SBL Notes Leading & Managing Pankaj Khandelwal

Chapter 26 Projects CA, CFA, CIA

What is A Project?
• A temporary activity with a clear start and finish.
• Undertaken to achieve specific objectives within time, cost, and quality limits.
• Designed to create a unique product, service, or result, unlike routine operations.

Distinguishing Features of Projects

Projects differ from day-to-day operations because:

• They involve cross-functional teams working together.

• The work is often new and unique, not repetitive.
• Project scope must be clearly defined to avoid scope creep (uncontrolled changes).
• They have fixed deadlines and budgets.

Project Constraints
The Triple Constraint (Iron Triangle)

• Scope – What the project is expected to deliver.

• Schedule (Time) – When the project must be completed.
• Cost – The budget available.

Quality is the final objective and depends on balancing these three constraints.

Relationship Between the Constraints

Changing one constraint affects the others:

• Increase scope → More time, cost, or both.

• Reduce schedule (finish faster) → Higher cost, smaller scope, or both.
• Reduce cost → More time, smaller scope, or both.

Project Management
Roles and Responsibilities of different stakeholders:

Role Key Responsibility

Project
Manages the project on a day-to-day basis, including the budget, schedule, and team.
Manager
Oversees large, cross-functional projects, provides guidance, and is usually chaired by the project
Steering Group
sponsor.
The person or department that will use the final project outcome and wants the objectives
Project Owner
achieved.
Project Provides funding, ensures the project delivers business value, approves key decisions, engages
Sponsor stakeholders, and provides strategic direction.
Project Promotes the project, gains support, resolves resistance, and keeps momentum during
Champion difficulties.
Has overall responsibility for the project, represents users and technical experts, and oversees
Project Board
major decisions.
SBL Notes Leading & Managing Pankaj Khandelwal
Chapter 26 Projects CA, CFA, CIA

Role and Responsibilities of the Project Manager

A project manager must balance three areas:

Area Responsibilities
Define project scope and objectives, prepare plans, allocate resources, assign responsibilities,
Task
monitor progress, maintain quality, and revise plans when needed.
Build teamwork, motivate members, encourage communication, establish standards, resolve conflicts,
Team
and provide training
Support team members, identify strengths and weaknesses, provide training, solve personal issues,
Individual
and balance individual needs with team goals.

Overall Responsibilities of a Project Manager

• Plan, monitor, and report project progress.

• Communicate project constraints at the start.
• Manage project risks and prepare contingency plans.
• Ensure appropriate standards and processes are followed.
• Report to the project sponsor or governance board.
• Deliver the project on time, within budget, and to the required quality.

The Project Sponsor

Role of the Project Sponsor

• Initiates and approves the project.

• Provides support, guidance, and funding.
• Promotes the project and ensures it delivers business value.
• Remains involved throughout the project.

Responsibilities of the Project Sponsor

• Defines the project vision and risk appetite with stakeholders.

• Ensures the business case remains valid throughout the project.
• Oversees project governance, including project and risk management.
• Ensures the project delivers its expected benefits.
• Resolves conflicts between the temporary project team and the permanent organisation.

Project Life Cycle

1. Initiation – Should we do it?

2. Planning – How will we do it?

3. Execution – Do the work and monitor progress.

4. Closure – Complete, hand over, and review.

SBL Notes Leading & Managing Pankaj Khandelwal
Chapter 26 Projects CA, CFA, CIA

Stage Purpose Key Activities

Prepare the business case, appoint the project sponsor and project
Decide whether the manager, conduct a feasibility study (commercial, technical, operational,
1. Initiation
project should go ahead. social), and prepare the Project Initiation Document (PID) defining scope,
objectives, and constraints.
Develop a detailed plan
2. Planning Prepare the project plan, quality plan, risk plan, and detailed budgets.
for the project.
Carry out the project Complete project tasks, monitor time, cost, quality, risks, and changes,
3. Execution
and deliver the outputs. provide status reports, measure performance, and take corrective action.
Formally complete the Hand over deliverables, obtain customer sign-off, close contracts, release
4. Closure
project. resources, inform stakeholders, and submit the final report.

Business Case and Project Initiation

Purpose of a Business Case

A business case is prepared before a project begins to decide whether the project is worth undertaking. It
evaluates the costs, benefits, risks, and strategic value of the project.

Steps in Preparing a Business Case

1. Identify business drivers – How the project supports the organisation's strategic objectives (e.g., using
SWOT analysis).
2. Identify stakeholders – Determine who will be affected and how.
3. Analyse costs and benefits – Include both financial (e.g., NPV, ROI) and non-financial benefits.

Typical Contents of a Business Case

• Executive summary and recommendation

• Business drivers and project scope
• Financial analysis (costs, benefits, cash flows, NPV)
• Risks and assumptions
• Strategic options and opportunity costs
• Conclusion and next steps

Project Benefits
Type of
Meaning Example
Benefit
Higher customer satisfaction, better staff morale,
Observable Can be seen but cannot be measured.
improved decision-making.
Can be measured, but the improvement cannot
Measurable Fewer customer complaints, lower staff turnover.
be predicted in advance.
Can be measured and forecast before the
Quantifiable Increased productivity, faster response times.
project starts.
Can be expressed in money and included in
Financial Cost savings, cost reductions, higher revenues.
NPV or cost-benefit analysis.
SBL Notes Leading & Managing Pankaj Khandelwal
Chapter 26 Projects CA, CFA, CIA

Project Costs
Typical project costs include:

• Capital costs – Hardware, software, and project assets.

• Development costs – Design, development, and implementation.
• Allocated costs – Shared services and premises.
• Consultancy costs – External experts and advisors.
• Quality costs – Training and quality control.
• Disruption costs – Temporary loss of productivity during implementation.

Project Appraisal Tools

• Payback → Liquidity (speed of recovery).

• ARR → Profitability.
• NPV → Shareholder value (preferred method).
• IRR → Rate of return compared with the required return.

Project Initiation Document (PID)

A Project Initiation Document (PID) is created during the initiation phase and acts as the main reference
document for the project. It defines the project's purpose, scope, and how it will be managed. It must be
approved by the project sponsor before the project begins.

Typical Contents of a PID

• Project objectives, scope, and deliverables

• Business case
• Project manager, team, sponsor, and owner
• Budget and required resources
• Timeline and project milestones
• Project risks and risk management plan
• Quality control procedures
• Project constraints and assumptions
• Reporting and governance arrangements

Consider PID as the project's blueprint or contract between the project manager and project sponsor, setting out
what will be delivered, how, when, by whom, and within what constraints.

Project Plans
1. Purpose of Project Planning

Project planning ensures the project is completed on time, within budget, and to the required quality.

Key purposes:

• Identify project tasks and their duration.

• Set deadlines and milestones.
• Plan and allocate resources.
• Prepare the project budget.
• Identify the critical path (the longest sequence of activities that determines the minimum project
completion time).
SBL Notes Leading & Managing Pankaj Khandelwal
Chapter 26 Projects CA, CFA, CIA

2. Components of a Project Plan

• Project Management Plan

• Work Breakdown Structure (WBS)
• Resource Plans (Gantt Chart & Network Diagram)
• Project Cost Management
• Quality Plan

3. Project Management Plan

• Coordinates all project plans.
• Improves communication with stakeholders.
• Provides a baseline for monitoring and controlling project progress.
• Covers project scope, time, and cost.

4. Work Breakdown Structure (WBS)

A WBS breaks the project into smaller tasks and sub-tasks.

Benefits:

• Identifies all work required.

• Allocates resources.
• Organises task sequence.
• Improves cost estimation and control.

A good work package should be Clearly defined; Measurable; Manageable; Independent but able to integrate
with other tasks.

5. Resource Planning

Gantt Chart

• Displays project activities on a timeline using horizontal bars.

• Shows task schedules and progress.
• Limitation: Does not show task dependencies.

Network Diagram (Critical Path Analysis - CPA)

• Shows task dependencies and the critical path.

• Helps identify the shortest project completion time.

6. Project Cost Management

Cost management estimates and controls project costs.

Common estimation methods:

• Top-down: Based on similar past projects.

• Bottom-up: Estimate each task (using WBS) and total them.
• Parametric: Uses historical data and project characteristics.
SBL Notes Leading & Managing Pankaj Khandelwal
Chapter 26 Projects CA, CFA, CIA

7. Quality Plan

A quality plan ensures the project meets its objectives. It includes:

• Quality standards and procedures.

• Quality communication.
• Inspection and review points.
• Quality measurement methods.
• Corrective actions if quality falls below the required standard.

Monitoring and Controlling Projects

1. Importance

Monitoring ensures the project stays on time, within budget, and meets quality standards. It helps identify
problems early so corrective action can be taken.

2. Progress Reports

The Project Manager should regularly issue progress reports to stakeholders (e.g. sponsor, budget holder, senior
users, and team).

A progress report should include:

• Project status
• Summary of progress
• Key issues and risks
• Next tasks and decisions required
• Important dates and milestones
• Budget vs. actual spending

Purpose: Track actual progress against the plan and identify any delays (slippage).

3. Risk Management

Risk = Probability × Impact

Effective risk management involves two stages:

Risk Assessment

• Identify risks.
• Analyse their impact on time, cost, and quality.
• Prioritise risks based on their importance.

Risk Control

• Take actions to reduce the likelihood or impact of risks.

• Continue monitoring risks throughout the project.

4. Slippage

Slippage occurs when project activities are delayed. Ways to reduce slippage:

• Build contingency (slack) into schedules.

• Monitor progress regularly.
• Review work quality.
SBL Notes Leading & Managing Pankaj Khandelwal
Chapter 26 Projects CA, CFA, CIA

• Communicate with the project team.

• Add extra resources if needed.
• Negotiate a later deadline if unavoidable.

Critical Path: Delays on the critical path delay the entire project.

5. Change Control

Projects often receive requests to change the original scope.

Good change control requires:

• A formal change request.

• Assessment of costs, benefits, and risks.
• Approval by the Project Sponsor.
• Updating project plans and the business case if required.

Purpose: Prevent scope creep, cost overruns, and project delays.

Project Closure
Project Evaluation

Project evaluation checks whether the project achieved its objectives and identifies lessons for future projects.

1. Post-Project Review

Immediately after the project is completed.

Purpose:

• Evaluate how well the project management process worked.

• Identify what went well and what can be improved.

Benefits:

• Improves project management practices for future projects.

• Allows team members to share feedback.
• Lessons are captured while still fresh.

2. Post-Implementation Review

Several months after completion, once users have used the project output.

Purpose:

• Assess whether the project delivered the expected benefits and met user needs.
• Identify any improvements or corrective actions required.

Benefits:

• Fixes any remaining issues.

• Improves the final product or service.
• Provides additional lessons for future projects.