Week 4 (Lec 14-19)

PROJECT MANAGEMENT: PLANNING, EXECUTION,
EVALUATION AND CONTROL

Prof. Sanjib Chowdhury
EL
Vinod Gupta School of Management
PT
IIT Kharagpur
N
Module 06: Developing Project Plan
Lecture 14: Extended Network Techniques to Represent Reality
Concepts Covered:
• Developing Project Network
• Constructing a Project Network
• Activity-on-Node (AON), Activity-on-Arrow (AOA)
• Network Computation Process
EL
• Forward Pass and Backward Pass Computation
PT
• Level of Details for Activities
• Extended Network Techniques
N
• Concepts of Lags, Laddering, Hammock Activities
• Uncertainty in activities - three time estimates
• Probability of Completion of Project on Time
Extended Network Techniques to Come Close to Reality
• Laddering
Laddering using finish-to-start relationship
EL
PT
N
Source: Project Management, Gray and Larson
• Lags
Use of Lags
Finish-to-Start Relationship
EL
PT
N
Start-to-Start Relationship

• Lags
Use of Lags
Finish-to-Finish Relationship
EL
PT
N
Start-to-Finish Relationship

• Lags
Use of Lags to Reduce Project Duration
Combination Relationship
EL
PT
Source: Project Management, Gray and Larson N
EL
PT
N
New Product Development Process
Network using Lags
EL
PT
N
Hammock Activities
EL
PT
N
Conclusion:
• Further to the previous lecture, this class discusses the extended network techniques
that represent the reality. It introduces the concept of lags and how to fast track a
project, and develop network using lag.
• It further illustrates the concept of laddering, Hammock activities etc., which are widely
used by the practitioners.
EL
PT
N
References:
1. Project Management – The Managerial Process, Gray, C.F., Larson, E.W., and
Joshi, R., McGraw Hill Education, 8th edition.
2. Project Management – Achieving Competitive Advantage, Jeffrey K. Pinto, Pearson
Publishing Ltd., 5th edition.
EL
3. Project Management: A Managerial Approach, Meredith, J.R. and Mantel, S.J.,
Wiley, PMBOK Guidelines Book
PT
4. Project Management, Pradeep Pai, Pearson India Education Services Pvt Ltd.,
N
2019, 1st edition.
N
PT
EL
EL
PT
IIT Kharagpur
N
Module 06: Developing Project Plan
Lecture 15: Probability of Completion of Project on Time
Concepts Covered:
• Developing Project Network
• Constructing a Project Network
• Activity-on-Node (AON), Activity-on-Arrow (AOA)
• Network Computation Process
EL
• Forward Pass and Backward Pass Computation
PT
• Level of Details for Activities
• Extended Network Techniques
N
• Concepts of Lags, Laddering, Hammock Activities
• Uncertainty in activities - three time estimates
• Probability of Completion of Project on Time
Incorporating Uncertainty in Activity Times
F(D)
P(D<A) = .01
P(D>B) = .01
EL
TIME
PT
A M D B
N
optimistic most pessimistic
likely
_ A+ 4M + B
Expected Duration: D=
6
2
 B − A Problem Solving
Variance: V = 
 6 
Activity and Project Frequency Distributions
EL
PT
‒ Three time estimates
N
‒ Average activity time
‒ Standard deviation for each activity
‒ Standard deviation for the project
Probability of Completion of Project on time
f (X)
34.1% 34.1% Z=1.2048
13.6% 13.6%
EL
0.1% 2.1% 2.1%
0.1%
PT
μ-3σ μ-2σ μ-σ μ μ+σ μ+2σ μ+3σ X
68.2%
N
95.4%
99.7%
Figure: Normal distribution with mean (μ) and standard deviation (σ) depicting areas under
each segment of the curve; shaded area left to the z-value is the probability of occurrence
Source: Optimization and Business Improvement Studies in Upstream Oil and Gas Industry, Sanjib Chowdhury, Wiley & Sons Inc., NJ, USA., 2016.
Question
The activity times of a project network is given below:
Activity aopt mml bpess
1-2 17 29 47
2-3 6 12 24
2-4 16 19 28
3-5 13 16 19
EL
4-5 2 5 14
5-6 2 5 8
PT
1. Compute the expected time and variance of activities
N
2. Compute the expected project duration, and determine critical path
showing early start (ES), early finish (EF), late start (LS), late finish (LF),
and slack for each activity.
3. What is the probability of completing the project by 67 days? And within
60 days?
Activity Times and Variances
EL
PT
N
N
PT
EL
N
PT
EL
Conclusion:
• Further to the last lecture, this chapter illustrates the uncertainty in activities such as
new product development, R&D work etc. It introduces three time estimates, namely,
optimistic, pessimistic, and most likely times, which are generally used in PERT.
• It further determines the probability of project completion on time to assist project
EL
managers and senior management to take decision and plan accordingly.
PT
N
References:
EL
PT
N
2019, 1st edition.
N
PT
EL
EL
PT
IIT Kharagpur
N
Module 07: Project Risk Management
Lecture 16: Managing Risk and Risk Identification
Concepts Covered:
• Risk Management Process
• Risk Identification
• Risk Assessment
• Risk Response Development
EL
• Contingency Planning
PT
• Contingency funding and Time buffers
N
• Risk Response Control
• Change Control Management
• Risk Assessment of Capital Project
Basic Concepts of Risk Management
• What is Risk?
• What is Risk Management?

‒Identify, assess, strategize, contingency, control
EL
PT
• Benefits of Risk Management
N
- Proactive approach, ↓ surprises and -ve consequences, prepares PM
and team, ↑ control, ↑ performance, achieve goals
Risk Event and Cost Relation
EL
PT
N
Risk Management Process
Risk
Risk Risk Response
Risk Assessment Response
Identification Development
Control
•Brainstorming - •Scenario analysis - •Develop strategy ↓ •Risk control
Involve stakeholders likelihood, impact damage ‒Execute risk response
•RBS – macro •Risk assessment ‒ Mitigating (identify root strategy; Monitor
matrix causes e.g. vendor unable to triggering events,
risk, specific risk
EL
supply on time, safety training,
•Risk profile •Failure Mode and using high-quality materials, Initiate contingency
•External risk, Effects Analysis scheduling outdoor events) plans, Watching for
PT
•Probability analysis - ‒ Avoiding new risks
common mistakes
Decision tree, NPV, ‒ Transferring •Establish Change
N
PERT ‒ Retaining Mgmt. system
•Develop Contingency ‒Monitor & report
plan risk; Foster open org.
‒ Technical risks, environ; Repeat
Schedule risks, Cost exercise; Assign
risks, Funding risks responsibility
•Opportunity mgmt.
Risk Breakdown Structure (RBS)
EL
PT
N
Partial Risk Profile for Product Development Project
EL
PT
N
Conclusion:
• This module deals with risk management process and explains risk is an event or
conditions, if it happens has a negative or positive effect on the (project) objective. The
module also describes risk management process, and its benefits.
• This chapter also discusses how to manage risks in a systematic way. The steps in
EL
managing risk starts with (1) risk identification, followed by (2) risk assessment, (3) risk
PT
response development, and (4) risk response control. Risk identification process has
been discussed in detail in this lecture.
N
References:
EL
2019, 1st edition.
PT
N
N
PT
EL
EL
PT
IIT Kharagpur
N
Lecture 17: Risk Assessment
Concepts Covered:
• Risk Assessment
EL
PT
N
Risk
Risk Risk Response
Control
risk, specific risk
EL
PT
common mistakes
N
What is Risk Severity Matrix?
4 User Backlash Interface problems

Red zone (major risk)
Yellow zone (moderate risk)
Likelihood
Green zone (minor risk)
EL
3
PT
2 System freezing
N
Hardware
1 malfunctioning
1 2 3 4 5
Impact
• What is Failure Mode and Effects Analysis (FMEA)?
Defined Conditions for Impact Scales of a Risk on Major Project Objectives
(Examples for Negative Impacts Only)
EL
PT
N
Risk Assessment Form
EL
PT
Source: Project Management, Gray and Larson N
Risk Assessment
 Based on the following information, prioritize the risk events. Which event
should you be most concerned about?
EL
PT
N
Measuring Risk Illustrative
e.g., XYZ Co.
Scale for Risk Likelihood Scale for Risk Impact (USD)

1/frequency Financial
Likelihood Cost of Event
(years) Impact
0 1 – Frequent - 0 - NA
EL
5 2 - Likely 1 1 - Incidental
PT
N
10 3 - Possible 5,000,000 2 - Minor
25 4 - Unlikely 50,000,000 3 - Moderate
100 5 - Rare 100,000,000 4 - Major
1000 6 - Very Rare 500,000,000 5 - Severe

Illustrative
Measuring Risk e.g., XYZ Co.
Scales for Monetary and Non Monetary Impacts
XYZ Co. Risk map Impact

3-
1 - Incidental 2 - Minor Moderate 4 - Major 5 - Severe
Medium High High Very High Very High
EL
1 - Frequent
Medium High High Very High Very High
PT
2 - Likely
Likelihood
N
Medium Medium High High Very High
3 - Possible
4 - Unlikely Low Medium High High High
5 - Rare Low Low Medium Medium High
Low Low Medium Medium High

6 - Very Rare
Conclusion:
• Further to the previous lecture, this session illustrates how to measure risk, that is,
assessing risk value and prioritizing risk; develop risk severity matrix containing
likelihood and impact of risk; and typical risk assessment form etc.
EL
• It also illustrates scales of likelihood and impact followed by large reputed companies
in real-life.
PT
N
References:
EL
2019, 1st edition.
PT
N
N
PT
EL
EL
PT
IIT Kharagpur
N
Lecture 18: Risk Response Development and Contingency Planning
Concepts Covered:
• Risk Assessment
EL
PT
N
Risk
Risk Risk Response
Control
risk, specific risk
EL
PT
common mistakes
N
Contingency Planning
• What is a Contingency Plan?
• Risks of not having a Contingency Plan?
• Some common Risks and Contingency Planning

‒ Technical risks
EL
‒ Schedule risks
‒ Costs risks
PT
‒ Funding risks
N
• What is an Opportunity in the context of Risk Management?
‒ Exploit
‒ Share
‒ Enhance
‒ Accept
Risk Response Matrix
EL
PT
N
Contingency Funding and Time Buffers
 Contingency Funds
• Funds to cover project risks—identified and unknown
‒ Size of funds reflects overall risk of a project
• Budget reserves
‒ Are linked to the identified risks of specific work packages.
EL
• Management reserves
PT
‒ Are large funds to be used to cover major unforeseen risks (e.g.,
change in project scope) of the total project
N
Contingency Funding and Time Buffers Illustrative
Contingency Fund Estimate ($000s)

Activity Baseline Budget Reserve Budget Project Budget
WBS 1 600 18 618
WBS 2 800 70 870
EL
WBS 3 150 5 155
PT
Subtotal 1550 93 1643
Management - - 60
N
reserve
Total 1550 93 1703

Contingency Funding and Time Buffers
 Time Buffers
• Amounts of time used to compensate for unplanned delays in the project
schedule. Buffers are added to -
‒ Activities with severe risk
‒ Merge activities prone to delays
EL
‒ Noncritical activities to reduce likelihood of creating another critical path
PT
‒ Activities that require scarce resources
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Conclusion:
• In continuation with the previous lecture, this session deals with developing risk
response plan that includes mitigating risk, avoiding risk, transferring risk, and
retaining risk.
• It further illustrates contingency planning which is an alternative plan in case of
EL
eventualities, that is, if risk becomes reality. Contingency plan is associated with four
types of risks, namely, technical risk, schedule risk, cost risk, and funding risk.
PT
• The module further elucidates opportunity in the context of risk management, which
N
are essentially of four types viz. exploit, share, enhance, and accept.
References:
EL
2019, 1st edition.
PT
N
N
PT
EL
EL
PT
IIT Kharagpur
N
Lecture 19: Risk Response Control, and Change Control Management
Concepts Covered:
• Risk Assessment
EL
PT
N
Risk
Risk Risk Response
Control
risk, specific risk
EL
PT
common mistakes
N
 Managing risks
• Step 4: Risk Response Control

– Risk control
o Execution of the risk response strategy
EL
o Monitoring of triggering events
PT
o Initiating contingency plans
N
o Watching for new risks
 Managing risks
• Establishing a Change Management System

o Monitoring, tracking, and reporting risk
o Fostering an open organization environment
EL
o Repeating risk identification/assessment exercises
PT
o Assigning and documenting responsibility for managing risk
N
Change Management Control
 Sources of Change

1. Project scope changes – redesign, new
feature additions Change Control
Process
EL
2. Implementation of contingency plans –
change in baseline cost and schedule
PT
3. Improvement changes
N
Change Management Control
 Benefits of Change control system
– Discourage inconsequential changes

– Maintain cost changes in logbook
– Maintain integrity of the WBS and performance measures
EL
– Track allocation and use of budget and management reserve funds
– Clarify responsibility for implementation
PT
– Ensure visibility of effect of changes
N
– Monitor implementation of change
– Scope changes to be reflected in baseline and performance measures
Sample Change
Request
EL
PT
N
Illustrative
Some Common Project Risks
• Pre-completion risks: • Post completion risk
 Accuracy of resource base  Price risk
 Technology risk  Production & transportation
 Construction challenges risk
 Partner/contractor risk  Environmental risk
EL
 Estimation risk  Geopolitical risk (Govt
PT
interface)
 Stakeholder risk
N
• Macroeconomic risk
 Inflation & economic
disruption
 Currency risk
Blow-out at BP Deepwater Horizon drilling rig
operating in Gulf of Mexico (20th April 2010)
Blow-out caused an oil spill covering a surface area

of at least 2,500 square miles.
The oil spill originating from a deepwater oil well
1,500 m below sea level, discharged an estimated
5–40 thousand barrels per day.
EL
PT
N
Role of contractors
in project execution
Few High-profile Accidents
Contractor Risk
• Capsize of Crude carrier Alexander Kielland (1980)
• Grounding of Exxon Valdez in Alaska (1989)
• Fire at Piper alpha platform in North sea (1989)
• Fire at BHN platform complex (2005)
• Destruction in Gulf of Mexico caused by Hurricane Katrina
EL
PT
N
Conclusion:
• This session deals with the final step of risk management process, that is, risk
response control that includes maintaining risk register, monitoring triggering events
for risk, watching for new risks, establishing change management control system,
sources of change, benefits of change control system, and so on.
EL
• The module also highlights some common project risks, and contractor risk, which
may lead to catastrophic effect if not attended to or proper risk management system is
PT
not in place in an organization.
N
References:
EL
2019, 1st edition.
PT
N
N
PT
EL

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PROJECT MANAGEMENT: PLANNING, EXECUTION,

EVALUATION AND CONTROL

Laddering using finish-to-start relationship

Source: Project Management, Gray and Larson

Source: Project Management, Gray and Larson

34.1% 34.1% Z=1.2048

• What is Risk Management?

4 User Backlash Interface problems

Green zone (minor risk)

Scale for Risk Likelihood Scale for Risk Impact (USD)

25 4 - Unlikely 50,000,000 3 - Moderate

100 5 - Rare 100,000,000 4 - Major

1000 6 - Very Rare 500,000,000 5 - Severe

XYZ Co. Risk map Impact

Medium High High Very High Very High

4 - Unlikely Low Medium High High High

5 - Rare Low Low Medium Medium High

Low Low Medium Medium High

• Risks of not having a Contingency Plan?

• Some common Risks and Contingency Planning

Contingency Fund Estimate ($000s)

Total 1550 93 1703

• Step 4: Risk Response Control

• Establishing a Change Management System

Source: Project Management, Gray and Larson

 Benefits of Change control system

– Discourage inconsequential changes

Blow-out caused an oil spill covering a surface area

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