Week 5 – Critical Path and Budgets

BUS1040 Online – Spring / Summer 2021

Key Course Milestone Dates
Date Topic Grades
Week 1 Introduction Overview Participation Activity 2%
Week 2 Project Selection Participation Activity 3%
Week 3 Project Definition Participation Activity 2%
Week 4 Project Planning Participation Activity 2%
Week 5 Project Planning (cont’d) Participation Activity 2%
Week 6 Midterm Exam Review and Team Meetings Project proposal due - 5%
Week 7 Midterm Exam 25%
Week 8 No Class - Intersession Week
Week 9 Project Monitoring
Week 10 Project Quality / Close Participation Activity 2%
Week 11 Team Meetings - Project Health Checks Participation Activity 2%
Week 12 Team Project: Written Reports Due 20% (5% + 20%= 25%)
Week 13 Team Project: Videos Due 15%
Week 14 Final Exam Review
Week 15 Final Exam 20%
Learning Objectives for Today
1.Understanding the use and value of critical path.
2.Calculating the Project Budget
3.Review Expectations for the Team Project
Project Planning

Project Project Project Project

Definition Planning Execution Close-Out
Waterfall Planning
Sequential Process, where progress is seen as flowing steadily downwards
(like a waterfall) through the project phases
Sashimi Planning
This approach to planning keeps the similar sequential approach of a
“waterfall” methodology, but recognizes that the break between phases are
never completely distinct.
Agile Planning
Recognizes that not all information about the project can be known at one
time, and aims to minimize delays between starting next project stages. It
highlights an Iterative process, which allows the team to proceed through the
project lifecycle for pieces or requirements of a project that are completely
understood, while other undefined aspects of the project get further
definition.

The following video helps explain Agile Development http://www.youtube.com/watch?v=OJflDE6OaSc&feature=related

Additional Supplementary Resources: Watch the following video that explains and compares the 3 Project Planning Approaches (Waterfall, Sashimi, and
Agile)
Agile vs Waterfall Video
 Gantt Charts
 One of the oldest and most
useful methods of presenting
schedule information – still
used by many organizations
today

 The Gantt chart shows

planned and actual progress
for a number of tasks
displayed against a horizontal
time scale

It is an effective and easy-to-

read method of indicating the
actual current status for each
set of tasks vs. the planned
progress for each item of the
set

 It can be helpful in expediting,

sequencing, and reallocating
resources among tasks
Gantt Chart Advantages
Even though they may contain a great deal of information, they are
easily understood
While they may require frequent updating, they are easy to maintain
Gantt charts provide a clear picture of the current state of a project
They are easy to construct – Microsoft Project generates Gantt Charts
automatically
Critical Path
THE LONGEST DURATION THROUGH THE
PROJECT
Calculating the Length of a
Project
Assuming a project involves 3 tasks, all starting on the same day
Task A takes 5 days

Task B takes 4 days

Task C takes 3 days

How long will this project take to complete?

Critical Path
The critical path specifically refers to the sequence or order of schedule
activities that will make up the entire duration of a project.
The critical path represents the LONGEST path through the entirety of
the project
Calculating the critical path will give us important management
information. Mainly,
1.How long we expect the project to take
2.What tasks are “critical” and therefore should be closely monitored
3.What tasks are non-critical, and how much “slack” time do they hold before
they impact the project timeline
Video: Introduction to Critical
Paths
Please view the step-by-step video by Derek.

Derek Vigar’s video

Schedule Network Analysis
A technique that helps identify the critical path, generates the project
schedule, and defines activity “slack” time.
Activity - specific task or set of tasks that are required by the project,
use up resources, and take time to complete
Event - result of completing one or more activities. An identifiable end
state occurring at a particular time. Events use no resources.
Network - combination of all activities and events define the project
and the activity precedence relationships
Path - series of connected activities (or intermediate events) between
any two events in a network
Critical - Activities, events, or paths which (if delayed), will delay the
completion of the project. A project’s critical path is understood to
mean that sequence of critical activities that connect the project’s start
event to its finish event
 Example: Constructing a
Network Diagram
The Data: (Collected after completing your Work Package or Work Breakdown
Structure)

Task Precedence Time

A None 5 days

B None 4 days

C A 6 days

D B 2 days

E B 5 days

F C,D 8 days

Step #1 –From the “Start”, identify the Tasks that do not have any Predecessor
Activities

35
Project Management: A Managerial Approach – Samuel J. Mantel, Jr. & Jack R. Meredith. Fourth Edition
 Example: Constructing a
Network Diagram
Step #2 – Build on the tasks that depend on the completion of these tasks

Step #3 – Continue to build on the tasks that depend on the completion of these tasks.

When completed, make sure that the project is closed off at a single “END”

36
Project Management: A Managerial Approach – Samuel J. Mantel, Jr. & Jack R. Meredith. Fourth Edition
 Example: Constructing a Network
Diagram
Step #4 – Add in the times required to complete each task.

The Critical Path is then defined as the path

6 with the longest duration from Start to End

Critical Path = A,C,F (19days)

Step #5 – Calculate Slack for activities which do not appear along the Critical Path

37
Project Management: A Managerial Approach – Samuel J. Mantel, Jr. & Jack R. Meredith. Fourth Edition
 Slack / Float Time
Total float is the duration of delay allowed within the project which will
not interfere with the projected completion date
To calculate, compare the difference between the earliest start time
(EST) and latest start time (LST) for a specific task, in each path for
which it is a part. The lowest calculated slack time for a task, in each of
these paths, is the total slack time for that task

For Example Therefore:

ABC = 10 days ADE is the critical path at 12 days
ADE = 12 days
BFG = 9 days To find slack for “B” The Slack
ADE – ABC = 2 days Time of B is
ADE – BFG = 3 days 2 days
Budgeting
COST AND BUDGET ESTIMATING
Budget and Cost Estimation
What is a Project Budget?
 A plan for allocating resources
 A standard for comparison
 A baseline from which to measure the difference between the actual
and planned use of resources
 A project plan (or work breakdown structure) with detailed cost
information

The Basis for Estimating a Project Budget

 Forecast what resources the project will require
 Determine how many of each resource is needed
 Decide when they will be needed
 Understand how much they will cost - including the effects of
potential price inflation
 Include any overhead costs specifically attributed to the project
 The Link: WBS & Budget
An accurate budget can be built by leveraging a well-thought out WBS

17
 Approaches to Budget Estimation
1. The Top-Down Strategy
 Top & middle management use their judgment & experiences to estimate an
overall total project cost
 These cost estimates are then allocated to line managers for each sub-project
who allocate the budget to each of the required tasks and units

2. The Bottom-Up Strategy

 In this method, tasks, their schedules, and their individual budgets are
constructed following the WBS or project action plan
 The people doing the work are consulted regarding times and budgets for the
tasks to ensure the best level of accuracy

3. Parametric Estimating
 Project characteristics (parameters) are expressed in a mathematical model/database
 E.g (cost per square foot)

 Considered to be a form of top-down estimating

4. Analogous Estimating
 Uses a previous similar project as the baseline

5. Three-Point Estimating
 Manages estimate uncertainty and risk by defining most likely, optimistic, and
pessimistic scenarios (take the average of all 3…more weight to likely scenario)

6. Vendor Bid Analysis

 Analysis of what the project should cost based on responsive bids from qualified vendors
Comparing Budget Approaches
Top-Down Budgeting
Advantages
 Aggregate budgets can often be
developed quite accurately
 Budgets are stable as a percent of
total allocation
 The statistical distribution is also
stable, making for high predictability
 Small yet costly tasks do not need to
be individually identified
 The experience and judgment of the
executive accounts for small but
important tasks to be factored into
the overall estimate
Bottom-Up Budgeting
Advantages
 Participative Management
 Individuals closer to the work are
apt to have a more accurate idea
of resource requirements
 The direct involvement of low-
level managers in budget
preparation increases the
likelihood that they will accept
the plans
 Involvement is a good
managerial training technique,
giving junior managers valuable
experience

So which Approach is more Common?

Typically a Hybrid of Top-Down and Bottom-Up
 Senior managers provide a framework and direction before engaging staff

 People closest to the work participate and estimate within these guidelines

 Senior management then consolidates, streamlines, removes duplication, etc.

A Budget Example
Example: Building an eCommerce Website
 Below is an example of how the WBS is transformed into a budget
 Note that revenue is an important consideration in justifying the budget

WBS Cost/hr Total Work Hours Total Cost

Define Requirements 100 16 1600

Write Copy 75 8 600
Create Creative Mockups 120 16 1920
Get Client Approval 75 4 300
Get Legal Approval 100 4 400
Build website front end 120 24 2880
Build website back end 130 24 3120
Test for Quality 80 4 320
Get final Client Signoff 75 4 300
Setup Tracking & Reporting 75 4 300
Launch 100 2 200

$ 11,940 Total Cost

  Price Forecast Unit Sales

Total
Revenue $25 2,000 $50,000 Revenue

$38,060 Total Profit

Using MS Project to Create
Your Budget
Step 1 – Complete Task Durations

Step 2 – Populate Resource Rates in

“Resource View”

Step 3 – Insert “Cost” Column & Assign

Resources to Tasks
Improving the Process of Cost
Estimation
Professional Estimators
It takes the input of many people to prepare an estimate for a project
Some organizations may setup an actual department whose specific
purpose is to prepare estimates
It is the job of the PM to generate a description of the work to be done
on the project and feed this info into the estimator
Even with the most accurate info – problems / changes will arise which
can =  money

Managing the Risks in Estimates

There are two ways to manage the risks that occur on every project:
1. The most common is to make an allowance for contingencies
 Use a fixed percentage such as 5 or 10%
2. Another is to forecast the “most likely, optimistic, and pessimistic”
estimates
Meeting Budget Estimates
The Probability of Hitting Initial Budget Estimates is Low
 60 – 80% of projects fail to meet their time, cost, and/or
specification objectives
 There are several common causes:
 Arbitrary and impossible goals
 Scope creep
 “Priced to Win”
 Changes in resource prices
 Failure to include an allowance for waste and spoilage
 Bad luck

What Can Project Managers Do

 Exercise strong project tracking & reporting
 Manage the change process
 Adjust other factors (timeline, scope) if necessary
 Be accountable and exert project control
 Keep communication lines open
Weekly Participation Assignment:
Critical Path (2%)
1. Given the following activities, Activity Predecessor Time (days)
predecessors, and times, draw a
A___________ - 3
critical path network diagram
B ______ - 2
2. What is the critical path?
C ______ - 6
3. How long will it take to
complete the project? D ______ B 5

4. What is the slack time for E ______ A 3

activity C? F ______ A 5
5. What is the slack time for G __ E&D 4
activity I?
H_______ C 2
I ______ F&G 4
Network diagram
Participation
For next week – Week 6
1. Midterm Exam Review Video is available in BB in
Weekly Learning Materials folder for June 14 and 15.
2. Team/group meetings scheduled and will take place in
MS Teams– see email
3. Project Proposals Due Next Week
◦ Monday’s Class June 14
◦ Tuesday’s Class June 15

4. Week 7 will be midterm exam during class time in BB.