Project Management Concepts

PROJECT
MANAGEMENT
CULTURAL ISSUES
SOCIAL-ECO
TRAINING
NOMIC ISSUES
PUBLIC
GOVRNMENTAL
RESOURCE
MANAGEME SUPPORT RELATIONS
ECONOMIC
ENVIRONMENTAL
FINANCING
FEASIBILITY IMPACT & CONTROL
ENGINEERING

PROCUREMENT

CONSTRUCTION

Work Breakdown Structure

Level

1
2

Program

Project 1

Project 2

Task 1.1

Task 1.2

Subtask 1.1.1

Work Package 1.1.1.1

Subtask 1.1.2

Work Package 1.1.1.2

Project Management - Issues

Project Description

What is to be done?
When will it occur?
How much will it cost?
Who will do it?
What determines task completion?
What mechanics will be employed to deal with changes
formally?
How will actual progress is measured?

Project Management
The Uncertainty Spectrum
CERTAINTY

RELATIVE

COMPLETE

CERTAINTY

UNCERTAINTY

Risk
Total Information

Specific Uncertainty
Partial Information

No Information

AMOUNT OF INFORMATION

Elements of Project Planning

Work Breakdown Structures

Networks
Schedules
Budgets
Policies and Guidelines
Change Control Procedures

Project Management
Scheduling
Planning

Bid

Design

Construction

SEQUENTIAL SCHEDULE
Planning
TIME
SAVED

Design
Bid
Construction
PHASED SCHEDULE

Types of Critical Path Methods

CPM with a Single Time Estimate
Used when activity times are known with certainty
Used to determine timing estimates for the project, each
activity in the project, and slack time for activities

CPM with Three Activity Time Estimates

Used when activity times are uncertain
Used to obtain the same information as the Single Time
Estimate model and probability information

Time-Cost Models
Used when cost trade-off information is a major
consideration in planning
Used to determine the least cost in reducing total project
time

St. Adolfs Hospital

Activity

Description

Immediate
Predecessor(s)

Responsibility

A
B
C
D
E
F

Select administrative and medical staff.

Johnson
Select site and do site survey.

Taylor
Select equipment.
A
Adams
Prepare final construction plans and layout.
B
Taylor
Bring utilities to the site.
B
Burton
Interview applicants and fill positions in
A
Johnson
nursing, support staff, maintenance,
and security.
G
Purchase and take delivery of equipment.
C
Adams
H
Construct the hospital.
D
Taylor
I
Develop an information system.
A
Simmons
J
Install the equipment.
E,G,H
Adams
K
Train nurses and support staff.
F,I,J
Johnson
http://news.yahoo.com/s/yblog_upshot/20101112/bs_yblog_upshot/chinese-workersbuild-15-story-hotel-in-just-six-days

St. Adolfs Hospital

Path
Activity

Expected Time (wks)

Description

I
15

Immediate
Predecessor(s)

Completion Time
A-F-K
28
A
Select administrative
and medical staff.
A-I-K
33
B
Select site and
A-C-G-J-K
67Ado site survey.
F
C
Select equipment.
12
10
B-D-H-J-K
D
Prepare final69
construction
plans and layout.
B-E-J-K
E
Bring utilities43
to the site.
F

G
H
I
J
K

Interview applicants and fill positions in

G
C
nursing,
Startsupport staff, maintenance,
35
10
and security.
Purchase and take delivery of equipment.
Construct the hospital.
B
H
D
Develop an information
system.
9
40
10
Install the equipment.
Train nurses and support staff.

KA
6
B
B
A

Responsibility
Johnson
Taylor
Adams
Taylor
Burton
Johnson

Finish

C
JD
4A

E,G,H
F,I,J

Adams
Taylor
Simmons
Adams
Johnson

E
24

St. Adolfs Hospital

Activity

Description
Completion Time
A
B
C
D
E
F

G
H
I
J
K

I
15

Immediate
Predecessor(s)

Select administrative and medical staff.

Select site and do site survey.

A
KA
F
Select equipment.
12
10
Prepare final construction
plans and layout. 6B
Bring utilities to the site.
B
Interview applicants and fill positions in
A
G
C
nursing,
Startsupport staff, maintenance,
Finish
35
10
and security.
Purchase and take delivery of equipment.
C
Construct the hospital.
B
JD
H
D
Develop an information
system.
9
4A
40
10
Install the equipment.
E,G,H
Train nurses and support staff.
F,I,J

Responsibility
Johnson
Taylor
Adams
Taylor
Burton
Johnson

Adams
Taylor
Simmons
Adams
Johnson

E
24

St. Adolfs Hospital

I

15

12

10

10

35

10

40

Start

B
9
Earliest Start
and
Earliest Finish Times

Finish

E
24

St. Adolfs Hospital

Earliest start time

12

I 27

Earliest finish time

15

A 12

12

12

Critical
path
0

B 9

9
Earliest Start
and
Earliest Finish Times

63 K 69

10

12

Start

F 22

C 22

22

10

D 19
10

G 57

Finish

35

19

H 59
40

59

J 63
4

9 E 33

24

St. Adolfs Hospital

I

12
27
48 15 63

A 12
12

12
53

F 22
10 63

12
22
14 10 24

Start

B 9

9
Latest Start
and
Latest Finish Times

63 K 69
63
69

9
19
9 10 19

22
57
24 35 59

19
19

H 59
40

59

Finish

59
59

J 63
4 63

9 E 33
35 24 59

St. Adolfs Hospital

Earliest start time
Latest start time
A

0
12
2 12 14

12
27
48 15 63

12
53

Critical
path
0
0

B 9
9 9

Latest Start
and
Latest Finish Times

Latest finish time

F 22
10

63 K 69
63
69

63

Start

Earliest finish time

12
22
14 10 24

9
19
9 10 19

22
57
24 35 59

19
19

H 59
40

59

Finish

59
59

J 63
4 63

9 E 33
35 24 59

Slack Hospital
St.Activity
Adolfs
I

12
27
48 15 63

SlackK = 0
or

0
12
2 12 14

SlackK = 0

12
53

F 22
10 63

12
22
14 10 24

Start

0
0

B 9
9 9

Activity Slack
Analysis

Node Duration ES

63 K 69
63
69

9
19
9 10 19

22
57
24 35 59

19
19

H 59
40

59

Finish

59
59

J 63
4 63

9 E 33
35 24 59

LS

Slack

0
14
9
35
53
24
19
48
59
63

0
2
0
26
41
2
0
36
0
0

Adolfs
ASt. 12
0
2 Hospital
2
I

B
C
D
E
F
G
H
I
J
K

9
10
10
24
10
35
40
15
4
6

0
12
9
9
12
22
19
12
59
63

0
0

Critical Path

B 9
9 9

12
27
48 15 63

12
53

F 22
10

63 K 69
63
69

63

12
22
14 10 24

9
19
9 10 19

22
57
24 35 59

19
19

H 59
40

59

Finish

59
59

J 63
4 63

9 E 33
35 24 59

St. Adolfs Hospital

I

12
27
48 15 63

0
12
2 12 14

12
53

F 22
10 63

12
22
14 10 24

Start

0
0

Critical Path

B 9
9 9

63 K 69
63
69

9
19
9 10 19

22
57
24 35 59

19
19

H 59
40

59

Finish

59
59

J 63
4 63

9 E 33
35 24 59

Minimum-Cost Scheduling
Step 1: Develop a network diagram and preliminary schedule.
Activities should be assigned their normal resources and
should start as early as possible
Step 2: Calculate the cost of the project. This will serve as an
upper limit.
Step 3: Identify activities that can be crashed and determine
the shortest time each activity requires (crash time) daily
cost of expediting the activity (crash premium)
Step 4: Calculate the length of each path through the network
and identify the critical path(s). The length of the critical
path(s) is the expected project duration.

Minimum-Cost Scheduling
Step5: Generate a list of activities that lie on a critical path and can
be crashed. If there are no such activities, the minimum -cost
schedule has been found. Stop.
Use the list to develop sets of one or more activities on parallel
critical paths that when simultaneously reduced by one day (or
any unit of time) will reduce the duration of critical paths by one
day. If there are no such sets, the minimum-cost schedule has
been found. Stop.
Step 6: Select the activity (or set of activities) with the lowest
(combined) crash premium. Compare the premium with the daily
penalty. If it exceeds the daily penalty, the minimum cost
schedule has been found.
Step 7: Crash the selected activity (or set of activities) by one day.
Return to step 4.

St. Adolfs Hospital

Cost-Time Relationships in Cost Analysis

Direct cost (dollars)

8000
Crash cost (CC)

7000

Linear cost assumption

6000
5200
5000

Estimated costs for

a 2-week reduction,
from 10 weeks to
8 weeks

4000
3000
0

Normal cost (NC)

|
5

|
6

(Crash time)

|
7

|
9

|
10

|
11

(Normal time)
Time (weeks)

10

St. Adolfs Hospital

TABLE 8.1

DIRECT COST AND TIME DATA FOR

THE ST. ADOLFS HOSPITAL PROJECT

Activity

Normal
Time
(NT)

Normal
Cost
(NC)

A
B
C
D
E
F
G
H
I
J
K

12
9
10
10
24
10
35
40
15
4
6

$ 12,000
50,000
4,000
16,000
120,000
10,000
500,000
1,200,000
40,000
10,000
30,000

Totals

$1,992,000

Crash
Time
(CT)
11
7
5
8
14
6
25
35
10
1
5

Maximum
Time
Reduction
(wk)

Crash
Cost
(CC)
$ 13,000
64,000
7,000
20,000
200,000
16,000
530,000
1,260,000
52,500
13,000
34,000

1
2
5
2
10
4
10
5
5
3
1

Minimum Cost Schedule

33 weeks
28 weeks
67 weeks

$ 1,000
7,000
600
2,000
8,000
1,500
3,000
12,000
2,500
1,000
4,000

$2,209,000

A
Start 12

I
15
F
10
C

B
9

10
D
10
E

St. Adolfs Hospital

A-I-K:
A-F-K:
A-C-G-J-K:

Cost of
Crashing per
Week

G
35
H
40

K
6

Finish

J
1

24

B-D-H-J-K:
B-E-J-K:

69 weeks
43 weeks

Total cost = $2,624,000 $2,543,000

Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
Critical Path B-D-H-J-K: 69 weeks
Crash Activity J by 3 weeks @ $1,000/week
3($28,000) 3($1,000) = $81,000
$2,624,000 $81,000 = $2,543,000

11

St. Adolfs Hospital

A
Start12

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks
67 weeks

B-D-H-J-K:
B-E-J-K:

B
9

I
15
F
10
C
10
D
10
E
24

G
35
H
40

K
6 Finish
J
1

69 weeks
43 weeks

Total cost = $2,624,000 $2,511,000

Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
Critical Path B-D-H-J-K: 64 weeks
Crash Activity D by 2 weeks @ $2,000/week
$28,000 + $8,000 2($2,000) = $32,000
$2,543,000 $32,000 = $2,511,000

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks
67 weeks

B-D-H-J-K:
B-E-J-K:

69 weeks
43 weeks

Total cost = $2,624,000 $2,507,000

Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
Critical Paths B-D-H-J-K and A-C-G-J-K: 63 weeks
Crash Activity K by 1 week @ $4,000/week
$8,000 $4,000 = $4,000
$2,511,000 $4,000 = $2,507,000

12

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks A
12
67 weeks

I
15

B-D-H-J-K:
F
B-E-J-K:
10

69 weeks
43K weeks
6

Total cost = $2,624,000

$2,507,000
C
G
Start
Finish
10
Indirect costs = $8,000/week 35
Penalty cost = $20,000/week after week 65
B
9

D
8

H
40

J
1

Critical Paths B-D-H-J-K and A-C-G-J-K: 63 weeks

Crash Activity K by 1 week @ $4,000/week
E
24

$8,000 $4,000 = $4,000

$2,511,000 $4,000 = $2,507,000

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks A
12
67 weeks

I
15

B-D-H-J-K:
F
B-E-J-K:
10

69 weeks
43K weeks
5

Total cost = $2,624,000

$2,507,000
C
G
Start
Finish
10
35
Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
B
9

D
8

H
40

J
1

Critical Paths B-D-H-J-K and A-C-G-J-K: 63 weeks

Crash Activity K by 1 week @ $4,000/week
E
24

$8,000 $4,000 = $4,000

$2,511,000 $4,000 = $2,507,000

13

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks
67 weeks

B-D-H-J-K:
B-E-J-K:

69 weeks
43 weeks

Total cost = $2,624,000 $2,507,000

Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
Critical Paths B-D-H-J-K and A-C-G-J-K: 63 weeks
Crash Activities B and C by 2 weeks
@ $7,000/week and $600/week

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks
67 weeks

B-D-H-J-K:
B-E-J-K:

69 weeks
43 weeks

Total cost = $2,624,000 $2,506,200

Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
Critical Paths B-D-H-J-K and A-C-G-J-K: 61 weeks
Crash Activities B and C by 2 weeks
@ $7,000/week and $600/week
2($8,000) 2($7,600) = $800
$2,507,000 $800 = $2,506,200

14

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks A
67 weeks12

I
15

B-D-H-J-K:
F
B-E-J-K:

10

69 weeks
43Kweeks
5

Total cost = $2,624,000 C$2,506,200

G
Start
Finish
10
35
Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
B
9

D
8

H
40

J
1

Critical Paths B-D-H-J-K and A-C-G-J-K: 61 weeks

Crash Activities B and C by 2 weeks
E
@ $7,000/week and $600/week
24
2($8,000) 2($7,600) = $800
$2,507,000 $800 = $2,506,200

St. Adolfs Hospital

Minimum-Cost Schedule
A-I-K:
A-F-K:
A-C-G-J-K:

33 weeks
28 weeks A
67 weeks12

I
15

B-D-H-J-K:
F
B-E-J-K:

10

69 weeks
43Kweeks
5

Total cost = $2,624,000 C$2,506,200

G
Start
Finish
8
35
Indirect costs = $8,000/week
Penalty cost = $20,000/week after week 65
B
7

D
8

H
40

J
1

Critical Paths B-D-H-J-K and A-C-G-J-K: 61 weeks

Crash Activities B and C by 2 weeks
E
@ $7,000/week and $600/week
24
2($8,000) 2($7,600) = $800
$2,507,000 $800 = $2,506,200

15

Decision Point:
Any further crashing costs more than the savings in the indirect
costs, resulting in a net increase in the project cost.
The minimum cost schedule is 61 weeks with a total cost of
$2,502,200 against Initial project completion by normal cost of
$2,624,000.
This crashed schedule costs $117,800 less than the normal time
schedule.
To obtain this schedule activities B,D,J and K should be crashed to
their limits and C to 8 weeks,

PERT
The earliest likely (optimistic) time is the time
required to complete the activity under the most
favorable conditions.
The most likely (probable) time is the time required
to complete the activity under normal conditions.
The latest likely (pessimistic) time is the time
required to complete the activity under the most
unfavorable conditions

16

CPM with Three Activity Time Estimates

Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28

Expected Time Calculations

Task
A
B
C
D
E
F
G
H
I

Immediate Expected
Predecesors
Time
None
7
None
5.333
A
14
A
5
C
11
D
7
B
11
E,F
4
G,H
18

Expected Time =

ET(C)= 6+4(12)+30
6
ET(C)=84/6=14
Immediate
Task Predecesors Optimistic Most Likely Pessimistic
A
None
3
6
15
B
None
2
4
14
C
A
6
12
30
D
A
2
5
8
E
C
5
11
17
F
D
3
6
15
G
B
3
9
27
H
E,F
1
4
7
I
G,H
4
19
28

Opt. Time + 4(Most Likely Time) + Pess. Time

6

17

Network

Duration = 54 Days
C(14)

E(11)
H(4)

A(7)
D(5)

F(7)
I(18)

G(11)

(5.333)

Probability Exercise
What is the probability of finishing this project in
less than 53 days?

p(t < D)
D=53

TE = 54
Z =

D - TE

2
cp

18

A ctiv ity v arian ce ,

Task
A
B
C
D
E
F
G
H
I

= (

P essim . - O p tim . 2
)
6

Optimistic Most Likely Pessimistic Variance

3
6
15
4
2
4
14
6
12
30
16
2
5
8
5
11
17
4
3
6
15
3
9
27
1
4
7
1
4
19
28
16

(Sum the variance along the critical path.)

= 41

p(t < D)
t

TE = 54
D=53

Z =

D - TE

2
cp

53 - 54
= -.156
41

p(Z < -.156) = .438, or 43.8 % (NORMSDIST(-.156)

There is a 43.8% probability that this project will be
completed in less than 53 weeks.

19

Additional Probability Exercise

What is the probability that the project

duration will exceed 56 weeks?

Additional Exercise Solution

p(t < D)

TE = 54

Z =

D - TE

2
cp

t
D=56

56 - 54
= .312
41

p(Z > .312) = .378, or 37.8 % (1-NORMSDIST(.312))

20

PERT and CPM

Common Steps
Define the project and all its significant activities or tasks
Determine the relationships among the activities. Decide
which activities must precede and which must follow
others
Draw a network connecting all activities
Assign time and/or cost estimates to each path through the
network
Compute the time required to complete the activities on
each path through the network
Use the network to help plan, schedule, monitor, and
control the project

PERT/CPM Limitations
Emphasis on critical path (activities that are
not on critical path often cause the entire
project to be extended)
Use of three time estimates (difficult to
estimate even one time estimate accurately)
Even the three estimates are accurate the
expected time is an approximation (errors
on the order of 5 to 10%)

21