Chapter 7

Project Management

© 2008 Prentice-Hall, Inc.

© 2009 Prentice-Hall, Inc.
 Learning Objectives
After completing this chapter, students will be able to:
1. Understand how to plan, monitor, and control
projects with the use of The program
evaluation and review technique (PERT)
PERT and
the critical path method (CPM)
CPM
2. Determine earliest start, earliest finish, latest
start, latest finish, and slack times for each
activity, along with the total project
completion time
3. Reduce total project time at the least total
cost by crashing the network using manual
(or linear programming) techniques

© 2009 Prentice-Hall, Inc. 13 – 2

 Introduction
 Most realistic projects are large and complex
 Tens of thousands of steps and millions of dollars
may be involved
 Managing large-scale, complicated projects
effectively is a difficult problem and the stakes are
high
 The first step in planning and scheduling a project
is to develop the “Work breakdown structure”
 Time, cost, resource requirements, predecessors,
and people required are identified for each activity
 Then a schedule for the project can be developed

© 2009 Prentice-Hall, Inc. 13 – 3

 Introduction
 The program evaluation and review technique
(PERT)
PERT and the critical path method (CPM)
CPM are two
popular quantitative analysis techniques to help
plan, schedule, monitor, and control projects
 Originally the approaches “differed in how they
estimated activity times”
 PERT used three time estimates (optimistic,
pessimistic and most likely) to develop a
“probabilistic estimate” of completion time
 CPM was a more “deterministic technique”
 They have become so similar they are commonly
considered one technique, PERT/CPM

© 2009 Prentice-Hall, Inc. 13 – 4

 Six Steps of PERT/CPM
1. Define the project and all of its significant
activities or tasks
2. Develop the “relationships among the activities”
and decide which activities must precede others
3. Draw the network connecting all of the activities
4. Assign “time and/or cost estimates” to each
activity
5. *Compute the longest time path through the
network; this is called the critical path
6. “Use the network to help plan, schedule, monitor,
and control the project”
 All activities along this critical path cannot be
delayed otherwise the project will be delayed.

© 2009 Prentice-Hall, Inc. 13 – 5

 PERT/CPM
 Given the large number of tasks in a project, it is
easy to see why the following 7 questions are
important:
1. When will the entire project be completed?
2. What are the critical activities or tasks in the
project, that is, the ones that will delay the entire
project if they are late?
3. Which are the non-critical activities, that is, the
ones that can run late without delaying the entire
project’s completion?
4. If there are three time estimates(PERT), what is
the probability that the project will be completed
by a specific date?
© 2009 Prentice-Hall, Inc. 13 – 6
 PERT/CPM
5. “At any particular date, is the project on
schedule,” behind schedule, or ahead of
schedule?
6. “On any given date, is the money spent equal to,
less than, or greater than the budgeted amount?”

7. Are there “enough resources available to finish

the project on time?”

© 2009 Prentice-Hall, Inc. 13 – 7

Project Evaluation and Review
Technique (PERT)
 E.g.: Consider a construction project
with six activities as provided below:
 Table: Project activities

Activity Time (in weeks) Immediate Predecessors

A 10 -
B 5 -
C 4 A
D 3 B
E 6 A,D
F 5 C,E

© 2009 Prentice-Hall, Inc. 13 – 8

 Drawing PERT network

A C F Finish

Start

B D E

© 2009 Prentice-Hall, Inc. 13 – 9

 Estimation of Activity Times

 PERT employs a probability

distribution based on three time
estimates for each activity
 A weighted average of these
estimates is used for the time
estimate and this is used to
determine the critical path

© 2009 Prentice-Hall, Inc. 13 – 10

 Activity Times
 The time estimates in PERT are

Optimistic time (a) =time an

activity will take if everything goes
as well as possible. There should be
only a small probability (say, 1/100) of
this occurring.
Pessimistic time (b) =time an
activity would take assuming very
unfavorable conditions. There
should also be only a small
probability that the activity will really
take this long.
Most likely time (m) =most
realistic time estimate to complete
the activity
© 2009 Prentice-Hall, Inc. 13 – 11
 Activity Times
 PERT often assumes time estimates follow a beta
probability distribution

Probability of 1 in 100
of a Occurring
Probability

Probability of 1 in
100 of b Occurring

Activity Time
Most Most Most
Optimistic Likely Pessimistic
Time Time Time
(a) (m) (b)
Figure 13.2
Note: Beta distribution can be understood as representing a distribution of
probabilities- that is, it represents all the possible values of a probability when we
© 2009 Prentice-Hall, Inc. 13 – 12
don't know what that probability is.
 Activity Times
 The formula for the expected activity time (t)
(from previous slide) is written below:

a  4m  b
E( t)
6

 To compute the dispersion or variance of activity

completion time,
time we use the formula
2
ba
Var(t), Variance   
 6 

© 2009 Prentice-Hall, Inc. 13 – 13

 Table: Expected Time &
Variance(ref. slide 13,14)
 Time estimates (weeks) for A Construction Project
EXPECTED
MOST TIME, VARIANCE,
OPTIMISTIC, PROBABLE, PESSIMISTIC, E(t) = [(a + 4m Var(t) =
ACTIVITY a weeks m weeks b weeks + b)/6] [(b – a)/6]2
A 9 10 11 10 4/36
B 4 5 6 5 4/36
C 2 4 6 4 16/36
D 1 3 5 3 16/36
E 3 6 9 6 36/36
F 4 5 6 5 4/36

= 1.222

© 2009 Prentice-Hall, Inc. 13 – 14

 Expected Completion Time of
Each Activity

A 10 C4 F5 Finish

Start

B5 D3 E6

© 2009 Prentice-Hall, Inc. 13 – 15

 Determine The Critical Path
 The critical path of a project is the
longest time path route of the project.
 We examine the project network and
find three time paths for the project:
Path Time
A-C-F 10 + 4 + 5 = 19 weeks
A-E-F 10 + 6 + 5 = 21 weeks
B-D-E-F 5 + 3 + 6 + 5 = 19 weeks

The longest path is A-E-F.

© 2009 Prentice-Hall, Inc. 13 – 16
 Thus, the critical path is A-E-F and the
project completion time is 21 weeks.
 All activities along the critical path
cannot be delayed as any delay will
cause the project to be delayed.
 The variance of the project
completion time(A-E-F ) is 4/36 +
4/36+ 16/6+ 16/6 + + 36/6+ 4/36
= 1.2222.

© 2009 Prentice-Hall, Inc. 13 – 17

 How to Find the Critical Path
 In the nodes, the activity time and the early and
late start and finish times are represented in the
following manner
ACTIVITY t
ES EF
LS LF

 Earliest times are computed as

Earliest finish time =
Earliest start time
+ Expected activity time
*EF
Earliest start = Largest of the earliest = times
finish ES of + t
immediate predecessors
*ES = Largest EF of immediate predecessors
© 2009 Prentice-Hall, Inc. 13 – 18
 Earliest start time(ES), Earliest Finish Time (EF),
Latest Start Time (LS), Latest Finish Time(LF), and
Slack (s)

 Latest start time(LS): the latest time

an activity can start
 Latest finish time(LF): the latest time
an activity can finish without
delaying the project.
 Use backward calculation to estimate
LF & LS

© 2009 Prentice-Hall, Inc. 13 – 19

 *LS = LF – expected activity time
 *For an activity with several
following activities, the “latest finish
time(LF) is the smallest of the latest
start times for the following
activities” (this is because the
following activities can only start if
that activity is completed)

© 2009 Prentice-Hall, Inc. 13 – 20

 The earliest start time and the earliest
finish time by forward pass

A 10 C 4 F 5
0 10 10 14 16 21 Finish

Start

B 5 D 3
0 5 5 8 E 6
10 16
For activity A: (EF=ES + the expected activity time), ES =
0 and EF = 0 + 10 = 10; for C: ES=10 and EF= 14 (10 + 4);
Note: ES for F:choose the largest EF(16) of E rather then
smaller EF(14) of C © 2009 Prentice-Hall, Inc. 13 – 21
 The latest start time and the latest
finish time by backward pass

A 10
C 4 F 5
0 10
10 14 16 21
0 10
12 16 16 21 Finish

Start

B 5 D 3
0 5 5 8 E 6
2 7 7 10 10 16
10 16

For activity F: (LS = LF – expected activity time), LF=21, LS=21-

5= 16; for A: LF=10(= smallest LS for following activities
D(LS=10) instead of C(LS=12) and A’s LS= 10 –10 = Prentice-Hall,
© 2009 0 Inc. 13 – 22
 The complete latest start time and latest
finish time of activities with slacks

A 10
C 4 F 5
0 10
10 14 16 21
0 10
12 16 16 21 Finish

Start

B 5 D 3
0 5 5 8 E 6
2 7 7 10 10 16
10 16

The slack (or total float), s = LS(latest start time) – ES(earliest start
time) or s = LF – EF. Slack: the length of time an activity can be
delayed without affecting project completion time . © 2009 Prentice-Hall, Inc. 13 – 23
 Critical path: slack=0. Since the slacks
for activities A, E and F are all zero,
these activities lie on the critical path.
 These activities cannot be delayed as
any delay will affect the project
completion time.
 Critical path: A-E-F
 Project completion time = 21 weeks.
 *Thus critical paths are determined by
identifying the activities with zero
slacks.
© 2009 Prentice-Hall, Inc. 13 – 24
 Eg. 2: General Foundry Example of
PERT/CPM
 General Foundry, Inc. has long been trying to
avoid the expense of installing air pollution
control equipment
 The local environmental protection group has
recently given the foundry 16 weeks to install a
complex air filter system on its main smokestack
 General Foundry was warned that it will be forced
to close unless the device is installed in the
allotted period
 They want to make sure that installation of the
filtering system progresses smoothly and on time

© 2009 Prentice-Hall, Inc. 13 – 25

 General Foundry Example of
PERT/CPM
 Activities and immediate predecessors for
General Foundry
IMMEDIATE
ACTIVITY DESCRIPTION
PREDECESSORS
A Build internal components —
B Modify roof and floor —
C Construct collection stack A
D Pour concrete and install frame B
E Build high-temperature burner C
F Install control system C
G Install air pollution device D, E
H Inspect and test F, G
Table 13.1

© 2009 Prentice-Hall, Inc. 13 – 26

 General Foundry Example of
PERT/CPM
 Network for General Foundry

A C F
Build Internal Construct Install Control
Components Collection Stack System

E H
Start Inspect Finish
Build Burner
and Test

B D G
Modify Roof Pour Concrete Install Pollution
and Floor and Install Frame Device

Figure 13.1

© 2009 Prentice-Hall, Inc. 13 – 27

 Activity Times
 Time estimates (weeks) for General Foundry

MOST EXPECTED VARIANCE,

OPTIMISTIC, PROBABLE, PESSIMISTIC, TIME,
ACTIVITY a m b t = [(a + 4m + b)/6] [(b – a)/6]2
A 1 2 3 2 4/36
B 2 3 4 3 4/36
C 1 2 3 2 4/36
D 2 4 6 4 16/36
E 1 4 7 4 36/36
F 1 2 9 3 64/36
G 3 4 11 5 64/36
H 1 2 3 2 4/36
25

Table 13.2

© 2009 Prentice-Hall, Inc. 13 – 28

 How to Find the Critical Path
 General Foundry’s network with expected activity
times

A 2 C 2 F 3

E 4 H 2
Start Finish

B 3 D 4 G 5

Figure 13.3

© 2009 Prentice-Hall, Inc. 13 – 29

 How to Find the Critical Path
 General Foundry’s ES and EF times

A 2 C 2 F 3
0 2 2 4 4 7

E 4 H 2
Start 4 8 13 15 Finish

B 3 D 4 G 5
0 3 3 7 8 13

Figure 13.4

© 2009 Prentice-Hall, Inc. 13 – 30

 How to Find the Critical Path
 Latest times are computed as

Latest start time(LS) = LF –

Expected activity time
LS = LF – t
Latest finish time(LF) = Smallest of latest start
times for following activities (this is because the
following activities can only start if that activity is
completed)

 For activity H

LS = LF – t = 15 – 2 = 13 weeks

© 2009 Prentice-Hall, Inc. 13 – 31

 How to Find the Critical Path
 General Foundry’s LS and LF times

A 2 C 2 F 3
0 2 2 4 4 7
0 2 2 4 10 13

E 4 H 2
Start 4 8 13 15 Finish
4 8 13 15

B 3 D 4 G 5
0 3 3 7 8 13
1 4 4 8 8 13

Figure 13.5
Note: LF=Smallest of LS for following activities
e.g. C: LF= 4 rather than 10 © 2009 Prentice-Hall, Inc. 13 – 32
 How to Find the Critical Path
 Once ES, LS, EF, and LF have been determined, it
is a simple matter to find the amount of slack
time that each activity has
Slack = LS – ES, or Slack = LF – EF
 From Table 13.3 we see activities “A, C, E, G, and
H have no slack time”
 These are called critical activities and they are
said to be on the critical path
 The total project completion time is 15 weeks

© 2009 Prentice-Hall, Inc. 13 – 33

 How to Find the Critical Path
 General Foundry’s critical path

A 2 C 2 F 3
0 2 2 4 4 7
0 2 2 4 10 13

E 4 H 2
Start 4 8 13 15 Finish
4 8 13 15

B 3 D 4 G 5
0 3 3 7 8 13
1 4 4 8 8 13

Figure 13.6

© 2009 Prentice-Hall, Inc. 13 – 34

Determining the Probability of Project
Completion(Using example 1)

 First, let T be the project completion

time, given the expected project
completion time, µ, and the variance,
σ2 from the previous construction
project using PERTmethod (e.g. 1)
 We can write T ~ N(µ, σ2) which
means T is normally distributed with
mean µ and variance σ2

© 2009 Prentice-Hall, Inc. 13 – 35

 To determine that the project can be
completed within k weeks, we use
the transformation Z = (T- µ) / σ,
where Z is a random variable with
standard normal distribution.
 Standard normal table is used to
determine the probability.
 The critical path of the construction
project is A-E-F,

© 2009 Prentice-Hall, Inc. 13 – 36

 The expected project completion
time, µ, is 21 weeks. The variance σ2
is 1.2222, and thus we write
T ~ N(µ=21 weeks, σ2 = 1.2222),
We can compute the following
probabilities:
(a)Probability that the project can be
completed in 20 weeks
= P(T ≤ 20 weeks)
= P(Z ≤ (20 – 21) / √1.2222© 2009 Prentice-Hall, Inc. 13 – 37
 P(Z ≤ -0.90) 0.1841
= 0.1841(0.5-0.3159)
-0.90 0 0.3159 from normal table
(b) Probability that the project can be
completed in 22 weeks
= P(T ≤ 22 weeks)
= P(Z ≤ (22 – 21) / √1.2222
0.8159
= P(Z ≤ 0.90) 0.1841
= 1 - 0.1841
= 0.8159 0.90
© 2009 Prentice-Hall, Inc. 13 – 38
(c) Probability that the project is
completed in more than 22 weeks
= P(T ≥ 22 weeks)
= P(Z ≥ (22 – 21) / √1.2222
= P(Z ≥ 0.90)
0.1841
= 0.1841

0 0.90

© 2009 Prentice-Hall, Inc. 13 – 39

(d) Probability that the project is
completed within 20 and 21 weeks
= P(20≤ T ≤ 21 weeks)
= P((20 – 21) /√1.2222 ≤ Z ≤ (21 – 21) /
√1.2222
= P(-0.90 ≤ Z ≤ 0) 0.3159

= 0.5 – 0.1841
-0.9 0
= 0.3159
0.1841 0.5
© 2009 Prentice-Hall, Inc. 13 – 40
 E.g. 2: Probability of Project
Completion
 The critical path analysis helped determine the
expected project completion time of 15 weeks (air
pollution filter)
 But variation in activities on the critical path can
affect overall project completion, and this is a major
concern
 If the project is not complete in 16 weeks, the
foundry will have to close
 PERT uses the “variance of critical path activities”
to help determine the variance of the overall project
 Critical path: A-C-E-G-H

© 2009 Prentice-Hall, Inc. 13 – 41

 Probability of Project Completion
 From Table 13.2 (slide 30) we know that

ACTIVITY VARIANCE
A 4/36
B 4/36
C 4/36
D 16/36
E 36/36
F 64/36
G 64/36
H 4/36

 Hence, the project variance is

Project variance = 4/36 + 4/36 + 36/36 + 64/36 + 4/36 = 112/36 = 3.111

© 2009 Prentice-Hall, Inc. 13 – 42

 Probability of Project Completion

 We know the standard deviation is just the

square root of the variance, so

Project standard deviation   T  Project variance

 3.11  1.76 weeks
 We assume activity times are independent and
total project completion time is normally
distributed

© 2009 Prentice-Hall, Inc. 13 – 43

 Probability of Project Completion
 The standard normal equation can be applied as follows
 Probability that the project can be completed in 16 weeks or less (Z = (T- µ) / σ)
=
 = P (Z
 = P (Z ≤

P(T ≤ 16 Weeks)
≤ (16 – 15) / √ 3.11
0.57) = 0.5 + 0.2157
=0.71566
 That means there is a 71.6% probability this
project can be completed in 16 weeks or less

© 2009 Prentice-Hall, Inc. 13 – 44

 What PERT Was Able to Provide
 PERT has been able to provide the project manager
with several valuable pieces of information
 The project’s expected completion date is 15 weeks
 There is a 71.6% chance that the equipment will be
in place within the 16-week deadline
 Five activities (A, C, E, G, H) are on the critical path
 Three activities (B, D, F) are not critical but have
some slack time built in
 A detailed schedule of activity starting and ending
dates has been made available
 *Continue onto project crashing & CPM (next slide)

© 2009 Prentice-Hall, Inc. 13 – 45

 Project Crashing
 Projects will sometimes have deadlines
that are impossible to meet using normal
procedures
 By using exceptional methods it may be
possible to finish the project in less time
than normally required
 However, this usually increases the cost
of the project
 Reducing a project’s completion time is
called crashing

© 2009 Prentice-Hall, Inc. 13 – 46

 Project Crashing
 Crashing a project starts with using the normal
time to create the critical path
 The normal cost is the cost for completing the
activity using normal procedures
 If the project will not meet the required deadline,
extraordinary measures must be taken
 The crash time is the shortest possible activity
time and will require additional resources
 The crash cost is the price of completing the
activity in the earlier-than-normal time

© 2009 Prentice-Hall, Inc. 13 – 47

 Five Steps to Project Crashing

1. Find the normal critical path and identify

the critical activities
2. Compute the crash cost per week (or
other time period) for all activities in the
network using the formula

Crash cost – Normal cost

Crash cost ∻ Time period =
Normal time – Crash time

© 2009 Prentice-Hall, Inc. 13 – 48

 Five Steps to Project Crashing
3. Select the activity on the critical path with the
smallest crash cost per week and crash this
activity to the maximum extent possible or to
the point at which your desired deadline has
been reached.
4. If this is not sufficient, an activity with the next
lowest crash cost per week is selected and is
crashed to the requirement. However, we need
to check whether the critical path remains
critical.
5. If another route also becomes critical, the route
needs to be considered as well.

© 2009 Prentice-Hall, Inc. 13 – 49

E.g. 1: Acer Company produces a
software called Genesis
 Table: Activities of Genesis

Activity Immediate Time (weeks) Cost (RM)

Predecessors Normal Crash Normal Crash

A - 3 2 800 1400
B - 2 1 1200 1900
C A 5 3 2000 2400
D B 5 3 1500 2300
E C, D 6 4 2000 2800
F C, D 2 1 600 1000
G F 2 1 500 1000

© 2009 Prentice-Hall, Inc. 13 – 50

(a) Draw a project network.
(b) Find the critical path
(c) What is the normal expected project completion
time?
(d) What is the total project cost using the normal
times?
(e) If the project is to be completed in 13 weeks,
determine which activities to crash at a minimum
cost. What additional cost is incurred? What is
the total cost?
(f) If the project is to be completed in 12 weeks,
determine which activities to crash at a minimum
cost. What additional cost is incurred?
© 2009 Prentice-Hall, Inc. 13 – 51
 Acer Company
Solution:
(a)

A3 C5 F2 G2 Finish

Start

B2 D5 E6

© 2009 Prentice-Hall, Inc. 13 – 52

There are four routes:
Route Time
A-C-F-G 3 + 5 + 2 + 2 = 12 weeks
A-C-E 3 + 5 + 6 = 14 weeks
B-D-E 2 + 5 + 6 = 13 weeks
B-D-F-G 2 + 5 + 2 + 2 = 11 weeks
(b) Since the longest time path is ACE,
The critical path is ACE

© 2009 Prentice-Hall, Inc. 13 – 53

(c) The normal expected project
completion time is 14 weeks
(d) The total project cost using the
normal time is (A to G)
= Rm800 + Rm1200 + RM2000
+ RM1500 + RM2000 + RM600 +
RM500 = Rm8600
(e) We need to compute crash cost per
week for each activity.

© 2009 Prentice-Hall, Inc. 13 – 54

 E.g. 1: Acer Company:
Crash Cost per Week
 Table: Activities of Genesis
Activity Immediate Time (weeks) Cost (RM) Maximum Crash C
Predecessors Can Per wee
crash
(week)
Normal Crash Normal Crash

A* - 3 2 800 1400 1 (1400-80

B - 2 1 1200 1900 1 (1900-12
C* A 5 3 2000 2400 2 (2400-20
D B 5 3 1500 2300 2 (2300-15
E* C, D 6 4 2000 2800 2 (2800-20
F C, D 2 1 600 1000 1 (1000-60
G F 2 1 500 1000 1 (1000-50
© 2009 Prentice-Hall, Inc. 13 – 55
 The activity with the lowest crash cost per week
along the critical path is C (RM200). Thus crash
this activity C by 1 week and the additional cost
is RM200
 The total cost is now RM8600 + RM200 = RM8800.
(for 13 weeks completion time)
(f) For 12 weeks: Now we have two critical paths:
ACE and BDE(both have longest path of 13
weeks).
Since E is common for both the routes and the cost
is the lowest (RM400), we crash E by 1 week with
additional cost of RM400. The project can be
completed in 12 weeks with total cost of RM9,200.

© 2009 Prentice-Hall, Inc. 13 – 56