Lecture 3 Flashcards

1
Q

9 General Planning Components

A

Objective, Program, Schedule, Budget, Forecast, Organisation, Policy, Procedure, Standard

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2
Q

Perspective project selection consists of 3 stages

A

Feasability study, Cost-Benefit Analysis, Setting of Milestones/Deadlines

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3
Q

What does the Feasibility Study consist of (8 steps)?

A

Initiation/outline, stakeholder analysis, define the clients needs, evaluate constraints, evaluate alternatives and options, gather information, value management, cost-benefit analysis

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4
Q

What is the purpose of a Cost-Benefit Analysis?

A

To ensure the project with provide financial and non-financial benefit

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5
Q

What are the two main types of benefits and what do they measure?

A
  1. Tangible - money - quantified and measurable

2. Intangible - everything other than money (often environment)

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6
Q

What is the Payback period (PP)?

A

The exact length of time needed to recover initial investment, calculated from cash inflows

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7
Q

What is the problem associated with calculating Payback period?

A

PP may contain great errors, it only takes into account the actual cash value, not time value of money. £1 today may not be worth £1 in the future

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8
Q

What is the Time value of Money?

A

This values the initial investment at a present day basis - by discounting final cash using a discount rate (scale factor) to arrive at the present day worth

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9
Q

What is the discount rate?

A

Effectively a scale factor used to discount final cash to find the present day value, this allows future costs and benefits to be evaluated and compared

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10
Q

Why is the Time value of Money so important for Engineering Projects?

A

Because of the time scale - engineering projects occur over many years. The end delivery must be quantifiable in relation to the initial proposal.

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11
Q

What is the Net Present Value used for?

A

To compare the Discounted cash flow Vs. the initial investment

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12
Q

When should Net present value, NPV be accepted?

A

If NPV=/>0 accept, if NPV <0 reject

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13
Q

What is the Internal Rate of Return, IRR?

A

The discount rate when NPV=0

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14
Q

Why is IRR often prefered over NPV?

A

It eliminates the need to determine a discount rate

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15
Q

How are IRR values ranked, and in what case can this determine the project to be unfeasable?

A

The higher the IRR, the more desirable the project (indicates profit at high discount rates - secure investment), if IRR is less than capital £ then the project is unfeasable

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16
Q

What is the purpose of Capital Rationing (CR)

A

By selecting and carefully ordering the best groups of project, the highest net present value will result

17
Q

What are the two main approaches to Capital Rationing?

A
  • Investment opportunity schedule - plot IRR in order against cumulative investment
  • Net present value method - again a ranking system of IRR
18
Q

What is the benefit of the planning cycle?

A

it allows management to control critical decision points

19
Q

What does implementing life-cycle phases allow and prevent?

A
  • avoids commitment to major resources too early
  • preserves future options
  • maximizes benefits of each project in relation to all other projects
  • assess risk
20
Q

Summary of Planning Cycle?

A

The planning cycle effectively splits the project into manageable chunks (life-cycles) allowing more control. These cycles can be ordered according to their IRR values. Those with high IRR will be invested in first to maximise overall profit.

21
Q

Detailed Scheduling and Charts are important, why?

A

To plan how company resources can be best integrated to produce synergy

22
Q

Guidelines for scheduling (4):

A
  • all major events and dates clearly identified
  • exact sequence of work defined through a network
  • schedules should be directly relatable - using WBS (work breakdown structure)
  • all schedules must identify time constraints and resources required
23
Q

What 4 things should Program planning do?

A
  • Eliminate conflicts
  • serve as a communication tool
  • provide verification of objectives and requirements
  • contain all activity schedules to facilitate progress analysis and reporting
24
Q

The project office can instruct functional managers to accomplish their task using what?

A

Program Plan

25
Q

External factors can often cause client or management to change project constraints, what must be done in this case?

A

Fast tracking (accelerates the schedule but increases the level of risk)

26
Q

How might fast tracking be done?

A

Conduct activities in parallel that are normally done in series

27
Q

What 5 aspects of quantitative and qualitative planning make up the Total project planning TPP?

A
  1. Schedule development
  2. budget development
  3. project administration
  4. leadership styles
  5. conflict management.