GREAT ZIMBABWE UNIVERSITY

FACULTY OF COMMERCE

DEPARTMENT OF MANAGEMENT STUDIES

MODULE NOTES

BM403: PROJECT MANAGEMENT AND CONTROL

Notes Prepared By L.C. Gumbo

Module Overview:

The module examines the following: (1) an overview of project management and its role in achieving
organisational outcomes; (2) how projects are created and managed across their lifecycle; (3) the
stakeholders that influence project objectives and outcomes; (4) the organisational structure that is
needed to provide project resources; (5) how to identify, define and manage the timeframe required to
deliver project outcomes and (7) how to identify and manage the financial resources required to deliver
project outcomes.
Objectives:
By the end of this module, the student should be able to:
 Define project management and how it affects organisational goals
 Develop a project plan and its implementation strategy
 Effectively manage projects time frame
 Identify the different stakeholders involved in different projects
 Identify the different sources of funds for projects
 Compile a report for successive stages in project implementation and completion
Assessment Criteria

Course Work – at least 2 assignments 25%

Final Examination 75%

N.B. Students will not be allowed to sit for the final exam if they do not meet the coursework
requirements

Key Texts:
1. Kemp S. (2012) Project Management for Small Business Made Easy. CWL Publishing
Enterprises. Wisconsin
2. Mantel S.J., Meredith J.R. et al (2011) Project Management in Practice 4th Edition. John
Wiley & Sons. New Jersey
3. Martin P. & Tate K. 2001. Getting Started in Project Management. John Wiley and Sons.
New York
4. PMBOK Guide (2012). A Guide to the Project Management Body of Knowledge. Project
Management Institute, Inc. Pennsylvania
Module Outline:

1. Introduction to Projects

1.1 Project Definition, Goals and Needs Assessment

1.2 Project Lifecycle
1.3 Project Stakeholders & Beneficiaries

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2. Project Planning Cycle

2.1 The planning process

2.2 Needs identification and Assessment
2.3 Planning at the different stages of the project lifecycle
2.4 Project failure

3. Project Scheduling Tools

3.1 Work Breakdown Structure
3.2 Gantt Chart
3.3 Network Analysis
 Programme Evaluation and Review Technique (PERT)
 Critical Path Method (CPM)
3.4 Logical Framework

4. Monitoring and Evaluation (M & E)

4.1 Logic behind Monitoring and Evaluation

4.2 Logical Framework Based M & E
4.3 Results-Based M & E
4.4 Total Quality Management

5. Project Appraisal

5.1 Financial Project Appraisal

5.2 Non-financial Appraisal

6. Project Communications Management

6.1 Communications Planning

6.2 Information Distribution
6.3 Manage Stakeholders

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1. Introduction To Project Managemnet

1.1 Project Definition

History of Project Management

Project management is an idealogy that has been in existence foirm the begiining of the
world. The order in which the world operates, the perfect sychronisation of the times and the
seasons all testify that there is a Great Manager at work. Massive projects such as the Great
Wall of China, the Taj Mahal, the Stonehenge all bera ptestimony of the use of project
management ideas and concepts. Closer to home, we have the Great Zimbabwe Monuments
which is a magnificent display of the artistry and construction expertise of our ancestors. Its
is therefore safe to conclude that project managemnet is not an „emerging‟ industry as many
say, but it is indeed one that we are only beginning to appreciate and develop more
scientifically.

One of the earliest researchers to document and apply scientifc methods to project
management is Fredrick Taylor(1856-1915). He applied scientific reasoning to work by
showing that labour can be analysed and improved by focusing on its elementary parts and
that introduced the concept of working more efficiently, rather than working harder and
longer. Henry Gantt (1861-1919), a close associate of Taylor‟s, is credited with developing
the Gantt Chart which documents the order of work.

Apart from the Gantt Chart, many other tools have since been developed for use in project
managemnt; the Critical Path Method (CPM) as well as the Program Evaluation and Review
Technique. These all serve to improve the efficiency of the oroject managemnt process thus
enusring that it delivers on the project objects.

Defining Projects

The question that begs to be answered now is: what is a project?? Simply put a project is any
sort of planned undertaking. Projects vary in nature, scope and duration: from personal
projects, like obtaining your undergraduate degree (3-4 years) or planning a birthday party for
your daughter (2 weeks), to large and complex projects such as the building of the Tokwe
Mukorsi Dam (2-20 years).

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A project has unique attributes which differentiate it fom ongoing work operations. Projects
are not done on a daily basis- they have a defined lifespan since they are not an everyday
business process. They should have definitive start dates and end dates. Generally projects
are made up of:

 a defined beginning,
 multiple activities which are performed to a plan,
 a defined end.

To help accomplish the goal of keeping projects within a defined time frame, schedules are
created. These schedules show when tasks should begin and end. As discussed earlier,
projects vary immensely in terms of duration. They can last for minutes, hours, days, weeks,
months or years.

Projects are unique in the sense that they are designed to create or introduce a product or a
service that was not in existence before, something that has never been done before. For
example, the research projects that you undertake. They are based on a knowledge gap- that
is, you want to explore an area that has not yet been explored and in so doing you fill a
knowledge gap. Therefore a project may be defined as a means of moving from a problem to
a solution via a series of planned activities.

In contrast with projects, operations are ongoing and repetitive. They involve work that is
continuous without an ending date and you often repeat the same processes and produce the
same result. The purpose of operations is to keep the organisation functioning while the
purpose of a project is to meet its goals on time and conclude the project. Therefore
operations are ongoing while projects are unique and temporary.

On most projects it is possible to carry out multiple activities simultaneously. Usually it is

possible to perform several activities at the same time; however there will be activities which
cannot begin until a preceding activity has been completed. Such relationships are referred to
as dependencies or precedencies, and when planning a project it is important to establish the
order of precedence of dependent activities, and to establish those activities which can be
performed in parallel with other activities.

Regardless of the nature or size of your project a successful outcome can only be achieved by
using sound project management techniques. The most widely used and popular methods of
project management are Gantt Charts, Critical Path Method (CPM) and Programme

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Evaluation and Review Technique (PERT). However, it is important to remember that
projects are carried out by people, and the human aspects of project management are also
critical for the project success.

Formal definition of a project:

Project Management Institute defines a project as a temporary endeavor undertaken to create

a unique product, service or result. The temporary nature of projects indicates a definite
beginning and end. The end is reached when the projects‟s objectives have been
accomplished or when the project is terminated because its objectives will not or cannot be
met, or when the need for the project no longer exists.

Characteristics of Projects

In considering whether or not what are you are dealing with is a project, bear in mind the
following questions: is it a project or an ongoing operation?who are the stakeholders?what
characteristics distinguish this endeavor as a project?

The characteristics of a project are:

 Projects are unique

 Projects are temporary in nature and have a definite duration
 Projects are completed when the objectives are met or it is determined that the project
is no longer viable

That table below summarises the differences between projects and oprations:

Project vs. business Processes

Project Business Process
1. temporary: has beginning and end date 1. ongoing: the same process is repeated over
& over again
2. produces a unique output or deliverable 2. produces the same output each time the
process is run
3. has no predefined work assignments 3. has predefined work assignments

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1.2 Project Lifecycle and Organisation

As can be discerned from the definition of a project, projects are undertaken in a much
broader context and environment than that of the project. That is, projects are undertaken in
an organisational environment, which is much broader than the project environment. A
project life cycle are the phases into which projects are divided to facilitate better
management and control with appropriate links to the ongoing operations of the performing
organisation.

Characteristics of the Project Life Cycle

The project life cycle defines the phases that connect the beginning of a project to its end. For
example, say an organisation identifies an opportunity they may wish to exploit. First and
foremost, a feasibility study will be conducted to determine whether or not such a projects is
worth undertaking. Defining the project life cycle can help the project manager determine if
the feasibility study is the first project phase or if it is a separate, stand-alone project.

As the project moves from one phase to the next in its life cycle, some form of technical
transfer or handoff is involved. Deliverables from one phase are reviewed for completeness
and accuracy and approved before work on the next phase is initiated. However, this
procedure is not cast in stone. In some projects, a succeeding phase can be initiated without
approval of the preceding phase, when the risks involved are acceptable of course.

Project Life cycles generally define:

 What technical work is to be done at each phase

 When the deliverables are to be generated in each phase and how each deliverable is
reviewed, verified, and validated
 Who is involved in each phase
 How to control and approve each phase

Project life cycles differ from organisation to organisation. Some organisations have
standardised projects with a single life cycle while others allow the project manager to choose
the most appropriate life cycle for the team‟s project. The manner in which projects are
defined can be very detailed or very general. Highly detailed descriptions of life cycles can
include forms, charts, and checklists to provide structure and control. However, most project
life cycles share a number of common characteristics:

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  Phases are generally sequential and are usually defined by some form of technical
information transfer or technical component handoff
 Cost and staffing are low at the start, peak during the intermediate phases and drop
rapidly as the project draws to a conclusion as shown below:

Source: PMBOK© Guide

 The level of uncertainty is highest and, hence, risk of failing to achieve the objective
is greatest at the start of the project. The certainty of completion generally gets
progressively better as the project continues.
 The ability of the stakeholders to influence the final characteristics of the project‟s
product and the final cost of the project is highest at the start, and gets progressively
lower as the project continues. A major contributor to this phenomenon is that the cost
of changes and correcting errors generally increases as the project continues.

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The generic project life cycle model

This model includes six phases:

 Project Identification and Design

 Project Initiation
 Project Planning
 Project Implementation
 Project Monitoring, Evaluation and Control
 End of Project Transition

Source: PMBOK© Guide

Project Identification and Design

The question that needs to be answered at this phase is: are we doing the right project?
During this phase the project management team works to:

1. identify project ideas

2. collect assessment data
3. analyse the project assessment data
4. develop the project logic

The project identification and design phase is important because it provides the most cost-
effective opportunity to answer fundamental questions about the project parameters. Where

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will the project work? Who are the beneficiaries? What are the deliverables? What is the
intervention logic? What are the major risks associated with the project? What is the
underlying project approach/strategy? Once a project is underway, changing these project
parameters is very costly and the change becomes much harder to manage. Therefore, it is
imperative that the project manager gathers and processes data to inform decisions during the
project identification and design phase.

Project Initiation

A formal initiation process provides a number of benefits:

 it helps to ensure there is sponsorship of the project

 it formally authorises the project team to mobilise resources for the project
 it provides a „green light‟ for the project to begin activities and expend resources
 it establishes clarity regarding the steps required to move forward with the project

Generally, initiation processes are most commonly associated with the formal initiation of
project activities. Initiation processes can also be established to initiate a particular phase of a
project. In the absence of formal project initiation processes, a project runs the risk of:

 wasting time, money, personnel capacity and organisational capital pursuing a project
that ultimately lacks commitment and support from key decision makers and/or ties-
up resources that could be used to better effect on other projects
 demoralising those who have worked hard to produce the proposal
 creating false expectations and hopes on the part of project participants
 damaging the credibility and reputation of the organisation

Whatever method your organization uses to initiate a project -- Sometimes it's very formal,
sometimes not. These are two formal methods for Project Initiation and documenting the
project approval and authorization.

The Project Charter -- PMI‟s PMBOK® recommends the use of a Project Charter as the
project initiation document. The Project Charter, as defined in the PMBOK® Guide (Third
Edition), is:

”A document issued by the project initiator or sponsor that formally authorizes the existence
of a project, and provides the project manager with the authority to apply organizational
resources to project activities.”

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The “project initiator” or Project Sponsor is external to the project organization and at a level
that is able to fund the project. The development and issuance of the Project Charter by the
project initiator links the project to the ongoing work of the organization. The Project Charter
documents:

Business Needs (at a higher level than detailed business requirements)

Project Justification (which may refer to other documents, such as a feasibility study,
business case, or other business needs analysis)

Current Understanding of the Customer‟s Requirements

The deliverable or work product intended to satisfy the Customer‟s requirements.

Project Planning

By the time a charter for a project is completed, the project team has already developed a
number of initiation deliverables related to the project. These initiation deliverables (the
project logical framework, the project proposal, the project charter etc) contain a relatively
extensive level of detail related to the project, including the:

 goal, outcomes and outputs

 scope and activities
 indicators and means of Verification
 budget; and
 schedule

Do not confuse the project proposal, the project logical framework, or other documents
developed during project identification and initiation phases with a project plan. These
documents differ substantially in terms of the format, purpose, audience, level of detail,
participation, timing, and schedule constraints.

The table below outlines keys differences between the project proposal and the project
implementation in terms of the purpose, format, and level of detail.

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NB. Some organisations use the project proposal as an implementing plan. This is especially
the case where the proposal format is based on donor driven requirements that can result in
proposals that approximate project plans in terms of length and level of detail.

Project Implementation

Within the implementation phase the project manager is responsible for the following
activities:

 launching the project

 coordinating roles and responsibilities
 directing and managing project implementation
 managing communications
 managing the project team
 managing issues and risks
 managing organisational capacity

The day-to-day work of project implementation is to lead and manage the implementation of
the project, ensuring that the project implementation plan and its associated documents are
delivered according to plan, are monitored closely and are revisited as issues and risks are
identified. There are tools, skills and processes that exist to help project managers develop
comprehensive and appropriate documents that are essential to the successful implementation
of the project.

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Documents that lead and manage project implementation include:

i. the Project Implementation Plan

ii. the Project Work Breakdown Structure
iii. the Project Schedule
iv. the Project Budget
v. the Communications Plan
vi. Project Team Plan

Project Monitoring, Evaluation and Control

Throughout the project life cycle, challenges/problems/issues will arise and it‟s the
responsibility of the project manager to keep control of the project to the end. However, there
are indispensible tools that assist the project manager‟s efforts to ensure that the project are
tracked, measured and controlled. These tools can generally be organised into four categories:

1. Project Monitoring: constantly checking if the implementation is progressing as

planned
2. Project Evaluation: assessing whether the expected benefits will be delivered and are
still valid
3. Project Risk Management: actively identifying and managing project risks that may
influence the capacity of the project to achieve its results for the end population to
take advantage of the project benefits
4. Integrated Change Management: ensuring that all proposed project changes (scope,
budget, schedule, quality, procurement, monitoring and evaluation, procurement,
transition etc) are assessed and logged, and appropriate action is taken.

The Monitoring, Evaluation and Control processes continually compare actual

performance to the project implementation plan (Variance analysis). When variance is
found, the project teams need to analyse the cause of the variance, identify potential
corrective actions, and implement changes to realign the model with the reality of the
project context.

End of Project Transition

By definition, a project is a temporary endeavour though it can run for many years. There
are four end-of-project transition scenarios which exist in practice:

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 1. Termination: the project is formally ended and all project closure activities
completed. Termination could also include „phasing over‟ or transferring the
project activities to a local partner, institution or community.
2. Extension: negotiation of added time to finish the project (could be at additional
or no cost)
3. Expansion: identification of elements for replication with a new target area or
population
4. Redesign: continuation via a new phase with modified interventions or activities

1.3 Project stakeholders and Beneficiaries

Project stakeholders are individuals and organisations that are actively involved in the
project, or whose interests may be affected as a result of project execution or project
completion. They may also be in a position to influence the project‟s objectives and
outcomes. Project stakeholders must be identified, their requirements and expectations
determined and their influence managed as effectively as possible.

The diagram below illustrates the relationship between stakeholders and the project team:

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Adapted from PMBOK© Guide

Stakeholders differ in their levels of responsibility and authority when participating on a

project and these can change over the course of the project‟s life cycle. In some cases,
stakeholder identification can be difficult but failure to identify a key stakeholder can cause
major problems for a project.

Stakeholders may have a positive or negative influence on a project. Positive stakeholders are
those who would normally benefit from a successful outcome from the project, while
negative stakeholders are those who see negative outcomes from the project‟s success. For
example, Great Zimbabwe University‟s Mashava campus project. The University
management may view this as positive stakeholders since they are likely to benefit from
higher revenues due to larger teaching venue & residence capacity whilst Mashava Residents
may be negative stakeholders as they may feel threatened by the presence of the University in
their community.

Key stakeholders in every project include:

 Project Manager. The person responsible for managing the project

 Customer/user. The person or organisation that will use the project‟s product. There
may be multiple layers of customers. For example, the customers for a new
pharmaceutical product can include the doctors who prescribe it, the patients who take
it and the insurers who pay for it. In some application areas, customer and user are the

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 same, while in others customer refers to the entity acquiring the project‟s product and
users who will use the project‟s product.
 Performing organisation. The enterprise whose employees are most directly
involved in doing the work of the project.
 Project team members. The group that is performing the work of the project
 Project management team. The members of the project team who are directly
involved in project management activities
 Sponsor. The person or group that provides the financial resources, in cash or in kind,
for the project.
 Influencers. People or groups that are not directly related to the acquisition or use of
the project‟s product, but due to an individual‟s position in the customer organisation
or performing organisation, can influence, positively or negatively, the course of the
project.

Stakeholders can also be classified in many ways and called by various names: as internal
and external, owners and investors, sellers and contractors, individual citizens,
government agencies, the society at large.

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2. THE PROJECT PLANNING CYCLE

Project Planning Definition

Project planning defines the project activities and end products that will be performed and
describes how the activities will be accomplished. The purpose of project planning is to
define each major task, estimate the time and resources required, and provide a
framework for management review and control. The project planning activities and goals
included defining:

 The specific work to be performed and goals that define and bind the project
 Estimates to be documented for planning, tracking and controlling the project
 Commitments that can be planned, documented and agreed to by affected groups
 Project alternatives, assumptions and constraints

The planning process includes steps to estimate the size of the project, estimate the
technical scope of the effort, estimate the resources required to complete the project,
produce a schedule, identify and assess risks and negotiate commitments

Repetition of these steps is necessary to establish the project plan. Typically, several
iterations of the planning process are performed before a plan is actually completed.

2.1 The Planning Process

Project Plan

A project plan is a formal, approved document that is used to manage and control a
project. The project plan forms the basis for all management efforts associated with the
project. It is a document that is also expected to change over time. The project plan
documents the pertinent information associated with the project; it‟s not a verbose textual
document. The information associated with the plan evolves as the project moves through
its various stages and is to be updated as new information becomes available.

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Techniques in Planning

The project management techniques related to the project planning stage include:

1. Describing project scope, alternatives, and feasibility

This involves getting an understanding of the content and complexity of the project.
Some relevant questions that should be answered include:
 What problem/opportunity does the project address?
 What results are to be achieved?
 What needs to be done?
 How will success be measured?
 How will we know when we are finished?
2. Divide the project into tasks
This is also known as the work breakdown structure. This step is done to ensure an
easy progression between tasks.
3. Estimating the resources and creating a resource plan
This helps to gather and arrange resources in the most effective manner
4. Developing a preliminary schedule
In this step, you are to assign time estimates to each activity in the work breakdown
structure. From here, you will be able to create the target start and end dates for the
project.
5. Developing a communication plan
This plan outlines the communication procedures between management, team
members and the customer.
6. Determining project standards and procedures
These are the specifications of how various deliverables are produced and tested by
the project team.
7. Identifying and assessing risk
The goal here is to identify potential sources of risk and the consequences of those
risks
8. Creating a preliminary budget
The budget should summarise the planned expenses and revenues related to the
project

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 9. Developing a statement of work
This document will list the work to be done and the expected outcome of the project
10. Setting a baseline project plan
This should provide an estimate of the project‟s tasks and resource requirements.

2.2 Needs Identification and Assessment

A need is a discrepancy or gap between “what is” and “what should be.” A needs
assessment is a systematic set of procedures that are used to determine needs, examine
their nature and causes, and set priorities for future action. In the real world, there is never
enough money to meet all needs. Needs assessments are conducted to help project
planners identify and select the right job before doing the job right.

The following actions may help you define the problem or opportunity:

 Get a clear definition of the problem to be solved from the project sponsor. A
clear definition will help keep the project focused.
 Determine the project sponsor‟s needs and wants. Time and money for the project
will be limited thus wants will have to be sacrificed in favour of needs
 Gather sufficient background information about the current situation. All issues
pertaining to the project must be investigated thoroughly.
 Learn and understand the business reasons for the project and the project
sponsor‟s motive in undertaking it. This will provide a basis for balancing the
budget, schedule, scope, quality, resources and risk. It might also help to capitalise
on opportunities to improve the outcome of the project.

Establishing Project Objectives

Having clearly defined the problem, objectives of the project have to be outlined, including
what is to be done (specific end results), how it will be done (quantity, quality), when it will
be complete (deadline), and how much it will cost. Consider the three main aspects of project
objectives:

i. Cost. The money and resources required to get the job done- including people,
equipment and other allocations
ii. Time. The time required to get the job done

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 iii. Scope. A description of all the deliverables- the end products, services, processes, or
other results to be provided at the end of the project.

The project objectives must be SMART (Specific, Measurable, Agreed-upon, Realistic,

Time/Cost-limited).

 Specific. Objectives must be clear and well-defined that anyone with a basic
knowledge of the project can understand.
 Measurable. Objectives must be defined in measurable terms. If they cannot be
measured they are too ambiguous and they need to be defined more clearly.
 Agreed-upon. The project manager, project sponsors and customers must agree on
the project objectives. All stakeholders must agree that the end result will solve the
problem or respond to the opportunity defined.
 Realistic. The project objectives must be achievable, given the available resources,
knowledge, skills and time.
 Time/cost limited. The objectives need to be framed within clear time/cost goals. The
amount of available time (budget) as well as any available flexibility should be
defined.

Balancing the Objectives

The three principal aspects of a project are time, cost and scope. The projects manager‟s job
is to keep these three elements in balance.

 If time is short, the resources (cost) must increase, the scope must decrease, or both.
 If funds are short, the time can be extended, the scope must decrease, or both.
 If the scope is large, the cost will be greater, the time must be extended or both.

The diagram below shows the principal aspects of a project.

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Cost considerations

Costs include the money and resources required to complete the project, including people,
equipment and materials. The project sponsor usually wants the project at the lowest cost
possible. The budget for the project is approved based on the scope and schedule. The cost of
the project is influenced by:

 Specifications of the end products ( such as levels of performance, quality and

reliability)
 Compliance with governmental, institutional or internal standards
 Technical requirements and administrative needs
 Availability of resources with the appropriate skill. For example, if in-house resources
are not available when needed, it may be necessary to contract with outside resources
at an extra cost

The project manager must establish performance standards to determine how to measure cost
performance.

Time considerations

The project schedule is easy to measure and is often given more attention than cost and
scope. Project managers must balance the schedule with the project scope, budget and
resources available. Project managers must establish performance standards to determine how
schedule performance will be measured.

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Scope Considerations

A good scope statement clearly defines all the work that must be performed to deliver a
product, service, or result with the specified features, functions and level of quality. It
describes what will and will not be completed at the end of the project. A complete scope
statement includes technical specifications, performance requirements, facilities
requirements, ground rules, constraints, exclusions, procedures, logistics, safety regulations,
security issues and environmental considerations. A complete scope statement also includes a
list of items that are not included, although some stakeholders might expect them to be
included. The project scope must be balanced with the time, budget and resources available.
It may increase over time (scope creep) because of an adequately defined problem or
opportunity, overlooked details, unforeseen problems or changes in the market or company.

Final Statement of Project Objectives

Once project objectives are defined, they should be clearly spelled out in a comprehensive
scope statement that provides a documented basis for making future project decisions. It
should include justification for the project, description of the product or service the project is
to create, and a description of the project deliverables. This written documentation is shared
with all stakeholders and project team members. As the project progresses, you might need to
refine or revise the scope statement to reflect approved changes in scope.

2.3 Planning at the different stages of the project lifecycle

i. Planning in the concept phase

In the concept phase, a need has to be identified that will result in the development/creation
of a product to fulfil the need being developed. Minimal information about the project may be
available at this stage of project development but it is important to capture this information
for use in the planning phase. At the concept phase, the focus of planning will be on project
definition and getting the project started. A strategy for deriving a solution to the stated goals
is crucial at this stage. The problem being addressed by the project is clearly stated; the
project goals and objectives are identified; and success criteria for the project are
documented. Also, the assumptions, constraints and risks that apply to the project are defined.

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Results of the technology assessment are documented as a precursor to the technical approach
that is later defined.

ii. Planning in the planning stage

The project plan is completed in the project planning and risk identification stage of the
project. For some large projects, this stage can run as a „mini-project‟ with a team of people
dedicated to performing the effort. For small projects, the plan may be developed by a group
of people as a part-time job.

During this project stage, details of the plan are determined and an approach is defined. The
full project plan is then developed. Project plan includes the following elements:

 A brief project summary

 A work break down structure
 A project organisation structure
 A schedule
 An approach
 A list of identified risks
 An estimated budget and costs
 A list of deliverables
 A description of planned quality activities
 A description of the configuration process to be used
 A summary of project requirements

Even during the planning stage, the development of the project plan is an iterative process.
Each element of the plan is regularly revisited for changes and refinements, based upon
further analysis and decisions in developing other plan elements. It is critical to get input on
the project plan from the involved parties before actually starting the project. Approval of the
plan commits the resources necessary for project implementation.

iii. Planning in the Project Start-Up Stage

To transition the project from the initial formulation and design to implementation/execution
requires some type of start-up activities. The project start-up stage is typically a short period
that transitions a project from the planning to the execution stage. In the start-up stage, the

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team is assembled and a kick-off meeting is held to familiarise the team with the elements of
the plan and the requirements of the system. Specific work packages detail and specify the
activities being performed by the teams, as well as the cost and schedule associated with
those activities.

iv. Planning in the Execution/Implementation Stage

At this stage planning consists of replanning when it is determined that the project is not on
track with the current plan. This might occur for a variety of reasons. It is very important to
know that project plans will change and that replanning is natural part of the planning
process. Replanning does not necessarily mean that the project is in trouble. Frequent and
extensive replanning may, however, indicate that there are some serious issues with the
project plan.

v. Planning in the project close-out stage

A close-out process is performed once the project objectives have been met. The first step in
the closing process is the acceptance of the product/system by the users. It is important that
the user decides when the project is completed. This determination is based upon the success
criteria outlined in the very early concept and planning stages of the project.

2.4 Project Failure

Why do projects fail? There can be many reasons why projects go wrong. The most common
reasons are as follows:

i. Project goals are not clearly defined

ii. There can be constraints on the completion of projects arising from the different
objectives of:
 Short time scale
 Resource availability
 Quality factors
 Human factors

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Problems with Project Goals

 The project sponsor or client has an inadequate idea of what the project is about at the
start.
 There may be a failure of communication between the client and the project manager.
The may be due to a lack of technical knowledge on the part of the client or an
overuse of jargon by the project manager.
 Specifications may be subject to constant change. This may be due to problems with
individual clients, decision making processes at the client end, or environmental
changes. For example, the government may change the basic "rules of the game"
before the completion of the project.
 The project goals may be unrealistic and unachievable, and it may be that this is only
realised once the project is under way.
 The client may become carried away with the idea of the project and may be unable to
see clearly what can be achieved.
 Projects may be highly complex and may have a number of objectives that actually
contradict each other.

There are perhaps two stages which can help in ensuring that goals are properly defined and
achievable:

a. Ensuring that the client specification is clear and understandable. To do this you must
first of all establish the objectives of the project. It would help to ask the following
questions:
 What is it that the organisation is setting out to achieve or is being asked to achieve?
 Will the suggested project fulfil these objectives?
 Have all the alternatives been considered and is the chosen option the best one
available?
 Have the full effects of the project, both inside and outside the organisation, been
considered?
b. Preparation of Project overviews (Project brief). The brief should take the objectives
set out in the previous exercise and translate them into targets and goals. Any key
constraints should also be identified and stated at this stage. This brief should be

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 agreed by the sponsor/client and communicated to the project manager. Any
ambiguities or queries should be sorted out as soon as possible.

A good way forward would be through the establishment of success criteria for the project.
If you want the project to succeed, then you have to know when you have succeeded.

Success criteria can be described as being hard or soft:

 Hard criteria are often the most obvious criteria that are tangible and measurable and
can be expressed in quantitative terms. They tend to pose the question "what?”; that is
"what should be achieved?"
 Soft criteria are usually less obvious, but not necessarily less important. They are often
intangible and qualitative. Consequently they may be difficult to measure. They would
tend to ask the question "how?"

a) Hard criteria
 Performance specifications: these may be set out in terms of the ability to deal with
certain demands. For example, this could be throughput of traffic, number of patients,
volume of transactions processed or the number of enquiries dealt with.
 Specific quality standards: this could relate to technical standards and tolerance, or
may be the achievement of a favourable report from an outside inspection agency.
 Meeting deadlines: this is probably the most obvious one of them all where projects
need to be completed within a given time scale. For example, a new system may need
to be implemented ready for the start of the financial year, or a new development may
have to meet time requirements as laid down in contract specifications.
 Cost of budget constraints: an important criterion may be to complete the project
within a cost limit or budget which has been determined. Additionally there may be
requirements in terms of the ongoing cost of the completed project. For example,
a new system may be required to make savings for the organisation on a continuing
basis.
 Resource constraints: there may be other resource constraints such as making use of
existing premises or labour force.

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As you can see, the above criteria are relatively easy to establish and should also be quite
easy to specify in a project brief.

b) Soft criteria
 Demonstrative co-operation: this would be about showing that the project team could
work together effectively and without a degree of conflict. It could be an important
consideration to develop and implement solutions for the organisation which have a
wide element of consensus and stem from a co-operative attitude.
 Presenting a positive image: this may also be important but obviously can be difficult
or impossible to quantify.
 Achieving a total quality approach: this would be more about the adoption of a
philosophy of continuous improvement than the achievement of specific performance
targets on quality.
 Gaining total project commitment: this is again about how the project is managed and
the attitude of the project team to it.
 Ensuring that ethical standards are maintained: it can be very important to ensure that
no corners have been cut that should not have been and that professional standards of
ethics have not been breached.
 Showing an appreciation of risk: this would ensure that no unacceptable risks were
taken in the pursuit of other project objectives. Again this is about how the project is
developed rather than the end product itself.

Constraints on the completion of projects

a. Time
Our definition of a project stated that it was an activity which has a defined beginning and
ending point. Most projects will be close-ended in terms of there being a requirement for
completion by a certain point in time. This point may be the result of an external factor
such as new legislation, or may be derived from organisational requirements. It may also
be partly determined by other constraints. There is likely to be some relationship between
the time taken for a project and its cost. A trade-off between the two constraining factors
may then be necessary.

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b. Resource Availability

There is likely to be a budget for the project and this will clearly be a major constraint.
Cost constraints may be set in a number of ways, for example as an overall cash limit or as
a detailed budget broken down over a number of expenditure headings. Labour resources
in particular may be a limiting factor on the completion of the project. In the short run it is
likely that labour will be fixed in supply. Whilst the overall resource available may in
theory be sufficient to complete the project, there may be difficulties arising out of the
way in which the project has been scheduled. That is, there may be a number of activities
scheduled to take place at the same time and this may not be possible given the amount of
resources available.

c. Quality factors

Whether the project delivers the goods to the right quality.

There are techniques which can be used to overcome the problems referred to above. These
include:

i. Budgeting and the corresponding control of the project budget through budgetary
control procedures.
ii. Project planning and control techniques such as Gantt charts and network analysis.

An important point to note at this stage is how the various constraints on project completion
are likely to be interlinked with each other. For example, problems with time constraints or
resource constraints may be overcome by spending more through working overtime,
employing more people or purchasing better machines. Budget problems may have a knock-
on effect on the achievement of deadlines.

It is important to remember that while project management techniques are important, they
tend to understate the importance of the key resource: people. In a fast changing environment
where tasks are often difficult, controversial with uncertain outcomes, "people management"
skills are called for.

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3. PROJECT SCHEDULING TOOLS

Gantt charts, PERT, CPM and other scheduling techniques have proven to be valuable tools in
the management of large and complex projects. A wide variety of software packages is
available for project managers, for use on micro- or larger computers, to assist in the handling
of complex network problems. PERT and CPM, however, cannot ever purport to be able to
solve all project scheduling and management problems in service or manufacturing industries.
Good management practices, clear responsibilities for tasks, and accurate and timely reporting
systems are the most essential qualities for successful project completions. The watchword is
that useful as these techniques are, they are only tools to assist the manager in making better,
more calculated decisions in the process of conducting large scale projects.

3.1 Work Breakdown Structure (WBS)

Once the business case has been approved, it is important for the project manager to move
quickly on to the development of the work breakdown structure. The work breakdown
structure is the structure that all project work is set against. It takes the existing plans and
breaks them into manageable groups of work. For example, developing a software package
might be broken into development, testing, project management and requirements
management. There are many ways to define the work breakdown structure for a project.

The main idea of doing a WBS is to capture all the tasks. The WBS does not show the
sequence in which work is performed. Such sequencing is determined when the schedule is
developed. The typical WBS has three to six levels but it is possible to have projects that
require a lot more levels.

For example, assume that you are planning a canoeing expedition with your family to Kariba.
The diagram below outlines the WBS that you can come up with to ensure that all aspects of
the „project‟ are fully covered:

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Guidelines for Developing WBS

The key consideration when developing a WBS is to know when to stop. The general
guideline is that you stop when you reach a point where either you can estimate time and cost
to the desired degree of accuracy or the work will take an amount of time equal to the
smallest units you want to schedule. Say you want to schedule to the nearest day; you
breakdown the work to the point where tasks take about a day to perform.

People who must undertake the tasks should participate in the planning process for obvious
reasons. The WBS should be developed before the schedule is worked out but without trying
to identify the sequence of activities. The WBS is the device that ties the entire project
together. It allows resources to be assigned and estimates of time and cost to be made and
shows the scope of the job in graphical form. Later, as the project is tracked, the work can be
identified as falling in a particular box in the WBS.

The WBS does not have to be symmetrical; that is, all paths need not be broken to a
particular level. Since the rule is to break down work to a level sufficient to achieve the
estimating accuracy desired one path may take 6 levels while another may need only three.

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Uses of the WBS

i. It is a good way to show the scope of a job

ii. It helps in assigning responsibilities for tasks
iii. Once work is broken down it becomes easier to estimate the duration, costs and
resources of the project
iv. It is useful in guiding the process of activity identification and sequencing
v. It also shows the inter-linkages among the activities
vi. It improves accountability among project team members as activities and
responsibilities are clearly outlined

Weaknesses

i. It is time consuming to construct

ii. It is also hectic and sometimes very difficult to construct especially for large and
complex projects

3.2 GANTT CHARTS

A Gantt chart is a simple technique that can be used to attach a time scale and sequence to a
project. A Gantt chart is a form of horizontal bar chart and horizontal bars are drawn against a
time scale for each project activity, the length of which represents the time taken to complete.
Gantt charts are ideal for tracking the progress of the project.

To construct a Gantt chart the following steps are necessary:

1) Use the horizontal axis to represent time

2) Use the vertical axis to represent activities
3) Represent each activity by a horizontal bar of appropriate length
4) Take activity procedures into account by starting each activity bar to an appropriate point
along the time axis after its preceding activities. Normally the start point for an activity is
the earliest time that it could start after its preceding activities had finished.

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It is possible to enhance the Gantt Chart in several ways. For instance the number of staff
required to do a task can be entered into the bar on the diagram. Gantt charts, also commonly
known as milestone plans, are a low cost means of assisting the project manager at the initial
stages of scheduling. They ensure that:

1. all activities are planned for,

2. the sequence of activities is accounted for,
3. the activity time estimates are recorded; and
4. the overall project time is recorded.

They are therefore a simple, rough and ready means of planning a project and assessing
progress and are sufficient for most simple projects. However, where projects become
complex, it becomes difficult to see relationships between activities by using a Gantt Chart.
For more complex projects Network Analysis techniques are used.

Gantt charts also provide a summary of the project as a whole and can be used as a rough and
ready means of assessing progress at the project control phase. At any date, the project
manager can draw a dateline through the Gantt chart and see which activities are on-time,
which are behind schedule and generally record project status against plan.

Gantt charts, named after Henry L. Gantt, one of the pioneers of scientific management, are a
useful means of representing a schedule of activities comprising a project and enable the
operations manager to know exactly what activities should be performed at a given time and,
more importantly, to monitor daily progress of a project so that corrective action may be taken
when necessary.

To construct a Gantt chart, the various activities are listed on a vertical axis and the
horizontal axis is used to represent time. Activity precedencies are taken into account by
starting a horizontal bar to represent the next activity at an appropriate point after its
preceding activities, i.e. those activities which must take place before the next activity can
start, have taken place. Normally this would be at the earliest time that it could start after its
preceding activities had finished.

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Example:
Suppose a project comprises five activities: A, B, C, D, and E. A and B have no preceding
activities, but activity C requires that activity B must be completed before it can begin.
Activity D cannot start until both activities A and B are complete. Activity E requires activities
A and C to be completed before it can start. If the activity times are A: 9 days; B: 3 days; C: 9
days; D: 5 days; and E: 4 days,

i) Determine the shortest time necessary to complete this project.

ii) Identify those activities which are critical in terms of completing the project in the shortest
possible time.

Solution:
The figure below indicates the form that a Gantt chart would take from the above information.

Activity A

Activity B

Activity C

Activity D

Activity E

Time

The above chart shows that activities A and B have no preceding activities and so can start
right away. Activity C requires Activity B to have been completed before it can begin. The
chart is then completed using such precedence relationships as listed in the question, with each
horizontal bar being proportional in length to the activity time that it represents.

Looking at the chart it is apparent that the project ends when activity E has been completed.

Working back in time from activity E the "steps" which are crucial or critical in order to ensure
that the project duration does not extend beyond the planned length are:A, E, C and B. The
shortest time in which the project could be completed from the given information is therefore
16 days. The set of activities A, B, C and E which together determine the project duration are
referred to as the critical path through the chart.

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Those activities forming the critical path can be highlighted on the Gantt chart to help the
operations manager to give priority to them if lack of resources means that such decisions have
to be made.

It is important to realize though that activities not on the critical path can become so if they are
allowed to drift too far. How far could activities A and D drift before they affected the duration
of the project?

Provided the project is not too complex in its activity relationships or simply too big to be
mapped on reasonably sized graph paper, Gantt charts can be very useful tools for the project
manager and are graphically superior to the network analysis methods of CPM and PERT.
They allow the critical activities to be found, i.e. those activities which must be performed on
time if the project duration is not to increase, and any "slack" or "float" in the sequence of
activities can easily be shown.

Benefits of using a Gantt chart

i. Gives an easy to understand visual display of the scheduled time of a task or activity
ii. Makes it easy to develop „what if‟ scenarios
iii. Enables better project control by promoting clearer communication
iv. Becomes a tool for negotiations
v. Shows the actual progress against the planned schedule
vi. Can report results at appropriate levels
vii. Allows comparison of multiple projects to determine risk or resource allocation
viii. Rewards the project manager with more visibility and control over the project

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Examples of Gantt charts

1. A project comprises the following activities:

Activity Immediate Predecessors Activity Time (days)

A - 12

B - 6

C A 13

D A, B 12

E C, D 11

F D 13

G E, F 11

a) Construct a Gantt chart which will provide an overview of the planned project.
b) How soon could the project be completed?
c) Which activities need to be completed on time in order to ensure that the project is
completed as soon as possible?

2. A project has the following activity details:

Activity Immediate Predecessors Activity Time (weeks)

A - 3

B - 4

C - 3

D C 12

E B 5

F A 7

G E, F 3

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Draw a Gantt chart to represent the project; determine those activities comprising the critical
path; and estimate the project duration

3. The following information is available on a management project:

Activity Immediate Predecessors Duration (Days) Staff Required (per day)

A - 3 6

B - 5 3

C B 2 4

D A 1 4

E A 6 5

F D 3 6

G D, E 3 3

At present you have nine staff available. Temporary staff can be hired at a rate of $100 per
day.

1) Draw a Gantt Chart to show the shortest time it will take to complete the project.
2) If the project is to finish on time, how many temporary staff are required, and at what
cost?

3.3 NETWORK ANALYSIS

The two most common and widely used project management techniques that can be classified
under the title of Network Analysis are Programme Evaluation and Review Technique (PERT)
and Critical Path Method (CPM). Both were developed in the 1950's to help managers
schedule, monitor and control large and complex projects. CPM was first used in 1957 to

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assist in the development and building of chemical plants within the DuPont Corporation.
Independently developed, PERT was introduced in 1958 following research within the Special
Projects Office of the US Navy. It was initially used to plan and control the Polaris missile
programme which involved the coordination of thousands of contractors. The use of PERT in
this case was reported to have cut eighteen months off the overall time to completion.

i. The PERT/CPM Procedure

Pert is a planning and control tool used for defining and controlling the tasks necessary to
complete a project. PERT charts and Critical Path Method (CPM) charts are often used
interchangeably; the only difference is how task time is computed. Both charts display the
total project with all the scheduled tasks shown in sequence. The displayed tasks show which
ones are in parallel, those tasks that can be performed at the same time. A graphic
representation called a „project network‟ or „CPM Diagram‟ is used to portray graphically the
interrelationships of the elements of a project and to show the order in which the activities
must be performed.

There are six stages common to both PERT and CPM:

1. Define the project and specify all activities or tasks. The activities are the tasks of the
project. The milestones are the events that mark the beginning and the end of one or
more activities.

2. Develop the relationships amongst activities. Decide upon precedencies by

determining the proper sequence of activities.

3. Draw network to connect all activities. Use the activity sequence information, a
network diagram can be drawn showing the sequence of the successive and parallel
activities. Arrowed lines represent the activities and circles or bubbles represent
milestones.

4. Assign time and/or costs to each activity. Weeks are a commonly used unit of time for
activity completion but any consistent unit of time can be used. A distinguishing feature
of PERT is its ability to deal with uncertainty in activity completion times. For each
activity, the model usually includes three time estimates:

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  Optimistic time – the shortest time in which the activity the activity can be
completed
 Most likely time – the completion time having the highest probability
 Pessimistic time – the longest time that an activity may take

5. Calculate the longest time path through the network: this is the "critical path". The
critical path is determined by adding the times for the activities in each sequence and
determining the longest path in the project. The critical path determines the total
calendar time required for the project. The amount of time that a non-critical path
activity can be delayed without delaying the project is referred to as slack time

6. Use network to plan, monitor and control the project. As the project unfolds, the
estimated times can be replaced with actual times. In cases where there are delays,
additional resources may be needed to stay on schedule and the PERT may be modified
to reflect the new situation.

Finding the critical path (step 5) is a major in controlling a project. Activities on the critical
path represent tasks which, if performed behind schedule, will delay the whole project.
Managers can derive flexibility by identifying the non-critical activities and replanning,
rescheduling and reallocating resources such as manpower and finances within identified
boundaries.

PERT and CPM differ slightly in their terminology and in network construction. However
their objectives are the same and, furthermore, their project analysis techniques are very
similar. The major difference is that PERT employs three time estimates for each activity.
Probabilities are attached to each of these times which, in turn, are used for computing
expected values and potential variations for activity times. CPM, on the other hand, assumes
activity times are known and fixed, so only one time estimate is given and used for each
activity. Given the similarities between PERT and CPM, their methods will be discussed
together. The student will then be able to use either, deciding whether to employ variable
(PERT) or fixed (CPM) time estimates within the network.

PERT and CPM can help to answer the following questions for projects with thousands of
activities and events, both at the beginning of the project and once it is underway:

 When will the project be completed?

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  What are the critical activities (i.e.: the tasks which, if delayed, will effect time for overall
completion)?
 Which activities are non-critical and can run late without delaying project completion
time?
 What is the probability of the project being completed by a specific date?
 At any particular time, is the project on schedule?
 At any particular time, is the money spent equal to, less than or greater than the budgeted
amount?
 Are there enough resources left to complete the project on time?
 If the project is to be completed in a shorter time, what is the least cost means to
accomplish this and what are the cost consequences?

ii. Critical Path Analysis

The objective of critical path analysis is to determine times for the following:

 ES = Earliest Start Time. This is the earliest time an activity can be started, allowing for
the fact that all preceding activities have been completed.
 LS = Latest Start Time. This is the latest time an activity can be started without delaying
the start of following activities which would put the entire project behind schedule.
 EF = Earliest Finish Time. The earliest time an activity can be finished.
 LF = Latest Finish Time. The latest time that an activity can finish for the project to
remain on schedule.
 S = Activity Slack Time. The amount of slippage in activity start or duration time which
can be tolerated without delaying the project as a whole.
If ES and LS for any activity are known, then one can calculate values for the other three times
as follows:

𝐸𝐹 = 𝐸𝑆 + 𝑡

𝐿𝐹 = 𝐿𝑆 + 𝑡

𝑆 = 𝐿𝑆 − 𝐸𝑆 or 𝑆 = 𝐿𝐹 − 𝐸𝐹

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Analysis of the project normally involves:

1. Determining the Critical Path. The critical path is the group of activities in the project that
have a slack time of zero. This path of activities is critical because a delay in any activity
along it would delay the project as a whole.
2. Calculating the total project completion time, T. This is done by adding the activity times
of those activities on the critical path.
The steps in critical path analysis are as follows:

a) Determine ES and EF values for all activities in the project: the Forward Pass through the
network.
b) Calculate LS and LF values for all activities by conducting a Backward Pass through the
network.
c) Identify the critical path which will be those activities with zero slack
(i.e.: 𝐸𝑆 = 𝐿𝑆 and 𝐸𝐹 = 𝐿𝐹).
d) Calculate total project completion time.

PERT and Activity Time Estimation

The major distinguishing difference between PERT and CPM is the use of three time estimates
for each activity in the PERT technique, with CPM using only one time for each activity using
CPM. The three time estimates specified for each activity in PERT are:

i) the optimistic time;

ii) the most probable time; and
iii)the pessimistic time.
The optimistic, most likely and pessimistic time estimates are used to calculate an expected
activity completion time which, because of the skewed nature of the beta distribution, is
marginally greater than the most likely time estimate. In addition, the three time estimates can
be used to calculate the variance for each activity. The formulae used are as follows:

o  4 m p
t  po
2

v  
 6 

6
 

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Where:

o, m, p - optimistic, most likely, and pessimistic times

t - Expected completion time for task

v - Variance of task completion time

Knowing the details of a project, its network and values for its activity times (t) and their
variances (v) a complete PERT analysis can be carried out. This includes the determination of
the ES, EF, LS, LF and S for each activity as well as identifying the critical path, the project
completion time (T) and the variance (V) for the entire project.

Normally when using PERT, the expected times (t) are calculated first from the three values of
activity time estimates, and it is these values of t that are then used exactly as before in CPM.
The variance values are calculated for the various activity times and the variance of the total
project completion time (i.e. the sum of the activity expected times of those activities on the
critical path) is the sum of the variances of the activities lying on that critical path.

Probability Analysis
Once the expected completion time and variance (T and V) have been determined, the
probability that a project will be completed by a specific date can be assessed. The
assumption is usually made that the distribution of completion dates follows that of a normal
distribution curve.

Consider the example where the expected completion time for a project (T) is 20 weeks and
the project variance (V) is 100. What is the probability that the project will be finished on or
before week 25?

Answer: 0.69

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Worked Examples on Networks

1. A project has the following activities, precedence relationships, and activity durations:

Activity Immediate Predecessors Activity Duration (weeks)

A - 3

B - 4

C - 3

D C 12

E B 5

F A 7

G E, F 3

a) Draw a Gantt chart for the project.

b) Construct a CPM network for the project.
c) Identify those activities comprising the critical path.
d) What is the project's estimated duration?
e) Construct a table showing for each activity, its activity duration, earliest start time, latest
start time, earliest finish time, latest finish time, and the activity slack.

Answers:

c) C, D
d) 15 weeks

2. A project designed to refurbish a hospital operating theatre consists of the following

activities, with estimated times and precedence relationships shown. Using this
information draw a network diagram, determine the expected time and variance for each
activity, and estimate the probability of completing the project within sixty days.

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 Activity Immediate Optimistic Most Likely Optimistic
Predecessors Time Time Time

A - 5 6 7

B - 10 13 28

C A 1 2 15

D B 8 9 16

E B, C 25 36 41

F D 6 9 18

3. An activity has these time estimates: optimistic time o = 15 weeks, most likely time m = 20
weeks, and pessimistic time p = 22 weeks.

a) Calculate the activity's expected time or duration t.

b) Calculate the activity's variance v.
c) Calculate the activity's standard deviation.

4. A project has the following activities, precedence relationships, and time estimates in
weeks:
Activity Predecessors Optimistic Time Most Likely Time Optimistic Time

A - 15 20 25

B - 8 10 12

C A 25 30 40

D B 15 15 15

E B 22 25 27

F E 15 20 22

G D 20 20 22

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a) Calculate the expected time or duration and the variance for each activity.
b) Construct the network diagram
c) Tabulate the values of ES, EF, LS, LF and slack for each activity
d) Identify the critical path, and the project duration.
e) What is the probability that the project will take longer than 57 weeks to complete?

5. The project detailed below has the both normal costs and "crash" costs shown. The crash
time is the shortest possible activity time given that extra resources are allocated to that
activity.

Activity Immediate Normal Normal Crash Crash Time

Predecessors Time Time Cost Time Cost

(£) (£)

A - 5 2 000 4 6 000

B A 8 3 000 6 6 000

C B 2 1 000 2 1 000

D B 3 4 000 2 6 000

E C 9 5 000 6 8 000

F C, D 7 4 500 5 6 000

G E, F 4 2 000 2 5 000

Assuming that the cost per day for shortening each activity is the difference between crash
costs and normal costs, divided by the time saved, determine by how much each activity
should be shortened so as to complete the project within twenty-six days and at the minimum
extra cost.

Benefits of using a PERT chart or the Critical Path Method

i. Improved planning and scheduling of activities

ii. Improved forecasting of resource requirements

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 iii. Identification of repetitive planning patterns which can be followed in other projects,
thus simplifying the planning process
iv. Ability to see and thus reschedule activities to reflect interproject dependencies and
resources limitations following known priority rules
v. It also provides the following: expected project completion time, probability of
completion before a specified date, the critical path activities that impact completion
time, the activities that have slack time and that can lend resources to critical path
activities, and activity start and end dates.

3.4 LOGICAL FRAMEWORK APPROACH (LFA)

The LFA was originally developed for the United States Agency for International
Development(USAID) in 1969.Many bilateral and multilateral agencies have adopted it as a
useful methodology for project planning that can be used to prepare different types of
projects.The LFA process consists of an analysis and planning phases.The analysis phase
consists of situational,participation,problem,objective and alternatives analyses.The planning
phase involves creation of the logical framework matrix(LogFrame) which is a document
which summarises the results of the LFA process. This approach has 5 steps in the
identification of the problem/ issue or opportunity.

These are:

 Situational analysis(SA)
The SA is used to define the actual circumstances which have produced the project idea.It is
vital to understand a problem and its causes before attempting to draw up a plan of action for
a programme or project that will address it.

 Participation analysis
An overview of persons, groups,organizations, connected to the project, indicating their
interests, motives and implications.

 Problem analysis
The stakeholder group will conduct a facilitated discussion to further identify and clearly
state the primary or focal problem that needs to be addressed.Problem analysis depicts the

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causes and effects of the core problem visually in the form of a problem tree.In the problem
tree „roots‟ indicate causes and „branches‟ the effects.

 Objective Analysis
This is a restatement of the root problems into positive statements.These are the
objectives.Objective analysis develops specific objectives that relate directly to problems
identified.The objectives should be SMART i.e.Specific, Measurable, Achievable, Realistic
and Time-bound objectives. Objective analysis is meant to:

a) Describe a future situation which would be achieved if all the problems are solved

b) Analyse systematically the ends – means relationship of interlinked and mutually

conditioning existing objectives.

c) Enable planners to identify project alternatives.

 Alternatives analysis
This step involves the identification of objectives and the assessment of alternatives
according to resources available, the probability of success, political feasibility, cost-benefit
ratio, social risk, time horizon and sustainability.Several possible strategies depicted in the
objectives tree are examined the best strategy is selected.

The logical framework matrix (logframe)

Once the strategy has been selected, the project purpose and overall objectives are
finalised.This leads into the creation of the logframe which has four columns and four
rows.Its main purpose is to link the project goals and objectives to the inputs,processes and
outputs required to implement the project. This matrix summarizes the project on one page.

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Sample layout of a logframe

Narrative Objectively Means of Risks and

Summary Verifiable Verification Assumptions

Indicators(OVI) (MOV)

Goal

Project

Objective

Outputs

Inputs/

Activities

Row headings

 Goal: the ultimate result to which the project is contributing

 Project objective(s): the change that occurs if project outputs are achieved.
 Outputs: the specifically intended results of a project
 Inputs/Activities: the actual tasks required to produce the desired outputs. Inputs or
resources: materials, equipment financial and human resources needed to carry out the
activities of the project.

Column headings

 Narrative summary: provides a brief summary of the research project plan or its
theory of action.It narrates or describes objective.
 Objectively Verifiable Indicators: measurable and objectively verifiable measures.
 Means of verification: the information or data required to assess against indicators
and their sources.

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  Risks and Assumptions: factors external to the project which are likely to influence
the work of the project management over which they have little or no control and
which need to exist to permit progress to the next level of LFA.

Example of a Log Frame Matrix

Consider a project in which the project team is tasked with improving the supply of water at
GZU Mashava Campus through the installation of water tanks and boreholes. Here is an
example of the Log Frame Matrix the team may come up with:

Narrative Risks and

Summary (OVI) (MOV) Assumptions

Goal Constant Supply of Percentage supply -observations -constant number of

clean water at GZU of water per week -surveys the beneficiaries
Mashava Campus -site visits -good rains
-reports -stable economic
environment
Project -to reduce incidence -perecentage of -reports -availability of other
of disease reported cases -inspection sources of clean water
-improve sanitation -number of -interviews
Objective
-provision of a basic functional toilets
human right -percentage of
people with access
to clean water
Outputs Clean Water -number of clean -reports -maintenance
sources e.g -test results -no vandalism
boreholes -interviews -no further
-level of cleanliness contamination after
purification
Inputs/ Drilling, Number of -reports from Availability of
procurement, resources various sources, eg appropriate and
purification, -water purification financial, adequate resources
Activities
construction materials operational,
-financial technical
-human

Uses of the Log Frame Matrix

i. It is a widely used tool to describe major elements of a project and gives answers to
questions about what, where, when, why and how of a project
ii. Log Frame Matrix is a dialogue matrix since it is all about results, benefits and impact
outcomes. The matrix weaves together the top-down or bottom-up approaches to
project management

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 iii. It is a tool that has the power to communicate the essential elements of a complex
project clearly throughout the project cycle
iv. It gives a whole picture of a project from beginning up to its end
v. Also used to develop the overall design of the project and improve its implementation
and monitoring

Advantages of using the Log Frame

 It helps planners to ask the relevant question about the project

 It gives project managers the focus of the whole project
 It breaks-down the project organisation and the management system into logical
connections for decision making
 It facilitates common understanding and better communication among stakeholders
 It provides shared methodology and terminology among donor agents, contractors and
clients
 It ensures continuity of the approach within the original project when staff is replaced
 It prepares people for replication of successful results, i.e. if the matrix is successfully
done. You can come up with something similar thus your project is guaranteed to
succeed

Demerits

 It is not an easy tool to be understood by an ordinary person unless you are educated
 It is not suitable for situations where there is uncertainty or where agreement has not
been reached on the main problem
 It is not user friendly for bigger projects where problems may not be clear
 It is prone to abuse by experts in project management who can manipulate it to serve
their personal interest

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4. PROJECT CONTROL, MONITORING AND EVALUATION

4.1 Project control

There are two connotations to the word control: one meaning is that of power, domination and
command whilst the other is a kind of authority which allows one to make decisions
unilaterally. Project control is the act of comparing progress to plan so that corrective action
can be taken when a deviation from planned performance occurs. Information is the primary
ingredient for project control thus the use of management information systems.

Characteristics of a project control system

The control system must focus on project objectives, with the aim of ensuring that the project
mission is achieved. The control system should be developed taking the following into
consideration:

 What is important to the organisation?

 What are the objectives?
 Which aspects of the work are most important to track and control?
 What are the critical points in the process at which controls should be placed?

Control should be exercised over what‟s important. The project manager must ensure that
controls are comprehensive enough to ensure that the objectives of the project are balanced and
no one variable suffers. For example, if budgets and schedules are emphasized to the exclusion
of quality you will have a project that comes in on time and within budget but at the expense of
quality. Project managers must monitor performance carefully to ensure that quality does not
suffer.

Taking corrective action

The point in having a control system is to ensure that responses to deviances are timely. A
control system which does not result in action is ineffective. That is, if a control system does
not use deviation data to initiate corrective action, it is not really a control system but a
monitoring system. The response data must be timely; if action occurs too late it will be
ineffective. In an ideal situation information on project status should be available on a real-
time basis but this is sometimes not feasible. The project manager however needs accurate

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data. Weekly reports may suffice to ensure that information about the project is available in a
still usable & accurate form. If project team members exercise proper control methods, then
reports that are prepared on a regular basis will only act as checks and balances and this is the
desired condition.

Designing the right system

Control systems have to be tailor-made for each project- a system may work well for a large
project but will overwhelm a small one with paperwork. Therefore in the case of control
systems one size does not fit all.

Keep it simple. The smallest control effort that achieves the desired result should be used. Any
non-essential data should not be included in the system. However, the system should not be
oversimplified to the extent that it becomes inadequate, especially for complex projects.

To keep control simple, generate period reports and ensure that the information contained
therein is actually being used by the recipients. If it is discovered that reports are not being
used then its best to drop those reports completely.

Remember that there are two aspects to review: maintenance and performance improvement.
The maintenance review tries to keep the project on track whilst the improvement reviews seek
to help project teams to improve performance. Three kinds of review are routinely conducted
to achieve these purposes:

 Status review
 Process or lessons-learned reviews
 Design reviews

Design reviews are only appropriate for hardware, software or some sort of campaign (e.g.
marketing campaign) whilst status review and process reviews are done for every project. A
status review is aimed at maintenance whilst process review looks at how work/tasks are being
done as these activities ultimately affect the project‟s outcome.

The project control process

To set up an effective and efficient project control structure only a few basic steps are required:

 Setting a baseline plan

 Measuring progress and performance

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  Comparing plan against actual
 Corrective action

The baseline plan provides the elements for measuring performance. It is derived from the
cost and durations information found in the WBS and the time sequence data from the network
and resource scheduling decisions. From the WBS the project resource schedule is used to
time-phase all work, resources and budgets into a baseline plan.

There are two forms of measuring progress and performance. One way is the quantitative
measurement of time and budget. The other method entails observing the qualitative measures
such as meeting customer technical specifications and product function. They are most
frequently determined by on-site inspections or actual use. Measuring performance against
budget (e.g. money, units in place, labour hours) is more difficult and is not simply a case of
comparing actual versus budget.

Plans hardly ever work out as expected. Therefore it is crucial to compare a plan against
actual, measured deviations and to determine if action is necessary. Periodic monitoring and
measuring of the status of the project allows for comparisons of actual versus expected plans.
If the comparison between plan ad actual results includes significant deviations, corrective
action will be needed to bring the project back in line with the original or revised plan. In some
cases, conditions or scope can change which in turn will require a change in the baseline plan
to recognise new information.

4.2 Project Monitoring and Evaluation

Monitoring is the gathering of evidence to show what progress has been made in the
implementation of programs. Monitoring focuses on inputs and outputs. Monitoring is a
systematic observation of the organisation‟s value chain and the changes that occur. It
focuses on the activities carried out by the organisation, the efficiency and relevance of
methods applied and the services and results delivered.

Evaluation is measuring changes in outcomes and evaluating the impact of specific

interventions on those outcomes. Evaluation is the comparison of the actual organisational
impacts against set and agreed strategic plans. It looks at what the o

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rganisation set out to do, what has been achieved and how it has been accomplished.

Monitoring and evaluation is intertwined with control as shown in the diagram below:

MONITOR EVALUATE CONTROL

Compare performance to Estimate/evaluate Detect and rectify

predetermined standards, performance difference errors and prevent
plans, objectives reoccurrence

Thus monitoring leads to evaluation and evaluation to control.

Benefits of M & E
 Records lessons learnt and promotes benchmarking against best practices
 Enhances problem identification and establishment of causes and effects and the
relevant solutions
 Ensures continuous review of strategies and assumptions central to organisation
success
 Leads to the identification of organisational Strengths, Weaknesses, Opportunities and
Threats in its environment
 Helps in the discovery of ways and approaches to problem solving
 Inspires innovation and reflection
 Improve design or implementation during project thus ensuring efficiency of
operational processes
 Planning and allocating resources
 Measure and demonstrate results
 Inform future decision-making and project designs

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Differences between M & E
The key differences between M & E are outlined below:

Monitoring Evaluation
(is the project doing things right?) (is the project doing the right things?)
- Routine collection of information - Analysing information
- Tracking implementation progress - Ex-post assessment of effectiveness
&impact
- Measuring efficiency - Confirming project expectations
- Measuring impacts

The complimentary roles of M & E:

Monitoring Evaluation

Clarifies programme objectives Analyses why intended results were or were

not achieved

Links activities and their resources to Assesses specific causal contributions of

objectives activities to results

Translates objectives into performance Examines implementation process

Routinely collets data on indicators Explores unintended results

Reports progress to the managers and Provides lessons, highlights significant

alerts them of problems accomplishment or program potential and
offers recommendations for improvement

4.3 Results-Based Monitoring and Evaluation (RBM&E)

Results are the changes occurring as an effect of a project and they can be directly attributed
to it. They may be positive or negative, intended or unintended. The project‟s strategy aims to
achieve positive results by carrying out activities that produce certain products or services
(i.e. outputs) for specific user groups. If those users make use of the services they will change

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their way of doing a certain things and experience a change or obtain a benefit (i.e. an
outcome) as a result. These outcomes may contribute together with the results of other
development interventions to higher development goals (these are impacts).

Preferably, the whole monitoring process, from its design to the active data collection and use
should be done together with partners and – whenever possible – with target groups. Thus,
different viewpoints on the occurring changes can be shared and valued at the same time. The
joint development of the strategy contributes to increased ownership for the project.

Process reengineering
Continuous rejuvenation
and refocusing of
programme activities
Feeding into the national
management information Lessons
Action
system or data base learnt

COMMUNITY
Project/programme

Internal Task Macro

environment Environment environment

Inputs Processes/activities Outputs Outcomes Impacts

Operational results Developmental results

What is RBM?

RBM is a management strategy focusing on performance and achievement of outputs,

outcomes and impacts. Its main purposes are to improve organisational learning and to fulfill
accountability obligations through performance reporting.

Phases of RBM

RBM has seven phases: (1) objectives are formulated, (2) indicators to show progress toward
the objectives are identified, and (3) targets are set. These three phases are called strategic

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planning. The next two phases, (4) monitoring results and (5) reviewing and reporting the
results are called Performance Measurement. Finally, (6) evaluation is conducted and (7) the
information obtained through M&E are used for improvement interventions.

Thus RBM entails not only setting objectives and implementing M&E activities but also
using the M&E results to improve management.

Designing an RBM system

RBM&E systems are designed to address the „so what‟ question. A RBM&E provides
feedback on the actual outcomes and goals of the project‟s activities. Results-based system
helps answer the following questions:

 What are the goals of the organisation?

 Are they being achieved?
 How can achievement be proven?

Step 1 – Identifying the system boundaries

A project can be perceived as a system which has control on its resources or inputs. With
them, it generates services for users outside the system and beyond its control. It is helpful, as
a first step, to identify all stakeholders that participate together with the project team in
service delivery and to distinguish them from the users of the outputs.

Staff of partner organisations, external experts, NGOs, government institutions, actors from
the private sector or even representatives from the users‟ groups may thus participate in the
generation of outputs. They are therefore part of the project system and under its control,
because they are paid for their work or because they are bound to a mutual agreement.

On the other side of the system boundary are the potential users of the outputs. Whenever
they have an interest in using the output or see an advantage in it, they will use it. However,
the project cannot control them. They could be from the private sector, from government
institutions, from NGOs or among the general population. Some actors might have a double
function – contributors to the service delivery and users of the service.

Step 2 – Formulating the results chains

The results chain of a project reflects the underlying hypothesis of its strategy and constitutes
the foundation of the whole RBM system.

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In an ongoing project one could start with the main products and services delivered. For
example, in a project promoting small scale miners there might be main outputs for the
mining development project (e.g. training), (e.g. awareness campaigns), for other NGOs (e.g.
training manuals) (e.g. organisational development). For each main output the corresponding
results chain would be formulated.

Next, the main activities necessary to achieve the output would be formulated. For example,
the main activities for the output “training delivered to miners” could be: a) to develop
concepts for technical and business training; b) to conduct training courses for miners. It is
not necessary to go into details of the sub-activities as this is not part of operational planning.

A useful third step in the process of developing Results Chains is to specify the supposed use
of the outputs by the users. For example, the miners may have received good training in new
techniques, but if this knowledge is not applied, then no improved systems would be adopted
and no change would occur. However, if they implement the new techniques then good
quality of mining will result, leading to them being competitive on the market. This direct
result is at the same time a goal for the project.

Continuing along the results chain will generate further indirect results that might occur in the
medium and long run and to which the direct result contributes. These impacts could be a)
more improved mining methods in use; b) less pressure on natural resources; c) more income
for small scale miners, and so on.

Components of the Results Chain

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Inputs: are the financial, human, and material resources used for the project

Outputs: the products, capital goods and services, which result from a project

Outcome: the likely or achieved short-term and medium term effects of a project‟s outputs.
Impacts: positive and negative, primary and secondary long-term effects produced by a
project, directly or indirectly, intended or unintended.
Results: the output, outcome, or impact (intended or unintended, positive and/or negative) of
a development intervention.

Step 3 – Analysing risks and side effects

Risks are external factors that may have a significant negative influence on the results chain.
They can be influenced (for example by the intervention of other donors, conflict of interests
among actors, etc.) or not (e.g. natural catastrophes, global economic developments etc.). As
they can hinder the achievement of the project goals, they usually have to be reported to
donors or other stakeholders. Project strategy should be designed in such a way as to

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minimize the negative influence of risks when they occur and limit the unwanted results as
far as possible.

Side effects are unplanned results of a development intervention, that might be positive or
negative, expected or not. As in the case of risks, they should also be monitored to allow for
an adjustment of the project strategy if necessary. An analysis of risks and potential side
effects can help make the stakeholders aware of them and to define alternative strategies.

Step 4 – Choosing observation fields

Observation fields are those parts of the results chains that need to be monitored regularly in
order to know whether the project is on target to achieve its goal. It is important to choose
which of the results chain hypothesis, risks and side effects we need to be informed about- it
isn‟t necessary to monitor every part of the results chain!

Step 5 – Examination of given, and formulation of new, indicators

Indicators are yardsticks that are used to measure results. They indicate what makes a
difference, to what degree and until when. They should be precise, specific, realistic and
measure a specific aspect of the desired result. Reference values (baselines) are required for
any indicator so that the initial situation can be compared to the expected change. Indicators
may be given by the donor, particularly for the project goal (level of direct result).

For the lower levels, milestones or process indicators are formulated by the project team for
their internal monitoring. The given indicators should be examined and a clear common
understanding developed. For all other observation fields chosen, new indicators are
formulated to measure the expected or unwanted change.

Good indicators are:

 qualitative or quantitative variables that provide a simple and reliable means to

measure achievement, to reflect the changes connected to an intervention, or to help
assess the performance of an organisation against the stated outcome

 Clear, relevant, economic, adequate and monitorable.

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 Uses of the Results Findings

i. Respond to stakeholders‟ demands for accountability

ii. Help formulate and justify budget requests
iii. Help make operational resource allocation decisions
iv. Trigger in-depth examinations of what performance problems exist and what
corrections are needed
v. Help motivate personnel to continue making programme improvements
vi. Formulate and monitor the performance of contractors
vii. Provide data for special, in-depth programme evaluations
viii. Help provide services more efficiently
ix. Support strategic and other long-term planning efforts (by providing baseline
information and later tracking progress)
x. Communicate better with the public to build public trust

4.4 Logical Framework (LogFrame) Approach to M&E

When monitoring a project, it is effective to compare the plan and the results by using the
LogFrame and activity schedules. Indicators and means of verification in LogFrame provide
the framework for monitoring. In the context of monitoring, the LogFrame matrix provides:

 A framework of objectives, indicators and sources of information which

should be used to develop and implement the monitoring, review and reporting
system;
 A list of key assumptions which must be monitored as part of the project‟s risk
management arrangements, and
 A clear and consistent reference point and structure for completing progress
reports

In evaluating a project, a plan shown in the LogFrame and the achievements are compared,
and analysed using five evaluation criteria to draw conclusions. The five evaluation criteria
are summarised below:

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 Criteria Definition/Points to be analysed
Relevance The extent to which the project is suited to the
priorities and policies of the organisation and its target
group. In evaluating Relevance, it is useful to consider
the following questions:
 To what extent are the objectives of the
project still valid?
 Are the activities and outputs of the project
consistent with overall goal and the
attainment of project purpose?
 Are the activities and outputs of the project
consistent with the intended impacts and
effects?

Effectiveness A measure of the extent to which a project attains its

project purpose. In evaluating Effectiveness of a
project, it is useful to consider the following questions:
 To what extent was the project purpose
achieved?/ to what extent is it likely to be
achieved?
 What are the major factors influencing the
achievement or non-achievement of project
purpose?
Efficiency Efficiency measures the outputs in relation to the
inputs. It is an economic term which signifies that the
project uses the least costly resources possible to
achieve the desired results. This requires comparing
alternative approaches to achieving the same outputs
in order to see whether the most efficient process has
been adopted. It is useful to consider the following
questions:
 Were the activities cost-efficient?
 Were the objectives achieved on time?
 Was the project implemented in the most
efficient way compared to alternatives
Impact The positive and negative changes produced by a
project, directly or indirectly, intended or unintended
are assessed. When evaluating impact, it is useful to
consider the following questions:
 What has happened as a result of the project?
 What real difference has the project made to
the beneficiaries?
 How many people have been affected?
Sustainability Sustainability is concerned with measuring whether
the benefits of a project are likely to continue after the
project is completed. Projects need to be
environmentally as well as financially sustainable. It is
useful to consider the following questions:
 To what extent did the benefits of a project
continue after the project is completed?
 What were the major factors which
influenced the achievement or non-
achievement of sustainability of the project?

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Monitoring with LogFrame Approach

In conducting monitoring, focus will be placed on monitoring the following 5 points.

i. Progress of Activities – check if activities are proceeding according to the plan of

operation
ii. Achievement of outputs – gather data on indicators of outputs and check the
achievement
iii. Achievement of project purpose – gather data on indicators of project purpose to
check the achievement
iv. Status of provision of inputs
v. Status of important assumptions and pre-conditions

While iv. and v. need to be monitored throughout the project cycle, the weight of monitoring
shifts from i. to iii. as the project progresses.

How to monitor with LogFrame Approach

i. At the beginning of the project – establishing monitoring system

In a monitoring system, it is necessary to specify the following points:
 Information to be collected
Indicators of project purpose and outputs, achievement of activities, amount of
inputs already provided, status of important assumptions, and other relevant
information inside and outside the project
 Staffing, timing, method for information collection
Who will collect which information, when and how often the information
should be collected and how it should be collected
 Staffing, timing, method for information aggregation
Who will aggregate the information, when and how often the information
should be aggregated, and how it should be aggregated and analysed
 Decision makers and timing of decision
Persons that make decisions as to whether or not revisions should be made to
the project plan, and when and how often these decisions should be made
 Means and timing to feedback
Who should feedback decisions, when and how should they feedback the
decisions.

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 ii. During implementation period – monitoring a project with monitoring system
In the beginning of project implementation, the focus of monitoring will be placed on
the progress of activities, but the focus gradually shifts toward the achievement of
outputs. When the project is about to complete, the focus will be on the degree to
which the project scope has been achieved.

Evaluation with LogFrame Approach

In order to plan and conduct the evaluation, the basic design of evaluation needs to be made
in advance. Consider the following:

i. Project to be evaluated
ii. Purpose of evaluation
iii. Method of evaluation
iv. Evaluation team
v. Expenses
vi. Time and period of evaluation
vii. What will be reported, how and to whom

Developing a Terms of Reference (TOR) for the expected evaluation will be useful for those
who organise the evaluation. TOR is a written document presenting the purpose and scope of
the evaluation, the methods to be used, the standard against which performance is assessed or
analyses are to be conducted, the resources and time allocated, and reporting requirements.

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5. PROJECT APPRAISAL

5.1 Financial Appraisal

Financial appraisal is a systematic process of evaluating alternative investment projects in

order to select the best option for implementation. It uses a number of numeric models that
use project cashflows, both inflows and outflows, over the useful or marketable life period of
the project. Management is faced with the problem of establishing basic criteria for the
acceptance or rejection of postponement of proposed investments then ranking the projects
that meet the criteria for acceptance in order of their value to the firm.

Project Cashflows

These are the inflows and outflows of cash involved in a project. Inflows are cash receipts
from project sales/revenue or income expected over the project life. Outflows are the cash
payments required for the project such as for construction, machinery, equipment, working
capital and taxes. Cashflows that go beyond the commissioning of the project until the project
is abandoned.

Cashflows are determined on the basis of cash and not on an accrual basis. Non-cash items
such as depreciation and other accruals are adjusted for, e.g. depreciation is added back to
income. These cashflows form the basis for the evaluation or appraisal of capital expenditure
on projects through various methods such as the Net Present Value, Pay Back Period, and
Internal Rate of Return.

Outflows

Cash outflows are cash or costs expended on a project from conceptual to divestment stages.
These costs must be properly estimated using at least a 95% confidence level, i.e. allowing an
error of 5%. The cash outflows are a result of a costing exercise. Project costs include:

i. Direct Project Costs

These are costs that can specifically be identified with the project or project activity or
task. These include direct material costs, direct labour, direct management, direct
equipment, direct expenses etc. as much of the costs as possible should be assigned to
direct costs because they can be budgeted, monitored and controlled more effectively

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 than indirect costs. Direct costs can be traced to particular activities and it thus
becomes easy to budget for it as well as monitor it.
ii. Indirect Project Costs
These are costs that cannot be directly assigned to a project activity or task. They are
costs that are necessary to support the project work and are also referred to as
overheads. These include indirect management costs including top management,
marketing staff etc; indirect materials such as stationery consumed and other indirect
expenses.
Indirect costs are normally absorbed into project product cost using a selected
overhead recovery rate or charged based on say, direct labour or direct material cost.
Absorption of overhead costs should be done properly otherwise the project is under
or over charged.

Techniques/ Method of Appraising Projects

A. Payback method

The payback method measures the time it takes for the firm to recover the cost of the
investment from the cash flows generated by the project. It is a crude indicator of risk as it
indicates how long the funds are at risk.

Decision Rule

Accept a project if the payback is less than or equal to maximum acceptable number of years
for payback.

Where all the projects‟ cash flows have equal annual receipts the payback can be calculated
using the formula:

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑜𝑢𝑡𝑙𝑎𝑦

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 =
𝑁𝑒𝑡 𝑎𝑛𝑛𝑢𝑎𝑙 𝑐𝑎𝑠𝑕 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠

Example 1

A $1000 investment returns an after-tax cash flow of $300 per year. Calculate the payback
period.

$1000
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 = = 3,3 𝑦𝑒𝑎𝑟𝑠
$300

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Where the cash flows are not constant then we have to deduct the cash flows from the initial
capital expenditure year by year to calculate payback.

Example 2

Projects X and Y both cost $12m for the company and have the following cash flow steams.

Year 0 1 2 3 4
Project X -$12m $4m $6m $6m $1m
Project Y -$12m $2m $4m $4m $8m

Calculate the payback and indicate which project should be chosen.

Solution

Project X

Year Cash flow ($m) Balance ($m)

0 -12 -12
1 4 -8
2 6 -2
3 6 4
4 1 5
2
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 = 2 = 2,33 𝑦𝑒𝑎𝑟𝑠
6

Project Y

Year Cash flow ($m) Balance ($m)

0 -12 -12
1 2 -10
2 4 -6
3 4 -2
4 8 6
2 1
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 = 3 = 3 𝑦𝑒𝑎𝑟𝑠 = 3,25 𝑦𝑒𝑎𝑟𝑠
8 4

The firm will accept project X as it has a shorter payback period.

Question 1

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Consider capital expenditure proposal with an expected lifetime of seven years, which has
initial cost of $250 000.

Year Expected Returns ($)

1 38 000
2 42 000
3 57 000
4 65 000
5 79 000
6 85 000
7 95 000
Calculate the payback period.

Advantages of the payback period

 It brings to attention the length of time a company‟s funds are at risk before recovery.
 It is a useful capital budgeting technique in conjunction with other techniques.

Disadvantages

 It ignores cash flows after payback period. A project may be rejected on the basis of a
longer payback period but it may generate more revenue than the one that has a
shorter payback period.
 It is not take into account the time value of money because it assumes the time value
of money is zero.
 It ignores profitability as it just focuses on payback time.
 It is not a true measure of profitability of an investment. It simply tells how many
years will be required to recover the original investment. Unfortunately a shorter
period does not always mean that one investment is more desirable than another.

B. Modified/Discounted Payback Method

It is similar to payback method but it uses discounted cash flows to calculate the length of
time it takes to recoup the original investment. The discount rate applied to the investment
reflects both the time value of money and uncertainty of future cash flow and this is usually
termed the cost of capital (i.e. the RRR by the suppliers of capital (owners and creditors). The
more uncertain the future cash flows the greater the cost of capital.

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Example 3

Below are the estimated future cash flows of Project A and Project B. The cost of capital is
10%. Calculate the projects‟ discounted cash flow and indicate which project is appropriate
for the company.

Year Project A Project B

0 ($600 000) ($600 000)
1 $350 000 $200 000
2 $30 000 $200 000
3 $30 000 $300 000
4 $200 000 $350 000
5 $200 000 $350 000

Solution

Project A

Year Cash flow PVIF@10% Discounted Balance

$ Cash flow
0 -600 000 1.0000 -600 000 -600 000
1 350 000 0.9091 318 185 -281 815
2 30 000 0.8264 247 920 -33 895
3 30 000 0.7513 225 390 191 495
4 200 000 0.6830 136 600 328 095
5 200 000 0.6209 124 180 452 275

33 895
𝑇𝑕𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑝𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑠 = 2 = 2.15 𝑦𝑒𝑎𝑟𝑠
225 390

Project B

Year Cash flow ($) PVIF@10% Discounted Balance

Cash flow
0 -600 000 1.0000 -600 000 -600 000
1 200000 0.9091 181 820 -418 180
2 200 000 0.8264 165 280 -252 390
3 300 000 0.7513 225 390 -275 510
4 350 000 0.6830 239 050 211 540
5 350 000 0.6209 217 315 428 885

275 510
𝑇𝑕𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑝𝑎𝑦𝑏𝑎𝑐𝑘 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑠 = 3 = 3,12 𝑦𝑒𝑎𝑟𝑠
239 050

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Project A is acceptable as it has a shorter discounted payback period than B.

Advantages

 It is a better measure than ordinary payback period as it also takes into account the
time value of money.
 It also determines the length of time the cash flows are at risk.

Disadvantages

 It ignores cash flows after payback.

 It ignores profitability as it is mainly concerned about the payback period.

Question

Projects A and B have an initial cost of $1 000 000 each. The following are the estimated
cash flows of the two projects.

Project A Project B
Year Cash flow ($) Cash flow ($)
1 400 000 300 000
2 400 000 300 000
3 400 000 300 000
4 400 000 300 000
5 400 000 300 000
6 400 000 300 000

Using the discounted cash flow method, which project should a firm choose if the cost of
capital is 12%?

C. Net Present Value

The net present value is the most commonly used technique in capital budgeting. It involves
discounting the project‟s cash flows at the company‟s required rate of return and then
subtracting the initial project cost. A positive result is acceptable as it indicates that the
project adds value to the company as it earns more than the required rate of return.

𝑛
𝐶𝑡
𝑁𝑒𝑡 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑉𝑎𝑙𝑢𝑒 = 𝑡
−𝐼
1+𝑟
𝑡=1

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𝑊𝑕𝑒𝑟𝑒 𝐶𝑡 = 𝑁𝑒𝑡 𝐶𝑎𝑠𝑕 𝑓𝑙𝑜𝑤 𝑎𝑡 𝑡𝑖𝑚𝑒 𝑡

𝐼 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

𝑟 = 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙

Example

Project X has the following cash flow streams. The project cost $10m and is to generate $8m
in year 1 and $6m in year 2. The project cost of capital is 14%. Calculate NPV of the project.

Year Cash flow PVIF@14% Discounted Cash flow

0 -10 000 000 1.0000 -10 000 000
1 8 000 000 0.87719 7 017 5000
2 6 000 000 0.76947 4 634 340
𝑁𝑃𝑉 = 1 634 340

Decision rules in NPV

Accept projects with positive NPV. If one has to choose between 2 projects, accept the
project with a higher NPV as it adds more value to the shareholders wealth.

Question 1

A project has the following cash flows.

Year Cash flow

0 -800 000
1 350 000
2 400 000
3 420 000

If the discount rate is 20% , calculate the NPV of the project.

Question 2

Year Investment A Investment B

Cash flow Cash flow

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0 -1 000 000 -1 000 000
1 400 000 100 000
2 400 000 100 000
3 400 000 100 000
4 400 000 100 000
5 400 000 100 000

Which project is preferable when the NPV technique is applied at a 15% discount rate?

D. Internal rate of return

It is the discount rate that causes the present value of net future cash flows to equal the cost of
investment. In other words it is the discount rate which causes the present value of the future
cash flows to equal the cost of the investment i.e. NPV=0. It reflects the implicit return of the
project stated in percentage terms. IRR is calculated through trial and error or iterations.

The formula is:

𝑛
𝐶𝑡
−𝐼 =0
(1 + 𝑟)𝑡
𝑡=1

Where r is the internal rate of return we want to calculate.

𝐶𝑡 is the Cash flow.

𝑡 is the time

We can use interpolation to calculate IRR.

𝑁𝑃𝑉1
𝐼𝑅𝑅 = 𝑟1 + 𝑁𝑃𝑉 × (𝑟2 − 𝑟1 )
1 −𝑁𝑃𝑉2

𝑊𝑕𝑒𝑟𝑒 𝑟1 𝑖𝑠 𝑡𝑕𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒 𝑡𝑕𝑎𝑡 𝑔𝑖𝑣𝑒𝑠 𝑎 𝑝𝑜𝑠𝑖𝑡𝑖𝑣𝑒 𝑁𝑃𝑉.

𝑟2 𝑖𝑠 𝑡𝑕𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒 𝑡𝑕𝑎𝑡 𝑔𝑖𝑣𝑒𝑠 𝑎 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑁𝑃𝑉

NPV represents net present value

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Example 1

The following cash flows relate to project X.

Cost $10 000

Year 1 $ 8 000

Year 2 $ 6000

The company’s cost of capital is 14%. Calculate IRR.

@14%
Year Cash flow Discount Factor Discounted Cash
flow
0 -10 000 1.0000 -10 000
1 8 000 0.87719 7017,54
2 6 000 0.76947 4616,81
NPV=1 634,35

@25%
Year Cash flow Discount Factor Discounted Cash
Flow
0 -10 000 1.0000 -10 000
1 8 000 0.8000 6 400
2 6 000 0.6400 3 840
NPV= = 240

@30%
Year Cash Flow Discounting Factor Discounted Cash
Flow
0 -10 000 1.0000 -10 000
1 8 000 0.7692 6153.60
2 6 000 0.5917 3550.30
𝑁𝑃𝑉 = −296,10

So now we know that the discount rate that equates cash flows to zero or IRR is somewhere
between 25% and 30%.

𝑁𝑃𝑉1 240
𝐼𝑅𝑅 = 𝑟1 + 𝑁𝑃𝑉 × (𝑟2 − 𝑟1 ) = 0.25 + 240+296,10 × 0.30 − 0.25 = 0.27238 =
1 −𝑁𝑃𝑉2

27,24%

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Decision Rule

When choosing projects based on IRR, it is necessary to compare a project‟s IRR with the
firm‟s cost of capital. Accept projects with a higher IRR than the firm‟s cost of capital as the
project will be offering higher returns than the cost of funding it.

Advantages

a. It is very useful especially when compared to the cost of capital as it shows the excess
return over cost of capital.

b. It considers time value of money.

c. It considers cost of money.

Disadvantages

a. IRR and NPV sometimes lead to different conclusions. In such instances revert to NPV.

b. Multiple IRRs where projects have none normal cash flows.

Question

Consider the following projects and their cashflows:

Year Investment A Investment B

0 -$1000 000 -$1 000 000
1 400 000 100 000
2 400 000 100 000
3 400 000 100 000
4 400 000 100 000
5 400 000 100 000

Use the IRR technique to determine which project to take up. The firm‟s cost capital is 12%.

E. Profitability Index

The profitability index (PI) shows the relative profitability of sany project, or the present
value per dollar of initial cost. The PI is calculated as:

𝑛 𝐶𝐹𝑡
𝑃𝑉 𝑜𝑓 𝑓𝑢𝑡𝑢𝑟𝑒 𝑐𝑎𝑠𝑕𝑓𝑙𝑜𝑤𝑠 𝑡=1 1+𝑟 𝑡
𝑃𝐼 = =
𝑖𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 𝐶𝐹0

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Where CFt represents the expected future cash flows, and CF0 represents the initial cost.
Hence, PI is a variation of NPV. By construction, if the NPV is zero, PI is zero.

Decision Rule

The profitability index tells us how much we get for each dollar invested. If PI is greater than
1, we get more than $1in present value for each $1 invested. The project should be accepted.
If the PI is less than 1, we get less than $1 in present value for each dollar invested. Such a
project should be rejected. If the PI=1, the project returns $1 in present value for every $1
invested. We will be indifferent between accepting the project and rejecting it.

Example

Investment A Investment B
Year Cash flow Cash flow
2007 -$1 000 000 $100 000
2008 $400 000 100 000
2009 400 000 100 000
2010 400 000 100 000
2011 400 000 100 000
2012 400 000 100 000
Given that the discount rate is 10% calculate the profitability index.

Solution

Investment A PVIF@10% PV
Year Cash flow
2007 -$1 000 000 1.0000 -$1 000 000
2008 400 000 0.9091 363636
2009 400 000 0.8264 330 579
2010 400 000 0.7513 300 526
2011 400 000 0.6830 273 206
2012 400 000 0.6209 248 369

$1 516 315
𝑃𝐼 = = $1.516315
$1 000 000

The PI of $1.5163 means that for each $1 invested we get $1.5163 in value.

Exercise

Calculate the PI of project B and comment.

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Advantages of the PI

 Considers all cash flows

 Recognises the time value of money
 Relative measure of profitability
 Generally consistent with maximisation principle

Disadvantages

 Requires estimates of the cost flows

 At all times fails to indicate correct choice between mutually exclusive projects

5.2 Non-financial appraisal

Costs and benefits that affect a project may not all be financial. There are non-financial
aspects that affect the project as it is being implemented in its environment; that is, there are
other considerations other than the economic rate of return. These include social,
environmental or economic in nature but may involve all three.

In addition to being financially viable, a development project cannot usually be considered

acceptable unless it is economically, technically and institutionally sound. It should be the
least-cost feasible solution to the problem being solved and should expect to produce net
economic and/or social benefits. For example, irrigation projects may facilitate the growing
of cash crops in one locality, but cause water shortages, and hence economic, social and
environmental pressures in another.

Social-Cultural Environment Analysis

This environment deals with the driving forces connected with social-cultural aspects of a
society in which the project is being undertaken. The environment covers aspects that would
matter in the behaviour and conduct of individuals and groups of individuals especially as
they interact in project work. These aspects include demographics, religion, power distance,
masculinity/feminity, individualism, risk avoidance and concern for environment and
pollution.

 It is critical to understand the demographic, e.g. undertaking a project that is attractive

to old people when 90% of that community are youths/young people.

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  Religion – should suit religious norms and beliefs and practises of the society e.g. a
facility that is Hindi-affiliated when the community is Christian.
 Power distance – how society respects their leaders, e.g. if they see a political leader.
Project should not try to divert people from their practises, e.g. not inviting local
leadership to commission a project, say a cattle dip tank or a new clinic.
 Masculinity/ femininity – align project progress and success to gender
 Individualism – most people like to keep to themselves. In that society that project
manager must be careful in making up the project team. Some people want to achieve
on their own and others find teams more useful. Assign tasks according to varying
personalities.
 Risk avoidance – some characters are very risk averse. Don‟t assign these to
programming activities, give them deterministic projects. Probabilistic assignments
will upset them.
 Environmental concern – measure the extent to which the society is sensitive to
environmental changes.

Stakeholder analysis

Stakeholders have different abilities to influence the outcome of a project. Often target
beneficiaries are in a relatively weak position to influence the outcome of a project whereas
much of the control lies in the hands of secondary and key stakeholders.

Social- cultural aspects have different impacts on the different stakeholders of the project;
that is, stakeholders have different needs, expectations and backgrounds. These are:

i. Project manager
The manager needs to meet deadlines and to ensure that the project is a success. S/he
needs to adapt to the needs of the community.
ii. Project champion
A project champion is a person with clout, has respect and has influence in the
organisation. He will „champion‟ the cause of the project. As a project manager you
should show your dependency on him as he will move things in your favour.
iii. Users/customers
Those buying are the customers but may not necessarily use the item

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 iv. Functional managers
The project requires their help and support, e.g human resources department, Finance
etc. you should understand them and work with them, understanding their values.

Stakeholders may either be actively involved in the project or have interests which may be
affected by the implementation of the project. Identify the needs and expectations of all the
stakeholders. Be able to properly manage, influence and balance these needs and expectations
to ensure project success. Create an environment in which stakeholders are encouraged to
contribute their skills, knowledge and influence towards project success.

The project manager should ensure good stress management particularly relating to the
project team; increase social support within the project team. Social support is assistance one
gets through interpersonal relationships, i.e. getting emotional support, appraising
performance and behaviour, giving advice, information and direct assistance in a task.

To efficiently manage these aspects, understand the possible social-cultural dynamics in a

project based on demographics, education levels, lifestyles, religion, beliefs, values, attitudes,
behaviours and social-cultural aspects.

Based on the distinction of primary, secondary and key stakeholders, stakeholder analysis
reviews the following:

• Who comprise the different stakeholders?

• What are their interests?

• How will they be affected by the proposed project?

• What are the project priorities between the different groups?

• What is their capacity to participate in the project?

Environmental analysis

Under this analysis you need to consider the internal and external environment; that is, the
influences from within and without the project. Consider the following:

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  Pressure groups and their activities e.g. Green Peace, Earth Watch especially
in ecological environments. Pressure groups can exert tremendous influence
on the project thus they need to be dealt with efficiently and effectively.
 Climatic conditions: rain, wind, heat waves etc
 Political situations
 Logistical constraints – procurement and availability of resources
 Availability of transportation
 Availability of financial support, e.g. the impact of exchange rate fluctuations

Environmental Assessment (EA) is supposed to provide the project analyst with a good
quantification of the biophysical and social impacts from developments. Environmental
Assessment generally refers to the broader system of environmental analysis, including
project-specific Environmental Impact Assessment (EIA). Most countries have an EIA policy
and supporting legislation.

Project-level EA (usually called EIA) generally refers to the environmental assessment of a

single project, such as one highway or a cement factory.

• "an assessment of impacts of a planned activity on the environment" (United Nations)

• "an activity which identifies, predicts, interprets and communicates information, and
proposes ameliorative measures, about impacts of a proposed action or development
proposal on human health and the well-being of the ecosystem upon which human
survival depends" (Sadar et al., 1994)

Reasons for using EIA

EIA has been developed as a result of the failure of traditional project appraisal techniques to
account for environmental impacts. Many development projects in the past were designed
and constructed in isolation from any consideration of their impacts on the environment,
resulting in:

• Higher costs,

• Failure of projects,

• Significant environmental change, and

• Negative social effects

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Environmental Attributes for a Project

Changes in the environmental attributes provide indicators of changes in the environment.

The EA describes, quantifies, then aggregates the effects of project activities on these
attributes: Water, Land, Air, Ecology, Resources, E.t.c

This dynamic approach may be more challenging, but will engender useful additional studies
and dialogues. It should take account of:

(a) Past trends in environmental quality over time,

(b) Community preferences or competing demands regarding resource utilisation, and

(c) Other current or proposed development programs and projects under study.

Steps in the EIA process

a) Screening - the review of the project proposal against a checklist of projects to

determine whether an EIA is a mandatory requirement.

b) Scoping – key issues and terms of reference (TOR)

c) Impact Identification - an appreciation of how the proposed project might interact

with its receiving environment

d) Impact Prediction - forecasting of the effects in the following terms:

• Magnitude;
• The affected feature/resource/population;
• Action causing the effect;
• Timescale and duration of the effect;
• Level of uncertainty in the forecast;
• Proposed mitigation/enhancement measures
• Significance

e) Mitigation and Enhancement - Environmental mitigation can often result in

reduced project costs and lower community costs when incorporated as a fundamental
part of project design rather than as an add-on exercise.

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 f) Reporting - The purpose of the exercise is to improve the project design prior to its
submission for consent and then to report the findings to the decision makers and the
affected public in a manner that they can understand.

Technical Appraisal

Technical Appraisal provides a comprehensive review of all technical aspects of the

project such as rendering judgment on merits of technical proposals and operating
costs. Here is a checklist that can be used:

• Is the technology proven or tested? If not, has it ever been successful elsewhere and
can that success be replicated in current context and conditions?

• Does the technology/ process/ equipment technically fit with the facility‟s existing
technology/ process/ equipment & machinery? If not, what aspects of the technology /
process do not fit and what measures is the implementing agency planning to take in
this regard?

• List of equipments and machinery to be installed with cost and specifications of the
equipment.

• Equipment capacity & whether it is as per requirement?

• List of recommended equipment suppliers.

A checklist evaluating the proposed implementation plan to assess whether the project can be
implemented as per schedule and requirements should be reviewed and should form part of
the project report. Below is a sample of such a checklist:

• Who is implementing the project?

• Does the project implementation team have adequate skills and experience?
• Provide a list of relevant projects completed in the last two years as per table
below:

• Have suppliers been selected? If yes, provide a list of selected suppliers including
equipments to be supplied by the supplier, price of the equipment and delivery
schedule.

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 • Reputation of the suppliers – whether the supplier is a large national or regional
distributor/ supplier or local supplier?

• Terms for supply and installation of the equipment by the suppliers.

• Is there any performance guarantees from the equipment suppliers?

Technical Analysis covers all technical considerations in project considerations:

• Technical feasibility
• Technological changes – upgrading and costs thereof
• Method of production
• Complications in process or production set-up
• Equipment required, design, sophistication, maintenance requirements
• Skills requirement and availability
• Extent of external consultancy
• Control system and procedures – based on all the activities and the various tasks.
Variances should be addressed. Systems should be user-friendly and easy to maintain
• Safety of the production system
• Energy or power requirements – costs, sources and their stability
• Other utilities necessary such as water, phones, internet
• Disaster recovery procedures
• Waste management system for project work
• Ergonomics – healthy and safety considerations. Impact of work set-up on the health
of workers

Market – Commercial Analysis

The commercial aspects of a project include the arrangements for marketing the output
produced by the project and the arrangement for the supply of inputs needed to build and
operate the project. On the output side, careful analysis of the proposed market for the
project's production is essential to ensure that there will be an effective demand at a
remunerative price. It needs to be ensured that adequate input supplies are available for the
efficient operation of the project.

Consider the following:

 Number of potential users – market share

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  Customer acceptance
 Estimated life of project product
 Any spin-offs – other products or advantages
 Image of company
 Extent of possible new markets
 Control of quality of information in the market
 Material and component availability and delivery lead times
 Services support, e.g. carpenters, computer programmers, welders etc

Institutional – Legal Analysis

A whole range of issues in project preparation revolves around the overlapping institutional,
organizational and managerial aspects of the project, which clearly have an important effect
on project implementation. The proposal should be examined to see that the project is
manageable and a relationship has been developed amongst the project, region and the
country.

The proposal may contain the replies of the probable questions:

(a) Are the authority and responsibility properly linked?

(b) Does the organizational set-up encourage delegation of authority?

(c) Does the proposed organization take proper account of the customs and
organizational procedures common in the country or, alternatively, does it introduce
enough change in organizational structure to break the traditional organization forms?

(d) What about training arrangements? etc

Clearly, a project cannot be considered if it is against the law. Where governments, local
authorities and other bodies operate under legislation, this must require or allow the project
activity. It could be, also, that whilst the proposed project itself is legal, intended funding
sources or revenue-generation may not be. For example: the borrowing of money, the levy of
a tax or even budgetary appropriation may all be constrained by statutory or administrative
law.

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The law must also be considered (and, more importantly, adhered to) relative to contracting,
employment, land acquisition, easements, industrial safety, and many other aspects of project
implementation and subsequent management.

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6. PROJECT COMMUNICATIONS MANAGEMENT

The communications planning process determines the information and communication needs
of the stakeholders; for example, who needs what information, when they will need it, how it
will be given to them and whom. While projects share the need to communicate project
information, the informational needs and methods of distribution vary widely. Identifying the
informational needs of the stakeholders and determining a suitable means of meeting those
needs is an important factor for project success.

To ensure the success of the communications planning process, input from project scope
statement and the project management plan are necessary. Project scope statement provides a
documented basis for future project decisions and for confirming a common knowledge of
project scope among the stakeholders.

The project management plan provides background information about the project, including
dates and constraints that may be relevant to communications planning.

Tools and techniques for communications planning

Information typically required to determine project communications requirements includes:

 Organisation charts
 Project organisation and stakeholder responsibility relationships
 Logistics of how many persons will be involved in the project and at which locations
 Internal information needs
 External information needs
 Stakeholder information

Communications technology

Methodologies used to transfer information among project stakeholders can vary

significantly. Communications technology factors that can affect the project include:

 The urgency of the need for the information

 The availability of technology
 The expected project staffing
 The length of the project

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  The project environment

Information Distribution

Information distribution involves making information available to project stakeholders in a

timely manner. Information distribution includes implementing the communication
management plan as well as responding to unexpected requests for information

Tools and techniques for information distribution

i. Communication skills
These are used to exchange information effectively. This includes ensuring tha the
right persons get the right information at the right time and also handling stakeholder
requirements
Communication has many dimensions:
• Written and oral, listening and speaking
• Internal (within the project) and external (customer, the media, the public)
• Formal (reports, briefings) and informal (memos, ad hoc conversations)
• Vertical (up and down the organisation) and horizontal with peers)

ii. Information Gathering and Retrieval Systems

A variety of media can be used to gather and store information including manual
filing systems, electronic databases, project management software etc.

iii. Information Distribution Methods

Information distribution ensures that information is gathered, shared and distributed to
project stakeholders in a timely manner across the project lifecycle. Methods by
which information can be distributed include:
• Project meetings, hard-copy document distribution, manual filing systems and
shared access electronic databases
• Electronic communication and conferencing tools such as e-mail, fax, voice
mail, telephone, video and web conferencing and web publishing
• Electronic tools for project management such as Web interfaces to scheduling
and project management software, meeting and virtual office support software
etc

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 iv. Lessons learned process
A lessons learned session focuses on identifying project successes and project failures
and includes recommendations to improve future performance on projects. Come
specific results from lessons learned include:
• Update of the lessons learned knowledge base
• Input to knowledge management system
• Updated corporate policies, procedures and processes
• Improved business skills
• Overall product and service improvements
• Updates to the risk management plan

Information Distribution Outputs

i. Lessons learned documentation. Documentation includes the causes of issues,

reasoning behind the corrective action chosen and other types of lessons learned.
Lessons learned are documented so that they become part of the historical database
for both the project and the performing organisation.
ii. Project records. These include correspondence, memos and documents describing
the project. Project team members can also maintain records in a project notebook.
iii. Project reports. Formal and informal project reports detail project status, and include
lessons learned, issues logs, project closure reports etc.
iv. Project presentations. The project team provides information formally or informally
to any or of all the project stakeholders. The information is relevant to the needs of
the audience, and the method of presentation is appropriate.
v. Feedback from stakeholders. Information from stakeholders concerning project
operations can be distributed and used to modify or improve future performance of
the project.
vi. Stakeholder notifications. Information may be provided to stakeholders about
resolved issues, approved changes and general project status.

Manage stakeholders

Stakeholder management refers to managing communications to satisfy the needs of, and
resolve issues with project stakeholders. Actively managing stakeholders increases the
likelihood that the project will not veer off track to unresolved stakeholder issues, enhances
the ability of persons to operate synergistically, and limits disruptions during the project.

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Tools and Techniques in Managing Stakeholders

i. Communication methods. Identify the appropriate method of communication for

identified stakeholders. Face to face meetings are the most effective but may not be
practical, say, on international projects. Telephone calls, e-mail, and other electronic
tools are useful in such scenarios.
ii. Issues logs. An issue log or action-item log is a tool that can be used to document and
monitor the resolution of issues. An issue is clarified and stated in a way that it can be
resolved. Unresolved issues can be a major source of conflict and project delays.

Results of Effectively Managing Stakeholders

1. Resolved issues. As stakeholders‟ requirements are identified and resolved, the issues
log will document concerns that have been addressed and closed.
2. Approved Change Requests. Including changes in the staff management plan which
are necessary to reflect changes to how communications with stakeholders will occur.
3. Approved Corrective Measures. These include changes that bring the expected
future performance o the project in line with the project management plan.
4. Project management plan updates. The plan is updated to reflect the changes made
to the communications plan.

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7. PROJECT HUMAN RESOURCES MANAGEMENT

All aspects of the project management process would fail if the human factor was amiss. It is
therefore crucial to ensure that qualified and dedicated personnel are in place to run the
project and work towards its successful implementation. Human resource planning entails
identifying and documenting project roles, responsibilities, and reporting relationships; as
well as creating the staffing management plan. Project roles can be designated for individuals
or groups. These individuals or groups can be from within the performing organisation or
outside.

Human Resource Planning

Roles and responsibilities of the project team are developed in the context of the existing
organisations‟ enterprise environment. Enterprise environmental factors that involve the
organisational culture and structure that need to be considered are:

 Organisational. Which organisations or departments will be involved in the project?

What are the current working arrangements among them? What relationships exist
both informally and formally?
 Technical. What are the different disciplines and specialties that will be needed to
complete the project? Do the transitions fro, from one life cycle phase to the next
present any unique challenges?
 Interpersonal. What type of formal or informal reporting relationships exists among
people who are candidates for the project team? What are their job descriptions? What
cultural or language differences will affect working relationships among team
members?
 Logistical. How much distance separates the people and units that will be part of the
project? Are people in separate buildings, time zones or countries?
 Political. What are the individual goals and agendas of the potential project
stakeholders? Which groups and individuals have informal power in areas important
to the project? What informal alliances exist?

Documents that can help the project manager in the process of human resource planning
include the project management, plan as it fully defines what needs to be done in the project
and by who; organisation charts, project performance appraisals, position descriptions etc

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Tools and techniques in HR planning

Organisation Charts and Position Descriptions

These document the team‟s roles and responsibilities. Most formats fall into one of
three types: hierarchical, matrix and text-oriented.
 Hierarchical-type charts. The traditional organisational chart structure can be
used to show positions and relationships in a graphic, top-down format.
 Matrix-based charts. A responsibility assignment matrix (RAM) is used to
illustrate the connections between work that needs to be done and project team
members. The matrix format, sometimes called a table, allows a person to see
all activities associated with one person or to see all persons associated with
one activity. The matrix illustrated below is a type of RAM called a RACI
chart because the names and roles being documented are Responsible,
Accountable, Consult and Inform:
RACI Person
Activity Chenge Rumbi Tino Manu Gari
Define A R I I I
Design I A R C C
Develop I A R C C
Test A I I R I

 Text-oriented formats. Team member responsibilities that require detailed

descriptions can be specified in text-oriented formats. Usually in outline form,
the documents provide information such as responsibilities, authority,
competencies and qualifications. The documents are known by various names,
including position descriptions and role-responsibility-authority forms

As a result of the human resources planning process the following are defined:

1. Roles and responsibilities. Roles label the portion of a project for the person is
accountable e.g., engineer, court liaison etc; authority is the right to apply project
resources, make decisions and sign approvals; responsibility is the work that a project
team member is expected to perform in order to complete the project activities and
competency are the skills and capacity required to complete project activities.

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 2. Project organisation charts. This is a graphic display of project team members and
their reporting relationships. It can be formal or informal, highly detailed or broadly
framed, based on the needs of the project.
3. Staffing management plan. This plan is a subset of the project management plan. It
describes when and how human resource requirements will be met. The plan is
updated continually during the project to direct ongoing team member acquisition and
development actions. Information in the staffing management plan varies by
application area and project size.

Acquiring the Project Team

This is the process of obtaining the human resources needed to complete the project. The
project management team may or may not have control over team members selected for the
project. In order to be able to bring together the right personnel fir the project team, the PM
has to consider the following:

i. Enterprise environment factors. Project team members are drawn from all available
sources, both internal and external. Characteristics to look for include:
 Availability. Who is available and when are they available?
 Ability. What competencies do people possess
 Experience. Have people done similar or related work?
 Interests. Are the people interested in working on this project?
 Cost. How much will each team member be paid, particularly if they are
contracted from outside the organisation?

ii. Policies, guidelines or procedures governing staff assignments

iii. Roles and responsibilities of the project team members
iv. Project organisation chart
v. Staffing management plan

Develop the project team

The PM may need to improve the competencies and interaction of team members to enhance
project performance. The competencies of the team can be enhanced and improved through:

i. General management skills. Understanding the sentiments of the project team,

anticipating their actions, acknowledging their concerns and following up on their

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 issues will greatly reduce problems and increase cooperation among team members.
This in turn ensures project success.
ii. Training. Includes all activities designed to enhance the competencies of the project
team. Training can be formal or informal.
iii. Team-building activities. These can vary from 5-minute agenda item in a status
review meeting to an off-site, professionally-facilitated experience designed to
improve interpersonal relationships.
iv. Co-location. This involves placing all or many of the most active project team
members in the same physical location to enhance their ability to work as a team.
While co-location is considered a good strategy, the use of virtual teams will reduce
the frequency that teams are located together.
v. Ground rules. Establish clear expectations regarding acceptable behaviour by project
team members. Early commitment to clear guidelines decreases misunderstandings
and increases productivity.
vi. Recognition and Rewards. Part of team development process involves recognising
and rewarding desirable behaviour. Recognition and rewards should consider cultural
differences. For example, developing appropriate team rewards in a culture that
encourages individualism can be difficult.

Manage the Project Team

This involves tracking team member performance, providing feedback, resolving issues and
coordinating changes to enhance project performance. Management of the project team
becomes difficult when team members are accountable to both a functional manager and the
project manager. Effective management of this dual reporting relationship is often a critical
success factor for the project and is generally the responsibility of the project manager.

Tools and Techniques in Managing the Project Team

The PM can use the following to stay in touch as well as manage the project team:

i. Observation and conversation

ii. Project performance appraisal
iii. Conflict management
iv. Issue log

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