17

Project
Management

McGraw-Hill/Irwin Copyright 2007 by The McGraw-Hill Companies, Inc. All

 Learning Objectives
Discuss the behavioral aspects of projects
in terms of project personnel and the
project manager.
Discuss the nature and importance of a
work breakdown structure in project
management.
Give a general description of PERT/CPM
techniques.
Construct simple network diagrams.

17-2
 Learning Objectives
List the kinds of information that a PERT or
CPM analysis can provide.
Analyze networks with deterministic times.
Analyze networks with probabilistic times.
Describe activity crashing and solve
typical problems.

17-3
 Projects
JAN FEB MAR APR MAY JUN
Build A

A Done

Build B

B Done

Build C

C Done
On time!
Build D

Ship

Unique, one-time operations designed to

accomplish a specific set of objectives in a limited
time frame.

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 Project Management
How is it different?
Limited time frame
Narrow focus, specific objectives
Less bureaucratic
Why is it used?
Special needs
Pressures for new or improves products or
services

17-5
 Project Management
What are the Key Metrics
Time
Cost
Performance objectives
What are the Key Success Factors?
Top-down commitment
Having a capable project manager
Having time to plan
Careful tracking and control
Good communications

17-6
 Project Management
What are the Major Administrative Issues?
Executive responsibilities
Project selection
Project manager selection
Organizational structure
Organizational alternatives
Manage within functional unit
Assign a coordinator
Use a matrix organization with a project leader

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 Project Management
What are the tools?
Work breakdown structure
Network diagram
Gantt charts
Risk management

17-8
 Planning and Scheduling

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

Locate new
facilities

Interview staff

Hire and train staff

Select and order

furniture

Remodel and install

phones

Move in/startup

17-9
 Key Decisions
Deciding which projects to implement
Selecting a project manager
Selecting a project team
Planning and designing the project
Managing and controlling project resources
Deciding if and when a project should be
terminated

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 Project Manager
Responsible for:

Work Quality
Human Resources Time
Communications Costs

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 Ethical Issues
Temptation to understate costs
Withhold information
Misleading status reports
Falsifying records
Comprising workers safety
Approving substandard work

17-12
 Project Life Cycle

Feasibility

Management
Planning
Concept
Execution

Termination

17-13
 Work Breakdown Structure
Figure 17.2

Project
Project X
X

Level 1

Level 2

Level 3

Level 4

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 PERT and CPM
PERT: Program Evaluation and
Review Technique
CPM: Critical Path Method

Graphically displays project activities

Estimates how long the project will take
Indicates most critical activities
Show where delays will not affect project

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 The Network Diagram
Network (precedence) diagram diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
Activity-on-arrow (AOA) a network diagram
convention in which arrows designate activities.
Activity-on-node (AON) a network diagram
convention in which nodes designate activities.
Activities steps in the project that consume
resources and/or time.
Events the starting and finishing of activities,
designated by nodes in the AOA convention. 17-16
The Network Diagram (contd)
Path
Sequence of activities that leads from the starting
node to the finishing node
Critical path
The longest path; determines expected project
duration
Critical activities
Activities on the critical path
Slack
Allowable slippage for path; the difference the
length of path and the length of critical path

17-17
 Project Network Activity on
Figure 17.4 Arrow
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3

17-18
 Project Network Activity on
Figure 17.4 Node
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move
Remodel
in

S 5 7

Hire and
Interview
train

3 4

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Network Conventions
a
b
c a

c
b

a c
a c

b Dummy
activity
b d

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 Time Estimates
Deterministic
Time estimates that are fairly certain

Probabilistic
Estimates of times that allow for variation

17-21
 Example 1
Figure 17.5

6 weeks
Deterministic 4
time estimates rd er e
O i tu r

Fur p
n 3 weeks
fu r

set
8 weeks 2

n i tu
u
Rem
ate s od e

re
c
Lo ilitie 11 weeks
l Move
fac in
1 5 6
In 1 week
te ain
rv t r
4 weeks ew
i
and
re
Hi 9 weeks

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 Example 1 Solution
Critical Path

P a th L e n g th S la c k
(w e e k s )
1 -2 -3 -4 -5 -6 18 2
1 -2 -5 -6 20 0
1 -3 -5 -6 14 6

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 Computing Algorithm
Network activities
ES: early start
EF: early finish
LS: late start
LF: late finish
Used to determine
Expected project duration
Slack time
Critical path

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 Probabilistic Time Estimates
Optimistic time
Time required under optimal conditions
Pessimistic time
Time required under worst conditions
Most likely time
Most probable length of time that will be
required

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 Probabilistic Estimates
Figure 17.8

Beta Distribution

to tm te tp

Activity Optimistic Most likely Pessimistic

start time time (mode) time

17-26
 Expected Time

te = to + 4t m +t p
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time

17-27
 Variance

(t
p o t ) 2

36

= variance
to = optimistic time
tp = pessimistic time

17-28
 Example 5

Optimistic Most likely Pessimistic

time time time

2-4-6
b

2- c
-4

3-
- 3

5
1
a
3-4-5 3-5-7 5-7-9
d e f
-6
2- g

4
3- i
3-
6

4-6-8
h

17-29
 Example 5 Time Estimates

Tabc = 10.0
Tdef = 16.0 4.00
b
Tghi = 13.50

3.1 c
.8 3

7
2
a
4.00 5.0 7.0
d e f
.4 17
3.3 g
3

i
6.0
h

17-30
 Path Probabilities

Specified time Path mean

Z =
Path standard deviation

Z indicates how many standard deviations

of the path distribution the specified tine
is beyond the expected path duration.

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 Example 6
17
Weeks
1.00
a-b-c
Weeks
10.0

d-e-f
Weeks
16.0

1.00
g-h-i
13.5 Weeks

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Time-cost Trade-offs: Crashing
Crash shortening activity duration
Procedure for crashing
Crash the project one period at a time
Only an activity on the critical path
Crash the least expensive activity
Multiple critical paths: find the sum of
crashing the least expensive activity on
each critical path

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 Time-Cost Trade-Offs: Crashing
Figure 17.11

Total
cost

Expected indirect costs

Shorten

Cumulative CRASH
cost of
crashing
Shorten

Optimum

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 Example 7

10
6 b
a
2
f
5

9
c

e
4
d

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 Advantages of PERT
Forces managers to organize
Provides graphic display of activities
Identifies
4
Critical activities 2

Slack activities 1 5 6

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 Limitations of PERT

Important activities may be omitted

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

on critical path 142 weeks

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 Goldratts Critical Chain
Goldratts insight on project management
Time estimates are often pessimistic
Activities finished ahead of schedule often go
unreported
With multiple projects, resources needed for one
project may be in use on another

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 Project Management Software
Computer aided design (CAD)
Groupware (Lotus Notes)
CA Super Project
Harvard Total Manager
MS Project
Sure Track Project Manager
Time Line

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 Advantages of PM Software
Imposes a methodology
Provides logical planning structure
Enhances team communication
Flag constraint violations
Automatic report formats
Multiple levels of reports
Enables what-if scenarios
Generates various chart types
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 Project Risk Management

Risk: occurrence of events that have

undesirable consequences
Delays
Increased costs
Inability to meet specifications
Project termination

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 Risk Management

Identify potential risks

Analyze and assess risks
Work to minimize occurrence of risk
Establish contingency plans

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 Summary
Projects are a unique set of activities
Projects go through life cycles
PERT and CPM are two common
techniques
Network diagrams
Project management software available

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