AN APPROACH TO PROJECT FORMULATION

Check List of Questions To Be Considered In

Formulating A Project:
 Project Idea:

1. Who conceived the project?

2. What is going to be his/her role in executing the project?
3. Is the project going to be seriously affected if he/she is not going to be involved in
executing and running the project?
4. What are the chances that he/she may not be involved in the project execution at
all?
5. Is the project idea well conceived, from the point of view of its scope and
objectives?
6. What are the critical assumptions on which the project idea has been conceived?
7. Which are the critical aspects, that can’t be validated at the time of
conceptualisation and are likely to seriously affect going ahead with the project
idea?
8. Is there an alternative to the idea already existing? How does it compare?
(Compare various modules of the project idea with the existing alternative, if any)
9. Describe the Project idea highlighting the special features.
 Reasons For Going In For A New Project/Idea:
What are the special considerations/compelling reasons for taking up a project of this
nature? Make use of the list below:

– New Product/Service

– Untapped Market

– High Profit Margin

– Developing an Underdeveloped Area.

– Influence Of Industrial Policy

– Dissatisfied Customers with the Existing Product/Service

– Export Potential

– To Improve the State Of the Art

 Product Demand:
1. What is the forecast figure for the new product/service?
2. What is the size of the potential markets?
3. What is the percentage of the market share expected to be achieved? (Segment-
wise)
4. Is it necessary to conduct a detailed market research/survey before obtaining
approval of the project?
5. Who are the leading competitors for this product/service and their existing market
share?
6. What is the desirable investment in plant and machinery to meet the expected
demand? (Present and Future)
7. Note: You may restructure the questions if the outcome of the project is a service.
 Product Technology:
1. Is it a Proven/State of The Art/Obsolete Technology?
2. Whether the technology know-how locally available or likely to be imported?
3. What are the skills requirement in operating/managing the technology?
4. If it is an indigenous technology, whether it is at the pilot plant stage/project
engineering stage?

Do you visualize any problem with regard to scaling up operations?

5. Can the technology be adopted with the existing infrastructure?

6. How soon the technology is likely to become obsolete?
7. Does this field ‘technology obsolescence’ prone?
8. Is technology going to play a critical role? Highlight the same.
 Project Inputs:
I. What are the various inputs required and the chances of their availability for
execution of the project?

a) Labour b) Material c) Project Machinery and Equipment d) Know-how e) Various other resources

II. What are the various inputs required and the chances of their availability for
successfully running the project, after it has been commissioned?
 Project Location:
1. What are the factors that you have considered for deciding on the particular location
as compared to others? Present your comparison in the form of a table, for all the
alternatives.

2. What is the weightage (importance) that you give for the factors chosen by you? (It
could be 0 to 1 for each factor and should total up to 1 for all factors together)

3. What are the chances of some of the important factors going out of control? What is
going to be the nature of impact of such a decision on the above factors to the
overall performance of the project?

◦ For foreign location in addition consider the factors already indicated in (13)
 Project Cost:
1. What is the approximate cost of the project?

2. What is estimated operating cost per year?

3. What is the break-up of the funds requirement (Including Foreign Exchange)?

 Project Economics:
1. What is the expected (%) of profit and the selling price?
2. What is break-up of the cost of production/service?
– Material
– Labour
– Overhead
3. If it is a developmental project whether Cost-Benefit Analysis has been carried out or
not?

What is the outcome of the Cost-Benefit Analysis?

4. What is approximately the break-even point as a percentage for the capacity of the
plant? How does this compare with the estimated demand for the product/service?
5. How many years will it require to recover the investment?
6. Is the project very sensitive to changes in Govt. policies & regulations?
 Time Frame:
1. What is the time-frame within which the project has to be completed to remain cost
effective and competitive?

2. Can you identify some critical areas of the project which are likely to seriously affect
the completion of the project in time?
 Environmental Issues:
1. Is it an ‘Environmental Friendly’ Project?

2. What are the issues that are likely to affect the successful completion of the
project ? (Make use of the list)

– Litigation
– Rehabilitation
– Pollution

3. Are the issues solvable within the time-frame stipulated for the project?
 Overall Performance:
1. Can you identify some of the critical areas of the project which are likely to seriously
affect the performance/objectives of the project? (Rank them in order of
criticalness) Areas of concern (Example only)

– Credibility of Suppliers

– Environmental Issues

– Political un-stability

– Management Style
 Past Experience:
1. Can you give reasons for a project which was successfully formulated?

2. Can you give five reasons for a project which was poorly formulated?

This will be useful for making comparisons with the current project.
 Summary:

Make a summary of the formulation taking into consideration of all the above
factors. The summary should be such that it facilitates taking a decision as to
whether to go ahead with the next stage (i.e. beyond formulation) or not.
 Conclusions:
The Project Formulation exercise is done with a view to:

1. Understand the various dimensions of the project from a very broad angle.
2. Facilitate the project authorities to take a decision as to whether it is going to be beneficial for the
organization to conduct a detailed feasibility study or not.

Otherwise the project idea may be dropped at this stage without proceeding for
probing any further.

3. Identify the deficiencies and gaps in the formulation and take remedial measures, if possible.

A check-list of factors as suggested above could be useful to carry out a meaningful

project formulation exercise. The list of factors indicated above are only a
representative one and not an exhaustive list. A well formulated project is the one
which presents a very unbiased picture of the project idea in more clear-cut terms
with regard to all the above factors. The project authorities should use the
information generated through the formulation exercise to identify the deficiencies
and gaps in the formulation and take remedial measures ahead of time.
 Characteristics of an [Link].
• Affected by weather
• Timely water supply essential
• Critical inputs-labour/equipments
• Output is perishable
• Controlled by government policies,rules,regulations etc.
• Political influence is high
• Lack of use of management techniques/technology
• Overall poor infrastructural support
• Best talent is not attracted to [Link]
CRASHING ASPECTS / CONSIDERATIONS

Dr.M.R. Gopalan, Project Management

IFIM, Bangalore
 Why Reduce Project Duration?
 Client organization wants the project to be
completed within a specified due date.

 Project execution authority wants the project to

be executed in a cost effective manner.

 Project execution authority wants to execute as

many projects as possible so as to achieve
effective utilisation of its resources & generate
more revenue for the organization.

Dr.M.R. Gopalan, Project Management

IFIM, Bangalore
What are the Costs of Running a Project?
 Direct cost of performing the activity:

 Indirect cost of running the project:

 Expenses on managerial services

• Indirect supplies

• Equipment rentals

• Insurance costs

• Penalty / Reward

• Allocation of FOH

• Cost due to fluctuations in foreign exchange

Dr.M.R. Gopalan, Project Management
IFIM, Bangalore
 Crashing: Reducing Project Length
WAYS OF REDUCING (OPTIONS)

• Eliminate or shorten tasks which are on the critical

path.

• Re-Plan serial paths to be parallel

• Overlap sequential tasks

• Increase the number of working days / hours

• Encourage concurrent engineering

Dr.M.R. Gopalan, Project Management

IFIM, Bangalore
 Guide-Lines for Shortening Tasks
Consider:

• Tasks which are on the CP.

• Tasks which are long or easy to speed up.

• Tasks for which resources are available / can be made available.

• Tasks which costs least to speed up.

• Tasks which your organisation can control.

• Continue reducing project duration as long as cost of shortening is less

than the saving in indirect cost of running the project.

• However –
There may be situations where the project duration has to be reduced /
shortened at any cost.
Dr.M.R. Gopalan, Project Management
IFIM, Bangalore
Importance of Break Down
Structure
 WORK BREAKDOWN STRUCTURE (WBS)
The WBS is the single most important element because it provides a
common framework from which:
 The total programme can be described as a summation of
subdivided elements
 Planning can be performed
 Costs and budgets can be established
 Time, Cost, and Performance can be tracked
 Objectives can be linked to company resources in a logical
manner
 Schedules and status-reporting procedures can be initiated
 The responsibility assignments for each element can be
established.

It pictures a project subdivided into hierarchical units of tasks,

subtasks, work packages, etc., as a type of GOZINTO chart or tree
constructed directly from the project’s action plan.
Monitoring Frequency
 Monitoring
FREQUENCY OF REVIEW

TO FIX THE REVIEW PERIOD CONSIDER THE FOLLOWING:

 Project size and complexity

 Types of individual activities involved and their range of durations

 The reliability of the estimates

 Delegation of powers to the individual supervisors on the spot

 Maximum allowable extension of project duration without affecting the

realistic planned completion

 The time it takes to respond to any change

Based on the nearest convenient administrative cycle-month, week, day

shift, hour or even less will be the period of review.
 Examples
Type of Project Project Duration Review period Number of reviews

New weapons 5 years 1 month 60

Development

Market 3 years 1 month 36

Development

Major 2 years 1 month 24

Construction

Product 1 - 2 years 2 - 4 months 12 to 50

Launch

Refinery 1 - 4 weeks 1 day 5 to 30

Overhaul
Network Development
 Network Development

 Project represents a set of well-designed objectives. Objectives should be met within

constraints stipulated by the Management.

E.g. Time available

Resource available: Personnel
Equipment
Materials
Funds
 To realize the end objectives it may be necessary to complete many intermediate
stages.
E.g. Let us consider the example of building a house.
The work involved can be broadly classified as:

 Preparation of site
 Masonry work
 Electrical activities
 Carpentry activities
 Plumbing activities
 Finishing work
 Network Development
The breakdown of activities can be considered as the first level planning. These broader
activities can now be broken down into its components as follows:-

Preparation of site: Preparation of the plan

Leveling the ground
Prepare the ground for laying the foundation
Procurement of Cement

Such breakdown of activities can be made use of to plan the project in a systematic manner.

Breakdown of project activities into different levels under various categories as shown above is
what is known as Work Breakdown Structure (WBS). In this procedure, the chances of missing
any project activity, while listing down the project activities, is considerably reduced.

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Network Development
Preparation of Site

Masonry Work

Plumbing Work Electrical Work

Carpentry Work

Finishing Work

HOUSE

Work Breakdown Structure (WBS)

For House Construction

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Network Development
WORK BREAKDOWN CAN BE STRUCTURED BASED ON THE FOLLOWING CLASSIFICATIONS:

Function Oriented breakdown – such as

• Design Function
• Construction Function
• Inspection Function
• Purchasing Function etc.,

Product Oriented breakdown – such as

• Construct approach channel

• Construct Power House
• Construct Spill Way
• Construct effluent plant
• Construct Godown
• Construct Guesthouse

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Network Development
WORK BREAKDOWN CAN BE STRUCTURED BASED ON THE FOLLOWING CLASSIFICATIONS:

Geographical Oriented breakdown – such as (w.r.t. Television Transmission)

• Bangalore Microwave
• Bombay Microwave
• Delhi Microwave
• Madras Microwave

Technological Oriented breakdown – such as

• Civil Works
• Electrical Works
• Road Works
• Plumbing Works

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Network Development
WORK BREAKDOWN CAN BE STRUCTURED BASED ON THE FOLLOWING CLASSIFICATIONS:

Chronological Oriented breakdown – such as

• Phase I
• Phase II
• Phase III etc. in a project where the duration extends to 3-4 years or more

Funds Oriented breakdown – such as

• List all activities depending upon the funds available in various periods

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Network Preparation
In order to draw a network for a project, the following steps have to be adhered to:

* Activity Listing:

Once the work breakdown for each ‘work’ at the lower most level is completed, the
various activities are identified.

* Sequencing Logic:

To draw a network or in other words to represent a project in the form of a network, it is

necessary for us to know which activities can be done simultaneously and which must be
done sequentially.

Sequencing of activities forces the personnel involved to think of the inter-relationship

and interdependencies between activities and provides an opportunity for re-organizing
the activities in the best possible sequence.

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Network Drawing: Network Preparation
To draw a network the following are needed.

o List of activities
o Sequencing logic for the activities
o Convention that have to be adhered to in drawing a network

The following definition with regard to an activity and an event will help us in developing
the network for a project.

 Activity

An activity is any definable and time-consuming task / job to be executed in a project.

Example of activities:

o Procurement of Cement
o Erection of Equipment
o Laying of foundation
o Preparation of Plan

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Event: Network Preparation
The start of an activity and completion of an activity are called events. An event is
defined as a specific point in time indicating the beginning or end of one or more
activities.

It is observed that it is often easier to think of all the activities required to have been
completed for an activity to start than to think of all activities which might be initiated by
the Completion of an activity.

E.g. To start ‘FOUNDATION WORK’:

The correct question to ask at this point in time is:

What are the activities required to have been completed before Foundation work starts?

Is it not a correct thing to ask:

What activities should be initiated after the foundation work is over?

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 • Notations / Conventions in Drawing a Network
An event is represented by a circle
• An activity is represented by an arrow connecting, starting and ending events for that activity
A

E.g. 1. 1 2 Activity A is represented by (1,2)

A B
1 2 3 Activity ‘A’ precedes activity ‘B’
E.g. 2.

A B
Dummy
E.g. 3. 1 2 3

C D
4 5

Preparation of Network Data: The information needed, especially the relationship among activities is
usually presented in a tabular form as shown below. In terms of relationship, it is enough if we give the
immediate predecessors (if any) for each activity. The activity codes can be identified once the
network is drawn based on the precedence relationship given.

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore Cont …
 Notations / Conventions in Drawing a Network
Precedence Relationship for Diagram 3
Activity Activity Code Immediate Predecessors

A 1-2 -
B 2-3 A
C 2-4 A
Dummy 3-4 -

D 4-5 B, C

Without a Dummy Ex.3 will look like this

A B D
1 2 3 4
C

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore Cont …
 Notations A/ Conventions
B in Drawing
D a5 Network
Example 4 1 2 4 4

E 6
C
3

A B D 5

Example 5 1 2 4 4

E 6
C
3

Precedence Relationship for Diagram 5

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore Cont …
 Notations / Conventions in Drawing a Network
Precedence Relationship for Diagram 5

Activity Activity Code Immediate Predecessors

A 1-2 -
B 2-4 A
C 2-3 A
Dummy 3-4 -
D 4-5 B, C
E 3–6 C

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore Cont …
 EXERCISE
A petrol bunkNotations
operator is to/ prepare
Conventions
a networkinrepresenting
Drawing aallNetwork
activities to be
performed on an Assumption:
incoming car. The Services normally offered are:-
1. Check Windshield 1. Activity Relationships refer
2. Check Tyres to a particular model of a
3. Check Oil car.
List of Activities for Petrol Bunk Example
4. Check Battery 2. Number of men Unlimited
Activity Description Immediate Predecessors
5. Check Petrol Tank
A Raise Bonnet -
B Add Petrol -
C Check Tyres -
D Check Radiator A
E Check Battery A
F Check Oil A
G Lower Bonnet D,E,F
H Clean Windshield -
I Compute Bill B,F
J Collect Payment I

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Notations
SOLUTION TO PETROL BUNK /EXAMPLE
Conventions
(ROUGH)in Drawing a Network

Petrol Bill

Radiator? Payment
Battery? Lower
Raise
Bonnet Bonne
Oil? t
Wind
Shield? Tyres

QUESTION: a) Is it a compete network?

b) What are your observations?

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
INITIAL Notations / Conventions in Drawing a Network
Petrol

Radiator?
3
Raise Battery? Lower Payment
Bonnet Bonne Bill
1 2 4 6 7 9
t
Oil? 5

Tyres

Wind Shield?
8

QUESTION: a) Is it ok?
b) What are your observations?

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore
 Notations / Conventions in Drawing a Network
Tyres?

Battery? 3

Radiator? Lower
1 Raise 2 5 8
Bonnet Bonne
Oil?
Wind
Add t Payment
Shield Compute
Petrol 4 7
? Bill

CAR SERVICING PROJECT

Dr. M.R. Gopalan, Network Development

IFIM, Bangalore