Role of Project Auditor: Line of Balance:

The project auditor is an expert in measuring, confirming, investigating and

reporting the status of a project with a view to reducing the uncertainties that encompass the Line-of–Balance (LOB) method is a project planning and control method which in
project. He should not arrogate to himself the role of a consultant or technical expert. projects with repetitive nature has proved to be more efficient than the network techniques like
The roles of a project auditor are as follows: CPM and Petri-nets. Much of the reason for superiority of LOB to other planning methods is because
it considers an additional dimension (unit of production) in the representation of the activities.
1. Gain the support and cooperation of the users and professionals
2. Check project management tools for proper usage Features of line of balance:
3. Perform project reviews at the end of each phase
4. Assess readiness for implementation This technique use for the actual progress in comparison for schedule objective.
5. Present findings to management Job scheduling
6. Maintain independence to remain objective Construction management
7. Review pre and post implementation process Resources allocation
Cost control
Gantt chart: Improving work efficiency
A Gantt chart is a horizontal bar chart developed as a production control tool in
1917 by Henry L. Gantt, an American engineer and social scientist. Frequently used in project Type of LOB chart:
management, a Gantt chart provides a graphical illustration of a schedule that helps to plan,
coordinate, and track specific tasks in a project. Gantt charts illustrate the start and finish dates of
the terminal elements and summary elements of a project. Terminal elements and summary
elements comprise the work breakdown structure of the project. LOB CHART
Gantt Charts are useful tools for analyzing and planning more complex projects.
They:

• Help you to plan out the tasks that need to be completed ACTIVITY
• Give you a basis for scheduling when these tasks will be carried out SETBACK
SCHEDULE
CHART
• Allow you to plan the allocation of resources needed to complete the project, and CHART
• Help you to work out the critical path for a project where you must complete it by a
particular date.
When a project is under way, Gantt Charts help you to monitor whether the project is on schedule. If
it is not, it allows you to pinpoint the remedial action necessary to put it back on schedule.

Difference between PART and CPM:

CPM PERT
CPM is activity oriented PERT is event oriented
CPM is a deterministic model. only single PERT however is a probabilistic Model
Estimating the duration for completion of
estimate of duration
CPM place dual emphasis on time and cost and PERT is primarily concerned with time. This tool
evaluate the tradeoff between project is basically a tool for planning
Cost and project time
CPM is best suited for routine and those PERT is more suitable for R&D related
projects where the project is performed for
projects where time and cost estimates can
the first time and the estimate of duration be
accurately calculated
CPM is not analyzed statistically PERT is analyzed statistically
CPM is designed for respective projects PERT is suitable for non- respective projects

Return on investment: VE work:

VE follows a structured thought process to evaluate options. Every VE session goes through
Return on investment - or ROI - is the rate of revenues received for every dollar invested in a number of steps:
an item or activity. In a marketing sense, knowing the ROI of your advertising and marketing 1. Gather information
campaigns helps you to identify which techniques are most effective in generating income for your 2. Measure Performance
3. Analyze Functions
business.
4. Generate Ideas
Calculation of ROI: 5. Evaluate and Rank Ideas
Here are two formulas for calculating financial ROI for an IT project or any other investment. 6. Develop and Expand Ideas
An example of how each formula is used is provided below. 7. Present Ideas
Inspection:
The single word term inspection refers to one of the most critical elements of the entire
process that surrounds the execution and successful completion of a given project. The term
inspection refers specifically to the act in which the project management team, project management
team leader, or other interested and significant parties take the effort to go review the entirety of
the project in meticulous detail to determine whether or not the project meets certain
predetermined requirements for completion. Of particular concern is a careful review of all
individual components, activities, products, and results and services that have been completed as
part of the project management process. In some cases, an independent third party will conduct an
inspection of a number of the final deliverables as it allows an independent arbiter to weigh in from
a fresh perspective at a time when the project management team may be unable to objectively
review.
The simple ROI calculation is commonly used for short-term (e.g., less than one
year) investments and benefits. It is uncomplicated and most people can understand it. For example, Total Quality Management:
say $1,000 is invested and it earns $1,250. This is a gain of $250. Divide the $250 by $1,000 (the Total Quality Management (TQM) is an approach that seeks to improve quality and
amount invested) gives an ROI of 25%. performance which will meet or exceed customer expectations. This can be achieved by integrating
all quality-related functions and processes throughout the company. TQM looks at the overall quality
Value engineering: measures used by a company including managing quality design and development, quality control
Value engineering (VE) is a systematic method to improve the "value" of goods or products and maintenance, quality improvement, and quality assurance. TQM takes into account all quality
and services by using an examination of function. Value, as defined, is the ratio of function to cost. measures taken at all levels and involving all company employees.
Value can therefore be increased by either improving the function or reducing the cost. It is a
primary tenet of value engineering that basic functions be preserved and not be reduced as a The Basic Concept of TQM:
consequence of pursuing value improvements. • A committed and involved management to provide long-term top-to-bottom
Value Engineering (VE), also known as Value Analysis, is a systematic and function-based organizational support.
approach to improving the value of products, projects, or processes. • An unwavering focuses on the customer, both internally and externally.
VE involves a team of people following a structured process. The process helps team • Effective involvement and utilization of the entire work force.
members communicate across boundaries, understand different perspectives, innovate, and • Continuous improvement of the business and production process.
analyze. • Treating suppliers as partners.
• Establish performance measures for the processes.
The benefits of VE Principles of TQM
Value Engineering is a tool that will improve your ability to manage projects, solve problems,  Constancy of purpose: short range and long range objectives aligned
innovate, and communicate.  Identify the customer(s); Customer orientation
A VE program in your organization will provide your staff with a definitive tool to improve  Identification of internal and external customers
value in any product, project or process.  Continuous improvement
Cost savings, risk reduction, schedule improvements, improved designs and better  Workflow as customer transactions
collaboration have been the outcomes of some of MTO's VE studies.  Empower front-line worker as leader
 Quality is everybody’s business
Scope of project audit: Life Cycle Costing:
The scopes of post audit are: The Life Cycle Cost (LCC) of an asset is defined as " the total cost throughout its life including
1. Current status planning, design, acquisition and support costs and any other costs directly attributable to owning or
2. Forecast the future status using the asset".
3. Highlight critical management issues Life Cycle Costing adds all the costs of alternatives over their life period and enables an
4. Point out exposure to risk and potential losses. evaluation on a common basis for the period of interest (usually using discounted costs). This
1. Current status: enables decisions on acquisition, maintenance, refurbishment or disposal to be made in the light of
Current status is the actual status at the time of the audit as against the full cost implications.
commitments of the constructors of the project management group and the The Life Cycle Costing process:
expectations of the management. The project audit report on current status
covers aspects of project cost performance, project’s performance in
relation to schedule, progress performance quality performance etc.
2. Forecast the future status:
In the lite of progress to date, the forecast of the project status for future
time periods or milestones that to be made and compared with contract or
work commitments and management expectations. These reflect the project
auditor’s considered conclusions assuming the observed trends persist.
3. Highlight critical management issues:
Aspects of particular significance that require management attention should
be identified and reported. Observed and existing weaknesses or
deficiencies that are bound to undermine the progress and outcome of the
project, unless prompt and effective managerial actions are taken, come for
special mention. The first four stages comprise the Life Cost Planning phase with the last two stages
4. Point out exposure to risk and potential losses: incorporating the Life Cost Analysis phase. The six stages are:
Some of the possible occurrences of events that have some probability of • Stage 1: Plan LCC Analysis
occurrence, have to be interpreted in terms of expected risks or losses and • Stage 2: Select/Develop LCC Model
their implementations in financial terms; and also in terms of adverse • Stage 3: Apply LCC Model
effects on the contractor or customers or other interested parties. • Stage 4: Document and Review LCC Results
• Stage 5: Prepare Life Cost Analysis
Objectives of project audit: • Stage 6: Implement and Monitor Life Cost Analysis
The objectives of project audit are: Project management information system:
I. Creating awareness among the project staff of the types and magnitude of PMIS not a single project can be implemented without effective project information system.
the problems that are likely to be encountered in completing the project No one can manage a complex entity, such as a project. The secret of effective project management,
and producing quality products, in planned volume and at competitive costs. planning & control is project the secret of effective project management planning & control is an
II. Providing a clear picture, from time to time, of the actual status of the integrated project management information system based on following
project. 1. the effective use of a structured approach to project is organization & its systems
III. Prompt identification of the factors that might cause product quantity 2. the use of earned value approach to performance analysis
problems or lead to time and cost overruns. 3. the use of modern project management computer software & database management
IV. Timely spotting of a variety of generic problems that are associated with system
execution of projects. The following are factor of PMIS:
V. Enabling the creation of good information base for a proper estimation and 1. The modern metrology of project control is more established.
costing of the project. 2. Computer hardware & software is cheaper more powerful & easier to use.
VI. Assisting in the establishment of appropriate standards and systems and 3. Communication between computer & software is much easier.
recommending suitable work techniques. 4. Experience in the design & implementation of such systems is more widespread & help can
VII. Identifying the specific training needs with reference to the project task. be obtained from package suppliers & consultants often using template systems.
VIII. Formalizing the experience and expertise in project management in order to 5. Database management information packages are widely available used by many firms &
be able to provide consultancy services to other enterprises. easy to use with most project management software packages designed to include or
interface with them.

Project appraisal method: o Construction of building

o Procurement of plant and machinery
Project appraisal is a generic term that refers to the process of assessing, in a structured way, the o Erection of plant and machinery
case for proceeding with a project or proposal. In short, project appraisal is the effort of calculating a o Trial production
project's viability. o Commercial production
The methods of project appraisal are: • Raw materials required
Technical Appraisal • Man power required
• Whether pre-requisites for the success of project considered? o Production executives
• Good choices with regard to location, size, process, machines etc. o Marketing executives
Economic Appraisal o Finance and accounting executives
• Social cost -benefit analysis o General management executives
• Direct economic benefits and costs in terms of shadow prices o Supervisory staff
• Impact of project on distribution of income in society o Skilled workers
• Impact on level of savings and investments in society o Semi- skilled workers
• Impact on fulfillment of national goals :- o Administrative staff
(1) Self-sufficiency (2) Employment and (3) Social order o Unskilled workers
Ecological Appraisal o others
• Impact of project on quality of :- Air, Water, Noise, Vegetation, Human life • location advantages of the proposed location
• Major projects ,such as these, cause environmental damage • infrastructural facilities

Power plants o transport facilities
• Irrigation schemes o electric power
• Industries like bulk drugs, chemicals and leather processing. o water
• Likely damage & the cost of restoration • Working capital assessment
Financial Appraisal • Details of fixed assets required for the project
• Whether the project is financially viable? o Land
o Servicing debt o Land development
o Meeting return expectations o Building
o Plant and machinery
Different section of Project Report: • Project cost
A project report is a written report explaining the business plan of the proposed o Land
business venture. o Land development
A project report is written as follows: o Building
• Production plan o Plant and machinery
o Products proposed to be manufactured o Tools, spares, accessories, testing equipment etc.
o Manufacturing process o Transportation and erection charges
o Plant capacity • Means of financing

Licensed capacity o Promoter’s contribution

Proposed capacity o Term loan
o Margin money assistance, if any
• Marketing plan o From developmental agencies
o Major customers o Subsidy
o Region/ area where the product will be sold o Unsecured loans
o Major players already in the field o Other sources, if any
o Competitive advantages enjoyed by the proposed venture • Projected profitability statement
o Sales channels & methods • Projected cash flow statement
o Market tie-up already made, if any • Financial parameters
o Promoter’s contribution
• About the promoters of the project o Debt service coverage ratio
• Schedule of implementation o Break-even point
o Acquisition of land o Return on investment
o Land development
Factors to be taken into consideration while calculating project cost :

Correct estimation of capital cost of project is foundation over which the edifice financial
appraisal stands resources for the project are tied up after the project cost is estimated

The factors to be taken into consideration while calculating project cost are:

1. Land
2. Land development
3. Buildings
4. Plant & machinery
• Indigenous
• imported
5. Electrical
6. Transport & erection charges
7. Know-how / consultancy fees
8. Miscellaneous & preoperative expenses
9. Provision for contingencies
• on buildings
• on plant and machinery
• on other fixed asset
10. Margin money for work capital