Project management information systems

A. Project management information systems

Project management information systems (PMIS) usually acquired by organizations as software packages are meant to provide managers with the decision-making support needed in planning, organizing, and controlling projects. However, the actual contribution of PMIS to project success or performance is still unknown. The purpose of this study is to empirically assess the quality of the PMIS presently used in organizations and to examine their impact on project managers and project performance, based on a PMIS success model. This model is composed of five constructs: the quality of the PMIS, the quality of the PMIS information output, the use of the PMIS, the individual impacts of the PMIS and the impacts of the PMIS on project success. Analysis of questionnaire data obtained from 39 project managers confirms the significant contribution of PMIS to successful project management. Improvements in effectiveness and efficiency in managerial tasks were observed here in terms of better project planning, scheduling, monitoring, and control. Improvements were also observed in terms of timelier decision-making. Advantages obtained from PMIS use are not limited to individual performance but also include project performance. These systems were found to have direct impacts on project success, as they contribute to improving budget control and meeting project deadlines as well as fulfilling technical specifications.

The main objective of project management information system is to complete the project successfully within predetermined time with maximum utilization of limited means and resources. But there are also other objectives and activities related with achievement of the main objective. So, the main objective is divided into different parts. Effective communication system is necessary for effective control. Information system does not only mean exchange of communication, it also means to understand given information correctly. If the information receiver does not know the real intention of information giver, it may be wrongly meant. Different problems may arise in project management. Generally, it is said that - "projects are operated through information system." This statement applies only to the effective and credible information system. 

Based on the above requirements the consultants developed five modules for assisting the project management team to improve the quality of the information used in management planning, control and reporting. The design principle using rapid prototyping techniques stressed the ease of use, use of existing formats and procedures while requiring the minimum of effort in maintaining the systems. The following paragraphs briefly describe the components that were developed and adopted. Efforts will be made in the future to integrate the components into a single system when the organization's local area network (LAN) is operational.

1. Project Performance Indicator Tracking System

The project managers are required to report to the World Bank the status of each Performance Indicator from the project's Hierarchy of Objectives and management actions taken towards their achievement. The report must be on a semi annual basis and in an agreed format. For the past few years, this report was compiled using a word processor. As the report has a column on comments by the project manager on the status of each indicator, the project manager had to devote considerable time in the production of this report.

The new Project Performance Indicator Tracking System (PPITS), stores the indicators in a database format, and codifies the status into five outcomes: Accomplished Successfully, Being Achieved (on course), Experiencing Minor Problems (being addressed), Experiencing Major Problems and Rescheduling of Target Date Required, and Not Yet Due. With a graphic interface in MS Access, the project manager updates the status of each indicator as events occur, inputs the comments, and records the management actions undertaken. At the end of each reporting period, the required report is produced automatically (an internal feature of the system) with all the up-to-date information.

2. Procurement Planning and Monitoring System (PPMS)

Procurement is a major part of the project activities. The procurement activity involves a number of discrete steps to be followed in sequence leading from development of specifications through bidding to contract signing with the suppliers who win the bid. The acquisition of goods and services essential to the implementation of the project will be delayed if the timetable of events is not followed. However, in many projects, procurement staffs simply follow the process in a step-by-step manner, finishing one step before tackling the next, with neither systematic planning nor tracking.

A good estimate of when project goods and services will become available can only be done when a contract is signed. The revised list of dates will be automatically updated if a constituent step for any item slips. Since the different methods of procurement for works, goods and services have different steps the PPMS uses different milestones for each type. It also produces a list of procurement activities for a specified time period, thus providing a calendar of all procurement activities required for the next month. This serves as a reminder of critical procurement tasks that the project staff has to perform on a day-to-day basis.

3. Disbursement Planning and Tracking System (DPTS)

With the recent introduction of the Loan Administration Change Initiative (LACI), project management units of World Bank supported projects have to furnish the Bank with accounting reports in a specified format. The tables in these reports require listing disbursements made in each quarter and the forecast of payments for the following quarter. The DPTS is a system designed to enable the planning of the payment schedule of each contract for works, goods and services and entering the dates of actual payments against this schedule. The system automatically analyzes the data and produces the reports in the required format. Together with the Procurement Planning and Monitoring System (PPMS), all the required LACI reports can be produced directly from the database.

4. Procurement Activity Tracking System (PATS)

Apart from the major contracts for the building of new schools and the major consultancies, each project management unit also undertakes a number of relatively small contracts for furnishing the new schools and for purchasing school supplies. These shopping activities include the following steps: Finalizing the initial specifications; contacting suppliers for price quotations; negotiating specification modifications, discounts and delivery dates; receiving shipments or verifying deliveries in terms of quantities and quality; and authorizing payments by the accountant.

Although the process for procuring an individual item is not complicated, when the number of items required for a particular date becomes large, there is a need for a database to keep track of the status of placement of orders and of deliveries so that suppliers can be paid promptly. Notification of authorization for payment is at present done off line, involving printing a list for payments authorized or passing a diskette to the Accountant.

5. Project Planning and Scheduling System (PP&SS)

A complete critical path based project plan and schedule was developed using MS project. The first level of indenture is the WBS of the project. The schedule for the items of procurement, transferred from the PPMS, is presented on one line in the CPM chart using the rollup technique in MS Project.

C. Market Risk

Ans. The market risk affects all the projects in an industry and not a particular project. In this section, the concept of market risk has been explained with respect to factors which are beyond the control of individual corporates. The market risk is further sub-divided into:

(i) Security market risk: Often we read in the newspaper that the stock market is in the bear hug or in the bull grip. This indicates that the entire market is moving in a particular direction either downward or upward. The economic conditions, political situations and the sociological changes affect the security market. The recession in the economy affects the profit prospect of the industry and the stock market. The 1998 recession experienced by developed and developing countries has affected the stock markets all over the world. The South East Asian crisis has affected the stock market world wide. There factors are beyond the control of the corporate and the investor. They cannot be entirely avoided by the investor. It drives home the point that the market risk is unavoidable.Jack Clark Francis has defined market risk as that portion of total

variability of return caused by the alternating forces of bull and bear markets. When the security index moves upward haltingly for a significant period of time, it is known as bull market. In the bull market, the index moves from a low level to the peak. Bear market is just a reverse to the bull market; the index declines haltingly from the peak to a market low point called trough for a significant period of time. During the bull and bear market more than 80 per cent of the securities’ prices rise or fall along with the stock market indices.The forces that affect the stock market are tangible and intangible events. The tangible events are real events such as earthquake,

war, political uncertainty and fall in the value of currency. Another example that can be cited is the Pokhran blast on May 13, 1998,and the fall of BSE sensex by 162 points. Impending sanctions, dampened sentiments and FIIs selling of stocks set a bear phase.Several examples like fall in the value of rupee and post-budget blue can be cited for triggering the bear phase.Intangible events are related to market psychology. The market psychology is affected by the real events. But reactions to the tangible events become over reactions and they push the market in a particular direction. Take for instance, the bull run in 1994 FII’s investment and liberalization policies gave buoyancy to the market.The market psychology was positive. Small investors entered the market and prices of stocks without adequate supportive fundamental factors soared up. In 1996, the political turmoil and recession in the economy resulted in the fall of share prices and the small investors lost faith in the market. There was a rush to sell the shares and the stocks that were floated in the primary market were not received well. Thus, any untoward political or economic event would lead to a fall in the price of the security which would be further accentuated by the over reactions and the herd like behaviour of the investors. If some financial institutions start disposing the stocks, the fear grips in and spreads to other investors. This results in a rush to sell the stocks. The actions of the financial institutions would have a snowballing effect. This type of over reaction affects the market adversely and the prices of the scrips’ fall below their intrinsic values. This is beyond the control of the corporate.

(ii) Interest rate risk: Interest rate risk is the variation in the single period rates of return caused by the fluctuations in the market interest rate. Most commonly interest rate risk affects the price of bonds, debentures and stocks. The fluctuations in the interest rates are caused by the changes in the government monetary policy and the changes that occur in the interest rates of treasury bills and the government bonds. The bonds issued by the government and quasi-government are considered to be risk free. If higher interest rates are offered, investor would like to switch his

investments from private sector bonds to public sector bonds. If the government to tide over the deficit in the budget floats a new loan/bond of a higher rate of interest, there would be a definite shift in the funds from low yielding bonds to high yielding bonds and from stocks to bonds.Likewise, if the stock market is in a depressed condition, investors would like to shift their money to the bond market, to have an assured rate of return. The best example is that in April 1996, most of the initial public offerings of many companies remained under subscribed but IDBI and IFC bonds were oversubscribed. The assured rate of return attracted the investors from the stock market to the bond market.

The rise of fall in the interest rate affects the cost of borrowing.When the call money market rate changes, it affects the badla rate too. Most of the stock traders trade in the stock market with the borrowed funds. The increase in the cost of margin affects the profitability of the traders. This would dampen the spirit of the speculative traders who use the borrowed funds. The fall in the

demand for securities would lead to a fall in the value of the stock index .Interest rates not only affect the security traders but also the corporate bodies who carry their business with borrowed funds.The cost of borrowing would increase and a heavy outflow of profit would take place in the form of interest t the capital borrowed. This would lead to a reduction in earnings per share and a consequent fall in the price of share.

(iii) Purchasing Power Risk: Variations in the returns are caused also by the loss of purchasing power of currency. Inflation, is the reason behind the loss of purchasing power. The level of inflation proceeds faster than the increase in capital value. Purchasing power risk is the probable loss in the purchasing power of the returns to be received. The rise in price penalizes the returns to the investor, and every potential rise in price is a risk to the investor. The inflation may be demand-pull or cost-push inflation. In the demand pull inflation, the demand for goods and services are in excess of their supply. At full employment level of factors of production, the economy would not be able to supply more goods in the short run and the demand for products pushes the price upward.d the supply cannot be increased unless there is an expansion of labour force or machinery for production. The equilibrium between demand and supply is attained at a higher price level. The cost-push inflation, as the name itself indicates that the inflation or the rise in price is caused by the increase in the cost.The increase in the cost of raw material, labour and equipment makes the cost of production high and ends in high price level. The producer tries to pass the higher cost of production to the consumer. The labourers or the working force try to make the corporate to share the increase in the cost of living by demanding higher wages. Thus, the cost push inflation has a spiraling effecton price level.