CHAPTER FIVE

PROJECT MANAGEMENT

6.1 Definitions

Project management is the discipline of planning, organizing, securing and managing

resources to bring about the successful completion of specific project goals and
objectives.

Project management deals with planning, scheduling, controlling and monitoring the
activities that must be completed to reach the predetermined objectives of the project.

Project management is a carefully planned and organized effort to accomplish a

specific (and usually) one-time objective, for example, construct a building or
implement a major new computer system. Project management includes developing a
project plan, which includes defining and confirming the project goals and objectives,
identifying tasks and how goals will be achieved, quantifying the resources needed, and
determining budgets and timelines for completion. It also includes managing the
implementation of the project plan, along with operating regular 'controls' to ensure that
there is accurate and objective information on 'performance' relative to the plan, and the
mechanisms to implement recovery actions where necessary.
The primary challenge of project management is to achieve all of the project goals and
objectives while honoring the preconceived project constraints. Typical constraints are
scope, time, and budget. The secondary—and more ambitious—challenge is to optimize
the allocation and integration of inputs necessary to meet pre-defined objectives.

Since projects are the investment of resources on a package of interrelated time-bound

activities, project management should focus on coordinating the activities. The
manager has to organize, staff, direct and control in the midst of constraints on time,
cost, and performance. Efficient managerial techniques are required for project
planning and controlling. Project planning is the process of preparing for the
commitment of resources in the most economical manner. Controlling is the process of
making events conform to schedules by coordinating the action of all parts of the
project.
A Project Manager is a systems analyst with a diverse set of skills – management,
leadership, technical, conflict management, and customer relationship – who is

responsible for initiating, planning, executing, and closing down a project. The project
manager’s environment is one of continual change and problem solving. The project
manager’s understanding of the project management process is critical.

6.2 Forms of Project Organization

There are a large number of factors that influence the organizational structure. Some of
them are delegation of powers, authority, leadership styles, skills, targets, etc.
Generally, project organization may be done in one of the following forms:

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1. Line and Staff Organization: Under this form of organization, a person commonly
referred to as the project coordinator, is appointed to coordinate the activities of various
departments. He acts in a staff position to facilitate the coordination of line
management in functional departments. He doesn’t have any authority and direct
responsibility of line management. He serves as a local pint for receiving project-
related information and serves the project by rendering services. Sharing information
and providing assistance.
Since he doesn’t enjoy formal organizational authority, he may become indifferent
towards his duties and may not be able to control the various departments. Thus, it is a
weak form of organization.
2. Divisional organization: In this form of organization, a separate division is set up to
implement the project. The division is headed by the project manager who enjoys full
line authority over the personnel of the division. As a result, he has total control over
the division. He is in a better position to integrate the efforts and strengthen the
commitment of project related personnel to the objectives of the project. It can also
improve the time and cost targets. However, a company that runs two or more projects
has to produce many specialists of the same type because of the necessity to allocate
them in total to each project. Such a duplication of experts will result in wastage of
time, energy and money.
3. Matrix organization: The matrix form is more suitable for achieving the twin
objectives of efficient use of resources and effective realization of project objectives.
Under this form, the authority is shared between the project manager and the functional
managers. As a result, the personnel working in the project have a responsibility to
their functional superior as well as to the project manager. The project manager
integrates the contributions of personnel in various functional departments towards the
realization of project objectives. However, a major drawback of this form of
organization is the dual subordination.

6.3 Network Techniques

During the implementation stage, you focus on completing a number of activities for
commencing the operations of the project. Most of these activities are interrelated.
In order to execute the implementation process, these activities have to carry out in a
proper order. For proper planning and scheduling and controlling the activities of a
project, given their relationships, network techniques have been found quite useful.
Performing the activities in a certain sequence, which is technologically ordered, is
referred to as employing network techniques. In order to employ network techniques,
the project should be broken down into a well-defined set of jobs or activities. Within a
defined sequence, the activities may be started and stopped in an independent manner.
Development of Project Network: Basic to PERT and CPM is the network diagram.
The network diagram also referred to as the project graph which shows the activities
and events of the project and their logical relationships.

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A network is an arrow diagram, which is a graphic presentation of the project plan. The
network diagram is constructed in terms of activities and events. It depicts the logical
sequence of the various elements of work, in relation to each other that must be
accomplished before a project can be completed.
An event is an occurrence at a point in time marking the commencement or completion
of one or more activities. It doesn’t consume any resources. The symbol for an event is
a circle. The events are numbered logically and are inscribed inside the circle.
An activity represents a clearly defined project work, job or task and requires time and
resources for carrying out. An arrow represents an activity. The tail of the arrow is its
start and the head is its completion.

For example, a simple network diagram for a dinner party:

Preparing dinner
2
2 Receiving
1 guests
Inviting guests
3 4
Taking dinner
In order to construct a network diagram, the activities of the project have to be
enumerated. Then, the sequence of the activities has to be decided. The preceding,
succeeding and simultaneous activities for each activity should be defined.
Rules for Network Construction: the following are some rules of network
construction:
o Each activity must have a preceding and a succeeding event.
o Each event must have a distinct number.
o There should be no loops in the project network
o Not more than one activity can have the same preceding and succeeding activity.
Time estimation: The network plan has to produce a timetable of work, with each job
allocated a starting point and a finishing date. The time estimate for completing each
activity should be established. Generally three time values are assigned for each
activity.
1. Optimistic Time (to): is the time required to complete a piece of work if no
hurdles or complications arise.
2. Most likely time (tm): is the time in which the activity is most likely to be
completed. It makes allowance for some delays.
3. The pessimistic time (tp): is the time required if unusual complications and
unforeseen difficulties arise.

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6.3 Contract Management
A contract is an agreement enforceable by law and is made between two or more
parties. Contracting is the process of establishing a relation between the owner and the
contractors to execute the project work, especially construction. Since it has many legal
and commercial facets its handling calls for specialized knowledge and practical
experience.

Contracting Approach
1. Entrust the total responsibility for engineering, procurement and construction to
a consortium of contractors who may divide the total responsibility among
themselves
2. Divide the project into engineering, construction, supplies etc, and entrust the
responsibilities to suitable suppliers and contractors.
3. Accomplish a portion of the work yourself with your own departmental
organization and contract out the balance to one or more agencies.

Contracting Procedure: There may be directives from the government with regard to
the contracting procedures. The world Bank, Asian Development Bank, UNDP, etc,
have their own detailed procedures.

The usual steps in contracting are:

1. Work Packaging: Work packages are made for the purpose of contracting with
concentration in particular schedule areas. As far as possible one package must be
independent of other packages and each package must be well defined. The size of
each package must be either too large or too small.
2. Preparation of Tender Documents: The preparation of tender documents requires
serious attention because it aims at furnishing the prospective contractors with the
details of the contract. Documents given to contractors should contain sufficient
information. They shall include the following:
A. Instruction to tenders: Instructions may cover contractor’s qualifications,
guidelines for the preparation of the tender, the number of copies to be
submitted, currency, bid bond requirement, tender evaluation criteria, dates of
submission and opening etc.
B. Model form of lender: The prescribed form of tender shall be included in the
tender documents.
C. Drawings and specifications: Specifications should be complete and clear, and
set out the way in which all work should be done. With respect to goods, they
should specify physical and chemical properties. Regarding work they should
specify standards, methods, quality and quantity. Specifications should cover
also site conditions, soil conditions etc.
D. General Conditions of Contract (GCC): GCC is a document made applicable
to all contractors. It must cover contract documents, drawings, terms of
payments, performance security, and procedure for settlement of claims and
disputes, rights and obligations of parties and other conditions which are
generally applicable to contractors.

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3. Determination of Contractors’ Qualifications: One of the modern contracting
approaches is to invite submissions for prequalification before issuing a tender. The
criteria for qualification of contractors for every work package should be
determined in advance. The contract will be given only to a party possessing those
qualifications. This technique is employed with a view of avoiding incapable
contractors. However, prequalification is not compulsory. The minimum
qualifying requirements should include a contractor’s qualification, experience,
employees, equipment, and financial stability. Different organizations determine
the qualifications of the contractors in different ways. If prequalification is included
in the contracting procedure, the following steps must be taken:
1. Advertisement of prequalification notice inviting submission of applications.
2. Evaluation of applications.
3. Enlistment of the qualified contractors and intimation to them.
4. Tender Invitation: If contractors are short-listed through prequalification
procedures, send them enquiry letters to know their interest in participating in the
tender. An open tender may be advertised in the absence of such a list. The invitation
to tender should be properly worded and should not give room for any dispute or
disadvantage.
5. Tender Submission: Tender is usually submitted in sealed envelopes. Tenders will
submit the required number of copies of tender documents together with the other
necessary documents on or before the last date for submission. The invitation to tender
should clearly say the requirements and last date for submitting a tender.
6. Tender opening: Unless a justifiable confidentiality is to be maintained, like in a
national defense project, tenders should be opened in the presence of tenders’
authorized representatives. The time, place and date of opening the tenders must be
informed in advance.
7. Evaluation and recommendation: The project manager and the interested
department heads have to participate in the evaluation of tenders. One of the very
important tasks in the evaluation process is to add the costs of the elements that the
tenders have not included with their prices. Costs of excluded components shall be
added at the maximum market price. The other areas of observation in the evaluation
process are the quantity, quality and other technical specifications.
8. Award of contract: Usually, contract is awarded to the tender who offers the lowest
price. In certain cases, the tenders may be called by the project managers for
negotiations for brining down the price. But negotiations are not encouraged by many
international organizations, especially the World Bank.
9. Signing of Agreement with detailed contract conditions: Once the tender is
awarded to a contractor, a contract agreement is signed. It is document by which the
contractor agrees with the owner to execute the defined work and the owner agrees to
pay the agreed contract price in the manner stipulated in the contract.
6.4. Procurement and Materials Management

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Proper planning and control of procurement and efficient post-procurement materials
management are essential for an efficient project management.

Procurement: Procurement is a multidimensional activity with a number of significant

features. Delay in the supply of critical equipment and materials may lead to project
overruns. The ultimate objective of project procurement is to ensure that all required
materials are made available at the right time. The most important activities in
procurement process of projects are Material Scheduling, Procurement Planning, and
Procurement Budgeting.
1. Material Scheduling: The first step in materials scheduling is listing. This is done
on the basis of the need for materials and equipment. A schedule for purchasing the
materials will be prepared after listing the materials taking the lead time into account.
Unless procurement of materials is scheduled in accordance with the work schedule, the
project may face overruns. It is usual to break down the total procurement into (1)
goods, (2) works, and (3) services, the first for all manufacture and supplies, the second
for construction, and the third services like those of consultants.
2. Procurement Planning: Procurement planning includes the following:
a) Indenting: Indent is the purchase requisition raised by the project manager.
b) Making-buying decisions: The project manager may seek the possibility of
making some items on the indent inside the project, if possible.
c) Initiation of procurement action: The principal methods of bidding for supplies
and purchasing are:
(1) Open bid against advertisement,
(2) Prequalification of bidders, and
(3) Search out and invite to quote.

d) Logistic Planning: It includes planning of loading, transport, port, clearance,

unloading, storage, and site transportation.
3. Procurement Budget: Procurement budget has to be prepared on the basis of the
final project estimate. In short, a well-planned procurement system aims at right
quantity, right quality, right price, and right time.
Materials Management: The functions of material management, with respect to
project management particularly with construction management are the following:
1. Checking the materials on arrival: Checking the materials on arrival has two
purposes: (1) to see if they have suffered any damage or loss in transit, and (2) to
satisfy technically that the supply tallies exactly with the order specifications.

2. Recording the receipts: Besides the book entries of the stores, the project manager
has to record the receipt of every item in his documents.
3. Storage on site, Handling, and Retrieval
Distribution logistics in project consisting of storage, handling retrieval, issue and
movement to job site are major activities often giving rise to problems which all project
managers face.

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4. Risk Management: Security of the materials during the storage and transportation,
safe handling to avoid damage and sufficient lighting, fencing etc. are necessary for
reducing the risk of materials. Moreover, proper insurance coverage must be given to
reduce the extent of risk.

5. Wastage and damage during usage: Wastage during the usage and handling
beyond a permissible level and damage by accident or negligence can cause for
financial loss and emergency replacement buying. People should be educated to avoid
wastage and prevent damage.
6. Make it at the site: The project team should try to make at the site workshop, the
replacement of damaged items, if possible so that the time could be saved. Components
can also be partly bought and partly made and then assembled.
7. Rectifications, repairs and replacements: Care should be taken to ensure that no
time is lost in the inspection of the defects. Saving project time by immediate decision
to do necessary rectification at your cost may be more economical than waiting for a
credit acceptance by a supplier.
8. Inventory control: An efficient inventory control system focuses on timely
procurement of materials and avoids high expenditure on inventory holding. ABC
analysis is also employed in inventory control. ABC analysis is a technique of sorting
out the materials on the basis of the value of total usage of individual materials and
taking better care of the more expensive ones. The items are listed in the order of value
and special care is given in the order of value. Care and control over the stock must
include proper accounting, insurance, periodic checking maintaining, suitable stock
levels, and maintaining proper material records.

6.5 Project Control

Once the project is launched, control becomes the dominant concern of the project
manager. Project control involves a regular comparison of performance against targets,
a search for the causes of deviation, and a commitment to check adverse variances. It
serves two major functions: (1) It ensures regular monitoring of performance, and (2) It
motivates project personnel to strive for achieving project objectives.
Cost Control Tools
Reliable and accurate data and information are the keys for controlling. The master
budget is the most important tool for the cost control. The master budget has to be
broken down into various components of cost such as material, equipment, labour,
office expenditure, technology acquisition, sundry costs etc. These schedules of cost
serve as the basic for controlling cost.

In addition to the schedules of costs, output information is used in cost control. At

different operating levels, important data are collected and converted into management
information. Progress reports, cash flow statements, and reports on cost trends, cost
status, and bottlenecks or constraints etc. are the important pieces of information
required for controlling costs. A number of ratios, such as ratios of total project cost and
individual activity costs, are also used for cost control.

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The control function includes:
o Check on activities
o Measure the qualitative output
o Compare the results with the budgeted figures
o Based on the present performance, predict the future costs
o Ascertain and analysis the past and the predicted variances
o Investigate and trace the causes of variances to their roots
o Offset the adverse variances and correct the root causes of the variances to
prevent their recurrence.
6.6 Performance Analysis: Modern Approach to Control
Effective control over a project requires systematic performance analysis. This calls for
answering the following questions:
 Is the project as a whole on scheduling, a head of schedule or behind schedule?
 Has the cost of the project been as per budget estimates or different?
 What is the trend of performance? What would be the final cost for completion of
the project?

Performance analysis may be done for individual components of the project. In

performance analysis, we consider the value of work that has been done. This enables
us to know systematically whether the expenditure incurred was commensurate with
progress.

Control of Contingency and Changes: Contingency control and changes control are
often used interchangeably. Unless an effective control is exercised on contingencies
and changes, the budget and schedule will be thrown out of control. Project cost control
to be effective, should have two streams of accounting, one for the estimated definitive
budgeted cost and the other for the potential contingencies or changes. Approved and
accrued contingency amounts shall get added on to the cost.

Contingency controlling or change controlling is done through a system of continual

trending, and predicting changes, and brining down the level of contingency. The
system should identify changes form the original scope, estimate their impact on the
cost budget, evaluate their benefits with reference of to cost, and provide the
management with sufficient information on these variables for making decisions on
giving effect to the changes. There are optional changes like modifications and
additional facilities being incorporated, and inescapable changes like statutory,
regulatory, and inflationary changes. If approved, the changes shall be implemented as
if they were parts of the original scope, with an additional contingency budget or add on
budget. Price escalations may also be combined with contingency.

The project manager must try to reduce the impact of contingencies and changes
through trending and predicting. They are simple forecasting exercised through which
the future performance of work and cost are predicted.

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Corrective and Preventive Actions: Variances identified or predicted shall form the
basis for management actions of correction and prevention. In project implementation,
there are controllable and uncontrollable factors of variance either existing at the
present time or likely to occur in the future. The manager should always be alert and be
in contact with the external and internal environment to be able to predict the potential
deviations and take preventive measures in times.

As for the past variances and the existing situation, urgent corrective actions must be
taken on controllable factors. A revision of budget is necessary for uncontrollable
factors. Controllable variance factors include wrong resource assessment, poor
productivity, etc. Among uncontrollable factors we usually find errors in design,
unenvisaged events, statutory changes, wrong selection of equipment, etc.

Management action in variance control shall be aimed at reducing further adverse

variance, and simultaneously accelerating the pace of activities to put the project back
on schedule. Preplanning, rescheduling, closer monitoring, change in project team to
induct more number of committed people, faster decision making, deletion of some
work packages, etc. are among corrective measures.
6.7 Project Monitoring and Evaluation

Monitoring is about systematically collecting information that will help you answer
questions about your project. You can use this information to report on your project and
to help you evaluate. This type of evaluation is performed while a project is being
implemented, with the aim of improving the project design and functioning while in
action. It is an internal project activity designed to provide constant feedback on the
progress of a project, the problems it is facing, and the efficiency with which it is being
implemented.

Evaluation is about using monitoring and other information you collect to make
judgments about your project. It is also about using the information to make changes
and improvements. An evaluation studies the outcome of a project (changes in income,
housing quality, benefits distribution, cost-effectiveness, etc.) with the aim of informing
the design of future projects. Evaluation studies can assess the extent to which the
project produced the intended impacts (increases in income, better housing quality, etc.)
and the distribution of the benefits between different groups, and can evaluate the cost-
effectiveness of the project as compared with other options”

Monitoring and evaluation need not be expensive or complicated, nor do they require
specialists or grand calculations. The complexity and extent of the studies can be
adapted to fit the program needs. The job of the project manager in this process is to
point out those areas in need of monitoring or evaluation. If this is left to the
researchers, the studies may tend to be too academic and not as useful to project
management.

Evaluation and monitoring systems can be an effective way to:

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 Provide constant feedback on the extent to which the projects are achieving
their goals.
Identify potential problems at an early stage and propose possible solutions.
Monitor the accessibility of the project to all sectors of the target population.
Monitor the efficiency with which the different components of the project are
being implemented and suggest improvements.
Evaluate the extent to which the project is able to achieve its general
objectives.
Provide guidelines for the planning of future projects (Bamberger 4).
Influence sector assistance strategy. Relevant analysis from project and policy
evaluation can highlight the outcomes of previous interventions, and the
strengths and weaknesses of their implementation.
Improve project design. Use of project design tools such as the logframe
(logical framework) results in systematic selection of indicators for monitoring
project performance. The process of selecting indicators for monitoring is a test
of the soundness of project objectives and can lead to improvements in project
design.
Incorporate views of stakeholders. Awareness is growing that participation by
project beneficiaries in design and implementation brings greater “ownership”
of project objectives and encourages the sustainability of project benefits.
Ownership brings accountability. Objectives should be set and indicators
selected in consultation with stakeholders, so that objectives and targets are
jointly “owned”. The emergence of recorded benefits early on helps reinforce
ownership, and early warning of emerging problems allows action to be taken
before costs rise.
Show need for mid-course corrections. A reliable flow of information during
implementation enables managers to keep track of progress and adjust
operations to take account of experience (OED).

Components Monitoring and Evaluation Design

Good monitoring and evaluation design during project preparation is a much broader
exercise than just the development of indicators. Good design has five components:

 Clear statements of measurable objectives for the project and its components, for
which indicators can be defined.
 A structured set of indicators, covering outputs of goods and services generated
by the project and their impact on beneficiaries.

 Provisions for collecting data and managing project records so that the data
required for indicators are compatible with existing statistics, and are available at
reasonable cost.

 Institutional arrangements for gathering, analyzing, and reporting project

data, and for investing in capacity building, to sustain the M&E service.

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 Proposals for the ways in which M&E findings will be fed back into decision
making.

Indicators of Project Monitoring and Evaluation

Input indicators are quantified and time-bound statements of resources to be provided.

Information on these indicators comes largely from accounting and management
records. Input indicators are often left out of discussions of project monitoring, though
they are part of the management information system. A good accounting system is
needed to keep track of expenditures and provide cost data for performance analysis of
outputs. Input indicators are used mainly by managers closest to the tasks of
implementation, and are consulted frequently, as often as daily or weekly.

Examples: vehicle operating costs for the crop extension service; levels of financial
contributions from the government or cofinanciers; appointment of staff; provision of
buildings; status of enabling legislation.

Process indicators measure what happens during implementation. Often, they are
tabulated as a set of contracted completions or milestone events taken from an activity
plan.

Examples: Date by which building site clearance must be completed; latest date for
delivery of fertilizer to farm stores; number of health outlets reporting family planning
activity; number of women receiving contraceptive counseling; status of procurement of
school textbooks.

Output indicators show the immediate physical and financial outputs of the project:
physical quantities, organizational strengthening, initial flows of services. They include
performance measures based on cost or operational ratios.

Examples: Kilometers of all-weather highway completed by the end of September;

percentage of farmers attending a crop demonstration site before fertilizer top-dressing;
number of teachers trained in textbook use; cost per kilometer of road construction;
crop yield per hectare; ratio of textbooks to pupils; time taken to process a credit
application; number of demonstrations managed per extension worker; steps in the
process of establishing water users' associations.

Impact refers to medium or long-term developmental change. (Some writers also refer
to a further class of outcome indicators, more specific to project activities than impact
indicators, which may be sectoral statistics, and deal more with the direct effect of
project outputs on beneficiaries.) Measures of change often involve complex statistics
about economic or social welfare and depend on data that are gathered from
beneficiaries. Early indications of impact may be obtained by surveying beneficiaries'
perceptions about project services. This type of leading indicator has the twin benefits
of consultation with stakeholders and advance warning of problems that might arise.

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Examples of impact: (health) incidence of low birth weight, percentage of women who
are moderately or severely anemic; (education) continuation rates from primary to
secondary education by sex, proportion of girls completing secondary education;
(forestry) percent decrease in area harvested, percent increase in household income
through sales of wood and non-wood products. Examples of beneficiary perceptions:
proportion of farmers who have tried a new variety of seed and intend to use it again;
percentage of women satisfied with the maternity health care they receive.

Project Review: The expenditure authorization for a project generally specifies how
much can be spent by whom and when. To ensure that the actual expenditure does not
deviate significantly from the authorized expenditure, periodical control is exercised
during project implementation.

An audit of a project after it has been commissioned is referred to as post audit or post
completion audit. Most firms do a post audit for almost every project above some
threshold limit. Such an audit compares actual performance with planned performance
when the operations of the project stabilize. Post audit will have the following
advantages:

 Post audit provide a documented log of experience that may be valuable in

improving future decision making.
 It enables the project in identifying individuals with superior abilities in
planning and forecasting.
 It helps in discovering systematic biases in judgment.
 It induces healthy caution among project sponsors.
 It serves as useful training ground for promising executives who need broader
perspective.

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