Project Chapter One

1
Project chapter one

Process in which all aspects of a proposed project are explored to examine the relationship between activities, events, durations, and costs. Areas of uncertainty
or conflict are identified, and possible alternatives or trade-offs are developed to strike a satisfactory balance.
A series of interrelated activities undertaken to achieve one time goal within budget cost, with in time schedule & accordingly to customer specification.
An individual or collaborative enterprise planned and designed to achieve an aim.
Every single project you work on in your career is probably going to be unique in one way or another. This makes the project manager role sound quite
daunting but there are some common characteristics which you can look out for along the way.
Charcterstics or features of good project
Well Planned
If you want to have a chance of making a success of the piece of work then you need to get the basics right and in projects that means planning well. This might
not be your favorite aspect of the job but it is one which is essential. At this point I have to confess that I am not a particularly keen planner either. The way I
try and get round this is by telling myself that if I do it right then I only need to do it once. Obviously you need to keep your eye on the project plan as the work
progresses but if you get it done well at the start then it will be a lot easier for you further down the line.
A Strong Team
Even the best project manager in the world isn’t likely to be able to deliver completed projects on time without the support of a strong team. Part of your role is
to make sure that everyone in the team understands the project, has the skills and resources to contribute and feels happy and motivated. If you can see that
something is lacking in the team then it is your job to sort it out. This isn’t always easy to do but you will benefit from doing so almost as much as the team
member you help out. One thing you should be wary of is the danger of taking all the credit yourself. If the rest of the project team played a big part in the
success then you should make sure that you point this out to your bosses and stakeholders.
Clear Communication
One of the features of a well run project is that it involves clear communication all the way through it. Obviously this doesn’t just depend on the project
manager but when you work in this role it is something which you will want to focus on. Lots of people will want to know what is happening and you are
probably going to be the only one who can see the full project from everyone’s point of view. This means that you will be under pressure to ensure that you
Prepared by Kamran Ali Khan 03335700624
2
keep everyone up to date at all times. The smartest way of dealing with this is to put your communication strategy in place at the start and stick to it. You
obviously need to avoid missing meetings or not sending out updates, so a backup plan for the times when you aren’t going to be able to do this is needed.
Good Change Control
Projects change as they go on, and the things you end up delivering could be very different from what you started out looking at. This means that a robust
change control process is vital. If you have this in place you can be sure that you won’t be faced with scope creep or suddenly realize that you don’t know
which version of the documents have been agreed with the stakeholders. As with so many things in the project environment, the key is in setting down the
process at the start and then sticking to it from then on.
A Clear Vision
With so many distractions along the way it is easy to lose track of what you are trying to do in the first place. This is why it is important that you keep a clear
vision in your hard about what you want to achieve. The best way to make sure that you do this is to be clear in your initial project documentation about the
goals. If you do this then you will always have this to look back on if things get too confusing.
Risk Control
There are many different types of risk which could affect your projects and you will want to have an effective way of managing them. Again, you need to
identify them at the start and then get your stakeholders to sign off the document containing them. After this you have to track them and add in any emerging
ones or others which change status. Project risks have a habit of getting out of hand if you let them, so it is an area you definitely need to keep a close eye on all
the time.
Characteristics of projects
 Projects have a purpose: Projects have clearly-defined aims and set out to produce clearly-defined results. Their purpose is to solve a "problem”, and
this involves analysing needs beforehand. Suggesting one or more solutions, a project aims at lasting social change.
 Projects are realistic: Their aims must be achievable, and this means taking account both of requirements and of the financial and human resources
available.
 Projects are limited in time and space: They have a beginning and an end and are implemented in (a) specific place(s) and context.
 Projects are complex: Projects call on various planning and implementation skills and involve various partners and players.
 Projects are collective: Projects are the product of collective endeavours. They involve teamwork and various partners and cater for the needs of others.
 Projects are unique: Projects stem from new ideas. They provide a specific response to a need (problem) in a specific context. They are innovative.
 Projects are an adventure: Every project is different and ground-breaking; they always involve some uncertainty and risk.
3
 Projects can be assessed: Projects are planned and broken down into measurable aims, which must be open to evaluation.
 Projects are made up of stages: Projects have distinct, identifiable stages (see Project cycle).
Project life cycle

Project management is a one-time carefully planned and organized effort to achieve a specific goal.
Project management includes:Developing a project plan, which includes defining project goals and objectives, specifying tasks or how goals will be achieved,
what resources are need, and associating budgets and timelines for completion Implementing the project plan, carefully to make sure the plan is being managed
according to plan.
Project management usually follows major phases:
1. Project Initiation
Project Initiation is the opening point in the 5 steps Projelogic's Project development Cycle, (based on the PMBOK® methodology) and in simple terms:
starting up the project. We initiate a project by defining its reason, business goals, and scope. The reason for initiating it, and the propose solution to be
implemented. We will also put together a project team, define early milestones, and early budget proposal. With the above information we can move on and
perform an end of Phase study in order to get a GO No GO decision.

4
2. Project Planning
Once we define the project and assemble the project team, we are ready to enter the in depth Project Planning phase. This involves creating the "PMP", Project
Management Plan, in order to guide the team during the project development and after. We will define the Required Skills of development team. Define Non-
labor Resources, Risks plan, detailed action items and milestones.
Project Execution:
3. Development
4. Implementation
With a comprehensible characterization of the project and the full and detailed PMP, we are now ready to enter the Execution phase of the project. This is the
stage in which the requirements are actually built and programmed. After the QA process the product will be presented to the customer for acceptance and full
implementation. If the customer has accepted the final product, the project is complete and ready for closure.

5
5.Project Closure
Project Closure involves releasing the final product to the customer, handing over project documentation, Manuals, Source code, and Network layouts. Last
remaining step is to undertake a Post Implementation Review to identify the level of project success and note down any lessons learned.
Project Life Cycle

The Project Life Cycle refers to a logical sequence of activities to accomplish the project’s
goals or objectives. Project activities are grouped into phases so that the project manager and the
core team can efficiently plan and organize resources for each activity. By planning activities
by stages the project manager can objectively measure achievement of goals and justify their
decisions to move ahead, correct, or terminate.
All projects go through a life cycle that starts at the initial project inception through project
shutdown. When applying Project Mechanics, it is critical to accurately assess the stage of the
project in the life cycle. It is important to note that not every project will be completed. For
example, some projects will not have the proper business justification to make it out of the
Project Definition stage.
Here are the stages of the project life cycle for projects in the professional services arena:
 Future / Opportunity - An opportunity has been identified, however, no team has been
assigned to define the opportunity. At this point the project is most likely on some list of
potential projects.
 Project Definition - The Project Sponsor has agreed to fund the creation of a project
definition. A team has been assigned to define the project and create a proposal. An
accounting code is created to track all time used to define the project during the solution
definition effort. A limited team is a used; the deliverable from this phase is a proposal
to do the project. This phase does not include any analysis, design, comps, or
documentation other than what is required to propose the work.
 Proposed - A proposal has been presented to the Project Sponsor for approval. This proposal should have an expiration date and specific metrics for
when the team can start (i.e. 2 weeks from approval). If resources are named, it should be noted that these resources may not be available for this project
if the defined time frame is exceeded.

6
 Approved - The Project Sponsor has approved the project proposal. The process of defining the project team and setting the project priority has begun.
When a team and priority is defined, the project kickoff is scheduled.
 In Progress - A team is working on the project. Weekly status reports are maintained. A formal change control process is being used to document any
changes to the project charter (scope, timeline, budget).
 Complete - The project has been delivered. There is no one working on the project. The project code has been closed. The final invoice has been sent.
The result of the project is in production and under the control of ongoing support.
 Cancelled - At any stage in the project life cycle, a project may be placed on hold, rejected or canceled.
Project constraints
 Scope. A project’s scope is its ultimate overall goal.

 Cost. All projects cost money. The project manager should have a realistic estimate of the project’s total cost before the project starts.
 Time. Individual tasks, their durations and sequencing determine how long the overall project will take to deliver and which tasks are on the
critical path.
Project management importance

Here are three reasons why project management is important to modern businesses.
Human focused
Today's employees are no longer satisfied with comfortable, rote work for which they need not take any responsibility. In fact, many people are looking for
more creative, empowered and hands-on positions where they can make a real impact. Project-based organisations provide this since they focus on goals and
outcomes rather than working according to the clock. This makes it a more logical and stimulating structure for skilled people.
In addition, since project management relies so much on good communication, the discipline emphasises the need to focus on the realities of working with
people – mistakes and successes, good and bad days, conflicts and so on. Research has proven that the more understanding and flexible an employer is, the
more devoted, productive and happy the staff are.

7
Flexible but structured
Project management perfectly combines the two needs of organisations – first, to be adaptable to changing circumstances, and second, to be structured,
predictable and organised. Good project managers spend a lot of time ensuring that everybody knows what their responsibilities are and when requirements are
due. They are also masters at adapting these schedules if something goes wrong, or things proceed better than expected.
Project-based organisations can be adapted much more easily than other business structures since whole teams can shift together to accommodate changes.
Efficient
A core project team with an excellent manager can be much more efficient than a whole stable of workers because, as a cohesive and dedicated unit, they can
focus all of their energy on the task at hand. Fewer people can accomplish a single project, meaning that human resources are freed up for other work.
One of the essential concepts of project management is balancing the three requirements of cost, time and quality – a project needs to be under budget,
delivered by the deadline, and of sufficiently high quality. Often, however, these three factors are in conflict and not all of them can be achieved at once; a
project may be running late due to some unavoidable delays, or the quality desired may require more money than was initially budgeted for. A good project
manager balances these three factors and produces the most efficient result possible.
On top of that, good planning and organisation can save a lot of mistakes, confusion, backtracking and delays – all of which decrease the efficiency of an
organisation. Planning for risks is inextricably linked to project management; the sooner these can be avoided, mitigated or prepared for, the better for the team,
project and organisation as a whole.
Profit maximize
Industrial resolution
Co ordination
Future risk and uncertainty remove
Remove the cause of project failure
Manage communication

8
Manage cost
Help ful for labour downsizing or increasing the labour
Global competition
Functions of project management

Scope management
Time management
Concept management
Communication management
Riks management
Cost management
Human resources management
Quality management
Project integration management
project planning chapter 2

Project planning is a discipline for stating how to complete a project within a certain timeframe, usually with defined stages, and with designated resources.
One view of project planning divides the activity into:
 Setting objectives (these should be measurable)

9
 Identifying deliverables
 Planning the schedule
 Making supporting plans
Supporting plans may include those related to: human resources, communication methods, and risk management.
Computer hardware and software project planning within an enterprise is often done using a project planning guide that describes the process that the enterprise
feels has been successful in the past.
Tools popularly used for the scheduling part of a plan include the Gantt chart and the PERT chart.
Project planning concepts

project management scheme is necessary to keep the project on schedule and running smoothly. Also, project management is necessary to ensure a smooth
production process when working in a team. Project management consists of organizing and structuring a systematic sequence of activities to most efficiently
develop the website. Project management is critical to maintaining a smooth workflow and to prevent tasks from having to be repeated.
To manage a project successfully, you must have a broad overview of the project, its content, and the ultimate goals. You must anticipate the difficulties that
could be encountered during the project. You might also need to assign work to various subcontractors and monitor their progress.
The most important aspect of project management is planning. The website's construction needs to be planned and organized into systematic phases. This
chapter stresses how important pre-production planning is to the successful implementation of the website. Do not neglect this important stage. Plan thoroughly
and include all the details in the plan.
The following are key terms that you might encounter when working on a project:
 Project—A temporary endeavor undertaken to create a unique product or service. Every project has an end.
 Process—A routine set of tasks repeated many times over. Project management is a process with four separate stages that are repeated for every project:
visualize, plan, implement, close.
 Task or activity—The lowest level of schedule detail is the work package, where managers can estimate durations, set dependencies (which define a
critical path), assign resources, and track progress by recording percent complete, actual dates and duration, and actual hours and cost.
 Deliverable—The specific output as a result of work carried out, usually based on a clearly defined work breakdown structure. It is the actual result of
the project. A project usually has both a final deliverable, which is the output received by the customer who determines success, and interim
deliverables, which is the output that is required along the way to achieving the project's final goals.
10
 Project milestones—Significant completion points in time (with zero duration) during a project that do not necessarily have a deliverable attached.
They communicate status and track progress more effectively.
 Phase—Group of related tasks designed to achieve a specific milestone and usually an interim deliverable, which adds to the successful delivery of the
project's final deliverables.
 Project team—A temporary organization that is assembled to accomplish a specific objective, such as record and edit video, and which is disbanded
when the defined work involved is finished.
 Exit points—Stages between the production phases where issues that could jeopardize the completion of the project are discussed with the client. The
goal is to determine how these issues can be worked out to ensure the successful completion of the project. If either side feels that these issues cannot be
worked out, the exit point serves as the ending point of the project.
 Requirements document—A document that includes the project description in terms of what, where, and when. This document serves as a laundry list
for you to make sure that you have received all the necessary assets and background information, and that you have understood the client's needs and
goals for developing the website.
Project planning process

Step 1: Explain the project plan to key stakeholders and discuss its key components. One of the most misunderstood terms in project management, the
project plan is a set of living documents that can be expected to change over the life of the project. Like a roadmap, it provides the direction for the project. And
like the traveler, the project manager needs to set the course for the project, which in project management terms means creating the project plan. Just as a driver
may encounter road construction or new routes to the final destination, the project manager may need to correct the project course as well.
A common misconception is that the plan equates to the project timeline, which is only one of the many components of the plan. The project plan is the major
work product from the entire planning process, so it contains all the planning documents for the project.
Typically many of the project's key stakeholders, that is those affected by both the project and the project's end result, do not fully understand the nature of the
project plan. Since one of the most important and difficult aspects of project management is getting commitment and buying, the first step is to explain the
planning process and the project plan to all key stakeholders. It is essential for them to understand the importance of this set of documents and to be familiar
with its content, since they will be asked to review and approve the documents that pertain to them.
Components of the Project Plan Include:
Baselines. Baselines are sometimes called performance measures, because the performance of the entire project is measured against them. They are the project's
three approved starting points and include the scope, schedule, and cost baselines. These provide the 'stakes in the ground.' That is, they are used to determine
whether or not the project is on track, during the execution of the project.

11
Baseline management plans. These plans include documentation on how variances to the baselines will be handled throughout the project. Each project baseline
will need to be reviewed and managed. A result of this process may include the need to do additional planning, with the possibility that the baseline(s) will
change. Project management plans document what the project team will do when variances to the baselines occur, including what process will be followed, who
will be notified, how the changes will be funded, etc.
Other work products from the planning process. These include a risk management plan, a quality plan, a procurement plan, a staffing plan, and a
communications plan.
Step 2: Define roles and responsibilities. Not all key stakeholders will review all documents, so it is necessary to determine who on the project needs to
approve which parts of the plan. Some of the key players are:
 Project sponsor, who owns and funds the entire project. Sponsors need to review and approve all aspects of the plan.
 Designated business experts, who will define their requirements for the end product. They need to help develop the scope baseline and approve the
documents relating to scope. They will be quite interested in the timeline as well.
 Project manager, who creates, executes, and controls the project plan. Since project managers build the plan, they do not need to approve it.
 Project team, who build the end product. The team needs to participate in the development of many aspects of the plan, such as identifying risks,
quality, and design issues, but the team does not usually approve it.
 End users, who use the end product. They too, need to participate in the development of the plan, and review the plan, but rarely do they actually need
to sign off.
 Others, such as auditors, quality and risk analysts, procurement specialists, and so on may also participate on the project. They may need to approve the
parts that pertain to them, such as the Quality or Procurement plan.
Step 3: Hold a kickoff meeting. The kickoff meeting is an effective way to bring stakeholders together to discuss the project. It is an effective way to initiate
the planning process. It can be used to start building trust among the team members and ensure that everyone's idea are taken into account. Kickoff meetings
also demonstrate commitment from the sponsor for the project. Here are some of the topics that might be included in a kickoff meeting:
 Business vision and strategy (from sponsor)

 Project vision (from sponsor)
 Roles and responsibilities
 Team building
 Team commitments
 How team makes decisions
 Ground rules
 How large the group should be and whether sub-groups are necessary

12
Step 4: Develop a Scope Statement. The Scope Statement is arguably the most important document in the project plan. It's the foundation for the rest of the
project. It describes the project and is used to get common agreement among the stakeholders about the scope. The Scope Statement clearly describes what the
outcome of the project will be. It is the basis for getting the buy-in and agreement from the sponsor and other stakeholders and decreases the chances of
miscommunication. This document will most likely grow and change with the life of the project. The Scope Statement should include:
 Business need and business problem

 Project objectives, stating what will occur within the project to solve the business problem
 Benefits of completing the project, as well as the project justification
 Project scope, stated as which deliverables will be included and excluded from the project.
 Key milestones, the approach, and other components as dictated by the size and nature of the project.
It can be treated like a contract between the project manager and sponsor, one that can only be changed with sponsor approval.
Step 5: Develop scope baseline. Once the deliverables are confirmed in the Scope Statement, they need to be developed into a work breakdown structure
(WBS), which is a decomposition of all the deliverables in the project. This deliverable WBS forms the scope baseline and has these elements:
 Identifies all the deliverables produced on the project, and therefore, identifies all the work to be done.
 Takes large deliverables and breaks them into a hierarchy of smaller deliverables. That is, each deliverable starts at a high level and is broken into
subsequently lower and lower levels of detail.
 The lowest level is called a "work package" and can be numbered to correspond to activities and tasks.
The WBS is often thought of as a task breakdown, but activities and tasks are a separate breakdown, identified in the next step.
Step 6: Develop the schedule and cost baselines. Here are the steps involved in developing the schedule and cost baselines.
1. Identify activities and tasks needed to produce each of the work packages, creating a WBS of tasks.
2. Identify resources for each task, if known.
3. Estimate how long it will take to complete each task.
4. Estimate cost of each task, using an average hourly rate for each resource.
5. Consider resource constraints, or how much time each resource can realistically devoted to this project.
6. Determine which tasks are dependent on other tasks, and develop critical path.
7. Develop schedule, which is a calendarization of all the tasks and estimates. It shows by chosen time period (week, month, quarter, or year) which
resource is doing which tasks, how much time they are expected to spend on each task, and when each task is scheduled to begin and end.
8. Develop the cost baseline, which is a time-phased budget, or cost by time period.

13
This process is not a one-time effort. Throughout the project you will most likely be adding to repeating some or all of these steps.
Step 7: Create baseline management plans. Once the scope, schedule, and cost baselines have been established, you can create the steps the team will take to
manage variances to these plans. All these management plans usually include a review and approval process for modifying the baselines. Different approval
levels are usually needed for different types of changes. In addition, not all new requests will result in changes to the scope, schedule, or budget, but a process is
needed to study all new requests to determine their impact to the project.
Step 8: Develop the staffing plan. The staffing plan is a chart that shows the time periods, usually month, quarter, year, that each resource will come onto and
leave the project. It is similar to other project management charts, like a Gantt chart, but does not show tasks, estimates, begin and end dates, or the critical path.
It shows only the time period and resource and the length of time that resource is expected to remain on the project.
Step 9: Analyze project quality and risks.

Project Quality: Project quality consists of ensuring that the end product not only meets the customer specifications, but is one that the sponsor and key
business experts actually want to use. The emphasis on project quality is on preventing errors, rather than inspecting the product at the end of the project and
then eliminating errors. Project quality also recognizes that quality is a management responsibility and needs to be performed throughout the project.
Creating the Quality Plan involves setting the standards, acceptance criteria, and metrics that will be used throughout the project. The plan, then, becomes the
foundation for all the quality reviews and inspections performed during the project and is used throughout project execution.
Project Risks: A risk is an event that may or may not happen, but could have a significant effect on the outcome of a project, if it were to occur. For example,
there may be a 50% chance of a significant change in sponsorship in the next few months. Analyzing risks includes making a determination of both the
probability that a specific event may occur and if it does, assessing its impact. The quantification of both the probability and impact will lead to determining
which are the highest risks that need attention. Risk management includes not just assessing the risk, but developing risk management plans to understand and
communicate how the team will respond to the high-risk events.
Step 10: Communicate! One important aspect of the project plan is the Communications Plan. This document states such things as:
 Who on the project wants which reports, how often, in what format, and using what media.
 How issues will be escalated and when.
 Where project information will be stored and who can access it.
For complex projects, a formal communications matrix is a tool that can help determine some of the above criteria. It helps document the project team's agreed-
on method for communicating various aspects of the project, such as routine status, problem resolution, decisions, etc.

14
work breakdown structure,

A complex project is made managable by first breaking it down into individual components in a hierarchical structure, known as the work breakdown
structure, or the WBS. Such a structure defines tasks that can be completed independently of other tasks, facilitating resource allocation, assignment of
responsibilities, and measurement and control of the project.
The work breakdown structure can be illustrated in a block diagram:
Work Breakdown Structure Diagram
Because the WBS is a hierarchical structure, it may be conveyed in outline form:
Work Breakdown Structure Outline

Level 1 Level 2 Level 3
Task 1
Subtask 1.1
Work Package 1.1.1
Work Package 1.1.2
Work Package 1.1.3

15
Subtask 1.2
Work Package 1.2.1
Work Package 1.2.2
Work Package 1.2.3
Task 2
Subtask 2.1
Work Package 2.1.1
Work Package 2.1.2
Work Package 2.1.3
Terminology for Different Levels
Each organization uses its own terminology for classifying WBS components according to their level in the hierarchy. For example, some organizations refer to
different levels as tasks, sub-tasks, and work packages, as shown in the above outline. Others use the terms phases, entries, and activities.
Organization by Deliverables or Phases
The WBS may be organized around deliverables or phases of the project life cycle. Higher levels in the structure generally are performed by groups. The lowest
level in the hierarchy often comprises activities performed by individuals, though a WBS that emphasizes deliverables does not necessarily specify activities.
Level of Detail
The breaking down of a project into its component parts facilitates resource allocation and the assignment of individual responsibilities. Care should be taken to
use a proper level of detail when creating the WBS. On the one extreme, a very high level of detail is likely to result in micro-management. On the other
extreme, the tasks may become too large to manage effectively. Defining tasks so that their duration is between several days and a few months works well for
most projects.

16
WBS's Role in Project Planning
The work breakdown structure is the foundation of project planning. It is developed before dependencies are identified and activity durations are estimated. The
WBS can be used to identify the tasks in the CPM and PERT project planning models.
Project network diagram chapter 3

The precedence diagram method is a tool for scheduling activities in a project plan. It is a method of constructing a project schedule network diagram that
uses boxes, referred to as nodes, to represent activities and connects them with arrows that show the dependencies.
 Critical tasks, noncritical tasks, and slack time

 Shows the relationship of the tasks to each other
 Allows for what-if, worst-case, best-case and most likely scenario
Key elements include determining predecessors and defining attributes such as
 early start date

 late start date
 early finish date
 late finish date
 duration
 WBS reference
How to Draw Activity Diagram?
Creating an activity diagram is easy. You can use a paper-based material such as a post it note or software for this purpose. Regardless of the medium used, the
process of creating the activity diagram remains the same.
Following are main steps involved in creating an activity diagram.
Step 1:
First of all, identify the tasks in the project. You can use WBS (work Breakdown Structure) for this purpose and there is no need to repeat the same.

17
Just use the same tasks breakdown for the activity diagram as well. If you use software for creating the activity diagram (which is recommended), create a box
for each activity.
Illustrate all boxes in the same size in order to avoid any confusion. Make sure all your tasks have the same granularity.
Step 2:
You can add more information to the task boxes, such as who is doing the task and the time frames. You can add this information inside the box or can add it
somewhere near the box.
Step 3:
Now arrange the boxes in the sequence that they are performed during the project execution. The early tasks will be at the left hand side and the tasks
performed at the latter part of the project execution will be at the right hand side. The tasks that can be performed in parallel should be kept parallel to each
other (vertically).
You may have to adjust the sequence a number of times until you get it right. This is why software is an easy tool for creating activity diagrams.
Step 4:
Now, use arrows to join task boxes. These arrows will show the sequence of the tasks. Sometimes, a 'start' and an 'end' box can be added to clearly present the
start and the end of the project.
To understand what we have done in the above four steps, please refer to the following activity diagram.

18
Conclusion
Activity diagrams can be used for illustrating the sequence of project tasks. These diagrams can be created with a minimum effort and gives you a clear
understanding of interdependent tasks.
In addition, the activity diagram is an input for the critical path method.
Rules for developing Network Diagrams
Some basic rules for developing network diagrams are:

 Network Diagrams flow from left to right
 An Activity cannot begin until all preceding connected activities have been completed
 Arrows on Network Diagrams depict the precedence and flow of Activities. Arrows can cross over each other without any impact.
 Each Activity should have a unique identification number
 It is acceptable to leave gaps between Activity Identifiers such as: 1, 5, 10, 15. This makes it easier to add missing Activities at a later date without
having to renumber the entire Network Diagram.
 Activity Identifiers should be ascending numbers that are as simple as possible
 Looping is not allowed
 Conditional statements are not allowed – the network diagram is NOT a decision tree
19
 Activities can only occur once on a Network Diagram. If they are to occur a second time, they should have a different name and new identifier.
 Experience suggests that when there are multiple starts, a common start node can be used to indicate a clear project beginning on the network. Similarly,
a single project end node can be used to indicate a clear ending
General diagram shapes
Basic or general diagrams shapes here are diagrams with a typical basic shape.
 
Block diagram Cluster diagram
Cycle diagram

Ladder diagram

20
Spiral diagram
Network diagram 
Timeline
 
Round diagram Tree diagram
 
Triangular diagram
General concept diagrams
Basic or general diagrams with a typical basic concept, present in multiple fields of application.

21
 
Activity diagram Flow diagram


Phase diagram
Comparison diagram
 Process diagram
Decision diagram
State diagram

Explanatory diagram

22
Timing diagram
Network diagram types: Activity On Node (AON) and Activity On Arrow (AOA)
There are many kinds of network diagram, but the classic ones are AON and AOA diagrams.
AOA diagram
AOA diagram is drawn using circles as the nodes , with nodes represents the beginning and ending points of the arrows or tasks. Arrows act as activities or tasks in AOA
diagram. Even though AOA is a good approach to draw a network diagram, it has its own drawbacks too. The following are the drawbacks of AOA network diagram
conventions identified by Taylor (2008):
 The AOA network diagram can only show Finish to start relationships. It is not possible to show lead or lag time except by adding or subtracting time . This makes
project tracking difficult.
 There are instances where "dummy activities" can occur in AOA diagram. (dummy activities are activities which does not have duration but simply there to show
dependency of one task on other task)
 AOA networks are not supported by many software tools , thus it is not not widely used.
AON diagram
AON network diagram is where circles are used to represent an activity, with arrows linking them together to show the sequence in which they are performed.The following
are the advantages of AON network diagram identified by Taylor (2008):
 AON does not have dummy activities as the arrows represents only dependencies.
 AON can accommodate any types of relationship ( Finish to Start, Finish to Finish, Start to Start, Start to finish, Lead and Lag)
23
 AON is widely as it is supported by almost all the project management software tools
Project scheduling chapter 4
Scheduling Techniques & Project Management
Project management is the process by which a proposed project is developed within a rigorous framework. The subset of project management that this lecture
will focus on is 'project scheduling', that is the process by which the various activities that need to be undertaken during a projects lifetime should be scheduled.
There are a range of activity management tools that are commercially available.

24
1. Project Scheduling
Project scheduling is concerned with the techniques that can be employed to manage the activities that need to be undertaken during the development of a
project.
Scheduling is carried out in advance of the project commencing and involves:
 identifying the tasks that need to be carried out;

 estimating how long they will take;
 allocating resources (mainly personnel);
 scheduling when the tasks will occur.
Once the project is underway control needs to be exerted to ensure that the plan continues to represent the best prediction of what will occur in the future:
 based on what occurs during the development;

 often necessitates revision of the plan.
Effective project planning will help to ensure that the systems are delivered:
 within cost;
 within the time constraint;
 to a specific standard of quality.
Two project scheduling techniques will be presented, the Milestone Chart (or Gantt Chart) and the Activity Network.
2. Milestone Charts
Milestones mark significant events in the life of a project, usually critical activities which must be achieved on time to avoid delay in the project.
Milestones should be truely significant and be reasonable in terms of deadlines (avoid using intermediate stages).
Examples include:
 installation of equipment;
 completion of phases;
 file conversion;
 cutover to the new system.

25
2.1 Gantt Charts

A Gantt chart is a horizontal bar or line chart which will commonly include the following features:
 activities identified on the left hand side;

 time scale is drawn on the top (or bottom) of the chart;
 a horizontal open oblong or a line is drawn against each activity indicating estimated duration;
 dependencies between activities are shown;
 at a review point the oblongs are shaded to represent the actual time spent (an alternative is to represent actual and estimated by 2 separate lines);
 a vertical cursor (such as a transparent ruler) placed at the review point makes it possible to establish activities which are behind or ahead of schedule.
Project management tools incorporating Gantt Charts include PRINCE [CCTA, 1990], MacProject and Microsoft Project.
Example of a Gantt Chart:
Figure 1: Example of a Gantt Chart

Which tasks is ahead of schedule ? Which task is behind schedule ?

26
Alternative Gantt Chart incorporating features commonly present in automated tools:
Figure 2: Example of a Gantt Chart showing Project Management Tool Features

Gantt charts produced in this form are:
 graphical;
27
 easy to read;
 easy to update.
There are no widely accepted standards for Gantt charts. Automated tools are available which produce Gantt charts directly from activity networks or from a
full definition of the tasks.
Automated tools have features which assist the planning function including:
 display of original and latest time for task;

 display of person(s) allocated to tasks;
 integration with other planning techniques (i.e. networks and milestones).
Now try to create a Gantt chart from the information presented in the Gantt Chart tutorial.
3. Activity Networks
The foundation of the approach came from the Special Projects Office of the US Navy in 1958. It developed a technique for evaluating the performance of large
development projects, which became known as PERT - Project Evaluation and Review Technique. Other variations of the same approach are known as the
critical path method (CPM) or critical path analysis (CPA).
The heart of any PERT chart is a network of tasks needed to complete a project, showing the order in which the tasks need to be completed and the
dependencies between them. This is represented graphically:
Figure 3: Example of an Activity Network

28
The diagram consists of a number of circles, representing events within the development lifecycle, such as the start or completion of a task, and lines, which
represent the tasks themselves. Each task is additionally labelled by its time duration. Thus the task between events 4 & 5 is planned to take 3 time units. The
primary benefit is the identification of the critical path.
The critical path = total time for activities on this path is greater than any other path through the network (delay in any task on the critical path leads to a delay
in the project).
Tasks on the critical path therefore need to be monitored carefully.
The technique can be broken down into 3 stages:
1. Planning:
 identify tasks and estimate duration of times;

 arrange in feasible sequence;
 draw diagram.
2. Scheduling:
 establish timetable of start and finish times.
3. Analysis:
 establish float;
 evaluate and revise as necessary.

29
3.1 Diagram Symbols
Figure 4: Symbols Used in Activity Networks

30
3.2 To Produce the Diagram
1. There is a single start and end event;

2. Time flows from left to right (so does the numbering sequence);
3. Events are given a unique number (activities then have a unique label i.e. head & tail event numbers);
4. The network can then be drawn taking into account the dependencies identified;
5. Working from the start event forward, calculate the earliest times, setting the earliest time of the first event to zero. Add the job duration time to the earliest event
time to arrive at the earliest time for the successor event. Where the successor has more than one activity dependent on to the latest time is entered;
6. Working from the finish event backwards, calculate the latest times. Set the latest time to the earliest time for the finish event. Subtract job duration from the
latest time to obtain predecessor latest event times. Where the predecessor event has more than one arrow emanating from it enter the earliest time;
7. Event slack is calculated by subtracting the earliest event time from the latest event time;
8. Critical path(s) are obtained by joining the events with zero event slack.
3.3 Worked Example

List of activities for the network:
Task Location Dependent On Duration
A - 3
B - 6
C - 3
D A 5
E C 2
F B, D, E 6

31
G A 9
Calculation of Earliest Time:

Use the instructions presented in section 3.2 and the the following diagram ..
Figure 5: Calculation of Earliest Start Time

What is the earliest time for event 4 ? If you are unsure, the answer is explained here.
Solution to Calculation of Earliest Start Time for Event 4
Activity Preceding ET Duration Calculated ET

32
2 3 5 8
1    
3    
So the earliest start time for event 4 is day 8 (by this time all the preceding activites will have been completed).
What is the earliest time for event 5 ? If you are unsure, the answer is explained here.

This solution builds on the previous one - the earliest start time for event 4 was day 8 therefore ...
2    
4    

33
Calculation of Latest Time:

Use the instructions presented in section 3.2 and the the following diagram ..
Figure 6: Calculation of Latest Start Time

What is the latest time for event 2 ? If you are unsure, the answer is explained here.

2    

34
4    
What is the latest time of event 1 ? If you are unsure, the answer is explained here.

2    
4    

35
Drawing the Critical Path:
Figure 7: Drawing the Critical Path

Analysis of the network allows the 'float' to be calculated, this is essentially the amount of time an action can be delayed without delaying the overall project.
Activities on the critical path must be monitored very carefully. Now try the Activity Network tutorial.
Web definitions
(Project Schedule) The planned dates for performing activities and the planned dates for meeting milestones..
Project scheduling is the act of constructing a timetable for each project activity, and differs in complexity due to the presence of renewable resources with
limited availability. In this article, three important aspects of scheduling will be discussed, as given along the following lines:
 Sequencing: scheduling with unlimited resources

36
 Scheduling: scheduling within limited resource constraints

 Scheduling objectives
Introduction:
If you have been into project management, I'm sure you have already heard the term 'critical path method'.
If you are new to the subject, it is best to start with understanding the 'critical path' and then move on to the 'critical path method'.
Critical path is the sequential activities from start to the end of a project. Although many projects have only one critical path, some projects may have more than
one critical path depending on the flow logic used in the project.
If there is a delay in any of the activities under the critical path, there will be a delay of the project deliverables.
Most of the times, if such delay is occurred, project acceleration or re-sequencing is done in order to achieve the deadlines.
Critical path method is based on mathematical calculations and it is used for scheduling project activities. This method was first introduced in 1950s as a joint
venture between Remington Rand Corporation and DuPont Corporation.
The initial critical path method was used for managing plant maintenance projects. Although the original method was developed for construction work, this
method can be used for any project where there are interdependent activities.
In the critical path method, the critical activities of a program or a project are identified. These are the activities that have a direct impact on the completion date
of the project.

37
Key Steps in Critical Path Method
Let's have a look at how critical path method is used in practice. The process of using critical path method in project planning phase has six steps.
Step 1: Activity specification
You can use the Work Breakdown Structure (WBS) to identify the activities involved in the project. This is the main input for the critical path method.
In activity specification, only the higher-level activities are selected for critical path method.
When detailed activities are used, the critical path method may become too complex to manage and maintain.
Step 2: Activity sequence establishment
In this step, the correct activity sequence is established. For that, you need to ask three questions for each task of your list.
 Which tasks should take place before this task happens.

 Which tasks should be completed at the same time as this task.
 Which tasks should happen immediately after this task.
38
Step 3: Network diagram
Once the activity sequence is correctly identified, the network diagram can be drawn (refer to the sample diagram above).
Although the early diagrams were drawn on paper, there is a number of computer software, such as Primavera, for this purpose nowadays.
Step 4: Estimates for each activity
This could be a direct input from the WBS based estimation sheet. Most of the companies use 3-point estimation method or COCOMO based (function points
based) estimation methods for tasks estimation.
You can use such estimation information for this step of the process.
Step 5: Identification of the critical path
For this, you need to determine four parameters of each activity of the network.
 Earliest start time (ES) - The earliest time an activity can start once the previous dependent activities are over.
 Earliest finish time (EF) - ES + activity duration.
 Latest finish time (LF) - The latest time an activity can finish without delaying the project.
 Latest start time (LS) - LF - activity duration.
The float time for an activity is the time between the earliest (ES) and the latest (LS) start time or between the earliest (EF) and latest (LF) finish times.
During the float time, an activity can be delayed without delaying the project finish date.
The critical path is the longest path of the network diagram. The activities in the critical path have an effect on the deadline of the project. If an activity of this
path is delayed, the project will be delayed.
In case if the project management needs to accelerate the project, the times for critical path activities should be reduced.

39
Step 6: Critical path diagram to show project progresses
Critical path diagram is a live artefact. Therefore, this diagram should be updated with actual values once the task is completed.
This gives more realistic figure for the deadline and the project management can know whether they are on track regarding the deliverables.
Advantages of Critical Path Method
Following are advantages of critical path methods.
 Offers a visual representation of the project activities.

 Presents the time to complete the tasks and the overall project.
 Tracking of critical activities.
Conclusion
Critical path identification is required for any project-planning phase. This gives the project management the correct completion date of the overall project and
the flexibility to float activities.
A critical path diagram should be constantly updated with actual information when the project progresses in order to refine the activity length / project duration
predictions.
early start and finish times

To perform the forward pass on a Precedence Diagram two ingredients are needed. The first is the starting time of the project. Many projects are scheduled
according to work days and weather impacts are not considered, therefore, unless otherwise instructed, all projects may be assumed to start on day one (1).
The second component needed to perform the forward pass is the complete set of activity durations. Activity durations and sequence should be determined prior
to drawing the precedence diagram and, therefore, should be available as you perform the forward pass.
The diagram below shows a simple three activity schedule with Early Time boxes ready to start the forward pass.

40
To conduct the forward pass in the Precedence Diagram, start with the first activity in the schedule and place the project start date in the Early Start Time. The
Early Finish Time of each activity is the Early Start Time plus the activity duration. The Early Finish Time of a given activity becomes the Early Start Time of
its following activities. The forward pass is completed when every Early Start Time box on the network has a value.
The figure below begins with the Early Start Time of Activity 1 being set to the project start time of one (1). The Early Finish Time of Activity 1 is equal to the
Early Start Time of Activity 1 plus the duration of Activity 1. Following this pattern we can see that the project will require 19 working days to complete.
Regardless of the technical differences between the Arrow and Precedence Diagrams the results of schedule calculations will be the same regardless of which
method is chosen.
Most schedules are, of course, not as simple as that shown in the diagram above. There are, however, clear rules about how to calculate Early Event Times in
networks where there are multiple activities starting and finishing at nodes within the schedule.
late start and finish times

To perform the backward pass you will start with the last activity in the network and continue until you have reached the first activity in the network.
The first step in the backward pass is to copy the Early Finish Time of the last activity in the schedule to the Late Finish Time of the last activity in the
schedule. If you have a project completion date, then use the overall project completion date for the last activity’s Late Finish Time.

41
Once the last activity’s Late Finish Time has been set, then you can calculate the activity’s Late Start Time by subtracting the activity duration from the Late
Finish Date. As you proceed through the schedule the Late Finish Time of a preceding activity is the earliest of the prior Late Start Times.
In this first example schedule, each activity has only a single following activity, therefore, the schedule calculation is quite simple. In the second example there
is an activity with multiple priors. Notice that the earliest of the following Late Start Times are set as the Late Finish Time of the prior activity.
Float or slot
First of all, float and slack are two words that mean the same thing. It is perfectly fine to use either term in project management. Float is a measure of flexibility
in the project schedule. There are two kinds of float, total float and free float. Total float is usually called float. (Sometimes it seems that we try to make things
unnecessarily confusing.) Total float is the amount of time that an activity can be delayed without having to reschedule the project completion date. Free float is
the amount of time an activity can be delayed without having to reschedule any other activity in the project.
Pert chart gantt chart management book
Chapter 5 project physiblity

42
The Feasibility Report is a document that assesses potential solutions to the business problem or opportunity and determines which of these are viable for
further analysis.
The purpose of the Feasibility Report is to present the project parameters and define the potential solutions to the defined problem, need or opportunity. Having
brainstormed a variety of potential solutions, the project team expands on each of these potential solutions, providing sufficient detail, including very high level
costing information, to permit the project leader to recommend to the approving authority all of the viable potential solutions that should be further analyzed in
the Analysis Phase (Business Case). Project constraints and limitations of expenditure are among the various factors that will determine viability.
Steps in feasibility study

Completing a Feasibility Study
A Feasibility Study needs to be completed as early in the Project Life Cycle as possible. The best time to complete it is when you have identified a range of
different alternative solutions and you need to know which solution is the most feasible to implement. Here’s how to do it…
Step 1: Research the Business Drivers
In most cases, your project is being driven by a problem in the business. These problems are called “business drivers” and you need to have a clear
understanding of what they are, as part of your Feasibility Study.
For instance, the business driver might be that an IT system is outdated and is causing customer complaints, or that two businesses need to merge because of an
acquisition. Regardless of the business driver, you need to get to the bottom of it so you fully understand the reasons why the project has been kicked off.
Find out why the business driver is important to the business, and why it’s critical that the project delivers a solution to it within a specified timeframe. Then
find out what the impact will be to the business, if the project slips.
Step 2: Confirm the Alternative Solutions
Now you have a clear understanding of the business problem that the project addresses, you need to understand the alternative solutions available.

43
If it’s an IT system that is outdated, then your alternative solutions might include redeveloping the existing system, replacing it or merging it with another
system.
Only with a clear understanding of the alternative solutions to the business problem, can you progress with the Feasibility Study.
Step 3: Determine the Feasibility
You now need to identify the feasibility of each solution. The question to ask of each alternative solution is “can we deliver it on time and under budget?”
To answer this question, you need to use a variety of methods to assess the feasibility of each solution. Here are some examples of ways you can assess
feasibility:
 Research: Perform online research to see if other companies have implemented the same solutions and how they got on.
 Prototyping: Identify the part of the solution that has the highest risk, and then build a sample of it to see if it’s possible to create.
 Time-boxing: Complete some of the tasks in your project plan and measure how long it took vs. planned. If you delivered it on time, then you know that your
planning is quite accurate.
Step 4: Choose a Preferred Solution
With the feasibility of each alternative solution known, the next step is to select a preferred solution to be delivered by your project. Choose the solution that; is
most feasible to implement, has the lowest risk, and you have the highest confidence of delivering.
You’ve now chosen a solution to a known business problem, and you have a high degree of confidence that you can deliver that solution on time and under
budget, as part of the project.
Step 5: Reassess at a lower level
It’s now time to take your chosen solution and reassess its feasibility at a lower level. List all of the tasks that are needed to complete the solution. Then run
those tasks by your team to see how long they think it will take to complete them. Add all of the tasks and timeframes to a project plan to see if you can do it all
within the project deadline. Then ask your team to identify the highest risk tasks and get them to investigate them further to check that they are achievable. Use
the techniques in Step 3 to give you a very high degree of confidence that it’s practically achievable. Then document all of the results in a Feasibility Study
report.

44
After completing these 5 steps, get your Feasibility Study approved by your manager so that everyone in the project team has a high degree of confidence that
the project can deliver successfully.
INTRODUCTION
A feasibility study assesses the operational, technical and economic merits of the proposed project. The feasibility study is intended to be a preliminary review of the facts
to see if it is worthy of proceeding to the analysis phase. From the systems analyst perspective, the feasibility analysis is the primary tool for recommending whether to
proceed to the next phase or to discontinue the project.
The feasibility study is a management-oriented activity. The objective of a feasibility study is to find out if an information system
project can be done and to suggest possible alternative solutions.
Projects are initiated for two broad reasons:
1. Problems that lend themselves to systems solutions
2. Opportunities for improving through: (a) upgrading systems (b) altering systems (c) installing new systems
A feasibility study should provide management with enough information to decide:
 Whether the project can be done
 Whether the final product will benefit its intended users and organization
 What are the alternatives among which a solution will be chosen
 Is there a preferred alternative

45
TECHNICAL FEASIBILITY
A large part of determining resources has to do with assessing technical feasibility. It considers the technical requirements of the
proposed project. The technical requirements are then compared to the technical capability of the organization. The systems project is
considered technically feasible if the internal technical capability is sufficient to support the project requirements.
The analyst must find out whether current technical resources can be upgraded or added to in a manner that fulfills the request under
consideration. This is where the expertise of system analysts is beneficial, since using their own experience and their contact with
vendors they will be able to answer the question of technical feasibility.
The essential questions that help in testing the operational feasibility of a system include the following:
 Is the project feasible within the limits of current technology?
 Does the technology exist at all?
 Is it available within given resource constraints?
 Is it a practical proposition?
 Manpower- programmers, testers & debuggers
 Software and hardware
 Are the current technical resources sufficient for the new system?
 Can they be upgraded to provide to provide the level of technology necessary for the new system?
 Do we possess the necessary technical expertise, and is the schedule reasonable?
 Can the technology be easily applied to current problems?

46
 Does the technology have the capacity to handle the solution?
 Do we currently possess the necessary technology?
OPERATIONAL FEASIBILITY
Operational feasibility is dependent on human resources available for the project and involves projecting whether the system will be used if
it is developed and implemented.
Operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities
identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system
development.
Operational feasibility reviews the willingness of the organization to support the proposed system. This is probably the most difficult of
the feasibilities to gauge. In order to determine this feasibility, it is important to understand the management commitment to the
proposed project. If the request was initiated by management, it is likely that there is management support and the system will be
accepted and used. However, it is also important that the employee base will be accepting of the change.
The essential questions that help in testing the operational feasibility of a system include the following:
 Does current mode of operation provide adequate throughput and response time?
 Does current mode provide end users and managers with timely, pertinent, accurate and useful formatted information?
 Does current mode of operation provide cost-effective information services to the business?
 Could there be a reduction in cost and or an increase in benefits?

47
 Does current mode of operation offer effective controls to protect against fraud and to guarantee accuracy and security of data and
information?
 Does current mode of operation make maximum use of available resources, including people, time, and flow of forms?
 Does current mode of operation provide reliable services
 Are the services flexible and expandable?
 Are the current work practices and procedures adequate to support the new system?
 If the system is developed, will it be used?
 Manpower problems
 Labour objections
 Manager resistance
 Organizational conflicts and policies
 Social acceptability
 Government regulations
 Does management support the project?
 Are the users not happy with current business practices?
 Will it reduce the time (operation) considerably?

48
 Have the users been involved in the planning and development of the project?
 Will the proposed system really benefit the organization?
 Does the overall response increase?
 Will accessibility of information be lost?
 Will the system affect the customers in considerable way?
 Legal aspects
 How do the end-users feel about their role in the new system?
 What end-users or managers may resist or not use the system?
 How will the working environment of the end-user change?
 Can or will end-users and management adapt to the change?
ECONOMIC FEASIBILITY
Economic analysis could also be referred to as cost/benefit analysis. It is the most frequently used method for evaluating the
effectiveness of a new system. In economic analysis the procedure is to determine the benefits and savings that are expected from a
candidate system and compare them with costs. If benefits outweigh costs, then the decision is made to design and implement the
system. An entrepreneur must accurately weigh the cost versus benefits before taking an action.
Possible questions raised in economic analysis are:
 Is the system cost effective?

49
 Do benefits outweigh costs?
 The cost of doing full system study
 The cost of business employee time
 Estimated cost of hardware
 Estimated cost of software/software development
 Is the project possible, given the resource constraints?
 What are the savings that will result from the system?
 Cost of employees' time for study
 Cost of packaged software/software development
 Selection among alternative financing arrangements (rent/lease/purchase)
The concerned business must be able to see the value of the investment it is pondering before committing to an entire system study. If
short-term costs are not overshadowed by long-term gains or produce no immediate reduction in operating costs, then the system is not
economically feasible, and the project should not proceed any further. If the expected benefits equal or exceed costs, the system can be
judged to be economically feasible. Economic analysis is used for evaluating the effectiveness of the proposed system.
The economical feasibility will review the expected costs to see if they are in-line with the projected budget or if the project has an
acceptable return on investment. At this point, the projected costs will only be a rough estimate. The exact costs are not required to
determine economic feasibility. It is only required to determine if it is feasible that the project costs will fall within the target budget or
return on investment. A rough estimate of the project schedule is required to determine if it would be feasible to complete the systems
project within a required timeframe. The required timeframe would need to be set by the organization.
50
Financial feasibility
In case of a new project, financial viability can be judged on the following parameters:
 Total estimated cost of the project

 Financing of the project in terms of its capital structure, debt equity ratio and promoter's share of total cost
 Existing investment by the promoter in any other business
 Projected cash flow and profitability
The financial viability of a project should provide the following information:[citation needed]
 Full details of the assets to be financed and how liquid those assets are.
 Rate of conversion to cash-liquidity (i.e. how easily can the various assets be converted to cash?).
 Project's funding potential and repayment terms.
 Sensitivity in the repayments capability to the following factors:
o Time delays.
o Mild slowing of sales.
o Acute reduction/slowing of sales.
o Small increase in cost.
o Large increase in cost.
o Adverse economic conditions.
6. Social Feasibility:
Social feasibility addresses the influences that a proposed project may have on the
social system in the project environment. The ambient social structure may be such that
certain categories of workers may be in short supply or nonexistent. The effect of the
project on the social status of the project participants must be assessed to ensure
compatibility. It should be recognized that workers in certain industries may have

51
certain status symbols within the society.
Project selection chapter 6

52
Cost-Benefit Analysis
Cost-benefit analysis examines the cost of the project in terms of resource use, financial commitment and lost opportunity if you must restrict other corporate
activities because of the project. Compare costs to the benefits in terms of profitability, development of future skills and enhanced reputation. Internal rate of
return analysis considers the expected cost of the project, estimates the actual profits from the project and compares this return to your company's standard IRR.
If a project will be less profitable than ordinary business, it may not be a good use of company resources. Other decision tools similar to cost-benefit analysis
include figuring the net present value of the profitability of the project. Net present value analysis is a valuable tool in times of inflation because it states the
value of future profits in relation to current money value.

53
Scoring
A good decision tool involves making a list of goals or requirements that are important to your company with respect to projects you undertake. Develop and
use a template score sheet if you regularly face decisions about projects. Score the project against each of your company's key requirements, including resource
availability, time constraints, IRR, opportunity cost and the potential for development of skills and reputation provided by the project.
Opportunity Cost
Internal projects designed to improve your operations and expand your company, or even big projects for outside clients, are unwise if they require more
resources than the benefits they bring. If an internal project reduces your ability to fully service your clients, or an outside project is so demanding that it takes
resources away from business development, it is not a good project to undertake. Analyze your normal flow of business, plus a percentage year-over-year
increase, to arrive at the business you can normally expect. Figure the potential costs and benefits of your project, and relate that to expenditure of your
resources. If the project will preclude expanding your business development activities to meet at least normally expected year-over-year growth, or it will
interfere with a much larger opportunity later in the year, that is your opportunity cost. Benefits from the project should outweigh the opportunity cost, or you
should not undertake the project.
Six Sigma
Six Sigma is a methodology used to increase the efficiency of your operations. It helps you to reduce waste, improve the quality of your products and services,
identify and correct inefficient processes, and improve customer satisfaction. It involves taking a detailed look at every aspect of your business, analyzing it
mathematically to discover deficiencies and create solutions. Six Sigma can be used to analyze projects, but it is such an involved process that it may be a
project that does not stand up to cost-benefit or opportunity cost analysis itself. If you suspect that closing a division will solve a company problem, applying a
less-complicated analysis to determine whether your suspicions are correct is better than taking up resources and time to do a full Six Sigma evaluation. The
goal of management is to make more profits with less. The Six Sigma process may be a good project to implement during slow times to identify problems in
your business processes and procedures that can be streamlined for better capability of handling large projects without compromising your company's overall
performance.
Sponsored Links
Chapter 7 project financing and control

54
Introduction
While riding on a high-speed train through India, Europe, or Taiwan, a passenger may see massive wind turbines scattered throughout the countryside. Marveled by the landscape, the
passenger may take a snapshot on her phone camera and send it to her family. Without realizing it, the passenger is likely to have benefitted from infrastructure projects that have been
financed by a mechanism called “project finance.” The high-speed rail, the wind turbine, and the telecommunication towers are all large and complex infrastructure undertakings.
Sometimes such projects are made possible by traditional financial methods; increasingly, however, infrastructure projects are financed by a mechanism that engages a multitude of
participants including multilateral organizations, governments, regional banks, and private entities. In project finance, participants negotiate amongst themselves to spread risks
associated with an undertaking, thereby increasing the chances for success in developing vital infrastructure projects for that country and its population.
Project finance is the preferred financing mechanism for large infrastructure projects that are essential for developing countries, emerging economies, and developed countries alike.
This FAQ will define project finance and compare it to corporate finance, present project finance participants, and discuss the financing mechanism. It will also address the
advantages and risks associated with project finance and provide insight into the future of project finance.
II. What is Project Finance?

At its core, project finance is a method of financing where the lender accepts future revenues from a project as a guarantee on a loan. In contrast, traditional method of financing is
where the borrower promises to transfer to the lender a physical or economic entity (collateral) in the case of default. In practice, most projects are financed by a combination of both
traditional methods as well as by guarantee-backed loans. While the name suggests that project finance refers to raising capital by any means to pay for any project, the term refers to
a narrow but increasingly more prevalent method of financing capital- and risk-intensive projects across a broad array of industries.
The twentieth century was marked by a reliance on the public sector for developing infrastructure projects. Historically, governments initiated infrastructure projects to develop or
build essential facilities so that citizens and businesses could conduct various operations and experience economic growth. In the last two decades, however, there has been a shift in
the model of development from the public sector to greater private sector participation. These hybrid public-private partnerships (“PPP”) have been instrumental in upgrading existing
facilities and creating new infrastructure in various industries and in all parts of the world. The most common method of financing PPPs is “project finance.”

55
Source: Thomson Routers
Today, various sectors employ project finance, including power, transportation, oil and gas, leisure and property, telecommunications, petrochemicals, mining, industry, water and
sewerage, waste and recycling, and agriculture and forestry. The chart above suggests that while project finance is most common in power and transportation projects, it extends to a
broad range of industries. Project finance is an important tool for financing projects in developing and emerging economies, yet developed countries employ the mechanisms as
actively as less developed countries. For example, in 2010 India had the most active project-finance market with over $52 billion worth of deals, stemming from 131 loans. Spain
came in second with 67 loans (for a total of $174 billion) and Australia in third with 32 loans (worth $14.6 billion).
internal sources of financing

56
Definition
Funds an organization can raise from the employee contributions, member contributions, retained profits, sale of assets, sale of goods and services, etc.
Sources of finance
Some sources of finance are short term and must be paid back within a year. Other sources of finance are long term and can be paid back over many years.
Internal sources of finance are funds found inside the business. For example, profits can be kept back to finance expansion. Alternatively the business can sell
assets (items it owns) that are no longer really needed to free up cash.
External sources of finance are found outside the business, eg from creditors or banks.
Short-term sources of external finance
Sources of external finance to cover the short term include:
 An overdraft facility, where a bank allows a firm to take out more money than it has in its bank account.
 Trade credits, where suppliers deliver goods now and are willing to wait for a number of days before payment.
 Factoring, where firms sell their invoices to a factor such as a bank. They do this for some cash right away, rather than waiting 28 days to be paid the full amount.
Long-term sources of external finance
Sources of external finance to cover the long term include:
 Owners who invest money in the business. For sole traders and partners this can be their savings. For companies, the funding invested by shareholders is called
share capital.
 Loans from a bank or from family and friends.
 Debentures are loans made to a company.
 A mortgage, which is a special type of loan for buying property where monthly payments are spread over a number of years.

57
 Hire purchase or leasing, where monthly payments are made for use of equipment such as a car. Leased equipment is rented and not owned by the firm. Hired
equipment is owned by the firm after the final payment.
 Grants from charities or the government to help businesses get started, especially in areas of high unemployment.
Introduction
Often the hardest part of starting a business is raising the money to get going. The entrepreneur might have a great idea and clear idea of how to turn it into a
successful business. However, if sufficient finance can’t be raised, it is unlikely that the business will get off the ground.
Raising finance for start-up requires careful planning. The entrepreneur needs to decide:
 How much finance is required?

 When and how long the finance is needed for?
 What security (if any) can be provided?
 Whether the entrepreneur is prepared to give up some control (ownership) of the start-up in return for investment?
The finance needs of a start-up should take account of these key areas:
 Set-up costs (the costs that are incurred before the business starts to trade)
 Starting investment in capacity (the fixed assets that the business needs before it can begin to trade)
 Working capital (the stocks needed by the business –e.g. r raw materials + allowance for amounts that will be owed by customers once sales begin)
 Growth and development (e.g. extra investment in capacity)
One way of categorising the sources of finance for a start-up is to divide them into sources which are from within the business (internal) and from outside
providers (external).
Internal sources
The main internal sources of finance for a start-up are as follows:
Personal sources
These are the most important sources of finance for a start-up, and we deal with them in more detail in a later section.

58
Retained profits
This is the cash that is generated by the business when it trades profitably – another important source of finance for any business, large or small.
Note that retained profits can generate cash the moment trading has begun. For example, a start-up sells the first batch of stock for £5,000 cash which it
had bought for £2,000. That means that retained profits are £3,000 which can be used to finance further expansion or to pay for other trading costs and
expenses.
Share capital – invested by the founder

The founding entrepreneur (/s) may decide to invest in the share capital of a company, founded for the purpose of forming the start-up. This is a common
method of financing a start-up. The founder provides all the share capital of the company, retaining 100% control over the business.
The advantages of investing in share capital are covered in the section on business structure. The key point to note here is that the entrepreneur may be using a
variety of personal sources to invest in the shares. Once the investment has been made, it is the company that owns the money provided. The shareholder
obtains a return on this investment through dividends (payments out of profits) and/or the value of the business when it is eventually sold.
A start-up company can also raise finance by selling shares to external investors – this is covered further below.
External sources
Loan capital
This can take several forms, but the most common are a bank loan or bank overdraft.
A bank loan provides a longer-term kind of finance for a start-up, with the bank stating the fixed period over which the loan is provided (e.g. 5 years), the rate
of interest and the timing and amount of repayments. The bank will usually require that the start-up provide some security for the loan, although this security
normally comes in the form of personal guarantees provided by the entrepreneur. Bank loans are good for financing investment in fixed assets and are
generally at a lower rate of interest that a bank overdraft. However, they don’t provide much flexibility.
A bank overdraft is a more short-term kind of finance which is also widely used by start-ups and small businesses. An overdraft is really a loan facility – the
bank lets the business “owe it money” when the bank balance goes below zero, in return for charging a high rate of interest. As a result, an overdraft is a
flexible source of finance, in the sense that it is only used when needed. Bank overdrafts are excellent for helping a business handle seasonal fluctuations in
cash flow or when the business runs into short-term cash flow problems (e.g. a major customer fails to pay on time).
Two further loan-related sources of finance are worth knowing about:
Share capital – outside investors

For a start-up, the main source of outside (external) investor in the share capital of a company is friends and family of the entrepreneur. Opinions differ on
59
whether friends and family should be encouraged to invest in a start-up company. They may be prepared to invest substantial amounts for a longer period of
time; they may not want to get too involved in the day-to-day operation of the business. Both of these are positives for the entrepreneur. However, there are
pitfalls. Almost inevitably, tensions develop with family and friends as fellow shareholders.
Business angels are the other main kind of external investor in a start-up company. Business angels are professional investors who typically invest £10k -
£750k. They prefer to invest in businesses with high growth prospects. Angels tend to have made their money by setting up and selling their own business – in
other words they have proven entrepreneurial expertise. In addition to their money, Angels often make their own skills, experience and contacts available to the
company. Getting the backing of an Angel can be a significant advantage to a start-up, although the entrepreneur needs to accept a loss of control over the
business.
You will also see Venture Capital mentioned as a source of finance for start-ups. You need to be careful here. Venture capital is a specific kind of share
investment that is made by funds managed by professional investors. Venture capitalists rarely invest in genuine start-ups or small businesses (their
minimum investment is usually over £1m, often much more). They prefer to invest in businesses which have established themselves. Another term you may
here is “private equity” – this is just another term for venture capital.
A start-up is much more likely to receive investment from a business angel than a venture capitalist.
Personal sources
As mentioned earlier, most start-ups make use of the personal financial arrangements of the founder. This can be personal savings or other cash balances that
have been accumulated. It can be personal debt facilities which are made available to the business. It can also simply be the found working for nothing! The
following notes explain these in a little more detail.
Savings and other “nest-eggs”

An entrepreneur will often invest personal cash balances into a start-up. This is a cheap form of finance and it is readily available. Often the decision to start a
business is prompted by a change in the personal circumstances of the entrepreneur – e.g. redundancy or an inheritance. Investing personal savings maximises
the control the entrepreneur keeps over the business. It is also a strong signal of commitment to outside investors or providers of finance.
Re-mortgaging is the most popular way of raising loan-related capital for a start-up. The way this works is simple. The entrepreneur takes out a second or
larger mortgage on a private property and then invests some or all of this money into the business. The use of mortgaging like this provides access to relatively
low-cost finance, although the risk is that, if the business fails, then the property will be lost too. .
Borrowing from friends and family

This is also common. Friends and family who are supportive of the business idea provide money either directly to the entrepreneur or into the business. This

60
can be quicker and cheaper to arrange (certainly compared with a standard bank loan) and the interest and repayment terms may be more flexible than a bank
loan. However, borrowing in this way can add to the stress faced by an entrepreneur, particularly if the business gets into difficulties.
Credit cards
This is a surprisingly popular way of financing a start-up. In fact, the use of credit cards is the most common source of finance amongst small businesses. It
works like this. Each month, the entrepreneur pays for various business-related expenses on a credit card. 15 days later the credit card statement is sent in the
post and the balance is paid by the business within the credit-free period. The effect is that the business gets access to a free credit period of aroudn30-45 days!

Project Chapter One

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Project Chapter One

Загружено:

Авторское право:

Доступные форматы

1

Project chapter one

An individual or collaborative enterprise planned and designed to achieve an aim.

Charcterstics or features of good project

Good Change Control

Project life cycle

Project management usually follows major phases:

Prepared by Kamran Ali Khan 03335700624

Prepared by Kamran Ali Khan 03335700624

Project Life Cycle

Prepared by Kamran Ali Khan 03335700624

 Scope. A project’s scope is its ultimate overall goal.

Project management importance

Prepared by Kamran Ali Khan 03335700624

Flexible but structured

Future risk and uncertainty remove

Remove the cause of project failure

Prepared by Kamran Ali Khan 03335700624

Help ful for labour downsizing or increasing the labour

Functions of project management

Human resources management

Project integration management

project planning chapter 2

 Setting objectives (these should be measurable)

Prepared by Kamran Ali Khan 03335700624

Project planning concepts

Project planning process

Components of the Project Plan Include:

Prepared by Kamran Ali Khan 03335700624

 Business vision and strategy (from sponsor)

Prepared by Kamran Ali Khan 03335700624

 Business need and business problem

Prepared by Kamran Ali Khan 03335700624

Step 9: Analyze project quality and risks.

Prepared by Kamran Ali Khan 03335700624

work breakdown structure,

The work breakdown structure can be illustrated in a block diagram:

Work Breakdown Structure Diagram

Because the WBS is a hierarchical structure, it may be conveyed in outline form:

Work Breakdown Structure Outline

Prepared by Kamran Ali Khan 03335700624

Terminology for Different Levels

Organization by Deliverables or Phases

Prepared by Kamran Ali Khan 03335700624

WBS's Role in Project Planning

Project network diagram chapter 3

 Critical tasks, noncritical tasks, and slack time

Key elements include determining predecessors and defining attributes such as

 early start date

How to Draw Activity Diagram?

Following are main steps involved in creating an activity diagram.

Prepared by Kamran Ali Khan 03335700624

Prepared by Kamran Ali Khan 03335700624

Rules for developing Network Diagrams

Some basic rules for developing network diagrams are:

General diagram shapes

Block diagram Cluster diagram

Prepared by Kamran Ali Khan 03335700624

Round diagram Tree diagram

General concept diagrams

Prepared by Kamran Ali Khan 03335700624

Activity diagram Flow diagram

Prepared by Kamran Ali Khan 03335700624