UNIT – I

FINANCIAL EVALUATION OF PROJECTS AND PROJECT PLANNING

Lecture No.:-

Introduction:-

Project:
A project is an investment activity where we expend capital resources to create a
producing asset from which we can expect to realize benefits over an extended period of time. Or
a project is an activity on which we will spend money in expectation of returns and which
logically seems to lend itself to planning, financing and implementation as a unit. A project
should have the following characteristics.
1. It should have a specific starting point and specific ending point.
2. Its major costs and returns are measurable
3. It should have a specific geographic location
4. It should have a specific clientele group
5. It should have a well-defined time sequence of investment and production activities.

Capital Investment Proposals (Capital Budgeting):-

The main objective of Capital Investment Proposals is to describe:
• Meaning nature and importance of capital expenditure decisions; and
• Criteria of capital expenditure decisions.
The efficient allocation of funds is among the main functions of financial management.
Allocation of funds means investment of funds in assets or activities. It is also called investment
decision because we have to select the assets in which investment has to be made. These assets
can be classified into two parts:-
• Short –Term Or Current Assets
• Long – Term Or Fixed Assets
Objectives of Capital Budgeting Decision
Capital budgeting helps in selection of profitable projects. A company should have system for
estimating cash flow of projects. A multidisciplinary team of managers should be assigned the
task of developing cash flow estimates. Once cash flow has been estimated, projects should be
evaluated to determine their profitability. Evaluations criteria chosen should correctly rank the
projects. Once the projects have been selected they should be monitored and controlled. Proper
authority should exist for capital spending. Critical projects involving large sum of money may
be supervised by the top management. A company should have a sound capital budgeting and
reporting system for this purpose. Based on the comparison of actual and expected performance,
projects should be reappraised and remedial action should be taken.
Kinds of Capital Expenditure Decisions
Capital expenditure decisions are of following types:
Expansion and diversification
A company may add capacity to its existing product lines to expand existing operations.
For example, a fertilizer company may increase its plant capacity to manufacture in more areas.
Diversification of a existing business require investment in new product and a new kind of
production activity within the firm. Investment in existing or new products may also be called as
revenue-expansion investment.
Replacement and modernization
The main objective of modernization and replacement is to improve operating efficiency and
reduce costs. Assets become out dated and obsolete as a result of technological changes. The firm
must decide to replace those assets with new assets that operate more economically. If a cement
company changes from semi-automatic drying equipment to fully automatic drying equipment, it
is an example of modernization and replacement.
Capital Budgeting Process
Capital budgeting is a complex process which may be divided into five broad phases.
These are:-
• Planning
• Analysis
• Selection
• Implementation
• Review
Planning
The planning phase of a firm’s capital budgeting process is concerned with the articulation of its
broad strategy and the generation and preliminary screening of project proposals. This provides
the framework which shapes, guides and circumscribes the identification of individual project
opportunities.
Analysis
The focus of this phase of capital budgeting is on gathering, preparing and summarizing relevant
information about various project proposals which are being considered for inclusion in the
capital budget. Under this a detail analysis of the marketing, technical, economic and ecological
aspects is undertaken.
Selection
Project would be selected in the order in which they are ranked and cut off point would be
reached when the cumulative total cost of the projects become equal to the size of the plan funds.
A wide range of appraisal criteria have been suggested for selection of a project. They are
divided into two categories viz, non-discounting criteria and discounting criteria (discussed in
detail in next section).
Implementation
Every entrepreneur should draw an implementation scheme or a time table for his project to
ensure the timely completion of all activities involved in setting upon enterprise. Timely
implementation is important because if there is delay it causes, among other things, a project cost
overrun. In India delay in project implementation has become a common feature.
Implementation phase for an industrial project, which involves settings up of manufacturing
facilities, consists of several stages. These are:-

• Project and engineering design

• Negotiation and contracting
• Construction
• Training
• Plant and commissioning
The above schedule can be broken up into scores of specific tasks involved in setting up the
enterprise. Project evaluation and review technique (PERT) and critical path method (CPM) can
also be used to get better insight into all activities related to implementation of the project.

Review
Once the project is commissioned, the review phase has to be set in motion. Performance review
should be done periodically compare actual performance with projected performance. A
feedback device is useful in several ways.
• It throws light on how realistic were the assumption underlying the project.
• It provides a documented log of experience that is highly valuable in future decision.
• It suggests corrective action to be taken in the light of actual performance. It helps in
uncovering judgmental basis.
 Lecture No.:-

Criterions to judge the worth whileness of capital projects:-

Methods/Criteria of Project Evaluation:

The methods/criteria more often used for evaluating a project are (1) Simple rate of return
(SRR) (2) Payback Period (PBP) (3) Benefit Cost Ratio (BCR) (4) Net present Value (NVP) or
Net Present Worth (NPW) and (5) Internal Rate of Return (IRR). The SRR and the PBP are the
undiscounted measures while BCR, .NPV and IRR are the discounted measures of project worth
of Investment. Discussions on the following methods are given below:
1. Simple Rate of Return:
The SRR is a. commonly used criterion of project evaluation. It basically expresses the
average net profits (Net Cash Flows) generated each year by an investment as a percentage of
investment over the investment's expected life. It is as
SRR = Y/I
Where
Y = the average annual net profit (after allowing depreciation) from the investment
I= the initial investment
The calculated SRR should be compared with the investor's Required Rate of Return
(RRR) to judge the profitability of the investment. The investment will be accepted if SRR.RRR,
otherwise it will be rejected. When the SRR of all the investment opportunities is greater than the
RRR of the investor, then the investment yielding the highest SRR should be selected.
2. Pay Back Period (PBP):
The Payback period is the length of time required for an investment to pay itself out. It is
computed as
PBP = I/E
When the projected net cash flows (E) are uniform or

When the projected net cash flows are non-uniform.

Where I = the initial investment.
E = the projected net cash flows per year from the investment.
PBP = Pay Back Period expressed in number of years.
Individual investments are ranked according to their relative payback period with the shortest
being the most favored. The acceptability of the investment is determined by comparison with
the investor's required payback period (RPP). Accept the investment when the PBP<RPP,
otherwise reject the investment. Although it is simple and easy to use, the PBP method has two
major weaknesses as a measure of investment worth.
(1) This method fails to consider earnings after the payback period is reached.
(2) It fails to consider the difference in timing of cash flows.
3. Benefit Cost Ratio (BCR):
It is an indicator used in the formal discipline of cost benefit analysis which summative
the value of money of project or proposal. BCR is the ratio of the benefits of a project or
proposal, expressed in monetary terms relative to its costs. All BCR should be expressed in
discounted PV. BCR take into account the amount of money gain realized by performing a
project versus.
It is the ratio of present worth of benefit stream to present worth of cost stream .i.e.

Mathematically, it can be shown as

Where,
Bn = Benefit in each year
Cn = Cost in each year
n = number of year
i = interest (discount) rates.
The investment is said to be profitable when the BCR is one or greater than
This method is widely used in economic analysis and not in private investment analysis.
4. Net Present Value (NVP):
Net present value is computed by finding the difference between the present worth of
benefit stream less the present worth of cost stream. Or it is simply the present worth of the cash
flow stream since it is a discounted cash flow measure of project worth along with internal rate of
return.
NPV = Present worth of Benefit Stream — Present Worth of Cost Stream. Mathematically, it can
be shown as

NPV = Present worth of the cash flow stream.

Mathematically,

Where
Bn = Costs in each year of the project.
Cn = Costs in each year of the project.
n = number of years in the project.
i = interest (discount) rate.
A project is profitable or feasible for investment when the internal rate of return is higher than
the opportunity cost of capital.
5. Internal rate of Return:
The internal rate of return is that discount rate which just makes the NPV of the cash flow
just equal to zero.

Bn = Costs in each year of the project.

Cn = Costs in each year of the project.
n = number of years in the project.
i = interest (discount) rate.
The computation of IRR for project involves a trial and error method. Here alternative discount
rates are used to the cash flow streams of the project under consideration till the NPV of the pi
eject reaches zero. However, it is not always possible to get a discount rate which makes the
NPV exactly equal to zero through this trial and error method. We may get discount rate, which
makes the NPV nearer to zero i.e. either positive or negative. Under such situation, we use
interpolation to estimate the true value. Interpolation is simply finding the intermediate value
between too discount rates we have chosen.
The rule for interpolating the value of the internal rate of return lying between two discount rates
too high on the one side and the too low on the other is.
IRR = Lower discount rate Difference between the two discount rates (NPV at lower discount
rate : Absolute difference between the NPVs of the two discount rates)
 Lecture No.:-

Risk Cost Management:-

Risk management is the continuing process to identify, analyze, evaluate, and treat loss
exposures and monitor risk control and financial resources to mitigate the adverse effects of
loss. Loss may result from the following: financial risks such as cost of claims and liability
judgments.
In the traditional cost management, the subject of the cost is the production and operation
of material products. Certainty constitutes its important feature. However, with the development
of market economy, the risks increase continually and the uncertainty of the cost emerges
increasingly. Especially, the development of the financial market makes the social and economic
structure change greatly and the virtual economy develops at an amazing speed. On the one hand,
the wealth effect generated by the fictitious economy promotes the prosperity of the global
economy. On the other hand, it makes that the financial risk more serious. The risk management
is increasingly challenged. The uncertainty and risk of economy and finance also more and more
affect cost and cost management. Cost management increasingly becomes the important means
of risk management.
Kinds of risk cost
The structure of risk cost is complex. Some kinds can be classified into from different angles.
Risk management cost under certainty and risk loss cost under uncertainty On the
basis of uncertainty, we can divide risk cost into two kinds: risk management cost under
certainty and risk loss cost under uncertainty. According to the relatively stable extent of
probability’s uncertain condition. Risk loss cost under uncertainty can also be classified
into three kinds: (1) Expected loss cost; (2) Unexpected loss cost; (3) Exquisite loss cost.
Actual risk cost and risk opportunity cost

Aimed at the function of decision, there are actual risk cost and risk opportunity cost.
When choosing and investing in the risk management project, risk opportunity cost is a
kind of risk gain in the process of selection for the optimal risk project and abandoning
sub-prime risk project. It is mainly used for reference for the risk decision, rather than
actual cost.
 Exogenous risk cost and Endogenous risk cost
According to the causes of formation, risk cost has exogenous risk cost and endogenous
risk cost. Exogenous risk cost is caused by the external objects, for example, Market risk
and credit risk in finance field also can lead to the exogenous risk cost. Because of the
cognition and management for risk in the process of internal operation, endogenous risk
cost is easily brought about.
Strict risk cost and generalized risk cost
The strict risk cost only means the current expense of enterprises, which affects the
current profit and loss cost. The generalized cost not only includes the costs which have
already been treated as expenses, but also the costs treated as capitals.

Major Causes of Project Failures;

1. Inadequate project formulation

Poor field investigation, inadequate information, lack of experience, etc.
2. Poor planning for implementation
Inadequate time plan, inadequate resource plan, inadequate equipment supply
plan, inter linking not anticipated, poor communication etc.
3. Lack of proper contract planning & management
4. Lack of project management during execution
Inefficient and ineffective working, delays, changes in scope of work and
location, law & order.
5. Failure due to unforeseen natural calamities
6. Failure due to management
a) Planning failure
b) Organization failure
c) Resource failure
d) Directional failure
e) Controlling failure
f) Co-ordination failure
g) Other failure
7. Poorly defined project scope
8. Inadequate risk management
9. Failure to identify key assumptions
10. Project managers who lack experience and training
11. No use of formal methods and strategies
12. Lack of effective communication at all levels
13. Key staff leaving the project and/or company
14. Poor management of expectations
15. Ineffective leadership
16. Lack of detailed documentation
17. Failure to track requirements
18. Failure to track progress
19. Lack of detail in the project plans
20. Inaccurate time and effort estimates
21. Cultural differences in global projects
 Lecture No.:-

Categories and Objectives of Construction Projects:-

Construction is defined as “a process that consists of the building or assembling of
infrastructure.” On the other hand, a Construction Project “includes all material and work
necessary for the construction of a finished structure for occupancy by End Customer. This
includes site preparation, foundations, mechanical, electrical work, and any other work necessary
to complete the project.”

Categories of Construction Projects

The various categories of Construction Projects are:

a) Nature of construction facility.

Building construction, industrial construction etc. Special purpose projects.
b) Nature of work
Repetitive or non-repetitive.
c) Nature of construction contracts
Item rate, Lump-sum, Turnkey, BOT etc.
d) Completion time
Long duration time (over 5 years)
Medium……(3-5 yeras)
Normal……..(1-3 years)
Short term….(less than 1 years)
e) Mode of execution
Departmental or contractual
f) Need based projects
Public need project, corporate need project, commercial project.
Residential
Residential construction projects include houses, townhouses, apartments, condominiums,
cottages, single unit dwellings and subdivisions. The housing designs are generally done by
architects and engineers and the construction is executed by builders who hire subcontractors for
structural, electrical, mechanical and other specialty work. This type of project must conform to
local building authority regulations and codes of practice. Many new builders are attracted to
residential projects because of its ease of entry in the real estate market. This makes it a highly
competitive market with potentially high risks as well as high rewards.

Building
Building construction is perhaps the most popular type of construction project. It is the process of
adding structure to real property. Most of the projects are room additions and small renovations.
Most new building construction projects are construction of sheltered enclosures with walk-in
access for the purpose of housing people, equipment, machinery or supplies. It includes
installation of utilities and equipment.

Institutional and Commercial

Institutional and commercial building construction covers a great variety of project types and
sizes such as hospitals and clinics, schools and universities, sports facilities and stadiums, large
shopping centres and retail chain stores, light manufacturing plants and warehouses and
skyscrapers for offices and hotels. Specialty architects and engineers are often hired for
designing a particular type of building. This market segment has few competitors because of the
high costs and greater sophistication of institutional and commercial buildings as compared to
residential construction projects.

Industrial
Industrial construction is only a small part of the whole construction industry nevertheless it is a
very important part of the industry. These projects are generally owned by big, for-profit
industrial corporations such as manufacturing, power generation, medicine, petroleum, etc.

Specialized Industrial Construction

This type of construction project usually involves very large scale projects with a high degree
of technological complexity such as nuclear power plants, chemical processing plants, steel
mills and oil refineries.

Highway Construction
Highway construction involves the construction, alteration, or repair of roads, highways,
streets, alleys, runways, paths, parking areas, etc. It includes all incidental construction in
conjunction with the highway construction project.
Heavy Construction
Heavy construction projects usually involve projects that are not properly classified as either
“building” or “highway.” Examples of this type of project would be: water and sewer line
projects, dams, sewage treatment plants and facilities, flood control projects, dredging projects,
and water treatment plants and facilities.

Objectives of Construction Projects:-

• Scope
• Quality
• Resources
• Completion time
• Cost
Scope defines the deliverable. It involves the quantity of work performed and nature of tasks
involved in the execution of the project.
Quality of product to be achieved is stated in terms of construction design drawing &
specifications.
Resources are necessary to perform the work.
Completion time depends upon the speed with which the project is to be executed.
Cost is the bulleted expenditure, which the client has agreed to commit for creating the desired
construction facility.
 Lecture No.:-

Project Development Process:-

Dividing a project into phases makes it possible to-lead it in the best possible direction. Through
this organization into phases, the total workload of a project is divided into smaller components,
thus making it easier to monitor. The following, paragraphs describe a phasing model that has
been useful in practice. It includes six phases:
1. Initiation phase
2. Definition phase
3. Design phase
4. Development phase
5. Implementation phase
6. Follow-up phase
Initiation Phase:-
The initiation phase is the beginning of the project. In this phase, the idea for the project
is explored and elaborated. The goal of this phase is to examine the feasibility of the project. In
addition, decisions are made concerning who is to carry out the project, which party (or parties)
will be involved and whether the project has an adequate base or support among those who are
involved.
In this phase, the current or prospective project leader writes a proposal, which contains a
description of the above-mentioned matters. Examples of this type of project proposal -include
business plans and grant applications. The prospective sponsors of the project evaluate the
proposal and, upon approval, provide the necessary financing. The project officially begins at the
time of approval.
Questions Lobe answered in the initiation phase include the following:
• Why this project?
• Is it feasible?
• Who are possible partners in this project?
• What should the results be?
• What are the boundaries of this project (what is outside the scope of the project)?
Definition Phase:-
After the project plan (which was developed in the initiation phase) has been approved,
the project enters the second phase: the definition phase. In this phase, the requirements-that are
associated with a project result are specified as clearly as possible. This involves identifying the
expectations that all of the involved parties have with regard to the project result.
How many files are to be archived? Should the meta data conform to the Data
Documentation Initiative format, or will the Dublin Core (DC) format suffice? May files be
deposited in their original format, or will only those that conform to the Preferred Standards be
accepted? Must the depositor of a data set ensure that it has been processed adequately in the
archive, or is this the responsibility of the archivist? Which guarantees will be made on the
results of the project? The list of questions goes on and on.
Design Phase:-
The list of requirements that is developed in the definition phase can be used to make
design choices. In the design phase, one or more designs are developed, with which the project
result can apparently be achieved. Depending on the subject of the project, the products of the
design phase can - include dioramas, sketches, flow charts, site trees, HIMI screen designs,
prototypes, photo impressions and UML schemas. The project supervisors use these designs to
choose the definitive design that will be produced in the project. This is followed by the
development phase. As in the definition phase, once the design has been chosen, it cannot be
changed in a later stage of the project.
Development Phase:-
During the development phase, everything that will be needed to implement the project is
arranged. Potential suppliers or subcontractors are brought in, a schedule is made, materials and
tools are ordered, and instructions are given to the personnel and so forth. The development
phase is complete when implementation is ready to start. All matters must be clear for the parties
that will carry out the implementation.
In some projects, particularly smaller ones, a formal development phase is probably not
necessary. The important point is that it must he clear what must be done in the implementation
phase, by whom and. when.
Implementation Phase:-
The Project takes shape during the implementation phase. This phase involves the
construction of the actual project result. Programmers are occupied with encoding, designers are
involved in developing graphic material, contractors are building, and the actual reorganization
takes place. It is during this phase that the project becomes visible to outsiders, to whom it may
appear that the project has just begun. The implementation phase is the doing phase, arid it is
important to maintain the momentum.
In one project, it had escaped the project team’s attention that one of most important team
members was expecting to become a father at any moment and would thereafter be completely
unavailable for about a month. When the time came, an external specialist was brought in to take
over his work, in order to keep the team from grinding to a halt. Although the team was able to
proceed, the external expertise put a considerable dent in the budget.
At the end of the implementation phase, the result is evaluated according to the list of
requirements that was created in the definition Phase. It is also evaluated according to the
designs. For example, tests may be conducted to determine whether the web application does
indeed support Explorer 5 and Firefox 1.0 and higher. It may be determined whether the trim on
the building has been made according to the agreement or whether the materials that were used
were indeed those that had been specified- in the definition phase. This phase is complete when
all of the requirements have been met and when the result corresponds to the design
Follow up Phase:-
Although it is extremely important, the follow-up phase is often neglected. During this
phase, everything is arranged that is necessary to bring the project to a successful completion.
Examples of activities in the follow-up phase include writing handbooks, providing instruction
and training for users, setting up a help desk, maintaining the result, evaluating the project itself,
writing the project report, holding a party to celebrate the result that has been achieved,
transferring to the directors and dismantling the project-team.
Planning, scheduling is an important part of the construction project management.
Planning and scheduling of construction activities helps engineers to complete the project in time
and within the budget.
The term 'Construction' does not only denotes physical activities involving men, materials and
machinery but also covers the entire gamut of activities from conception to realization of a
construction project. Thus, management of resources such as men; materials, machinery requires
effective planning and scheduling of each activity.

Function of Project Management:-

Project management is the art and science of converting vision into reality working
efficiently, effectively & safely. It is also defined as the planning, monitoring and controlling of
all aspects of a project. Project management has achieved almost universal recognition as the
most effective way to ensure the success of large, complex, multidisciplinary tasks. The success
of project management is based on the simple concept that the sole authority for the planning, the
resource allocation, and the direction and control of a single time- and budget-limited enterprise
is vested in a single individual.
• Planning
It involves deciding in advance what is to be done, how and in what order it is to be done
in order to achieve the objectives. Planning decides the future course of action.
• Scheduling
Scheduling is the fitting of the final work plan to a time scale. It shows the duration and
order of various construction activities. It deals with the aspect of 'when to do it'.
• Organizing
It establishes a structural relationship among of functions of people.
It includes;
a) Dividing work into component activities.
b) Designing job structures.
c) Allocating resources Responsibilities.
• Staffing
It implies managing and keeping manned the position of crated by the organization
structure and providing them the right quality resources at the right time.
a) Preparing resource procurement schedules
b) Developing specifications
c) Preventing wastage
d) Supplying on time required quantity
• Directing
It involves influencing people so as to enable them to contribute to organizational goals
efficient them to contribute to organizational goals efficient & effectively.
a) Providing effective leadership
b) Motivating participants behavior
c) Communicating instructions
• Controlling
It involves monitoring of the performance and applying corrective measure in case of
deviations from the plan.
a) Specifying factors to be controlled.
b) Stating methods of measurement.
c) Monitoring data.
d) Applying corrective measures.
e) Re-planning when necessary..
• Coordinating:
It involves bringing together and coordinating the work of various departments and
sections so as to have good communication. It is necessary for each section to aware of its
role and the assistance to be expected from others.
 Lecture No.:-

Project Management Organization and Staffing:-

A project organization is a structure that facilitates the coordination and implementation

of project activities. Its main reason is to create an environment that fosters interactions among
the team members with a minimum amount of disruptions, overlaps and conflict. One of the
important decisions of project management is the form of organizational structure that will be
used for the project.
Each project has its unique characteristics and the design of an organizational structure should
consider the organizational environment, the project characteristics in which it will operate, and
the level of authority the project manager is given. A project structure can take on various forms
with each form having its own advantages and disadvantages.
The structure defines the authority by means of a graphical illustration called an organization
chart.
A properly designed project organization chart is essential to project success. An organization
chart shows where each person is placed in the project structure. An organization chart is drawn
in pyramid form where individuals located closer to the top of the pyramid have more authority
and responsibility than members located toward the bottom.
It is the relative locations of the individuals on the organization chart that specifies the working
relationships, and the lines connecting the boxes designate formal supervision and lines of
communication between the individuals.
The organization chart has a limited functionality; it only shows the hierarchical relationship
among the team members but does not shows how the project organization will work, it is for
that reason that the design should consider factors that will facilitate the operation of the
structure; these include communications, information flows, coordination and collaboration
among its members.
 Fig. Project Organization Chart
Creating the project structure is only a part of organizing the project; it is the actual
implementation and application that takes the most effort. The project organization chart
establishes the formal relationships among project manager, the project team members, the
development organization, the project, beneficiaries and other project stakeholders. This
organization must facilitate an effective interaction and integration among all the major project
participants and achieve open and effective communication among them.

Factors in designing a Project Structure

There are two design factors that significantly influence the process of developing a project
management structure. These are the level of specialization, and the need for coordination. The
project manager should consider these factors at the moment of designing the project
organization in order to maximize the effectiveness of the structure.

Specialization affects the project structure by the degree of specialty in technical areas or
development focus; projects can be highly specialized and focus on a specific area of
development, or have different broad specializations in many areas of development. For large
projects that have multiple specializations or technical areas, each area may have a different
need; from differences in goals, approaches and methodologies, all of which influence the way
the project will implement its activities.
While specialization allows each project component to maximize their productivity to attain their
departmental goals, the dissimilarities may lead to conflict among the members or leads of each
component. In general, the greater the differences, the more problems project managers have in
getting them to work together.
Coordination is required to bring unity to the various elements that make up a project. The
project work is organized around a work breakdown structure (WBS) that divides the overall
project goals into specific activities or tasks for each project area or component; the project
manager must design an organizational structure that ensure that the various components are
integrated so that their efforts contribute to the overall project goal. Integration is the degree of
collaboration and mutual understanding required among the various project components to
achieve project goals. Most projects are characterized by the division of labor and task
interdependencies, creating the need for integration to meet project objectives. This need is
greatest when there are many project components that have different specializations. The goal of
the project management structure is the achievement of harmony of individual efforts toward the
accomplishment of the group goals.

Types of Project Organizations Structures

Of the several factors to consider when deciding on the design of project organizational
structures, especially within an existing organization, the factor that has a significant is the extent
of authority and responsibility top management is prepared to delegate to the project manager.
An important function of the organizations’ top management is to design an organization that
fully supports project management. This is done by redesigning the organization to emphasize
the nature of the projects and adapting how roles and responsibilities are assigned.
A project has three organization structures available for design and all are defined by the level of
organizational authority given to the project manager:
• Programmatic based, in which project managers have authority only within the program
focus or area.
• Matrix based, in which the project manager shares responsibility with other program unit
managers.
• Project based, in which project managers have total authority.

Programmatic based
The programmatic focus refers to a traditional structure in which program sector managers have
formal authority over most resources. It is only suitable for projects within one program sector.
However, it is not suitable for projects that require a diverse mix of people with different
expertise from various program sectors. In a programmatic based organization, a project team is
staffed with people from the same area. All the resources needed for the project team come from
the same unit. For instance, if the project is related to the health area, the project resources come
from the health unit.

A major disadvantage of the programmatic based organization is that the program area may not
have all of the specialists needed to work on a project. A nutrition project with a water
component, for instance, may have difficulty acquiring specialty resources such as civil
engineers, since the only people available will work in their own program unit.
Another disadvantage is that project team members may have other responsibilities in the
program unit since they may not be needed fulltime on a project. They may be assigned to other
projects, but it is more typical that they would have support responsibilities that could impact
their ability to meet project deadlines.
Matrix Method
Matrix based project organizations allow program units to focus on their specific technical
competencies and allow projects to be staffed with specialists from throughout the organization.
For instance, nutrition specialists may report to one program unit, but would be allocated out to
work on various projects. It is common for people to report to one person in the programmatic
unit, while working for one or two project managers from other projects in different
programmatic units.
The main advantage of the matrix based organization is the efficient allocation of all resources,
especially scarce specialty skills that cannot be fully utilized by only one project. For instance,
monitoring and evaluation specialists may not be utilized full-time on a project, but can be fully
leveraged by working on multiple projects.
The matrix based organization is also the most flexible when dealing with changing
programmatic needs and priorities. Additional advantages to matrix management are: it allows
team members to share information more readily across the unit boundaries, allows for
specialization that can increase depth of knowledge and allow professional development and
career progression to be managed. Matrix management can put some difficulty on project
managers because they must work closely with other managers and workers in order to complete
the project. The programmatic managers may have different goals, objectives, and priorities than
the project managers, and these would have to be addressed in order to get the job done. An
approach to help solve this situation is a variation of the Matrix organization which includes a
coordinating role that either supervises or provides support to the project managers. In some
organizations this is known as the Project Management Office (PMO), dedicated to provide
expertise, best practices, training, methodologies and guidance to project managers.
Project Method
In this type of organization project managers have a high level of authority to manage and
control the project resources. The project manager in this structure has total authority over the
project and can acquire resources needed to accomplish project objectives from within or outside
the parent organization, subject only to the scope, quality, and budget constraints identified in the
project.
In the project based structure, personnel are specifically assigned to the project and report
directly to the project manager. The project manager is responsible for the performance appraisal
and career progression of all project team members while on the project. This leads to increased
project loyalty. Complete line authority over project efforts affords the project manager strong
project controls and centralized lines of communication. This leads to rapid reaction time and
improved responsiveness. Moreover, project personnel are retained on an exclusive rather than
shared or part-time basis. Project teams develop a strong sense of project identification and
ownership, with deep loyalty efforts to the project and a good understanding of the nature of
project’s activities, mission, or goals.

Pure project based organizations are more common among large and complicated projects. These
large projects can absorb the cost of maintaining an organization whose structure has some
duplication of effort and the less than cost-efficient use of resources. In fact, one major
disadvantage of the project based organization is the costly and inefficient use of personnel.
 Lecture No.:-

Stages and Steps Involved In Project Planning:-

Job Planning
i) It involves planning of construction work, division into different stages according to
sequence of work.
ii) It includes;
a) Manner of execution of job
b) Duration of job
c) Planning resources

* Project Planning
It is the process of determining what is to be done, where and when is to be done by
whom. Defining goals, establishing a strategy for achieving these goals and developing a plan to
integrate and co-ordinate activities.
* Objectives
i) Procurement of materials in advance.
ii) Proper design of each element of the project
iii) Employment of trained and equipment & machinery
iv) To provide welfare schemes
v) Proper selection of equipment & machinery
vi) To arrange proper safety measures
Technical Planning
It is done by an engineer for economical and safe execution of the work. It includes
a) Preparation detailed drawing & specification
b) Preparation of detailed estimate
c) Finalizing method of execution of work
d) Planning resource
e) Checking of stages of procuring resource
f) Visualization & remedies of obstacles

Pre. & Post Tender Planning

i) Pre-tender includes time do invite tender, finalizing acquisition of site, planning of
resources etc.
ii) Post-tender includes arrangement of machinery, equipment after finalizing the tender,
availability of labour quantities of materials etc.

The following steps are involved in Project Planning

Identify the Long Range Goals
Begin by describing the conditions that would exist in a “perfect community;” that set of
statements is the community’s long range goals in such areas as “employment”, “education”,
cultural preservation”, “housing” and “family income”. Sometimes “the community” engaged in
project planning is a subset of the overall community. The community
subset might be the community elders, local school student population, or any of the definable
sub-populations found in your community.

Conduct a Community Assessment to Identify the Problem

A successful project is one that was designed based on a good understanding of the community
conditions and identifies the problems preventing the community from achieving its long-range
goal(s). Community conditions include aspects of the community such as its geographic location,
demographics, ecosystem, and history. A community assessment can be conducted to identify the
problem(s) and determine which adverse current community condition a project will address.

Assess Available Resources

Assessing your available resources will help determine the best strategy for implementing your
project and should be part of your community assessment process. Begin this analysis with the
resources that currently exist within the community. Every project and every strategy is different
and requires a different set of resources, but a few hard-and-fast rules exist in the assessment of
available resources.

Refine Assessment of Assets

Use the list of assets/resources that you identified in the community assessment to build an
inventory of internal (from within the community) and external (from outside the community)
resources that could be available for a project that would address the problem(s) identified in the
assessment.

Determine the Project Goal

The project goal is a basic description of the purpose of the project, in other words, a reduction
or resolution of the problem or problems you identified earlier. The project goal should reflect
positive changes in the set of conditions desired by the community after the problem is
addressed. The goal statement represents the result of the successful completion of the project. It
is important to show the relationship between the project goal and the long-range community
goals.

Select a Project Approach/Strategy

Once you have determined your project goal, you are ready to develop your project approach or
strategy. Based on the information gathered in the previous steps, develop a list of possible
strategies for addressing your problem and achieving your goal and then select a strategy that
represents the best method for implementing your project. This strategy will be the basis for
developing your objectives and activities.

Develop Project Objectives and Activities

Once you have determined how you are going to implement your project, you can begin
developing your objectives. Objectives are specific, measurable accomplishments designed to
address the stated problems and attain your project goal. An objective is an endpoint, not a
process, to be achieved within the proposed project period. Completion of objectives must result
in specific, measurable outcomes that benefit the community and directly contribute to the
achievement of the stated project goal.
Identify Potential Challenges and Develop a Contingency Plan

Every project has the potential to run into challenges that can impede progress and prevent or
delay successful completion. Development of contingency plan requires that you identify and
prepare for potential challenges that may cause your project to be late in starting up or to fall
behind schedule and/or over budget.
Developing a contingency plan as a fallback position, or “just in case”, will leave you better
prepared to handle challenges. By identifying potential challenges and planning ahead, you will
be more likely to overcome challenges with minimal disruption and cost to your project.

Develop a Project Evaluation Plan

A project evaluation measures the effectiveness and efficiency of a project, and determines the
level of achievement of the project objectives. Findings from an evaluation will also help a tribe
or organization plan for the future, as it can identify additional or persistent problems that need to
be solved. This is why the project cycle is a continuous process.

Develop an Objective Work Plan

An Objective Work Plan (OWP) is to describing how (through what activities), when (within
what time frames) and by whom (assignment of responsibility) the project will be
implemented—as well as the expected outcomes or benefits. Items included in an OWP are:
• Project Title and Goal o The

problem addressed

• The Results expected and criteria for evaluating success in achieving them

• The Benefits expected and criteria for evaluating success in achieving them

• The Project Objectives (an OWP form is needed for each objective)

Develop a Sustainability Strategy

A sustainable project is one that can and will continue without additional Federal funds, and will
therefore contribute to long-term success and impacts within your tribe or organization.
However, sustainability is not simply about generating new grant dollars, it also involves
outlining a specific strategy and action plan for continuing your project. Significant attention is
placed on this section of your application because the funding source does not want the project to
fail once support is complete. Some projects lend themselves more to sustainability strategies,
however all projects include benefits to the community that can be continued after
implementation is complete.

Develop a Project Cost Estimate

The project budget is a program and fiscal document. The budget reflects the costs necessary to
perform the activities of the project. The budget is the dollar expression of the project being
proposed and must be reasonable and tied to the project objectives and work plan.

Write the Project Summary

The project summary is the last component written but will be the first read by an application
reviewer. The project summary should not exceed one single-spaced page, and should reflect the
essence of the entire project.
The summary section should include the following:

Clear statement of the priority area the application is submitted under.Two or three
pertinent facts about the community and the population to be served.
• A brief discussion of the problem that exists in the community, relating it to the facts you
presented in the first paragraph about your community (one paragraph maximum). This
can include your problem statement.
• The project goal
• The project objectives
• The impact indicators
• The number of people to be served or impacted by the project
 Lecture No.:-

Plan Development Process & Objectives of Construction Project Management:-

Project Phases and Process
In project life cycle, works are divided into phases for existing control. The cycle consist of four
phase scope formulate, planning & procurement, construction (execution & control) and close-
up.

Construction Project Planning Objectives:

Construction project planning is a process of documenting action based plans for
completion of project in time. Construction project planning includes defining the work task,
sequence of work, construction methods, roles and responsibilities and planning of resources to
complete the work as per schedule.
The documents construction planning includes designs and drawings, quantity estimates,
construction methods to be adopted, contract documents, site conditions, market survey, local
resources, project environment and the client's requirements.
Following are the objectives:
1. Planning of each activity:
The construction protect planning should identify and include every activity of the project in a
sequential order. Every activity should be scheduled in a timeline for tracking of construction
project.

2. Construction Methods:
Plans should include construction methods to be adopted for different construction activities and
tools and planning for tools and tackles for each activity so that they can be made available
whenever required.
3. Planning for Construction Equipments and Machinery:
Cost of a construction varies greatly with the use of construction equipments and heavy
machinery as their renting cost could be very high per day. So, planning and scheduling for such
equipments and machinery should he done in advance so that project activities goes on smoothly
without keeping these equipments in waiting. Project should be planned in such a way that the
use of these machinery can be made to Maximum during the given period to make it cost
effective.
4. Procurement of materials:
Project planning should also include procurement planning for materials. It is not advisable to
keep the material unused for site for long time. This can degrade the material as well as much of
the cost is spent on such materials. So, proper planning of material procurement also helps to
complete the project within budget.
5. Planning for employee skills:
Some of the construction activities require availability of skilled person to execute that work. It is
not necessary to employ such person throughout the project, so proper planning of such work can
reduce the cost of operation for that activity.
6. Planning for required documents and drawings:
Construction projects are executed based on the drawings and specifications. It is necessary to
track and make available these drawings at site on time so that the construction activities are not
stopped. Thus construction project planning should also include the schedules of drawings
specifications and other documents to be made available at site for review and execution without
delaying the project.
7. Financial Planning:
Financial planning of construction is the most important aspects. Different amounts arc required
at different stages of construction project. Proper planning of funds for construction helps the
project proceed smoothly. There is no point in investing the entire budgeted amount on the
construction project during start of the project. This can be done in phases as and when required