Description
The PPT on complete guide of project management.
Project Management
EXAMPLES OF PROJECT
• DEVELOP NEW PRODUCT • EFFECTING CHANGE MGT • DESIGNING/MODIFYING INFORMATION SYSTEMS • DESIGNING AND IMPLEMENTING NEW BUSINESS PROCESSES • BPR EXERCISES
OVERVIEW OF PROJECT MGT BODY OF KNOWLEDGE
• DESCRIBES SUM OF KNOWLEDGE IN PROJECT MGT PROFESSION • PMBOK INCLUDES KNOWLEDGE OF PROVEN TRADITIONAL PRACTICES AND EMERGING TRENDS THAT ARE WIDELY USED • PMBOK DESCRIBES GENERALLY ACCEPTED PM PRACTICES WHICH BRING VALUE AND PROFITABILITY TO THE PROJECT
TOPICS COVERED IN PMBOK
• • • • • • • • • PROJECT LIFECYCLE PROJECT MGT PROCESS PROJECT SCOPE MGT PROJECT QLTY MGT PROJECT TIME AND RESOURCE MGT PROJECT COST MGT PROJECT HR MGT PROJECT PROCUREMENT MGT PROJECT COMMUNICATION MGT
WHAT PROJECT MGT INVOLVES
• PROJECT PLANNING -DEFINITION OF WORK REQMNT -DEFINITION OF QTY AND QLTY OF WORK -DEFINITION OF RESOURCES REQD • PROJECT MONITORING -TRACKING PROGRESS -COMPARING ACTUAL OUTCOME AGAINST PREDICTED -ANALYSING IMPACT -MAKING ADJUSTMENTS
CLASSIFICATION OF PROJECTS
• • • • • • BASED ON TYPE OF ACTIVITY BASED ON NEED BASED ON LOCATION OF PROJECT BASED ON SIZE BASED ON PROJECT DURATION BASED ON OWNERSHIP
BASED ON NEED
• • • • • • NEW PROJECT EXPANSION PROJECT MODERNIZATION PROJECT REPLACEMENT PROJECT DIVERSIFICATION PROJECT BACKWARD OR FORWARD INTEGRATION PROJECT
CRITERIA FOR PROJECT SELECTION
• REALISM-REALITY OF SITUATION • CAPABILITY-EXISTING CAPABILITIES OF COMPANY EXISTING PROJECT AND THAT OF PARTNERS • FLEXIBILITY-RESULTS TO BE PRODUCED WITHIN RANGE OF PARAMETRIC CHANGES INTERNALLY AND EXTERNALLY • COST OF PROJECT-SHOULD BE LESS THAN THE BENEFITS ACCRUED
SUCCESSFUL PROJECT OBJECTIVES
• WITHIN TIME • WITHIN COST • AT THE DESIRED PERFORMANCE/QUALITY LEVEL • ACCEPTED BY THE CUSTOMER • MINIMUM SCOPE CHANGES • WITHOUT DISTURBING EXISTING WORKFLOW
PROJECT CHARACTERISTICS
• • • • • • • • • • • • SPECIFIC UNIQUE OBJECTIVES LIFE CYCLE TIME LIMIT FOR PLANNING AND EXECUTION UNIQUENESS TEAM WORK COMPLEXITY SUB CONTRACTING RISKS AND UNCERTAINTY CUSTOMER SPECIFIC CHANGING REQUIREMENTS RESPONSIVENESS TO ENVIRONMENT RESOURCE AND COST OPTIMIZATION
POTENTIAL BENEFITS OF PROJECT MGT
• IDENTIFICATION OF FUNCTIONAL RESPONSIBILITY TO ENSURE ALL ACTIVITIES ARE ACCOUNTED FOR • MEASUREMENT OF ACCOMPLISHMENT AGAINST PLANS • EARLY IDENTIFICATION OF PROBLEMS FOR CORRECTION • IMPROVED ESTIMATING CAPABILITY FOR FUTURE PLANNING
POTENTIAL BENEFITS OF PROJECT MGT
• • • • • DELIVERY OF SOLUTIONS INCREASED BUSINESS INCREASED QUALITY INCREASED PROFITABILITY CONTROLLED SCOPE CHANGE
OBSTACLES IN PROJECT MGT
• • • • • • • • • • • PROJECT COMPLEXITY HIGHTENED COMPETITION UNSTABLE ECONOMY COST INFLATION PROJECT INPUT SHORTAGES CUSTOMER SPECIAL REQUIREMENTS AND SCOPE CHANGES ORGANIZATIONAL RESTRUCTURING PROJECT RISKS TECHNOLOGY CHANGES SOCIETAL CONCERNS QUALITY OF WORK
EFFECTS OF UNCONTROLLED OBSTACLES
• • • • • • • DECREASED PROFITS INCREASED MANPOWER COST OVERRUNS,DELAYS,PENALTIES INABILITY TO COPE WITH NEW TECHNOLOGY NEW PRODUCTS INTRODUCED TOO LATE HASTY DECISIONS COSTING DEARLY DIFFICULTY IN ACHIEVING ON TIME TARGET OBJECTIVES IN REAL TIME • PROBLEMS IN RELATING COST TO TECHNICAL PERFORMANCE AND SCHEDULING DURING PROJECT EXECUTION
EFFECTS OF BAD PROJECT MANAGEMENT
• • • • LATE ACTIVITIES COMPLETION COST OVERRUNS SUBSTANDARD PERFORMANCE HIGH TURNOVER IN PROJECT
CAUSES OF BAD PROJECT MGT
• TOP MGT NOT COMMITED • TOO MANY PROJECTS GOING ON AT THE SAME TIME SOME DUPLICATING WORK eg mini computer in DEC leading to formation of DG • IMPOSSIBLE SCHEDULE COMMITMENTS • NO ONE PROJECT MANAGER • POOR CONTROL OF CUSTOMER CHANGES • POOR UNDERSTANDING OF CUSTOMERS TRUE REQUIREMENTS • NO INTEGRATED PLANNING AND CONTROL • OVERCOMMITED RESOURCES • UNREALISTIC PLANNING AND SCHEDULING • NO COST ACCOUNTABILITY
PURPOSE OF PROJECT MANAGEMENT
• FORESEE OR PREDICT DANGERS TO PROJECT • ENSURE PROJECTS COMPLETED AS SUCCESSFULLY AS POSSIBLE INSPITE OF RISKS • ACHIEVE FINAL RESULT AS DESIRED WITHIN RESOURCE BUDGETED IN TIME WITH THE REQUISITE QUALITY • USAGE OF PLANNING AND CONTROL AND RESOURCE ALLOCATION INITIATIVES TO MONITOR PROJECT PROGRESS
PROJECT PORTFOLIO MGT
• IMPORTANT INPUTS TO THIS PROCESS ARE THE GOALS AND STRATEGIES OF THE COMPANY WHICH ARE ALIGNED WITH THE VISION AND MISSION • PURPOSE OF PROJECT PORTFOLIO MGT IS TO -IDENTIFY PROPOSED PROJECTS AND PRIORITIZE -LIMIT THE NUMBER OF PROJECTS FLOATED TO HAVE BETTER CONTROL -IDENTIFY THOSE PROJECTS THAT BEST FIT THE ORG GOALS AND STARTEGY -ELIMINATE PROJECTS THAT HAVE EXCESSIVE RISK AND COSTS -BALANCE RESOURCES WITH NEEDS -BALANCE SHORT MEDIUM AND LONG TERM RETURNS
PROJECT PORTFOLIO ASSESSMENT
• WHETHER REQUIRED COMPETENCE EXISTS IN ORG • WHETHER THERE IS MARKET FOR OFFERING • HOW PROFITABLE IS THE OFFERING GOING TO BE • HOW RISKY IS THE PROJECT • ARE THE RIGHT RESOURCES AVAILABLE AT THE RIGHT TIME • IS THE PROJECT A GOOD TECHNOLOGICAL FIT IN THE ORG
CATEGORIES OF PROJECTS
• DERIVATIVE PROJECTS-PROJECTS WITH OBJECTIVES OR DELIVERABLES THAT ARE INCREMENTALLY DIFFERENT IN PRODUCT AND PROCESS IN CURRENT OFFERING • PLATFORM PROJECTS-MAJOR DEPARTURE FROM EXISTING OFFERINGS. NEXT GENERATION OF PRODUCT OFFERINGS • BREAKTHROUGH PROJECTS-INVOLVE NEW TECHNOLOGY • R&D PROJECTS-VISIONARY ENDEAVOURS ORIENTED TOWARDS USING NEWLY DEVELOPED TECHNOLOGIES
ISSUES IN PROJECT MGT
• WHAT ARE INTERNAL AND EXTERNAL SOURCES • HOW DO WE SELECT • HOW DO WE PROVIDE CAREER DEVELOPMENT IN PROJECT MGT • HOW CAN WE DEVELOP PROJECT MGT SKILLS • HOW DO WE EVALUATE PROJECT MGT PERFORMANCE
TASKS IN PROJECT MGT
• • • • • • • • SET OBJECTIVES ESTABLISH PLANS ORGANIZE RESOURCES PROVIDE STAFFING SET UP CONTROLS ISSUE DIRECTIVES MOTIVATE PEOPLE LOOK AT ALERNATIVES TO IMPROVE PERFORMANCE OR OBVIATE RISKS
PROJECT MGT PROCESSES
• • • • • INITIATING PROCESSES PLANNING PROCESSES EXECUTING PROCESSES CONTROLLING PROCESSES CLOSING PROCESSES
INITIATION
• AUTHORIZING PROJECT • DEFINING SCOPE AND RESPONSIBILITIES
PLANNING
• • • • • • • • • SCOPE PLANNING AND DEFINITION ACTIVITY DEFINITION ACTIVITY SEQUENCING ACTIVITY DURATION ESTIMATION SCHEDULE DEVELOPMENT RESOURCE PLANNING COST ESTIMATION COST BUDGETING RISK MGT PLANNING-IDENTIFICATION,ANALYSIS,RESPONSE PLANNING • QUALITY PLANNING • STAFFING • PROCUREMENT PLANNING
EXECUTION
• • • • PROJECT PLAN EXECUTION INPUT STAFFING ACTIVITY MGT AND CRASHING PERFORMANCE AND COST MEASUREMENT • RISK MONITORING
CONTROL
• • • • • • CHANGE CONTROL SCHEDULE CONTROL COST CONTROL QUALITY CONTROL RISK CONTROL PRODUCTIVITY CONTROL
CLOSURE
• • • • COMPLETION OF PROJECT RESOLUTION OF ISSUES HANDOVER CHANGE CONTROL IMPLEMENTATION
RESPONSIBILITY OF PROJECT MGR
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PRODUCE RESULTS WITH AVAILABLE RESOURCES AND WITHIN THE CONSTRAINTS OF TIME COST TECHNOLOGY PERFORMANCE TO MEET CONTRACTUAL PROFIT OBJECTIVES TO TAKE REQUIRED DECISIONS AS ALTERNATIVES CORRECTION SUSPENSION OR TERMINATION TO MANAGE CHANGE TO RESOLVE CONFLICTS INTERFACE WITH CUSTOMER AND ENSURE THAT CUSTOMER PROVIDES RESOURCES AS PER AGREED UPON PLAN MANAGE INFORMATION MANAGE RESOURCES – MAN MONEY FACILITIES MATERIAL EQUIPMENT TECHNOLOGY PLANNING AND CONTROL MGT WHICH INCLUDES INCREASED EQPT UTILIZATION INCREASED PERFORMANCE EFFICIENCY REDUCED RISKS IDENTIFICATION OF ALTENATIVES TO PROBLEMS
TYPES OF PROJECTS
• ERECTION PROCUREMENT COMMISSIONING • MANUFACTURING • MANAGEMENT • RESEARCH AND DEVELOPMENT
PRIMARY PROJECT OBJECTIVES
• SPECIFICATION PERFORMANCE QUALITY • WITHIN BUDGET AND RESOURCE CONSUMPTION • WITHIN TIME FRAME SPECIFIED TO COMPLETE
EFFECT OF PROJECT DELAYS
• • • • DIRECT COSTS OVERHEAD COSTS PENALTY COSTS COST EFFECT OF PROJECT DELAYS
DEFINING THE PROJECT
• PROJECT DEFINITION IS A PROCESS THAT STARTS WHEN THE IDEA OF A PROJECT IS FIRSTLY CONCEIVED AND ENDS WHEN THE PROJECT IS COMPLETED TO THE DESIRED REQMNT
PROJECT LIFECYCLE
• • • • • • • • • • • CONCEPT APPRAISAL(FEASIBILITY) COMMERCIAL AND TECHNICAL AGREEMENT PLANNING AND DESIGN ENGINEERING AND PROCUREMENT PHASE TESTING AND COMMISSIONING END OF PHASE CHANGE MGT PROJECT CLOSURE OPERATIONS MAINTENANCE AND CONTROL DOCOMMISIONING AND DISPOSAL
PROJECT ASSESSMENT
• EXPECTED DELIVERABLES AND BEYOND SCOPE OF PROJECT • PROJECT CHANGE MANAGEMENT ISSUES AND IMPACTS • RETURN ON INVESTMENT • TOTAL ESTIMATED EXPENDITURE AND RESOURCES REQUIRED • ESTIMATED DATE OF COMPLETION • RISK FACTORS INVOLVED IN PROJECT EXECUTION • FORECAST OF OPERATING AND MAINTENANCE COSTS • LIKELY LIFESPAN OF PLANT • SALVAGE VALUE • FORECASTS OF FINANCING COSTS OVER PROJECT LIFE INCLUDING INTEREST RATE CHANGES EXCHANGE RATE FLUCTUATION ETC • TAX CONSIDERATIONS
PROJECT COMMERCIAL MANAGEMENT
• • • • FINANCIAL PROJECT APPRAISAL PROJECT RISK MANAGEMENT PROJECT FUNDING PROJECT ENGINEERING PROCUREMENT COMMISSIONING • PROJECT ACCOUNTING • INSURANCE
PROJECT FEASIBILITY
• • • • • • • TECHNICAL COMMERCIAL FINANCIAL FEASIBILITY AND FUTURE RISKS EVALUATE MKT POTENTIAL RAW MATERIAL AVAILABILITY INFRASTRUCTURAL SUPPORT STRATEGIC ALTERNATIVES WITH FUTURE VALUES AND PROBABILITIES ENVIRONMENTAL IMPLICATIONS COMPETENCE AND CAPABILITY OF PROJECT TO DELIVER STATED AND UNSTATED OUTCOMES PROJECT IMPLICATIONS FOR STAFF FEASIBILITY OF COMPLETION PERIOD PROJECT COSTS AND ESCALATION FIGURES AND HOW IS THE PROJEC T FUNDED;WHAT ARE THE RETURNS ON INVESTMENTS RISKS AND IMPACTS OPERATING COSTS OF PLANT AND MACHINERY EXPECTED USEFUL LIFE SPAN AND TECHNOLOGY OBSOLESCENCE RISKS OF PLANT AND MACHINERY QUANTIFY WEAKNESSES AND UNKNOWN INITIAL PROJECT GOALS AND OBJECTIVES
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TECHNICAL FEASIBILITY
• CURRENCY OF TECHNOLOGY AND RISKS INCLUDING OBSOLESCENCE • ADAPTATION OF TECHNOLOGY TO LOCAL CONDITIONS • IN CASE OF IMPORTED TECHNOLOGY SUPPORT AND LIFESPAN OF SUPPORT
PROBLEM WITH OBJECTIVES
• GOALS NOT AGREEABLE TO EVERYBODY • OBJECTIVES DO NOT ACCOMMODATE AGILITY • INSUFFICIENT TIME • OBJECTIVES NOT QUANTIFIED • OBJECTIVES NOT DOCUMENTED
PROJECT FUNDING SOURCES
• • • • • CURRENT CASH RESERVES SALE OF ASSETS MORTGAGE PROPERTY BORROWING FROM FI RAISING SHARE CAPITAL FOR THE PROJECT • COLLABORATING WITH OTHER COMPANIES FOR THE PROJECT
PROJECT PLANNING AND SCHEDULING
• PLANNING ENTAILS DEFINING THE SCOPE OF THE PROJECT ESTIMATING THE RESOURCES AND DEFINING THE PROJECT STRUCTURE • SCHEDULING IS ALL ABOUT ALLOCATING RESOURCES TO THE ACTIVITIES IN THE PROJECT IN ORDER TO ACHIEVE THE DELIVERABLES WITHIN THE BUDGET TIME AND QUALITY
PROJECT PLANNING AND SCHEDULING
• EXTERNAL AND INTERNAL FACTORS THAT HAVE AN EFECT ON THE PROJECT PLAN AND SCHEDULE • ALSO QUALITY OF PROJECT PLANNING AND EXECUTION AFFECTS THE OUTCOME • EXTERNAL FACTORS INCLUDE FORCE MAJEURE,FISCAL POLICIES CORPORATE STRATEGY,MARKET CONDITIONS,STATUTORY REGULATIONS • INTERNAL FACTORS INCLUDE SUPPORTING SERVICES,PROCEDURES AND SYSTEMS,MANAGEMENT SKILLS,ORGANIZATION STRUCTURE,RESOURCES AND CAPACITY,TECHNICAL CAPABILITY
EXTERNAL FACTORS
• EVENTS AND CONDITIONS THAT LIE OUTSIDE THE CONTROL OF THE PROJECT MGT TEAM • SOME OF THESE FACTORS CAN AFFECT OR RUIN PROJECT SCHEDULING
ACTS OF GOD
• ALL PROJECTS ARE SUBJECT TO RISK AND MANY OF THOSE RISKS CAN HAVE AN ENORMOUS IMPACT ON PLANS • ACTS OF GOD COULD BE BY WAY OF NATURAL DISASTERS,EPIDEMIC • FORCE MAJEURE BY WAY OF ACT OF WAR IS ALSO INCLUDED UNDER THIS HEAD
FISCAL POLICY
• POLICY OF GOVT WRT TAXATION AND OTHER FINANCIAL MEASURES CAN HAVE A PROFOUND EFFECT ON PROJECTS AND THEIR PLANNING eg GOVT FUNDED PROJECT IS ABANDONED THROUGH A POLITICAL DECISION • ECONOMIC CONSEQUENCES OF GOVT POLICY NEED TO BE CONSIDERED FOR LOOKING AT EFFECTS ON PROJECTS
CORPORATE STRATEGY
• STRATEGIC DECISIONS CAN AFFECT PLANNING eg -SHIFT FOCUS FROM ONE COMPANY AND RESTART PROJECT IN ANOTHER GROUP COMPANY -DELAY THE START OF AN INTERNAL PROJECT DUE TO DIVERSION OF FUNDS TO ANOTHER PURPOSE -STRATEGIC DECISION TO STOP RECRUITMENT TO CUT COSTS -CHANGES IN PROJECT PRIORITIES
STATUTORY REGULATIONS
• LEGISLATION BY GOVT CAN IMPOSE EXTRA BURDEN ON PROJECT • BURDEN TOP BE TAKEN INTO ACCOUNT AT PLANNING STAGE
PROJECT PLANNING
• PROCESS OF DECIDING IN ADVANCE ABOUT THE FUTURE COURSE OF ACTIONS TO BE TAKEN WITH ALTERNATIVES • PLANNING CONSISTS OF DEFING ALL THE WORK REQUIRED TO BE CARRIED OUT • PLANNING IS CRITICAL TO THE PROJECT SINCE MOST ACTIVITIES MAY BE PERFORMED FOR THE FIRST TIME
BASIC REASONS FOR PROJECT PLANNING
• ELIMINATE OR REDUCE UNCERTAINTY • IMPROVE EFFICIENCY OF OPERATIONS • OBTAIN BETTER UNDERSTANDING OF OBJECTIVES • PROVIDE BASIS FOR MONITORING AND CONTROLLING WORK
COMPONENTS OF PROJECT PLANNING
• • • • • • OBJECTIVE – GOAL TARGET QUOTA TO BE ACHIEVED BY A CERTAIN TIME PROGRAM – STRATEGY TO BE FOLLOWED AND MAJOR ACTIONS TO BE TAKEN IN ORDER TO ACHIEVE OR EXCEED OBJECTIVES SCHEDULE – PLAN SHOWING WHEN ACTIVITIES WILL START AND END COST ESTIMATES-PREPARING COST ESTIMATES FOR ACTIVITIES RESOURCES-RESOURCE REQUIREMENT FOR ACTIVITIES BUDGET – PLANNED EXPENDITURES REQD TO ACHIEVE OR EXCEED OBJECTIVES FORECAST – PROJECTION OF WHAT WILL HAPPEN BY A CERTAIN TIME RESPONSIBILITIES – REQD TO ACHIEVE OR EXCEED OBJECTIVES POLICY – GENERAL GUIDELINS FOR DECISION MAKING AND INDIVIDUAL ACTIONS PROCEDURE – DETAILED METHOD FOR CARRYING OUT A POLICY STANDARD – PERFORMANCE DEFINED AS ADEQUATE OR ACCEPTABLE
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INFORMATION NEEDS FOR PLANNING
• • • • STATEMENT OF WORK PROJECT SPECIFICATIONS MILESTONE SCHEDULE WORKBREAKDOWN STRUCTURE
PROJECT SPECIFICATIONS
• SPECIFICATIONS ARE USED FOR MAN HOUR , EQPT, MATERIAL ESTIMATES • SMALL CHANGES IN SPECIFICATION CAN CAUSE LARGE COST OVERRUNS • SPECIFICATIONS ARE STANDARDS FOR PRICING A PROPOSAL
MILESTONE SCHEDULES
• • • • PROJECT START DATE PROJECT END DATE OTHER MAJOR MILESTONES DELIVERABLES
STATEMENT OF WORK
• NARRATIVE DESCRIPTION OF WORK REQUIRED FOR PROJECT • SOW IS BASED ON THE DOCUMENTED SCOPE OF WORK AND THE ACTIVITIES REQD TO ACHIEVE THE STATED OBJECTIVES • SOW IS BASED ON THE IDENTIFICATION OF ACTIVITIES AND EXPLOSION TO WORK BREAKDOWN STRUCTURE • COST ESTIMATES FOR THE PROJECT ARE BASED ON THE SOW
WORK BREAKDOWN STRUCTURE
• SUCCESSFUL ACCOMLISHMENT OF PROJECT DELIVERABLES REQUIRES A PLAN THAT DEFINES ALL EFFORTS TO BE EXPENDED ASSIGNS RESPONSIBILITY AND ESTABLISHES SCHEDULES AND BUDGETS FOR ACCOMLISHMENT OF WORK • WORK BREAKDOWN STRUCTURE HAS WORK ELEMENTS
WORK ELEMENTS
• REPRESENT UNITS OF WORK AT THE LEVEL WHERE WORK IS PERFORMED • CLEARLY DEFINED START AND END DATES • SPECIFIES A BUDGET IN TERMS OF MONEY, MAN HOURS,
WORK ELEMENTS
• MANAGEABLE SMALL ACTIVITIES • INDEPENDENTWITH MINIMUM DEPENDENCE OR INTERFACING WITH OTHER ONGOING ELEMENTS • MEASURABLE IN TERMS OF PROGRESS • COSTS AND BUDGETS CAN BE ESTABLISHED • TIME COST AND PERFORMANCE CAN BE TRACKED • STATUS REPORTING PROCEDURES ARE ESTABLISHED
DISTINCTION BETWEEN PLANNING AND SCHEDULING
• PLAN IS THE LISTING THAT RESULTS WHEN ALL ACTIVITIES HAVE BEEN SUBJECTED TO ESTIMATING SEQUENCING TARGET TIMING AND PRIORITISING • NETWORK DIAGRAMMING IS USUALLY THE WAY TO PLAN ACTIVITIES • SCHEDULE IS OBTAINED BY DOING ADDITIONAL WORK ON THE INITIAL PLAN SO THAT RESOURCES NEEDED TO CARRY OUT THE PROJECT ACTIVITIES ARE TAKEN INTO ACCOUNT
PLANNING TIME FRAMES
• FREE PLANNING APPROACH • TARGET LED PLANNING
FREE PLANNING APPROACH
• SCHEDULES PROVIDED FROM ESTIMATES WITH NO EXTERNAL PRESSURE TO COMPRESS TIME SCALE • ALLOWS PLANNER TO DEVELOP A SCHEDULE THAT IS CAPABLE OF BEING ACHIEVED WITH A CERTAIN AMOUNT OF CERTAINTY
TARGET LED PLANNING
• END DATE REQUIREMENT IS PREDETERMINED, GOVERNED BY FACTORS OUTSIDE THE PLANNERS CONTROL • PROJECT HAS TO BE FINISHED TO MEET A FORTHCOMING PUBLIC EVENT
ELEMENTS OF PLAN
• • • • • WHAT WILL BE ACCOMPLISHED HOW WILL IT BE ACCOMPLISHED WHERE WILL IT BE ACCOMLISHED WHEN WILL IT BE ACCOMLISHED WHY WILL IT BE ACCOMPLISHED
TYPES OF PLANS
• BUDGETS-HOW MUCH MONEY IS ALLOCATED TO EACH EVENT • CONFIGURATION MGT-HOW ARE TECHNICAL CHANGES MADE AND MANAGED • QUALITY ASSURANCE-HOW DO I GUARANTEE SPECS WILL BE MET • FACILITIES-WHAT RESOURCES ARE AVAILABLE
CONFIGURATION MGT
• PROVIDES APPROPRIATE LEVEL OF REVIEW AND APPROVAL FOR CHANGE • FOCAL POINT FOR THOS SEEKING TO MAKE CHANGES
QUESTIONS IN CONFIG MGT
• WHAT IS THE COST OF CHANGE • DO THE CHANGES IMPROVE QLTY • IS THE ADDITIONAL COST OF QLTY JUSTIFIABLE • IS THE CHANGE NECESSARY • IS THERE AN IMPACT ON THE DELIVERY DATE
WHY DO PLANS FAIL
• CORPORATE GOALS ARE NOT UNDERSTOOD AT THE LOWER LEVELS • PLANS ENCOMPASS TOO MUCH IN TOO LITTLE TIME • FINANCIAL AND TECHNICAL ESTIMATES WERE POOR AND BASED ON GUESSWORK • PLANS BASED ON INSUFFICIENT DATA • ULTIMATE OBJECTIVE UNKNOWN AND MILESTONE DATES AND ACHIEVABLES ARE NOT STATED PROPERLY • STAFFING REQUIREMENTS AND COMPETENCES NOT DONE WELL
PROJECT TERMINATION REASONS
• FINAL ACHIEVEMENT OF OBJECTIVES • TERMINATION DUE TO CHANGE IN COMPANY INTEREST AND STRATEGY • PROJECT LOSS OR TIME EXTENSION • KEY PEOPLE LEAVE • INADEQUATE SKILLS TO CONTINUE • ALLOCATED TIME IS EXCEEDED
SYSTEMS AND PROCEDURES FOR IMPLEMENTATION
• WHO CAN CHANGE MODIFY PROJECT OBJECTIVES • WHO IS RESPONSIBLE FOR PROCUREMENT OF PROJECT RESOURCES • WHO IS AUTHORIZED TO CHANGE SCHEDULES AND ACTIVITY DURATIONS OR REALLOCATE RESOURCES • WHO HAS THE AUTHORITY TO CONTROL PROJECT CHANGE MGT OR PREMATURELY TERMINATE THE PROJECT
PROJECT CONTROL SYSTEMS
• MEASURES TO CONTROL COST TIME QUALITY • SOME OF THE CONTROL SYSTEMS USED ARE: -WORK BREAKDOWN STRUCTURE -BAR CHART -PROGRESS CHART -EARNED VALUE ANALYSIS -PERT COST SYSTEM -CPM/PERT NETWORKS -NETWORK SIMULATION -GANTT CHARTS
PROJECT CONTROL REPORTS
• FINANCIAL REPORTS -PLANNED V/S ACTUAL EXPENDITURE -ACCOUNTS PAYABLES • PROCUREMENT REPORTS -ORDERS PLACED DURING THE MTH -ORDERS EXECUTED/PENDING -STATUS OF REQUISITIONS -STOCK POSITION OF MATERIAL
PROJECT CONTROL REPORTS
• ENGINEERING REPORTS -ADHERENCE TO SPECIFICATIONS -TECHNICAL SCRUTINY OF BIDS • INSPECTION PROGRESS REPORTS -WORK EXECUTED -TECHNICAL CONSTRAINTS • EPC REPORTS -JOBWISE PROGRESS -ERECTION SCHEDULE PLANNED V/S ACTUAL -FIELD MODIFICATIONS DONE
PROJECT CONTROL REPORTS
• REVIEW REPORTS -MAJOR ISSUES -EXCEPTION REPORTS
PROJECT CONTROL PARAMETERS
• PERFORMANCE • COST • TIME
PERFORMANCE
• • • • UNEXPECTED TECHNICAL PROBLEMS INSUFFICIENT RESOURCES QUALITY PROBLEMS INTER FUNCTIONAL PROBLEMS
COST
• REQUIREMENT OF MORE RESOURCES • SCOPE OF WORK INCREASES DUE TO UNDER ESTIMATION • INITIAL LOW ESTIMATES • POOR REPORTING • INADEQUATE BUDGETING • PRICE CHANGES
TIME
• UNDER ESTIMATION OF TIME ESTIMATES OR IMPEDIMENTS IN EXECUTION OF ACTIVITIES LEADING TO LONGER TIMES • OVER OPTIMISTIC TIME ESTIMATES • INCORRECT TASK SEQUENCING • RESOURCES UNAVAILABLE WHEN REQUIRED LEADING TO IDLING TIME • PRECEDING TASKS TOOK LONGER THAN EXPECTED
NETWORK ANALYSIS
• SEE NETWORK ANALYSIS1
PROJECT SCHEDULING
• A SCHEDULE IS THE CONVERSION OF A PROJECT ACTION PLAN INTO A OPERATING TIMETABLE • SERVES A BASIS FOR MONITORING AND CONTROLLING PROJECT ACTIVITY • TAKEN IN CONJUNCTION WITH PLANNING AND BUDGETING • SCHEDULES ARE BASED ON PREVIOUSLY BASED ACTION PLANS WHICH USE WORK BREAKDOWN STRUCTURES • CREATE A SCHEDULE FOR EACH ACTIVITY IN THE WBS
PROJECT SCHEDULING
• DEFINE THE TECHNICAL FINANCIAL AND TIME OBJECTIVES • PRODUCE THE WORK BREAKDOWN STRUCTURE • PUT ALL TASKS INTO LOGICAL WORKING SEQUENCE • ESTIMATE DURATION OF EVERY TASK • CALCULATE TIMING AND PRIORITY OF EACH TASK • RECONCILE TASK NEEDS WITH RESOURCES THAT CAN BE PROVIDED • ASSIGN EACH TASK FOR ACTION
PRIORITY FOR SCHEDULING
• • • • • AS SOON AS POSSIBLE AS LATE AS POSSIBLE SHORTEST TASK FIRST MOST RESOURCES FIRST MINIMUM SLACK FIRST
SCHEDULING CASH FLOWS
• CASH FLOW SCHEDULES NEEDED TO BE STUDIED VERY CAREFULLY TO ENSURE NO CASH CRUNCH. ACTIVITY INVOLVES: -INITIAL ACQUISITION COST WHICH IS PURCHASE PAYMENT -INTEREST PAYABLE ON FINANCING LOANS -COST OF OPERATING AND MAINTAINING PLANT -TRAINING COSTS -OTHER INCURRABLE EXPENSES
BENEFITS OF SCHEDULING
• CONSISTENT FRAMEWORK FOR PLANNIONG SCHEDULING MONITORING AND CONTROLLING • ILLUSTRATES THE INTER DEPENDENCE OF TASKS AND WORK ELEMENTSDENOTES TIMES WHEN SPECIFIC PEOPLE AND RESOURCES MUST BE AVAILABLE FOR WORK • DETERMINES AN EXPECTED PROJECT COMPLETION DATE • IDENTIFIES CRITICAL ACTIVITIES WHICH IF DELAYED WILL DELAY THE PROJECT COMPLETION TIME • IDENTIFIES SLACK IN THE PROJECT • DETERMINES THE DATES ON WHICH TASKS MUST BE STARTED IF THE PROJECT HAS TO STAY ON SCHEDULEW
PROJECT RESOURCES
• PROJECT RESOURCES CAN BE MEN MATERIAL MONEY TIME CAPACITY etc • RESOURCES CAN BE EXHAUSTIBLE REPLENISHABLE OR REUSABLE • ONCE EXHAUSTABLE REOURCES ARE USED OR EXPIRE THEY CAN NEVER BE USED eg TIME. TIME NEEDS ITS OWN TECHNIQUES FOR PLANNING AND SCHEDULING eg CPM. EXHAUSTABLE RESOURCES FEATURE IN PROJECT FEASIBILITY • MONEY IS AN EXHAUSTABLE RESOURCE AND CASH FLOW PREDICTIONS FORM PART OF PROJECT RESOURCE SCHEDULING
PROJECT RESOURCES
• REPLENISHABLE RESOURCES ARE THOSE RESOURCES OBTAINED THRU PURCHASING AND ARE REPLENISHABLE RESOURCES • PRINCIPAL METHODS FOR SCHEDULING MATERIAL COMES FROM STOCK CONTROL AND PURCHASING.INFO FROM PROJECT PLANNING PROVIDES CONTROL FRAMEWORK FOR PURCHASES AND STOCK MGT BY STATING HOW MUCH WILL BE NEEDED AND WHEN. • QUANTITIES ON SITE MUST MATCH THE RATE OF PROGRESS EXPECTED FROM THE PROJECT CPM NETWORK.
PROJECT RESOURCES
• REUSABLE RESOURCES ARE ASSETS THAT ARE REQUIRED FOR USAGE AT PROJECT SITES BUT REMAIN AVAILABLE FOR REUSE AFTER TASK HAS BEEN PERFORMED • SKILLED PEOPLE AND MOVEABLE EQUIPMENT ARE EXAMPLES • THEIR UTILIZATION NEEDS CAREFUL PLANNING AND SCHEDULING • PROCESS OF ARRIVING AT SUCH SCHEDULES IS CALLED LOAD LEVELING OR RESOURCE SCHEDULING
RESOURCE SCHEDULING
• • • • IMPORTANT ELEMENT IN FORMULATING LONG TERM PLANS IN PROJECT MGT IT IS CONCERNED WITH SHORT TERM OPERATIONS OF THE BUSINESS PROJECT AND OTHER WORKING SCHEDULES CONTRIBUTE VITAL INFORMATION TO THE STRATEGIC PLANNING PROCESS RESOURCE SCHEDULING CALCULATES REQUIREMENT OF INDIVIDUAL COMPETENCES AND THEIR ACTIVITYWISE DEPLOYMENT FOR THE DURATION OF THE PROJECT. IT ALSO CALCULATES THE REQUIREMENT OF EQUIPMENT AND MATERIAL NEEDED TO SERVICE THE ACTIVITIES NEED TO DEFINE WHO WILL DO WHAT WHEN WHERE HOW RESOURCE UTILIZATION NEEDS TO BE MONITORED AND ALLOCATED TO CRITICAL PATH ACTIVITIES IN ORDER TO ENABLE THE PROJECT TO COMPLETE IN TIME POSSIBLE EFFECTS OF PREDICTED NEW WORKLOAD CAN BE TESTED USING WHAT IF MODELLING
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SIX STEPS OF PROJECT RESOURCE SCHEDULING
• • • • • • WORK BREAKDOWN STRUCTURE PROJECT NETWORK COST ESTIMATES AND BUDGETS SCHEDULE OF CASH INFLOWS SCHEDULE OF CASH OUTFLOWS SCHEDULE OF NET CASH FLOWS
CALENDARS FOR RESOURCE SCHEDULING
• BY DEFAULT ALL THE ACTIVITIES IN THE PROJECT WILL BE ASSIGNED TO ONE CALENDAR • HOWEVER IT IS POSSIBLE TO ASSIGN A SEPARATE CALENDAR TO SEPARATE LOCATION RELATED SITES eg IN A FACTORY THE SHOP FLOOR AND WORKS OFFICE MAY HAVE ONE CALENDAR BUT SALES OFFICE AND PROJECT OFFICE MAY HAVE A SEPARATE CALENDAR • HOLIDAYS FOR PLANT ARE ALSO INDICATED SEPARATELY • ADDITIONALLY EACH SHOP FLOOR MAY HAVE A CALENDAR eg SF1 WORKS 24*7 WHEREAS SF2 WORKS 8*7 • ALSO EACH WORKER HAS A SEPARATE CALENDAR AND IS IN DIFFERENT SHIFTS AND ALSO HAS DIFFERENT LEAVE PERIODS
RESOURCE LOADING
• DESCRIBES THE AMOUNT OF INDIVIDUAL RESOURCES AN EXISTING SCHEDULE REQUIRES DURING SPECIFIC TIME PERIODS • RESOURCE LOADING GIVES AN UNDERSTANDING OF THE DEMANDS OF A PROJECT ON FIRMS RESOURCES
RESOURCE LEVELING
• RESOURCE LEVELING AIMS AT MINIMIZING THE PERIOD TO PERIOD VARIATIONS IN RESOURCE LOADING BY SHIFTING TASKS WITHIN THEIR SLACK ALLOWANCES • PURPOSE IS TO CREATE A SMOOTHER DISTRIBUTION OF RESOURCE USAGE AND LESSEN THE FLUCTUATION OF REQUIRED LOADS • IF RESOURCE USAGE IS LEVEL A JUST IN TIME INVENTORY POLICY COLD BE DEPLOYED • WHEN RESOURCES ARE LEVELED THE ASSOCIATED COSTS ARE ALSO LEVELED
METHODS OF PROJECT EXECUTION
• BOOM - BUILD,OWN,OPERATE MAINTAIN • BOOT – BUILD,OWN,OPERATE TRANSFER • BOT – BUILD,OPERATE,TRANSFER
CRITERIA FOR EFFECTIVE PROJECT CONTROL
• • • • • • • • • • DETAILED PROJECT PLANNING BREAK PROGRAM INTO SUBSYSTEMS RESULTS AND DELIVERABLES MEASURABLE MILESTONES PROJECT TRACKING MEASURABILITY REGULAR REVIEWS SIGN ON COMMUNICATION MINIMIZED RISKS
PROJECT CONTROL ISSUES
• • • • • • • SET OBJECTIVES LIST ALTERNATIVE STRATEGIES LIST THREATS AND OPPORTUNITIES PREPARE FORECASTS SELECT STRATEGIES PREPARE ACTION PLANS EXECUTE MONITOR AND CONTROL
CONTROL PARAMETERS IN PROJECT
• PERFORMANCE • COST • TIME
PERFORMANCE
• • • • • • • SCHEDULE MGT RESOURCE MGT TECHNICAL ISSUES MGT QUALITY MGT CHANGE MGT CUSTOMER RELATIONS MGT DELIVERABLES AND OUTCOME MGT
COST
• • • • • • RESOURCE MGT SCOPE OF WORK MGT ESTIMATE MGT BUDGET MGT EVENT REPORTING MGT COST CHANGE MGT
TIME
• TIME ESTIMATION OF EVENTS • TIME TAKEN TO COMPLETE ACTIVITY
FEEDBACK CONTROL FOR PROJECTS
• • • • • • • ASSIGN TASK PERFORM TASK MONITOR PROGRESS AGAINST PLAN IDENTIFY VARIANCES AGAINST PLAN DECIDE CORRECTIVE ACTION PROCESS IMPROVEMENT BACK TO PERFORM TASK
PROGRESS OF PROJECT TASKS
• TASK NOT STARTED AS PLANNED WITH REASONS GIVEN • TASK HAS JUST STARTED WHETHER IN TIME OR DELAYED START • TASK IS IN PROGRESS WITH AN ASSESSMENT OF % OF TASK COMPLETED • TASK IS IN PROGRESS WITH AN ESTIMATE OF THE REMAINING DURATION TO COMPLETE • TASK IS COMPLETED
REASONS FOR POOR PROJECT CONTROL
• • • • • INSUFFICIENT PLANNING UNREALISTIC PROJECT PLANS UNDERESTIMATED PROJECT SCOPE CUSTOMER CHANGES INSUFFICIENT CONTINGENCY AND BUSINESS CONTINUITY PLANNING • TECHNICAL COMPLEXITIES • STAFFING PROBLEMS
PROJECT EVALUATION
• PROJECT ASSESSMENT DURING COURSE OF IMPLEMENTATION AIMED AT STEERING THE PROJECT IN THE RIGHT DIRECTION • PROJECT EVALUATION HAS SEVERAL OBJECTIVES
PROJECT EVALUATION OBJECTIVES
• VERIFY THE PROGRESS OF IMPLEMENTATION IS AS PLANNED AND TOP TAKE CORRECTIVE MEASURES IF PROGRESS LAGS BEHIND SCHEDULE • ASCERTAIN WHETHER ACTUAL COSTS ARE WITHIN BUDGETED COSTS AT DIFFERENT STAGES OF IMPLEMENTATION AND TO TAKE STEPS TO CONTAIN COSTS IF ACTUAL COSTS ESCALATE OVER THE BUDGETED COSTS • ENSURE COMPLIANCE OF QUALITY STANDARDS WITHOUT COMPROMISES • IDENTIFY UNEXPECTED PROBLEM AREAS AND PLAN FOR MANAGING SUCH SITUATIONS • APPRAISE PROMOTERS ABOUT PROJECT PROGRESS • CONTINUOUS PROCESS IMPROVEMENT IN PROJECT • ENSURE PROJECT OBJECTIVES ARE MET AND TAKE CORRECTIVE ACTIOS TO CORRECT COURSE
PROJECT AUDIT
• THOROUGH EXAMINATION OF MGT OF PROJECT METHOFDOLOGIES AND PROCEDURES • RECORDS PROPERTIES BUDGETS EXPENDITURES AND DEGREE OF COMPLETION • PROJECT RISK ASSESSMENT AN IMPORTANT PART OF THE AUDIT
PROJECT CONTRACTS
• • • • TURNKEY LUMPSUM TIME AND MATERIAL COST PLUS PERCENTAGE LABOUR
CHALLENGES FOR MANAGING PROJECTS
• END DATE DRIVEN SCHEDULES • RESOURCE LIMITATION • ESTABLISHING MEASURABLE MILESTONES • COPING WITH CHANGES • MANAGING CONFLICT • MANAGING VENDORS SUB CONTRACTORS AND CUSTOMER
REASONS FOR PROJECT SLIPPAGES
• INSUFFICIENT PLANNING • UNREALISTIC PROJECT PLAN • UNDER ESTIMATION OF SCOPE OF WORK • INSUFFICIENT CONTINGENCY PLANNING • IMPROPER PROGRESS TRACKING METHODS • PROJECT PROBLEMS NOT DETECTED
REASONS FOR PROJECT SLIPPAGES
• • • • STAFFING PROBLEMS TECHNICAL COMPLEXITIES PRIORITY CHANGES LACK OF COMPETENCE FOR PROJECT EXECUTION
PROJECT COST ESTIMATION AND CONTROL
COST OF PROJECT
• CORRECT ESTIMATION OF CAPITAL COST OF PROJECT IS FOUNDATION ON WHICH FINANCIAL APPRAISAL STANDS • UNDERESTIMATION OF PROJECT COSTS LEADS TO SHORTAGE OF FUNDS DURING IMPLEMENTATION LEADING TO PROJECT SUSPENSION FOR LACK OF FUNDS
COST CONTROL ACTIVITIES
• • • • PLANNING OF WORK ESTIMATION OF TIME LABOR COSTS SCOPE OF REQUIRED TASKS DISCIPLINED BUDGET AND AUTHORIZATION OF EXPENDITURE • TIMELY ACCOUNTING OF PHYSICAL PROGRESS • PERIODIC REESTIMATION OF TIME AND COST TO COMLETE REMAINING WORK • FREQUENT COMPARISON OF ACTUAL PROGRESS AND EXPENDITURE TO SCHEDULE AND BUDGETS
MANAGING COSTS
• COST MGT IS AN INTEGRAL PART OF PROJECT MGT • COST MGT INCLUDES EXPENDITURE CONTROL,REVENUE CONTROL AND RECEIVABLES MGT
CHECKLIST OF COST MGT FACTORS
• COST AWARENESS BY ENGG USING VALUE ANALYSIS • COST AWARENESS THROUGHOUT PROJECT LIFECYCLE MOTTO IS MINIMIZE LIFECYCLE COSTS • PROJECT WORK BREAKDOWN • PRECISE ACCOUNTING CODES TRACEABLE TO ACTRIVITY TYPE • COST BUDGETS • ACCURATE COST ACCOUNTING SYSTEM eg AB COSTING • ENSURE PROGRESS MEETS WORK SCHEDULE • EXPENDITURE CONTROL • PROPER PERUSAL OF COMMERCIAL AND TECHNICAL IMPLICATIONS • QUALITY CONTROL • ENSURING FINANCIAL SOUNDNESS OF CUSTOMER • MONITORING PRICE FLUCTUATIONS AND INCREASES
COST CONTROL
• • • • • • • COST ESTIMATING COST ACCOUNTING PROJECT CASH FLOW COMPANY CASH FLOW DIRECT LABOR COSTING OVERHEAD RATE COSTING --COST CONTROL A SUBSYSTEM OF MGT COST CONTROL SYSTEM • MCCS IS A 2 CYCLE PROCESS – PLANNING CYCLE AND OPERATING CYCLE • PLANNING CYCLE KNOWN AS PLANNING AND CONTROL CYCLE • OPERATING CYCLE IS ALSO KNOWN AS COST CONTROL SYSTEM
MCCS PLANNING ACTIVITIES
• WORK AUTHORIZATION FOR PROJECT PLANNING • WORK BREAKDOWN STRUCTURE • SCHEDULES • PLANNING CHARTS • BUDGETS
PHASES IN MCCS
• WORK AUTHORIZATION AND RELEASE • COST DATA COLLECTION AND REPORTING • COST ANALYSIS • REPORTING
BUDGETS
• PROJECT BUDGETS TO BE DERIVED FROM COST ESTIMATES • BUDGET SHOULD BE SPREAD OVER PROJECT BREAKDOWN STRUCTURE SO THAT THERE IS A SPECIFIED BUDGET FOR EACH WORK PACKAGE • DIFFWRENT KINDS OF BUDGETS SUCH AS CAPITAL,REVENUE etc
BUDGETING PROCESS
• • • • • • PLANNING ANALYSIS WORTHINESS FINANCING IMPLEMENTATION REVIEW AND CONTROL
VARIANCE
• DEFINED AS ANY SCHEDULE OR COST DEVIATION FROM SPECIFIC PLAN • COST VARIANCE COMPARES DEVIATIONS FROM BUDGETS BUT DOES NOT PROVIDE MEASURE OF COMPARISON BETWEEN WORK SCHEDULED AND WORK ACCOMPLISHED • SCHEDULING VARIANCE PROVIDES COMPARISON BETWEEN PLANNED AND ACTUAL PERFORMANCE BUT DOES NOT INCLUDE COSTS • TWO METHODS OF MEASUREMENT -MEASURABLE EFFORTS -LEVEL OF EFFORT
VARIANCE ANALYSIS
• WHAT IS THE PROBLEM CAUSING THE VARIANCE • WHAT IS THE IMPACT ON TIME COST PERFORMANCE • WHAT IS THE IMPACT ON OTHER EFFORTS • WHAT CORRECTIVE ACTION IS PLANNED • WHAT ARE THE EXPECTED RESULTS OF THE CORRECTIVE ACTION
MILESTONE ANALYSIS
• USED THROUGHOUT PROJECT LIFETIME TO COMPARE ACTUAL COST AND PROGRESS WITH PLANNED COSTS AND PROGRESS • QUESTIONS AS LISTED UNDER ARE SOUGHT TO BE ANSWERED -HOW MUCH HAVE WE SPENT TO DATE -WHAT SHOULD WE HAVE SPENT TO DATE -WHAT HAVE WE ACHIEVED SO FAR -WHAT SHOULD WE HAVE ACHIEVED UPTO NOW -WHAT ARE THE FINAL COST AND DELIVERY PROSPECTS FOR THE PROJECT IF PERFORMANCE COTINUES AT CURRENT LEVEL
EARNED VALUE ANALYSIS
• REGARDED AS THE MISSING LINK BETWEEN COST REPORTING AND COST CONTROL • IT DEPENDS ON THE EXISTENCE OF A SOUND FRAMEWORK OF PLANNING AND CONTROL WHICH HAS -DETAILED WORK BREAKDOWN STRUCTURE -CORRESPONDING DETAILED COST CODING SYSTEM -ACCURATE REPORTING OF COST DATA -METHOD OF MONITORING AND QUANTIFYING THE AMOUNT OF WORK DONE INCLUDING WORK IN PROGRESS
EARNED VALUE ANALYSIS
• AIMS TO COMPARE COSTS INCURRED FOR AN ACCURATELY IDENTIFIED AMOUNT OF WORK WITH THE COSTS BUDGETED FOR THE SAME WORK • CAN BE APPLIED AT THE LEVEL OF INDIVIDUAL TASKS OR COMPLETE WORK PACKAGE AND DATA ROLLED UP FOR ENTIRE PROJECT • PROCEDURE USES RESULTS TO PRODUCE A COST PERFORMANCE INDEX WHICH IS = 1 IF EVERYTHING IS GOING EXACTLY ACCORDING TO PLAN AND < 1 IF VALUE EARNED FOR MONEY SPENT IS LESS THAN EXPECTED
EARNED VALUE DEFINITIONS
• ACWP = ACTUAL COST OF WORK PERFORMED • BCWP = BUDGETED COST OF WORK PERFORMED. AMOUNT OF MONEY OR LABOR TIME THAT WORK ACTUALLY PERFORMED SHOULD HAVE COST TO BE IN LINE WITH ESTIMATE • CPI = COST PERFORMANCE INDEX. FACTOR THAT INDICATES MEASURE OF SUCCESS IN ACHIEVING RESULTS AGAINST BUDGET. ANYTHING < 1 INDICATES VALUE EARNED FROM MONEY SPENT IS LESS THAN INTENDED • SPI = SCHEDULE PERFORMANCE INDEX. MEASURE OF PROGRESS PERFORMANCE AGAINST PLAN . ANYTHING < 1 SHOWS PROGRESS SLOWER THAN PLANNED
EARNED VALUE DEFINITIONS
• BAC = BUDGET AT COMPLETION WHICH IS THE SUM OF ALL BUDGETS (BCWS)ALLOCATED TO THE PROJECT. THIS IS WHAT THE TOTAL EFFORT SHOULD COST • EAC = ESTIMATE AT COMPLETION IDENTIFIES THE VALUE OR HOURS THAT REPRESENT A REALISTIC APPRAISAL OF THE WORK WHEN PERFORMED. THE SUM OF ALL COSTS TILL DATE PLUS ESTIMATE OF ALL REMAINING WORK. EAC = CUM ACTUALS + ESTIMATE TO COMPLETE
PARAMETERS FOR VARIANCE ANALYSIS
• BCWS = BUDGETED COST OF WORK SCHEDULED = HOW MUCH WORK SHOULD BE DONE • BCWP = BUDGETED COST OF WORK PERFORMED = HOW MUCH WORK IS DONE • ACWP= ACTUAL COST OF WORK PERFORMED = HOW MUCH DID THE WORK DONE COST • BAC = TOTAL BUDGET AT COMPLETION = WHAT WAS THE JOB SUPPOSED TO COST • EAC = ESTIMATE AT COMPLETION =WHAT DO WE EXPECT THE TOTAL JOB TO COST • VAC = VARIANCE AT COMPLETION
FORMULAE FOR PERFORMANCE INDEX
• CPI(COST PERFORMANCE INDEX) = BCWP/ACWP • SPI(SCHEDULE PERFORMANCE INDEX) = BCWP/BCWS • IN BOTH CASES IF >1. 0 GOOD PERFORMANCE; IF = 1.0 PERFECT PERFORMANCE AND IF < 1.0 POOR PERFORMANCE
EXAMPLE
• • • • • • • TOTAL WALL LENGTH = 1000 MTRS ESTIMATED PROJECT COST =40000R PLANNED DURATION = 50 DAYS BUDGETED COST PER DAY 800R PLANNED RATE OF WORK = 20 MT/DY BUDGETED COST PER MTR FINISHED = R40 AT END OF DAY 20 AN EARNED VALUE ANALYSIS CARRIED OUT AS IN NEXT SLIDE
EXAMPLE
• ACTUAL AND PLANNED DATA FOR 20TH DAY • WORK COMPLETED 360 MTRS AGAINST 400MTRS • ACWP IS 18000R WHICH IS TOTAL PROJECT COST ON DAY 20 • BCWS 20DYS @ R800 PER DAY = 16000R • BCWP 360 MTR OF WALL TO COST R40/MTR WHICH IS RS 14400 • CPI = BCWP/ACWP = 14400/18000 = 0.8 • SPI = BCWP/BCWS = 14400/16000 = 0.9 • REVISED PROJECT DURATION = 50/0.9 = 56
COST VARIANCE CALCULATION
• CV = BCWP – ACWP. NEGATIVE IS COST OVERRUN • SCHEDULE VARIANCE(SV) = BCWP – BCWS. NEGATIVE INDICATES BEHIND SCHEDULE • COST VARIANCE (CVP) = CV/BCWP • SCHEDULE VARIANCE(SVP) = SV/BCWS IN HRS DYS etc, • VAC = BAC – EAC • EAC = (ACWP/BCWP) * BAC = BAC/CPI WHERE BAC IS THE VALUE OF BCWS AT COMPLETION
PERCENTAGE COMPLETION AND MONEY SPENT
• PERCENT COMPLETE = BCWP/BAC • PERCENT MONEY SPENT = ACWP/BAC • BQAC IS BUDGET AT COMPLETION
METHOD FOR ASSESSING PROGRESS
• THREE STAGES OF PROGRESS APPLY TO ACTIVITIES • -ACTIVITY NOT STARTED EARNED VALUE IS ZERO • -ACTIVITY COMPLETED EARNED VALUE EQUAL TO ACTIVITY COST BUDGET • -ACTIVITY IN PROGRESS EARNED VALUE WORK ASSESSED BY MEASURING ACTUAL QUANTITY OF WORK DONE
STATUS REPORTS
• WHERE ARE WE TODAY -COST VARIANCES IN CURRENCY/HR AND %COMPLETE -SCHEDULE VARIANCE (IN CURRENCY/HR AND %COMPLETE) -%COMPLETE -%MONEY SPENT
STATUS REPORTS
• WHERE WILL WE END UP -ESTIMATE AT COMPLETION EAC -REMAINING CRITICAL PATH -TREND ANALYSIS SPI -TREND ANALYSIS CPI
IDENTIFYING COST HEADS IN PROJECT
• ENGINEERING AND PROJECT MANAGEMENT • TECHNICAL KNOW HOW • PURCHASING • SUBCONTRACTING • LEGAL FEES • PRE OPERATIVE EXPENSES • CONTINGENCY EXPENDITURE • WORKING CAPITAL FOR OPERATIONS
COST CONTROL PROBLEMS
• • • • • • • • • UNREALISTIC BUDGETS DUE TO POOR ESTIMATION OUT OF SEQUENCE STARTING AND ENDING EVENTS INADEQUATE WBS POOR WORK DEFITION REDUCED BUDGETS BY MGT INADEQUATE FORMAL PLANNING POOR COMPARISON OF ACTUAL AND PLANNED COSTS UNFORESEEN TECHNICAL PROBLEMS SCHEDULE DELAYS THAT REQUIRE OVERTIME OR IDLING TIME COSTS • MATERIAL ESCALATION FACTORS
CAUSES FOR PROJECT OVERRUNS
• FAILURE TO UNDERSTAND CUSTOMER REQMNT • UNREALISTIC APPRAISAL OF INHOUSE COMPETENCES • UNDERESTIMATING COMPLEXITY OR TIME ESTIMATES • INACCURACY OF WBS • FAILURE TO IDENTIFY MAJOR COST ELEMENTS • FAILURE TO DO RISK ASSESSMENT • EXCESSIVE COSTS DUE TO PROJECT INEFFICIENCY OR INFLATION
COMMERCIAL MANAGEMENT
• ESTABLISHMENT OF COMMERCIAL ENVIRONMENT OF PROJECT IS THE FIRST STEP • PROJECT MANAGEMENT HAS FIVE PRINCIPAL AREAS OF COMMERCIAL MANAGEMENT
PRINCIPAL AREAS OF COMMERCIAL MANAGEMENT
• • • • FINANCIAL PROJECT APPRAISAL FUNDING CONTRACTS AND NEGOTIATION ACCOUNTING INVOICING AND CREDIT CONTROL • INSURANCE
PROJECT FEASIBILITY ANALYSIS
• DECISION TAKEN WHETHER TO INVEST IN THIS PROJECT OR CHOOSE BETWEEN PROJECTS • FINAL DECISION DEPENDS ON SEVERAL FACTORS
FACTORS AFFECTING PROJECT INVESTMENT
• • • • IS PROJECT TECHNICALLY FEASIBLE HOW VALID ARE THE ESTIMATES OF PLANNERS WHAT ARE THE ENVIRONMENTAL IMPLICATIONS WILL THE EFFECTIVENESS OF THE PLANT BE AS PROJECTED WHAT ARE THE OPERATIONAL AND FINANCIAL RISKS IN THE PROJECT WILL THE PROJECT BE COMPLETED ON TIME WHAT ARE THE OPERATIONAL COSTS WHAT IS THE PROJECT LIFE CYCLE HOW DO WE RAISE THE FUNDS IS THE ROI JUSTIFIED
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PROJECT CHANGE MGT
• IS THE CHANGE POSSIBLE TO MAKE • IS THE CHANGE REQUESTED BY CUSTOMER OR IS IT A STATUTORY CHANGE • WHAT IS THE ESTIMATED COST OF CHANGE AND WILL THE CUSTOMER PAY • WHAT WILL BE THE EFFECT ON THE PROJECT SCHEDULE • WHAT CHANGES OUGHT TO BE MADE WITH RETROSPECTIVE EFFECT AND WHAT IS THE IMPACT
CHANGE CONTROL SYSTEM
• REVIEW ALL REQUESTED CHANGES TO PROJECT • IDENTIFY TASK IMPACTS • TRANSLATE IMPACTS INTO PERFORMANCE COST AND SCHEDULE • EVALUATE BENEFITS AND COSTS OF REQUESTED CHANGES • ACCEPT OR REJECT REQUESTED CHANGES • ENSURE PROPER IMPLEMENTATION OF CHANGES
PROJECT APPRAISAL AND FINANCING
PROJECT APPRAISAL
• PROJECT APPRAISAL IS DONE TO ASCERTAIN THE VIABILITY OF PROJECTS WITH RESPECT TO CERTAIN CRITICAL PARAMETERS • ALL PROJECTS WHICH ARE VIABLE NEED CAPITAL INVESTMENTS TO FUND THE PROJECT AND THE VARIOUS MODES OF PROJECT FINANCING ARE DISCUSSED LATER
MODES OF PROJECT APPRAISAL
• • • • • TECHNICAL COMMERCIAL ECONOMIC FINANCIAL MANAGEMENT
TECHNICAL PROJECT APPRAISAL
• • • • • • • • • • • SELECTION OF TECHNOLOGY AND PROCESS AVAILABILITY OF INFRASTRUCTURE PROJECT SCHEDULING AND IMPLEMENTATION OPERATIONS WORK FLOW RAW MATERIAL OPERATIONAL KNOW HOW PRODUCT MIX PLANT LAYOUT LOCATION OF PROJECT TECHNOLOGY OBSOLESCENCE COLLABORATION AGREEMENTS
COMMERCIAL PROJECT APPRAISAL
• DEMAND FOR PRODUCT • SUPPLY POSITION FOR PRODUCT AND RAW MATERIAL • DISTRIBUTION CHANNELS • PRODUCT PRICING • GOVERNMENT POLICIES
ECONOMIC PROJECT APPRAISAL
• MEASURES EFFECT OF PROJECT ON NATIONAL ECONOMY • INCLUDES INFRASTRUCTURAL PROJECTS, IMPORT SUBSTITUTION
FINANCIAL PROJECT APPRAISAL
• ARRIVING AT PROJECT COST • ARRIVING AT MEANS TO FUND PROJECT
MANAGEMENT PROJECT APPRAISAL
• MOST IMPORTANT FACTOR IN PROJECT APPRAISAL • INVOLVES QUALITY OF MANAGEMENT OVERSEEING THE PROJECT AND THEIR ABILITY TO COMPLETE SUCH PROJECTS WITHIN THE STATED TIME QUALITY COST
SWOT ANALYSIS FOR PROJECT APPRAISAL
• SWOT ANALYSIS APPLIED TO PROJECT APPRAISAL IS USED IN AREAS OF EXPANSION AND DIVERSIFICATION ACTIVITIES • NEED TO KEEP COMPETITIVE POSITION IN INDUSTRY • THROUGH SWOT AREAS WHICH WORK AGAINST THE INTEREST OF THE PROJECT CAN BE DISCOVERED AND ADDRESSED
STRENGTHS
• LOCATIONAL ADVANTAGE • CLIENT GOODWILL • RISK SHARING THROUGH ALLIANCES
WEAKNESS
• • • • • TECHNOLOGICAL OBSOLESCENCE SCARCITY OF RAW MATERIAL INFRASTRUCTURE PROBLEMS LABOR UNAVAILABILITY LOCATIONAL DISADVANTAGE
OPPORTUNITIES
• CHEAPER RAW MATERIAL THROUGH INDEGINIZATION OR VALUE ENGG • LIBERALIZATION OF IMPORTS • BREAKTHROUGH TECHNOLOGY • SOCIETAL ADVANTAGE
THREATS
• COMPETITION DOING BETTER PROJECTS • WITHDRAWAL OF PATRONAGE BY PARTNER OR GOVT • COST ESCALATIONS • ECONOMIC RECESSION • INFRASTRUCTURAL INADEQUACIES • COMPETITIVE POSITIONING
PROJECT FINANCING
• RAISING OF FUNDS REQUIRED TO FINANCE AN ECONOMICALLY VIABLE CAPITAL INVESTMENT PROJECT
PROJECT FINANCING
• CASH RESERVES (MONEY HELD IN BANK OR IN SHORT TERM INVESTMENTS INCLUDING NON DISTRIBUTED PROFITS) • SALE OF ASSETS • MORTGAGING PROPERTY • BORROWING FROM BANK/FI AS OVERDRAFT OR FIXED TERM LOAN • LEASING PROJECT IN RETURN FOR FINANCE IN WHICH CASE PROJECT WILL BE OWNED BY FI • ISSUEING DEBENTURES OR LOAN STOCK • RAISING SHARE CAPITAL FOR THE PROJECT • COLLABORATING WITH OTHER COMPANIES TO SET U[ A CONSORTIUM OR A JOINT VENTURE IN WHICH RISKS ARE SHARED
IMPORTANCE OF CAPITAL INVESTMENTS
• CAPITAL EXPENDITURE DECISIONS REPRESENT THE MOST IMPORTANT DECISIONS TAKEN. IMPORTANCE STEMS FROM 3 INTER RELATED REASONS • LONG TERM EFFECTS-CONSEQUENCES OF CAPITAL EXPENDITURE DECISIONS EXTEND FAR INTO THE FUTURE.SCOPE OF CURRENT ACTIVITIES OF FIRM GOVERNED BY CAPITAL EXPENDITURE IN THE PAST.CAPITAL EXPENDITURE DECISIONS PROVIDE FRAMEWORK FOR FUTURE ACTIVITIES • IRREVERSIBILITY-WRONG CAPITAL INVESTMENT DECISION CANNOT BE REVERSED WITHOUT LOSSES • SUBSTANTIAL LOSSES-CAPITAL EXPENDITURE INVOLVES SUBSTANTIAL OUTLAYS. CAPITAL COSTS INCREASE WITH ADVANCED TECHNOLOGY
TYPES OF CAPITAL INVESTMENTS
• • • • • • • • PHYSICAL-PHYSICAL ASSETS ARE TANGIBLE INVESTMENTS LIKE LAND BUILDING P&M etc MONETARY-MONETARY ASSETS ARE FINANCIAL ASSETS SUCH AS SHARES ACR etc INTANGIBLE-INTANGIBLE ASSETS REPRESENT OUTLAYS ON R&D,TRG,MARKET DEVELOPMENT;THESE ARE EXPECTED TO GENERATE BENEFITS OVER A PERIOD OF TIME STRATEGIC-STRATEGIC INVESTMENTS HAVE BEARING ON STRATEGIC PLANNING AND TEND TO HAVE SIGNIFICANT IMPACT ON DIRECTION OF THE FIRM TACTICAL-TACTICAL INVESTMENT IS MEANT TOP IMPLEMENT A CURRENT STRATEGY AS PROFITABLY AS POSSIBLE eg REPLACE AN OLD MACHINE TO INCREASE PRODUCTIVITY AND REDUCE OPERATIONAL COSTS MANDATORY-MANDATORY INVESTMENT IS CAPITAL INVESTMENT DONE TO COMPLY WITH STATUTORY REGULATIONS eg POLLUTION CONTROL OR FIRE FIGHTING EQUIPMENT REPLACEMENT-REPLACEMENT INVESTMENT MEANT TO REPLACE WORN OUT EQUIPMENT WITH NEW EQUIPMENT EXPANSION-EXPANSION INVESTMENT IS MEANT TO INCREASE CAPACITY TO CATER TO GROWING DEMAND DIVERSIFICATION-DIVERSIFICATION INVESTMENT AIMED AT EXPANDING OPERATIONS INTO NEW AVENUES R&D-R&D INVESTMENTS ARE MEANT TO DEVELOP NEW PRODUCTS AND PROCESSES WHICH WILL GIVEW THE COMPANY A TECHNOLOGY EDGE
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DIFFICULTIES
• MEASUREMENT PROBLEMS-IDENTIFYING AND MEASURING COSTS AND BENEFITS OF CAPITAL EXPENDITURE PROPOSALS IS DIFFICULT ESPECIALLY WHEN CAPITAL EXPENDITURE HAS BEARING ON SOME OTHER ACTIVITIES OF THE FIRM eg REVENUE BUDGETS • UNCERTAINTY-CAPITAL EXPENDITURE DECISION INVOLVES COSTS AND BENEFITS THAT EXTEND INTO THE FUTURE. IMPOSSIBLE TO PREDICT EXACTLY WHAT WILL HAPPEN IN THE FUTURE IN TERMS OF COST ESCALATION • TEMPORAL SPREAD-COSTS AND BENEFITS ASSOCIATED WITH CAPITAL EXPENDITURE SPREAD OVER LONG PERIOD OF TIME USUALLY 10-20 YRS.
CAPITAL BUDGETING PROCESS
• PLANNING-CONCERNED WITH ARTICULATION OF INVESTMENT STRATEGY AND PRELIMINARY EXAMINATION OF PROJECT PROPOSALS • ANALYSIS-DETAILED ANALYSIS OF MARKETING,TECHNICAL,FINANCIAL, ECONOMIC AND ECOLOGICAL ASPECTS. GATHERING PREPARING AND SUMMARISING INFORMATIONOF VARIOUS PROJECT PROPOSALS
INVESTMENT WORTHINESS OF PROJECT
• ESTIMATE COSTS AND BENEFITS OF PROJECT • ASSESS PROJECT RISKS • CALCULATE COST OF CAPITAL
CAPITAL BUDGETING RATIOS
• SELECTION-SELECTION OF PROJECTS BASED ON CRITERIA SUCH AS CRITERIA ACCEPT REJECT PBP PBP<TGT PRD PBP>TGT PRD ARR ARR>TGT RT ARR<TGT RT NPV NPV>0 NPV<0 IRR IRR>CST CAP IRR<CST CAP BCR BCR>1 BCR<1 PBP IS PAYBACK PERIOD TGT PRD IS TARGET PERIOD ARR IS ACCOUNTING RATE OF RETURN TGT RT IS TARGET RATE NPV IS NET PRESENT VALUE IRR IS INTERNAL RATE OF RETURN CST CAP IS COST OF CAPITAL BCR IS BENEFIT COST RATIO
• • • • • • • •
PAYBACK PERIOD
• LENGTH OF TIME REQUIRED TO RECOVER THE INITIAL CASH OUTLAY • SHORTER THE PAYBACK PERIOD MORE DESIRABLE THE PROJECT
ACCOUNTING RATE OF RETURN
• ALSO REFERRED AS AVERAGE RATE OF RETURN ON INVESTMENT • MEASURE OF PROFITABILITY WHICH RELATES INCOME TO INVESTMENT • MEASURES INCLUDE AVERAGE INCOME AFTER TAX/INITIAL INVESTMENT • ACCOUNTING RATE OF RETURN = PROFIT AFTER TAX/BOOK VALUE OF INVESTMENT
NET PRESENT VALUE
• SUM OF PRESENT VALUES OF ALL THE POSITIVE AND NEGATIVE CASH FLOWS THAT ARE EXPECTED TO OCCUR OVER THE LIFE OF THE PROJECT • NPV=TOTAL OF ALL Ct/(1+r)**t • Ct=CASH FLOW AT END OF YEAR t • r = DISCOUNT RATE • Eg NPV OF A PROJECT WHICH HAS RETURN OF 2 LAC IN YR 1 AND 2 LAC IN YR 2 IS NPV=(200000)/(1.10)**1 + (200000)/(1.10)**2 =181818 + 165289 =347107
INTERNAL RATE OF RETURN
• • • • • • • • • DISCOUNT RATE OF A PROJECT WHICH MAKES THE NPV = 0 IT IS DISCOUNT RATE WHICH EQUATES PRESENT VALUE OF FUTURE CASH FLOWS WITH INITIAL INVESTMENT INVESTMENT = TOTAL OF ALL Ct /(1+r)**n WHERE Ct IS CASH FLOW AT END OF YEAR t , r IS INTERNAL RATE OF RETURN, n IS LIFE OF PROJECT CALCULATION OF r IS BY TRIAL AND ERROR AND DIFFERENT VALUES ARE TRIED TILL THE RIGHT HAND SIDE IS NOT LESS THAN THE INITIAL INVESTMENT IN YEAR 0 YR 0 =100000 YR 1 = 30000 YR 2 = 30000 YR 3 = 40000 YR 4 = 45000 100000 = 30000/(1+r) + 30000/(1+r)**2 + 40000/(1+r)**3 + 45000/(1+r)**4 ITERATIONS DONE WITH DIFFERENT VALUES OF r TILL RHS IS NOT LESS THAN LHS TRY r = 15% 30000/(1.15)+30000/(1.15)**2+40000/(1.15)**3+45000/(1.15)**4 =100802 WHICH IS GT 100000 THE LHS
DATA REQUIRED FOR RATIO CALCULATION
• • • • LIFE OF PROJECT CASH OUTFLOW CASH INFLOW COST OF CAPITAL
BENEFIT COST RATIO
• RATIO OF THE PRESENT VALUE OF BENEFITS TO THE INITIAL INVESTMENT COSTS • BCR = PVB/I • NET BCR (NBCR) = BCR – 1 • PVB = PRESENT VALUE OF BENEFITS • I=INITIAL INVESTMENT COSTS • WHEN BCR > 1 OR NBCR > 0 ACCEPT • WHEN BCR = 0 OR NBCR = 0 INDIFFERENT • WHEN BCR < 1 OR NBCR < 0 REJECT
EXAMPLE OF BENEFIT COST RATIO
• • • • • • INITIAL INVESTMENT 100000 BENEFIT YEAR 1 25000 BENEFIT YEAR 2 40000 BENEFIT YEAR 3 40000 BENEFIT YEAR 4 50000 BENEFIT COST RATIO = ((25000/1.12)+(40000/(1.12)**2)+(40000/ (1.12)**3)+(50000/(1.12)**4))=1.145 • NBCR = BCR – 1 = 0.145
COST OF CAPITAL
• COST OF CAPITAL IS IMPORTANT IN FINANCIAL MGT • USED FOR EVALUATING INVESTMENT PROJECTS , FOR DETERMINING CAPITAL STRUCTURE • COST OF CAPITAL IS THE WEIGHTED AVERAGE COST OF VARIOUS SOURCES OF FINANCE USED eg DEBT EQUITY PREFERENCE • WEIGHTED COST OF CAPITAL WACC = (PROPORTION OF EQUITY)*(COST OF EQUITY) + (PROPORTION OF PREFERENCE)*((COST OF PREFERENCE) + (PROPORTION OF DEBT)*(COST OF DEBT) • Eg (0.50)(16)+(0.10)(12)+(0.40)(8) = 12.4 % • 16,12,8 ARE THE PERCENTILE COSTS • 0.50,0.10,0.40 ARE THE PROPORTIONS WRT 1
COST OF CAPITAL
• TWO COSTS OF CAPITAL • COMPANY COST OF CAPITAL IS THE RATE OF RETURN EXPECTED BY THE EXISTING CAPITAL PROVIDERS. IT REFLECTS THE BUSINESS RISK OF EXISTING ASSETS AND CAPITAL STRUCTURE CURRENTLY EMPLOYED • PROJECT COST OF CAPITAL IS THE RATE OF RETURN EXPECTED BY CAPITAL PROVIDERS FOR NEW PROJECTS
FACETS OF PROJECT FINANCING
• MARKET ANALYSIS-AGGREGATE DEMAND OF PRODUCT IN FUTURE AND MKT SHARE • TECHNICAL ANALYSIS-ANALYSIS OF TECHNICAL AND ENGINEERING ASPECTS • FINANCIAL ANALYSIS-ASCERTAIN WHETHER PROJECT IS FINANCIALLY VIABLE • ECONOMIC ANALYSIS-JUDGING PROJECT FROM SOCIAL COST BENEFIT ANGLE • ECOLOGICAL ANALYSIS-ECOLOGICAL IMPLICATIONS OF PROJECT
ASPECTS IN MARKET ANALYSIS
• AGGREGATE DEMAND OF PRODUCT IN FUTURE • MARKET SHARE OF PROJECT • CONSUMPTION TRENDS • SUPPLY CHAIN CONSTRAINTS • COMPETITION • COST STRUCTURE • ELASTICITY OF DEMAND • CONSUMER BEHAVIOUR • DISTRIBUTION CHANNELS
ASPECTS IN TECHNICAL ANALYSIS
• AVAILABILITY OF RAW MATRL AND OTHER INPUTS • IS SELECTED SCALE OF OPERATIONS OPTIMAL • IS PROPOSED LAYOUT OF PLANT SOUND • WHAT IS THE PROVISION FOR DISCHARGE OF EFFLUENTS AND OTHER DISCHARGES
ASPECTS IN FINANCIAL ANALYSIS
• INVESTMENT OUTLAY AND COST OF PROJECT • MEANS OF FINANCING • COST OF CAPITAL • PROJECTED PROFITABILITY • BREAK EVEN POINT • CASH FLOWS OF PROJECT • INVESTMENT WORTHINESS • LEVEL OF RISK
ASPECTS IN ECONOMIC ANALYSIS
• DIRECT ECONOMIC BENEFITS AND PROJECT COST MEASURED IN TERMS OF EFFICIENCY • IMPACT OF PROJECT ON JOB OPPORTUNITIES AND OTHER SOCIAL BENEFITS
ASPECTS IN ECOLOGICAL ANALYSIS
• DAMAGE CAUSED BY PROJECT TO ENVIRONMENT • COST OF RESTORATION MEASURES REQUIRED TO ENSURE DAMAGE TO ENVIRONMENT IS CONTAINED WITHIN ACCEPTABLE LIMITS
KEY ISSUES IN PROJECT ANALYSIS
• MARKET ANALYSIS -POTENTIAL MARKET -MARKET SHARE • TECHNICAL ANALYSIS -TECHNICAL VIABILITY -PRACTICAL CHOICES • FINANCIAL ANALYSIS -RISK -RETURN
COMMON WEAKNESS IN CAPITAL BUDGETING
• POOR ALIGNMENT BETWEEN STRATEGY AND CAPITAL BUDGETING • OPTIONS NOT PROPERLY EVALUATED • INADEQUATE RISK TREATMENT • SIDE EFFECTS IGNORED • INADEQUATE POST AUDITS
PROJECT QUALITY MANAGEMENT
PROJECT QUALITY MANAGEMENT
• QUALITY PLANNING-IDENTIFYING WHICH QLTY STANDARDS ARE RELEVANT TO THE PROJECT AND DETERMINING HOW TO SATISFYTHEM • QUALITY ASSURANCE-EVALUATING OVERALL PROJECT PERFORMANCE ON A REGULAR BASIS TO ENSURE THAT PROJECT WILL SATISFY RELEVANT QUALITY STANDARDS • QUALITY CONTROL-MONITORING SPECIFIC PROJECT RESULTS TOP DETERMINE IF THEY COMPLY WITH RELEVANT QUALITY STANDARDS AND IDENTIFYING WAYS TO ELIMINATE CAUSES OF UNSATISFACTORY PERFORMANCE • COMPLIANT WITH ISO 9000 AND 10000 SERIES OF STANDARDS AND GUIDELINES • PROJECT QUALITY MANAGEMENT MUST ADDRESS MGT OF PROJECT AND PRODUCT OF PROJECT
QUALITY PLANNING
• INPUTS -QLTY POLICY –SCOPE STATEMENT -STDS AND REGULATION • TOOLS AND TECHNIQUES -BENEFIT COST ANALYSIS -BENCHMARKING -FLOWCHARTING -COST OF QUALITY • OUTPUTS -QUALITY MGT PLAN
QUALITY ASSURANCE
• INPUT -QUALITY MGT PLAN -RESULTS OF QLTY CONTROL MEASUREMENTS -OPERATIONAL DEFINITIONS • TOOLS AND TECHNIQUES -QUALITY AUDITS • OUTPUT -QLTY IMPROVEMENTS
QUALITY CONTROL
• INPUTS -WORK RESULTS –QLTY MGT PLAN -OPERATIONAL DEFINITION -CHECKLISTS • TOOLS AND TECHNIQUES -INSPECTION -7 QC TOOLS -TREND ANALYSIS • OUTPUT -QLTY IMPROVEMENT -ACCEPTANCE DECISIONS -REWORK -PROCESS ADJUSTMENTS
APPROACHES TO TQM IN PROJECTS
• DO NOT ACCEPT POOR QLTY MATRL • DESIGN A SCIENTIFIC METHOD FOR MATRL INSPECTION FOR QLTY • DO NOT GO ON PRICE ALONE • FIND OUT ROOT CAUSE OF QLTY PROBLEMS AND PREVENT OCCURRENCE • ENABLE INFORMATION TO FLOW FREELY IN THE PROJECT RELATED TO QLTY OF PRODUCTS,PROCESSES AND SERVICES • INSTITUTE QUALITY CIRCLE PROGRAMS IN THE PROJECT AND CONDUCT CONTINUOUS TRAINING PROGRAMS AND BUILD QUALITY AWARENESS IN MEMBERS • COMMITMENT OF TOP MGT TO PROJECT QLTY
PROJECT RISK MANAGEMENT
RISK MGT
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RISK IS A MEASURE OF THE PROBABILITY AND CONSEQUENCE OF NOT ACHIEVING A DEFINED PROJECT GOAL RISK INVOLVES ELEMENT OF UNCERTAINTY IMPACT OF RISK IS A VERY SERIOUS CONSIDERATION RISK HAS TWO PRIMARY COMPONENTS -PROBABILITY OF OCCURRENCE OF EVENT -IMPACT OF EVENT OCCURRING IN MONEY TERMS RISK IS A FUNCTION OF LIKELIHOOD AND IMPACT RISK CONSTITUTES A LACK OF KNOWLEDGE OF FUTURE EVENTS(OUTCOMES) FAVORABLE OUTCOMES ARE CALLED OPPORTUNITIES AND UNFAVORABLE RISKS CAUSE OF RISK ITSELF IS A RISK AND IS CALLED A HAZARD IN THIS CASE RISK IS A FUNCTION OF HAZARD AND SAFEGUARD RISK INCREASES WITH HAZARD BUT DECREASES WITH SAFEGUARD
RISK MGT
• INVOLVES PLANNING FOR RISK,ASSESSING,(IDENTIFYING AND ANALYSIS), DEVELOPING RISK HANDLING OPTIONS ,MONITORING RISKS • RISK MGT SHOULD BE COUPLED WITH PROJECT PROCESSES
PROJECT RISKS
• • • • • • • • • • • • PROJECT INITIATION RISK PROJECT COMPLETION RISK RESOURCE AVAILABILITY RISK PRICE INCREASE RISK EXCHANGE RATE RISK TECHNOLOGY RISK POLITICAL RISK COMMERCIAL RISK PHYSICAL RISK ECONOMIC RISK OPERATIONAL RISK PARTNERSHIP RISK
MANAGING PROJECT RISK
• POTENTIAL EFFECTS OF RISKS RANGE FROM INCONVENIENCE TO DISASTERS • PROJECT MGT RISK ASSESSMENT DEALS WITH IDENTIFYING THE PROBABILITY AND SEVERITY OF THESE RISKS AND DECIDING HOW TO REDUCE POTENTIAL IMPACT
RISK PLANNING
• PROCESS OF DEVELOPING AND DOCUMENTING AN ORGANIZED COMPREHENSIVE STRATEGY FOR IDENTIFYING AND TRACKING RISK ISSUES,DEVELOPING RISK HANDLING PLANS , PERFORMING CONTINUOUS RISK ASSESSMENTS TO DETERMINE HOW RISKS HAVE CHANGED
RISK ASSESSMENT
• PROCESS INVOLVES IDENTIFYING AND ANALYSING AREAS AND CRITICAL PROCESS RISKS TO INCREASE THE LIKELIHOOD OF MEETING COST PERFORMANCE AND SCHEDULE OBJECTIVES • RISK IDENTIFICATION IS THE PROCESS OF IDENTIFYING AND DOCUMENTING THE RISK • RISK ANALYSIS IS THE PROCESS OF EXAMINING IDENTIFIED RISK ISSUES TO REFINE THE RISK DESCRIPTION,ISOLATE THE CAUSE AND DETERMINE THE EFFECTS
RISK IDENTIFICATION
• IDENTIFY ALL POTENTIAL RISK ISSUES • OBJECTIVE OR SUBJECTIVE SOURCES • OBJECTIVE -RECORDED EXPERIENCES FROM PAST PROJECTS IN TERMS OF LEASONS LEARNT, CURRENT PERFORMANCE DATA • SUBJECTIVE -EXPERIENCE BASED UPON KNOWLEDGEABLE EXPERTS
IDENTIFYING RISKS
• RISKS OCCURING AT START OF PROJECT • RISKS OCCURING DURING EXECUTION OF PROJECT • RISKS THAT CAN AFFECT THE FINAL STAGES OF A PROJECT DURING COMMISSIONING • RISKS OCCURING DURING AT ANY TIME DURING THE PROJECT
RISK ANALYSIS
• BEGINS WITH DETAILED STUDY OF RISK ISSUES IDENTIFIED • OBJECTIVE IS TO GATHER INFO ABOUT RISK ISSUES • RISK ANALYSIS DONE ON FOLLOWING TOPICS -COST EVALUATION -SCHEDULE EVALUATION -TECHNICAL EVALUATION
TOOLS IN RISK ANALYSIS
• • • • • • • • LIFE CYCLE COST ANALYSIS MONTE CARLO SIMULATION IMPACT ANALYSIS PROBABILITY ANALYSIS DECISION ANALYSIS WBS SIMULATION TECHNOLOGY TRENDING TOTAL RISK ASSESSING COST ANALYSIS
LEVELS OF RISK
• HIGH RISK – SUBSEQUENTIAL IMPACT ON COST SCHEDULE HIGH • MODERATE RISK – SOME IMPACT ON COST SCHEDULE • LOW RISK – MINIMAL IMPACT ON COST SCHEDULE • RISK RATINGS GIVEN • RATING = SEVERITY * IMPACT
RISK SEVERITY
• • • • • 1 2 3 4 5 HIGHLY UNLIKELY CHANCES SLIGHT CHANCES LIKELY CHANCES HIGHLY LIKELY CHANCES ALMOST CERTAIN CHANCES
RISK IMPACT
• 5 HUGE-DISASTROUS BUSINESS EFFECTS DIFFICULT TO RECOVER • 4 LARGE-SIZEABLE IMPACT ON BUSINESS BUT POSSIBLE TO RECOVER • 3 MEDIUM-MODERATE EFFECT ON BUSINESS • 2 LOW-MINIMAL IMPACT ON BUSINESS • 1 NO EFFECT ON BUSINESS
RISK HANDLING
• IDENTIFIES EVALUATES SELECTS AND IMPLEMENTS OPTIONS INORDER TO SET RISK AT ACCEPTABLE LEVELS • INCLUDES SPECIFICS ON WHAT SHOULD BE DONE , WHEN IT SHOULD BE ACCOMPLISHED , WHO IS RESPONSIBLE, AND ASSOCIATED COSTS AND SCHEDULE • RISK HANDLING OPTIONS INCLUDE ASSUMPTION AVOIDANCE MITIGATION AND TRANSFER
RISK HANDLING OPTIONS
• ASSUMPTION/RETENTION = RISK EXISTS AWARE OF CONSEQUENCES WILLING TO WAIT AND SEE WHAT HAPPENS.ACCEPT THE RISK AND IMPACT • AVOIDANCE = WILL NOT ACCEPT THE RISK • RISK MITIGATION/CONTROL = TAKE REQD MEASURES TO CONTROL RISK BY DEVELOPING CONTINGENCY PLANS • RISK TRANSFER = SHARE RISK WITH OTHERS
RISK MONITORING
• PROCESS THAT SYSTEMATICALLY TRACKS AND EVALUATES PERFORMANCE OF RISK HANDLING ACTIONS AGAINST ESTABLISHED METRICS THROUGHOUT THE ACQUISITION PROCESS • TECHNIQUES SUITABLE FOR RISK MONITORING INCLUDE -EARNED VALUE -SCHEDULED PERFORMANCE MONITORING
METHODS OF DEALING WITH RISK
• AVOID THE RISK-DO NOT EXECUTE PROJECT • TAKE PRECAUTION TO PREVENT OR MINIMIZE RISKS-PREVENTIVE MEASURES eg SAFETY PRECAUTIONS • ACCEPT THE RISK-ACCEPT THE RISK AS A PART OF THE ACTIVITY AND REACT ACCORDINGLY • SHARE THE RISK-SEEK PARTNERSHIP TO SHARE RISK • LIMIT THE RISK – AUTHORIZE STEP BY STEP AND EXECUTE STEP BY STEP AFTER REVIEW • TRANSFER THE RISK - INSURE
STEPS FOR PROJECT RISK MANAGEMENT
• DEFINE PROJECT SCOPE • ANALYSE THE PROJECT CHARACTERISTICS , DEFINE THE ENVIRONMENT ,ASSESS THE PROJECT STAKEHOLDERS, IDENTIFY THE RISKS INVOLVED • DESIGN FINANCING , TECHNICAL AND RISK MGT PROCEDURES • STUDY CURRENT RISK FACTORS AND MEET THEM ON AN ONGOING BASIS • DECIDE TO ACCEPT OR REJECT RISK • IF RISK IS TO BE REJECTED DESIGN PROCEDURES TO MITIGATE RISK
SOURCES OF RISK
• EXTERNAL – GLOBAL, POLITICAL, ECONOMIC, MARKET CONDITIONS • INTERNAL – REASONS • RELATED TO COMPANY ISSUES
SOURCES OF PROJECT RISKS
• INABILITY TO ASSESS ABILITY OF FINANCERS TO PROVIDE FINANCE DURING THE LIFECYCLE OF THE PROJECT • INACCURATE PROJECT PLANS INCLUDING ACTIVITY COSTING , RESOURCE REQMNT AND PROJECT COST ESCALATIONS • OPERATIONAL RISKS AND ALTERNATIVES NOT ASSESSED • NEED TO HAVE A RISK BREAKDOWN STRUCTURE WITH PROBABILITY AND IMPACT ATTACHED TO EACH ACTIVITY
METHODS OF RISK ANALYSIS
• FINANCIAL VIABILITY ANALYSIS • SENSITIVITY ANALYSIS-WHAT IF • DECISION TREE ANALYSIS-ANALYSIS OF ALTERNATIVES WITH RISKS • MONTE CARLO TECHNIQUE
APPENDED SLIDES
doc_843680582.pptx
The PPT on complete guide of project management.
Project Management
EXAMPLES OF PROJECT
• DEVELOP NEW PRODUCT • EFFECTING CHANGE MGT • DESIGNING/MODIFYING INFORMATION SYSTEMS • DESIGNING AND IMPLEMENTING NEW BUSINESS PROCESSES • BPR EXERCISES
OVERVIEW OF PROJECT MGT BODY OF KNOWLEDGE
• DESCRIBES SUM OF KNOWLEDGE IN PROJECT MGT PROFESSION • PMBOK INCLUDES KNOWLEDGE OF PROVEN TRADITIONAL PRACTICES AND EMERGING TRENDS THAT ARE WIDELY USED • PMBOK DESCRIBES GENERALLY ACCEPTED PM PRACTICES WHICH BRING VALUE AND PROFITABILITY TO THE PROJECT
TOPICS COVERED IN PMBOK
• • • • • • • • • PROJECT LIFECYCLE PROJECT MGT PROCESS PROJECT SCOPE MGT PROJECT QLTY MGT PROJECT TIME AND RESOURCE MGT PROJECT COST MGT PROJECT HR MGT PROJECT PROCUREMENT MGT PROJECT COMMUNICATION MGT
WHAT PROJECT MGT INVOLVES
• PROJECT PLANNING -DEFINITION OF WORK REQMNT -DEFINITION OF QTY AND QLTY OF WORK -DEFINITION OF RESOURCES REQD • PROJECT MONITORING -TRACKING PROGRESS -COMPARING ACTUAL OUTCOME AGAINST PREDICTED -ANALYSING IMPACT -MAKING ADJUSTMENTS
CLASSIFICATION OF PROJECTS
• • • • • • BASED ON TYPE OF ACTIVITY BASED ON NEED BASED ON LOCATION OF PROJECT BASED ON SIZE BASED ON PROJECT DURATION BASED ON OWNERSHIP
BASED ON NEED
• • • • • • NEW PROJECT EXPANSION PROJECT MODERNIZATION PROJECT REPLACEMENT PROJECT DIVERSIFICATION PROJECT BACKWARD OR FORWARD INTEGRATION PROJECT
CRITERIA FOR PROJECT SELECTION
• REALISM-REALITY OF SITUATION • CAPABILITY-EXISTING CAPABILITIES OF COMPANY EXISTING PROJECT AND THAT OF PARTNERS • FLEXIBILITY-RESULTS TO BE PRODUCED WITHIN RANGE OF PARAMETRIC CHANGES INTERNALLY AND EXTERNALLY • COST OF PROJECT-SHOULD BE LESS THAN THE BENEFITS ACCRUED
SUCCESSFUL PROJECT OBJECTIVES
• WITHIN TIME • WITHIN COST • AT THE DESIRED PERFORMANCE/QUALITY LEVEL • ACCEPTED BY THE CUSTOMER • MINIMUM SCOPE CHANGES • WITHOUT DISTURBING EXISTING WORKFLOW
PROJECT CHARACTERISTICS
• • • • • • • • • • • • SPECIFIC UNIQUE OBJECTIVES LIFE CYCLE TIME LIMIT FOR PLANNING AND EXECUTION UNIQUENESS TEAM WORK COMPLEXITY SUB CONTRACTING RISKS AND UNCERTAINTY CUSTOMER SPECIFIC CHANGING REQUIREMENTS RESPONSIVENESS TO ENVIRONMENT RESOURCE AND COST OPTIMIZATION
POTENTIAL BENEFITS OF PROJECT MGT
• IDENTIFICATION OF FUNCTIONAL RESPONSIBILITY TO ENSURE ALL ACTIVITIES ARE ACCOUNTED FOR • MEASUREMENT OF ACCOMPLISHMENT AGAINST PLANS • EARLY IDENTIFICATION OF PROBLEMS FOR CORRECTION • IMPROVED ESTIMATING CAPABILITY FOR FUTURE PLANNING
POTENTIAL BENEFITS OF PROJECT MGT
• • • • • DELIVERY OF SOLUTIONS INCREASED BUSINESS INCREASED QUALITY INCREASED PROFITABILITY CONTROLLED SCOPE CHANGE
OBSTACLES IN PROJECT MGT
• • • • • • • • • • • PROJECT COMPLEXITY HIGHTENED COMPETITION UNSTABLE ECONOMY COST INFLATION PROJECT INPUT SHORTAGES CUSTOMER SPECIAL REQUIREMENTS AND SCOPE CHANGES ORGANIZATIONAL RESTRUCTURING PROJECT RISKS TECHNOLOGY CHANGES SOCIETAL CONCERNS QUALITY OF WORK
EFFECTS OF UNCONTROLLED OBSTACLES
• • • • • • • DECREASED PROFITS INCREASED MANPOWER COST OVERRUNS,DELAYS,PENALTIES INABILITY TO COPE WITH NEW TECHNOLOGY NEW PRODUCTS INTRODUCED TOO LATE HASTY DECISIONS COSTING DEARLY DIFFICULTY IN ACHIEVING ON TIME TARGET OBJECTIVES IN REAL TIME • PROBLEMS IN RELATING COST TO TECHNICAL PERFORMANCE AND SCHEDULING DURING PROJECT EXECUTION
EFFECTS OF BAD PROJECT MANAGEMENT
• • • • LATE ACTIVITIES COMPLETION COST OVERRUNS SUBSTANDARD PERFORMANCE HIGH TURNOVER IN PROJECT
CAUSES OF BAD PROJECT MGT
• TOP MGT NOT COMMITED • TOO MANY PROJECTS GOING ON AT THE SAME TIME SOME DUPLICATING WORK eg mini computer in DEC leading to formation of DG • IMPOSSIBLE SCHEDULE COMMITMENTS • NO ONE PROJECT MANAGER • POOR CONTROL OF CUSTOMER CHANGES • POOR UNDERSTANDING OF CUSTOMERS TRUE REQUIREMENTS • NO INTEGRATED PLANNING AND CONTROL • OVERCOMMITED RESOURCES • UNREALISTIC PLANNING AND SCHEDULING • NO COST ACCOUNTABILITY
PURPOSE OF PROJECT MANAGEMENT
• FORESEE OR PREDICT DANGERS TO PROJECT • ENSURE PROJECTS COMPLETED AS SUCCESSFULLY AS POSSIBLE INSPITE OF RISKS • ACHIEVE FINAL RESULT AS DESIRED WITHIN RESOURCE BUDGETED IN TIME WITH THE REQUISITE QUALITY • USAGE OF PLANNING AND CONTROL AND RESOURCE ALLOCATION INITIATIVES TO MONITOR PROJECT PROGRESS
PROJECT PORTFOLIO MGT
• IMPORTANT INPUTS TO THIS PROCESS ARE THE GOALS AND STRATEGIES OF THE COMPANY WHICH ARE ALIGNED WITH THE VISION AND MISSION • PURPOSE OF PROJECT PORTFOLIO MGT IS TO -IDENTIFY PROPOSED PROJECTS AND PRIORITIZE -LIMIT THE NUMBER OF PROJECTS FLOATED TO HAVE BETTER CONTROL -IDENTIFY THOSE PROJECTS THAT BEST FIT THE ORG GOALS AND STARTEGY -ELIMINATE PROJECTS THAT HAVE EXCESSIVE RISK AND COSTS -BALANCE RESOURCES WITH NEEDS -BALANCE SHORT MEDIUM AND LONG TERM RETURNS
PROJECT PORTFOLIO ASSESSMENT
• WHETHER REQUIRED COMPETENCE EXISTS IN ORG • WHETHER THERE IS MARKET FOR OFFERING • HOW PROFITABLE IS THE OFFERING GOING TO BE • HOW RISKY IS THE PROJECT • ARE THE RIGHT RESOURCES AVAILABLE AT THE RIGHT TIME • IS THE PROJECT A GOOD TECHNOLOGICAL FIT IN THE ORG
CATEGORIES OF PROJECTS
• DERIVATIVE PROJECTS-PROJECTS WITH OBJECTIVES OR DELIVERABLES THAT ARE INCREMENTALLY DIFFERENT IN PRODUCT AND PROCESS IN CURRENT OFFERING • PLATFORM PROJECTS-MAJOR DEPARTURE FROM EXISTING OFFERINGS. NEXT GENERATION OF PRODUCT OFFERINGS • BREAKTHROUGH PROJECTS-INVOLVE NEW TECHNOLOGY • R&D PROJECTS-VISIONARY ENDEAVOURS ORIENTED TOWARDS USING NEWLY DEVELOPED TECHNOLOGIES
ISSUES IN PROJECT MGT
• WHAT ARE INTERNAL AND EXTERNAL SOURCES • HOW DO WE SELECT • HOW DO WE PROVIDE CAREER DEVELOPMENT IN PROJECT MGT • HOW CAN WE DEVELOP PROJECT MGT SKILLS • HOW DO WE EVALUATE PROJECT MGT PERFORMANCE
TASKS IN PROJECT MGT
• • • • • • • • SET OBJECTIVES ESTABLISH PLANS ORGANIZE RESOURCES PROVIDE STAFFING SET UP CONTROLS ISSUE DIRECTIVES MOTIVATE PEOPLE LOOK AT ALERNATIVES TO IMPROVE PERFORMANCE OR OBVIATE RISKS
PROJECT MGT PROCESSES
• • • • • INITIATING PROCESSES PLANNING PROCESSES EXECUTING PROCESSES CONTROLLING PROCESSES CLOSING PROCESSES
INITIATION
• AUTHORIZING PROJECT • DEFINING SCOPE AND RESPONSIBILITIES
PLANNING
• • • • • • • • • SCOPE PLANNING AND DEFINITION ACTIVITY DEFINITION ACTIVITY SEQUENCING ACTIVITY DURATION ESTIMATION SCHEDULE DEVELOPMENT RESOURCE PLANNING COST ESTIMATION COST BUDGETING RISK MGT PLANNING-IDENTIFICATION,ANALYSIS,RESPONSE PLANNING • QUALITY PLANNING • STAFFING • PROCUREMENT PLANNING
EXECUTION
• • • • PROJECT PLAN EXECUTION INPUT STAFFING ACTIVITY MGT AND CRASHING PERFORMANCE AND COST MEASUREMENT • RISK MONITORING
CONTROL
• • • • • • CHANGE CONTROL SCHEDULE CONTROL COST CONTROL QUALITY CONTROL RISK CONTROL PRODUCTIVITY CONTROL
CLOSURE
• • • • COMPLETION OF PROJECT RESOLUTION OF ISSUES HANDOVER CHANGE CONTROL IMPLEMENTATION
RESPONSIBILITY OF PROJECT MGR
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PRODUCE RESULTS WITH AVAILABLE RESOURCES AND WITHIN THE CONSTRAINTS OF TIME COST TECHNOLOGY PERFORMANCE TO MEET CONTRACTUAL PROFIT OBJECTIVES TO TAKE REQUIRED DECISIONS AS ALTERNATIVES CORRECTION SUSPENSION OR TERMINATION TO MANAGE CHANGE TO RESOLVE CONFLICTS INTERFACE WITH CUSTOMER AND ENSURE THAT CUSTOMER PROVIDES RESOURCES AS PER AGREED UPON PLAN MANAGE INFORMATION MANAGE RESOURCES – MAN MONEY FACILITIES MATERIAL EQUIPMENT TECHNOLOGY PLANNING AND CONTROL MGT WHICH INCLUDES INCREASED EQPT UTILIZATION INCREASED PERFORMANCE EFFICIENCY REDUCED RISKS IDENTIFICATION OF ALTENATIVES TO PROBLEMS
TYPES OF PROJECTS
• ERECTION PROCUREMENT COMMISSIONING • MANUFACTURING • MANAGEMENT • RESEARCH AND DEVELOPMENT
PRIMARY PROJECT OBJECTIVES
• SPECIFICATION PERFORMANCE QUALITY • WITHIN BUDGET AND RESOURCE CONSUMPTION • WITHIN TIME FRAME SPECIFIED TO COMPLETE
EFFECT OF PROJECT DELAYS
• • • • DIRECT COSTS OVERHEAD COSTS PENALTY COSTS COST EFFECT OF PROJECT DELAYS
DEFINING THE PROJECT
• PROJECT DEFINITION IS A PROCESS THAT STARTS WHEN THE IDEA OF A PROJECT IS FIRSTLY CONCEIVED AND ENDS WHEN THE PROJECT IS COMPLETED TO THE DESIRED REQMNT
PROJECT LIFECYCLE
• • • • • • • • • • • CONCEPT APPRAISAL(FEASIBILITY) COMMERCIAL AND TECHNICAL AGREEMENT PLANNING AND DESIGN ENGINEERING AND PROCUREMENT PHASE TESTING AND COMMISSIONING END OF PHASE CHANGE MGT PROJECT CLOSURE OPERATIONS MAINTENANCE AND CONTROL DOCOMMISIONING AND DISPOSAL
PROJECT ASSESSMENT
• EXPECTED DELIVERABLES AND BEYOND SCOPE OF PROJECT • PROJECT CHANGE MANAGEMENT ISSUES AND IMPACTS • RETURN ON INVESTMENT • TOTAL ESTIMATED EXPENDITURE AND RESOURCES REQUIRED • ESTIMATED DATE OF COMPLETION • RISK FACTORS INVOLVED IN PROJECT EXECUTION • FORECAST OF OPERATING AND MAINTENANCE COSTS • LIKELY LIFESPAN OF PLANT • SALVAGE VALUE • FORECASTS OF FINANCING COSTS OVER PROJECT LIFE INCLUDING INTEREST RATE CHANGES EXCHANGE RATE FLUCTUATION ETC • TAX CONSIDERATIONS
PROJECT COMMERCIAL MANAGEMENT
• • • • FINANCIAL PROJECT APPRAISAL PROJECT RISK MANAGEMENT PROJECT FUNDING PROJECT ENGINEERING PROCUREMENT COMMISSIONING • PROJECT ACCOUNTING • INSURANCE
PROJECT FEASIBILITY
• • • • • • • TECHNICAL COMMERCIAL FINANCIAL FEASIBILITY AND FUTURE RISKS EVALUATE MKT POTENTIAL RAW MATERIAL AVAILABILITY INFRASTRUCTURAL SUPPORT STRATEGIC ALTERNATIVES WITH FUTURE VALUES AND PROBABILITIES ENVIRONMENTAL IMPLICATIONS COMPETENCE AND CAPABILITY OF PROJECT TO DELIVER STATED AND UNSTATED OUTCOMES PROJECT IMPLICATIONS FOR STAFF FEASIBILITY OF COMPLETION PERIOD PROJECT COSTS AND ESCALATION FIGURES AND HOW IS THE PROJEC T FUNDED;WHAT ARE THE RETURNS ON INVESTMENTS RISKS AND IMPACTS OPERATING COSTS OF PLANT AND MACHINERY EXPECTED USEFUL LIFE SPAN AND TECHNOLOGY OBSOLESCENCE RISKS OF PLANT AND MACHINERY QUANTIFY WEAKNESSES AND UNKNOWN INITIAL PROJECT GOALS AND OBJECTIVES
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TECHNICAL FEASIBILITY
• CURRENCY OF TECHNOLOGY AND RISKS INCLUDING OBSOLESCENCE • ADAPTATION OF TECHNOLOGY TO LOCAL CONDITIONS • IN CASE OF IMPORTED TECHNOLOGY SUPPORT AND LIFESPAN OF SUPPORT
PROBLEM WITH OBJECTIVES
• GOALS NOT AGREEABLE TO EVERYBODY • OBJECTIVES DO NOT ACCOMMODATE AGILITY • INSUFFICIENT TIME • OBJECTIVES NOT QUANTIFIED • OBJECTIVES NOT DOCUMENTED
PROJECT FUNDING SOURCES
• • • • • CURRENT CASH RESERVES SALE OF ASSETS MORTGAGE PROPERTY BORROWING FROM FI RAISING SHARE CAPITAL FOR THE PROJECT • COLLABORATING WITH OTHER COMPANIES FOR THE PROJECT
PROJECT PLANNING AND SCHEDULING
• PLANNING ENTAILS DEFINING THE SCOPE OF THE PROJECT ESTIMATING THE RESOURCES AND DEFINING THE PROJECT STRUCTURE • SCHEDULING IS ALL ABOUT ALLOCATING RESOURCES TO THE ACTIVITIES IN THE PROJECT IN ORDER TO ACHIEVE THE DELIVERABLES WITHIN THE BUDGET TIME AND QUALITY
PROJECT PLANNING AND SCHEDULING
• EXTERNAL AND INTERNAL FACTORS THAT HAVE AN EFECT ON THE PROJECT PLAN AND SCHEDULE • ALSO QUALITY OF PROJECT PLANNING AND EXECUTION AFFECTS THE OUTCOME • EXTERNAL FACTORS INCLUDE FORCE MAJEURE,FISCAL POLICIES CORPORATE STRATEGY,MARKET CONDITIONS,STATUTORY REGULATIONS • INTERNAL FACTORS INCLUDE SUPPORTING SERVICES,PROCEDURES AND SYSTEMS,MANAGEMENT SKILLS,ORGANIZATION STRUCTURE,RESOURCES AND CAPACITY,TECHNICAL CAPABILITY
EXTERNAL FACTORS
• EVENTS AND CONDITIONS THAT LIE OUTSIDE THE CONTROL OF THE PROJECT MGT TEAM • SOME OF THESE FACTORS CAN AFFECT OR RUIN PROJECT SCHEDULING
ACTS OF GOD
• ALL PROJECTS ARE SUBJECT TO RISK AND MANY OF THOSE RISKS CAN HAVE AN ENORMOUS IMPACT ON PLANS • ACTS OF GOD COULD BE BY WAY OF NATURAL DISASTERS,EPIDEMIC • FORCE MAJEURE BY WAY OF ACT OF WAR IS ALSO INCLUDED UNDER THIS HEAD
FISCAL POLICY
• POLICY OF GOVT WRT TAXATION AND OTHER FINANCIAL MEASURES CAN HAVE A PROFOUND EFFECT ON PROJECTS AND THEIR PLANNING eg GOVT FUNDED PROJECT IS ABANDONED THROUGH A POLITICAL DECISION • ECONOMIC CONSEQUENCES OF GOVT POLICY NEED TO BE CONSIDERED FOR LOOKING AT EFFECTS ON PROJECTS
CORPORATE STRATEGY
• STRATEGIC DECISIONS CAN AFFECT PLANNING eg -SHIFT FOCUS FROM ONE COMPANY AND RESTART PROJECT IN ANOTHER GROUP COMPANY -DELAY THE START OF AN INTERNAL PROJECT DUE TO DIVERSION OF FUNDS TO ANOTHER PURPOSE -STRATEGIC DECISION TO STOP RECRUITMENT TO CUT COSTS -CHANGES IN PROJECT PRIORITIES
STATUTORY REGULATIONS
• LEGISLATION BY GOVT CAN IMPOSE EXTRA BURDEN ON PROJECT • BURDEN TOP BE TAKEN INTO ACCOUNT AT PLANNING STAGE
PROJECT PLANNING
• PROCESS OF DECIDING IN ADVANCE ABOUT THE FUTURE COURSE OF ACTIONS TO BE TAKEN WITH ALTERNATIVES • PLANNING CONSISTS OF DEFING ALL THE WORK REQUIRED TO BE CARRIED OUT • PLANNING IS CRITICAL TO THE PROJECT SINCE MOST ACTIVITIES MAY BE PERFORMED FOR THE FIRST TIME
BASIC REASONS FOR PROJECT PLANNING
• ELIMINATE OR REDUCE UNCERTAINTY • IMPROVE EFFICIENCY OF OPERATIONS • OBTAIN BETTER UNDERSTANDING OF OBJECTIVES • PROVIDE BASIS FOR MONITORING AND CONTROLLING WORK
COMPONENTS OF PROJECT PLANNING
• • • • • • OBJECTIVE – GOAL TARGET QUOTA TO BE ACHIEVED BY A CERTAIN TIME PROGRAM – STRATEGY TO BE FOLLOWED AND MAJOR ACTIONS TO BE TAKEN IN ORDER TO ACHIEVE OR EXCEED OBJECTIVES SCHEDULE – PLAN SHOWING WHEN ACTIVITIES WILL START AND END COST ESTIMATES-PREPARING COST ESTIMATES FOR ACTIVITIES RESOURCES-RESOURCE REQUIREMENT FOR ACTIVITIES BUDGET – PLANNED EXPENDITURES REQD TO ACHIEVE OR EXCEED OBJECTIVES FORECAST – PROJECTION OF WHAT WILL HAPPEN BY A CERTAIN TIME RESPONSIBILITIES – REQD TO ACHIEVE OR EXCEED OBJECTIVES POLICY – GENERAL GUIDELINS FOR DECISION MAKING AND INDIVIDUAL ACTIONS PROCEDURE – DETAILED METHOD FOR CARRYING OUT A POLICY STANDARD – PERFORMANCE DEFINED AS ADEQUATE OR ACCEPTABLE
• • •
• •
INFORMATION NEEDS FOR PLANNING
• • • • STATEMENT OF WORK PROJECT SPECIFICATIONS MILESTONE SCHEDULE WORKBREAKDOWN STRUCTURE
PROJECT SPECIFICATIONS
• SPECIFICATIONS ARE USED FOR MAN HOUR , EQPT, MATERIAL ESTIMATES • SMALL CHANGES IN SPECIFICATION CAN CAUSE LARGE COST OVERRUNS • SPECIFICATIONS ARE STANDARDS FOR PRICING A PROPOSAL
MILESTONE SCHEDULES
• • • • PROJECT START DATE PROJECT END DATE OTHER MAJOR MILESTONES DELIVERABLES
STATEMENT OF WORK
• NARRATIVE DESCRIPTION OF WORK REQUIRED FOR PROJECT • SOW IS BASED ON THE DOCUMENTED SCOPE OF WORK AND THE ACTIVITIES REQD TO ACHIEVE THE STATED OBJECTIVES • SOW IS BASED ON THE IDENTIFICATION OF ACTIVITIES AND EXPLOSION TO WORK BREAKDOWN STRUCTURE • COST ESTIMATES FOR THE PROJECT ARE BASED ON THE SOW
WORK BREAKDOWN STRUCTURE
• SUCCESSFUL ACCOMLISHMENT OF PROJECT DELIVERABLES REQUIRES A PLAN THAT DEFINES ALL EFFORTS TO BE EXPENDED ASSIGNS RESPONSIBILITY AND ESTABLISHES SCHEDULES AND BUDGETS FOR ACCOMLISHMENT OF WORK • WORK BREAKDOWN STRUCTURE HAS WORK ELEMENTS
WORK ELEMENTS
• REPRESENT UNITS OF WORK AT THE LEVEL WHERE WORK IS PERFORMED • CLEARLY DEFINED START AND END DATES • SPECIFIES A BUDGET IN TERMS OF MONEY, MAN HOURS,
WORK ELEMENTS
• MANAGEABLE SMALL ACTIVITIES • INDEPENDENTWITH MINIMUM DEPENDENCE OR INTERFACING WITH OTHER ONGOING ELEMENTS • MEASURABLE IN TERMS OF PROGRESS • COSTS AND BUDGETS CAN BE ESTABLISHED • TIME COST AND PERFORMANCE CAN BE TRACKED • STATUS REPORTING PROCEDURES ARE ESTABLISHED
DISTINCTION BETWEEN PLANNING AND SCHEDULING
• PLAN IS THE LISTING THAT RESULTS WHEN ALL ACTIVITIES HAVE BEEN SUBJECTED TO ESTIMATING SEQUENCING TARGET TIMING AND PRIORITISING • NETWORK DIAGRAMMING IS USUALLY THE WAY TO PLAN ACTIVITIES • SCHEDULE IS OBTAINED BY DOING ADDITIONAL WORK ON THE INITIAL PLAN SO THAT RESOURCES NEEDED TO CARRY OUT THE PROJECT ACTIVITIES ARE TAKEN INTO ACCOUNT
PLANNING TIME FRAMES
• FREE PLANNING APPROACH • TARGET LED PLANNING
FREE PLANNING APPROACH
• SCHEDULES PROVIDED FROM ESTIMATES WITH NO EXTERNAL PRESSURE TO COMPRESS TIME SCALE • ALLOWS PLANNER TO DEVELOP A SCHEDULE THAT IS CAPABLE OF BEING ACHIEVED WITH A CERTAIN AMOUNT OF CERTAINTY
TARGET LED PLANNING
• END DATE REQUIREMENT IS PREDETERMINED, GOVERNED BY FACTORS OUTSIDE THE PLANNERS CONTROL • PROJECT HAS TO BE FINISHED TO MEET A FORTHCOMING PUBLIC EVENT
ELEMENTS OF PLAN
• • • • • WHAT WILL BE ACCOMPLISHED HOW WILL IT BE ACCOMPLISHED WHERE WILL IT BE ACCOMLISHED WHEN WILL IT BE ACCOMLISHED WHY WILL IT BE ACCOMPLISHED
TYPES OF PLANS
• BUDGETS-HOW MUCH MONEY IS ALLOCATED TO EACH EVENT • CONFIGURATION MGT-HOW ARE TECHNICAL CHANGES MADE AND MANAGED • QUALITY ASSURANCE-HOW DO I GUARANTEE SPECS WILL BE MET • FACILITIES-WHAT RESOURCES ARE AVAILABLE
CONFIGURATION MGT
• PROVIDES APPROPRIATE LEVEL OF REVIEW AND APPROVAL FOR CHANGE • FOCAL POINT FOR THOS SEEKING TO MAKE CHANGES
QUESTIONS IN CONFIG MGT
• WHAT IS THE COST OF CHANGE • DO THE CHANGES IMPROVE QLTY • IS THE ADDITIONAL COST OF QLTY JUSTIFIABLE • IS THE CHANGE NECESSARY • IS THERE AN IMPACT ON THE DELIVERY DATE
WHY DO PLANS FAIL
• CORPORATE GOALS ARE NOT UNDERSTOOD AT THE LOWER LEVELS • PLANS ENCOMPASS TOO MUCH IN TOO LITTLE TIME • FINANCIAL AND TECHNICAL ESTIMATES WERE POOR AND BASED ON GUESSWORK • PLANS BASED ON INSUFFICIENT DATA • ULTIMATE OBJECTIVE UNKNOWN AND MILESTONE DATES AND ACHIEVABLES ARE NOT STATED PROPERLY • STAFFING REQUIREMENTS AND COMPETENCES NOT DONE WELL
PROJECT TERMINATION REASONS
• FINAL ACHIEVEMENT OF OBJECTIVES • TERMINATION DUE TO CHANGE IN COMPANY INTEREST AND STRATEGY • PROJECT LOSS OR TIME EXTENSION • KEY PEOPLE LEAVE • INADEQUATE SKILLS TO CONTINUE • ALLOCATED TIME IS EXCEEDED
SYSTEMS AND PROCEDURES FOR IMPLEMENTATION
• WHO CAN CHANGE MODIFY PROJECT OBJECTIVES • WHO IS RESPONSIBLE FOR PROCUREMENT OF PROJECT RESOURCES • WHO IS AUTHORIZED TO CHANGE SCHEDULES AND ACTIVITY DURATIONS OR REALLOCATE RESOURCES • WHO HAS THE AUTHORITY TO CONTROL PROJECT CHANGE MGT OR PREMATURELY TERMINATE THE PROJECT
PROJECT CONTROL SYSTEMS
• MEASURES TO CONTROL COST TIME QUALITY • SOME OF THE CONTROL SYSTEMS USED ARE: -WORK BREAKDOWN STRUCTURE -BAR CHART -PROGRESS CHART -EARNED VALUE ANALYSIS -PERT COST SYSTEM -CPM/PERT NETWORKS -NETWORK SIMULATION -GANTT CHARTS
PROJECT CONTROL REPORTS
• FINANCIAL REPORTS -PLANNED V/S ACTUAL EXPENDITURE -ACCOUNTS PAYABLES • PROCUREMENT REPORTS -ORDERS PLACED DURING THE MTH -ORDERS EXECUTED/PENDING -STATUS OF REQUISITIONS -STOCK POSITION OF MATERIAL
PROJECT CONTROL REPORTS
• ENGINEERING REPORTS -ADHERENCE TO SPECIFICATIONS -TECHNICAL SCRUTINY OF BIDS • INSPECTION PROGRESS REPORTS -WORK EXECUTED -TECHNICAL CONSTRAINTS • EPC REPORTS -JOBWISE PROGRESS -ERECTION SCHEDULE PLANNED V/S ACTUAL -FIELD MODIFICATIONS DONE
PROJECT CONTROL REPORTS
• REVIEW REPORTS -MAJOR ISSUES -EXCEPTION REPORTS
PROJECT CONTROL PARAMETERS
• PERFORMANCE • COST • TIME
PERFORMANCE
• • • • UNEXPECTED TECHNICAL PROBLEMS INSUFFICIENT RESOURCES QUALITY PROBLEMS INTER FUNCTIONAL PROBLEMS
COST
• REQUIREMENT OF MORE RESOURCES • SCOPE OF WORK INCREASES DUE TO UNDER ESTIMATION • INITIAL LOW ESTIMATES • POOR REPORTING • INADEQUATE BUDGETING • PRICE CHANGES
TIME
• UNDER ESTIMATION OF TIME ESTIMATES OR IMPEDIMENTS IN EXECUTION OF ACTIVITIES LEADING TO LONGER TIMES • OVER OPTIMISTIC TIME ESTIMATES • INCORRECT TASK SEQUENCING • RESOURCES UNAVAILABLE WHEN REQUIRED LEADING TO IDLING TIME • PRECEDING TASKS TOOK LONGER THAN EXPECTED
NETWORK ANALYSIS
• SEE NETWORK ANALYSIS1
PROJECT SCHEDULING
• A SCHEDULE IS THE CONVERSION OF A PROJECT ACTION PLAN INTO A OPERATING TIMETABLE • SERVES A BASIS FOR MONITORING AND CONTROLLING PROJECT ACTIVITY • TAKEN IN CONJUNCTION WITH PLANNING AND BUDGETING • SCHEDULES ARE BASED ON PREVIOUSLY BASED ACTION PLANS WHICH USE WORK BREAKDOWN STRUCTURES • CREATE A SCHEDULE FOR EACH ACTIVITY IN THE WBS
PROJECT SCHEDULING
• DEFINE THE TECHNICAL FINANCIAL AND TIME OBJECTIVES • PRODUCE THE WORK BREAKDOWN STRUCTURE • PUT ALL TASKS INTO LOGICAL WORKING SEQUENCE • ESTIMATE DURATION OF EVERY TASK • CALCULATE TIMING AND PRIORITY OF EACH TASK • RECONCILE TASK NEEDS WITH RESOURCES THAT CAN BE PROVIDED • ASSIGN EACH TASK FOR ACTION
PRIORITY FOR SCHEDULING
• • • • • AS SOON AS POSSIBLE AS LATE AS POSSIBLE SHORTEST TASK FIRST MOST RESOURCES FIRST MINIMUM SLACK FIRST
SCHEDULING CASH FLOWS
• CASH FLOW SCHEDULES NEEDED TO BE STUDIED VERY CAREFULLY TO ENSURE NO CASH CRUNCH. ACTIVITY INVOLVES: -INITIAL ACQUISITION COST WHICH IS PURCHASE PAYMENT -INTEREST PAYABLE ON FINANCING LOANS -COST OF OPERATING AND MAINTAINING PLANT -TRAINING COSTS -OTHER INCURRABLE EXPENSES
BENEFITS OF SCHEDULING
• CONSISTENT FRAMEWORK FOR PLANNIONG SCHEDULING MONITORING AND CONTROLLING • ILLUSTRATES THE INTER DEPENDENCE OF TASKS AND WORK ELEMENTSDENOTES TIMES WHEN SPECIFIC PEOPLE AND RESOURCES MUST BE AVAILABLE FOR WORK • DETERMINES AN EXPECTED PROJECT COMPLETION DATE • IDENTIFIES CRITICAL ACTIVITIES WHICH IF DELAYED WILL DELAY THE PROJECT COMPLETION TIME • IDENTIFIES SLACK IN THE PROJECT • DETERMINES THE DATES ON WHICH TASKS MUST BE STARTED IF THE PROJECT HAS TO STAY ON SCHEDULEW
PROJECT RESOURCES
• PROJECT RESOURCES CAN BE MEN MATERIAL MONEY TIME CAPACITY etc • RESOURCES CAN BE EXHAUSTIBLE REPLENISHABLE OR REUSABLE • ONCE EXHAUSTABLE REOURCES ARE USED OR EXPIRE THEY CAN NEVER BE USED eg TIME. TIME NEEDS ITS OWN TECHNIQUES FOR PLANNING AND SCHEDULING eg CPM. EXHAUSTABLE RESOURCES FEATURE IN PROJECT FEASIBILITY • MONEY IS AN EXHAUSTABLE RESOURCE AND CASH FLOW PREDICTIONS FORM PART OF PROJECT RESOURCE SCHEDULING
PROJECT RESOURCES
• REPLENISHABLE RESOURCES ARE THOSE RESOURCES OBTAINED THRU PURCHASING AND ARE REPLENISHABLE RESOURCES • PRINCIPAL METHODS FOR SCHEDULING MATERIAL COMES FROM STOCK CONTROL AND PURCHASING.INFO FROM PROJECT PLANNING PROVIDES CONTROL FRAMEWORK FOR PURCHASES AND STOCK MGT BY STATING HOW MUCH WILL BE NEEDED AND WHEN. • QUANTITIES ON SITE MUST MATCH THE RATE OF PROGRESS EXPECTED FROM THE PROJECT CPM NETWORK.
PROJECT RESOURCES
• REUSABLE RESOURCES ARE ASSETS THAT ARE REQUIRED FOR USAGE AT PROJECT SITES BUT REMAIN AVAILABLE FOR REUSE AFTER TASK HAS BEEN PERFORMED • SKILLED PEOPLE AND MOVEABLE EQUIPMENT ARE EXAMPLES • THEIR UTILIZATION NEEDS CAREFUL PLANNING AND SCHEDULING • PROCESS OF ARRIVING AT SUCH SCHEDULES IS CALLED LOAD LEVELING OR RESOURCE SCHEDULING
RESOURCE SCHEDULING
• • • • IMPORTANT ELEMENT IN FORMULATING LONG TERM PLANS IN PROJECT MGT IT IS CONCERNED WITH SHORT TERM OPERATIONS OF THE BUSINESS PROJECT AND OTHER WORKING SCHEDULES CONTRIBUTE VITAL INFORMATION TO THE STRATEGIC PLANNING PROCESS RESOURCE SCHEDULING CALCULATES REQUIREMENT OF INDIVIDUAL COMPETENCES AND THEIR ACTIVITYWISE DEPLOYMENT FOR THE DURATION OF THE PROJECT. IT ALSO CALCULATES THE REQUIREMENT OF EQUIPMENT AND MATERIAL NEEDED TO SERVICE THE ACTIVITIES NEED TO DEFINE WHO WILL DO WHAT WHEN WHERE HOW RESOURCE UTILIZATION NEEDS TO BE MONITORED AND ALLOCATED TO CRITICAL PATH ACTIVITIES IN ORDER TO ENABLE THE PROJECT TO COMPLETE IN TIME POSSIBLE EFFECTS OF PREDICTED NEW WORKLOAD CAN BE TESTED USING WHAT IF MODELLING
• •
•
SIX STEPS OF PROJECT RESOURCE SCHEDULING
• • • • • • WORK BREAKDOWN STRUCTURE PROJECT NETWORK COST ESTIMATES AND BUDGETS SCHEDULE OF CASH INFLOWS SCHEDULE OF CASH OUTFLOWS SCHEDULE OF NET CASH FLOWS
CALENDARS FOR RESOURCE SCHEDULING
• BY DEFAULT ALL THE ACTIVITIES IN THE PROJECT WILL BE ASSIGNED TO ONE CALENDAR • HOWEVER IT IS POSSIBLE TO ASSIGN A SEPARATE CALENDAR TO SEPARATE LOCATION RELATED SITES eg IN A FACTORY THE SHOP FLOOR AND WORKS OFFICE MAY HAVE ONE CALENDAR BUT SALES OFFICE AND PROJECT OFFICE MAY HAVE A SEPARATE CALENDAR • HOLIDAYS FOR PLANT ARE ALSO INDICATED SEPARATELY • ADDITIONALLY EACH SHOP FLOOR MAY HAVE A CALENDAR eg SF1 WORKS 24*7 WHEREAS SF2 WORKS 8*7 • ALSO EACH WORKER HAS A SEPARATE CALENDAR AND IS IN DIFFERENT SHIFTS AND ALSO HAS DIFFERENT LEAVE PERIODS
RESOURCE LOADING
• DESCRIBES THE AMOUNT OF INDIVIDUAL RESOURCES AN EXISTING SCHEDULE REQUIRES DURING SPECIFIC TIME PERIODS • RESOURCE LOADING GIVES AN UNDERSTANDING OF THE DEMANDS OF A PROJECT ON FIRMS RESOURCES
RESOURCE LEVELING
• RESOURCE LEVELING AIMS AT MINIMIZING THE PERIOD TO PERIOD VARIATIONS IN RESOURCE LOADING BY SHIFTING TASKS WITHIN THEIR SLACK ALLOWANCES • PURPOSE IS TO CREATE A SMOOTHER DISTRIBUTION OF RESOURCE USAGE AND LESSEN THE FLUCTUATION OF REQUIRED LOADS • IF RESOURCE USAGE IS LEVEL A JUST IN TIME INVENTORY POLICY COLD BE DEPLOYED • WHEN RESOURCES ARE LEVELED THE ASSOCIATED COSTS ARE ALSO LEVELED
METHODS OF PROJECT EXECUTION
• BOOM - BUILD,OWN,OPERATE MAINTAIN • BOOT – BUILD,OWN,OPERATE TRANSFER • BOT – BUILD,OPERATE,TRANSFER
CRITERIA FOR EFFECTIVE PROJECT CONTROL
• • • • • • • • • • DETAILED PROJECT PLANNING BREAK PROGRAM INTO SUBSYSTEMS RESULTS AND DELIVERABLES MEASURABLE MILESTONES PROJECT TRACKING MEASURABILITY REGULAR REVIEWS SIGN ON COMMUNICATION MINIMIZED RISKS
PROJECT CONTROL ISSUES
• • • • • • • SET OBJECTIVES LIST ALTERNATIVE STRATEGIES LIST THREATS AND OPPORTUNITIES PREPARE FORECASTS SELECT STRATEGIES PREPARE ACTION PLANS EXECUTE MONITOR AND CONTROL
CONTROL PARAMETERS IN PROJECT
• PERFORMANCE • COST • TIME
PERFORMANCE
• • • • • • • SCHEDULE MGT RESOURCE MGT TECHNICAL ISSUES MGT QUALITY MGT CHANGE MGT CUSTOMER RELATIONS MGT DELIVERABLES AND OUTCOME MGT
COST
• • • • • • RESOURCE MGT SCOPE OF WORK MGT ESTIMATE MGT BUDGET MGT EVENT REPORTING MGT COST CHANGE MGT
TIME
• TIME ESTIMATION OF EVENTS • TIME TAKEN TO COMPLETE ACTIVITY
FEEDBACK CONTROL FOR PROJECTS
• • • • • • • ASSIGN TASK PERFORM TASK MONITOR PROGRESS AGAINST PLAN IDENTIFY VARIANCES AGAINST PLAN DECIDE CORRECTIVE ACTION PROCESS IMPROVEMENT BACK TO PERFORM TASK
PROGRESS OF PROJECT TASKS
• TASK NOT STARTED AS PLANNED WITH REASONS GIVEN • TASK HAS JUST STARTED WHETHER IN TIME OR DELAYED START • TASK IS IN PROGRESS WITH AN ASSESSMENT OF % OF TASK COMPLETED • TASK IS IN PROGRESS WITH AN ESTIMATE OF THE REMAINING DURATION TO COMPLETE • TASK IS COMPLETED
REASONS FOR POOR PROJECT CONTROL
• • • • • INSUFFICIENT PLANNING UNREALISTIC PROJECT PLANS UNDERESTIMATED PROJECT SCOPE CUSTOMER CHANGES INSUFFICIENT CONTINGENCY AND BUSINESS CONTINUITY PLANNING • TECHNICAL COMPLEXITIES • STAFFING PROBLEMS
PROJECT EVALUATION
• PROJECT ASSESSMENT DURING COURSE OF IMPLEMENTATION AIMED AT STEERING THE PROJECT IN THE RIGHT DIRECTION • PROJECT EVALUATION HAS SEVERAL OBJECTIVES
PROJECT EVALUATION OBJECTIVES
• VERIFY THE PROGRESS OF IMPLEMENTATION IS AS PLANNED AND TOP TAKE CORRECTIVE MEASURES IF PROGRESS LAGS BEHIND SCHEDULE • ASCERTAIN WHETHER ACTUAL COSTS ARE WITHIN BUDGETED COSTS AT DIFFERENT STAGES OF IMPLEMENTATION AND TO TAKE STEPS TO CONTAIN COSTS IF ACTUAL COSTS ESCALATE OVER THE BUDGETED COSTS • ENSURE COMPLIANCE OF QUALITY STANDARDS WITHOUT COMPROMISES • IDENTIFY UNEXPECTED PROBLEM AREAS AND PLAN FOR MANAGING SUCH SITUATIONS • APPRAISE PROMOTERS ABOUT PROJECT PROGRESS • CONTINUOUS PROCESS IMPROVEMENT IN PROJECT • ENSURE PROJECT OBJECTIVES ARE MET AND TAKE CORRECTIVE ACTIOS TO CORRECT COURSE
PROJECT AUDIT
• THOROUGH EXAMINATION OF MGT OF PROJECT METHOFDOLOGIES AND PROCEDURES • RECORDS PROPERTIES BUDGETS EXPENDITURES AND DEGREE OF COMPLETION • PROJECT RISK ASSESSMENT AN IMPORTANT PART OF THE AUDIT
PROJECT CONTRACTS
• • • • TURNKEY LUMPSUM TIME AND MATERIAL COST PLUS PERCENTAGE LABOUR
CHALLENGES FOR MANAGING PROJECTS
• END DATE DRIVEN SCHEDULES • RESOURCE LIMITATION • ESTABLISHING MEASURABLE MILESTONES • COPING WITH CHANGES • MANAGING CONFLICT • MANAGING VENDORS SUB CONTRACTORS AND CUSTOMER
REASONS FOR PROJECT SLIPPAGES
• INSUFFICIENT PLANNING • UNREALISTIC PROJECT PLAN • UNDER ESTIMATION OF SCOPE OF WORK • INSUFFICIENT CONTINGENCY PLANNING • IMPROPER PROGRESS TRACKING METHODS • PROJECT PROBLEMS NOT DETECTED
REASONS FOR PROJECT SLIPPAGES
• • • • STAFFING PROBLEMS TECHNICAL COMPLEXITIES PRIORITY CHANGES LACK OF COMPETENCE FOR PROJECT EXECUTION
PROJECT COST ESTIMATION AND CONTROL
COST OF PROJECT
• CORRECT ESTIMATION OF CAPITAL COST OF PROJECT IS FOUNDATION ON WHICH FINANCIAL APPRAISAL STANDS • UNDERESTIMATION OF PROJECT COSTS LEADS TO SHORTAGE OF FUNDS DURING IMPLEMENTATION LEADING TO PROJECT SUSPENSION FOR LACK OF FUNDS
COST CONTROL ACTIVITIES
• • • • PLANNING OF WORK ESTIMATION OF TIME LABOR COSTS SCOPE OF REQUIRED TASKS DISCIPLINED BUDGET AND AUTHORIZATION OF EXPENDITURE • TIMELY ACCOUNTING OF PHYSICAL PROGRESS • PERIODIC REESTIMATION OF TIME AND COST TO COMLETE REMAINING WORK • FREQUENT COMPARISON OF ACTUAL PROGRESS AND EXPENDITURE TO SCHEDULE AND BUDGETS
MANAGING COSTS
• COST MGT IS AN INTEGRAL PART OF PROJECT MGT • COST MGT INCLUDES EXPENDITURE CONTROL,REVENUE CONTROL AND RECEIVABLES MGT
CHECKLIST OF COST MGT FACTORS
• COST AWARENESS BY ENGG USING VALUE ANALYSIS • COST AWARENESS THROUGHOUT PROJECT LIFECYCLE MOTTO IS MINIMIZE LIFECYCLE COSTS • PROJECT WORK BREAKDOWN • PRECISE ACCOUNTING CODES TRACEABLE TO ACTRIVITY TYPE • COST BUDGETS • ACCURATE COST ACCOUNTING SYSTEM eg AB COSTING • ENSURE PROGRESS MEETS WORK SCHEDULE • EXPENDITURE CONTROL • PROPER PERUSAL OF COMMERCIAL AND TECHNICAL IMPLICATIONS • QUALITY CONTROL • ENSURING FINANCIAL SOUNDNESS OF CUSTOMER • MONITORING PRICE FLUCTUATIONS AND INCREASES
COST CONTROL
• • • • • • • COST ESTIMATING COST ACCOUNTING PROJECT CASH FLOW COMPANY CASH FLOW DIRECT LABOR COSTING OVERHEAD RATE COSTING --COST CONTROL A SUBSYSTEM OF MGT COST CONTROL SYSTEM • MCCS IS A 2 CYCLE PROCESS – PLANNING CYCLE AND OPERATING CYCLE • PLANNING CYCLE KNOWN AS PLANNING AND CONTROL CYCLE • OPERATING CYCLE IS ALSO KNOWN AS COST CONTROL SYSTEM
MCCS PLANNING ACTIVITIES
• WORK AUTHORIZATION FOR PROJECT PLANNING • WORK BREAKDOWN STRUCTURE • SCHEDULES • PLANNING CHARTS • BUDGETS
PHASES IN MCCS
• WORK AUTHORIZATION AND RELEASE • COST DATA COLLECTION AND REPORTING • COST ANALYSIS • REPORTING
BUDGETS
• PROJECT BUDGETS TO BE DERIVED FROM COST ESTIMATES • BUDGET SHOULD BE SPREAD OVER PROJECT BREAKDOWN STRUCTURE SO THAT THERE IS A SPECIFIED BUDGET FOR EACH WORK PACKAGE • DIFFWRENT KINDS OF BUDGETS SUCH AS CAPITAL,REVENUE etc
BUDGETING PROCESS
• • • • • • PLANNING ANALYSIS WORTHINESS FINANCING IMPLEMENTATION REVIEW AND CONTROL
VARIANCE
• DEFINED AS ANY SCHEDULE OR COST DEVIATION FROM SPECIFIC PLAN • COST VARIANCE COMPARES DEVIATIONS FROM BUDGETS BUT DOES NOT PROVIDE MEASURE OF COMPARISON BETWEEN WORK SCHEDULED AND WORK ACCOMPLISHED • SCHEDULING VARIANCE PROVIDES COMPARISON BETWEEN PLANNED AND ACTUAL PERFORMANCE BUT DOES NOT INCLUDE COSTS • TWO METHODS OF MEASUREMENT -MEASURABLE EFFORTS -LEVEL OF EFFORT
VARIANCE ANALYSIS
• WHAT IS THE PROBLEM CAUSING THE VARIANCE • WHAT IS THE IMPACT ON TIME COST PERFORMANCE • WHAT IS THE IMPACT ON OTHER EFFORTS • WHAT CORRECTIVE ACTION IS PLANNED • WHAT ARE THE EXPECTED RESULTS OF THE CORRECTIVE ACTION
MILESTONE ANALYSIS
• USED THROUGHOUT PROJECT LIFETIME TO COMPARE ACTUAL COST AND PROGRESS WITH PLANNED COSTS AND PROGRESS • QUESTIONS AS LISTED UNDER ARE SOUGHT TO BE ANSWERED -HOW MUCH HAVE WE SPENT TO DATE -WHAT SHOULD WE HAVE SPENT TO DATE -WHAT HAVE WE ACHIEVED SO FAR -WHAT SHOULD WE HAVE ACHIEVED UPTO NOW -WHAT ARE THE FINAL COST AND DELIVERY PROSPECTS FOR THE PROJECT IF PERFORMANCE COTINUES AT CURRENT LEVEL
EARNED VALUE ANALYSIS
• REGARDED AS THE MISSING LINK BETWEEN COST REPORTING AND COST CONTROL • IT DEPENDS ON THE EXISTENCE OF A SOUND FRAMEWORK OF PLANNING AND CONTROL WHICH HAS -DETAILED WORK BREAKDOWN STRUCTURE -CORRESPONDING DETAILED COST CODING SYSTEM -ACCURATE REPORTING OF COST DATA -METHOD OF MONITORING AND QUANTIFYING THE AMOUNT OF WORK DONE INCLUDING WORK IN PROGRESS
EARNED VALUE ANALYSIS
• AIMS TO COMPARE COSTS INCURRED FOR AN ACCURATELY IDENTIFIED AMOUNT OF WORK WITH THE COSTS BUDGETED FOR THE SAME WORK • CAN BE APPLIED AT THE LEVEL OF INDIVIDUAL TASKS OR COMPLETE WORK PACKAGE AND DATA ROLLED UP FOR ENTIRE PROJECT • PROCEDURE USES RESULTS TO PRODUCE A COST PERFORMANCE INDEX WHICH IS = 1 IF EVERYTHING IS GOING EXACTLY ACCORDING TO PLAN AND < 1 IF VALUE EARNED FOR MONEY SPENT IS LESS THAN EXPECTED
EARNED VALUE DEFINITIONS
• ACWP = ACTUAL COST OF WORK PERFORMED • BCWP = BUDGETED COST OF WORK PERFORMED. AMOUNT OF MONEY OR LABOR TIME THAT WORK ACTUALLY PERFORMED SHOULD HAVE COST TO BE IN LINE WITH ESTIMATE • CPI = COST PERFORMANCE INDEX. FACTOR THAT INDICATES MEASURE OF SUCCESS IN ACHIEVING RESULTS AGAINST BUDGET. ANYTHING < 1 INDICATES VALUE EARNED FROM MONEY SPENT IS LESS THAN INTENDED • SPI = SCHEDULE PERFORMANCE INDEX. MEASURE OF PROGRESS PERFORMANCE AGAINST PLAN . ANYTHING < 1 SHOWS PROGRESS SLOWER THAN PLANNED
EARNED VALUE DEFINITIONS
• BAC = BUDGET AT COMPLETION WHICH IS THE SUM OF ALL BUDGETS (BCWS)ALLOCATED TO THE PROJECT. THIS IS WHAT THE TOTAL EFFORT SHOULD COST • EAC = ESTIMATE AT COMPLETION IDENTIFIES THE VALUE OR HOURS THAT REPRESENT A REALISTIC APPRAISAL OF THE WORK WHEN PERFORMED. THE SUM OF ALL COSTS TILL DATE PLUS ESTIMATE OF ALL REMAINING WORK. EAC = CUM ACTUALS + ESTIMATE TO COMPLETE
PARAMETERS FOR VARIANCE ANALYSIS
• BCWS = BUDGETED COST OF WORK SCHEDULED = HOW MUCH WORK SHOULD BE DONE • BCWP = BUDGETED COST OF WORK PERFORMED = HOW MUCH WORK IS DONE • ACWP= ACTUAL COST OF WORK PERFORMED = HOW MUCH DID THE WORK DONE COST • BAC = TOTAL BUDGET AT COMPLETION = WHAT WAS THE JOB SUPPOSED TO COST • EAC = ESTIMATE AT COMPLETION =WHAT DO WE EXPECT THE TOTAL JOB TO COST • VAC = VARIANCE AT COMPLETION
FORMULAE FOR PERFORMANCE INDEX
• CPI(COST PERFORMANCE INDEX) = BCWP/ACWP • SPI(SCHEDULE PERFORMANCE INDEX) = BCWP/BCWS • IN BOTH CASES IF >1. 0 GOOD PERFORMANCE; IF = 1.0 PERFECT PERFORMANCE AND IF < 1.0 POOR PERFORMANCE
EXAMPLE
• • • • • • • TOTAL WALL LENGTH = 1000 MTRS ESTIMATED PROJECT COST =40000R PLANNED DURATION = 50 DAYS BUDGETED COST PER DAY 800R PLANNED RATE OF WORK = 20 MT/DY BUDGETED COST PER MTR FINISHED = R40 AT END OF DAY 20 AN EARNED VALUE ANALYSIS CARRIED OUT AS IN NEXT SLIDE
EXAMPLE
• ACTUAL AND PLANNED DATA FOR 20TH DAY • WORK COMPLETED 360 MTRS AGAINST 400MTRS • ACWP IS 18000R WHICH IS TOTAL PROJECT COST ON DAY 20 • BCWS 20DYS @ R800 PER DAY = 16000R • BCWP 360 MTR OF WALL TO COST R40/MTR WHICH IS RS 14400 • CPI = BCWP/ACWP = 14400/18000 = 0.8 • SPI = BCWP/BCWS = 14400/16000 = 0.9 • REVISED PROJECT DURATION = 50/0.9 = 56
COST VARIANCE CALCULATION
• CV = BCWP – ACWP. NEGATIVE IS COST OVERRUN • SCHEDULE VARIANCE(SV) = BCWP – BCWS. NEGATIVE INDICATES BEHIND SCHEDULE • COST VARIANCE (CVP) = CV/BCWP • SCHEDULE VARIANCE(SVP) = SV/BCWS IN HRS DYS etc, • VAC = BAC – EAC • EAC = (ACWP/BCWP) * BAC = BAC/CPI WHERE BAC IS THE VALUE OF BCWS AT COMPLETION
PERCENTAGE COMPLETION AND MONEY SPENT
• PERCENT COMPLETE = BCWP/BAC • PERCENT MONEY SPENT = ACWP/BAC • BQAC IS BUDGET AT COMPLETION
METHOD FOR ASSESSING PROGRESS
• THREE STAGES OF PROGRESS APPLY TO ACTIVITIES • -ACTIVITY NOT STARTED EARNED VALUE IS ZERO • -ACTIVITY COMPLETED EARNED VALUE EQUAL TO ACTIVITY COST BUDGET • -ACTIVITY IN PROGRESS EARNED VALUE WORK ASSESSED BY MEASURING ACTUAL QUANTITY OF WORK DONE
STATUS REPORTS
• WHERE ARE WE TODAY -COST VARIANCES IN CURRENCY/HR AND %COMPLETE -SCHEDULE VARIANCE (IN CURRENCY/HR AND %COMPLETE) -%COMPLETE -%MONEY SPENT
STATUS REPORTS
• WHERE WILL WE END UP -ESTIMATE AT COMPLETION EAC -REMAINING CRITICAL PATH -TREND ANALYSIS SPI -TREND ANALYSIS CPI
IDENTIFYING COST HEADS IN PROJECT
• ENGINEERING AND PROJECT MANAGEMENT • TECHNICAL KNOW HOW • PURCHASING • SUBCONTRACTING • LEGAL FEES • PRE OPERATIVE EXPENSES • CONTINGENCY EXPENDITURE • WORKING CAPITAL FOR OPERATIONS
COST CONTROL PROBLEMS
• • • • • • • • • UNREALISTIC BUDGETS DUE TO POOR ESTIMATION OUT OF SEQUENCE STARTING AND ENDING EVENTS INADEQUATE WBS POOR WORK DEFITION REDUCED BUDGETS BY MGT INADEQUATE FORMAL PLANNING POOR COMPARISON OF ACTUAL AND PLANNED COSTS UNFORESEEN TECHNICAL PROBLEMS SCHEDULE DELAYS THAT REQUIRE OVERTIME OR IDLING TIME COSTS • MATERIAL ESCALATION FACTORS
CAUSES FOR PROJECT OVERRUNS
• FAILURE TO UNDERSTAND CUSTOMER REQMNT • UNREALISTIC APPRAISAL OF INHOUSE COMPETENCES • UNDERESTIMATING COMPLEXITY OR TIME ESTIMATES • INACCURACY OF WBS • FAILURE TO IDENTIFY MAJOR COST ELEMENTS • FAILURE TO DO RISK ASSESSMENT • EXCESSIVE COSTS DUE TO PROJECT INEFFICIENCY OR INFLATION
COMMERCIAL MANAGEMENT
• ESTABLISHMENT OF COMMERCIAL ENVIRONMENT OF PROJECT IS THE FIRST STEP • PROJECT MANAGEMENT HAS FIVE PRINCIPAL AREAS OF COMMERCIAL MANAGEMENT
PRINCIPAL AREAS OF COMMERCIAL MANAGEMENT
• • • • FINANCIAL PROJECT APPRAISAL FUNDING CONTRACTS AND NEGOTIATION ACCOUNTING INVOICING AND CREDIT CONTROL • INSURANCE
PROJECT FEASIBILITY ANALYSIS
• DECISION TAKEN WHETHER TO INVEST IN THIS PROJECT OR CHOOSE BETWEEN PROJECTS • FINAL DECISION DEPENDS ON SEVERAL FACTORS
FACTORS AFFECTING PROJECT INVESTMENT
• • • • IS PROJECT TECHNICALLY FEASIBLE HOW VALID ARE THE ESTIMATES OF PLANNERS WHAT ARE THE ENVIRONMENTAL IMPLICATIONS WILL THE EFFECTIVENESS OF THE PLANT BE AS PROJECTED WHAT ARE THE OPERATIONAL AND FINANCIAL RISKS IN THE PROJECT WILL THE PROJECT BE COMPLETED ON TIME WHAT ARE THE OPERATIONAL COSTS WHAT IS THE PROJECT LIFE CYCLE HOW DO WE RAISE THE FUNDS IS THE ROI JUSTIFIED
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PROJECT CHANGE MGT
• IS THE CHANGE POSSIBLE TO MAKE • IS THE CHANGE REQUESTED BY CUSTOMER OR IS IT A STATUTORY CHANGE • WHAT IS THE ESTIMATED COST OF CHANGE AND WILL THE CUSTOMER PAY • WHAT WILL BE THE EFFECT ON THE PROJECT SCHEDULE • WHAT CHANGES OUGHT TO BE MADE WITH RETROSPECTIVE EFFECT AND WHAT IS THE IMPACT
CHANGE CONTROL SYSTEM
• REVIEW ALL REQUESTED CHANGES TO PROJECT • IDENTIFY TASK IMPACTS • TRANSLATE IMPACTS INTO PERFORMANCE COST AND SCHEDULE • EVALUATE BENEFITS AND COSTS OF REQUESTED CHANGES • ACCEPT OR REJECT REQUESTED CHANGES • ENSURE PROPER IMPLEMENTATION OF CHANGES
PROJECT APPRAISAL AND FINANCING
PROJECT APPRAISAL
• PROJECT APPRAISAL IS DONE TO ASCERTAIN THE VIABILITY OF PROJECTS WITH RESPECT TO CERTAIN CRITICAL PARAMETERS • ALL PROJECTS WHICH ARE VIABLE NEED CAPITAL INVESTMENTS TO FUND THE PROJECT AND THE VARIOUS MODES OF PROJECT FINANCING ARE DISCUSSED LATER
MODES OF PROJECT APPRAISAL
• • • • • TECHNICAL COMMERCIAL ECONOMIC FINANCIAL MANAGEMENT
TECHNICAL PROJECT APPRAISAL
• • • • • • • • • • • SELECTION OF TECHNOLOGY AND PROCESS AVAILABILITY OF INFRASTRUCTURE PROJECT SCHEDULING AND IMPLEMENTATION OPERATIONS WORK FLOW RAW MATERIAL OPERATIONAL KNOW HOW PRODUCT MIX PLANT LAYOUT LOCATION OF PROJECT TECHNOLOGY OBSOLESCENCE COLLABORATION AGREEMENTS
COMMERCIAL PROJECT APPRAISAL
• DEMAND FOR PRODUCT • SUPPLY POSITION FOR PRODUCT AND RAW MATERIAL • DISTRIBUTION CHANNELS • PRODUCT PRICING • GOVERNMENT POLICIES
ECONOMIC PROJECT APPRAISAL
• MEASURES EFFECT OF PROJECT ON NATIONAL ECONOMY • INCLUDES INFRASTRUCTURAL PROJECTS, IMPORT SUBSTITUTION
FINANCIAL PROJECT APPRAISAL
• ARRIVING AT PROJECT COST • ARRIVING AT MEANS TO FUND PROJECT
MANAGEMENT PROJECT APPRAISAL
• MOST IMPORTANT FACTOR IN PROJECT APPRAISAL • INVOLVES QUALITY OF MANAGEMENT OVERSEEING THE PROJECT AND THEIR ABILITY TO COMPLETE SUCH PROJECTS WITHIN THE STATED TIME QUALITY COST
SWOT ANALYSIS FOR PROJECT APPRAISAL
• SWOT ANALYSIS APPLIED TO PROJECT APPRAISAL IS USED IN AREAS OF EXPANSION AND DIVERSIFICATION ACTIVITIES • NEED TO KEEP COMPETITIVE POSITION IN INDUSTRY • THROUGH SWOT AREAS WHICH WORK AGAINST THE INTEREST OF THE PROJECT CAN BE DISCOVERED AND ADDRESSED
STRENGTHS
• LOCATIONAL ADVANTAGE • CLIENT GOODWILL • RISK SHARING THROUGH ALLIANCES
WEAKNESS
• • • • • TECHNOLOGICAL OBSOLESCENCE SCARCITY OF RAW MATERIAL INFRASTRUCTURE PROBLEMS LABOR UNAVAILABILITY LOCATIONAL DISADVANTAGE
OPPORTUNITIES
• CHEAPER RAW MATERIAL THROUGH INDEGINIZATION OR VALUE ENGG • LIBERALIZATION OF IMPORTS • BREAKTHROUGH TECHNOLOGY • SOCIETAL ADVANTAGE
THREATS
• COMPETITION DOING BETTER PROJECTS • WITHDRAWAL OF PATRONAGE BY PARTNER OR GOVT • COST ESCALATIONS • ECONOMIC RECESSION • INFRASTRUCTURAL INADEQUACIES • COMPETITIVE POSITIONING
PROJECT FINANCING
• RAISING OF FUNDS REQUIRED TO FINANCE AN ECONOMICALLY VIABLE CAPITAL INVESTMENT PROJECT
PROJECT FINANCING
• CASH RESERVES (MONEY HELD IN BANK OR IN SHORT TERM INVESTMENTS INCLUDING NON DISTRIBUTED PROFITS) • SALE OF ASSETS • MORTGAGING PROPERTY • BORROWING FROM BANK/FI AS OVERDRAFT OR FIXED TERM LOAN • LEASING PROJECT IN RETURN FOR FINANCE IN WHICH CASE PROJECT WILL BE OWNED BY FI • ISSUEING DEBENTURES OR LOAN STOCK • RAISING SHARE CAPITAL FOR THE PROJECT • COLLABORATING WITH OTHER COMPANIES TO SET U[ A CONSORTIUM OR A JOINT VENTURE IN WHICH RISKS ARE SHARED
IMPORTANCE OF CAPITAL INVESTMENTS
• CAPITAL EXPENDITURE DECISIONS REPRESENT THE MOST IMPORTANT DECISIONS TAKEN. IMPORTANCE STEMS FROM 3 INTER RELATED REASONS • LONG TERM EFFECTS-CONSEQUENCES OF CAPITAL EXPENDITURE DECISIONS EXTEND FAR INTO THE FUTURE.SCOPE OF CURRENT ACTIVITIES OF FIRM GOVERNED BY CAPITAL EXPENDITURE IN THE PAST.CAPITAL EXPENDITURE DECISIONS PROVIDE FRAMEWORK FOR FUTURE ACTIVITIES • IRREVERSIBILITY-WRONG CAPITAL INVESTMENT DECISION CANNOT BE REVERSED WITHOUT LOSSES • SUBSTANTIAL LOSSES-CAPITAL EXPENDITURE INVOLVES SUBSTANTIAL OUTLAYS. CAPITAL COSTS INCREASE WITH ADVANCED TECHNOLOGY
TYPES OF CAPITAL INVESTMENTS
• • • • • • • • PHYSICAL-PHYSICAL ASSETS ARE TANGIBLE INVESTMENTS LIKE LAND BUILDING P&M etc MONETARY-MONETARY ASSETS ARE FINANCIAL ASSETS SUCH AS SHARES ACR etc INTANGIBLE-INTANGIBLE ASSETS REPRESENT OUTLAYS ON R&D,TRG,MARKET DEVELOPMENT;THESE ARE EXPECTED TO GENERATE BENEFITS OVER A PERIOD OF TIME STRATEGIC-STRATEGIC INVESTMENTS HAVE BEARING ON STRATEGIC PLANNING AND TEND TO HAVE SIGNIFICANT IMPACT ON DIRECTION OF THE FIRM TACTICAL-TACTICAL INVESTMENT IS MEANT TOP IMPLEMENT A CURRENT STRATEGY AS PROFITABLY AS POSSIBLE eg REPLACE AN OLD MACHINE TO INCREASE PRODUCTIVITY AND REDUCE OPERATIONAL COSTS MANDATORY-MANDATORY INVESTMENT IS CAPITAL INVESTMENT DONE TO COMPLY WITH STATUTORY REGULATIONS eg POLLUTION CONTROL OR FIRE FIGHTING EQUIPMENT REPLACEMENT-REPLACEMENT INVESTMENT MEANT TO REPLACE WORN OUT EQUIPMENT WITH NEW EQUIPMENT EXPANSION-EXPANSION INVESTMENT IS MEANT TO INCREASE CAPACITY TO CATER TO GROWING DEMAND DIVERSIFICATION-DIVERSIFICATION INVESTMENT AIMED AT EXPANDING OPERATIONS INTO NEW AVENUES R&D-R&D INVESTMENTS ARE MEANT TO DEVELOP NEW PRODUCTS AND PROCESSES WHICH WILL GIVEW THE COMPANY A TECHNOLOGY EDGE
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DIFFICULTIES
• MEASUREMENT PROBLEMS-IDENTIFYING AND MEASURING COSTS AND BENEFITS OF CAPITAL EXPENDITURE PROPOSALS IS DIFFICULT ESPECIALLY WHEN CAPITAL EXPENDITURE HAS BEARING ON SOME OTHER ACTIVITIES OF THE FIRM eg REVENUE BUDGETS • UNCERTAINTY-CAPITAL EXPENDITURE DECISION INVOLVES COSTS AND BENEFITS THAT EXTEND INTO THE FUTURE. IMPOSSIBLE TO PREDICT EXACTLY WHAT WILL HAPPEN IN THE FUTURE IN TERMS OF COST ESCALATION • TEMPORAL SPREAD-COSTS AND BENEFITS ASSOCIATED WITH CAPITAL EXPENDITURE SPREAD OVER LONG PERIOD OF TIME USUALLY 10-20 YRS.
CAPITAL BUDGETING PROCESS
• PLANNING-CONCERNED WITH ARTICULATION OF INVESTMENT STRATEGY AND PRELIMINARY EXAMINATION OF PROJECT PROPOSALS • ANALYSIS-DETAILED ANALYSIS OF MARKETING,TECHNICAL,FINANCIAL, ECONOMIC AND ECOLOGICAL ASPECTS. GATHERING PREPARING AND SUMMARISING INFORMATIONOF VARIOUS PROJECT PROPOSALS
INVESTMENT WORTHINESS OF PROJECT
• ESTIMATE COSTS AND BENEFITS OF PROJECT • ASSESS PROJECT RISKS • CALCULATE COST OF CAPITAL
CAPITAL BUDGETING RATIOS
• SELECTION-SELECTION OF PROJECTS BASED ON CRITERIA SUCH AS CRITERIA ACCEPT REJECT PBP PBP<TGT PRD PBP>TGT PRD ARR ARR>TGT RT ARR<TGT RT NPV NPV>0 NPV<0 IRR IRR>CST CAP IRR<CST CAP BCR BCR>1 BCR<1 PBP IS PAYBACK PERIOD TGT PRD IS TARGET PERIOD ARR IS ACCOUNTING RATE OF RETURN TGT RT IS TARGET RATE NPV IS NET PRESENT VALUE IRR IS INTERNAL RATE OF RETURN CST CAP IS COST OF CAPITAL BCR IS BENEFIT COST RATIO
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PAYBACK PERIOD
• LENGTH OF TIME REQUIRED TO RECOVER THE INITIAL CASH OUTLAY • SHORTER THE PAYBACK PERIOD MORE DESIRABLE THE PROJECT
ACCOUNTING RATE OF RETURN
• ALSO REFERRED AS AVERAGE RATE OF RETURN ON INVESTMENT • MEASURE OF PROFITABILITY WHICH RELATES INCOME TO INVESTMENT • MEASURES INCLUDE AVERAGE INCOME AFTER TAX/INITIAL INVESTMENT • ACCOUNTING RATE OF RETURN = PROFIT AFTER TAX/BOOK VALUE OF INVESTMENT
NET PRESENT VALUE
• SUM OF PRESENT VALUES OF ALL THE POSITIVE AND NEGATIVE CASH FLOWS THAT ARE EXPECTED TO OCCUR OVER THE LIFE OF THE PROJECT • NPV=TOTAL OF ALL Ct/(1+r)**t • Ct=CASH FLOW AT END OF YEAR t • r = DISCOUNT RATE • Eg NPV OF A PROJECT WHICH HAS RETURN OF 2 LAC IN YR 1 AND 2 LAC IN YR 2 IS NPV=(200000)/(1.10)**1 + (200000)/(1.10)**2 =181818 + 165289 =347107
INTERNAL RATE OF RETURN
• • • • • • • • • DISCOUNT RATE OF A PROJECT WHICH MAKES THE NPV = 0 IT IS DISCOUNT RATE WHICH EQUATES PRESENT VALUE OF FUTURE CASH FLOWS WITH INITIAL INVESTMENT INVESTMENT = TOTAL OF ALL Ct /(1+r)**n WHERE Ct IS CASH FLOW AT END OF YEAR t , r IS INTERNAL RATE OF RETURN, n IS LIFE OF PROJECT CALCULATION OF r IS BY TRIAL AND ERROR AND DIFFERENT VALUES ARE TRIED TILL THE RIGHT HAND SIDE IS NOT LESS THAN THE INITIAL INVESTMENT IN YEAR 0 YR 0 =100000 YR 1 = 30000 YR 2 = 30000 YR 3 = 40000 YR 4 = 45000 100000 = 30000/(1+r) + 30000/(1+r)**2 + 40000/(1+r)**3 + 45000/(1+r)**4 ITERATIONS DONE WITH DIFFERENT VALUES OF r TILL RHS IS NOT LESS THAN LHS TRY r = 15% 30000/(1.15)+30000/(1.15)**2+40000/(1.15)**3+45000/(1.15)**4 =100802 WHICH IS GT 100000 THE LHS
DATA REQUIRED FOR RATIO CALCULATION
• • • • LIFE OF PROJECT CASH OUTFLOW CASH INFLOW COST OF CAPITAL
BENEFIT COST RATIO
• RATIO OF THE PRESENT VALUE OF BENEFITS TO THE INITIAL INVESTMENT COSTS • BCR = PVB/I • NET BCR (NBCR) = BCR – 1 • PVB = PRESENT VALUE OF BENEFITS • I=INITIAL INVESTMENT COSTS • WHEN BCR > 1 OR NBCR > 0 ACCEPT • WHEN BCR = 0 OR NBCR = 0 INDIFFERENT • WHEN BCR < 1 OR NBCR < 0 REJECT
EXAMPLE OF BENEFIT COST RATIO
• • • • • • INITIAL INVESTMENT 100000 BENEFIT YEAR 1 25000 BENEFIT YEAR 2 40000 BENEFIT YEAR 3 40000 BENEFIT YEAR 4 50000 BENEFIT COST RATIO = ((25000/1.12)+(40000/(1.12)**2)+(40000/ (1.12)**3)+(50000/(1.12)**4))=1.145 • NBCR = BCR – 1 = 0.145
COST OF CAPITAL
• COST OF CAPITAL IS IMPORTANT IN FINANCIAL MGT • USED FOR EVALUATING INVESTMENT PROJECTS , FOR DETERMINING CAPITAL STRUCTURE • COST OF CAPITAL IS THE WEIGHTED AVERAGE COST OF VARIOUS SOURCES OF FINANCE USED eg DEBT EQUITY PREFERENCE • WEIGHTED COST OF CAPITAL WACC = (PROPORTION OF EQUITY)*(COST OF EQUITY) + (PROPORTION OF PREFERENCE)*((COST OF PREFERENCE) + (PROPORTION OF DEBT)*(COST OF DEBT) • Eg (0.50)(16)+(0.10)(12)+(0.40)(8) = 12.4 % • 16,12,8 ARE THE PERCENTILE COSTS • 0.50,0.10,0.40 ARE THE PROPORTIONS WRT 1
COST OF CAPITAL
• TWO COSTS OF CAPITAL • COMPANY COST OF CAPITAL IS THE RATE OF RETURN EXPECTED BY THE EXISTING CAPITAL PROVIDERS. IT REFLECTS THE BUSINESS RISK OF EXISTING ASSETS AND CAPITAL STRUCTURE CURRENTLY EMPLOYED • PROJECT COST OF CAPITAL IS THE RATE OF RETURN EXPECTED BY CAPITAL PROVIDERS FOR NEW PROJECTS
FACETS OF PROJECT FINANCING
• MARKET ANALYSIS-AGGREGATE DEMAND OF PRODUCT IN FUTURE AND MKT SHARE • TECHNICAL ANALYSIS-ANALYSIS OF TECHNICAL AND ENGINEERING ASPECTS • FINANCIAL ANALYSIS-ASCERTAIN WHETHER PROJECT IS FINANCIALLY VIABLE • ECONOMIC ANALYSIS-JUDGING PROJECT FROM SOCIAL COST BENEFIT ANGLE • ECOLOGICAL ANALYSIS-ECOLOGICAL IMPLICATIONS OF PROJECT
ASPECTS IN MARKET ANALYSIS
• AGGREGATE DEMAND OF PRODUCT IN FUTURE • MARKET SHARE OF PROJECT • CONSUMPTION TRENDS • SUPPLY CHAIN CONSTRAINTS • COMPETITION • COST STRUCTURE • ELASTICITY OF DEMAND • CONSUMER BEHAVIOUR • DISTRIBUTION CHANNELS
ASPECTS IN TECHNICAL ANALYSIS
• AVAILABILITY OF RAW MATRL AND OTHER INPUTS • IS SELECTED SCALE OF OPERATIONS OPTIMAL • IS PROPOSED LAYOUT OF PLANT SOUND • WHAT IS THE PROVISION FOR DISCHARGE OF EFFLUENTS AND OTHER DISCHARGES
ASPECTS IN FINANCIAL ANALYSIS
• INVESTMENT OUTLAY AND COST OF PROJECT • MEANS OF FINANCING • COST OF CAPITAL • PROJECTED PROFITABILITY • BREAK EVEN POINT • CASH FLOWS OF PROJECT • INVESTMENT WORTHINESS • LEVEL OF RISK
ASPECTS IN ECONOMIC ANALYSIS
• DIRECT ECONOMIC BENEFITS AND PROJECT COST MEASURED IN TERMS OF EFFICIENCY • IMPACT OF PROJECT ON JOB OPPORTUNITIES AND OTHER SOCIAL BENEFITS
ASPECTS IN ECOLOGICAL ANALYSIS
• DAMAGE CAUSED BY PROJECT TO ENVIRONMENT • COST OF RESTORATION MEASURES REQUIRED TO ENSURE DAMAGE TO ENVIRONMENT IS CONTAINED WITHIN ACCEPTABLE LIMITS
KEY ISSUES IN PROJECT ANALYSIS
• MARKET ANALYSIS -POTENTIAL MARKET -MARKET SHARE • TECHNICAL ANALYSIS -TECHNICAL VIABILITY -PRACTICAL CHOICES • FINANCIAL ANALYSIS -RISK -RETURN
COMMON WEAKNESS IN CAPITAL BUDGETING
• POOR ALIGNMENT BETWEEN STRATEGY AND CAPITAL BUDGETING • OPTIONS NOT PROPERLY EVALUATED • INADEQUATE RISK TREATMENT • SIDE EFFECTS IGNORED • INADEQUATE POST AUDITS
PROJECT QUALITY MANAGEMENT
PROJECT QUALITY MANAGEMENT
• QUALITY PLANNING-IDENTIFYING WHICH QLTY STANDARDS ARE RELEVANT TO THE PROJECT AND DETERMINING HOW TO SATISFYTHEM • QUALITY ASSURANCE-EVALUATING OVERALL PROJECT PERFORMANCE ON A REGULAR BASIS TO ENSURE THAT PROJECT WILL SATISFY RELEVANT QUALITY STANDARDS • QUALITY CONTROL-MONITORING SPECIFIC PROJECT RESULTS TOP DETERMINE IF THEY COMPLY WITH RELEVANT QUALITY STANDARDS AND IDENTIFYING WAYS TO ELIMINATE CAUSES OF UNSATISFACTORY PERFORMANCE • COMPLIANT WITH ISO 9000 AND 10000 SERIES OF STANDARDS AND GUIDELINES • PROJECT QUALITY MANAGEMENT MUST ADDRESS MGT OF PROJECT AND PRODUCT OF PROJECT
QUALITY PLANNING
• INPUTS -QLTY POLICY –SCOPE STATEMENT -STDS AND REGULATION • TOOLS AND TECHNIQUES -BENEFIT COST ANALYSIS -BENCHMARKING -FLOWCHARTING -COST OF QUALITY • OUTPUTS -QUALITY MGT PLAN
QUALITY ASSURANCE
• INPUT -QUALITY MGT PLAN -RESULTS OF QLTY CONTROL MEASUREMENTS -OPERATIONAL DEFINITIONS • TOOLS AND TECHNIQUES -QUALITY AUDITS • OUTPUT -QLTY IMPROVEMENTS
QUALITY CONTROL
• INPUTS -WORK RESULTS –QLTY MGT PLAN -OPERATIONAL DEFINITION -CHECKLISTS • TOOLS AND TECHNIQUES -INSPECTION -7 QC TOOLS -TREND ANALYSIS • OUTPUT -QLTY IMPROVEMENT -ACCEPTANCE DECISIONS -REWORK -PROCESS ADJUSTMENTS
APPROACHES TO TQM IN PROJECTS
• DO NOT ACCEPT POOR QLTY MATRL • DESIGN A SCIENTIFIC METHOD FOR MATRL INSPECTION FOR QLTY • DO NOT GO ON PRICE ALONE • FIND OUT ROOT CAUSE OF QLTY PROBLEMS AND PREVENT OCCURRENCE • ENABLE INFORMATION TO FLOW FREELY IN THE PROJECT RELATED TO QLTY OF PRODUCTS,PROCESSES AND SERVICES • INSTITUTE QUALITY CIRCLE PROGRAMS IN THE PROJECT AND CONDUCT CONTINUOUS TRAINING PROGRAMS AND BUILD QUALITY AWARENESS IN MEMBERS • COMMITMENT OF TOP MGT TO PROJECT QLTY
PROJECT RISK MANAGEMENT
RISK MGT
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RISK IS A MEASURE OF THE PROBABILITY AND CONSEQUENCE OF NOT ACHIEVING A DEFINED PROJECT GOAL RISK INVOLVES ELEMENT OF UNCERTAINTY IMPACT OF RISK IS A VERY SERIOUS CONSIDERATION RISK HAS TWO PRIMARY COMPONENTS -PROBABILITY OF OCCURRENCE OF EVENT -IMPACT OF EVENT OCCURRING IN MONEY TERMS RISK IS A FUNCTION OF LIKELIHOOD AND IMPACT RISK CONSTITUTES A LACK OF KNOWLEDGE OF FUTURE EVENTS(OUTCOMES) FAVORABLE OUTCOMES ARE CALLED OPPORTUNITIES AND UNFAVORABLE RISKS CAUSE OF RISK ITSELF IS A RISK AND IS CALLED A HAZARD IN THIS CASE RISK IS A FUNCTION OF HAZARD AND SAFEGUARD RISK INCREASES WITH HAZARD BUT DECREASES WITH SAFEGUARD
RISK MGT
• INVOLVES PLANNING FOR RISK,ASSESSING,(IDENTIFYING AND ANALYSIS), DEVELOPING RISK HANDLING OPTIONS ,MONITORING RISKS • RISK MGT SHOULD BE COUPLED WITH PROJECT PROCESSES
PROJECT RISKS
• • • • • • • • • • • • PROJECT INITIATION RISK PROJECT COMPLETION RISK RESOURCE AVAILABILITY RISK PRICE INCREASE RISK EXCHANGE RATE RISK TECHNOLOGY RISK POLITICAL RISK COMMERCIAL RISK PHYSICAL RISK ECONOMIC RISK OPERATIONAL RISK PARTNERSHIP RISK
MANAGING PROJECT RISK
• POTENTIAL EFFECTS OF RISKS RANGE FROM INCONVENIENCE TO DISASTERS • PROJECT MGT RISK ASSESSMENT DEALS WITH IDENTIFYING THE PROBABILITY AND SEVERITY OF THESE RISKS AND DECIDING HOW TO REDUCE POTENTIAL IMPACT
RISK PLANNING
• PROCESS OF DEVELOPING AND DOCUMENTING AN ORGANIZED COMPREHENSIVE STRATEGY FOR IDENTIFYING AND TRACKING RISK ISSUES,DEVELOPING RISK HANDLING PLANS , PERFORMING CONTINUOUS RISK ASSESSMENTS TO DETERMINE HOW RISKS HAVE CHANGED
RISK ASSESSMENT
• PROCESS INVOLVES IDENTIFYING AND ANALYSING AREAS AND CRITICAL PROCESS RISKS TO INCREASE THE LIKELIHOOD OF MEETING COST PERFORMANCE AND SCHEDULE OBJECTIVES • RISK IDENTIFICATION IS THE PROCESS OF IDENTIFYING AND DOCUMENTING THE RISK • RISK ANALYSIS IS THE PROCESS OF EXAMINING IDENTIFIED RISK ISSUES TO REFINE THE RISK DESCRIPTION,ISOLATE THE CAUSE AND DETERMINE THE EFFECTS
RISK IDENTIFICATION
• IDENTIFY ALL POTENTIAL RISK ISSUES • OBJECTIVE OR SUBJECTIVE SOURCES • OBJECTIVE -RECORDED EXPERIENCES FROM PAST PROJECTS IN TERMS OF LEASONS LEARNT, CURRENT PERFORMANCE DATA • SUBJECTIVE -EXPERIENCE BASED UPON KNOWLEDGEABLE EXPERTS
IDENTIFYING RISKS
• RISKS OCCURING AT START OF PROJECT • RISKS OCCURING DURING EXECUTION OF PROJECT • RISKS THAT CAN AFFECT THE FINAL STAGES OF A PROJECT DURING COMMISSIONING • RISKS OCCURING DURING AT ANY TIME DURING THE PROJECT
RISK ANALYSIS
• BEGINS WITH DETAILED STUDY OF RISK ISSUES IDENTIFIED • OBJECTIVE IS TO GATHER INFO ABOUT RISK ISSUES • RISK ANALYSIS DONE ON FOLLOWING TOPICS -COST EVALUATION -SCHEDULE EVALUATION -TECHNICAL EVALUATION
TOOLS IN RISK ANALYSIS
• • • • • • • • LIFE CYCLE COST ANALYSIS MONTE CARLO SIMULATION IMPACT ANALYSIS PROBABILITY ANALYSIS DECISION ANALYSIS WBS SIMULATION TECHNOLOGY TRENDING TOTAL RISK ASSESSING COST ANALYSIS
LEVELS OF RISK
• HIGH RISK – SUBSEQUENTIAL IMPACT ON COST SCHEDULE HIGH • MODERATE RISK – SOME IMPACT ON COST SCHEDULE • LOW RISK – MINIMAL IMPACT ON COST SCHEDULE • RISK RATINGS GIVEN • RATING = SEVERITY * IMPACT
RISK SEVERITY
• • • • • 1 2 3 4 5 HIGHLY UNLIKELY CHANCES SLIGHT CHANCES LIKELY CHANCES HIGHLY LIKELY CHANCES ALMOST CERTAIN CHANCES
RISK IMPACT
• 5 HUGE-DISASTROUS BUSINESS EFFECTS DIFFICULT TO RECOVER • 4 LARGE-SIZEABLE IMPACT ON BUSINESS BUT POSSIBLE TO RECOVER • 3 MEDIUM-MODERATE EFFECT ON BUSINESS • 2 LOW-MINIMAL IMPACT ON BUSINESS • 1 NO EFFECT ON BUSINESS
RISK HANDLING
• IDENTIFIES EVALUATES SELECTS AND IMPLEMENTS OPTIONS INORDER TO SET RISK AT ACCEPTABLE LEVELS • INCLUDES SPECIFICS ON WHAT SHOULD BE DONE , WHEN IT SHOULD BE ACCOMPLISHED , WHO IS RESPONSIBLE, AND ASSOCIATED COSTS AND SCHEDULE • RISK HANDLING OPTIONS INCLUDE ASSUMPTION AVOIDANCE MITIGATION AND TRANSFER
RISK HANDLING OPTIONS
• ASSUMPTION/RETENTION = RISK EXISTS AWARE OF CONSEQUENCES WILLING TO WAIT AND SEE WHAT HAPPENS.ACCEPT THE RISK AND IMPACT • AVOIDANCE = WILL NOT ACCEPT THE RISK • RISK MITIGATION/CONTROL = TAKE REQD MEASURES TO CONTROL RISK BY DEVELOPING CONTINGENCY PLANS • RISK TRANSFER = SHARE RISK WITH OTHERS
RISK MONITORING
• PROCESS THAT SYSTEMATICALLY TRACKS AND EVALUATES PERFORMANCE OF RISK HANDLING ACTIONS AGAINST ESTABLISHED METRICS THROUGHOUT THE ACQUISITION PROCESS • TECHNIQUES SUITABLE FOR RISK MONITORING INCLUDE -EARNED VALUE -SCHEDULED PERFORMANCE MONITORING
METHODS OF DEALING WITH RISK
• AVOID THE RISK-DO NOT EXECUTE PROJECT • TAKE PRECAUTION TO PREVENT OR MINIMIZE RISKS-PREVENTIVE MEASURES eg SAFETY PRECAUTIONS • ACCEPT THE RISK-ACCEPT THE RISK AS A PART OF THE ACTIVITY AND REACT ACCORDINGLY • SHARE THE RISK-SEEK PARTNERSHIP TO SHARE RISK • LIMIT THE RISK – AUTHORIZE STEP BY STEP AND EXECUTE STEP BY STEP AFTER REVIEW • TRANSFER THE RISK - INSURE
STEPS FOR PROJECT RISK MANAGEMENT
• DEFINE PROJECT SCOPE • ANALYSE THE PROJECT CHARACTERISTICS , DEFINE THE ENVIRONMENT ,ASSESS THE PROJECT STAKEHOLDERS, IDENTIFY THE RISKS INVOLVED • DESIGN FINANCING , TECHNICAL AND RISK MGT PROCEDURES • STUDY CURRENT RISK FACTORS AND MEET THEM ON AN ONGOING BASIS • DECIDE TO ACCEPT OR REJECT RISK • IF RISK IS TO BE REJECTED DESIGN PROCEDURES TO MITIGATE RISK
SOURCES OF RISK
• EXTERNAL – GLOBAL, POLITICAL, ECONOMIC, MARKET CONDITIONS • INTERNAL – REASONS • RELATED TO COMPANY ISSUES
SOURCES OF PROJECT RISKS
• INABILITY TO ASSESS ABILITY OF FINANCERS TO PROVIDE FINANCE DURING THE LIFECYCLE OF THE PROJECT • INACCURATE PROJECT PLANS INCLUDING ACTIVITY COSTING , RESOURCE REQMNT AND PROJECT COST ESCALATIONS • OPERATIONAL RISKS AND ALTERNATIVES NOT ASSESSED • NEED TO HAVE A RISK BREAKDOWN STRUCTURE WITH PROBABILITY AND IMPACT ATTACHED TO EACH ACTIVITY
METHODS OF RISK ANALYSIS
• FINANCIAL VIABILITY ANALYSIS • SENSITIVITY ANALYSIS-WHAT IF • DECISION TREE ANALYSIS-ANALYSIS OF ALTERNATIVES WITH RISKS • MONTE CARLO TECHNIQUE
APPENDED SLIDES
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