ML0009 – Project Management in Retail

Assignment Set- 1

1. What do you mean by retail project management? Explain the project life cycle in a
retail store?
Sol.
Project management (PM) involves collecting, organizing, and distributing knowledge that is
accumulated over a period of time for the purposes of improving and increasing a company’s
competitive edge. This knowledge is more than mere facts and data. It is information and
experience collected and applied to achieve the overall goals of a company.
Project management is the discipline of organizing and managing resources (e.g. people) in
such a way that the project is completed within defined scope, quality, time and cost constraints.
A project is a temporary and one-time endeavor undertaken to create a unique product or service,
which brings about beneficial change or added value. This property of being a temporary and
one-time undertaking contrasts with processes, or operations, which are permanent or semi-
permanent ongoing functional work to create the same product or service over and over again.
The management of these two systems is often very different and requires varying technical
skills and philosophy, hence requiring the development of project management.
The first challenge of project management is to make sure that a project is delivered within
defined constraints. The second, more ambitious challenge is the optimized allocation and
integration of inputs needed to meet pre-defined objectives. A project is a carefully defined set of
activities that uses resources (money, people, materials, energy, space, provisions,
communication, etc.) to meet the pre-defined objectives.

Project Life Cycle

The Project Life Cycle refers to a logical sequence of activities to accomplish the project’s
goals or objectives. Regardless of scope or complexity, any project goes through a series of
stages during its life.
There is first an Initiation or Birth phase, in which the outputs and critical success factors are
defined, followed by a Planning phase, characterized by breaking down the project into smaller
parts/tasks, an Execution phase, in which the project plan is executed, and lastly a Closure or
Exit phase, that marks the completion of the project. Project activities must be grouped into
phases because by doing so, the project manager and the core team can efficiently plan and
organize resources for each activity, and also objectively measure achievement of goals and
justify their decisions to move ahead, correct, or terminate.
It is of great importance to organize project phases into industry-specific project cycles. Why?
Not only because each industry sector involves specific requirements, tasks, and procedures
when it comes to projects, but also because different industry sectors have different needs for life

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cycle management methodology. And paying close attention to such details is the difference
between doing things well and excelling as project managers.
Diverse project management tools and methodologies prevail in the different project cycle
phases. Let’s take a closer look at what’s important in each one of these stages:
1) Initiation
In this first stage, the scope of the project is defined along with the approach to be taken to
deliver the desired outputs. The project manager is appointed and in turn, he selects the team
members based on their skills and experience. The most common tools or methodologies used in
the initiation stage are Project Charter, Business Plan, Project Framework (or Overview),
Business Case Justification, and Milestones Reviews.
2) Planning
The second phase should include a detailed identification and assignment of each task until the
end of the project. It should also include a risk analysis and a definition of criteria for the
successful completion of each deliverable. The governance process is defined, stake holders
identified and reporting frequency and channels agreed. The most common tools or
methodologies used in the planning stage are Business Plan and Milestones Reviews.
3) Execution and controlling
The most important issue in this phase is to ensure that project activities are properly executed
and controlled. During the execution phase, the planned solution is implemented to solve the
problem specified in the project’s requirements. In product and system development, a design
resulting in a specific set of product requirements is created. This convergence is measured by
prototypes, testing, and reviews. As the execution phase progresses, groups across the
organization become more deeply involved in planning for the final testing, production, and
support. The most common tools or methodologies used in the execution phase are an update of
Risk Analysis and Score Cards, in addition to Business Plan and Milestones Reviews.
4) Closure
In this last stage, the project manager must ensure that the project is brought to its proper
completion. The closure phase is characterized by a written formal project review report
containing the following components: a formal acceptance of the final product by the client,
Weighted Critical Measurements (matching the initial requirements specified by the client with
the final delivered product), rewarding the team, a list of lessons learned, releasing project
resources, and a formal project closure notification to higher management. No special tool or
methodology is needed during the closure phase.

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 2. Describe the roles and responsibilities of a retail project manager.
Sol.
Role of the Project Manager
A project manager is the person who has the overall responsibility for the successful planning
and execution of a project. This title is used in the construction industry, architecture,
information technology and many different occupations that are based on production of a product
or service.
The project manager must possess a combination of skills including an ability to ask penetrating
questions, detect unstated assumptions and resolve interpersonal conflicts as well as more
systematic management skills.
Key amongst his/her duties is the recognition that risk directly impacts the likelihood of success
and that this risk must be both formally and informally measured throughout the lifetime of the
project.
Risk arises primarily from uncertainty and the successful project manager is the one who focuses
upon this as the main concern. Most of the issues that impact a project arise in one way or
another from risk. A good project manager can reduce risk significantly, often by adhering to a
policy of open communication, ensuring that every significant participant has an opportunity to
express opinions and concerns.
It follows from the above that a project manager is one who is responsible for making decisions
both large and small, in such a way that risk is controlled and uncertainty minimized. Every
decision taken by the project manager should be taken in such a way that it directly benefits the
project.
Project managers use project management software, such as Microsoft Project, to organize their
tasks and workforce. These software packages allow project managers to produce reports and
charts in a few minutes, compared to the several hours it can take if they do not use a software
package
Roles and Responsibilities
The role of the project manager encompasses many activities including:
· Planning and Defining Scope
· Activity Planning and Sequencing
· Resource Planning
· Developing Schedules
· Time Estimating
· Cost Estimating
· Developing a Budget
· Controlling Quality
· Managing Risks and Issues
· Creating Charts and Schedules

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· Risk Analysis
· Benefits Realization
· Scalability, Interoperability and Portability Analysis
· Documentation
· Team Leadership
· Strategic Influencing
· Customer Liaison
On the other hand as stated by Tom Mochal, the Project Management Tips and Techniques
– The Role of a Project Manager are as follows:
Each month, Tom Mochal presents a set of project management tips and techniques for handling
various aspects of planning and managing a project. Tom has over 23 years of IT experience. He
has developed a comprehensive, scalable project management process called Ten Step
(www.TenStep.com). He has also developed PMO Step (www.PMOStep.com), which is focused
on building, implementing and supporting project management methodology through a Project
Management Office. Tom also has a comprehensive application support methodology called
Support Step (www.SupportStep.com).
On the surface, the role of a project manager should be easy to describe. In fact, from a textbook
perspective it probably is. But the challenge to understanding roles and responsibilities is that
they are different from company to company.
In general, the project manager is responsible for the overall success of the project. In some
companies, this person might be called a Project Coordinator, or a Team Leader, however, the
key aspect is that the person is responsible for ensuring the success of the project.
Process Responsibilities
The project manager normally is responsible for defining and planning the project. This results in
the completion of a Project Definition and a project work plan. Once the project starts, the
project manager must successfully manage and control the work, including:
· Identifying, tracking managing and resolving project issues
· Proactively disseminating project information to all stakeholders
· Identifying, managing and mitigating project risk
· Ensuring that the solution is of acceptable quality
· Proactively managing scope to ensure that only what was agreed to is delivered, unless changes
are approved through scope management
· Defining and collecting metrics to give a sense for how the project is progressing and whether
the deliverables produced are acceptable
· Managing the overall work plan to ensure work is assigned and completed on time and within
budget
To manage the project management processes, a person should be well organized, have great
follow-up skills, be process oriented, be able to multi-task, have a logical thought process, be

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able to determine root causes, have good analytical ability, be a good estimator and budget
manager, and have good self-discipline.
People Responsibilities
In addition to process skills, a project manager must have good people management skills. This
includes:
· Having the discipline and general management skills to make sure that people follow the
standard processes and procedures
· Establishing leadership skills to get the team to willingly follow your direction. Leadership is
about communicating a vision and getting the team to accept it and strive to get there with you.
· Setting reasonable, challenging and clear expectations for people, and holding them
accountable for meeting the expectations. This includes providing good performance feedback to
team members
· Team building skills so that the people work together well, and feel motivated to work hard for
the sake of the project and their other team members. The larger your team and the longer the
project, the more important it is to have good team-building skills.
· Proactive verbal and written communicator skills, including good, active listening skills.
Multiple Roles
Depending on the size and complexity of the project, the project manager may take on other
responsibilities in addition to managing the work. For instance, the project manager may assist
with gathering business requirements. Or they may help design a database management system
or they may write some of the project documentation. Project management is a particular role
that a person fills, even if the person who is the project manager is working in other roles as well.
Further the Project Manager has sole responsibility and authority for project and contract
direction and control. Support Managers (Task Managers) that report within the various line
organizations and departments have the responsibility for work definition and effective
management of the resources to accomplish the authorized work. The Project Manager is
responsible for each contract’s end item (i.e., knowing what needs doing, by whom, when, and
the required amount of resources by cost element and/or cost code).
Senior Management appoints the Project Manager. Normally the Project Manager is accountable
to the General Manager, or Vice President, or President depending on the size of the
organization; and is accountable to the Customer for project and contract success. The Project
Manager has the delegated authority to commit the organization on matters concerning
performance that are within the contract scope.
The Project Manager is responsible for defining the organizational structure of the project and
for interfacing with the functional organizations. The Project Manager directs and controls all
work performed within the framework of the Work Breakdown Structure (WBS). The Project
Manager has the authority for WBS element’s task assignment; control and assigns budgets; and
master project schedule(s). The Project Manager makes final decisions on tradeoff studies, and
task changes within the contract statement of work. The Project Manager is responsible for daily
communications and formal project reviews with both the customer and his/her senior
management.

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Projects vary in duration, value, and complexity. On a large or complex project, the Project
Manager may elect to appoint one or more Assistant Project Managers. The Project Manager
may delegate single or multiple responsibilities, including budget responsibility to an Assistant
Project Manager. The Project Manager may direct the Assistant Project Manager to control all
work performed within the framework of various assigned WBS legs. This includes defining
work scope, authorizing work, assigning and controlling budgets, and monitoring progress.
Most companies operate under a functional organization structure. The functional organization
maintains adequate technical resources and disciplines within their own organization entities.
The Project Manager should provide written direction to the various functional organizations on
their individual contribution. This written direction, called the work authorization, provides the
Support Managers (Task Managers) with the contract’s work scope, schedule, and budget
information.

3. Write a brief note on project environment in retail.

Sol.
Depending upon the complexity of the proposed project more information other than the
information asked below would be required in which case the promoter will be required to
provide the specific information as and when asked by the NEC/DOI.
a) Description of the present state of the environment within the 50 meters radius of the proposed
project location including in particular
· Topography
· Present land use
· Sett,ement / Institutions / Infrastructures
· Flora and fauna
· Cultural and heritage sites
· Water resources
· Total area required
b) Description of the principal environmental issues during the construction phase
c) Description of the principal environmental issues during the operation phase:
· A description of the main characteristics of the production processes, for instance, nature and
quantity of the materials used and the final product(s)
· Identification and estimation, by type and quantity, of expected wastes resulting from the
operation of the proposed project.
d) A description of the likely impact that the proposed project would have on the environment,
including, in particular, population, fauna flora, soil, water, air, material assets, including cultural

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and heritage resources, landscape and the inter-relationship between the above factors both
during construction and operation phases.
e) A description of the measures envisaged to prevent, reduce and where possible offset any
adverse effects on the environment.
f) A description of the method and site of disposal of the waste, indicating waste and residual
products stored at the plant.
g) A description of measures to prevent or reduce Occupational Health and Safety (OHS) issues.
h) Provide the name and proper contact address including telephone and fax numbers, and email
address of person(s) who would be responsible for the environmental management of the Project.

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 ML0009-Project Management in Retail
Assignment Set 2

Q 1. Write a brief note on stages in project formulation in retail and preparing the project
report in Retail environment.
Sol.
Stages in Project formulation in retails
Project management is composed of several different stages/types of activities such as:
1. Planning the work or objectives
2. Analysis & design of objectives and events
3. Assessing and controlling risk (or Risk Management)
4. Estimating resources
5. Organizing the work
6. Acquiring human and material resources
7. Assigning tasks
8. Directing activities
9. Controlling project execution
10. Tracking and reporting progress
11. Analyzing the results based on the facts achieved
12. Defining the products of the project
13. Forecasting future trends in the project
14. Quality Management
15. Issues management
16. Issue solving
17. Defect prevention
18. Identifying, managing & controlling changes
19. Project closure
20. Communicating to stakeholders
21. Increasing/ decreasing a company’s workers

Project report preparation for retails

The Project Report being compiled by the entrepreneur should accomplish the vital task of
providing a "Bird’s-eye-view" of the entire spectrum of activity.

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Technical Feasibility
Technical feasibility would encompass factors such as description of the product specifications
to be adopted, raw material availability as per requirements, and outline of "Manufacturing
process" inclusive of a "flow process chart", quality control measures, power supply, and
availability of water, transport facilities and communication network.
Economic Viability
Essentially involves compilation of demand for domestic and export markets, most appropriate
installed capacity requirements in regard to capital assets, evaluation of the production cost,
capturing a substantial share of market sales, revenue expected suitable price structure and so
on.
Financial Implications
Project cost covering "Non-recurring expenses" such as land and building, plant and equipment,
pre-operative expenses and so on and "Recurring Expenses" such as Working capital needs, Raw
material needs, Wages for personnel and so on will have to be worked out in detail. The probable
cost of production over a period of 5 years to be assessed and expenses such as fixed and
variable expenses and break-even analysis should be presented. Besides profit per month,
percentage of profit on total investment and percentage of profit on expected sales should also be
computed and furnished.
Managerial Competency
The new entrepreneur Manager entering the small scale sector should devote his full attention to
the new venture and should consider the product line chosen as a "Major Economic Activity".
He should develop keen desire to adopt "Modern Management Practices" for ensuring its
successful growth. He should endeavor to put on the market a product in his own style in an
"Innovative Spirit” without blindly imitating other brands.
He should maintain up-to-date records pertaining to actual production, sales effected every
month, in addition to gathering useful data on "POTENTIAL CUSTOMER", "NEW MARKET
SEGMENTS", "CHANGES IN FASHIONS", "DESIGNS" "STYLES", etc., The new enterprise
must emerge as a "CUSTOMER SATISFYING" and "CUSTOMER CREATING" organization.
More over
The Project Profile should, at the minimum, cover the following broad Chapters to facilitate the
Department to appraise the proposed project and determine its viability:
1. INTRODUCTION: DESCRIPTION OF THE PROPOSED PROJECT
In its introduction, the Profile should briefly outline the following:
· The purpose of the project (one paragraph)
· The proposed legal business status and ownership structure of the project
· The proposed name of the company or business
· The proposed project activity (the type of manufacturing or service industry and specific
industrial sector)
· The proposed products or services

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2. PROMOTER(S)
The Project Profile should contain the following details on the promoter(s):
· Full Name; Citizenship Card No; Age; Date of Birth; Sex; Name of Father; Name of Mother;
Marital Status; Name of Spouse; and Occupation of Spouse
· Permanent Address; Village/Town; Gewog; Dungkhag; Dzongkhag; House No. and Thram No.
· Mailing or Contact Address (if different from the above), Post Office Box No. and
telephone/facsimile no. and email address
· Academic qualifications
· History of past employment
· Promoter’s current line of business(es) (if any)
· Registered name and address of the current business
· Ownership structure and performance of existing business(es) that may be owned in part
(share/partnership), or in whole (proprietorship) by the promoter.
3. PROJECT LOCATION:
Provide the size of the proposed project are and the exact project site; precise location of
factory/business; name of area; city/town/village; Geog; Dungkhag; Dzongkhag. It should be
supported by land acquisition and use documentation (in attachments). Also mention whether the
proposed site is self-owned, to be purchased, rented, commercial building/area, government land
or industrial or service estate. If the land has been purchased, the cost of the land should be
indicated in Section 7 (Project Costs).
4. INFRASTRUCTURE REQUIREMENTS:
Provide an assessment of the level of infrastructure facilities available at the proposed site, and
provide as accurately as possible in the note as well as in Part II the cost of any additional
infrastructure that is needed to be installed (road access, power lines, telecommunication lines,
water supply, fuel storage, and cost of earthmoving and engineering works to stabilize land and
create sufficient flat land for the project to be built.
5. TECHNOLOGY/MANUFACTURING PROCESS TO BE USED
Provide the proposed source of technology/equipment with a copy of the manufacturer(s)’
equipment brochure(s) and explain the rationale for the choice of equipment.
The proposed production process should be described in detail and production flow diagram
should be provided. Also provide installed capacity per day and per year.
6. CONSUMPTION OF RAW MATERIAL, POWER, AND WATER:
The Profile should provide information on raw materials, fuel, electric power and water required
annually. Raw materials should be calculated in terms of tones per annum, fuel in litres per
annum, power in kwh per annum, and water in cubic metres per annum as under. The Profile
should also provide the source of raw material supply. Table presented below may be used to
provide the required information.

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Types of Raw MaterialsAnnual Source of Supply
Required Consumption
1.
2.
3.
4. Fuel (liters)
5. Electric Power (kWh)
6. Water (cubic meters)
7.
8.

7. PROJECT COST/TOTAL INVESTMENT:

Provide the project cost in detail and as accurately as possible supported an engineering plan of
the site development work and an engineer’s estimate of the cost of the site works. The project
cost should include the cost of land, site development, infrastructure/installation charges, civil
construction, plant and equipment, technical know-how/services, other pre-operating expense,
miscellaneous/ contingencies and working capital requirement.
8. PROJECT FUNDING REQUIREMENTS
Describe the proposed debt/enquiry ratio of the project, the equity funding source(s) and the
value of contributions, and the amounts of bank loans required for fixed asset purposes, and the
amounts required for working capital purposes to place the project into operation and provide it
with sufficient cash for operations in its first year;
In describing the proposed security to be pledged against a fixed asset loan, attach a note to the
Profile/License Application for the financial institutions detailing the promoter’s personal
financial conditions (net worth) in terms of assets (land, orchards, livestock, buildings, vehicles,
shares, cash etc.) and liabilities (detailing the promoter’s outstanding loans and
mortgage/security arrangements for these current loans).
9. HUMAN RESOURCES
Specify the maximum human resource requirements of the project (at maximum level of
production/sales), with a clear break-up of national/ non-national requirements, and requirements
for professional/technical personnel as under:
(1) Total National:…..Professional/Technical:…..Casual/Seasonal:…..
(2) Total Non-National:…Professional/Technical:….Casual/Seasonal:….
10. MARKETS:

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Provide an assessment of the domestic and export market, explaining if the product is new or
expected to substitute for an existing or imported product, and explaining the special (or
competitive) qualities of the product. If the product is export-oriented, provide information on
the export market’s target location, size, international prices, the known supply-demand gap, the
promoter’s marketing strategy, and current and likely competition. A table provided below may
be used to provide information on the projected sales.
Sales Projected Year 2 Sales Projected Year 5 Sales
Domestic Sales: Nu…………………p.a. Nu………………..p.a.
Export Sales: Nu…………………p.a. Nu………………..p.a.
Total Sales: Nu…………………p.a. Nu………………..p.a.
Current Local Prices of the Products: Nu…………………….
Current Export Prices of the Products: Nu……………………
11. ENVIRONMENTAL IMPACT
Provide the following information to enable the NEC/DOI to access the proposed project and
process for environmental clearance: (Depending upon the complexity of the proposed project
more information other than the information asked below would be required in which case the
promoter will be required to provide the specific information as and when asked by the
NEC/DOI).
a) Description of the present state of the environment within the 50 meters radius of the proposed
project location including in particular
· Topography
· Present land use
· Sett,ement / Institutions / Infrastructures
· Flora and fauna
· Cultural and heritage sites
· Water resources
· Total area required
b) Description of the principal environmental issues during the construction phase
c) Description of the principal environmental issues during the operation phase:
· A description of the main characteristics of the production processes, for instance, nature and
quantity of the materials used and the final product(s)
· Identification and estimation, by type and quantity, of expected wastes resulting from the
operation of the proposed project.
d) A description of the likely impact that the proposed project would have on the environment,
including, in particular, population, fauna flora, soil, water, air, material assets, including cultural

12
and heritage resources, landscape and the inter-relationship between the above factors both
during construction and operation phases.
e) A description of the measures envisaged to prevent, reduce and where possible offset any
adverse effects on the environment.
f) A description of the method and site of disposal of the waste, indicating waste and residual
products stored at the plant.
g) A description of measures to prevent or reduce Occupational Health and Safety (OHS) issues.
h) Provide the name and proper contact address including telephone and fax numbers, and email
address of person(s) who would be responsible for the environmental management of the Project.
12. PROJECT FINANCIAL PROJECTIONS
Prepare and attach to the Profile/License Application the proposed project’s financial statements
projected to year 5 of production/sales (projected cash flow statement, projected profit/loss
statement, and projected balance sheet. In considering funding requirements and calculating
financial projections, use the current debt/equity ratio in vogue.

Q 2. Discuss the five types of appraisals followed by a retailer in a retail store.

Sol.
Appraisal in retail operations
Appraisers examine works of art, jewelry, antiques, and the contents of estates to determine their
value and authenticity. This job requires detailed knowledge of the subjects and an understanding
of current market values and trends.
A fine art appraiser, for example, will study a work of art for style of brush strokes, color values,
and other relevant characteristics. This information can establish the period in which it was
painted or help identify the artist. If a forgery is suspected, the appraiser may analyze paint
samples for their chemical content or examine the painting using sophisticated laser equipment
or under X-ray. This judgment requires knowledge of the materials, style, and techniques
employed by different artists in different periods.
Antique appraisers usually have a specialty, such as silver, jewelry, or furniture of a particular
period. They must be familiar with the styles, materials, and markings that help them date and
authenticate genuine antiques. They must also assess the condition of an article in relation to
others still in existence and determine the rarity of the piece.
Most jewelry appraisers have some training in gemology. This training enables them to appraise
the value of gemstones according to their color, the clarity of the stones, and the quality of the

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cut. After examining an article, a jewelry appraiser then determines its wholesale and retail
values. This figure is based on the information the appraiser gathers about the piece and how it
compares to similar pieces. Appraisers also have to know the current market value of an item
according to various pricing guidelines and any trends that may affect the price, such as the
current price of gold.
Estate appraisers are in great demand today to establish the value of items for purposes of sale,
estate planning, insurance, and bankruptcy. Unlike other appraisers, they tend to deal with a
group of items rather than individual types of articles. An estate appraiser will visit a house, list
and possibly photograph the contents, and take measurements of large pieces of furniture. The
appraiser then sets the value of each item by consulting catalogs, comparing retail values, and
finding prices for comparable items.
Education and Training Requirements
The education and training requirements for appraisers vary according to the types of articles
they After examining a piece of jewelry, an appraiser determines its wholesale and retail value
based on information he gathers about the piece and how it compares to other similar pieces. (©
Julio Donoso/Sygma/Corbis.) appraise. Generally, training and experience are gained by
working as assistants to specialists in retail stores, galleries, and auction houses. For fine art
appraisal, galleries and art dealers prefer to hire those with a bachelor’s degree in fine art or art
history. For those interested in jewelry, the Gemological Institute of America offers a six-month
training program leading to a diploma in diamonds and colored stones. It also offers courses in
sales and appraisal. Estate appraisers prefer to hire high school graduates as assistants, whom
they will train to appraise certain types of articles. Hence, there are five types of appriasel in
retail stores. They are as follows:
1 Market Appraisal for retail
2 Technical Appraisals
3 Financial Appraisals
4 Socio-Economic Appraisals
5 Managerial Appraisals

1 Market Appraisal for retail

Fair market appraisals help to determine the fair market value of an item. These appraisals are
generally sought after when a quilt owner wishes to sell a quilt. When establishing a fair market
value for a quilt, the appraiser determines what a "willing buyer" may pay a "willing seller" for
the item. In establishing this value, the appraiser assumes that both the buyer and the seller
would have equal knowledge concerning the item. It must also be assumed that the item would
be sold under normal conditions and that neither party could be under pressure to buy or sell the
item.
A good quilt appraiser will be aware of current market trends regarding the sale of quilts. Quilt
appraisers frequently check auction houses, antique stores, Internet quilt sites and galleries for
quilt prices and sales. Appraisers use this data to find quilts similar to the quilt you want to sell.

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These values fluctuate with changing trends and popularities, the economy and geographic areas
of the country.
It should be understood that a fair market value placed upon an item does not guarantee you will
realize that value in a sale. The value is an opinion, based upon the facts of asking and selling
prices of other similar quilts. If you sell your quilt to an antique dealer or store, they will not
want to pay the fair market appraised value. They want to purchase quilts and sell them at a
profit. When selling a quilt at a regular or Internet auction (e.g. Ebay), you may realize much
more (or much less) than the fair market value.
More over Market Appraisal has the following factors:
· The reasonableness of the demand projections supplied by the promoters are verified by
utilizing the findings of available reports/ surveys, industry association/ planning commission/
DGTD projections, and independent market surveys (sometimes commissioned with the expense
borne by the promoters).
· Assess the adequacy of the marketing infrastructure planned in terms of promotional effort,
distribution network, transport facilities, stock levels, etc.
· Judge the knowledge, experience and competence of the key marketing personnel.
In case of appraisal for projects, the market appraisal generally tends to be accorded low
importance. The localized/regional nature of these businesses often makes success in marketing
more a function of the entrepreneur’s attributes or contacts rather than a fundamental demand-
supply mismatch in the product (currently met by expensive imports or near substitutes).
However, over the past few years’ most financial institutions, based on their experience of past
lending have drawn up categories of industries where new projects would be restricted /
prohibited. These are clearly stated in the lending policies of the financial institutions.
When the lending policy of a financial institution (FI) categorizes an industry in the prohibited
category, it actually means that the risk of financing such projects (in its opinion) is high making
such projects an unacceptable risk from the point of a lender. In the event of your project being
classified under the Prohibited Category, it would be prudent to review its viability before taking
it up for implementation. Also such projects might have to be completely self-financed.

2 Technical Appraisal
The retailer has to ensure that projects are soundly designed, appropriately engineered, and
follow accepted agronomic, educational, or other standards. The appraisal mission looks into
technical alternatives considered, solutions proposed, and expected results.
More concretely, technical appraisal is concerned with questions of physical scale, layout, and
location of facilities; what technology is to be used, including types of equipment or processes
and their appropriateness to local conditions; what approach will be followed for the provision of
services; how realistic implementation schedules are; and what the likelihood is of achieving
expected levels of output. In a family planning project, the technical appraisal might be
concerned with the number, design, and location of Maternal and child health clinics and the
appropriateness of the services offered to the needs of the population being served; in highways,
with the width and pavement of the roads in relation to expected traffic and the trade-offs
between initial construction costs and recurrent costs for maintenance, and between more or less

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labor-intensive methods of construction; in education, with whether the proposed curriculum and
the number and layout of classrooms, laboratories, and other facilities are suited to the country’s
educational needs.
A critical part of technical appraisal is a review of the cost estimates and the engineering or other
data on which they are based to determine whether they are accurate within an acceptable margin
and whether allowances for physical contingencies and expected price increases during
implementation are adequate. The technical appraisal also reviews proposed procurement
arrangements to make sure that the Bank’s requirements are met. Procedures for obtaining
engineering, architectural, or other professional services are examined. In addition, technical
appraisal is concerned with estimating the costs of operating project facilities and services and
with the availability of necessary raw materials or other inputs. The potential impact of the
project on the human and physical environment is examined to make sure that any adverse
effects will be controlled or minimized.
Further, the technical appraisal is done by qualified & experienced personnel (internal or
external) and focuses is mainly on the following aspects:
· Product mix
· Capacity
· Process of manufacture
· Engineering know-how and technical collaboration
· Raw materials and consumables
· Location, site and building
· Plant and equipment
· Manpower requirements
· Break-even point
Normally, projects do not involve breakthrough technology. As a result, the technology aspect is
fairly simple to appraise. However, substandard equipment resulting in unsuccessful pilot runs
and prolonged rectification process is often a major problem leading to a unit turning sick even
prior to commercial operations. What is accorded maximum importance by the FIs is the
reputation of the suppliers and the necessity of 2-3 quotes for the key equipment to judge
reasonableness of quality and price. Some of the FIs maintain lists of approved suppliers from
among whom such equipment will have to be sourced (if available). However such lists also tend
to have problems since they are not updated on a regular basis. Consequently, some delays and
minor problems are unavoidable in most cases on this count

3 Financial Appraisal
Term lending institutions try to assess the following in their financial appraisal of a project
proposal:
a. Estimate of capital cost
b. Estimate of working results

16
c. Rate of return
d. Financing pattern
a. Estimate of capital cost:
a. The assessment of capital cost involves a vigorous check of the financial projections provided
by the promoter on the following aspects:
· Padding or under-estimation of costs
· Proper specification of machinery
· Credibility of various suppliers
· Allowances for contingencies
· Inflation factors
b. Estimate of working results:
The projections supplied by the promoters regarding the sales, realizations and profits are
assessed by checking whether:
• A realistic market demand forecast has been given
• Price computations for inputs and outputs are based on current quotations and
inflationary factors
• An appropriate time schedule for capacity utilization is given
• The cost projections are distinguished between fixed and variable costs appropriately
c. Rate of return: The norms for the financial viability are generally in the range of:
• Internal Rate of Return (IRR) 15-20%
• Return on Investment (ROI) 20-25%
• Debt-service coverage ratio (DSCR) 1.5 to 2
The above mentioned figures are not mandatory and a certain degree of flexibility is shown on
the basis of the nature of the project, risks inherent in the project, and the status of the promoter.
d. Financing pattern:
• A general debt-equity ratio norm of 1.5:1
• Minimum Promoters contribution 20-25% of the project cost
• Stock-exchange listing requirements in cases part of the equity is proposed to be raised
from the public
• The financial capability of the promoter
In case of sectors involving standard technologies and having seen numerous projects, norms are
readily available for most of the parameters such as the gestation period, build-up of capacity
utilization, the unit project cost, cost structure etc. However, in case of other projects, such
financial analysis often tends to be based on an aggregation of reasonable assumptions. FIs
rework these projections based on the 2-3 parameters where they have standardized assumptions.
These could be build-up in capacity utilization, power tariff per unit, etc.

17
The beauty of Financial Analysis is that the viability of projects can be established by effecting
minor changes in assumptions such as growth rates, cost structure, residual value, etc (often at
the second or third decimal.). So, achieving the cut-off IRR or coverage may not prove difficult
to a person well versed with the various facilities available on spreadsheets.
However, Financial Analysis remains an extremely important step, as it is the standard that
influences decision of the financiers. (Especially of the public sector). Secondly, the sensitivity
analysis conducted as part of such studies forms the basis for identifying the crucial parameters
for the success of the project. Financiers tend to monitor the project progress through these
milestones and parameters.
In day-to-day practice the financial institutions have their own independent criteria and credit
rating methodology for arriving at the credit rating of each project. Financial institutions
calculate the Internal Rate of Return (IRR). The Internal Rate of Return refers to the rate of
return that the project is expected to generate based on its projected cash flows accruing over its
expected lifespan. Institutions have a threshold IRR that the project needs to surpass to assess its
viability.
Various financial ratios are calculated for the past and future by the data provided to them by the
promoters after checking the veracity of the same. The various ratios, which are frequently
calculated include:
· Current ratio:
[(Receivables + material and finished good inventory)/ (creditors for goods and expenses)]
· Long term debt-equity ratio
[Long Term Debt/ Networth]
· Interest coverage ratio
[(Profit Before Interest – Provision for Tax)]/(Interest payments due for the year]
· Fixed assets coverage ratio
[Fixed Assets/ (Term loan and other long term debt obligations)]
· Debt-service coverage ratio
[{(Profit before interest- Provision for taxes)+Depreciation}/ {Interest repayments + (Principle
Repayments*(1-effective tax rate))}]
· Profit after tax/sales
The minimum or maximum values for some of the ratios are as follows:
Long-term debt-equity ratio (Maximum
2
allowable)
Current ratio (Minimum) 1.33
Interest cover ratio (Minimum) 2
Fixed asset coverage ratio (Minimum) 1.25

18
The above values are taken as standard though a certain amount of flexibility is exercised
depending on the perception and personal judgment of the appraising officer. A rating is
assigned to the project based on the scores of the different ratios. A cut-off rating determines
financing decision (whether the project would be financed or not).
Above the rating, the projects maybe categorized into excellent, good and average. Based on this
and the project characteristics, the final terms and conditions of financial assistance are decided
upon like:
· Moratorium
· Repayment period
· Availability period
· Security (like pari-passu charge, first charge, personal guarantee, corporate guarantee etc.)
· Interest rate
All the expenses like service fee, processing fee, document fee and other expenses like
inspection of site, factory, etc. are charged to the applicant and is a source of income for the
lending institution.
More over, Capital Investment Programs (CIP) is usually thought of as building things. This
includes: development of land; erection of buildings; installation of roads, bridges, pipes and
other infrastructure – above, on and under the ground; or, the supply of equipment for use on a
semi-permanent basis.
Primary participants in these activities are mainly engineers. Thus, it is natural that they will be
concerned to build and install, as rapidly as possible, the infrastructure and other fixed assets
perceived to be urgently needed. They, after all, have the primary expertise for this task. A
principal limit on the pace and magnitude of their work is, clearly, financial resources. A capital
investment program, therefore, is an opportunity for prioritization of fixed asset implementation
activity and the related access to urgent and important funding sources. It will also show how the
vision and operational strategy of a community is reflected in the program for capital
expenditures.
Because of the very large Capital Investment Programs (CIP) to be financed, failure to consider
the availability of funding could give rise to an undue sense of urgency. That might engender a
disregard for the need to carefully examine each project component with due diligence. It is
important, of course, to ensure that the necessary funding will be available, in full and on time,
as and when needed for each project component. However, it is also important to ensure that:
(a) each project component, as well as its size and scope, is selected on the basis of a rational
prioritization, with reference to its financial and economic costs, measured against its benefits or
effectiveness – economic, financial, social and equity; and
(b) each project component represents the least economic cost of providing a sound solution to
the concern being addressed.
These should be addressed on the basis of life-cycle costs. These allow for the capital costs and
also the impact of these on recurrent finances, together with costs of operation, maintenance and
administration. Also to be considered are the costs of replacement or rehabilitation of equipment
that will not continuously serve with optimum efficiency, or even become unserviceable, during

19
the life-cycle of the principal project assets. Analyses will need to allow for expenditure in later
years to be discounted against earlier expenditures.
It is also important to take account of the extent and timing of revenue flows from the use of
various infrastructure items. Some components, such as water supply, will provide immediate
individual benefits and may well be connected with optimum promptness.
Others, such as sewerage, provide benefits that are only partially directed to individual
households. Some benefits accrue to the community as a whole. They are also more diverse and
less immediately obvious. It may be that there will be a greater reluctance by individual
households to connect to the system. Solid waste services also exhibit some of the same
characteristics.
Sometimes, financial revenues may still be collected, by levying charges whether there is a direct
household service or not. However, this may well be contentious, especially for sewerage. For
example, households that can ill-afford this may need modifications to internal plumbing.
Moreover, lack of connection will likely have technical shortcomings. Low flows will potentially
harm the sewer pipes, while a lack of connections will limit public health benefits to the wider
community.
Some infrastructure, such as roads and drainage, will likely provide benefits that are of a general
public nature, rather than to individuals. Road improvements, moreover, are likely to improve
the efficiency of other public services that rely on transport, especially solid waste removal,
police, fire and ambulances. The operation and maintenance of roads and storm drainage,
together with necessary capital cost recovery, will need to be borne mainly from general taxes.
Thus, it is important to ensure that the necessary increases in general tax revenues are
engendered from: buoyant increases in the tax bases; politically acceptable and administratively
sustainable increases in the tax levies; or, reductions in other tax-borne expenditures. The last-
named would need to result either from efficiency improvements or curtailment of other services.
All of these matters are the concern of both technical and financial expertise. Moreover, they
have financial and economic effects beyond the scope of the individual projects. They impact
upon the entire financial framework of the local government unit, and way beyond it, to other
entities. Engineering specialists should, therefore, work closely with financial colleagues. This
will provide greater assurance that appropriate costs are budgeted and accounted for, in ways that
will be both credible for reporting and useful for effective action. Most importantly, these are
policy issues.
Cost Recognition
The above view of Capital Investment Programs has focused on the raising and spending of cash,
to provide the infrastructure and other assets. Some attention has also been given to the provision
of funds to operate and maintain these.
Certainly, cash-flow management is important, for a variety of reasons. However, other than by
blind coincidence, "cash-flow," is unlikely to be synonymous with "cost." Cost definition cannot
be meaningful unless based on economic principles. Therefore, it should relate as closely as
possible to the concept of resource consumption, rather than to the mere receipt and payment of
cash. It should also incorporate, where possible, recognition of the recovery of capital costs.
Therefore, costs – in terms of resource use – of any business or public activity should include
properly recognized and recorded expenditures on the following:

20
(a) operation of the activity – in terms of the production of goods and services;
(b) maintenance of all premises, plant and equipment in a satisfactory condition to perform its
operations in a safe and efficient manner for its entire working life;
(c) administration and management of the activities, together with the payment of taxes,
necessary to ensure that operations are efficiently effected; and,
(d) the rental cost (capital cost recovery factors) of fixed and working capital, comprising, either
(for property not owned) the market rent, or (for property owned):
(i) consumption of capital, typically recognized as depreciation of premises, plant and
equipment;
(ii) adjustment of value, either in terms of changes in real values (opportunity costs) of property
or in recognition of the effects of changes in monetary values (inflation and deflation); and,
(iii) return on investment, including interest on debt and an expected and reasonable return on
contributed (equity) capital, either by dividends to owners or by retained earnings.
After covering all the above, which are resource costs, it would be prudent to expect that the
budgeted activity costs would also allow for an additional (albeit small) "surplus," over and
above the expected and reasonable costs of capital. This would allow for periodical fluctuations
in financial fortunes, more specifically: risk; uncertainty; new activity; and, longer-term stability.
Return on Investment
Included as part of the "return on investment" is the provision for dividend and retained earnings,
typically accruing to the owners (shareholders) of an entity. These are items which, according to
"generally accepted accounting principles" are not treated as costs but as allocations of "profit."
The distinction arises because financial accounts reflect “property rights” rather than economic
principles. Thus, the interests of owners (shareholders) are reported as the earnings (profits) after
all claims have been met from outside of the entity, including those of lenders.
There is, however, common agreement among economists that what are considered to be
"normal" profits are no more than a part of the "opportunity cost of capital." Only extraordinary
earnings are typically regarded as true "profits." This is somewhat analogous to what is described
as "surplus" in the above set of distinctions. Furthermore, the standard practices of financial
analysis deal explicitly with costs of capital, the return on total net assets, as the weighted
consolidation of the separate and specific returns to debt and equity financing.
This has a parallel in the public sector. In some countries, notably in the USA and UK, it had in
the past typically been standard practice for state and local governments to finance up to and
including 100% of many items of capital expenditure by borrowing. This usually had
amortization periods closely related to the working life of the fixed assets acquired.
However, even where all or part of these assets may have been financed from sources other than
debt, the funds used for this purpose still have an opportunity cost. Indeed, the financing of
capital expenditure from general government revenues (local, state or central) will do one of two
things. Either it will add to the overall "deficit," which will have to be borrowed, with interest, or
it will eliminate some part of the overall "surplus," which will create a loss of interest on the
related monetary investment. Even if the deficit is covered by increased taxes, the taxpayers
(effectively the "shareholders" of the government) will (collectively) lose the equivalent in

21
interest on what would otherwise have been their own money. They will also forego the use of
the principal sum.
The issue of cost definition has been fully stressed and explained because it forms the basis
against which all related aspects will need to be assessed. For example, it affects, or is affected
by: cost accounting systems; prices; allocation of overheads; budgetary management; fiscal
deficits; maintenance of assets; and, inter-governmental transfers. Costs of service cannot be
credibly stated, nor fully recovered, unless they include reference to all of these various factors.
Effective decisions on public service delivery depend upon whether, and in what form, the costs
of these are determined. Furthermore, cost recognition, to be consistent, should relate to the
maintenance, use and consumption of resources and not to the manner in which these resources
are originally financed. Sometimes, subsidies are appropriate, for economic or social reasons.
However, unless costs are determined in an authentic fashion, there is no way to know whether,
or to what extent, the subsidies already exist (such as in the initial capitalization) or are
ultimately justified, as in transfers from other accounts, funds or governmental entities.
An example of the presentation and use of financial statements, incorporating full
accounting for resource use costs, is given in the annual financial statements of the City of
Birmingham, England. As required by law, it follows the “Code of Practice on Local
Authority Accounting in Great Britain” and the “Statements of Standard Accounting
Practice” (SSAP) required by the Chartered Institute of Public Finance and Accountancy
and other UK professional accounting bodies. These include stipulations for full accounting
of all fixed assets, irrespective of the method of financing. It includes imputed rental,
depreciation and interest costs, where appropriate at current (replacement) values.
Government Grants
Central governments, of many other countries, are attempting to encourage and support activity
by the local government units. This includes activity that it favors or for which there is some
clear justification on national grounds. However, the prime responsibility is, increasingly, that of
the local government units.
A most important means of financial support by the central government of local government
units is the government grant. Among the many reasons for government grants are the following:
(a) transfer to local government units of a proportion of revenues collected in or for their areas,
but which can be collected more efficiently at national level (e.g. income tax, sales tax, VAT and
customs duty);
(b) support for services in which national government has an interest but which may be better
performed locally, with input from local people (e.g. primary and secondary education, local
roads and public health);
(c) equalization, to some degree, of the needs and resources among different areas;
(d) provision for specific burdens upon individual areas not shared generally;
(e) encouragement of practices which are consistent with national social, economic or financial
policies (and discouragement of those which are not);
(f) enhancement of limited local resources to provide reasonable flexibility in decision-making
on the provision of services;

22
(g) major shifts in political, economic or social characteristics of a nation, group of nations or
region (e.g. the massive political changes resulting from the liberalization policies in Eastern
Europe).
There needs to be a great deal of common sense and political wisdom, as well as economic logic,
in the administration of a grant structure. For example, whatever may be argued for the needs of
a particular area, it may also be one of the most important commercial centers, with a great deal
more economic potential than elsewhere. Thus, there might be a strong economic or equity-based
case for a net transfer of resources away from the area, in favor of much poorer areas.
Capital Grants
Grants may be given towards specific capital projects or to support recurrent operations. In
principle, capital grants have a distinct disadvantage. They will tend to support new capital
schemes, perhaps too soon, too large or even not justified at all, instead of encouraging the
continuance of a service using existing available equipment and infrastructure. This is very
serious in any country where capital resources, especially in foreign currency, are scarce and thus
costly.
Faced with a choice of spending its own resources on maintenance or getting a grant for new
capital investment, a local government unit may be strongly tempted to opt for a capital grant. A
more appropriate financial support for capital expenditure would be a loan, for the life of the new
asset, at market interest rates. Then, the local government would be faced with a more even-
handed financial choice. It would either continue to pay operation and maintenance costs for the
old (probably inefficient) asset or pay debt service (more strictly, capital charges) on the new
one.
However, in practice, application of these principles may often be difficult, even inappropriate.
First, much local infrastructure is in a very poor state and in urgent need of replacement. Indeed,
there are some areas or communities that have been so disadvantaged that there is little or no
decent infrastructure to begin with. Second, there is no reasonable supply of market-driven
medium-term or long-term capital. Even if there were, there is no satisfactory mechanism to
administer it. Third, many local government units lack credit-worthiness, at least until revenues
are greatly stabilized and enhanced. Finally, with the meager and uncertain financial resources
available to the central government, capital grants at least represent one-time payments for which
there is no continuing obligation beyond the duration of a particular program.
Thus, capital grants offer the opportunity to assist with the initial installation, expansion,
reconstruction and rehabilitation of infrastructure. They can also be highly selective, giving
preference to areas of greatest need and with the poorest resources. Where used, they will almost
always represent a proportion of an approved capital cost, after careful examination and appraisal
of the project by central government officials, or those acting on their behalf (e.g. staff of a
"development fund" or "municipal bank").
Sometimes, as an alternative, projects will qualify if they meet pre-determined conditions that
apply to all similar and relevant circumstances. This suggests that the central government
ministry responsible for local government should try to develop an improved capability for
project appraisal. This could provide significant assistance to local government units in planning
their development, even without grant support.

23
Recurrent Grants
However capital expenditure is financed or supported, there will usually be some need for
continuing support of recurrent operations. Thus, methods must be found to provide this support.
To some degree, at least, this may also need to be supplied by central or state government grants.
Usually, there is a system which combines a local government’s own revenue sources with
recurrent grants from state or central governments.
Some of the methods to be considered for the administration of a recurrent grant system are set
out below. However, it must be realized that, at present, many would need to rely upon statistical
information that is simply not available or reliable. The ministry of “local government” or of
“finance” should, therefore, attempt to build a data-base for this and many other purposes.
Possible assessment and distribution methods for recurrent grants are:
(a) budget review – central government reviews each local budget in turn, assesses its credibility
and provides a grant to cover all or some of any expected recurrent deficit;
(b) policy support – central government undertakes to reimburse local government units for the
costs of nationally mandated policies, such as nation-wide salary increases;
(c) reimbursement – central government effectively pays for the costs of delegated services,
properly the primary responsibility of the central government;
(d) revenue compensation – central government covers losses resulting from curtailment of local
revenues as a result of national policy (e.g. abolition of a local tax based on incomes or the
imposition of rent controls affecting property tax valuations);
(e) percentage – central government provides a percentage of the cost of local services, with
percentages, typically, varying from service to service;
(f) population – central government provides a lump sum per head of population, which could
vary among age-groups to take account, for example, of the special needs of children and the
elderly, with respect to education, health and welfare;
(g) unit – central government provides a lump sum per unit of service or potential service (eg.
per mile of road, per patient at clinics, per refuse vehicle);
(h) revenue potential – central government compensates for potential loss of revenue, for
example, based on property tax values or assessed incomes for graduated tax, relative to total
population and national average tax potentials;
(i) revenue sharing – government designates all or part of nationally-collected revenues (eg.
vehicle licences) to be shared among local government units; and
(j) formula – a variety of factors is taken into account to provide a grant structure which meets
multiple objectives.
All of these procedures are appropriate for most sets of circumstances, although only some of
them may be chosen for practical use

24
4 Socio-Economic Appraisal
Through cost-benefit analysis of alternative project designs, the one that contributes most to the
development objectives of the country may be selected. This analysis is normally done in
successive stages during project preparation, but appraisal is the point at which the final review
and assessment are made.
During economic appraisal, the project is studied in its sectoral setting. The investment program
for the sector, the strengths and weaknesses of public and private sectoral institutions, and key
government policies are all examined.
In transportation, each appraisal considers the transportation system as a whole and its
contribution to the country’s economic development. A highway appraisal examines the
relationship with competing modes of transport such as railways. Transport policies throughout
the sector are reviewed and changes recommended, for example, in any regulatory practices that
distort the allocation of traffic. In education, power, and telecommunications, the "project" as
defined by the Bank may embrace the investment program of the whole sector. In agriculture,
which is more diversified and accounts for a much larger share of a developing country’s
economic activity, and where it is more difficult to formulate a comprehensive strategy for the
sector; attention is given to sectoral issues such as land tenure, the adequacy of incentives for
farmers, marketing arrangements, availability of public services, and governmental tax, pricing,
and subsidy policies.
Whenever the current state of the art permits, projects are subjected to a detailed analysis of their
costs and benefits to the country, the result of which is usually expressed as an economic rate of
return. This analysis often requires the solution of difficult problems, such as how to determine
the physical consequences of the project and how to value them in terms of the development
objectives of the country.
Over the years, the retailer has kept in close touch with progress in the methodology of economic
appraisal. "Shadow" prices are used routinely when true economic values of costs are not
reflected in market prices as a result of various distortions, such as trade restrictions, taxes, or
subsidies. These shadow price adjustments are made most frequently in the exchange rate and
labor costs used in the calculations. The distribution of the benefits of a project and its fiscal
impact are considered carefully, and the use of "social" prices to give proper weight in the cost-
benefit analysis to the government’s objectives of improved income distribution and increased
public savings is passing through an experimental phase. Since the estimates of future costs and
benefits are subject to substantial margins of error, an analysis is always made of the sensitivity
of the return on the project to variations in some of the key assumptions.
Less frequently, in cases of major uncertainty, a risk/probability analysis is also carried out. The
optimal timing of the investment is tested in relation to the first year’s benefits. When the Batik
provides funds to intermediate agencies (development finance companies, agricultural credit
institutions) for relending to smaller operations, or in the case of sector lending, those agencies’
own appraisal methods must be acceptable.
Some of the elements of project costs and benefits, such as pollution control, better health or
education, or manpower training, may defy quantification; in other projects, for example electric
power or telecommunications, it may be necessary to use proxies, such as revenues, that do not
fully measure the value of the service to the economy. In some cases, it is possible to assess

25
alternative solutions that have the same benefits and to select the least-cost solution. In other
cases, for example education, alternatives are likely to involve different benefits as well as
different costs, and a qualitative assessment must suffice.
Whether qualitative or quantitative, the economic analysis always aims at assessing the
contribution of the project to the development objectives of the country; this remains the basic
criterion for project selection and appraisal. And while greater concern with the distributional
effects of projects reflects broader objectives of development, it does not mean that the Bank has
lowered its standards of appraisal. Whether "old" style or "new," every project must have a
satisfactory economic return, a standard that the Bank believes serves the best interests of both
the country and the Bank itself

5 Managerial Appraisal
Managerial competence and integrity is an extremely important pre-requisite to translate a
project viable on paper into a real life success. Capital markets across the world (and even Indian
investors in recent times) factor in the company management in company valuations (in other
words share prices).
The following criteria tend to be looked at by the FIs to form a judgement regarding the
managerial competence and resourcefulness.
· Track record in earlier projects
· Resourcefulness of the promoter
· Understanding of the business
· Commitment to the project and
· Integrity
Sanction
In the event of the project being assessed as viable, Sanction is accorded for financing to the
proposal. The Sanction is an in-principle decision for financing the project and is generally
subject to fulfillment of certain terms and conditions. Some of these conditions could be standard
ones such as:
· In-principle approval from a bank for working capital
· No Objection certificate from the Pollution Control Board
· Sanction for power from the Electricity Board
· Completion of all documentation formalities creating a charge in favour of the financial
institution on all the relevant assets.
· Disbursement shall commence only when the First Investment Clause has been satisfied. First
Investment Clause requires the entrepreneur to invest his contribution before approaching the
Financial Institutions for disbursement.
Additionally in the event of the Financial Institution being dissatisfied with any particular aspect
of the project, then a condition stipulating the fulfillment of the desired change may be made for
disbursement to commence.

26
Q 3. List out the planning components in retail operations and describe the project
designing process in retail project management.
Sol.
Planning Components in Retail Operations
It is necessary to lead a retail operation with adequate project planning components. The
summary of Project planning components are as follows:
Summary of Supplemental Project
Plan Components

Key Elements /Impact on

Project Plan Component Purpose Notes Project Planning
Change Control Plan Describes how theCan includeProactive
project success factorsassessment ofapproach; manage
(scope, cost, schedule,expected expectations.
quality) will bestability of
managed and howproject scope
changes will be
integrated.
Communications Plan Describes how theOften Communications
information anddocumented andmanagement plan
communication needspresented indetails must be
of project stakeholderstabular form. added to WBS
will be met. and project
schedule.
Configuration Management Plan Describes howShould includeProactive
changes to projectboth technicalapproach; manage
deliverables and workwork productsexpectations.
products will beand project
controlled anddocumentation
managed.
Procurement Management Plan Describes how theContract typesRemaining
procurement processRoles of projectprocurement
will be managed. team andmanagement tasks
procurement must be added to
dept. project schedule.
Constraints of
scheduling
procurement
activities with
third-party
vendors may
impact the project

27
 schedule.

Summary of Supplemental
Project Plan Components
Impact on
Key Elements /Project
Project Plan Component Purpose Notes Planning
Quality Management Plan Describes the project qualityShould addressCost and
system. both projectschedule
work productsadjustments
and the projectmay be needed
processes. to meet quality
standards.
Quality
assurance and
quality control
activities must
be staffed and
added to the
project
schedule.
Responsibility Matrix Lists the project roles andRACI matrix. Ensure all
responsibilities. Cross-references required
roles with assigned resources. resources are
accounted for.
Resource Management Plan Indicates when project resourcesImpact ifCost baseline,
are needed on the project (startresource cannotwork estimates,
and end dates). meet all skilland project
requirements. schedule are in
Impact ifflux until the
resource mustfinal resources
be acquired atare acquired.
rates higher
than estimated.
Risk Management Plan Describes how the riskDescribes theEnsure risk
management process will beprocess to bemanagement
structured and performed. used. tasks are added
to WBS and
project
schedule.
Risk Response Plan Describes the response strategiesRisk Log.Risk response
for identified risks. Details actionstrategies may
steps to beentail the

28
 taken if riskallocation of
event occurs. additional
resources, tasks,
time, and costs.
Budget
reserves,
contingency
plans.
Variance Management Describes how performanceDocuments Proactive
(cost, schedule) variances will beplanned approach;
managed. responses tomanage
different expectations
variance levels.

Project Designing
After you have a list of tasks for your project and estimates for how long it will take to complete
them, you can schedule (schedule: The timing and sequence of tasks within a project. A schedule
consists mainly of tasks, task dependencies, durations, constraints, and time-oriented project
information about the tasks). Depending on how you schedule the tasks, you can predict finish
dates for the tasks and the project as you enter information about how the project is progressing.
You can use this information to determine whether your project schedule is at risk.
1. Get ready to sequence your project tasks:
At this point, you should have entered some tasks that must be completed in order to complete
your project. Each task should be associated with a duration, which indicates how long the task
will take to complete.
Task schedule is easier if you list your tasks in the approximate order that you expect work to be
done on them. You may have to enter some tasks out of sequence, but be sure to list together the
tasks that will be done in the same time frame. There are two ways to sequence tasks:
1. Use dependency: To indicate that work on a task cannot begin or end until work on another
task begins or ends. For example, you use a dependency if painting cannot start until preparation
work is finished.
2. Use constraint: To indicate that work on a task must begin or end in relation to a specific
date. For example, you use a constraint if a task must end by June 30, because the subject matter
expert will be unavailable after that time.
2. Sequence the tasks in a project: You can link tasks according to their dependencies (Task
dependencies: A relationship between two linked tasks: linked by a dependency between their
finish and start dates: There are four kinds of task dependencies:
1. Finish -to -start (FS),
2. Start- to- start (SS),
3. Finish -to -Finish (FF) and

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4. Start- to- finish (SF).
specifying the sequence for your tasks includes showing which tasks overlap or have a delay
between them.
A) Create a dependency between tasks in a project: to link dependent tasks and tell Project how
they are dependent. Tasks often happen in a linear sequence: For example, you first prepare the
walls, then paint them, and then hang pictures. However, there are exceptions in any project. In
the same example, as one person prepares the walls for painting, someone else can buy the
pictures that you intend to hang.
B) Set lead or lag time between tasks: to show a delay between tasks. If a task link alone is not
enough to accurately show the relationship between tasks, you can set lag time (lag time: A delay
between tasks that have a dependency. For example, if you need a two-day delay between the
finish of one task and the start of another, you can establish a finish-to-start dependency and
specify a two-day lag time(has appositive value).
3. Create a milestone to represent an external dependency:
When you want to track an event but you can’t link to it because the event doesn’t appear in any
project, you can create a milestone to represent the event. For example, you may not be able to
begin a certain task until another company completes a software program that you need to use.
You can create a milestone in your project that represents the completion of that program and
reminds you to track its progress.
4. Create a deadline for a task: To be notified when a task is finished after a particular date,
you can create a deadline. Creating a deadline does not restrict you from freely adjusting the
schedule when you update information, just as it does when you enter flexible constraints.
(Flexible constraints: A constraint is flexible because it does not tie a task to a date. The
inflexible constraints must finish on and must start on a fixed date.
5. Tie a task or phase to specific date : When you absolutely must start or finish a task on a
particular date, tie a task or phase to a specific date. That date can represent an event, such as a
seminar or class.
6. Add supporting information about task: Add more information about a task in the form of
notes, documents, and links to Web pages.
a) Add a note to tasks, resources or assignments: if you have only a small amount of information
that you want to include directly in your project file. You can also add a file from another
program to a note.
b) View and Upload document: if you want to link supporting documents by using Project
Server.

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