BASICS OF PROJECT

MANAGEMENT

New Pattern
for UPSC IES/CSE

IES MASTER PUBLICATION

IES MASTER Publication
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First Edition : 2016

Typeset at : IES Master Publication, New Delhi-110016

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Preface

Preface to first Edition

Project management is a method of planning the plan. It starts from Project definitions
and ends with goal achievement.Project management is both an art and a science.
The science consists of a systematic approach using a standard methodology. The
art consists of “soft skills” including leadership, trust, credibility, problem solving, and
managing expectations.A project manager who is skilled in the art instinctively knows
how and when to react toproject problems. Project manager successfully utilizes
and refines both skill sets to effectively manage projects.
The book “Basic of Project Management” has been written to address the
need of students appearing for UPSC Engineering Services Exam (ESE). Most of
the books on this subject have been written too extensively and with a particular
branch of engineering in focus, which makes most of the part of the book irrelevant
for the exam. In this book we have tried to cover all the relevant topics pertinent to
the exam and have introduced important informations in boxes to attract special
attention and to clarify important concepts. Objective questions have been introduced
at the end for practice and to discover the extent of students knowledge.
IES Master Publication is thankful to Mr. Ankit Sharma for his extensive
contribution in generating, shaping, editing and production of this book. We also
thank the staff at IES Master Publication and all those who have assisted by providing
informations on the topics and advice in the production of the Book.

IES Master Publication

New Delhi, 2016

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CONTENTS

Pages

Chapter-1 Fundamental of Project Management 01 – 28

Chapter-2 Process Group & Knowledge Areas 29 – 40

Chapter-3 Project Initiation 41 – 64

Chapter-4 Risk Analysis 65 – 70

Chapter-5 Project Planning 71 – 133

Chapter-6 Project Monitoring & Control 134 – 141

Chapter-7 Project Closing 142 – 145

Chapter-8 Contract Management & Tendering Process 146 – 193

Objective Questions 194 – 230

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TABLE OF CONTENTS
Section Description Page No.

PREFACE ................................................................................ (iii)

CONTENTS ................................................................................. (v)

CHAPTER-1 FUNDAMENTAL OF PROJECT MANAGEMENT 1 – 28

1.1 Introduction 1
1.2 What is Project?
1.3 Types of Projects 4
1.3.1 Personal Project 4
1.3.2 Business/Organisational Project 5
1.3.3 National Projects 5
1.3.4 Global Projects 5
1.3.5 Based on Completion Time 5
1.3.6 Based on Value of Project 5
1.3.7 Based on Speed of Execution 6
1.3.8 Based on Ownership 6
1.4 Characterstics of Projects 6
1.5 Operations
1.6 Stakeholders 8
1.6.1 Project Manager 8
1.6.2 Sponsor 8
1.6.3 User/Customer 8
1.6.4 Sellers or Business Partners 9
1.6.5 Project Team 9
1.6.6 Departmental Managers 9
1.6.7 Board of Directors 9
1.6.8 Project Management Office 9
1.7 Projectt Constraints 9
1.8 Why Project Management is needed? 10
1.9 What is Project Management? 10
1.10 Objectives of Project management 11
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1.11 Project Management office 11
1.12 Functions of Project Management 12
1.13 Project, Program and Portfolio 13
1.14 Project Manager 15
1.15 Organisational Structure 16
1.16 Types of Organisational Structure 17
1.17 Project Lifce Cycle 21
1.18 Phase to phase Relationship 25
1.19  Types of Projects Life Cycles 26
1.20 Project Success 28
CHAPTER-2 PROCESS GROUP & KNOWLEDGE AREAS 29 – 40

2.1 Introduction 29
2.2  What is “Process Groups”? 30
2.3  What is “Knowledge Areas”? 31
2.4 Process Groups 32
2.5  Knowledge  Areas 34
CHAPTER-3 PROJECT INITIATION 41 – 64

3.1 Introduction 41
3.2 Project Identification and Prima Facie analysis 42
3.3 Project Preparation 42
3.4 Technical Feasibility 43
3.4.1 Factors Considered in Technical Analysis 43
3.5. Market Feasibility 48
3.5.1. Demand Analysis 48
3.5.2 Demand Forecasting Techniques 48
3.6. Financial Feasibility 52
3.6.1 Importance and Steps of Financial Feasibility 52
3.6.2 Components of Cost of Project & its Estimation 53
3.6.3 Working Capital Estimations 55
3.6.4 Techniques of Capital Budgeting 55
3.7. Social Cost Benefit Analysis 61
3.7.1 Social Costs 61
3.7.2 Social Benefits 63
3.8 Detailed Project Report (DPR) 64
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CHAPTER-4 RISK ANALYSIS 65 – 70

4.1 Introduction 65
4.2 Sources of Risk in Project Management 65
4.3 Managing Risk 67
4.3.1 Identification of Risk 68
4.3.2 Mapping out Causes of Risk & Constraints Involved 68
4.3.3 Quantifying the Eisk 68
4.3.4 Develop the Alternatives: 68
4.2.5 Selection of Best Alternative 69
4.2.6 Creation of Risk Management Plan 69
4.2.7 Implementation 69
4.3.7 Review 70

CHAPTER-5 PROJECT PLANNING 71 – 133

5.1 Project Planning 71

5.2 Project Planning Steps 71
5.2.1 Defining the Scope 72
5.2.2 Work Breakdown Structure (WBS) 72
5.2.3 Project Scheduling 73
5.3 Activity Over Arrow (A – O – A) Network Diagrams 80
5.4 Network Rules 83
5.5 Numbering of Events - Fulkerson’s Rule 83
5.6 Pert Analysis 87
5.7 Time Estimates 88
5.8 Frequency Distribution 89
5.9 Probability Distribution 90
5.10 Normal Probability Distribution 91
5.11 Beta Probability Distribution 93
5.12 Expected Time (TE) of An Activity 93
5.13 Expected Time for Activities in Series 95
5.14 Event Time 96
5.15 Slack 97
5.16 Critical Path 98
5.17 Probability of Completion of Project 99
5.18 CPM Analsysis 105
5.19 Comparison 106
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5.20 CPM – Networks 106
5.21 Event Time 107
5.22 Start and Finish Times of Activity 108
5.23 Float 1 109
5.24 Super Critical, Critical and Subcritical Activities 114
5.25 critical Path 115
5.26 Estimation of Project Cost 117
5.27 Project Cost 117
5.28 Indirect Cost 118
5.29 Direct Cost 118
5.30 Optimum Cost and Optimum Duration. 119
5.31 Cost Slope/Slope of Direct Cost Curve 120
5.32 Crashing 121
5.33 Resource Allocation 124
5.34 Important Points 125
5.35 Resource Levelling 129

CHAPTER-6 PROJECT MONITORING & CONTROL 134– 141

6.1 Introduction 134

6.2 What do we Monitor? 135
6.3 Tools for monitoring and Control 135
6.3.1 S-Curve 135
6.3.2 Earned Value Analysis 137
CHAPTER-7 PROJECT CLOSING 142 – 145

7.1 Introduction 142

7.2 Main Objectives 142
7.3 Types of Project Closing 143
7.4 Reasons for Pre-completion Termination of any Project 143
7.5 Steps of Project Closing Process 144
7.6 Project Completion Audit 144
7.7 Different Types of PCA 144
7.8 Reasons for Failure of Projects 145

CHAPTER-8 CONTRACT MANAGEMENT & TENDERING PROCESS 146 – 193

8.1 Definition and Objective 146

8.1.1 Essential Features of a Contract Agreement 147
8.2 Contractual Approach 148
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8.2.1 Traditional Build-Only Contracts 148
8.2.2 Design and Build Contracts 148
8.2.3 Build-Own Transfer (BOT) Contracts 149
8.2.4 Organisational Approach 149
8.2.5 Management Contract Approach 150
8.2.6 Professional Construction Management Approach 150
8.2.7 resources and Services Procurements Contract 151
8.3 Contract Documents 152
8.3.1 Notice Inviting Tender (NIT) 152
8.3.2 Contract Specifications 153
8.4 Forms and Conditions of Contract 155
8.5 Contract Types 156
8.5.1 Fixed Price/Lump-Sum Contracts 156
8.5.2 Cost-Plus-Fee Contracts 157
8.6 Types of Contracts in Common Use 157
8.6.1 Lumpsum Contracts 157
8.6.2 Measurement Contracts 158
8.7 Choice of Types of Contract 159
8.8 Pre Requisites of Execution of Work 160
8.8.1 Pre Construction and Construction Stages 160
8.10 Contracts for Specialist Works based on T and Q 165
8.10.1 Build-Operate Transfer/ Design-Build Operate
Approach 165
8.10.2 Engineering-Procurement-Construction
(EPC) / Lump Sum Turn Key Contract LSTK 166
8.11 Specifications 167
8.11.1 Art of Writing Specifications 167
8.12 Contract Stage 171
8.12.1 Measures to Incorporate Genuine Material
in Works 172
8.12.2 Passing and Inspection of Works 173
8.12.3 Confidential Report on the Performance of
Contractors 173
8.12.4 Extension of Time 174
8.12.5 Compensation for Delay 174
8.12.6 Suspensation of Work and Extension of Time 175
8.12.7 Interim Payments 175
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8.12.8 Assesment of Value of Work Executed 175
8.12.9 Causes Leading to Over Payment 175
8.12.10 Deviation Orders and Amendment to Contract 176
8.12.11 Completion of Work and Final Bill 176
8.12.12 Cancellation of Contract 176
8.13 Some Definitions 177
8.13.1 Mobilisation Advance 177
8.13.2 Yard Stick 177
8.13.3 Site Laborary 177
8.13.4 National Accreditation Board Testing and
Calibration Laboratories 177
8.13.5 Earnest Money 178
8.13.6 Bank Guarantee Bond 178
8.14 Post Contract Stage 179
8.14.1 Defects Liability Period 179
8.14.2 Arbitration 180
8.15 Contract Management 181
8.15.1 What is Contract Management? 181
8.15.2 Contract Management Trends 181
8.15.3 Building a Contract Management Team 182
8.15.4 Stakeholder Engagement 182
8.15.5 Resolving Conflicts 182
8.15.6 Corporate Governance 183
8.16 e-Tendering 183
8.16.1 What is Electronic-Procurement or
e-Procurement? 183
8.16.2 What is Electronic Tendering or e-Tendering? 183
8.16.3 e-Tendering as a Contract Management Tool 184
8.17 FIDIC189
8.17.1 The General Layout of the Contracts is as Follows189
8.17.2 The Other Books 190
8.17.3 Characteristics of FIDIC 191
8.17.4 Application Prospect of FIDIC 192
8.17.5 FIDIC and Design/Build & EPC Turnkey Contracts193

Objective Questions 194 – 230