PROJECT MANAGEMENT PSTU

Project concept
The term “project” has a wider meaning. A project is accomplished by performing a set of activities. The
construction of a house is accomplished by performing the set of activities. Another aspect of “project” is
the non-routine nature of activities. Each project is unique in the sense that the activities of a project are
unique and non-routine.
A project consumes resources. The resources required for completing a project are man, material, money &
time. The nature of resources is that are limited are scarce. Thus we can define a project as an organized
programme of predetermined group of activities that are non-routine in nature and that must be completed
using the available resources within the given time limit.
According to Harison, A project can be defined as a non-routine, non-repetive, one-off undertaking,
normally with discrete time, financial and technical performance goals.
A project is initiated to achieve a mission-whatever the mission may be. A project is completed as soon as
the mission is fulfilled. The project lives between these two cut-off points and therefore, this time-span is
known as project life cycle.
A project start from scratch with a definite mission, generate activities involving a variety of human and non
human resources all directed towards fulfillment of the mission and stops once the mission is fulfilled.
Project Management Institute of USA has good definition for it. “A project, according to the institute, is a
one-shot, time-limited, goal directed, major undertaking, requiring the commitment of varied skills and
resources.”
It also describes a project as “a combination of human and non-human resources pooled together in a
temporary organization to achieve a specific purpose.” The purpose and the set of activities which can active
that purposes are distinguish one project from another.
Identification of project in separate way R.L. Martino described “A project is some overall task which has a
definable beginning and a definable end. It consists of a number of related and interdependent activities, all
of which utilize resources and upon which there are imposed with internal and external conditions.”
A project is generally defined as a programme of work to bring about a beneficial change and which has:-
• a start and an end
• a multi-disciplinary team brought together for the project
• constraints of cost, time and quality
• a scope of work that is unique and involves uncertainty
Examples of a project:-
• The development and introduction of a new services.
• The development of a management information system.
• The introduction of an improvement to an existing process.
• Setting up a new care initiative.
• The creation of a large tender or the preparation of a response to it.
• The production of a new customer newsletter, catalogue or Web site.
Above the discussion we can say that, a project is a set o activities perform in a sequence to achieve mission
or missions. Activities are goal oriented, non-repeated, non-routine task, definable beginning and end and
have definable resources in relation to cost of project is termed as project.

Features of Project
Every course of action has some distinct features that help to separate from other course of action.
Similarly projects have some distinctive features that are why to know about project clearly & deeply.
1. Specific purpose (s):
Every project is purpose oriented. It is never possible to form a project without specific purpose (s). When
multi-purposes can be satisfied through project, it is called multi-purpose project.
The lifetime of every project depends on the specific purpose. When purpose can be satisfied through a
project, then project becomes successful end point. To make specific purpose is not sufficient to meet the

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criteria of project. Project must be clear and understandable to all. Otherwise the purpose will be gone heal.
2. Specific direction:
Projects act as an organization, having same structure in which top, middle & lower level management are
involve to direct corresponding level of management that means top management give direction to middle
level management and middle level to lower level management to achieve project goal.
3. Definite life cycle:
A project has a life cycle reflected by idea generation planning, and execution stages.
a. Idea generation stage: In this stage, idea generator must generate idea about project alike why
projects need, what types of projects need etc.
b. Planning stage: In this stage, idea generator must make a plan that is deciding in advance what is
to be done.
c. Execution stage: In this stage, how will executive the project is deciding.
4. Complex interdependency:
Project is a temporary organization. Every project works as a helping hand of organization and every project
have its parent organization.
A project runs through organizational environment. Organizational environment can be two types.
a. Internal environment: Internal environment consists of those who are participating in idea
generator stage.
b. External environment: External environment consists of those who are influenced the project.
Every disciplinary people suffer ego problem and comes from different discipline. So project director has to
realize their differences to execute the project smoothly.
5. Uniqueness:
Projects must have the feature of uniqueness. Two projects are not exactly similar even if the plans are
exactly or merely duplicated. Sometime projects may look like similar but in really they are different. So
project must not be same.
6. Conflicting environment:
As projects act as an organization, so conflict may arise from different level of management. But here
conflict means different strategies not creating violence. Because variety of people are gathered with
different interest in a project. So management should be know about project clearly and then should reform
it.
7. Neutral Judgment:
Project manager should judge every employee’s task impartially. That’s why every one can enjoy inspiration
to work.
8. Non-repetitive:
Projects must not be repeated again and again. One project must be ended, when its goal will be achieved.
9. Risk and uncertainty:
Every project has risk and uncertainty associated with it. The degree of risk and uncertainty depend on now
a project has passed through its various life-cycle phases. An ill-defined project will have extremely high
degree of risk and uncertainty.

Classification of Project:
There is no boundary to classify project. Every day we hear different types of project like agricultural
project, industrial project, construction and health project. On the basis of these project types, project can be
classified in the following manner:
1. On the basis of national income and socio-economic activities: on the basis of national income and
socio-economic activities project can be classify on different categories-
a. Industrial project: establishment of new industry, introducing new wings of established
industry, innovation of new product are categorized in industrial project.
b. Agricultural project: Invention of High Yielding verities of seeds, research for enhancing
yielding capacities of seeds, introduction of technology based production system in
agriculture are examples of agricultural project.
c. Education project: program for enhancing quality and rate of education, compulsory

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primary education, and adult education are termed as educational project.
d. Engineering project: Innovation of new technology, program for developing infrastructure
facilities are examples of engineering project.

2. On the basis of production-materials: On the basis of production materials project can be classified into
two categories-
A. Capital intensive project: Capital intensive project requires huge investment as well as
modern technology. This is especial feature of project of developed countries.
B. Labor intensive project: Labor intensive project employs large number of people. This is a
distinguishing feature of project of developing country like Bangladesh.

3. On the basis of partnership: Project partnerships represent collaborative partnerships between different
countries. On the basis of partnership of project, project can be classified into two groups-
I. Single owned project: single owned project is characterized by internal source of finance
and often use of indigenous technology.
II. Partnership project: Partnership project is characterized by internal and external sources of
finance and use of technology granted form foreign countries or international organizations.

Government identifies and selects different types of project for the socio-economic development of a
country. Above mentioned different projects than classified as per different determinates. These are
discussed in below-
Determinat-01 Project Outcomes: On the basis of project’s inflows, project can be classified into three
categories-
a) X Type Project: Productive and revenue earning project is called X type project. This types
of project is self-financing in nature, produce and distribute commodities for earn revenue.
After meeting administrative and selling expenses, it remains profit. Expense and revenue of
that type of project can easily measure. Different types of industrial project are termed as X
type project.
b) Y Type Project: Productive but not revenue generating is called Y type project. This type of
project generates facilities for other project so that they can earn revenue. Direct advantage of
that type of project can easily measure and called upon a Y type project. For example
irrigation project.
c) Z Type Project: Project who renders service is called Z type project. Outcomes of this project
generally non measurable. Education, training, hospital, road, bridge, culvert, weather
forecasting examples of Z type project.

Determinant-02 Preference on allocation of resources: On the basis of national urgency and importance,
project can be classified into two categories.
A. Core project: Project which is selected for priority basis on the basis of national importance
and socio-economic development is called core project. Core project includes-
• Approved project, revised and non approved project and project nominated by project
evaluation committee.
• Projects whose have available internal and foreign inflow of fund.
• Partially completed project.
• X type and Z type project.

B. Non-core project: Other than core project.

Determinant-03 Stage of project: On the basis of project formulation and implementation, project can be
classified into four categories-

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I. Experimental project: A trial or special observation, examine is made to confirm or
disprove something doubtful; esp., one under conditions determined by the experimenter;
called experimental project. This type of project is conducted in narrow environment. High-
tech technology and higher risky project is not economically favorable all time and
sometimes its outcomes remain undefined. For learning purpose this types of project is
frequently used. Considering above clauses, experimental project may be five categories-
1. For defining problems;
2. Quest for undiscovered truth;
3. Generate available alternatives for achieving a particular objectives;
4. Identification of different barriers for well defined objectives and problems to solve;
and
5. For removing treble makers.
II. Pilot Project: The next step of experimental project is pilot project. Pilot is wider than
experimental project so it requires more allocation of fund. Acceptability, applicability and
utility of experimental results are main considerations of pilot project. Pilot project is initiated
for-
a) Test of applicability;
b) Test of acceptability;
c) Test of adaptability in new environment;
d) Enlargement of experimental result; and
e) Reduction of risk for massive use.
III. Demonstration Project: Demonstration Projects designed to prove the viability of new
technologies offering potential economic advantage but which cannot be commercialized
directly. Main goal of this project is to represent accuracy, acceptability, economy, utility and
advantages of new invention to mass people so that they will aware on new invention.
Demonstrated project is initiated after successful completion of pilot project. It is a
stimulating project directed for application of new findings for social benefit.
IV. Replication, Dissemination and Service Delivery Project: This is the last step of entire
process of experimental project, pilot project and demonstration project. Contributions of this
project are increasing productivity and enhancing administrative capability through
delivering new technology to social door.

Project Cycle:
Project cycle of Warran C. Baum:
From the view point of world Bank C. Baum classify project cycle into 6 categories. Based on formal
activities six stages involves a range from project identification to project evaluation. Project cycle
developed by Baum is illustrated in below:

1. Project identification:

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According to Baum project identification is the first stage of project cycle. Through project identification
essential Matters are identified and conceptions built. Profit oriented investment possibility is created
through project identification and that possibility is achieved by existing development activities of a country.
1. Project
identification

2. Project
preparation

6. Project
evaluation

3. Project
appraisal
5. Project
implementation
and supervision

4. Project
negotiation
Figure: project cycle of Baum
2. Project preparation:
Project preparation means preparation of project design in all volume o financial, finance, social,
institutional. One of the stags of project preparation is to conduct feasibility study.
3. Project Appraisal:
It is a process of decision making for selecting a project by which it is possible to ensure maximum
utilization of minimum resources. The purposes of this stage are the determination of projects commercial
gain, economic effectiveness and social acceptability.
4. Project Negotiation:
In respect of aid oriented project through negotiation aid provider and aid receiver reach in consent to take
proper steps for the success of the project. Subsequently such consent turns into legal obligation that is
disclosed in debt deed.
5. Project implementation and supervision:
Project implementation stage includes construction to project structure. Steady political commitment easy
design, proper project preparation and meaningful management etc. are required for successful
implementation of project.
6. Project evaluation:
Project evaluation is called the last stage and in many cases it is called post project complementation
observation project evaluation is done to analyze and judge the outcome that has achieved in compassion to
the project’s goal. Its effectiveness is not only applicable to the completed project but also equally effective
for the running project.

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Denise A. Rondenell project cycle
Denise A. Rondenell has divided project cycle into 12 stages. Major functions of each stage are described
precisely in below:
12. Follow up
analysis and action
faking

11. Project evaluation 1. Project

identification and
definition

10. Output diffusion

2. Project formulation
and transfer to normal
scouring and feasibility
administration
analysis

9. Project completion or
termination 3. Project design

8. Project supervision
monitoring and control 4. Project appraisal

7. Project
implementation and
5. Project selection
operation
negotiation and
approval

6. Project
activation and
organization

1. Project identification and definition:

It is first stage of the project cycle. Determination of short term and long term project purpose, primary goal,
fixation of logicality, identification of beneficiary group, or goal place, fixation of cost and realization of
preliminary political and administrative support for project.
2. Project formulation, scouring and feasibility analysis:
This stage involves such major functions as scouring project purpose and target goal, giving detail
estimation of project cost and facility, preparation of planning of money.
3. Project design:
The major functions of this stage are the determination of whether are there any obstacle and demand and
local situation in designing project, identification of activity, preparation of work schedule and initial work
planning, budget etc.
4. Project appraisal:
In this prospective expense and facility of project are determined. Through it a decision is taken regarding
the acceptability of the project. Major functions are the determination of the yeard stick for the fixation of
project value, fixation of environmental influence on project, analysis of expense estimation, review of
social, political, organizational, technological and financial facility for the project.
5. Project selection, negotiation and Approval:
This stage is very important for aid directed project. Major functions are the election of the maximum profit
oriented project from those projects whose value has been determined. Major functions also include
formation of group for negotiating about agreement, obtaining govt. Approval for debt agreement, preparing
debt deed etc.

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6. Project activation and organization:
This stage includes such major functions as establishing project implementation unit, recruiting & training
project manager and worker etc.
7. Project implementation and operation:
Project implementation and operation stage involves such factors as planning activation, collection of assets,
elements and raw materials, Co-ordination of production and distribution method, development of method to
solve problem and determination of stock and supply method.
8. Project supervision Monitoring and control:
This stage involves supervision & controlling of project activity, establishment of monitoring method etc.
9. Project completion of termination:
The prime function of this stage are the determination of post project completion debt payment, preparation
of project report and disclose and disseminate of project outcome etc.
10. Output Diffusion and transfer to normal administration:
In this stage required steps taken to provide output to the project beneficiaries with the help of formal
administration.
11. Project evaluation:
Through project evaluation a picture of total success or failure of project can be found. Prime function
includes an analysis whether the project is properly implemented.
12. Follow up analysis and action:
This is the last stage of the project cycle. Achieved outcome from the present project evaluation is used to
the alike future project.

General Project Life Cycle

The Project Life Cycle refers to a logical sequence of activities to accomplish the project’s goals or
objectives. Regardless of scope or complexity, any project goes through a series of stages during its life.
There is first an Initiation or Birth phase, in which the outputs and critical success factors are defined,
followed by a Planning phase, characterized by breaking down the project into smaller parts/tasks, an
Execution phase, in which the project plan is executed, and lastly a Closure or Exit phase, that marks the
completion of the project. Project activities must be grouped into phases because by doing so, the project
manager and the core team can efficiently plan and organize resources for each activity, and also objectively
measure achievement of goals and justify their decisions to move ahead, correct, or terminate. It is of great
importance to organize project phases into industry-specific project cycles. Why? Not only because each
industry sector involves specific requirements, tasks, and procedures when it comes to projects, but also
because different have industry sectors had different needs for life cycle management methodology. And
paying close attention to such details is the difference between doing things well and excelling as project
managers.
Diverse project management tools and methodologies prevail in the different project cycle phases. Let’s take
a closer look at what’s important in each one of these stages:

1) Initiation: In this first stage, the scope of the project is defined along with the approach to be taken to
deliver the desired outputs. The project manager is appointed and in turn, he selects the team members based
on their skills and experience. The most common tools or methodologies used in the initiation stage are
Project Charter, Business Plan, Project Framework (or Overview), Business Case Justification, and
Milestones Reviews.

2) Planning: The second phase should include a detailed identification and assignment of each task until the
end of the project. It should also include a risk analysis and a definition of criteria for the successful
completion of each deliverable. The governance process is defined, stake holders identified and reporting
frequency and channels agreed. The most common tools or methodologies used in the planning stage are
Business Plan and Milestones Reviews.

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3) Execution and controlling: The most important issue in this phase is to ensure project activities are
properly executed and controlled. During the execution phase, the planned solution is implemented to solve
the problem specified in the project's requirements. In product and system development, a design resulting in
a specific set of product requirements is created. This convergence is measured by prototypes, testing, and
reviews. As the execution phase progresses, groups across the organization become more deeply involved in
planning for the final testing, production, and support. The most common tools or methodologies used in the
execution phase are an update of Risk Analysis and Score Cards, in addition to Business Plan and
Milestones Reviews.

4) Closure: In this last stage, the project manager must ensure that the project is brought to its proper
completion. The closure phase is characterized by a written formal project review report containing the
following components: a formal acceptance of the final product by the client, Weighted Critical
Measurements (matching the initial requirements specified by the client with the final delivered product),
rewarding the team, a list of lessons learned, releasing project resources, and a formal project closure
notification to higher management. No special tool or methodology is needed during the closure phase.
A typical methodology would involve a number of stages and activities which occur at different parts of the
life cycle.

• The preparation stage involves the project manager and sponsor in the preparation and approval of an
outline project justification, plan and project budget.
• The startup stage involves the selection and briefing of the project team and some discussion on the
roles and organization.
• The Feasibility or Research stage will establish whether the project is feasible and establish the risks
and key success measures. Unless the organization undertakes research or new product development,
feasibility often means ‘can this process or technology be cost effectively applied to the organization
or department’, rather than is it generally feasible. It may include the identification of external
resources such as specialist consultants or product and service providers who may wish to tender
goods, software or services for the project.
The work will be undertaken by the team (which may include external consultants) and co-ordinate by the
project manager. This team should consist of the key users or main beneficiaries of the beneficial change the
project is delivering (hence the term ‘project deliverables’ or ‘products’. They may be line managers,
supervisors or staff with particular skills. They must be the best people available and never those ‘who can
be spared’ because they have difficult or awkward personalities. The object is to build a team that is better
than the sum of the individuals.
• Defining and planning the project in more detail by writing and publishing a full definition of the
project and determining a project plan. This work is undertaken by the team and co-ordinate by the
project manager. Both should be communicated widely to ensure maximum understanding of the
project’s objectives by all staff that will be affected by the project. Now is the time to ensure their
input to minimize surprises at a later stage.
• The implementation stage involves the execution of the project as agreed, whilst carefully
monitoring progress and managing changes. The team may need to be expanded at this stage to
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resource all the tasks. If so, it is essential they are fully briefed and feel ‘included’ as part of the
team.
When project management is not an integrated part of an organization’s culture it is a very good idea to
undertake some team building events that allow the team to work together in a competitive but non-
threatening environment. As people get used to forming and dissolving teams the need for and style of such
team building events will be decided by the team.
• The close down stage involves the satisfactory delivery (satisfactory to the project ‘customer’ that is)
of the products or services that achieve the beneficial gain. A project review should be held to learn
the lessons. These should be formally documented and published ‘warts and all’.
Definition of project management

A project requires a special approach to ensure the success of the project success of a project means:
(1) It must get completed.
(2) It must be completed within budget.
(3) It must get completed within allocated time.
(4) It must perform to satisfaction.
Project management meets these demands.
There are two concepts associated with project management. One is project then another is management.
Management means planning, organizing, coordinating, directing, motivating and controlling activities for
accomplishing desired goat. Project is goal oriented, no repetitive, having definable life cycle and cost and
resources are scarce. A project contains three components. Such as:
A. Operations: that done in a project.
B. Resources: Use to capital, men, materials and time for accomplishing task.
C. Conditions: Consideration of environment, constraints and conditions for performing activities.
Project management means planning, organizing coordinating and controlling of project with considering
above conditions.
According to Chase and Aquilano “Project management can be defined as the planning, directing and
controlling of resources (People, equipment, material) to meet the technical, cost and time constraints of the
project.
According to B.B. Goel “Project management is an organized venture or managing projects that involves
scientific application of modern tools and techniques in Planning, financing, implementing, Monitoring,
controlling and Coordinating unique activities of tasks to produce desirable outputs in consonance with
predetermined objectives within the constraints of time, cost, quantity and quality.”
So project management is the application of managerial knowledge, skills, tools and techniques to project
activities in order to meet predetermined objectives or goals.

Necessity of project Management

Project Management is a highly professional branch of management which is used in all areas of industry,
Commercial and governmental. The benefits of using a project management approach, obviously follows on
from addressing the needs of the project. The project manager is responsible for developing a plan through
which the project can be tracked and controlled to ensure the project meets present objectives. To do this
effectively the project manager requires accurate and timely information.
At present time, the use of project is seen in all areas such as agriculture, education, medical center,
research, construction, even social development. At present project is using in all areas of economic and
social development. Developed and developing countries are trying to national development through project
through allocating huge amount of budget for financing of project. So the importance of project management
is increasing day by day.
The activities of project are quite different from the activities of an organization, so project needs different

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types of managerial techniques.
The necessity of project management is discussed below:
Firstly:
In a big organization, overall Managerial activities are divided into different functional department. Such as
purchase department, production department, collection department, employee and finance department. In a
project management almost every department activities are involved. The duration of a project very shorter
than the duration of an organization. So it is not possible to create functional department in a project,
considering time. For this reason a project manager has to take the responsibility of supervision and
controlling of a project.

Secondly:
Almost every organization has organizational structure where the position of employee, interactive relation
is shown of an organization. But project is not permanent than organization, for this reason it is not possible
to stand permanent organizational structure for project. The nature of project structure is matrix type.
Thirdly:
Internal environment of a project is different from internal environment of parent organization, because
variety of people are gathered different interests in a project, So that conflicting environment arise in respect
of leadership and accountability which affect growth of a project, so that directing, ordering quite different
formal system. Thus communication among different persons involves in a project maintain through
informal system.
Fourthly:
Project is not parent organization. It is an objective base specific time programme. A project is completed as
soon as the mission is fulfilled. Failure in any stage a project could impact of a project.
So, we can say project is different from parent organization thus organizational structure management
technique, special communication system, and nature of project should be executed by specialized manager.

For the following reasons project management is very much attractive for project manager.

 Decision making is essentially a part of project management. Today project manager finds a lot of
project management tools such as programme evaluation and review technique (PERT), critical path
method (CPM), Qualitative Analysis method, Decision support systems (DSS) project quality control
techniques etc. These tools provide addition of information to the manager. However he uses his
judgment to take decision based on this information.

 Project is best controlled by monitoring the program trends of time, cost and performance. This
information may not be available to the project manager if the trend parameters are derived from a
number of different functional sources.

 Timely response on project performance is essential for effective project control. This project
planning and control system can adjust the content and frequently of this feed back to address the
needs of the project, while the corporate systems may be flexible.

 The planning and control system enable the project manager to develop procedures and work
instruction which are tailored to the specific needs of the projects.

 The critical path method (CPM) calculates the activities start and finish dates, together with the
critical activities which determine the duration of the project delaying a critical activity will delay the
project.

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Function of project management

The function of a project management similar to general management activities. Project manager perform
managerial activities such as planning organizing. Coordinating and control in every stages of project,
similar to general management function. A project is different from parent organization, so its managerial
activities also differ from parent organization. The functions of project management are as follows.
• To execute of proper planning of project function based on project objectives.
• To make budget and work list by using modern techniques based on planning of project
• Selection of employees for project and give training, and determine the relation and leadership role.
• Supervision and control of activities of project as per predetermined time, cost and standard.
• Maintain link with parent organization and its different division.
• Maintain relation among competitive organization government and non-government organization
and other related parties.
• Make evaluation report after project is executed.

Project and Plan

Project is not parent organization. A project is an objective oriented program of parent organization.
Formulating project requires planning as well as planning is required for its implementation. Thus project
and planning are interrelated and interdependence.
Project plan is a formal, approved document used to guide both project execution and project control. The
primary uses of project plan are to document planning assumptions and decisions; to facilitate
communication among stakeholders and to document approved scope, Cost and schedule baseline. Project
plan represent the basic tool for successfully executing a project. It forms the basis for all management
efforts associated with the project. It is a record of plans that is expected to change over time. The project
manager is responsible for bringing out the project plan, which should be accurate and complete as for as
possible without being several volumes in length. It is a document that allows the project manager to
manage the details and not be managed by the details.
In modern state system government bear main responsibility to initiate socio-economic development in
developed and developing countries. For this purpose government formulate long term, five years planning
and yearly planning. For implementing different plans government formulate different types of project.
Effectiveness of different plans depends on how well projects are being implemented. For describing
relationship between planning & project Little & Marrless state that planning is for project and project is for
planning. Sector programme formulates in light of national planning and project formulates in light of sector
programme. For describing relationship between national planning and project, Skylark Chanda state that
project is based on sector program and national planning formulates in light of sector programme.

Long term planning/national development planning

Sector programme/Scheme

Project

Fig: Relationship between national development planning and project.

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CHAPTER- 02
Project Formulation:
“Project formulation refers to a series of steps to be taken to convert an idea or aspiration into a feasible plan
of action”.-B.B. Goel.

“Project formulation is one of the basic techniques through which planning can be changed from an
institutional base to an institutional and rational base”.-G. Myrdal.

Project formulation is a pre-project evaluation. Through project appraisal entrepreneur evaluate economic,
technical and social feasibility study.

Formulation of project is a complex, risky and intellectual work. No person can do it alone. It is a combine
effort of specialists from various fields, such as economics, engineering, finance, management and
environment science. It project is not select properly and fail in evaluating than it is impossible to reach
project goal.

Steps in project formulation:

Project formulation involves various stages. Fail in any stage negatively affect whole project. Steps in
project formulation are as follows:
1. Project identification;
2. Technical analysis;
3. Feasibility analysis;
4. Appraisal of project.
1. Project identification:
Project identification means needs identification, problem identification that is we suffering from and finally
identification of expectation. Project can be identified by single person, government even NGO, financial
institutions or social investment company.

2. Technical analysis:
Project formulation stage analyses various supplementary power of project such as location of project,
source of labor and raw materials, transportation system, analysis of produced goods & services in respect of
demand and supply. Technical analysis can be discussed into two categories.
2.1. Input analysis; and
2.2. Demand & supply analysis.
2.1. Input analysis:
Where the proposed project will be located, whatever the human and material resources are required,
from which material to be supplied in project are considered in input analysis. Now we discuss in
details.

a) Location: Location of project should be select in realistic and intellectual manner.

b) Size and cost of land: Cost of land as well as availability of land should be considered.

c) Raw materials: Location of raw materials, availability of raw materials as well as price of raw
materials should be considered.

d) Utilities: Power, water, natural gas supply should be ensured.

e) Manpower: Appointing required personal for caring out project proposal.

f) Transport facilities: Necessary transportation facilities are essentials for project success.

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Transportation cost should be considered.

g) Incentives & concessions: It should be considered that proposed project will receive incentive &
concession from government.

h) Environmental consideration: Whether project is environment friendly or not should be

considered.

i) Climate & natural hazard consideration: Whether temperature & humidity will affect
effectiveness and existence of project should be considered.

j) Technological aspect consideration: Cost effective, easy to use environmental friendly

technology should be used.

2.2. Demand & supply analysis:

Importance and necessary of a project depend on necessity and demand of produced product &
service of that project. Demand & supply analysis attempted to identify whether the propose project
will supply qualities products & service to satisfy customer. Demand & supply analysis require
relevant information regarding buyer, customer and seller. Methods of demand & supply analysis are
as follows:
1. Survey of Buyers Intention;
2. Composite of sales-force opinion;
3. Expert’s opinion;
4. Market test Method; and
5. Statistical Method.

3. Feasibility study: Feasibility study compare economic, technical, commercial, managerial financial
advantages of proposed project in project formulation stage following feasibility study are conducted:

A. Economic feasibility study;

B. Financial feasibility study;
C. Commercial feasibility study; and
D. Managerial feasibility study.

(A) Economic feasibility study: Economic feasibility study consider project contribution on
national economy. In case of governmental project economic feasibility study is conducted on the
basis following yards stick.
a) Net national income add;
b) Employment effect;
c) Distribution effect;
d) Foreign exchange effect;
e) Infrastructural complication;
f) Environmental complication.
(B) Financial feasibility study: Main purpose of financial feasibility study is to determine sources
of project fund, amount of fund required, out flow of project return and compare over all income
and expenditure of project. Financial feasibility study considers following aspect-
1) Capital cost;
2) Working capital requirement;
3) Estimates of operating costs;
4) Taxes/Depreciation.

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5) Profit.
============================================================================
Tools of financial feasibility study:
Financial feasibility study and investment decision are carried out on testing various tools of financial
feasibility study. These tools act as indicator of investment decision. Tools of financial feasibility study are
as follows:
(1) Pay Back Period (PBP);
(2) Net Present Value (NPV);
(3) Benefit Cost Ratio (BCR);
(4) Internal Rate of Return (IRR); and
(5) Financial ratios.

Capital Budgeting:
Long term investment represents sizable outlays of funds that commit a firm to some course of action.
Consequently, the firm needs procedures to analyze and properly select its long term investment. It must be
able to measure cash flows and apply appropriate decision n techniques. At time passes, fixed assets may
become obsolete at this point financial decision may be required. Capital budgeting is the process of
evaluating and selecting long term investments that are consistent with the firm’s goal of maximizing
owner wealth. Firms typically make a variety of long term investments but the most common for the
manufacturing firm is in fixed assets, which include property (land), plant, and equipment. These assets,
often referred to as earning assets, generally provide the basis for the firms earning power and value.

Common techniques of capital budgeting:

When firms have developed relevant cash flows, they analyze them to assess whether a project is acceptable
or to rank projects. A number of techniques are available for performing such analyses.

(1) Pay Back Period (PBP): Pay back periods are commonly used to evaluate proposed investments. The
pay back period is the amount of time required for the firm to recover it’s initial investment in a
project, as calculated from cash inflows. In case of an annuity, pay back period can be found by dividing
the initial investment by the annual cash inflows. For a stream of cash inflows, the yearly cash inflows
must be accumulated until the initial investment is recovered. Al though popular, the pay back period is
generally viewed as an unsophisticated capital budgeting technique, because it does not explicitly
consider time value of money.

When pay back period is used to make accept-reject decision the flowing decision criteria are to be
followed:
• If the pay back period is less than the maximum acceptable pay back period, accept the project.
• If the pay back period is greater than the maximum acceptable pay back period, reject the project.

The length of maximum acceptable payback period is determined by management.

(2) Net Present Value (NPV): Net present value (NPV) gives explicit consideration to the time value of
money; so it is considered a sophisticated capital budgeting technique. It is a sophisticated capital
budgeting technique, found by subtracting a projects initial investment from the present value of its cash
inflows discounted at a rate equal to the firms cost of capital.

NPV= Present value of cash inflows − initial investment.

When NPV is used to make accept reject decisions, the decision criteria are as follows:
• If the NPV is greater than Tk. 0, accept the project.
• If the NPV is less than Tk. 0, reject the project.

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(3) BCR (Benefits Cost Ratio): When present value of return is divided by present value of investment
than we get BCR, BCR more than 1 (one) creates acceptable criteria, other hand less than one creates
rejection criteria.

BCR =

(4) Internal Rate of return (IRR): Internal rate of return (IRR) is probably the most widely used
sophisticated capital budgeting technique. Internal rate of return (IRR) is the discount rate that equates
the (NPV) of an investment opportunity with Tk. 0 (Because present value of cash investment equal to
zero)

When IRR is used to make accept reject decisions, the decision criteria are as follow:

• If the IRR is greater than the cost of capital, accept the project.
• If the IRR is less than the cost of capital, reject the project.

These criteria guarantee that the firm earns at least its required return. Such an outcome should determine or
enhance the market value of the firm and therefore the wealth of its owner

(1)Pay Back Period

(a) Annuity or even cash inflow:

PBP =
NCO = Net cash outlay or Total investment
NCB = Net cash benefit or Annual return

(b) Stream cash inflow:

PBP =A+ Where

A = The year in which accumulation
cash inflow is nearer to NCO
C =Cumulative cash inflow of the year A
D =Cash inflow of the year following year A.
Problem-1
Suppose project X requires total amount of investment Tk 50,000 and yearly return is Tk 10,000. Calculate
pay back period.

Solution:
We know, pay back period in case of annuity cash inflow as-

PBP =
=
= 5 years (Ans.) Where
NCO = Net cash outlay
NCB = Net cash benefit

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Problem-2
Project ‘X’, Net cash outlay (NCO) = Tk. 20,000
Yearly cash inflows are as follows
Year Cash inflow
1 Tk 2000
2 6000
3 11000
4 4200
5 700
Calculate PBP.
Solution:
We know PBP under mixed cash inflow:
PBP = A +
Where
A = Year at which cumulative cash inflow is near at NCD
C = Cumulative cash inflow of year A
D = Cash inflow of the year following year A.

Calculation table
Year Cash inflow Cumulative cash
Inflow
1 Tk 2000 Tk 2000
2 6000 8000
3 =A 11000 19000 = C
4 4200 = D 23200
5 7000 30200

PBP = 3 +

=3+
= 3+0.24
= 3.24 years. (Answer)

(2) Net present value

Calculation of present value = N

Where,
F = Future single received
i = Discount rate or Interest rate
N = Number of interest period
Suppose, F = Tk. 1.0, i = 10%, N = 1
PV =

=
= 0.909

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Problem-3
Project ‘T’ requires NCO Tk. 100,000, discount rate @ 10% and yearly cash inflows are as under:
Year Cash inflow
1 Tk 20000
2 25000
3 45000
4 40000
5 25000
Calculate NPV.
Solution:
Calculation table of NPV of project-T
Year Cash in flow present value of Tk 1 Present value of cash
@ 10% inflow @ 10%
1 Tk 20,000 0.909 Tk 18,180
2 25,000 0.826 20,650
3 45,000 0.751 33,795
4 40,000 0.683 27,320
5 25,000 0.621 15,525
Total Tk 1,50,000 Tk 1,15,470

We, know,
NPV = Present value of return − Present value of investment
= Tk 1,15,470 – 1,00,000
= Tk 15,470 (answer.)

Comment: Since NPV is positive, project ‘T’ is feasible project. So investment decision can be made.

(3) Benefit cost ratio (BCR)

BCE =

= (Information from problem-3)

= 1.15470

Comment: Since BCR is 1.15470 (more than 1) so project is feasible, so investment decision can be
undertaken. Tk 1 investment results in 1.15470 received.

Problem-4: Project-‘K’
NCO = Tk. 100000, total benefits = 175000, project life = 5 years, discount rate = 10%. Calculate BCR.
Total investment and benefit receive given below:
Year Total cost/investment Total benefit
1 Tk 50000
2 50000
3 Tk 40000
4 60000
5 75000

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Solution:
BCR Calculation table of project ‘K’
1 2 3 4 5 6
year Total cost/ Total Present value of Tk Present value of total present value of
Investment benefit 1 @ 10% cost (1) × (4) benefit (3)×(4)
1 Tk 50000 0.909 45450 -
2 50000 0.826 41300 -
3 Tk 40000 0.751 - 30000
4 60000 0.683 - 40980
5 75000 0.621 - 86575
Total Tk 86750 Tk 117595

BCR =
= 1.36 (Approximately)
Comment: Tk 1 investment results in 1.36 benefits received so investment decision can be made.

(4) Internal rate of return (IRR)

IRR =
Where
LDR = Lower Discount Rate
HDR = Higher Discount Rate
NPV = Net Present Value
Problem-5: Project-‘Y’
NCO = Tk. 100,000, project life = 4 years.
Cash inflow on the table
Year Cash flow
1 10,000
2 4000
3 4000
4 4000
Solution:
Calculation table of IRR
1 2 3 4 5 6
2×3 5×6
Year Cash PV of Tk 1 at LDR PV of cash PV of Tk 1 at PV of cash
flows discount rate @ 8% flows HDR discount flows
rate @ 10%
0 (10000) 1.00 (10000) 1.00 (10000)
1 4000 0.926 3704 0.909 3636
2 4000 0.857 3428 0.826 3304
3 4000 0.798 3176 0.751 3004
308 -56

IRR =
=
=
= 8+ 1.69
= 9.69 (Answer)

Comment: If rate of return of that project is 9.69 or more than project is acceptable.

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(5) Ratio Analysis:

Ratio analysis involves the methods of calculating and interpret financial ration in order to assess the firms
performance and status. The inputs to ratio analysis are the firm’s income statement and balance for the
period to be examined. Ratio analysis is used to compare perms performance and status to that of other firm
or to itself over time. Financial ratios can be divided into four basic group or categories: liquidity ratios;
actively ratios; debt ratios and profitability ratios.
Profitability ratios: Measure return
Liquidity, activity and debt ratios: Measure risk

============================================================================

C. Commercial feasibility study:

Commercial feasibility study is wider than financial feasibility. Commercial feasibility study
consider total population, different segment of population, class of population, income category,
channel of distribution, price and paces, religion belief, habit, buying pattern. It considers the present
position in loss but future it will be profitable. Look at what change is going to power (political
power).

D. Managerial feasibility study:

Managerial feasibility study analyzes handling capacity to carry out such a big project. Project
director (PD) is selected within organization having experience and handling capacity for project
management.

4. Project appraisal:
Project appraisal is a summary of all feasibility studies. Project appraisal is a stage of decision, where
investment decision is made.

“Project appraisal is a tool to examine as to whether in the given situation, it would be most realistic, reliable
and reasonable one to commit resources or not”- B. B. Goal.

“Project appraisal is the process of evaluating the silent features of feasibility analysis, techno-economic
analysis, design and network analysis, input analysis, financial analysis, and social cost benefit analysis of a
project- R.K. Motto.

Considerations of Project Appraisal Report:

Areas feasibility
Basic Questions
study

(1)Technical 1. Is project technically feasible?

feasibility study 2. Whether proposed technology will obsolete in future?
3. What extent project is depending on foreign technology?
4. Whether Strategic position of project sound or not?
5. Whether project design reflects all project functions?

(2)Economic 1. Whether project planning consistent with national planning structure?

feasibility study 2. Is project in high preferable sector?
3. Whether project will contribute in related sectors?
4. Whether project will be able to use scarce resources of related sector

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(3)Financial 1. Whether parent organization is financially sound in implementing project plan?

feasibility study 2. Is project cost estimation made on the basis of future price level?
3. What types of finance will be used? What source to be used?
4. Is project investor able to pay credit to credit supplying institutions?
5. What will be administrative structure, liquidity and income of that project?

(4)Commercial 1. Is project having dependable transportation for supplying input to the project?
feasibility study 2. Is it possible to ensure proper supply of materials to project?
3. Is step to be taken to measure market demand of project output? Whether
channel of distribution is selected or not?

(5)Organizational 1. Whether project will be successful or not?

feasibility study 2. Whether outside assistance is required or not?

(6)Managerial 1. What type of managerial structure will be used?

feasibility study 2. Whether present methods are competent with directing and controlling of project
activities?

(7)Environmental 1. Whether project is environment friendly are not?

feasibility study 2. Whether project will affect in ecological balance not?
3. Whether project is competent with environment or not.

(8)Social 1. What change can bring by proposed project on attitude or behavior of people?
feasibility study 2. What attitude of people holds regarding proposed project?
3. How beneficiary group can be involved in project in different stages of project?

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CHAPTER- 03
Project Market and Demand Analysis
Forecast:
Forecasting means assessment of future event based on experience. According to William J. Stevenson “A
statement about the future value of a variable of interest”. According to Lee J. Krajewshi and Larry Ritzman
“A forecast is a reproduction of future events used for planning purposes”.

Forecasting is essential for valuable managerial decision. Forecasting is a basis of long term planning of an
organization. Forecast also basis of cost control and budgetary control. Forecasting enables organization to
produce the required quantities at the right time and arrange well in advance for the various factors of
production.

General features of forecasting.

Forecasting is the assessment of future events based on past experience. Forecasting should be information
based. General feature of forecast are as follows:
(i) It reflects past experience: What happened in past may happen in future.
(ii) Forecasting is not 100% correct: Forecasting is assumption, correctness of forecasting
depending on proper judgment of information.
(iii) Forecasting provides some expectation: Assessment of future provides some expectation,
how market can be served, by which opportunities can be captured, planning to be educated.
(iv) Planning is very much depending on forecasting: Forecast is basis of planning,
Forecasting assess future event and planning is promulgated and executed on the basis of
forecasting. So planning is very much depending on forecasting.

Elements of forecasting/qualities of good forecasting:

Forecasting should be made timely, not in advance, not in late. It should be accurate and reliable. Qualities
of good forecasting are as follows:
(i) Timely forecasting: Forecasting should be made timely not in advance, not in late.
Advanced forecasting leads to high degree of uncertainty.
(ii) Forecasting should be accurate: Relevant information is necessary for accurate forecasting.
(iii) Forecasting should be reliable: Reliability of forecasting depends on agencies, which
provide relevant information.
(iv) Forecasting should be expressed in meaningful units: Financial forecasting should be
expressed in Tk and production forecasting in unit.
(v) Forecasting should be in written: Written forecasting accountable person who forecast and
organization for which forecasting is made.
(vi) Methods applied for making forecasting should be easy and understandable.
(vii) Forecasting should be cost effective: Forecasting should not make excessive cost, it should
be cost effective.
Demand/factors of demand / law of demand /Assumptions of demand:
Demand: In general sense, the desire to have a commodity or service is called demand. But in economics
more desire is not called demand. The desire of the buyer, who has the ability and willingness to fulfill it, is
call demand. There are, therefore, factors of demand such as
(i) Desire expectation to have a commodity
(ii) Necessary money to purchase the commodity and
(iii) Willingness to spend the money for the commodity.

Law of demand: The demand for a commodity depends on its price other things remaining the same, when
the price of a commodity increases at a particular time, its demand decreases, again when price falls demand
increases. A relationship can therefore be observed between price and quantity demanded. This very
relationship of dependence of demand on the price of a commodity is called law of demand.

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Assumption of the law of demand: It is presumed at the beginning of the law of demand that other things
remaining the same. That is there will be no change in any factor which can influence price and quantity
demanded. Among other things are including:
1. Income of the buyer.
2. Testes, habits, and choice of the buyers.
3. Prices of other relevant goods.
4. The number of buyers.
5. Normal behavior of consumer
If these conditions remain unchanged, only then the law of demand will be operative.

Key steps in market and demand analysis:

Market and demand analysis should be carried out in an orderly and systematic manner. The key steps in
such analysis are as follows:
• Situational analysis and specification of objectives.
• Collection of secondary information
• Conduct of market survey.
• Characterization of the market.
• Demand forecasting
• Market planning.

Collection of Demand
secondary forecasting
information

Situational analysis Characterization

and specification of of the market
objectives

Conduct of Market
market survey planning

Fig: Key steps in market and demand analysis:

1. Situational analysis and specification of objectives:

Situational analysis generates enough data to measure the market and get a reliable handle over
projected demand and revenues. To carry out such a study, it is necessary to spell out its objectives
clearly and comprehensively. A helpful approach to spell out objectives is to structure them in the
form of questions.
• Who are the buyers?
• What is total current demand?
• What price and warranty will ensure its acceptance?
• What channel of distribution is most suited?

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2. Collection of secondary information:

In order to answer the questions listed, while delineating the objectives of the market study,
information may be obtained from secondary and primary source. Secondary information provides
the base and the starting point for market and demand analysis. It indicates what is known and often
provides leads and cues for generating primary information required for further analysis.

3. Conduct of market survey:

Secondary information often does not provide a comprehensive basis for market and demand
analysis. It needs to be supplemented with primary information generated through a market survey,
specific to the project being appraised. The market survey may be a census survey or a sample
survey. In a census survey the entire population is covered. The market survey is typically as sample
survey.

4. Characterization of the market:

Based on the information gathered from secondary sources and through the market survey the market
for the product/service may be described in terms of the following:
• Effective demand in the past and present;
• Breakdown of demand;
• Price;
• Methods of distribution and sales promotion;
• Consumers;
• Supply & Competition;
• Government policy.

5. Demand forecasting:
After gathering information about various aspects of the market demand from primary and secondary
sources, an attempt may be made to esteem ate future demand.

6. Market planning:
To enable the product to reach a desired lever of market perform a suitable marketing plan should be
developed. Broadly, it cover pricing, distribution, promotion and, service.

Determinants of demand:
The demand for a product or its sales depends upon number of factors. Number of factors that determinate
demands of a particular product are as follows:

1. Price of particular product: Demand for a particular product depends upon price of its. There is
an adverse relation between price and the quantity demanded, lower the price the greater is the
quantity demanded and vice versa.

2. Price of a substitute and completive product: If the price of a commodity remains same the
demand for this commodity may change if the prices of substitutes and complementary goods
change. For example, gur is a substitute of sugar. Assume that the price of sugar increases, in that
case if the price of gur remain unchanged, its demand will increase.

3. Income of buyers: Demand of a particular product also depends upon income of demanders. If
the purchasing power of money increases or real income increases than demand of a particular
product will go up. Again demand for a commodity will not increase with a fall in price if the
income of the consumer decreases substantially.

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4. Advertising: Demand for a particular product can be increased through advertising. As increase
in advertisement will lead to a more than proportionate increase in sales.

5. Population: Composition of the population or size of the population which affects demand for
certain commodities or service.

6. Season of the year: It is obvious that demand for a commodity must change with the change in
season. In winter, there is a greater demand for worm clothing for certain types of torics and for
coal of fuel. In summer, there is a great demand for electric fans room coolers and cooling drinks
etc.

7. Availability of credit: Availability of credit facilities in terms of payment and service increase
buyer’s ability to purchase a particular product.

8. Geographical location of buyer: Geographical location of buyers also influence in determining

demand of a particular product. Demand per a product very due to change in geographical
location of buyers.

9. Expected future in market: Expected future trend in market also determinate demand of a
particular product. If price of a product may seem to increase in future than demand for that
product may increase and vice versa.

10. Change in consumer taste: If with the change in habits and taste, consumer begin to take coffee
instead of tea and even if two price of tea the demand for tea to that person will not increase.

11. Needs and preferences: If is quite obvious that if a consumer dustups market liquidity prudence,
his demand for goods will decrease, because he prefers to keep with him ready cash instead of
buying things.

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Risk
Risk is measureable uncertainty. Risk implies the uncertainty of profit or danger of loss due to some
unforeseen events in future. It refers to the chance of loss on account of unfavorable or unpredictable
happenings. Risk is the possibility of loss arising out of future uncertainties. Risk occurs when there is an
adverse deviation from desired or expected outcome. According to Wheeler, Risk is “chance of loss.” It is
the possibility of some unfavorable occurrence. In other words, it can be said that risk is the variability in
actual returns in respect to estimated returns.

Uncertainty
Uncertainty is an essential condition of business because business decisions are concerned with future which
cannot be forecasted with 100% accuracy. Uncertainty arises due to the ever-changing environment within
which a business operates. Natural calamities, changes in demand and prices, improvement in technology,
change in Governmental policies etc. are a few examples of uncertainties which create risk in business. F. H.
Knight defined uncertainty is a kind of risk which cannot be insured against and is incalculable.

Differences between Risk and Uncertainty

In the previous times risk and uncertainty were thought to be the same. F. H. Knight first drew the
distinction between risk and uncertainty. Later Richard Cantillon supported this distinction and thus it
became well established.

When the outcome of the decision is not known with certainty, a manager faces a decision making problem
either condition of risk or condition of uncertainty.

The difference between risk and uncertainty has been made clear in the following discussion:
Point of Distinction Risk Uncertainty
1. Condition A decision is made under risk when a Uncertainty exists when a decision
manager can make a list of all possible maker cannot list all possible outcomes
outcomes associated with a decision and or cannot assign probabilities to the
assign a possibility of occurrence to various outcomes.
each of the outcomes.
2. Measurability Risk can be measured. Uncertainty cannot be measured.
3. Reduction Risk can be reduced by insurance Uncertainty cannot be reduced by
principle insurance principle.
4. Probability Risk denotes a positive probability of Uncertainty does not imply any value
something bad happening. judgment or ranking of possible
outcomes.
5. Example A manager decides to spend $1000 on a A pharmaceutical company decides to
magazine ad believing there are three spend $3 million on R&D of new
possible outcomes for the ad: a 20% medication for high blood pressure the
chance, a 60% chance, a 80% chance of pay off from the research and
increasing sales. development depends on Governments
new health policy. Government may
impose price regulation or not. In such
a condition, decision is made under
uncertainty.

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Types of Risk
Risk can be classified from various points of view.
On the basis of scope of risk, risk can be classified into three categories-
1. Stand alone risk;
2. Corporate risk and
3. Systematic risk.

1. Stand alone risk: Assessment of risk on individual project point of view, suppose uncertainty of
achieving 10% profit on project “A” is called stand alone risk.

2. Corporate risk: Assessment of risk on industry point of view. Here risk is determined as per
industry on which certain project is included. This types of risk also termed as firm risk.

3. Systematic risk: Risk on market of project changes in demand, supply, price fluctuations changes
fashion are example of systematic risk. It also termed as market risk.

On the basis of source of risk, risk can be classified into two major types-

1. Internal risk
2. External risk

A. Internal Risk: Risk arises from project itself. Manager have substantial control over this type of
risk. It can further divided into two types-
a. Market Risk: Market risk associate with market changes in demand, supply, price
fluctuations changes fashion are example of systematic risk .Causes of market risk are –
i. Improper assessment of demand
ii. Change in customer change
iii. Strong market competitors product

b. Technical Risk: Technical risk created due to time, cost and failure in achieving quality
standard of output.

B. External Risk : Management have little control over external risk. Main causes of external risk are
as follows-

i. Changes of market condition ;

ii. Changes of strategies of competitors;
iii. Changes of governmental industrial policy;
iv. Changes of bank interest rate;
v. Fundamental changes in project structure;
vi. Changes in customer demand/ behavior;
vii. Improper relationship with suppliers;
viii. Change in climate;
ix. Insufficient labor supply;
x. Shortage of supply of raw materials;
xi. Change of influence of customer and sub-contract.

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Techniques of measuring risk

Range: Range difference between maximum and minimum outcomes. The greater difference (range) creates
greater risk.

Formula for calculating risk:

Range ( Rg) = R h – Ri

Where,
Rg = Range of distribution.
Rh = Highest possible value.
Ri = Lowest possible value.

Mean absolute Deviation (MAD): Mean absolute deviation is obtained by calculating the absolute
deviations of each variable from expected value of the distribution.

Formula for calculating risk:

n
MAD = ∑
i =1
Pi Ri - R

Where,
MAD = Mean absolute deviation
R i = ith possible value of the variable
R = Expected value of the distribution
P i = Probability of ith possible value.

Variance: Average squared deviations of each variable from the expected value of the distribution.

Formula for calculating risk:

n
Variance ( σ 2 ) = ∑i =1
P i (R i - R ) 2

Where,
σ 2 = Variance
R i = ith possible value of the variable
R = Expected value of the distribution.
P i = Probability of ith possible value.

Standard deviation: Standard deviation is obtained by calculating the square root of the average squared
deviations of each variable from the expected value of the distribution.

Formula for calculating risk:

n
S.D ( σ ) = ∑
i =1
PI ( RI − R) 2

Where,
S.D ( σ ) = Standard deviation
Ri = ith possible value of the variable
R = Expected value of the distribution
Pi = Probability of ith possible value

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Coefficient of variance: Coefficient of variance is a measure of risk per unit of expected value of the
distribution.
Formula for calculating risk:
σ
C.V =
R
Where,
C.V = Coefficient of variance
σ = Standard deviation
R = Expected value of the distribution

Problem
Project -A Project-B
Outcome Probability Outcome Probability
1100 0.2 900 0.2
700 0.5 600 0.5
600 0.3 200 0.3
Which Project is acceptable?

Solution:
Project A
Range:
We know,
Range = Rg = Highest outcome- Lowest outcome
= 1100- 600
= 500

Mean absolute deviation (MAD) :

We know,
n
MAD = ∑ i =1
Pi Ri - R

At first we have to calculate expected value ( R )

We know,
n
R = ∑
i =1
(outcome x Probability)

= (1100 x 0.2) + (700 x 0.5) + ( 600 x 0.3)

= 750

Now,
MAD = 0.2 x 1100-750 + 0.5 x 700-750 + 0.3x 600-750
= 0.2 x 350 + 0.5 x 50 + 0.3 x 150
= 70+25+45
= 140

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Variance
We know,
n
Variance ( σ 2 ) = ∑
i =1
P i (R i - R ) 2

Calculation table
Pi Ri Pi Ri (Ri- R) (Ri-R) Pi(Ri-R)
0.2 1100 220 350 122500 24500
0.5 700 350 -50 2500 1250
0.3 600 150 -150 22500 6750
n
R =750
∑
i =1
P i (R i - R ) 2 =3250

So Variance ( σ ) = 32500
2

Standard deviation:
We know,
S.D ( σ ) = σ 2
= 32500
= 180
Coefficient of Variance:
We know,
σ
C.V =
R
180
=
750
= 0.24

Project B
Range ( R g ) :
We know ,
Range = R g = Highest outcome- Lowest outcome
= 900 – 200
= 700
Mean absolute deviation (MAD) :
We know,
n
MAD = ∑
i =1
Pi Ri - R

At first we have to calculate expected value

we know,
n
R = ∑i =1
(outcome x Probability)

= (900 x 0.2) + (600 x 0.5) + ( 200 x 0.3)

= 180+300+60
= 540
Now,
MAD = 0.2 x 900- 540 + 0.5 x 600-540 + 0.3 x 200-540
= 0.2 x 360+ 0.5 x 60 + 0.3 x 340
= 72+30+102
= 204

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Variance :
n
We know, Variance ( σ 2 )= ∑ P i (R i - R ) 2
i =1
Calculation table
Pi Ri Pix Ri (Ri- R ) (Ri- R ) 2 Pi(Ri-R)
0.2 900 180 360 129600 25920
0.5 600 300 60 3600 1800
0.3 200 60 -340 115600 34680
n
R = 540
∑i =1
P i (R i - R ) 2 =62400

So Variance ( σ ) = 62400
2

Standard deviation:
We know,
S.D ( σ ) = σ2
= 62400
= 250
Coefficient of variance:
We know,
σ
C.V=
R
250
=
540
= 0.46

Summary of results
Techniques Project A Project B
Range 500 700
Mean absolute deviation (MAD) 140 204
Variance ( σ 2 ) 3200 62400
Standard deviation (SD) 1800 250
Coefficient of variance (C.V) 0.24 0.46

Comment: Project A is accepted because it is lower risky than project B (as per solution obtained)

How to make a comment:

Greater the value of each technique more risky the project is. Among the techniques Standard
deviation is more widely accepted technique of measuring risk. But along with S.D, Coefficient of variance
should be taken into consideration.

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Scheduling
Scheduling
Scheduling is a plan express in time frame. It is conversion of project action plan into an operating time
table.
According to Punmias and Khandelwal “Schedule is the determination of time required for execution of
each operation and the time order in which each operation is to be carried out to meet the project
objectives”.
Scheduling express future activities to be performed a sequence. Scheduling express start and end of
particular activity. The amount of materials and human force are required in different stages of project are
stated in scheduling.
For effective administration and controlling, scheduling is one of the most important matters of
management. When, what activities will be started, when it will be completed can be known from
scheduling. Project manager acquire money and material resources as per time table of scheduling. On the
basis of scheduling control mechanism is developed to control overall activities at different slack time of
scheduling.

Feature of scheduling
On the basis of above discussion feature of scheduling can be listed as under-
1. Activities involved in a project: Scheduling express different activities are to be performed in a
project.
2. Relation among the activities: Scheduling makes relationship among the activities involves in a
project.
3. Expected start and finished time of each activity: Scheduling defines each activity in terms of
start and finish time.
4. Duration of a project: Scheduling is used to calculate duration of a project. Critical path indicate
duration of project.
5. Resource requirement: Scheduling indicates resources are required in different activities at
different time.

Stages in scheduling
Dennis Lock has suggested seven specific steps for project scheduling are as under-

1. Determination of schedule objectives: At first stage the schedule maker has to determine specific
activities are to be performed to meet schedule objectives.
2. Division of project activities: The entire project has to make divide into some easily supervised and
controllable proportion.
3. Setting order of activities: Once the project activities are divided, than make a rationale order of
each activity involved.
4. Time planning: In this stage, allocate time for each activity involved.

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5. Determination of terminal time of project: In this stage the schedule maker will determine
possible duration of project on the basis of time allocate for different activities involved.
6. Coordinating resources: Available resources should have to coordinate with activities involved
other than revise scheduling.
7. Allocating responsibility: This is final stage of scheduling. Here scheduling maker has to allocate
responsibility of the respective individuals involved in project scheduling.

Project scheduling Methods:

There are two common methods of project scheduling-
1. Bar Chart and
2. Network Technique.
1. Bar Chart
History

This technique was originated by H.L Gant, a management specialist contemporary to F.W Taylor when the
world war-I was in situation. Bar Chart is mostly known as Gant Chart.

It is a symbolic technique of preparing project schedule. The project activities are presented here with the
help of parallel stick on time axis. The left terminal of the stick represents the starting time and the right
terminal represents the ending time. The length of the stick indicates the total time required to finish the
project.

Symbols used in Bar chart

Activities start

Activities end

Real growth of activities

Project condition at specific point of time (Status of project)

Example

Project Time of Activities (weekly)

activities 0 7 V 14 21 28

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Advantages of Bar Chart
Bar Chart has the following advantages:
• It represents the full mode symbol of the project. One can avail the entire concept about the project at
a glance through it.
• It requires easy effort to make it. No special training is required to compose it.
• It enables the presenter to show the actual growth of the project.
• The manpower planning required to complete the project activities is also shown in this chart.

Disadvantages of Bar Chart

Bar Chart is not free from disadvantages, some disadvantages are:
• Bar Chart is useless in showing the interrelationship of the project activities.
• It has also the size limitation that makes it useless in case of large scale project.
• It requires high time and cost to make it fit to changing situation.

2. Network Technique
Once a project is selected, the focus shifts to its implementation. This involves completion of numerous
activities (project components). The activities of a project have interrelationship arising from physical,
technical and other considerations. For proper planning, scheduling and control of activities of a project,
given their interrelationships and constraints on the availability of resources, Network Technique have been
found quite useful; includes two in special:
• CPM (Critical Path Method) and
• PERT (Performance Evaluation Review Technique).
It is noted that it was developed in America (1950 - 1960) to support the composition of proper planning and
scheduling for large scale critical and complex projects.

Advantages of network Technique

The network Technique contains the following objectives:
• It helps to show the mutual interrelationship among the projects activities.
• The schedule for the large scale project is possible to compose with the help of this.
• The critical events required to complete the project can be known by using the network diagram.
• The growth of the project can be traced in a specified time.
• Necessary changes can be made in any changed situation.
• The use of modern computer is possible.

Disadvantages of Network Technique

The network technique, however not free from certain limitations:
• The main limitation of Network Technique is complexity. The use and composition of it is
comparatively complex than of the Bar Chart.
• It doesn’t specify who accomplish and when the task does, though it indicates the interrelationship
among the activities.
• It is not fit to compose the schedule for all kinds of project.

The characteristics must a project have for application of network technique

There must have some characteristics of the project(s) that make it fit when using Network Technique which
are as follows:
• The project activities should have contained nature that make them easily identifiable and when the
identified activities will be completed, it would declare the termination of the project.
• The activities should be specific in nature that makes it possible to start, postpone and directing

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separately.
• The activities should be decorated in such manners that help them follow in a gradual order.

If the above natures are present in a project, it is very much fit to use Network Technique.
Symbols used in Network Technique
1. Arrow
2. Circle
3. Doted Arrow
4. Path

Types of Network Diagram

There are two types of network diagram, which are-
1. Arrow Diagram and
2. Node Diagram.
Arrow Diagram: Function of a project and their relationship are shown with the help of arrow ( → ). In this
diagram dummy (- - → ) is used for showing the relevant mutual relationship among the activities.
Node Diagram: The function of a project is presented with the help of cycle and the relationship is shown
by the arrow. This type of diagram does not have dummy function.

Project Preceding
activities activities
A

C A
Arrow diagram

D B

E B

F C

G D,E

Node Diagram

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Rules for constructing network:
Here are some rules for constructing network diagram that should be followed properly. The rules are
discussed in below-
• All works must have event after finishing work or in before. Each work should symbolize different
letter.
• In staring each work must be finished before work (if home).
• Every event must be trace different number. The numbering should be in this way as the back
number of arrow is smaller than the number of front of arrow.
• The length of arrow is not important; small work can be directed by big arrow and large work can be
directed by small arrow.
• To show the relation among the activities of project, dummy can be used if necessary.
• From the discussion above we get the assumption of network construction

CPM (Critical Path Method):

Critical path method was invented be J.E Kelly and M. R. Worker in 1957. this method is invented for the
planning of chemical processing plant and for controlling this method is for the presentation of various work
related to a project, relation for each other, performing time, critical path etc. through design or diagram.

Problem-1
Activity Immediate Time
predecessor ( In days)
activity
A - 6
B A 9
C A 8
D A 12
E B 11
F C,D 7
G E,F 12
H D 14
I G,H 9
Requirements
1. Draw a network diagram.
2. Indicate critical path.
3. If activity f requires 9 days instead of 7 days. Do you think that it would change the critical path?

Solution:
Requirement-1

Fig. Network Diagram

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Requirement-2
Alternative path of network diagram
Path-1. A-B-E-G-I = 6+9+11+12+9 = 47 days
Path-2. A-C-F-G-I = 6+8+7+12+9 = 42 days
Path-3. A-D-Dummy-F-G-I = 6+12+0+7+12+9 = 46 days
Path-4. A-D-H-I = 6+12+14+9 =41 days
We know, critical path is the largest path among alternative paths of network diagram.
Here path-1 (A-B-E-G-I) is critical path and length of this path is 47 days.

Requirement-3
If the activity f requires 9 days instead of 7 days than length of each alternative path will be-
Path-1. A-B-E-G-I = 6+9+11+12+9 = 47 days
Path-2. A-C-F-G-I = 6+8+9+12+9 = 44 days
Path-3. A-D-Dummy-F-G-I = 6+12+0+9+12+9 = 48 days
Path-4. A-D-H-I = 6+12+14+9 =41 days
From above calculation we see that, if F activity requires 9 days instead of 7 days than critical path is
changed. New critical path is path-3(A-D-Dummy-F-G-I) and its length is 48 days.

PERT (Performance Evaluation Review Technique)

Steps in developing and solving PERT Network:
Using PERT technique, the following steps are followed for scheduling of project:
1. Identify the activities need to be performed for project implementation.
2. The time required for completing each activity of the project is estimated and noted on network.
3. Time is estimated for each activity of the project. In ease of pert three type of time estimation is
needed for each activity. Three types of time estimation are-
I. Optimistic time: Logical time estimation of project completion. In case of optimistic time it
presumes that everything will be done normally. Optimistic time is donated by “a”
II. Pessimistic time: The delay estimated time for completing a project. Pessimistic time is
estimated with due consideration of adverse situation and is denoted by “b”
III. Most likely time: Most possible time of completing a project. Most likely time is denoted by
“m” . Time dimension of most likely time is middle ground of optimistic and pessimistic
time.
4. Expected time account (TE): Expected time is to count with the help of the following formula

a+4m+b
Expected time =
6
The weight of most likely time is given four times more than optimistic or pessimistic time.
Expected time (TE), in really, in the overage of three time estimation. The formula of determining
expected time is based on the “Beta Distribution”.

5. Calculation of variance of activities of alternative path:

2
b−a
Formula σ = 2
 Where, σ 2 =variance
 6 
b = pessimistic time
a=optimistic time

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6. Determination of critical path:
Critical path is the largest path of alternative paths of network diagram.

7. Probability of completing project:

Where, D= due date
D − TE
Formula Z= TE= expected time
∑σ 2
cp

∑σ
2
cp = Variance of critical path

Table value of Z is the probability of completing a project.

Problem-2
Activity Optimistic time (A) Most Likely Time(m) Pessimistic Time(b) Immediate
(in days) (in days) (in days) predecessor
activity
A 10 22 22 -
B 20 20 20 -
C 4 10 16 -
D 2 14 32 A
E 8 8 20 B,C
F 8 14 20 B,C
G 4 4 4 B,C
H 2 12 16 C
I 6 16 38 G,H
J 2 8 14 D,E
Requirements
1. Draw a network diagram.
2. Calculate expected time.
3. Indicate critical path.
4. What is the variance of critical path?
5. What is the probability of completing the project within 50 days?

Solution:
Requirement-1

Dummy

Fig. Network Diagram

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Requirement-2
Calculation of expected time (TE)
a + 4m + b
We know, expected time (TE) = where, a= Optimistic time
6
b= Pessimistic time and
m= Most likely time

10 + 22 X 4 + 22 8 + 14 X 4 + 20
TE A = =20 TE F = =14
6 6
20 + 20 X 4 + 20 4 + 4X 4 + 4
TE B = =20 TE G = =04
6 6
4 + 10 X 4 + 16 2 + 12 X 4 + 16
TE C = =10 TE H = =11
6 6
2 + 15 X 4 + 32 6 + 16 X 4 + 38
TE D = =15 TE I = =18
6 6
8 + 8 X 4 + 20 2 + 8X 4 + 4
TE E = =10 TE J = =08
6 6

Alternative path and length of alternative path are as follows:

Path-1. A-D-J=20+15+8 = 43 days Path-5. C-H-I=10+11+18 = 39 days
Path-2. E-B-J=20+10+8 = 38 days Path-6. C-Dummy-E-J=10+0+10+8 = 28 days
Path-3. B-F=20+14 = 34 days Path-7. C-Dummy-F=10+0+14 = 24 days
Path-4. B-G-I=20+4+18 = 42 days Path-8. C-Dummy-G-I=10+0+4+18 = 32 days

Requirement-3
We know, critical path is the largest path among alternative paths of network diagram. Network diagram has
eight alternative paths. Among these paths path-1 (A-D-J) is the highest length of alternative path. So path
A-D-J is critical path and its duration is 43 days and duration of project is 43 days.

Requirement-4
Variance of critical path
2
b−a
We know, variance ( σ ) =  2
 where, b = pessimistic time and a=optimistic time
 6 
Alternative path comprises activities A, D and J. So we have to calculate variance of activities A,D and J.

σ 2 A =  22 − 10  4
 6 

σ 2 D =  32 − 2  25
 6 

σ 2 J =  14 − 2  4
 6 

∑σ
2
So variance of critical path is cp = σ 2 A + σ 2 D+ σ 2 J = 4+25+4=33

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Requirement-5
Probability of completing project within 50 days.
At first we have to calculate value of Z before arriving probability of completing project.
Formula for calculating Z is-
D − TE 50 − 43 7 Where, D=Due date;
Z= = = =1.22 ≅ 1.2 TE=Expected time of project duration;
∑ σ CP
2
33 5.745
∑σ cp=Total variances of activities comprising critical path
2

From the chart (page 85), when value of Z is 1.2 than probability is 88.49%. So probability of completing
project within 50 days is 88.49 %( time estimation is reliable).

Comparison between PERT and CPM:

PERT CPM
It is an event oriented approach It is an activity oriented approach.
PERT is established on possibility theory and The possibility theory is not used in CPM. Time
three times estimation is used for each activity. estimation is used for each activity.

There is no opportunity for impeding the project But, in CPM, the relation time and expenditure
activities is PERT technique. In it, the relation project and there is an opportunity for impeding the
between of time and expenditure is not seen. project activities.

PERT technique is used more in that project in CPM is used in that project in where the risk and
where risk and time related uncertainty is more. time related uncertainty is less and stagnation
Generally, the use of PERT technique is seen in technique are used. The use of CPM is seen more in
research. constructive activities.
It is time based It is cost based
It averages time It does not average time
It is probabilistic model It is a deterministic model.

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MONITORING
Monitoring
Monitoring means watching and checking and checking something over a period of time. In case of project,
monitoring means watching the project progress to ensure whether project activities are going according to
plan or not.
It provides a feedback through which necessary adjustment are made in the work plan. So monitoring is
defined as a management functions to check performance against pre-determined plans.
According to B.B Goel – “Monitoring involves watching the progress against time, resources and
performance, schedules during the execution of the project and identifying lagging areas requiring timely
attention and action”.

So, monitoring means periodic checking of progress in order to ensure timely completion of the project. On
the other hand, M. Thgagarajan’s view “Monitoring means periodic checking of progress of works against
the targets laid down in order to ensure timely completion of the project’’.

So, monitoring is the process of observation of the activities of project that is advancing according to
planning, schedules, budget and fixed standard.

So monitoring is considered as an important task of project management. It has the less possibility to
achieve the project goal, if it is not monitored the activities of project during the period of implementation.
Monitoring is the coordination of activities of formulating recommendation for solving problem regarding
supervision, result orientation involved in implementing the project.

Scope of monitoring
Monitoring is the periodic checking of the progress against target. It is very important task of project. As it
helps to complete the project the timely, scope of monitoring depends on the purpose and nature of
monitoring.

1. Physical Development: In case of constriction project, bridge, building, dams, machinery,

installation then main task of monitoring is to observe physical development and helps project to
complete within specified time and allocated budget.

2. Qualitative & Quantitative: If the project target is expressed in terms of quality and quantity then
the task of monitoring is to inspect project advancement based on standard & target.

3. X-Type: In case of X-type projects (productive & revenue) earning. The monitor observes whether
project can obtain production target as not as well as whether it carry expected revenues or not.

4. Capital Assets: Another task including monitoring is to look after whether capital assets used in
project mentioned or not.

5. Investment in one sector: Inspect whether or not the capital invested in one sector has been used in
another sector.

Benefits of Monitoring
There are some benefits of monitoring these are as follows:
1. Determine those projects are implementing according to goal or not.
2. Identify problem and recommendation of solution.
3. Step of implementation can be determined.
4. It is possible to provide information to concerned authority to observing the condition of project
implementation.

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5. It is possible to provide recommendation to the concerned authority.

Level of monitoring
Level of monitoring consists of project level, agency level, ministry level and national level these are
explained in below.

1. Project level: In this project level stage the director of the project monitors all the functions of a
project.

2. Agency level: In this level the government distributes in two departments.

i. Planning department
ii. Implementation department
The implementation department monitors all the functions.

3. Ministry level: We know that the government has several ministries and each ministry have some
specific project. To run these projects they have to prepare different planning cells. These planning
cells can monitor the all functions.

4. National level: There are some national projects for the development of a country to monitor these
projects, the government has different departments. For example- Implementation Monitoring and
evaluation Department (IMED).

Methods of monitoring
Monitoring is the periodic checking of the progress against target. It is very important task of project as it
helps to complete the project timely. However, different methods of monitoring are as follows:

1. Project status report

2. Project schedule chart
3. Photographs of physical progress
4. Project inspection

1. Project status report: It is a short report where present condition is stated at a fixed of a project.
Title project number of estimated cost, project start; scheduling etc is included in that report. Color
code is used, here color code represent the weak points of project where management is badly
needed.

2. Project schedule chart: In this method schedule is prepared to count time and that is followed
properly. It is totally time based. It is intensive chart of important directing activities. It also indicates
feasible time of ending projects. Elaboration work schedule is prepared of project activities on the
basis of this chart.

3. Project financial status report: It is one of the methods of important reports. Financial position of
project whether it is going according to budget and time. It time is needed more from a fixed time
that badly affect to the project. So these aspects are known from this method.

4. Photographs of physical progress: Photographs are used as a method for observing the
advancement of construction project. Here, picture description is shown of physical progress. It is
possible whether advancement of project is satisfactory or not according to planning cost and time.

5. Project inspection: In this method, project authority inspects the advancement of project directly
without depending on supplied report. After inspection of project by the inspector groups, a report is
submitted at fixed rules or column to the concern authority.

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Impediment of successful monitoring (obstacles)

The success of monitoring may be hampered for some causes those are the impediment of the success of
monitoring. Those may be explained by the following points:
1. Inspection.
2. Practical
3. Coordination
4. Technical knowledge

1. Inspection: The success of monitoring sometimes may be hampered for the lack of proper
inspection. Groups not individual perform the inspection. Thus it discloses an approximate result.

2. Practical: The overall monitoring process depends on some projection ideas rather than practical.
This fails to explain the cause and effect scientifically.

3. Coordination: The success of monitoring may be hampered for lack of proper coordination. A
sound effective coordination is required for a successful monitoring.

4. Technical knowledge: Sometimes the persons related to monitoring may have not adequate
technical knowledge of monitoring. Most of them have the theoretical knowledge. And we know the
theoretical knowledge is helpful but not so dependable and useful without proper technical
knowledge.

Since the success of a project in somewhat depends on its proper monitoring so monitoring is much more
important. In order to offer a successful monitoring, the suitable method should be chosen and its
impediment should be overcome. So in that perspective the concern authority should conduct or ensure
proper monitoring.

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Project Implementation
Project implementation
Project implementation means execution of project plan as per project schedule. Project planning determines
project activities. What will be cost of project, amount of resources are required and number of workforces
are required to complete a project. Project schedule determines series of activities to be carried out for
completing a project. Project implementation means implementation of project activities as per schedule of
project planning.

Main objectives of effective implementation of project are completion of project with in time allocate and
within budget allocate with due conformation to requirement.

Stages of project implementation

When the project is applied in practical field then it is called project implementation. It is the last step of
project formulation. Project implementation is started after planning forming evaluating and scheduling of a
project and end after termination of project.

01. Initiating the project:

Initiating is the first step of a project. It has similarities with primary stage from different aspect of project
implementation. The main task of this stage is selecting project manager and getting approval of planning,
techniques, budgets, and schedule of the project from the appropriate authority. Required contract have to
sign for the financing and technical assistance with other party, if it is necessary.

Selecting a competent project manager is very much significant matter. A project manager should have
many qualities for the successful implementation of project. Such as consciousness about the environment of
project and parent organization, mentality to accept the modern management concept, adaptation with the
changing environment of the project, effective communication and capability to motivate others etc. That is
why some organization likes to employ an experienced employee of parent organization as a project
manager.

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Pabna Science and Technology University [email protected]
 PROJECT MANAGEMENT PSTU

02. Clarifying Authority, Responsibility and Relationship:

In these case organizational identifications of the concerning people are to be interpreted. Who are engaged
for doing the specific work, the amount of power or responsibility, the relations with each others are
described in this stage clearly. For avoiding the misunderstanding and conflict among to the concerned
people of the project about their authority and responsibility, there need to be clear explanation about the
following aspects:
a) Who have power of changing schedule of the project?
b) Under whose person or persons have the decision power for using alternative assets instead of
predetermined assets of the project?
c) Who can make the end of the project before completing it?
d) Who have the authority on the “CONTINGENCY FUND”?
e) Who can change the objectives of the project?
f) Who are engaged for collecting the required assets or information?
g) What number or numbers the term paper will be needed and on whom it distributed?

03. Specifying and scheduling the work:

In this stage, project planning is details analysis. Each project identifies specifically and determines
relationships among functions. To explain details under this steps who, when, where, how do the job and
require how time for the job etc. Total works of project classify primary and secondary divisions. As a result
it is easily to guess time duration for each work and quantity of assets. Under project implementation stage
perform some other important functions which are describe below-
1. Prepare final technological parameter.
2. Select instruments.
3. Prepare layouts.
4. Identify infrastructure.
5. Acceptance of tender and give order.
6. Collect supplies and establish machinery.
7. Manpower training etc.

04. Obtaining resources:

In this stage, necessary resource is collected from different sources. At any given time, the firm may have a
fixed level of various resources available for its projects. The fixed resources might include labor-hours of
various types of special professional or technical services. Machine-hours of various types machinery or
instrumentation hours of computing time specialized locations and scare resources needed for accomplishing
projects tasks.
Resources using in a project can be divided into there type. These are
a) Personnel
b) Finance
c) Materials & Equipments

Above types are discussed is below

A) Personnel: Manpower like personnel is important element for any organization. Sound and
effective use of other elements depend on appointed personnel’s skill honesty and devotion in organization
most of success of the project depends on selection of appropriate personnel and appoint them in the right
place. It is the project manager's responsibility to ensure that the required manpower, in the required
amounts, is available when and where they are needed. Because deficit of manpower hamper the project
progress and excess manpower may increase the project cost.

Md. Hasebur Rahman, Lecturer, Department of Business Administration Page 2

Pabna Science and Technology University [email protected]
 PROJECT MANAGEMENT PSTU
The project manager must be aware of the availabilities and flows of usage for each input resource
throughout the life of the project. On account of manpower cost of a project can be divided into the
categories.
(1) Direct manpower cost
(2)Placement cost
Those which many are to pay for salary wage to appointed personnel to be considered as direct
manpower cost. Otherwise those which money is to pay for to ensure other opportunities without salary or
wage to be considered placement cost. We must refer to individual types of labor specific facilities, kinds of
materials individual pieces of equipment and other discrete inputs that are relevant to an individual project
but are limited in availability.

b) Finance: Main sources of supply of finance in Govt. owned Project are-

1. Allocated money to development sector in National Budget.
2. Obtaining loan & assistance from different countries
3. Collected loan from different international institution as World Bank, international
development institution international finance corporation, international monetary
fund, Asian Development Bank and Islamic Development Bank.

(c) Materials and Equipments: It has been considered that a single world unit or several
projects. The requirements of each materials and equipment type are simply listed as a function of time
period. It is an excellent guide. For early, rough project planning. It is also a first step in attempting to
reduce excessive demands or certain resources, regardless of the specific technique used to reduce the
demands. In this stage technique is used to reduce the demands. In these stage materials equipments is to
collect on the basis of schedule. So the project must be finished by a certain time, using as little resource and
without exceeding some specific level of resource usage as possible.

05. Establishing control system

In this stage the following steps will be taken
i. Determinate the target.
ii. Measurement of actual performance.
iii. Identifying deviation.
iv. Taking amendment step.
v. Taking effective provision
vi. Establish sophisticate control system.

06. Directing and controlling

Direction is given to the employees after establishing the controlling system in a project. It means that order
advise and indications given for the execution that when and how will be performed. It is mentioned before
that the internal environment of a project is different than other organization’s environment. The direction
should be given in such a way so that the employees spontaneously do their job and do not feel boring their
job. In the case of direction the project manager have to consider mental and humanistic side of employees.
Project manager have to take care whether the execution is going on in well manner or not. He has to take
corrective action if there is any difference between what is going on and what should be done.

Impediments to project implementation

1. Improper project planning.
2. Lack of planner experience skill
3. Insufficient right information.
4. Delay receives permission from concerned authority.

Md. Hasebur Rahman, Lecturer, Department of Business Administration Page 3

Pabna Science and Technology University [email protected]
 PROJECT MANAGEMENT PSTU
5. Political unrest
6. Appointment of unskilled worker.
7. Improper distribution of work and responsibility
8. Delay receiving foreign finance & technological help.
9. More Transfer and turnover.
10. Deficit manpower
11. Excessive manpower
12. Change of specific agency.
13. Misunderstanding with one another
14. Lack of effective technique.
15. Luck of sufficient raw materials.
16. Lack of financial resources.
17. Change of Govt. rules and regulation
18. Fault accounting system.
19. Less monitoring
20. Lack of efficient direction & controlling.
21. Different accident during project implementation.
22. Reluctance use of modern management techniques.
23. Lack of effective communication
24. More & more change of design drawing
25. Natural disaster

Guidelines for effective implementation of projects:

The advancement of a project is hindered due to different controllable and uncontrollable reasons. As a
result it becomes really tough to complete the project within predetermined budget and time. The following
guidelines are to be followed to make effective implementation of projects:-
1. Inadequacy of resources is a great problem in implementing the project whether it is private or
government.
2. The time schedule must be well-designed and it must be maintained strictly
3. If necessary, the prevailing working process can be changed somewhat with remaining the same time
schedule. Such as decentralization of power and delegation of authority etc.
4. Prior to the implementation of the project a comprehensive analysis relating the location of project,
necessary raw-materials, technology must be conducted.
5. There should be an arrangement of modern system in order to collect process and supply information
regarding the advancement of project implementation.
6. Making such a situation in where the assigned persons willingly attempt to achieve the goal of
project.
7. It is not reasonable to take a contract of extending the project before its entire completion.
8. In case of implementing government project mutual understanding and co-operation are essential
among the concerned authorities (Ministry/Department/Agency)
9. Regular monitoring and evaluating are essential in order to check the status of project and if there is
any deviation, necessary steps should be taken.

If the above mentioned instructions are followed properly, the feasibility of project implementation will
definitely increase.

Md. Hasebur Rahman, Lecturer, Department of Business Administration Page 4

Pabna Science and Technology University [email protected]