Sikkim Manipal University Project

Planning & Scheduling PM0002

PROJECT PLANNING & SCHEDULING -

PM0002
MBA SEMESTER 3
ASSIGNMENT (SET – 1)

Q1. Distinguish between value engineering &

value analysis. Briefly explain the techniques used
in value management?

Ans: Value engineering: (VE) is a systematic method

to improve the "value" of goods or products and
services by using an examination of function. Value, as
defined, is the ratio of function to cost. Value can
therefore be increased by either improving the function
or reducing the cost. It is a primary tenet of value
engineering that basic functions be preserved and not
be reduced as a consequence of pursuing value
improvements.

VE follows a structured thought process that is

based exclusively on "function", i.e. what something
"does" not what it is. For example a screw driver that is
being used to stir a can of paint has a "function" of
mixing the contents of paint can and not the original
connotation of securing a screw into a screw-hole. In
value engineering "functions" are always described in a

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

two word abridgment of an active verb and measurable

noun (what is being done - the verb - and what it is
being done to - the noun) and to do so in the most non-
prescriptive way possible. In the screw driver and can of
paint example, the most basic function would be "blend
liquid" which is less prescriptive than "stir paint" which
can be seen to limit the action (by stirring) and to limit
the application (only considers paint.) This is the basis
of what value engineering refers to as "function
analysis".

Value analysis is an approach to improving the value of

a product or process by understanding its constituent
components and their associated costs. It then seeks to
find improvements to the components by either
reducing their cost or increasing the value of the
functions.

How Does It Work?

To understand value analysis it is necessary to
understand some key concepts:
 Value: the ratio between a function for customer
satisfaction and the cost of that function.

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

 Function: the effect produced by a product or by

one of its elements, in order to satisfy customer
needs.
 Value analysis: methodology to increase the
value of an object – the object to be analyzed could
be an existing or a new product or process, and it is
usually accomplished by a team following a work
plan.
 Need: something that is necessary or desired by
the customer.

Value Management uses a unique combination of

concepts and methods to create sustainable value for
both organizations and their stakeholders.

Some tools and techniques are specific to Value

Management and others are generic tools that many
organizations and individuals use. Detailed below is a
summary of some of the main tools and techniques.

Value = Function or objective / cost i.e. getting what

you require/ for what you will pay

Tool Description Benefits

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

Allows a large volume

to be generated a short
Brain period of time. Also
Idea generation that
storming strives to ensure all
focuses on creation of
of Mind parties are involved –
ideas by volume (no
Showerin no ideas are
judging)
g discounted initially
(later evaluation and
filtering undertaken)
Used to analyze the Often used in VM on
costs of implementing procedure or process
Cost something compared type projects. Can be
Benefit to the benefits to be combined with other
Analysis achieved. Assists tools e.g. process
business case mapping, option
submissions. selection.
A tool used to assist in Enables option
Criteria
option selection. Uses selection and
Weightin
functional drivers (or alternatives to be
g
objectives) that are reviewed in order to
Techniqu
weighted for scoring support decisions being
e
options against. made.
Excursion A tool used to take Very effective in
/Metapho delegated on an bringing creativity to
rs outward and return the forefront. Often

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

journey (possible
excursion). Moves
delegated away from a
problem to
somewhere where used as a precursor to
creativity flourishes. brainstorming or other
The return journey idea generation tells.
often releases such
creativity and ideas
that would not
normally be evident
Function Identification of Determines what
Analysis functions (at the heart functions are delivered
System of Value Management) i.e. what they do or
Techniqu of products, must do, not what they
e processes, projects or are (avoiding solution
(fast) services. Focused on mode). The FAST
client needs and diagram works by
wants. asking how the
functions (primary and
secondary) relate to
each other by ask How
and Why questions o
check the logic works.

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

Later costs are added

to functions to assist in
indentifying any VM
mismatches or areas of
over –engineering
Diagrammatic process
for indentifying Assists in focusing
Objective objectives in a input where the key
s hierarchical manner. objectives are as the
Hierarchy Often used in diagram is constructed
conjunction with is descending order.
functions.
Issues A way of eliciting Voting of the top 10
Generati many issues important issues
ons and connected with a follows. Actions to
Analysis problem or address issued then
opportunity. Team explored.
members write down
their issues on post-it
notes and they are
displayed on the wall
under appropriate
categories or
groupings .e.g.

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

Requirements,
Constraints, Problems,
Opportunities,
Assumptions,
Uncertainties, Risks
Enables option
Enables ranking of
selection and
Pair Wise items by means of
alternatives to be
Comparis comparisons between
reviewed in order to
on all possible pairs of
support decisions being
items.
made.
Often called the 20/80
rule. Aim to
Focuses on those items
Pareto concentrate on the top
or activities that can
Analysis 20% of items that
achieve the optimum.
often have biggest
(often 80%) impact.
Process Uses flow charts to Identifies processes in
Mapping review steps in a diagrammatic format
processes is a step by step
manner. Often used in
manufacturing of
system type processes.
Used to identify
omissions or

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

superfluous items in
the process for
corrections.
A structured approach
to indentify risks that
could affect project,
Often used in parallel
product, process or
with Value
service success. Risks
Risk Management as there
are identified,
Analysis are genuine links.
evaluated (in terms of
Assists decision making
cost, time, other
or option selections.
impact) and robust
action planning
applied.
Indentifies those key
Can assist in focusing
stakeholders (group of
Stake attention where the
individuals) with an
holder priorities are required
influence or interest in
Analysis i.e. satisfaction of key
project, product,
stakeholder interests.
process or service.
SWOT Indentifies strengths, Assists in
Analysis weakness, understanding
opportunities and strengths, weaknesses,
threats. A tool used in opportunities and
many organization to threats that can impact

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

assist in focusing
activities where on an organization ,
required and minimize individual, product or
those items that can process
impact negatively.
Optimization and
Structured team based maximization or value
approach to to the client or
Value indentifying functional customer. Optimum
Analysis requirements of balance between
projects, products, function and cost
processes or services. without detriment to
quality
5W’s and A technique for Who- e.g. is
H exploring problems responsible?
which provokes further Why – e.g. is the end
depth of questioning date important?
about the dimensions What – e.g. what would
framing the problems happen if the scheme
or opportunity were delayed?
When – e.g. must the
work start?
Where – e.g. might the
problem occur?

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

How – e.g. might we do

this seemingly
impossible thing?
This could help with
Used as checklist to
moving an idea from a
develop ideas by
creative thought to a
applying separate
more practical use,
verbs to chosen ideas
expand on the concept
SCAMPER singly or together with
behind ideas, find
others. E.g. combine,
different ways of
amend, modify, put to
expressing the idea,
other use, expand,
provoked new ideas,
reverse /reduce.
etc.

Value Management is a structured team based

approach to identify functional requirements of
projects/contracts to achieve Optimum Function for
Minimum Cost

Q2. What is meant by project viability? How do

you assess financial viability of a project?

Project viability

The rationale for the project is set out in the business

case which will be expressed in terms of a set of

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

benefits which contribute towards strategic goal(s). The

project framework and planning should be written to
ensure that achievement of those benefits is
maximized.

Many things can affect project viability

1. Cost overruns. If the project is based on a rate of

return on capital invested, then an increase in
project costs can eliminate this

2. Time overruns. Some projects have to be delivered

within a certain time frame to deliver benefits.
Extending time may completely eliminate the
benefits.
3. Changes to specifications and scope. As projects
progress changes to the plan or even the scope will
inevitably be requested. These need to be carefully
assessed against the continued ability to deliver the
benefits

4. Quality problems. It may become clear during the

project life cycle that the original quality
expectations cannot be met. This can have an
impact on the acceptability and hence the usability

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

of the project's outputs by the end user. Changes to

quality must be assessed against the benefits.

5. Change in the business environment. Sometimes

organisations have to take a different strategic
path, making the need for the project obsolete.
There is little point carrying on committing
resources to a project for which there is no longer a
need.

Assessing Financial Viability of the Project

Certain tools help us assess the financial viability of any
project where investment is contemplated. We will
discuss some tools in brief.
Tools that determine the adequacy of the surplus:

RETURN ON INVESTMENT (ROI)

As we know, a project collects funds from two sources
for long-term investment.
The amount collected is used to create assets and
operation, which generates surplus for the enterprise.
Surplus is required to be distributed to the contributors
of the funds. Interest is the compensation given to

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

contributors of borrowed capital, and net profit and

depreciation are given to contributors of own capital.
Why should one add depreciation here? Though
depreciation reduces profit, it is a non-cash provision
made to recover the original investment. Thus, the cash
profit of the enterprise is increased to the extent of
depreciation.
Acceptance Rule
For the investment to be financially viable, the RoI
should be greater than the cost of investment.
DEBT SERVICE COVERAGE RATIO (DSCR)
Running an enterprise with financial support from
banks/financial institutions requires their loans to be
repaid with interest. Therefore, an entrepreneur must
generate surplus, adequate to meet repayment
obligations
Acceptance Rule
A project is considered financially viable if the
cumulative DSCR during repayment period is at least
2:1

BREAK-EVEN POINT (BEP)

This is another important tool. The break-even point is
the level of activity where the total contribution is equal

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Sikkim Manipal University Project
Planning & Scheduling PM0002

to the total fixed cost. Contribution is the excess of

sales over variable cost,
DEBT-EQUITY RATIO
This ratio indicates the extent to which the promoter’s
funds are leveraged to procure loans. The formula of
DER is:

Contribution = Sales – Variable Cost

A higher debt equity ratio indicates more risk due to a
higher fixed cost of interest. The BEP of such enterprises
will go up.

Q3. Explain work breakdown structure of a

construction activity with example.

Ans: A work breakdown structure (WBS) in project

management and systems engineering, is a tool used to

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

define and group a project's discrete work elements (or

tasks) in a way that helps organize and define the total
work scope of the project

A work breakdown structure element may be a product,

data, a service, or any combination. A WBS also
provides the necessary framework for detailed cost
estimating and control along with providing guidance for
schedule development and control. Additionally the WBS
is a dynamic tool and can be revised and updated as
needed by the project manager.

The Work Breakdown Structure is a tree structure, which

shows a subdivision of effort required to achieve an
objective; for example a program, project, and contract.
In a project or contract, the WBS is developed by
starting with

 the end objective and

 successively subdividing it into manageable
components
 in terms of size, duration, and responsibility (e.g.,
systems, subsystems, components, tasks, subtasks,
and work packages)

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Sikkim Manipal University Project
Planning & Scheduling PM0002

 which include all steps necessary to achieve the

objective

Work is effort performed by people to transform or create

products, to solve identified problems or to satisfy specific
needs. Just as the Implementing Agency hierarchically
structures the people who perform work, so the work
breakdown structure hierarchically structures the products/
deliverables to be produced.

In order to use the work breakdown structure as a

framework for structuring the technical objectives of a
project –in addition to its use as a management tool for cost
and schedule control- it is important that the work
breakdown structure be product–oriented. Its elements
should represent identifiable work products whether they
are goods, equipment, software, data, infrastructure
elements or service products.

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MBA III Semester Assignment
Sikkim Manipal University Project
Planning & Scheduling PM0002

Sample WBS of Construction:

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Sikkim Manipal University Project
Planning & Scheduling PM0002

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MBA III Semester Assignment