Multiple Projects and
Constraints
Namrata K
Introduction
In isolation, Investment projects can be evaluated
on any of discounted cash flow method (NPV, IRR,
B/C ratio etc.) for correct decision making.
• In existing organization capital investment
decisions can’t be taken in isolation due to lack of
capital rationing and project independence
• Without considering the constraints, the
rational criterion of project evaluation (NPV, IRR,
etc) may lead to wrong decisions.
With any project, there are limitations and
risks that need to be taken into account and
addressed to ensure the project’s ultimate
success.
The three primary constraints that project
managers should be familiar with are time,
scope and cost.
These are frequently known as the triple
constraints or the project management
triangle. Each constraint is connected to the
other two; so, for example, increasing the
scope of the project will likely require more
time and money, while speeding up the
In real life situations, project organisations undertake
simultaneous execution of various projects at different
locations. The projects vary according to the number of
activities and also each activity in different projects
require different amount of scarce resources at different
time periods. The management at the same time tries to
evaluate the performance of different projects in terms of
multiple performance measures, in order to provide
direction and set constraints on managerial
behaviour.
ProjectManger make an attempt to formulate an
Integer Goal Programming (IGP) model. This model
has been analysed for a problem involving 3 projects
and 3 resources. Further, a possible extension of the
model to incorporate the cost-time trade-off in
managing the projects has also been presented and
analysed(optimisation) minimize the usage of
resources maximize the profit.
Why Multiple Projects?
Capital Rationing
Projects Dependency
Projects Indivisibility (like construction
projects so have different business
models, as working capital requirement
changes, gestation period change & so
on)
Project dependence
Project A and B are financially independent if acceptance or
rejection of one does not affect the cash flow of other or
does not affect acceptance or rejection of other. (Ex.
Investment in boiler and investment in computer network
are independent)
Mutually exclusive projects: (Alternative projects) .
Acceptance of one project automatically precludes the other
mutually exclusive projects.
Negatively dependent projects : Projects though not
mutually exclusive but negatively influence each others cash
flows (Ex. Building a bridge & buying commercial ferry)
Positively dependent projects: (Complementary projects)
undertaking of a project positively affects cash flows of
other.
Positively dependent projects:
(Complementary projects) undertaking of a
project positively affects cash flows of
other.
Symmetric complementary: positive effect
in both direction only (taking A or B
benefits other)
Asymmetric complementary: positive
effect in one direction only (taking A
benefits B but taking B does not benefit A)
Capital Rationing
• Capital rationing exists when capital available is
inadequate to undertake all projects which are
otherwise acceptable.
• Capital rationing may arise because of internal
limitation or external constraints.
• Internal capital rationing is caused by management
decision to set a limit on capital expenditure outlays.
• External capital rationing arise out of firm’s inability
to raise sufficient fund at a given cost of capital.
• Implication of cost of capital curve is that some
projects which might have been acceptable if cost of
capital being constant , have to be abandoned or
postponed
Project Indivisibility:
A Capital project has to be accepted in Toto
i.e. it can not be accepted partially Ex. Three
indivisible projects A, B and C require
investment of Rs 5 crore, 4 crore and 3 crore.
NPV of the projects are 2 crore, 1.5 crore and
1 crore respectively. On the basis of NPV
Project A is superior. But acceptance of A with
NPV of 2 crore makes sure rejection of B and
C due to capital rationing, which together
provides NPV of 2.5 crore. Thus comparison
of projects under constraints is required to
make a suitable financial decision
The triple constraints of PM
Time constraint: The time constraint refers to the
project’s schedule for completion, including the deadlines
for each phase of the project, as well as the date for
rollout of the final deliverable.
Scope constraint: The scope of a project defines its
specific goals, deliverables, features and functions, in
addition to the tasks required to complete the project.
Cost constraint: The cost of the project, often dubbed
the project’s budget, comprises all of the financial
resources needed to complete the project on time, in its
predetermined scope. Keep in mind that cost does not just
mean money for materials — it encompasses costs for
labour, vendors, quality control and other factors, as well.
Time constraint
When it comes to the time constraint, proper
scheduling is essential. According to the Project
Management Body of Knowledge (PMBOK), the
following steps should be taken for effective time
management:
Planning: This includes defining the main goal(s) of
the project team, how the team intends to achieve
the goal, resources and the equipment and/or
steps that will be taken to do so.
Scheduling: The project management team must
plot out the realistic timeframe for completion of
each phase of the project.
Monitoring: This step occurs once the project is
underway and requires the project team to analyze how
the past stages of the project performed, noting trends
and impacts on future plans, and communicating
these findings to all relevant stakeholders.
Control: In the control step, the team must, upon
communicating the results of each phase of the project,
move forward accordingly. That means if things are
running smoothly, the team must analyze the factors
contributing to that positive outcome so that it can be
continued and replicated. If there has been a derailment,
the team must know how and why the derailment
occurred and take steps to correct it for future actions.
A Gantt chart can be helpful to visualize the project
timeline and whether they are tracking to the proper
constraints.
Scope constraint
Defined upfront, the scope of the project should be clearly
and regularly communicated to all stakeholders to ensure
that “scope creep”—the term used when changes are made
to the scope mid-project, without the same levels of control
—is avoided. To keep the scope in check, you can:
Provide clear documentation of the full project scope at the
beginning of the project, including all requirements.
Set up a process for managing any changes, so if
someone proposes a change, there is a controlled system in
place for how that change will be reviewed, approved or
rejected, and implemented if applicable.
Communicate the scope clearly and frequently with
stakeholders.
Cost constraint
A project’s budget includes both fixed and variable
costs, including materials, permits, labour and the
financial impact of team members working on the
project. A few of the ways to estimate the cost of a project
include:
Historical data: Looking at what similar projects cost in
the recent past
Resources: Estimating the rate of cost for goods and
labour.
Parametric: Comparing historical data with updated,
relevant variables
Vendor bid: Averaging the total charge of several solid
vendor bids
Effective cost control is paramount to the success of the
project.
Quality
The quality constraint focuses on the characteristics of
the deliverable or product. In general, the quality of
the project will be evaluated by how closely the
outcome matches the expectations set in the planning
stages.
Returning to the previous house building example, the
scope of work includes building a 2,500 square foot
home with three bedrooms and two bathrooms.
However, the quality requirements of the project can
refer to the building materials that will be used, such
as brick versus vinyl siding or carpet versus hand-
scraped hardwood flooring. Defining quality
requirements helps to further identify previously
defined scope items, avoiding potential rework, sunk
costs, and wasted productivity.
Customer Satisfaction
Another constraint to bear in mind is customer
satisfaction, “When thinking about customer
satisfaction as a constraint, project managers need to
keep in mind that simply delivering a project on time,
within budget and scope does not mean the customer
will be satisfied.”
In some cases, you may not have a proper “customer,”
but you will still need to satisfy the needs of your key
stakeholders. Ultimately, you should be asking
yourself whether the project achieves the overarching
business or customer goal. The earlier you begin
looking for clues to answer that question, the better
you will be able to deliver a product, service, or
deliverable that meets customer or stakeholder needs.
Resources
Taking consideration of the availability of resources,
both material and human.
This constraint is typically associated with cost, as the
amount of funding for a project usually determines the
experience level and the number of resources available.
Additional resource constraints also deal with
availability and accessibility.
“In today’s global economy, project managers are often
asked to lead teams dispersed geographically or across
various groups within an organizational setting.” In
addition to the constraints outlined above, a project
may also face constraints associated
with risk, technology, sponsor commitment,
organizational objectives, or economic conditions.
It is important to understand that project
constraints can never be eliminated and each
project will have a different set of constraints.
The only way to properly manage project
constraints is by Measures
to
Understanding the constraints, eliminate
Project
Educate key stakeholders.
Constrain
View constraints in a positive light ts
Transparency,
Implementation of project management best
practices,
Effective task management software, and
Maintaining control over your project.
Understand the constraints.
Any constraint that surfaces during a project
should be fully understood before it can be
addressed. To understand a constraint, project
managers and their teams need to identify which
aspects of the project will be affected by asking
questions like who, what, when, where, why,
and how much.
Then, the project manager can utilize various tools
and techniques to get the project back on track,
such as performing risk analysis, cause and
effect analysis, resource levelling techniques,
and communicating with key stakeholders.
Educate key stakeholders.
“It is critical that the customer not only understands what is
included in the scope but more importantly what is not included,
the quality of the materials being used, and the availability of
resources. Expectations and assumptions are project killers if
they are not adequately discussed.”
To illustrate this point, consider the house building example once
more.
”If the customer decides to change the scope of the project by
adding an indoor pool, we will definitely expect the cost of the
project to increase, and we will most likely expect the time
required to complete the project to increase. We should also
expect the pool to use additional resources, pose new risks,
as well as have quality requirements. If we fall behind
schedule by too far, we may increase the cost of the project, bring
in resources, or we may decide to alter the scope of the work to
reduce the time required to complete the project so that the
View constraints in a positive light
One of the assumptions that new project
managers tend to make is that project constraints
are limitations or restrictions to their work.
However, while they can pose risks to a project,
constraints don’t necessarily need to be negative.
“I think by the very nature of the word
constraint, project managers think of the term as
having a negative connotation,”
“Instead, to help mitigate risks that may be
associated with these constraints, we need to
think more of the guiding principles for each
constraint.”
Transparency is often considered a key factor for successfully
managing project constraints. With transparency, everyone
involved in the process knows about the priorities and
objectives of the project.
In addition to helping in managing project constraints, project
transparency can help project managers by enhancing the
productivity of their team and project.
Implementing project management best practices and
dynamic management strategies in your projects is another
way of dealing with constraints and completing the project
successfully.
Creating a detailed work breakdown structure, measuring
performance throughout the project life cycle, keeping the
team members engaged, and having an effective control
strategy are some of the ways that can improve your
performance despite multiple constraints.
Comparing projects under constraint:
Mathematical programming approach Feasible
combination approach tends to be cumbersome if
number of projects increases. The solution lies in
mathematical programming model. This approach helps
in determining optimum solution ( most desirable
combination of projects) A mathematical model is
formulated in form of
• Objective function (maximise profits)
• Constraint equation (minimise wastage, cost,
resource)
Type of mathematical programming models
• Linear Programming model
• Integer Programming model
• Goal Programming Model
