Edinburgh Business School

PROJECT MANAGEMENT

AUGUST 2021

Please note that it should take approximately 3 hours to complete this exam.
However, you do have a 24 hour period to complete, review and upload your
answers.

The 24 hour period began at 10:00 AM (GMT) on Monday 16 August 2021 and
must be uploaded no later than 10:00 AM (GMT) on Tuesday 17 August 2021.

INSTRUCTIONS

This examination paper consists of four questions.

Each question is worth 25 marks.

There is no choice in the selection of questions to be answered.

Maximum word limits are provided for all written sections.

A formula sheet is provided at the end of the question paper.

 HERIOT-WATT UNIVERSITY

PROJECT MANAGEMENT – AUGUST 2021

Case study

Assume you are an internal project manager who is employed by a major retail organisation
called IQEA. Now, after the COVID-19 restriction have eased, the stores are about to re-
open for business and you have been put in charge of a pilot project to introduce a new
Logistics Management System (LMS) in one of the company’s stores in the country. The
existing system is to be left fully operational until the new system is fully installed and
commissioned. There is then to be a switchover at which time the old system will be
disconnected, and the new system will be activated and made operational.

The new system has been designed by IQEA’s own centralised IT section called Internal
Networks. This department is centralised in a main head office and is responsible for the
design and modification of all IQEA’s operating systems. Internal Networks has written and
developed much of the operating software that is used throughout the network of stores.

The current project is only one in a long-term programme to upgrade systems in all the
stores nationwide. As a result, the company has appointed an internal programme manager
who is referred to as the Strategic Co-ordinator, who is responsible for ensuring that the
performance of the various upgrading projects all match the overall strategic objectives of
the organisation. The Strategic Co-ordinator reports directly to an internal Strategic Steering
Committee that, in turn, reports to the IQEA Board of Directors (BoD). The Strategic Steering
Committee is also in charge of an internal IQEA Strategic Cost Control Section that is
responsible for monitoring and controlling the overall cost of the various upgrade projects.
There is also an internal IQEA Legal Department that is responsible for the development,
issue and control of all contracts with external bodies.

Some parts of the current project have been awarded to external organisations. All new
hardware and support electrical works are being carried out by a specialist hardware installer
called System Installation Ltd. System Installation Ltd has an established track record of
working with IQEA. System Installation Ltd is currently involved in carrying out hardware
installation contracts in approximately 15 of the 27 IQEA’s stores nationwide. On the current
project System Installation Ltd has sub-contracted the installation of the electrical systems to
a specialist electrical domestic sub-contractor called Wiring Central Ltd. System Installation
Ltd is using PCs supplied by a nominated supplier called PC County Ltd. IQEA took the
decision to nominate PC County Ltd as standard nominated suppliers for all IQEA LMS
upgrade projects throughout the country. IQEA took this decision in an attempt to move
towards standardisation of supply and maintenance of hardware nationwide. IQEA has also
appointed a nominated sub-contractor called Fire Detectors Ltd to design and install all new
fire detection, protection and suppression systems.

The project is particularly difficult to plan as the main retail areas will remain operational
throughout the upgrading works. It will be possible to seal some areas off while installation
works are carried out, but the Strategic Co-ordinator has stipulated that a minimum of 95%
of all LMSs terminals must be operational throughout. This stipulation is regarded as being
necessary in order to achieve an acceptable degree of supply chain function protection in
order to effectively plan and manage under such complex conditions, it is IQEA policy to
commission an external logistics consultant called Logistics Planning to plan and manage
the actual retail processes during the works. Logistics Planning is responsible for carrying
out all necessary operational surveys and feasibility assessments and for developing a
detailed operational plan for the use of storage and retail floor space while the works are in
progress.

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It is also IQEA policy to commission a risk management consultant called Risk Shift on each
project. Risk Shift is responsible for carrying out all necessary risk assessments and for
developing and implementing an appropriate risk management system for each project and
for the programme as a whole.

There is a requirement for some new electrical supply works as part of the contract. All new
electricity supply works are carried out by the local supplier called Electric Supply PLC. All
new works are subject to inspection by the Local Authority prior to a completion certificate
being issued.

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Question 1 Maximum Word Count 1000 words

(a) Making any reasonable assumptions, design and discuss a suitable organisational
breakdown structure (OBS) for the project showing all communication, authority and
contractual links and discuss the rationale behind your recommended arrangement of
contracts.
(15 marks)

(b) From the point of view of IQEA, identify five major project risks that could affect the
success of the project or even the programme. In each case, discuss the nature of
the risk and suggest the most likely response.
(10 marks)

(Total 25 marks)

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Question 2 Maximum Word Count 1000 words

Refer to the table below which shows estimates of optimistic, likely and pessimistic durations
for package activities to be carried out by your in-house developers.

Activity Optimistic time Likely time (weeks) Pessimistic time

(weeks) (weeks)
A–B 1 2 3
B–C 1 2 3
B–D 2 3 4
B–E 2 6 10
C–F 1 3 5
C–G 1 2 3
D–H 3 4 5
E–F 5 10 15
F–I 2 6 10
F–L 1 2 3
G–I 1 2 3
G–J 1 2 3
H–J 1 3 5
I–K 4 10 16
J–K 1 2 3
K–M 4 8 12
L–N 2 3 4
M–N 6 8 10

(a) Develop a project schedule for the activities given. Show the start and finish date and
duration of each activity. State the overall work package duration and show the
critical path.
(5 marks)

(b) Calculate the probability of this particular package being completed by week 55.
(5 marks)

(c) Discuss the main stages involved in developing a schedule for the project and
suggest the likely challenges relevant to each of these stages, in the context of the
case study.
(15 marks)

(Total 25 marks)

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Question 3 Maximum Word Count 1000 words

Refer to the table below which shows actual production and costs for the installation of
control systems by three teams of technicians from Internal Networks over a 5-week period.
Note the target production and cost figures given. The project plan requires Internal
Networks to install a total of 15 register networks per week (5 register networks per team per
week) over a 6-week period at a total cost of £900,000.

Week Team Cumulative number of Cumulative

register networks installed actual cost (£)
1 1 5 50,000
2 5 50,000
3 0 12,000
2 1 10 100,000
2 10 100,000
3 5 90,000
3 1 15 150,000
2 16 140,000
3 8 110,000
4 1 20 200,000
2 22 180,000
3 12 180,000
5 1 25 250,000
2 28 230,000
3 18 250,000

(a) Comment on the performance of each team and the work package as a whole over
the 5-week period. Support your comments using EVA technique.
(10 marks)

(b) Calculate and comment on the estimate at completion (EAC) for each team and for
the work package as a whole based on performance at week 5.
(5 marks)

(c) Discuss how project cost increases can be accommodated and allowed for within
standard forms of contract and explain the procedures that System Installation Ltd
would probably have to follow in requesting reimbursement for cost increases that
can be recovered from IQEA.
(10 marks)

(Total 25 marks)

5
Question 4 Maximum Word Count 1000 words

(a) Compare the main conceptual bases of quality management and total quality
management (TQM) and discuss which approach would be most appropriate for
IQEA to adopt.
(10 marks)

(b) Design a suitable quality management system for use by IQEA. Discuss the main
components content and explain how they work together in the context of the case
study.
(15 marks)

(Total 25 marks)

END OF PAPER

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Project Management

Formulae Sheet
For the purposes of this examination the following formulae can be assumed to apply.

For a beta distribution:

Activity mean = (a + 4m + b) / 6
Activity standard deviation = (b – a) / 6

Where a = optimistic time, m = most likely time and b = pessimistic time.

The project standard deviation is the square root of the sum of the squares of the
critical path activity standard deviations.

The project mean is the sum of the critical path activity means.

The mean difference is the difference between the project mean and the target mean.

The standardised mean difference is the mean difference divided by the project
standard deviation.

Estimate at completion (EAC) = (ACWP / BCWP) × BAC

Estimate to complete (ETC) or Estimated cost to complete (ECTC) = EAC – ACWP
Variance at completion (VAC) = BAC – EAC

Where:

BCWP = Budgeted cost of the works performed.

ACWP = Actual cost of the works performed.
BAC = Budget at completion.

In a normal distribution assume:

The area under the curve within 1 standard deviation each side of the mean = 68%.
The area under the curve within 2 standard deviations each side of the mean = 95%.
The area under the curve within 3 standard deviations each side of the mean = 99%.

Therefore:

Events up to 3 standard deviations below the mean occur 0.5% of the time.
Events up to 2 standard deviations below the mean occur 2.5% of the time.
Events up to 1 standard deviation below the mean occur 16% of the time.
Events up to the mean occur 50% of the time.
Events up to 1 standard deviation above the mean occur 84% of the time.
Events up to 2 standard deviations above the mean occur 97.5% of the time.
Events up to 3 standard deviations above the mean occur 99.5% of the time.

(continued overleaf)

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Cost variance (CV) = BCWP – ACWP
Schedule variance (SV) = BCWP – BCWS

CVI = BCWP / ACWP

SVI = BCWP / BCWS

ACWP = actual cost of the work performed.

BCWP = budgeted cost of the work performed.
BCWS = budgeted cost of the work scheduled.

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