CH 08 - Project Management

1 of 85 8.
1 Forms of project organization
Why a project organization?

1because the traditional form
1. Has no means of integrating different departments
2. Does not facilitate effective communication, coordination and
control of several departments
Alternative means of project organization
1. Line and staff organization
2. Divisional organization
3. Matrix organization
Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Management
Management
2 of 85 8.1 Forms of project organization
1. Line and staff organization

2 Project activities are done by people in each functional
departments
 A project coordinator is assigned to facilitate coordination of
line management in functional departments
 The coordinator is devoid of authority and responsibility of line
management
 he collects project-information, shares information, renders
advice, and provide assistance

Management
2. Divisional organization
3 a separate division with its own functional departments is set
up to implement a project.
 The project manager has full line authority and total formal
control over the project.
 Facilitates planning and control, brings about better integration
of efforts, and strengthens commitment of project personnel.
 But it may entail inefficient use of resources-unnecessary
duplication of specialists

Management
3. Matrix organization
4 Designed to achieve efficient use of resources and effective
realization of project objectives
 Project personnel are responsible to their functional supervisor
and project manager (dual responsibility)
 Violates the unity of command rule
 Implies greater organizational complexity and creates inherent
conflicts

Management
5 of 85 8.2 Project Planning
Why a plan?
5 Used as a basis for organizing project activities and allocating
responsibilities to individuals
 A means of communication and coordination between all those
involved in the project
 Encourages people to look ahead
 Instills a sense of urgency and time consciousness
 Establishes the basis for monitoring and control

Management
What do we plan?
6 The work
 Manpower and organization
 Financial resources
 Information system
Project objectives
Must help in answering the following questions
 What are the technical and performance objectives?
 What are the time and cost goals?
 To what extent should project work be sub-contracted? How many
contractors? The
Project Financing terms
and of contract?
Management-Project
Project Financing and Management-Project Management Thursday, January 23, 2020
Management
Tools of planning
7Bar chart(Ghant chart)
 A pictorial device in which activities are represented by a

horizontal bars on the time axis.
 Manpower requirement can be shown a number on the bar
Advantages Disadvantages
 simple to understand  cannot show interrelations
among activities in complex
projects
 used for manpower planning  physical limit to the chart
 used to show project progress  cannot easily cope with
Project Financing and Management-Project frequent changes/updating
Management
Tools of planning
8Bar chart

Management
Tools of planning
9Bar chart
 simple to understand  cannot show interrelations
among activities in complex
projects
 used for manpower planning  physical limit to the chart
 used to show project progress  cannot easily cope with
frequent changes/updating

Management
Tools of planning
10
Network Techniques
 Activities, events and interrelationships are represented by a
network diagram
 effectively handles  more complicated than bar charts
interrelationships
 identifies critical activities  do not define operational schedule
 can handle complex projects
 can be easily computerized
Management
11 of 85 8.3 Project Control
Why control?
 ensures regular monitoring of performance
11
 motivates project personnel to strive for achieving project

objectives
Approaches
1. Variance analysis approach
2. Performance analysis

Management

 Involves comparison of actual cost with budgeted cost
12
Example
Activity A Activity B
Budgeted cost in the period Br 95,000 15,000
Cumulative budget to date 450,000 155,000
Actual cost in the period 105,000 12,000
Cumulative actual cost to date 440,000 160,000
Variance for the period (10,000) 3,000
Cumulative variance to date 10,000 (5,000)
Management

Limitations
13
 Is a backward looking
 Does not use data effectively to provide integrated control. It
doesn’t show value of work done.

Management
2. Performance analysis approach

Involves answering the following questions:
14
 Is the project on schedule, ahead of schedule or behind
schedule? If there is variation, where did it occur, why did it
occur, who is responsible, and what would be its implications?
 Has the cost of the project as per the budget, less than the
budget or more than the budget? If there is variation, where
did it occur, why did it occur, who is responsible, and what
would be its implications?
 What is the trend in performance? What would be the likely final
cost and completion date of the project and its components?
Management
2. Performance analysis approach

Method
15 of analysis
TERMS
 Budgeted Cost for Work Scheduled(BCWS). This includes budgets
for
 all work packages scheduled to be completed
 portion of work in progress scheduled to be completed
 Overheads for the period
 Budgeted Cost for Work Performed (BCWP). It comprises budget
for work completed, for work-in progress, and overhead budget.
Management
Method of analysis…

16 Actual Cost of Work Performed(ACWP)
 Budgeted Cost for Total Work (BCTW). Total budgeted cost for the
entire project
 Additional Cost for Completion (ACC)
Given the above terms performance is evaluated as follows:
Cost variance= BCWP-ACWP
Schedule variance in cost terms = BCWP-BCWS
Cost performance index= BCWP/ACWP
Schedule performance index= BCWP/BCWS
Estimated cost performance index = BCTW/(ACWP+ACC)
Management
Performance analysis approach(Example)

17
Consider the following project cost information
Budgeted Cost for Work Scheduled(BCWS) Br 4.5mill

Budgeted Cost for Work Performed (BCWP) 3.9mill
Actual Cost of Work Performed(ACWP) 4.1mill
Budgeted Cost for Total Work (BCTW) 8mill
Additional Cost for Completion (ACC) 4.4mill

Management
Performance analysis approach(Example)

Cost variance = Br 3.9mill – 4.1 mill
18
= -Br 0.2mill
Schedule variance = Br 3.9mill – 4.5mill
=-Br 0.6mill
Cost performance index = Br 3.9mill/Br 4.1mill
= 0.95
Schedule performance index =Br 3.9mill/Br 4.5mill
= 0.87
Estimates cost performance index = Br 8mill/(4.1mill+4.4mill)
= 0.94
Management
19 of 85 8.4 Human aspects of Project Management
 the following aspects need to be carefully

19
handled to succeed in human relations:
 Authority
 Orientation
 Motivation
 Group functioning

Management
Authority
20
to exercise leadership and influence, a PM has to
explain logic and rationale for activities rather
than giving orders
 entertain the views and suggestions by others
 avoid unilateral imposition of decisions
 eschew dogmatic posture

Management
Authority…
21
His authority stems from his
 ability to develop a rapport with project personnel
 skill in resolving conflicts
 professional reputation and
 skills in communication and persuasion

Management
Orientation
 Strengthen managerial orientation of the
22
project rather than an engineering orientation.

Motivation
 The project manager should understand that
 humans are motivated by varieties of needs
 pressure is counterproductive
 people are motivated more when the goals are
Project Financing and but
challenging Management-Project
attainable Thursday, January 23, 2020
Management
Motivation…
 expectation of reward rather than fear of
23
punishment has greater impact on behavior
Group functioning
 a project may comprise a vertical, horizontal,
or mixed groups

Management
Group functioning…
 an effective group can be established through
24
the following steps:

 development of mutual trust
 Diminution of defensive behavior
 openness and candor in communication
 cooperation and supportive behavior
 resolution of differences by mutual
Project Financing and Management-Project
negotiation Thursday, January 23, 2020
Management
25 of 85 8.5 Network scheduling
 A network diagram is used that shows activities

25
and events of the project and their logical

relationship
Example: ECSU uses the following activities as part of
applicant selection and admission process
1. Send letter of notification to regions to select
candidates
2. Set entrance exam
Management
Example…
26
3. Administer entrance exam
4. Announce the result
5. Registration
3
4
5
1
2
Management
Rules for Network Construction

1. Each activity has a preceding and succeeding event.
27
Activities are numerically denoted by pair of preceding
and succeeding events.
Example: Send notification (1-3)
Administer Exam (2-3)
2. Each event has a distinct number
3. No loops
4. No more than one activity can have the same
preceding and succeeding event
Management
No looping!
X
28
1 2
3 Dummy
Activity
1 2
Management
Time estimation
29
 Three times values are obtained
 Optimistic time-time if no complications arise
 Most likely time-takes into account normal
delays
 Pessimistic time-time required if unusual
complications arise
Management
Average Time
30
te = (to + 4tm + tp)/6

where
te = weighted arithmetic average time
to = optimistic time
tm = most likely time
tp = pessimistic time
Management
Example: Project A
31 2 5 8
3 7
1
4 6

Management
32
Event to tm tp Average
1-2 5 12 17 12
1-3 8 10 13 10
1-4 9 11 12 11
2-3 5 8 9 8
2-5 9 11 13 11
4-6 14 18 22 18
3-7 21 25 30 25
6-7 8 13 17 13
5-8 14 17 21 17
7-8 6 9 12 9
Management
Example: Project A
17
33 2 5 8
11
10 3 7
1
25
13
4 18 6

Management
Determining the Critical Path

34
STEPS
1. Calculate the Earliest Occurrence Time (EOT)
for each event
 Time at which the event can be completed at
the earliest. It is computed beginning from
event o and moving forward.

Management
EOT for activities in Project A

17
35 2 5 8
11
10 3 7
1
25
13
4 18 6

Management

36
STEPS
2. Calculate Latest occurrence time(LOT) for
each event
 the latest allowable time by which an event
can occur , given the time allowed for
completion of the project. Project
completion time is EOT of the last event.
Management
LOT for activities in Project A

17
37 12 2 5 8
11
37 54
10 3 7
1
25
20 45
0
13
4 18 6
14
Project Financing and Management-Project 32
Management

38
STEPS
3. Calculate slack for each event
Slack = LOT - EOT

Management
EOT for activities in Project A

17
39 2 5 8
12 11
37 54
10 3 7
1
25
20 45
0
13
4 18 6
14
Management
Slack
Event LOT EOT (LOT-EOT)
40
1 0 0 0
2 12 12 0
3 20 20 0
4 14 11 3
5 37 23 14
6 32 29 3
7 45 45 0
8 54 54 0
Management
Critical Path
17
41 2 5 8
12 11
37 54
10 3 7
1
25
20 45
0
13
4 18 6
14
Management
PERT(Program Evaluation and review technique)

model
42
 considers uncertainty in project completion time
 uses the standard deviation as a measure of
variability
STEPS
1. determine SD of the duration of each activity in
the critical path
2. determine SD of total duration of the critical path
Management
SD of the duration of each activity is determined as

43
follows
σ = (tp-to)/6
Variance is obtained by squaring σ
SD of total duration of the critical path
sum of variance 1/2
of activity
= duration on the
critical path
Management
2
44 Event to tp σ σ
1-2 5 17 2 4
2-3 5 9 0.67 0.44
3-7 21 30 1.5 2.25
7-8 6 12 1 1
Sum 7.69
Standard deviation (critical path duration)

= 2.77 (SQRT of 7.69)
Management
Critical path duration (mean) is 54 days and

45
standard deviation is 2.77.
The critical path duration is assumed to
approximate a normal distribution, and hence
the probability that
Mean + 1SD is 68.2%
Mean + 2SD is 95.4%
Mean + 3SD is 99.8%
Management
Probability of completion by a specific date(D)

46
is determined by first calculating value of Z.
Z= (D-T)/σ
and obtaining cumulative probability upto Z by
looking at the probability distribution of standard
normal variable.

Management
47

Management
CPM (Critical Path Method)

 developed for projects that are relatively less-
48
risky.
 focuses on variations in activity times as a result
of resource assignment.
 the variations are planned and are within the
control of the project manager
 it aims at finding a schedule that minimizes total
cost
Project Financing and Management-Project
Management
CPM…
49
Assumptions
1. Costs associated with the project are divided into
two categories as Direct costs and Indirect costs.
2. Activities can be expedited by crashing using
more resources
3. Crashing reduces time but increases direct costs
4. Indirect costs increase with project duration.
Management
STEPS
50
1. Obtain the critical path in the normal network and
determine project duration and direct cost
2. Examine cost-time slope of activities on the critical
path and crash activities with the smallest slope
3. Construct a new critical path, and determine
project duration and cost
4. Repeat steps (2) and (3) till activities on the critical
path are
Project crashed
Financing and Management-Project
Management
Illustration: Consider the following information on a

project Time(weeks) Cost
51
Activity Normal Crash Normal Crash
1-2 5 2 Br 6,000 Br 9,000
2-4 6 3 7,000 10,000
1-3 4 2 1,000 2,000
3-4 7 4 4,000 8,000
4-7 9 5 6,000 9,200
3-5 12 3 16,000 19,600
4-6 10 6 15,000 18,000
6-7 7 4 4,000 4,900
7-9 6 4 3,000 4,200
5-9 12 7 4,000 8,500
Assume
Project theand
Financing indirect costs of the project are
Management-Project
Br 1,000 a week.
Thursday, January 23, 2020
Management
Illustration…
Time Cost Cost to
52
Activity Normal Crash Normal Crash expedite
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
1-3 4 2 1,000 2,000 500
3-4 7 4 4,000 8,000 1,333
4-7 9 5 6,000 9,200 800
3-5 12 3 16,000 19,600 400
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600
5-9 12 7 4,000 8,500 900
Management
Illustration
53
6 9 26
2
4 7
5 6 34
10
1
6 9 34
4 3
5 12 28
12
26
Management
Illustration…
Time Cost Cost to
54
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
1-3 4 2 1,000 2,000 500
3-4 7 4 4,000 8,000 1,333
4-7 9 5 6,000 9,200 800
3-5 12 3 16,000 19,600 400
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600
5-9 12 7 4,000 8,500 900
Management
Illustration…
55
CP 1 Time Cost Cost to
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600
Total 34weeks Br 35,000

Management
Illustration…
CP2 Time Cost Cost to
56
1-3 4 2 1,000 2,000 500
3-4 7 4 4,000 8,000 1,333
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
57
6 9 26
2
4 7
5 4 6 31
10
1
6 9 31
4 3
5 12 28
12
26
Management
Illustration…
58
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration…
59
1-3 4 2 1,000 2,000 500
3-4 7 4 4,000 8,000 1,333
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
60
6 9 26
2
4 7
5 4 6 31
10
1
6 9 29
2 3
5 12 26
12
24
Management
Illustration…
61
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration…
Cost and duration after crashing Activity 7-9
62
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
63
6 9 24
2
4 7
5 4 4 29
10
1
6 9 27
2 3
5 12 26
12
22
Management
Illustration…
64
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration…
65
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
66
6 9 24
2
4 7
5 4 4 25
6
1
6 9 23
2 3
5 12 26
12
22
Management
Illustration…
67
1-3 4 2 1,000 2,000 500
3-5 12 3 16,000 19,600 400
5-9 12 7 4,000 8,500 900
Total 26 weeks Br 22,000

Management
Illustration…
68
1-3 4 2 1,000 2,000 500
3-5 12 3 16,000 19,600 400
5-9 12 7 4,000 8,500 900

Management
Illustration
69
6 9 24
2
4 7
5 4 4 25
6
1
6 9 23
2 3
5 12 17
3
22
Management
Illustration…
70
Time Cost Cost to
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration…
71
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
72
3 9 21
2
4 7
5 4 4 22
6
1
6 9 23
2 3
5 12 17
3
22
Management
Illustration…
73
Time Cost Cost to
1-3 4 2 1,000 2,000 500
3-4 7 4 4,000 8,000 1,333
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration…
74
Time Cost Cost to
1-3 4 2 1,000 2,000 500
3-4 7 4 4,000 8,000 1,333
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
75
3 9 21
2
4 7
5 4 4 22
6
1
6 9 20
2 3
5 12 17
3
19
Management
Illustration…
76
Time Cost Cost to
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration…
77
1-2 5 2 Br 6,000 Br 9,000 Br 1,000
2-4 6 3 7,000 10,000 1,000
4-6 10 6 15,000 18,000 750
6-7 7 4 4,000 4,900 300
7-9 6 4 3,000 4,200 600

Management
Illustration
78
3 9 18
2
4 7
2 4 4 19
6
1
6 9 20
2 3
5 12 17
3
19
Management
Illustration…
79 Project cost and duration
Time Direct Cost Indirect
Activity (Crash) (Crash) cost Total cost
1-3 2 2,000
3-4 4 8,000 (20weeks x
4-6 6 18,000 Br 1,000
6-7 4 4,900 per week)
7-9 4 4,200
Total 20 weeks Br 37,100 Br 20,000 Br 57,100

Management
80 of 85 8.6 Project closure
Administrative closure
80
 the process of documenting the results of a
project work to ensure that all of the
requirements and specifications have been met
 administrative closure should be performed at
completion of each phase of a project

Management
Issues to be addressed include:

81
 collection and archiving of all project
documents that includes final cost and schedule
data.
 Updating records and product specifications to
reflect what was actually achieved
Revising employee records to reflect newly
developed skills and anticipate future training
needs
Management
Issues to be addressed…
82
 Preparation of a final project report that summarizes
history of the project.

Management
Final lessons-learned review

83
 it includes evaluation of the strengths and weaknesses
of a project. Questions like ”what did we do right and
what did we do wrong? are answered.
 data from lessons- learned reviews should be viewed
as one of the most important resources that an
organization can acquire

Management
Personnel issues in project closing

84
 the project manager must assure workers that their job is
secured despite completion of a project work
 in a project that has lasted for a prolonged period,
the project team becomes like a family to some individuals,
and losing that family can arouse considerable sadness.
 emotions of project people should be properly managed
because failure to do so may result in people not wanting
future project assignments.
Management
85 of 85
85

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1 of 85 8.

1 Forms of project organization

Why a project organization?

Project Financing and Management-Project Thursday, January 23, 2020

1. Line and staff organization

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

 A pictorial device in which activities are represented by a

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

 motivates project personnel to strive for achieving project

Project Financing and Management-Project Thursday, January 23, 2020

1. Variance analysis approach

1. Variance analysis approach

Project Financing and Management-Project Thursday, January 23, 2020

2. Performance analysis approach

2. Performance analysis approach

Performance analysis approach(Example)

Budgeted Cost for Work Scheduled(BCWS) Br 4.5mill

Project Financing and Management-Project Thursday, January 23, 2020

Performance analysis approach(Example)

 the following aspects need to be carefully

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

project rather than an engineering orientation.

punishment has greater impact on behavior

Project Financing and Management-Project Thursday, January 23, 2020

the following steps:

 A network diagram is used that shows activities

and events of the project and their logical

Rules for Network Construction

te = (to + 4tm + tp)/6

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Determining the Critical Path

Project Financing and Management-Project Thursday, January 23, 2020

EOT for activities in Project A

Project Financing and Management-Project Thursday, January 23, 2020

Determining the Critical Path

LOT for activities in Project A

Determining the Critical Path

Project Financing and Management-Project Thursday, January 23, 2020

EOT for activities in Project A

PERT(Program Evaluation and review technique)

SD of the duration of each activity is determined as

Standard deviation (critical path duration)

Critical path duration (mean) is 54 days and

Probability of completion by a specific date(D)

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

CPM (Critical Path Method)

Illustration: Consider the following information on a

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020

Project Financing and Management-Project Thursday, January 23, 2020