Project Management

Lec- 15 & 16
 Learning Objectives
• Discuss the behavioral aspects of projects in
terms of project personnel and the project
manager.
• Discuss the nature and importance of a work
breakdown structure in project management.
• Give a general description of PERT/CPM
techniques.
• Construct simple network diagrams.
 Learning Objectives
• List the kinds of information that a PERT or
CPM analysis can provide.
• Activity Scheduling
• Analyze networks with deterministic times.
• Analyze networks with probabilistic times.
• Describe activity “crashing.
 What is Project
• “A project is a set of activities with a defined start
point and a defined end state, which pursues a
defined goal and uses a defined set of resources”

• “Projects have an objective, a definable end result or

output, that is typically described in terms of quality,
cost and timing”

• Projects have a temporary nature, some degree of

complexity and have to cope with uncertainty
 Projects
JAN FEB MAR APR MAY JUN
Build A
A Done
Build B
B Done

Build C
C Done
Build D On time!
Ship

Unique, one-time operations designed to accomplish

a specific set of objectives in a limited time frame.
 Project Management
• How is it different?
– Limited time frame
– Narrow focus, specific objectives
– Less bureaucratic
• Why is it used?
– Special needs
– Pressures for new or improves products or
services
 Project Management
• What are the Key Metrics
– Time
– Cost
– Performance objectives
• What are the Key Success Factors?
– Top-down commitment
– Having a capable project manager
– Having time to plan
– Careful tracking and control
– Good communications
 Project Management
• What are the Major Administrative Issues?
– Executive responsibilities
• Project selection
• Project manager selection
• Organizational structure
– Organizational alternatives
• Manage within functional unit
• Assign a coordinator
• Use a matrix organization with a project leader
 Key Decisions in Project Management

• Deciding which projects to implement

• Selecting a project manager
• Selecting a project team
• Planning and designing the project
• Managing and controlling project resources
• Deciding if and when a project should be
terminated
 Project Manager
Responsible for:

Work Quality
Human Resources Time
Communications Costs
Project Life Cycle
 Project Management
• What are the tools?
– Gantt charts
– Work breakdown structure
– Network diagram
– Risk management
 Gantt Chart
 A popular tool for planning and scheduling simple projects,
and for initial planning for more complex projects
 Graph or bar chart
 Bars represent the time for each task
 Bars also indicate status of tasks
 Provides visual display of project schedule
 Closely associated with PERT
 Slack
 amount of time an activity can be delayed without delaying the
project
 Planning and Scheduling

Gantt Chart MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Locate new facilities

Interview staff
Hire and train staff
Select and order
furniture
Remodel and install
phones
Move in/startup
 Precedence Relationship
Activity Activity Activity
Activity Legend Predecessor Duration
Design house and obtain financing 1 - 3
Lay foundation 2 1 2
Order and receive material 3 1 1
Build house 4 2,3 3
Select Paint 5 2,3 1
Select Carpet 6 5 1
Finish work 7 4,6 1
 Example of Gantt Chart

Month
0 | 2 | 4 | 6 | 8 | 10
Activity
Design house
and obtain
financing
Lay foundation
Order and
receive materials

Build house

Select paint

Select carpet

Finish work

1 3 5 7 9
Month
 Using Gantt Charts
• Positives
– Communicates the plan
– Easy to construct
– Readily understood
– Good for static environments
– Widely used
– Graphical interface for most project planning software
 Using Gantt Charts

• Limitations
– Difficult to update manually
– Does not equate time and cost
– Does not help in optimizing resource allocation
– Tendency to be perceived as a ‘statement of reality’ or
certainty, whereas it is really a statement of ‘how it might
be done’, recognizing the uncertainty that managers in
projects have to deal with, the nature of estimating, the
quality of input information
 Work Breakdown Structure

Project
Project XX

Level 1

Level 2

Level 3

Level 4
Work Breakdown Structure
 PERT and CPM

PERT: Program Evaluation and

Review Technique
CPM: Critical Path Method

• Graphically displays project activities

• Estimates how long the project will take
• Indicates most critical activities
• Show where delays will not affect project
 The Network Diagram
• Network (precedence) diagram – diagram of project
activities that shows sequential relationships by the use
of arrows and nodes.
• Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
• Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
• Activities – steps in the project that consume resources
and/or time.
• Events – the starting and finishing of activities,
designated by nodes in the AOA convention.
 The Network Diagram (cont’d)
• Path
– Sequence of activities that leads from the starting
node to the finishing node
• Critical path
– The longest path; determines expected project
duration
• Critical activities
– Activities on the critical path
• Slack
– Allowable slippage for path; the difference the length
of path and the length of critical path
Project Network – Activity on Arrow
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move in

Interview
Hire and
train
3
Project Network – Activity on Node
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move in
Remodel

S 5 7

Hire and
Interview
train

3 4
 AON Network for House Building Project

Lay Build
foundation house
Activity Number
2 4
Activity Time
2 3

Start 1 7
3 1
Finish work
Design house 3 5 6
and obtain
1 1 1
financing
Order &receive Select Select
materials paint carpet
 Critical Path
Activity Network (Scheduling) Diagrams are used to determine Critical Path.

2 4
2 3

Start 1 7
3 1
3 5 6
1 1 1

A: 1-2-4-7
3 + 2 + 3 + 1 = 9 months  Critical path
B: 1-2-5-6-7  Longest path through a
3 + 2 + 1 + 1 + 1 = 8 months network
C: 1-3-4-7
3 + 1 + 3 + 1 = 8 months
 Minimum project
D: 1-3-5-6-7 completion time
3 + 1 + 1 + 1 + 1 = 7 months
Node Configuration
Activity Earliest Earliest
number start (ES) finish (EF)

1 0 3

3 0 3

Activity Latest Latest

duration start (LS) finish (LF)
 Activity Scheduling

• Earliest start time (ES)

 earliest time an activity can start
 ES = maximum EF of immediate predecessors

• Forward pass
 starts at beginning of CPM/PERT network to determine
earliest activity times

• Earliest finish time (EF)

 earliest time an activity can finish
 earliest start time plus activity duration
 EF= ES + t
 Activity Scheduling

• Latest start time (LS)

 Latest time an activity can start without delaying critical path
time
 LS= LF – t

• Latest finish time (LF)

 latest time an activity can be completed without delaying
critical path time
 LF = minimum LS of immediate predecessors

• Backward pass
 Determines latest activity times by starting at the end of
CPM/PERT network and working forward
 Time Estimates
• Deterministic
– Time estimates that are fairly certain
• Probabilistic
– Estimates of times that allow for variation
 Example 1
6 weeks
Deterministic 4
time estimates rder e
O itur

Furn p
3 weeks
furn

setu
8 weeks 2

itur
Rem
ate s ode

e
c
Lo ilitie l
11 weeks Move in
fac
1 5 6
1 week
In n
te
vie r trai
4 weeks w and
e
Hi r 9 weeks

3
Example 1 Solution: Deterministic
Critical Path

P
at
h L
eng
th S
la
ck
(
w e
eks
)
1
-2
-3
-4
-5
-6 1
8 2
1
-2
-5
-6 2
0 0
1
-3
-5
-6 1
4 6
Step 2- Diagram the Network for
Cables By Us
Step 3 (a)- Add Deterministic Time Estimates
and Connected Paths
 ES, EF Network
Forward Pass
 LS, LF Network
Backward Pass
Calculating Slack
 Project Evaluation and Review Technique
(PERT)
• Large complex engineering projects are usually planned using project
management systems that are based upon Project Evaluation and
Review Technique (PERT).

• The Critical Path Method uses single value deterministic estimates for
each activity duration - PERT assumes three duration estimates for
each activity (optimistic, most likely, pessimistic).

• PERT considers duration uncertainty where CPM does not

• PERT models uncertainty using the Beta distribution

• The Beta distribution can represent symmetric, left skewed or right

skewed distributions.
 Probabilistic Time Estimates
• Optimistic time
– Time required under optimal conditions
• Pessimistic time
– Time required under worst conditions
• Most likely time
– Most probable length of time that will be
required
Probabilistic Time Estimates
 Using Beta Probability Distribution to Calculate
Expected Time Durations
• A typical beta distribution is shown below, note that
it has definite end points
• The expected time for finishing each activity is a
weighted average
Calculating Expected Task Times
Network Diagram with Expected Activity Times
Estimated Path Durations through the
Network
 Variance
• Using probabilistic time estimates offers the advantage of predicting
the probability of project completion dates
• We have already calculated the expected time for each activity by
making three time estimates
• Now we need to calculate the variance for each activity
• The variance of the beta probability distribution is:

2 =(P– O) 2

36
where p=pessimistic activity time estimate
o=optimistic activity time estimate
Project Activity Variance
Variances of Each Path through the
Network
Calculating the Probability of Completing the
Project in Less Than a Specified Time
Example: Calculating the probability of
finishing the project in 48 weeks
 Reducing Project Completion Time

• Project completion times may need to be

shortened because
– Different deadlines
– Penalty clauses
– Need to put resources on a new project
– Promised completion dates

• Reduced project completion time is “crashing”

 Time-cost Trade-offs: Crashing
• Crash – shortening activity duration
• Procedure for crashing
– Crash the project one period at a time
– Only an activity on the critical path
– Crash the least expensive activity
– Multiple critical paths: find the sum of
crashing the least expensive activity on each
critical path
Project Crashing Example
Project costs are
$1000/day

10
6 b
a
2
f
5

9
c

4 e
d
 Project Crashing Solution
1. Find the critical path:

2. Rank the critical path activities in order of

lowest crashing cost, and determine the
number of days that can be crashed
Normal time –
crash time
 Project Crashing Solution
3.Crash the project, one day at a time. After each crash, re-
check the critical path.

a. Crash activity c one day for $300. Length of critical path in now 19 days.

b. Activity c cannot be crashed any more (only had 1 day available for
crashing).

c. Crash activity e one day for $600. Length of critical path is now 18 days
– same as path a-b-f.

d. Both paths are now critical. We must shorten both paths for further
improvement
 Project Crashing Solution
4. Remaining activities for crashing and costs:

5. Analysis:
a) Should we crash f? f is on both paths, and crashing cost is
$800 per day.
b) Alternatively, we may crash b ($500/day) and e ($600/day) to
reduce 1 day. But the combined cost is $1100.
 Project Crashing Solution
6. Crash f. Project duration is now 17 days.
7. Analysis: can we crash any more activities?
Cost is crash b is $500 and cost to crash e is
$600, added together ($1100) exceeds the
project daily cost of $1000.
8. Conclusion: no more crashing is feasible.
9. Summary:
 Advantages of PERT

• Forces managers to organize

• Provides graphic display of activities
• Identifies
4
– Critical activities 2
– Slack activities
1 5 6

3
 Limitations of PERT

• Important activities may be omitted

• Precedence relationships may not be
correct
4
• Estimates may include
2
a fudge factor
• May focus solely 1 5 6

on critical path
142 weeks

3
 Project Management Software

• Computer aided design (CAD)

• Groupware (Lotus Notes)
• CA Super Project
• Harvard Total Manager
• MS Project
• Sure Track Project Manager
• Time Line
 Project Risk Management

• Risk: occurrence of events that have

undesirable consequences
– Delays
– Increased costs
– Inability to meet specifications
– Project termination
 Risk Management

• Identify potential risks

• Analyze and assess risks
• Work to minimize occurrence of risk
• Establish contingency plans
 Summary
• Projects are a unique set of activities
• Projects go through life cycles
• PERT and CPM are two common techniques
• Network diagrams
• Project management software available