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PROJECT: project is a temporary endeavor with a defined beginning and end

(usually time-constrained, and often constrained by funding or deliverables),[1] undertaken to meet unique goals and objectives,[2] typically to bring about beneficial change or added value. The temporary nature of projects stands in contrast with business as usual (or operations),[3] which are repetitive, permanent, or semi-permanent functional activities to produce products or services. In practice, the management of these two systems is often quite different, and as such requires the development of distinct technical skills and management strategies.

Characteristics of Project Plans and Balanced Plans

A project plan can be considered to have five key characteristics that have to be managed:

Scope: defines what will be covered in a project. Resource: what can be used to meet the scope. Time: what tasks are to be undertaken and when. Quality: the spread or deviation allowed from a desired standard. Risk: defines in advance what may happen to drive the plan off course, and what will be done to recover the situation.

Balanced Plans
The sad thing about plans is you cannot have everything immediately. Many people plan using planning software packages, without realising the tradeoffs that must be made. They assume that if they write a plan down, reality will follow their wishes. Nothing is further from the truth. The point of a plan is to balance:

The scope, and quality constraint against, The time and resource constraint, While minimising the risks.


Forms of project organization (Matrix, Divisional, Line and Staff).


Technical Appraisal of the project.


6. PCAS (Project Cost Accounting System


PROJECT COST ACCOUNTING SYSTEM (PCAS) A feature of the FFS accounting system to collect cost and other information concerning projects. Individual increase and decrease requests are tracked through the Congressional process, as well as amounts at the program component, subactivity, activity, and appropriation levels.

Social Cost Benefit Analysis

Social Cost Benefits Analysis means to analyze the social cost and total social benefits if we accept any project. We all know that for completing the big project, we need big investment. In social cost benefit analysis (SCBA), we see whether return or benefits on this investment are more than its cost from point of view of society in which we are living. In public investment, we analyze and compare government expenditure with total benefits to society through SCBA. It is also good technique of financial evaluation of a project because we leave that project whose benefits to society are less than total cost which will to society because all resources are from society. Problems which can be solved by Social Cost Benefits Analysis

1st Problem: Rationale for SCBA

a) Market imperfection : We will not analyze social cost benefit; we can not find market imperfections. After study of market rates following factors come in to our knowledge. i) Rationing factor : It means some of raw material prices are controlled by Govt. So, it may increase our project cost but its social benefit will go to poor community. ii) Regulation for providing minimum wage factor: It also affects social cost and benefits of any project. Because company must have to pay this minimum wages. iii) Foreign Exchange Regulations factor: Sometime, we have to deal at currency rate which is less than actual market rate due to regulation on FOREX. So, we should analyze this point also. b) Externalities : Externalities are non-cash or benefits which an organization suffer or get if it starts the project. For example, if govt. makes road near your project plant, you can get this facility without any payment. On the other side, if any other organization is polluting and spreading diseases, its cost may suffer due to absence of your employee for going to hospitals. c) Tax and Subsidies: Tax is payment on the earning of the project and it will reduce our overall benefits. On the other hand, if govt. gives us subsidy for operating any project, it will count for our cost benefit analysis. 5|Page

2nd Problem: What is net benefit to society from a project?

With UNIDO approach, we can evaluate net benefit from any project. Formula is given below

"UNIDO"United Nations Industrial Development Organization: UNIDO is the

specialized agency of the United Nations that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability

The mandate of the United Nations Industrial Development Organization (UNIDO) is to promote and accelerate sustainable industrial development in developing countries and economies in transition. In recent years, UNIDO has assumed an enhanced role in the global development agenda by focusing its activities on poverty reduction, inclusive globalization and environmental sustainability. The Organization carries out two core functions: as a global forum, it generates and disseminates industry-related knowledge; as a technical cooperation agency, it provides technical support and implements projects. The Organization is recognized as a specialized and efficient provider of key services meeting the interlinked challenges of reducing poverty through productive activities, integrating developing countries in global trade through trade capacity building, fostering environmental sustainability in industry, and improving access to energy. UNIDO's vision is a world where economic development is sustainable and economic progress is equitable. The Organization focuses on three main thematic areas:

Poverty reduction through productive activities Trade capacity-building Energy and environment

The critical path method (CPM) :The critical path method (CPM) is
an algorithm for scheduling a set of project activities.[1] It is an important tool for effective project management. CPM provides the following benefits:

Provides a graphical view of the project. Predicts the time required to complete the project. Shows which activities are critical to maintaining the schedule and which are not.


CPM models the activities and events of a project as a network. Activities are depicted as nodes on the network and events that signify the beginning or ending of activities are depicted as arcs or lines between the nodes. The following is an example of a CPM network diagram: Steps in CPM Project Planning 1. 2. 3. 4. 5. 6. Specify the individual activities. Determine the sequence of those activities. Draw a network diagram. Estimate the completion time for each activity. Identify the critical path (longest path through the network) Update the CPM diagram as the project progresses. The

Program (or Project) Evaluation and Review Technique(PERT):

Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a statistical tool, used in project management, that is designed to analyze and represent the tasks involved in completing a given project. First developed by the United States Navy in the 1950s, it is commonly used in conjunction with the critical path method (CPM). PERT is a method to analyze the involved tasks in completing a given project, especially the time needed to complete each task, and to identify the minimum time needed to complete the total project. PERT was developed primarily to simplify the planning and scheduling of large and complex projects. It was developed for the U.S. Navy Special Projects Office in 1957 to support the U.S. Navy's Polaris nuclear submarine project.

Financial Appraisal
Companies usually have policies and procedures for evaluating projects from a financial perspective: to ensure that all costs have been identified and quantified (as part of the overall approach to risk management) to bring consistency of approach across the organisation to meet legal and accounting requirements to apply internal controls for authorising expenditure.

It includes:

Project Cost Estimation- It is the process of determining the total cost of the project which is supported by long term funds. Working Capital Requirement- It is the difference between current assets and current liabilities.

Sources of Funds Appropriate composition of Funds (Capital Budgeting)

Rr vs npv Rate of Return : Rate of return is the method of capital budgeting. This method
is used to select a good investment project out of large number of investment projects. Under this method, we calculate rate of return. If we divide average net profit after depreciation and tax with the amount of investment and multiply with 100, then this will be rate of return and it will be compared with other projects rate of return. We only invest our money in that project whose rate of return will be high. If there is only one project, then we can compare its standard rate of return or minimum rate of return. This minimum rate is calculated by financial consultant after analyzing different investment.

Net present value:The difference between the present value of cash inflows and

the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative.
internal rate of return (IRR) : The internal rate of return (IRR) is the rate of

return promised by an investment project over its useful life. It is some time referred to simply as yield on project. The internal rate of return is computed by finding the discount rate that equates the present value of a project's cash out flow with the present value of its cash inflow In other words, the internal rate of return is that discount rate that will cause the net present value of a project to be equal to zero. 'Discounted Cash Flow - DCF' :A valuation method used to estimate the attractiveness of an investment opportunity. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one. There are many variations when it comes to what you can use for your cash flows and discount rate in a DCF analysis. Despite the complexity of the calculations 8|Page

involved, the purpose of DCF analysis is just to estimate the money you'd receive from an investment and to adjust for the time value of money.

project scheduling: the discipline for stating how to complete a project

within a certain timeframe, usually with defined stages, and with designated resources. Project scheduling looks at which tasks need to be performed for a project and assigns deadlines for their completion. The project scheduler sets these deadlines by calculating how long each task should take to perform. Scheduling requires a comprehensive understanding of which action steps need to get done and when.

Contract management process : Contract management process starts

from the identification of the requirement of goods and service and runs through the completion of the contract. It has two stage Pre-Award and PostAward Contract Management Pre-Award Contract Management encapsulates all activities in the contracting process from initial request, or reception of third party contracts, to the final executed copy of the contract and often incorporates activities like contract request processes, contract drafting or authoring, internal reviews, external party negotiation and archiving contract documents. Post-Award Contract Management is more concerned with managing contractrelated milestones, commitments and obligations and can involve the analysis and interrogation of contract and transactional data to provide business users with realtime management information to maximize the value from contracted relationships.

Pre-requisite of effective contract management.


Rationale for SCBA

In SCBA the focus is on social cost and benefits of a project. These often tend to differ from the cost incurred in monetary terms and benefits earned in monetary terms by the project.


principle reasons for discrepancies are -:

The common market imperfections found in

Market imperfections -: developing countries are

Rationing -: rationing means control over the prices and distribution of a commodity. Prescription of minimum wage rates -: in case of minimum wage rates the wages paid to the labourers are more than what the wages would be in a competitive labour market free from such wage legislation.

Foreign exchange regulations -: the official rate of foreign exchange in most of the developing countries which exercise close regulation over foreign exchange is typically less than the rate that would prevail in the absence of foreign regulation. Externalities: - a project may have beneficial external effects, for e.g.

a project may create certain infrastructure facilities like roads which benefit the neighbouring areas, or a may have harmful external effects like it may create environmental pollution. Such benefits/losses are ignored in assessing the monetary benefits to the project sponsors but such externalities are relevant in SCBA because in such analysis all cost and benefits, irrespective to whom they accrue and whether they are paid for or not, are relevant. Taxes and subsidies -: in case of monetary cost and benefit of a project taxes and subsidies are to be considered because they are definite monetary gains, however, taxes and subsidies are ignored in case of SCBA because they are considered as transfer payments. Concern for savings -: in case of monetary cost benefit analysis a private firm is least concerned as to how its benefits are divided between consumption and savings, but from social point of view, however, the division of benefit between saving and consumption is relevant because while doing SCBA it is assumed that a rupee of benefit saved is more valuable than a rupee of 10 | P a g e

benefit consumed. Thus a higher concern of society for saving and investment is duly reflected in SCBA where higher valuation is put on saving than on consumption. Concern for redistribution -: while doing monetary cost and benefit analysis a private firm is least concerned about as to how its benefits are being distributed among various groups of the society, but while doing SCBA this factor is kept in mind because it is assumed that a rupee of benefit going to the poor section is considered more valuable than a rupee of benefit going to an affluent section. Merit wants -: while merit wants are not relevant from the private point of view, they are important from the social point of view. E.g. GOVT may prefer to promote an adult education programme even though they are of no benefit to the consumers in market, but from the point of view of the society they are important. LITTLE-MIRRLEES(LM) & UNIDO DISSIMILARITIES 1. UNIDO method also emphasis calculation of financial profitability of SCBA but this is not so done in case of Little-Mirrlees

market prices along with method.

2. Little-Mirrlees method measures cost and benefit in terms of international currency that is in border price or world price in international price. UNIDO approach measure costs and benefits in terms of domestic currency. 3. The numeraire in case of Little-Mirrlees approach measures cost and benefit in terms of uncommitted social income. On the other hand in UNIDO method it measures the same in terms of domestic consumption. 4. UNIDO approach focuses efficiency, saving and redistribution of income stage by stage while Little-Mirrlees approach considers the same in totality.

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