Project Management

Course code: Fin-423

Chapter note 1
Prepared by ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
Islamic University, Kushtia
In need: abmfahadhossain@[Link]

Introduction

1. What is project? State the characteristics of project.

2. How does project Multidisciplinary and conflict can be rising?
3. How project significantly differ from ongoing operation?
4. Slate the differences between project and program.
5. What is project management? State the processes of project management.
6. What are the differences between Project management and general management?
7. State the Forces of project management/ why project management?
8. State the Benefits of Project management.
9. Describe the goals/objectives of project / how does project management goal trade off
10. Describe the Life cycle of a project
 ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
1. What is project? State the characteristics of project.
Ans: A project is a temporary task that accomplishes within a certain period to accomplish a certain
objective. It can be part of program and a program has a large-long objective and broken into a set of
projects. So, a project can be defined as a temporary effort to create a unique product or service. The
characteristics of a project are given below:
1. Temporary: Project is accomplishing only for limited amount of time. It has definite starting
and ending dates. The project will be said end when the projects objectives have been achieved.
2. Unique: Every project is unique. So, two projects are not similar. A Cement plant project and
construction project are two different projects and don’t have similar characteristics.
3. Specific Purpose: A project is a temporary task that accomplishes within a certain period to
accomplish a specific objective.
4. Multidisciplinary: A project is the combination of various talents and skills of various groups
of people. It includes business, technical, and manufacturing skills.
5. Conflict Ridden: Conflicts may arise in a project because project has different objectives of
different groups.
2. How does project Multidisciplinary and conflict can be rising?
Ans: Project Multidisciplinary can be rising for following reasons:
 A project is the combination of various talents and skills of various groups of people. It includes
business, technical, and manufacturing skills. That’s why; project is a multidisciplinary field.
 Operation generally encompasses one specialty. It is also raising the project Multidisciplinary.

Conflict can be rising because project brings together a diverse group, objectives and different groups have
different objectives.

3. How project significantly differ from ongoing operation?

Ans: A project is significantly difference from an ongoing operation by the following ways:
Points A project An ongoing operation
Nature One time affair Continuous process
Basis Temporary basis Ongoing basis
Time Limited time frame Unlimited time frame
Objective Single clear objective No clear objective
Start and end
Specific start and end points No real start and end points
points

4. Slate the differences between project and program.

Ans: The differences between program and project are given below:
Points Program Project
Meaning A program has a large-long objective and A project is a part of program and is
broken into a set of projects. individual activity.
Scope It has broader scope It has relatively narrow scope
Time It has longer duration It has shorter duration
Risk profile Program risk is more complex to identify and Project risk is easy to identify and
manage, manage.
Nature of the A significant number of potential solutions A relatively limited number of potential
solution solutions.
 ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
5. What is project management? State the processes of project management.
Ans: The Project management is the application of knowledge, skills, tools and techniques in project
activities to meet the project requirement. Project Management is accomplished through the use of the
following processes:
1. Initiating: It consists of those processes that define a new project or a phase of an existing project by
obtaining authorization to start the project or phase.
2. Planning: It consists of those processes that establish the scope of the project. It also defines the
objectives and the course of action to attain the objectives of the project.
3. Executing: It consists of those processes performed to complete the work of the project to satisfy the
project specifications.
4. Controlling: It consists of those processes that help to track, review and regulate the progress and
performance of the project.
5. Closing: It consists of those processes performed to finalize all activities to formally close the project.

6. What are the differences between Project management and general management?
Ans: The differences between project management and general management are given below:
Points of
General management Project management
distinctions
Nature Continuous process One time affair
Multidisciplinary Single state Moves from one state to another.
Objective No clear objective Single clear objective
Time No real start and end points Specific start and end points
Emphasis Not much of emphasis on planning Greater emphasis on planning.
Related Resource and machine related More human resource related
Oriented Product or process oriented Project oriented
Unique Repetitive and non unique Non repetitive and unique
Team building Simple team building Complex team building
Role of manager and team membership is Role of manager and team
Role
permanent or long term. membership is temporary

7. State the Forces of project management/ why project management?

Ans: Project management is for the following reasons:

1. General Business/Society Drivers: Following forces are driving Project Management:

a. The expansion of human knowledge
b. The growing demand for a broad range of complex, sophisticated, customized goods and
services.
c. The evolution of worldwide competitive markets for the production and consumption of goods
and services.
d. An expansion of global market.
2. Organizational Changes: The process of managing organizations has been impacted by three
revolutionary changes:
a) Accelerating replacement of traditional, hierarchical management by participatory management
b) Currently adoption of the “systems approach”.
c) Organizations establishing projects to accomplish the many specific changes that must be made
when the organization attempts to alter its strategy.
 ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
8. State the Benefits of Project management.
Ans: Project management is required to Companies due to following reasons:
1. Better control
2. Better customer relations
3. Shorter development times
4. Lower costs
5. Higher quality and reliability
6. Higher profit margins
7. Sharper orientation toward results
8. Better interdepartmental coordination
9. Higher worker morale
9. Describe the goals/objectives of project / how does project management goal trade off?
Ans: the project has three Objectives. These are given below:
1. Performance
2. Time
3. Cost
The primary job of the Project Manager is to manage the trade-offs between time, cost and performance.
Trade-offs occurred when maximizing each of the goals. A change in product specs has adverse impact on
cost, schedule or both.

a. During the formation stage of the project life cycle, there is no significant difference in the
importance of three goals.
b. During the build-up stage, schedule is the primary goal and it is more important than performance
and cost.
c. During the final stage, performance is significantly more important than cost.

Relative importance of project objectives for each stage of the project life cycle:

Note: 1 = Most important

 ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
10. Describe the Life cycle of a project
Ans: The life cycle of project can be described in the following ways —

1. Conventional project life cycle: The project is born according to a manager’s choice, the project
team and initial resources. Then work gets under way and momentum quickly builds. Progress is
made. For completing the final tasks, it will use a lot of time. Thus, the stages of a conventional
project are —
 Slow beginning
 Buildup of size
 Peak
 Begin a decline
 Termination

2. Time distribution of project effort curve: Time distribution of project effort is characterized by
slow-rapid- slow. In this cycle, the time is broken into several phases of project life. Minimal effort
is required in the beginning of the project. In the pan of planning, scheduling, monitoring, and
controlling, the effort has peak level and will be decreasing until the end project.

Figure: Time distribution of project effort

3. Exponential progress curve: Some projects follow exponential progress. These projects are
comprised of subunits. These subunits have little use but become useful when put together.
 ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)

Figure: Exponential progress project life cycle

Differences:

Conventional project life cycle (S shape curve) Exponential progress project life cycle

It shows that at the project nears completion, It shows that at the projectsnear completion,
additional inputs result in smaller increments of additional inputs result in larger increments of
completion that means diminishing marginal returns. progress that means increasing marginal returns.

For the S-shaped life cycle, percentage of project

For the exponential progress curve, the expenditure
completion is closely correlated with cost, or the use
of resources has little correlation with progress.
of resources.
 Project Management
Course code: Fin-423
Chapter note 2
Prepared by ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
Islamic University, Kushtia
In need: abmfahadhossain@[Link]

Chapter: Project Manager, organization & Team

1. Describe the differences between Functional manager and project manager.

2. Describe the roles of project manager.
3. State the responsibility of a project manager to its parent organization, client and team
member.
4. Describe the special demands on the project manager.
5. What type of obstacles tends to cluster near completion of project?
6. Which project objective is most important in formation, build up, main and phase out
stage?
7. Describe the types of project and state the causes of failure of each project.
8. What are some of the essential characteristics of effective project team members?
9. Describe the characteristics & Skills of project managers
10. What are the major causes of stress associated with the management of project?
11. State the ethical issues regarding the project manager.
12. Define project selection. State the criteria for project selection models.
13. What are the impacts of institutional environments?
14. Describe the importance of Project management Experience.
15. Describe the Project Management Career Paths
16. State the various factors for project evaluation
17. Same for basic types of project organization and state the advantage and disadvantages
of each.
18. Describe the nature of project selection model/ State the basic types of project
selection model.
19. What are the limitations of project selection models?
20. What are the sources of project benefits and project costs?
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
1. Describe the differences between Functional manager and project manager.

Ans: Functional manager and project managers have different roles and duties within an
organization. Functional managers are usually specialists and they know the details of their each
operation.

Figure: Functional management organization chart: marketing department of an insurance

company.

Project managers are responsible for running many functional areas to accomplish a specific
objective.

Figure: Project management organization showing responsibilities of a project manager.

Sometimes, both functional managers and project managers have to work together to share resources
and experience. This may help to improve efficiency and overall performance. But there are many
differences which are summarized below:

Functional Manager Project Manager

Functional managers need technical skills Project managers need negotiation skills.
Functional managers should be more skilled at Project managers should be more skilled at
analysis. coordination.
Functional managers are responsible for a small
project managers are responsible for the big area
area
Functional managers act as direct technical
Project managers act as facilitators.
supervisors.
Functional managers assign project Project managers assign work for project
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
2. Describe the roles of project manager.

Ans: The roles of project manager can be described below:

1. Project manager as Facilitator: Projects may raise conflict. So, PM must manage and
resolve solutions to conflicts by taking following steps:
 Understanding the interactions between the various subsystems
 Optimizing the total system interactions
 Optimizing all of the subsystems may not the entire system
2. Project Manager as a Communicator: PM has the responsibilities to create communication
among clients, senior Management, project team and other outside parties. PM must manage
better communication between these parties to minimize confusion and maximize clarity of
project objectives.
3. Project manager for Other Roles:
a. Virtual Project Manager:
 Projects are conducted over wide geographic area.
 Creates special problems in managing project
b. Meeting Convenor & Chair
 Must set agenda, call participants, keep minutes, and distribute information

3. State the responsibility of a project manager to its parent organization, client and team
member.
Ans: The following three major questions face the project manager:
1. What needs to be done?
2. When must it be done?
3. How are the resources required to do this job going to be obtained?
Project manager is responsible for planning, organizing, staffing, budgeting, directing and
controlling the project. The responsibilities of a project manager are given below:

A. Responsibilities to the Patent Organization:

1. Conservation of resources
2. Timely and accurate project communications
3. Careful management of the project
4. Protect the firm from high risk
5. Accurate reporting of project status with regard to budget and schedule
B. Responsibility to the Client:
1. Preserve utility of project and client
2. Resolve conflict among interested parties
3. Ensure performance, budgets, and deadlines are met.

C. Responsibly to project team members:

1. Fairness, respect, honesty
2. Concern for members’ future after project.
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
4. Describe the special demands on the project manager.
Ans: The special demands on the project manager are given below:

A. Acquiring Adequate Resources:

1. Initially, insufficient resources are budgeted for projects
2. Sometimes resource trade-offs are required
3. Subcontracting is an option
4. Project and functional managers perceive availability of resources to be strictly limited
5. Competition for resources turns into win-lose’ propositions between project and
functional managers.
B. Acquiring and Motivating Personnel: A major problem for the project manager is that most
people required for a project must be borrowed
1. At times, functional managers may become jealous if they perceive a project is more
effective than their own functional area.
2. The functional manager retains control of personnel evaluation, salary, and promotion for
the projects people.
3. Because the functional manager controls pay and promotion, the project manager cannot
promise much beyond the challenge of the work itself.
C. Dealing with Obstacles:
1. At the inception of a project, the “fires” tend to be associated with resources
2. At the time of project completion, obstacles are to be happened for two issues:
a. Last minute schedule and technical changes
b. Uncertainty for the members of the project team when the project is completed

D. Making Project Goal Trade-offs: The project manager must make tradeoffs between the
project cost, time and performance
E. Failure and the Risk and Fear of Failure: It is difficult to distinguish between project failure,
partial failure and success.
1. Failure at one point of a project may look like a success at another.
2. By dividing all projects into two general categories, difficulties of projects can be found.
F. Breadth of Communication: Most of the project manager’s time is required for
communicating with the many groups of the project.
1. Considerable time must be spent selling, reselling, and explaining the project
2. Interested parties include:
a. Top management
b. Functional departments
c. Clients
d. Members of the project team
G. Negotiation: In order to meet the demands of the job of project manager, the project manager
must be a highly skilled negotiator.
To effectively deal with the demands, a project manager must understand and deal with certain
following fundamental issues:
1. Must understand why the project exists
2. How to support of top management
3. Build and maintain a solid information network
4. Must be flexible in many ways with as many people, and as many activities.
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
5. What type of obstacles tends to cluster near completion of project?
Ans: At the time of project completion, obstacles are to be happened for two issues:
c. Last minute schedule and technical changes
d. Uncertainty for the members of the project when the project is completed

6. Which project objective is most important in formation, build up, main and phase out
stage?
Ans: The project manager must make tradeoffs between the project goals of cost and performace at
the following stages:
1. During formation stage of the project life cycle, there is no significant difference in the
importance project managers’ place on the three goals.
2. During build up stage, schedule is the primary goal of the project. Here schedule is more
important than performance and cost.
3. During main and phase out stage, performance significantly more important than cost.

7. Describe the types of project and state the causes of failure of each project.

Ans: Two general types of projects are given below:

1. Type-1: Type 1 projects are generally well-understood, routine construction projects. The
features of this project are :

a. Simple at the beginning of the project

b. Rarely fail because they are over budget
c. They fail because they are not organized to handle unexpected crises and deviations from
the plan.
d. These projects have lack of appropriate technical expertise to handle crises.

2. Type-2: Type-2 projects are not well understood and not routine construction projects. The
feature are:
a. Many difficulties early in the life of the project
b. Considered planning problems
c. Most of these problems arise from a failure to define mission carefully.
d. Failing to get the clients acceptance on the project mission

8. What are some of the essential characteristics of effective project team members?
Ans: The essential characteristics of effective project team members are given below:

1. High-quality technical skills: Team members should be able to solve most of the technical
problems of a project without outside assistance.
2. Political sensitivity: PM requires political skills of a high order. Senior project members also
need to be politically skilled and sensitive to organizational politics.
3. Strong problem orientation: The chances for successful completion of a multidisciplinary
project are increased if project team members are problem-oriented than discipline-oriented.
4. Strong goal orientation: Projects do not provide a comfortable work environment for
individuals. That is why; Team members should be strong goal oriented.
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
5. High self-esteem: Team members have high levels of self-esteem that they are not threatened
by acknowledgment of their errors and possible problems.

9. Describe the characteristics & Skills of project managers

Ans: Some of the most popular attributes, skills, and qualities of project managers are:

a) Strong technical background

b) Hard-nosed manager
c) A mature individual
d) Someone on good terms with senior executives
e) A person who can keep the project team happy
f) One who has worked in several different departments
g) A person who can walk on the waters

Four major skills those are required for the project manager:

1. Credibility: The project manager needs the following two kinds of credibility:
a. Technical credibility: Technical credibility perceived by the client, senior executives,
the functional departments and the project team. It represents PM has sufficient technical
knowledge to direct the project.
b. Administrative credibility: keeping the project on schedule and within costs as well as
making sure reports are accurate and timely.

2. Sensitivity: There are several ways for project managers to display sensitivity:
 Understanding the organization’s political structure
 Finding interpersonal conflict on the project team or team members and outsiders
 Does not avoid conflict
 Always keep the project members cool
 Have sensitive set of technical sensors

3. Leadership & Management Style: Leadership has been defined as: “interpersonal influence
and direction to attain a specified goal or goals.” Other attributes may include
 enthusiasm
 tenacity
 optimism
 courage
 energy
 personal
 Maturity

4. Ability to Handle Stress: Four major causes of stress associated with the management of
projects:
a. Never developing a consistent set of procedures and techniques
b. Many project managers have “too much on their plates”
c. Some project managers have a high need to achieve but frustrated
d. The parent organization is in the middle of major change
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
10. What are the major causes of stress associated with the management of project?
Ans: Four major causes of stress associated with the management of projects:
1. Never developing a consistent set of procedures and techniques
2. Many project managers have “too much on their plates”
3. Some project managers have a high need to achieve but frustrated
4. The parent organization is in the middle of major change

11. State the ethical issues regarding the project manager/ what are the ethical missteps taken
by a project manager?
Ans: A project manager must also have a strong sense of ethics. Some common ethical missteps are
given below:
1. “wired” bids and contracts (the winner has been predetermined)
2. buy-in” (bidding low with the intention of cutting corners)
3. “kickbacks”
4. covering for team members
5. taking “shortcuts”
6. using marginal materials
7. compromising on safety
8. violating standards
9. consultant loyalties

12. Define project selection. State the criteria for project selection models.
Ans: Project selection is the process of evaluating individual projects or groups of project and
closing some of them so that the objectives of the parent organization will be achieved. Managers
use decision-aiding models to find problems from a project. This Model represents the problem’s
stricture and can be useful in selecting and evaluating projects. The criteria for project selection
models are given below:

1. Realism: The model should reflect the reality of the manager’s decision situation. It should
include the multiple objectives of both the firm and the managers. Without a common
measurement system, direct comparison of different projects is impossible.

2. Capability: The model should be sophisticated enough to deal with multiple time periods,
various situations to the project and optimize the decision.

3. Flexibility: The model should give valid results with the conditions of firm. It should have
the ability to be easily modified with the changes in the firm’s environment.

4. Ease of Use: The model should be reasonably convenient. It should not take a long time to
execute. It should be easy to use and understand.

5. Cost: Data collecting and modeling costs should be low than the project cost and must be less
than the potential benefits of the project.

6. Easy Computerization: It should be easy to gather and store the information in a computer
database.
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
13. What are the impacts of institutional environments?
Ans: In general systems theory, the environment system is defined as everything outside the system
that receives outputs from it or delivers inputs to it. Project managers must consider the following
environments and how they may impact a project:
 Socioeconomic Environment
 Legal Environment
 The Business Cycle as an Environment
 Technological Environment
14. Describe the importance of Project management Experience.
Ans: Experience Project manager performs the following activities effectively and efficiently:
a. An organized plan for reaching an objective
b. Negotiation with one’s co-workers
c. Follow through
d. Sensitivity to the political realities of organizational life

15. Describe the Project Management Career Paths

Ans: The career path often starts with participation in small projects, and later in larger projects.
Most Project Managers get their training in one or more of four ways:
a) On-the-job
b) Project management seminars and workshops
c) Active participation in the programs of the Project Management institute.
d) Formal education in degreed programs

16. State the various factors for project evaluation

Ans: Various types of project evaluation factors are given below:
A. Production Factors
1. Time until ready to install
2. Energy requirements
3. Change in quality of output
4. Availability of raw materials
5. Required development time and cost
6. Impact on current suppliers
B. Marketing Factors
1. Size of potential market for output
2. Impact on current product line
3. Consumer acceptance
4. Impact on consumer safety
5. Estimated life of output
C. Financial Factors
1. Profitability of the investment
2. Impact on cash flows
3. Payout period
4. Cash requirements
5. Time until break-even
6. Size of investment required
7. Impact on seasonal and cyclical fluctuations
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
D. Personnel Factors
1. Training requirements
2. Availability of required labor skills
3. Change in size of labor force
4. Inter- and intra-group communication requirements
5. Impact on working conditions
E. Administrative and Miscellaneous Factors
1. Meet government safety standards
2. Impact on information system
3. Reaction of stockholders and securities markets
4. Patent and trade secret protection
5. Impact on image with customers, suppliers, and competitors

17. Same for basic types of project organization and state the advantage and disadvantages of
each.
Ans: Different types of project organizations are given below:

A. Project in the Functional organizations: In this organization, project will be assigned to the
functional area for seeing the project completed successfully. The advantages of this organization
are given below:

1) Maximum flexibility the use of staff

2) Individual experts can be utilized by many different projects
3) Specialists can be grouped to share knowledge and experience
4) The functional division serves the base technological community when individuals
choose to leave the project.
5) The functional division contains the normal path of advancement for individuals.

Disadvantages of functional organization ate given below:

1) The client is not the focus of activity.

2) The functional division gives importance on the particular activity not the overall
function.
3) No individual is given full responsibility for the project.
4) There are several stages of management between the project and the client.
5) There is a tendency to sub-optimize.

B. Pure Project Organization: In Pure Project Organization, project will be separated from the
parent organization and it will become a self-contained unit. But technical and administrative
staffs are accountable to the parent organization for financial performance. Advantages of this
organization are given below:
1) The project manager has full authority over the project.
2) All members of the project are directly responsible to the project manager
3) The lines of communication are shortened
4) The pure project organization can maintain a permanent cadre of experts due to
similar tasks.
5) By centralized authority, the decision can be made rapidly.
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
6) Unity of command exists
7) The structure of the pure project organizations is simple and flexible that easy to
understand and implement

Disadvantages of Pure Project Organization are given below:

1) Each project tends to be fully staffed which can lead to a duplication of effort in every area.
2) Managers have to need adequate stock of equipment and technical assistance to ensure
technical knowledge and skills.
3) The repository of technical knowledge is not readily accessible in the pure project
organization.
4) Pure project groups seem to be inconsistent with project policies and procedures.
5) It is a concern among members about “life after the project ends.

C. The matrix Organization: The matrix organization is a combination of functional and pure
project. There are three types of matrices: weak, balanced, and strong. The matrix project is not
separated from the parent organization. Advantages of matrix organization are given below:

1) The project is the point of emphasis

2) The project has reasonable access to the technology in all areas.
3) There is less uncertainty future happening (after project competed)
4) This project ensures the response to client’s needs rapidly.
5) The matrix organization allows a better company-wide balance of resources to achieve
goals.
6) There is a great deal of flexibility in the project activities.

Disadvantages of using the matrix organization: most involve conflict between the functional and
project managers for the following reasons:
1) Balance of power between the project and functional areas
2) Movement of resources
3) Problems associated the shutting down projects
4) Division of authority and responsibility
5) Matrix management violates the management principle of unity of command because
of having two bosses.

18. Describe the nature of project selection model/ State the basic types of project
selection model.
Ans: There are two basic types of project selection models, numeric and non-numeric. Both are
widely used. Many organizations use both at the same time or combination of both models.

1. Nonnumeric Models:
a. Sacred Cow - project is suggested by a senior official in the organization
b. Operating Necessity - the project is required to keep the system running.
c. Company’s Necessity - project as necessary to sustain a competitive position
d. Product Line Extension- projects are judged on how they fit with current product line,
fills a gap, and strengthens a weak link.
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
e. Comparative Benefit Model: severa1 projects are considered and the one with the most
favorable project is selected.
2. Numeric models: Numeric models can be divided into the following two ways:
A. On the basis of the profitability;
1) Non discounted cash flow:
 Average Rare of Return: It is the ratio of average annual profit and average
investment
 Pay-back period: It is the ratio of initial fixed investment and estimated annual
cash inflows from the project.
2) Discounted Cash Flow - Present Value Method
 Net present value: It is the difference between cash outflows and cash inflows on
a present value basis.
 Internal Rate of Return: It finds the rate of return that equates present value of
inflows and outflows
 Profitability Index: it is the ratio of PV of all future expected cash flows and
initial cash investment
3. On the basis of the scoring:
 Un-weighted 0-1 Factor Model
 Un-weighted Factor Scoring 1odel
 Weighted Factor Scoring Model
 Constrained Weighted Factor Scoring Model
 Goal Programming with Multiple Objectives
19. What are the limitations of project selection models?
Ans: The limitation of project selection models are given below:
1. Models do not make decision. The manager shares responsibility for the decision.
2. A model can only support the manager by showing advantages and disadvantage
3. They do not represent the reality: A project is selected or rejected because it is predicted to
have a certain outcome which could be good or bad in reality.

20. What are the sources of project benefits and project costs?
Ans: Project Benefits come from either –
1. Increasing Revenues, from which net profits will be an inflow
2. Decrease Expenses from inflow Project Costs or Investments:
Project Costs/Investments come from a variety of sources:
1. Labor & materials to develop software
2. Infrastructure of project and ongoing maintenance costs
3. Ongoing software licensing fees
 Prepared by ABM Fahad Hossain
Dept. of Finance and Banking (5th Batch)
 Project Management
Course code: Fin-423
Chapter note 3
Prepared by ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
Islamic University, Kushtia
In need: abmfahadhossain@[Link]

Chapter: Project Scheduling

1. How to create the project action plan? Stale the uses of project action plan.
2. What is work breakdown structure (WBS)? What are the steps and uses of WBS?
3. Define Scheduling. State the benefits of a network of activity and event relationship.
4. Describe various network Techniques
5. Define activity, even, network, path and critical path in network communication.
6. What are Gantt charts? What are the advantages of Gantt charts?
7. What is project communication? what are the causes of poor communication?
8. What do you mean by crash? What are the procedures for crashing?
9. What are the differences between normal schedule and crash schedule?
10. What are the objectives of crashing?
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
1. How to create the project action plan? Stale the uses of project action plan.

Ans: The steps of creating the project action plan are:

1. Identifying and arranging project activities in details successively.

2. Identifying the type and quantity of required resource for each activity.
3. Estimating the predecessors and durations for each activity.
4. Identifying milestones
5. Assigning individual or groups to perform the all activities of the project.

Project Master Schedule created by combining milestones, durations, and predecessors used to
compare with actual and planned performance.

2. What is work breakdown structure (WBS)? What are the steps and uses of WBS?

Ans: Work Breakdown structure is a simple set of all tasks in a project usually arranged by task
levels. It is sometimes presented as a tree. At the top are the projects objectives, below tasks are level
1 tasks, and below tasks are the level 2 tasks and so on. The primary purpose of the WBS is to ensure
that the important tasks are not overlooked. The steps of WBS are given below:

1. Using information from the action plan and list the task breakdown in detail. Decompose the
action plan to make budget, schedule, monitor and control the project
2. For each WBS work package, create a linear responsibility chart.
3. Review the work packages before aggregating activities for the project.
4. Convert the WBS into a Cost Breakdown Structure (CBS) that includes budget data for direct
costs. indirect costs, contingency reserves, and profit
5. Create the master schedule.
6. Capture actual costs and schedule performance of project

3. Define Scheduling. State the benefits of a network of activity and event relationship.

Ans: A schedule is the conversion of a project action plan into an operating timetable. It serves as the
basis for monitoring and controlling project activity with plan and budget. It is the major tool for the
management of projects. In a project environment, the scheduling function is more important than
ongoing operation. The basic approach of all scheduling is to form a network of activity and event
relationships. This network represents the sequential relations between the tasks in a project.

Such networks are a powerful tool for planning and controlling a project. It has also following
benefits:

1) It is a consistent framework for planning, scheduling, monitoring and controlling the project
2) It explains the interdependence of all tasks, work package & and work elements
3) Ii denotes the times when specific individuals must be available for a given task
4) Ii helps in ensuring that the proper communications between departments and functions
5) It determines an expected project completion date
6) It identifies critical activities that, if delayed, will delay the project completion.
7) It identifies activities the slack time of every project
8) Ii determines the starting dates of an task
9) It determines which tasks may be done or must be done for completing the project
10) It removes some interpersonal conflict by clearly showing task deficiencies
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
4. Describe various network Techniques

Ans: PERT and CPM are the most commonly used approaches to project scheduling. Both were
introduced in the 1950s. PERT has been primarily associated with Research & Development projects
and CPM with construction projects. Today PERT is not used much after generating CPM style
networks. The primary difference between them is that PERT uses probabilistic techniques to
determine task durations but CPM focuses the single duration estimate for each task. Both techniques
identify the critical path and associated slack in the schedule. According to PMI, PERT is called
ADM PERT (Arrow Diagram Method) and CPM is PDM CPM (Precedence Diagram Method).

5. Define activity, even, network, path and critical path in network communication.
 Activity: Activity is a specific task or set of tasks that are required by the project. Activity
uses the resources and takes time to complete. To convert a project plan into a network, one
must know what activities comprise the project and what its predecessors or successors are.
An activity can be in any of these conditions:
1) it may have a successor(s) but no predecessor(s):
2) it may have a predecessor(s) but no successor(s); and
3) It may have both predecessor(s) and successor(s).
The first of these is an activity that starts a network, the second ends a network. The third
is in the middle.
 Event: Event is the result of completing one or more activities. It occurs at a particular time
and it does not use any resources.

 Network: Network is the arrangement of all activities in a project arrayed in their logical
sequence and represented by arcs and nodes. It is precedence relationship among the project
activities. Networks are drawn starting on the left and proceeding to the right.

 Path: Path is the series of connected activities or intermediate events between any two events
in a network.

 Critical path: A projects critical path is the sequence of critical activities or events that
connect between start event to its finish event of the project, and which cannot be delayed
without delaying the project.

6. What are Gantt charts? What are the advantages of Gantt charts?
Ans: The most familiar tool for showing project schedules is the Gantt chart invented by Henry L
Gantt in 1917. The activities are showed as horizontal bars with their length proportional to their
duration. Gantt charts can be difficult to maintain if there are large changes in the project schedule.
Gantt chart does not typically depict the network relationships.

There are several advantages to the use of Gantt charts:

1) It is an easy way to read graphical depiction of the project schedule.
2) Ii is an effective method of indicating the actual current status of project tasks
3) It can be helpful in expediting, sequencing and reallocating resources among tasks.
4) Gantt charts usually do not show technical dependencies
5) Gantt charts provide a clear picture of the current state of a project
6) They are easy to construct
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
7. What is project communication? what are the causes of poor communication?

Ans: Good communication is essential to the success of any project. Good communication comes
from Learning. It occurs over time and experience. It must be practiced. Causes of Poor
communication are given below:

1) People come from different disciplines such as designers, programmers, sales, users, business
managers. etc
2) Lack of mutual understanding of technology
3) Ineffective meetings Meeting can be incredible waste of time
4) Proximity
 Distance team members
 Poor infrastructure and support
 Technology problem
5) Being an expert
 Expert at something
 Fear
 Panic
 Lack of good communication structure

8. What do you mean by crash? What are the procedures for crashing?

Ans: Crashing is a method for shortening the project duration by reducing the time. The crash time
and cost are the time and cost incurred if the activity is executed as fast as possible. The procedures
for crashing are given below:

1. Set up the normal schedule and calculate the cost to crash each activity

2. Shorten the project completion time by one time unit at the lowest cost possible. This is done
by crashing the activity on the critical path having the smallest cost-to crash slope
(Incremental cost). If there are two or more critical paths, it may be necessary to crash more
than one critical activity. If the project duration can’t be shortened at crash points, then
STOP- we have the minimum-cost crash schedule.

3. Construct a new critical path using the newly created activity times, and then repeat step 2.
9. What are the differences between normal schedule and crash schedule?

Ans: The normal schedule is a network that results from using normal time and normal costs for
each activity. It is a process of doing the project within a budget at a normal period of time.

The crash schedule is a network that results from using crash time and crash costs for each
activity. It is a process of doing the project as soon as possible with incurred costs.

10. What are the objectives of crashing?

Ans: Crashing is a method for shortening the project duration by reducing the time. The objectives
of project crashing are given below:

1. to reduce project duration while minimizing the cost of crashing

2. By using crashing, the managers finish the project sooner than indicated by the CPM/PERT
network analysis.
 Project Management
Course code: Fin-423
Chapter note 4
Prepared by ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
Islamic University, Kushtia
In need: abmfahadhossain@[Link]

Earned value analysis

1. Definition of Earned value analysis. What are the three fundamental values at the
root of EVA?
2. What else does earned value measure?
3. How do you interpret earned value?
4. Which earned value quantities can you show or calculate in a project?
5. Where do you see earned value data in project?
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
1. Definition of Earned value analysis. What are the three fundamental values at the root of
EVA?

Ans: Earned value analysis is the project management tool that is used to measure project
progress. It compares the actual work completed at any time to the original budget and schedule.
The three fundamental values at the root of EVA are described below:

 Budgeted cost of work scheduled (BCWS): The budgeted cost of work schedule is prepared
on the basis of costs of resources and fixed costs of the tasks. This is called the budgeted cost
of work scheduled (BCWS). BCWS shows how much of the budget should have been spent to
perform the task. It is calculated as the baseline costs up-to the status date. For example, the
total planned budget for a 4-day task is TK. 100 and it starts on a Monday. If the status date is
Wednesday, the BCWS is TK. 75.
 Actual cost of work performed (ACWP): The actual cost required to complete all or some
portion of the tasks up to the status date. This is the actual cost of work performed (ACWP).
For example, if the 4-day task incurs cost of TK. 35 each of the first 2 days, the ACWP for
this period is TK. 70 (but the BCWS is still TK. 75).

 Budgeted cost of work performed (BCWP): BCWP shows how much of the budgets have
been spent for actual duration of the task. This is called the budgeted cost of work performed
(BCWP) or Earned Value. For example, if after 2 days 60% percent of the work on a task has
been completed, one may expect that 60% of budget has been spent.

2. What else does earned value measure?

Ans: In addition to measuring BCWS, ACWP and BCWP, earned value analysis measures:

1) Cost variance (CV): CV is the difference between the budgeted cost of work performed
(BCWP) and actual cost of work performed (ACWP). If the CV is positive, the cost is
currently under the budgeted amount but if the CV is negative, the task is currently over
budget.
2) Schedule variance: SV is the difference between the budgeted cost of work performed
(BCWP) and the budgeted cost of work scheduled (BCWS). If the SV is positive, the project
is ahead of schedule in cost terms but if the SV is negative, the project is behind schedule in
cost terms.
3) Cost performance index: CPI is the ratio of budgeted costs of work performed to actual
costs of work performed (BCWP/ACWP).
4) Schedule performance index: SPI is the ratio of work performed to work scheduled
(BCWP/BCWS). SPI is used to estimate the project completion date.
5) The task to complete performance index: TCPI is the ratio that can be measure by
following ways: [BAC - BCWP]/[BAC - ACWP]. A TCPI value greater than one indicates a
need for increased performance. But less than one indicates performance can decrease.
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
3. How do you interpret earned value?

Ans: Earned value indicates the variances that help to determine if there is enough money left; the
project will finish on time.

a. Variance: Variance is the difference between baseline and scheduled task.

They occur when set a baseline plan and begin entering actual information into the schedule.
Variances can occur in work, costs and schedule. For example, a cost variance (CV) can be
positive or negative:
 If the CV is positive, the cost is currently under the budget or ahead of schedule.
Positive variances might enable to reallocate money from tasks.
 If the CV is negative, the task is currently over budget or behind the schedule. One
might increase the budget or accept reduced profit margins.

b. Ratio: Ratios including cost performance index (CPI) and the schedule performance index
(SPI) can be greater than 1 or less than 1:
 A value greater than 1 indicates that the project is ahead of schedule or under budget
 A value less than 1 indicates that the project behind schedule or over budget

For example, an SPI of 1.5 indicates that the project have taken only 67 percent of the planned time
to complete the task within period. A CPI of 0.8 indicates that the project has spent 25 percent more
time to complete the task.

4. Which earned value quantities can you show or calculate in a project?

Ans: With Project, I can show:

1) Actual cost of work performed (ACWP): The actual cost required to complete all or some
portion of the tasks up to the status date. This is the actual cost of work performed (ACWP).

2) Budget at completion (BAC): It shows an estimate of the total project cost.

3) Budgeted cost of work performed (BCWP): BCWP shows how much of the budgets have
been spent for actual duration of the task. This is called the budgeted cost of work performed
(BCWP) or Earned Value.

4) Budgeted cost of work scheduled (BCWS): The budgeted cost of work schedule is prepared
on the basis of costs of resources and fixed costs of the tasks. This is called the budgeted
cost of work scheduled (BCWS). BCWS shows how much of the budget should have been
spent to perform the task.

5) Cost variance (CV): CV is the difference between the budgeted cost of work performed
(BCWP) and actual cost of work performed (ACWP). If the CV is positive, the cost is
currently under the budgeted amount but if the CV is negative, the task is currently over
budget.
6) Schedule variance: SV is the difference between the budgeted cost of work performed
(BCWP) and the budgeted cost of work scheduled (BCWS). If the SV is positive, the project
is ahead of schedule in cost terms but if the SV is negative, the project is behind schedule in
cost terms.
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
7) Variance at completion (VAC): The earned value field that shows the difference between
the budget at completion [BAC] and the estimate at completion [EAC]. In Project. the EAC
is the Total Cost field, and the BAC is the Baseline Cost field.

8) Cost performance index: CPI is the ratio of budgeted costs of work performed to actual
costs of work performed (BCWP/ACWP).
9) Schedule performance index: SPI is the ratio of work performed to work scheduled
(BCWP/BCWS). SPI is used to estimate the project completion date.

10) Estimate at completion (EAC): It is the expected total cost of a task or project based on
performance as of the status date. It is calculated like this: EAC = ACWP + (BAC -BCWP)
/CPI.

11) The task to complete performance index (TCPI): TCPI is the ratio of remaining work to
remaining funds at the status date [BAC – BCWP]/ [BAC - ACWP]. A TCPI value greater
than one indicates a need for increased performance and less than one indicates performance
can decrease.

5. Where do you see earned value data in project?

Ans: The earned value data can be seen in any sheet by applying following factors:

1. Earned Value table: The Earned Value table shows BCWS, BCWP, ACWP, SV, CV, EAC,
BAC, and VAC. By using this table, one can see the consolidated earned value data. By
using EAC, BAC and VAC, one can evaluate the difference between project’s scheduled and
budgeted costs. CV shows the difference between project’s budgeted and actual cost. SV
shows the difference between the budgeted cost of work and the actual cost of work.

2. Earned Value Cost Indicators table: The Earned Value Cost Indicators table shows BCWS,
BCWP, CV, CV%. CPI, BAC, EAC, VAC, and TCPI. This table helps to analyze cost
variances. By checking the CPI and TCPI, one can see the progress of the project. If CPI is
less than 1, one is getting less work per dollar than planned. The TCPI tells how much
performance will be needed to finish the remaining tasks within budget.
 Project Management
Course code: Fin-423
Chapter note 5
Prepared by ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
Islamic University, Kushtia
In need: abmfahadhossain@[Link]

Project Budgeting and Risk Management

1. Define budgeting & state the types of budgeting. What is the most important task for lop
management to do in bottom-up budgeting?
2. What are the differences between Top—down budgeting Bottom-up Budgeting?
3. In preparing a budget, what indirect costs should be considered?
4. Describe the tracking signal.
5. what are the errors estimated in tracking signal? Interpret, If it is close to and if it is not close
to zero.
6. How to improve the process of cost estimation
7. What are the consequences of budget cut?
8. What are the differences among cost category budgeting, activity budgets and Program
Budgets?
9. Describe the learning curve
10. What do you mean by risk management? State the process of risk management.
11. Describe the golden rules of project risk management.
 ABM Fahad Hossain
Dept. of Finance a& Banking (5th Batch)
1. Define budgeting & state the types of budgeting. What is the most important task for lop
management to do in bottom-up budgeting?
Ans: Budgeting is the process of forecasting the requirement of resources for a project. Generally, it
uses historical costs. In IT projects, availability of detailed historical costs are limited. Budgeting
must consider the timing of the costs. Budgeting can be divided into the following two types —

A. Top-Down Budgeting: This is the technique of budgeting by comparing this project to past
project. It is prepared by using the judgment and experience of top and middle management.
Advantages of top-down budgeting include:
1. Management can develop accurate budgets by using Top-Down Budgeting system.
2. It promotes upper-level commitment
3. Overall budget costs can be estimated quite accurately
Disadvantages: The main disadvantages of top-down budgeting are that:
1. Significant errors may be made for low-level tasks.
2. A lower level of budget acceptance is due to limited participation, and
3. It provides little training opportunities for junior managers.

B. Bottom-Up Budgeting: This is the process of budgeting by asking the people who will
perform the individual tasks. Advantages of bottom-up budgeting include:
1. Bottom—up budgets ensure the accurate estimation.
2. It forecasts how much resources will be needed to complete tasks more accurately
than other budgeting techniques.
3. Active participation of the stakeholders will tend to increase the acceptance and
support for the budget.
4. Bottom-up budgeting can help managers to understand important dimensions of
project success.
5. If the estimates are unbiased, the sum of their errors will tend to cancel out.
Disadvantages: The main disadvantage of bottom-up budgeting is the risk of overlooking tasks.
Senior management should check to ensure that all major cost elements have been included in the
bottom-up budget.

2. What are the differences between Top—down budgeting Bottom-up Budgeting?

Ans: The differences between top-down and bottom-up budgeting are given below:
Points Top-Down Budgeting Bottom-Up Budgeting
Definition Top-down budgeting is the technique of Bottom-Up Budgeting is the process of
budgeting by comparing this project to budgeting by asking the people who will
past project. perform the individual tasks.
Nature It is inflexible. It is flexible.
Advantage It promotes upper—level commitment It promotes lower—level commitment
Time and It takes less time and lower cost to
It is time consuming and costly.
cost prepare.
Motivation Lack of motivation High level of team motivation
Employee Employee can participate in this
Lack of employee participation.
participation budgeting.
Vision It has a long term vision. Lack of long term vision.
Feeling of
Employees feel their input not valued. Employees feel valued.
employees
Existence Top-down budgeting is common. True bottom-up budgets are rare.
 ABM Fahad Hossain
Dept. of Finance a& Banking (5th Batch)
3. In preparing a budget, what indirect costs should be considered?

Ans: An indirect cost is a cost that cannot be directly traced back to the production of an output. To
prepare a budget, the project manager should consider the following indirect costs:

1. Sales, general, and administrative expenses (SG&A)

2. Contract penalties
3. Contingency allowances
4. Waste and reduction to fair market value (defects. spoilage, and obsolescence)
5. Turnover costs (replacement and training of personnel)

4. Describe the tracking signal.

Ans: A tracking signal is a measurement of how well a forecast is predicting actual values. As
forecasts are updated every week, month or quarter, the newly available demand data are compared
to the forecast values. The tracking signal is computed as the cumulative error divided by the mean
absolute deviation.
 Positive tracking signals indicate that demand is greater than forecast.
 Negative signals mean that demand is less than forecast.
A good tracking signal has a low cumulative error. In other word, small deviations are okay. But
positive and negative errors should balance one another so that the tracking signal centers closely
around zero.
5. what are the errors estimated in tracking signal? Interpret, If it is close to and if it is not
close to zero.
Ans: The following two types of errors estimated in tracking signal:
1. Random error: Random error refers to equal chance that estimates are higher or lower than
true value.
2. Bias error: A consistent tendency for forecasting to be greater or less than the actual values
is called a Bias error. It is also known as systematic error. Bias errors don’t cancel out.

If tracking signal is close to 0, random errors are present. If it is not close to zero and grows, there is
systematic error.

6. How to improve the process of cost estimation?

Ans: Estimates by nature are always wrong. It’s important to account for uncertainty in some other
way. One way is using PERT process of developing likely, optimistic and pessimistic estimates. In
addition, the PM must understand whether overhead cost is part of the estimate or not. Cost estimates
can be improved by the following ways —
1. Use of standard forms templates
a) Ensures that items are not missed
b) Standard format to review
c) Standard way to add overhead costs
d) Standard rates for various resources
2. Use of historical metrics
a) If available, information from previous projects
b) Productivity rates
c) Create new metrics
 ABM Fahad Hossain
Dept. of Finance a& Banking (5th Batch)
7. What are the consequences of budget cut?
Ans: The consequences of budget cuts are given below:
1. Resources of organization and project budgets can be in conflict
2. Estimates can be inflated
3. Need to bring estimates what company can spend
4. Estimates must be refined, padding removed
5. Efficiencies must be found
8. What are the differences among cost category budgeting, activity budgets and Program
Budgets?
Ans: Category-oriented is based upon historical data that accumulated through a traditional,
category-based and cost accounting system. Individual expenses are classified as basic budget lines
such as phone, materials, personnel, utilities, direct labor etc. These expense lines are gathered into
more inclusive categories, and are reported by organizational unit.
Activity budgets consider each project individually. On the other hand, Program budgets consider
all of the activities of the organization together.

9. Describe the learning curve

Ans: A learning curve is a graphical representation of tasks that represents ―when the tasks are done
on a continuous basis lead to a reduction in activity duration, resources and costs‖. Learning curve is
relevant in taking following decision:
a) Pricing decision based on estimation of future costs.
b) Workforce schedule based on future requirements.
c) Capital requirement projections
d) Set-up of incentive structure
The time required to produce a unit of output follows by using a well known formula:
T = T1nr
There
T = the time required for the nth unit of output.
T1 = the time required for the initial unit of output.
n = the number of units to be produced, and
r = log decimal learning rate / log 2.
For example: Consider the information given in the aircraft manufacturing example above:
T1 = 100 minute
T2 = 80 minute
Learning rate = 80%
what would be the time required to produce the eighth part?
Here, T8 = (100) (8 -0.322) = 51.2 minutes (since, b= In (0.80)/In(2) = -0.322
 ABM Fahad Hossain
Dept. of Finance a& Banking (5th Batch)
10. What do you mean by risk management? State the process of risk management.

Ans: Risk management is the process of identifying things that can go wrong. It consists of the
followings steps-
1. Risk Identification: This step is brain-storming. By reviewing all sources of possible risk
and the experiences and knowledge project team, all potential risks are identified. All the
potential sources of risk in a project are given below:
a) Technology
b) Project Organization
c) Senior Management
d) Client
e) Skills character of project team members
f) Outside factors (laws. etc)
Scenario analysis is common method for identifying the risk.

2. Risk Management-Analysis: This step is state various outcomes and probabilities. For this
purpose, the following statistical methods can be used –
a) Decision tables
b) Monte Carlo simulation etc.
These methods are used in normal projects.

3. Risk Management-Response/Mitigation: Based on the probabilities and impact of the

negative event, must determine which risks to plan for and how:

a) High impact and high probability- first priority

b) High impact and low probability- next priority
Risk response plans are contingency plans that will be executed if things go bad.

11. Describe the golden rules of project risk management.

Ans: the golden rules of project risk management are described below:

1. Make Risk Management Part of Project: The first rule is essential to the success of project
risk management. One should include Risk Management part into the project. Many people
believe that there is no need to formalize risk management and they are blindly confident that
no risks will occur. But it is not a correct decision.
2. Identify Risks Early in the Project: The first step in project risk management is to identify
risk of the project at the beginning. Two main sources exist to identify risks, people and
paper. People are the team members who have personal experiences and expertise. Paper is
the different documents that contain project risks.
3. Communicate About Risks: Communicating about risks is a two way street. Listen to team
members, sponsors and stakeholders when they talk about risk communication in team
meeting, project meetings and stakeholder meetings.

4. Consider Both Threats and Opportunities: Project risks have a negative factor that can
harm the project. However, one should consider both threats and opportunities for removing
the negative effects of the project risks.
 ABM Fahad Hossain
Dept. of Finance a& Banking (5th Batch)
5. Clarify Ownership Issues: After developing a list of risks, clarify who is responsible for
managing that risk. Risk owner is responsible for optimizing this risk for the project. He
monitors the risk and develops strategies for mitigating the risk.
6. Prioritize Risks: All risks are not created equal. One should focus on risks that will have the
largest impact on the project.
7. Analyze Risks: After identifying risk, analyze the risk very closely and take necessary steps
to mitigate the risk in an effective and efficient way.
8. Plan and Implement Risk Responses: Implementing a risk response is the activity that
actually adds value to the project. One can prevent a threat that occurring from negative
effects by preparing proper response plan of risk.
9. Register Project Risks: Maintain a risk register or risk log. A good risk register log contains
risk descriptions, clarifies ownership and analysis of the risk to mitigate the risks.
10. Track Risks and Associated Tasks: Update the Risk Register regularly. Document tasks
implemented to mitigate a risk.
 Project Management
Course code: Fin-423
Chapter note 6
Prepared by ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
Islamic University, Kushtia
In need: abmfahadhossain@[Link]

Chapter 6: Project Auditing

1. What are the dimensions of success of project evaluation?/ purposes of project evaluation.
2. How a successful project evaluation can help an organization?
3. What do mean by Project Audit? Describe the parts of a project audit.
4. What are the differences between financial audits and project audits?
5. Describe the three distinct levels of project audit?
6. Describe the timing of the Audit
7. Describe the construction and use of audit report / what information should be contained
in the audit report?
8. Describe the responsibilities of the Project Auditor/E valuator
9. Describe the Project Audit Life Cycle
10. What are the essentials of an Audit/Evaluation?
11. What is the measurement of a particular problem in auditing?
12. What do you mean by termination of a project? Explain the different ways to close out a
project.
13. When to Terminate a Project? or Identify the four reasons for project termination.
14. What factors are considered most important in the decision to terminate a project?
15. Describe the termination Process of a project
16. State the duties of the termination manager.
17. What does the Project Final Report include?
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
1. What are the dimensions of success of project evaluation?/ purposes of project evaluation.
Ans: Four independent dimension of success of project evaluation are given below:

1. The first and most straightforward dimension is the project„s efficiency in meeting both the
budget and the schedule. This has been the primary focus of project management and control
is meeting the time, cost, and performance objectives of the project.

2. The second and most complex dimension is customer impact/satisfaction. This dimension
includes not only meeting the project‟s technical and operational specifications but also
fulfilling the customer‟s in needs, solving a major operational problem of the customer, and
overcoming the challenges of customer satisfaction.

3. The third dimension is business/direct success, measured here primarily in terms of level of
commercial success and market share. For internal projects however, the factors night include
such measures as yields, cycle times, processing steps, quality, and so on.

4. The last dimension somewhat more difficult and nebulous to ascertain is future potential.
This includes factors relating to opening a new market developing a new line of products or
services if an internal project developing a new technology, skills, or competences.

2. How a successful project evaluation can help an organization?

Ans: A successful project evaluation can help an organization:
1. Identify problems earlier
2. Clarify performance, cost, and time relationships
3. Improve project performance
4. Identify opportunities for future technological advances
5. Evaluate the quality of project management
6. Reduce costs
7. Improve the process of risk identification and management
8. Speed up the achievement of results
9. Identify mistakes, remedy them, and avoid them in the future
10. Provide information to the client
11. Reconfirm the organization‟s interest in and commitment to the project

Evaluation makes recommendations that relate to ancillary unplanned, but important contributions to
the project and its parent:
 Improve understanding of the ways in which projects may maximize the value of the
organization
 Improve processes for organizing and managing projects
 Provide a better environment in which project team members can work creatively together.

 Ancillary goals:
 Identify organizational strengths and weaknesses in project-related personnel, management
and decision-making techniques and systems
 Identify risk factors in the firms use of projects
 Improve the way projects contribute to the professional growth of project team members
 Identify project personnel who have high potential for managerial leadership
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
3. What do mean by Project Audit? Describe the parts of a project audit.
Ans: The project audit is a thorough examination of the management of a project. The audit of the
project can be different sectors like the project methodology and procedures, records, properties,
budgets and expenditures and the degree of completion. It may deal with the whole project or only a
part of the project. The formal report may be presented in various formats. But report should contain
minimum comments on some specific points. There are six parts of a project audit. These are given
below:
1. Current status of the project: Does the work actually completed within the completion
time?
2. Future status: Project audit report also focuses the future status of the project by
considering the current status.
3. Status of crucial tasks: Project audit report also focuses the status of crucial tasks of the
project that affects the success or failure of the project.
4. Risk assessment: What is the potential for project failure or monetary loss?
5. Information pertinent to other projects: What lessons learned from the project audited that
can be implemented in other projects?
6. Limitations of the audit: What limitations affect the data of the project audit?

4. What are the differences between financial audits and project audits?
Ans: The differences between financial audits and project audits are given below:
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
5. Describe the three distinct levels of project audit?
Ans: While an audit will be performed at any level the organization, three distinct levels are
recognized and widely used:

1. General audit: This audit is normally most constrained by time and resources. It is usually a
brief review of the project touching slightly on the six parts of an audit.

2. Detailed audit: This audit is conducted to follow-up the general audit. This audit is required
when the general audit has disclosed an unacceptable level of risk in some parts of the
project.

3. Technical audit: Technical audits are carried out by a qualified technician under the direct
guidance of the project auditor. In the case of very advanced or secret technology, it may be
difficult to find qualified technical auditors. In such cases, it is common for the firm to use
academic consultants who have signed the appropriate documents.

6. Describe the timing of the Audit

Ans: The first audits are usually done early in the project‟s life. Early audits are focused on the
technical issues in order to make sure that key technical problems have been solved. Audits done
later are of less immediate value to the project, but are more valuable to the parent organization. As
the project develops, technical issues are less important matters of concern. Conformity to the
schedule and budget become the primary interests. Management issues are major matters of interest
for audits made late in the project‟s life. Post project audits are a legal necessity because the client
specified such an audit in the contract

7. Describe the construction and use of audit report / what information should be contained in
the audit report?
Ans: In an audit report, the information should be arranged in such a way that helps to easy
comparison of predicted versus actual results. Negative comments about individuals or groups of the
project should be avoided. The following information should be contained in a audit report:

1. Introduction: This section contains a description of the project to provide a framework of

understanding for the reader. Project objectives must be clearly defined in this section.

2. Current Status: Project audit report also focuses the current status of the project by
considering the following factors:
a) Cost: This section compares actual costs to budgeted costs.
b) Schedule: This section compares actual time to budgeted time.
c) Progress: This section compares work completed with resources expended.
d) Quality: Quality is a measure of the degree activities in a definite characteristic.
3. Future Project Status: This section contains the progress of the project and conclusions
recommendations for any changes in technical approach, schedule or budget for remaining
tasks.
4. Critical management issues: In this section, the auditor should focus all issues that will be
monitoring by senior management.
5. Risk Management: This section should contain a review of major risks of the project and
their projected impact on project time, cost and performance.
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
6. Caveats, Limitations, and Assumptions: In this section, the auditor should include a
statement that includes any caveats, limitations or validity of the report.

8. Describe the responsibilities of the Project Auditor/E valuator

Ans: First and foremost responsibility of the auditor is that he should tel1 the truth. The auditor must
do the audit in an objective and ethical manner. He must assume responsibility for what is included
and excluded from the report. The auditor must free from bias. The auditor must maintain political
and technical independence during the audit. He should maintain the privacy of all treat confidential
information. They also list the following steps for carrying out an audit:

1. Make a small team of experienced experts

2. Familiarize the team with the requirements of the project
3. Audit the project on site
4. After completion, debrief the projects management
5. Produce a written report according to a pre-specified format
6. Distribute the report to the Project Manager and project team for their response
7. Follow up to see if the recommendations have been implemented

9. Describe the Project Audit Life Cycle

Ans: Like the project life cycle, the audit has a life cycle. There are six steps of audit life cycle.
These are described below:

1. Project Audit Initiation: This step involves starting the audit process, defining the purpose
and scope of the audit. It also involves gathering sufficient information to determine the
proper audit methodology.
2. Project Baseline Definition: This phase consists of identifying the performance areas,
determining standards for each area through benchmarking, ascertaining management
performance expectations for each area, and developing a program to measure the reliability
of information.
3. Establishing an Audit Database: After establishing baseline standards, the execution of
the audit begins. The next step is to create a database for using by the audit team.
4. Preliminary Analysis of the Project: After data collecting, judgments are made. In this step,
the auditor must analyze the data and present the analysis to managers that focus the real
meaning of the audit‟s findings.
5. Audit Report Preparation: This phase includes the preparation of the audit report. A set of
recommendations and plan for implementing is also a part of audit report.
6. Project Audit Termination: When the final report and recommendations are released, there
will be a review of the audit process. When the review is finished, the audit is truly complete
and the audit team should be formally disbanded.
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
10. What are the essentials of an Audit/Evaluation?
Ans: For an audit evaluation, the audit team must be properly selected, all records and files must be
accessible and free contact with project members must be ensured. These essentials are described
below:

A. The Audit Evaluation team: the success of audit report largely depends on the choice of the
audit evaluation team. For a small project, one person can handle all the tasks of an audit. But
for a large project, the team may require to handle the tasks of an audit. The areas that may
furnish audit team members are:

1. The project itself

2. The accounting controlling department
3. Technical specialty areas
4. The customer
5. The marketing department
6. Purchasing asset management
7. Human resources
8. Legal contract administration department
The main role of the audit evaluation team is to conduct a thorough and complete examination of
the project.

B. Access to Records: In order to make the audit evaluation team effective, it must have free
access to all information relevant to the project. The audit team requires information of
various departments such as accounting, personnel, and purchasing. Some information comes
from documents that predate the project. Examples of documents that predate the project:

1. Correspondence with the customer that led to RFP

2. Minutes of the project selection committee
3. Minutes of senior management committee

C. Access to Project Personnel and Others: There is several rules that should be followed to
contact the project personnel. There must be needed care to avoid misunderstandings between
the audit evaluation team and project team members. Information may be given to audit
evaluation team members in confidence. The auditor must protect the sources of confidential
information.

11. What is the measurement of a particular problem in auditing?

Ans: Measurement is an integral part of the audit evaluation process. Measuring the actual
expenditure against the planned budget is difficult and depends on an in-depth understanding the
procedures of the accounting department. It is a very difficult task to determine what revenues should
be assigned to a project. Sometimes measurements are obvious, sometimes unobvious and sometimes
impossible to identify.
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
12. What do you mean by termination of a project? Explain the different ways to close out a
project.
Ans: A project can be terminated when work of the project has ceased or further progress is no
longer possible. There are four different ways to close out a project:

A. Termination by Extinction: The project may end if it has been successful and achieved its
goals. The project may end if it is unsuccessful and can‟t achieve its goals. The termination
by extinction is happened due to “termination by murder” which can range from political
assassination to accidental projecticide.

B. Termination by Addition: If a project is a major success, it may be terminated by the parent

organization. In this process, project personnel, property, and equipment are simply
transferred from the dying project to the newly born division.

C. Termination by Integration: This method is the most common way of dealing with
successful projects and the most complex. The property, equipment, material, personnel, and
functions of the project are distributed among the existing elements of the parent
organization. There are some important aspects of the transition from project to integrated
operation that must be considered:

1. Personnel - where will the team go?

2. Manufacturing - is the training complete?
3. Accounting/Finance - have the project‟s account been closed and audited?
4. Engineering - are all drawings complete and on file?
5. Information Systems/Software - has the new system been thoroughly tested?
6. Marketing - is the sales department aware of the change?

D. Termination by starvation: This type of project termination is a “slow starvation by budget

decrement”. There are many reasons why senior management does not wish to terminate an
unsuccessful project: Terminating a project that has not accomplished its goals is an
admission of failure.

13. When to Terminate a Project? or Identify the four reasons for project termination.
Ans: Some questions to ask when considering termination:

1. Has the project been obviated by technical advances?

2. Is the output of the project still cost-effective?
3. Is it time to integrate or add the project as a part of regular operations?
4. Are there better alternative uses for the funds, time and personnel devoted to the project?
5. Has a change in the environment altered the need for the project‟s output?

Fundamental reasons for project termination are given below:

1. A project organization is not required
2. Insufficient support from senior management
3. Naming the wrong person as project manager
4. Poor planning
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
14. What factors are considered most important in the decision to terminate a project?
Ans: The following factors should be considered in the decision to terminate a project:
1. Technical and commercial failure
2. Low probability of achieving technical objectives
3. Technical or manufacturing problems cannot be solved with available R&D skills
4. Higher priority of other projects requiring R&D labor or funds
5. Low profitability on investment.
6. Low market potential
7. Too long time required to achieve commercial results
8. Negative effects on other projects or products,
9. Patent problems
15. Describe the termination Process of a project
Ans: The termination process has two distinct parts. These are described below:

A. The Decision Process: Decision-aiding models for the termination fall into two generic
categories:

1. Models that base the decision on the degree of the quality of the project that
associated with successful projects.

2. Models that base the decision on the degree to which the project meets the goals and
objectives set for it.

B. The Implementation Process: In this process, the project will be terminated and must be
implemented.

The actual termination can be planned and orderly, or a simple hatchet. Special termination managers
are sometimes useful in completing the long and involved process of shutting down a project. If
 ABM Fahad Hossain
Dept. of Finance & Banking (5th Batch)
technical knowledge is required during the termination process, a member of the project team may be
upgraded and assi2ncd responsibility for the termination.

16. State the duties of the termination manager.

Ans: Duties of the termination manager are given below:
1. Ensure completion of the work including tasks performed by subcontractors
2. Notify the client of project completion and ensure that delivery is accomplished
3. Ensure that documentation is complete including a terminal evaluation of the project
deliverables and preparation of the project‟s Final Report
4. Clear for final billings and oversee preparation of the fumal invoices sent to the client
5. Redistribute personnel, materials equipment. and any other resources to the appropriate
places.
6. Clear project with legal counsel or consultant
7. Determine what records to keep
8. Ascertain any product support requirements. decide how each support will be delivered, and
assign responsibility
9. Oversee the closing of the project‟s books

17. What does the Project Final Report include?

Ans: The project final report includes the followings —
1. Project Performance: A key element of the report is a comparison between actual and
planned performance. This comparison may be extensive. It should include explanations of
all deviations of projects.

2. Administrative Performance: Another important element of the report is representing the

administration performance. This performance cannot solve technical problems but it can
enable the implementation of good technology. Administrative practices should be reviewed
highlighted the well and poor activities.

3. Organizational Structure: Each organizational structure is unique and has both advantages
and disadvantages. The final report should include comments on the structure of the project.

4. Project and Administrative Teams: Administration team is required when a project has
high level of interpersonal communication and cooperation. The final report should
recommend the individuals may not be assigned to future projects.

5. Technique of Project Management: The outcome of the project helps in forecasting,

planning, budgeting, scheduling, resource allocation, risk management and control techniques
of the project. If the forecasts, budgets, and schedules were not reasonably accurate, some
recommendations should be given for improving the techniques of project management.