MBA management

Meaning and Definition of Project

A Project is a group of unique, interrelated activities that are planned and executed in a certain sequence to create a unique product and/ or service, within a specific time frame, budget and the client’s specifications.

According to the Project Management Institute’s (PMI) Publication, “A Guide to the Project Management Body of Knowledge’ (PMBOK), a project is defined as, “a temporary endeavor undertaken to create a unique product or service.”

According to F. L. Harrison, “A project can be defined as a non- repetitive, one- off undertaking, normally with discrete time, financial and technical performance goals.”

According to the British Standard , a project is define as, “ a unique set of co-ordinated activities, with definite starting and finishing points, undertaken by an individual or organization to meet specific objectives.

Broadly these objectives, which are usually defined as part of the business case and set out in the project brief, must meet three fundamental criteria:
1. The project must be completed on time;
2. The project must be accomplished within the budgeted cost;
3. The project must meet the prescribed quality requirement.

Characteristics of Project

Some characteristics of projects are:

1. Focus: A project has a fixed set of objectives/mission/goal. Once these objectives, goals, or missions’ targets have been achieved, the project will become extinct from the organizational pyramid.

2. Life Span: A project cannot continue indefinitely. It is either executed, terminated, or dead. Every project is invariably time bound. The time limits are well defined through schedules.

3. Team Spirit: Every project encourages team spirit among the group of people who participate in it and are instrumental in achieving its goal. This team consists of different individuals from varied disciplines who give their knowledge, experience, and credence towards a total performance.

4. Lifecycle: Like any other product, a project is also reflected and influenced by the lifecycle phases and to which the success or failure of the project can be ascribed. Unswervingly, from conception to commission, a project has to run through six phases that are intertwined with various stages.

5. Unique Activities: Every project has a set of activities that are unique, which means it is the first time that an organization handles that type of activity. These activities do not repeat in the project under similar circumstances, i.e., there will be something different in every activity or even if the activity is repeated, the variables influencing it change every time. For example, consider a ship building yard that builds ships for international clients. Even though the organization builds many ships, each time there will be a difference in some variable such as the vessel’s design, time allowed for construction, etc.

6. Attainment of Specific Goal: Organizations take up projects to perform a particular task or attain a specific goal. These tasks differ from project. The projects in an organization could be constructing a new facility, computerizing the accounts department or studying the demand for a new product that the organization plans to launch in the market. All these projects have a specific goal or result to attain and hence it can be said that every project is goal-oriented.

7. Sequence of Activities: A project consists of various activities that are to be performed in a particular sequence to deliver the end-product. This sequence depends on the technical requirements and interdependency of each of the activities.

8. Specified Time: very project has a specified start date and completion date. This time limit is either self- imposed or it is specified by the client. The life span of a project and run from a few hours to a few years. A project coms to a close when it delivers the product and/ or service as per the client’s requirements or when it is confirmed that it is no longer possible for the project to deliver the final product and/or service as required by the client.

9. Interrelated Activities: Projects consists of various technically interrelated activities. These activities are considered interrelated as the deliverable (Output) of one activity becomes the input for another activity of the project. For example, the project of building a multi- storied luxury hotel. This project consists of various activities such as making a building plan, landscaping, constructing the building, designing the interiors, furnishing the rooms, etc. All these activities are interrelated and are equally important for the completion of the project.

10. Transience creates Urgency: To be worthwhile and to repay the investment, the development objectives must be achieved by a certain time. Sometimes those time constraints are very tight, there is a very narrow market window for the output from the project. If the market window is missed, the project has no value. However, more often, the market window is broader and though the project will be worth less if it is late, the loss in value from later delivery has to be balanced against a potential greater value if more time is spent developing the project’s output. Unfortunately, the timescale often receives undue emphasis. There are time pressure in routine operations. However, because they are routine, it is known how much can be done in a given time, and so there is less likelihood of committing to impossibly tight timescales.

11. Uniqueness Create risk and Uncertainty: The project must have a plan. As the work is unique, it will only be done once; the planning effort will only be received once. It is essential to coordinate the input of resources and ensure that the product is delivered at such a time and cost as to make a profit. However, the plan needs to be more strategic, focusing on the coordination and integration. The detail levels of the plan need to be almost flexibly defined as the project progresses. And necessarily, the uncertainty and the risk must be overtly managed as part of the complete project management process.

The features of transience, uniqueness and the stresses they create, urgency, integration and uncertainty, define projects and project management. Project and project management are not defined by the so called ‘triple constraint’ of time, cost and functionality; all managers have to manage those, from both projects and operations.

12. Subcontracting: This is not a frill in the life of a project. Subcontracting is a subset of every project and without which no project can be completed unless it is of proprietary from or tiny in nature. Subcontracting is an inescapable fact of projects and is one of the healthy antidotes for fruitful completion of the project, if dosage appropriately, well in time. For example, DDA, HUDA< etc., undertake to construct housing colonies for the general public.

Objectives and Functions of Project

Project execution must be directed to achieve the project objectives. There are three primary objectives of a project to be met, which include:

1) Performance: This is to satisfy the specified standards of performance/ function, reliability and safety.
2) Within Budget: Containment of expenditure within budgets to ensure smooth running.
3) Time Scale: Timely Implementation of project to be proven at time of launch.

The last two objectives are linked to the resources, which are limited. But this may represent an over simplification of real intent of project objectives. A project may have many objectives, which must be clear to both project manager and the owner. Prioritizing the objectives is necessary for knowing the primary and secondary objectives.

Some of the typical objectives, not listed in any particular order, include:
1) Quality of product,   2) Fastest completion time,
3) Avoiding unproven equipment,   4) High level of automation,
5) Safety during construction,   6) Lowest capital investment,
7) Designing for particular project life,   8) Lowest operational costs,
9) Safety for maintenance,   10) Reliability of information,
11) Minimizing start-up time,   12) Security of information,
13) Safety during operation,   14) Use of local suppliers.

Project Management Institute (PMI) identifies six basic functions that project management must address, these are:
1) Manage the project‘s scope to define the goals and the work to be done, in sufficient detail to facilitate understanding and correct performance by participants.
2) Manage the human resources involved in a project effectively.
3) Managing communications to see that appropriate parties are informed and have sufficient information to keep the project coordinated.
4) Manage time by planning and meting schedules.
5) Manage quality so that project results are satisfactory.
6) Manage costs to see that project is performed at the minimum possible cost and within the budget, if possible.

Classification of Projects

i) National and International projects: Just as Indian companies invite collaboration from foreign companies to set up plants in India, in the same way, Indian entrepreneurs extend their skills outside their skills outside the country to set up plants in other host countries. The projects set up by large industrial houses or government undertakings in other countries are known as international projects. In order to participate in international projects, much greater efforts by the entrepreneur are required to understand the conditions in that country and evaluate the project opportunities more carefully. The risks associated with these projects are much higher and of a different nature.

ii) Industrial and Non-Industrial Projects: The national projects can be classified into industrial and non-industrial projects. The examples of non-industrial projects are: healthcare projects, educational projects, irrigation projects, agricultural development projects, soil conservation projects, etc. In case of non-industrial projects, the benefits are not easy to qualify as the main purpose of these projects is social service. The investments in non-industrial projects are made by the Central or State governments. Allocations are made in the annual budget and development plants are included in the Five Year Plans.

On the other hand, projects with money- making mission belonging to business organizations are undertaken to ensure generation of wealth and are known as industrial projects.

iii) Projects Board on Level of Technology: On the basis of technology, industrial projects can be classified into high technology, conventional technology and low technology projects. High technology projects involve very huge amount of investments. The examples of high technology projects are; space projects, nuclear power projects and sophisticated electronic projects. The projects which use traditional or known technologies in the process industries such as steel, sugar, cement, chemicals, etc., are known as conventional technology projects. Most of the products which are produced for use in other industries or the final products which are used directly by people come from these conventional technology projects. Investment in these projects is of a sizeable amount though not very huge.

Project which produces products of daily use, e.g., soap, detergents, cosmetics, etc., belongs to low-technology projects. Several products which are reserved for the small scale belong to low technology type. Investment requirement of such projects is not high.

iv) Projects Based on Size: Projects based on size of investment and plant capacity are classified as large, medium and small projects. Projects with a capital outlay of less than s. 5 Crore are regarded as small-scale projects, projects requiring an investment of more than Rs. 100 crore are treated as large-scale projects and projects those falling between these two limits are considered as medium-sized projects. While large and medium size projects are given financial assistance by All India Financial Institutions like IDBI, IFCI and ICICI and commercial banks, small size projects receive financial assistance from State Financial Corporations. Small size projects are also assisted by State Industrial Development Corporations in obtaining their raw materials, equipment’s, etc.

v) Projects Based on Ownership: Projects based on ownership can be classified into three categories; public sector projects, private sector projects and joint sector projects.

• Public Sector: Projects which are owned by the government—Central or Stat or both—are known as public sector projects. These projects may be controlled either directly by the administrative ministries/ departments or through public sector Enterprises/ Public Sector Undertakings ( PSE or PSU) which are owned by the government railways, Airlines, State Transport Corporations, SBI and Other Nationalized Banks, LIC, Steel Plants—Rourkela, Bhilai and Durgapur, etc., are some of the examples of public sector projects.
• Private Sector Projects: projects with complete ownership in the hands of promoters and investors are known as private sector projects. The owners of such projects are individuals, partnership firm or a company (private or public but not PSU). While the profit motive is not the primary consideration of public sector projects, it is an important consideration in private sector projects. No entrepreneur would like to invest in a project which does not give him adequate returns.
• Joint Sector Projects: Projects where ownership belongs to partnership between thee State and private entrepreneurs are known as joint sector projects, in such projects, normally the management expertise is from the private sector and the partner representing the government helps in liaison with various government authorities including large scale funding. The main consideration for investment in joint sector projects is the desire on the part of the State to utilize managerial talents and marketing capabilities of thee private entrepreneur. From the entrepreneur’s point of view, joint sector is attractive because he does not have to make all the contribution for its investment.

6) Infrastructure Projects: Projects which are undertaken to provide infrastructure facilities in the country are known as infrastructure projects. These projects strong stimulus to the infrastructure through huge amount of investment and generally belongs to power, roads, telecom and ports. Infrastructure projects differ from conventional projects for manufacture of goods and services and needs substantial resources with long implementation schedule.

7) Need Based Projects: Any project undertaken for implementation by an organization must have some specific purpose or need. The recognition of such specific need is important for successful management of the project. A new industrial project which is implemented by a well-established organization may be categorized out of the following group of projects:

i) Balancing Project: A project for augmenting or strengthening capacity of a particular area or areas within the chain of entire production plant, with the purpose to harmonize production capacity of all the production centers within the plant, is known as a balancing project.

Balancing projects are undertaken in order to harmonize capacities of different production shops within the plant, so that ultimately the plan production of the final product in increased.

ii) Modernization Project: due to continuous up gradation of technology and production processes, modernization becomes inevitable for any organization to take advantage of new technologies/ processes, new input materials, new production methods, etc. To remain competitive and produce at reasonable price, the company cannot afford to continue with obsolete technology.

Modernization projects are undertaken with the objective of improvement in plants and processes by new machineries, new techniques and new processes and are not meant for changes in the line of activities/ products of the organization. This type of projects results in higher output and also brings in economy in operations with ultimate effect in the form of increased profitability of the organization.

iii) Expansion Project: Project undertaken by an organization with the goal for major increase in the volume of output of the existing products or services is known as an expansion project. A large organization manufacturing television sets with installed capacity of 1,00,000 sets per annum may have a project for increase its capacity to 1,50,000 sets per annum by installing another plant, such a project is called ‘ expansion project’ of the organization. An important consideration for undertaking expansion projects is the intention of the firm to meet an anticipated growth in demand for the product or to increase its market share for the product.

iv) Replacement Project: Replacement project is undertaken to replace certain part of the plant which is creating problems/ breakdowns due to age and wear and tear. Such problems lead to increase in maintenance cost and reduction in plant output. With the help of a replacement project, the relevant part of the plant including the old machineries by new one is replaced which reduces the maintenance cost and increases the level of output of the organization.

Replacement project is generally cost based and does not have enough scope to expect additional revenues from the projected investment. The appraisal is made with the estimated benefits from such investment in the shape of saving the maintenance cost and achieving the sales target by timely deliveries.

v) Diversification Project: Project undertaken by an organization for activities completely different from its current activities is considered as diversification project.

A company may seek profitable investment opportunities in altogether new areas. When a company undertakes a project to enter into a new area, it is called a diversification project.

vi) Rehabilitation / Reconstruction project: When a project is undertaken to revive a sick company, it is called a rehabilitation project.

vii) Plant Relocation Project: When an organization feels the need to shift its existing plant from the present location to any other suitable place, a project for such shifting is undertaken known as plant relocation project. Similarly, when a company purchases an existing plant within the country or from outside and re-erect/re- install it at its place of business, the project undertaken for the re-erection/ r- installation is considered a plant relocation project.

Parameters of Project

The primary aim of a project is to deliver a product and/or service to a client within the specified time, budget (resources and cost) and according to the quality and performance specifications. Usually, the clients ask for too much to be delivered within limited resources. Therefore, it is important for the project manager to make the clients aware of the limitations pertaining to time, budget, technicalities, etc., that he/she is working under. The success of a project depends on the project manager’s ability to strike a balance between these interrelated variables or constraints. Some common constraints that influence a project are:

1) Scope: Scope is a brief and accurate description of the end – products or deliverables to be expected from the project that meet the requirements. Scope describes all the activities that are to be performed, resources that will be consumed and the end- products from the successful completion of the project, including the quality standards. The scope also includes the target outcomes, prospective customers, outputs, work, financial and human resources required to complete the project.

2) Quality: Every project has to satisfy the quality requirements at two levels—products quality and process quality. The first quality requirement relates to products resulting from the project. A comprehensive quality management system ensures effective utilization of scare resources to achieve the project objective of delivering products and/or services to the client’s satisfaction.

3) Time: Time is one of the important resources available to a project manager. At the same time, it is one of the major constraints within which a project has to be completed. Generally, thee client or the sponsor of the project specifies the time for the completion of the project. The time required to complete a project is inversely related to the cost of the project. Therefore, the cost of a project increases as the time available for its completion decreases. Since time cannot be stored as an inventory, it is the duty of the project manager to manage time by carefully scheduling the various activities on time.

4) Cost: Cost plays a major role in the various stages of a project life cycle. Project costs include the monetary resources required to complete the activities mentioned in the scope of the project. Project costs are costs associated with all the activities in the planning and implementation phases. The client or the sponsor of the project prepares a budget based on the estimated costs of various project activities, within which the project manager has to deliver the product.

5) Resources: Resources includes thee people, finances and the physical and information resources required to perform the project activities.

Factors Affecting Project

1) General Factors
i) Lick-outs/ strikes/labor unrest,
ii) Power cuts,
iii) Vagaries of weather conditions.

2) Government –Related Factors
i) Clearances for projects and for imports,
ii) Availability of finances,
iii) Statutory clearances, approvals, inspection, testing and other requirements.

3) Site-Related Problems
i) Land acquisitions and local problems,
ii) Inadequate infrastructure facilities.

4) Drawings –Related and Work-front -Related Factors
i) Delay in release of drawings or release of work-front,
ii) Frequent changes and modifications.

5) Problems due to Shortage of
i) Construction materials such as cement, steel, bricks, etc.,
ii) Consumables. Gas and welding electrodes,
iii) Skilled/ unskilled manpower.

6) Vendors/materials-related factors
i) Delay in supply of vendor’s information for engineering,
ii) Delayed deliveries,
iii) Abnormal transportation time/damages during transportation,
iv) Shortages/damages on receipt at site,
v) Effects in materials identified at site, such as cracks, laminations, leakages, etc.,
vi) Mismatching/failure/ non-performance at site,
vii) Spoilage of material during erection and/or storages.

7) Contractors -Related Factors
i) Lack of previous experience,
ii) Inadequate mobilization, supervision, construction tools/ tackles,
iii) Lack of financial capabilities,
iv) Poor site organization,
v) Substantial increase in quantities, changes and modifications.

8) Delay due to Interphasing Activities
i) Obstructions/ interferences,
ii) Holds due to erection requirement not visualized during initial planning,
iii) Dependence on other contractors work.

9) Problems due to Mid-Stream Changes
i) Changes in process design,
ii) Changes in project formulation,
iii) Mid-stream requirements stipulated by the owner, licensor, etc.

10) Owners- Related Factors
i) Delay in approval of drawings documents,
ii) Delay in release of orders,
iii) Financial problems,
iv) Inadequate set-up, and lack of experience,
v) Delay in fulfilling owner’s obligations.

Project Life Cycle

The project life cycle is a collection of generally sequential project phases. The number of project phases is determined by the control needs of the project organization. The project life represents the linear progression of a project, from defining the project, through developing a plan, implementing the plan and closing the project.

A project life cycle usually specifies:
1) The technical work that must be carried out in various phases of the project.
2) The list of individuals and their roles in each phase of the project.

Projects are “born” when a need is identified by the customer – the people or the organization willing to provide funds to have the need satisfied.

The customer must first identify the need or problem. Sometimes the problem is identified quickly, as in the case of a disaster such as an earthquake or explosion. In other situation. In other situations, it may take months for a customer to clearly identify a need, gather data on the problem and define certain requirements that must be met by the persons, project team or contractor who will solve the problem.

Phases of Project Life Cycle

There are four phases of project life cycle:
1) FIRST PHASE: In this phase project life cycle involves the identification of a need, problem or opportunity and can results in the costumers requesting proposals from individuals, a project team or organization (contractors) to address the identified need or solve the problem. The need and requirements are usually written up by the customer in a document called a Request for proposal (RFP). Through the RFP, the customer asks individuals or contractors to submit proposals on how they might solve the problem, along with the associated cost and schedule.

Not all situations involve a formal RFP, however, Needs often are defined informally during a meeting or discussion among a group of individuals. Some of the individuals may then volunteer or be asked to prepare a proposal to determine whether a project should be undertaken to address the need. It is important to define the right need.

2) Second Phase: The second phase of the project life cycle is the development of a proposed solution to the need or problem. This phase results in the submission of a proposal to the customer by one or more individuals or organizations ( contractors) who would like to have the customer pay them to implement the proposed solution. In this phase, the contractor effort is dominant. Contractors interested in responding to the RFP may spend several weeks developing approaches to solving the problem, estimating the types and amounts of resources that would be needed as well as the time it would take to design and implement the proposed solution. In many situations, a request for proposal may not involve soliciting competitive proposals from external contractors. A company’s own internal project team may develop a proposal in response to a management defined need or request. In this case, the project would be performed by the company’s own employees rather than by an external contractor.

3) Third Phase: The third phase of the project life cycle is the implementation of the proposed solution. This phase begins after the customer decides which of the proposed solutions will best fulfill the need and an agreement is reached between the customer and the individual or contractor who submitted the proposal. This phase, referred to as performing the project, involves doing the detailed planning for the project and then implementing that plan to accomplish the project objective.

4) Fourth and Final Phase: The final phase of the project life cycle is terminating the project. When a project is completed, certain close-out activities need to be performed, such as confirming that all deliverables have been provided to and accepted by the customer, that all payments have been collected and that all invoices have been paid. An important task during this phase is evaluating performance of the project in order to learn what could be improved, if a similar project were to be carried out in the future. This phase should include obtaining feedback from the customer to determine the level of the customer’s satisfaction and whether the project met the customer’s expectations. Also, feedback should be obtained from the project team in the form of recommendations for improving performance of projects in the future.
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