Project Report

Soon after the identification of a project and its implementation, the project report is formulated after examining various relevant aspects. Usually the entrepreneur gets a project report prepared before a project or investment is undertaken. That project report prepared before a project investment is undertaken. That project report assesses the demand of the proposed product to be produced, works out the costs of investment as well as operational costs and thus estimates the expected profitability of the proposed investment. It is on this basis that not only the entrepreneur takes his decision on whether to proceed on the proposed project, but also financial backers, banks and state departments involved in the project base their decisions on the ways and the extent to which the help should be provided. If the entrepreneur has to go to the money market to raise some risk capital for his venture, the project report may serve as his main instrument in convincing the investors about the profitability of his venture.

Harvinder Kaur, BPIBS UNIT 3

!roject "eport
project report incorporating relevant data in respect of a project serves as a guide to management and records merits and demerits in allocating resources to production of specific goods or services. project report is prepared for analy#ing the extent of opportunities in the contemplated project. project report is prepared by an expert after detailed study and analysis of the various aspects of a project. It gives a complete analysis of the inputs and outputs of the project. It enables the entrepreneur to understand, at the initial stage, whether the project is sound on technical, commercial, financial and economic parameters.

Scope
!roject report includes information on the following aspects. $. %conomic spects& The project report should be able to present economic justification for investment. It should present analysis of the market for the product to be manufactured. 'arket analysis basically pertains to the following issues& (a) how big is the present market* (b) +ow much is it likely to grow* (c) +ow much of the future market It provides an analysis of the economics of production.
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,. Technical details about

spects& The appropriate report should give the technology needed, e-uipments and

machinery re-uired and the sources of availability. .. /inancial spects& The report should indicate the total investment re-uired including sources of finance and the entrepreneur0s contribution. It should present a comparison of cost of capital with the return on capital. 1. !roduction spects& it should contain a description of the project selected for manufacture and the reasons for such selection2 the report should also give details of the design of the product. 3. 'anagerial spects& The report should contain -ualifications and experience of the persons to be put on the management of the job. It the entrepreneur will look after management, the report must emphasis as to how he is -ualified to manage the venture.

/easibility "eports Setting

feasibility report or a project report of a new enterprise or of an expansion provides, in general, primary economic information, financial data and technical details which serve a finite number of discrete economic processes or cost structures of the industry concerned.

Harvinder Kaur, BPIBS UNIT 3

The feasibility report should contain the following details&

promoters(s) of the project, products(s) of the project, the level of output, the raw materials used and the sources of supply, the technical production method selected and the location of the plant, the total cost of the project (in local currency and foreign currencies), the proposed method of financing (proportions of the various sources of capital) and legal structure of the future enterprise,

the unit cost of the manufacture the si#e of the market ( and the expected trading profits), the effects of the projects on the economy, public finances and the labor market, the existence of the market& trends in imports, exports income, prices, local producers etc, possibility of producing at reasonable cost, alternative methods and brief reasons for selecting, initial costs and costs of conversion& (i) investment costs and (ii) operating costs, commercial profitability to ensure repayment of loans and a return on capital investment, general information.

Harvinder Kaur, BPIBS UNIT 3

4ontents of a !roject "eport

The following are the contents of a project report& $. 5bjective and scope of the report. ,. !roduct characteristics (specifications, product uses and application, standards and -uality.) .. 'arket position and trends (installed capacity, production and anticipated demand, export prospectus and information on import and export, price structure and trends). 1. "aw materials (re-uirements of raw materials, prices, sources and properties of raw materials). 3. 'anufacture (processes of manufacture, selection of process, production schedule and production techni-ue). 6. !lant and 'achinery (e-uipments and machinery, instruments, laboratory e-uipments, elastic load and water supply and the essential infrastructure). 7. 8and and building (re-uirement of land area building, construction schedule). 9. /inancial implications (fixed and working capital investment, project cost and profitability). :. 'arketing channels (trading practices and marketing strategy). $;. !ersonnel (re-uirements of staff, labour and expenses on wage payment).

Harvinder Kaur, BPIBS UNIT 3

The project report is prepared for submission to the financial institutions concessions. for the grant of land and other financial n entrepreneur can himself prepare the report2

otherwise assistance from experts can be sought.

Importance of a !roject "eport

!roject report is of great importance. It highlights the practicability of a project in terms of different factors like economy, finance, technology and social desirability. It is needed by the entrepreneur for carrying out expansion or starting a new production line. These may be carried on by individuals like engineers and scientists, bankers or institutions, consultancy services and development banks. n important aspect of the report lies in determining the profitability of the project and minimi#ing risks in the execution of the project.

!roforma of a !roject "eport !roforma for a !roject Scheme for the 'anufacture of <
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$. Introduction Title=>ame of the firm a. Scope b. Product (give specification, viz., ISS/BSS/ASS) c. Process d. Marketabilit e. !ocation f. Sources of finance/repa "ent sc#edule. ,. Scheme a. !and and Building$ (%&ned/rented or leased) b. Mac#iner and '(uip"ent ()ive detailed specification/capacit /i"ported or indigenous). *or i"ported "ac#ine allo&ances (for dut on i"ported ite"s, dock clearance c#arges, freig#t and insurance and local freig#t) +otal$ c. +esting '(uip"ent d. %t#er fi,ed invest"ents$ i. Packing and for&arding c#arges ii. 'lectrification and installation c#arges iii. -ost of tools/.igs/fi,tures iv. -ost of office e(uip"ent e. +otal /on0recurring e,penditure (a) 1 (b) 1 (c) 1 (d) f. Staff and !abour$ i. Indirect labour nos, and &ages/p." ii. 2irect labour nos, and &ages/p.".
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+otal salaries p.". 3(i) 1 (ii)4 g. 5a& Materials and -onsu"ables$ (Per "ont# on single s#ift basis &it# specifications) i. Indigenous 5s. ii. I"ported 5s. +otal$ 5s. #. %t#er ite"s of e,penditure$ (Per "ont# on a single s#ift basis) i. Po&er and &ater c#arges 5s. ii. Advertising and traveling 5s. iii. +ransport iv. -o""ission to distributors/agents i. +otal recurring e,penditure$ (f) 1 (g) 1 (#) .. 6orking capital for 7 "ont#s 7 , recurring e,penditure k. +otal invest"ent re(uired$ i. /on0recurring e,penditure ii. 6orking capital for 7 "ont#s +otal$ 5s. l. +otal -ost of Production$ i. +otal recurring e,penditure ii. 2epreciation on "ac#iner and e(uip"ent iii. 2epreciation on building iv. Maintenance c#arges v. Interest on total invest"ent vi. 6elfare for staff 5s. vii. %ffice stationer and postage, etc.
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+otal$ 5s. ". Profit and !oss Account$ i. B sale of 8 ((t .) of 89 5s. e,0factor e,clusive of applicable ta,es ii. -ost of Production (:) iii. Profit (i) ; (ii) Appro,. percentage of t#e total capital e"plo ed 5s. +otal$ 5s. .. !rofitability and !rojections ()enerall for about < to := ears) P#ase of activit Profitabilit of p#ases 1. Infrastructure i. !ocational advantage ii. Availabilit of "aterial/po&er/&ater/labour ?reak@%ven !oint i. *i,ed -osts$ (',ecutive salaries/depreciation/rent/interest on invest"ent and ad"inistration cost) ii. >ariable costs (direct labour/direct "aterial/inco"e0ta,/ co""ission and ad"inistration costs)

Ite" of -ost Materials !abour

Harvinder Kaur, BPIBS UNIT 3

*i,ed 1 5s. 5s.

>ariable 5s. 5s.

+otal 5s. 5s.

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%t#er ',penditure 5s. A B /=!@C Dhere A B ?reak@%ven Auantity * ? *i,ed -ost > ? >ariable -ost per unit P ? Sales Price per unit 3. >ames and ddresses of Suppliers i. 5a& Materials ii. Mac#iner and '(uip"ent 6. "emarks

5s.

5s.

Seal and 2ate (Signature of t#e -onsultant)

!"5E%4T !!" IS 8
Pro.ect appraisal an e,ercise &#ereb a lending financial institution "akes an independent and ob.ective assess"ent of various aspects of an invest"ent proposition to arrive at t#e financing decision. Appraisal e,ercises are basicall ai"ed at deter"ining t#e viabilit of a pro.ect and so"eti"es, also in res#aping t#e pro.ect so as to upgrade its viabilit .
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+#e e,ercise of pro.ect appraisal si"pl "eans t#e assess"ent of a pro.ect in ter"s of its econo"ic, social, and financial viabilit . +#is e,ercise is critical as it calls for a "ulti0di"ensional anal sis of t#e pro.ect t#at is, a co"plete scanning of t#e pro.ect. *inancial institutions and banks "ake a critical appraisal of pro.ects, &#ic# are sub"itted to t#e" b t#e entrepreneurs for getting loans. +#e #ave traditionall been accepting t#e data provided b t#e entrepreneur as valid &#ile assessing t#e pro.ect. +#e factors generall considered b institutions &#ile appraising a pro.ect included tec#nical, financial, co""ercial, econo"ic, ecological, social and "anagerial aspects.

2efinition
Pro.ect appraisal can be defined as t#e pro"oter taking a second look criticall and carefull at a pro.ect as presented b t#e pro"oter person &#o is in &a involved in or connected &it# its preparation and &#o is as suc# able to take an independent, dispassionate and ob.ective vie& of t#e pro.ect in its totalit as also in respect of its various co"ponents. +#e person &#o carries out appraisal of a
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pro.ect is usuall an official fro" t#e financial institutions or tea" of institutional officials.

Scope of ppraisal
+#e appraisal of a pro.ect is undertaken b t#e financial institutions &it# t#e t&in ob.ectives of deter"ining t#e "arket potential of a pro.ect and selecting an opti"al strateg . +#e "et#ods of anal sis var fro" pro.ect to pro.ect, /evert#eless certain co""on aspects of stud fro" t#e angle of tec#nolog and engineering are &it# a "ention$ @ -#oice of tec#nical process and/ or appropriate tec#nolog A @ +ec#nical collaboration arrange"ents, if an A @ Size and scale of operationsA @ !ocational aspects of t#e pro.ect and availabilit of infrastructural facilities. @ Selection of plant, "ac#iner suppliersA @ Plant la out and factor buildingsA @ +ec#nical 'ngineering Services @ Pro.ect design and net&ork anal sis for t#e assess"ent of pro.ect i"ple"entation sc#eduleA @ Aspects relating to effluent disposal, "anage"ent of entr , utilisation of b products. and e(uip"ent toget#er &it# of "ac#iner / e(uip"ent background, co"petence and capabilit

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@ Pro.ect cost and its co"parison &it# ot#er si"ilar pro.ects, based on tec#nolog , e(uip"ent, product "i, and ti"e spreadA @ 2eter"ination of pro.ect cost esti"ates, profitabilit etc, @ Sensitivit anal sis It "ust be re"e"bered t#at t#e different aspects of a pro.ect are not independent entities but are #ig#l inter0relatedA and a "eaningful pro.ect appraisal depends upon t#e appreciation of t#is funda"ental fact. Steps /ollowed in !roject ppraisal pro.ections,

Pro.ect appraisal is a scientific tool. It follo&s a specific pattern. *irst and fore"ost, an anal sis of a regionBs econo" provides a general fra"e&ork &it#in &#ic# t#e assess"ent of an pro.ect is "ade. +#is anal sis indicates &#et#er t#e pro.ect is in a potential environ"ent, &#ic# en.o s priorit for econo"ic develop"ent of t#e region/ state concerned. +#is e,ercise itself usuall involves t#e investigation of si, different aspectsA econo"ic, tec#nical, considerabl organisational, according to "anagerial, operational and financial. +#e relative i"portance of t#ese different aspects can var pro.ect appraisal are$ Step : 'cono"ic Indicates priorit use. circu"stances and t pe of pro.ect. +#e "ain stages of t#e s ste" of

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Step C Step 7 Step D Step < Step E

+ec#nical Involves scale of t#e pro.ect and t#e process adopted. %rganisational Suitabilit is e,a"ined. Managerial Ade(uac and co"petence are criticall scrutinized. %perational -apabilit of t#e pro.ect. *inancial 2eter"ines t#e financial viabilit for sound i"ple"entation and efficient operation.

!roject !lanning F Scheduling using >etworking Techni-ues of !%"T= 4!'

!roject !lanning Pro.ects neit#er co"e out of not#ing, nor &ould t#e fall fro" t#e blue. +#e #ave to be planned. Invest"ent pro.ects s#ould be planned &it#in t#e fra"e&ork of national polic directives.

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Priorities s#ould be fi,ed. Planning is t#e "ost i"portant aspect of pro.ect preparation. Planning is t#inking deepl t#roug# a proble", e,a"ining all t#e logical pat# and &riting do&n all t#e ti"es in t#eir logical and ti"e order. Planning in an pro.ect sector s#ould .ustif t#e follo&ing$ a. Planning &ould #elp to opti"ize t#e use of scarce resources. b. %pti"ization and better utilization of t#e e,isting resource. c. 5esults in t#e desired benefits d. 6it#in t#e budgetar provisions of a financing institution. +#e need for a &ell0planned pro.ect is no& &ell establis#ed. !ack of proper planning, for e,a"ple, #ad e,#austed t#e ground &ater potential in so"e states or is being over0e,ploited. +#e e,ecution of a Pro.ect follo&s a definite pat# of planning, sc#eduling and controlling. +#e first and t#e fore"ost aspect of pro.ect is t#e pro.ect design. It is in fact t#e #eart of t#e pro.ect entit . It defines t#e individual activities &#ic# go into t#e corpus of t#e pro.ect and t#eir interrelations#ip &it# eac# ot#er. Pro.ect design enables to identif t#e flo& of event &#ic# "ust take place for t#e successful i"ple"entation of t#e pro.ect. /et&ork tec#ni(ues #elp t#e "anage"ent of an organization in perfor"ing t#ese functions efficientl and effectivel . +oget#er t#e stand concerned &it# t#e develop"ent of t#e pro.ect &ork plan and t#e duration ti"e0 esti"ate and evaluation of t#ese in t#e lig#t of t#e constraints of t#e pro.ect situation.
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printer

Importance of >etwork nalysis

+#e net&ork anal sis #as t#e potential of unfolding unkno&n snags involved in pro.ect esti"ates &#ic#, &#en detected, "a provide "anage"ent not onl to i"prove on t#e ongoing pro.ect esti"ates but also to take serious lesson for future application of different niceties of t#e tec#ni(ues of net&ork anal sis &#ic# re(uire a"ong ot#er t#ings, t#at0 a. +#e &#ole pro.ect s#ould be considered &it# reference to t#e se(uence of activities and events. Se(uence #ere is not a "ere "at#e"atical proble". It underlines activities t#at are to follo& one after anot#er leading to an event.
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b. +#is &ould also re(uire t#at t#e events s#ould be t#oug#t of in different stea"s of operations and t#eir relations#ip understood clearl . c. +#e &#ole pro.ect "a be put on one net&ork &#ile different t#at no seg"ents of t#e pro.ect "a be detailed out in separate net&orks for final integration in t#e overall net&ork. +#is &ould i"pl end, &ould "iss t#e attention of t#e "anage"ent. d. +#e ti"e esti"ates "a be "ade taking into vie& t&o discrete aspects$ one pro.ects in &#ic# previous e,perience dos not e,ist at all and ti"e esti"ates &ould #ave to be based on probabilities and t&o, ti"e esti"ates "a be deter"inistic, being based on previous e,perience of si"ilar t pes of operations in different ot#er pro.ects. e. -ost esti"ates &ould depend on t#e pro.ect ti"e esti"ates and t#e c#anges in t#e process of different factors of production. In t#is specific conte,t, "ere provision of escalation clauses &ould not be enoug#. Inflationar "anage"ent "a c#anges &ould #ave to atte"pted so t#at kno& for certain &#at slippage in ti"e &ould i"portant detail of an operation in t#e pro.ect, fro" beginning to

"ean in ter"s of cost. +#is is apart for" efficienc variations ; bot# favourable and unfavorable ; depending on circu"stances not (uite foreseen at t#e ti"e t#e esti"ates &ere "ade. f. +#e p# sical progress of t#e pro.ects, individualit and si"ultaneit of events, .obs for"ed out snags in different areas of pro.ect &ork &ould all re(uire ade(uate notice and application corrective in proper ti"e. It is also possible t#at "anage"ent "a t#ink it appropriate and econo"ical to speed up co"pletion of
Harvinder Kaur, BPIBS UNIT 3 17

pro.ects be &#at is kno&n as Fcras#ing.B +#e concept of cras#ing is particularl relevant in vie& of t#e avoidance of #uge constructive total loss t#at slippage, dill 0dall ing or ot#er factor "a cause. !%"T (!rogramme %valuation and "eview Techni-ues) and 4!' (4ritical !ath 'ethod) P'5+ and -PM are but t&o of so"e different na"es given to net&ork anal sis. It is believed and underlined t#at net&ork is a logical e,tension of t#e old )rant Bar -#art. P'5+ and -PM tec#ni(ues &ere developed in t#e G.S. independentl , &#ile -PM ca"e into focus about :H<I as an offs#oot of collaboration bet&een 2u Pont and 5e"ington 5and. 6#ile different distinctions are often ascribed to -PM and P'5+, t#e basic distinction is per#aps t#at t#e e"p#asis of -PM is essentiall for t#e pro.ect as &#ole. P'5+, &#ic# &as developed about :H<J as a result of collaboration bet&een t#e %perational 5esearc# 2ivision of t#e Gnited States /av and a fir" of business consultants, #ad for e"p#asis t#e events rat#er t#at t#e activities leading to events. Most of t#e distinctions #ave, #o&ever, dissolved &#ile bot# P'5+ and -PM under&ent different "easures for attaining perfection t#roug# t#eir application as tools. on t#e activities t#e"selves, t#e costs associated &it# co"pletion of eac# activit and opti"u" plan

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>etwork
A net&ork co"prises a set of e,ponents connected &it# eac# ot#er in a se(uential relations#ip &it# eac# step till t#e co"pletion of pro.ect. /et&ork anal sis is a s ste", &#ic# plans bot# large and s"all pro.ects b anal zing t#e pro.ect activities. Pro.ects are broken do&n into si"ple activities, &#ic# are t#en arranged, in a logical se(uence. It is also decided as to &#ic# task &ill be perfor"ed si"ultaneousl and &#ic# ot#ers se(uentiall . A net&ork diagra" constructed belo& presents t#e relations#ip bet&een all t#e activities involved. +i"e, costs and ot#er resources are allocated to different activities.
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>etwork Gesign >etwork Techni-ues In a pro.ect, t#ere "a be t&o categories of .obs or activities ; &#ic# can be taken up concurrentl and &#ic# can be taken up onl after co"pleting so"e ot#er activities ; eit#er co"pletel or partiall . Kence, in a bar c#art, so"e of t#e bars "a run parallel or overlap eac# ot#er ti"e0&ise &#ile so"e "a run seriall . +#e sc#eduling of construction and identification of potential causes of dela for" an i"portant part of a pro.ect appraisal. +i"ing and se(uencing of various activities involved in pro.ect i"plantation are revie&ed, keeping in vie& t#e conditions regarding t#e availabilit of construction "aterials, labour, procure"ent and deliver periods of plant and "ac#iner , erection and co""ission, start0up and trial0runs, training of staff, etc,. +#e i"ple"entation sc#edule also takes into account seasonal and ot#er variations in &orking conditions, &#ic# "ig#t interfere &it# t#e i"ple"entation of t#e pro.ect. Several tec#ni(ues of pro.ect sc#eduling and control suc# as Bar -#arts, Progra""e 'valuation and 5evie& +ec#ni(ues (P'5+), -ritical Pat# Met#od (-PM) etc. are used. %f t#ese -PM #ave co"e to be &idel used in pro.ect "anage"ent, as t#e are ver useful in t#e basic "anage"ent functions of
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planning, sc#eduling and control. +#ese tec#ni(ues can be applied in diverse kinds of pro.ects like construction of a building or a #ig#&a , planning an launc#ing of ne& product, large "aintenance pro.ects, sc#eduling s#ip construction and repairs, end0of0t#e "ont# closing of accounts, large, researc# pro.ects, etc. >eed for >etwork Techni-ues /et&ork anal sis #elps in designing, planning, coordinating, controlling and decision0"aking in order to acco"plis# t#e pro.ect econo"icall in t#e "ini"u" available ti"e &it# t#e li"ited available resources. /et&ork tec#ni(ues &ere developed fro" t#e Milestone -#art and Bar -#art. +#ese conventional planning "et#ods, because of t#eir in#erent li"itations, could not be utilized for planning large and co"ple, pro.ects. +#e disadvantages$ a. A bar c#art beco"es too cu"berso"e &#ile dealing &it# big and co"ple, pro.ects, &#ic# t#e activities are to be considered in detail and t#eir interaction or interdependencies, are to be studies clearl , b. A bar c#art does not point out &#ic# tasks s#ould be given priorit as regards resources (i.e., "en, "one , "aterials and "ac#iner ). c. +#e effects of c#anges in sc#edule cannot be evaluated &it# t#e #elp of a bar c#art. d. A bar c#art neit#er satisfactor tells t#e ti"e at &#ic# t#e activities begin and end nor does it indicate tolerances in activit ti"ings. #ad t#e follo&ing

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P'5+ is one of t#e "anage"ent tec#ni(ues &#ic# considerabl "ore useful to so"e "anagers t#an to ot#ers. It is of tested tools of "anage"ent in industriall developed countries. It &orks a "et#od of "ini"izing production dela s, interruptions and conflictsA of coordinating and s nc#ronizing t#e various parts of t#e overall .obA and of e,pediting t#e co"pletion of pro.ects to&ards sc#eduling and budgeting resources so as to acco"plis# a predeter"ined .ob. It is a co""unication facilit in t#at it can report develop"ents and keep t#e "anagers posted and infor"ed. !%"T is concerned with two concepts& :. 'vents$ An event is a specific acco"plis#"ent t#at occurs at a recognizable point of ti"e and does not call for eit#er t#e need of ti"e or resources, C. Activities$ An activit is t#e &ork re(uired to co"plete a specific event. In P'5+, t#e activities, t#e events, re(uire ti"e, "one in referring to #is events as "ilestones. K.!. )antt developed L)antt Milestone -#artM. and resources for its co"pletion. In t#is sense, K.!. )antt &as (uite rig#t

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'ac# of t#e digit ("ilestones) represents t#e acco"plis#"ent of a specific p#ase of t#e total undertaking, and, of course, eac# of t#e rectangles represents of task, t#e t#ree rectangles taken represent t#e entire pro.ect. Steps in !%"T +#e first step in t#e develop"ent of a P'5+ net&ork is t#e establis#"ent of ob.ectives. +#ere &ill be "a.or ob.ectives to be acco"plis#ed, linked b supporting ob.ectives. 6#en t#ese are identified, t#e "ust be linked toget#er so as to enable to planner to see t#e pro.ect in its true perspective and also see t#e relations#ips bet&een and a"ong all t#e steps. +#e second step is to sc#edule &ork breakdo&n in great detail. In t#e t#ird step, bot# tec#nical and "anagerial persons s#ould begin to &ork toget#er. +#e fourt# step is t#at eac# person &#o participates in t#e application of P'5+ to t#e control of t#e pro.ect s#ould #ave so"e basic fa"iliarit &it# t#e general nature of t#e &ork and &it# t#e ulti"ate ob.ective desired.
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So"e aut#ors #ave also indicated t#e follo&ing steps involved in P'5+ anal sis$ :. 2evelop"ent of pro.ect net&ork. C. +i"e esti"ation. 7. 2eter"ination of critical pat#, event slacks, and activit floats. D. 2evelop"ent of pro.ect sc#edule. <. -alculation of variabilit duration and t#e probabilit of co"pletion in a given ti"e. In P'5+, ti"e is t#e basic "easure. It is usuall stipulated opti"istic ti"e. In order to arrive at t#e "ost reliable esti"ate of ti"e, t#ree ti"e esti"ates are usuall belo&$ i. +#e opti"istic ti"e$ It is t#e s#ortest ti"e possible if ever t#ing goes perfectl &ell &it# no co"plication, t#e c#ance of t#is opti"u" actuall occurring "ig#t be one in a #undredA ii. +#e pessi"istic ti"e$ It is longest ti"e conceivableA it includes ti"e for unusual dela s and t#us t#e c#ance of its #appening "ig#t be onl one in a #undredA iii. +#e "ost likel ti"e$ It &ould be t#e best esti"ate of &#at nor"all &ould occur. e"plo ed under t#is tec#ni(ue as given e,pressed in

calendar &eeks t#e pro.ect s#ould be co"pleted &it#in t#e

dvantages of !%"T
Harvinder Kaur, BPIBS UNIT 3 24

a. +#is tec#ni(ue gives t#e "anage"ent t#e abilit to plan t#e best possible use of resources to ac#ieve a given goal &it#in t#e overall ti"e and cost li"itations. b. It #elps "anage"ent to #andle t#e uncertainties involved in progra""ers &#ere no standard ti"e data of t#e +a lor0 )antt variet are available. c. It presses for t#e rig#t action, at t#e rig#t point, and at t#at rig#t ti"e in t#e organization. 8imitations of !%"T a. +#e basic difficult co"es in t#e &a of ti"e esti"ates for t#e co"pletion of activities because activities are of non repetitive t pe. b. +#is tec#ni(ue does not consider resources re(uired at various stages of t#e pro.ect. c. Gse of t#is tec#ni(ue for active control of a pro.ect re(uires fre(uent updating and revising t#e P'5+ calculations and t#is proves (uite a costl affair. 4ritical !ath 'ethod (4!') /e,t to P'5+, t#e -PM for planning and controlling pro.ects #as en.o ed t#e &idest use a"ong all t#e s ste"s t#at follo&s t#e net&orking principles. -PM &as developed in :H<E at t#e '.I.2upont /e"ours N -o., G.S.A, in connection &it# t#e periodic over#auling and "aintenance of a c#e"ical plants. It resulted in reducing t#e s#ut0do&n period
Harvinder Kaur, BPIBS UNIT 3 25

fro" :7= #ours to H= #ours and saving #ours and saving t#e co"pan O: "illion. -PM #as t&o ti"e0cost esti"ates for eac# activit (one ti"e0cost esti"ate for t#e nor"al situation and t#e ot#er esti"ate for t#e cras# situation)but does not incorporate an staticall anal sis in deter"ining suc# ti"e esti"ates. -PM operates on t#e assu"ption t#at t#ere is a precise kno&n ti"e t#at eac# activit in t#e pro.ect &ill take. dvantages of 4!' Besides being applicable to sc#edule large and s"all pro.ects it #as so"e of t#e i"portant advantages listed belo&$
a.

It #elps in ascertaining t#e ti"e sc#edule.

b. 6it# its aid, control b t#e "anage"ent is "ade eas . c. It "akes better and detailed planning possible. d. It provide a standard "et#od for co""unicating pro.ect plans, sc#edules, ti"e and cost perfor"ance. e. It identifies t#e "ost critical ele"ents and t#us "ore attention can be paid to t#ese activities. 8imitations of 4!' a. -PM fails to incorporate statistical anal sis in deter"ine t#e ti"e esti"ates. b. It operates on t#e assu"ptions t#at t#ere is a precise kno&n ti"e t#at eac# activit in t#e pro.ect &ill take but t#is "a not be true in actual life.
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c. It difficult to use -PM as controlling devices for t#e si"ple reason t#at on "ust repeat t#e entire evaluation of t#e pro.ect eac# ti"e &#en c#anges are introduced into t#e net&ork. It "a be re"e"bered t#at -PM &as initiall developed as a static planning "odel and not as a d na"ic controlling device.

The ?enefits of >etwork

nalysis

/et&ork anal sis underlines several benefits. +#e i"portant ones are$ i. It ensures earl and logical planning of t#e &#ole pro.ect, in ter"s of bot# aggregates and disaggregates. ii. It puts into perspectives t#e full interrelations#ip of all activities concerned in t#e pro.ect. iii. It "onitors t#e progress of t#e pro.ect to its co"pletion date. Initial planning of pro.ects t#roug# net&ork anal sis &ould underline &#ic# .obs control t#e rate of progress and &#ic# .obs #ave ti"e to spare. +#e controlling .obs are, in fact, t#e critical
Harvinder Kaur, BPIBS UNIT 3 27

.obs or Fke .obsB. An dela in co"pleting t#ese .obs &ould #old up t#e rest of t#e pro.ect &#ile an reduction in ti"e on t#ese .obs can reduce t#e overall ti"e of t#e pro.ect. +#e se(uences of .obs &#ic# re(uire t#e longest ti"e to co"plete, "akes up t#e critical pat#.

Harvinder Kaur, BPIBS UNIT 3

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