1. What is a project? What are the characteristics of a project?

A project, by definition, is a temporary activity with a starting date, specific goals and conditions, defined responsibilities, a budget, a planning, a fixed end date and multiple parties involved. Projects- leads to a change. Its an Input-Process-Output.Projects make use of resources like men, material, money, equipment, and time.

Definition: According to Project Management Institute Project is defined as a temporary endeavor to create a unique product or service.

Projects are group of activities. They are non repetitive in nature. Project is initiated to achieve a mission. Sometimes it happens that projects end, when goals and objectives cannot be accomplished, or the product, service or result of the project is no longer needed.

CHARACTERISTICS OF PROJECT:

a) Objective: A project has a fixed set of objectives or goals. Once the objectives have been achieved, the project ceases to exist.b) Life Span: A project cannot continue endlessly. It has a definite starting and ending points.c) Single Entity: A project is one entity and is normally entrusted to a single responsibility centre while the participants in the projects are many. d) Uniqueness: No two projects are exactly similar even if the plants are exactly identical or are merely duplicated.e) Team Work: Teams with members belonging to different discipline, organizations, even different countries work together.f) Change: A project sees many changes throughout its life. While some may be small others may change entire character.g) Life Cycle: Every project has a life cycle i.e growth, maturity and decay. h) Made to Order: A project is always made to the order of the customer.i) High Level of Sub Contracting: A high percentage of the work in a project is done through contractors. The more the complexity of the project, the more will be the extent of contracting.

2. What is project management?

3. Prepare project life cycle.

All projects have to pass through certain phases. The attention that a particular project receives is again not uniformly distributed throughout its life span, but it varies from phase to phase. At a particular appropriate attention has to be paid.Following are the general phases of a project.

1. Conception phase

2. Definition phase 3. Planning and organizing people4. Implementation phase5. Project clean up phase

The above phases won’t follow a sequence … rather they overlap; sometimes this overlapping is done deliberately in the interest of compressing the overall project schedule. There are others who would encourage natural growth.

a) Conception phase:Phase in which the project idea germinates. This phase is also known as Identification of the problem, identifying the performance gap. It we avoid or truncate this phase, the project will have innate defects and may eventually become a liability for the investors. How to implement the project is not the botheration of this phase. It we start thinking about the implementation during this phase, it will unnecessary delays this phase.

b) Definition Phase:The definition phase of the project will develop the idea generated during the conception phase and produce a document describing the project in sufficient details covering all aspects necessary for the customer or investors to make up their minds on the project idea.

c) Planning and organizing phase:This phase can effectively start only after definition phase, nut in practice it starts much earlier, almost immediately after the conception phase. This phase overlaps so much with the definition and also with implementation phases. That is why no formal recognition is given to this by most organizations.

d) Implementation phase:This period is of hectic activity for the project. It is during this period, something starts growing in the field and people for the first time can see the project.

e) Project clean up phase:Finally project is completed and handed over. For project personnel this phase is basically a clean up task. Drawings, documents, files, operations and maintenance manuals are catalogued and handed over to the customers.

4. Explain project feasibility report and its contents

Project feasibility study

In its simplest term, the two criteria to judge feasibility are cost required and value to be attained.

Definition

Analysis and evaluation of a proposed project to determine if it (1) is technically feasible, (2) is feasible within the estimated cost, and (3) will be profitable. Feasibility studies are almost always conducted where large sums are at stake. Also called feasibility analysis.

A feasibility study should examine three main areas:

Market issues: The primary area that the feasibility study needs to address is potential market opportunities for the cooperative.

Technical and organizational requirements: This area concerns the internal set-up of the cooperative. 

Financial overview: Questions such as the following need to be considered:

What are the total start-up costs required in order to begin operations? What are the operating costs involved? Based on the estimated revenues and costs, what is the projected profit (loss)

The Components of a Feasibility Study

Description of the Business: The product or services to be offered and how they will be delivered.

Market Feasibility: Includes a description of the industry, current market, anticipated future market potential, competition, sales projections, potential buyers, etc.

Technical Feasibility: Details how you will deliver a product or service (i.e., materials, labor, transportation, where your business will be located, technology needed, etc.).

Financial Feasibility: Projects how much start-up capital is needed, sources of capital, returns on investment, etc.

Organizational Feasibility: Defines the legal and corporate structure of the business (may also include professional background information about the founders and what skills they can contribute to the business).

Conclusions: Discusses how the business can succeed. Be honest in your assessment because investors won’t just look at your conclusions they will also look at the data and will question your conclusions if they are unrealistic.

Summary: Feasibility studies contain comprehensive, detailed information about your business structure, your products and services, the market, logistics of how you will actually deliver a product or service, the resources you need to make the business run efficiently, as well as other information about the business.

5. Explain detailed project report.

6. Explain the importance of location for a project.

The six key factors that drive the calculation of time — that is, of dates and duration  — in Project are:

Project start date Task durations Task dependencies Project calendars Task constraints and deadlines Resource assignments and task types

7. What do you understand by appraisal and evaluation of projects?

8. Explain the importance of EIA and EMP.

9. What are the various sources of finance available for projects? What do you mean by financial closure?

Long Term Sources of Finance

Long term sources of finance are those that are needed over a longer period of time - generally over a year. The reasons for needing long term finance are generally different to those relating to short term finance.

Long term finance may be needed to fund expansion projects - maybe a firm is considering setting up new offices in a European capital, maybe they want to buy new premises in another part of the UK, maybe they have a new product that they want to develop and maybe they want to buy another company. The methods of financing these types of projects will generally be quite complex and can involve billions of pounds.

Shares

A share is a part ownership of a company. Shares relate to companies set up as private limited companies or public limited companies (plcs). There are many small firms who decide to set themselves up as private limited companies; there are advantages and disadvantages of doing so. It is possible, therefore, that a small business might start up and have just two shareholders in the business.

If the business wants to expand, they can issue more shares but there are limitations on who they can sell shares to - any share issue has to have the full backing of the existing shareholders. PLCs are different. They sell shares to the general public. This means that anyone could buy the shares in the business.

Venture Capital

Venture capital is becoming an increasingly important source of finance for growing companies. Venture capitalists are groups of (generally very wealthy) individuals or companies specifically set up to invest in developing companies. Venture capitalists are on the look out for companies with potential. They are prepared to offer capital (money) to help the business grow. In return the venture capitalist gets some say in the running of the company as well as a share in the profits made.

Venture capitalists are often prepared to take on projects that might be seen as high risk which some banks might not want to get involved in. The advantages of this might be outweighed by the possibility of the business losing some of its independence in decision making.

Examples of venture capitalists (who are also called private equity firms) are Advantage Capital Limited, Braveheart Ventures, Permira and Hermes Private Equity.

Government Grant

The Eden Project near St Austell in Cornwall. The cost of the project was £133.6 million. Some of the funding came from the National Lottery and some came from the EU. Copyright: Simon Nicholson, from stock.xchng.

Some firms might be eligible to get funds from the government. This could be the local authority, the national government or the European Union. These grants are often linked to incentives to firms to set up in areas that are in need of economic development. In Cornwall, for example, there have been a number of initiatives to encourage new businesses to locate there.

Cornwall has the lowest gross domestic product (GDP) per head of the population in the UK. The average wage in Cornwall is 28% below the UK average. As a result, the area attracts funding from the EU and the government. Firms looking to set up in Cornwall might be able to apply for some help in starting or moving a business to the area. One of the disadvantages of this type of funding is that it involves large amounts of paperwork and administration. This can add to costs and in some cases might not make the project worthwhile.

Bank Loans

As with short term finance, banks are an important source of longer term finance. Banks may lend sums over long periods of time - possibly up to 25 years or even more in some cases. The loans have a rate of interest attached to them. This can vary according to the way in which the Bank of England sets interest rates. For businesses, using bank loans might be relatively easy but the cost of servicing the loan (paying the money and interest back) can be high. If interest rates rise then it can add to a business’s costs and this has to be taken into account in the planning stage before the loan is taken out.

Mortgage

A mortgage is a loan specifically for the purchase of property. Some businesses might buy property through a mortgage. In many cases, mortgages are used as a security for a loan. This tends to occur with smaller businesses. A sole trader, for example, running a florists shop might want to move to larger premises. They find a new shop with a price of £200,000. To raise this sort of money, the bank will want some sort of security - a guarantee that if the borrower cannot pay the money back the bank will be able to get their money back somehow.

The borrower can use their own property as security for the loan - it is often called taking out a second mortgage. If the business does not work out and the borrower could not pay the bank the loan then the bank has the right to take the home of the borrower and sell it to recover their money. Using a mortgage in this way is a very popular way of raising finance for small businesses but as you can see carries with it a big risk.

Owner's Capital

Some people are in a fortunate position of having some money which they can use to help set up their business. The money may be the result of savings, money left to them by a relative in a will or money received as the result of a redundancy payment. This has the advantage that it does not carry with it any interest. It might not, however, be a large enough sum to finance the business fully but will be one of the contributions to the overall finance of the business.

Retained Profit

This is a source of finance that would only be available to a business that was already in existence. Profits from a business can be used by the owners for their own personal use (shareholders in plcs receive a share of the company profits in the form of a dividend - usually expressed as Xp per share) or can be used to put back into the business. This is often called 'ploughing back the profits'.

The owners of a business will have to decide what the best option for their particular business is. In the early stages of business growth, it may be necessary to put back a lot of the profits into the business. This finance can be used to buy new equipment and machinery as well as more stock or raw materials and hopefully make the business more efficient and profitable in the future.

Selling Assets

As firms grow they build up assets. These assets could be in the form of property, machinery, equipment, other companies or even logos. In some cases it may be appropriate for a business to sell off some of these assets to finance other projects.

10. Explain the following: Payback period ROI IRR

The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.

IRR is sometimes referred to as "economic rate of return (ERR)".

The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR) or simply the rate of return (ROR).

The internal rate of return on an investment or project is the "annualized effective compounded return rate" or discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) from a particular investment equal to zero.

In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.

Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. Assuming all projects require the same amount of up-front investment, the project with the highest IRR would be considered the best and undertaken first.

A firm (or individual) should, in theory, undertake all projects or investments available with IRRs that exceed the cost of capital. Investment may be limited by availability of funds to the firm and/or by the firm's capacity or ability to manage numerous projects.

Given a collection of pairs (time, cash flow) involved in a project, the internal rate of return follows from the net present value as a function of the rate of return. A rate of return for which this function is zero is an internal rate of return.

Given the (period, cash flow) pairs (n, Cn) where n is a positive integer, the total number of periods N, and the net present value NPV, the internal rate of return is given by r in:

The period is usually given in years, but the calculation may be made simpler if r is calculated using the period in which the majority of the problem is defined (e.g., using months if most of the cash flows occur at monthly intervals) and converted to a yearly period thereafter.

Any fixed time can be used in place of the present (e.g., the end of one interval of an annuity); the value obtained is zero if and only if the NPV is zero.

In the case that the cash flows are random variables, such as in the case of a life annuity, the expected values are put into the above formula.

Often, the value of r cannot be found analytically. In this case, numerical methods or graphical methods must be used.

Decision Criterion

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.

NVP

The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. 

In finance, the net present value (NPV) or net present worth (NPW) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.

The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of cash flows and a price as input and inferring as output a discount rate (the discount rate which would yield the given price as NPV) - is called the yield, and is more widely used in bond trading.

Formula

Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms,

where

t - the time of the cash flow i - the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.) Rt - the net cash flow (the amount of cash, inflow minus outflow) at time t. For educational purposes, R0 is commonly placed to the left of the sum to emphasize its role as (minus) the investment.

The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial Cash outlay will be the present value but in case where the cash flows are not equal in amount then the previous formula will be used to determine the present value of each cash flow separately. Any cash flow within 12 months will not be discounted for NPV purpose.

If... It means... Then...

NPV > 0

the investment would add value to the firm

the project may be accepted

NPV the investment would the project should be rejected

< 0subtract value from the firm

NPV = 0

the investment would neither gain nor lose value for the firm

We should be indifferent in the decision whether to accept or reject the project. This project adds no monetary value. Decision should be based on other criteria, e.g. strategic positioning or other factors not explicitly included in the calculation.

Common pitfalls

If, for example, the Rt are generally negative late in the project (e.g., an industrial or mining project might have clean-up and restoration costs), then at that stage the company owes money, so a high discount rate is not cautious but too optimistic. Some people see this as a problem with NPV. A way to avoid this problem is to include explicit provision for financing any losses after the initial investment, that is, explicitly calculate the cost of financing such losses.

Another common pitfall is to adjust for risk by adding a premium to the discount rate. Whilst a bank might charge a higher rate of interest for a risky project, that does not mean that this is a valid approach to adjusting a net present value for risk, although it can be a reasonable approximation in some specific cases. One reason such an approach may not work well can be seen from the following: if some risk is incurred resulting in some losses, then a discount rate in the NPV will reduce the impact of such losses below their true financial cost. A rigorous approach to risk requires identifying and valuing risks explicitly, e.g. by actuarial or Monte Carlo techniques, and explicitly calculating the cost of financing any losses incurred.

Yet another issue can result from the compounding of the risk premium. R is a composite of the risk free rate and the risk premium. As a result, future cash flows are discounted by both the risk-free rate as well as the risk premium and this effect is compounded by each subsequent cash flow. This compounding results in a much lower NPV than might be otherwise calculated. The certainty equivalent model can be used to account for the risk premium without compounding its effect on present value.

Another issue with relying on NPV is that it does not provide an overall picture of the gain or loss of executing a certain project. To see a percentage gain relative to the investments for the project, usually, Internal rate of return or other efficiency measures are used as a complement to NPV.

11. Explain the need of project organization and its advantages.

The project organization offers powerful advantages of clear project authority, access to special expertise, project focus and priority, as well as simplified project communications. However, its

disadvantages are equally as formidable: duplication of effort, intra-company rivalries, uncertain reintegration of resources and unclear motivations and loyalties.

Advantages: Labour force highly flexible Staff of own company, preventing extra costs

http://www.cmguide.org/archives/319

12. Explain the need of project consultants and their jobs.

13. What do you mean by specifications and its purpose?

14. What is a contract? Types of contracts.

A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing, though contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific performance of the contract or an injunction. Both of these remedies award the party at loss the "benefit of the bargain" or expectation damages, which are greater than mere reliance damages, as in promissory estoppel. The parties may be natural persons or juristic persons. A contract is a legally enforceable promise or undertaking that something will or will not occur. The word promise can be used as a legal synonym for contract. Although care is required as a promise may not have the full standing of a contract, as when it is an agreement without consideration.

Contract law varies greatly from one jurisdiction to another, including differences in common law compared to civil law, the impact of received law, particularly from England in common law countries, and of law codified in regional legislation.

Types of contracts:

Fixed Price (Lump Sum)

This is the simplest type of all contracts. The terms are quite straightforward and easy to understand. To put in simple, the service provider agrees to provide a defined service for a specific period of time and the client agrees to pay a fixed amount of money for the service. This contract type may define various milestones for the deliveries as well as KPIs (Key Performance Indicators). In addition, the contractor may have an acceptance criteria defined for the milestones and the final delivery. The main advantages of this type of contract is that the contractor knows the total project cost before the project commences.

Unit Price

In this model, the project is divided into units and the charge for each unit is defined. This contract type can be introduced as one of the more flexible methods compared to fixed price contract. Usually the owner (contractor/client) of the project decides on the estimates and asks the bidders to bid of each element of the project. After bidding, depending on the bid amounts and the qualifications of bidders, the entire project may be given to the same services provider or different units may be allocated to different services providers. This is a good approach when different project units require different expertise to complete.

Cost Plus

In this contract model, the services provider is reimbursed for their machinery, labour, and other costs, in addition to contractor paying an agreed fee to the services provider. In this method, the services provider should offer a detailed schedule and the resource allocation for the project. Apart from that, all the costs should be properly listed and should be reported to the contractor periodically. The payments maybe paid by the contractor at a certain frequency (such as monthly, quarterly) or by the end of milestones.

Incentive

Incentive contracts are usually used when there is some level of uncertainty in the project cost. Although there are nearly-accurate estimations, the technological challenges may impact on the overall resources as well as the effort. This type of contracts is common for the projects involving pilot programs or the project that harness new technologies. There are three cost factors in an Incentive contract; target price, target profit, and the maximum cost. The main mechanism of Incentive contract is to divide any target price overrun between the client and the services provider in order to minimize the business risks for both parties.

Retainer (Time and Material - T&M)

This is one of the most beautiful engagements that can get into by two or more parties. This engagement type is the most risk-free type where the time and material used for the project are priced. The contractor only requires knowing the time and material for the project in order to make the payments. This type of contracts has short delivery cycles and for each cycle separate estimates are sent of the contractor. Once the contractor signs off the estimate and Statement of Work (SOW), the services provider can start work. Unlike most of the other contract types, retainer contracts are mostly used for long-term business engagements.

Percentage of Construction Fee

This type of contracts is used for engineering projects. Based on the resources and material required, the cost for the construction is estimated. Then, the client contracts a service provider and pays a percentage of the cost of the project as the fee for the services provider.

As an example, take the scenario of constructing a house. Assume that the estimate comes up to Rs.230,000. When this project is contracted to a services provider, the client may agree to pay 30% of the total cost as the construction fee, which comes up to Rs.69,000.

15. Explain BOT, BOLT types of contracts.

BOT

Build-own-operate-transfer (BOOT) or build-operate-transfer (BOT) is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project.

Due to the long-term nature of the arrangement, the fees are usually raised during the concession period. The rate of increase is often tied to a combination of internal and external variables, allowing the proponent to reach a satisfactory internal rate of return for its investment.

Examples of countries using BOT are Thailand, Turkey, Taiwan, Saudi Arabia, Israel, India, Iran, Croatia, Japan, China, Vietnam, Malaysia, Philippines, Egypt, and a few U.S. states (California, Florida, Indiana, Texas, and Virginia). However, in some countries, such as Canada, Australia and New Zealand, the term used is build-own-operate-transfer (BOOT).

Traditionally, such projects provide for the infrastructure to be transferred to the government at the end of the concession period. In Australia, primarily for reasons related to the borrowing powers of states, the transfer obligation may be omitted. For the Alice Springs - Darwin section of the Adelaide-Darwin Railway the lease period is 50 years, see AustralAsia Rail Corporation.

BOOT (Build Own Operate Transfer)

A BOOT structure differs from BOT in that the private entity owns the works. During the concession period the private company owns and operates the facility with the prime goal to recover the costs of investment and maintenance while trying to achieve higher margin on project. The specific characteristics of BOOT make it suitable for infrastructure projects like highways, roads mass transit, railway transport and power generation and as such they have political importance for the social welfare but are not attractive for other types of private investments. BOOT & BOT are methods which find very extensive application in countries which desire ownership transfer and operations including. Some advantages of BOOT projects are:

Encourage private investment Inject new foreign capital to the country Transfer of technology and know how Completing project within time frame and budget planned Providing additional financial source for other priority projects Releasing the burden on public budget for infrastructure development

BOO (Build Own Operate)

In a BOO project ownership of the project remains usually with the Project Company for example a mobile phone network. Therefore the private company gets the benefits of any residual value of the project. This framework is used when the physical life of the project coincides with the concession period. A BOO scheme involves large amounts of finance and long payback period. Some examples of BOO projects come from the water treatment plants. This facilities run by private companies process raw water, provided by the public sector entity, into filtered water, which is after returned to the public sector utility to deliver to the customers.

BLT (Build Lease Transfer)

Under BLT a private entity builds a complete project and leases it to the government. On this way the control over the project is transferred from the project owner to a lessee. In other words the ownership remains by the shareholders but operation purposes are leased. After the expiry of the leasing the ownership of the asset and the operational responsibility are transferred to the government at a previously agreed price. For foreign investors taking into account the country risk BLT provides good conditions because the project company maintains the property rights while avoiding operational risk.

DBFO (Design Build Finance Operate)

Design- Build- Finance- Operate is a project delivery method very similar to BOOT except that there is no actual ownership transfer. Moreover, the contractor assumes the risk of financing till the end of the contract period. The owner then assumes the responsibility for maintenance and operation. Some disadvantages of DCMF are the difficulty with long term relationships and the threat of possible future political changes which may not agree with prior commitments.This model is extensively used in specific infrastructure projects such as toll roads. The construction company build a private entity which is in charge to design and construct an infrastructure for the government which is the true owner. Moreover the private entity has the responsibility to raise finance during the construction and the exploitation period. The cash flows serve to repay the investment and reward its shareholders. They end up in form of periodical payment to the government for the use of the infrastructure. The government has the advantage that it remains the owner of the facility and at the same time avoids direct payment from the users. Additionally, the government succeeds to avoid getting into debt and to spread out the cost for the road over the years of exploitation.

DCMF (Design Construct Manage Finance)

Some examples for the DCMF model are the prisons or the public hospitals. A private entity is built to design, construct, manage, and finance a facility, based on the specifications of the government. Project cash flows result from the government’s payment for the rent of the facility. In the case of the hospitals, the government has the ownership over the facility and has the price

and quality control. The same financial model could be applied on other projects such as prisons. Therefore this model could be interpreted as a mean to avoid new indebtedness of public finance.

16. Explain CPM and PERT in PM.

CPM

The critical path method (CPM) is an algorithm for scheduling a set of project activities. It is an important tool for effective project management.

In project management, a critical path is the sequence of project network activities which add up to the longest overall duration. This determines the shortest time possible to complete the project. Any delay of an activity on the critical path directly impacts the planned project completion date (i.e. there is no float on the critical path). A project can have several, parallel, near critical paths. An additional parallel path through the network with the total durations shorter than the critical path is called a sub-critical or non-critical path.

PERT

The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a statistical tool, used in project management, that is designed to analyze and represent the tasks involved in completing a given project. First developed by the United States Navy in the 1950s, it is commonly used in conjunction with the critical path method or CPM.

A PERT chart presents a graphic illustration of a project as a network diagram consisting of numbered nodes (either circles or rectangles) representing events, or milestones in the project linked by labelled vectors (directional lines) representing tasks in the project. The direction of the arrows on the lines indicates the sequence of tasks. In the diagram, for example, the tasks between nodes 1, 2, 4, 8, and 10 must be completed in sequence. These are called dependent or serial tasks. The tasks between nodes 1 and 2, and nodes 1 and 3 are not dependent on the completion of one to start the other and can be undertaken simultaneously. These tasks are called  parallel or concurrent tasks. Tasks that must be completed in sequence but that don't require resources or completion time are considered to have event dependency. These are represented by dotted lines with arrows and are called dummy activities. For example, the dashed arrow linking nodes 6 and 9 indicates that the system files must be converted before the user test can take place, but that the resources and time required to prepare for the user test (writing the user manual and user training) are on another path. Numbers on the opposite sides of the vectors indicate the time allotted for the task.

The PERT chart is sometimes preferred over the Gantt chart, another popular project management charting method, because it clearly illustrates task dependencies. On the other hand, the PERT chart can be much more difficult to interpret, especially on complex projects. Frequently, project managers use both techniques.

17. One problem on CPM/AOL and AON.

18. One problem on PERT

19. One problem on Crashing/Compression.

20. One problem on Resource allocation.

21. One problem on Updating.

22. What do you mean by strategic project management?

Strategic Project Management (SPM) has been defined by Callahan & Brooks (2004) as “the use of the appropriate project management knowledge, skills, tools and techniques in the context of the companies goals and objectives so that the project deliverables will contribute to company value in a way that can be measured” (Callahan & Brooks, 2004, p. 23). They further describe SPM as a “process that takes into account a company’s way of doing business, allowing for the possibility of a significant payoff with fewer risks” (Callahan & Brooks, p. 30).

The above definitions are good, but they do not convey the most important aspect of SPM, which is the fact that senior leadership needs to be involved in selecting, defining and prioritizing which projects are undertaken within the organization. Because of this, the following definition does a much better job of accurately defining SPM:

Strategic Project Management consists of selecting, managing and measuring project outcomes to ensure optimal value for an organization. All projects undertaken by an organization must meet a set of criteria setup by the organizations’ leadership to ensure alignment with the strategic vision of the organization.

Strategic Project Management is really nothing more than the picking the right projects for the organization to ensure optimal returns. This sounds very simple and straightforward, but research shows that there are many organizations that have overlooked the important fact of aligning projects with corporate strategy. The fact that SPM is often overlooked can be seen in research performed by Stanleigh (2006) and report in the article titled “From Crisis to Control: New Standards for Project Management”. Stanleigh reports that a fraction of projects undertaken by organizations (roughly 2.5 percent) are 100% successful (Stanleigh, 2006, p. 1). Stanleigh discusses the need for organizations to ensure that only those projects that are aligned with the corporate strategic vision be undertaken and he describes four key strategies that assist organizations in regaining control over their projects and ensuring strategic fit.

23. What do you mean by Risk, Risk management and Risk analysis in projects?

Risk

From the OXFORD dictionary, risk is defined as .possibility of meeting danger or suffering harm.. With this definition, it makes us feel that there is a need to avoid risks especially when managing projects. But unfortunately, like what all risk managers know, risk can never be avoided BUT it can be reduced . and that is what management wants to hear. And unfortunately again, risks are often ignored. By abolishing constraints and reducing ambiguities, risk can be minimised to an acceptable level. Project risks may be .accidentally. overlooked by those who just do not have time to look into it or those who want to avoid serious delays. Others may be terrified to look into it because if risks were to be uncovered, the team may look incompetent in managing the project. To manage the risk that has been exposed, there is a need to fix that risk . and to fix that risk, it will cost more money . a resource that a project usually lacks. Risk management should be conducted throughout the whole project lifecycle . from the initiation phase till the decommissioning of the project. Risk Management could often contribute to project success through improvements due to the loopholes it uncovered.

Risk Management

Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. Several risk management standards have been developed including the Project Management Institute, the National Institute of Science and Technology, actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.

The strategies to manage risk typically include transferring the risk to another party, avoiding the risk, reducing the negative effect or probability of the risk, or even accepting some or all of the potential or actual consequences of a particular risk.

Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk, whether the confidence in estimates and decisions seem to increase.

Risk Analysis

Understanding the nature of a risk is a precondition for a good response. Therefore take some time to have a closer look at individual risks and don't jump to conclusions without knowing what a risk is about.

Risk analysis occurs at different levels. If you want to understand a risk at an individual level it is most fruitful to think about the effects that it has and the causes that can make it happen. Looking at the effects, you can describe what effects take place immediately after a risk occurs and what effects happen as a result of the primary effects or because time elapses. A more detailed analysis may show the order of magnitude effect in a certain effect category like costs, lead time or product quality. Another angle to look at risks, is to focus on the events that precede a risk occurrence, the risk causes. List the different causes and the circumstances that decrease or increase the likelihood.

Another level of risk analysis is investigate the entire project. Each project manager needs to answer the usual questions about the total budget needed or the date the project will finish. If you take risks into account, you can do a simulation to show your project sponsor how likely it is that you finish on a given date or within a certain time frame. A similar exercise can be done for project costs.

The information you gather in a risk analysis will provide valuable insights in your project and the necessary input to find effective responses to optimise the risks.

24. Explain the importance of project management software.

Project management or project planning basically involves managing of resources, to finish a specific attainable task at a particular time frame. A project planning software have been one of the best things in construction or project management. Everything just becomes easiery. I am lucky to be exposed on training seminars in the area of project management. The whole experience was possible with a tie up with a construction engineering consultancy firm which develops a local software for vertical and horizontal constructions. Aside from engineering consultancy another part of it is conducting construction project management courses.

There are a number of construction project management software like Harvard Project Management, Primavera Project Planner, and Microsoft Project Management. Depending on the complexity of the project and size a corresponding project management software could be selected from the various options available. One of the simple and versatile project management software which is on the middle scale should I say is Microsoft Project. Some of the things that can be done using Microsoft Project are creating project calendar, baseline plan, resources entry, gantt chart, project evaluation review technique (PERT) chart, and more.

If an indepth knowledge is needed, a MS Project training would be indespensable. This could be provided by some local training centers or some individual tutor. Using a software like MS Project would spell a big difference in the over-all project management.

25. What is the importance of materials management in projects?

Materials Management can be defined as that function of business that is responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide service to the customer, at a pre-decided level at a minimum cost.

All the functions are primarily carried out by the store manager whose mission is to ensure that goods are not below average as to satisfy the demands of customers.

The fundamental objectives of the Materials Management function, often called the famous 4 Rs of Materials Management, are acquisition of materials and services:

of the right quality in the right quantity at the right time from the right source

Importance of Material Management:

1. Improved cash flow: Prevents material waste or damage so do not have to buy new material Can buy a little at a time (e.g. : first, the amount of material for foundation, next for

basement etc) Do not have to provide big storage capacity to store the material. Reduce claim reduction (gain more profit)

2. Reduce Surplus: Prevent over buy amount/stock of material Estimate the amount need to reduce material damage Prevent buying material that not suitable with construction condition (soil, weather,such as

cements-RHPC,SRPC)

3. Improves Labor Productivity: Encouraging the labors to finish the construction works on the given time Gain a good quality finished construction building/structures

4. Can avoid claim reduction: Plan and estimate the amount of material will be use (gain more profit) Reduce material wastage Do not have to claim more money from client Build client trustworthy to the consultant

5. Can avoid material Damage:

Buy a little amount at a time Need a small storage capacity Reduce cost to build a bigger storage Reduction of material waste due of efficient storage capacity

6. Can avoid construction delay: Have the material to be use on time Reduce material damage/waste so do not have to order and wait for the new material arrive Prevent any construction delay due of no material management

7. Systematic: Shows good construction planning and management Improves company productivity and performance Improves client trustworthiness towards the company

8. Better Accountability:

Better accountability on part of materials as well as other departments as no one can shift blame to others.

9. Better Coordination:

As materials management is handled by single authority, it can result in better coordination, as it becomes the central point for any material related problems.

10. Development of Ethical and moral standards:

One indirect advantage of material management is that good quality material develops the ethical and moral standard in an organization.

26. Explain deterministic model of inventory control and EOQ.

In this the demand of an item is known and fixed, but in probabilistic models the demand of an item is not known (stochastic). Under the deterministic situation, we have the following models of inventory control:

Types of Inventory Models

    DEMAND RATE

   Same for each period

Varies from one period to another

NATURE OF MEMAND

Known, constant

Static Deterministic

Dynamic Deterministic

Random variable having probability distribution

Static Probabilistic

Dynamic Probabilistic

EOQ:Economic order quantity is the level of inventory that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models.

EOQ only applies where the demand for a product is constant over the year and that each new order is delivered in full when the inventory reaches zero. There is a fixed cost charged for each order placed, regardless of the number of units ordered. There is also a holding or storage cost for each unit held in storage (sometimes expressed as a percentage of the purchase cost of the item).

We want to determine the optimal number of units of the product to order so that we minimize the total cost associated with the purchase, delivery and storage of the product

The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, however, this number can be determined from the other parameters

Formula = .

Where D = annual demandS = ordering cost per orderH = holding cost per unit per year

Q= 2*6400*100 2Q= 800 units.Optimum Number of orders = 6400

800Optimum Number of orders= 8