01 Part I - PM Concepts

Economy Analysis for Engineering Projects
‫التحليل األقتصادي للمشاريع الهندسية‬

Instructor:
Dr. Attia H. Gomaa
Head of Industrial Engineering Dept.
Cairo University, Fayoum branch
attiagomaa@yahoo.com
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Total Project
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Management
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January 2005
Economy Analysis for Engineering Projects
‫التحليل األقتصادي للمشاريع الهندسية‬
Author:
Dr. Attia H. Gomaa
Head of Industrial Eng. Dept. Cairo University, Fayoum branch,
Who Should Attend:

Managers, engineers, and other practitioners concerned
with projects planning and control in government,
industrial and services sectors.
Objectives:
 To provide the participants with the modern concepts
and techniques in projects planning and control.
 To train the participants on how to use and apply these
techniques in practice.
 To enhance the participants experience by discussing
some planning and control problems and how to deal
with them.
Course Outline:
1. Project Concepts
2. Project Life Cycle
3. Project Management Concept
4. Project Cost & Budget Estimation
5. Project Risk Management
6. Project Planning Approaches
7. Total Project Control
8. Project Cash Flow Analysis
9. Project Value Analysis
10. Modern Project Management (MPM)
11. Computer applications
12. Practical cases.
Economy Analysis for Engineering Projects 2

INTRODUCTION
This course is mainly concerned with the problems of

engineering projects management.
This course systematically presents several conceptual and

pragmatic methodologies, tools, and techniques for the
project cycle & project management.
This course attempts to serve the practical needs of project

engineers, project directors/coordinators, project managers,
corporate planners, and administrators.
This course is written in a relatively simple, easy-to-

understand style, making it suitable for industrial engineers
and practitioners. More than 20 references and about 15
worked examples further help the reader understand the
topics.
Finally, I’m very grateful to my readers, participants &

professional peers for joining us in this course.
Dr. Attia H. Gomaa

January 2005

1- Project Concepts
What is the Project?

 Project is a collection of activities that work together:
o to create a unique product or service;
o to achieve a certain target.
 Project is any undertaking with a defined starting point
and defined objectives.
 Goal Oriented – Directed towards a specific result.
 Involves many coordinated activities designed to reach
the same goal.
 Specific Duration: A definite beginning and ending.
 Project is unique; no two projects are exactly alike.
 In practice most projects depend on finite or limited
resources.
Projects
have been
around as
long has
humans
have!

What are the Main Types of Projects?
o Construction projects
o Production projects
o Power projects
o Maintenance projects
o Service projects, etc.

What is the Project System?
Constraints
Target Products/
Processes Services
Information
Resources
Control
Figure - Traditional management feedback
Figure - Public relations feed forward concept

2- Project Life Cycle
What is the Project Life Cycle?
o It is the sequence of phases through which the project will

evolve.
o Project life cycle follows a common generic sequence:

 Opportunity,
 Design & Development,
 Production,
 Hand-over, and
 Post-Project Evaluation.
Three Life Cycles to consider:

 Business (or Corporate) Life Cycle
 Product Life Cycle
 Project Life Cycle

2-1- Product Life Cycle:
Product Life Cycle Cash Flow:

2-2- The Project Life Cycle: Four Basic Phases
Figure - Four-phase generic project life cycle

Phase 1: Concept
 Gather data
 Identify need
 Goals
 Practicality
 Economics
 Resources
 Strategies
 Risks
 Alternatives
 Sell concept
 Approvals
Phase 2: Development
 Feasibility
 Objectives/rationale
 Program, schematics
 Sketches/outline drawings
 WBS
 Resources, team
 Schedule
 Budget
 Cash flow
 Financing
 Re-assess risks, alternatives
 Present Project Charter/Brief
 Go/No go

Phase 3: Execution
 Mobilize team
 Planning & scheduling
 Technical requirements
 Work packages
 Detail design & specs
 Procurement
 Execute the work
 Testing
 Resolve issues
 Progress monitoring
 Forecasts
 Reports
 Deliver facility
Phase 4: Transfer
 Assemble start-up team
 Training
 Finalize/test all systems
 Reviews & Acceptances
 Transfer responsibility
 Settle all accounts
 Project review
 Re-assign remaining team
 Archive lessons learned
 Close all records
 Deliver Final Report

Figure- A typical building project bar chart schedule.
Figure - Typical manpower loadings for the design and

construction forces.

Figure - The total man-hours invested by management
and its design teams will amount to at least 25% of the
on-site labor man hours.
Figure - The rate of development of information during

the various stages of the project.

Figure - The significance of PM during the design stages.
Figure - The total overall cost of ownership of a typical

office building over a forty year life cycle.

3- Project Management Concept
What is the Project Management?
1- PM is the application of knowledge, tools and scientific

techniques to project activities in order to meet or exceed the
system needs and expectations from the project.
2- PM is a powerful systematic methodology to achieve a

certain target and to improve the resource productivity.
Through:
(1) Define the scope, target & constraints
(2) Information collection, estimation & analysis
(3) Planning & target plan
(4) Risk analysis
(5) Organization
(6) Motivation and Direction
(7) Implementation
(8) Control & corrective Actions
(9) Learned lessons
(10) Close out report

3- PM is the art and science of bring a project through its
lifecycle as effectively as possible.
4- PM is the business process of estimating, allocating and

managing working capital to yield an acceptable return on
investment.
5- PM is the art of matching a project's goals, tasks, and

resources to accomplish a goal as needed.
6- PM is “do the right things, with the right tools, and in the
right way".
7- PM is "The art of directing and coordinating human and

material resources throughout the life of a project by using
modern management techniques to achieve predetermined
objectives of scope, cost, time, quality and participant
[stakeholder] satisfaction.", (PMI 1985).

Project Management Targets:
PM Main Steps:
1. Planning: establishing the required activities, their
logical sequence, restraints and interfaces
2. Scheduling: adding durations and resources and

adjusting for optimum results
3. Monitoring: evaluating progress against plan
4. Control: exercising positive corrective action over

unacceptable variances

artsnoc lacinhceT -
artsnoc laicnaniF -
- tcejorP snalP -
- tnemeganam stropeR -
- sessecorp
tcejorP
ecnamrofrep
srotacidni
Project Management Cycle
Targets Data Planning Decision-

Define Preparation making
Organization
Corrective Control Review Implementation

actions

Project Planning & Control Steps:
Project Planning & Control

Planning Control
WBS Productivity Analysis
Master Plan Performance Evaluation

Action Plan Follow-up
Targets Constraints Resources
Information
Long-run Plans
Annual run Plans
Short run Plans
Management Action
Control Implementation

Project Objectives & Targets
How do you measure PM success?

Targets
Customer
Satisfaction
Time Cost & Resources
What are the main Constraints in PM?

All projects operate within the Triple Constraint of:
Performance
ytilauQ & epocS) (
remotsuC
noitcafsitaS
emiT secruoseR & tsoC
What are the main Goals in PM?

 Purpose (to which end?)
 Vision (what do we want to achieve?)
 Target group (for whome?)
 Success criteria (how can it be controlled?)

What are the main Target Dimensions in PM?
 Time wise: Right time or less
 Cost wise: Right cost or less
 Quality wise: Right quality or more
 Quantity wise: Right quantity or more
 Resource wise: Right resources or less
 Safety wise: Right safety or more
Maximization Targets:
 Cost Wise: Profit, Value added
 Quantity Wise: Production volume
 Material Wise: Mat. utilization
 Manpower Wise: Worker utilization
 Machines Wise: M/c. utilization
 Quality Wise: Yield
 Time Wise: Availability
Minimization Targets:
 Cost Wise: Cost elements
 Quantity Wise: WIP
 Material Wise: Mat. scrap
 Manpower Wise: Unused capacity

 Machines Wise: Unused capacity
 Quality Wise: Rejected
 Time Wise: Downtime
Project Resources
What are the main resources for any project?
Resource: Any tangible support used in the performance of a

project, such as:
 Materials
 Machines
 Manpower
 Building
 Space
 Method (Know-how)
 Money
 Tools (computers, software, etc.)
 Time
 Information
 Infrastructure

Project Planning Concept
Before you start to plan your project, consider...
 Who is the ultimate customer?
 What are the customer needs?
 How long will the project last?
 Where are we now?
 Where should we end-up?
 What are the cost constraints?
 What are the technical challenges?
So, Planning must determines what, when, where, how,

and by whom something is done.
 What is to be achieved? "Project description"
 Why? "Target"
 How? "Method"
 By whom? "Resources"
 When? "Schedule"
 Where? "Location"
Priority principle: planning is more important than

everything else.

Effectively principle: plans are effective if they are
consistent with the constraints.
Living plan principle: plans must be updated quickly,

otherwise they “age”.
What are the main Types of Project Plans?

Time plans:
 Long term 2 to 10 y Risk 15 to 25%
 Medium term 6m to 1 y Risk 7 to 10%
 Short term 1w to 3 m Risk 3 to 5%
Risk plans:
 Target plan (normal or most likely)
 Optimistic plan
 Pessimistic plan
Management level plans:

 Master plan Top management (10 -15 activity)
 Action plan Control management (50-100)
 Detailed plan Operational manag. (more than 500)
Strategic Plans:
 Strategic plan
 Tactical plan
 Operational plan
 Urgent plan
Planning Level:
 Overall plan “Complete information”
 Partial plan “Incomplete information”
 Urgent plan “Without information”

4- Project Cost & Budget Estimation:
Budget:
Budget is the estimate of the total number of resource units or

costs required by an activity (or project).
Cost Budgeting:
Allocating the cost estimates to individual project

components.
Components of a Budget:
 Direct labor costs
 Subcontractors
 Overheads
 Fringe benefits
 Consultant fees
 Travel
Managing Project Budget:

 Look at history of similar projects
 Determine internal resources
 Determine external resources

Budget Calculation:
 Direct cost (materials, labor, equipment)
 Indirect cost (overhead)
 Total cost = direct cost + indirect cost
Budget Management Tools:

 Cumulative Cost Curve - graph of planned Vs. actual
expenditures and variances
 Proposal
 Estimates
 Budget
Budget Steps:
 Look at history of similar projects
 Determine internal resources
 Determine external resources
 Pricing the project

Project Cost Estimation:
 Quantity Survey
 Pricing the project
 Detailed priceDetailed estimation
 Unit price Rough-cut estimation
Project Cost Estimation Based on Unit price

Item Estimated Unit Estimated
Description Unit
# Quantity Price $ Amount $
1 Excavation M3 3600 1.2 4320
#1
2 Excavation M3 350 7.7 2695
#2
3 Concrete #1 M3 120 6 720
4 Concrete #2 M3 200 18 3600
5 Concrete #3 M3 120 60 7200
6 Concrete #4 M3 280 80 22400
7 Steel #1 ton 120 290 34800
8 Steel #2 ton 65.5 410 26855
9 Painting l.s. Job - 3120
(subcontractor)
Total Estimated Amount ($) 105710

Project Cost Estimation Based on Detailed price:
 Total direct cost
 Materials cost
 Labor cost
 Equipment cost
 Sub-contract
 Total indirect cost

 Job overhead (10 to 20 %)
 Office overhead (5 to 10 %)
 Sales tax (3 to 6 %)
 Total cost = direct cost + indirect cost
 Price = Total cost + Profit
 Profit (10 to 20 %)
 Markup = Office overhead + Profit
 Markup (15 to 30 %)

Project Cost Estimation Based on Detailed price
Mat Lab Eq Sub TDir

# Des. Unit E.Q.
$ $ $ $ $
1 Ex. #1 M3 3600 - 1376 1819 - 3195
2 Ex. #2 M3 350 - 1430 553 - 1983
3 Co. #1 M3 120 185 279 66 - 530
4 Co. #2 M3 200 1628 1008 53 - 2689
5 Co. #3 M3 120 3324 1807 131 - 5262
6 Co. #4 M3 280 8820 7424 272 - 16516
7 St. #1 ton 120 11719 14133 119 - 25971
8 St. #2 ton 65.5 12764 5909 734 - 19407
9 Paint. l.s. Job - - - 2300 2300
Total direct cost = $ 77853

Job overhead (13.75%) = 10705
--------------
88558
Sales tax (3.0 %) = 2657
--------------
91215
Markup (15.0 %) = 13682
--------------
104897
Bond = 370
--------------
Total Project Bid = $ 105267
Margin factor = Total project bid / Total direct cost

= 1.3521

Unit price = Unit direct cost * Margin factor
TDir Margi E.A. Unit

# Des. Unit E.Q.
$ n $ Price $
1 Ex. #1 M3 3600 3195 1.3521 4320 1.20
2 Ex. #2 M3 350 1983 1.3521 2681 7.66
3 Co. #1 M3 120 530 1.3521 717 5.97
4 Co. #2 M3 200 2689 1.3521 3636 18.18
5 Co. #3 M3 120 5262 1.3521 7115 59.29
6 Co. #4 M3 280 16516 1.3521 22331 79.75
7 St. #1 ton 120 25971 1.3521 35115 292.62
8 St. #2 ton 65.5 19407 1.3521 26240 400.61
9 Paint. l.s. Job 2300 1.3521 3110 -
Total Estimated Amount ($) 105465

Project data:
 Certain data "Deterministic"
 Uncertain data "Probabilistic"
Risk levels:
Risk % 0-5 5 - 10 10 - 15 15 - 25 > 25

Risk level 1 2 3 4 5
Description Minor Low Mediu High Major
m
Uncertain Material cost
Material cost Probability

$ 100,000 %
9 20
10 50
11 20
12 7
13 3
Estimate the Material budget based on the following:

1- Average method ($ 1,100,000)
2- Probability method ($ 1,023,000)
3- PERT method ($ 1,033,000)

5- Project Risk Management
1- Project selection
2- Target plan
3- Information collection & analysis
4- Critical activities / resources
5- Risk identification
Potential failure models
Potential failure cause
Potential failure mechanism
6- Risk assessment
Failure effect
Failure severity
Failure probability
Risk priority
Recommended actions
(Policy & job plan)
7- Implementation
8- Risk performance evaluation
9- Learned lessons
10- Corrective actions

Project Risk Analysis
Case Study: Civil works
Historical projects:
Unit price $/ m
3
# Excavation Concrete F-Concrete Back filling

1 1.7 18 95 0.85
2 1.9 19 100 0.9
3 2.0 20 100 1.0
4 2.3 20 110 1.0
5 2.5 20 120 1.0
6 2.8 21 123 1.1
Project cost risk analysis:

Annual Target Annual Pessimistic
Quantity Unit Quantity Unit
Activity 3 3
m price m price
$/ m3 $/ m3
Excavation 15,000 2.0 17,000 2.5
Concrete 3,000 20 3,000 20
F-Concrete 9,000 100 10,000 120
Back filling 10,000 1.0 10,000 1.0
Project cost control:

Annual Target Annual Actual
Quantity Unit Quantity Unit
Activity
m3 price m3 price
$/ m3 $/ m3
Excavation 15,000 2.0 16,000 1.5
Concrete 3,000 20 3,500 20
F-Concrete 9,000 100 9,500 110
Back filling 10,000 1.0 8,000 1.0

Project Risk Analysis
Normative references:
 ISO/IEC Guide 73: Risk management – Vocabulary –
Guidelines for use in standards
 IEC 62198: 2001, Project risk management – Application
guidelines
Risks should be managed, similar to tasks
Project risk areas:

When planning a project, it is critically important to know
what the key risks are, and is possible plan for them:
 Data accuracy
 Work contents
 Schedule
 Resources unavailability
 Finance
 Staff turnover;
 Management change;
 Hardware unavailability;
 Requirements change;
 Specification delays;
 Size underestimate;
 Technology change;
 Product competition.

Project Risk Management:
PROCESS DESCRIPTION
1- Risk Determing risks in the project.
identification
2- Risk estimation Evaluating the probability of the
risk occurence and the impact of
risk on the project.
3- Risk response Developing plans for responding to
development risks.
4- Risk control Implementing and updating the risk
plans.
Project Risk management:

 Elements of risk
 Develop worst case scenarios
 Develop “lines of defense” against reviewers
 Develop contigency plans (alternatives)
Project Risk Analysis:

 Similarly to tasks, put up a table of risks
o probability that they happen
 Group risks in decision trees

Function Description
Identify Search for and locate risks before they become
problems.
Analyze Transform risk data into decision-making
information. Evaluate impact, probability and
timeframe, classify risks and prioritize risks.
Plan Translate risk information into decisions and
mitigating actions (both present
and future) and implement those actions.
Track Monitor risk indicators and mitigation actions.
Control Correct for deviations from the risk mitigation
plans.
Communicate Provide information and feedback internal and
external to the project on the risk activities,
current risks and emerging risks.
Note: Communication happens throughout all the
functions of risk management.

Decision tree:

6- Project Planning Approaches
 CPM (Critical Path Method)

 PERT (Program Evaluation & Review Technique)
 GERT (Graphical Evaluation & Review Technique)
Parameter Project Planning Approaches
CPM PERT GERT
Duration Certain Uncertain Uncertain
Logic diagram Certain Certain Uncertain
Types of project Scope plans:
 Quality plan: Describes the quality procedures and

standards that will be used in a project.
 Validation plan: Describes the approach, resources and

schedule used for system validation.
 Configuration management plan: Describes the

configuration management procedures and structures to
be used.
 Staff development plan: Describes how the skills and

experience of the project team members will be
developed.

Project Planning Approaches & Tools
What are the main Approaches of Project Planning?
 CPM (Critical Path Method)

 PERT (Program Evaluation & Review Technique)
 GERT (Graphical Evaluation & Review Technique)
 Simulation
 Resource smoothing (time constraints)
 Resource leveling (non-time constraints)
 Duration compression (time crashing)
 Project management software (Primavera, Microsoft Project, .. etc.)
Parameter Project Planning Approaches

CPM PERT GERT
Duration Certain Uncertain Uncertain
Logic diagram Certain Certain Uncertain
Critical Path Method (CPM):
 A network analysis technique used to predict project

duration by analyzing which sequence of activities
(which path) has the least amount of scheduling
flexibility (the least amount of float).
 Early dates are calculated by means of a forward pass

using a specified start date.

 Late dates are calculated by means of a backward pass
starting from a specified completion date (usually the
forward pass’s calculated project early finish date).
Program Evaluation and Review Technique (PERT):

 An event-oriented network analysis technique used to
estimate project duration when there is a high degree of
uncertainty with the individual activity duration
estimates.
 PERT applies the critical path method to a weighted
average duration estimate.
PERT time calculation:

o Beta distribution
o Optimistic time (to)
o Most likely time (tm)
o Pessimistic time (tp)
o Estimated time (te)
te = (to+ 4 tm + tp ) /6
What are the main Planning Tools?

! Process Mapping
! Brainstorming
! Affinity Diagrams
Process Mapping:
Graphically identifying all processes to the Sub-process and
tasks levels
Subcontract Work
- Issue Specification
- Evaluate Bids
Review History
Then Ask: Why, How Much, What If, etc
Brainstorming:
 Structured method of generating ideas and solutions
 Pitfall: Must be conducted within established guidelines
Typical Brainstorming Rules:

 No criticism is allowed
 Anything goes; all ideas are valid
 “Piggybacking” of ideas is fine
 No discussion of issues
 Everyone participates

 One person speaks at a time
 Consider diversity
Affinity Diagrams:
Used to process the ideas generated during brainstorming:
 Write the brainstormed ideas on Post- in Notes
 Post them randomly on a wall
 Invite people to group them in like categories, without
discussion
 Develop headings for the categories
What are the main Tools for Project Schedule?
 Work Breakdown Structure (WBS)

 Logic diagram (Network)
 Gantt Charts (Bar charts)
 Resource Profiles & Curves

Work Breakdown Structure (WBS)
How do you construct the WBS?

WBS - a task-oriented "family tree" of activities, which
organizes, defines, and graphically displays the work to be
accomplished.
WBS must:
 Establish an information structure for describing the
project's scope;
 Serve as an effective means of communication to
integrate the objectives and activities of all the internal
and external organizations involved in the project;
 Represent the planning of the project, step by step;
 Separate sequential and parallel activities assigned to
different groups who will schedule, measure and control
their own performance; and
 Reflect the procurement strategy during the various
stages of the project's life cycle.

WBS Steps:
 Listing of project tasks to be performed
 Starts at the major project view
 Next the major phase levels are added
 Then details for each phase are added
 Tabular WBS
1.0 Project Level
1.1 Concept or Phase Level
1.2 Summary / Work Level
Work Break Down Structure (WBS) :

 Components or elements
 Work types
 Locations
 Areas
 Period
 Stages
For each Work Package (WP):

 Brief description;
 Activity list
 Activity duration & relations
 Activity resource allocation
 Earliest start date;
 Earliest end date;
 Total person months effort;
 Pre-requisite WPs or tasks;
 Dependent WPs or tasks;
 Who is responsible.

Project Tree:
P0
P01 P02
P01 P01 P02 P02

1 2 1 2
P022 P022
1 2

AM - Acme Motors Expansion Project:
WBS Code Title
---------------- ------------------------------------
AM.01 Automated System
AM.01.1 System Engineering
AM.01.2 Hardware
AM.01.2.A Temperature Control Equipment
AM.01.2.B Robot Controller
AM.01.2.C System Controller
AM.01.3 Software
AM.01.4 Training
AM.01.4.A Manuals
AM.02 Conveyor System
AM.02.1 System Design and Engineering
AM.02.2 Field Operations
AM.02.2.A Installation
AM.02.2.B Onsite Testing
AM.02.3 Training
AM.02.3.A Conveyors
AM.02.3.B Operation Manuals
AM.03 Office Building Addition
AM.03.1 Design and Engineering
AM.03.2 Foundation
AM.03.3 Structure
AM.03.4 Mechanical/Electrical Systems
AM.03.4.A Elevator
AM.03.4.B HVAC
AM.03.4.C Plumbing and Electrical
AM.03.5 Exterior Finishes
AM.03.5.A Brick
AM.03.5.B Roof
AM.03.5.C Doors and Windows
AM.03.6 Interior Finishes
AM.03.6.A Plumbing and Lighting Fixtures
AM.03.6.B Floor and Carpeting
AM.03.6.C Carpentry
AM.03.6.D Paint

WBS Construction:
There are many ways of breaking down the activities in a

project, but the most usual is into:
– Work packages;
– Tasks;
– Deliverables;
– Milestones.
Usually. . .
– work packages are numbered WP1, WP2, . . . ;
– tasks are numbered T1.1, T1.2, etc,
– the first number is the number of the workpackage;
– the second is a sequence number.
– deliverables are numbered D1.1, D1.2, etc
– milestones are numbered M1, M2 etc.
Work Packages:
A Work Package describes the work to be performed by a
specific organizational unit, and serves as a vehicle for
monitoring and reporting on progress, cost and schedule. All
work packages fall into one of three different categories:
– Discrete Tasks which have a specific end result or

objective. These normally cover 60 to 75 percent of the
total work in a project.
– Apportioned-effort Tasks which can be directly related

and apportioned to discrete tasks. Examples include
quality control or inspection. These tasks are required in
support of the discrete tasks, and hence, their schedule
and budget can be related to the discrete tasks.

– Level-of-effort Tasks which have performance standards
rather than specific end results. These consist mainly of
the overhead accounts, e.g., management,
administration, liaison, coordination, etc. These tasks are
characterized by relatively level, time-phased budgets
and are not time-limited as in the case of the discrete
tasks.
A work-package:
– Independent of other activities;
– but may depend on, or feed into other activities;
– May include multiple concurrent activities;
– Typically allocated to a single team.
To be effective, work packages should be controlled by

the following rules:
– Rule 1: A work package must represent a unit of work

at a level where work is performed.
– Rule 2: It must be clearly distinguishable from all other

work packages.
– Rule 3: It should have scheduled start and completion

dates.
– Rule 4: It should have a budget.

– Rule 5: Its size and duration should be limited to
relatively short spans of time.

– Rule 6: It must integrate with other work packages and
schedules.
– Rule 7: It must represent a level at which actual costs

can be collected or assigned.
– Rule 8: On small projects the following "test of

reasonableness" is suggested: a work package should at
least be large enough to constitute a scope of work that
could be competitively bid and contracted for by itself.
– Rule 9: On large, multi-million dollar projects design

work packages should not be less than, say, 300 man-
hours and two months in duration.
For construction, a minimum work package value of, say,

0.1 percent is a good rule of thumb.
Tasks:
A task is typically a much smaller piece of work:
– A part of a work-package.
– May be dependent on other concurrent activities;
– Typically allocated to a single person.
Deliverables:

A deliverable is an output of the project that can
meaningfully be assessed. For examples:
– A report (e.g., requirements spec);
– Code (e.g., alpha tested product).
Deliverables are indicators (but only indicators) of progress.

– A milestone is a point at which progress on the project
may be assessed.
– Typically a major turning point in the project.
EXAMPLES:
– Delivery of requirements spec;
– Delivery of alpha tested code.
Milestones:
– A milestone is a significant event in the project, usually
completion of a major deliverable.
– A point in time when a deliverable or set of deliverables

is available.
– Generally used to denote a significant event such as the

completion of a phase of the project or of a set of critical
activities.
– A milestone is an event; it has no duration or effort. It
must be preceded by one or more tasks.

– Goal of a development step
– Define as precisely as possible: content or form (which

documents, which tests,.. etc.).
– Success criteria
– Responsibilities
– Acceptance responsibility
– Dependencies: what is required, what is dependent
– Estimate time
– Evolve estimation

Activity:
 An element of work performed during the course of a

project.
 An activity normally has an expected duration, an expected

cost, and expected resource requirements. Activities are
often subdivided into tasks.
Activity ID:
 A value used to identify an activity in P3. Each
activity is represented by a unique ID containing one
to ten alphanumeric characters.
 P3 justifies numeric IDs to the right; alphanumeric

IDs or those with blank spaces appear as entered.
Activity codes:
 Values assigned to activities to organize them into

manageable groups for updating, analyzing, reporting,
and summarizing.
 P3 provides two types of codes: activity codes and

activity ID codes.
 Activity codes are assigned to specific activities as

needed.
 Activity ID codes are predefined portions of the activity

ID itself.

Activity types:
 Task activity (duration & resources)
 Flag activity (event without duration & resources)
 Milestone activity (critical event without duration &

resources)
Activity type in P3:

An activity can be classified as one of the following types:
 Task,
 Hammock,
 Start Milestone,
 Finish Milestone,
 Start Flag,
 Finish Flag,
 Topic,
 Independent,
 Meeting, or
 WBS.
Flag activity:
 An activity that signals the start or completion of an

activity or a set of activities.
 A start flag uses the earliest start date of its predecessors;
 A finish flag uses the latest finish date of its predecessors.

 You must first set up a flag activity as a successor to an
activity or group of activities.
 A flag cannot have successors since it has zero original
and remaining duration, and does not increase the length of
the project.
 P3 automatically updates them based on the dates of their
predecessors.
Hammock:
 An aggregate or summary activity (a group of related
activities is shown as one and reported at a summary
level).
 A hammock may or may not have an internal sequence.

See also subproject and subnet.
Meeting activity:
 P3 schedules a meeting activity for a time when all of
the resources assigned to it can work on it at once, for
the entire duration of the activity.
 This is most commonly used when a group of people

must work on an activity simultaneously.
 P3 checks the resource calendars of all resources

assigned to a meeting activity and schedules the activity
for workdays and work-hours common to all resources
assigned to it.
 If there is no common time when all assigned resources

work, the activity will be scheduled according to the
activity's base calendar.

Activity relations:
– Predecessors, An activity that must occur before

another activity.
– Successors, An activity that must occur after another

activity.
Activity relationship types:
– FS (Finish to Start): A relationship in which the start

of a successor activity depends on the completion of
its predecessor activity.
– SS (Start to Start): A relationship between activities

in which the start of a successor activity depends on
the start of its predecessor.
– FF (Finish to Finish): A relationship in which the

finish of a successor activity depends on the finish of
its predecessor activity.
– SF (Start to Finish): A relationship between

activities in which a successor activity cannot
complete until its predecessor activity starts.

Logic Diagram (Network)
How do you construct the Logic Diagram?
Network Diagram is a graphic tool for depicting the

sequence and relationships between tasks in a project.
Forms:
 Activity On Arrow Diagram (AOA) or Arrow Diagram
 Activity On Node Diagram (AON) or Precedence
Diagram
Activity On Arrow Diagram (AOA):
Arrow Diagramming Method (ADM):
 A network diagramming technique in which activities

are represented by arrows.
 The tail of the arrow represents the start and the head
represents the finish of the activity
 Notes: the length of the arrow does not represent the

expected duration of the activity.
 Activities are connected at points called nodes (usually

drawn as small circles) to illustrate the sequence in
which the activities are expected to be performed.

Activity On Node Diagram (AON):
PDM (precedence diagramming method):

A type of network diagramming that represents activities as
nodes (boxes or circles) and draws lines between them to
determine relationships.
i.e.,
– Nodes corresponding to activities,
– Arcs corresponding to activity relationships;

Activity box configuration:
Earliest Start Duration Earliest Finish

Activity description
Latest Start Total Float Latest Finish
Activity times calculations:
 Forward pass calculation:

 Early Start (ES)
 Early Finish EF = ES + t
 Backward pass calculation:

 Late Finish (LF)
 Late Start LS = LF – t
 Float calculation:
 Total Float TF = LF - EF
 Free Float FFi = ESj - EFi
 Interfering Float IF = TF - FF
Float:
 The amount of time that an activity may be delayed from
its early start without delaying the project finish date.
 It is the difference between the task's early and late start
dates.
 Free Float (FF): The amount of time an activity can be
delayed without delaying the early start of any
immediately following activities.
Critical activity:

An activity with zero or negative float.
Near-critical activity:
An activity that has low total float needed to complete the
work.
Critical paths:
– Path from start node to end node
– Summing up the estimated durations of the tasks
– The critical path is the sequence of activities that takes the
longest time to complete.
– Any delay to an activity in the critical path will cause
delays to the overall project.
– Delays to activities not on the critical path need not
necessarily cause overall delays.
Activity bar:
 A bar which graphically represents an activity along a
time scale.
 The length of an activity bar is proportional to the

duration of the activity.
 Critical activity TF = 0
 Non-critical activity TF > 0

Gantt Charts (Bar charts)
How do you construct the Gantt Charts?

Bar Chart:
 A graphic display of schedule-related information.
 In the typical bar chart, activities are listed down the left
side of the chart, dates are shown across the top, and
activity durations are shown as date-placed horizontal
bars.

Resource Profiles & Curves
Resource Management Tools:
1- Resource/Cost Profile (histogram) :

Graphic shows resource use or costs per time period for
activities.
2- Resource curves:
Graphic displays the percentage of accumulated resource.
Figure - Resource profile/curves.

Figure- Histogram, envelope, and empirical resource loading.
3- S-Curve:
 Graphic displays of cumulative costs, labor hours, or other
quantities, plotted against time.
 The name derives from the S-like shape of the curve
(flatter at the beginning and end, steeper in the middle)
produced on a project that starts slowly, accelerates, and
then tails off.
 It is more generally referred to as a Progress Curve.
Figure - Comparison of actual vs. planned production

of bulk rock excavation.

Project Resource Management
What are the main steps of the project resource

management?
 Resource Identify
 Resource planning
 Resource control
Resource Identify:
Resources needed for the project should be identified.
Resource planning:
 Resource Planning Determining what resources

(people, equipment, materials) are needed in what
quantities to perform project activities.
 Resource plans should state what resources will be

required by the project, and when they will be required
according to the project schedule.
 The plans should indicate how, and from where,

resources will be obtained and allocated.
 If applicable, the plans should also include the manner

of disposition of excess resources.

 The plans should be suitable for resource control.
 The validity of the inputs to resource planning should be

verified.
 The stability, capability, and performance of

organizations supplying resources should be evaluated.
 Constraints on resources should be taken into account.

Examples of constraints include availability, safety,
environmental and cultural considerations, international
agreements, labor agreements, governmental regulations,
funding, and the impact of the project on the
environment.
 Resource plans, including estimates, allocations, and

constraints, together with assumptions made, should be
documented and included in the project management
plan.
Resource control:
 The timing of reviews and the frequency of data

collection and forecasts should be established to ensure
adequate control over the resource supply and to ensure
that the remaining resources are sufficient to meet the
project objectives.
 Deviations from the resource plan should be identified,

analyzed and acted upon.

 Decisions on actions to be taken should only be made
after taking into account the implications for other
project processes and objectives.
 Changes that affect the project objectives should be

agreed with the customer and relevant interested parties
before implementation.
 Changes in the resource plan should be authorized as

appropriate.
 Revisions of the resource forecast should be coordinated

with other project processes when developing the plan
for remaining work.
 Root causes for shortages or excesses in resources

should be identified and used as input for continual
improvement.
Main steps for Resource planning:

1. Basic plan
2. Resource list
3. Resource loading (allocations)
4. Resource limits
5. Critical resources
6. Resource smoothing
7. Resource leveling
8. Time crashing
9. Target plan

Resource loading (allocations)
It is the process of assigning resources (people, facilities and
equipment) to a project, usually activity by activity.
Resource smoothing:
 Resource smoothing is an optional resource leveling
method that resolves resource conflicts by delaying
activities that have positive float.
 This method minimizes peaks and valleys in the resource

usage profile.
 Resource smoothing uses the available positive float and

incrementally increases the availability limits in ten equal
steps from normal to maximum.
 P3 smooths only those activities that will be delayed

beyond their calculated early start date due to insufficient
resources.
Resource Leveling:
 Resource leveling is the part of the scheduling process in
which the start and end dates of tasks are driven by
resource limitations (e.g., limited availability of resources
or difficult-to-manage resource levels).
 It is the process of determining and minimizing the effect
of low resource availability on the schedule.
 Use resource leveling to resolve resource conflicts by
rescheduling activities to times when sufficient resources
are available.

 Split activities to work around times when resources are
not available; stretch activity durations to reduce their
resource per time-period requirements; or compress
activity durations to take advantage of ample resource
supplies.
 Resource leveling uses the normal and maximum limits
established in the Resource Dictionary.
 The normal limit is used during resource-constrained
leveling to take advantage of positive float within the
network.
 During forward leveling, activities may be shifted to a later
date (the leveled date).
 In backward leveling, activities may be moved earlier in
time.
 If an activity cannot be scheduled without exceeding the
normal limit and without exhausting all positive float, P3
increases the resource availability limit to the maximum
level.
 A resource leveling analysis report details the reasons
activities are rescheduled.
Time crashing:
Taking action to decrease the total project duration after

analyzing a number of alternatives to determine how to get
the maximum duration compression for the least cost.

7- Total Project Control
Quality Quantity
Under Safety
Conditions
Cost Time
Resources
Total Control Indicators:

1- Work quantity control
 Over estimation
 Under estimation
2- Time control
 Behind schedule (late)
 Ahead schedule (early)
3- Cost control
 Cost overrun
 Cost underrun
4- Quality control
 Acceptable level
 Non-acceptable level
5- Inventory control
 Over estimation

6- Resources control
 Over estimation
7- Plant condition control (safety, etc.)

 Acceptable level
 Non-acceptable level
Control Steps:
1- What to control?
2- What is the standard (target) performance?
3- What is the actual performance level?
4- Comparison between the actual & target.
5- Detection of variance
6- Identification of causes of variance
7- Corrective actions
8- Learned lessons.
Total Control Levels:

1- Review and data collection.
2- Follow-up.
3- Performance evaluation.
4- Productivity analysis.
5- Risk analysis for any future project.
6- Corrective actions.
7- Learned lessons.

What are the Main Indicators of Project control?
Percent Complete (PC):
 The proportion of an activity that has been completed.
 An estimate, expressed as a percent, of the amount of

work which has been completed on an activity or group
of activities.
 The proportion of the resource requirement for an

activity that has been completed.
 Enter an estimate of schedule percent complete during

updating, or update the remaining duration and have P3
calculate schedule percent complete using the following
formula:
Schedule percent complete =

[(Original Duration - Remaining Duration) ÷
Original Duration] x 100
Budgeted Cost of Work Scheduled (BCWS):

The sum of the approved cost estimates (including any
overhead allocation) for activities (or portions of activities)
scheduled to be performed during a given period (usually
project-to-date).

Actual Cost of Work Performed (ACWP):
Total costs incurred (direct and indirect) in accomplishing
work during a given time period.
Budgeted Cost of Work Performed (BCWP):

The sum of the approved cost estimates (including any
overhead allocation) for activities (or portions of activities)
completed during a given period (usually project-to-date).
Cost variance:
 The difference between the actual cost for work
performed and the budgeted cost for work performed.
 It deals with performance of an activity while it is
underway.
 In earned value, BCWP less ACWP.
Earned Value (EV):

 A method for measuring project performance. It
compares the amount of work that was planned with
what was actually accomplished to determine if cost and
schedule performance is as planned.

 The budgeted cost of work performed for an activity or
group of activities.
 Earned value is also known as the Budgeted Cost for
Work Performed, or BCWP. Earned value = Pct x
Budget
Cost Performance Index (CPI):

 The ratio of budgeted costs to actual costs
(BCWP/ACWP).
 CPI is often used to predict the magnitude of a possible
cost overrun using the following formula:
Original cost estimate/CPI = projected cost at completion.
Schedule Variance (SV):

 Any difference between the scheduled completion of an
activity and the actual completion of that activity.
 SV is The difference between planned effort and earned
value.
Schedule variance = BCWP – BCWS
Schedule Performance Index (SPI):

The ratio of work performed to work scheduled
(BCWP/BCWS).
In summary,
 Budgeted cost of work performed (BCWP)
 Actual cost of work performed (ACWP)
 Budgeted cost of work scheduled (BCWS)
 Budgeted Cost for Work Scheduled (BCWS)
BCWS = Target budget * percent complete
 Budgeted Cost for Work Performed (BCWP)

 BCWP = Earned value =
= Target budget * percent complete
 Actual Cost for Work Performed (ACWP)
 Cost Variance CV = ACWP - BCWP
 Schedule variance: SV = BCWP – BCWS
 Cost Performance Index (CPI) = BCWP/ACWP
 Schedule Performance Index (SPI) = BCWP/BCWS
 Overrun (or under-run) percentage (O/U):

O/U = (ACWP-BCWP)/BCWP
 Schedule late (SL)

Cumulative manpower consumed (S-Curve)
Earned value and performance measurement

Three examples of progress S-curves
Placing of formed structural concrete.

Total concrete = 31 900 m 3 ; total time = 16.5 months

- Project Productivity Analysis
Productivity may be described as a measure of how well the

resources in a firm are brought together and used to
accomplish a set of results.
In its simplest form, it may be expressed as the ratio of:

 Output to input
 Actual rate of output or production per unit of time
worked.
These represent measures of production efficiency.
Productivity Analysis is a collection of indicators that

work together to measure the following:
 System performance
 System efficiency
 Resource utilization
Waste
Input Output
Productivity = Output / Input

PROJECT PRODUCTIVITY DIMENSIONS
Project Productivity Dimensions

Time Quantity Quality Cost
Effectiveness Efficiency
= Actual output / 1- Technical Efficiency

Planned output 2- Operating Efficiency
3- Production Efficiency
4- Economical Efficiency
Project Effectiveness:
 It is related to performance.
 It is the degree of accomplishment of objectives.
 How well a set of results is accomplished.
Project Efficiency:
 It is related to resource utilization.
 It is the degree resources utilization.
 How well the resources are utilized to achieve the

results.

Productivity:
 It is a combination of both effectiveness & efficiency.
Productivity index
= Output obtained / Input expended
= Performance achieved / Resources consumed
TOTAL PRODUCTIVITY:
 Total productivity is the ratio of total output to the sum

of all inputs factors.
Total productivity = Total output / Total input
SPECIFIC (PARTIAL) PRODUCTIVITY:
Partial productivity = Total output / One of the inputs

- Labor productivity.
- Raw material productivity.
- Machinery productivity.
- Capital productivity.
- Energy productivity.
- Engineers productivity.

Level Productivity indicators
Top
Management Monetary indicators
Middle
Management
Technical indicators
Operational
Management
Performance Based Management System (PBMS)
1- Determining Performance
objectives and indicators
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rof snoitca Processes
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stnemevorpmi
3- Evaluating
performance

Main 30 Steps of Project Planning & Control
1. Project definition
2. Data collection & analysis
3. Project targets & constraints
4. List of quantities
5. Activity list
6. Activity relations
7. Resource list
8. Resource allocation
9. Performance rates
10. Activity durations
11. Logic diagram
12. Time calculations
13. Critical activities (TF = 0)
14. Bar chart (Basic plan)
15. Resource profiles
16. Resource limits (required/ available capacities)
17. Critical resources (required limits > available)
18. Resources analysis (smoothing & leveling)
19. Project time crushing (project time > target)
20. Target plans (time, resources, cost)
21. Organization

22. Reports
23. Implementation
24. Review
25. Updates
26. Project Control
27. Corrective actions & problems solving
28. Final control
29. Final reports
30. Project close-out
Example (1): Monthly Plan for Civil Works
Activity ID A B C D E
Predecessors - - - A C
Duration (day) 8 5 6 8 20
Worker/day 5 7 8 5 5
Budget Cost $ 1000 10 15 8 60 120
Required:
1. Draw the project network (logic diagram)?
2. Calculate the critical path?
3. Draw the corresponding Gantt chart?
4. Construct the corresponding smoothed worker loading?
5. If the maximum worker limit is 12 worker/day, construct
the corresponding worker leveling?
6. Construct the monthly work plan.
7. Construct the monthly cost profile.

Example (2): Ten-days Plan for Civil Works
Activity E1 E2 E3 E4 C5 C6 C7 C8
Predecessors - - - - E2 & E4 E3 C6 C5& C7
Duration 4 2 2 2 3 2 3 3
(day)
Worker/day 9 3 6 4 8 7 2 1
Cost ($ 1000) 5 3 5 3 2 5 3 5
Required:
1- Draw the project network (logic diagram)?
2- Calculate the critical path?
3- Draw the corresponding Gantt chart?
4- Construct the corresponding smoothed worker loading?
5- If the maximum worker limit is 10 worker/day,
construct the corresponding worker leveling?
6- Construct the corresponding cost profile and the
cumulative cost profile (S curve) for the best plan?

Example (3)
Project description : Monthly Plan for Civil Works
Project Name : MPCV Project start: 1 Jan. 2004
Planning unit : Day 6 DAYS /WEEK
1- Activity List
Predecessors Relations
Duration
Activity ID (SS, FF,
(day)
etc.)
1 Mobilization MOB 1
2 Excavation #1 EX1 3 MOB
5 Concrete #1 CO1 8 EX1 SS 1
8 Finishing FIN 2 CO1 FS5
CO2 FS5
CO3 FS5
2- Resource List:
Resource Resources description Unit Limits/day Price

code Norm. Max. LE/unit
L01 Excavation worker md 3 6 40
L02 Concrete worker md 6 12 60
E01 Excavator eqd 1 2 400
E02 Concrete mixer eqd 1 2 500
M01 Concrete material m3 - - 500
md = man-day eqd = Equipment day

3- Resource Allocation:
Resource/day
Activity ID
1 2 3
1 Mobilization MOB L01, 2
2 Excavation EX1 L01, 3 E01, 1
5 Concrete CO1 L02, 6 E02, 1 M01, 40
6 Concrete CO2 L02, 6 E02, 1 M01, 50
7 Concrete CO3 L02, 6 E02, 1 M01, 40
8 Finishing FIN L02, 3
4- Base Calendar (Working periods):
Saturday Sunday Monday Tuesday Wednesday Thursday Friday

X X X X X X
Holidays: 20 to 21 Jan. 2004
Required:
2. Draw the corresponding Gantt chart?
4. Construct the corresponding worker leveling?
5. Construct the target action plan.
6. Construct the target master plan.
7. Calculate the project cost elements (labor, equipment
and materials).
8. Construct the cost profile and S curve.

Example (4)
Project description : Annual Budget Planning
Project Name : ABPL Project start: 1 July 2004
Planning unit : Month
1- Project List & Budgets
Budget Duration Predecessors

Description ID
(M$) (month)
1 Project #1 P1 45 5 -
2 Project #2 P2 6 2 -
3 Project #3 P3 12 2 -
4 Project #4 P4 8 2 -
5 Project #5 P5 24 3 P2 & P4
6 Project #6 P6 14 2 P3
7 Project #7 P7 6 3 P6
8 Project #8 P8 3 3 P5 & P7
2- Budget Limitation:
10 M$ /month
Required:
2. Draw the corresponding Bar chart?
4. Construct the corresponding budget leveling?

Example (5)
Project description : Gas Pipe Line 120 Km
Project Name : G120 Project start: 01/01/2004
Planning unit : Day 6 DAYS /WEEK
According ASME / ANSI: or API
20 inch pipe Max pressure 40 bar
Activity Activity Description Performanc Cost

ID e rate 1000 L.E. / Km
Km/day
E Excavation 2 5
S Stringing 4 400
W Welding 1 20
N NDT 2 10
C Coating & 2 2
Wrapping
L Lowering 4 1
B Backfilling 4 3
T Hydrotest (3 days) 0.1
Required:
1. Construct the activity relations (SS and FF).
3. Draw the corresponding bar chart?
4. Construct the project cost profile and S-Curve.

Example (6)
The production plan and the actual production in a power towers
fabrication project are as follows:
Activity ID (work order) A11 A12 A13 A14 A15
Predecessors - - - A11 A13
Duration (week) 8 5 6 8 20
Number of equipment 5 7 8 5 5
Target number of equipment is 12 equipment/week
Target duration: 24 week
Work Production plan & critical resources

order # Planned Standard Planned Planned
quantity cost ($/ton) manpower material
(ton) (Man-day/ton) (ton/ton)
A11 40 1000 100 1.20
A12 30 1200 110 1.20
A13 50 900 95 1.20
A14 30 850 80 1.20
A15 80 950 95 1.20
Overhead cost rate = $ 1,000 /week & Downtime cost rate = $ 3,000/week
Work Actual production & critical resources

order # Actual Actual cost Actual Actual
quantity ($/ton) manpower material
(ton) (Man-day/ton) (ton/ton)
A11 40 1100 95 1.30
A12 20 1200 110 1.25
A13 40 1000 100 1.20
A14 35 800 80 1.15
A15 90 1000 85 1.16
Actual number of equipment is 14 equipment/week &
Actual duration: 27 week
Based on these data, construct the following:

1. Target plans (schedule, equipment profile, cost profile, and S-
curve).
2. Performance evaluation indicators

Example (7): Annual Budget Planning for 8 projects
1- Relations:
Project ID P1 P2 P3 P4 P5 P6 P7 P8
Predecessors - - - - P2 & P4 P3 P6 P5 & P7
Project Production plan & critical resources

# Duration Equipment Manpower cost Material cost
(month) cost (M$) (M$) (M$)
P1 5 5.0 10 30
P2 2 1.5 1.5 3
P3 2 1.5 2.5 8
P4 2 1.0 2.0 6
P5 3 2.0 8.0 14
P6 2 2.0 4.0 8
P7 3 0.5 1.5 4
P8 3 0.5 1.5 2
Target budget rate: 11 M$ /month & Target duration: 10 month
Overhead cost rate = $ 4,000 /month & Downtime cost rate = $
6,000/month
Project Actual production & critical resources

# Duration Equipment Manpower cost Material cost
(month) cost (M$) (M$) (M$)
P1 6 4.0 10 32
P2 3 2.0 2.0 4
P3 2 1.5 3.0 7
P4 3 1.0 2.0 5
P5 4 2.0 7.0 15
P6 2 2.0 5.0 7
P7 3 0.6 1.4 4
P8 2 0.7 1.3 2
Maximum budget rate: 14 M$ /month & Actual duration: 12 month

1. Target plans (schedule, equipment profile, cost profile, and S-
curve).

Example (8): Gas Pipe Line 120 Km
Target production:
Activity Activity Description Performance Cost

ID rate Km/day 1000 L.E. / Km
E Excavation 2 5
S Stringing 4 400
W Welding 1 20
N NDT 2 10
C Coating & Wrapping 2 2
L Lowering 4 1
B Backfilling 4 3
T Hydrotest (3 days) 0.1
Target duration: 6 month * 24 day/month
Overhead cost rate = $ 1,000 /day
Downtime cost rate = $ 2,000/day
Actual production:
Activity Activity Description Duration Cost

ID (day) 1000 L.E.
E Excavation 50 500
S Stringing 25 40,000
W Welding 140 2,500
N NDT 80 1,500
C Coating & Wrapping 50 250
L Lowering 40 150
B Backfilling 25 350
T Hydrotest (5 days) 10
Actual duration: 8 month * 24 day/month

1. Target plans (schedule, cost profile, and S-curve).

8- Project Cash flow Analysis
Revenu
F e
A
P
Cost
MOST COMMON PAYMENT FACTORS

Single Uniform Gradient Geometric
payment series series series
( F or P ) (A) (G) (j)
Compound Compound amount Uniform series factor Present worth
amount factor factor (A/G, i, n) factor
(F/A, i, n)
(F/P, i, n) (P/A, i, j, n)
Present worth factor
Present worth Present worth
(P/A, i, n)
factor factor Future worth
(P/F, i, n) (P/G, i, n) factor
Sinking fund
factor (F/A, i, j, n)
(A/F, i, n)
Capital
recovery factor
(A/P, i, n)
i = Interest rate (%) n = Life time (year)
P = Present value F= Future value
A= Annual uniform value G= Gradient value
j = Geometric series percentage (%)

9- Project Value Analysis
1. Net present value

2. Annual value
3. Pay back period
4. Internal rate of return
5. Benefits/cost ratios
6. Break Even Analysis
Revenue
Project one
Project two
Year
Revenue
After
Before
Year

Case study (1)
Item Project 1 Project 2

Construction period One year Three years
Construction $ 460,000 250,000 first year
Investment 150,000 second
100,000 third year
Revenue after $ 80,000/year 30,000 first year
construction 60,000 second
90,000 third year
120,000 for 3 years
150,000 for 4 years
Salvage value $ 40,000 $ 40,000
Life after Ten years Ten years
construction
Interest rate 15 % 15 %

Project no. 1:
F=40000 Revenue
A=80000
P=460000 Cost
From table,
(P/A, i%, n) = (P/A, 12%, 10) = 5.650223
(P/F, i%, n) = (P/F, 12%, 10) = 0.321973
PC = P = 460000
A (P/A, i%, n) = 80000 * 5.650223 = 452018
F (P/F, i%, n) = 40000 * 0.321973 = 12879
PR = 452018 + 12879 = 464897
PW = PR – PC
PW = 464897 – 460000 = 4897
PI = PR/PC = 464897 / 460000 =

Project no. 2:
Year Cost Revenue i=

Factor Value
12%
(P/F, i%, n)
1 250000 1 - 250000
2 150000 n= 1 0.892857 - 133929
3 100000 n= 2 0.797194 - 79719
4 30000 n= 3 0.711780 + 21353
5 60000 n= 4 0.635518 + 38131
6 90000 n= 5 0.567427 + 51068
7 120000 n= 6 0.506631 + 60796
8 120000 n= 7 0.452349 + 54282
9 120000 n= 8 0.403883 + 48466
10 150000 n= 9 0.360610 + 54093
11 150000 n= 10 0.321973 + 48296
12 150000 n= 11 0.287476 + 43121
13 150000 + n= 12 0.256675 + 48768
40000
PW + 4725
Project 1 Project 2
Present Cost (PC) 460000 463648
Present Revenue (PR) 464897 468373
Present Worth (PW) 4897 4725
Profit Index (PI) 1.01058 1.01019

Case study (2)
A manager is trying to decide between two machines.
Item Machine Machine

A B
First cost $ 26,000 $ 36,000
Annual operating & 800 300

maintenance cost
Annual labor cost 11,000 7,000
Extra income taxes -- 2,600
Salvage value 2,000 3,000
Life, years 6 10
Determine which machine should be selected.
MARR 15% per year,

(A/P, 15%, 6) = 0.26424, (A/F, 15%, 6) = 0.11424,
(A/P, 15%, 10) = 0.19925, (A/F, 15%, 10) = 0.04925.

Case study (3)
A manager is trying to decide between three machines.
Item Machine Machine Machine

A B C
Initial cost $ 20,000 $ 40,000 $ 50,000
Uniform annual benefit $ 4,100 $ 6,390 $ 7,000
Life, years 20 20 20
Determine which machine should be selected.
MARR 16%, per year,

(P/A, 12 %, 20) = 7.4694, (P/A, 15 %, 20) = 6.2593,
(P/A, 20 %, 20) = 4.8696

Case study (4)
There are two ways (A and B) to construct a power line.
Item Way Way

A B
Length Under lake Around lake
Frist cost 5 miles 15 miles
Maintenance $ 25,000 /mile $ 5,000 /mile

cost
Expected Life $ 400/mile/year $ 200/mile/year
Salvage value 15 year 15 year
Annual power $ 5000/mile $ 3000/mile

loss
Annual Tax $ 500/mile $ 500/mile
Interest rate 7% 7%
Determine which way should be selected.
(A/P, 7%, 15) = 0.10979, (A/F, 7%, 15) = 0.03979

Case study (5)
A manager is trying to decide between three projects.
Item Project Project project

A B C
Total investment
cost 300 300 300
($1000)
Life, years 5 5 5
Annual benefit
($1000)
Year 1 50 170 100
2 60 120 100
3 120 90 100
4 160 80 100
5 200 70 100
Determine which project should be selected.

Case study (6)
A manager is trying to decide between three projects.
Item Project project project

A B C
Total investment cost
($1000) 300 300 300
Life, years 5 5 5
Annual manufacturing
cost ($1000)
Year 1 100 160 130
2 120 140 130
3 140 120 130
4 160 100 130
5 180 80 130
Uniform annual
Revenue ($1000) 250 250 250
Determine which project should be selected.

8- Modern Project Management (MPM)
Traditional PM Modern PM
Focused on: Focused on:
Cost, Time, and Total Project Management
Quality (Integration, Scope, Resource, Cost,
Time, Quality, Risk, etc.)
 Modern Project Management (MPM)
 Project Management Information System (PMIS)
 Project Decision Support Systems (PDSS)
 Project Expert Systems (PES)
 Project Executive Information Systems (PEIS)
 Project Management Body of Knowledge (PMBOK)
 Total Project Management (TPM)
 Project Portfolio Management (PPM)
 ISO1006: Quality Management in Projects

8-1- Project Management Information System
 PMIS is the computerized linkage between project

planning and control for the different project management
levels.
 PMIS is a Project Knowledge Based
 Knowledge is knowing what to do with information,
(Gruber).
 PMIS aims to "get information to the right people, at the
right time, and in the right form".
Customers Suppliers Others
PMIS Top management
Control management
Operational management
Automation
Sites / factories / workshops

PMIS Goals:
 Improve system integration
 Improve system productivity
 Improve system communications
 Minimize time and costs
 Minimize conflicts between activities
 Minimize human effort & errors
PMIS main Steps:
Project engineering phase
Step 1: Project overview
Step 2: Project study phase
Step 3: Project conceptual design phase
Step 4: Project detailed design phase
Step 5: Project programming and hardware
Step 6: Project evaluation

What are the main Objectives in PMIS?
Objective How?
First and foremost, Project
Meet the customer expectations: Scope
What is to be delivered? Management
On schedule: Project
How long is the project estimated to take and in Time
what sequence will we do the necessary work? Management
Meet the technical /contractual requirements: Project
To what standards is project going to be Quality
delivered? Management
Now, and only now, Project
Within budget: Cost
What will be the estimated funding required? Management
Without future problems: Project
How certain we can do the project? Risk
Management
Quality of the process: Project Human
What skills are needed to do the work? Resources
Management
Good procurement: Project
What are the outsourced resources? Procurement
Management
Effective work achievement: Project
How all works is effective and efficient? Information/
Communications
Management
Meet the top management expectations: Project
How the project be overall planning & Integration
coordination? Management

8-2- Project Management Body of Knowledge
Project Management Body of Knowledge (PMBOK):
 An inclusive term that describes the sum of knowledge

within the profession of project management.
 As with other professions such as law, medicine, and

accounting, the body of knowledge rests with the
practitioners and academics who apply and advance it.
 PMBOK includes proven, traditional practices which are

widely applied as well as innovative and advanced ones
which have seen more limited use.
 PMBOK is All those topics, subject areas and

intellectual processes which are involved in the
application of sound management principles to the
collective execution of any types of effort which qualify
as projects.

PMBOK Standards, 1996:
Project
Success
2- Project 3- Project
Scope Time
Management Management
Cost Quality
Human Res. Communications
Risk Procurement
1-
Project
Integration
Management

- Project Integration Management
Project Integration Management. A subset of project

management that includes the processes required to ensure
that the various elements of the project are properly
coordinated.
i.e., Overall planning & coordination

Integration of actions & decisions
1- PROJECT INTEGRATION MANAGEMENT
1.1 PROJECT PLAN DEVELOPMENT
1.2 PROJECT PLAN EXECUTION
1.3 OVERALL CHANGE CONTROL

PROJECT PLAN DEVELOPMENT
Inputs Tools & Techniques Outputs
Other planning outputs Project planning Project plan

Historical information methodology Supporting detail
Organizational policies Stakeholder skills and
knowledge
Constraints
Project management
Assumptions information system
(PMIS)
PROJECT PLAN EXECUTION
Project plan General management Work results

Supporting detail skills Change requests
Organizational policies Product skills and
knowledge
Corrective action
Work authorization
System
Status review meetings
Project management
information system
Organizational
procedures
OVERALL CHANGE CONTROL

Project plan Change control system Project plan updates

Performance reports Configuration Corrective action
Change requests management Lessons learned
Performance
measurement
Additional planning
Project management
information system

- Project Scope Management
Project Scope Management. A subset of project

that the project includes all of the work required, and only the
work required, to complete the project successfully.
i.e.,
 Action plan for each work package (WP)
 Knowledge flow analysis (Method, work content &
resource required)
2- PROJECT SCOPE MANAGEMENT
2.1. INITIATION
2.2 SCOPE PLANNING
2.3 SCOPE DEFINITION
2.4 SCOPE VERIFICATION
2.5 SCOPE CHANGE CONTROL

INITIATION
Product description Project selection methods Project charter

Strategic plan Expert judgment Project manager
Project selection criteria identified/assigned
Historical information Constraints

Assumptions
SCOPE PLANNING
Product description Product analysis Scope statement

Project charter Benefit/cost analysis Supporting detail
Constraints Alternatives Scope management
Assumptions identification plan
Expert judgment
SCOPE DEFINITION
Scope statement Work breakdown Work breakdown

Constraints structure templates structure
Assumptions Decomposition
Other planning outputs

Historical information

SCOPE VERIFICATION
Work results Inspection Formal acceptance

Product documentation
SCOPE CHANGE CONTROL

Work breakdown Scope change control Scope changes

structure system Corrective action
Performance reports Performance Lessons learned
Change requests measurement
Scope management Additional planning

plan

3- Project Time Management
Project Time Management. A subset of project

timely completion of the project. It consists of activity
definition, activity sequencing, activity duration estimating,
schedule development, and schedule control.
3- PROJECT TIME MANAGEMENT
3.1 ACTIVITY DEFINITION
3.2 ACTIVITY SEQUENCING
3.3 ACTIVITY DURATION ESTIMATING
3.4 SCHEDULE DEVELOPMENT
3.5 SCHEDULE CONTROL

ACTIVITY DEFINITION
Work breakdown Decomposition Activity list

structure Templates Supporting detail
Scope statement Work breakdown
Historical information structure updates
Constraints
Assumptions
ACTIVITY SEQUENCING
Activity list Precedence Project network

Product description Diagramming Method diagram
(PDM) Activity list updates
Mandatory
dependencies Arrow Diagramming
Method (ADM)
Discretionary
dependencies Conditional
diagramming methods
External dependencies
Network templates
Constraints
Assumptions
ACTIVITY DURATION ESTIMATING

Activity list Expert judgment Activity duration

Constraints Analogous estimating estimates
Assumptions Simulation Basis of estimates
Resource requirements Activity list updates
Resource capabilities

SCHEDULE DEVELOPMENT
Project network Mathematical analysis Project schedule

diagram Duration compression Supporting detail
Activity duration Simulation Schedule management
estimates plan
Resource leveling
Resource requirements heuristics Resource requirement
Resource pool Project management updates
description software
Calendars
Constraints
Assumptions
Leads and Lags
SCHEDULE CONTROL
Project schedule Schedule change Schedule updates

Performance reports control system Corrective action
Change requests Performance Lessons learned
measurement
Schedule management
plan Additional planning
Project management
software

4- Project Cost Management
Project Cost Management. A subset of project management

that includes the processes required to ensure that the project
is completed within the approved budget.
4- PROJECT COST MANAGEMENT
4.1 RESOURCE PLANNING
4.2 COST ESTIMATING
4.3 COST BUDGETING
4.4 COST CONTROL
RESOURCE PLANNING
Work breakdown Expert judgment Resource requirements

structure Alternatives
Historical information identification
Scope statement
Resource pool
description
Organizational policies

COST ESTIMATING
Work breakdown Analogous estimating Cost estimates

structure Parametric modeling Supporting detail
Resource requirements Bottom-up estimating Cost management plan
Resource rates Computerized tools
Activity duration
estimates
Chart of accounts
COST BUDGETING
Cost estimates Cost estimating tools Cost baseline

Work breakdown and techniques
structure
Project schedule
COST CONTROL
Cost baseline Cost change control Revised cost estimates

Performance reports system Budget updates
Change requests Performance Corrective action
measurement
Cost management plan Estimate at completion
Additional planning
Lessons learned
Computerized tools

5- Project Human Resource Management
Project Human Resource Management. A subset of project

management that includes the processes required to make the
most effective use of the people involved with the project.
5. HUMAN RESOURCE MANAGEMENT
5.1 ORGANIZATIONAL PLANNING
5.2 STAFF ACQUISITION
5.3 TEAM DEVELOPMENT

ORGANIZATIONAL PLANNING
Project interfaces Templates Role and responsibility

Staffing requirements Human resource assignments
Constraints practices Staffing management

Organizational theory plan
Stakeholder analysis Organization chart

Supporting detail
STAFF ACQUISITION
Staffing management Negotiations Project staff assigned

plan Pre-assignment Project team directory
Staffing pool Procurement
description
Recruitment practices
TEAM DEVELOPMENT
Project staff Team-building Performance

Project plan activities improvements
Staffing management General management Input to performance

plan skills appraisals
Performance reports Reward and

recognition systems
External feedback
Collocation
Training

6- Project Quality Management
Project Quality Management. A subset of project
that the project will satisfy the needs for which it was
undertaken.
6- PROJECT QUALITY MANAGEMENT
6.1 QUALITY PLANNING
6.2 QUALITY ASSURANCE
6.3 QUALITY CONTROL

QUALITY PLANNING
Quality policy Benefit/cost analysis Quality management

Scope statement Benchmarking plan
Product description Flowcharting Operational definitions
Standards and Design of experiments Checklists

regulations Inputs to other
Other process outputs processes
QUALITY ASSURANCE
Quality management Quality planning tools Quality

plan and techniques improvement
Results of quality Quality audits
control measurements
Operational definitions
QUALITY CONTROL
Work results Inspection Quality improvement

Quality management Control charts Acceptance decisions
plan Pareto diagrams Rework
Operational definitions Statistical sampling Completed checklists
Checklists Flowcharting Process adjustments
Trend analysis

- Project Communication Management
Project Communications Management. A subset of project

proper collection and dissemination of project information.
7- PROJECT COMMUNICATIONS MANAGEMENT
7.1 COMMUNICATIONS PLANNING
7.2 INFORMATION DISTRIBUTION
7.3 PERFORMANCE REPORTING
7.4 ADMINISTRATIVE CLOSURE
COMMUNICATIONS PLANNING
Communications Stakeholder analysis Communications

requirements management plan
Communications
technology
Constraints
Assumptions

INFORMATION DISTRIBUTION
Work results Communications skills Project records

Communications Information retrieval
management plan systems
Project plan Information
distribution systems
PERFORMANCE REPORTING
Project plan Performance reviews Performance reports

Work results Variance analysis Change requests
Other project records Trend analysis
Earned value analysis
Information
distribution tools and
techniques
ADMINISTRATIVE CLOSURE
Performance Performance reporting Project archives

measurement tools and techniques Formal acceptance
documentation
Lessons learned
Documentation of the
product of the project
Other project records

8- Project Risk Management
Project Risk Management. A subset of project management

that includes the processes concerned with identifying,
analyzing, and responding to project risk. It consists of risk
identification, risk quantification, risk response development,
and risk response control.
8- PROJECT RISK MANAGEMENT
8.1 RISK IDENTIFICATION
8.2 RISK QUANTIFICATION
8.3 RISK RESPONSE DEVELOPMENT
8.4 RISK RESPONSE CONTROL

RISK IDENTIFICATION
Product description Checklists Sources of risk

Other planning outputs Flowcharting Potential risk events
Historical information Interviewing Risk symptoms
Inputs to other
processes
RISK QUANTIFICATION
Stakeholder risk Expected monetary Opportunities to

tolerances value pursue, threats to
Sources of risk Statistical sums respond to
Potential risk events Simulation Opportunities to

ignore, threats to
Cost estimates Decision trees accept
Activity duration Expert judgment
estimates
RISK RESPONSE DEVELOPMENT
Opportunities to Procurement Risk management plan

pursue, threats to Contingency planning Inputs to other
respond to processes
Alternative strategies
Opportunities to Contingency plans
ignore, threats to Insurance
accept Reserves
Contractual
agreements

RISK RESPONSE CONTROL
Risk management plan Workarounds Corrective action

Actual risk events Additional risk Updates to risk
Additional risk response development management plan
identification
- Project Procurement Management
Project Procurement Management. A subset of project

management that includes the processes required to acquire
goods and services from outside the performing organization.
9- PROJECT PROCUREMENT MANAGEMENT

9.1 PROCUREMENT PLANNING
9.2 SOLICITATION PLANNING
9.3 SOLICITATION
9.4 SOURCE SELECTION
9.5 CONTRACT ADMINISTRATION
9.6 CONTRACT CLOSE-OUT

PROCUREMENT PLANNING
Scope statement Make-or-buy analysis Procurement

Product description Expert judgment management plan
Procurement resources Contract type selection Statement(s) of work
Market conditions
Other planning outputs
Constraints
Assumptions
SOLICITATION PLANNING
Procurement Standard forms Procurement

management plan Expert judgment documents
Statement(s) of work Evaluation criteria
Other planning outputs Statement of work
updates
SOLICITATION
Procurement Bidders conferences Proposals

documents Advertising
Qualified seller lists

SOURCE SELECTION
Proposals Contract negotiation Contract

Evaluation criteria Weighting system
Organizational policies Screening system
Independent estimates
CONTRACT ADMINISTRATION
Contract Contract change Correspondence

Work results control system Contract changes
Change requests Performance reporting Payment requests
Seller invoices Payment system
CONTRACT CLOSE-OUT
Contract Procurement audits Contract file

documentation Formal acceptance and
closure

8-3- Total Project Management
1-
Project
Integration
Management
Scope Time
Cost Quality
Human Res. Communications
Risk Procurement
Operational Management
Project Project Project Project Others

Design Quality Detailed Inventory
plans
Sites / factories / workshops

Production (Construction, Fabrications, .. etc.)

8-4- Project Portfolio Management (PPM)
What is Project Portfolio?
Project portfolio is a collection of projects carried out in the

same company or organizational unit with the same strategic
objectives and the same resource pool.
What is Project Portfolio Management?
Project portfolio management is the art and science of

applying a set of knowledge, skills, tools, and techniques to a
collection of projects in order to meet or exceed the needs
and expectations of an organization’s [investment] strategy.
Project portfolio management is a process that includes

decision-making, prioritization, review, realignment, and
reprioritization. The emphasis is in management of strategic
content of projects at the aggregate level (= at the level of
collection of projects).
The Need for New Project Portfolio Management (PPM)

Content:
• According to our/my definition, project portfolio

management constitutes the management of a multi-project
organization and its projects in a manner that enables the
linking of projects to business objectives.
• This implies development at two levels:

– First, the process of managing single projects
– Second, management processes at the level of
business units or other organizational units above
projects:
• e.g. how responsibilities, decision making and information

sharing are arranged and supported
PPM Objectives (3) and their Managerial Practices:

 Maximizing the value of the portfolio
 Link to strategy
 Balance in the portfolio

8-5-ISO10006:
Quality Management in Projects

ISO 1006 Contents:
1 Scope
2 Normative references
3 Definitions
4 Project characteristics
4.1 General.
4.2 Project management
4.3 Organization
4.4 Project phases and project processes
5 Quality in project management processes

5.1 General
5.2 Strategic process
5.3 Interdependency management processes
5.4 Scope-related processes
5.5 Time-related processes
5.6 Cost-related processes
5.7 Resource-related processes
5.8 Personnel-related processes
5.9 Communication-related processes
5.10 Risk-related processes
5.11 Purchasing-related processes
6 Learning from the project
Annexes
A Quality practices in project management
ISO 9000 family of standards
B Use of progress evaluations for quality
C Bibliography
Tables:
Table 1—Description of project management processes.

1 Scope
These guidelines use project management processes to serve

as a framework to discuss their application.
This International Standard is applicable to projects of

varying complexity, small or large, of short or long duration,
in different environments, and irrespective of the kind of
project product (including hardware, software, processed
material, service or combinations thereof). This may
necessitate some tailoring of the guidance to suit a particular
project.
This International Standard is not a guide to project

management itself.
2 Normative references:
 ISO 9000:2000, Quality management systems — Fundamentals
and vocabulary
 ISO 9004: 2000, Quality Management Systems – Guidelines for
performance improvements
 ISO/IEC Guide 73: Risk management – Vocabulary –
Guidelines for use in standards
 IEC 62198: 2001, Project risk management – Application
guidelines.

ISO 10006 Standards, 1997:
Project
Success
1- STRATEGIC 2- INTER-
PROCESS DEPENDENCY
MANAGEMENT
PROCESSES
3- SCOPE 4- TIME
RELATED RELATED
PROCESSES PROCESSES
5- COST 6- RESSOURCE
RELATED RELATED
PROCESSES PROCESSES
7- PERSONNEL 8- COMMUNICATION
RELATED RELATED
PROCESSES OPERATIONAL
PROCESSES
9- RISK 10- PURCHASING

RELATED RELATED PROCESSES
PROCESSES

STRATEGIC PROCESS:
PROCESS DESCRIPTION
Strategic process Setting the direction for the project and
managing realization of the other processes.
INTERDEPENDENCY MANAGEMENT PROCESSES
PROCESS DESCRIPTION
2-1- Project initiation Evaluating stakeholders requirements,
and project plan preparing a project plan and initiating
development other processes.
2-2- Interaction Managing the interaction that occur
management during the project.
2-3- Change and Anticipating change and managing it
configuration across all process.
management
2-4- Closure Closing processes and obtaining
feedback.
SCOPE RELATED PROCESSES
PROCESS DESCRIPTION
3-1- Concept Defining the broad outlines of what the
development project product will do.
3-2- Scope Documenting the characteristics of the
development and project product in measureable terms
control and controlling them.
3-3- Activity Identifying and documenting activities
definition and steps required to achieve the project
objectives.
3-4- Activity control Controlling the actual work carried out
in the project.

TIME RELATED PROCESSES
PROCESS DESCRIPTION
4-1- Activity Identifying interrelationships and the logical
dependency interactions and dependencies among project
planning activities.
4-2- Duration Estimating the duration of each activity in
estimation connection with the specific conditions and
with the resources required.
4-3- Schedule Interrelating the project time objectives,
development activity dependencies and their durations as
the framework for developing general and
detailed schedules.
4-4- Schedule Controlling the realization of the project
control activities, for confirming the proposed
schedule or for taking adequate actions for
recovering from delays.
COST RELATED PROCESSES
PROCESS DESCRIPTION
5-1- Cost Developing cost estimates for the project.
estimation
5-2- Budgeting Using results from cost estimation to produce
the project budget.
5-3- Cost Controlling costs and deviations from the
control project budget.
RESSOURCE RELATED PROCESSES
PROCESS DESCRIPTION
6-1- Ressource Identifying, estimating, scheduling and
planning allocating all relevant resources.
6-2- Ressource Comparing actual usage against ressource
Control plans and taking action, if needed.

PERSONNEL RELATED PROCESSES
PROCESS DESCRIPTION
7-1- Defining a project organizational structure
Organizational tailored to the suit the project needs including
structure identifying roles in the project and defining
definition authority and responsibility.
7-2- Staff Selecting and assigning personnel with
allocation appropriate competence to suit the project
process needs.
7-3- Team Developing individual and team skills and
development ability to enchance project performance.
COMMUNICATION RELATED OPERATIONAL

PROCESSES
PROCESS DESCRIPTION
8-1- Communication Planning the information and
planning communication systems of the project.
8-2- Information Making necessary information
management available to project organization
members and others stakeholders.
8-3- Communication Controlling communication in
control accordance with the planned
communication system.
RISK RELATED PROCESSES
PROCESS DESCRIPTION
9-1- Risk Determing risks in the project.
identification
9-2- Risk estimation Evaluating the probability of the risk
occurence and the impact of risk on the
project.
9-3- Risk response Developing plans for responding to risks.
development
9-4- Risk control Implementing and updating the risk
plans.

PURCHASING RELATED PROCESSES:
PROCESS DESCRIPTION
10-1- Purchasing Identifying and controlling what is to be
planning and control purchased and when.
10-2- Requirements Compiling commercial conditions and
documentation technical requirements.
10-3- Subcontractor Evaluating and determing which
evaluation subcontractors should be invited to
supply products.
10-4- Subcontracting Issuing invitations to tender, tender
evaluation, negotiation. Preparation and
placing of the subcontract.
10-5- Contract Ensuring that subcontractors
control performance meets contractual
requirements.
Table 1 – Description of project management processes
Clause Process Description
QUALITY MANAGEMENT SYSTEMS IN Projects
4.1 Project characteristics

4.1.1 General
4.1.2 Project management The processes of managing a project.
processes
4.1.3 Organization The organizations involved in a
project.
4.1.4 Project phases and project The phases and processes of a
processes project.
4.2 Quality management in Quality management processes in the
projects document.
MANAGEMENT RESPONSIBILITY
5.1 Management commitment

5.2 Strategic process Setting the direction for the project
and managing realization of the other
project processes.

5.2.1 General
5.2.2 Customer focus Satisfaction of customer and other
interested parties requirements.
5.2.3 Leadership Leadership in both project and
originating organizations.
5.2.4 Involvement of personnel Personnel in the organization.
5.2.5 Process approach The process approach and continual
improvement.
5.2.6 System approach to Coordination and compatibility of
management planned processes.
5.2.7 Continual improvement The responsibility of management.
5.2.8 Factual approach to decision The analysis and evaluation of data
making for decision making.
5.2.9 Mutually beneficial supplier Relationships between suppliers and
relationships the project.
Quality practices in projects — References to the ISO 9000 Standards
This annex presents quality practices that are applicable to many project
processes. It indicates where further information can be found in the ISO 9000
Standards. Some of these practices have also been covered in Clauses 5, 6 and
7.
Table A.1 – Descriptions of quality practices that are applicable to project

processes
Practice Description
Approvals Requirements for approvals should be established and the
approvals documented (refer to ISO/IEC Guide 2).
Audits Audits can be carried out for both internal and external
purposes. They may be applied to all project processes.
Further guidance is given in ISO 9004:2000, 8.2, ISO
9000:2000, 2.8, and ISO 10011. The definition of “audit” is
given in ISO 9000:2000, 3.9.
Corrective action Corrective action should be carried out whenever
appropriate with regard to the change management process.
Further guidance is given in ISO 9004:2000, 8.5.2. The
definition of “corrective action” is given ISO 9000:2000,
3.6.5.
Documentation Documentation includes plans, specifications, quality
management system documents and records. Planned and
actual inputs and outputs of processes should be

documented. Further guidance on documentation is given in
ISO 9000:2000, 2.7, ISO 9004:2000, 4.2.4 (control of
records) and 4.2.3 (control of documents). The definition of
“specification” is given in ISO 9000:2000, 3.7.3.
Improvement Improvement should be carried out throughout the project.
Further guidance is given in ISO 9004:2000, 8.5.
Inspection The definition of “inspection” is given in ISO 9000:2000,
3.8.2.
Preventive action Preventive action should be carried out throughout the
project. The definition of “preventive action” is given in ISO
9000:2000, 3.6.4.
Process control Process control should be carried out throughout the project.
Further guidance on process control is given in ISO
9004:2000, 7.5.
Quality assurance The definition of “quality assurance” is given in ISO
9000:2000, 3.2.11.
Quality The definition of “quality management system” is given in
management ISO 9000:2000, 3.2.3.
system
Quality planning The definition of “quality planning” is given in ISO
9000:2000, 3.2.9.
Reviews Subjects of reviews should include inputs and outputs of
project processes including documents. Review is defined in
ISO 9000:2000, 3.8.7, and includes reference to
“management review”, “contract review” and “design and
development review”.
Specification and Guidance is given in ISO 9004:2000, 7.3.
design
Traceability The definition of “traceability” is given in ISO 9000:2000,
3.5.4.
Training Guidance is given in ISO 9004:2000, 6.2.2.2.
Validation of The methods, tools, techniques and software used should be
tools and appropriate to the project and valid. The definition of
techniques “validation” is given in ISO 9000:2000, 3.8.5.
Verification Outputs of project processes should be verified. The
definition of “verification” is given in ISO 9000:2000, 3.8.4.
RESOURCE MANAGEMENT
6.1 Resource related processes

6.1.1 General
6.1.2 Resource planning Identifying, estimating, scheduling
and allocating all relevant resources.
6.1.3 Resource control Comparing actual usage against
resource plans and taking action if
needed.
6.2 Personnel related processes
6.2.1 General
6.2.2 Project organizational Defining a project organizational
structure definition structure tailored to suit the project
needs including identifying roles in
the project and defining authority and
responsibility.
6.2.3 Allocation of personnel Selecting and assigning sufficient
personnel with appropriate
competence to suit the project needs.
6.2.4 Team development Developing individual and team skills
and ability to enhance project
performance.
PRODUCT REALIZATION
7.1 Interdependency
management process
7.1.1 General
7.1.2 Project initiation and project Evaluating customer and other
management plan interested parties requirements,
development preparing a project management plan
and initiating other processes.
7.1.3 Interaction management Managing interactions during the
project.
7.1.4 Change management Anticipating change and managing it
across all processes.
7.1.5 Closure Closing processes and obtaining
feedback.

Table 1 – continued
7.2 Scope-related processes

7.2.1 General
7.2.2 Concept development Defining the broad outlines of what
the project product will do.
7.2.3 Scope development and Documenting the characteristics of
control the project product in measurable
terms and controlling them.
7.2.4 Activity definition Identifying and documenting
activities and steps required to
achieve the project objectives.
7.2.5 Activity control Controlling the actual work carried
out in the project.
7.3 Time-related processes
7.3.1 General
7.3.2 Activity dependency Identifying interrelationships and the
planning logical interactions and dependencies
among project activities.
7.3.3 Estimation of duration Estimating the duration of each
activity in connection with the
specific conditions and the resources
requited.
7.3.4 Schedule development Interrelating the project time
objectives, activity dependencies and
their durations as the framework for
developing general and detailed
schedules.
7.3.5 Schedule control Controlling the realization of the
project activities, for confirming the
proposed schedule or for taking
adequate actions for recovering from
delays.
7.4 Cost-related processes
7.4.1 General
7.4.2 Cost estimating Developing cost estimates for the
project.
7.4.3 Budgeting Using results from cost estimation to
produce the project budget.
7.4.4 Cost control Controlling costs and deviations from

the project budget.
7.5 Communication-related
processes
7.5.1 General
7.5.2 Communication planning Planning the information and
communication systems of the
project.
7.5.3 Information management Making necessary information
available to project organization
members and other interested parties.
7.5.4 Communication control Controlling communication in
accordance with the planned
communication system.
7.6 Risk-related processes
7.6.1 General
7.6.2 Risk identification Determining risks in the project.
7.6.3 Risk assessment Evaluating the probability of
occurrence of risk events and the
impact of risk events on the project.
7.6.4 Risk treatment Developing plans for responding to
risks.
7.6.5 Risk control Implementing and updating the risk
plans.
7.7 Purchasing-related
processes
7.7.1 General
7.7.2 Purchasing planning and Identifying and controlling what is to
control be purchased and when.
7.7.3 Documentation of Compiling commercial conditions and
purchasing requirements technical requirements.
7.7.4 Supplier and subcontractor Evaluating and determining which
evaluation suppliers and subcontractors should
be invited to supply products.
7.7.5 Subcontracting Issuing invitations to tender, tender
evaluation, negotiation, preparation
and placing of the subcontract.
7.7.6 Contract control Ensuring that subcontractors’
performance meets contractual
requirements.

Table 1 – continued
CONTINUAL IMPROVEMENT
8.1 General
8.2 Role of the originating Information from the project for
organization continual improvement
8.3 Role of the project Defining the information required
organization from projects for continual
improvement
9- Project Management Proverbs
 Any project can be estimated accurately (once it's completed).
 Nothing is impossible for the person who doesn't have to do it.
 At the heart of every large project is a small project trying to get

out.
 If you don't stand for something, you'll fall for anything.
 The more desperate the situation the more optimistic the situate
 Too few people on a project can't solve the problems - too many
create more problems than they solve.
 A problem shared is a buck passed.
 A user will tell you anything you ask about, but nothing more.
 A user is somebody who tells you what they want the day you
give them what they asked for.
 What you don't know hurts you.

 The conditions attached to a promise are forgotten, only the
promise is remembered
 There's never enough time to do it right first time but there's
always enough time to go back and do it again.
 I know that you believe that you understand what you think I said
but I am not sure you realise that what you heard is not what I
meant.
 The sooner you begin coding the later you finish.
 What is not on paper has not been said.
 If you don’t know where you’re going, any road will take you
there.
 If you fail to plan you are planning to fail.
 If you don't attack the risks, the risks will attack you.
 A little risk management saves a lot of fan cleaning.
 The sooner you get behind schedule, the more time you have to
make it up.
 There are no good project managers - only lucky ones.
 The more you plan the luckier you get.
 You Will Waste A LOT Of Time, If You Do Not Manage Your

Group Carefully.
 Make Every Second/Minute/Hour Of Effort Count.

 Schedule CAREFULLY, Do Not Leave Everything Until The
Last Minute.
 Nothing is as easy as it looks.
 Everything takes longer than you think.
 Anything that can go wrong will go wrong.
 If there is a possibility of several things going wrong, the one that
will cause the most damage will be the one to go wrong.
Corollary: If there is a worse time for something to go wrong, it
will happen then.
 If anything simply cannot go wrong, it will anyway.
10- Sources of Information on PM

Project Management Institute – www.pmi.org
 PMI Certification
 Project Management Body of Knowledge
Other sites
www.mapnp.org/library/plan_dec/
Project Management
project/project.htm
Welcom - Enterprise Project

www.welcom.com/
Management Solutions
Wideman Comparative Glossary of

www.pmforum.org/library/glossary/
Project Management Terms v2.1
Project Management Programs -

www.faqs.org/faqs/proj-plan-faq/
Frequently asked Questions (FAQ)
Project Management Guide k12science.ati.stevens-tech.edu/

training/projectmgtv2/
IT Project Management for Project

www.gantthead.com/
Managers - gantthead
Tantara: Project Management Plan

www.tantara.ab.ca/ja_pmiee.htm
(Template)
Biscayne Bay Coastal Wetlands www.evergladesplan.org/pm/program/

Project Management Plan (PMP) pmp_28_biscayne.cfm
Project Management Plan | Project web.wm.edu/mast/

MAST project_management_plan.php
Open Directory - Computers: dmoz.org/Computers/Software/

Software: Project Management Project_Management/
Project Management Training www.amanet.org/seminars/cmd2/

Courses - Creating a Project Plan Project.htm
PROJECT MANAGEMENT PLAN www.strategy.gov.uk/files/pdf/PMP.pdf
Performance-Based Management www.ornl.gov/~webworks/cpr/rpt/

System Project Management Plan 109436_.pdf
www.tedi.uq.edu.au/mag/
Project planning & management 2_Definition/
Definition05_ProjectPlan.html
CAMS Project Management Plan

www.nist.gov/admin/cams_external/
Chapter 9 Appendix J - CAMS Phase
pmp_ver7/pmpchap9appxj.html
III ...
C-BRAT PROJECT - Project

www.cbratproject.com/
Management software
River Protection Project - Project www.hanford.gov/orp/uploadfiles/doe-

Management Plan orp.pdf

www.losangeles.af.mil/
Project Management Plan (PMP) Special_Interest/SAMS/
pmp1222003.pdf
DRAFT Page 1 v9-12-02v2 Project icecube.wisc.edu/collab-docs/pep/

Management Plan For IceCube 12 ... 091202/Draft_PMP_v9-12-02_lar.pdf
PROGRAM MANAGEMENT
www.hq.usace.army.mil/pmbp/PgMP
PLAN (PgMP) Project Management
%2019%20Oct%2001.pdf
Business Process ...
www.gjo.doe.gov/programs/hanf/vzcp/
Project Management Plan
pmp.pdf
Project Management plan (for www.vista.ac.uk/jifbid/management/

construction phase) Management.pdf
DRAFT US ATLAS Computing www.usatlas.bnl.gov/mgmt/

Project Management Plan July 2000 computing/PMP%20July%202000.pdf
WBDG | Project Planning,

www.wbdg.org/project/index.php
Management & Delivery
Integrated Project Development

www.learncanada.ca/management.php
Team Model
Microsoft Office Online: Project office.microsoft.com/project/
ecommerce.ncsu.edu/studio/templates/
Software Project Management Plan
SPMP.htm
Project Management - Guidelines - www.projectmanagement.tas.gov.au/

Appendix 1: Project Management ... guidelines/pm5_14appx1.htm
Micro Planning International -

www.microplanning.com/plan/
Project Management professionals ...
Project management training, tools,

www.4pm.com/
techniques and textbooks

SPMP â€“ SOFTWARE PROJECT wwwtech.de/calculator/doku/2002-05-
MANAGEMENT PLAN 30_SPMP.doc
Assignment 2 - Project Management depts.washington.edu/busdev/

Plan BEDP_Mktg445_assignment2.shtml
Wideman Comparative Glossary of www.maxwideman.com/pmglossary/

Project Management Terms v3.1 PMG_R05.htm
pearl1.lanl.gov/bioassay/pdf/
Project Management Plan for the
PMP_rev81-9-031.pdf
The Project Management Certificate

www.dci.com/events/iil_pmcert/
Program ...
Download this quality management techrepublic.com.com/5100-6315-

plan to ensure project approval ... 5034545.html
Project Management Software www.capterra.com/project-

Comparison: workforce software ... management-solutions
www.umesc.usgs.gov/
Project Management Plan
habitat_needs_assessment/
Introduction
pmp_intro.html
www.project-education-
Project Management Education UK
uk.freeserve.co.uk/
Kickoff Meeting Plan, Project

varatek.com/kickoff_sample.html
Breakdown, project ...
A Comprehensive Management Plan

www.glc.org/stclair/factsheet.html
for Lake St. Clair and the St. ...
Software Development Online:

www.sdmagazine.com/projects/
Process & Project Management
ETP, Global Structured Programme

www.etpint.com/projectplan.htm
& Project Management - Tools ...

Parallel 56 – Strategy Planning for www.parallel56.com/strategy.asp?
business, ecommerce, ebusiness ... page=13
Adaptive Planning Tools. Scheduling

www.adaptive-planning.com/
and project management.
Project Management Software,

www.planview.com/
workflow automation, PlanView ...
www.sun.com/service/sunps/
Project Management
projectmanagement/
RSP&A project planning (estimation)

www.rspa.com/spi/project-plan.html
resources
Project Management Software -

www.guysoftware.com/planbee.htm
Critical Path Planning with PlanBee
CIOI - Masters Certificate in IT cioi.web.cmu.edu/programs/mcipm/

Project Management - IT Risk ... itrisk.jsp
https://cshelpdesk.csd.sc.edu/
Project Management Framework
pmframework/projectmanagement.pdf
Project Management Software-Plan

4abetterbusiness.com/tracker.htm
& Progress Tracker
Workpackage description: 1: Project www.w3.org/2001/sw/Europe/plan/

Management workpackages/live/esw-wp-1.html
Amazon.com: Books: A Guide to the www.amazon.com/exec/obidos/tg/

Project Management Body of ... detail/-/1880410230?v=glance

References
1. Abdomerovic, M., Project Management Descriptors, Project Management
Journal, PMI, PA, 1992, p42.
2. Adams, J. R. and Barndt, S. E. "Organizational Life Cycle Implications for
Major Projects." Project Management Quarterly, Vol. IX, No. 4, Dec. 1978,
p. 32-39.
3. Adrian, J. J. 1987. Construction Productivity Improvement. Elsevier Science
Publishing
4. Allen, W. 1979. Developing the Project Plan. Notes prepared for
Engineering Institute of Canada Annual Congress Workshop. Toronto. pp 3-
9.
5. Asian Development Bank, Analyzing the Project Environment. 13th ADB
Regional Seminar MS, Manila, Philippines, 1987
6. Barrie, D. S. and Paulson, Jr. B. C. 1978. Professional Construction
Management.
7. Cleland, D. I., Project Management: Strategic Design and Implementation,
TAB Professional and Reference Books, PA, 1989.
8. Connor, D. M. Promotional Literature. Victoria, B.C.: Connor Development
Services, 1989
9. Dell'Isola, A. J. "Value Engineering in Construction." Van Nostrand
Reinhold Co. 4. Wideman, R. M., Cost Control of Capital Projects, BiTech
Publishers, Vancouver, BC, Canada, Second Edition, 1995.
10. Drewin, F. J. 1982. Construction Productivity - Measurement and
Improvement through
11. Duncan, W. R. 1996. A Guide to the Project Management Body of
Knowledge and Glossary of Terms., PMI, PA, 1996.
12. Fayol, H., General and Industrial Management, IEEE Press, NY, Rev. ed.
1984.
13. Forsberg, K., H. Mooz & H. Cotterham, Visualizing Project Management,
John Wiley & Sons, NY, 1996.
14. Kerzner, H. 1989. Project Management: A Systems Approach to Planning,
Scheduling, and Controlling. Van Nostrand Reinhold, New York. pp 804-
809.
15. Kerzner, H., Project Management: A systems Approach to Planning,
Scheduling and Controlling, Van Nostrant Reinhold, NY, 1989, cover
jacket.
16. Kliem, Ralph L. and Harris B. Anderson, Teambuilding Styles and Their
Impact on Project Management Results, PMI Journal 27(1), 1996, p46.
17. Management Institute 1997 Seminar & Symposium Proceedings: 1006-
1011

18. Meredith, J. R. and Mantel, Jr. S. J. 1985. Project management - A
Managerial Approach. John Wiley & Sons, New York. p 328.
19. Nagabhushana Rau A. A Case Study of Human Management at a
Construction Project Paper presented in Bangalore, India: Association of
Consulting Civil Engineers, New Delhi, 1990
20. Patel, M. B. & Prof. P.G. W. Morris, Guide to the Project Management
Body of Knowledge, Centre for Research in the Management of Projects,
University of Manchester, UK, 1999, p52.
21. Pinto, j. k., Project management: the Future, in chapter 13 of Project
management for Business Professionals, A comprehensive guide, edited by
Joan Knutson, Wiley, NY, 2001, p586.
22. Shenhar, A. J., R. M. Wideman, Toward a Fundamental Differentiation
between Projects, PICMET '97 Conference Proceedings, Management of
Engineering and Technology Dept., Portland State University, Portland,
Oregon, 1997, p391.
23. Wideman, R. M. "Project Management Examined." Unpublished lecture
material for the University of Victoria, British Columbia, 1980.
24. Wideman, R. M. 1997. A Project Management Knowledge Structure for the
Next Century. Project
25. Wideman, R. M. Cost Control of Capital Projects. Vancouver, B.C.: AEW
Services, 1983.
26. Wideman, R. M. Good Public Relations, an Essential Part of Successful
Project Management. Denver, Colorado: Project Management Institute,
Seminar/Symposium Proceedings, 1985
27. Wideman, R. M. Successful Project Control and Execution Keynote paper,
INTERNET '88 Proceedings: Butterworth Scientific Limited, London, 1989
28. Wideman, R. M. Total Project Management of Complex Projects,
Improving Performance with Modern Techniques Presentations in five cities
in India for The Consultancy Development Centre, New Delhi, India, 1990
29. Wideman, R. M., A Framework for Project and Program Management,
Project Management Institute, PA, 1991, Appendix A: A Historical
Perspective.
30. Wideman, R. M., developer of the Project Management Body of
Knowledge of the Project Management Institute, approved March 1987.
31. Wideman, R. M., in a Review of Kim Heldman's Project Management
Professional Study Guide at
http://www.maxwideman.com/papers/studyguide/lifespan.htm
Dr. Attia Gomaa
Head of Industrial Engineering Dept.

Cairo University, Fayoum branch


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Economy Analysis for Engineering Projects

‫التحليل األقتصادي للمشاريع الهندسية‬

Who Should Attend:

Economy Analysis for Engineering Projects 2

This course is mainly concerned with the problems of

This course systematically presents several conceptual and

This course attempts to serve the practical needs of project

This course is written in a relatively simple, easy-to-

Finally, I’m very grateful to my readers, participants &

Dr. Attia H. Gomaa

Economy Analysis for Engineering Projects 3

What is the Project?

Economy Analysis for Engineering Projects 4

Economy Analysis for Engineering Projects 5

Figure - Traditional management feedback

Figure - Public relations feed forward concept

Economy Analysis for Engineering Projects 6

What is the Project Life Cycle?

o It is the sequence of phases through which the project will

o Project life cycle follows a common generic sequence:

Three Life Cycles to consider:

Economy Analysis for Engineering Projects 7

Product Life Cycle Cash Flow:

Economy Analysis for Engineering Projects 8

Figure - Four-phase generic project life cycle

Economy Analysis for Engineering Projects 9

Economy Analysis for Engineering Projects 10

Economy Analysis for Engineering Projects 11

Figure - Typical manpower loadings for the design and

Economy Analysis for Engineering Projects 12

Figure - The rate of development of information during

Economy Analysis for Engineering Projects 13

Figure - The total overall cost of ownership of a typical

Economy Analysis for Engineering Projects 14

What is the Project Management?

1- PM is the application of knowledge, tools and scientific

2- PM is a powerful systematic methodology to achieve a

Economy Analysis for Engineering Projects 15

4- PM is the business process of estimating, allocating and

5- PM is the art of matching a project's goals, tasks, and

7- PM is "The art of directing and coordinating human and

Economy Analysis for Engineering Projects 16

2. Scheduling: adding durations and resources and

3. Monitoring: evaluating progress against plan

4. Control: exercising positive corrective action over

Economy Analysis for Engineering Projects 17

Project Management Cycle

Targets Data Planning Decision-

Corrective Control Review Implementation

Economy Analysis for Engineering Projects 18

Project Planning & Control

Master Plan Performance Evaluation

Targets Constraints Resources

Annual run Plans

Short run Plans

Economy Analysis for Engineering Projects 19

How do you measure PM success?

What are the main Constraints in PM?

What are the main Goals in PM?

Economy Analysis for Engineering Projects 20

Economy Analysis for Engineering Projects 21

Resource: Any tangible support used in the performance of a

Economy Analysis for Engineering Projects 22