Developing Project Network Using PERT and CPM

Learning Objectives

 To learn how to develop the project networks

 To know the basic rules of constructing network diagrams.

 To know how to construct project networks using PERT

 To learn how to construct project network using CPM

One of the most challenging jobs that any manager can take on is the management of a large-
scale project that requires coordinating numerous activities throughout the organization. A
myriad of details must be considered in planning how to coordinate all these activities, in
developing a realistic schedule, and then in monitoring the progress of the project.
Fortunately, two closely related operations research techniques, PERT (program evaluation
and review technique) and CPM (critical path method), are available to assist the project
manager in carrying out these responsibilities. These techniques make heavy use of networks
(as introduced in the preceding chapter) to help plan and display the coordination of all the
activities. They also normally use a software package to deal with all the data needed to
develop schedule information and then to monitor the progress of the project. Project
management software, such as MS Project in your OR Courseware, now is widely available for
these purposes.
PERT and CPM have been used for a variety of projects, including the following types.
1. Construction of a new plant
2. Research and development of a new product
3. NASA space exploration projects
4. Movie productions
5. Building a ship
6. Government-sponsored projects for developing a new weapons system
7. Relocation of a major facility
8. Maintenance of a nuclear reactor
9. Installation of a management information system
Conducting an advertising campaign
PERT and CPM were independently developed in the late 1950s. Ever since, they have been
among the most widely used OR techniques.
 The original versions of PERT and CPM had some important differences, as we will point out
later in the chapter. However, they also had a great deal in common, and the two techniques
have gradually merged further over the years. In fact, today’s software pack- ages often
include all the important options from both original versions.
Consequently, practitioners now commonly use the two names interchangeably, or combine
them into the single acronym PERT/CPM, as we often will do. We will make the distinction
between them only when we are describing an option that was unique to one of the original
versions.

Network modeling: Most projects comprise of more than one interrelated activities, which are
to be executed over a period of time. It is helpful for an operations manager to have a method
of visualizing these interrelationships. Network diagram assist project manager in defining the
activities of a project.

Network diagram: network diagrams are:

 Logical representations of scheduled project activities
 Define the sequence of work in a project
 Drawn from left to right
 Reflect the chronological order of the activities

Networking terminologies:
 Activity: An activity is a task which must be completed in order to finish the project.
Activities consume resources and time, and have a definite starting and ending point.
Activity is generally denoted by an arrow.
 Event: An event is the outcome of an activity or group of activities. It represents the
completion of some activities and the beginning of some new activities in the network.
An event is also referred to as a node and it does not consume time or resource. An
event is generally denoted by a circle.

1 AA
22
Fig 8.1
Here A is an activity which starts from the event 1 (initial node) and ends at the event
2(terminal node). Direction of the arrow gives the actual direction of the activity but
since this is a logical diagram so length and shape has no meaning.

 Precedence: Precedence defines the sequencing order. Activities that must be completed
immediately prior to the start of another activity are called predecessor activities.
 A
1
C
3 4

2
B

Fig 8.2

A and B are the predecessor activities for the activity C

 Successor activity: Activities that cannot be started until one or more of other activities are
completed, but immediately succeed them are called successor activities
In the above figure C is the successor activity of A and B

 Concurrent or parallel activities: Activities which can be accomplished concurrently are

called concurrent or parallel activities. In other words the activities which start from the
same event are called parallel activities.

C
A 2 4
1
B 5
3
D

Fig 8.3

In the above figure A and B are parallel or concurrent activities

Guidelines for network constructions:

1. A complete network diagram should have one start point (source) and one finish point
(destination).

2. The flow of diagram should be from left to right.

 3. Activities (arrows) should not be crossed unless it is completely unavoidable.

4. Arrows should be kept straight and not curved.

5. Angle between arrows should be as large as possible.

6. Each activity must have a tail and head event. No two or more activities should have
same tail and head events.

7. Once the diagram is complete the nodes should be numbered from left to right.

8. Dummy activities are used to avoid ambiguity. Dummies are used when:

a. Two parallel activities would have the same tail events. For example let a project
has five jobs A, B, C ,D and E and logically B, C and D can all start as soon as A is
complete. Job E has to wait until B, C , d are complete.
Logically diagram would be like

D
A E
C
2 3 4
1

B
Fig 8.4

As per rule the above diagram will not be a correct one as three activities B , C and D are having
same starting and ending point, so in this case dummy activities will be used to show the logical
sequence.

3 D1
B
A
1 2 C E
5 6

D
4
D2
 Fig 8.5
b. When two chains may have a common event, yet may in themselves be
independent. Let us consider the following group of jobs which occur when
dealing with a flat tyre on a truck:

A: remove wheel with punctured tire

B: repair punch.

C: Bring spare wheel from boot

D: Fit spare wheel to hub

Here B and D must follow A and D must follow C

B
A 2 4
1
D1

C D
3
5

Fig 8.6

How to draw a network:

 Example: Following activities give the description of a project of starting the production of a
new product.

Activity Description Preceded by

A Market research --

B Make drawings --

C Decide production A
policy

D Prepare sales program A

E Prepare operation B, C
 sheets

F Buy Materials B, C

G Plan labour force E

H Make tools E

I Schedule production D, G

J Produce product F, H, I

 Find out the initial activities: The activities which have no precedence are the initial
activities. A and B are the initial activities and can be started from the initial event as
concurrent activities.

A 2
1

B 3

Fig 8.7

 Find out the successor activities of A and B: A has two successor activities C and D. B
individually does not have any successor activity but B and C together precede E and F, so B
and C should have a single end point.

D
A
2 4
1 C

B
Fig 8.8 3

Find out the successor activities of B, C and D: E and F are the successor activities B and C
together.
 D
4
2
A

C
1
E 5
B 3
6
F
Fig 8.9

 Find out the successor activities of D, E and F: G and H are successor activities of E, G
along with D precedes I so will have the same terminating event. F, H and I precede the
last activity J, F, H and I should have the same terminating event from which the last
activity J emerges.

D
2 4
I
A
G
C H J
1
E 6 7
5
B 3
F
Fig 8.10

Critical Path Method (CPM): CPM was the discovery of M.R.Walker of E.I.Du Pont de Nemours
& Co. and J.E.Kelly of Remington Rand, circa 1957. The computation was designed for the
UNIVAC-I computer. The first test was made in 1958, when CPM was applied to the
construction of a new chemical plant. In March 1959, the method was applied to a
maintenance shut-down at the Du Pont works in Louisville, Kentucky. Unproductive time was
reduced from 125 to 93 hours.

Critical path: the critical path is the longest path of interrelated activities with zero slack time.
The critical path consists of all those activities, which if delayed will result in the delay in project
completion.
 Steps to find out critical path

I. Define the Project and all of its significant activities or tasks. The Project (made up of
several tasks) should have only a single start activity and a single finish activity.

II. Develop the relationships among the activities. Decide which activities must precede
and which must follow others.

III. Draw the "Network" connecting all the activities. Each Activity should have unique event
numbers. Dummy arrows are used where required to avoid giving the same numbering
to two activities.

IV. Assign time and/or cost estimates to each activity

V. Compute the longest time path through the network. This is called the critical path.

VI. Use the Network to help plan, schedule, and monitor and control the project.

Critical Path Definitions

 Earliest Start Time (ES) is the earliest time a task can feasibly start

 Earliest Finish Time (EF) is the earliest time a task can feasibly end

 Latest Start Time (LS) is the latest time a task can feasibly start, without delaying the
project at all.

 Latest Finish Time (LF) is the latest time a task can feasibly end, without delaying the
project at all
Example: Listed in the table are the activities and sequencing requirements necessary for the
completion of a research project. Draw the network and find the critical path.

Activity Description Procedure Duration(weeks)

A Literature Search -- 6

B Formulation of hypothesis -- 5

C Preliminary feasibility B 2
study

D Formal disposal C 2

E Field analysis A, D 2

F Progress report D 1

G Formal research A, D 6

H Data collection E 5

I Data analysis G, H 6

J Conclusion I 2

K Rough draft G 4

L Final copy J, K 3

M Preparation of oral L 1
presentation
 24 24
K 4
15 16
10
D2 0
7
G 6

0 0 9 9 H5 J2
A 6 E2 L3
6 8 9
1 2 27 27
I6
11 11 16 16 22 22
11
B 5 D1 0
3 F1 M1
4 5
5 5 C2 D 2 12
7 7 9 9
28 28

Fig 8.11

Computation of earliest time (Forward Pass)

For event 1
Earliest time E1 = 0 (as event 1 is the source)

For event 3
Earliest time E3 = E1 + duration of B
 E3 = 0+5 = 5

For event 4
Earliest time E4 = E3 + duration of C
 E4 = 5+2 = 7
For event 5
Earliest time E5 = E4 + duration of D
 E5 = 7+2 = 9

For event 2
Earliest time E2 = Maximum of {E1 + duration of A, E5 + duration of D1}
 E2 = Maximum of {0+6, 9+0} = 9

For event 6
Earliest time E6 = E2 + duration of E
 E6 = 9+2 = 11

For event 7
Earliest time E7 = E2 + duration of G
 E7 = 9+6 = 15

For event 8
Earliest time E8 = Maximum of {E6 + duration of H, E7 + duration of D2}
 E8 = Maximum of {11+5, 15+0} = 16

For event 9
Earliest time E9 = E8 + duration of I
 E9 = 16+6 = 22

For event 10
Earliest time E10 = Maximum of {E9 + duration of J, E7 + duration of K}
 E10 = Maximum of {22+2, 15+4} = 24

For event 11
Earliest time E11 = E10 + duration of L
 E11 = 24+3 = 27

For event 12
Earliest time E12 = E11 + duration of M
 E12 = 27+1 = 28

Computation of latest time (Backward Pass)

For event 12
L12 = 28 (as event 12 is the final event)

For event 11
L11 = L12 – duration of M
 L11 = 28-1 = 27

For event 10
L10 = L11 – duration of L
 L10 = 27-3 = 24

For event 9
L9 = L10 – duration of J
 L9 = 24-2 = 22

For event 8
L8 = L9 – duration of I
 L8 = 22-6 = 16

For event 6
L6 = L8 – duration of H
 L6 = 16-5 = 11

For event 7
L7 = Minimum of {L10 – duration of K, L8 - duration of D2}
 L7 = Minimum of {24-4, 16-0} = 16

For event 2
L2 = Minimum of {L6 – duration of E, L7 – duration of G}
 L2 = Minimum of {11-2, 16-6}
 L2 = 9

For event 5
L5 = Minimum of {L12 – duration of F, L2 – duration of D2}
 L5 = Minimum of {28-1, 9-0}
 L5 = 9

For event 4
L4 = L5 – duration of D
 L4 = 9-2 = 7

For event 3
L3 = L4 – duration of C
 L3 = 7-2 = 5

For event 1
L1 = Minimum of {L2 – duration of A, L3 – duration of B}
 L1 = Minimum of {9-6, 5-5}
 L1 = 0

Project duration = 28 weeks

Critical path: 1-3-4-5-2-6-8-9-10-11-12
Critical activities: B,C, D,D1,E,H,I,J.L,M

Float (or Slack) of an activity (or event):

Longest time path through the network is called the critical path where any overrun would
affect the project completion date, so critical activities have no spare time. However in case of
non critical activities certain amount of spare time is available and this spare time is called float.
The detection, measurement and utilization of float is as important as identifying the critical
path. It can be used to balance the requirement of resources and or to reduce the cost of
duration of the project.
Float is defined as the difference between the latest and the earliest activity time. Slack is
defined as the difference between the latest and the earliest event time.

Total float: It refers to the amount of time by which the completion of an activity could be
delayed beyond the earliest expected completion time without affecting the overall project
duration time.
Mathematically, the total float of an activity i is the difference between the latest finish time
and the earliest finish time of that activity.
Hence the total float for an activity (i, j) denoted by
TFi =(Latest finish-Earliest finish) for activity i.
The value of total float for any activity can help in making the following conclusions:
 Total float value

Negative Zero Positive

Resources are not Resources are just sufficient to Resources are surplus
adequate and activity may complete the activity
not finish in time.

One has the freedom to

relocate the resource
Induct extra resources.
elsewhere

Free Float: It is that portion of the total float within which an activity can be manipulated
without affecting the floats of subsequent activities. It is computed by subtracting the head
event slack from the total float (TF).
Free float = total float – head event slack

Independent Float: It is that portion of the total float within which an activity can be delayed
for start without affecting the floats of preceding activities. It is computed by subtracting the
tail event slack from the free float. If the result is negative, it is taken as zero.
Independent float = Free float – tail event slack.

Slack: It is the time by which occurrence of an event can be delayed. It is denoted by S and is
the difference between the latest occurrence time and earliest occurrence time of the event.
Si = Li – Ei

Example: All India Management Association is considering to hold a conference. The

following table gives the list of activities involved, their immediate predecessors and their
duration (in days).
(i) Prepare a network diagram showing the interrelationships of the various activities.
(ii) Find the total time required to hold the conference.
(iii) Compute the floats for each activity.

Activity Description Predecessor Duration(in

days)

A Design conference meeting and ---- 3

theme

B Design front cover of the A 2

conference proceedings

C Prepare brochure and send A 6

request for papers

D Compile list of distinguished A 3

speakers

E Finalize brochure and print it C,D 7

F Make travel arrangements for D 4

speakers

G Dispatch brochures E 3

H Receive papers foe conference G 25

I Edit papers and assemble F,H 10

proceedings.

J Print proceedings B,I 20

Solution: At first we will be drawing the network.

Initial activity: A

Terminal activity: J
 19 19
16 16
9 9 G3
E7
6
5
3

C6 H 25

D1 0
F4 44 44
7
A3
0 0 4
1 2 D3

3 3 6 9

B2
J 20
8
9
I 10
54 54
74 74

Fig 8.12

Project duration = 74 days

Critical path: 1-2-3-5-6-7-8-9

Critical activities: A, C, E, G, H,I, J Earliest finish = earliest start +

duration = 0+3 =3
0 0 3 3 Latest start = Latest finish –
A 3 duration = 3-0 =3
2 Latest Head slack = 3-3 = 0
1
finish Tail slack = 0-0 =0
Earliest
Activity Duration(i Earliest time Latest time Total float Free Independent
start
n days) float float
ES EF LS LF

A 3 0 3 0 3 0 0 0
 B 2 3 5 52 54 49 49 49

C 6 3 9 3 9 0 0 0

D 3 3 6 6 9 3 0 0

E 7 9 16 9 16 0 0 0

F 4 6 10 40 44 34 34 31

D1 0 6 6 6 9 3 3 0

G 3 16 19 16 19 0 0 0

H 25 19 44 19 44 0 0 0

I 10 44 10 44 54 0 0 0

J 20 54 74 54 74 0 0 0

Advantage and drawbacks of CPM:

Advantages of Using a CPM

 Helpful for scheduling, monitoring, and controlling projects

 A project manager can determine actual dates for each activity and compare what should
be happening to what is taking place and react accordingly
 The activities and their outcomes can be shown as a network
 Displays dependencies to help scheduling
 Evaluates which activities can run parallel to each other
 Determines slack and float times
 Widely used in industry
 Can define multiple, equally critical paths
 CMP determines the project duration, which minimized the sum of direct and indirect costs

Disadvantages of Using a CPM

 CPM's can be complicated, and complexity increases for larger projects

 Does not handle the scheduling of personnel or the allocation of resources
 The critical path is not always clear and needs to be calculated carefully
 Estimating activity completion times can be difficult

Programme (Project) Evaluation and Review Technique (Pert):

The network methods discussed so far may be termed as deterministic, since estimated activity
times are assumed to be known with certainty. However, in research project or design of gear
box or a new machine, various activities are based on judgment. It is difficult to obtain a reliable
time estimate due to the changing technology. Time values are subject to chance variations. For
such cases where the activities are non-deterministic in nature, PERT was developed.
Hence, PERT is a probabilistic method where the activity times are represented by a probability
distribution. This probability distribution of activity times is based upon three different time
estimates made for each activity.

 Optimistic time estimate: It is the smallest time taken to complete the activity if
everything goes on well. There is very little chance that activity can be done in time less
than the optimistic time. It is denoted by to. or a.

 Most likely time estimate: It refers to the estimate of the normal time the activity
would take. This assumes normal delays. It is the mode of the probability distribution. It
is denoted by tm

 Pessimistic time estimate: It is the longest time that an activity would take if everything
goes wrong. It is denoted by tp or b.

Fig 8.13

These three time values are shown in the above figure.

From these three time estimates, we have to calculate the expected time of an activity. It is
given by the weighted average of the three time estimates.
  Expected time = ( Optimistic + 4 x Most likely + Pessimistic ) / 6

b−a
 Standard deviation of the time required to complete each activity =
6
As a part of statistical analysis, we may be interested in knowing the probability of completing
the project on or before a given due date (C) or we may be interested in knowing the expected
project completion time if the probability of completing the project is given. For this, the beta
distribution is approximated to standard normal distribution whose statistic is given below:
Due date−Expected date of completion
Normal variate Z =
√ Project variance

Advantages and drawbacks of PERT

Advantages:

 Focuses attention on the critical elements of the project. It helps management to take
selective attention for expediting activities to maintain the schedule.

 Suggest areas for increasing efficiency, reduction of costs and profit improvements.

 Provides up to date status information through frequent reporting, data processing and
accurate programme analysis.

 Helps to formulate new schedules when the existing schedule cannot be met.

 Functional responsibilities are identified with the help of network.

 Estimation of time for each activity takes care of bottleneck anticipated at the time of
execution. This helps management to take corrective action beforehand.

Disadvantages

 Takes only time into consideration, and not the cost.

 Time estimated to perform activities constitute a major limitation of this technique.

  Calculation of probabilities under this approach is done on the assumption that a large
number of independent activities operate on critical path and as such the distribution is
normal which may not be true in real life situations.

 Frequent updating and revision of calculations become necessary for controlling a

project under PERT.

 Out of three time estimates the pessimistic time varies widely from the mean and is
always biased.

 Any change in the technological parameters involves reworking of the entire network.

Example: A textile mill was inspected by government safety inspection team and found to be
in violation of a number of safety regulations. The inspector orders the mill to alter some
existing machinery to make it safer, purchase some new machinery to replace the unsafe
ones. The mill was given only 35 weeks to make the changes. If the changes were not made
by then, the mill would be fined Rs. 2 crores. The mill determined the alternatives to be
completed, prepared the three time estimates for each activity namely pessimistic, most
likely and optimistic. The table gives the data compiled by the mill.

 Determine the expected duration.

 Identify the critical activities in the project

 What is the probability that the mill will be fined Rs. 2 crore.

Activity description Precedence to tm tp

A Order new machinery --- 1 2 3
B Plan new physical layout ---- 2 5 8
C Determine safety changes ---- 1 3 5
D Receive equipment A 4 10 25
E Hire new employees A 3 7 12
F Make plant alteration B 10 15 25
G Make changes in existing C 5 9 14
machineries
H Train new employees D,E 2 3 7
I Install new machinery D,E,F 1 4 6
J Relocate old machinery D,E,F,G 2 5 10
K Conduct employee safety H,I,J 2 2 2
 orientation

Solution:

Activity Precedence to tm tp Expected Variance

time te
A --- 1 2 3 2 0.11
B ---- 2 5 8 5 1
C ---- 1 3 5 3 0.44
D A 4 10 25 11.5 12.25
E A 3 7 12 7.17 2.25
F B 10 15 25 15.83 6.25
G C 5 9 14 9.16 2.25
H D,E 2 3 7 3.33 0.69
I D,E,F 1 4 6 4.5 0.69
J D,E,F,G 2 5 10 5.33 1.78
K H,I,J 2 2 2 2 0

13.5 20.83

D 11.5 5
2 9.33
D1 0
2 E 7.17 13.5 20.83
A2 .83
6
H 3.33
0 0
1 B5 5 5 D2 0
F 15.83
3 I 4.5 28.66 28.66
7
C3
K2
D3 0
20.83 20.83 9 10
4 G 9.16

3 11.67 8 26.16 26.16

J 5.33

20.83 20.83
Fig 8.15

Expected project duration = 28.66 weeks

Critical activities = B, F, D3, J , K

Due date = 35

Project variance = sum of variances of critical activities = 1+6.25+0+1.78+0 = 9.03

Standard deviation of the project = 3.004

35−28.66
Z=
3.004

Z = 2.11

1. Normal area with respect to Z = 2.11 = 0.4826

2. Probability that the mill will be fined = 0.5-0.4826 = 0.0174

Comparison between PERT and CPM

PERT CPM
1. Time is probabilistic in nature, there are 1. Time is deterministic in nature. Single
three time estimates: optimistic time, time is given to each activity based upon
pessimistic time and most likely time past experience.

2. It is said to be event oriented as the 2. It is activity oriented as the results of

results of analysis are expressed in terms calculations are considered in terms of
of events activities.

3. It is applied for widely planning and 3. CPM is generally used for those projects
scheduling research programmes and which are repetitive in nature and where
developing projects one has prior experience in handling
similar type of projects.
4. PERT analysis does not usually consider 4. CPM deals with cost of project schedule
cost and their minimization.

5. PERT is basically a tool for planning. 5. CPM can control both time and cost
when planning

Crashing and Resource Levelling of Projects

Learning Objectives

 To learn how to crash project networks

 To learn the technique of resource leveling

 To learn the technique of resource allocation.

Crashing of Project Network: Crashing refers to a particular variety of project schedule

compression which is performed for the purposes of decreasing total period of time (also
known as the total project schedule duration). The diminishing of the project duration typically
take place after a careful and thorough analysis of all possible project duration minimization
alternatives in which any and all methods to attain the maximum schedule duration for the
least additional cost. The objective of crashing a network is to determine the optimum project
schedule. Crashing may also be required to expedite the execution of a project, irrespective of
the increase in cost. Each phase of the project consumes some resources and hence has cost
associated with it. In most of the cases cost will vary to some extent with the amount of time
consumed by the design of each phase. The total cost of project, which is aggregate of the
activities costs will also depends upon the project duration, can be cut down to some extent.
The aim is always to strike a balance between the cost and time and to obtain an optimum
project schedule. An optimum minimum cost project schedule implies lowest possible cost and
the associated time for the project management.

Activity Time-Cost Relationship: A simple representation of the possible relationship between

the duration of an activity and its direct costs appears in the following figure. Shortening the
duration on an activity will normally increase its direct cost. A duration which implies minimum
direct cost is called the normal duration and the minimum possible time to complete an activity
is called crash duration, but at a maximum cost. The linear relationship shown above between
these two points implies that any intermediate duration could also be chosen.
 Fig 9.1

Linear time and cost trade-off for an activity: It is possible that some intermediate point may
represent the ideal or optimal trade-off between time and cost for this activity. The slope of the
line connecting the normal point (lower point) and the crash point (upper point) is called the
cost slope of the activity. The slope of this line can be calculated mathematically by knowing the
coordinates of the normal and crash points:

Cost slope = (crash cost-normal cost)/ (normal duration crash duration)

As the activity duration is reduced, there is an increase in direct cost. A simple case arises in
the use of overtime work and premium wages to be paid for such overtime.

Also overtime work is more prone to accidents and quality problems that must be corrected, so
indirect costs may also increase. So, do not expect a linear relationship between duration and
direct cost but convex function as shown in the following figure.
Fig 9.2

Project Time-Cost Relationship: Total project costs include both direct costs and indirect costs
of performing the activities of the project. If each activity of the project is scheduled for the
duration that results in the minimum direct cost (normal duration) then the time to complete
the entire project might be too long and substantial penalties associated with the late project
completion might be incurred. At the other extreme, a manager might choose to complete the
activity in the minimum possible time, called crash duration, but at a maximum cost.

Thus, planners perform what is called time cost trade-off analysis to shorten the project
duration. This can be done by selecting some activities on the critical path to shorten their
duration. As the direct cost for the project equals the sum of the direct costs of its activities,
then the project direct cost will increase by decreasing its duration. On the other hand, the
indirect cost will decrease by decreasing the project duration, as the indirect cost are almost a
linear function with the project duration.

The below figure shows the direct and indirect cost relationships with the project duration. The
project total time-cost relationship can be determined by adding up the direct cost and indirect
cost values together. The optimum project duration can be determined as the project duration
that results in the least project total cost.
 Project time-cost relationship

Fig 9.3

Materials and Method:

Step1: Calculate Earliest time Estimates for all the activities. It is calculated as

TE = Maximum of all(TEj + tEij) for all I,j leading into the event, where T Ej is the earliest expected
time of the successor event j. TEi is the earliest expected time of the predecessor event, and t Eij
is expected time of activity ij

Step 2: Calculate Latest time Estimates for all the activities. It is calculated as

TL = minimum of all (TLi-tEij) for all I,j leading into the event where TLi is the latest allowable
occurrence time for event i.

Step 3: After knowing the TE and TL values for the various events in the network, the critical
path activities can be identified by applying the following conditions:

 TE and TL values for tail event of the critical activity are the same: TE =
TL
 TE and TL values for head event of the critical activity are the same: TE
= TL

Step 4: Find the project cost by the formula

 Project cost = (Direct cost + (Indirect cost*project duration)

Step 5: Find the minimum cost slope by the formula

Cost slope = (Crash cost - Normal cost)/(Normal time - Crash time)

Step 6: Identify the activity with the minimum cost slope and crash that activity by one day.
Identify the new critical path and find the cost of the project by formula

Project Cost = ((Project Direct Cost + Crashing cost of crashed activity) + (Indirect Cost*project
duration))

Iteration Step

Step 7: In the new Critical path select the activity with the next minimum cost slope, and crash
by one day, and repeat this step until all the activities along the critical path are crashed up to
desired time.

Step 8: At this point all the activities are crashed and further crashing is not possible. The
crashing of non critical activities does not alter the project duration time and is of no use. Step
9: To determine optimum project duration, the total project cost is plotted against the duration
time given by figure.

Further Modification: Un-Crashing

Step10: Now see if the project cost can be further reduced without affecting the project
duration time. This can be done by un-crashing the activities which do not lie along the critical
path. Un-crashing should start with an activity having the maximum cost slope. An activity is to
be expanded only to the extent that it itself may become critical, but should not affect the
original critical path.

Proposed Work

Step 1: Find earliest time estimates for all the activities, it is denoted as TE

Step 2: Find latest time estimates for all the activities, it is denoted as TL

Step 3: Determine the Critical Path.

Step 4: Compute the cost slope (i.e., cost per unit time) for each activity according to the
following formula: Cost slope = (Crash cost -Normal cost)/(Normal time-Crash time)

Step 5: Among the critical path identify the activity with the minimum cost slope, and crash
the activity by 1 day.

Step 6: Calculate the project cost. Identify new critical path. Project Cost= [(Project Direct Cost
+ Crashing cost of crashed activity) + (Indirect Cost*project duration)]
Step 7: Now in the new critical path select the activity with the next minimum cost slope, and
crash by one day.

Step 8: Repeat this process until all the activities in the critical path have been crashed by 1
day.

Step 9: Once all the activities along the critical path are crashed by one day, repeat the
process again i.e., goes to step5.

Step 10: Find the minimum project cost and identify the activities which do not lie along the
critical path

Step 11: Now perform un crashing, i.e., un crash the activities which do not lie along the critical
path.

Crashing Example: The network and durations given below shows the normal schedule for a
project. You can decrease (crash) the durations at an additional expense.

The Table given below summarizes the time-cost information for the activities. The owner
wants you to finish the project in 110 days. Find the minimum possible cost for the project if
you want to finish it on 110 days. (Assume that for each activity there is a single linear,

continuous function between the crash duration and normal duration points).
Solution: Assume that the duration-cost relationship for each activity is a single linear,
continuous function between the crash duration and normal duration points.

Using the normal duration (ND), crash duration (CD), normal cost (NC), and crash cost (CC), the
crash cost slope for each activity can be determined as follows:

SA = (CC – NC)/(ND – CD)

SA =(14000-12000)/ (120-100) = 100/day

SB = ` 200/day

SC= ` 600/day

SD= ` 60/day

SE = ` 120/day

SF = ` 300/day

The normal cost for the project is the sum of a normal cost for each activity. The normal cost for
the project is ` 48300 and the normal duration is 140 days.

The activity which should be crashed is the one on the critical path which will add the least
amount to the overall project cost. This will be the activity with the flattest or least-cost slope.

The duration can be reduced as long as the critical path is not changed or a new critical path is
created. In addition, the activity duration cannot be less than the crash duration.

SD = ` 60/day (least-cost slope) Maximum of 10 days can be cut from this schedule by reducing
the duration of activity D to the crash duration of 20 days.
Fig 9.5

Overall duration is 130 days and there are multiple critical paths (B-F-E and B-C-D-E).

Total project cost at this duration is the normal cost of ` 48300 plus the cost of crashing the
activity D by 10 days (60 * 10 =` 600) for a total of ` 48900.

The next activity to be crashed would be the activity E, since it has the least-cost slope (`
120per day) of any of the activities on the critical path. Activity E can be crashed by a total of 10
days. Crashing the activity E by 10 days will cost an additional ` 120 per day or ` 1200.

Fig 9.6

The project duration is now 120 days and the total project cost is ` 50100. There are now three
critical paths (A, B-C-D-E, and B-F-E). The next stage of crashing requires a more thorough
analysis since it is impossible to crash one activity alone and achieve a reduction in the overall
project duration. Activity A is paired with each of the other activities to determine which has
the least overall cost slope for those activities which have remaining days to be crashed.
Activity A (` 100) + activity B (` 200)

Activity A (` 100) + activity C (` 600) + activity F (` 300)

The least-cost slope will be activity A + activity B for a cost increase of ` 300 per day. Reducing
the project duration by 5 days will add 5*300 = ` 1500 dollar crashing cost and the total project
cost would be ` 51600. Activity B cannot be crashed any more.

Fig 9.7

Final step in crashing the project to 110 days would be accomplished by reducing the duration
of activity A by 5 days to 110 days, reducing activity C by 5 days to 35 days, and reducing activity
F by 5 days to 55 days. The combined cost slope for the simultaneous reduction of activity A,
activity C, and activity F would be ` 1000 per day. For 5 days of reduction this would be an
additional ` 5000 in total project cost. The total project cost for the crashed schedule to 110
days of duration would be ` 56600.

Resource Leveling and Resource Allocation Resource Leveling:

Resource Leveling is a project management technique used to examine unbalanced use of
resources (usually people or equipment) over time, and for resolving over-allocations or
conflicts. When performing project planning activities, the manager will attempt to schedule
certain tasks simultaneously. When more resources such as machines or people are needed
than are available, or perhaps a specific person is needed in both tasks, the tasks will have to be
rescheduled concurrently or even sequentially to manage the constraint. Project planning
resource leveling is the process of resolving these conflicts. It can also be used to balance the
workload of primary resources over the course of the project[s], usually at the expense of one
of the traditional triple constraints (time, cost, scope). When using specially designed project
software, leveling typically means resolving conflicts or over allocations in the project plan by
allowing the software to calculate delays and update tasks automatically. Project management
software leveling requires delaying tasks until resources are available. In more complex
environments, resources could be allocated across multiple, concurrent projects thus requiring
the process of resource leveling to be performed at company level. In either definition, leveling
could result in a later project finish date if the tasks affected are in the critical path.

Resource Leveling is also useful in the world of maintenance management. Many organizations
have maintenance backlogs. These backlogs consist of work orders. In a “planned state” these
work orders have estimates such as 2 electricians for 8 hours. These work orders have other
attributes such as report date, priority, asset operational requirements, and safety concerns.
These same organizations have a need to create weekly schedules. Resource-leveling can take
the “work demand” and balance it against the resource pool availability for the given week. The
goal is to create this weekly schedule in advance of performing the work. Without resource-
leveling the organization (planner, scheduler, supervisor) is most likely performing subjective
selection. For the most part, when it comes to maintenance scheduling, there are very few logic
ties and therefore no need to calculate critical path and total float.

Resource Allocation: Resource allocation is used to assign the available resources in an

economic way. It is part of resource management. In project management, resource allocation
is the scheduling of activities and the resources required by those activities while taking into
consideration both the resource availability and the project time. In strategic planning, resource
allocation is a plan for using available resources, for example human resources, especially in the
near term, to achieve goals for the future. It is the process of allocating resources among the
various projects or business units. The plan has two parts: Firstly, there is the basic allocation
decision and secondly there are contingency mechanisms. The basic allocation decision is the
choice of which items to fund in the plan, and what level of funding it should receive, and which
to leave unfunded: the resources are allocated to some items, not to others. There are two
contingency mechanisms. There is a priority ranking of items excluded from the plan, showing
which items to fund if more resources should become available; and there is a priority ranking
of some items included in the plan, showing which items should be sacrificed if total funding
must be reduced.

Ways to Avoid Time and Cost Overruns: Correct identification of the causes of delays can help
the project team to eliminate the same, as per the adage, a problem well formulated is half
solved. The most important reason for delay in cost and time overrun: planning, organising and
monitoring; hence, the need to plan the resources adequately and estimate the need
scientifically. Right choice of project manager, project oriented organisation, project team and
delegation of authority commensurate with responsibility will go a long way to reduce the
overruns. Proper project management information system and effective coordination with all
concerned will ensure timely project completion. The other reasons that help completing the
project without delay are listed hereunder. These are:

 Detailed planning and implementation schedule

 Sound monitoring

 Resource-planning based on time schedules and anticipated progress

 Ensuring safety measures while preparing contracts

 Reward and incentive schemes for the project staff

 Selection of appropriate, feasible technology

 Listing engineering parameters and designs

 Mobilising community participation in planning and implementation

 Decentralised decision-making for fast implementation

 Continuity of the project manager, at least till the start of the plant

 Adequate training of the workers, supervisors involved

 Anticipating omissions, mistakes and preparing the organisation to
face crisis
 Minimising managerial lapses
 Identifying transport bottlenecks by proper liaison

 Communication, and following-up with vendors and subcontractors to

know the latest status and location of project material
 Regular follow-up with local, national and international financial
agencies
 Innovative attitude and skills of the project team
  Adequate project information system
 Maintaining ecological balance and avoiding environmental pollution

 Clarity of scope on project objectives

 Lucid description of team and sub-team tasks

 Lucid financial cost estimates

 Milestone charts and project audit reports, and

 Minutes of the co-ordination committees’ meetings with contractors

and government agencies

Conclusion: The completion of projects without overruns and delays is probably the most
important current problem area for cost engineers and project managers as well as for the
image of the whole professional area of Cost Engineering / Project Cost Control not to mention
the owners/contractors and users themselves. Commercial Risk Analysis is therefore one of the
basic sub-procedures used by cost engineers.