Project Management XIMR

PROJECT
MANAGEMEN
T
1
WHAT IS A PROJECT ?
The most obvious characteristic of a Project is

that it has to achieve a particular purpose
2
WHAT IS A PROJECT ?
 It is most useful to think of a project as an
instrument of change
 When the project is successfully completed, it will

have an impact on people’s lives, by changing their
working patterns or by changing their environment
 ‘Managing Change’ is clearly different and at times

much harder than managing the status quo
 It is for this reason that projects are established to

effect such change in a controlled manner
3
Characteristics of a Project
1. It is an instrument of change
2. It has a clearly identifiable start and finish
3. It has a specific aim
4. It results in something being delivered
5. It is unique
6. It involves cost, resources and time
7. It uses a wide variety of resources and skills
4
Another way of looking at a Project
is that :
1. It has a start and a finish
2. It has a time frame for completion
3. It has a unique time lines
4. It has an involvement of several people
5. It has a limited set of resources
6. It has a sequencing of activities and phases

5
Project Classification
 New Project
 Balancing Projects
 Expansion Projects
 Modernization Project
 Replacement Project
 Diversification Project
 Backward Integration Project
 Forward Integration Project
6
Project Identification
 New Product Development Projects as an ongoing
affair (e.g. Consumer Durable / Automobile /
Electronics etc)
 Demand – Supply – Price Trends
 Expansion
 Performance of Existing Industry
 Modernisation / Replacement
 Need for Backward / Forward Integration
 Import / Export Statistics
 Govt. Policies
 Analysis of Socio – Economic Scenario
 Reviving Sick Units / Possibilities of M & A
7
WHAT IS PROJECT MANAGEMENT ?
Project Management is the application of
skills, knowledge, tools & techniques to meet
or exceed stakeholder requirements from a
project.
 The tools are a means to an end
 The desired end is a successful project
that contributes to the business success of the
organization as well
8
Project Management focuses on a project
A project is an undertaking that has a beginning and an

end and is carried out to meet established goals
within cost, schedule, and quality objectives
Project Management brings together and optimizes the

resources necessary to successfully complete the
project
These resources include the skills, talents, and co-

operative effort of a team of people, facilities, tools,
and equipment; information, systems, and techniques
and money 9
 Project is a series of related jobs usually
directed toward some major output and
requiring a significant period of time to perform
 Project Management are the management

activities of planning, directing, and controlling
resources (people, equipment, material) to
meet the technical, cost, and time constraints
of a project
10
Project Management Logo
The Project Management Logo
 An Equilateral triangle
 Having the three sides

 Time, Cost and Quality
 The scope of the project is the sphere

touching all three sides of the equilateral
triangle
 This Logo shows that all three parameters,
Time, Cost and Quality are equally important
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Project Management Logo
12
There are three dimensions to Project
Management. They are depicted below :
3. Project Management Tools
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Three Dimensions of Project Goals
Cost
Target
Time
Performance
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Conformance versus Performance Attributes of
Time, Cost and Quality
Time Cost Quality
Performance Shortest possible Cheapest possible Highest Level
Conformance As planned As budgeted As specified
15
Successful Project Management means :
 Planning Effectively
 Managing Time
 Controlling Costs
 Ensuring Quality (Performance)
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Managing User Expectations
 In the end it is the user’s (customer)
reactions to what you deliver that is the prime
determinant of whether your project was a
success or a failure
17
Resources to be Managed
1. TIME
2. MONEY
3. PEOPLE
4. FACILITIES
5. EQUIPMENT
6. MATERIAL
18
Resource Management
 A common cause of project delays, resulting in
penalties and other undesirable effects, is the
OVER COMMITMENT of the organization to
contracts and projects with respect to available
resources.
 Cost over-runs can also occur when the limitations

of available resources are not considered at the
time of project commitment and during project
execution.
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TIME
TIME
is a fundamental resource which cannot be
managed like the others
TIME
flows at a constant rate, and time that is not used
can never be recovered.
TIME
is the element that interrelates all other resources
with the project plan.
20
Project Preparation (or Formulation)
 Pre – feasibility Study
 Functional or Support Studies
 Feasibility Study
 Detailed Project Analysis (leading to DPR)
21
 PLANT LOCATION (or Facility Location)
 Facility location- Operations as well as Services
 When does a location decision arise?
 1)When a new facility is to be established
 2)Expansion of existing plant
 3)Government rules and regulations
 4)Economic, social, legal, political factors suggesting a
change
 Steps in facility location study
 1)General territory selection/geographical area.
 2)Specific selection of plant site/ community.
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
factor Phase I Phase II
Market yes
Raw material yes
Power yes yes
Transportation yes yes
Climate & fuel supply yes
Labor & wages yes yes
Taxation laws yes yes
Community services yes
Water/waste management yes
Ecology & pollution yes
Capital availability yes yes
Vulnarability to enemy attack yes yes
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 Market: Locating a plant near a market is preferred if
customer service is required to be very high, it is
susceptible to spoilage/deterioration. Product is relatively
inexpensive but transportation cost adds substantially.
 Raw material supplies: material index = Weight of
localized material used / weight of finished product. If MI
> 1 then location should be near to the source of raw
material & MI< 1 it should be near to market. Inward
freight cost minimization if it is perishable. If raw material
is supplied from various locations, the plant/facility should
be located so as to minimize total transportation cost.
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 Transportation facilities- (even river banks )
 Manpower supply- skilled, wage pattern, cost
of living, Industrial relations
 Infrastructure- availability & reliability of
power, water, fuel and communication facility
 Legislation &
taxation-concessions/subsidies/tax
holidays
 Climate- textile requires highly humid conditions
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 Site/Community selection:
 Community facility- schools, hospitals, places of
worship, police/fire station, cultural/social/recreational
opportunities, housing, communication & transportation
facilities
 Community attitude
 Waste & disposal
 Ecology/pollution--maintain natural ecological balance
 Site size—plot of land should be sufficient to
accommodate current plant plus scope for future
expansion.
 Supporting industries/ services
 Land cost.
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 Requirements governing choice of city
location:
 Availability of adequate supply of labor force of
desired skill set.
 Rapid public transportation system, & contact with
customer/vendor.
 Small plant size & multi floor operations.
 Good communication facility- IT Network,
telephone/fax/post office.
 Good banking / health care service.
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 Requirements governing the choice of
country/rural locations:
 Large plant size, dangerous production process.
 Lesser efforts required for anti pollution measures.
 Large volume of relatively clean water.
 Lower property tax, away from urban land ceiling act.
 Protection against possible sabotage or for a secret
process.
 Balanced growth and development of a
underdeveloped/developing area.
 Requirement of unskilled labor force.
 Lower wages required to meet competition.
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Equal weight method:
Factor Potential site S1 S2 S3 S4

F1 10 2 5 9 2
F2 10 3 3 8 3
F3 10 6 2 7 3
rating 11 10 24 8
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Weight cum Rating method:
Factor / Potential site Rating S1 S2 S3 S4

F1 ( weight –5 ) 10 2 * 5 = 10 5 * 5 = 25 9 * 5 = 45 2 *5 =10
F2 ( weight –3 ) 10 3*3=9 3*3=9 8 * 3 = 24 3*3=9
F3 ( weight – 2 ) 10 6 * 2 = 12 2*2=4 7 * 2 = 14 3*2=6
Site Rating 31 38 83 25
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Factor Point Rating Method –
Factor- Rating- Fair Adequate Good Excellent

point Poor
F1 ( Water -15 12 6 6 10
Supply )
F2 ( -3 -1 0 1 2
Power
Sully)
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 Pre – feasibility Study
 Feasibility Study
 Detailed Project Analysis (leading to DPR)
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 Pre – feasibility Study –
 Market Potential
 Competitors and Market Share
 Forecast
 Trading Practices of Industry in terms of Pricing, Credit,
Govt. Controls, Distribution etc.
 Technology available and suitable
 Raw Material – Availability, Source & Cost
 Plant Location
 Plant Capacity
 Manpower Requirement (of all types)
 Investment reqd., ROI etc
33
 Market Study
 Raw Material / Input Study
 Project Location
 Plant Size
 Equipment Selection etc
34
 Feasibility Study – Key Analysis includes

 Market – Potential Market, Market Share
 Technical –
 Technology – existing, to be adapted, latest, proven, available indigenously, imported ( if
yes- whether available)
 Technical Viability & sensible choices
 Economic - Risk & Returns

 Commercial - Market Research for assessing likely sales of new product, expected
Revenue thro demand
 Financial - Project Financing ( equity or debt?)
 Ecological – Environmental Damage, Restoration Measures
35
Flow Chart for Feasibility Study
Generation of Ideas
Screening of Ideas
Is the idea prima facie feasible?
Yes No
Plan Feasibility Analysis Terminate
Conduct Analysis - Market, Technical,

Economic, Commercial, Ecology
Is the Project worthwhile
Yes No
Prepare Funding Proposal Terminate 36
Typical Capital Cost of a Project
 Land
 Land Development
 Buildings
 Plant & Machinery
 Electricals
 Transport and erection charges
 Know How / Know Why ( Consulting Charges)
 Provision of Contingencies
 Margin Money for Working Capital
 Preliminary or Preoperative Expenses
 Misc. assets
37
Example/Case Study
One of the Chinese OEM Dongfeng planning to
build manufacturing plant for electric vehicle in
India. Before that they wanted to do feasibility
study to see if the Indian Automotive market is
ready for electric vehicle and cost of building a
manufacturing plant.
5
Prefeasibility Study
Market Potential Govt. initiatives
India's automobile sector is the world's fifth biggest, To promote the domestic electric vehicle
with plans to become the third largest by 2030. industry, the Indian government has provided tax
exemptions and subsidies to the EV
manufacturers and consumers.
Competitors
Automotive industry is an Oligopoly industry i.e.

there are limited no. of players in the market,
none of which can keep the others from having
significant influence.
6
Functional or Support Studies
Raw Material: The biggest hurdle for the Indian EV industry

remains its dependence on China for batteries or Advanced
Chemistry Cell batteries, as the country has no cell
production.
Plant Location:Uttar Pradesh has the highest number of

registered EV sales
Plant Size:Some of the existing OEM such as Tata motors said it

it will invest $2 billion in its electric vehicle business over the
next five years
7
Feasibility Study
Market: Risk: Project Financing:
Report projects that the Indian High voltage batteries could also The federal government is also
EV market will grow at a pose a pollution risk, if not prioritizing the shift towards
CAGR of 36 percent till properly disposed of. mobility, and recent moves to
2026. The EV battery . amend the Faster Adoption and
market is also projected Manufacturing of Hybrid and
to grow at a CAGR of Electric Vehicles in India
30 percent during the
same period.
8
Detailed Project Report (DPR)
Contents of DPR
 General Information about project
 Background & experience of project promoters
 Detail results of Promoter’s holdings
 Details of proposed project – e.g. Plant Capacity,
Mfg. Process, Technical ‘know – how’, tie-up,
management team for project, details of land,
building / Plant , machinery, proposed effluent
management, labour requirements / availibility
 Schedule of implementation of project
 Project Cost
 Means of financing the project
 Working Capital Requirement / arrangements
42
Detailed Project Report (DPR)
Contents of DPR ( Contd...)
 Marketing and selling arrangements
 Profitability & Cash Flow estimates
 Repayment of term loans
 Govt. Approvals, local body consents, other
statutory permissions
 Collateral security to financial institutions
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Detailed Project Report (DPR)..Example
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Capital Investment / Budgeting
•The term Capital Budgeting refers to long term planning for

proposed capital outlay and their financing
•It includes raising long term funds and their utilization.
•It may be defined as a firm's formal process of acquisition
and investment of capital
• It deals exclusively with investment proposals, which an
essentially long term projects and is concerned with the
allocation of firm's scarce financial resources among the
available market opportunities
•Capital expenditure plans involve a huge investment in fixed
assets
• Capital expenditure once approved represents long-term
investment that cannot be reserved or withdrawn without
sustaining a loss
48
• Preparation of capital budget plans involve forecasting of
several years profits in advance in order to judge the
profitability of projects
• It may be asserted that ,decision regarding capital
investment should be taken very carefully so that the future
plans of the company are not affected adversely
• All types of capital budgeting decisions are exposed to risk
and uncertainty
• They are irreversible in nature
• Capital Budgeting offers effective control on cost of capital
expenditure projects
• It helps the management to avoid over investment and
under investments
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 Capital Investment
 Physical
 e.g. Land, Building, Plant & Machinery etc.
 Monetary
 e.g. Deposits, Bonds, Equity etc.
 Intangible
 e.g. Outlays on R&D, Market Development, franchises
 Expected to generate benefits over a period of time
 Strategic
 Tactical
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 Mandatory (to fulfil Govt rules / regulations)
 Replacements
 Expansion
 Diversification
 R&D
 Ecology
51
Capital Budgeting Process –
1. Planning
• A broad investment strategies
2. Analysis
• Marketing, Technical, Financial, Economic, Ecology
• Inclusion of various inputs in budget
3. Selection
• Is the project worthwhile?

52
•
Capital Budgeting Process (Contd..)
4. Financing
• Equity
• Paid up capital, Share Premium, retained earnings
• Debt
• Term loans, debentures, working capital advances
• FRICT (Flexibility, Risk, Income, Control, Taxes)
• key consideration for Capital Structure (Debt / Equity
ratio)
5. Implementation
6. Review (at every stage)
53
Financial Appraisal
Two broad categories of Financial Appraisal:
1. Non Discounted Cash Flow –
 Payback Period Method (PB)
 Accounting Rate of Return (ARR)
2. Discounted Cash Flow –
 Net Present Value (NPV)
 Internal Rate of Return (IRR)

54
A TYPICAL PROJECT LIFE CYCLE
All projects have the same basic underlying structure.
Whatever be the project, it will develop over four

distinct phases :
1. The Conceptual and Definition phase
2. The Planning / Designing Phase
3. The Implementation or Execution phase
4. The Completion and Review Phase

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Typical Activity Levels During the
Phases of Project’s Life Cycle
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Project Life Cycle
1. The Conceptual & Definition phase - Includes

identifying needs, establishing feasibility, searching
for alternatives, preparing proposals, developing
basic budgets and schedules, and naming the
starting project team.
2. The Planning / Design phase - involves creating
schedules; conducting studies and analyses,
designing systems; building and testing prototypes,
analyzing results, and obtaining approval for
production
57
Project Life Cycle
3.The implementation / execution phase -
encompasses procuring and implementing
systems, verifying performance and modifying
systems as required. Activity level is highest.
4. The completion / Commission phase - includes

training operational personnel, transferring
Materials, transferring responsibility, releasing
resources and reassigning project team members
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CONCEPTUAL PHASE
What are the key considerations in the Conceptual Phase
and the Definition Phase that follows to firm up the
concepts ?
 Determine existing needs or potential deficiencies of

existing systems
 Establish system concepts which provide initial strategic

guidance to overcome existing or potential deficiencies
 Determine initial technical, environmental and economic

feasibility and practicability of the system
 Examine alternative ways of accomplishing system

objectives
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CONCEPTUAL PHASE
 Provide initial answers to the questions
 What will the system cost ?
 When will the system be available ?
 What will the system do ?
 How will the system be integrated into existing systems ?
 Identify the initial human-and non-human resources,

required to support the system
 Select initial system designs which will satisfy the system

objectives
 Establish a system organization

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DEFINITION PHASE
 Firm identification of the human and non-human resources
required
 Preparation of the final system performance requirements
 Preparation of the detailed plans required to support the
system
 Determination of realistic cost, schedule and performance
requirements
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DEFINITION PHASE
 Identification of those areas of the system where high risk and
uncertainty exist, and delineation of plans for further
exploration of these areas
 Definition of intersystem and intra-system interfaces
 Determination, of necessary support subsystems
 Identification and initial preparation of the documents required
to support the system, such as policies, procedures, job
descriptions, budget and funding papers, letters, memoranda,
etc.
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The development cycle: Major Phases:
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Competitive Approach
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Planning Steps
 Establish the project objective
 Choose a basic strategy for achieving the objective
 Break the project down into sub-units or steps
 Determine the performance standards for each sub-unit
 Determine time required to complete each sub-unit
 Determine the proper sequence for completing the sub-units &
aggregate this information into a schedule for the total project
65
Planning Steps
 Design the cost of each sub-unit and aggregate costs into the
project budget
 Design the necessary staff organization, including the
number and kind of positions, and the duties and
responsibilities of each
 Determine training requirements for project team members
 Develop the necessary policies and procedures
66
Creating a Work Breakdown Structure
 A work breakdown structure is the starting place for
planning all three parameters of a project: Quality
(Performance), Cost, and Time
 It is a technique based on dividing a project into
subunits or work packages

 Because all elements required to complete the
project are identified, you reduce the chances of

neglecting or overlooking an essential step
 WBS Level / Stages –
Project – Sub Project – Task – Sub Task – Work

Package
Product Oriented & Functionality Oriented WBS
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Creating a Work Breakdown Structure
1.Prepare
Meal
1.1 1.2 1.3 1.4 1.5

Prepare Shop for Make Prepare Serve
Setting Ingredient Menu Food Meal
1.1.1 1.4.1
Wash Appetizers
Tableware
1.4.2
1.1.2
Ingredients
Set
Table
1.4.3
Cook Food
68
Work Breakdown Structure
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 1. 100 per cent rule: The 100 per cent rule states that the
WBS includes 100 per cent of the work defined by the
project scope and captures all deliverables—internal,
external and interim—in terms of the work to be
completed, including project management.
 2. Mutually exclusive elements: The elements of the tree
or level 2 should be mutually exclusive and should,
therefore, not have an overlap of activities. This is
necessary to ensure that the sum total of all the outcomes
is 100 per cent and not more than 100 per cent.
70
 3. Plan outcomes, not actions: The planned outcomes are the
desired ends of the project and they form a relatively stable set
of categories in which the costs of the planned actions needed
to achieve them can be collected.
 4. Level of detail: Certain sets of details are required for WBS
but the level of detail is not known.
 5. Terminal element: A terminal element is the lowest element
in a WBS and it cannot be further subdivided. Terminal
elements are the items that are estimated in terms of resource
requirements, budget and duration—linked by dependencies—
and schedule
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Project Risks Identification & Mitigation
(Risk Management)
Kinds of Project Risks -
Project Completion Risk
Resource Risk (e.g. Raw Material, Power, Fuel)
Manpower Risk (People)
Price Risk ( Both – Input & Output)
Technology Risk
Political Risk
Interest Rate Risk
Exchange Rate Risk
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POSSIBLE SOURCES OF RISK
PEOPLE
 Are they available?
 Are they committed?
 Are they skilled?
 Do they know what is required of them?
TECHNICAL
 Is the technology proven?
 Is it reliable?
 Is it available?
 Is it understood?
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POSSIBLE SOURCES OF RISK
POLITICAL
 Is the need for the project agreed?
 Does the sponsor control the stakeholder group?
 Are negative stakeholders influential?
 Is communication with stakeholders good?
FINANCIAL
 Am I in control of project funds?
ENVIRONMENTAL
 How can the weather affect my project? What
geological factors might put the project's success at
risk?
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Risk Assessment - Quantitative
 Break Even Analysis
 Sensitivity Analysis
 Decision Tree Analysis
 Simulation
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Risk Assessment - Qualitative
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CONTINGENCY
 The amount of contingency allowance can be reduced as
the project progresses, commitments made and the funds
expended
 The Project Manager can use either the Graphical Method

shown herein or a formula to reduce the contingency
 One such formula is :

Contingency = (0 % x Expenditure)
+ 5% x (Commitments)
+ 9% x (Funds not yet committed)
+ (1% of total cost.)
 Whichever method is used, some funds must be retained to
cover corrective work during commissioning to overcome

bottle necks, commissioning spares and warranty spares
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Contingency versus Schedule
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THE IMPLEMENTATION PHASE
- Making Things Happen
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Key Duties During Implementation
 Controlling work in progress
 Providing feedback
 Negotiating for materials, supplies, and

services
 Resolving differences
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Factors which change projects
 The planning assumptions may have been wrong
- there may be more to do than you anticipated
- it might be harder than you anticipated
- resources you depend on might not be available
 The requirements may change (very common)
 The deadline may change (usually earlier)
 The budget may be cut
 The priority of the project in the mind of senior management
might change
 Barriers/resistance to change
 People make mistakes (usually large ones)
 Acts of God
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Assessing the situation
 How much will this effect other activities ?
 What must I do to correct this particular problem?
 What must I do to put the project back on track?
 Why did it happen ?
 What must I do to ensure that it does not happen
again?
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RESOLVING ISSUES & PROBLEMS
Although action to resolve issues will be as varied as the different

types of problem that will occur as a project, it can be generalized
into several basic categories:
 Genuinely creative solutions to problems
 Using contingency
 Applying more resources
 Slipping the completion dates (not desirable).
 De-scoping. (not desirable).
 Making sure it does not happen again
Note: there is no 'do nothing' option
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Controlling Projects
 Assessing the situation
 Impact analysis
 Resolving issues and problems
 Controlling change
 Completing the project
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
Various types of estimates
The Figure below shows the various types of estimates that are made during the life-cycle of a project with probable errors.
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Distribution of project cost between phases
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Relative influence of each phase on basic cost of the project
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Level of uncertainty of project estimate versus time
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Emphasis of cost control
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The Value Of TIME
A fraction of “Time” cannot be bought by a ‘Tonne of Gold’.
•
You cannot control how much time you have, but you can
•
control the way to use it

You cannot choose whether to spend time or not, but you can
•
decide how to spend it

You cannot manage time, but you can learn to manage
•
yourself in relation to time

Time cannot be expanded, accumulated, mortgaged,
•
hastened, or retrieved
Hence you should value Time “As man’s most precious
•
commodity; and have optimum utilization of every fraction of a

second”. 90
Earned Value Analysis (EVA)
Time and Cost Control
Experience has shown that if there is no time
overrun it is unlikely that there will be cost overrun

EVA
Effective control over a project can be exercised
only by performing periodic & systematic

performance analysis
Performance Analysis, also called as Earned Value
Analysis, provides analytical framework for project

control.
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Earned Value Analysis
Budgeted Cost for Total Work (BCTW) or
Budget at Completion (BAC)
The total budgeted cost for entire project.
Estimated at Completion (EAC)

What the total cost of the project will be, as calculated by
looking at the plan as it stands, i.e. costs incurred to
date + scheduled costs
Additional Cost for Completion (ACC)

It is estimated additional cost reqd for completing the
project
92
Actual Cost of Work Performed (ACWP) or also
mentioned as AC ( Actual Cost) - The amount of
money spent so far
Earned Value or Budgeted Cost of Work Performed
(BCWP)
It is budgeted cost for completed work. What you
should have spent to get this far, i.e. the total
budgeted cost for the project multiplied by the
percentage achieved
Budgeted Cost of Work Scheduled (BCWS) or
Planned Value (PV) - It is Cost / value of work that
should have been completed so far.
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CPI ( Cost Performance Index) = BCWP / ACWP
= Earned Value
Actual Costs Incurred
 A CPI of 1 represents ‘par’ performance

 A CPI of less than 1 represents performance
‘poor’ than planned
 A CPI of greater than 1 represents a ‘better’
performance than planned
 Cost Variance = BCWP (EV) – ACWP (AC)
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Schedule performance index
SPI = BCWP / BCWS wrt Cost Factor
=(Actual Time/Budgeted Time) wrt Time Factor
(An SPI greater than 1 represents completion
ahead of schedule)
Schedule Variance (In Cost terms) = BCWP -
BCWS
TV (Time Variance) = (Date of Review) – (Date
on which BCWP = BCWS)
Estimated Cost Performance Index = BCTW /
(ACWP + ACC) 95
 Estimate at Completion : EAC = BAC / CPI
 Estimate to Completion : ETC = EAC – Actual Cost
 Critical Ratio (CR) = CPI * SPI
 To Complete Performance Index (TCPI) = it is the
value of remaining work
 TCPI = BAC – EV / BAC – AC
 (BAC – AC = Amount of Funds remaining)
 TCPI = 1: At Par Performance
 TCPI > 1 – Can be more than budget
 TCPI < 1 : Very good cost management
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Earned Value Analysis - Example
 XYZ Company has bagged a fixed cost contract for the supply,
installation, testing & commissioning of 200 computers of same
specifications at a cost of Rs 600 Lakhs.
 The company had estimated that it could supply, install, test &
commission 10 computers per day so that the entire work
would be completed in 20 days time.
 The project status was reviewed after the completion of 16
days.
 It was noted at the time of review that only 120 computers
have been installed & the cost incurred was Rs 380 Lakhs.
 It was estimated at the time of review that a sum of Rs 260
Lakhs would be required for completing pending work. ( i.e
remaining 80 Computers)
 Make a performance analysis (EVA) by arriving at various
connected parameters.
97
 Work Scheduled per day =
 Work Scheduled for 16 Days = = Computers
 Budgeted Cost of one computer installation= / = Lakhs
 BCWS = Rs Lakhs
 BCWP = = Rs Lakhs
 CV (Cost Variance)= = = Lakhs
 CPI (Cost Performance Index) = =
 Schedule Variance (in Cost Terms) = =
 Schedule Performance Index = =
 Time Variance = = Days
 ECPI = = =
98
 Work Scheduled per day =
 Work Scheduled for 16 Days = = Computers
 Budgeted Cost of one computer installation= / = Lakhs
 BCWS = Rs Lakhs
 BCWP = = Rs Lakhs
 CV (Cost Variance)=BCWP- ACWP = = Lakhs
 CPI (Cost Performance Index) = BCWP/ ACWP =
 Schedule Variance (in Cost Terms) = BCWP – BCWS =
 Schedule Performance Index = BCWP / BCWS =
 Time Variance = = Days
 ECPI = BCTW/ (ACWP +ACC) = =
99
 Work Scheduled per day – 10
 Work Scheduled for 16 Days = 16* 10 = 160 Computers
 Budgeted Cost of one computer installation=600/200 = 3 Lakhs
 BCWS or PV = Rs 480 Lakhs
 BCWP = 120 * 3 = Rs 360 Lakhs
 CV (Cost Variance)= BCWP - ACWP =360 – 380= -20 Lakhs
Cost incurred more than budget

 CPI (Cost Performance Index) = BCWP/ ACWP = 360/380 =
0.947
 Schedule Variance (in Cost Terms) = BCWP – BCWS = 360 -
480 = - 120 Lakhs (Project running behind schedule)

 Schedule Performance Index = BCWP / BCWS = 360 / 480 =
0.75 (or 120 / 160 = ¾ = 0.75)

 Time Variance = (160-120) / 10 = 4 Days
 ECPI = BCTW/ (ACWP +ACC)=600/(380 + 260)= 0.9375
100
You have planned for a project to write a software application to
take one year. The cost on this project is budgeted at ₹9,37,500/-
per month. Six months into the project you find that the software
application is 50% completed and you have spent ₹52,50,000/-.
Based on above information find the following:
CV ,CPI, SV, SPI, ETC, TCPI, Critical Ratio
101
Particulars Value Interpretation:
BAC (in Rs.) = 11,250,000.00
PV (in Rs.) = 5,625,000.00
EV (in Rs.) = 5,625,000.00
AC (in Rs.) = 5,250,000.00
CV (in Rs.) = 375,000.00 Under Planned Budget
CPI = 1.07 - Under Planned Budget
SV (in Rs.) = 0.00 -As Per Schedule
SPI = 1.00 - As Per Schedule
EAC (in Rs.) = 10,500,000.00
ETC (in Rs.) = 5,250,000.00
TCPI = ~ 0.94 - Easier to Complete
Critical Ratio 1.07 - Excellent Performance
102
103
104
105
Hint: 1) Draw Network Diagram,

2) Prepare Scheduled Completion
3) Prepare BCWS, BCWP & Cost Variance
4) Calculate SPI & CPI
5) Project Delay = Delay on Critical Path
106
Ex. A project has a budget of Rs 5 Lakhs & is scheduled to be
completed in one year. The following table gives the data for
first four months ( at the end of each month),
Month Planned Cost Earned Value Actual Cost
1 20,000 24,000 23,500
2 60,000 58,000 62,000
3 1,10,000 95,000 1,05,000
4 2,20,000 1,90,000 2,05,000
Calculate the following Values:

1.CPI at the end of each month
2.SPI for each of the four months
3.Estimated Cost to complete the project based on performance
at the end of the fourth month
4.Estimated time to complete the project based on performance
at the end of the fourth month
107
Month Planned Earned Actual Cost CPI = SPI =
Cost - Value – BCWP / BCWP /
BCWS BCWP ACWP BCWS
1 20,000 24,000 23,500
2 60,000 58,000 62,000
3 1,10,000 95,000 1,05,000
4 2,20,000 1,90,000 2,05,000
3. Estimated Cost to complete the project based on performance

at the end of the fourth month = BCTW / CPI =
4. Estimated time to complete the project based on performance

at the end of the fourth month = Estimated Project Duration /
SPI =
108
Month Planned Earned Actual Cost CPI = SPI =
Cost - Value – BCWP / BCWP /
BCWS BCWP ACWP BCWS
1 20,000 24,000 23,500 1.02 1.2
2 60,000 58,000 62,000 0.94 0.97
3 1,10,000 95,000 1,05,000 0.90 0.86
4 2,20,000 1,90,000 2,05,000 0.93 0.86
3. Estimated Cost to complete the project based on performance

at the end of the fourth month = BCTW / CPI = 5,00,000 / 0.93
= Rs. 5,37,634/-
4. Estimated time to complete the project based on performance

at the end of the fourth month = Estimated Project Duration /
SPI = 1 / 0.86 = 1.163 Years
109
Cost at Completion
1. Cost to complete must be re-estimated monthly on in –
progress tasks, and quarterly on all incomplete tasks.
Depending on duration of the project, the frequency could
be shortened, but not lengthened
2. Cost at Completion must be forecast at least monthly at the

task, intermediate and total project levels.
Cost at completion is the sum of :
i) Cost of all completed task
ii) Cost to date plus estimate to complete all in-progress
tasks
iii) Current estimate to complete all future tasks
(Note that the last mentioned – future tasks – not even begun,
must be revisited. They may not be static at the original
estimates). 110
Partial cost control report
111
Causes of Cost Problems
1. Unrealistic, low original estimates, bids and budgets
2. Management decision to reduce bid price and budgets to
meet competitive pressure or offset assumed padded
estimates
3. Uncontrolled, unnoticed increase in scope of work
4. Extra scope work in response to customer or management
inquiries
5. Unforeseen technical difficulties
6. Schedule delays that require overtime or other added cost
to recover
7. Inadequate cost budgeting, reporting and control
practices & procedures
112
The “S” Curve
• S curve is graphical representation of ‘Cumulative project
cost’ (y-axis) against ‘Time schedule’ (x-axis)
• It is also plotted ‘Cumulative man hours’ (y-axis) against

‘Time schedule’ (x-axis)
• This plot takes shape of English alphabet ‘S’, so it is known

as S curve
• It is plotted over the phases of project life cycle

• Shape is always travelling in upward direction, as cost is
cumulative
• Application in project management to asses / estimate: time,

baseline, cost, time etc. 113
The “S” Curve
114
A Typical project’s schedule and progress
115
Expenditure Curve
116
Weekly Report
117
MANAGING A PROJECT TEAM
PHASE TASK
CONCEPTUAL  Define scope - meet/talk to client and sponsor

Deliverable: Definition Document
PLANNING  Plan tasks, deliverables, risks, milestones,

dependencies, expenditure and responsibilities
Deliverable: Project Schedule and Budget
IMPLEMENTATION  Monitor progress against project schedule/budget

 Modify the plan as necessary
 Identify and record changes to scope
 Liaise with sponsor and client
Deliverable: Project Deliverables
118
MANAGING A PROJECT TEAM
PHASE TASK
COMPLETION /  Confirm objectives met

HANDOVER  Hold official handover event
 Produce end-user instructions
Deliverable: Completed Project
REVIEW Conduct post-project review. Agree learning points

Deliverable: Project Review Document (published in
an appropriate format)
119
Project Organization
 The key to successful organization design is
understanding that most project interaction takes
place through people, not through systems or
things
 It is people who make the organization go, and
cause significant things to happen
 A project must be organized so as to optimize the
human interaction required to carry out the
activities necessary to meet final goals
120
Influence Project Management
121
Task force organization for a manufacturing
project
122
Matrix organization for Project
123
Role of the Project Manager
 TO PLAN
 TO ORGANISE
 TO CO-ORDINATE
 TO CONTROL
 TO LEAD
125
Personal Qualities of the Project
Manager
 Motivating
 Directing
 Communicating
 Leading
126
EIGHT PARADOXES OF PROJECT MANAGEMENT
According to the American management guru Tom Peters, there are eight key
paradoxes in a good project manager. The truly successful project manager
needs to be able to balance the qualities in the left-hand column with their
opposites on the right:
TOTAL EGO NO EGO
Confident in his/her own ability and right to Not one to pull rank - a true servant leader.
make demands of people.
AUTOCRAT DELEGATOR
Decisive and authoritative where Encourages team members to act on their
necessary. own initiative.
LEADER MANAGER
Has a vision of the future and inspires Manages the nuts and bolts of
people. implementation.
COMFORTABLE WITH AMBIGUITY OBSESSED WITH PRECISION
Projects are surrounded by ambiguity. Some things do need precise definition.
Searching for exactitudes causes The project manager has a nose for what
paralysis. these are.
127
EIGHT PARADOXES OF PROJECT MANAGEMENT
GOOO FACE-TO-FACE GOOD COMMUNICATOR IN WRITING

COMMUNICATOR Has the discipline to write things down and
Is confident and persuasive in face-to-face ensures paperwork is kept up to date.
briefings. Builds rapport with people.
UNFAZED BY COMPLEXITY LIKES TO KEEP THINGS SIMPLE
Recognizes that the direct route is not the Believes that simple rules are most likely to
best one. be kept and simple solutions most often
work
AWARE OFTHE BIG PICTURE ATTENTION TO DETAIL
Is able to take account of the environment Pays attention to the small but vital
(political, economic or business) that components of a project that can mean the
surrounds the project. difference between failure and success.
IMPATIENT PATIENT
A project manager often needs to agitate Sometimes listening is more effective than
to overcome resistance and achieve a speaking. Unnecessary checking slows
result . progress.
128
Human Factors in Project Management
1. Project Blending – Building the project team

2. Planning & Strategy
3. Organizing Projects
4. Project Interfacing
5. Using Managerial Time
6. Handling conflict
7. Communication
8. Negotiating
9. Decision Making & Problem Solving
10. Managing Change Across Changing Frontiers
11. Managing Behaviour
129
Two Premises make up the cornerstone of
this “Human Side” of project management.
 People are the cause of a project’s
problems
 A project’s problems can be solved only
by people
No matter what type of project or what
industry, problems occur either because
people
1. Make them occur, or
2. Do not take action to prevent them from
occurring
130
At Least 50% of the problems that
exist on projects are either totally or
partially behavioral in nature. The
percentage has reached 75% in
some groups.
131
Project Manager’s Role During Interim
Progress Reviews
Listener Contributor
Integrator Leader
132
Leadership Qualities
• Dynamic • Confident
• Visionary • Imaginative
• Flexible • Analytic
• Creative • Decisive
• Patient • Sympathetic
• Persistent • Organized
• Assertive • Goal-driven
• Persuasive • Charismatic
 Each of these qualities will be called upon during a

project; the successful leader will instinctively know
the right approach to take in the right circumstance
133
Project versus Line management
Line management Project management
- responsible for managing the status quo - responsible for overseeint change
- authority defined by management - lines of authority 'fuzzy'
structure
- Consistent set of tasks - ever-changing set of tasks
- responsibility limited to their own - responsibility for cross-fucntional activities
function
- works in 'permanent'organisational - operates within structures which exist for
structures the life of the project
- taks described as 'maintenance' - predominantly concerned with innovation
- main task is optimisation - main task is the resolution of conflict
- success determined by achievement of - success determined by achievement of
interim targets stated end goals
- limited set of variables - contains intrinsic uncertainties
134
Projects Vs Operations
• Unique • Repetitive
• Finite • Eternal
• Revolutionary change • Evolutionary Change
• Disequilibrium • Equilibrium
• Unbalanced objectives • Balanced objectives
• Transient resources • Stable resources
• Flexibility • Stability
• Effectiveness • Efficiency
• Goals • Roles
• Risk & Uncertainty • Experience
135
Innovation/Maintenance activities in Line and Project
Management
Innovation
A
Project
management
Line
management
B
Maintenance
136

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Project Management XIMR

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PROJECT

The most obvious characteristic of a Project is

 When the project is successfully completed, it will

 ‘Managing Change’ is clearly different and at times

 It is for this reason that projects are established to

2. It has a clearly identifiable start and finish

3. It has a specific aim

4. It results in something being delivered

6. It involves cost, resources and time

7. It uses a wide variety of resources and skills

2. It has a time frame for completion

3. It has a unique time lines

4. It has an involvement of several people

5. It has a limited set of resources

6. It has a sequencing of activities and phases

A project is an undertaking that has a beginning and an

Project Management brings together and optimizes the

These resources include the skills, talents, and co-

 Project Management are the management

 Having the three sides

 The scope of the project is the sphere

3. Project Management Tools

Conformance As planned As budgeted As specified

 Cost over-runs can also occur when the limitations

 Pre – feasibility Study

 Functional or Support Studies

 Detailed Project Analysis (leading to DPR)

Equal weight method:

Factor Potential site S1 S2 S3 S4

Weight cum Rating method:

Factor / Potential site Rating S1 S2 S3 S4

Factor Point Rating Method –

Factor- Rating- Fair Adequate Good Excellent

 Pre – feasibility Study

 Functional or Support Studies

 Detailed Project Analysis (leading to DPR)

 Raw Material / Input Study

 Equipment Selection etc

 Feasibility Study – Key Analysis includes

 Economic - Risk & Returns

Is the idea prima facie feasible?

Plan Feasibility Analysis Terminate

Conduct Analysis - Market, Technical,

Market Potential Govt. initiatives

Automotive industry is an Oligopoly industry i.e.

Raw Material: The biggest hurdle for the Indian EV industry

Plant Location:Uttar Pradesh has the highest number of

Plant Size:Some of the existing OEM such as Tata motors said it

Market: Risk: Project Financing:

•The term Capital Budgeting refers to long term planning for

• A broad investment strategies

• Marketing, Technical, Financial, Economic, Ecology

• Inclusion of various inputs in budget

• Is the project worthwhile?

1. Non Discounted Cash Flow –

 Payback Period Method (PB)

 Accounting Rate of Return (ARR)

2. Discounted Cash Flow –

 Net Present Value (NPV)

 Internal Rate of Return (IRR)

All projects have the same basic underlying structure.

Whatever be the project, it will develop over four

1. The Conceptual and Definition phase

2. The Planning / Designing Phase