CHAPTER 1

Project Management

An Overview

Key Terms: Project, Program, Task, Work Package, Project Significance, Mutually Exclusive Project, Independent Project, Contingent Project, Agencies Interested

Projects: Examples

We come across projects which range in size, cost, time frame, and dimension—local, domestic and international. Some examples are

Project: Meaning

What do we mean by a project and how does it differ from the similar terms program, task, an activity, or work package?

A project is defined as an activity or set of activities which

Distinct features of a project as indicated above in italics include: it is specific and unique; it serves some objectives and requires resources, output or assets it creates, costs involved, time frame, and stakeholders interested. Project Management Institute’s (PMI) Project Management Body of Knowledge (PMBOK) has defined a project as “a temporary endeavor undertaken to create a unique product, service or result.”¹ On the other hand, jobs or activities which are of routine nature are non-projects, though such distinction between a project and a non-project gets blurred in many cases.

The term “project” is similar to terms “program,” “task,” and “work package”; program is a broader term; it refers to an exceptionally large or voluminous work which encompasses a set of projects. Projects are further divided into tasks or activities which can be combined or put together into work packages. In other words, the terms program, projects, tasks, and work packages indicate the hierarchy of a job in view and have the features of a project. For example, development of a new engine and development of suspension system are parts of the program to develop a new automobile. Similarly, literacy program would involve setting of education institutes, construction of buildings, acquisition of furniture, preparation of books, and training of teachers. Further, urban development program would entail construction of roads or houses or development of civic facilities like water and sewerage system.

Project Management

Project management refers to the collective steps to make the project happen, that is, to take the project to final end to achieve the desired objective. PMBOK defines project management as “the application of knowledge, skill, tools and techniques to project activities in order to meet stakeholder’s needs and expectations from a project.” Project management is similar to an investment decision or a capital budgeting exercise; it involves investment in long-term assets with the expectation of benefits in coming years. The investment has long-term implications and is a decision-making process to evaluate a proposal to set up a project, or for expansion, or acquisition or replacement of fixed assets, or amalgamation or merger decisions.

A project manager is responsible for the success of the project and is expected to have knowledge of different functions of management, namely, technical, sales and marketing, human resources, production management, and so on. As such, there is an overlap between project management, production management, and technical management. However, project management is multi-disciplinary, normally unique, and non-repetitive, while production management and technical management are not multi-disciplinary and often are repetitive.

Every project has two sides, namely,

Every project involves finances as outflows and inflows. Outflows may be Capital Cost or Operating Costs. Capital cost is one time cost and usually nonrecurring, while operating costs are operation and maintenance costs, relate to normal business operations, and are recurring in nature. Similarly, inflows are nonrecurring or recurring. Nonrecurring inflows relate to raising of fund from the owners or shareholders or from financial institutions or banks for setting-up of the project, while operating revenue refers to stream of sales revenues and is recurring.

A project as such is of concern to

Project Significance

Various stakeholders have interest in a project and every project has significance as

Project Categorization: Bases

As mentioned earlier, projects have different dimensions in terms of costs, concept, locations, longevity, and purposes they serve. As such, projects can be categorized under three heads on the basis of

These categories many a time overlap and are illustrated below.

Projects categorized on the basis of purpose they serve include

First two are economically justifiable while the last one is socioeconomic project.

Projects categorized on the basis of segments of an economy include

Project categorized on the basis of their nature include

Some examples are

What agencies/parties are interested in a project?

Project management exercise will depend, to a large extent, on the party or an agency for whom the exercise is being done. Such agencies include

First three are primarily interested in commercial aspects of a project, while the last two are also interested in social aspects like regional development or employment generation or pollution control.

As such, for the former, the exercise is called Commercial appraisal, that is, to examine the profitability of the project, and is primarily involved with analysis of the financial aspects, while the latter is termed as Economic appraisal, which also considers nonfinancial aspects, like social benefits and costs, besides the financial ones. The appraisal principles and process for both are the same and are discussed later.

Instances for Discussion

First Geothermal Plant in Chhattisgarh

A Geothermal Power Plant at Tattapani area of Balrampur district was to be installed by the NTPC and the Chhattisgarh government had granted permission for the same. It would be the first geothermal power plant in the country.

Geothermal generation refers to harnessing of the geothermal energy or the vast reservoir of heat stored in the earth’s inner core.

IGI Airport to Get New ATC Tower

Delhi’s Indira Gandhi International (IGI) Airport planned to have one of the world’s tallest air traffic control (ATC) tower. The proposed tower is nearly double the size of the existing ATC tower. The areas of concern on account of the new tower include space requirement for facilities like training center, recreation facilities, rest areas, and offices.

Cairn India Plans to Revive Oil Hunt

Cairn India, controlled by billionaire Anil Agarwal, plans to start drilling its first new well in 5 years to raise output and help bolster the best profit margin for an oil company in Asia. The company got the Indian government’s approval in mid February 2013 to explore new oil pools in its biggest field in Rajasthan and is accelerating its plans to drill 30 wells in the year starting April 1, 2013, and a similar number in the following 12 months.

Reliance–Sibur Plant Construction

Reliance Sibur Elastomers, a joint venture (JV) of Reliance Industries Ltd (RIL) and Sibur started construction of a butyl rubber plant in Jamnagar. The plant was planned to be commissioned in 2015 and would be India’s only manufacturer of butyl rubber and the JV will be among the world’s top-five manufacturers of butyl rubber. RIL and Russia’s Sibur signed the JV in February 2013 to produce 100,000 tonnes of butyl rubber per annum.

New York Co. Plans to Sell Boston Globe

The New York Company plans to sell the Boston Globe and other New England properties with an objective to focus its energy and resources on its flagship newspaper. The Globe and The Telegram & Gazette are described as “outstanding.”

InterContinental Plans 47 New Hotels in India

Global hospitality major InterContinental Hotels Group (IHG) planned to open 47 new hotels in India by 2017 there by increasing room strength by 9,882 rooms to over 12,000 in the country.

IHG currently operated 13 hotels in 9 cities across India, including Bangalore, Mumbai, Pune, Kochi, Jaipur, Ahmedabad, and Delhi with a total 2,334 rooms. The company planned to open five new hotels in 2013, and eight new hotels in the following year.

Hathway Cable and Datacom Ltd.

Hathway Cable and Datacom Ltd, promoted by the Raheja Group, is one of the largest multisystem operator and cable television and broadband service provider in India. The company decided to demerge its broadband business to a wholly owned subsidiary, Hathway Pvt. Ltd, with the objective to accelerate value creation for the shareholders of the company.

Agreement between ONGC and Rajasthan Government for Gas Supply

ONGC and Rajasthan State Government signed gas sales and purchase agreement with the terms as follows:

ONGC Videsh Ltd and British Petroleum Donation of Helmets to Students and Teachers

ONGC Videsh Ltd and the British Petroleum agreed in October 2004 to donate 900 helmets to students and teachers of Lang Throng Primary School in Hanoi. This was with the objective to make a positive and meaningful contribution to community and to improve road safety awareness among school children and their parents.

Public Enterprise Agreed for Social Religious Projects

ONGC, a leading public enterprise, agreed for global compact-initiatives projects for the construction of

Another community development project related to adoption of six villages in Tripura by the state enterprise with the objective to provide basic amenities like sufficient power supply, standard education, health service, surface communication, and eco-friendly habitation.

Paltana Power Project in Tripura

A 750 MW gas-based power project was approved to meet the power demands of Tripura and adjoining states where there is a potential demand. The project got forest and environment clearance in October 2005. Tripura state, NBCC, and ONGC are the partners to the project.

The term “Paltana” is a Bengali word to mean “to change.”

Furniture Manufacturing Unit by a Japanese Company

Japanese housing and building materials trading firm Sumitomo has bought a 26 percent stake in India’s Spacewood for $14 million (Rs. 91 crores). This would give Sumitomo Forestry an entry into India’s high-margin furniture segment. Sumitomo and Spacewood would jointly set up a facility for the production of pre-hung doors and they have plans to have 50 retail outlets and gross sales of Rs. 50 crores in the next 3 years (Source: Economic Times October 8, 2015).

Ikea, Swedish Furniture Retailer

Considering that home segment is currently dominated by carpenters, and three-fourth of the furniture industry in India is controlled by stand-alone stores and carpenters, there is a major shift toward readymade furniture products. Ikea, a Swedish furniture, is planning to setup furniture production unit in India. Ikea bought land in 2015 in Hyderabad for its first India outlet and plans to open 25 stores by 2025.

Brief Case Examples

Tata Motors and AirAsia Planned to Set Up Joint Venture to Make and Sell Tata Vehicles in South-East Asia

Tata Motors and AirAsia entered into JV to jointly build low-cost vehicles drawn from the stable of Tata Motors Ltd in Malaysia for sale in that country and other markets.

The vehicles proposed to be sold by the JV were Nano, billed as the world’s cheapest car, and light commercial vehicles such as the Ace, Magic, and Winger.

The proposed JV would enhance the global footprint of Tata Motors, which had a strong presence in Europe after its acquisition of Jaguar Land Rover in 2008.

Tata had capacity to manufacture at its plant at Sanad in Gujarat 20,000 Nano cars per month of which half was lying idle as the present sale is in the range of 5,000 to 7,000 units.

The Tata group, a salt-to-software conglomerate had traditionally envisaged big-ticket industrial projects and built them from scratch like it did with its steel and automobiles business. Even when the group considered an entry into services, it built businesses such as financial services and information technology without a partner. With this proposed JV, Tata was willing to share management control and even cede this a JV partner.

¹ Project Management Institute, A Guide to Project Management Body of Knowledge, 5th ed. 2013.