PM Module2 ProjectPlanning 21-23

Title / Author: Project Management/Anand Dhutraj Page No.
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Project Management
Prof. Anand Dhutraj

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Agenda
• Project Planning
• Network Analysis
• Critical Path Method
Title / Author: Project Management/Anand Dhutraj Page No. 3

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Project Planning
• Planning means predicting or forecasting the future activities and jobs in advance.
• Basic reason is to develop model, so as to aid Project Manager to identify critical
tasks which require timely completion
• In Project planning following needs to be defined:
1. Goals of project and respective activities for accomplishing them
2. Documentation of various estimates for controlling and correcting
3. Documentation of the agreements by the affected groups and individuals
4. Presence of alternatives and substitutes for constraints in the project

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Objectives of Project Planning

1. Various complexities arranged in series of activities
2. Estimation of time and resources for each activity in project
3. Adequate provision for risk and uncertain events
4. Improvement in communication and coordination.
5. Prioritizing the activities
6. Implementing control measures and reducing duration of project
7. Effective resource utilization
8. Availability of good quality data for assistance in decision making process
9. All activities are inline with overall objectives
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Process of Project Planning
Identification Formulation Appraisal Selection
1. Identification of Project
2. Project Formulation
3. Project Appraisal
4. Project Selection

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Functions of Project Planning
1. Organizing and assigning various activities to individuals

2. Platform for coordination and communication among individuals
3. Individuals are induced for forward thinking
4. People realize the importance of timely completion of schedule.
5. Control and correction is established.

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Tools and Techniques of Project Planning

1. Multi level scheduling
i. Master Project Schedule
ii. Functional Area Schedule
iii. Schedule of Work Package
2. Multiple Project Scheduling
3. Material Requirement Planning (MRP)
4. CATS and RATS
- Committed Activity Target Schedule
- Reserved Activity Target Schedule
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CAT AND RAT Schedule
a) The CAT schedule is used for progressing of the executing agencies whereas the RAT
schedule are those that are to be achieved. The project manager will try to maintain a
distance between two schedules so that CAT schedule does not swallow the RAT schedule.
b) A CAT schedule is detailed and developed in squared network form and RAT schedule is
maintained in S curve form.
c) The RAT schedule will contain only the key milestones whereas the CAT schedule will have
all important activities.
d) The RAT schedule is based on some in built allowances for delays. This allowance is not to
be disclosed to execution agencies. The RAT schedule is for taking care of all uncertainties
in execution of projects.

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5. Network Analysis
6. Allocation of Resources
7. Resource Levelling
8. Work Packages
- SoW, Resource requirement, Time, Costs, Responsibility, Outcomes, Inputs, QA, Risk
9. Bar-Chart
10. Line-of-Balance

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Importance of Project Planning

1. Activities and tasks are clearly defined
2. Working schedules are framed better considering availability of resources
3. Identifying a suitable way of resource utilization for achieving overall objectives
4. Preparation of practical budgets for work performance.
5. Monitoring progress and correcting deviations
6. Forecasting project cost and estimating completion date
7. Exploring the various alternate strategies
8. Recognizing the requirement of contingent planning

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Estimating Projects
• Estimating
• The process of forecasting or approximating the time and cost of completing
project deliverables.
• The task of balancing expectations of stakeholders and need for control while
the project is implemented.
• Types of Estimates
• Top-down (macro) estimates: analogy, group consensus, or mathematical
relationships
• Bottom-up (micro) estimates: estimates of elements of the work breakdown
structure

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Why Estimating Time And Cost
Are Important
• To support good decisions.
• To schedule work.
• To determine how long the project should take and its cost.
• To determine whether the project is worth doing.
• To develop cash flow needs.
• To determine how well the project is progressing.
• To develop time-phased budgets and establish the project
baseline.

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Factors Influencing The Quality Of Estimates

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Developing Work Package Estimates

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Estimating Guidelines For Times,
Costs, And Resources
1. Have people familiar with the tasks make the estimate.
2. Use several people to make estimates.
3. Base estimates on normal conditions, efficient methods, and a normal level of
resources.
4. Use consistent time units in estimating task times.
5. Treat each task as independent, don’t aggregate.
6. Do not make allowances for contingencies.
7. Add a risk assessment to avoid surprises to stakeholders.

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Top-down Versus Bottom-up Estimating

• Top-Down Estimates
• Are usually derived from someone who uses experience and/or information to determine
the project duration and total cost.
• Are made by top managers who have little knowledge of the processes used to complete
the project.
• Bottom-Up Approach
• Can serve as a check on cost elements in the WBS
by rolling up the work packages and associated cost accounts to major deliverables at the
work package level.

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Top-down Versus Bottom-up Estimating

Conditions for Preferring Top-Down or
Bottom-up Time and Cost Estimates
Top-down Bottom-up
Condition Estimates Estimates
Strategic decision making X
Cost and time important X
High uncertainty X
Internal, small project X
Fixed-price contract X
Customer wants details X
Unstable scope X

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Estimating Projects
Preferred Approach
• Make rough top-down estimates.
• Develop the WBS/OBS.
• Make bottom-up estimates.
• Develop schedules and budgets.
• Reconcile differences between top-down and bottom-up estimates

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Cost Estimates
Project cost budgeting involves allocating the project cost estimate to individual
work items overtime. Estimation of Project Cost involves:
1. Estimation of Capital Cost of Project
2. Estimation of Cost of Production/Operating cost of Project
3. Estimation of Working Capital requirement

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Estimation of Capital Cost of Project

1. Land and site development
2. Buildings and civil works
3. Plant and machinery
4. Technical know-how and engineering fees
5. Expenses on foreign technicians and training of Indian technicians abroad
6. Miscellaneous fixed assets
7. Preliminary and capital issue expenses
8. Pre-operative expenses
9. Provision for contingencies
10. Margin money for working capital
11. Initial cash losses

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Estimation of Operating cost of Project

Components of Operating Cost of Project
1. Direct Cost
i. Material cost
ii. Labour cost
iii. Sub-contractors and consultants
iv. Equipment and Facilities Rental
2. Overhead Costs
i. Direct Overhead Costs
ii. General and Administrative ( G&A) Overhead costs

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Estimation of Working Capital Requirement

• The working capital requirement consists of raw materials and components,
work-in-process, finished goods, consumable stores, debtors, and operating
expenses.
• The principal sources of working capital finance are working capital advances
provided by commercial banks, trade credit, accruals and provisions, and long-
term sources of financing.
• There are limits to obtaining working capital advances from commercial banks.
They relate to the maximum permissible bank finance for working capital and
the amounts that can be raised against each individual current asset.

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Estimation of Working Capital Requirement

• The working capital requirement consists of raw materials and components,
work-in-process, finished goods, consumable stores, debtors, and operating
expenses.
• The principal sources of working capital finance are working capital advances
provided by commercial banks, trade credit, accruals and provisions, and long-
term sources of financing.
• There are limits to obtaining working capital advances from commercial banks.
They relate to the maximum permissible bank finance for working capital and
the amounts that can be raised against each individual current asset.

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Network Analysis & Critical Path Method

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Network Analysis
• Network Analysis is the tool used for planning, scheduling, and monitoring
project progress.
• The network is developed from the information collected for the WBS and is a
graphic flow chart of the project job plan.
• The network depicts the project activities that must be completed, the logical
sequences, the interdependencies of the activities to be completed, and in most
cases the times for the activities to start and finish.
• The network can be constructed through series of arrows and nodes
conveniently expressing the sequential nature of the project.

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Network Analysis (Contd)

• Network Analysis is based on the following two assumptions:
1. Each activity may have a fixed or variable completion time
2. The total duration of the project may be reduced to certain extent by allocating some
extra amount towards the completion.
• There are two techniques to study the network analysis:
• Project Evaluation and Review Technique (PERT)
o Developed to manage the Polaris missile project
o Many tasks pushed the boundaries of science & engineering (tasks’ duration =
probabilistic)
• Critical Path Method (CPM)
o Developed to coordinate maintenance projects in the chemical industry
o A complex undertaking, but individual tasks are routine (tasks’ duration =
deterministic)
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Objectives of Network Analysis

• Helpful in planning and establishing inter-relationship of various activities
• Minimize Project Cost and control
• Minimization of Project completion time
• Optimum utilization of human and other resources and control on idle resources
• To ensure minimum conflicts and avoiding delays, interruptions

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Constructing A Project Network

Terminology
Activity: an element of the project that
A
requires time.
Merge Activity: an activity that has two or
more preceding activities on which it B D
depends.
Parallel (Concurrent) Activities: Activities
that can occur independently and, if C
desired, not at the same time.

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Constructing A Project Network (Cont’d)
Terminology
Path: a sequence of connected, dependent activities.
Critical path: the longest path through the activity network that allows for the completion
of all project-related activities; the shortest expected time in which the entire project can
be completed. Delays on the critical path will delay completion of the entire project.
C
A B D
(Assumes that minimum of A + B > minimum of C in length of times to complete activities.)

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Constructing A Project Network (Cont’d)
Terminology
Event: a point in time when an activity is started B
or completed. It does not consume time.
Burst Activity: an activity that has more than one activity
immediately following it (more than one dependency arrow
flowing from it). A C
Two Approaches
• Activity-on-Node (AON)
• Uses a node to depict an activity. D
• Activity-on-Arrow (AOA)
• Uses an arrow to depict an activity.

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Basic Rules To Follow In Developing
Project Networks
1. Networks typically flow from left to right.
2. The network should have only one start node and only one end node.
3. An activity cannot begin until all preceding connected activities are complete.
4. Arrows indicate precedence and flow and can cross over each other.
5. Each activity must have a unique identify number that is greater than any of its
predecessor activities.
6. Looping is not allowed.
7. Conditional statements are not allowed.
8. Use common start and stop nodes.

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Basic Rules To Follow In Developing
Project Networks
9. No two activities can be identified by the same beginning and end event. In such
cases, a dummy activity is introduced to resolve the problem as shown below.
Using a dummy activity
10. Use dummy activity freely in rough graph but final network should have only
reluctant dummy.

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Activity-on-node Fundamentals

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Activity-on-node Fundamentals (Cont’d)

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A Comparison of AON and AOA
Network Conventions
Activity on Activity Activity on
Node (AON) Meaning Arrow (AOA)
A comes before B,
(a) A B C which comes
before C A B C
A A
A and B must both be
(b) C completed before C
can start C
B B
B
B and C cannot
(c) A begin until A is B
completed A
C C
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Network Conventions
C and D cannot
A C begin until A and
A C
(d) B have both been
completed
B D B D
C cannot begin until

both A and B are
A C completed; D cannot A C
(e) begin until B is Dummy activity
completed. A dummy
B D activity is introduced
in AOA
B D
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Network Conventions
B and C cannot
begin until A is
completed. D
A B D cannot begin until A B D
both B and C are
(f) completed. A Dummy C
C dummy activity is activity
again introduced in
AOA.

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Project Network – Activity on Arrow

AOA
Order 4
Locate 2 setup
facilities
Remodel
1 5 6
Move in
Interview
Hire and
train
3
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Project Network – Activity on Node

Order
AON Locate
facilities
2 setup
1 6
Move in
Remodel
S 5 7
Hire and
Interview
train
3 4

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Error in Drawing Network

There are three types of errors which are common in network diagrams
1. Dangling error - To disconnect an activity before the completion of all activities in a

network diagram is known as dangling.
In Fig above the activity 5 to 8, 6 to 7 are known as dangling error. These are not last
activities in the network.

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2. Looping error – Looping error is also known as cyclic error in the network. Drawing
an endless loop in a network diagram is known as error of looping as shown below
Appearance of a loop in the network

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3. Redundancy error - Unnecessarily inserting the dummy activity in a network
diagram is known as error of redundancy as shown below in which putting an dummy
activity from 10 to 12 is a redundancy error.

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Labeling of a Network Diagram

For network representation it is necessary that various nodes be properly labeled. For convenience,
labeling is done on a network diagram. A standard procedure called i-j rule developed by D.R.F
Fulkerson is most commonly used for this purpose.
Fulkerson’s i-j Rule
Step 1: First, a start event is one which has arrows emerging from it but not entering it. Find the start
event and label it as number1.
Step 2: Delete all arrows emerging from all numbered events. This will create at least one new start
event out of the preceding events.
Step 3: Number all new start events 2, 3 and so on. No definite rule is necessary but numbering from
top to bottom may facilitate other users using the network when there are more than one new start
event.
Step 4: Go on repeating step no. 2 & 3 until the end reached.

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Network Information (Example 1)

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Automated Warehouse—Partial Network

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Automated Warehouse—Complete Network

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Activity Preceding Activity
Network Information (Predecessors)
(Example 2)
A -
B A
C A
D B
E C
F D
G E
H F,G
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Activity Preceding Activity (Predecessors)
A -
B -
C -
D A
E B
F C
G D,E
H F

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Activity Preceding Activity (Predecessors)
A -
B -
C A
D B
E C
F D
G E,F

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Network Computation Process

• Forward Pass—Earliest Times
• How soon can the activity start? (early start—ES)
• How soon can the activity finish? (early finish—EF)
• How soon can the project finish? (expected time—ET)
• Backward Pass—Latest Times

• How late can the activity start? (late start—LS)
• How late can the activity finish? (late finish—LF)
• Which activities represent the critical path?
• How long can activity be delayed? (slack or float—SL)

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Network Computation Process (Contd)

• All activities on the critical path have zero slack
• Slack defines how long non-critical activities can be delayed without delaying the
project
• Slack = the activity’s late finish minus its early finish (or its late start minus its early
start)
• Float : There are many activities where the maximum time available to finish the activity
is more than the time required to complete the activity. The difference between the
two times is known as float available for the activity.
Ei Lj Time (t) Ei Lj
T H

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Network Computation Process (Contd)

There are three types of float:
• Total float : It is the spare time available when all preceding activities occur at
earliest possible times & all succeeding activities occur at latest possible times.
Total float = Ls – Es or Lf – Ef
• Free float : time available when all preceding activities occur at the earliest possible
time &all succeeding activities also occur at the earliest possible times.
Free float = total float - head event slack
• Independent Float : it may be defined as the amount of time by which the start of
an activity can be delayed without affecting the earliest start time of any successor
activity , assuming that preceding activity has finished at its latest finish time.
Independent Float = free float – tail event slack

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Network Information

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Activity-on-node Network

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Activity-on-node Network Forward Pass

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Forward Pass Computation

• Add activity times along each path in the network (ES + Duration = EF).
• Carry the early finish (EF) to the next activity where it becomes its early
start (ES) unless…
• The next succeeding activity is a merge activity, in which case the largest
EF of all preceding activities is selected.

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Activity-on-node Network Backward Pass

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Backward Pass Computation
• Subtract activity times along each path in the network (LF - Duration = LS).
• Carry the late start (LS) to the next activity where it becomes its late finish
(LF) unless
• The next succeeding activity is a burst activity, in which case the smallest LF
of all preceding activities is selected.

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Determining Free Slack (Or Float)

• Free Slack (or Float)
• Is the amount of time an activity can be delayed after the start of a longer parallel
activity or activities.
• Is how long an activity can exceed its early finish date without affecting early start
dates of any successor(s).
• Allows flexibility in scheduling scarce resources.
• Sensitivity
• The likelihood the original critical path(s) will change once the project is initiated.
• The critical path is the network path(s) that has (have) the least slack in common.

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Forward And Backward Passes
Completed With Slack Times

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Critical Path Method

• Critical Path
• Critical path is the longest path in the network diagram i.e. the path with
maximum duration
• Any delay along the critical path will result in delaying the total project
completion time.

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• Critical Event – Refers to an event in the project which cannot be delayed by any
time duration beyond its earliest occurrence time without affecting the total
project completion time. Slack of critical event is zero
• Critical Activity – Refers to an activity in which the starting or completion time
cannot be delayed without affecting the total project completion time. Float of
critical activity is zero.

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• Advantages of CPM
o Helps in ascertain the time schedule of activities having sequential relationship.
o It makes control easier for the management.
o Mathematically simple
o Use graphical displays
o Give critical path & slack time and identifying critical activities.
o Useful in monitoring costs

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• Limitations of CPM
o CPM needs clearly defined, independent, & stable activities
o Specified precedence relationships
o Subjective time estimates not based on statistical analysis
o Over emphasis on critical path
o Cannot be used as controlling device since any change introduced will change the
entire structure of the network.

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Problem 1
A project has the following times schedule
Construct the network and compute

1. TE (ES) and TL (LS) for each event
2. Critical path and its duration

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Problem 1 Solution 18 18
4 12
Solution The
network is
11 16
5 13
25 25
17 17
0 0
1 1 7 7 15 15

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Problem 1 Solution
Path Duration Activity Duratio EST EFT=EST+t LST= LFT-t LFT

1-2-4-9-10 17 n (t)
1-3-5-6-8-9-10 20
1-2 4 0 4 8 12
1-3-4-9-10 14
1-3 1 0 1 0 1
1-3-5-7-8-9-10 25
2-4 1 4 5 12 13
1-3-5-7-8-10 25
3-4
3-5
The two critical paths are 4-9
i. 1 → 3 → 5 →7 → 8 → 9 →10 1
ii. 1 → 3 → 5 → 7 → 8 →10

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Problem 2
• A small project consists of following eight activities:
Activity Preceding Activity Duration (days)
• Draw network diagram and find
A - 20
critical path and project
B A 25
completion time.
C A 5
D B 15 • Find EST, EFT, LST and LFT for all
E C 30 the activities.
F D 35 • Calculate Slack and Float of all
G E 5 activities.
H F, G 2

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Problem 2 Solution

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Problem 2 Solution

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Problem 2 Solution

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Problem 3
• A small project consists of following eight activities:
Activity Preceding Activity Duration (days)
• Draw network diagram and find
A - 4
critical path and project
B - 5
completion time.
C - 7
D A 6 • Find EST, EFT, LST and LFT for all
E B 7 the activities.
F C 6 • Calculate Slack and Float of all
G D 5 activities.
H E 8
I F 5

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Problem 3 Solution

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Problem 3 Solution

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Problem 3 Solution

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Analyzing Cost-Time Trade-Offs

• There are always cost-time trade-offs in project management.
• You can complete a project early by hiring more workers or running extra
shifts.
• There are often penalties if projects extend beyond some specific date, and a
bonus may be provided for early completion.
• Crashing a project means expediting some activities to reduce overall project
completion time and total project costs.

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Crashing Concepts
• Project duration can be reduced by assigning more resources to project
activities.
• However, doing this increases project cost.
• Decision is based on analysis of trade-off between time and cost.
• Project crashing is a method for shortening project duration by reducing one or

more critical activities to a time less than normal activity time.
• Time-Cost Trade-Off Overview - reducing task durations by increased costs

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Project Costs
• The total project costs are the sum of direct costs, indirect costs, and
penalty costs.
• Direct costs include labor, materials, and any other costs directly
related to project activities.
• Indirect costs include administration, depreciation, financial, and
other variable overhead costs that can be avoided by reducing total
project time.
• The shorter the duration of the project, the lower the indirect costs will be.

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Cost to Crash
To assess the benefit of crashing certain activities, either from a cost or a schedule
perspective, the project manager needs to know the following times and costs.
Normal time (NT) is the time necessary to complete an activity under normal
conditions.
Normal cost (NC) is the activity cost associated with the normal time.
Crash time (CT) is the shortest possible time to complete an activity.
Crash cost (CC) is the activity cost associated with the crash time.

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Cost to Crash per Period

Crash Cost − Normal Cost CC − NC
The Cost to Crash per Period = =
Normal Time − Crash Time NT − CT
E.g.: in the example on the right,

CC − NC
The Cost to Crash per Period =
NT − CT
= $2000/5 = $400/wk

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Project Crashing and Time-Cost Trade-Off
General Relationship of Time and Cost
• Project crashing costs and indirect costs have an

inverse relationship.
• Crashing costs are highest when the project is
shortened.
• Indirect costs increase as the project duration
increases.
• Optimal project time is at minimum point on the total
cost curve.
The time–cost trade-off

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Objectives for crashing

1. To complete project in minimum possible time.
2. Minimization of cost & time required in the project completion
3. Reduce the idle available on the activities with help of some extra
cost
4. Obtain the cost of project completion in minimum duration
5. Find out the extra amount required to reduce the project duration
6. To find optimal time and optimal cost for project

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Steps for crashing

1. Find the critical path and identify critical activities
2. Calculate the crash slope for such activity.
3. Identify and rank activities. Crash the that activity first that is the cheapest to
reduce in time. Calculate revised project cost by adding direct cost, indirect
cost and cumulative cost of crashing.
4. Be aware of multiple critical paths as by crashing other path can become
critical.
5. Stop crashing when:
• the crash-time is reached at every activity,
• benefits of possible crashing are lower than crashing costs.

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Principles for crashing

1. Only critical activities are crashed
2. Crashing is started with the critical activity having minimum cost slope i.e.
minimum rank
3. Critical path should remain longest.

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Example
Sharon Lowe, Vice President for Marketing for the Electronic
Toys Company, is about to begin a project to design an
advertising campaign for a new line of toys. She wants the
project completed within 47 days in time to launch the
advertising campaign at the beginning of the Christmas
season.
Sharon has identified the six activities (labeled A, B, …, F)
needed to execute this project. Considering the order in
which these activities need to occur, she also has
constructed the following project network.
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Example (Contd.)
A C E F
START F IN IS H
B D
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Example (Contd.)
To meet the deadline of 47 days, Sharon has decided to crash the project, using the CPM method of
time-cost trade-offs to determine how to do this in the most economical way. She has gathered the data
needed to apply this method, as given below.
Time (days) Cost Maximum Crash
Activity Reduction in Cost per
Normal Crash Normal Crash Time day saved
A 12 9 $210,000 $270,000 3 $20,000

B 23 18 $410,000 $460,000 5 $10,000
C 15 12 $290,000 $320,000 3 $10,000
D 27 21 $440,000 $500,000 6 $10,000
E 18 14 $350,000 $410,000 4 $15,000
F 6 4 $160,000 $210,000 2 $25,000
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Example - Solution
The upper path is A-C-E-F with a path length of 51 days which is the critical path.
Of the activities on the path, activity C has the smallest crash cost per day saved ($10,000) and
activity E is next ($15,000). Activity C can only be reduced by 3 days, so activity E also will need to
be crashed somewhat. Therefore, we find that the most economical way of reducing the length of
this path to 47 days is to shorten activity C by 3 days and activity E by 1 day with an additional total
cost of $45,000.
A C E F Activity to Crash Cost Maximum
12 15 18 6 crash Crash
C $10,000 3
START F IN IS H E $15,000 4
23 27 A $20,000 3
F $25,000 2
B D
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Example - Solution
The lower path is B-D with a path length of 50 days now becomes critical path
From the time-cost trade-off data, both activities B and D have a crash cost per day saved of
$10,000, and both can be reduced by more than 3 days. Therefore, using marginal cost analysis,
we find that the most economical way of reducing the length of this path to 47 days is to shorten
either activity (it doesn’t matter which one) by 3 days with an additional total cost of $30,000.
A C E F Activity to Crash Cost Maximum

12 15 18 6 crash Crash
B or $10,000 5 or
START F IN IS H D $10,000 6
23 27
B D
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Example - Solution
Combining both the results, the total
crashing cost for the optimal way of
meeting the deadline of 47 days is
$30,000 + $45,000 = $75,000.
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Example 2
For the data given in the below table, draw the network. Crash systematically the
activities and determine the optimal project duration and cost.
Activity 1-2 1-3 2-4 2-5 3-4 4-5

Normal Time (days) 8 4 2 10 5 3
Normal Cost (Rs) 100 150 50 100 100 80
Crash Time (days) 6 2 1 5 1 1
Crashed Cost (Rs) 200 350 90 400 200 100
Indirect Cost Rs. 70 per day

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Example 2 - Solution
Activity 1-2 1-3 2-4 2-5 3-4 4-5
Normal Time (days) 8 4 2 10 5 3
Normal Cost (Rs) 100 150 50 100 100 80
Crash Time (days) 6 2 1 5 1 1
Crashed Cost (Rs) 200 350 90 400 200 100
Critical path

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S No Path Duration
1 1-2-5 18 days
2 1-2-4-5 13 days
3 1-3-4-5 12 days
Critical Path : 1-2-5
Normal Project Completion time = 18 days
Direct Cost = Sum of normal cost of all activities
= 100+150+50+100+100+80
DC = Rs 580
Indirect Cost (IC) = 70 x 18 = Rs. 1260
Total Normal cost = DC + IC
Total Normal cost = 580+1260= Rs 1840

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Example 2 – Solution
Activity
(Contd)
Paths (Days) Cost (Rs)
1-2-5 1-2-4-5 1-3-4-5 Direct Indirect Total
Maximum Crash Rank Before 18 13 12 580 1260 1840
Activity Reduction Cost per Crashin
in Time day saved
g
1-2 2 50 4
1-3 2 100 6 1-2 6+10=16 6+2+3=11 12 580+2*50 70*16 680+1120
2-4 1 40 3 =680 =1120 =1800
2-5 5 60 5 2-5 6+5=11 11 12 680+5*60 70*12 980+840
3-4 4 25 2
=980 =840 =1820
4-5 2 10 1
4-5 11 11 4+5+2=11 980+1*10 70*11 990+770
=990 =770 =1760
∴ Minimum Project Completion time = 11 days

∴ Optimal Project Completion time = 11 days
∴ Optimal cost of Project = Rs 1760
NLDIMSR
Example 3
For the data given in the below table, draw the network. Crash systematically the
activities and determine the optimal project duration and cost.
Activity 1-2 1-4 2-4 2-3 2-5 3-4 4-6 5-6

Normal Time (weeks) 8 10 5 6 8 0 12 5
Normal Cost (Rs) 1500 2000 800 1100 900 0 300 500
Crash Time (weeks) 6 7 4 4 5 0 8 4
Crashed Cost (Rs) 2000 3000 1400 1500 1500 0 400 800
Indirect Cost Rs. 200 per week

NLDIMSR
Activity 1-2 1-4 2-4 2-3 2-5 3-4 4-6 5-6
Normal Time (weeks) 8 10 5 6 8 0 12 5
Normal Cost (Rs) 1500 2000 800 1100 900 0 300 500
Crash Time (weeks) 6 7 4 4 5 0 8 4
Crashed Cost (Rs) 2000 3000 1400 1500 1500 0 400 800

NLDIMSR
S No Path Duration
1 1-2-5-6 21 weeks
2 1-2-4-6 25 weeks
3 1-2-3-4-6 26 weeks
4 1-4-6 22 weeks
Critical Path : 1-2-3-4-6
Normal Project Completion time = 26 weeks
Direct Cost = Sum of normal cost of all activities
DC= Rs 7100
Indirect Cost (IC) = 26*200 = Rs5200
Total Normal cost = DC + IC
Total Normal cost = Rs 12300

NLDIMSR
Example 3 – Solution (Contd)

Maximum Crash Cost Rank Activity Paths (Weeks) Cost (Rs)
Activity Reduction per week 1-2-5-6 1-2-4-6 1-2-3-4-6 1-4-6 Direct Indirect Total
in Time saved Before Crashing 21 25 26 22 7100 5200 12300
1-2 2 250 3 1st Crashing 4-6 by 21 25-4=21 26-4=22 22-4=18 7100+100 22*200= 11600
1-4 3 333.3 5 4day =7200 4400
2-4 1 600 6 2nd crashing 2-3 by 21 21 22-1=21 18 7200+200 21*200= 11600

1 day =7400 4200
2-3 2 200 2
3rd crashing 1-2 by 21-1=20 21-1=20 21-1=20 18 7400+250 20*200= 11650
2-5 3 200 2 1 day =7650 4200
3-4 0 - - 4th crashing 1-2 by 20-1=19 20-1=19 20-1=19 18 7650+250 19*200= 11700
4-6 4 25 1 1day =7900 3800
5-6 1 300 4
∴ Minimum Project Completion time = 19 weeks
∴ Optimal Project Completion time = 21 weeks
∴ Optimal cost of Project = Rs 11600

NLDIMSR
Thank you!

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Title / Author: Project Management/Anand Dhutraj Page No.

Prof. Anand Dhutraj

Title / Author: Project Management/Anand Dhutraj Page No. 3

Title / Author: Project Management/Anand Dhutraj Page No. 4

Objectives of Project Planning

Process of Project Planning

Identification Formulation Appraisal Selection

Title / Author: Project Management/Anand Dhutraj Page No. 6

Functions of Project Planning

1. Organizing and assigning various activities to individuals

Title / Author: Project Management/Anand Dhutraj Page No. 7

Tools and Techniques of Project Planning

Tools and Techniques of Project Planning

Title / Author: Project Management/Anand Dhutraj Page No. 9

Tools and Techniques of Project Planning

Title / Author: Project Management/Anand Dhutraj Page No. 10

Importance of Project Planning

Title / Author: Project Management/Anand Dhutraj Page No. 11

Title / Author: Project Management/Anand Dhutraj Page No. 12

Title / Author: Project Management/Anand Dhutraj Page No. 13

Factors Influencing The Quality Of Estimates

Title / Author: Project Management/Anand Dhutraj Page No. 14

Developing Work Package Estimates

Title / Author: Project Management/Anand Dhutraj Page No. 15

Title / Author: Project Management/Anand Dhutraj Page No. 16

Top-down Versus Bottom-up Estimating

Title / Author: Project Management/Anand Dhutraj Page No. 17

Top-down Versus Bottom-up Estimating

Title / Author: Project Management/Anand Dhutraj Page No. 18

Title / Author: Project Management/Anand Dhutraj Page No. 19

Title / Author: Project Management/Anand Dhutraj Page No. 20

Estimation of Capital Cost of Project

Title / Author: Project Management/Anand Dhutraj Page No. 21

Estimation of Operating cost of Project

Title / Author: Project Management/Anand Dhutraj Page No. 22

Estimation of Working Capital Requirement

Title / Author: Project Management/Anand Dhutraj Page No. 23

Estimation of Working Capital Requirement

Title / Author: Project Management/Anand Dhutraj Page No. 24

Network Analysis & Critical Path Method

Title / Author: Project Management/Anand Dhutraj Page No. 25

Title / Author: Project Management/Anand Dhutraj Page No. 26

Network Analysis (Contd)

Objectives of Network Analysis

Title / Author: Project Management/Anand Dhutraj Page No. 28

Constructing A Project Network

Title / Author: Project Management/Anand Dhutraj Page No. 29

Constructing A Project Network (Cont’d)

(Assumes that minimum of A + B > minimum of C in length of times to complete activities.)

Title / Author: Project Management/Anand Dhutraj Page No. 30

Constructing A Project Network (Cont’d)

Title / Author: Project Management/Anand Dhutraj Page No. 31

Title / Author: Project Management/Anand Dhutraj Page No. 32

Using a dummy activity

Title / Author: Project Management/Anand Dhutraj Page No. 33

Title / Author: Project Management/Anand Dhutraj Page No. 34

Activity-on-node Fundamentals (Cont’d)

Title / Author: Project Management/Anand Dhutraj Page No. 35