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Preliminary ExaminationESE 2017UPSC ENGINEERING SERVICES EXAMINATION

General Studies andEngineering Aptitude

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Basics of Project Management

7

Comprehensive Theory with Practice Questions

As per new syllabus of ESE 2017

I

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1st Edition : 2016

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PrefaceThe compilation of this book Basics of Project

Management was motivated by the desire to provide a

concise book which can benefit students to understand

the concepts of Project Management topics.

This textbook Basics of Project Management provides

all the requirements of the students, i.e. comprehensive

coverage of theory, fundamental concepts and objective

type questions articulated in a lucid language. The

concise presentation will help the readers grasp the theory of this subject with clarity and apply

them with ease to solve objective questions quickly. This book not only covers the syllabus of ESE

but also addresses the need of many other competitive examinations. Topics like ‘Basic Concepts

and Project Life Cycle, Initiation Process : Project Formulation and Appraisal, Project Organisation,

Planning Process : Project Planning and Scheduling, Execution Process: Project Monitoring and

Control, Closing Process: Project Evaluation and Termination, Tender and Contract’ are given full

emphasis, keeping in mind of our research on their importance in competitive examinations.

We have put in our sincere efforts to present detailed theory and MCQs without compromising the

accuracy of answers. For the interest of the readers, some notes, do you know and interesting facts

are given in the comprehensive manner. At the end of each chapter, sets of practice question are

given with their keys, that will allow the readers to evaluate their understanding of the topics and

sharper their question solving skills.

Our team has made their best efforts to remove all possible errors of any kind. Nonetheless, we would

highly appreciate and acknowledge if you find and share with us any printing and conceptual errors.

It is impossible to thank all the individuals who helped us, but we would like to sincerely thank all

the authors, editors and reviewers for putting in their efforts to publish this book.

With Best Wishes

B. Singh

CMD, MADE EASY

Chapter 1Basic Concepts and Project Life Cycle .... 1 1.1 What is Project? ................................................................. 1

1.1.1 Characteristics and Features of a Project ... 1

1.1.2 Classification of Projects (Taxonomy of

Projects) ................................................................. 2

1.2 What is Management? .................................................... 3

1.3 What is Project Management? ..................................... 3

1.3.1 Characteristics of Project Management ..... 3

1.3.2 Different Types of Management ................... 4

1.4 Project Life Cycle ............................................................... 4

1.4.1 Project Life Cycle (4 Phases) ............................ 4

1.4.2 Level of Effort (Intensity of Activities) ......... 6

1.4.3 Level of Influence Vs. Cost of Changes

(Front-End Importance) .................................... 7

1.4.4 Product Life Cycle (10 Phases) ....................... 7

1.5 Project Management Process ....................................... 9

Objective Brain Teasers ...............................................11

Chapter 2Initiation Process :Project Formulation and Appraisal ...... 14 2.1 Project Formulation and Development ..................14

2.1.1 Pre-Investment Phase .....................................14

2.2 Project Appraisals ...........................................................16

2.2.1 Technical Analysis/Technical Appraisal ....16

2.2.2 Market and Demand Analysis ......................17

2.2.3 Financial Analysis/Financial Feasibility .....23

2.2.4 Economic Analysis (Economic Feasibility) ... 29

2.2.5 Social Cost Benefit Analysis (SCBA) ............29

2.5 Formulation of Detailed Project Reports (DPR)....34

2.6 Project Risk Analysis .......................................................36

Objective Brain Teasers ...............................................43

Chapter 3Project Organisation ............................. 49 3.1 Introduction ......................................................................49

3.1.1 Attributes/ Qualities of a Good Project

Manager ...............................................................49

3.1.2 Role of the Project Manager .........................50

3.2 Type of Project Organisations ....................................51

3.2.1 Functional Organisation/Traditional/

Classical Organisation .....................................51

3.2.2 Product Organisation ......................................52

3.2.3 Matrix Organisation .........................................53

3.2.4 The Strong, Weak or Balanced Matrix........55

3.3 Project Organisation Structure ..................................56

Objective Brain Teasers ...............................................57

Chapter 4Planning Process :Project Planning and Scheduling ......... 59 4.1 Planning .............................................................................59

4.2 Scheduling .......................................................................59

4.3 Implementation and Control ......................................59

4.4 Work Break Down Structure ........................................59

4.5 Techniques Used for scheduling ...............................61

4.5.1 Bar Charts ............................................................61

4.5.2 Mile-Stone Charts .............................................61

4.5.3 Line of Balance (LOB) Techniques ...............62

4.5.4 Network Method of Scheduling ..................62

4.6 Network Diagram ............................................................62

4.6.1 Elements of a Network ...................................63

4.6.2 Rules of a Network ...........................................66

4.7 Network Scheduling Techniques...............................67

4.7.1 Programme Evaluation and Review

Technique (PERT) ..............................................67

Basics of Project Management

ContentsGeneral Studies and Engineering Aptitude

(v)

4.7.2 Critical Path Method (CPM) ...........................70

4.7.3 Comparison between PERT and CPM ......73

4.7.4 CPM Systems ......................................................73

Objective Brain Teasers ...............................................78

Chapter 5Execution Process:Project Monitoring and Control ........... 89 5.1 Project Control System ..................................................89

5.1.1 Tools Used for Project Control .....................89

5.1.2 Earned Value Analysis (EVA) ..........................90

5.1.3 Critical Ratio .......................................................92

5.1.4 Line of Balance (LOB) ......................................92

5.1.5 Graphical Evaluation and Review Technique

(GERT) ...................................................................93

5.1.6 Network Simulation .........................................95

5.1.7 Outsourcing Method .......................................96

5.1.8 Review Meetings ..............................................96

5.2 Tips for Efficient Implementation of Projects .......96

5.3 Project Information System .........................................97

5.4 Resource Allocation .......................................................97

5.4.1 Resource Leveling ............................................98

5.4.2 Resource Smoothening ............................... 100

5.5 Project Cost Control .................................................... 101

5.5.1 Time-Cost Trade-off ...................................... 101

5.5.2 Cost Model Analysis ...................................... 101

Objective Brain Teasers ............................................ 107

Chapter 6Closing Process:Project Evaluation and Termination .. 110 6.1 Project Evaluation ........................................................ 110

6.1.1 Project Evaluation Objectives ................... 110

6.1.2 Evaluation Methods ...................................... 110

6.2 Networking Updating of Network Diagram ....... 112

Objective Brain Teasers ............................................ 113

Chapter 7Tender and Contract ............................ 114 7.1 Project Contract ............................................................ 114

7.1.1 Type of Contracts ........................................... 114

7.2 Project Tender ............................................................... 115

7.3 Project Cost Estimate .................................................. 118

7.3.1 Objectives of Cost Estimate ....................... 118

7.3.2 Methods of Cost Estimate .......................... 118

7.3.3 Project Cost Components ........................... 119

7.3.4 Cost Funnel ...................................................... 119

7.4 Types of Cost Estimates ............................................. 120

7.4.1 Conceptual Cost Estimate .......................... 120

7.4.2 Semidetailed Cost Estimate ....................... 121

7.4.3 Detailed Cost Estimate ................................ 121

7.5 Project Sickness ............................................................ 122

7.6 Miscellaneous Topics .................................................. 124

7.6.1 What is Cost Overrun? ................................. 124

7.6.2 What is Credit Rating? .................................. 124

7.6.3 What is Capital Cost? .................................... 125

7.6.4 What is Operating and Maintenance Cost? ...125

7.6.5 What is Enterprise Resource Planning (ERP)? .....126

7.6.6 What is ABC Analysis? .................................. 127

7.6.7 What is Economic Ordering Quantity (EOQ)? .......

(Wilson Harris Model for Inventory Control) .127

7.6.8 What is Technical Consultancy

Organisations (TCOs)? .................................. 131

7.7 Value Analysis and Value Engineering .................. 131

Objective Brain Teasers ............................................ 135

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