FALL 2014

MBA SEM 3
PM0010 INTRODUCTION TO PROJECT MANAGEMENT
Q1. Describe the principles of project management.
Principles of Project Management
Principles refer to a set of standards or laws that serve as the foundation of various ideas,
practices, and procedures. According to Webster, a principle can be defined as a general truth,
law on which others are founded or from which others are derived.
The study of project management is based on certain universally applicable principles. These
principles are given by James Chapman.
Principle of business nature and commitment
Principle of project success
Principle of project strategy
Principle of team building
Principle of project assessment
Principle of documentation
Principle of satisfaction
Pro-active principle
Principle of business nature and commitment: This principle states that organisations should
identify their project goals and business values to fulfil their commitment. Recognising the
nature of business and volumes always helps a project manager in executing the project
accordingly.
Principle of project success: The objectives of a project remain unfulfilled till the success of a
project. Everyone on a project should know what the term success signifies for that particular
project. The success of a project may be defined in terms of various deliverables such as scope,
return, fulfilment of commitment, time, cost, business expansion, and efficiency.
Principle of project strategy: It is one of the vital principles of project management. The
strategy principle involves setting-up of a result-oriented project plan that helps the entire project
team to execute the plan effectively.
Principle of team building: As you know, a project is not a one man show and therefore, it
cannot be completed without the synchronised efforts of a team. A project team may comprise
various human resources, who are very competent in their respective domains of operations.
Principle of project assessment: This principle focuses on keeping a tab on project status and
provides feedback to the associated workforce on a regular basis. It helps enhance the project

performance and quality. In addition, it also helps to consistently determine the associated risks
and opportunities.
Principle of documentation: Documentation plays a crucial role in every discipline of a project.
Starting from project planning to its implementation, every phase of a project is recorded and
maintained through documentation. Without documentation, it becomes quite challenging for
project teams to have baseline controls, communication, presentation, decisions, etc.
Principle of satisfaction: Every project is initiated with certain specific objectives. Satisfaction
of customers/clients is the utmost objective of any project. To satisfy customers/clients, some
projects even introduce changes in their plan.
Pro-active principle: The issues that are ignored when they crop up for the first time generally
grow complex in future. Therefore, it is important for project professionals to proactively address
the risks and confront them at the earliest.

Q2. Define is project scope. Describe the elements of project scope

Project scope is part of project planning and involves setting project goals, identifying
processes, assigning tasks, and allocating resources. Defining project scope is a prerequisite
for setting the stage for project plan development. The scope should be defined by collaborative
efforts of the project manager and the customer.
Project scope includes a number of elements, which are:
Project objectives
Deliverables
Milestones
Technical requirements
Limits and exclusions
Constraints and risks
Project objectives: The objectives of a project are documented in the project scope. These are
the aims of a particular project. As you have studied earlier, all projects have specific objectives.
For example, the objective of a product launch project can be to capture a certain percentage of
the market share in a particular region.
Deliverables: Deliverables of a project are explicitly mentioned in its scope. These are the
tangible or intangible outcomes to be achieved on the completion of a project. A tangible
outcome can be an item or an article, whereas an intangible outcome includes the services
delivered to the customers or other beneficiaries. For example, a product is the tangible
outcome of a product development project. On the other hand, accommodation of more traffic is
an intangible outcome of a new terminal construction project at an airport.

Milestones: The scope of a project clearly documents its milestones. Milestones are the
significant events that may occur at a point of time during the project. They indicate the direction
of the project and ensure that the project activities are performed according to the schedule.
Technical requirements: The technical requirements of projects need to be identified and
documented in its scope. These are the technical specifications for accomplishing the project
tasks and activities such as speed and capacity of database systems.
Limits and exclusions: The limits and exclusions of a project need to be properly identified
and documented in the project scope. The limits of the project scope define the boundary of a
project, whereas the exclusions define the elements that are beyond the scope of the project.
For example, a drinking water project may be kept limited to only certain districts of a state. This
is the geographical limit of the project. Likewise, the poverty eradication project of the
government may exclude the well-off sections of the society. This is an example of exclusion.
Constraints and risks: It is important for an organisation to identify and document the
constraints and risks of a project before its initiation. A constraint refers to the limitations of
resources in a project. For example, projects are required to be executed with a given budget;
thus, budget can be a constraint in a project.

Q3. Write short notes on:

Force field analysis
Product mix analysis
Financial feasibility of a project
Capital rationing
Force field analysis: This project planning tool was developed by Kurt Lewin, a renowned
social psychologist. The tool identifies the negative and positive forces associated with a
particular project. In other words, force field analysis tool is used to analyse the pros and cons
of a project. For example, while taking decision regarding buying a car, there two forces that
works in your mind, one, the helping forces that stimulate you to make the buying decision and
the other, the hindering force that stops you from taking the decision. Figure shows the forcefield analysis that represents both helping and hindering forces of customers:

While manufacturing a car, the manufacturers take these forces into account. It results in
making an effective project planning.
Product mix analysis: Product mix is the combination of various product lines of an
organisation. It is a set of similar or non-similar products produced by an organisation. It is also
known as the product assortment. There can be one or more product lines in a product mix. The
product mix of an organisation has four elements, width, length, depth, and consistency.
Width: It refers to the total number of product lines in an organisation. food, home care,
personal care, water, nutrition and beauty products are the six product lines that are collectively
called width of product mix.
Length: It refers to the total number of items available in a product mix. the length of the product
mix of Hindustan Unilever Limited is 34.
Depth: It refers to the total number of items in a product line. the product line of personal care
has the depth of 13 items.
Consistency: It measures the extent to which product lines of an organisation are related with
each other. For example, if an organisation produces shampoos, oil, conditioners and other hair
care products then it maintains consistency in its product lines.

financial feasibility of a project: The financial feasibility of a project is determined after

considering the marketing feasibility. Financial feasibility refers to the study on estimating the
extent of viability of a project in terms of costs of production, requirements of working capital,
cash flows, etc. A project has to be financially viable for every investor associated with it so that
the invested capital generates a profitable return to him or her. An analysis of different financial

aspects of a project is called financial feasibility analysis. This analysis helps an investor to
estimate two key factors, expected returns and expected risks.
Capital rationing: An organisation implements a capital rationing policy to minimise or restrict
the capital investment. Capital rationing decisions are taken to manage a situation when an
organisation accepts many high yielding independent investment proposals; however, the
financial condition of the organisation is not favourable enough to execute all the approved
projects. In such cases, the organisation rationally approves only those projects that yield a
higher rate of return and improve its competitiveness and profitability in the long run.

Q4. What are the sources of differences, for which social costs and benefits of project
are estimated?
SCBA, the emphasis is given on the social cost and benefits of a project. The SCBA approach
assesses the social or economic impact of a project on the society as a whole. A project may
have two types of social impacts.
Positive impact or social benefit: It refers to monetary or non-monetary returns generated
from a project and enjoyed by the society. The social benefit of a project has a positive impact
on the society.
Negative impact or social cost: It refers to the monetary or non-monetary cost incurred by the
organisation and the society in the course of a project. The social cost affects the society
negatively.
Some of the main sources of differences, for which social costs and benefits of a project are
estimated, are as follows:
Imperfections of market: From an organisations point of view, the costs and benefits are
estimated in monetary terms on the basis of the market price of a product. However, the market
price only reflects social values in a perfectly competitive market, which is hardly ever realised
in a developing country.
Externalities: Externalities refer to non-monetary benefits or costs associated with a project
that affect the society at large. Externalities can be negative or positive. For example, if a project
causes environmental pollution, it is said to have a negative externality. On the other hand, the
employment opportunities generated by the project are an example of a positive externality.
Subsidies and taxes: From the organisations point of view, taxes are costs and subsidies are
benefits in monetary terms. On the contrary, from the societys point of view, subsidies and
taxes are nothing but transfer payments. Therefore, subsidies and taxes are not beneficial from
the societal point of view.

Saving concerns: Private organisations are not concerned about the difference in benefits of
consumption and saving patterns. In other words, they do not differentiate between savings
consumptions. On the other hand, SCBA gives great importance to the patterns of saving and
consumption. For example, in developing countries like India, where there is scarcity of capital,
savings form the main source of investment. Thus, SCBA values the benefits of savings more
valuable than the benefits of consumption.
Redistribution concerns: From the social standpoint, the wealth generated from a project
should be properly distributed to the economically weaker sections of the society. However, the
distribution of benefits is not a matter of concern for private firms.
Merit want: Some necessary goods or services are provided free of cost by the government for
the well-being of people in the society. Free health and education services are some of the
examples of merit want. The health and educational projects are undertaken by the government
not for the purpose of generating profit, but for benefitting the common man.
Q5. Explain the corporate governance practices in infrastructure projects.
the SPV is a distinct corporate entity. Therefore, it needs to follow the standards of corporate
governance to protect the rights of shareholders and lenders. However, lack of efficient
corporate governance standards may result in lack of trust among the stakeholders. For
example, any avoidable Project Cost Escalations, incurred due to the lack of proper control
measures, when transferred to the government or purchaser cause significant mistrust and may
sometimes negatively impact project viability and sustainability.
The SPV should address the issues of shareholders through a legal framework.
Collection of information: In the initial stage, the SPV should identify the need for
implementing corporate governance and areas that need implementation of corporate
governance. The collection of information involves the following:

Preparing the guiding principles

Considering the objectives of the SPV
Appointing accountable managerial personnel

Development of governance capability: In this stage, efficient individuals are deployed for
documenting, developing and approving policies and procedures related to corporate
governance. The development of governance capability involves the following:
Developing the corporate governance structure
Identifying and assigning priority areas
Developing governance practices

Operation and evaluation of governance: In this stage, the policies and procedures approved
in the previous stage are implemented, managed and evaluated in an effective manner. This
stage involves the following:
Implementing the policies in the actual operation of the SPV
Evaluating and suggesting improvement in different areas
The framework helps in ensuring that corporate governance is practiced in the SPV. However, in
a changing business environment, organisations need to continuously monitor and improve
corporate governance policies and procedures. The steps involved in the improvement of
corporate governance practices are as follows:
Preparation of action plan: This step involves creating a corporate governance improvement
plan after prioritising the improvement areas. In this stage, the SPV needs to highlight the
loopholes in the existing corporate governance policies and provide appropriate
recommendations.
Allocation of resources: In this step, the SPV identifies the additional resources required for
improving corporate governance. This stage requires the SPV to identify the required human
resource, skills and knowledge for implementing the agreed action plan.
Development of strategy: In this step, strategies related to targets, required time frame, key
deliverables and performance measurement are formulated. These strategies are used to
implement and monitor the action plan.
Implementation of the action plan: In this step, the strategy is put into practice. The
implementation of an action plan involves communicating the action plan to all involved
personnel in the project, mobilising the resources and managing the implementation process.
Supervision: This step involves monitoring the progress of the implementation process. The
supervising team informs the personnel involved in the project if there is any gap in the
implementation of the action plan.

Q6. Write short notes on:

Expert judgement (a tool used in procurement planning)
Project audit
Statistical Quality Control (SQC)
Project termination by extinction

Expert judgement (a tool used in procurement planning): An important tool that helps in
procurement planning is expert judgement. The decision to procure products and services on

the basis of an experts advice can be beneficial for an organisation. Sometimes, an

organisation appoints an expert, who can be from within or outside the organisation. Such an
expert is proficient and well trained in the field of procurement management, and has the ability
to guide the organisation in its procurement decisions.
Project audit: a project audit is a detailed inspection of the project management standards,
policies and procedures, assets, budget and expenditure and the time of project completion. It is
an independent assessment of some or all aspects of the project's health. It seeks to find the
reasons for uncomfortable symptoms in the project, and answer questions posed by the
sponsor or manager. It gives practical and specific advice on fixing any problems uncovered,
and guidance on improving efficiency for the future.
Statistical Quality Control (SQC): SQC involves the use of statistical tools by quality
professionals for controlling the quality of products or services. These tools help identify quality
issues in the production process and rectify them. SQC is divided into three categories, which
are as follows:

Descriptive statistics: It describes quality characteristics and relationships, and

involves tools, such as mean, standard deviation, range, and a measure of distribution of
data for defining quality characteristics.

Statistical Process Control (SPC): SPC involves the inspection of final output by
taking a random sample from it during the production process. It aims at verifying
whether the products meet the required specifications, thereby ensuring the proper
functioning of the production process. One of the common tools used under SPC is the
control chart.

Acceptance sampling: It involves inspecting the sample of products and deciding

whether to accept or reject these products. To do so, a quality check is done on the
products. Acceptance sampling uses tools, such as sampling plans and operating
characteristic curve.

Project termination by extinction: Project termination is the final stage of a project life cycle. A
project comes to an end either after its successful completion or failure to meet its goals and
objectives. Thus, both success and failure of a project can be the reason for project termination.
However, all projects are not terminated in the same manner. A project is terminated on the
basis of its scope and objectives as well as the degree of its success or failure. For example, a
successful building construction project may be terminated after handing over the constructed
building to the stakeholders. All activities in the project stop immediately after the termination of
the project. On the other hand, a project for implementing the Enterprise Resource Planning
(ERP) process in an organisation is terminated after the new system is integrated with the
existing system of the organisation.