Module 1

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

Project Management:

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Dept. of Mechanical Engineering, MMEC
*Responsibilities of project Manager:

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Characteristics of a Project
• Projects are Bound by Time
As we have already seen, projects are temporary in nature. It means that all projects have
defined start and end times within which the project concept is birthed, planned, executed,
and delivered. Once project objectives have been met, the project comes to a close.
• Projects are Purposeful
The Project Management Institute (PMI) defines a project as a pool of human and non-human
resources in a temporary undertaking to achieve a specific purpose.
Projects are initiated to accomplish specific objectives against the available resources. After
the project’s purpose has been achieved, a project will be brought to a close.
• Projects Progress Through a Life Cycle to Accomplish Goals
The project life cycle represents the different phases that a project goes through from start to
completion. All projects typically go through four phases which are:
• Initiation
• Planning
• Implementation
• Closure
• Projects are Unique
Projects are temporary and undertaken to create a unique project service or result. Projects
are unique in purpose, goals, location, structure, resources, activities, and other project
variables to make each project different from the others.

Project Performance Dimensions

Three major dimensions that define the project performance are scope, time, and resource.
These parameters are interrelated and interactive. The relationship generally represented as an
equilateral triangle. The relationship is shown in figure 1.

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 It is evident that any change in any one of dimensions would affect the other. For example, if
the scope is enlarged, project would require more time for completion and the cost would also
go up. If time is reduced the scope and cost would also be required to be reduced. Similarly
any change in cost would be reflected in scope and time. Successful completion of the project
would require accomplishment of specified goals within scheduled time and budget. In recent
years a fourth dimension, stakeholder satisfaction, is added to the project. However, the other
school of management argues that this dimension is an inherent part of the scope of the project
that defines the specifications to which the project is required to be implemented. Thus the
performance of a project is measured by the degree to which these three parameters (scope,
time and cost) are achieved.
Mathematically Performance = f(Scope, Cost, Time)
In management literature, this equilateral triangle is also referred as the “Quality triangle” of
the project.
Project Life Cycle
Project Life Cycle Every project, from conception to completion, passes through various
phases of a life cycle synonym to life cycle of living beings. There is no universal consensus
on the number of phases in a project cycle. An understanding of the life cycle is important to
successful completion of the project as it facilitates to understand the logical sequence of events
in the continuum of progress from start to finish. Typical project consists of four phases-
Conceptualization, Planning, Execution and Termination. Each phase is marked by one or more
deliverables such as Concept note, Feasibility report, Implementation Plan, HRD plan,
Resource allocation plan, Evaluation report etc.
Conceptualization Phase

Conception phase, starting with the seed of an idea, it covers identification of the product /
service, Pre-feasibility, Feasibility studies and Appraisal and Approval. The project idea is
conceptualized with initial considerations of all possible alternatives for achieving the project
objectives. As the idea becomes established a proposal is developed setting out rationale,
method, estimated costs, benefits and other details for appraisal of the stakeholders. After
reaching a broad consensus on the proposal the feasibility dimensions are analyzed in detail.
Planning Phase
In this phase the project structure is planned based on project appraisal and approvals. Detailed
plans for activity, finance, and resources are developed and integrated to the quality parameters.
In the process major tasks need to be performed in this phase are
• Identification of activities and their sequencing
• Time frame for execution
• Estimation and budgeting
• Staffing
A Detailed Project Report (DPR) specifying various aspects of the project is finalized to
facilitate execution in this phase.

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 Execution Phase
This phase of the project witnesses the concentrated activity where the plans are put into
operation. Each activity is monitored, controlled and coordinated to achieve project
objectives. Important activities in this phase are
• Communicating with stakeholders
• Reviewing progress
• Monitoring cost and time
• Controlling quality
• Managing changes

Termination Phase
This phase marks the completion of the project wherein the agreed deliverables are installed
and project is put in to operation with arrangements for follow-up and evaluation.

Life Cycle path

The life cycle of a project from start to completion follows either a “S” shaped path or a “J “
shaped path (Figure 2 and 3). In “S” shape path the progress is slow at the starting and terminal
phase and is fast in the implementation phase. For example, implementation of watershed
project. At the beginning detailed sectoral planning and coordination among various
implementing agencies etc. makes progress slow and similarly towards termination, creating
institutional arrangement for transfer and maintenance of assets to the stakeholders progresses
slowly.

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In “J” type cycle path the progress in beginning is slow and as the time moves on the progress
of the project improves at fast rate. Example, in a developing an energy plantation. In this the
land preparation progresses slowly and as soon as the land and seedling are transplantation is
under taken. This is shown in figure 3.

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Project Classification
There is no standard classification of the projects.
However considering project goals, these can be classified into two broad groups,
1. Industrial and 2. Developmental.
Each of these groups can be further classified considering nature of work (repetitive, non-
repetitive), completion time (long term, shot term etc), cost (large, small, etc.), level of risk
(high, low, no-risk), mode of operation ( build, build-operate-transfer etc).
Industrial projects also referred as commercial projects, which are undertaken to provide goods
or services for meeting the growing needs of the customers and providing attractive returns to
the investors/stake holders. Following the background, these projects are further grouped into
two categories i.e., demand based and resource / supply based.
The demand based projects are designed to satisfy the customers’ felt as well the latent needs
such as complex fertilizers, agro-processing infrastructure etc. The resource/ supply based
projects are those which take advantage of the available resources like land, water, agricultural
produce, raw material, minerals and even human resource. Projects triggered by successful
R&D are also considered as supply based. Examples of resource based projects include food
product units, metallurgical industries, oil refineries etc. Examples of projects based on human
resource (skilled) availability include projects in IT sector, Clinical Research projects in bio
services and others.
Development projects are undertaken to facilitate the promotion and acceleration of overall
economic development. These projects act as catalysts for economic development providing a
cascading effect. Development projects cover sectors like irrigation, agriculture, infrastructure
health and education. The essential differences between Industrial projects and Developmental
project are summarised in the following table 1.

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Dept. of Mechanical Engineering, MMEC
Understanding Project Prioritization and Selection
Project prioritization in project management is all about evaluating and ranking projects
according to specific criteria that establish the degree of significance and importance for
each. It is a coordination process, which entails harmonizing the overall goals of an
organization and its project objectives whereby materials, time, money, space, and skills are
efficiently distributed where they are needed. Here are the steps to master project
prioritization:
• Define Criteria: Assess strategic fit, return on investment, availability of resources,
and project complexity. Come up with a scorecard that provides an objective
assessment of every project’s success based on the predefined parameters.
• Stakeholder Involvement: Involve major actors and get different views. To have a
holistic perspective, consider input from various departments.
• Risk Assessment: Identify probable or potential risks for every project. Look into
how your business is going to be affected by outside happenings and market trends, as
well as technology.
• Weighted Scoring Model: Determine the weight of each criterion according to its
significance. Determine the overall score for every project using a weighted scoring
model.
• Decision Making: Based on scored data on projects, prioritize the projects. Analyze
trade-offs and possible synergies across projects.

Why is Project Prioritization Important?

Project prioritization is crucial for several reasons:
• Resource Optimization: Prioritization does placing the first demands on limited
resources such as manpower, financial funds, and time so that no project will be left
without full efficiency.
• Strategic Alignment: It aligns the projects with the strategic organizational goals
which gives value to the organizational vision and mission. This is a way of
improving the organization’s performance towards the set goals.
• Risk Mitigation: Project management ensures the sequencing of the project by the
level of risk as the organizations can anticipate and mitigate (less severe) risk thereby
reducing the likelihood of the project failure.
• Return on Investment (ROI): Prioritization for the projects focuses on such
activities such that they provide the greatest benefit based on a company’s results.
• Adaptability to Change: In an economy where goods and services are prioritized,
changes may occur without prior information or notice. An organization can withstand
the changes that affect the current business environment because reprioritization of
the activities can be done quickly when a project is prioritized first.

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 • Competitive Edge: Prioritization of the strategic project helps the organization to
react fast which relies on market needs changes.

Project Selection Criteria For Portfolio Management

1. Strategic Fit:
To attain the strategic fit it is important to develop new initiatives that match the purpose,
vision, and mission of the company. Here in lies an intricate harmonization of project goals to
the general strategic scheme, which brings unity between the separate undertakings and
development direction. Businesses need to coordinate carefully the new projects they have
initiated; this strengthens their strategic position, giving shape to one story that is heard by all
stakeholders and emphasizing the company’s intention to follow in the footsteps of this
strategy.
2. ROI Potential:
When making good financial decisions, it is a must that you examine the possible ROI of every
project. The projection of the returns over the project costs and comparison among the diverse
alternatives will allow for ranking according to the expected gainfulness. Prioritization of ROI-
oriented initiatives ensures the efficient utilization of the resources and optimum return on
investment for every project in the business.
3. Resource Availability:
However, the project feasibility depends on vital things such as manpower, finance, and time
management. However, this will determine whether there are enough of these resources, and if
they are adequate for the accomplishment of projects. Through an exhaustive analysis,
organizations will uncover the feasibility concerns that could lead to insufficiency in necessary
resources as well as develop strategies towards resourcing. In addition, a proactive approach is
adopted such that not only do the selected projects align with strategy but they must also be
practically feasible.
4. Risk Assessment:
Therefore, it is significant to undertake an accurate risk analysis of each of the proposed
projects to identify the probable problems and possible vagueness. Manageable or acceptable
risks are those for which the projects must be evaluated. Selecting the projects and featuring
balanced risk levels enables the companies to handle unpredictability’s as well and reduce the
chances of failure cases. This approach helps in making decisions that match the risk attitude
with the project objectives contributing to organizational resiliency.
5. Market Demand:
The nature of the market changes all the time and therefore it’s necessary to understand this
market and to react accordingly. There must be a consideration of the present and the future
demand for the product that is offered by the project in every case. Matching projects with the
market needs enables capturing the available opportunities and responding to customers’
expectations which will make it possible for the organizations to stay relevant and continue
being successful in the marketplace.

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Understanding Projects
Several frameworks that can help a person better understand project management are
described below: the Project Management Institute (PMI); the Project Management Body of
Knowledge (PMBOK® Guide); methods of selecting and prioritizing projects, project goals
and constraints; project success and failure; use of Microsoft Project to help plan and measure
projects, and various ways to classify projects.

Project Management Institute

Project management has professional organizations just as do many other professions and
industry groups. The biggest of these by far is the Project Management Institute. It was founded
in 1969, grew at a modest pace until the early 1990s, and has grown quite rapidly since. As of
March 2013, PMI had well over 650,000 members and credential holders in 185 countries. PMI
publishes and regularly updates PMI has established a professional certification entitled Project
Management Professional (PMP). To be certified as a PMP, a person needs to have the required
experience and education, pass an examination on the PMBOK® Guide, and sign and be bound
by a code of professional conduct. PMI has also established a second certification—Certified
Associate in Project Management (CAPM)—that is geared toward junior people working on
projects before they are eligible to become PMPs. PMI also has established additional
credentials, practice standards, and extensions of the PMBOK® Guide in areas such as program
management, agile, risk, scheduling, resource estimating, work breakdown structures,
construction, and government.
Project Management Body of Knowledge (PMBOK®)
The Project Management Body of Knowledge consists of a project life cycle, 5 process
groups, and 10 knowledge areas. A project management process group is “a logical grouping
of the project management inputs, tools and techniques, and outputs.” The five process
groups, paraphrased from the PMBOK® Guide, are as follows:
1. Initiating- “define a project or a new phase by obtaining authorization”
2. Planning- “establish the project scope, refine objectives and define actions to attain
objectives”
3. Executing- “complete the work defined to satisfy project specifications”
4. Monitoring and controlling- “track, review, and regulate progress and performance,
identify changes required, and initiate changes”
5. Closing- “finalize all activities to formally close project or phase”
The 10 knowledge areas, paraphrased from the PMBOK® Guide, are as follows:
1. Integration management- “processes and activities to identify, define, combine, unify,
and coordinate the various processes and project management activities”
2. Scope management- “processes to ensure that the project includes all the work required,
and only the work required, to complete the project successfully”

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3. Time management- “processes to manage timely completion of the project”
4. Cost management- “processes involved in planning, estimating, budgeting, financing,
funding, managing, and controlling costs so that the project can be completed within the
approved budget”
5. Quality management- “processes and activities of the performing organization that
determine quality policies, objectives, and responsibilities so that the project will satisfy the
needs for which it was undertaken”
6. Human resources management- “processes that organize, manage, and lead the project
team”
7. Communications management- “processes to ensure timely and appropriate planning,
collection, creation, distribution, storage, retrieval, management, control, monitoring, and
ultimate disposition of project information”
8.Risk management- “processes of conducting risk management planning, identification,
analysis, response planning, and control…to increase the likelihood and impact of positive
events and decrease the likelihood and impact of negative events in the project”
9.Procurement management- “processes to purchase or acquire products, services, or
results from outside the project team”
10. Stakeholder management- “processes to identify the people, groups, or organizations
that could impact or be impacted by the project, analyze their expectations and impact, and
develop strategies for engaging them and managing conflicting interests”

Strategic Planning Process

One of the tasks of a company’s senior leadership is to set the firm’s strategic direction. Some
of this direction setting occurs when an organization is young or is being revamped, but some
needs to occur repeatedly. Exhibit 2.1 depicts the steps in strategic planning and how
portfolio management should be an integral part.

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a Strategic Analysis
The first part of setting strategic direction is to analyze both the external and internal
environments and determine how they will enhance or limit the organization’s ability to
perform. This strategic analysis is often called strengths, weaknesses, opportunities, and threats
(SWOT). The internal analysis (elements within the project team’s control) consists of asking
what strengths and weaknesses the organization possesses in itself. The external analysis
(elements over which the project team has little or no control) consists of asking what
opportunities and threats are posed by competitors, suppliers, customers, regulatory agencies,
technologies, and so on. The leaders of an organization often need to be humble and open to
ideas that are unpleasant when conducting this analysis. Performed correctly, a strategic
analysis can be very illuminating and can suggest direction for an organization. An example of
SWOT analysis for the Built Green Home at Suncadia is shown in Exhibit 2.2.

Guiding Principles
Once the SWOT analysis is complete, the organization’s leadership should establish guiding
principles such as the vision and mission. Some organizations break this step into more parts
by adding separate statements concerning purpose and/or values.
VISION
The vision “must convey a larger sense of organizational purpose.” It should be both inspiring
and guiding, describing the organization as it can be in the future, but stated in the present
tense. A clear and compelling vision will help all members and all stakeholders of an

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organization understand and desire to achieve it. Visions often require extra effort to achieve
but are considered to be worth the effort. Visions are often multi-year goals that, once achieved,
suggest the need for a new vision. One of the visions most often cited, because it was so clear
and compelling, was President John F. Kennedy’s goal of placing a man on the moon before
the end of the 1960s. Kennedy set this goal after Russia launched Sputnik and the United States
found itself behind in the space race. His vision was very effective in mobilizing people to
achieve it. Increasingly companies are incorporating the triple bottom line into their vision
statements. This approach emphasizes the social, environmental, and economic health of all of
the company’s stakeholders rather than a narrow emphasis only on the economic return for
shareholders. This stated desire to be a good corporate citizen with a long-term view of the
world can motivate efforts that achieve both economic return for shareholders and other
positive benefits for many other stakeholders.
MISSION STATEMENT
The vision should lead into the mission statement, which is a way to achieve the vision. The
mission statement includes the “organization’s core purpose, core values, beliefs, culture,
primary business, and primary customers.” Several of these sections may flow together in the
mission statement and, sometimes, an overall statement is formed with expanded definitions
of portions for illustration.
By including the organization’s purpose, the mission statement communicates why the
organization exists.
• By including the organization’s core values, a mission statement communicates how
decisions will be made and the way people will be treated. True organizational values
describe deeply held views concerning how everyone should act—especially when adhering
to those values is difficult.
• By including beliefs, a mission statement communicates the ideals for which its leaders and
members are expected to stand. Beliefs are deeply held and slow to change, so it is quite
useful to recognize them, as they can either help or hinder an organization’s attempt to
achieve its vision.
• By including the organization’s culture, the mission statement instructs members to act in
the desired manner.
• By including the primary business areas, everyone will know in what business the
organization wishes to engage.
• By identifying the primary customers, everyone will understand which groups of people
need to be satisfied and who is counting on the organization. The mission needs to be specific
enough in describing the business areas and customers to set direction, but not so specific that
the organization lacks imagination.
An example of a vision and mission statement from Cincinnati Children’s Hospital Medical
Center is shown in Exhibit 2.3.

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Strategic Objectives
With the strategic analysis, mission, and vision in place, leaders turn to setting strategic
objectives, which should be means of achieving the mission and vision. For most organizations,
this strategic alignment of objective setting occurs annually, but some organizations may
review objectives and make minor revisions at three- or six-month intervals. While the planning
is normally performed annually, many of the strategic objectives identified will take well over
one year to achieve. The objectives describe both short- and long-term results that are desired
along with measures to determine achievement. Organizations that embrace a triple bottom line
in their guiding values will have objectives promoting each bottom line, and projects that are
selected will contribute toward each. These objectives should provide focus on decisions
regarding which projects to select and how to prioritize them, since they are an expression of
the organizational focus. Many writers have stated that for objectives to be effective, they
should be “SMART—that is specific, measurable, achievable, results-based, and time-
specific.” An example of strategic objectives from The Internet Society is shown in Exhibit 2.4.

Flow-Down Objectives
Once an organization’s strategic objectives are identified, they must be enforced. Some
objectives may be implemented by work in ongoing operations. However, projects tend to be
the primary method for implementing many objectives. If the organization is relatively small,
leaders may proceed directly to selecting projects at this point. Larger organizations may elect
a different route. If the organization is so large that it is impractical for the overall leaders to
make all project selection decisions, they might delegate those decisions to various divisions
or functions with the stipulation that the decisions should be aligned with all of the
organization’s strategic planning that has taken place to this point. Regardless of whether the
organization is small and the top leaders make all project selection decisions or whether the
organization is large and some of the decisions are cascaded one or more levels down, several
methods of project selection may be used.
Portfolio Management
Companies that use a strategic project selection process to carefully align projects with their
organizational goals will find they tend to be more successful at completing their projects and
deriving the expected benefits from them. Portfolio management “aligns with organizational
strategies by selecting the right projects, prioritizing work, and providing needed resources.”
“The goal of portfolio management is to achieve the maximum benefit toward the strategic
goals of the company. To accomplish this, executives need to identify, select, prioritize,
resource, and govern an appropriate portfolio of projects and other work.”

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Portfolios
Organizations require many work activities to be performed, including both ongoing
operational work and temporary project work. Large organizations often have many projects
underway at the same time. A portfolio is “projects, programs, sub portfolios, and operations
managed as a group to achieve strategic business objectives.” Project portfolios are similar to
financial portfolios. In a financial portfolio, efforts are made to diversify investments as a
means of limiting risk. However, every investment is selected with the hope that it will yield a
positive return. The returns on each investment are evaluated individually, and the entire
portfolio is evaluated as a whole. Each project in the portfolio should have a direct impact on
the organization.
Organizations typically try to have a sense of balance in their portfolios. That is, an organization
includes in its portfolio:
• Some large and some small projects
• Some high-risk, high-reward projects, and some low-risk projects
• Some projects that can be completed quickly and some that take substantial time to finish
Programs
A program is “a group of related projects, subprograms, and program activities managed in a
coordinated way to obtain benefits not available from managing them individually.” Programs
often last as long as the organization lasts, even though specific projects within a program are
of limited duration. For example, the U.S. Air Force has an engine procurement program. As
long as the Air Force intends to fly aircraft, it will need to acquire engines.
Projects and Subprojects
Just as a program is made up of multiple projects, a large project may be composed of multiple
subprojects. A subproject is “a smaller portion of the overall project created when a project is
subdivided into more manageable components or pieces.” If the project is quite large,
individuals may be assigned as subproject managers and asked to manage their subproject as a
project.

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Identifying Potential Projects
The second part of aligning projects with the firm’s goals is to identify potential projects. These
potential projects can be in response to a market demand, strategic opportunity, social need,
environmental consideration, customer request, legal requirement, or technological advance.
Ideally, this is accomplished in a systematic manner—not just by chance. Some opportunities
will present themselves to the organization. Other good opportunities will need to be
discovered. All parts of the organization should be involved. This means people at all levels,
from front-line workers to senior executives, and people from all functional areas need to help
identify potential projects. For example, salespeople can uncover many opportunities by
maintaining open discussions with existing and potential customers, and operations staff may
identify potential productivity-enhancing projects.
Methods for Selecting Projects
The people in charge of selecting projects need to ensure overall organizational priorities are
understood, agreed upon, and communicated. Once this common understanding is in place, it
is much easier to prioritize potential projects. The degree of formality used in selecting projects
varies widely. In a small company, it can be straightforward. The prioritization should include
asking questions such as these:
• What value does each potential project bring to the organization?
• Are the demands of performing each project understood?
• Are the resources needed to perform the project available?
• Is there enthusiastic support both from external customers and from one or more internal
champions?
• Which projects will best help the organization achieve its goals?

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 There are several different methods of systematically selecting projects. The methods include
both financial and scoring models. The primary reason for including financial analysis—either
to make the project selection decisions directly or to at least assist in the decision making—is
that, from management’s perspective, projects are investments. Therefore, proper selection
should yield a portfolio of projects that collectively contribute to organizational success.
Three different approaches are commonly used to ensure both financial and nonfinancial
factors are considered when selecting projects.
First, some organizations use financial analysis as the primary means of determining which
projects are selected
Second, some organizations use financial models as screening devices to qualify projects or
even just to offer perspective; qualified projects then go through a selection process using a
scoring model.
Third, at still other organizations, financial justification is one factor used in a multifactor
scoring model.
NET PRESENT VALUE (NPV) Net present value (NPV) is the most widely accepted model.
If the net present value is positive, then the organization can expect to make money from the
project. Higher net present values predict higher profits.
BENEFIT-COST RATIO (BCR) The ratio is obtained by dividing the cash flow by the initial
cash outlay. A ratio above 1.0 means the project expects to make a profit, and a higher ratio
than 1.0 is better.
INTERNAL RATE OF RETURN (IRR) The third financial model is internal rate of return
(IRR). In this model, the analyst calculates the percentage return expected on the project
investment. A ratio above the current cost of capital is considered positive, and a higher
expected return is more favorable.
PAYBACK PERIOD (PP) In this analysis, a person calculates how many years would be
required to pay back the initial project investment. The organization would normally have a
stated period that projects should be paid back within, and shorter payback periods are more
desirable.
Using a Scoring Model to Select Projects
In addition to ensuring that selected projects make sense financially, other criteria often need
to be considered. A tool called a scoring model helps to select and prioritize potential projects.
It is useful whenever there are multiple projects and several criteria to be considered.
IDENTIFYING POTENTIAL CRITERIA These criteria should include how well each
potential project fits with the organization’s strategic planning.

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Prioritizing Projects
Once all projects have been selected, they will need to be prioritized—that is, the decision
makers will need to determine which ones will get assigned resources and be scheduled to
begin first.
Securing Projects
This section deals with projects a company (called the client) wants performed, but for which
it may hire external resources (called contractors) to execute significant parts or all of the work.
Negotiate to Secure the Project
Once all proposals have been delivered and evaluated, the client company may elect to either
award the project or enter into negotiations with one or more potential contractors.

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