El Control Social

In the face of scare resources, there is greater need to investigate the risk involved in any project of investment an organization want to commit fund in order to minimize its effect. This enables projects to be analyze in view of the changing variables in the environment – government policies, consumer income, culture of the people and their values, inflation, technology and world economy. A change in these variables will certainly increase the risk in our project and has implication for project analysis.

Risk is the variability in the size of possible returns in an investment. It could be describe in two forms:

o a situation where there is incomplete predictability of alternative events;

o a situation in which parametric knowledge of probability distribution is used to assess a set of alternative event.

Also, risk is complex in nature because it involves the assessment of uncertain future events which are difficult to predict. In project analysis it is incorporated in the required rate of return (the discount rate).

81 Decision Rules

A feature of project analysis is the ability to make decision on what project to invest in at a given time. These guidelines can be grouped as two basic decisions facing project analyst. They are:

o Accept or reject decision problem, the analyst has two options to whether accept or reject a particular project. To make this decision, there must be an appropriate rule for judging the economic worth (profitability) of an investment project. If a project is profitable it is accepted, if not, it is rejected.

o Select from alternative the best project: in the face of limited resources acting as a constraint or when working with a given project, the best project or most profitable project is selected, others are sacrificed or forgone. The projects are said to be mutually exclusive, that is, the choice if one preclude the other.

3.3 Other Elements of project analysis

Unique

Projects are unique, one-of-a-kind, never been done before. It‘simportant to know what it means to be ―unique‖ if we hope to separate the common fromthe uncommon. In the performance of a project, there is an enormous amount of work to bedone. Some of it will be unique and some of it will not. The tools of project analysis are designed to control and manage the uncertainty inherent in projects. We must therefore,separate these two types of work and apply project tools to the unique work and operationaltools (when required) to the common work. Of all the work required to bring a project in ontime and on budget only some portion of it will be unique.Only some part of all the work required will be unique and therefore ―project‖ work.The rest of the

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work is operational work. We must apply project tools to project work andoperational tools to operational work.The ―project‖only analyzes and plans for the unique work.

One Accountable Entity

Accountability implies someonethat has both the responsibility and the authority to do the work of the project.Because operations have clearly defined and segmented work that is repeated over and overit is possible to have separate entities accountable for each section of the work. This controlcomes through the well defined processes that drive the work. In projects, there are few welldefined processes for the work (actually, the processes of planning and managing a projectare operational while the work of the project is unique). The project plan represents the besteffort to create a one time process that will have many missing parts. Such uncertaintyrequires one person to have full accountability for all the work of the project. This does notmean the same person must remain the one accountable entity for the entire project.

Somepeople are very good at getting the team organized and planning the project but fail whenit's time to drive the details of daily work. Feel free to change project leaders at each phaseif it‘s necessary. If you intend to change leaders at strategic points in the project make sureeveryone knows up front to prevent rumors of leadership failure.

Now that we see why we need one accountable entity let's define the term. Accountablemeans to answer to somebody for your actions. Responsible means someone who has theconfidence to boldly state, "Fire me first" when things don't work out. The accountableentity knows the phrase

"the buck stops here" and provides no excuses for failure. It meansto be responsible and have authority. Being responsible is the "no excuses" part of the job.Authority means to be able to make sound decisions that guide the project. If theaccountable entity is unable to make decisions, he cannot manage the project.

83 4.0 CONCLUSION

We conclude that resource, time and timing, cost, quality, risk, decision rules, unique and one accountable entityare elements of project and project analysis. They are well discussed in detail in this unit.All these elements are interrelated and must be managed together if project and project analysis, is to be a success.

5.0 SUMMARY

In this unit, we have identified various elements of project and project analysis. They are resources, time and timing, cost, quality, risk, and decision rules. We have also discussed them in detail.

6.0 TUTOR-MARKED ASSIGNMENTS

4. Identity the basic elements of project analysis and briefly discuss any three.

5. Explain decision rules as it relates to project analysis.

7.0 REFERENCES/FURTHER READINGS

Curry, S. & Weiss, J. (1993). Project Analysis in Developing Countries.Britain, Palgrave Macmillan.

Elder, A. (2006).The five elements of a project. No Limits Leadership Inc. 1-10.

84 MODULE 3

Unit 1 The Projected Income Statement Unit 2 Projected Cash Flow Statements Unit 3 The Projected Balance Sheet Unit 4 Project Evaluation Criteria

Unit 5 Introduction to Economic Analysis Unit 6: Cashflow dimensions

UNIT 1 PROJECTED INCOME STATEMENT