTING AND FINANCE
SECOND YEAR FIRST SEMESTER
CHAPTER-THREE
PROJECT PLANNING

PROF.DR.CHINNIAH ANBALAGAN
PROFESSOR OF ACCOUNITNG AND FINANCE
COLLEGE OF BUSINESS AND ECONOMICS
SAMARA UNIVERSITY, AFAR, ETHIOPIA EAST AFRICA
MAIL ID: DR,CHINLAKSHANBU@GMAIL.COM
 Project Planning
 There are several reasons to use
considerable care when planning projects:
 The primary purpose of planning is to
establish a set of directions in enough detail
to tell the project team exactly what must be
done.
 The purpose of planning is to facilitate later
accomplishment
 Initial Project Coordination
 It is crucial that the project’s objectives be
clearly tied to the overall mission of the firm
 A project launch meeting is an initial
coordinating meeting that serves as a visible
symbol of top management’s commitment to the
project
 The project launch meeting’s success is
absolutely dependent on the existence of a well-
defined set of objectives .
 Project Launch Meeting
The outcomes should be:
1. Technical Scope is established
2. Basic areas of performance responsibility are
accepted by the participants
3. Some tentative overall schedules and budgets are
spelled out
Care should be taken to not allow plans,
schedules, and budgets to go beyond the most
aggregated level at the launch meeting.
 Composite Plan
 Each individual/unit accepting responsibility for a portion
of the project should agree to deliver a preliminary plan
about how that responsibility will be accomplished

 These plans should contain descriptions of the required

tasks, and estimates of the budgets and schedules

 These plans are then scrutinized by the group and

combined into a composite project plan
 Composite Plan

 The composite plan, still not completely firm, is approved

by each participating group, by the project manager, and
then by senior organizational management

 Each subsequent approval hardens the plan, and when

senior management has endorsed it, any further changes
in the project’s scope must be made by processing a
formal change order
 Project Plan
 The final approved result of this procedure is the project
plan, also known as a Master or Baseline plan

 Once planning phase is complete, it is beneficial to hold

a post-planning review

 The major purpose of the review is to ensure that all

necessary elements of a project plan have been properly
developed and communicated
PROJECT PLAN ELEMENTS
 Project Plan Elements
 Overview - a short summary of the objectives and scope
of the project
 Objectives - A more detailed statement of the general
goals noted in the overview section
 General Approach - describes both the managerial and
technical approaches to the work
 Contractual Aspects - includes a complete list and
description of all reporting requirements, customer
supplied resources, liaison arrangements, advisory
committees, project review and cancellation procedures,
etc.
 Project Plan Elements
 Schedules - this section outlines the various schedules
and lists all the milestone events
 Resources - this includes the budget (both capital and
expense requirements) as well as cost monitoring and
control procedures
 Personnel - this section lists the expected personnel
requirements of the project including special skills, training
needs, and security clearances
 Evaluation Methods - every project should be evaluated
against standards and by methods established at the
project’s inception. It contains a brief description of the
procedures to be followed in monitoring, collecting, storing
and evaluating the history of the project.
 Project Plan Elements
 Potential Problems - this section should include any
potential difficulties such as subcontractor default,
technical failure, tight deadlines, resource limitations and
the like. Preplanning may avert some crises
 Project Planning in Action
 Project plans are usually constructed by listing
the sequence of activities required to carry the
project from start to completion, and developing
an action plan to complete the activities
 This helps the planner decide the necessary
sequence of things
 Sequencing is a necessary consideration for
determining the project schedule and duration
 Project Planning in Action
 Software and hardware developers commonly
use a planning process oriented around the life
cycle events:
 Concept evaluation
 Requirements identification
 Design
 Implementation
 Test
 Project Planning in Action
 Software and hardware development planning
process (cont.)
 Integration
 Validation
 Customer test and evaluation
 Operations and maintenance
 Systems Integration
 Systems Integration is one part of integration
management and plays a crucial role in the
performance aspect of the project

 This includes any technical specialist in the

science or art of the project who is capable of
integrating the technical disciplines to achieve
the customer’s objectives
 Systems Integration
 Systems Integration is concerned with three
major objectives:
 Performance - what a system does
 Effectiveness - achieve desired performance in an
optimal manner
 Requires no component specifications unless necessary to
meet one or more systems requirements
 Every component requirement should be traceable to one or
more systems requirements
 Design components to optimize system performance, not
the performance of subsystems
 Cost Systems - cost is a design parameter
 Hierarchical Planning System
 All activities required to complete a project must
be precisely delineated, and coordinated
 Some activities must be done sequentially, and
some simultaneously
 Using a hierarchical planning system will allow
these activities to be identified and sorted
appropriately
 Also known as the “even planning process”
 Sorting Out the Project
 The importance of careful planning can
scarcely be overemphasized

 Pinto and Slevin developed a list of ten

factors that should be associated with
success in implementation projects

 The factors were split into strategic and

tactical clusters
 Sorting Out the Project
 Strategic Success Factors:
 Project Mission - spell out clearly defined and agreed-
upon objectives in the project plan
 Top Management Support - it is necessary for top
management to get behind the project at the outset, and
make clear to all personnel involved that they support
successful completion
 Project’s Action Plan - detailed plan of the required
steps in the implementation process needs to be
developed including all resource requirements
 Tools for Planning
 Work Break Down Structure
 Responsibility matrix
 The Work Breakdown Structure
 The Work Breakdown Structure (WBS) can
take a variety of forms that serve a variety of
purposes
 The WBS often appears as an outline with
Level-I tasks on the left and successive levels
appropriately indented
 The WBS may also picture a project
subdivided into hierarchical units of tasks,
subtasks, work packages, etc.
 A Typical Model of WBS
Proj.goal
Obj 2
Obj.1
task2-1 task2-2 task2-3
task1-1 task1-2
act2-1-1 Act2-2-1. act2-3-1
act1-1-1 Act1-2-1.
act1-1-2 act2-2-2
act2-3-2
act1-2-2
act1-1-3 act2-2-3
 The Work Breakdown Structure
 The WBS is an important document and can be
tailored for use in a number of different ways
 It may illustrate how each piece of the project contributes
to the whole in terms of performance, responsibility,
schedule, and budget
 It may list the vendors or subcontractors associated with
specific tasks
 It may serve as the basis for making cost estimates or
estimates of task duration
 It may be used to document that all parties have signed
off on their various commitments to the project
 The Work Breakdown Structure
 General steps for designing and using the WBS
 Using information from the action plan, list the task
breakdown in successively finer levels of detail. Continue
until all meaningful tasks or work packages have been
identified
1. For each such work package, identify the data
relevant to the WBS. List the personnel and
organizations responsible for each task.
2. All work package information should be reviewed with
the individuals or organizations who have
responsibility for doing or supporting the work in order
to verify the accuracy of the WBS
 The Work Breakdown Structure
 General steps for designing and using the WBS (cont.):
 4. The total project budget should consist of four elements: direct
budgets from each task; an indirect cost budget for the project; a
“contingency” reserve for unexpected emergencies; and any
residual, which includes the profit derived from the project

 5. The project master schedule integrates the many different

schedules relevant to the various parts of the project

 Items 1-5 focus on the WBS as a planning tool but it may

also be used to monitor and control the project
 The Work Breakdown Structure
 Items 6 and 7 focus on the WBS as an aid to
monitor and control a project:
 The project manager can examine actual resource use,
by work element, work package, task, up to the full project
level. The project manager can identify problems, harden
the estimates of final cost, and make sure that relevant
corrections have been designed and are ready to
implement
 The project schedule may be subjected to the same
comparisons as the project budget. Actual progress is
compared to scheduled and corrective action can be
taken
 Exercise
John just graduated from a local university and
joined his father’s company as executive V.P,
Operations. Dad gives him a project. 20% of the
company’s sales come from sale of above
ground swimming pool kits. They do not install
the pools. John has to find out whether or not
they should get into that business. John has
decided to personally estimate the cost to
company of setting up the pool and then calling
some competitors to see how much they charge.
That will tell him if it is profitable.

John’s WBS looks like this-

 Pool installation WBS
Work tasks Labour hrs(estimate)
Prepare grd surface 2.67
Clear 1
Rake 1/3
Level 1
Sand bottom 1/3
Lay out pool frame 2.50
Bottom ring 1
Side panels ½
Top Ring 1
Add plastic liner 0.50
Assemble pool 1.66
Build wooden support 3.00
Layout 1
Assemble 2
Fill and test 2.00
--------
Total 12.33
Based on 12.33 labor hrs. at $15 per labor hr.,
total cost came out to $185.00. John found
that on average his competitors charged
$229 to install a similar pool. John thought he
had a winner. Since he had never assembled
a pool himself, he decided to increase the
budget by 10%, just in case….
Is his projection reasonable ? What other
aspects can be considered?
 Benefits
1. Gives people responsibility for a manageable
part of the project
2. Facilitates control activities, as individual
parts can have their consumption of
resources tracked
3. Facilitates the financial aspects like budget
cost etc
 Drawbacks
 Destructive situations can arise when
improvements in one area upset the
running of another.

 People try to optimize their own part of

the project & lose the holistic view of the
project.
 Responsibility matrix
 It is a format which shows work package for a
functional position
RESPONSIBILTY MATRIX
 V.P GM PM Mgr1 Mgr2
Establish project 6 2 1 3 3
plan
Define WBS 5 1 3 3
Establish H/w specs 2 3 1 4
Establish s/w specs 2 3 4 1
Establish mfg specs 2 3 4 1
1 Actual Responsibility 4 May be consulted
2 General Supervision 5 Must be notified
3 Must be consulted 6 Final approval
Ques-Project Management in Practice

Task 5 C is the critical, pacing task of a rush

project. Fred always nitpicks anything that
comes his way, slowing it down, driving up
costs, and irritating everyone concerned.
Normally Fred would be listed as “Notify” for task
5C on the responsibility matrix, but the PM is
considering “forgetting” to make the notation on
the chart. Is this unethical, political or smart
management?
Interface Coordination through Integration
Management

 The most difficult aspect of implementing a

project is the coordination and integration of the
various elements of the project
 The intricate process of coordinating the work
and timing of all inputs is called integration
management
 Interface coordination is used to denote the
process of managing this work across multiple
groups
 Approaches to Interface Management
 Recent work on managing the interface focuses
on the use of multifunctional teams (MT)
 There is general agreement that MT has a
favorable impact on product/service design and
delivery
 Successfully involving cross-functional teams in
project planning requires that some structure be
imposed on the planning process
 Approaches to Interface Management

 A different attack on the problem is defining and

mapping all interdependencies between the
various members of the project team
 Rather than mapping interfaces on the firm’s
organizational chart, instead it maps the
interdependencies directly
 Does not ignore the value of the WBS, action plan, or
PERT/CPM networks, but simply uses interface maps
as a source of the coordination requirement to manage
the interdependencies
 THANKS
END OF CHAPTER THREE