CHAPTER ONE

PROJECT MANAGEMENT CONCEPTS

Project Management Statistics
 According to Project Management Institute fact book of 2001.
The U.S. spends $2.3 trillion on projects every year, an amount equal to one-quarter of
the nation’s gross domestic product (GDP).
The world as a whole spends nearly $10 trillion of its gross product on projects of all
kinds.
More than sixteen million people regard project management as their profession
On average, a project manager earns more than $82,000 per year.
 Can you explain what the following examples have in
common?
Construction of Great Renaissance Dam of Ethiopia
A pharmaceutical company launches a new COVID-19
drug
The Construction of Ethiopian Communication Satellite
Construction of Railway from Djbuti to Ethiopia
Conducting a thesis for fulfilment of Masters program
What is project
 It is very difficult to find a single comprehensive definition of Project
 Because projects are different in terms of their nature and objectives.
 Some of its definitions are:
1. (PMI) defines a project temporary endeavor undertaken to create a unique
product or service.
 This means that a project is done only one time.
 If it is repetitive, it’s not a project.
 A project should have
 Definite starting and ending time
 A budget
 Clearly defined scope and specific performance requirements that must be met .
What is a Project?
“Unique process consisting of a set of coordinated and
controlled activities with start and finish dates, undertaken
to achieve an objective conforming to specific
requirements, including constraints of time, cost, quality
and resources”

• A Project is a planned set of activities

• A Project has a scope
• A Project has time, cost, quality and resource constraints
• What is Project?
Harold Kerzner, Project Management book
• Project can be considered to be any series of activities and tasks that:
Have a specific objective to be completed within certain specifications
Have defined start and end dates
 Have funding limits (if applicable)
Consume human and nonhuman resources (i.e., money, people, equipment)
Are multifunctional (i.e., cut across several functional lines)
 Dr. J. M. Juran, the quality guru, also defines a project as a problem
scheduled for solution.
• However, the word “problem” typically has a negative meaning, and
projects deal with both positive and negative kinds of problems.
• For example, developing a new product is a problem, but a positive
one, while an environmental cleanup project deals with a negative
kind of problem
What is a Project?
A series of activities and tasks that have
 SCOPE
 TIME
 RESOURCES
Characteristics of project
 Like most organizational efforts, the major goal of project is to satisfy a customer need.
But the chx. of project help differentiae it from other endeavors.
∞A project has a unique and non-routine activity clearly different from arranged similar
investments. For example, many people hire firms to design and build a new house, but
each house, like each person, is unique.
∞A project is temporary. A project has a definite beginning and a definite end. For a
home construction project, owners usually have a date in mind when they’d like to move
into their new home.
∞A project will a has specific time, cost, and performance requirements.
∞Has an established objective.
∞Usually, Involvement of several departments and professional. Project requires the
combined effort of a various specialists instead of working in separate.
 Project Characteristics
1. A project usually has a single definable purpose or aim.
2. A project usually has a series of individual operational constraints or performance
objectives
3. Each project team tends to be unique in that it is generally multidisciplinary.
 Projects often draw together members from different specializations.
4. Each project is unique. Project is designed for a specific purpose or aim and no two
projects are ever identical
5. Projects tend to be unfamiliar.
 They are often designed to bring about change, may involve new
approaches and processes, and may generate an unfamiliar end condition.
 Projects tend to be characterized by a high degree of uncertainty.
 In the case of an acquisition the target brings a lot of new people into the
system and the effect this will have is always difficult to forecast in
advance
6. A project generally has a finite lifespan
 A project tends to be established for a set timescale.
7. Projects tend to pass through clear stages of development.
8.Projects are often complex.
 The multidisciplinary nature of projects generally results in their being
more complex and involved than associated functional production systems.
9. Projects are characterized by change.
 Projects are usually designed to achieve change and they often operate
under conditions of change.
10. Projects are often high risk.
 Projects are often classified as higher risk
 Bringing about change while operating under conditions of change results
in a high degree of uncertainty and, more specifically, risk.
11. Projects tend to be secondary to the main strategic function of the organization.
 For example, a bank may initiate a project to upgrade its IT system.
 The IT system itself is a support function: it enables the bank to perform its primary
strategic financial functions.
 The project to upgrade the IT system is intended to improve the support function and
improve the overall competitive advantage of the bank.
 The project is, therefore, secondary to the main functional thrust of the organization.
 In most cases, however, projects have a secondary role and are intended to improve the
efficiency and effectiveness of the primary role.
The Three Project Constraints

• SCOPE

• TIME

• RESOURCES
 Project Vs Program
The terms of project and programs are often used synonymously, but in practice the two terms are
different. The major difference lie in scale and time span.
∞ A program is “a group of related projects designed to accomplish a common goal over an extended

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period of time.
∞ Example:
 Project: completion of a required course in project management.
 Program: completion of all courses required for a business major.
∞ With in a program, they could be many interrelated projects unless the program has standalone
program.
∞ Therefore, the activity of program is grater or equal to the activity of project.
∞ A program manager provides leadership and direction for the project managers heading the projects
within the program.

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Project Vs Program
 Project and every day activities are not the same

Project Operation

Produce a unique product or service Produce the same product or service

Temporary in nature Ongoing

Definite beginning and end No definite beginning and end

Resources are dedicated to the projects Resources are dedicated to operations

Ending is determined by specific criteria Process are not completed

 Project Vs Program
The difference between project and program can be summarized as follows:
Issues Project Program

Objective Specific objective General objective

Life span Specific life time No bounded life time

Resource requirement Limited budget Larger budget

Location Specific projects area No specific project area

The difference and common feature that characterizes both operation
works and project works can be summarized.
Comparison of Project Management and General Management

Dimension Project Management General Management

Type of Work Activity Unique Routine

Management Approach Ability to adapt to change Manage by exception
Planning Critical Important
Budgeting Start from scratch, multiple Modify budget from previous
budget periods budget period

Sequence of Activities Must be determined Often predetermined

Location of Work Crosses organizational units Within an organizational unit

Reporting Relationships Informal Well defined
 What is Project Management?
• The art of organising, leading, reporting and completing a project
through people.
• Project management is application of knowledge, skills, tools, and
techniques to project activities to achieve project requirements.
What Is Project Management?
• Project management processes of initiating, planning, executing, monitoring
and controlling and closing.
• A project is a planned undertaking
• A project manager is a person who causes things to happen
• Therefore, project management is causing a planned undertaking to happen.
What Is Project Management?
∞Project management is the application of knowledge, skills, tools and
techniques to meet or exceed the expectations of stakeholder
(Meredith and Mantel, 2006)
∞The planning, organisation, monitoring and control of all aspects of a
project and the motivation of all involved to achieve the project
objectives safely and within agreed time, cost and performance
criteria (Atkinson, 1999).
 Project management involves five process
1. Project initiation
2. Project planning
3. Project execution
4. Project monitoring and control
5. Project closure
 Project Management
∞ The fact that a project involves the delivery of a unique product, service, or result,
also changes the management approach to the work.
∞ Therefore, project manager must master the skills that are necessary to be

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successful in executing temporary projects.
∞ ‘Mistakenly thought’ technical skill is the only that the project manager must
posses.
∞ But, Project managers are generalists with many skills in their repertoires.
∞ Due to the Project characteristics, project manager must posses the skills beyond
operational managers.
∞ Project manager skill = Operational management skill + Project management skill
 Project Management
Operation Management Skills:
∞ Successful project manager must posses all the skills needed by operations managers of
organizations. These skills include:

Chapter One
* Good communication * Team building
* Planning * Expediting
* Motivating * Political sensitivity
Project Management Skills
Because project managers generally operate in a project environment that is more time sensitive
and goal driven, the successful project manager requires additional knowledge, skills, and
abilities.
^Credibility ^Creativity as a problem solver
^Tolerance for ambiguity ^Flexibility in management style
^Effectiveness in communicating
• The potential benefits from project management are:
Identification of functional responsibilities to ensure that all activities are
accounted for, regardless of personnel turnover
Minimizing the need for continuous reporting
Identification of time limits for scheduling
 Identification of a methodology for trade-off analysis
Measurement of accomplishment against plans
Early identification of problems so that corrective action may follow
Improved estimating capability for future planning
 Knowing when objectives cannot be met or will be exceeded
 Project Stakeholders Management
∞ Stakeholders are the people involved in or affected by project activities.
For example, there are several stakeholders involved in a home construction
Custo
project. mer or
Gov’t User
Contac
bodies tor
Project
Stakehold Workers
Opponen er ,
ts electrici
an
Supplie Suppor
rs t staff

∞ They are the people who are actively involved with the work of the project or have
something to either gain or lose as a result of the project.
∞ Successful project managers develop good relationships with project stakeholders to
understand and meet their needs and expectations
Stakeholders of a project
 Internal project stakeholders
 Project sponsor
 Project team
 Support staff
 Internal customers for the project
 Top management
 Other functional managers, and
 Other project managers
 External project stakeholders
 Project’s customers (if they are external to the organization)
 Competitors
 Suppliers
 Other external groups that are potentially involved in the project or affected by
it, such as government officials and concerned citizens.
Importance of Project Stakeholder Management
• Because stakeholder management is so important to project success.
• The purpose of project stakeholder management:
1. To identify all people or organizations affected by a project
2. To analyze stakeholder expectations, and to effectively engage
stakeholders
 Changing the way work is done can send a shock wave through an
organization, leaving many people afraid and even thinking about ways to stop
or sabotage a project
Importance of Project Stakeholder Management
• Projects often cause changes in organizations, and some people may
lose their jobs when a project is completed
• Project managers might be viewed as enemies
• By contrast, they could be viewed as allies if they lead a project that helps
increase profits, produce new jobs, or increase pay for certain stakeholders
• In any case, project managers must learn to identify, understand, and
work with a variety of stakeholders
Project knowledge Area
 Integration management
 Scope management
 Time management
 Cost management
 Quality management
 HRM management
 Communication management
 Risk management
 Procurement management
 Project Parameter
∞ Every project is constrained in different ways. Some project managers focus
on scope, time, and cost constraints.
These limitations are sometimes referred to in project management as the

Chapter One
triple constraint.
 Scope: What work will be done as part of the project? What unique
Understand the product, service, or result does the customer or sponsor expect from the
constraint of
projects.
project?
 Time: How long should it take to complete the project? What is the
project’s schedule?
 Cost: What should it cost to complete the project? What is the project’s
budget? What resources are needed?
∞ To create a successful project, project managers must consider scope, time,
and cost and balance these three often-competing goals.
 Project Parameter
∞ Other people focus on the quadruple constraint, which adds quality as a
fourth constraint.
 Quality: How good does the quality of the products or services need to be? What do we

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need to do to satisfy the customer?
∞ PMBOK also adds a resources and risk as a constraint , but states that there may be
others as well, depending on the project.
Understand the
constraint of ∞ The triple constraint goals—scope, time, and cost—often have a specific target at
projects.
the beginning of the project.
 For example, a couple might initially plan to move into their new 2,000 square foot
home in six months and spend $300,000 on the entire project.
∞ The couple will have to make many decisions along the way that may affect
meeting those goals.
 They might need to increase the budget to meet scope and time goals
 Or decrease the scope to meet time and budget goals
 Project Parameter
∞ The other three constraints – quality, resource and risk are often affect each
other as well as the scope, time, and cost goals of a project.
∞ These constraints are an interdependent set. Change in one can cause a

Chapter One
change in another constraint to restore the equilibrium of the project.
∞ Therefore, Project performance is a function of scope, time, cost, quality
Understand the
resource and risk.
constraint of
projects. Performance = f (S, T, C, Q, R, r)
∞ What will be scope and cost, if the product time/duration is reduced?

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 Project Success Vs failures
 How do you define the success or failure of a project?
 There are a few common criteria for measuring project success as applied to
the example project of building a new 2,000 square foot home within six

Chapter One
months for $300,000:
Understood  We can define the project was success alternatively,
reason the
for project 1. The project was met scope, time and cost goals.
success and
failure If the home was 2,000 square feet and met other scope requirements, was
completed in six months, and cost $300,000, we could call it a successful
project based on these criteria.
2. The project satisfied the customer/sponsor.
Many organizations implement a customer satisfaction rating system for
projects to measure project success
 Successful project management can then be defined as having achieved the project
objectives:
1. Within time
2. Within cost
3. At the desired performance/technology level
4. While utilizing the assigned resources effectively and efficiently
5. Accepted by the customer
 DEFINING PROJECT SUCCESS

 Project success is a completion of an activity within the constraints of time, cost, and
performance.
 This was the definition used for the past twenty years or so.
 Today, the definition of project success has been modified to include completion:
 Within the allocated time period
 Within the budgeted cost
 At the proper performance or specification level
 With acceptance by the customer/user
 With minimum or mutually agreed upon scope changes
 Without disturbing the main work flow of the organization
 Without changing the corporate culture
 Project Success Vs failures
Reason for failure
Reason for Success
∞ Inadequate project planning Sound project planning and
(budget, schedule, scope) management processes
Understood
reason the ∞ Lack of executive commitment. Project tied to the organization’s
for project
∞ Lack of linkage to the business business goals
success and
failure strategy Senior management commitment
∞ Wrong team members Realistic schedule
∞ No measures for evaluating the Good stakeholder relationships
success of the project Skilled and appropriate team
∞ Inability to manage change members with defined roles and
(inflexibility) responsibilities
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Unfortunately, the benefits cannot be achieved without overcoming
obstacles such as:
● Project complexity
● Customer’s special requirements and scope changes
● Organizational restructuring
● Project risks
● Changes in technology
● Forward planning and pricing
Project Cycle

 A project is a set of interrelated activities which are designed to achieve specific

objectives, with the available resources and within a specific time frame.
 The project cycle is a tool for understanding the tasks and functions that must be
performed in the lifespan of a project.
 Commonly, a project cycle contains stages of design, implementation,
monitoring and evaluation.
 The ‘project cycle’ is a way of viewing the main elements that projects have in
common, and how they relate to each other in sequence.
 A project goes through various planning phases before it is actually realized.
 These phases constitute what is often called “the project cycle”.
•Project cycle models
• There are various models that deal with project cycle.
• These project cycle models differ in their perspectives, emphasis and level of
details.
• The basic models are
• Baum’s cycle
• UNIDO and
• European Commission’s project cycle
1. The Baum cycle ( World Bank Procedures)
 The first basic project model is Baum cycle developed by Warren C
Baum in 1970 adopted by the World Bank by then.
 The four main stages, namely:
1. Identification
2. Preparation
3. Appraisal & Selection and
4. Implementation
 At the latter stage in 1978 the author has added an additional stage called
Evaluation which usually closes the cycle. This model amended in 1978 – to
include “Negotiation” and “Evaluation
THE BAUM CYCLE

THE BAUM CYCLE

Identification

Evaluation
Preparation/Formulation

Implementation
Appraisal/ Selection

Financing
1. IDENTIFICATION
• First stage in the cycle – it is searching for and identifying potential/ feasible projects ideas.
• Most projects start as an elementary idea.
 Resource-based project ideas – opportunity to make profitable use of available resources.
 Market-based project ideas – arising from identified demand in home or overseas markets.
 Need-based project ideas –to fulfill certain basic material requirements and services
(unsatisfied needs).
 Technical specialists may identify areas with technical deficiencies
 Local leaders- may provide information about existing problems and bottlenecks. Proposals
to extend and/or expand existing programs/projects.
2. PREPARATION /FORMULATION … PROJECT DESIGN
 A progressively detailed preparation and analysis of the aspects of a project follows
identification.
 The project seriously considered as a definite investment action at this stage.
 Involves pre-feasibility and feasibility studies. Covers the establishment of:- commercial,
technical, institutional, financial, and socio- economic feasibility.
 Decisions made on the:
scope of the project,
location and site,
soil and hydrological requirements,
project size( farm or factory size) etc .
Resource base investigations undertaken and alternative forms of projects are explored.
• Outcomes: distinct proposal(s) in terms of technical specifications, financial and
economic costs and benefits, institutional and managerial aspects etc
3. APPRAISAL AND SELECTION

 Critical review (independent appraisal) comes after preparation.

 Opportunity to re-examine every aspect of the project plan.
 Helps to determine whether the proposal is appropriate, sound, and acceptable or not
before large sums are committed.
 Appraisals should cover at least 7 aspects of a project (that are given special
considerations during the preparation phase):
1. Technical: verifying whether what is proposed will work in the way suggested or not.
2. Financial: see if the requirements for money needed by the project have been calculated
properly, their sources are all identified, and reasonable plans for their repayment are made
where necessary.
3. Commercial: examine arrangements for acquisition of inputs and disposal (marketing) of
the products.
4. Incentive: examine whether the project is in the best interest of all the participants
(stakeholders).
5. Economic: verify project’s soundness from the viewpoint of the national economic
development interest, examine whether all project effects (positive as well as negative)
taken into account, and check if all are correctly valued.
6. Managerial: examine if capacity exists for operating the project, see if those
responsible ones can operate it project, satisfactorily and are given sufficient power and
scope to do what is required.
7. Organizational: examine the project if it is organized internally and externally into
units, contract, policy, institution, etc. to allow the proposals to be carried out properly,
and allow for change as the project develops
 Based on the appraisal report, decisions made whether to go ahead with the
project or not.
 The appraisal may also change the basic project plan or develop a new plan.
 Comments given at this stage frequently give rise to alterations in the project
plan (project proposal).
 Some projects may be discarded.
 Viable projects chosen for implementation after appraisal on the basis of the
priorities of stakeholders and available resources.
4. NEGOTIATION AND FINANCING
 Once the project to be implemented is agreed on, for donor funded projects,
discussions are held on funding and associated aspects of funding:-
Conditions for grants,
 Repayment period (for loans),
 Interest rates on loans,
 Flow of funds,
 Contributions from stakeholders, and
Whether there is co-financing or not.

 This culminates into an “Agreement Document” –binds all the parties

involved in the implementation of the project
5. IMPLEMENTATION
 Is the most important part of the project cycle.
 Funds actually disbursed to get the project started and keep running.
 Major priority: accomplishing the project in accordance with the basic plan (within cost,
quality, and time standards).
 Problems frequently occur as the economic and financial environment during
implementation often differ from the expectations at the time of appraisal.
 Original proposals frequently modified, though with difficulty, because of this it need here
agreement between the parties involved.
 Many of the real problems of projects faced at this stage.
 The feedback effects on the discovery and design of new projects.
 Deficiencies in the capabilities of the project actor can be revealed.
 Recording, monitoring, and progress reporting should integral parts..
 Allows the management to be aware of the difficulties that might arise.
6. EVALUATION
 Final phase in the project cycle -it is useful (though not always done)
 Look back what has been done in the past
 Compare actual progress with the plans
 Judge whether the decisions and actions taken were responsible and useful.
 Primary criterion for an evaluation: the extent to which the objectives of a project are being
realized.
 Systematically look at the elements of success and failure in the project experience.
 Helps to learn how to prepare better plan – future projects.
 Important managerial tool in on-going projects.
 May take place at several times in the life of a project.
 May be undertaken when the project is in trouble as the first step in a re-
planning effort.
• Careful evaluation should precede any effort to plan for new projects and it is
also needed to follow-up the progress of projects.
o Final evaluation – when a project is terminated or is well into routine operation.
 Different bodies or units may do the evaluation of projects.
• Projects management unit.
• Sponsoring agency (the operating ministry, planning agency, or an external
assistant agency).
2. The UNIDO (United Nations International Development Organization) Manual for Industrial Feasibility Study
outlines 3 distinct phases
A. The pre-investment phase
B. The investment phase, and
C. The operating phase

UNIDO Project Cycle

Pre-
Operating investment
phase phase

Investment
phase
1. THE PRE––INVESTMENT PHASE
 This phase also comprises several stages:
 Identification of investment opportunities (opportunity studies);
 Analysis of project alternatives and preliminary project selection,
 Project preparation (pre-feasibility and feasibility studies);
 Project appraisal, selection, and investment decision
 Support or functional studies are also part of the project preparation stage and are
usually conducted separately, for later incorporation of the findings in a pre-
feasibility study or feasibility study as appropriate
The division of the pre-investment phase into stages:
1. OPPORTUNITY STUDIES
 Identification of investment opportunities is the starting point in a series of investment related
activities.
 Provides information on available investment opportunities.
 Purposes:
 highlight the principal investment aspects of a possible industrial proposition.
 arrive at a quick and inexpensive determination of salient facts of an investment possibility.
 The opportunity study should analyze:
 Natural resources
 The existing agricultural base (for agro-industries),
 Future demand for consumer goods,
 Imports substitution and export possibilities,
 Environmental impacts (mandatory or non-revenue producing projects),
 Expansions of existing capacity,
 Manufacturing sector (benchmarking from other countries), & Diversification, etc.
 2. PRE--FEASIBILITY STUDIES
 The project idea elaborated in a more detailed study.
• A feasibility study is a costly and time-consuming task
 Pre-feasibility study helps to see if:
 All possible project alternatives are examined,
 The project concept justifies detailed study,
 All aspects are critical and need in-depth investigation, &
 The project idea is viable and attractive or not
3. SUPPORT /FUNCTIONAL/ STUDIES
• Required as prerequisites for or in support of prefeasibility and feasibility
studies particularly for large-scale investment proposals
• Functional studies include:
 Market studies of products,
 Raw material and factory supplies studies,
 Laboratory and pilot plant tests,
 Location studies, Environmental impact assessment,
 Economies of scale studies, and
 Equipment selection studies.
D. FEASIBILITY STUDIES
 It should provide all data necessary for an investment decision.
 Commercial, technical, financial, economic, and, environment prerequisites for
an investment project should be defined, refined, and critically examined.
5. APPRAISAL REPORT
 Various parties will carry out their own appraisal of the investment project in
accordance with their individual:
 Objectives: Evaluation of expected risks, costs, and gains
2. The Investment/Implementation Phase
 This phase provides wide scope for consultancy and engineering work-primarily in the field
of project management.
 Comprises the following stages:
 Establishing the legal, financial, and organizational framework;
 Tendering, evaluation of bids, and negotiations;
 Technology acquisition and transfer;
 Detailed engineering design and contract, including tendering, evaluation of bids, and
negotiations;
 Acquisition of land, construction work, and installation
 Pre-production marketing, including the securing of supplies and suppliers and setting up
the administration of the firm;
 Recruitment and training of personnel; and
 Plant commissioning and start-up
 3. THE OPERATING PHASE
• ... Problems arising
 Short term view– relates to the initial, after commencement of production period
problems.
 Problems associated with the application of production techniques, operation of
equipment, or inadequate labor productivity owing to lack of qualified staff and
labor.
 Their origin is in the implementation phase – relatively easy to overcome due to
learning over time.
 Long-term view –problems that relates to chosen strategies and the associated
production and marketing costs as well as sales revenues.
 These have direct relationships with the projections made at the pre-investment
phase.
 If such strategies and projections prove faulty, any remedial measures if not made
there it will become, not only be difficult but, may prove highly expensive.
European commission project life cycle
1. Programming
2. Identification
3. Appraisal
4. Financing
5. Implementation
6. Evaluation
1. Project Cycle In Ethiopia Developed By DEPSA’s in 1990
 Generally, project cycle in Ethiopia consists of 6 phases which can be
described as:
1. Identification,
2. Feasibility
3. Appraisal/ Funding Negotiation/Budget Allocation,
4. Implementation,
5. Ex-post Evaluation/Implementation Completion Report, and
6. Operation.
 Consequences of not using PMT
DELAY
COST
WASTE OF RESOURCES
QUALITY
DISSATISFACTION
REPUTATION
Types of Projects
1. Manufacturing Projects:
 Where the final result is a vehicle, ship, aircraft, a piece of machinery etc.
2. Construction Projects:
• Resulting in the erection of buildings, bridges, roads, tunnels etc. Mining and
petro-chemical projects can be included in this group.
3. Management Projects:
• Which include the organization or reorganization of work without necessarily
producing a tangible result.
4. Research Projects:
• In which the objectives may be difficult to establish, and where the results are
unpredictable.
Project Management….

Work Smart Not Hard !!!