Definition and Characteristics of Project

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Project is a great opportunity for organizations and individuals to achieve their business and non-
business objectives more efficiently through implementing change. Projects help us make desired
changes in an organized manner and with reduced probability of failure.

A Project is a temporary, unique and progressive attempt or endeavor made to produce some
kind of a tangible or intangible result (a unique product, service, benefit, competitive advantage,
etc.). It usually includes a series of interrelated tasks that are planned for execution over a fixed
period of time and within certain requirements and limitations such as cost, quality, performance,
others.

Projects differ from other types of work (e.g. process, task, procedure). Meanwhile, in
the broadest sense a project is defined as a specific, finite activity that produces an
observable and measurable result under certain preset requirements.

Projects differ from other types of work (e.g. process, task, procedure). Meanwhile, in
the broadest sense a project is defined as a specific, finite activity that produces an
observable and measurable result under certain preset requirements.

Characteristics of a Project

(a) Project has a owner, who, in the private sector, can be an individual or a company
etc., in the public sector, a government undertaking or a joint sector organization,
representing a partnership between public and private sector.

(b) Project has a set objective to achieve within a distinct time, cost and technical
performance.

(c) Project is planned, managed and controlled by an assigned team the project team
planted within the owner’s organization to achieve the objectives as per specifications.

(d) Project, in general, is an outcome in response to environments economies and

opportunities. As an example, we find that considering the changing pattern of modern
living the domestic appliances small e.g. grinders, mixers etc., and large, e.g.
refrigerators, washing machines etc. are on ever-increasing demand. This generates
responses to avail opportunity to produce such appliances.

(e) Project is an undertaking involving future activities for completion of the project
within estimates and involves complex budgeting procedure with a mission.
 (f) Implementation of the project involves a co-ordination of works/supervisions by
project team/manager.

(g) Project involves activities to be carried out in future. As such, it has some inherent
risk and, in reality, the process of implementation may necessitate certain changes in
the plan subject to limitations and concurrence of the project owner.

(h) Project involves high-skilled forecasting with sound basis for such forecasting.

(i) Projects have a start and an end a characteristic of a life cycle. The organization of
project changes as it passes through this cycle the activities starting from—
conception stage, mounting up to the peak during implementation and, then, back to
zero level on completion and delivery of the project.

Types of Project
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1 Construction Projects

The project produces an artifact. The value generated by the project is embedded in the artifact. The
artifacts may be a complex system with human and mechanical components.

Examples:

2 Warship
3 Jubilee line extension
4 Millennium dome
5 Customer call centre
6 Method guidebook

2 Research Projects

The project produces knowledge. The knowledge may be formally represented as models,
patterns or patents. Or the knowledge may be embedded in a working process or artifact.

Examples:
(ii) Business modelling
(iii) Developing a model of the UK economy
(iv) Developing a new species of wheat
(v) Developing novel approaches to project management.
(vi) Military intelligence/ codebreaking.
(vii) The analysis, testing, QA or evaluation portions of a larger project.

7 Reengineering Projects

The project produces a desired change in some system or process.

Examples:

(i) Taking sterling into the Euro

(ii) Renumbering the UK telephone system

(viii) Implementing PRINCE project management practices into a large organization.

(ix) Designing and installing an Intranet.

8 Procurement Projects

The project produces a business relationship contractually based with a selected supplier for a
defined product or service based on a fixed specification and/or a defined specification process

Examples:

(x) Outsourcing a specific construction or research project

(xi) Outsourcing a complete business function (such as IT).
(xii) Imposing new rules and measures on a regulated industry.

9 Business Implementation Projects

The project produces an operationally effective process. The value generated by the project is
embedded in the process.

(iii) Developing a new business process to repackage and exploit existing assets.
(iv) Installing e-commerce

Some projects are difficult to classify under 

this scheme.
 (i) National symbolic programmes

(xiii) Putting a man on the moon by the end of the decade

(xiv) Mitterand’s Grandes Projects
(xv) New Labour

(ii) Large medical programmes

10 Creating an artificial heart

11 Mass inoculation programmes

(iii) Other hybrid or interdisciplinary projects

(v) Pilot projects

(vi) Moving offices

Project Life Cycle

THEINTACTFRONT12 MAR 20193 COMMENTS

The project life cycle describes the stages a project goes through as it progresses from start to
finish. A well-defined life cycle brings order and structure to the project.
The Project Life Cycle refers to the four-step process that is followed by nearly all project
managers when moving through stages of project completion. This is the standard project life
cycle most people are familiar with. The Project Life Cycle provides a framework for managing
any type of project within a business. Leaders in project management have conducted research
to determine the best process by which to run projects. It has been found that following a
project life cycle is critical for any services organization.

The Project Life Cycle (Phases)

The project manager and project team have one shared goal: to carry out the work of the project
for the purpose of meeting the project’s objectives. Every project has a beginning, a middle
period during which activities move the project toward completion, and an ending (either
successful or unsuccessful). A standard project typically has the following four major phases
(each with its own agenda of tasks and issues): initiation, planning, implementation, and
closure. Taken together, these phases represent the path a project takes from the beginning to
its end and are generally referred to as the project “life cycle.”

The project manager and project team have one shared goal: to carry out the work of the project
for the purpose of meeting the project’s objectives. Every project has a beginning, a middle
period during which activities move the project toward completion, and an ending (either
successful or unsuccessful). A standard project typically has the following four major phases
(each with its own agenda of tasks and issues): initiation, planning, implementation, and
closure. Taken together, these phases represent the path a project takes from the beginning to
its end and are generally referred to as the project “life cycle.”

1. Initiation Phase

During the first of these phases, the initiation phase, the project objective or need is identified;
this can be a business problem or opportunity. An appropriate response to the need is
documented in a business case  with recommended solution options. A feasibility study is
conducted to investigate whether each option addresses the project objective and a final
recommended solution is determined. Issues of feasibility (“can we do the project?”) and
justification (“should we do the project?”) are addressed.
 

Once the recommended solution is approved, a project is initiated to deliver the approved
solution and a project manager is appointed. The major deliverables and the participating work
groups are identified, and the project team begins to take shape. Approval is then sought by the
project manager to move onto the detailed planning phase.

2. Planning Phase

The next phase, the planning phase, is where the project solution is further developed in as
much detail as possible and the steps necessary to meet the project’s objective are planned. In
this step, the team identifies all of the work to be done. The project’s tasks and resource
requirements are identified, along with the strategy for producing them. This is also referred to
as “scope management.” A project plan is created outlining the activities, tasks, dependencies,
and timeframes. The project manager coordinates the preparation of a project budget by
providing cost estimates for the labor, equipment, and materials costs. The budget is used to
monitor and control cost the budget is used to monitor and control cost expenditures during
project implementation.

Once the project team has identified the work, prepared the schedule, and estimated the costs,
the three fundamental components of the planning process are complete. This is an excellent
time to identify and try to deal with anything that might pose a threat to the successful
completion of the project. This is called risk management. In risk management, “high-threat”
potential problems are identified along with the action that is to be taken on each high-threat
potential problem, either to reduce the probability that the problem will occur or to reduce the
impact on the project if it does occur. This is also a good time to identify all project
stakeholders and establish a communication plan describing the information needed and the
delivery method to be used to keep the stakeholders informed.

Finally, we will want to document a quality plan, providing quality targets, assurance, and control
measures, along with an acceptance plan, listing the criteria to be met to gain customer
acceptance. At this point, the project would have been planned in detail and is ready to be
executed.

3. Implementation (Execution) Phase

During the third phase, the implementation phase, the project plan is put into motion and the
work of the project is performed. It is important to maintain control and communicate as
needed during implementation. Progress is continuously monitored and appropriate
adjustments are made and recorded as variances from the original plan. In any project, a project
manager spends most of the time in this step. During project implementation, people are
carrying out the tasks, and progress information is being reported through regular team
meetings. The project manager uses this information to maintain control over the direction of
the project by comparing the progress reports with the project plan to measure the performance
of the project activities and take corrective action as needed. The first course of action should
always be to bring the project back on course (i.e., to return it to the original plan). If that cannot
happen, the team should record variations from the original plan and record and publish
modifications to the plan. Throughout this step, project sponsors and other key stakeholders
should be kept informed of the project’s status according to the agreed-on frequency and
format of communication. The plan should be updated and published on a regular basis.

Status reports should always emphasize the anticipated end point in terms of cost, schedule,
and quality of deliverables. Each project deliverable produced should be reviewed for quality and
measured against the acceptance criteria. Once all of the deliverables have been produced and
the customer has accepted the final solution, the project is ready for closure.

4. Closing Phase

During the final closure, or completion phase, the emphasis is on releasing the final deliverables
to the customer, handing over project documentation to the business, terminating supplier
contracts, releasing project resources, and communicating the closure of the project to all
stakeholders. The last remaining step is to conduct lessons-learned studies to examine what
went well and what didn’t. Through this type of analysis, the wisdom of experience is transferred
back to the project organization, which will help future project teams.

Example: Project Phases on a Large Multinational Project

A U.S. construction company won a contract to design and build the first copper mine in
northern Argentina. There was no existing infrastructure for either the mining industry or large
construction projects in this part of South America.

During the initiation phase of the project , the project manager focused on defining and finding a
project leadership team with the knowledge, skills, and experience to manage a large complex
project in a remote area of the globe. The project team set up three offices. One was in Chile,
where large mining construction project infrastructure existed. The other two were in Argentina.
One was in Buenos Aries to establish relationships and Argentinian expertise, and the second
was in Catamarca—the largest town close to the mine site. With offices in place, the project
start-up team began developing procedures for getting work done, acquiring the appropriate
permits, and developing relationships with Chilean and Argentine partners.
During the planning phase, the project team developed an integrated project schedule that
coordinated the activities of the design, procurement, and construction teams. The project
controls team also developed a detailed budget that enabled the project team to track project
expenditures against the expected expenses. The project design team built on the conceptual
design and developed detailed drawings for use by the procurement team. The procurement
team used the drawings to begin ordering equipment and materials for the construction team;
develop labor projections; refine the construction schedule; and set up the construction site.
Although planning is a never-ending process on a project, the planning phase focused on
developing sufficient details to allow various parts of the project team to coordinate their work
and allow the project management team to make priority decisions.

The implementation phase represents the work done to meet the requirements of the scope of
work and fulfill the charter. During the implementation phase, the project team accomplished
the work defined in the plan and made adjustments when the project factors changed.
Equipment and materials were delivered to the work site, labor was hired and trained, a
construction site was built, and all the construction activities, from the arrival of the first dozer
to the installation of the final light switch, were accomplished.

The closeout phase included turning over the newly constructed plant to the operations team of
the client. A punch list of a few remaining construction items was developed and those items
completed. The office in Catamarca was closed, the office in Buenos Aries archived all the
project documents, and the Chilean office was already working on the next project. The
accounting books were reconciled and closed, final reports written and distributed, and the
project manager started on a new project.

Concepts of Deliverables
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The term deliverables is a project management term that’s traditionally used to describe the
quantifiable goods or services that must be provided upon the completion of a project.
Deliverables can be tangible or intangible in nature. For example, in a project focusing on
upgrading a firm’s technology, a deliverable may refer to the acquisition of a dozen new
computers.
On the other hand, for a software project, a deliverable might allude to the implementation of a
computer program aimed at improving a company’s accounts receivable computational
efficiency.
Deliverables:
In addition to computer equipment and software programs, a deliverable may refer to in-person
or online training programs, as well as design samples for products in the process of being
developed. In many cases, deliverables are accompanied by instruction manuals.
Documentation
 Deliverables are usually contractually obligated requirements, detailed in agreements drawn up
between two related parties within a company, or between a client and an outside consultant or
developer. The documentation precisely articulates the description of a deliverable, as well as
the delivery timeline and payment terms.
Milestones
Many large projects include milestones, which are interim goals and targets that must be
achieved by stipulated points in time. A milestone may refer to a portion of the deliverable due,
or it may merely refer to a detailed progress report, describing the current status of a project.
Film Deliverables
In film production, deliverables refer to the range of audio, visual, and paperwork files that
producers must furnish to distributors. Audio and visual materials generally include stereo and
Dolby 5.1 sound mixes, music and sound effects on separate files, as well as the full movie in a
specified format.
Paperwork deliverables include signed and executed licensing agreements for all music, errors,
and omissions reports, performance releases for all on-screen talent, a list of the credit block
that will appear in all artwork and advertising, as well as location, artwork, and logo legal
releases. Films deliverables also pertain to elements that are ancillary to the movies themselves.
These items include the trailer, TV spots, publicity stills photographed on set, and other legal
work.

(xvi) The word “deliverables” is a project management term describing the quantifiable goods or services that
must be provided upon the completion of a project.
(xvii) Deliverables can be tangible in nature, such as the acquisition of a dozen new computers, or they can be
intangible, like the implementation of a computer program aimed at improving a company’s accounts
receivable computational efficiency.
(xviii) A deliverable may refer to in-person or online training programs, as well as design samples for products
in the process of being developed.
(xix) In many cases, deliverables are accompanied by instruction manuals.
(xx) In film production, deliverables refer to the range of audio, visual, and paperwork files that producers
must furnish to distributors.

Scope of Work and Milestones

AKTUTHEINTACTONE10 JAN 20201 COMMENT

A scope of work (SOW) document is an agreement on the work you’re going to perform on the
project

The document includes

(xxi) Deliverables

This is what your project delivers, of course. Whether it’s a product or a service, it’s the reason
you’re executing the project for your customer, stakeholder or sponsor. Whatever that
 deliverable is, and it can be some sort of document or report, software, product, build (or all of
the above), you need to have each item clearly identified here.

12 Timeline

Think of a timeline as a road leading from the start of a project to its end. It’s a section of the
document that delineates the major phases across the schedule of the project’s duration. It
should also mark the points in the project when your deliverables are ready. As you can guess,
it’s essential to scoping out the overall plan of any project. This is best presented visually, like a
rolled-up Gantt chart plan, so the stakeholders can see the high level timeline.

(vii) Milestones

Projects can be very long and complex, which is why they’re laid out over a timeline and broken
down into more manageable parts called tasks. Larger phases of the project are marked by what
is called a milestone. It’s a way to help you monitor the progress of the project to make sure it’s
adhering to your planned schedule. Define your key milestones in the Scope of Work document,
including project kickoffs, meetings, hand offs, etc.

 Reports

You’ll be generating these throughout the project, delivered to either you team or customer,
stakeholder or sponsor. They’re a formal record of the progress of your project, but they’re also
a means of communication beyond whether the project’s on schedule or not. Depending on
how you customize them, there’s a wealth of data that can serve a number of different
audiences. Define how you’ll be reporting on the project and when the stakeholders can be
expecting them and from whom.

Scope of Work Example

To understand a scope of work, let’s create a hypothetical project, nothing too complex but
important none the less. A wedding is a project, and depending on the bridezilla (or groomzilla),
it could be bigger and more complicated than building a highway or an airport. So, let’s just take
one aspect of that larger project, the wedding invitations, and break this down into a scope of
work. I’ll outline the deliverables, timeline, milestones and reports in this scope of work
example.
Deliverables

 Invite List
 Addresses of Attendees
 Invites
 Addressed Envelopes
 Stamps
 Manage your projects online. Try it free for 30 days
 Timeline

 1 Decided on invite list

 1 Have addresses collected of attendees
 March 1 Pick invitation style and have printed
 April 1 Address and mail invites
 May 1 Get final count of guests
 June 1 Wedding

Milestones

 Selection of guest and collection of addresses

 Mailing of invitations
 Final count of attendees

Reports

 Check on status of address collection

 Stay in touch with printer for progress on invitations
 Check RSVPs against invitation list

Tools and Techniques of Project Management

THESTREAK20 FEB 20193 COMMENTS

Techniques in project management range from traditional to innovative ones. Which one to
choose for running a project, depends on project specifics, its complexity, teams involved, and
other factors. Most of them can be used in various fields, however, there are techniques that
are traditionally used in certain areas of activity, or are developed specifically for certain fields.
Below, we’ve listed the most popular techniques that are used in project management.

Classic Technique

The simplest, traditional technique is sometimes the most appropriate for running projects. It
includes preparing a plan of upcoming work, estimating tasks to perform, allocating resources,
providing and getting feedback from the team, and monitoring quality and deadlines.
Where to use: this technique is ideal for running projects performed by small teams, when it’s
not really necessary to implement a complex process.

Waterfall Technique

This technique is also considered traditional, but it takes the simple classic approach to the new
level. As its name suggests, the technique is based on the sequential performance of tasks. The
next step starts when the previous one is accomplished. To monitor progress and performed
 steps, Gantt charts are often used, as they provide a clear visual representation of phases and
dependencies.
Where to use: this technique is traditionally used for complex projects where detailed phasing is
required and successful delivery depends on rigid work structuring.

Agile Project Management

Agile project management method is a set of principles based on the value-centered approach.
It prescribes dividing project work into short sprints, using adaptive planning and continual
improvement, and fostering teams’ self-organization and collaboration targeted to producing
maximum value. Agile frameworks include such techniques as Scrum, Kanban, DSDM, FDD, etc.
Where to use: Agile is used in software development projects that involve frequent iterations
and are performed by small and highly collaborative teams.
Rational Unified Process

Rational Unified Process (RUP) is a framework designed for software development teams and
projects. It prescribes implementing an iterative development process, where feedback from
product users is taken into account for planning future development phases.
Where to use: RUP technique is applied in software development projects, where end user
satisfaction is the key requirement.

Program Evaluation and Review Technique

Program Evaluation and Review Technique (PERT) is one of widely used approaches in various
areas. It involves complex and detailed planning, and visual tracking of work results on  PERT
charts. Its core part is the analysis of tasks performed within the project. Originally, this
technique was developed by the US Navy during the Cold War to increase efficiency of work on
new technologies.
Where to use: this technique suits best for large and long-term projects with non-routine tasks
and challenging requirements.

Characteristics of Project Team

AKTUTHEINTACTONE10 JAN 20201 COMMENT

On this type of team, there is usually a strong trust bond, people work cooperatively together to
reach the common project goals, and often the project is even more successful than the project
manager and customer could have imagined.
These types of teams generally have some key characteristics in common that help make them
the effective, high-performing teams that they are.
Clearly defined goals
Clearly defined goals are essential so that everyone understands the purpose and vision of the
team. It’s surprising to learn sometimes how many people do not know the reason they are
doing the tasks that make up their jobs, much less what their team is doing. Everyone must be
pulling in the same direction and be aware of the end goals. Clear goals help team members
understand where the team is going. Clear goals help a team know when it has been successful
by defining exactly what the team is doing and what it wants to accomplish. This makes it easier
for members to work together – and more likely to be successful.
Clear goals create ownership. Team members are more likely to “own” goals and work toward
them if they have been involved in establishing them as a team. In addition, ownership is longer
lasting if members perceive that other team members support the same efforts. Clear goals
foster team unity, whereas unclear goals foster confusion – or sometimes individualism. If team
members don’t agree on the meaning of the team goals, they will work alone to accomplish
their individual interpretations of the goals. They may also protect their own goals, even at the
expense of the team.
Clearly defined roles
If the team’s roles are clearly defined, all team members know what their jobs are, but defining
roles goes beyond that. It means that we recognize individuals’ talent and tap into the expertise
of each member – both job-related and innate skills each person brings to the team, such as
organization, creative, or team-building skills. Clearly defined roles help team members
understand why they are on a team. When the members experience conflict, it may be related
to their roles. Team members often can manage this conflict by identifying, clarifying, and
agreeing on their individual responsibilities so that they all gain a clear understanding of how
they will accomplish the team’s goals. Once team members are comfortable with their primary
roles on the team, they can identify the roles they play during team meetings. There are two
kinds of roles that are essential in team meetings.
Open and clear communication
The importance of open and clear communication cannot be stressed enough. This is probably
the most important characteristic for high-performance teams. Many different problems that
arise on projects can often be can be traced back to poor communication or lack of
communication skills, such as listening well or providing constructive feedback. Enough books
have been written about communication to fill a library. And I’ve personally written several
articles on this subject alone for this site over the past few months.
Excellent communication is the key to keeping a team informed, focused, and moving forward.
Team members must feel free to express their thoughts and opinions at any time. Yet, even as
they are expressing themselves, they must make certain they are doing so in a clear and concise
manner. Unfortunately, most of us are not very good listeners. Most of us could improve our
communication if we just started to listen better—to listen with an open mind, to hear the
entire message before forming conclusions, and to work toward a mutual understanding with
the speaker.
Effective decision making
Decision making is effective when the team is aware of and uses many methods to arrive at
decisions. A consensus is often touted as the best way to make decisions—and it is an excellent
method and probably not used often enough. But the team should also use majority rule, expert
decision, authority rule with discussion, and other methods. The team members should discuss
the method they want to use and should use tools to assist them, such as force-field analysis,
pair-wise ranking matrices, or some of the multi-voting techniques.
Effective decision making is essential to a team’s progress; ideally, teams that are asked to solve
problems should also have the power and authority to implement solutions. They must have a
grasp of various decision-making methods, their advantages and disadvantages, and when and
how to use each. Teams that choose the right decision-making methods at the right time will not
only save time, but they will also most often make the best decisions.  This completes the four
basic foundation characteristics: clear goals, defined roles, open and clear communication, and
effective decision making.
Balanced participation
If communication is the most important team characteristic, participation is the second most
important. Without participation, you don’t have a team; you have a group of bodies. Balanced
participation ensures that everyone on the team is fully involved. It does not mean that if you
have five people each is speaking 20 percent of the time. Talking is not necessarily a measure of
participation. We all know people who talk a lot and say nothing. It does mean that each
individual is contributing when it’s appropriate. The more a team involves all of its members in
its activities, the more likely that team is to experience a high level of commitment and synergy.
Leader’s behavior
A leader’s behavior comes as much from attitude as from anything. Leaders who are effective in
obtaining participation see their roles as being a coach and mentor, not the expert in the
situation. Leaders will get more participation from team members if they can admit to needing
help, not power. Leaders should also specify the kind of participation they want right from the
start.
Participants’ expectations
Participants must volunteer information willingly rather than force someone to drag it out of
them. They should encourage others’ participation as well by asking a question of others,
especially those who have been quiet for a while.
Participants can assist the leader by suggesting techniques that encourage everyone to speak,
for example, a round robin. To conduct a round robin, someone directs all members to state
their opinions or ideas about the topic under discussion. Members go around the group, in
order, and one person at a time says what’s on his or her mind. During this time, no one else in
the group can disagree, ask questions, or discuss how the idea might work or not work, be good
or not good.
Only after everyone has had an opportunity to hear others and to be heard him- or herself, a
discussion occurs. This discussion may focus on pros and cons, on clarifying, on similarities and
differences, or on trying to reach consensus.
Valued diversity
Valued diversity is at the heart of building a team. Thus, the box is at the center of the model. It
means, put simply, that team members are valued for the unique contributions that they bring
to the team.
 Diversity goes far beyond gender and race. It also includes how people think, what experience
they bring, and their styles. The diversity of thinking, ideas, methods, experiences, and opinions
helps to create a high-performing team.
Managed Conflict
Conflict is essential to a team’s creativity and productivity. Because most people dislike conflict,
they often assume that effective teams do not have it. In fact, both effective and ineffective
teams experience conflict. The difference is that effective teams manage it constructively. In
fact, effective teams see conflict as positive.
Managed conflict ensures that problems are not swept under the rug. It means that the team
has discussed members’ points of view about an issue and has come to see well-managed
conflict as a healthy way to bring out new ideas and to solve whatever seems to be unsolvable.
Here are some benefits of healthy conflict:

(xxii) Conflict forces a team to find productive ways to communicate differences, seek common goals, and
gain consensus;
(xxiii) Conflict encourages a team to look at all points of view, then adopt the best ideas from each;
(xxiv) Conflict increases creativity by forcing the team to look beyond current assumptions and parameters.

Positive team atmosphere

To be truly successful, a team must have a climate of trust and openness, that is, a positive
atmosphere. A positive atmosphere indicates that members of the team are committed and
involved. It means that people are comfortable enough with one another to be creative, take
risks, and make mistakes. It also means that you may hear plenty of laughter, and research
shows that people who are enjoying themselves are more productive than those who dislike
what they are doing.
Cooperative relationships
Directly related to having a positive atmosphere are cooperative relationships. Team members
know that they need one another’s skills, knowledge, and expertise to produce something
together that they could not do as well alone. There is a sense of belonging and a willingness to
make things work for the good of the whole team. The atmosphere is informal, comfortable,
and relaxed. Team members are allowed to be themselves. They are involved and interested.
Cooperative relationships are the hallmark of top-performing teams. These top teams
demonstrate not only cooperative relationships between team members but also cooperative
working relationships elsewhere in the organization.
Participative Leadership
The participative leadership block is not at the top of the model because it is the most
important.
It is at the top because it is the only block that can be removed without disturbing the rest.
Participative leadership means that leaders share the responsibility and the glory, are supportive
and fair, create a climate of trust and openness, and are good coaches and teachers.
In general, it means that leaders are good role models and that the leadership shifts at various
times.
In the most productive teams, it is difficult to identify a leader during a casual observation.
 In conclusion, a high-performing team can accomplish more together than all the individuals can
apart.

Characteristics of Project Leader

AKTUTHEINTACTONE10 JAN 20201 COMMENT

The terms project manager and project leader get used interchangeably all the time, and yet
there are a couple important differences that can be derived from the respective terms
themselves. Managers manage. Leaders lead. What this means in practice is that project leaders
are responsible for establishing direction, communicating their vision to management and the
workforce, and forging teams that are capable of delivering high-performance. In contrast,
project managers focus primarily on short-term goals and are responsible for solving short-term
problems.
The project manager implements the project and solves roadblocks as they emerge. Noting that
difference, it is easy to argue that project leaders have the most difficult job of all in regard to
the implementation of major change initiatives.
After all, project leaders liaise between management and the workforce, and are directly
responsible for ensuring the inspired execution of the agreed upon strategy. Here are the five
characteristics of highly effective project leaders. 

(xxv) They are strong communicators

Project leaders need to be particularly strong communicators as they must eventually provide
feedback to the management and facilitate the continual improvement efforts of the men and
women working under them.

13 They are trustworthy

Whether project leaders come from inside or outside the organization, they must have the
continued support and trust of the board of directors and management. Without this,
micromanagement and inefficiencies are bound to occur over the course of a major
transformation.

(viii) They understand people

While the project leader doesn’t necessarily need to be a “people person”, he or she does need
to have a strong sense of where the aptitudes and abilities of the team members lie. Putting
together a team twith complimentary strengths and weaknesses helps to ensure the eventual
success of the chosen project.

 They can see the overall Performance

 Being able to take the long-term view is a critical characteristic of project leadership and project
leaders need to be able to see the whole as it is in order to make connections that the individual
team members cannot see due to their limited scope in the overall project.

 They can see the all level of efforts

While taking the holistic view is critical for project leaders, they need to be able to communicate
on a detailed level about all aspects of the project to any level of seniority. Possessing long-term
vision will prove insufficient when it comes to managing people and their individual roles within
the larger project.

Project Organization
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The project organization consists of a number of horizontal organizational units to complete

projects of a long duration.
Each project is vitally important to the organization. Therefore, a team of specialist from
different areas is created for each project.
The size of the project team varies from one project to another. The activities of a project team
are coordinated by the project manager who has the authority to obtain advice and assistance
of experts both inside and outside the organization.

The core concept of project organization is to gather a team of specialists to work on and
complete a particular project. The project staff is separate and is independent of the functional
departments. Project organization is employed in aerospace, construction, aircraft manufacture
and professional areas like management consultancy etc.
 Project organization is appropriate when the enterprise is undertaking tasks that have definite
goals that are frequent and unfamiliar to the present structure, that are complex because of
interdependence of tasks and that are crucial for the success of the firm. A project team is a
temporary set up. Once the project is complete, the team is dissolved and the functional
specialists are assigned some other projects.
Merits of Project Organization

(xxvi) It provides concentrated attention that a complex project demands.

(xxvii) It permits the timely completion of the project without disturbing the normal routine of rest of the
organization.
(xxviii) It provides a logical approach to any challenge in fulfilling a large project with definite beginning, end
and clearly defined result.

Demerits of Project Organization

14 There is an organizational uncertainly as a project manager has to deal with professionals drawn from
diverse fields.
15 Organizational uncertainties may lead to interdepartmental conflicts.
16 There is a considerable fear among personnel that the completion of the project may result in loss of
job. This feeling of insecurity may create considerable worry about career progress.

Importance of Project Management

AKTUTHEINTACTONE10 JAN 20201 COMMENT

(xxix) Strategic Alignment

Project management is important because it ensures what is being delivered, is right, and will deliver
real value against the business opportunity.

Every client has strategic goals and the projects that we do for them advance those goals. Project
management is important because it ensures there’s rigor in architecting projects properly so that they
fit well within the broader context of our client’s strategic frameworks Good project management
ensures that the goals of projects closely align with the strategic goals of the business.

In identifying a solid business case, and being methodical about calculating ROI, project management is
important because it can help to ensure the right thing is delivered, that’s going to deliver real value.

Of course, as projects progress, it is possible that risks may emerge, that turn into issues or even the
business strategy may change. But a project manager will ensure that the project is part of that
realignment. Project management really matters here because projects that veer off course, or which
fail to adapt to the business needs may end up being expensive and/or unnecessary.
 17 Leadership

Project management is important because it brings leadership and direction to projects.

Without project management, a team can be like a ship without a rudder; moving but without direction,
control or purpose. Leadership allows and enables a team to do their best work. Project management
provides leadership and vision, motivation, removing roadblocks, coaching and inspiring the team to do
their best work.

Project managers serve the team but also ensure clear lines of accountability. With a project manager in
place there’s no confusion about who’s in charge and in control of whatever’s going on in a project.
Project managers enforce process and keep everyone on the team in line too because ultimately they
carry responsibility for whether the project fails or succeeds.

(ix) Clear Focus & Objectives

Project management is important because it ensures there’s a proper plan for executing on strategic
goals.

Where project management is left to the team to work out by themselves, you’ll find teams work
without proper briefs, projects lack focus, can have vague or nebulous objectives, and leave the team
not quite sure what they’re supposed to be doing, or why.

As project managers, we position ourselves to prevent such a situation and drive the timely
accomplishment of tasks, by breaking up a project into tasks for our teams. Oftentimes, the foresight to
take such an approach is what differentiates good project management from bad. Breaking up into
smaller chunks of work enables teams to remain focused on clear objectives, gear their efforts towards
achieving the ultimate goal through the completion of smaller steps and to quickly identify risks, since
risk management is important in project management.

Often a project’s goals have to change in line with a materializing risk. Again, without dedicated oversite
and management, a project could swiftly falter but good project management (and a good project
manager) is what enables the team to focus, and when necessary refocus, on their objectives.

 Realistic Project Planning

Project management is important because it ensures proper expectations are set around what can be
delivered, by when, and for how much.

Without proper project management, budget estimates and project delivery timelines can be set that
are over-ambitious or lacking in analogous estimating insight from similar projects. Ultimately this
means without good project management, projects get delivered late, and over budget.
 Effective project managers should be able to negotiate reasonable and achievable deadlines and
milestones across stakeholders, teams, and management. Too often, the urgency placed on delivery
compromises the necessary steps, and ultimately, the quality of the project’s outcome.

We all know that most tasks will take longer than initially anticipated; a good project manager is able to
analyze and balance the available resources, with the required timeline, and develop a realistic
schedule. Project management really matters when scheduling because it brings objectivity to the
planning.

A good project manager creates a clear process, with achievable deadlines, that enables everyone within
the project team to work within reasonable bounds, and not unreasonable expectations.

 Quality Control

Projects management is important because it ensures the quality of whatever is being delivered,
consistently hits the mark.

Projects are also usually under enormous pressure to be completed. Without a dedicated project
manager, who has the support and buy-in of executive management, tasks are underestimated,
schedules tightened and processes rushed. The result is bad quality output. Dedicated project
management ensures that not only does a project have the time and resources to deliver, but also that
the output is quality tested at every stage.

Good project management demands gated phases where teams can assess the output for quality,
applicability, and ROI. Project management is of key importance to Quality Assurance because it allows
for a staggered and phased process, creating time for teams to examine and test their outputs at every
step along the way.

 Risk Management

Project management is important because it ensures risks are properly managed and mitigated against
to avoid becoming issues.

Risk management is critical to project success. The temptation is just to sweep them under the carpet,
never talk about them to the client and hope for the best. But having a robust process around the
identification, management and mitigation of risk is what helps prevent risks from becoming issues.

Good project management practice requires project managers to carefully analyze all potential risks to
the project, quantify them, develop a mitigation plan against them, and a contingency plan should any
of them materialize. Naturally, risks should be prioritized according to the likelihood of them occurring,
and appropriate responses are allocated per risk. Good project management matters in this regard,
because projects never go to plan, and how we deal with change and adapt our plans is a key to
delivering projects successfully.
 Orderly Process

Project management is important because it ensures the right people do the right things, at the right
time – it ensures proper project process is followed throughout the project lifecycle.

Surprisingly, many large and well-known companies have reactive planning processes. But reactivity – as
opposed to proactivity – can often cause projects to go into survival mode. This is a when teams
fracture, tasks duplicate, and planning becomes reactive creating inefficiency and frustration in the
team.

Proper planning and process can make a massive difference as the team knows who’s doing what, when,
and how. Proper process helps to clarify roles, streamline processes and inputs, anticipate risks, and
creates the checks and balances to ensure the project is continually aligned with the overall strategy.
Project management matters here because without an orderly, easily understood process, companies
risk project failure, attrition of employee trust and resource wastage.

 Continuous Oversight

Project management is important because it ensures a project’s progress is tracked and reported
properly.

Status reporting might sound boring and unnecessary – and if everything’s going to plan, it can just feel
like documentation for documentation’s sake. But continuous project oversight, ensuring that a project
is tracking properly against the original plan, is critical to ensuring that a project stays on track.

When proper oversight and project reporting is in place it makes it easy to see when a project is
beginning to deviate from its intended course. The earlier you’re able to spot project deviation, the
easier it is to course correct.

Good project managers will regularly generate easily digestible progress or status reports that enable
stakeholders to track the project. Typically these status reports will provide insights into the work that
was completed and planned, the hours utilized and how they track against those planned, how the
project is tracking against milestones, risks, assumptions, issues and dependencies and any outputs of
the project as it proceeds.

This data is invaluable not only for tracking progress but helps clients gain the trust of other
stakeholders in their organization, giving them easy oversight of a project’s progress.

 Subject Matter Expertise

Project management is important because someone needs to be able to understand if everyone’s doing
what they should.
 With a few years experience under their belt, project managers will know a little about a lot of aspects
of delivering the projects they manage. They’ll know everything about the work that their teams
execute; the platforms and systems they use, and the possibilities and limitations, and the kinds of
issues that typically occur.

Having this kind of subject matter expertise means they can have intelligent and informed conversations
with clients, team, stakeholders, and suppliers. They’re well equipped to be the hub of communication
on a project, ensuring that as the project flows between different teams and phases of work, nothing
gets forgotten about or overlooked.

Without subject matter expertise through project management, you can find a project becomes
unbalanced – the creatives ignore the limitations of technology or the developers forget the creative
vision of the project. Project management keeps the team focussed on the overarching vision and brings
everyone together forcing the right compromises to make the project a success.

(i) Managing and Learning from Success and Failure

Project management is important because it learns from the successes and failures of the past.

Project management can break bad habits and when you’re delivering projects, it’s important to not
make the same mistakes twice. Project managers use retrospectives or post project reviews to consider
what went well, what didn’t go so well and what should be done differently for the next project.

This produces a valuable set of documentation that becomes a record of “do and don’t” going forward,
enabling the organization to learn from failures and success. Without this learning, teams will often keep
making the same mistakes, time and time again. These retrospectives are great documents to use at a
project kickoff meeting to remind the team about failures such as underestimating projects, and
successes such as the benefits of a solid process or the importance of keeping time sheet reporting up to
date!

Project Identification
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Project Identification

Project identification is the first step of any project cycle. Entrepreneurs need to identify and zero
in on a project that suits their requirements and can help them attain their goals before spending
significant time and resources on a project. They also need to study in detail the feasibility of the
proposed project well before they start planning the other steps of the project cycle. Usually
various aspects are required to be studied before picking a project.
 The purpose of project identification is to develop a preliminary proposal for the most
appropriate set of interventions and course of action, within specific time and budget frames, to
address a specific development goal in a particular region or setting. Investment ideas can arise
from many sources and contexts. They can originate from a country’s sector plan, programme or
strategy, as follow-up of an existing project or from priorities identified in a multi-stakeholder
sector or local development dialogue. Identification involves:

(xxx) A review of alternative approaches or options for addressing a set of development problems and
opportunities;
(xxxi) The definition of project objectives and scope of work at the degree of detail necessary to justify
commitment of the resources for detailed formulation and respective preparatory studies; and
(xxxii) The identification of the major issues that must be tackled and the questions to be addressed before a
project based on the concept can be implemented.

Sufficient information on project options must be gathered to enable the government and
financing agencies to select a priority project and reach agreements among stakeholders on
arrangements for preparation work, including setting up steering committees or national
preparation teams. The results of identification work should be summarized in a report, project
brief or concept document, the format of which will depend upon the government’s and/or
financing agencies’ requirement.

Opportunities in the Environment for Project Identification

Meaningful indication for a successful project can be availed from the following one or more
sources for project identification

(a) Five Year Plans

For project identification, the Five Year Plans are indicative enough to reflect the government’s
intention, including the policy emphasis on the sectors and—within the sector—particular type
of industries.

(b) Imports and Exports

The industry-wise, and also product-wise, detailed statistics of imports and exports are regularly
published by the government. These information indicates the possible venture area—What are
the products, and the volume of such products as exported to which countries? And similar
information of imports as well.

We can get enough idea from these statistics about the possible export industry or project to
produce goods for import substitution.
(c) Financial Corporation and Industrial Development Corporation at State level sponsor project
feasibility reports with the help of reliable and established consultants for promotion of
industries in the State. Such reports can be a very helpful guide to generate ideas for the start of a
project.

(d) Departments of SSI and ARI, as mentioned earlier, prepared about 200 project profiles to
help and guide small industries for investment up to Rs. 5 crores in a project. These projects are
industry-group-wise, and even provide source information of the required plant and machineries
with costs updated in 1994.

(e) Council of Scientific and Industrial Research (CSIR)

With their network of laboratories has developed new processes and technologies along with
their commercial applications. These know-how are available at less cost and without any
foreign exchange involved and can be useful in considering a suitable project.

The selection of the process/product know-how can be made in conjunction with information
available from other sources. For example, the CSIR, Jorhat, has the technical know-how for the
manufacture of ‘micro-crystalline wax’.

It also appears from the import statistics that this product is regularly imported by many
organizations. Such information and the available know-how can give ideas of developing a
project for the manufacture of this product provided the availability of the basic raw material—
i.e. ‘crude oil-tank-bottom- scrappings’—is ensured.

(f) Analysis of industrial information such as capacity installed, actual productions, market sizes
with its growth can be a source of information to indicate opportunities.

(g) Trade Fairs and Industrial Exhibitions including both national and international exhibits,
many new products and processes can be a source of information and ideas for a project.

(h) Economic and social trend and the various statistics available in this regard can be analysed
to find some opportunities. The band of affluent middle class population with the changes in
their pattern of living will indicates the growth of demand for specific range of consumer
durables including domestic appliances—big and small.

(i) BIFR can provide a list of endless sick units which are chained by enormous accumulated
loss. With careful analysis, a large number of such units may be profitably revived by skilled
management and infusion of necessary fund. We have noted earlier that in such cases financial
helps can be availed from IIBI and banks as well.
 Project Selection
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Project Selection is a process to assess each project idea and select the project with the highest
priority.

Projects are still just suggestions at this stage, so the selection is often made based on only brief
descriptions of the project. As some projects will only be ideas, you may need to write a brief
description of each project before conducting the selection process.

Selection of projects is based on

(i) Benefits: A measure of the positive outcomes of the project. These are often described as “the
reasons why you are undertaking the project”. The types of benefits of eradication projects
include:

 Biodiversity
 Economic
 Social and cultural
 Fulfilling commitments made as part of national, regional or international plans and
agreements.

(ii) Feasibility: A measure of the likelihood of the project being a success, i.e. achieving its
objectives. Projects vary greatly in complexity and risk. By considering feasibility when
selecting projects it means the easiest projects with the greatest benefits are given priority.
Why Do Project Selection?

Often you will have a number of suggested projects but not enough resources, money or time to
undertake all of the projects. The ideas for eradication projects may have come from many
sources including: the community, funders, local and national governments and Non-
Governmental Organizations (NGOs). You will therefore need a way of deciding on a priority
order and choosing a project.

If your organization has limited experience in conducting eradications then it is recommended to

concentrate on a small number of projects, ideally one project at a time, until the people in your
organization have developed the skills and experience. Grow capacity and build up to
 undertaking multiple projects at any one time. Do the easy projects first. Work towards the most
difficult and rewarding projects. Use the easy projects to help answer questions/solve issues for
the more difficult projects. Use the best opportunities to learn.

You may have a mix of straight forward and difficult eradication projects and do not know where
to start. The Project Selection Stage will assist you by providing a process to compare the
importance of the projects and select the most suitable project to undertake.

By following the Project Selection Stage you will follow a step by step objective method for
prioritizing projects – this can be used to explain to stakeholders the reasoning behind why you
selected a particular project.

The benefits of completing the Project Selection are-

 A transparent and documented record of why a particular project was selected

 A priority order for projects, that takes into account their importance and how achievable the
project is

Who Should Be Involved?

 Agency Management: Set selection criteria to ensure the selection process aligns with agency
strategies. Selection processes are often run as a management initiative before the implementing
Project Manager is assigned.
 Stakeholders: Stakeholder participation at the start of a project creates strong community
ownership and support, and increases the chances of a successful outcome. Stakeholder input should be
included at the ideas stage; consult widely as you are developing the ideas for projects as the
community will be the source of many of the best project ideas. Stakeholders must be informed of the
outcome of the Project Selection Stage.
 Project Manager: Involving the Project Manager in the Project Selection process will help build
ownership in the project and support a successful project in the long run.

Process of Project Selection

(i) Identification of Projects

The first step of this process, identification, requires a clearly defined and communicated
strategy. The best option would be to set up a strategy development process that contains project
identification and project selection as an integral part (cf. “How to Find the Right Projects” in
sub-section White Papers). In fact, we observe that most organizations identify investment
projects within their strategy development process, but delegate the identification of customer
projects to their key account and sales departments.

(ii) Evaluation and Prioritization of Projects

 Central part of the project selection process is evaluation and prioritization of identified projects.
There are a couple of methods available:

 Net Present Value (NPV)

 Internal Rate of Return (IRR)
 Benefit / Cost Ratio (BCR)
 Opportunity Cost (OC)
 Payback Period (PP)
 Initial Risk Assessment

These methods require a certain minimum level of “planning” for each one of the projects to be
evaluated. We need to know

 Project life cycle duration, in number of accounting periods,

 Expected project cost per accounting period,
 Expected project revenue per accounting period,
 Overall risk values of the projects to be evaluated.

(iii) Selection and Initiation of Projects

Project selection and initiation is the step that naturally follows evaluation and prioritization. A
particularly delicate step of project initiation turns out to be the staffing of project teams. As
mentioned earlier, resources are scarce, and in most organizations appear to be the most limiting
factor in project selection. If we take in too many projects we overload our resources, if we do
not take in enough we do not utilize them economically enough. As discussed in the sub-section
Multi Project Management, having too many staff members working in multi-tasking mode, i.e.
on two or more projects at the same time, decreases overall productivity of the organization. On
a medium / long term scale, it seems to be the better option to initiate projects in a way so that
the teams can focus and work on one project at a time, thus, avoiding disturbances of one project
by the others. Of course, that needs clear prioritization of the selected projects, based on
evaluation done in the previous step.

(iv) Review of Projects

After project selection we need to regularly review projects that are under way in order to find
out if they are still in-line with our strategy. Thus, the first way of checking them is repeating the
initial evaluation with more accurate estimates as they become available; the second way is
holding regular project management review meetings in order to identify major problems on a
per-project basis, via project status reports.

Project Rating Index

The  Project Definition Rating Index (PDRI) is a methodology used by capital projects to
measure the degree of scope definition, identify gaps, and take appropriate actions to reduce
risk during front end planning.  PDRI is used at multiple stages in the front end planning process. 
 As a project progresses, identified gaps will continue to be addressed until a sufficient level of
definition (measured using the PDRI score) is achieved for the project to successfully proceed to
detailed design and construction.
Poor scope definition is recognized as one of the leading causes of project failure, resulting in
cost and schedule overruns, and long term operational issues. As a result, front end planning is
one of the most important process in the construction and operation of a capital asset. The PDRI
methodology is proven to reduce risk in capital project delivery by promoting rigorous scope
definition and a collaborative review process during front end planning. Using the PDRI
methodology will help your project teams improve scope definition, become better aligned, and
provide transparency on identified gaps. This helps to equip all project stakeholders to better
mitigate risks identified in PDRI reviews, predict potential issues, and overcome costly problems
down the road.
PDRI Structure
The PDRI methodology supports a comprehensive assessment of scope definition. Templates are
organized in three sections for systematic assessment of the:

(xxxiii) Basis of project decision – the business objectives and drivers

(xxxiv) Basis of design – processes and technical information required
(xxxv) Execution approach – for executing the project construction and closeout

Each section is broken down into categories and elements. The element is the lowest level of
the index where the assessment of scope definition is conducted.
There are three industry-validated PDRI templates that are each focused on a specific industry
sector.
(i) Industrial Projects
The Industrial template is targeted for projects that provide an output in terms of assemblies,
sub-assemblies, chemical compounds, electricity, food or other marketable goods. Examples
include power plants, chemical plants, oil & gas production, refineries, water and waste
treatment, and manufacturing facilities.
(ii) Building Projects
The Building template is designed for commercial building projects. Examples including offices,
schools, medical facilities, institutional buildings, warehouses, parking structures and research
facilities.
(iii) Infrastructure Projects
The Infrastructure template is targeted for projects that involve linear construction with
extensive public interface and environmental impact considerations. Examples include railways,
highways, pipelines, transmission and distribution and canals.

Market and Demand Analysis Techniques

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Companies use market demand analysis to understand how much consumer demand exists for a
product or service. This analysis helps management determine if they can successfully enter a
market and generate enough profits to advance their business operations. While several
 methods of demand analysis may be used, they usually contain a review of the basic
components of an economic market.
Market Identification
The first step of market analysis is to define and identify the specific market to target with new
products or services. Companies will use market surveys or consumer feedback to determine
their satisfaction with current products and services. Comments indicating dissatisfaction will
lead businesses to develop new products or services to meet this consumer demand. While
companies will usually identify markets close to their current product line, new industries may
be tested for business expansion possibilities.
Business Cycle
Once a potential market is identified, companies will assess what stage of the business cycle the
market is in. Three stages exist in the business cycle: emerging, plateau and declining. Markets
in the emerging stage indicate higher consumer demand and low supply of current products or
services. The plateau stage is the break-even level of the market, where the supply of goods
meets current market demand. Declining stages indicate lagging consumer demand for the
goods or services supplied by businesses.
Product Niche
Once markets and business cycles are reviewed, companies will develop a product that meets a
specific niche in the market. Products must be differentiated from others in the market so they
meet a specific need of consumer demand, creating higher demand for their product or service.
Many companies will conduct tests in sample markets to determine which of their potential
product styles is most preferred by consumers. Companies will also develop their goods so that
competitors cannot easily duplicate their product.
Growth Potential
While every market has an initial level of consumer demand, specialized products or goods can
create a sense of usefulness, which will increase demand. Examples of specialized products are
iPods or iPhones, which entered the personal electronics market and increased demand through
their perceived usefulness by consumers. This type of demand quickly increases the demand for
current markets, allowing companies to increase profits through new consumer demand.
Competition
An important factor of market analysis is determining the number of competitors and their
current market share. Markets in the emerging stage of the business cycle tend to have fewer
competitors, meaning a higher profit margin may be earned by companies. Once a market
becomes saturated with competing companies and products, fewer profits are achieved and
companies will begin to lose money. As markets enter the declining business cycle, companies
will conduct a new market analysis to find more profitable markets.

Survey Method
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Survey method is one of the most common and direct methods of forecasting demand in the
short term. This method encompasses the future purchase plans of consumers and their
intentions. In this method, an organization conducts surveys with consumers to determine the
demand for their existing products and services and anticipate the future demand accordingly.
(xxxvi) Experts’ Opinion Poll

Refers to a method in which experts are requested to provide their opinion about the product.
Generally, in an organization, sales representatives act as experts who can assess the demand
for the product in different areas, regions, or cities.
Sales representatives are in close touch with consumers; therefore, they are well aware of the
consumers’ future purchase plans, their reactions to market change, and their perceptions for
other competing products. They provide an approximate estimate of the demand for the
organization’s products. This method is quite simple and less expensive.
However, it has its own limitations, which are discussed as follows:
(a) Provides estimates that are dependent on the market skills of experts and their experience.
These skills differ from individual to individual. In this way, making exact demand forecasts
becomes difficult.
(b) Involves subjective judgment of the assessor, which may lead to over or under-estimation.
(c) Depends on data provided by sales representatives who may have inadequate information
about the market.
(d) Ignores factors, such as change in Gross National Product, availability of credit, and future
prospects of the industry, which may prove helpful in demand forecasting.

18 Delphi Method

Refers to a group decision-making technique of forecasting demand. In this method, questions

are individually asked from a group of experts to obtain their opinions on demand for products
in future. These questions are repeatedly asked until a consensus is obtained.
In addition, in this method, each expert is provided information regarding the estimates made
by other experts in the group, so that he/she can revise his/her estimates with respect to
others’ estimates. In this way, the forecasts are cross checked among experts to reach more
accurate decision making.
Ever expert is allowed to react or provide suggestions on others’ estimates. However, the names
of experts are kept anonymous while exchanging estimates among experts to facilitate fair
judgment and reduce halo effect.
The main advantage of this method is that it is time and cost effective as a number of experts
are approached in a short time without spending on other resources. However, this method may
lead to subjective decision making.

(x) Market Experiment Method

 Involves collecting necessary information regarding the current and future demand for a
product. This method carries out the studies and experiments on consumer behavior under
actual market conditions. In this method, some areas of markets are selected with similar
features, such as population, income levels, cultural background, and tastes of consumers.
The market experiments are carried out with the help of changing prices and expenditure, so
that the resultant changes in the demand are recorded. These results help in forecasting future
demand.
There are various limitations of this method, which are as follows:
(a) Refers to an expensive method; therefore, it may not be affordable by small-scale
organizations
(b) Affects the results of experiments due to various social-economic conditions, such as strikes,
political instability, natural calamities

Trend Projection Method

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The Trend Projection Method is the most classical method of business forecasting, which is
concerned with the movement of variables through time. This method requires a long time-
series data.
The trend projection method is based on the assumption that the factors liable for the past
trends in the variables to be projected shall continue to play their role in the future in the same
manner and to the same extent as they did in the past while determining the variable’s
magnitude and direction.
In predicting demand for a product, the trend projection method is applied to the long time-
series data. A long-standing firm can obtain such data from its departments (such as sales) and
the books of accounts. While the new firms can obtain data from the old firms operating in the
same industry. The trend projection method includes three techniques based on the time-series
data. These are:
(xxxvii) Graphical Method

It is the most simple statistical method in which the annual sales data are plotted on a graph,
and a line is drawn through these plotted points. A free hand line is drawn in such a way that the
distance between points and the line is the minimum. Under this method, it is assumed that
future sales will assume the same trend as followed by the past sales records. Although the
graphical method is simple and inexpensive, it is not considered to be reliable. This is because
the extension of the trend line may involve subjectivity and personal bias of the researcher.

19 Fitting Trend Equation or Least Square Method

The least square method is a formal technique in which the trend-line is fitted in the time-series
using the statistical data to determine the trend of demand. The form of trend equation that can
be fitted to the time-series data can be determined either by plotting the sales data or trying
different forms of the equation that best fits the data. Once the data is plotted, it shows several
trends. The most common types of trend equations are:
(i) Linear Trend: when the time-series data reveals a rising or a linear trend in sales, the
following straight line equation is fitted:
S = a + bT
Where S = annual sales; T = time (years); a and b are constants.
(ii) Exponential Trend: The exponential trend is used when the data reveal that the total sales
have increased over the past years either at an increasing rate or at a constant rate per unit
time.

(xi) Box Jenkins Method

Box-Jenkins method is yet another forecasting method used for short-term predictions and
projections. This method is often used with stationary time-series sales data. A stationary time-
series data is the one which does not reveal a long term trend. In other words, Box-Jenkins
method is used when the time-series data reveal monthly or seasonal variations that reappear
with some degree of regularity.
Thus, these are the commonly used trend-projection methods that tell about the trend of
demand for a product and are based on a long and reliable time-series data.

THEINTACTONE

Project Risk Management: Introduction

THEINTACTFRONT12 MAR 20193 COMMENTS

Risk is inevitable in a business organization when undertaking projects. However, the

project manager needs to ensure that risks are kept to a minimal. Risks can be mainly
divided between two types, negative impact risk and positive impact risk.
 Not all the time would project managers be facing negative impact risks as there are
positive impact risks too. Once the risk has been identified, project managers need to
come up with a mitigation plan or any other solution to counter attack the risk.

Project Risk Management

Managers can plan their strategy based on four steps of risk management which
prevails in an organization. Following are the steps to manage risks effectively in an
organization:

20 Risk Identification
21 Risk Quantification
22 Risk Response
23 Risk Monitoring and Control

Step 1: Risk Identification

Managers face many difficulties when it comes to identifying and naming the risks that
occur when undertaking projects. These risks could be resolved through structured or
unstructured brainstorming or strategies. It’s important to understand that risks
pertaining to the project can only be handled by the project manager and other
stakeholders of the project.

Risks, such as operational or business risks will be handled by the relevant teams. The
risks that often impact a project are supplier risk, resource risk and budget risk. Supplier
risk would refer to risks that can occur in case the supplier is not meeting the timeline to
supply the resources required.

Resource risk occurs when the human resource used in the project is not enough or not
skilled enough. Budget risk would refer to risks that can occur if the costs are more than
what was budgeted.

Step 2: Risk Quantification

Risks can be evaluated based on quantity. Project managers need to analyze the likely
chances of a risk occurring with the help of a matrix.
 Using the matrix, the project manager can categorize the risk into four categories as
Low, Medium, High and Critical. The probability of occurrence and the impact on the
project are the two parameters used for placing the risk in the matrix categories. As an
example, if a risk occurrence is low (probability = 2) and it has the highest impact
(impact = 4), the risk can be categorized as ‘High’.

Step 3: Risk Response

When it comes to risk management, it depends on the project manager to choose

strategies that will reduce the risk to minimal. Project managers can choose between
the four risk response strategies, which are outlined below.

(xii) Risks can be avoided

(xiii) Pass on the risk
(xiv) Take corrective measures to reduce the impact of risks
(xv) Acknowledge the risk

Step 4: Risk Monitoring and Control

Risks can be monitored on a continuous basis to check if any change is made. New
risks can be identified through the constant monitoring and assessing mechanisms.

Risk Management Process

Following are the considerations when it comes to risk management process:

 Each person involved in the process of planning needs to identify and understand the risks
pertaining to the project.
 Once the team members have given their list of risks, the risks should be consolidated to a
single list in order to remove the duplications.
 Assessing the probability and impact of the risks involved with the help of a matrix.
 Split the team into subgroups where each group will identify the triggers that lead to project
risks.
  The teams need to come up with a contingency plan whereby to strategically eliminate the
risks involved or identified.
 Plan the risk management process. Each person involved in the project is assigned a risk in
which he/she looks out for any triggers and then finds a suitable solution for it.

Project Risk; an Opportunity or a Threat?

As mentioned above, risks contain two sides. It can be either viewed as a negative
element or a positive element. Negative risks can be detrimental factors that can
haphazard situations for a project.

Therefore, these should be curbed once identified. On the other hand, positive risks can
bring about acknowledgements from both the customer and the management. All the
risks need to be addressed by the project manager.

An organization will not be able to fully eliminate or eradicate risks. Every project
engagement will have its own set of risks to be dealt with. A certain degree of risk will
be involved when undertaking a project.

The risk management process should not be compromised at any point, if ignored can
lead to detrimental effects. The entire management team of the organization should be
aware of the project risk management methodologies and techniques.

Enhanced education and frequent risk assessments are the best way to minimize the
damage from risks.

Types of Project Risk

AKTUTHEINTACTONE10 JAN 20201 COMMENT

Complex projects are always fraught with a variety of risks ranging from scope risk to cost
overruns. One of the main duties of a project manager is to manage these risks and prevent
them from ruining the project. In this post, I will cover the major risks involved in a typical
project.

(xxxviii) Scope Risk

This risk includes changes in scope caused by the following factors:

 24 Scope creep the project grows in complexity as clients add to the requirements and developers start
gold plating.
25 Integration issues
26 Hardware & Software defects
27 Change in dependencies

(xvi) Scheduling Risk

There are a number of reasons why the project might not proceed in the way you scheduled.
These include unexpected delays at an external vendor, natural factors, errors in estimation and
delays in acquisition of parts. For instance, the test team cannot begin the work until the
developers finish their milestone deliverables and a delay in those can cause cascading delays.
To reduce scheduling risks use tools such as a Work Breakdown Structure (WBS) and RACI matrix
(Responsibilities, Accountabilities, Consulting and Information) and Gantt charts to help you in
scheduling.

 Resource Risk

This risk mainly arises from outsourcing and personnel related issues. A big project might involve
dozens or even hundreds of employees and it is essential to manage the attrition issues and
leaving of key personnel. Bringing in a new worker at a later stage in the project can significantly
slow down the project.
Apart from attrition, there is a skill related risk too. For instance, if the project requires a lot of
website front end work and your team doesn’t have a designer skilled in HTML/CSS, you could
face unexpected delays there.
Another source of the risk includes lack of availability of funds. This could happen if you are
relying on an external source of funding (such as a client who pays per milestone) and the client
suddenly faces a cash crunch.

 Technology Risk

This risk includes delays arising out of software & hardware defects or the failure of an
underlying service or a platform. For instance, halfway through the project you might realize the
cloud service provider you are using doesn’t satisfy your performance benchmarks. Apart from
this, there could be issues in the platform used to build your software or a software update of a
critical tool that no longer supports some of your functions.

THEINTACTONE

Risk Identification
THEINTACTFRONT13 MAR 20193 COMMENTS
Risk identification is the first step in risk management. We need to identify both project
and product risk by using certain techniques. Some of the most common techniques
which can be applied to identify different risks are using risk templates, interviewing the
stakeholders, project retrospectives etc.

You should try to include as many stakeholders as you can to identify different risk
because the broadest range of stakeholders will provide the maximum risk items
associated to the product.

Several formal techniques like Failure Mode and Effect Analysis (FMEA) and Failure
Mode Effect and Criticality Analysis (FMECA) are used to find the risk. These techniques
identify the effects of the risk if in case that becomes an outcome. The effects can be
on people, society, users, customers etc.

The Importance of Identifying Risks

Once a risk is managed, the mitigation and contingency steps become just one more
task on a project manager’s to-do list–or better yet, someone else’s list. Before you can
manage risks, though, you need to identify them so that they can be analyzed,
discussed and mitigated.

The ability to identify risks should involve the entire project team, but normally the
project manager will lead the effort and get the ball rolling. There are many different
ways to identify risks that will pertain to the project, and the project manager should
work through as many of them as are relevant to the project–and realistic for the
project team.

Old Projects: The first step in identifying risks is to look at projects that are already
completed. If a project is similar in nature to the present one, then you can review the
documentation and the information that was captured about those projects. The risks
that were identified for that project can be reviewed to determine if they could also be
risks for the current project.

In addition, the issues that occurred will be a great resource for identifying risks that
might occur in the present project. You need to identify those issues as risks before
they occur and determine how to best mitigate them so that they do not turn into
issues. Mitigating these types of risks can provide a great boost to the project from the
very beginning; it will not fall into the same problems that have plagued other projects.
At the same time, these sessions should not devolve into predicting every possible dire
outcome. After all, the project team is not going to mitigate the risk that an asteroid
could strike Earth and wipe out life as we know it. Instead, the project manager should
lead the brainstorming effort and concentrate on letting everyone speak to the realistic
and manageable risks that the project will face.

Careful Listening: One other tactic to identify risks is to practice careful listening. As a

project begins in the planning and designing phases, the project manager should be in
meetings and listening carefully to what is going on. By being involved in these
meetings, the PM can begin to formulate ideas for risks that need to be mitigated and
managed by the project team. If you hear people talk about tasks they are worried about
or scope that is not understood well, that is a clue to sit up, pay attention and start
writing down risks related to the issues they are talking about. Being able to do this
means that you are listening and paying attention to what is going on with the project
team.

Templates: In addition to looking through data and information from previous projects,
it can be helpful to look at templates. There are many resources available about
implementing projects and common risks that occur in projects based on the industry
or type of project. The project manager should do the research and make use of
anything that may be available. These resources can be found online or in the library or
even through your network of project management peers. Whenever you have an
available resource to get risks identified for the project, you should make use of it.

Staying Ahead of the Curve: All of these ways of identifying risks are how you can stay
ahead of the curve when it comes to managing the project. Most of your time and
energy will be spent on creating a schedule and managing work according to that
schedule. But risks are a vital part of the project, and they should not be worked on in
whatever time is left after everything else is done. Identifying them early in the project
and working on them continually–and as often as possible–is a way to stay on top of
the risks and potential issues that will affect the project. Identifying risks helps everyone
on the project.

Brainstorming: The entire project team should be involved in brainstorming for risks.

Key stakeholders can also be polled for the risks that they anticipate on the project.
These brainstorming sessions should be open discussions and not limited by any
preconceived notions or small lists of risks that the project manager wants to work on.
A good brainstorming session involves letting everyone have their say and hearing out
the thoughts of the entire project team.
 Risk Analysis
THEINTACTFRONT13 MAR 20193 COMMENTS

Risk analysis is the process of identifying and analyzing potential issues that could negatively
impact key business initiatives or critical projects in order to help organizations avoid or mitigate
those risks.

Benefits of Risk Analysis

Organizations must understand the risks associated with the use of their information systems to
effectively and efficiently protect their information assets.
Risk analysis can help an organization improve its security in a number of ways. Depending on
the type and extent of the risk analysis, organizations can use the results to help:

(xxxix) Identify, rate and compare the overall impact of risks to the organization, in terms of both financial and
organizational impacts;
(xl) Identify gaps in security and determine the next steps to eliminate the weaknesses and strengthen
security;
(xli) Enhance communication and decision-making processes as they relate to information security;
(xlii) Improve security policies and procedures and develop cost-effective methods for implementing these
information security policies and procedures;
(xliii) Put security controls in place to mitigate the most important risks;
(xliv) Increase employee awareness about security measures and risks by highlighting best practices during
the risk analysis process; and
(xlv) Understand the financial impacts of potential security risks.

Steps in Risk Analysis Process

The risk analysis process usually follows these basic steps:

(i) Conduct a risk assessment survey: This first step, getting input from management and
department heads, is critical to the risk assessment process. The risk assessment survey is a way
to begin documenting specific risks or threats within each department.
(ii) Identify the risks: The reason for performing risk assessment is to evaluate an IT system or
other aspect of the organization and then ask: What are the risks to the software, hardware,
data and IT employees? What are the possible adverse events that could occur, such as human
error, fire, flooding or earthquakes? What is the potential that the integrity of the system will be
compromised or that it won’t be available?
(iii) Analyze the risks: Once the risks are identified, the risk analysis process should determine
the likelihood that each risk will occur, as well as the consequences linked to each risk and how
they might affect the objectives of a project.
 (iv) Develop a risk management plan: Based on an analysis of which assets are valuable and
which threats will probably affect those assets negatively, the risk analysis should produce
control recommendations that can be used to mitigate, transfer, accept or avoid the risk.
(v) Implement the risk management plan: The ultimate goal of risk assessment is to implement
measures to remove or reduce the risks. Starting with the highest-priority risk, resolve or at least
mitigate each risk so it’s no longer a threat.
(vi) Monitor the risks: The ongoing process of identifying, treating and managing risks should be
an important part of any risk analysis process.

Risk Analysis
THEINTACTFRONT13 MAR 20193 COMMENTS

Risk analysis is the process of identifying and analyzing potential issues that could negatively
impact key business initiatives or critical projects in order to help organizations avoid or mitigate
those risks.

Benefits of Risk Analysis

Organizations must understand the risks associated with the use of their information systems to
effectively and efficiently protect their information assets.
Risk analysis can help an organization improve its security in a number of ways. Depending on
the type and extent of the risk analysis, organizations can use the results to help:

(xlvi) Identify, rate and compare the overall impact of risks to the organization, in terms of both financial and
organizational impacts;
(xlvii) Identify gaps in security and determine the next steps to eliminate the weaknesses and strengthen
security;
(xlviii) Enhance communication and decision-making processes as they relate to information security;
(xlix) Improve security policies and procedures and develop cost-effective methods for implementing these
information security policies and procedures;
(l) Put security controls in place to mitigate the most important risks;
(li) Increase employee awareness about security measures and risks by highlighting best practices during
the risk analysis process; and
(lii) Understand the financial impacts of potential security risks.

Steps in Risk Analysis Process

The risk analysis process usually follows these basic steps:

(i) Conduct a risk assessment survey: This first step, getting input from management and
department heads, is critical to the risk assessment process. The risk assessment survey is a way
to begin documenting specific risks or threats within each department.
(ii) Identify the risks: The reason for performing risk assessment is to evaluate an IT system or
other aspect of the organization and then ask: What are the risks to the software, hardware,
 data and IT employees? What are the possible adverse events that could occur, such as human
error, fire, flooding or earthquakes? What is the potential that the integrity of the system will be
compromised or that it won’t be available?
(iii) Analyze the risks: Once the risks are identified, the risk analysis process should determine
the likelihood that each risk will occur, as well as the consequences linked to each risk and how
they might affect the objectives of a project.
(iv) Develop a risk management plan: Based on an analysis of which assets are valuable and
which threats will probably affect those assets negatively, the risk analysis should produce
control recommendations that can be used to mitigate, transfer, accept or avoid the risk.
(v) Implement the risk management plan: The ultimate goal of risk assessment is to implement
measures to remove or reduce the risks. Starting with the highest-priority risk, resolve or at least
mitigate each risk so it’s no longer a threat.
(vi) Monitor the risks: The ongoing process of identifying, treating and managing risks should be
an important part of any risk analysis process.

Risk Identification
THEINTACTFRONT13 MAR 20193 COMMENTS

Risk identification is the first step in risk management. We need to identify both project and
product risk by using certain techniques. Some of the most common techniques which can be
applied to identify different risks are using risk templates, interviewing the stakeholders, project
retrospectives etc.
You should try to include as many stakeholders as you can to identify different risk because the
broadest range of stakeholders will provide the maximum risk items associated to the product.
Several formal techniques like Failure Mode and Effect Analysis (FMEA) and Failure Mode Effect
and Criticality Analysis (FMECA) are used to find the risk. These techniques identify the effects of
the risk if in case that becomes an outcome. The effects can be on people, society, users,
customers etc.

The Importance of Identifying Risks

Once a risk is managed, the mitigation and contingency steps become just one more task on a
project manager’s to-do list–or better yet, someone else’s list. Before you can manage risks,
though, you need to identify them so that they can be analyzed, discussed and mitigated.
The ability to identify risks should involve the entire project team, but normally the project
manager will lead the effort and get the ball rolling. There are many different ways to identify
risks that will pertain to the project, and the project manager should work through as many of
them as are relevant to the project–and realistic for the project team.
Old Projects: The first step in identifying risks is to look at projects that are already completed.
If a project is similar in nature to the present one, then you can review the documentation and
the information that was captured about those projects. The risks that were identified for that
project can be reviewed to determine if they could also be risks for the current project.
 In addition, the issues that occurred will be a great resource for identifying risks that might
occur in the present project. You need to identify those issues as risks before they occur and
determine how to best mitigate them so that they do not turn into issues. Mitigating these types
of risks can provide a great boost to the project from the very beginning; it will not fall into the
same problems that have plagued other projects.
At the same time, these sessions should not devolve into predicting every possible dire
outcome. After all, the project team is not going to mitigate the risk that an asteroid could strike
Earth and wipe out life as we know it. Instead, the project manager should lead the
brainstorming effort and concentrate on letting everyone speak to the realistic and manageable
risks that the project will face.
Careful Listening: One other tactic to identify risks is to practice careful listening. As a project
begins in the planning and designing phases, the project manager should be in meetings and
listening carefully to what is going on. By being involved in these meetings, the PM can begin to
formulate ideas for risks that need to be mitigated and managed by the project team. If you
hear people talk about tasks they are worried about or scope that is not understood well, that is
a clue to sit up, pay attention and start writing down risks related to the issues they are talking
about. Being able to do this means that you are listening and paying attention to what is going
on with the project team.
Templates: In addition to looking through data and information from previous projects, it can be
helpful to look at templates. There are many resources available about implementing projects
and common risks that occur in projects based on the industry or type of project. The project
manager should do the research and make use of anything that may be available. These
resources can be found online or in the library or even through your network of project
management peers. Whenever you have an available resource to get risks identified for the
project, you should make use of it.
Staying Ahead of the Curve: All of these ways of identifying risks are how you can stay ahead of
the curve when it comes to managing the project. Most of your time and energy will be spent on
creating a schedule and managing work according to that schedule. But risks are a vital part of
the project, and they should not be worked on in whatever time is left after everything else is
done. Identifying them early in the project and working on them continually–and as often as
possible–is a way to stay on top of the risks and potential issues that will affect the project.
Identifying risks helps everyone on the project.
Brainstorming: The entire project team should be involved in brainstorming for risks. Key
stakeholders can also be polled for the risks that they anticipate on the project. These
brainstorming sessions should be open discussions and not limited by any preconceived notions
or small lists of risks that the project manager wants to work on. A good brainstorming session
involves letting everyone have their say and hearing out the thoughts of the entire project team.

Risk Analysis
THEINTACTFRONT13 MAR 20193 COMMENTS
 Risk analysis is the process of identifying and analyzing potential issues that could negatively
impact key business initiatives or critical projects in order to help organizations avoid or mitigate
those risks.

Benefits of Risk Analysis

Organizations must understand the risks associated with the use of their information systems to
effectively and efficiently protect their information assets.
Risk analysis can help an organization improve its security in a number of ways. Depending on
the type and extent of the risk analysis, organizations can use the results to help:

(liii) Identify, rate and compare the overall impact of risks to the organization, in terms of both financial and
organizational impacts;
(liv) Identify gaps in security and determine the next steps to eliminate the weaknesses and strengthen
security;
(lv) Enhance communication and decision-making processes as they relate to information security;
(lvi) Improve security policies and procedures and develop cost-effective methods for implementing these
information security policies and procedures;
(lvii) Put security controls in place to mitigate the most important risks;
(lviii) Increase employee awareness about security measures and risks by highlighting best practices during
the risk analysis process; and
(lix) Understand the financial impacts of potential security risks.

Steps in Risk Analysis Process

The risk analysis process usually follows these basic steps:

(i) Conduct a risk assessment survey: This first step, getting input from management and
department heads, is critical to the risk assessment process. The risk assessment survey is a way
to begin documenting specific risks or threats within each department.
(ii) Identify the risks: The reason for performing risk assessment is to evaluate an IT system or
other aspect of the organization and then ask: What are the risks to the software, hardware,
data and IT employees? What are the possible adverse events that could occur, such as human
error, fire, flooding or earthquakes? What is the potential that the integrity of the system will be
compromised or that it won’t be available?
(iii) Analyze the risks: Once the risks are identified, the risk analysis process should determine
the likelihood that each risk will occur, as well as the consequences linked to each risk and how
they might affect the objectives of a project.
(iv) Develop a risk management plan: Based on an analysis of which assets are valuable and
which threats will probably affect those assets negatively, the risk analysis should produce
control recommendations that can be used to mitigate, transfer, accept or avoid the risk.
(v) Implement the risk management plan: The ultimate goal of risk assessment is to implement
measures to remove or reduce the risks. Starting with the highest-priority risk, resolve or at least
mitigate each risk so it’s no longer a threat.
 (vi) Monitor the risks: The ongoing process of identifying, treating and managing risks should be
an important part of any risk analysis process.

Risk Mitigation Strategies

AKTUTHEINTACTONE10 JAN 20201 COMMENT

Risk Mitigation
All organizations face risks. These risks may be internal, such as inaccurate sales projections or
insufficient protection of valuable assets such as inventory. Risks may also be external, such as
the risk of a natural disaster or an economic crisis. Whatever the cause, managers of
organizations should be attentive to potential risks and how they can protect the organization
from these risks.
Protecting an organization from the impact of risk events by using different techniques is called
mitigating risks. Mitigation techniques aim to lower the potential impact of a risk and decrease
the likelihood of the risk event from occurring. There are four primary mitigation techniques
that may be used and together form the TARA framework: Transference, Avoidance,
Reduction/mitigation, and Acceptance.
Transference
Transference is a risk mitigation technique that involves transferring all, or some, of the risk to
another party. Take a minute and think if you can come up with an example of risk transference
in your personal life. When do you transfer or share risk with another person or company?
Did you identify insurance, such as automobile insurance or health insurance? Think about what
that insurance provides. In exchange for a fee, insurance companies will help you deal with the
impact of a risk, such as a car accident or injury. This is exactly what companies and
organizations can do with some of the risks they face. Through purchasing insurance,
organizations can share exposure to certain risks with an insurance company.
Avoidance
Sometimes, the management can decide that the potential impact of a certain risk is not worth
accepting. If the management does not want to deal with the risk, they can simply avoid it.
However, note that avoiding the risk is not always an option.
As an example of avoiding risk, imagine a large company that wants to expand their operations
into a volatile region of the world. While they may be able to lower costs or access a new
market, they know that operating in a volatile region may include risks to their business, their
employees, and their brand. After weighing the costs and benefits, if the company decides that
the risk is not worth the potential reward and therefore does not expand, they are avoiding the
risk. Avoidance occurs whenever something is not done because of the risk involved.
Reduce
This means to reduce the risk exposure probably by carrying out the activity in a different way.
For example, this strategy is suitable when the risk does not have significant impact but likely to
occur. This is to reduce the likelihood of occurrence by using different method to carry out the
activity. However if reduction cannot be done, company might have to accept the risk if it does
not have significant impact or avoid it if otherwise.
Accept
 This means to accept the risk and do nothing. For example, this strategy is suitable when the risk
has a low impact and low probability of occurrence. This is because the risk is not really a matter
even if it is realised.

Project Costing: Fundamental Components of Project

Cost
AKTUTHEINTACTONE10 JAN 20201 COMMENT

The project cost is a cost required to procure all the needed products, services and resources to
deliver the project successfully.
Example: In an example of a construction project, the cost estimation starts from land
acquisition cost, construction cost, materials cost, administration cost, labor cost and other
direct and indirect costs.

Cost management is concerned with the process of finding the right project and carrying out the
project the right way. It includes activities such as planning, estimating, budgeting, financing,
funding, managing, controlling, and benchmarking costs so that the project can be completed
within time and the approved budget and the project performance could be improved in time.
Step 1: Resource planning
Resource planning is the process of ascertaining future resource requirements for an
organization or a scope of work. This involves the evaluation and planning of the use of the
physical, human, financial, and informational resources required to complete work activities and
their tasks. Most activities involve using people to perform work. Some activities involve
materials and consumables. Other tasks involve creating an asset using mainly information
inputs (e.g., engineering or software design). Usually, people use tools such as equipment to
help them. In some cases, automated tools may perform the work with little or no human effort.
Resource planning begins in the scope and execution plan development process during which
the work breakdown structure, organizational breakdown structure (OBS), work packages, and
execution strategy are developed. The OBS establishes categories of labor resources or
responsibilities; this categorization facilitates resource planning because all resources are
someone’s responsibility as reflected in the OBS.
Resource estimating (usually a part of cost estimating) determines the activity’s resource
quantities needed (hours, tools, materials, etc.) while schedule planning and development
determines the work activities be performed. Resource planning then takes the estimated
resource quantities, evaluates resource availability and limitations considering project
circumstances, and then optimizes how the available resources (which are often limited) will be
used in the activities over time. The optimization is performed in an iterative manner using the
duration estimating and resource allocation steps of the schedule planning and development
process.

Step 2: Cost estimating

Cost estimating is the predictive process used to quantify, cost, and price the resources required
by the scope of an investment option, activity, or project. It involves the application of
techniques that convert quantified technical and programmatic information about an asset or
project into finance and resource information. The outputs of estimating are used primarily as
inputs for business planning, cost analysis, and decisions or for project cost and schedule control
processes.
The cost estimating process is generally applied during each phase of the asset or project life
cycle as the asset or project scope is defined, modified, and refined. As the level of scope
definition increases, the estimating methods used become more definitive and produce
estimates with increasingly narrow probabilistic cost distributions.
Cost estimating could be performed by dedicated software systems like Cleopatra Enterprise
cost estimating and project cost databases like CESK that are created and maintained to support
the various types of estimates that need to be prepared during the life cycle of the asset or
project.

Step 3: Cost budgeting

Budgeting is a sub-process within estimating used for allocating the estimated cost of resources
into cost accounts against which cost performance will be measured and assessed. This forms
the baseline for cost control. Cost accounts used from the chart of accounts must also support
the cost accounting process. Budgets are often time-phased in accordance with the schedule or
to address budget and cash flow constraints.
Step 4: Cost control
Cost control is concerned with measuring variances from the cost baseline and taking effective
corrective action to achieve minimum costs. Procedures are applied to monitor expenditures
and performance against the progress of a project. All changes to the cost baseline need to be
recorded and the expected final total costs are continuously forecasted. When actual cost
information becomes available an important part of cost control is to explain what is causing the
variance from the cost baseline. Based on this analysis corrective action might be required to
avoid cost overruns.
Below figure is a process map for project performance measurement. This process should be run
in a continuous improvement cycle until project completion:
 The process for performance assessment starts with planning and having the right tools in place.
Dedicated cost control software tools can be valuable to define cost control procedures, track
and approve changes and apply analysis. Furthermore, reporting can be enhanced and
simplified which makes it easier to inform all stakeholders involved in the project. 
Cleopatra Cost Control helps you achieve

(lx) Project cost control and always tracing back cost components to its original budget.
(lxi) Scope change management. Estimate costs and add it to your project controls document.
(lxii) Project completed? The feedback process will be in place. Send the actuals to your cost models to
increase their accuracy and quality for future estimating. Where most tools are limited to either being
cost estimating software or a cost control tool, Cleopatra Enterprise is both.
Bonus Step: Benchmarking
As a bonus step, it is wise to add Benchmarking to the project cost management process.
Benchmarking helps close the loop between project A and project B. The knowledge from
project A (referring to the running and executed projects) are analyzed and the feedback is
reflected in project B (the next projects). That’s how an improvement cycle is created to
increase project performance. Benchmarking is widely used by technical industries to improve
the performance of the projects. Software systems such as Cleopatra project benchmarking aid
estimators and project controllers in answering the complex question: How to use project big
data to execute projects within time and budget?
The goal of project benchmarking is to store data from executed and running projects to extract
valuable project metrics and to benchmark current estimates. Performing statistical analysis on
historical data can result in valuable information on relationships between variables, which can
be used to set up a reliable cost knowledgebase or calibrate existing ones.

It is important to note that project benchmarking does not only include the comparison
between projects, as it is also interesting to compare revisions within a project.
 What you can achieve with Cleopatra Benchmarking
 28 Collect historical project data that can provide valuable analysis and project comparison to make critical
business decisions.
29 Benchmark your estimates against your previous projects and improve your cost estimate significantly.
30 Extract metrics across projects to enhance future cost estimating accuracy.
31 Develop meaningful and interactive reports.
32 Export & Import data easily from Excel.

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Types of Cost
AKTUTHEINTACTONE10 JAN 20203 COMMENTS

33 Direct Cost

A direct cost is a price that can be directly tied to the production of specific goods or
services. A direct cost can be traced to the cost object, which can be a service, product,
or department. Direct and indirect costs are the two major types of expenses or costs
that companies can incur. Direct costs are often variable costs, meaning they fluctuate
with production levels such as inventory. However, some costs, such as indirect costs
are more difficult to assign to a specific product. Examples of indirect costs include
depreciation and administrative expenses.

Direct Costs Examples: Any cost that’s involved in producing a good, even if it’s only a
portion of the cost that’s allocated to the production facility, are included as direct
costs. Some examples of direct costs are listed below:

(xvii) Direct labor

(xviii) Direct materials
(xix) Manufacturing supplies
(xx) Wages for the production staff
(xxi) Fuel or power consumption

Because direct costs can be specifically traced to a product, direct costs do not need to
be allocated to a product, department, or other cost objects. Direct costs usually benefit
only one cost object. Items that are not direct costs are pooled and allocated based on
cost drivers.

 Indirect cost
 Indirect Costs are costs that are not directly accountable to a cost object (such as a
particular project, facility, function or product). Indirect costs may be either fixed or
variable. Indirect costs include administration, personnel and security costs. These are
those costs which are not directly related to production. Some indirect costs may be
overhead. But some overhead costs can be directly attributed to a project and are direct
costs.

There are two types of indirect costs. One are the fixed indirect costs which contains
activities or costs that are fixed for a particular project or company like transportation of
labor to the working site, building temporary roads, etc. The other are recurring indirect
costs which contains activities that repeat for a particular company like maintenance of
records or payment of salaries.

 Recurring Cost

A Recurring Cost is a regularly occurring cost or estimated cost which is documented

with one record—a Recurring Cost record—that describes the income or expense and its
pattern (how often it occurs, the rate at which it increases or decreases, the time period
during which the cost applies, and so forth). Recurring costs are stored in the Recurring
Costs table

Recurring Costs provide a means of quickly modeling the major components of your
finances. You first establish a series of recurring costs to represent such items as tax
expenses, estimated maintenance costs, and monthly income from leases. Once you
enter this information, you can use these costs to generate Cost, Cash Flow, and Base
Rent reports.

Recurring Cost Examples

Use recurring costs to:

 Record fixed expenses and income, or costs that change at a fixed rate – For costs that are
fairly static, enter one Recurring Cost record describing the cost, rather than create individual
Scheduled Cost records for each time you encounter this cost. For example, enter one Recurring
Cost record describing your monthly rent for a year rather than enter 12 Scheduled Cost records for
each rent bill. For costs that change at a fixed rate, complete the Yearly Factor field of the Recurring
Costs table.
 Record estimates of your expenses and income – Rather than enter the exact amount of
each monthly utility bill as a Scheduled Cost, enter a monthly estimate with a Recurring Cost record
by completing the Period field with “Month”, the Amount-Expense with an estimate of the monthly
bill, and the Start Date field. Since utilities are ongoing costs do not complete the End Date field.
  Model seasonal costs – If you incur landscaping costs only between April and September,
create a Recurring Cost record for landscaping with a Seasonal Start Date of April 01 and a Seasonal
End Date of September 01 (the year value is ignored). The system will only consider this recurring
cost during the specified time frame.

 Non- Recurring Cost

Unusual charge, expense, or loss that is unlikely to occur again in the normal course of a
business. Non recurring costs include write offs such as design, development, and
investment costs, and fire or theft losses, lawsuit payments, losses on sale of assets,
and moving expenses. Also called extraordinary cost.

 Fixed Cost

A fixed cost is a cost that does not change with an increase or decrease in the amount
of goods or services produced or sold. Fixed costs are expenses that have to be paid by
a company, independent of any specific business activities. In general, companies can
have two types of costs, fixed costs or variable costs, which together result in their total
costs. Shutdown points tend to be applied to reduce fixed costs.

 Variable Cost

A variable cost is a corporate expense that changes in proportion to production output.

Variable costs increase or decrease depending on a company’s production volume; they
rise as production increases and fall as production decreases. Examples of variable
costs include the costs of raw materials and packaging.

(ii) A variable cost is a corporate expense that changes in proportion with production output.
(iii) Variable costs are dependent on production output.
(iv) A variable cost can increase or decrease depending on several factors, as opposed to a fixed cost
which is one-time or constant.

The total expenses incurred by any business consist of fixed costs and variable costs.
Fixed costs are expenses that remain the same regardless of production output.
Whether a firm makes sales or not, it must pay its fixed costs, as these costs are
independent of output.

Examples of fixed costs are rent, employee salaries, insurance, and office supplies. A
company must still pay its rent for the space it occupies to run its business operations
irrespective of the volume of product manufactured and sold. Although fixed costs can
change over a period of time, the change will not be related to production.
 Variable costs, on the other hand, are dependent on production output. The variable
cost of production is a constant amount per unit produced. As the volume of production
and output increases, variable costs will also increase.

Conversely, when fewer products are produced, the variable costs associated with
production will consequently decrease. Examples of variable costs are sales
commissions, direct labor costs, cost of raw materials used in production, and utility
costs. The total variable cost is simply the quantity of output multiplied by the variable
cost per unit of output.

There is also a category of costs that falls in between, known as semi-variable costs
(also known as semi-fixed costs or mixed costs). These are costs composed of a
mixture of both fixed and variable components. Costs are fixed for a set level of
production or consumption and become variable after this production level is exceeded.
If no production occurs, a fixed cost is often still incurred.

(i) Normal Cost

Normal costing is cost allocation method that assigns costs to products based on the
materials, labor, and overhead used to produce them. In other words, it’s a way to find
the price of an item that is being produced using three different cost factors (which
make up the product cost).

The product costs that make up normal costing are actual materials, actual direct costs
and manufacturing overhead. The materials and direct costs are the true costs that are
associated with producing the item such as raw materials (the materials that make up
the product) and labor.

(i) Expedite Cost

“Expedite Fees” are fees added to another fee, often a fee for service, to ensure that the
service provided will be expedited, meaning that it will be provided sooner than the
same service would be provided without such a fee.

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MENU
Project Financing and Budgeting
AKTUTHEINTACTONE10 JAN 20201 COMMENT
 Developing the project budget is a process for allocating administered and
departmental funds necessary to build a financial foundation for producing stated
project deliverables. When we talk about the project budget and financial resources we
mean the solid framework that helps project managers to deal with the “on budget” part
of the project implementation process. This framework involves cost planning and
control.

For successful delivery of the project product, the project manager should effectively
estimate costs, track expenditure over time and adequately react to situations when the
financial resources are over-spent or under-spent, or there are opportunities for savings
in the project budget.

A Project Budget is the total amount of authorized financial resources allocated for the
particular purpose(s) of the sponsored project for a specific period of time. It is the
primary financial document that constitutes the necessary funds for implementing the
project and producing the deliverables. The project budget gives a detailed statement of
all the direct and overhead costs required to carry out the project goals and objectives.

A project budget template should be designed and managed under supervision and
control of the project manager. Also the customer and sponsor should be involved in
allocating and managing financial resources. Project budget management is a set of
activities for estimating the necessary amount of financial resources for the project,
controlling project costs within the approved budget and delivering the expected project
goals.

Steps of the Budgeting Process

As an independent process, project budget management includes a series of steps to

define and produce a budget sheet. The key steps include:

34 Development: estimating a necessary amount of financial resources and creating a project budget
sheet.
35 Use: utilizing the authorized financial resources and executing the budget.
36 Measurement: viewing cost performance and controlling the budget.
37 Updating: viewing changes to the cost baseline and making updates to the project budget sheet.

1: Budget Development

The first step of the project budget management process involves the project manager
in developing cost estimates and identifying the total amount of money resources
necessary for implementation of all the tasks and activities defined and stated in the
WBS and the Schedule.

Budget development should cover both capital and operating expenses to ensure
successful project completion. The project manager needs to define funding
requirements and then send a formal request to the sponsor who reviews the
requirements and make a package decision on providing the necessary money and
financial resources. The sponsor can use the initiation documents (like Feasibility Study,
Business Case and Project Charter) to make that decision.

Such estimation methods as expert judgement, cost baseline measurement and cost
aggregation can be used for developing a project budget sheet. The project manager in
cooperation with the key stakeholders can use a combination of the methods to
estimate a necessary amount of financial resources and develop a project budget
template.

2: Budget Use

The second step in project budget management is to allocate the identified financial
resources and start executing the budget. The project manager should control and keep
track of the budgeted resources in order to make sure that every scheduled task or
activity is performed with necessary funding and that there is no lack of money for the
implementation of the entire project.

The greatest way to track and control budget use is to develop an investment plan. This
formal document includes justifications and approvals for the acquisition of necessary
procurement items and services required in support of the project. An investment plan
describes the acquisition process with reference to the feasibility study (often in larger
projects a feasibility study template serves as a foundation for developing a project
investment plan).

The project manager needs to send an investment approval request form to the
stakeholders and wait for their approval/rejection. In case the plan is approved, the
manager uses it to control the budget execution. In case the document is rejected, the
project manager should receive stakeholder suggestions and make necessary
amendments to the plan template. Then the process may repeat until the plan is
approved.

3: Budget Measurement
The third step in managing the project budget refers to taking actions necessary for
providing appropriate cost performance. The manager needs to use work performance
data (like status of the deliverables, cost-schedule estimates), the funding requirements
request and the cost performance baseline to check the budget appropriateness.

By conducting variance analysis, performance reviews and forecasting, the project

manager can compare the current cost performance against the planned amount of
financed resources stated in the project budget template. In case of any gaps or
deviations it is necessary to make formal change requests and modify the budget
accordingly.

The project manager can develop corrective actions and send suggestions for approval
to the key stakeholders. The further budget control and measurement should be done
with the necessary evaluations and approvals.

4: Budget Updating

Once all the changes have been approved by the key stakeholders, the project manager
can proceed with updating the budget sheet and make changes to the existing
breakdown structure of financial resources. This will be the forth step of project budget
management.

Cost estimates, resource activity estimates, the cost performance baseline and the cost
management plan should be updated in accordance with the approved changes.

Top Down Budgeting

AKTUTHEINTACTONE10 JAN 20201 COMMENT

Top-down budgeting is a crucial method of preparing a budget for an organization or a

company. Under this method, the senior management prepares a high-level budget on the basis
of the company’s objectives. The top management then allocates the amounts for the individual
departments, who use those numbers to prepare their own budget.
For the top-down budget, the top management uses past experiences and the current market
scenario, including margin pressure, competition, tax legislation, macroeconomic conditions and
more.
Also, the management uses past years budget and financial statements as a reference for
making an allocation to various departments. Additionally, senior management may also use
input from lower-level managers. For instance, if any department accounted for 20% of the
overall expenditure last year, then this year it would be allocated 20% of the funds. Any
adjustments to these numbers will be based on the input from the managers or the current
market scenario.
 Process of TOP-DOWN BUDGETING
The top-level management will meet to decide on the targets for sales, expenses, and profits.
Next, the finance department will allocate these targets to other business departments. After
this, each department prepares its own budget.
Each department will then come up with a detailed budget, indicating how it will hit the revenue
target and at what cost. For instance, the number of products they will sell, how much staff they
will need, and more.
All such detailed budgets from the individual departments are then sent back to the finance
department. The finance department then approves them if they are in-line with the overall
objectives of the company. The finance department may also ask for some revisions if they
believe the department’s budget is deviating from the set goals.
After the finance department finalizes all the things, the budgets are put in the system. Going
forward, monthly reports are generated to compare the actual results from the planned ones.
Advantages

(lxiii) Such type of budget focuses on the overall growth of the organization.
(lxiv) It makes departments aware of what the top management expects from them.
(lxv) It is a quick way of preparing a budget and helps to overcome interdepartmental issues.
(lxvi) Saves time for lower management as well. Rather than preparing the budget from scratch, each
department gets a set goal. This saves both time and resources.
(lxvii) Under top-down budgeting, management creates only one budget, rather than allowing the department
to create their own budget and combine them later. Hence, it is a less tedious approach.

Disadvantages

38 Since managers are not part of the budget-making process, they may not feel much motivation to
ensure their success.
39 Since senior managers are not much aware of the day-to-day operations of the departments, they may
set unrealistic targets. This results in lower-level managers finding it difficult to meet the set numbers.
40 Such type of budgeting may often lead to over or under allocation of resources.

Bottom Up Budgeting
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Bottom up budgeting is a type of budgeting that attempts to determine the underlying costs for
each individual department or segment of an organization and then total up each department.
This type of budgeting works in contrast to top down budgeting. Here are a few things to
consider about bottom up budgeting and how it works.
Start Small
This process starts out small by looking at the individual components and costs of projects. In
order to do this type of budgeting, you will need to start out by identifying all of the projects
that you plan on completing as a business. Once you identify the project, you need to figure out
 what steps you will be taking to complete that project. At that point, you have to figure out the
costs for each step of the project and total them up.
Work Your Way up
After you have come up with a realistic cost estimate of each project, you need to total up all
the projects together. During this process, you need to work your way up from one level to the
next. For example, you may start out with a project budget for each week. Then total although
the to come up with a project budget for each month. You will then total the projects for each
month together to come up with an annual budget.
Manager Budgets
With this type of budgeting, you will also rely on managers to help out in the budgeting process.
You need each manager to come up with a realistic budget for all of the projects that they will
be taking on. You will then get the information from each manager and total it up in order to
come up with a budget for the company as a whole. When it comes to estimating the number of
man-hours that will be necessary to complete a particular project, a manager should convert
that figure to cash. This will ensure that there is enough money budgeted for payroll as well.
Advantage of Bottom up Budgeting
One of the primary advantages of bottom-up budgeting is that it is traditionally very accurate. As
long as everyone takes care to look at every last detail of a project, it will generally come out
with an accurate estimate of costs. This type of budgeting also tends to improve the morale of
the employees because most of them will be involved with the budgeting process. Every
department will be expected to pitch in to come up with the new budget.
Disadvantage of Bottom up Budgeting
One of the disadvantages of this strategy is that it can sometimes lead to over budgeting. Every
department wants to make sure that they have enough money for the things that they want to
do over the course of the year. Because of this, some managers might add a little bit of extra
money into the budget so that it will be padded. If this happens often enough, it can throw the
whole budget off.

Introduction to Activity Based Costing

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ABC costing focuses on identifying activities, or production processes, that are used to process

a job. These individual activities are grouped together with similar processes into a cost pool
that relates to single activity cost driver.
The cost pools are then analyzed and assigned a predetermined overhead rate that will
eventually be assigned to individual jobs and products.
As you can see, this is a multi-step process, but activity-based costing is a much more accurate
way of assigning indirect costs. It’s difficult to determine how much electricity or heat one
department or job uses over another without some type of methodical allocation process.
 Activity based costing has grown in importance in recent decades because:-
(1) Manufacturing overhead costs have increased significantly,
(2) The manufacturing overhead costs no longer correlate with the productive machine hours or
direct labor hours,
(3) The diversity of products and the diversity in customers’ demands have grown, and
(4) Some products are produced in large batches, while others are produced in small batches.
Let’s take a look at an example

Example
Activity based costing helps allocate overhead expenses to jobs and products based on the
amount of the activities required to produce the product instead of simply estimating how much
each job uses.
Properly assigning indirect costs is extremely important for management, especially in the case
of downsizing or outsourcing. Profitable departments can be assigned too much indirect cost
causing them to appear unprofitable on paper. Based an evaluation management can choice to
discontinue the operations and close a profitable branch because the costs were properly
distributed.
To compound the problems, once the profitable branch is closed the only remaining branches
are the unprofitable ones. By shutting down the only profitable department, the company may
not be able to cover its fixed costs.
The same scenario is true for outsourcing. Management may estimate outsourcing to be a
cheaper option because costs have not been allocated properly. In fact, outsourcing might
actually be more expensive.
 Social Cost Benefit Analysis (SCBA) of Project
AKTUTHEINTACTONE10 JAN 20201 COMMENT

A Social cost benefit analysis, also known as economic analysis, is a decision-making strategy
which helps in assessing the impact of investment business projects on the society as a
complete. It is an organized and cohesive mechanism to contemplate the impact of
development projects on society. The objective of analyzing the social cost benefit is to weight
the heterogeneous impact of your development project on societal elements such as pollution,
real estate, legal prospects, health, environment etc. As a result of the analysis, the project
decision maker can precisely elucidate the social welfare impact of the project.
Social cost-benefit analysis is a systematic and cohesive economic tool (method) to survey all
the impacts caused by an urban development project. It comprises not just the financial effects
(investment costs, direct benefits like tax and fees, et cetera), but all the social effects, like:
pollution, safety, indirect (labour) market, legal aspects, et cetera. The main aim of a social cost-
benefit analysis is to attach a price to as many effects as possible in order to uniformly weigh the
above-mentioned heterogeneous effects. As a result, these prices reflect the value a society
attaches to the caused effects, enabling the decision maker to form a statement about the net
social welfare effects of a project.
Measured impacts on Social cost benefit analysis
The social cost-benefit analysis calculates the direct (primary), indirect (secondary) and external
effects:

(lxviii) Direct effects are the costs and benefits that can be directly linked to the owners/users of the project
properties (e.g., the users and the owner of a building or highway).
(lxix) Indirect effects are the costs and benefits that are passed on to the producers and consumers outside
the market with which the project is involved (e.g., the owner of a bakery nearby the new building, or a
business company located near the newly planned highway).
(lxx) External effects are the costs and benefits that cannot be passed on to any existing market because they
relate to issues like the environment (noise, emission of CO2 etc.), safety (traffic, external security) and
nature (biodiversity, dehydration etc.).

The model engineers try to quantify and monetise as much effects as possible. Effects that
cannot be monetised are presented in such a way that they can be compared. This way, policy-
makers can include these effects in their final judgement if an urban planning project (or a
particular variation) is worth investing in. The method of monetising effects can also influence
the outcome of a social cost-benefit analysis and predictions will always remain uncertain.
Therefore, the results of a social cost-benefit analysis are not absolute. Nevertheless, it is a
sufficient instrument to investigate the strong and weak points of the different alternatives.
Results of a social cost-benefit analysis

41 An integrated way of comparing the different effects. All relevant costs and benefits of the different
project implementations (alternatives) are identified and monetized as far as possible. Effects that
cannot be monetized are described and quantified as much as possible.
42 Attention for the distribution of costs and benefits. The benefits of a project do not always get to the
groups bearing the costs. A social cost-benefit analysis gives insight in who bears the costs and who
derives the benefits.
43 Comparison of the project alternatives. A social cost-benefit analysis is a good method to show the
differences between project alternatives and provides information to make a well informed decision.
44 Presentation of the uncertainties and risks. A social cost-benefit analysis has several methods to take
economic risks and uncertainties into account. The policy decision should be based on calculated risk.

Significance of SCBA
AKTUTHEINTACTONE10 JAN 20201 COMMENT

The importance has been explained with the help of the following factors that affect the general
masses as a whole.
Market Failure
Market failure when a big project is not affecting everyone but only a few. A private firm would
only look at profitability and related market prices to take up a deal but the government has to
look at other factors. To determine the social cost in case of market failure and when market
prices are unable to define them. These social costs are known as shadow prices.
Savings & Investment
Impact of the project on general savings and investment level. A project that induces more
savings are investment in an economy and not the other way round.
Distribution & Redistribution of Income
The project should not lead to accumulating income in the hands of a few but, it should equally
distribute the income.
Employment and Standard of Living
How a project affects employment and standard of living will be taken into account as well. The
deal should lead to increase in employment and standard of living.
Externalities
Externalities are impacts of a project which can be both harmful and beneficial. Therefore, both
the effects are to be assessed before sanctioning a deal. Positive-externalities could be in the
form improvement in technology and negative-externalities could be in the form of increase in
pollution and destruction of ecology.
Taxes and Subsidies
In a general cost benefit calculation, taxes and subsidies are considered as expenses and income
respectively. Though in case of social-cost benefit analysis, taxes and subsidies are considered as
transfer payments.
Social cost benefit analysis enables the government to take up new developments which will
benefit everyone and not just a few. Also, it helps in bringing about an overall development in
an economy and can help make decisions that will increase employment, investments, saving
and consumption, thus, improving the economic activities in an economy.
 THEINTACTONE

Approaches to SCBA
AKTUTHEINTACTONE10 JAN 20201 COMMENT

45 Rationale for SCBA

The society is concern about the distribution of benefits across different group. A rupee
of benefit going to an economically poor section is considered more valuable than a
rupee of benefit going to an affluent section.

(xxii) UNIDO approach

UNIDO approach was first articulated in the Guidelines for Project Evaluation which
provides a comprehensive framework for SCBA in developing countries. UNIDO
approach is based largely on the latter publication though at places we will draw on the
former publication too.

 Measures cost and benefits in terms of domestic rupees

 Measures cost and benefits in terms of consumption.
 Focuses on efficiency, savings and redistribution aspects in different stages.

UNIDO method of project appraisal involves five stages:

(i) Calculation of the financial profitability of the project measured at market prices.

(ii) Obtaining the net benefit of the project measured in terms if economic (efficiency)
prices.

(iii) Adjustment for the impact of the project on savings and investment.

(iv) Adjustment for the impact of the project on income and distribution.

(v) Adjustment for the impact of the project on merit goods and demerit goods whose
social values differ from their economic values.

 Net benefit in terms of economic prizes

One of the important aspects of shadow pricing is the determination of the numeraire,
the unit of account in which the value of inputs or outputs is expressed. To define the
nummeraire, the following questions have to be answered:
  What unit of currency, domestic or foreign, should be used to express benefits or costs?
 Should costs and benefits be measured in current values or constant values?
 Should the income of the project is measured in terms of consumption or investment?

 Saving impacts and its value

Its seek to answer fallowing question

 Given the income distribution project what would be its effect on saving?
 What is the value of such saving?

 Income distribution impact

 Adjustment for merit and demerit goods

(v) Merits good is one for which the social value exceeds the economic value.
(vi) Demerits good is one social value of goods is less than the economic value.

(ii) Little-Mirrlees approach

I.M.D Little and J.A Mirrlees have developed an approach to social cost benefit analysis
which became popular as Little-mirrlees approach (L-M approach).

(ii) Shadow prices

(iii) SCBA by financial institutions
(iv) Public sector investment decisions in India

Project Scheduling
AKTUTHEINTACTONE10 JAN 20201 COMMENT

Project schedule is prepared listing down step by step in sequential order the jobs involved in
the implementation of the project. The steps should be well-defined along with the required
time to complete each step.
This project schedule becomes a “tool” to ensure timely implementation of the project. When a
final decision has been taken to launch, the Project Manager is to entrust the jobs involved to
personnel within the Project Team with assigned responsibility to ensure that the steps are
completed within the time-frame allotted and within the budgeted cost.
Steps to Developing a Project Schedule
Step 1: Create a work breakdown structure
Step 2: Estimate durations
Step 3: Determine resources
Step 4: Identify predecessors
Step 5: Determine milestones
Step 6: Identify dependencies
 Step 1: Create a Work Breakdown Structure (WBS)
A Work Breakdown Structure (WBS) is used for estimating the project scope by breaking it down
into easily manageable components, or bites. WBS is the hierarchical list of project’s phases,
tasks, and milestones.
A WBS is very useful in planning a project and makes a complex project more manageable. The
WBS is designed to help break down a project into manageable chunks that can be effectively
estimated, managed and supervised.
A WBS also provides the basis for a detailed duration and cost estimates. It gives accuracy in
estimating a project by calculating how much time and effort is required to accomplish a task or
activity, thereby aggregating to estimate the effort required to complete a superior component
in the hierarchy.
Step 2: Estimate Task Duration
Once the list of activities is identified, estimate the task duration for all activities as to how much
effort by duration is required to perform each activity. To estimate the task duration, make sure
the activity is detailed enough to estimate how much effort each activity or sub-activity will
require to complete.
For example, to calculate how much time is required to complete the ‘Excavation’ for
constructing the house, you may need to know what is involved in doing excavation and how
much time is required to complete each activity in excavation.  List the set of activities required
to do excavation on the site and estimate the duration of each activity.
Step 3: Determine the Resources Requirements
Determine the personnel and non-personnel resources required to perform all activities. For
example, the excavation work may require the following resources: Project Manager – Work
duration 16 hours Site Grading Contractor – Work duration 80 hours.

(lxxi) Create a Resource Table of all resources who will work on the project
(lxxii) Assign or Allocate resources to activities

Step 4: Identify the Dependencies between Tasks

After identifying all the activities and timeline necessary to complete the project, we identify
and define the immediate predecessors of all activities. This will determine the sequence in
which the activities may be performed. For example, excavation work will be carried out before
the steel erection can be done. Hence, the predecessor to ‘1.2 Steel erection’ activity will be ‘1.1
Excavation’.
Step 5: Identify Dependencies
In a project, dependency is a link between tasks or activities or elements. There are four kinds of
dependencies:-
Finish to Start (FS): A FS B = B can’t start before A is finished or B will start only after A is
finished.
For example, concrete must cure before it can be used. Therefore, the builder pours the
concrete, waits four days and then builds the walls on the concrete.
Finish to Finish (FF): A FF B = B can’t finish before A is finished, i.e., B will finish only after A is
finished.
 For example, Foundations excavation cannot be completed unless the elevator pit excavation is
complete.
Start to Start (SS): A SS B = B can’t start before A starts, i.e., B can start only if A has started.
For Example

46 Curing cannot be started unless pouring for the foundation has started. Start to Finish (SF): A SF B = B
can’t finish before A starts, i.e., B can finish only after A has started.
47 Pouring & curing is a parallel activity and Pouring can finish only after curing has started.

During the project planning phase, the project is estimated to list out the set of activities, tasks,
and resources required to complete the project. The project schedule is detailed enough to
show each task to be performed, the resource allocated to perform the task, the start and end
date of each task and the duration in which the task will be performed. During the lifecycle of a
project, the project progress is monitored by the project schedule.

Network Analysis
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The network analysis is a method used to analyze, control and monitoring of business processes
and workflows. Contrary to the work breakdown structure, a network diagram also considers
the chronological order of activities, milestones and tasks, their durations and dependencies and
visualizes them graphically or as a table, e.g. in a Gantt chart.
The network analysis enables project managers to take various factors into account when
creating a project plan:

(lxxiii) Dependencies between activities

(lxxiv) Buffer times between activities
(lxxv) Earliest and latest start and end dates
(lxxvi) Duration of activities
(lxxvii) Critical Path

Steps in Network Analysis

48 Network Design Requirements |Identifying Customer Design Requirements: As a network designer you
need following steps to identify customer requirements:

Identify network applications and services that the organization wants to run in it network.
Define the organizational goals. Define the possible organizational constraints and limitations,
these limitations may be related to cost. Define the technical goals Define the possible technical
constraints.

(xxiii) Describe the Existing Network-Characterizing the existing network is second step of the network design
methodology. In this step, you need to identify a network’s existing infrastructure and services that are
 currently running. You can use the different tools to analyze existing network traffic, and toolsfor
auditing and monitoring network traffic.
(xxiv) Designing the Network Topology and Solutions The best approach to design the network topology is the
structure approach which allows you to develop the optimal solution with lower cost with fulfilling all
requirements of customer like capacity, flexibility, functionality, performance, scalability and availability
You can start the network designing process with information that you extract through:

Existing information and documentation Network audit Traffic analysis

 Plan the network implementation In documentation you should have the step-by-step
procedure of each aspect of modular network and have the complete detail for implementation of each
step. Documentation must have rollback plan for each step, if something goes wrong you can back to
previous step and after modification you can re-implement that step again
 Construct a prototype network A prototype network is a subset of the full design, tested in an
isolated environment. The prototype does not connect to the existing network. The benefit of using a
prototype is that it allows testing of the network design before it is deployed before affecting a
production network. When implementing a new technology such as IPsec, you might want to implement
a prototype test before deploying it to the operational network.
 Fully Document the Design Documenting the project is the best practice and has a number of
advantages and future benefits.
 Implement the Design In implementation phase network engineer implement the network’s
designer design. In this phase network engineer implement the documented steps, network diagram
into real network.
 Verify , monitor and modify as needed Once your network is fully implemented then your job to
run and operate the network properly, you have to monitor the network devices, traffic and other
security aspects. You can make the modification if you find something wrong with network operation
during monitoring of network. Also if you need to add some more services and feature you can add
these services too.

Gantt Chart
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A Gantt chart is a horizontal bar chart that visually represents a project plan over time. Modern
gantt charts typically show you the status of—as well as who’s responsible for each task in the
project.
In other words, a gantt chart is a super-simple way to keep you out of a project pinch!
A Gantt chart is made up of several different elements. So let’s take a quick look at 8 key
components so you know how to read a gantt chart:

(lxxviii) Task list: Runs vertically down the left of the gantt chart to describe project work and may be organized
into groups and subgroups
(lxxix) Timeline: Runs horizontally across the top of the gantt chart and shows months, weeks, days, and years
(lxxx) Dateline: A vertical line that highlights the current date on the gantt chart
(lxxxi) Bars: Horizontal markers on the right side of the gantt chart that represent tasks and show progress,
duration, and start and end dates
(lxxxii) Milestones: Yellow diamonds that call out major events, dates, decisions, and deliverables
(lxxxiii) Dependencies: Light gray lines that connect tasks that need to happen in a certain order
(lxxxiv) Progress: Shows how far along work is and may be indicated by % Complete and/or bar shading
(lxxxv) Resource assigned: Indicates the person or team responsible for completing a task

The History of Gantt Charts

The first project management chart was invented by Karol Adamiecki in 1896. So why isn’t it
called an Adamiecki chart? Good question!
Here’s a quick history of gantt charts:

49 1896: Karol Adamiecki creates the first project management chart: the Harmonogram, a precursor to
the modern gantt chart.
50 1931: Adamiecki publishes the Harmonogram (but in Polish with limited exposure).
51 1910-1915: Henry Gantt publishes his own project management system, the gantt chart.
52 Today: Gantt charts are the preferred tool for managing projects of all sizes and types.

How to Use a Gantt Chart

Gantt charts come in many forms—from good old-fashioned paper to desktop and even web-
based software. Bringing these charts online transformed them from a static document that
quickly becomes obsolete to a living, collaborative representation of a project’s current state.
Gantt charts are useful in almost any industry. Here are just a few examples of the types of
teams and companies that use gantt charts to plan, schedule, and execute their projects:

(xxv) Construction
(xxvi) Consulting agencies
(xxvii) Marketing teams
(xxviii) Manufacturing
(xxix) Human resources
(xxx) Software development
(xxxi) Event planning

The Benefits of Gantt Charts

A gantt chart is like a front-row seat to the project action. All the tiny details you never noticed
from the nosebleed section suddenly come to life in full color right before your very eyes.
Benefits of Using Gantt Charts

 Visualize Your Entire Project

 See How Tasks are Connected
 Keeps Everyone on the Same Page
 Know Who’s Busy and Who Isn’t
 Work Breakdown Structure (WBS)
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Dividing complex projects to simpler and manageable tasks is the process identified as Work
Breakdown Structure (WBS).
Usually, the project managers use this method for simplifying the project execution. In WBS,
much larger tasks are broken down to manageable chunks of work. These chunks can be easily
supervised and estimated.
WBS is not restricted to a specific field when it comes to application. This methodology can be
used for any type of project management.
Following are a few reasons for creating a WBS in a project:

(lxxxvi) Accurate and readable project organization

(lxxxvii) Accurate assignment of responsibilities to the project team
(lxxxviii) Indicates the project milestones and control points
(lxxxix) Helps to estimate the cost, time and risk
(xc) Illustrate the project scope, so the stakeholders can have a better understanding of the same

Construction of a WBS
Identifying the main deliverables of a project is the starting point for deriving a work breakdown
structure.
This important step is usually done by the project managers and the subject matter experts
(SMEs) involved in the project. Once this step is completed, the subject matter experts start
breaking down the high-level tasks into smaller chunks of work.
In the process of breaking down the tasks, one can break them down into different levels of
detail. One can detail a high-level task into ten sub-tasks while another can detail the same high-
level task into 20 sub-tasks.
Therefore, there is no hard and fast rule on how you should breakdown a task in WBS. Rather,
the level of breakdown is a matter of the project type and the management style followed for
the project.
In general, there are a few “rules” used for determining the smallest task chunk. In “two weeks”
rule, nothing is broken down smaller than two weeks worth of work.
This means, the smallest task of the WBS is at least two-week long. 8/80 is another rule used
when creating a WBS. This rule implies that no task should be smaller than 8 hours of work and
should not be larger than 80 hours of work.
One can use many forms to display their WBS. Some use tree structure to illustrate the WBS,
while others use lists and tables. Outlining is one of the easiest ways of representing a WBS.
Following example is an outlined WBS:
 There are many design goals for WBS. Some important goals are as follows:

53 Giving visibility to important work efforts

54 Giving visibility to risky work efforts
55 Illustrate the correlation between the activities and deliverables
56 Show clear ownership by task leaders

WBS Diagram
In a WBS diagram, the project scope is graphically expressed. Usually the diagram starts with a
graphic object or a box at the top, which represents the entire project. Then, there are sub-
components under the box.
These boxes represent the deliverables of the project. Under each deliverable, there are sub-
elements listed. These sub-elements are the activities that should be performed in order to
achieve the deliverables.
Although most of the WBS diagrams are designed based on the deliveries, some WBS are
created based on the project phases. Usually, information technology projects are perfectly fit
into WBS model.
Therefore, almost all information technology projects make use of WBS.
In addition to the general use of WBS, there is specific objective for deriving a WBS as well. WBS
is the input for Gantt charts, a tool that is used for project management purpose.
Gantt chart is used for tracking the progression of the tasks derived by WBS.
Following is a sample WBS diagram:
 The efficiency of a work breakdown structure can determine the success of a project.
The WBS provides the foundation for all project management work, including, planning, cost
and effort estimation, resource allocation, and scheduling.
Therefore, one should take creating WBS as a critical step in the process of project
management.

Responsibility Assignment Matrix

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A Responsibility Assignment Matrix (RAM)describes the participation by various organizations,

people and roles in completing tasks or deliverables for a project. It’s used by the Program
Manager (PM) in clarifying roles and responsibilities in cross-functional team, projects and
processes. A Request for Proposal (RFP) might request a RAM from a contractor.
A RAM is also called a Responsible, Accountable, Consulted, and Informed (RACI) matrix.

(xci) Responsible: Those who do the work to achieve the task. There is typically one role with a participation
type of Responsible, although others can be delegated to assist in the work required
(xcii) Accountable: The one ultimately accountable for the correct and thorough completion of the deliverable
or task, and the one to whom Responsible is accountable. In other words, an Accountable must sign off
(Approve) on work that Responsible provides. There must be only one Accountable specified for each
task or deliverable
(xciii) Consulted: Those whose opinions are sought; and with whom there is two-way communication
(xciv) Informed: Those who are kept up-to-date on progress, often only on completion of the task or
deliverable; and with whom there is just one-way communication

A RAM can define what a project team is responsible for within each component of the Work
Breakdown Structure (WBS). It could also be used within a working group to designate roles,
responsibilities and levels of authority for specific activities. The matrix format shows all
 activities associated with one person and all people associated with one activity. This ensures
that there is only one person accountable for any one task to avoid confusion.

Project Network Design

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One of the first steps in starting a network design project is to determine its scope. Some of the
most common network design projects these days are small in scope— for example, projects to
allow a few people in a sales office to access the enterprise network via a VPN. On the other
hand, some design projects are large in scope. Ask your customer to help you understand if the
design is for a single network segment, a set of LANs, a set of WAN or remote-access networks,
or the entire enterprise network. Also ask your customer if the design is for a new network or a
modification to an existing one.
Explain to your customer any concerns you have about the scope of the project, including
technical and business concerns. Subsequent sections in this chapter discuss politics and
scheduling, which are tightly linked to the scope of a network design project. (Many network
designers have learned the hard way what happens when you don’t help your customers match
the schedules of their projects to the scope.
Make sure your customers tell you everything they can about the network and the design
project. You may want to poke around outside the stated scope of the project, just to make sure
nothing essential has been omitted. Double-check that you have gathered all the requirements
and that you have accurate information about sites, links, and devices. If the project addresses
network security, make sure you know about all external links, including dial-in access.
Designers rarely get a chance to design a network from scratch. Usually a network design project
involves an upgrade to an existing network. However, this is not always the case. Some senior
network designers have developed completely new next-generation networks to replace old
networks. Other designers have designed networks for a new building or new campus. Even in
 these cases, however, the new network usually has to fit into an existing infrastructure—for
example, a new campus network that has to communicate with an existing WAN. Where there is
an existing network, the design project must include plans for migrating to the new design with
minimal disruption and risk.
When analyzing the scope of a network design, you can refer to the seven layers of the OSI
reference model to specify the types of functionality the new network design must address. For
example, you might decide that the design project is concerned only with network layer
concerns such as routing and IP addressing. Or you might decide that the design also concerns
the application layer because the focus is on voice applications, such as Interactive Voice
Response (IVR), which directs customers to the correct location in a call center, or unified
messaging, where e-mail can be retrieved via voice mail and text messages can be converted
into speech. Figure shows the OSI reference model.
Figure: The Open Systems Interconnection (OSI) Reference Model

Layer 7 Application

Layer 6 Presentation

Layer 5 Session

Layer 4 Transport

Layer 3 Network

Layer 2 Data Link

Layer 1 Physical

In addition to using the OSI reference model, this book also uses the following terms to define
the scope of a network and the scope of a network design project:

(xcv) Segment- A single network based on a particular Layer 2 protocol. May include Ethernet hubs and
repeaters, and multistation access units (MAUs) if Token Ring is still in use.
(xcvi) LAN- A set of switched segments, usually based on a particular Layer 2 protocol (although mixed LANs
are possible). May have one or more Layer 3 protocols associated with it, although most networks are
standardizing on IP.
(xcvii) Building network- Multiple LANs within a building, usually connected to a building-backbone network.
(xcviii) Campus network- Multiple buildings within a local geographical area (within a few miles), usually
connected to a campus-backbone network.
(xcix) Remote access- Networking solutions that support individual remote users or small remote branch
offices accessing the network.
(c) WAN- A geographically dispersed network including point-to-point, Frame Relay, ATM, and other long-
distance connections.
(ci) Enterprise network- A large and diverse network, consisting of campuses, remote-access services, and
one or more WANs or long-range LANs. An enterprise network is also called an internetwork.

Activity on Arrow (AoA)

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The original form of network diagram that has effectively been superseded by the precedence
diagram format.
In an activity-on-arrow network, activities are represented by a line between two circles. The
first circle represents the start of the activity and is known as the start event (sometimes called
the i-node). The second circle represents the finish of the activity and is known as the finish
event (sometimes called the j-node).

Space is allowed in the circles for calculation results from critical path analysis. The calculated
times are the earliest event time (EET) and latest event time (LET). The earliest event time of the
i-node is the earliest start of the activity and the latest event time is the latest start. Similarly,
the earliest event time and latest event times of the j-node are the earliest and latest finishes of
the activity.
The activity name is shown above the arrow and its duration is shown below. Its float is shown
in brackets after the duration.
A network diagram is created by connecting activities according to their dependence upon each
other. For instance, in the diagram below, activities 10-15 and 10-25 cannot start until 5-10 is
 finished. Activity 30-35 cannot start until both 20-30 and 25-30 are complete. Dotted lines are
referred to as dummies. These simply indicate a dependency between two events and are not
activities.

Activity-on-arrow was in common use before the widespread use of computers for critical path
analysis and so the drafting and calculations were performed manually. The convention of
numbering the nodes at intervals of 5 was to allow additional nodes to be added while retaining
an element of numerical sequence.

Activity-on-Node (AoN)
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Activity-on-node is a project management term that refers to a precedence diagramming

method which uses boxes to denote schedule activities. These various boxes or “nodes” are
connected from beginning to end with arrows to depict a logical progression of the
dependencies between the schedule activities. Each node is coded with a letter or number that
correlates to an activity on the project schedule.
Typically, an activity-on-node diagram will be designed to show which activities must be
completed in order for other activities to commence. This is referred to as “finish-to-start”
precedence – meaning one activity must be finished before the next one can start. In the
diagram below, activities A and D must be done so that activity E can begin. It is also possible to
create other variations of this type of diagram. For example, a “start-to-start” diagram is one in
which a predecessor activity must simply be started rather than fully completed in order for the
successor activity to be initiated.
An activity-on-node diagram can be used to provide a visual representation of the network logic
of an entire project schedule. Or, it can be used for any smaller section of the schedule that
lends itself to being represented as having a defined beginning and end. To keep the logic in the
diagram simple, it may be most effective to include only critical path schedule activities. The
planned start date of each node may also be listed in the diagram legend in accordance with the
project management timeline.
Project Planning and Scheduling using PERT/CRM
THEINTACTFRONT25 OCT 20183 COMMENTS
THEINTACTONE PM/U2 Topic 10 Crashing of Activities

The initial project plan you construct seldom will be delivered without making
modifications to the project’s triple constraint, which are schedule, cost, and scope.
Crashing a project is an advanced project management technique which means to add
 the appropriate amount of skilled project resources to critical path task(s), which is
commonly used to compress the project schedule. The project schedule compression
technique consists of:

 Fast Tracking
 Crashing a project

Crashing your project will directly impact two out of three of your project triple
constraints, which are schedule and cost. Crashing your project will accelerate your
project delivery schedule and increase your project budget; however, it will have no
effect to your project scope. Typically, when project sponsors want you to crash your
project, it means they are not concerned about the project costs. Either they have
unrestricted budgets or they just want you to get the project done as fast as possible.

Consequently, since crashing your project will increase your project cost, you must
identify all critical path tasks that have the potential to compress your project schedule.
If you are unable to add resources to critical path tasks resulting in shortening your
project schedule, do not attempt to implement project crashing. Do not select non-
critical path tasks to crash because adding additional resources to non-critical path
tasks will have no effect to your project schedule.

Crashing is a schedule compression technique used to reduce or shorten the project

schedule.

The PM can various measures to accomplish this goal. Some of the common methods
used are

 Adding additional resources to the critical path tasks: This option has various constraints
such as the securing of the budget to add the resources, and the availability of the resources.
 Reduce the project requirements or scope:This can be done only if the sponsor and major
stakeholders agree to reduce the scope

After applying the crashing, the critical path might have changed and result in creating a
different critical path. Always revisit the project schedule to ensure the schedule has
been crashed.

Crashing of Activities in Activities

 Crashing is the technique to use when fast tracking has not saved enough time on the
schedule. It is a technique in which resources are added to the project for the least cost possible.
Cost and schedule tradeoffs are analyzed to determine how to obtain the greatest amount of
compression for the least incremental cost.
 Crashing refers to a particular variety of project schedule compression which is performed
for the purposes of decreasing total period of time (also known as the total project schedule
duration). The diminishing of the project duration typically take place after a careful and thorough
analysis of all possible project duration minimization alternatives in which any and all methods to
attain the maximum schedule duration for the least additional cost.
 When we say that an activity will take a certain number of days or weeks, what we really
mean is this activity normally takes this many Project Management Triangle days or weeks. We
could make it take less time, but to do so would cost more money. Spending more money to get
something done more quickly is called “crashing”. There are various methods of project schedule
crashing, and the decision to crash should only take place after you’ve carefully analyzed all of the
possible alternatives. The key is to attain maximum decrease in schedule time with minimum cost.
 Crashing the schedule means to throw additional resources to the critical path without
necessarily getting the highest level of efficiency.
 Crashing is another schedule compression technique where you add extra resources to the
project to compress the schedule. In crashing, you review the critical path and see which activities
can be completed by adding extra resources. You try to find the activities that can be reduced the
most by adding the least amount of cost. Once you find those activities, you will apply the crashing
technique.

Project Monitoring and Control

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Every project has a life cycle. During this life cycle, there are several phases called ‘process
groups‘. Each of these process groups has a different and crucial objective, which helps to
produce desired outcomes in a project. Project monitoring and controlling process group
activities help to keep the project on track. Project monitoring and controlling, unlike the other
phases, is done from the beginning until the end of the project. These project monitoring and
controlling process activities check whether the project is going as planned and whether there
are any deviations from the baseline. So this process group covers all the other four process
groups.
The 16 Best Practices for Project monitoring and controlling process
Step #1: Take action to control the project
Necessary steps, control points, and actions are taken to monitor and control the project. These
actions provide if the project is deviating from the planned baseline.
Step #2: Measure performance
You should measure the performance in order to check whether the project is going well. For
instance, cost performance of the project will give an indication whether the planned budget
will be sufficient to complete the project. Schedule performance of the project will give an
indication whether the planned schedule and dates can be reached.
Step #3: Determine variances and if they warrant a change request
If there is a lot of variance from the baseline, for instance, if it is expected that the project
duration will exceed the planned duration by 20%, then regarding actions must be taken to
meet the project targets.
Step #4: Influence the factors that cause changes
Changes are inevitable in a project. But, preventive actions can be taken to influence the factors
that cause changes. For instance, a detailed scope and requirement clarification with the
customer will reduce the changes that will be coming from the customer.
Step #5: Request changes
If there is a deviation from the planned values, then a change can be requested to meet the
planned values again.
Step #6: Perform integrated change control
Changes in a project must be implemented in an integrated manner. Because a small change in
one aspect of the project might impact the overall project. Performing an integrated change
control evaluates the changes and its impacts on the project. Then, a proper change
implementation is planned to minimize the risk of changes.
Step #7: Approve or reject changes
Project monitoring and controlling process may approve or reject changes. Changes are
evaluated by the change control board and if this board rejects the change, it won’t be
implemented. If a change is approved, project plan revisions must be done and change should
be implemented properly.
Step #8: Inform stakeholders of approved changes
If the decision of the change control board is approving a change. This must be communicated
to the stakeholders. Because, the previous plan, scope, and targets have a change. So the
stakeholders must be notified about this change.
Step #9: Manage configuration
The configuration of a project describes the meaningful and properly working combination of
different modules or parts. In order to ensure healthy project progression, the configuration is
managed.
Step #10: Create forecasts
Project monitoring and controlling process group activities create forecasts. What will be the
budget of the project on completion? What will be the end date of the project if the project
performs as it performed till now? These types of forecasts help to see how far the project is
from its targets.
Step #11: Gain acceptance from customer
Once the project deliverables are completed, they are presented to the customer. If the
deliverables meet the requirements agreed with the customer, in the beginning, the customer
accepts the project and closing phase is triggered.
Step #12: Perform quality control
Quality control activities check the quality attributes of the delivered outputs. For instance, the
product of a project might meet the budget and schedule targets. But the quality requirements
might not meet the customers’ expectations. In this case, the project will be considered as failed
as well. Therefore, performing a quality control is important.
Step #13: Report on project performance
 Since forecasting and project performance is measured during monitoring and controlling,
project performance reports are sent to relevant stakeholders during this phase as well.
Step #14: Perform risk audits
Risks may affect a project drastically. Therefore, each anticipated risk must be documented, and
risk response strategies for each risk must be planned in case a risk occurs.
Step #15: Manage reserves
Reserves are planned to accommodate costs of risks and unexpected situations in projects. For
instance, if the project budget is 100,000 USD, a 10% reserve can be planned to accommodate
impacts of risks. Or, if the project duration is 12 months, an additional 2 months can be planned
as a buffer to overcome any kind of risks that might occur during the project. These reserves are
managed in monitoring and controlling phase.
Step #16: Administer procurements
Tools, equipment or resources can be outsourced from a supplier during a project.
Administration of these purchases, outsourcing, and leasing activities are done during
monitoring and control phase of a project.
If a successful monitoring and controlling process can be implemented, the whole project has a
better chance to be a success. So the outcomes of closing process group activities will be as
planned in the planning phase.

Planning Monitoring and Controlling Cycle

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Project planning
The main roles and responsibilities associated with project planning are:
(i) Senior responsible owner: ensuring that the project has a coherent set of plans at the
appropriate levels; the SRO will approve plans including any proposed changes to scope, cost or
timescale and monitor the impact of plan changes on the business case and stage progress
against agreed tolerances
(ii) Project board: is responsible for the decision making process supporting project plan
creation; the board will approve all stage and project plans including exception plans and all
associated resource, time and cost implications
(iii) Project manager: preparing project and stage plans, monitoring and updating them
regularly; the PM will liaise with the programme manager on relevant planning issues and alert
the SRO or project board to any potential exception conditions, preparing exception plans as
required
(iv) Project management office: administering project change control procedures, maintain
planning standards and procedures and updating and maintaining all project, stage, team and
other relevant plans under the direction of the project manager; the PMO will provide advice
and guidance on practical matters associated with plans.
 Monitoring, Reporting and Control
Monitoring is about assessing what work has been completed for a programme or project
including costs, risks and issues. In addition the SRO and board will routinely monitor if the
business case continues to be viable and in alignment with strategic objectives. This usually
takes the form of the production of documentation and reports at key stages. Monitoring is
used to oversee progress of products, outputs, and outcomes.
Reporting provides the programme or project board with a summary of the status of the
programme or project at intervals defined by them. Reporting advises the correct people at the
correct time of positive and negative events, allowing for progression or remedial action as
appropriate.
Controls usually relate to stages in projects and are established to control the delivery of the
project’s outputs. In project management, controls are:

(cii) Event driven – meaning that the control occurs because a specific event has taken place; examples are
end stage reports, completion of a project initiation document and creation of an exception plan
(ciii) Time driven – meaning controls are regular progress feedbacks; examples include checkpoint and
highlight reporting

Controls then assist with both monitoring and reporting by provision of required review points
such as end stage assessments. This does not replace the need for the board to maintain an
overall view of progress.
 An example of the monitoring process in a project environment.
The key programme and project monitors, controls and reports are:

57 Business case – this effectively describes what the value is to the sponsoring organization from the
outcomes of the programme; managing the business case is about value management of benefits, costs,
timescales and risks
58 Project plan – a comprehensive plan which clearly defines the products to be produced, resources and
time needed for all activities, any dependencies between activities and points at which progress will be
monitored and controlled with any agreed tolerances
59 Project initiation document (or project execution plan in construction projects) – this document defines
all major aspects of the project and forms the basis for its management and the assessment of its overall
success; the two primary uses of the document are to ensure that the project has a complete and sound
basis before there is any major commitment to it and to act as a base document against which the
project can assess progress, change management issues and ongoing viability questions.
60 Stage plan – provides detail of how and when the objectives for the stage are to be met by showing the
deliverables, activities and resources required – it provides a baseline against which stage progress will
be measured and is used as the basis of management control throughout the stage
61 Work package – sets out all information needed to deliver one or more specialist products; the
necessary information is collated by the project manager and used to formally pass responsibility for
work or delivery to a team leader or member
62 Change control strategy – this documents the procedure to ensure that the processing of all project
issues is controlled, including the submission, analysis and decision making
63 Highlight reports – provide the project board (and possibly other stakeholders) with a summary of the
stage status at intervals defined by them; it is used to monitor stage and project progress and will be
used by the project manager to advise the project board of any potential problems
64 Checkpoint report – these are sent from the team manager to the project manager at a frequency
defined in the stage plan or work package detailing the status of work for each member of a team
65 Project issue log – this is a generic term for any matter that has to be brought to the attention of the
project team and requires an answer
66 Risk management log – risks can be threats to the successful delivery of the programme or project; they
are usually recorded in a risk register
67 End stage report – summarises progress to date and provides an overview of the project as a whole,
including the impact of the stage on the project plan, the business case and identified risks; the project
board uses the information to decide what action to take
68 End project report – this is sent from the project manager to the project board; it confirms the hand-
over of all deliverables, provides an updated business case, and an assessment of how well the project
has done against its PID
69 Lessons learned report – describes the lessons learned in undertaking a project; it is approved by the
project board then held centrally for the benefit of future projects – if the project is one of a number
attached to a programme this document will also be used as input to the programme review
70 Post project review – this will document whether business benefits have been realised and if
recommendations for future improvements have been recorded

Project Management Information System

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A project management information system (PMIS) can be a framework to guide the progress of a

project and help to increase its success rate. It brings accurate and relevant information to
management within the required time frame, and helps to speed up the decision-making
process and any action necessary to ensure that the project is on track in terms of time, budget
and objectives.
The Right Approach
A PMIS must basically identify the information that is needed and its relevance to the project
and its implementation. It must be able to compare the present state of affairs on a project to
the aims laid down and analyze the differences so that corrective or remedial action can be
taken. A PMIS should not lead to any loss of control because of the analysis of the information
 that has been gathered. There has to be some method of integrating the scope of the project, its
quality objectives, and the time and cost that it requires. There should be no duplication of
information as this only leads to a waste of scarce resources in terms of time and manpower.
Planning the Information
The information that is gathered has to help the project management team to plan, organize,
and control the project. It must have sufficient information which can be of interest to all the
people who have a stake in the project. If there is any linkage to other projects within the same
organization or out of it, it must have information on the connected milestones so that it
provides the right interlinking. It must have a system where any slippages in time or money are
highlighted and analyzed so that corrective action can be taken. The information available must
not be data alone and must have a relevance to any decision-making that is required for project
implementation or monitoring. Unnecessary detailing must be avoided so that any decision-
making is not bowed down by the sheer weight of the information given.
Benefits and Expectations
The PMIS should enable a project team to pinpoint the variances in terms of time, money and
resources and see if they can find the reason why these have occurred. It should enable the
team to track the status of each part of the project and assess the work that is completed and
the work that remains to be done. When this information is available the project team will be
able to reallocate the necessary resources to see that each part of the project contributes to the
success of the project. It should be able to help the project leaders to assess the impact on the
project from any future risks caused by time and cost overruns, and also to ensure that the
quality of the project does not suffer. It should help the team to understand which of the parts
of the project require revised guidelines and how they are to be implemented.
For an effective PMIS, it is necessary that the preliminary estimates and technical specifications
are very precise and all encompassing. Cost control and feedback systems have to be always up
to date. Project milestones need to be very clearly identified and linked to the resources that are
required to reach them. Vendor selection, materials management, human resources have to be
individually looked into to ensure that each of these areas fits within the parameters for the
project. Document control including its coding and movement is another vital area of PMIS.

Milestone Analysis and Gantt Chart

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Gantt charts and milestone schedules are staples of modern project management techniques. A
Gantt chart is a bar chart illustrating the schedule of a work project. It shows the dates of the
start and finish of the project as well as the milestones along the way.
Some Gantt charts show the dependency between an activity and the previous activities, which
is referred to as the precedence network. The milestones are a way to show the breakdown of
the work of a project.
Milestones, as recorded on Gantt charts are used as checkpoints to determine how well a
project is progressing. They signify how far along work on a project has come, and whether a
 project is headed in the right direction. A milestone might be something that marks the end of a
phase of work, such as a deliverable product or document. Or it might be the completion of a
set of calculations, or the results of an evaluation of a product’s functionality or safety.
Though Gantt charts and milestone schedules are considered commonplace, they were nothing
short of a revolution when they were first introduced by Henry Gantt in the 1910s. Today there
is even a Henry Laurence Gantt Medal awarded for achievements in management and
community service.
A milestone is a marker in a project that signifies a change or stage in development. Milestones
are powerful components in project management because they show key events and map
forward movement in your project plan.
Milestones act as signposts through the course of your project, helping ensure you stay on track.
Without project milestone tracking, you’re just monitoring tasks and not necessarily following
the right path in your project.
Milestones can do more than just show progress—they can help you communicate what’s
happening with your project. TeamGantt features project milestones in its free project
management software, so it seamlessly syncs with all of your gantt chart’s moving parts.
Project management milestone
Milestones make it easier to keep projects on track by calling out major events, dates, decisions,
and deliverables. Here are a few examples of project milestones you might include in your plan:

(civ) Start and end dates for project phases

(cv) Key deliveries
(cvi) Client and stakeholder approvals
(cvii) Important meetings and presentations
(cviii) Key dates or outages that may impact your timeline

Gantt charts show a current schedule status using shadings that show what percentage of a task
is complete, along with a vertical line representing the current day. In the field of information
technology, Gantt charts and milestone schedules are used to depict data collected.
Gantt created many types of charts, including charts that foremen could use to quickly know if
production was on, ahead of, or behind schedule. Project management today continues to use
similar systems. His charts had representations of each worker’s record, showing what each
worker was assigned and completed, and representations of each day’s balance of work
showing the amount of work assigned and the amount actually completed. These are still
underlying fundamentals of project management.
Gantt charts and milestone schedules are ingrained parts of work culture, and have been since
the latter part of the modern industrial revolution of the late 19th and early 20th centuries.
Without the two bedrock processes of using Gantt charts and milestone schedules, modern
workplaces would most likely be fundamentally different.
Earned Value Analysis: Planned Value (PV), Earned
Value (EV), Cost Variance (CV), Schedule Variance (SV)
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Earned Value Analysis (EVA) is an industry standard method of measuring a project’s progress at
any given point in time, forecasting its completion date and final cost, and analyzing variances in
the schedule and budget as the project proceeds. It compares the planned amount of work with
what has actually been completed, to determine if the cost, schedule, and work accomplished
are progressing in accordance with the plan. As work is completed, it is considered “earned”.
Planned Value (PV)
This is the first element of earned value management. Planned Value is the approved value of
the work to be completed in a given time.
According to the PMBOK Guide, “Planned Value (PV) is the authorized budget assigned to work
to be accomplished for an activity or WBS component.”
You must calculate Planned Value before actually doing the work; it also serves as a baseline.
The total Planned Value for the project is known as Budget at Completion (BAC). Planned Value
is also called Budgeted Cost of Work Scheduled (BCWS).
Formula for Planned Value (PV)
The formula to calculate Planned Value is simple. Multiply the planned percentage of the
completed work by the project budget. That will give you the Planned Value.
Planned Value = (Planned % Complete) X (BAC)
Earned Value (EV)
This is the third and last element of earned value management. Earned Value is the work
actually completed to date. It shows you the value that the project has produced if it were
terminated today.
According to the PMBOK Guide, “Earned Value (EV) is the value of work performed expressed in
terms of the approved budget assigned to that work for an activity or WBS component.”
Although all three elements have their significance, Earned Value is the most useful because it
shows you how much value you have earned from the money you have spent to date,
management is always looking for this information.
Earned Value is also known as Budgeted Cost of Work Performed (BCWP).
Aspirants often get confuse Planned Value and Earned Value. Planned Value shows you how
much value you expected to earn within a given time, while Earned Value shows how much
value you have actually earned.
Formula for Earned Value (EV)
The formula to calculate the Earned Value is simple. Multiply the actual percentage of the
completed work by the project budget.
Earned Value = % of completed work X BAC (Budget at Completion).
Cost Variance (CV)
A cost variance is the difference between the cost actually incurred and the budgeted or
planned amount of cost that should have been incurred. Cost variances are most commonly
tracked for expense line items, but can also be tracked at the job or project level, as long as
there is a budget or standard against which it can be calculated. These variances form a
 standard part of many management reporting systems. Some cost variances are formalized into
standard calculations. The following are examples of variances related to specific types of costs:

(cix) Direct material price variance

(cx) Fixed overhead spending variance
(cxi) Labor rate variance
(cxii) Purchase price variance
(cxiii) Variable overhead spending variance

Schedule Variance (SV)

Schedule variance is an indicator of whether a project schedule is ahead or behind and is
typically used within Earned Value Management (EVM). Schedule Variance can be calculated by
subtracting the Budgeted Cost of Work Scheduled (BCWS) from the Budgeted Cost of Work
Performed (BCWP). The BCWS measures the budget for the entire project and the BCWP
measures the cost of actual work done. The difference is the schedule variance.

Cost Performance Index (CPI), Schedule Performance

Index (SPI)
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Cost Performance Index (CPI)

The Cost Performance Index helps you to analyze the cost efficiency of the project. It measures
the value of the work completed compared to the actual cost spent.
According to theintactone, “The Cost Performance Index (CPI) is a measure of the cost efficiency
of budgeted resources, expressed as a ratio of earned value to actual cost.”
The Cost Performance Index specifies how much you are earning for each dollar spent on the
project. It shows how well the project is sticking to the budget.
The Formula for the Cost Performance Index (CPI)
You can calculate the Cost Performance Index by dividing the earned value by actual cost.
Cost Performance Index = (Earned Value) / (Actual Cost)
CPI = EV / AC
You can conclude that:
Earning and spending is equal if the CPI is equal to one. You can say that the project is
proceeding as per the planned spending.

(cxiv) You are earning more than what you have spent if the CPI is greater than one. The project is under
budget.
(cxv) You are earning more than what you have spent if the CPI is greater than one. The project is under
budget.
(cxvi) Earning and spending is equal if the CPI is equal to one. You can say that the project is proceeding as per
the planned spending.
 Example
You have a project to be completed in 12 months, and the budget of the project is 100,000 USD.
6 months have passed, and 60,000 USD has been spent, but upon closer review, you find that
only 40% of the work has been completed.
Find the Cost Performance Index for this project and deduce whether you are under budget or
over budget.
The following information is given in the question:
Actual Cost (AC) = 60,000USD
Planned Value (PV) = 50% of 100,000 USD = 50,000 USD
Earned Value (EV) = 40% of 100,000 USD = 40,000 USD
Now,
Cost Performance Index (CPI) = EV / AC
= 40,000 / 60,000
= 0.67
Hence, the Cost Performance Index is 0.67
Schedule Performance Index (SPI)
The Schedule Performance Index (SPI) shows how you are progressing compared to the planned
project schedule.
According to theintactone, “The Schedule Performance Index (SPI) is a measure of schedule
efficiency, expressed as the ratio of earned value to planned value.”
The Schedule Performance Index gives you information on the time efficiency of your project.
The Formula for the Schedule Performance Index (SPI)
You can find the Schedule Performance Index by dividing Earned Value by Planned Value.
Schedule Performance Index = (Earned Value) / (Planned Value)
SPI= EV / PV
You can conclude that:
The completed work is equal to the planned work if the SPI is equal to one; the project is on
schedule.

71 You have completed more work than planned if the SPI is greater than one; the project is ahead of
schedule.
72 If you have completed less work than planned work if the SPI is less than one. The project is behind
schedule.
73 The completed work is equal to the planned work if the SPI is equal to one; the project is on schedule.

Make sure you consider all tasks while calculating the Schedule Performance Index. Sometimes,
you may only consider those on the critical path and ignore the rest, which will give you an
incorrect result.
Therefore, make sure that non-critical activities are included.
Example
You have a project to be completed in 12 months, and the budget is 100,000 USD. Six months
have passed, and 60,000 USD has been spent, but upon closer review, you find that only 40% of
the work has been completed so far.
 Find the Schedule Performance Index and deduce whether the project is ahead or behind of
schedule.
Given in the question:
Actual Cost (AC) = 60,000USD
Planned Value (PV) = 50% of 100,000 USD =50,000 USD
In the question, the Planned Value is not given. However, the project duration is 12 months and
6 months have passed. In this situation, you can assume the budget was distributed evenly for
each month. Therefore, in 6 months, 50% of the budget will have been spent.
Earned Value (EV) = 40% of 100,000 USD = 40,000 USD
Now,
Schedule Performance Index (SPI) = EV / PV
= 40,000 / 50,000 = 0.8
Hence, the Schedule Performance Index is 0.8

Project Termination: Types of Termination

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Project termination (or close-out) is the last stage of managing the project, and occurs after the
implementation phase has ended. Acceptance testing has been carried out, and the project
deliverables have been handed over to the client. The project team has been disbanded and
unused resources have been disposed of as appropriate. All outstanding bills have been passed
for payment, and the final invoices for work carried out have been issued. The main purpose of
the close-out stage is to evaluate how well you performed, and to learn lessons for the future. A
final project status report is prepared that should contain a summary of changes to the project
scope (if any), and show how actual completion dates for project milestones and costs accrued
compare with the final version of the project schedule and budget. All significant variances from
the project baseline should be explained here. A review is then undertaken with the client and
other project stakeholders, during which the project outcomes are evaluated against the
project’s stated aims and objectives. The results of the review are recorded in a close-out
report.
Types of Termination
Termination types are a commonly used tool for HR administrators to track the nature of
historical terminations, e.g., in the event that a previously terminated employee reapplies to the
same company.
There are two main termination types: Voluntary (Regretted or Non-Regretted)  and Involuntary:

(cxvii) Involuntary: the company elects to end the employment relationship; fired or laid off
(cxviii) Voluntary (Regretted or Non-Regretted):employee elects to end employment; resignation

If Voluntary is selected you will be asked, Would you hire this employee again?
There is no legal requirement for reporting termination types, but some states have specific
requirements for furnishing an employee’s final paycheck according to the type of termination.
Project Termination Process
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A project is a temporary endeavor, so it has a beginning and also an end. We have seen the
phases of the project life cycle, called the ‘project management process groups’. Every process
group has a particular objective. But what is the aim of the project closure? Doesn’t the project
end after finishing the work and handing out the outcome? Of course no. During the last phase
of the project life cycle, meaning the project closure, everything should be detailed in order to
measure if the project went as planned and if the outcome is done as required by the customer.
Project closure activities ensure the recording project documents, archiving in organizational
process assets, making final payments, releasing resources and completing the project. Every
project teaches lessons to the organization whether it’s a success or is a failure. So even after a
project finishes, the documentation of this project is going to be helpful for completing the
coming projects successfully.
8 steps of the project termination phase
1: Confirm work is done as per the requirements
Once the project is closing, all deliverables of the project must have been completed and
delivered to the customer. You should also take formal acceptance of the customer for the
completed work.
2: Complete procurement closure
Since the project is closing, you should complete any remaining payments that need to be made
to the suppliers or partners. The procurement steps are also completed.
3: Gain formal acceptance
Formal acceptance of the project and project deliverables are taken from the customer. Usually,
the customer presents a written document, it can be an email or a signed off document, which
states that the project has been completed and they accept the outputs of the project.
4: Complete final performance reporting
The final performance of the project is calculated and recorded. These include cost
performance, schedule performance, quality performance etc. For instance, whether the project
has been completed under budget or if it could not be completed, how much did the project
exceeded the planned budget?
5: Index and archive records
Collected documents are finalized. Final versions of the project management plans and all
necessary documents about the project are archived in the company records.
6: Update lessons learned
Lessons learned is collected and gathered from all stakeholders. Lessons learned documentation
is stored in the organizational process assets of the company.
7: Hand-off completed product
Once the project is completed, the product of the project is handed over for the use of the end
customer. The handover may need a predetermined period of assistance or some documents
describing how to use or how to operate with the product.
8: Release the resources
After the project is completed successfully, all assignments of the project resources are closed,
lessons learned inputs from the project resources are collected and then these resources are
released respectively.
As you see, the project closure is also as important as the other phases, so you must take these
activities into consideration for better outcomes in your next projects.