CHAPTER-1
Concept of Project
A project is a temporary endeavor undertaken to create a unique product or service. It implies
a specific timeframe a budget unique specifications working across organizational boundaries
Project Management
Project management is about creating an environment conducive to getting critical projects done! Project management is about changing peoples behavior
What is Project
Objective Activities Outputs Duration BudgetInput) Resources (Input)
An undertaking for the purpose of achieving established objectives, within a given budget and time period.
CONCEPT
The dictionary meaning of project is speculative meaning . It deal with three dimensions :-innovation , risk , and vision. Gilliner:- defines it as the whole complex of activities involved in using recourses to gain benefits.
CHARACTERISTICS OF A PROJECT
Investment pattern Expected result Time limit Location
PROJECT MANAGEMENT
Project management is the modern context is a highly sophisticated and fast developing concept and practice. It has been defined as The process of planning directing a project from its inception to its completion in a given cost to generate a given results.
ROJECT CLASSIFICATION
Quantitative & non-quantitative project Sectoral project Techno- Economic project Financial institution classification
CHAPTER-2
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PROJECT IDENTIFICATION
It is concerned with the collection, completion and analysis of economic data for the eventual purpose of locating possible opportunity for investment and with the development of the characteristics of such opportunity.
PROJECT FEASIBILITY
The methods are as follows:Economic analysis Financial analysis Market analysis Technical assessment Managerial competence
Evaluation
PDM
Planning
Implementation
Do
See
Plan
Do
Plan
See
Do
Plan
See
Overall Goal
Direction that the project should take next
Outputs
Strategies for achieving the Project Purpose
Activities
Specific actions taken to produce Outputs
Important Assumptions
Conditions important for project success, but that cannot be controlled by the projects. Whether these conditions develop or not is uncertain.
Means of Verification
Data sources from which indicators are derived.
Inputs
Personnel, materials, equipments, facilities and funds required by the project.
Preconditions
Conditions that must be fulfilled before a project gets underway
Characteristics of PCM
Participatory Approach
Logicality
Transparency
Consistency
ProblemSolving
Early 1990s
PCM(FASID)
Moderator
Other organization
PCM Workshop
Analyzing step by step
Consensus
Cards &Board
Moderator
Working as a team
Brainstorming
Visualizing ideas
8 Rules
1. 2. 3. 4. 5. Write down your own statement on a card. Write only one idea on a card. Make your statement specific. Express your statement in a concise sentence. Stick to the facts and avoid abstractions and generalizations. 6. Make it a rule to write cards before beginning discussions. 7. Do not remove a card from the board before a consensus is obtained. 8. Do not ask who wrote a particular card.
7 Steps in PP
Analysis Stage Stakeholders Analysis Problems Analysis Objectives Analysis
PDM
Appraisal
Plan of Operation
Efficiency
The productivity in project implementation. The degree to which Inputs have been converted into Outputs.
Effectiveness
The degree to which the Project Purpose has been achieved by the project Outputs.
Impact
Positive and negative changes produced, directly or indirectly, as a result of the Implementation of the project.
Relevance
The validity of the Overall Goal and Project Purpose at the evaluation stage.
Sustainability
The durability of the benefits an and development effects produced by the project after its completion.
When things appear to be going better, you have overlooked something. No system is ever completely debugged. Attempts to debug a system inevitably introduce new bugs that are even harder to find. A carelessly planned project will take three times longer to complete than expected A carefully planned project will take only twice as long. Project teams detest progress reporting because it vividly manifests their lack of progress.
Project Charter
What must be done?
What are the required resources? What are the constraints? What are the short and long term implications?
Why do it? When must it be done? Where must it be done? Who does what?
Who is behind the project? Who is funding the project? Who is performing the work of the project?
Project Charter
Project Goal & Objective Sponsor Stakeholders Timeline Resources required Deliverables Decision making Assumptions Risks Business process changes Project manager Project team Budget Signatures
Assumptions
Opportunity to put it all out there
Challenges facing the project Implications Organizational history Political implications Impact to traditional power Requirements of decision-making
Most important
Monitor tasks Gantt views of project
one page views for executives rollout and more complex views for work teams
Critical Paths Inputs from multiple teams that roll up to project manager Dependencies Resources assigned to tasks
Project Budget
Direct Costs Indirect Costs Ongoing costs
Project Budget
Year 1 Year 2 Year 3
Direct Costs
Hardware Software Contractor fees
Estimated hours Hourly Rates per contractor Various contractor rates
Indirect Costs
Your peoples time and effort
Estimated time on project Estimated cost based on hourly rate Others time and effort Opportunity cost What projects or tasks are NOT going to get done in order to get this project done?
Communicate
Define Plan Monitor Complete
Communicate
Re-Plan
Traditional Organization
President VP Academics VP Student Affairs VP Finance VP Development
PM is a mindset, a discipline, that can help your organization increase effectiveness and put order to chaos
Project Finance
Costs of distress/bankruptcy
Risk of default and allocation of this risk very different than conventional debt Less risk contamination with other parts of firm Less co-insurance benefit Rearranges states in which default occurs Trade-off, clearly
Agency costs
High leverage, dedicated cash flows, very specific contractual terms for repayment and contingencies
May limit opportunities for risk shifting May limit cross subsidization incentives May replace managerial incentives of a publicsector project with a for-profit venture, contracts used to enhance incentives
Outside guarantees
Project finance is usually high leverage and non recourse to project sponsors
even with its possible benefits, this usually leads to high risk debt, which is often illiquid, costly and sometimes simply not available
CHAPTER-3
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PROJECT APPRAISAL
INTRODUCTION PROJECT APPRAISAL:
1. Technique to analyse if the project is feasible or not. 2. It helps in recognizing needs and problems, and their early analysis 3. A tool for decision making 4. Identifying input, output parameters and criteria for evaluating systems. 5. Evaluating feasibility in terms of technical, financial and economic practicability. 6. Developing and implementation of system so designed in terms of - Engg. Calculations
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Feasibility Study:
It involved creating, identifying, brain storming feasibility of ideas and then selecting to prove further one or more feasible solutions. - Then prilimary design, optimal design (best alternatives) - Detailed design (a complete description of projects for its implimentation. - Lastly planning for production:
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Yes
Plan Feasibility Analysis
No
Terminate
Yes
NO
Terminate
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Key issues in Project Analysis Potential Market Market Analysis Market Share Technical Viability Technical Analysis Sensible Choices Risk Financial Analysis Return Benefits and Costs in Shadow Prices Economic Analysis Other Impacts Environmental Damage Ecological Analysis Restoration Measure 80
Feasibility Study has following sequence of events (Parts) Need Analysis: Define objectives of the projects. New or improves. Project Identification: Quantifies input, output, design parameters.
a. Project Inputs: (i) Purposeful Controllable - Uncontrollable Controllable: Man hours, Capital Inflow, Activity Analysis: Uncontrollable: Cost of Raw Material, Reliability of Technology, Availability of Power, Govt. & Political Interference.
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(ii) Environment (Business) Interest, Insurance, Legal, Regulatory, Pollution. b. Project Output (i) Desired (ii) Undesired (i) Desired: Desired could involved physical quantities of products how much, how many, could also involve value judgment status, comfort, Aesthetic Appeal (Keeping user in view undesired) (ii) Undesired: Undesired Pollution, Waste material, Waste Energy, Danger (Bhopal Gas Tragedy, Nuclear Explosion). Discomfort to people living in vicinity. c. Design Parameters: Like features attributes that would affect behavior and performance. Most common 82 are physical size, weight, etc.
d. Constraint Specification: on input, output, design parameters which could be essential to evaluate the alternative solutions. Measure of the values indicate range of acceptable values. e. Evaluation Criteria: Total revenue operating cost gross/ net profit, ROI/ EOI etc.
3. Practicability Analysis: Idea to eliminate the concepts that are not feasible. Are these operational financeable, Economical, Physically realizable, Politically acceptable ,
Physically Realizable which alternatives needs the solutions within the specified parameters.
(ii) Sources of Capital Inflow who where from: 4. Economic Practicality : (i) Even a financially feasible may not be economically practical. (ii) Economic Feasibility Study of alternative solutions by constraints operating cost, Maintenance and Spare part expenditure. (iii) Total revenue that would accrue over the operational life of systems, (i.e. what is the break even point or optimum point of economic operations of the project) We will consider those alternative solutions to be economically feasible that meet the specified rates of return on investment.
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5. Social and Political Realizeability : The project may be physically, Financially, Economically feasible, but may encounter social at political obstacles. Normally in case of large projects, there are additional considerations of health (Polio Campaign, Malaria, TB, CNG Buses) education (private and foreign universities) Welfare (METRO RAIL, Realignment over the range area, Civil Nuclear Technology).
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Technical Appraisal
By technical appraisal of project, we mean an assessment of its basic technical and functional feasibility of project (Road under/over bridge) Besides costs and schedules, the project performance depends on how well the project is meeting the technical requirements of the end project (connect village to stadium)
(i) Detailed technical Appraisal Which include describing the details of the assignment and the key property.
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It also includes describing the deficiencies of particular acclamation. The detailed technical appraisal method helps in commenting on the reviewers action, analysis and conclusions.
Report from is becoming more widely accepted by many users. Factors Effecting Technical Appraisal (i) Layout:- Layout of the project includes description of the project in terms of what they represent and when they occur, who has authorized it, number of people who will handle. It also states where quality control will be exercised. A description and explanation of the methods of that will be used to monitor progress e.g. bar charts could be used. For Example Weekly progress meeting to exercise control over the project. 88
(ii) Location:- The nine key factors that influence location of a project are: (keep NANO Car Project In Mind) Costs Infrastructure around the location Labour Characteristics Wage rates Motivation of workers Telecommunication systems Government stability and industrial relations laws Protection of patents A availability of management resources and specific skills and system and integration costs. These factors have an impact on management decisions and governments policies.
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Government policies: Regulatory barriers may preclude the use of innovative technologies e.g. some reservation for SME Sector (Now only 3s items) Types of equipment or processes: Equipments are basically of two types temporary and permanent equipments. (Olympic stadium in China) The availability and quality of equipments affect the technical appraisal. Appropriateness of Local Conditions: The project should be adaptable to local technical and environmental conditions, such as voltage, dust, temperature, humidity, etc. The appropriate supply of material and equipments for keeping the project working should be available in proximity.
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Impact of Environment: The potential impact of the project on the human and physical environment is examined to make sure that nay adverse effects can be controlled or minimized e.g. pollution. Approach Followed: Procedures for obtaining engineering, architectural, or other professional services are examined. Risk Factor: It is necessary to identify the risks associated with the project and estimate the scale of risk. There should also be contingency plans in place to minimize the risk of project failure or of a major gap between whats promised and whats delivered. Cost Estimated: Technical appraisal is a review of the cost estimates of the engineering and maintaining the project. Cost estimates also determine whether technical 91
Environmental Appraisal A systems approach is a holistic approach to problem solving that involves formal considerations of the following parameters: 1. The total objectives of the project and, ore specifically, the performance measures of the whole project. 2. The projects environment or the fixed constraints. 3. The resources or inputs to the projects. 4. The components of the project, their activities, goals, and measures of performance. 5. The management of the project, or the organization or various components and their interactions. The next aspect to consider in the system approach is the projects environment.
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This can be viewed as whatever lies outside the project, but that which can affect and be affected by the operations of the project. In project parlance the environment means much more than just the weather. For example, for automobile environment, we can consider the roads and highways; petrol pumps and servicing stations, etc. need to be included in our definition of the automobile system. When we say that something lies outside the project, and hence constitutes its environment, we mean that the project can do relatively little about its environments characteristics or behaviour. Identification of the environment depends on the answers to the following two questions. 1. Can I do anything about it? 93
2. Does it affect my situation or objectives? If the answer to the first is No, and that do the second is Yes, then it is the environment.
(b). Secondly, by definition, the environment is something that we cannot control, and hence it is fixed. Of course we could consider the effects of the output of a project on its environment. (METRO NO Pollution Less Noise, Dev of Area) This is what is referred to as Environmental Impact Assessment (EIA), which would be a part of the feasibility study for most projects, especially for large industrial projects. (e.g. Refinery , Chemical plant, Nuclear plant)
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Managerial Appraisal
One of the main preoccupations of management in any organization and in project organization is the allocation of scarce resources. These resources include manpower, materials, facilities, and financial resources. For every project being planned, the project manager must ask the following two questions: - Are the resources required for the given project available ? - Is this the best use to which these resources can be put ? Most project are subjected to an evaluation before they are given the go-ahead. An essential part of his evaluation is the financial 96
appraisal. Traditionally, this has been aimed at deciding whether or not a project will be profitable and selecting the one project out of several competing projects that appears the most profitable. The project manager should understand the processes so that he can benefit from them. (Difference between private public Social Benefit projects).
It is with this intention that we present the various techniques of managerial evaluation, which consist of the technical, economic, financial, social and political appraisal and assessment of a project.
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Project Selection
Project selection is the process of evaluating individual projects or groups of projects, and then choosing to implement some set of them so that the objectives of the parent organization will be achieved Managers often use decision-aiding models to extract the relevant issues of a problem from the details in which the problem is embedded Models represent the problems structure and can be useful in selecting and evaluating projects
Chapter 2-1
Chapter 2-2
Risk Analysis
Principal contribution of risk analysis is to focus the attention on understanding the nature and extent of the uncertainty associated with some variables used in a decision making process Usually understood to use financial measures in determining the desirability of an investment project
Chapter 2-8
Risk Analysis
Probability distributions are determined or subjectively estimated for each of the uncertain variables The probability distribution for the rate of return (or net present value) is then found by simulation Both the expectation and its variability are important criteria in the evaluation of a project
Chapter 2-9
Risk Analysis
Chapter 2-10
Technological Shock
Chapter 2-11
CHAPTER-4
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Project Scheduling
Project planning and Project Scheduling Project scheduling involves,
Estimated start time Required completion time WBS (Work Breakdown Structure) Scheduling the activities Allocating owners and resources
Scheduling Activities
Activity duration
An estimate
Influence
Estimated start time Required completion time
Activity Description Activity Number Duration Estimate
Owners
Time
Key concepts
Earliest start time (ES) Earliest finish time (EF) EF = ES + Duration Latest finish time (LF) Latest start time (LS) LS = LF - Duration
Earliest start Estimated Duration Activity Number Activity Description Latest start Latest Finish Earliest Finish
Total Slack
Falling behind ?
Activities and entire Project Total slack (Float)
Difference
All activities EF and Project required completion time
Positive result
Activity can be delayed without any hassle
Negative result
Activity work needs to be accelerated
Free slack ??
Calculating,
Critical path Noncritical path Most critical path
Scheduling a challenge
Scheduling in Information System
A random process
Project scheduling software an advantage Perfection comes with practice and experience
5.1 Introduction
A project is a collection of tasks that must be completed in minimum time or at minimal cost. Objectives of Project Scheduling
Completing the project as early as possible by determining the earliest start and finish of each activity. Calculating the likelihood a project will be completed within a certain time period. Finding the minimum cost schedule needed to complete the project by a certain date.
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5.1 Introduction
A project is a collection of tasks that must be completed in minimum time or at minimal cost. Objectives of Project Scheduling
Investigating the results of possible delays in activitys completion time. Progress control. Smoothing out resource allocation over the duration of the project.
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Task Designate
Tasks are called activities.
Estimated completion time (and sometimes costs) are associated with each activity. Activity completion time is related to the amount of resources committed to it. The degree of activity details depends on the application and the level of specificity of data.
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Based on this information we can develop managerial tools for project control.
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PERT/CPM is used for scheduling activities such that the projects completion time is minimized.
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Evaluate the ES of all the nodes for which EF of all the immediate predecessor has been determined.
ES = Max EF of all its immediate predecessors. EF = ES + Activity duration.
0,90
A A 90
90,115
F F 25
129,149 D D 20
177 149,177 H H 28
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Evaluate the LF of all the nodes for which LS of all the immediate successors has been determined.
LF = Min LS of all its immediate successors. LS = LF - Activity duration.
Repeat this process backward until all nodes have been evaluated.
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90,105
95,110 B B 15 90,115 90, 115 F F 25 C C 5
5,95
A A 90 29,119
0,90 0,90
129,149 149,177 115,129 129,149 115,129 129,149 153,173 166,194 129,149 129,149 D 146,166 H G D H G 129,149 20 28 14 129,149 129,149 129,149
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90,120 119,149
I I 30
149,194 149,194
J 45
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Slack Times
Activity start time and completion time may be delayed by planned reasons as well as by unforeseen reasons. Some of these delays may affect the overall completion date. To learn about the effects of these delays, we calculate the slack time, and form the critical path.
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Slack Times
Slack time is the amount of time an activity can be delayed without delaying the project completion date, assuming no other delays are taking place in the project.
Slack Time = LS - ES = LF - EF
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Activity A B C D E F G H I
J
LS - ES 0 -0 95 - 90 110 - 105 119 - 119 173 - 149 90 - 90 115 - 115 166 - 149 119 - 90 149 - 149
Slack 0 5 5 0 24 0 0 17 29 0
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The sum of the completion times for the activities on the critical path is the minimal completion time of the project.
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90,105 95,110
C C 5
105,110 110,115
149,170 173,194
E E 21 149,177 166,194 H H 28
0,90 0,90
A A 90
115,129 115,129 G G 14
129,149 129,149 D D 20
90,120 119,149 I I 30
149,194 149,194
J J 45
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Possible Delays
We observe two different types of delays:
Single delays.
Multiple delays.
Under certain conditions the overall project completion time will be delayed. The conditions that specify each case are presented next.
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Single delays
A delay of a certain amount in a critical activity, causes the entire project to be delayed by the same amount.
A delay of a certain amount in a non-critical activity will delay the project by the amount the delay exceeds the slack time. When the delay is less than the slack, the entire project is not delayed.
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B 15
C 5
LS=173
E 21
A 90
F 25
G 14
D 20
H 28
90
105 90 A B C D 15 5 20 115 129 149 194
E
F G
Gantt chart demonstration of the (no) effects on the project completion time when delaying activity I and E by 15 days.
21 25
194
Activity E
14
28
30
H
I J
Activity I
45
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Multiple delays of non critical activities: Case 2: Activities are on the same path, separated by critical activities.
ES=90 DELAYED START =94 LS =95 ES=149
B 15
C 5
E 21
A 90
F 25
G 14
D 20
H 28
Multiple delays of non critical activities: Case 2: Activities are on the same path, no critical activities separating them.
ES= 90
DELAYED START =94 DELAYED START= DELAYED FINISH = 109 + 4 =113; 94+15=109 LS =110 B C
15
E 21
A 90
F 25
G 14
D 20
H 28
In an earliest time Gantt chart each bar begins and ends at the earliest start/finish the activity can take place.
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Heres how we build an Earliest Time Gantt Chart for KLONEPALM 2000
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90
105 90 A B C D E 15 5 20 115 129 149 194
F
G H I J
Immediate Estimated Activity Predecessor Completion CompletionTime Time A None 90 B A 15 C B 5 D G 20 E D 21 F A 25 G C,F 14 H D 28 I A 30 J D,I 45
21 25
194
14
28 30 45
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F
G H I J
14
Do not conclude that the project is behind schedule. 30 Activity I has a slack and therefore can be delayed!!!
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28
45
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Disadvantages
Gives only one possible schedule (earliest). Does not show whether the project is behind schedule. Does not demonstrate the effects of delays in any one activity on the start of another activity, thus on the project completion time.
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Step 1: Consider the schedule that begins each activity at its ES. Step 2: Determine which activity has slack at periods of peak spending. Step 3: Attempt to reschedule the non-critical activities performed 141 during these peak periods to periods of less spending,
PERT is a technique that treats activity completion times as random variables. Completion time estimates are obtained by the Three Time Estimate approach
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The Three Time Estimate approach provides completion time estimate for each activity. We use the notation:
a = an optimistic time to perform the activity. m = the most likely time to perform the activity. b = a pessimistic time to perform the
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To calculate the mean and standard deviation of the project completion time we make some simplifying assumptions.
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Assumption 3
There are enough activities on the critical path so that the distribution of the overall project completion time can be approximated by the normal distribution.
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Marginal Cost
Additional Cost to get Max. Time Reduction = Maximum Time reduction (4400 - 2000)/(20 - 12) = $300 per day
M=
E R
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Crashing activities
Meeting a Deadline at Minimum Cost
If the deadline to complete a project cannot be met using normal times, additional resources must be spent on crashing activities. The objective is to meet the deadline at minimal additional cost.
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7.11 PERT/COST
PERT/Cost helps management gauge progress against scheduled time and cost estimates. PERT/Cost is based on analyzing a segmented project. Each segment is a collection of work PROJECT packages.
Work Package 1 Activity 1 Activity 2 Work Package 2 Activity 3 Activity 5 Work Package 3 Activity 4 Activity 6
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