Project Management for Engineers with Case Studies-Part-1

Project under study: Electromechanical Relay Panel Replacement Project at XYZ Electric

Before moving further Electrical Engineer need to understand what is Project?

Project is define as “‘a unique set of coordinated activities, with definite starting and finishing points,

Undertaken by an individual or organization to meet specific objectives within defined schedule, cost and performance parameters.’”

So if we are working in maintenance department and we have a job to continue power supply of particular area, we can say it is not project, why

·        It is coordinated activities but not unique, why not unique? “Engineer and involved team need to follow standard procedures of organization and not allowed to think out of box, yes in some scenarios out of box thinking is allowed but again it is under the umbrella of organizational approvals for example during task if engineer found overloading of transformer and he suggest to shift load to nearby transformer, he need to get approval of such act from business department, and why this approval is necessary? Because business department have to readjust cost center of related maintenance and billing units of load area”

·        Although starting is define but No finishing dates mention, as main objective of this task is continuity, continuity is something in engineering we called operations

·        Cost parameter is link with continuity of power supply, and will be adjusted in annual cost center of involved department, which help in cost management

·        Performance is not only limited to this task of continuity of power supply , but it may be a part of our annual appraisal, and again this parting is depend on other task allotted to involved engineer and his team

Now let us transform this operational job into project, I am in maintenance department and I have allotted project to reduce power supply shortages in particular area within 3 months and budget allotted for this project is $UYZ million.

·        It is unique set of coordinated activities, I need to coordinate with my team, 3rd party service providers i.e. consultant or designer, consumers, my client’s representative, other utilities, distributed generation companies or owners, local law and order authorities etc.

·        I have to complete this project within 3 months after commencement of work, so starting and finishing point is mentioned and highlighted

·        Budget is defined and I am bound to execute my project within this budget, remember we need to include our overhead costs in our commercial offers to clients, Overhead budget can be prepared as per budget baseline studies.

·        My performance is totally defined in the successful execution of project, performance criteria may be defined be timely execution, cost management, safe work execution and quality work execution.

Why we need project management in our engineering fields?

The answer is that project management is essentially management of change while running a functional or ongoing business is managing a continuum or ‘business-as-usual’

Now the question is what is Management of Change?

Management of change is a systematic way to deal with change within an organization in order to effectively deal with the change and to capitalize on change opportunities. Change management includes adapting to the change, controlling the change and affecting new change. Management of change requires an organization to take a proactive approach to change.

Now question is that, can I adopt project management system in one cable manufacturing factory, I thought personally it will go bit complex, if I enforce my shift manager to be responsible for complete cable lot of particular client, and then transfer him to another cable lot project once previous one completed, as it is not just that we will ask him a question about 24 hours production while he is serving 8 hour official duty, yes he is responsible for his/her shift. Although provision is there to implement shift wise project management again it is bit complicated and away from smart management. 

We can say after analyzing that any new project is producing change within an organization

Change can be

·        New position i.e. appointment of project manager and his team or Transfer of Engineer with the team in new project

·        Allotment of resources from existing resources

·        New resources acquiring if the organization doesn’t have required resources in an organization

·        Etc.

When an organization has project management structure in place, they can manage these changes with success.

Now our awarded project is

Electromechanical Relay Panel Replacement Project at XYZ Electric

Duration is 1 week

Cost is $ 5000

Now analyze it

Is this project time bound?

Yes, client give us a 1 week time to complete

Is this project cost bound?

Yes we quoted under cost $5000

Is scope well defined?

A core requirement of the project is defined 

Business case

Now the issue is that how management of project team will be convinced to take Project?

For that purpose, management/project team have to develop a business case

Please remember “The document which defines and sets the advantages and parameters of any project is called the business case”

Who can develop business case?

·        Client or

·        Sponsor or

·        Business development manager

Business case main points

The business case is all about why, who, what and how

Let’s make our business case on our understudy project

Please remember contractor-PPN of this project is 1 Owner (General Manager) 21 employee company, and the organizational chart is given below

Business development manager developed a business case in this project

Business case- Electromechanical Relay Panel Replacement Project at XYZ Electric 

“Why is this project required”?

The organization has all capabilities to execute this project, the duration is short, it means resources allocation is for the very short time interval and also return on this resource investment is very much profitable. The project is totally unique to the organization and it also enriches the company’s experience profile.

“What are we trying to achieve”?

·        Profit

·        Experience

·        Market Sustainability

·        Leads to other projects with the same client

·        Good customer relationship

“What are the deliverables?”

·        Panel Replacement Report

·        Working IEDs Panel

·        Flow Study document 

“What is the anticipated cost?”

·        $2500+Overhead($750)

“How long will it take to complete?”

·        6 days + 1day(Documentation and Handover)

“What quality standards must be achieved?”

·        ISO 9001:2015

“What are the performance criteria?”

·        Timely completion

·        Execution with minimum overhead cost

·        Positive Customer Feedback

·        Complete Obligation of Safety and Quality standards

·        Complete Project Documentations

·        Complete Safety and Quality Documentations 

“What are Key Performance Indicators (KPI)?”

·        Timely completion

·        Execution with minimum overhead cost

·        Quality work

·        Zero incident/accident/causality

 “What are the main risks?”

·        Delay due to shut down arrangement or shutdown delay

·        Raise in overhead cost due to technical reasons

·        Safety risk high due to the involvement of welding

 

“What are success criteria?”

·        Handing over of project to the client with complete commitments (i.e. documents related to SAT, Quality, Safety etc.)

“Who are the main stakeholders?”

·        Client-XYZ Electric (Direct)

·        Contractor-PPN(Direct)

·        Local consumers (Direct)

·       law enforcement authorities (indirect)

·       Power Regulatory authorities (indirect)

·       Distributed Generation Plants(if any)(indirect)

“Investment Appraisal”

It includes cost/benefit analysis, in cost/benefit analysis following will be discussed

·        Return on Investment (ROI)

·        Net Present Value (NPV)

·        Payback (PB)

1.   Return on investment

Usually, ROI is calculated annually,

ROI = (No: of Years * Return per year) – (total investment) / No: of years

For example, If a project investment is $10 000, and gives a return of $2000 per year over 6 years, then ROI is

= (6*2000) – 10000/6 = $ 333.33

But here project is of 7 days duration, our quotation is $3250, our “invoice or cash receiving for project” duration is 10 days ($500/Day) after project handover, so ROI is

= (10*500)-3250/10= $175

Usually, ROI is in percentage,

ROI% = (175/3250)*100 = 5.384%

2.      Net Present Value

If company invest $3250 in this project, with an expected profit of $1750, means (5000-3250)*100/3250=53.846% is profit on this project. So the net present value of this investment is

NPV = 3250*1.53846=$5000

For next similar project (same duration), it will be

NPV=3250*1.53846*1.53846=$7692.29

For next similar project (same duration), it will be

NPV=3250*1.53846*1.53846*1.53846=$11834.284

Means the NPV of $11834.284 is $5000, this technique help in defining discount package to the client.

It also will play a major part in quotation stage, the contractor can quote $11834.284 and also in the same quote we define discount of (11834.284-5000/11.834.284)*100=57.7498%, but it is only advisable in case (you can count this as calculated risk) when there is the possibility of more than 2 similar projects.

3.      Payback

Payback is the period of time it takes to recover the capital outlay of the project, having taken into account all the operating and overhead costs during this period. Usually, this is based on the undiscounted cash flow.

In this project, payback of $3250 is 7days of execution + 10 days. 

Continue..........