PROJECT OPERATIONS AND

MANAGEMENT

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A Conceptual Framework by

Prof. Tapash Kumar Ganguli

Technical Session on

Introduction to Basic Project Management

Understanding of TEFRs & DPRs with Reasoning

What are the Stages & Phases of a Project ?

Any project has to pass through certain stages and phases. UNIDO, Geneva has divided project cycles into the following phases and stages

I. Pre-Investment Phase (Project Initiation)

Identification and Screening of Investment Opportunity (Idea Generation) or Feasibility Study :
Idea Generation through Individual Creativity / Innovation
Group Creativity (Brain Storming, Nominal Group Technique) Delphi Technique,

NOTE: Delphi Technique : In this method, estimates are called from a group of people considered to be experts in the field. But the group is not allowed to meet and discuss or debate each others opinion. Individual experts are asked to give their estimates independently. This is aimed at avoiding those who are dominant influencing the opinion of the others. As different experts, based on their knowledge and experience may give divergent views, a panel co-ordinator carries out the job of reconciling the views of all of them. First, the co-ordinator solicits opinions from all the experts. Then, those whose opinions are well off the average are asked to explain the rationale of their position. A second round of questionnaire is sent to them. When a reasonable consensus is arrived at, the co-ordinator sums up the outcome of the exercise and calculate the demand. The main drawback of this method is its complexity.

Nominal Group Technique : It is a structured technique administered by the co-ordinator.

It consists of the five steps :
1. 2. Silent Idea Generation Round Robin Presentation

3.
4. 5.

Idea Classification
Voting and Ranking Discussion of Results

The ideas generated in the process are ranked and the best is chosen.

Market Analysis
Market and Demand Analysis

Situational Analysis
Collection of Primary and Secondary Information through Market Survey Market Description Demand Forecasting and Uncertainties

Economical Analysis (PEST) :

Study of the inputs and outputs of various industries Import Substitution Reports of studies conducted by Institutions Revival of sick industries Local Political scenario Global Competitive Environment

Technical Analysis :
Technology Selection, Input requirements and Utilities, Product Mix, Plant Capacity, Functional Layout, Location of the Project, Logistical Requirements, Vendor Support, Machinery and Equipment, Consideration of Alternatives.

The Technical Feasibility generally include the following items :

Who should select the technology and how ? What will the technology do ?

What will it not do ?

What will it require ( inputs ) ?

What will it cost ? How certain are the above ? Does it facilitate easy expansion ? What was the experience of the previous users, if any ? Promoters often depend on consultants for selecting the appropriate technology. Technological decisions are generally irreversible they call for a big outlay of investment they directly affect the competitiveness

Financial Analysis :
Means of Financing the Project (Term Loan / Deferred Credit etc.), Sources of Finance , Risk Analysis of the Project Investment, Sensitivity Analysis, Scenario Analysis - Social Cost Benefit Analysis.

This includes the understanding of :

The cost of the project The means of finance Estimation of working capital Profitability estimations Balance sheet projections Projection of sources and uses of funds

The Financial Institutions expect certain conditions to be fulfilled to qualify for Financial Assistance.
The requirements broadly cover the following aspects :

Debt equity ratio Promoters contribution Security margin Debt service capacity Repayment schedule Conversion

The role of Financial Institutions, in fulfilling Government objectives, embraces :

Survey of potential for agriculture and industrial growth. Maximizing export earning by identifying products with good export potential. Maximizing industrial / agriculture production of both capital and consumer goods. Identifying projects with employment generation potential. Maximizing self employment opportunities.

Promotion of industrial health.

Detailed Project Report (DPR)

It is the culmination of all the analysis that I have discussed so far. There is no set pattern in which the DPR has to be presented. The DPR is generally prepared for submission to the Financial Institutions. Contents of DPR : 1. General Information Name Constitution and sector Location Nature of the industry and product Promoters and their contribution 2. Promoters details 3. Marketing and selling arrangements

4. Particulars of the Project Product mix and capacity Location and Site Plant and Machinery Raw Materials Utilities

5. Technical arrangements 6. Production process 7. Environmental aspects 8. 9. Schedule of implementation Cost of the Project

10. Means of Finance

11. Profitability Estimates

Assumptions
Projected Balance Sheet Projected Cash Flow Statement

12. Appraisal based on profitability Estimates. 13. Economic considerations 14. Appendices Estimates of costs of production Calculation of depreciation

Calculation of working capital and margin money for working capital.

Repayment / interest schedule of term loan and bank finance

Calculation of tax NPV, IRR etc.

Coverage ratios Sensitivity analysis

Strategic Analysis :
Strategic Models : Michael Porters Model Portfolio Analysis BCG Matrix SWOT Analysis

Operational Analysis :
Operation and Stabilization of the Project.

Project Appraisal :
Once the analysis part is over and the DPR is produced the project group get set ready for the appraisal session. This includes Corporate Appraisal Government Appraisal

Institutional appraisal for the fund disbursement The appraisal process also includes simulation and prototype analysis.

General Requirement for Fund Disbursement :

Product identification Market potential Locational advantages Entrepreneurial ability Feasibility study report Compliance of legal requirements General layout Technology adoption Economics of working Project estimates Means of finance Cash-flow and profitability Socio Costs And Social Benefits Debt Service and IRR norms

Initial capital
Corporate planning Performance review Co-ordination Consumer protection Consultancy services Policy considerations Management development Nomination of whole time directors and term sanctioned.

Before the Financial Institutions make any commitment about their funds, they have to necessarily satisfy themselves about the feasibility of the Project be assisted.

The process generally involves the following sequence :

Application The appraisal process Management evaluation Assessment and distribution of risks Time frame for completion and expected returns Consent from the appropriate authority Documentation and disbursements

Single institution
Loan syndication Project Evaluation : Technical, Commercial and Financial

Once the project has been identified and screened and the approval has received after all the appraisal process the next stage is :
II. Investment Phase or On-going Project Phase :
Project Formulation Phase i.e. forming a project group to execute the project. This group shall be responsible for basic and detailed engineering, recruitment of staff members, appointing the contractor, consultants etc. tendering, bidding and contracting , procurement, quality, safety, health hazards etc. all related issues to resolve. A formal order is place the order with an appropriate contractor.

Construction Phase Installation and Commissioning Start-up

III. Operation and Maintenance Phase : This is for implementation, assess and take further actions to stabilize the project with :
Short Term Views Long Term Views

This follows by project planning and scheduling.

THE HARVARD LAW

Under the most rigorous controlled conditions of pressure, temperature, volume, humidity and other variables the organism will do as it damn well pleases

Thank You