We discussed the planning and implementation phases in our earlier posts. But that is surely not enough to be able to effectively complete the project.
Here is when Project review comes into the picture. Project review is, therefore, the assessment of the status of the project at a given stage.
This is a very important aspect of project management as it helps us know what is the progress in the project, are there any difficulties in executing the project and if there are any issues then what should be done to solve them.
So in this post, we will study the Project Review and its Administrative aspects and through this, we will learn about the importance of project review in the successful completion of a project.
- Control of In-Progress Projects
- Post-Completion Audit
- Abandonment Analysis
- Administrative Aspects of Capital Budgeting
- Agency Problem
- Evaluating the Capital Budgeting
Control of in-progress projects
After the project is commenced the next step is to ensure that the project gets completed by achieving the desired objectives. But sometimes things go wrong when we try to implement them.
So it becomes very important to control and monitor the projects especially in the implementation stage. Another reason for this control is the amount of cost involved with the projects.
So one way of doing this is the control of in-progress projects. Therefore it refers to the assessment and monitoring of the projects which are currently in progress. It helps to implement any changes to be done at an early stage so that if something goes wrong it can be treated well in time.
There are two aspects of control of in-progress projects:
- Establishing procedures for internal control: it refers to setting up certain procedures through which we can keep control of the ongoing project internally. It may be done through assigning a dedicated supervisor for this or can be done by investing in technology related to this.
- Regular progress reports: regular progress reports may be maintained so as to judge the daily progress of the project. This progress report can also be used to track the planned performance with the actual performance. This will help the company know about areas where we may be lacking.
Even a small amount of control over operations during the implementation of the process can do wonders for the organisation.
As the name suggests the post-completion audit, therefore, refers to the audits done after the project is completed. These audits also play a crucial role when it comes to project review.
Even after the project is completed it is so important to audit the project. The main aim is to compare the actual performance with the planned performance or we can say that to know whether the project has produced desired results or not.
If the results are desired we aim to look for things which performed well and is there any scope for improvement or not and if the results are not desired then we may aim to find out the shortcomings due to which the project suffered and how can we improve them.
Post-completion audits also help a business find out what were the biases that we made in our judgements. We will also be able to include healthy caution.
It will also help us to determine who were the best performers who put in extra efforts to make the project success and we will also be able to serve this audit as a training ground for potential executives.
Also Read: 8 Techniques of Risk Analysis in Business
Project management is certainly a very dynamic process. Anything can happen in this fast-changing dynamic world. Here is where abandonment analysis comes into the picture.
Abandonment analysis is a technique which is used for existing projects and even for new projects that whether the existing project terminated or is to be continued.
Let us discuss what are the differences between an existing project and a new project:
|New Project||Existing Project|
|A project in which the major amount of investment is yet to be made is known as a new project. Hence the cash outflow here is relevant.||A project in which most of the investments are made and this investment represents the sunk cost.|
|The cash flow estimates are uncertain in this case.||The cash flow estimates are quite precise.|
Some rules are to be considered when making a decision regarding whether to divest, continue or terminate the project. Before getting to know about the rules we must first be aware of the following terms:
PVCF- the present value of expected cash flows
SV- salvage value or the value which can be expected by terminating the project and selling the assets
DV- divestiture value or the price which the third party is ready to pay for buying the project
The rules to consider are:
If PVCF<SV<DV then it is highly advised to divest the project because the divestiture value is highest in the case and makes the most sense to divest.
If PVCF<DV<SV then the project must be terminated because the SV value is highest and we will get the most benefit by terminating the project.
If SV<PVCF<DV then we should divest the project because at this stage we are getting the most value by divesting the project.
If SV<DV<PVCF then we should continue with the project because we will get the most benefit by continuing the project.
If DV<SV<PVCF then in this we should continue with the project as both DV and SV are lower than PVCF.
If DV<PVCF<SV then we must terminate the project because neither divesting nor continuing the project will help.
Administrative Aspects of Capital Budgeting
We discussed all capital budgeting in our earlier post. So here we are going to discuss some of the administrative aspects required for capital budgeting.
- Identifying investment opportunities
- Classifying the investments into categories
- Finalising and submission of the proposal
- Making decisions
- Performing capital budgeting
- Implementing whats decided
Every single person irrespective of the company he is working in has his personal desires which he wants to fulfil.
Companies want people working in the organisation to fully support the organisational goal but employees try to complete their personal objectives as well. Employees can sometimes be more inclined towards pursuing their personal goals.
Companies want employees to maximize shareholders’ wealth and employees consider their own goals.
This is an agency problem. To Prevent from being dislodged from their position, managers may try to achieve some acceptable level of performance as far shareholder welfare is concerned.
Also Read: Market and Demand Analysis in Business
Evaluating the Capital Budgeting
Evaluation of the capital budgeting is as important as performing the act of capital budgeting. Certain criteria are to be considered when it comes to the evaluation of the capital budgeting. The criteria to consider are:
Projects once commenced face a lot of problems. It is nearly impossible for a project to not have any kind of issues or shortcomings. Thus project review plays an important role in the successful completion of a project.
Different techniques which are mentioned above are used to conduct a review of projects at different stages of a project. A timely review and correction can do wonders for a project and help in its successful completion.
Stay with us to get more such amazing stuff from our side. We will be meeting soon. Till then have a look at some FAQs;
Frequently Asked Questions
Project review the assessment of the status of the project at a given stage.
It refers to a group of members formed to execute the process of project review.
A report which is prepared to show the status of the project review process and the outcomes of the review.
The main aim is to compare the actual performance with the planned performance or we can say that to know whether the project has produced desired results or not.
The agenda of forming the review board is to formalise the process of project review.
The value which can be expected to be received by terminating the project and selling the assets.
The price which the third party is ready to pay for buying the project.