Project Management

Case Study:
Riddi Siddhi Developers, the state owned company responsible for planning and
developing a major high speed rail project in Mumbai, must persuade both public
officials and lenders that the revamp project of the Mumbai Local Railways at Rs.
2000crs and 3 years time period is worth undertaking. It must also make a
recommendation on the appropriate organizational form for the enterprise.
Specially it must determine the role of the Mumbai Municipal Corporation in
financing and operating the high speed rail network, with option ranging from full
development and management of the project by the public sector to completely
private development and management. Lying in between these two polar cases
were a variety of hybrid models often referred to as public-private partnerships
(PPPs). Using data in the case, student have the opportunity to perform a benefitcost analysis of the project. They also must think carefully about the optimal role of
the government in a major new infrastructure project. Wayward or doomed are the
projects that are poorly managed. You must demonstrate standards and metrics
that will make the initiated project a project that succeeds.
Q.1. Prepare a project Report justifying the above mentioned high speed rail project
giving its cost benefit analysis.
Ans.
The existing rail systems always have extreme pressure and the same have been
pass to existing bus system which is limited in providing feeder services to rail
services. There are constraints in the expansion of the existing roads and rail
network capacity. Many areas in the Island city and suburbs are not served by the
rail based mass transport system.
The Speed Rail Project of Mumbai has been initiated by state owned company Riddi
Siddhi developers undertaken to provide rail based mass transit connectivity to
people within an approachable distance at Rs. 2000crs and 3 years time period and
the areas which are not connected by existing rail systems.
Greater Mumbai, the financial capital of India is the heart of commercial and trade
activities of the country. Mumbai has always had the distinction and advantage of a
high modal share (88%) in favor of a public mass transport system.

The high speed rail project is the evolution of rail- way networks and services
across the country.

There is always a need for highly efficient transportation,

besides road and air traffic, cuts across all industrialized area where passenger and
cargo traffic must move efficiently in crowded and growing mega-regions.
The introduction of high speed rail would lead to a number of socio- economic
advantages by distribution of work amongst Mumbai Municipal Corporation and
public sector, such as increased competitiveness by linking strongly developed
economic regions of Mumbai. The expansion and strengthening of the existing
railway industry, in both infrastructure and rolling stock, creates a leading global
sector of Mumbai which could boost technology as well as employment in urban
areas. With a continuous increase of passenger and cargo traffic, the electricpowered

railway

transportation

solution

would

provide

sustainable

and

environmentally friendly way to meet the transportation needs of tomorrow by

reducing the amounts of carbon dioxide emitted by automobiles and aircraft.
The capacity of todays transportation system fails to meet our current, let alone
future, demand. Bottom line, rail will provide faster, safer and more efficient travel
options.
The ultimate goal of a connected and balanced transportation network is one that
maximizes the benefits of every mode. Convenient, efficient, and affordable transportation is a major building block of Mumbais economic strength and quality of
life, and it is duty of ours to ensure that we are continuing to provide new and
better mobility options.
The success of high-speed rail and public transportation will depend on various
factors regarding working together: rail- roads, states, manufacturers, suppliers,
labor, transportation planners, and many others.

With continued support of

Municipal Corporation of Mumbai and Private and public sector, the designing,
building and operation of transportation network will serve Mumbai for generations
to come with an integrated, national passenger rail system.
Social Cost Benefit Analysis called economic analysis, is a methodology developed
for evaluating investment projects from the point of view of the society as a whole
ie it is a systematic process for calculating and comparing benefits and costs of a
project, decision or government policy. It served two purposes:

1.

To determine if it is a sound investment/decision (justification/feasibility),

2.

To provide a basis for comparing projects. It involves comparing the total

expected cost of each option against the total expected benefits, to see whether the
benefits outweigh the costs, and by how much.
Social cost benefit analysis aids in evaluating individual projects within the planning
framework which spells out national economic objectives and broad allocation of
resources to various sector. It is concerned with tactical decision making within the
framework of broad strategic choices defined by planning at the macro level. The
benefits and costs are expressed in monetary terms, and are adjusted for the time
value of money, so that all flows of benefits and flows of project costs over time
could be expressed on a common basis in terms of their "net present value."
i.e. Benefit > Cost (desirable)
Therefore, it is nothing but a profitability analysis.

Objectives of SCBA
The main focus of Social Cost Benefit Analysis is to determine:
1. Economic benefits of the high speed rail projects in terms of shadow prices;
2 The impact of the projects on the level of savings and investments in the society;
3. The impact of the projects on the distribution of income in the society;
4. The contribution of the projects towards the fulfillment of certain merit wants
(self- sufficiency, employment etc).

In social cost benefit analysis of High speed rail project would focus on social cost
and benefits of the project. These often tend to differ from monetary cost and
benefit of the project. The principle source of discrepancy is.

Market Imperfections

Externalities

Taxes & Subsidies

Concern for Savings

Concern for Redistribution

Merit Wants

Market Imperfections:
Market prices which form the basis for computing the monetary costs and benefits
from, the point of view of the project sponsors reflect social values only under
conditions perfect consumption. When imperfections exists, market prices do not
reflect social values. The common market imperfections: a) rationing b) prescription
of minimum wage rates and c) foreign exchange regulation.
Externalities:
A projects may have beneficial or harmful external effects. For example, for
creating an infrastructure in high speed rail project, facilities like roads which
benefit the neighboring areas. Such benefits are ignored in assessing the monetary
benefits to the project sponsors as they do not receive any monetary compensation
from those who benefited by the project.
Taxes & Subsidies:
From the private point of view, taxes are treated as monetary costs & subsidies
benefits are monetary gains. From the social point of view, taxes & subsidies are
nothing but transfer payments hence considered irrelevant.
Concern for Savings:
Unconcerned about how its benefits are divided between consumption and savings
a private firm does not put differential valuation on savings and consumption. From
social point of view, the division between benefits & consumption is relevant
wherein higher valuation is placed on savings.
Concern for Redistribution:
A private firm does not bother how its benefits are distributed across various groups
in the society. The society is concerned about the distribution of benefits across
different groups.
Merit Wants:

Goals and preferences not expressed in the market place, but believed by policy
makers to be in the larger interest, may be referred to as merit wants. It does not
relevant from the private point of view, they are important from the social point of
view.
One of the principal stumbling blocks in developing High speed rail systems from a
technological standpoint is cost. High-speed rail is very expensive to deploy.
Unfortunately, this is a fact of life, and while advances in technology may lower
costs in the future, recent history indicates that infra- structure and vehicle system
costs will continue to rise despite improved methods of construction and enhanced
design and manufacturing techniques.

Q.2. After listing the Work Break Down. Please refer to using the Gantt
chart techniques or the CMP, PERT technique to demonstrate the project
completion schedule.
CPM Model was developed for projects which are relatively risk free whereas PERT
model was developed for projects characterized by uncertainty. Both the approach
begins with the development of the network and a focus on the critical path. The
PERT approach is probabilistic and CPM approach is deterministic. The principal
focus of CPM analysis is on variations in activity times as a result of changes in
resource assignments. These variations are planned and related to resource
assignments and are not caused by random factors beyond the control of
management as in the case of PERT analysis. The main objective of CPM analysis is
on time cost relationships and it seeks to determine the project schedule which
minimizes total cost.
CPM analysis works on following assumptions:
1. The cost associated with a project can be dividing into two components:
direct cost and indirect costs. Direct costs are incurred on direct material and
direct labour. Indirect costs consists of overhead items like indirect supplies,
rent, insurance, material services, etc.
2. Activities of the project can be expedited by crashing which involves
employing more resources.
3. Crashing reduces time but enhances direct costs because of factors like
overtime payments, extra payments and wastage. The relationship between
time and direct activity cost can be reasonably approximated by downward
sloping straight line.
Indirect is associated with the project increase linearly with project duration.
Activity to be defined for high speed rail project:

Scope

Development of project purpose and need statement to guide alternatives

analysis, propose study goals and objectives. Prepare Scoping Technical
Report.

Ongoing Public Input

Coordinate with Municipal Corporation to develop the following community

partnership program. This will include meetings, project updates, and
presentations in geographically dispersed areas. Provide media relations,
monthly project updates and stakeholder database. The data collected on
alternatives development and alternatives analysis to allow public, private
and governmental review of proposed plans and areas of collaboration.

Scoping Technical Report

Preparation of scope of the alternatives that the public would like to have
considered

Methodology, Data Collection and Existing Conditions

Develop study databases and assess existing conditions which would
include;

Methodology Report

Market Database

Engineering Database

Technology Database

Property Database

Existing Conditions Report

Feasibility Determinations

Financial Analysis