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Project Management

By:- Kumar Ratnesh

CHAPTER-1

2

Concept of Project
A project is a temporary endeavor undertaken to create a unique product or service. It implies
– a specific timeframe – a budget – unique specifications – working across organizational boundaries

Project Management Project management is about creating an environment conducive to getting critical projects done! Project management is about changing people’s behavior .

Why Project Management? • Today’s complex environments require ongoing implementations • Project management is a method and mindset…a disciplined approach to managing chaos • Project management provides a framework for working amidst persistent change .

Why Projects Fail • • • • • • Failure to align project with organizational objectives Poor scope Unrealistic expectations Lack of executive sponsorship Lack of project management Inability to move beyond individual and personality conflicts • Politics .

Why Projects Succeed! • • • • • • • Project Sponsorship at executive level Good project charter Strong project management The right mix of team players Good decision making structure Good communication Team members are working toward common goals .

Why this matters to YOU • Most of us get to where we are by some technical or specific set of skills • If you want to get things done. you need a good blend of – – – – Business knowledge People management Knowledge of organizational politics AND an area of technical expertise Those are the people that make things happen! .

within a given budget and time period. .What is Project? • • • • • Objective Activities ⇒ Outputs Duration Budget(Input) Resources (Input) An undertaking for the purpose of achieving established objectives.

defines “it as the whole complex of activities involved in using recourses to gain benefits”.CONCEPT ►The dictionary meaning of project is speculative meaning . risk . . and vision. ►Gilliner:. ►It deal with three dimensions :-innovation .

CHARACTERISTICS OF A PROJECT ►Investment pattern ►Expected result ►Time limit ►Location .

►It has been defined as “The process of planning directing a project from its inception to its completion in a given cost to generate a given results”. .PROJECT MANAGEMENT ►Project management is the modern context is a highly sophisticated and fast developing concept and practice.

PHASES OF PROJECT MANAGEMENT ►Identification ►Formulation ►Appraisal ►Selection ► Implementation ►Management .

Economic project ►Financial institution classification .ROJECT CLASSIFICATION ►Quantitative & non-quantitative project ►Sectoral project ►Techno.

CHAPTER-2 15 .

. completion and analysis of economic data for the eventual purpose of locating possible opportunity for investment and with the development of the characteristics of such opportunity.PROJECT IDENTIFICATION ►It is concerned with the collection.

CONSTRAINTS IN PROJECT IDENTIFICATION ►Internal constraints ►External constraints .

TECHNIQUES OF PROJECT IDENTIFICATION
►Desk research ►Techno-Economic survey

CRITERIA FOR PROJECT SELECTION
►Investment size ►Location ►Technology ►Equipment ►Marketing

STAGES OF PROJECT FORMULATION
►Feasibility Analysis ►Techno-economic analysis ►Project design and network analysis ►Input analysis ►Financial analysis ►Pre-investment analysis

PROJECT FEASIBILITY ►The methods are as follows:►Economic analysis ►Financial analysis ►Market analysis ►Technical assessment ►Managerial competence .

TOOLS OF PROJECT APPRAISAL ►Financial appraisal ► Economic appraisal ►Technological appraisal ►Socio-economic appraisal ►Managerial appraisal .

What is Project Cycle ? • • • • • • • • Project identification Project formation Appraisal Implementation Monitoring Plan revision Evaluation Feedback .

Project Cycle Management Evaluation PDM Planning Implementation .

Do See We are in this stage. Plan Do Plan See Do Plan See .

Project Design Matrix(PDM) Narrative Objectively Summary Verifiable Indicators Overall Goal Project Purpose Outputs Activities Inputs Pre-conditions Means of Important Verification Assumptions .

Whether these conditions develop or not is uncertain. but that cannot be controlled by the projects.PDM Vertical Logic • Project Purpose Objectives that the project should achieve within the project duration • Overall Goal Direction that the project should take next • Outputs Strategies for achieving the Project Purpose • Activities Specific actions taken to produce Outputs • Important Assumptions Conditions important for project success. .

• Preconditions Conditions that must be fulfilled before a project gets underway . materials. • Inputs Personnel. facilities and funds required by the project. equipments. • Means of Verification Data sources from which indicators are derived.PDM Horizontal Logic • Objectively Verifiable Indicators Standards for measuring project achievement.

Characteristics of PCM Participatory Approach Logicality Transparency Consistency ProblemSolving .

Development of PCM Method • Late 1960s • Early 1980s Logical Framework (USAID) ZOOP (GTZ) ➢ International Agencies introduce the Logframe Objectives-Oriented Project Planning ➢ European countries adapt the ZOPP • Early 1990s PCM(FASID) ➢ JICA begins full-scale introduction of the PCM .

Participants in the Workshop Moderator Recipient country implementing agency Recipient country government al agency Other organization Resident of the community Expert in a related issue Personnel of the donor agency .

PCM Workshop Analyzing step by step Consensus Cards &Board Moderator Working as a team Brainstorming Visualizing ideas .

Do not remove a card from the board before a consensus is obtained.8 Rules 1. Write only one idea on a card. Make it a rule to write cards before beginning discussions. 5. Write down your own statement on a card. . Do not ask who wrote a particular card. Make your statement specific. Stick to the facts and avoid abstractions and generalizations. 2. 3. 6. Express your statement in a concise sentence. 8. 7. 4.

Project Selection Planning Stage PDM Appraisal Plan of Operation .7 Steps in PP Analysis Stage Stakeholders Analysis Problems Analysis Objectives Analysis We are practicing by this stage.

problems.STEP1 Stakeholders Analysis Identify the issues. . Tentatively select a target group. and current conditions of the target area through analyzing the area and local residents targeted for assistance. Focus on people and organization. related groups. related organizations and agencies.

. in the form of a Problem Tree. It clarifies the relationships among the identified problems.STEP2 Problems Analysis Problems Analysis visually represents the causes and effects of existing problems in the project area.

. This stage also requires an Objective Tree.STEP3 Objectives Analysis Objective Analysis clarifies the means-ends relationship between the desirable situation that would be attained one problems have been solved and the solution for attaining it.

. based upon selection criteria.STEP4 Project Selection Project Selection is a process in which specific project strategies are selected from among the objectives and means raised in Objectives Analysis.

STEP5 Formation of the PDM The project design Matrix (PDM) is formed through elaborating the major project components and plans based on the approach selected. and therefore can be commonly used worldwide. The format of PDM is similar to that of the Logical Framework. .

It is composed of the following stage: (1) Examination of the details of the PDM elements. . (3) examination from the perspective of the five evaluation criteria.STEP6 PDM Appraisal The PDM Appraisal is conducted by an aid agency to ensure the project plan. (2) review of the PDM formation process.

STEP7 Plan of Operations The Plan of Operation is prepared by the project implementers. based on the PDM and other information. It is an effective tool for project implementation and management. and provides important data for monitoring and evaluation of the project. .

Avoid Generalization. 5. Write in a Sentence. 3. Don’t Write a Cause and Effect in One Card. 2. Avoid “No Solution”.– Be Specific. 4. Make Clear “Subject and Object”. .Rules for Writing Problems 1. Be Specific Whose problem.

Example: Format of Plan of Operation Activities Expected Results Schedule Person in Charge Implementer Materials and Equipment Cost Remarks 1-1 1-1-1 1-1-2 2-1 2-1-1 2-1-2 .

Relevance 5. Sustainability . Efficiency 2.Monitoring and Evaluation The Five Evaluation Criteria 1. Effectiveness 3. Impact 4.

• Efficiency
The productivity in project implementation. The degree to which Inputs have been converted into Outputs.

• Effectiveness
The degree to which the Project Purpose has been achieved by the project Outputs.

• Impact
Positive and negative changes produced, directly or indirectly, as a result of the Implementation of the project.

• Relevance
The validity of the Overall Goal and Project Purpose at the evaluation stage.

• Sustainability
The durability of the benefits an and development effects produced by the project after its completion.

Laws of Project Management
• No major project is ever installed on time, within budget, or with the same staff that started it. Yours will not be the first. • Projects progress quickly until they become 90% complete, then they remain at 90% complete forever. • When things are going well, something will go wrong. • When things just cannot get any worse, they will.

• When things appear to be going better, you have overlooked something. • No system is ever completely debugged. Attempts to debug a system inevitably introduce new bugs that are even harder to find. • A carelessly planned project will take three times longer to complete than expected • A carefully planned project will take only twice as long. • Project teams detest progress reporting because it vividly manifests their lack of progress.

Core Project Management Tools • • • • Project Charter Work Breakdown Structure (WBS) Project Schedule Project Budget .

Project Charter • What must be done? – What are the required resources? – What are the constraints? – What are the short and long term implications? • • • • Why do it? When must it be done? Where must it be done? Who does what? – Who is behind the project? – Who is funding the project? – Who is performing the work of the project? .

Project Charter • Project Goal & Objective • Sponsor • Stakeholders • Timeline • Resources required • Deliverables • • • • • • • • Decision making Assumptions Risks Business process changes Project manager Project team Budget Signatures .

Assumptions • Opportunity to put it all out there – Challenges facing the project – Implications – Organizational history – Political implications – Impact to traditional power – Requirements of decision-making • Write down what cannot be said – Keep it objective .

Project Schedule Tools • Many tools available – Microsoft Project – Many more specialized softwar – Excel • Most important – Monitor tasks – Gantt views of project • one page views for executives • rollout and more complex views for work teams – – – – Critical Paths Inputs from multiple teams that roll up to project manager Dependencies Resources assigned to tasks .

Project Budget • Direct Costs • Indirect Costs • Ongoing costs .

Project Budget Year 1 Year 2 Year 3 • Direct Costs – Hardware – Software – Contractor fees • Estimated hours • Hourly Rates per contractor • Various contractor rates • Indirect Costs – Your people’s time and effort • Estimated time on project • Estimated cost based on hourly rate – Other’s time and effort – Opportunity cost • What projects or tasks are NOT going to get done in order to get this project done? – Training – Fanfare – Other TOTALS .

Managing the Project • • • • • • • • Triple Constraint Five Stages Project Manager Role Decision Making Structure Communication Plan Meeting Management Team Development Navigating Organizational Politics .

Planning & Design • • • • Project team creation Project kick-off Planning (WBS.Five Stages of Project Management Project Management (in our industry) is divided into five parts: 1.RFP Development and Process 3. . schedule) Budget 4.Implementation/construction 5.Project termination. hand-off to operations mgt.Project charter development 2.

Project Manager’s Role Lead Communicate Define Plan Monitor Complete Communicate Re-Plan .

Project Manager’s Role • • • • • • • • • Leadership Organization Communication Finance Technical savvy Politicking Team building Praising Punishing .

Traditional Organization President VP Academics VP Student Affairs VP Finance VP Development .

Project Management is Change • Project methodology is really about managing change – Change in current practices – Developing new practices – Getting people to change their behaviors • • • • How they do their work How they work together How they get the work of the project done Avoidance of paving the cowpaths • PM is a mindset. that can help your organization increase effectiveness and put order to chaos . a discipline.

Limitations of Project Management • PM works when there is buy-in for the methods and process • It does not work when – buy-in is lacking or there is not support for the methods by executives – ‘end arounds’ are tolerated – influential players operate project business outside the project – decisions made by project teams are not supported – charters. schedules and other work products of the team are not supported .

Project Portfolio Management • More common in disciplined IT organizations • Manages projects that are – Proposed – Approved – In progress • Requires organizational buy-in .

Project Finance .

How is most corporate investment organized? • In corporations – Debt is usually recourse to entire organization’s assets – Leverage is usually modest (obvious exceptions) .

.e.. debtholders (banks. These financing structures usually have one thing in common --. public lenders) place a substantial degree of reliance on the performance (I.the financing is not primarily dependent on the credit support (credit quality) of the sponsors or the value of the assets involved. cash flows) of the project itself… • Non-recourse (or at least limited resource) financing • Project finance is both a financial structure and a corporate governance structure aimed at resolving capital market imperfections and efficiently allocating risk. Instead.What is project finance? • Refers to a wide range of financing structures.

What types of projects? • Somewhat arbitrary. but – Single purpose capital investment – Stand alone entity – Finite and long life – Large in size .

FIN.Project finance versus conventional financing • Modigliani Miller still holds if its assumptions are true – if there were no taxes or transactions costs – no costs of financial distress – no agency conflicts – no information costs – THEN PROJECT FINANCE WOULD ADD NO VALUE RELATIVE TO CONV. .

6% of deal size. long time to close • Fees (0.Project finance is very costly • Transactions costs very large • Contracts: very complex organizational structure. not much flexibility • Long negotiations. similar to M&A) • DISADVANTAGE RELATIVE TO CONVENTIONAL FINANCE .

clearly .Costs of distress/bankruptcy • Risk of default and allocation of this risk very different than conventional debt • Less risk contamination with other parts of firm • Less co-insurance benefit • Rearranges “states” in which default occurs • Trade-off.

very specific contractual terms for repayment and contingencies – May limit opportunities for risk shifting – May limit cross subsidization incentives – May replace managerial incentives of a publicsector project with a for-profit venture. contracts used to enhance incentives . dedicated cash flows.Agency costs • High leverage.

’s may be reduced . reg. gov’t.May improve economics • MM theorem assumes the investment is fixed – It may be that the investment itself is improved by the structure • Walt Disney got huge tax and governmental relief by setting up EuroDisney as a project structure rather than owning outright – Tax.

which is often illiquid. costly and sometimes simply not available • Often a guarantee or credit support is offered by – Governments/international agency (IFC/World Bank)/Sponsors/etc. this usually leads to high risk debt.Outside guarantees • Project finance is usually high leverage and non recourse to project sponsors – even with its possible benefits. .

Different contractual relationships • Contracts needed: – – – – Management/shareholder agency relationship Intercorporate agency relationship Government/corporate agency relationship Bondholder stockholder relationship • Definition of the organization (corporation) is a nexus of these contracts .

CHAPTER-3 74 .

financial and economic practicability. Calculations 75 . and their early analysis 3. 6. A tool for decision making 4. Evaluating feasibility in terms of technical.Engg. Identifying input. Developing and implementation of system so designed in terms of .PROJECT APPRAISAL INTRODUCTION PROJECT APPRAISAL: 1. It helps in recognizing needs and problems. output parameters and criteria for evaluating systems. 2. 5. Technique to analyse if the project is feasible or not.

d. Optimality: Project to be best alternative e.Needs a feed back loop to review update and keep system on rough track. manufacturing Installation and commissioning SALIENT ASPECTS OF PROJECT APPRAISAL a. Uncertainty : Probability of risk and cost of information to achieve greater certainty f. 76 .Technically. Need . Financially economically viable. Realisability .Cost/benefit terms c. Practicability . Controllability .- Specification of finalization Production.New or improved b.

Feasibility Study: It involved creating. identifying.Then prilimary design. . . optimal design (best alternatives) .Detailed design (a complete description of projects for its implimentation. brain storming feasibility of ideas and then selecting to prove further one or more feasible solutions.Lastly planning for production: 77 .

/ Return 78 .Preliminary Practical Analysis Feasibility Study: A Schematic Diagram Generation of Ideas Initial Screening Is the Idea Prima Facie Promising ? Yes Plan Feasibility Analysis No Terminate Conduct Market Analysis Conduct Technical Analysis Basic and functional feasibliity Conduct Financial Analysis Risk.

Conduct Economic and Ecological Analysis Social & Political Realisability Is the Project Worthwhile? Prepare Funding Proposal Yes NO Terminate Including optimality and controllability 79 .

Key issues in Project Analysis Potential Market Market Analysis Market Share Technical Viability Technical Analysis Sensible Choices Risk Financial Analysis Return Benefits and Costs in Shadow Prices Economic Analysis Other Impacts Environmental Damage Ecological Analysis Restoration Measure 80 .

Capital Inflow. design parameters. a. Govt.Uncontrollable Controllable: Man hours. output. & Political Interference.  Project Identification: Quantifies input.Feasibility Study has following sequence of events (Parts)  Need Analysis: Define objectives of the projects. Project Inputs: (i) Purposeful – Controllable . 81 . New or improves. Availability of Power. Activity Analysis: Uncontrollable: Cost of Raw Material. Reliability of Technology.

could also involve value judgment status. b. . c. how many. weight. Nuclear Explosion). Project Output (i) Desired (ii) Undesired (i) Desired: Desired could involved physical quantities of products how much. Most common 82 are physical size. Discomfort to people living in vicinity. Waste material. etc. Insurance. Pollution. Waste Energy. Aesthetic Appeal (Keeping user in view undesired) (ii) Undesired: Undesired Pollution. Danger (Bhopal Gas Tragedy. Regulatory.(ii) Environment (Business) Interest. Legal. Design Parameters: Like features attributes that would affect behavior and performance. comfort.

d. Physically Realizable which alternatives needs the solutions within the specified parameters. Evaluation Criteria: Total revenue operating cost gross/ net profit. Constraint Specification: on input. Politically acceptable . Physically realizable. Are these operational financeable. Will the money 83 . Practicability Analysis: Idea to eliminate the concepts that are not feasible. Economical. e. ROI/ EOI etc. Measure of the values indicate range of acceptable values. 3. design parameters which could be essential to evaluate the alternative solutions. Financial Realizability: (i) required come as per time frame. output.

(i. (iii) Total revenue that would accrue over the operational life of systems. Economic Practicality : (i) Even a financially feasible may not be economically practical. Maintenance and Spare part expenditure. what is the break even point or optimum point of economic operations of the project) We will consider those alternative solutions to be economically feasible that meet the specified rates of return on investment. (ii) Economic Feasibility Study of alternative solutions by constraints operating cost.(ii) Sources of Capital Inflow who where from: 4.e. 84 .

TB. there are additional considerations of health (Polio Campaign. Normally in case of large projects. Financially. Realignment over the range area. Social and Political Realizeability : The project may be physically. CNG Buses) education (private and foreign universities) Welfare (METRO RAIL. Malaria. 85 . Civil Nuclear Technology).5. Economically feasible. but may encounter social at political obstacles.

the project performance depends on how well the project is meeting the technical requirements of the end project (connect village to stadium) - THREE STAGES OF TECH APPRAISAL (i) Detailed technical Appraisal  Which include describing the details of the assignment and the key property. we mean an assessment of its basic technical and functional feasibility of project (Road – under/over bridge) Besides costs and schedules.Technical Appraisal By technical appraisal of project. 86 .

(iii)Form Technical Appraisal  In form review. (ii) Exceptional Technical Appraisal  appraisal reviews records only significant and exceptional findings and action take by the reviewer.  The exceptional review is often used for high – level reviews within an organization when the first level review is a narrative report. analysis and conclusions. further abbreviates the documentation associated with reviewing an appraisal report.  The detailed technical appraisal method helps in commenting on the reviewer’s action.  Forms are developed for specific institutional or agency needs and the Standard Appraisal Review87 . It also includes describing the deficiencies of particular acclamation.

Report from is becoming more widely accepted by many users.g. For Example – Weekly progress meeting to exercise control over the project. number of people who will handle.Layout of the project includes description of the project in terms of what they represent and when they occur. bar charts could be used.  It also states where quality control will be exercised. Factors Effecting Technical Appraisal (i) Layout:.  A description and explanation of the methods of that will be used to monitor progress e. 88 . who has authorized it.

These factors have an impact on management decisions and governments policies.The nine key factors that influence location of a project are: (keep NANO Car Project – In Mind) Costs Infrastructure around the location Labour Characteristics Wage rates Motivation of workers Telecommunication systems Government stability and industrial relations laws Protection of patents A availability of management resources and specific skills and system and integration costs. 89 .- (ii) Location:.

such as voltage. humidity.  The appropriate supply of material and equipments for keeping the project working should be available in proximity. dust. etc. (Olympic stadium in China) The availability and quality of equipments affect the technical appraisal. some reservation for SME Sector (Now only 3s items)  Types of equipment or processes: Equipments are basically of two types – temporary and permanent equipments. Government policies: Regulatory barriers may preclude the use of innovative technologies e. temperature.  Appropriateness of Local Conditions: The project should be adaptable to local technical and environmental conditions. 90 .g.

There should also be contingency plans in place to minimize the risk of project failure or of a major gap between what’s promised and what’s delivered. or other professional services are examined.  Approach Followed: Procedures for obtaining engineering. Cost estimates also determine whether technical 91 . Impact of Environment: The potential impact of the project on the human and physical environment is examined to make sure that nay adverse effects can be controlled or minimized e. pollution.  Cost Estimated: Technical appraisal is a review of the cost estimates of the engineering and maintaining the project. architectural.g.  Risk Factor: It is necessary to identify the risks associated with the project and estimate the scale of risk.

Environmental Appraisal A systems approach is a holistic approach to problem solving that involves formal considerations of the following parameters: 1. or the organization or various components and their interactions. The project’s environment or the fixed constraints. goals. their activities. The management of the project. 3. 4. The components of the project. the performance measures of the whole project. 92 . The total objectives of the project and. The next aspect to consider in the system approach is the project’s environment. The resources or inputs to the projects. 5. and measures of performance. 2. ore specifically.

For example. This can be viewed as whatever lies ‘outside’ the project. need to be included in our definition of the automobile system. petrol pumps and servicing stations. but that which can affect and be affected by the operations of the project. 1. etc. and hence constitutes its environment. for automobile environment.  Identification of the environment depends on the answers to the following two questions. we mean that the project can do relatively little about its environment’s characteristics or behaviour. we can consider the roads and highways. Can I do anything about it? 93 .  In project parlance the environment means much more than just the weather.  When we say that something lies ‘outside’ the project.

directly or indirectly. 94 .  However.  It is also affected. then ‘it’ is the environment. it has a ‘dynamic’ influence on the project or by the project.2. Characteristics of the Environment  The environment provide. by the outputs from the project. Does it affect my situation or objectives’? If the answer to the first is ‘No’. ‘given’ or ‘fixed’ inputs to the project.  Hence. less attention is paid on environment because of two reasons (a) Firstly : The environment is ‘outside’ the project and hence of little direct interest to us. and that do the second is ‘Yes’.

the environment is something that we cannot control. Of course we could consider the effects of the output of a project on its environment. (METRO – NO Pollution – Less Noise. (e. Dev of Area)  This is what is referred to as Environmental Impact Assessment (EIA). by definition. Nuclear plant) 95 . which would be a part of the feasibility study for most projects. Secondly.g.(b). Chemical plant. Refinery . and hence it is ‘fixed’. especially for large industrial projects.

Are the resources required for the given project available ? . facilities.Managerial Appraisal  One of the main preoccupations of management in any organization and in project organization is the allocation of scarce resources. and financial resources. the project manager must ask the following two questions: . materials.Is this the best use to which these resources can be put ?  Most project are subjected to an evaluation before they are given the go-ahead.  For every project being planned.  An essential part of his evaluation is the financial 96 .  These resources include manpower.

 It is with this intention that we present the various techniques of managerial evaluation. which consist of the technical. (Difference between private – public Social Benefit projects). financial. The project manager should understand the processes so that he can benefit from them.  Traditionally. social and political appraisal and assessment of a project. this has been aimed at deciding whether or not a project will be profitable and selecting the one project out of several competing projects that appears the most profitable.appraisal. economic. 97 .

Project Selection • Project selection is the process of evaluating individual projects or groups of projects. and then choosing to implement some set of them so that the objectives of the parent organization will be achieved • Managers often use decision-aiding models to extract the relevant issues of a problem from the details in which the problem is embedded • Models represent the problem’s structure and can be useful in selecting and evaluating projects Chapter 2-1 .

reasonably convenient.able to simulate different scenarios and optimize the decision • Flexibility . and easily understood • Cost .Data gathering and modeling costs should be low relative to the cost of the project • Easy Computerization .reality of manager’s decision • Capability. easy execution. store and manipulate data in the model Chapter 2-2 .Criteria for Project Selection Models • Realism .provide valid results within the range of conditions • Ease of Use .must be easy and convenient to gather.

when a decision maker has information that is not complete and therefore cannot determine the expected value of each alternative Chapter 2-7 .Risk Versus Uncertainty • Analysis Under Uncertainty .The Management of Risk – The difference between risk and uncertainty • Risk . An expected value of each alternative action can be determined • Uncertainty .when the decision maker knows the probability of each and every state of nature and thus each and every outcome.

Risk Analysis • Principal contribution of risk analysis is to focus the attention on understanding the nature and extent of the uncertainty associated with some variables used in a decision making process • Usually understood to use financial measures in determining the desirability of an investment project Chapter 2-8 .

Risk Analysis • Probability distributions are determined or subjectively estimated for each of the “uncertain” variables • The probability distribution for the rate of return (or net present value) is then found by simulation • Both the expectation and its variability are important criteria in the evaluation of a project Chapter 2-9 .

Risk Analysis Chapter 2-10 .

Qualitative – Reliable vs. Unreliable – Valid vs.Information Base for Selections • Accounting Data • Measurements – Subjective vs. Objective – Quantitative vs. Invalid • Technological Shock Chapter 2-11 .

CHAPTER-4 105 .

In Nut Shell ! Project Scheduling • Project Scheduling – Understanding Project plan • Scheduling activities • Managing time – Essential methodologies • Overcoming time constraint • Effective project scheduling .

– Estimated start time – Required completion time – WBS (Work Breakdown Structure) – Scheduling the activities – Allocating owners and resources .Project Scheduling • Project planning and Project Scheduling • Project scheduling involves.

Scheduling Activities • Activity duration – An estimate • Influence – Estimated start time – Required completion time Activity Description Activity Number Duration Estimate Owners .

Duration Earliest start Estimated Duration Activity Number Activity Description Latest start Latest Finish Earliest Finish Total Slack .Time • Key concepts – Earliest start time (ES) – Earliest finish time (EF) EF = ES + Duration – Latest finish time (LF) – Latest start time (LS) LS = LF .

Falling behind ? • Activities and entire Project • Total slack (Float) – Difference • All activities EF and Project required completion time – Positive result • Activity can be delayed without any hassle – Negative result • Activity work needs to be accelerated • Free slack ?? .

Critical Path Analysis • What is critical path analysis? – Understanding it’s Effect • Calculating. – Critical path – Noncritical path – Most critical path • Using calculated information – Advantages .

Scheduling – a challenge • Scheduling in Information System – A random process • Figures need to be realistic – Identifying requirements – allocating resources • Project scheduling software – an advantage • Perfection comes with practice and experience .

Project Scheduling Models 113 .

– Finding the minimum cost schedule needed to complete the project by a certain date.5. • Objectives of Project Scheduling – Completing the project as early as possible by determining the earliest start and finish of each activity. – Calculating the likelihood a project will be completed within a certain time period.1 Introduction • A project is a collection of tasks that must be completed in minimum time or at minimal cost. 114 .

5.1 Introduction • A project is a collection of tasks that must be completed in minimum time or at minimal cost. 115 . – Smoothing out resource allocation over the duration of the project. • Objectives of Project Scheduling – Investigating the results of possible delays in activity’s completion time. – Progress control.

” – Estimated completion time (and sometimes costs) are associated with each activity. – Activity completion time is related to the amount of resources committed to it.Task Designate • Tasks are called “activities. 116 . – The degree of activity details depends on the application and the level of specificity of data.

2 Identifying the Activities of a Project • To determine optimal schedules we need to – Identify all the project’s activities. – Determine the precedence relations among activities. • Based on this information we can develop managerial tools for project control. 117 .5.

3 The PERT/CPM Approach for Project Scheduling • The PERT/CPM approach to project scheduling uses network presentation of the project to – Reflect activity precedence relations – Activity completion time • PERT/CPM is used for scheduling activities such that the project’s completion time is minimized. 118 .5.

• ES = Max EF of all its immediate predecessors. • EF = ES + Activity duration.Earliest Start Time / Earliest Finish Time • Make a forward pass through the network as follows: – Evaluate all the activities which have no immediate predecessors. • The earliest finish is the activity duration EF = Activity duration. 119 . – Evaluate the ES of all the nodes for which EF of all the immediate predecessor has been determined. – Repeat this process until all nodes have been evaluated • EF of the finish node is the earliest finish time of the project. • The earliest start for such an activity is zero ES = 0.

Earliest Start / Earliest Finish – Forward Pass 90.177 H H 28 194 EARLIEST FINISH 90.115 F F 25 129.170 E E 21 0.149 D D 20 177 149.90 A A 90 90.124 115.110 C C 5 110.129 G G 14 170 149.105 B B 15 105.120 I I 30 120.194 J J 45 120 .165 194 149.

• LF = Min LS of all its immediate successors. 121 .Latest start time / Latest finish time • Make a backward pass through the network as follows: – Evaluate all the activities that immediately precede the finish node. • LS = LF . – Evaluate the LF of all the nodes for which LS of all the immediate successors has been determined. • The latest start for such an activity is LS = LF .Activity duration. – Repeat this process backward until all nodes have been evaluated. • The latest finish for such an activity is LF = minimal project completion time.activity duration.

194 J 45 122 J .115 90.95 A A 90 29.194 129.120 119.90 129.166 H G D H G 129.170 173.129 129.149 129.149 194 90.149 153.105 95.149 I I 30 149.149 129.Latest Start / Latest Finish – Backward Pass 105.90 0. 115 F F 25 C C 5 5.115 149.149 D 146.149 149.173 166.177 115.149 129.129 129.110 110.110 B B 15 90.149 20 28 14 129.194 149.119 0.149 115.194 E E 21 90.

• To learn about the effects of these delays. 123 . • Some of these delays may affect the overall completion date. we calculate the slack time.Slack Times • Activity start time and completion time may be delayed by planned reasons as well as by unforeseen reasons. and form the critical path.

Slack Times
– Slack time is the amount of time an activity can be delayed without delaying the project completion date, assuming no other delays are taking place in the project.

Slack Time = LS - ES = LF - EF

124

Slack time in the Klonepalm 2000 Project

Activity A B C D E F G H I
J

LS - ES 0 -0 95 - 90 110 - 105 119 - 119 173 - 149 90 - 90 115 - 115 166 - 149 119 - 90 149 - 149

Slack 0 5 5 0 24 0 0 17 29 0

Critical activities must be rigidly scheduled

125

The Critical Path
• The critical path is a set of activities that have no slack, connecting the START node with the FINISH node. • The critical activities (activities with 0 slack) form at least one critical path in the network. • A critical path is the longest path in the network.

• The sum of the completion times for the activities on the critical path is the minimal completion time of the project.
126

177 166.90 A A 90 115.170 173.110 110.149 D D 20 90.149 129.105 95.90 0.110 B B 15 90.194 H H 28 0.149 I I 30 149.The Critical Path 90.129 115.194 J J 45 127 .194 E E 21 149.129 G G 14 129.115 149.115 90. 115 F F 25 C C 5 105.120 119.194 149.

128 .Possible Delays • We observe two different types of delays: – Single delays. • The conditions that specify each case are presented next. – Multiple delays. • Under certain conditions the overall project completion time will be delayed.

the entire project is not delayed. 129 . When the delay is less than the slack. causes the entire project to be delayed by the same amount.Single delays • A delay of a certain amount in a critical activity. • A delay of a certain amount in a non-critical activity will delay the project by the amount the delay exceeds the slack time.

Multiple delays of non critical activities: Case 1: Activities on different paths ES=149 DELAYED START=149+15=164 B 15 C 5 LS=173 E 21 A 90 F 25 G 14 D 20 H 28 Activity E and I are each delayed 15 days. THE PROJECT COMPLETION TIME IS NOT J DELAYED I ES=90 LS =119 30 45 DELAYED START=90+15 =105 130 .

90 105 90 A B C D 15 5 20 115 129 149 194 E F G Gantt chart demonstration of the (no) effects on the project completion time when delaying activity “I” and “E” by 15 days. 21 25 194 Activity E 14 28 30 H I J Activity I 45 131 .

ES=90 DELAYED START =94 LS =95 ES=149 DELAYED START=149+15 =164 LS =173 B 15 C 5 E 21 A 90 F 25 G 14 D 20 H 28 THE PROJECT COMPLETION TIME IS NOT DELAYED I 30 J 45 132 Activity B is delayed 4 days. separated by critical activities.Multiple delays of non critical activities: Case 2: Activities are on the same path. activity E is delayed 15 days .

Multiple delays of non critical activities: Case 2: Activities are on the same path. no critical activities separating them. ES= 90 DELAYED START =94 DELAYED START= DELAYED FINISH = 109 + 4 =113. 94+15=109 LS =110 B C 3 DAYS DELAY IN THE ENTIRE PROJECT 15 5 E 21 A 90 F 25 G 14 D 20 H 28 Activity B is delayed 4 days. THE PROJECT COMPLETION TIME IS DELAYED 3 DAYS I 30 J 45 133 . Activity C is delayed 4 days.

• In an earliest time Gantt chart each bar begins and ends at the earliest start/finish the activity can take place. A horizontal bar is drawn proportionately to an activity’ s expected completion time. – Each activity is listed on the vertical axis.5. • A Gantt Chart is a graphical presentation that displays activities as follows: – Time is measured on the horizontal axis.6 Gantt Charts • Gantt charts are used as a tool to monitor and control the project progress. 134 .

Here‘s how we build an Earliest Time Gantt Chart for KLONEPALM 2000 135 .

90 105 90 A B C D E 15 5 20 115 129 149 194 F G H I J Immediate Estimated Activity Predecessor Completion CompletionTime Time A None 90 B A 15 C B 5 D G 20 E D 21 F A 25 G C.F 14 H D 28 I A 30 J D.I 45 21 25 194 14 28 30 45 136 .

• Appropriate percentage of a bar is shaded to document the completed work.Gantt ChartsMonitoring Project Progress • Gantt chart can be used as a visual aid for tracking the progress of project activities. • The manager can easily see if the project is progressing on schedule (with respect to the earliest possible completion times). 137 .

Monitoring Project Progress 90 A B C D E 15 5 194 20 21 194 The shaded bars represent completed work BY DAY 135. 25 F G H I J 14 Do not conclude that the project is behind schedule. 30 Activity “I” has a slack and therefore can be delayed!!! 135 28 45 138 .

– Does not demonstrate the effects of delays in any one activity on the start of another activity.Gantt Charts – Advantages and Disadvantages • Advantages. – Does not show whether the project is behind schedule. thus on the project completion time. • Disadvantages – Gives only one possible schedule (earliest). – Easy to construct – Gives earliest completion date. – Provides a schedule of earliest possible start and finish times of activities. 139 .

7 Resource Leveling and Resource Allocation • It is desired that resources are evenly spread out throughout the life of the project. • Resource leveling methods (usually heuristics) are designed to: – Control resource requirements – Generate relatively similar usage of resources over time.5. 140 .

Step 2: Determine which activity has slack at periods of peak spending. • Costs can be allocated equally throughout an activity duration.Resource Leveling – A Heuristic • A heuristic approach to “level” expenditures – Assumptions • Once an activity has started it is worked on continuously until it is completed. Step 3: Attempt to reschedule the non-critical activities performed 141 during these peak periods to periods of less spending. Step 1: Consider the schedule that begins each activity at its ES. .

• PERT is a technique that treats activity completion times as random variables.8 The Probability Approach to Project Scheduling • Activity completion times are seldom known with 100% accuracy. • Completion time estimates are obtained by the Three Time Estimate approach 142 .5.

m = the most likely time to perform the activity.The Probability Approach – Three Time Estimates • The Three Time Estimate approach provides completion time estimate for each activity. b = a pessimistic time to perform the 143 . • We use the notation: a = an optimistic time to perform the activity.

a + 4m + b  = the mean completion time = 6 b -a  = the standard deviation = 6 144 . and Standard Deviation of an Activity Approximations for the mean and the standard deviation of activity completion time are based on the Beta distribution. Mean.The Distribution.

The Project Completion Time Distribution Assumptions To calculate the mean and standard deviation of the project completion time we make some simplifying assumptions. 145 .

The Project Completion Time Distribution Assumptions • Assumption 1 – A critical path can be determined by using the mean completion times for the activities. • Assumption – The time to complete one activity is independent of the time to complete any other activity. 146 . • Assumption 3 – There are enough activities on the critical path so that the distribution of the overall project completion time can be approximated by the normal distribution. – The project mean completion time is determined solely by the completion time of the activities on the critical 2 path.

along the critical 147 .The Project Completion Time Distribution The three assumptions imply that the overall project completion time is normally distributed. the following parameters: Mean = Sum of mean completion times along the critical path. Variance = Sum of completion time variances path.

• Completion time depends only on the amount of money allocated to activities.5. • Reducing an activity’s completion time is called “crashing.” 148 .10 Cost Analyses Using The Critical Path Method (CPM) • The critical path method (CPM) is a deterministic approach to project planning.

– Crash cost (CC).Crash time/Crash cost • There are two crucial completion times to consider for each activity. the minimum possible completion time. – Normal completion time (TN). The activity is completed in TN. • The cost spent on an activity varies between – Normal cost (CN). The activity is completed 149 in . – Crash completion time (TC).

Crash time/Crash cost –
The Linearity Assumption
• The maximum crashing of activity completion time is TC – TN. • This can be achieved when spending CN – CC. • Any percentage of the maximum extra cost (CN – CC) spent to crash an activity, yields the same percentage reduction of the maximum time savings (TC – TN).
150

Crash time/ Crash cost The Linearity Assumption

Marginal Cost

Additional Cost to get Max. Time Reduction = Maximum Time reduction (4400 - 2000)/(20 - 12) = $300 per day

=

M=

E R
151

Crashing activities –
Meeting a Deadline at Minimum Cost
• If the deadline to complete a project cannot be met using normal times, additional resources must be spent on crashing activities. • The objective is to meet the deadline at minimal additional cost.

152

7.11 PERT/COST • PERT/Cost helps management gauge progress against scheduled time and cost estimates. Work Package 1 Activity 1 Activity 2 Work Package 2 Activity 3 Activity 5 Work Package 3 Activity 4 Activity 6 153 . Each segment is a collection of work PROJECT packages. • PERT/Cost is based on analyzing a segmented project.

Work Package .Assumptions – Once started. – The costs associated with a work package are spread evenly throughout its duration. 154 . a work package is performed continuously until it is finished.

Monitoring Project progress • For each work package determine: – Work Package Forecasted Weekly cost = Budgeted Total Cost for Work Package Expected Completion Time for Work Package (weeks) – Value of Work to date = p(Budget for the work package) where p is the estimated percentage of the work package completed. – Expected remaining completion time = (1 – p)(Original Expected Completion Time) 155 .

Monitoring Project progress • Completion Time Analysis Use the expected remaining completion time estimates.[Value of Work to Date]. to revise the project completion time. 156 . • Cost Overrun/Underrun Analysis For each work package (completed or in progress) calculate Cost overrun = [Actual Expenditures to Date] .

and or experiencing cost overruns. 157 . • Management seeks out causes such as: – Mistaken project completion time and cost estimates.Monitoring Project Progress – Corrective Actions • A project may be found to be behind schedule. – Mistaken work package completion times estimates and cost estimates. – Problematic departments or contractors that cause delays.

– Focus on uncompleted activities. 158 . channel more resources to problem activities. – In the case of cost underrun. – Determine whether crashing activities is desirable. – Reduce resource allocation to non-critical activities.Monitoring Project Progress – Corrective Actions • Possible Corrective actions. to be taken whenever needed.

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