Unit2 Chapter 2 Programme Management and Project Evaluation.pdf

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1. Programme
Management and
Project Evaluation

2. To Be Covered
ProgrammeManagement
Creating Program
Resource Allocation
Project Evaluation
Risk Evaluation

3. ProgrammeManagement
Onedefinition:
‘agroupofprojectsthataremanagedinaco-
ordinatedwaytogainbenefitsthatwouldnotbe
possiblewheretheprojectstobemanaged
independently’

4. Programmes may be
Strategic
Business cycle programmes
Infrastructure programmes
Research and development programmes
Innovative partnerships
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5. Strategic Programmes
Severalprojectstogethercanimplementasingle
strategy.
Forexample:Twoorganizationsaremerging
Sowehavetocreateunifiedpayrollandaccountingapplication.
Physicalreorganizationofoffices
Training,neworg.procedures,re-creatingcorporateimageusingmedia
Alloftheseprojectscanbetreatedasseparate
project
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6. Business cycle programmes
Portfolio???
Thecollectionofprojectsthatanorganizationundertakeswithina
particularplanningcycleissometimesreferstoasaportfolio.
CompanieshadfixedbudgetforICTdevelopment.
Plannersneedstoassessthecomparativevalueandurgencyofprojects
withinaportfolio.
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7. 
ICT (information and communications technology -or technologies) is an
umbrella term that includes any communication device or application,
encompassing: radio, television, cellular phones, computer and network
hardware and software, satellite systems
so on, as well as the various services and applications associated with
them, such as videoconferencing and distance learning.

8. Infrastructure programmes
Someorganizationshavedifferentdepartmentsfor
differentactivitieswithcommunicationasabasic
requirementamongthem.
Soitisrequiredtohaveauniforminfrastructureto
sharetheinformationamongdifferentdepartments.
Inthissituationinfrastructureprogramsetupand
maintain
ICTinfrastructure,
includethenetworks,workstationandserver.
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9. Research and development programmes
Asearchforknowledge
R&Dprogrammesarecarriedoutbytheinnovative
companies.
Thesecompanydevelopsnewproductsformarket.
Thereisalwayshighriskassociatedwiththesetypeof
programmes.
CompaniesdoingR&D
IBM,APPLE,MS,Google,Yahoo
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10. Innovative partnerships
Sometechnologicaldevelopmentsbenefitswholeindustries.
Inthesetypeofprogrammescompaniescomestogethertodevelopnew
technologies
ExampleWorldwideweb,GSM
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11. Programme managers
versus project managers
Programme manager
Many simultaneous projects
Optimization of resource use
Projects tend to be seen as
similar
Project manager
One project at a time
Minimization of demand for
resources
Projects tend to be seen as
unique
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12. 2.8 Allocation of Resource
What is a project?
Planned Activity
What is Resource?
support that may be drawn upon when needed
Each project needs Resources to achieve there
objective.
Resources may be:
Programmers
Skilled resources
Infrastructure (PC, Network, Server, Work stations etc)
Mangers
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13. Managing the allocation of resources
within programmes
In company there are many project running concurrently at same
time
But resources are limited in company so they need to be managed
within the organization.
So we need to manage these resource.
ICT department has pools of:
Expertise
Software Developer
Database designer
Network Support Staff
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14. Projects sharing resources
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15. Theseexpertsmaybeneededinnumberofprojectsrunningincompany.
Soitistheresponsibilityofprogrammanagertousetheseresourcesin
optimumway.
Andifprogrammanagerhavepersonalrelationshipwiththeseskilled
resources.i.e.he/shehastheknowledgeabouttheseresources
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16. Oneresourcemaybeneededbydifferentproject
Soweneedtoidentifythepriorityoftheproject
Wecandelaythestartofactivityofaprojectwithleastpriority.
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17. 2.10 Creating Programme
Based on OGC approach
OGC is a UK govt. Agency responsible for introduction programme
management
Programme triggered by the creation of programme
mandate
Initial planning document is the Programme Mandate
describing
The new services/capabilities that the programme should deliver
How an organization will be improved
Fit with existing organizational goals
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18. A programme directoris appointed for the program to take leadership
Programme director is responsible for success of the programme
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19. Next stages/documents
The programme brief
equivalent of a feasibility study:
It will have sections:
Vision Statement
Benefits
Risks and Issues
Estimation cost, timescale and effort
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20. The vision statement
The vision statement–explains the new capability that the organization
will have
Provides information to sponsoring that it is worth moving to more detailed
definitions.
Next Step is team forming
A small team is formed with a programme manager
This team will now take the outline vision and prepare a detailed vision
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21. The blueprint
The blueprint –explains the changes to be made to obtain the new
capability
It contains:
Business model outline
Organizational structure (staff & new system needed )
The other non-staff resource needed
Data and information requirements
Cost, performance and service level requirements
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22. 2.4 Project Evaluation
Evaluation of individual projects
How the feasibility of an individual project can be evaluated.

23. 1.Technical assessment:
 Whether the required functionality can be achieved
with current affordable technologies.
 Organizational policies
 H/W S/W infrastructure limitations
 Cost of technology adapted

24. 2.Cost-benefit analysis:
 Is the proposed project is the best of several options?
Cost-benefit analysis comprises two steps-
1.Identify costs and benefits of
 Developing costs
 Operating costs
 Benefit expected from the new system
2.Expressing above costs in common units
 Express cost and benefit in terms of a common unit

25. Benefits management
In Benefit management, we
identify,
optimise and
track the benefits.
To carry this out, you must:
Define expected benefits
Analyse balance between costs and benefits
Plan how benefits will be achieved
Allocate responsibilities for their achievement
Monitor achievement of benefits 25

26. Cash Flow Forecasting
Which in indicates when expenditure and income will take place.
Ex: Spend money on staff salaries
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27. 2.5 Cost-Benefit Evaluation
Techniques
Net Profit
Payback Period
Return on Investment(ROI)
Net Present Value

28. Net profit
Net Profit = (Total income) –(Total cost)
Over the life of the project
Estimation for more distant future are less reliable than short term
estimation.
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29. Net profit
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30. Pay back period
It is time taken to break even or pay back the initial investment.
Project with shortest payback period will be chosen on the basis that an
organization will wish
to minimize the time that a project is in debt.
Advantage: Easy to calculate
Not sensitive to small forecasting errors
Disadvantage: Ignores overall profitability of project
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31. 31
Pay back period
Year Cash-flow Accumulated
0 -100,000 -100,000
1 10,000 -90,000
2 10,000 -80,000
3 10,000 -70,000
4 20,000 -50,000
5 100,000 50,000
Accumulated of last year –cash flow of present year
The payback period would be about 4.5 years.

32. Return on investment (ROI)
Accounting rate of return (ARR)
Compares net profitability with investment required.
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ROI =
Average annual profit
Total investment
X 100

33. ROI
For project1
Net Profit = 50000
Time Duration= 5 years
Average annual profit is =50000/5=10000
ROI =
10000
100000
X 100
ROI = 10%

34. Return on investment (ROI)
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In the previous example
Calculate ROI and decide which project is most
worthwhile:
P1: 10%
P2: 20%
P3:10%
P4:15%
We eliminate P3, and consider only from P2 and
P4, out of this P2 is better

35. Net present value
NPVisaprojectevaluationtechniquethattakesinto
accounttheprofitabilityandtimingofthecashflows.
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•Present value = (value in year t)/(1+r)
t
t = value in year, r = discount
factor
Discount Cash Flow= Cash flow * Present Value
Net Present Value = Sum of the discounted cash flows for
all the
years -investment

36. Year Cash-flow Discount
factor/Present
value @10%
Discounted cash
flow
0 -100,000 -100,000
1 10,000 0.9091 9,091
2 10,000 0.8264 8,264
3 10,000 0.7513 7,513
4 20,000 0.6830 13,660
5 100,000 0.6209 62,090
Net
Profit
50,000 NPV 618
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t = 1
r = 10% = 0.1
PV = 1 / (1 + 0.1)
1
Discount Cash Flow = 10000 * 0.9091 =
9091
NPV = (9091 + 8264 + 7513 + 13660 +62090) -
100000 )
= 618

37. If NPV is in +Vethan its discount factor is good
If NPV is –Vethan its discount factor is bad
Irr-internal rate of return-

38. 2.6 Risk Evaluation
Every project involves risk of some form.
Project A might appear to give a better return than
B but could be riskier
How to choose ?????
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Dealing with uncertainty: Risk
Evaluation

39. Risk Evaluation
1.Risk Identification and Ranking
One technique is, to draw risk matrix.
Classify risk into two categories :
Important (impact)
Likelihood (probabilty)
Matrix may be used for project evaluation
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40. Example of a project risk matrix
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41. 2. NPV and Risk
For riskier projects, could use higher discount rates.
We can increase Discount rate for risky projects by 5 to10%.
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42. 3. Cost-benefit Analysis:
In this approach we consider each possible outcome and estimate the
probability of their occurrence.
So instead of single cash flow we will have set of cash flows and their
occurrence.
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43. Risk Evaluation(Cont.)
Sales Annual Sales
Income
Probability Expected value
High 8,00,000 0.1 80,000
Medium 6,50,000 0.6 390,000
Low 100,000 0.3 30,000
Expected Income 5,00,000
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44. 4.Risk Profile Analysis
Construction of risk profiles using sensitivity analysis
We can analyze the risk with project by varying the parameters of project that affects
the cost or benefits of the project.
First we do the estimation then we vary it and check it’s sensitivity.
For example we are varying the original estimation by + or –5%and then
recalculate the cost and benefits. If the project cost and benefits changes
drastically then that parameter becomes sensitive to project
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45. 5.Decision trees:
Example:
Some company is providing payroll service to their customers.
Their system is old and number of customers are increasing. There is a
probability that market will expand more.
They have two option
Expand the existing system
Replace the old with new
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46. Decision trees
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