Break even analysis , Forecasting , Errors , Tenders and contracts , Basics of project management , General studies , UPSC ESE

 BEA

• Unit contribution margin:s-c
• Contribution margin : total sales - total variable cost
• Contribution margin ratio : contribution margin /total sales
• Margin of safety 
• P/V ratio 

Note : use graph as much as possible

Financial feasibility:

• Deals with cost of project and means of financing.

Limitation:

• Ignores time value money
• Ignores return after PB time 

Market feasibility:

• Potential size of market for the product is analysed.
• Based on past data: yes for forecasting and no for prediction
• 
  

  Qualitative (opinion based)	Quantitative (objective)
  Consumer survey	Simple average
  Nominal group	Moving average
  Sales forces opinion	Weighted moving average
  Delphi technique	Exponential smoothing method

Delphi technique:

• It is qualitative method
• It uses quostionaire series of rounds and reports submitted
• They are circulated without revealing source's identity
• It is for unbiased consenous based decision.

Exponential smoothing:

• It assigns weight to each of past data
• Weightage is exponential

Qualitative method are preferred for long term forecast and launch of a new product.

Forecast error:

1. Error = actual - forecast
2. Bias = algebraic sum of forecast error / no. of periods
3. MAD= sum of absolute value of error /no. of observations
4. MSE:
5. Tracking signal= running sum forecast error /MAD

Socio economic feasibility:

• Analysis effect of project on society as a whole
• Accounts for benefits like employment generation , indirect employment , taxes, etc
• Little Mireless (LM) method is a popular SCBA method

Environment feasibility:

• Environment impact assessment (EIA) is undertaken
• EIA is mandatory for infra projects under EPA , 1986

Tendor and contract

• Tendor : office to work
• Tendor invitation: 
• pre qualification: 

1. To ensure participation of completely only . 
2. Not needed for all projects (small projects)

• EMD:

1. Deposited by all tendorers
2. 1.3% of project value

• Tendor selection: generally lowest quotaion is accepted, but need to both is other factors like technology , infrastructure , past performance, etc
• Tendor award: letter of intent - promise by successful tenderor.
• Contract: legally enforceable agreement , as per Indian contract act , 1872. 
• Security deposit : 10-15% of total value,  by successful tenderors only.
• Liquidated damages clause : penalty imposed on contractor if he voilates any of contracts conditives.
• Force majeure clause: when contractor suffers due to uncontrollable factor  , he can be provided relief.
• Arbitration: to resolve contract issues.

Types of contracts

Project planning :

• Determines use of resources and plans for constraints.
• Leads to preperation of project management plan and detailed project report.

PMP

• Outcome of planning phase
• Contain all plans for project
• Integrates all knowledge areas
• Also called as integrated base line as it integrates baseline plans of project scope , time and schedule.

Kickoff meeting:

• First formed meeting of project
• PM collects the requirements

Defining scope

• Scope refers to all work that is required to be completed in the project successfully.

Scope creap: inherent tendency in projects to expand scope.

Scope baseline : includes WBS dictionary , WBS and scope statement, scope needs to be well defined as poorly defined scope will lead to problems in execution and termination.

Work break down structure:

• Top down hierarchical description of work 
• Decomposition of work 
• Could be pictored as well as indexed

Work package: it is the lowest level of the WBS

WBS is basis of many things like role assignment , scheduling , casting , risk analysis , organisation structure , monitoring and control.

Role assignment:

• RACI matrix is prepared
• R -responsible , A -accountable ,C -consulted ,I - informed

Other break down structures:

• Organisational breakdown structures - organisational relation ship
• Cost breakdown structure - classity costs
• Product breakdown structure - hierarchical structure of products

Project scheduling: it can use:

• Bar chart
• Milestone chart
• Linked chart
• Line of balance
• Networks
• Squared networks
• Graphical evolution and review technique
• Critical chain method

Bar chart:

• Pictorial charts
• Gant chart

Limitation:

• Unable to depict interdependencies of activities.
• Unable to show uncertainity
• Doesn't shown critical path
• Unable to do optimal resource utilization
• Suitable for small projects , conventional projects

Milestone chart:

• Key events of activity
• Shows relationship within the same activity / job element

Linked bar charts:

• Shows inter dependency behaviour activities
• Other limitation of barchart persist.

Line of balance:

• Links location and time
• Used for repetitive activities

Squared network / barchart:

• Shows interdisciplinary
• Length of arrow proportional to activity duration

Graphical evaluation and review technique

• Overcome limitation of pert
• Both activities and event nodes are related probablistically
• Permits feedback loops
• Simulation based
• Preferred for large projects

Critical chain method

• Adds buffers

Networks diagrams

• CPM , PERt , UNETICS , LESS , JOPS and SCANS
• Should not kept simple and stupid
• Flow of activities events is shown

Event:

• No time 
• No resource
• Project can have only one tail event and one head event
• All other events are dual role events 
• An event cannot occur twice

Activity:

• Uses time 
• Uses resources
• Activity can't start until its tail event has occured
• Tail event can not occur until all activies coming into it have occured.

Dummy activity:

• No time , no resource
• Used for grammatical and logical purpose

1. Showing two activities having same set of tail and head events 
2. When activities share same precedence activity but not all precedence are shared.

Errors in networks

1. Dangling
2. Looping
3. Redundancy
4. Wagon wheel error