Slide 1

Project Management

1. Definition of Project

2. Project Management

3. Project Planning & Scheduling

4. Network Diagram

5. Critical Path Method

6. PERT
 Definition of Project

Project is defined as a huge (mammoth) task which for

convenience of management is broken down into smaller
elements such that, for each of the smaller elements, one
can identify the finite requirements of resources and finite
requirements of time. These smaller elements are
referred as activities i.e. a project comprises of a number
of activities e.g. construction of building is a project and
electrical work is one of the activities of the project.
 Project Management

The task of the competent project manager are:

a. to list all the activities of the project.
b. to define all the activities of the project in terms of time
and other dimensions like cost etc.
c. to establish the inter relation & interdependence of the
defined activities.
The following are some examples to explain the first three
task for small projects.
 Example 1 - Planning and coordinating sales
management training program
Christine Philips is in charge of planning and coordinating next spring’s sales
management training program for her company. Christine has listed
following activities information for this project.
Activity Description Immediate Duration
predecessors
A Select location - 2
B Obtain speakers - 3
C Make speaker travel plans A, B 2
D Prepare and mail brochure A, B 2
E Take reservations D 3

Draw the network diagram, find the critical path and the duration along the
critical path
 Example 2 - Developing a new power supply for a
console television set
A research and development department is developing a new power supply for a console

television set. It has broken down the job into the following form:
Activity Description Immediate Duration
predecessors
A Determine output voltages - 5
B Determine whether to use solid A 7
estate rectifiers
C Choose rectifiers B 2
D Choose filter B 3
E Choose transformer C 1
F Choose chassis D 2
G Choose rectifiers mounting C 1
H Layout chassis E.F. 3
I Build and test G.H. 10

Draw the critical path schedule, indicate the critical path. What is the time required for
 Project Planning & Scheduling

 After listing & defining of activities & establishing the relation between the

activities, the fourth step is project analysis.

 There are broadly two category of project analysis:

1. Project Planning & Scheduling

2. Project Financing

 In Project Planning & Scheduling we are concerned with the following broad

objectives:
1. Estimating Project Completion time
2. Identifying Critical Path
3. Review of Project
4. Compressing Project Completion time
5. Probabilistic estimates for duration of Project
 Network Analysis

 The project with the list of activities, their duration & cost & their

inter relation will be given to us (as compiled by a competent project

manager).
 CPM/PERT are the two popular models used in project planning &

scheduling. The base theory for CPM/PERT is Network analysis

with a specific focus of the five broad objectives of Project Planning
& Scheduling.
 The study of network analysis (for convenience) is covered in two

parts:
1. Construction of Network (Network Diagram)

2. Analysis of Network (CPM/PERT)

 Network Diagram

Network diagram is a graphical/pictorial representation of

a series or a sequence of activities in the logical order of
their performance, such that we establish the inter
relation and interdependence of one activity on all other
activities of the project.
Network Diagram comprises of two basic elements:
i. Activity
ii. Event (Node)
 Slide 9

Elements of Network Diagram

i. Activity: An activity is denoted by an arrow

Tail Head
It signifies the deployment of finite resources over
a finite period of time. The tail of the arrow
signifies the commencement of the activity and
the head signifies the completion of the activity.

ii. Events or Nodes: An event is denoted by a circle

i where, i={1,2,3,4…. and so on}

It signifies the status of the project at a point of
time. It indicates the start & completion of an
activity.
 Slide 10

A-O-A Convention (i-j convention)

Activity A or Activity i-j

A
i j
tij
Tail Event Head Event
i<j
Tail event signifies commencement status of the activity.
Head Event signifies completion status of the activity
Arrow signifies deployment of finite resources over a finite period of time.
tij is the duration of the activity
 Good practices of drawing a Network Diagram

i. Drawing a network diagram is a trial and error procedure.

ii. The starting event is always one event, irrespective of the number of starting
activities. This event signifies the commencement status of the project.
iii. The completion event is always one event, irrespective of the number of final
activities. This event signifies the completion status of the project.
iv. The length of the arrow is the convenience of drawing the network diagram. It is
no indication of the duration of activity.
v. The arrows must be drawn in the forward direction. Avoid crossing of arrows.

vi. The numbering of events starts with the first event and progressively moves
from the left to the right of the network diagram.
vii. There is no uniqueness in the final picture of the network diagram.
 Manager’s View of Critical Path Method

Inputs Outputs
(What information must be (What information results
supplied to CPM) from CPM that provides for
better project management)
1. A Complete list of
C 1. Estimated duration of
project activities P project
2. Precedence 2. Identification of critical
relationship among M activities
activities 3. Amount of Float for
3. Estimate of each each activity
activities duration
 Critical Path Method

 It was developed in 1956/1957 by Remington Rand and DuPont to

help schedule maintenance projects in chemical plants and
construction projects.
 Critical Path Method is a systematic scientific method based on
principle of time estimates to perform a detailed analysis of
Network in an application of Project Management.

 Critical Path is a continuous series or sequence of critical activities

that joins the first event with the last event of the network diagram.
 Critical Path Method

 Path of network is a continuous series or sequence of activities that

joins the first event with the last event of the network diagram.

 In a network one can enumerate many sequences of activities from

starting event to end event. Each sequence will contain different

combination of activities with different duration.

 To know the possible time by which the project can be completed,

we determine the critical path i.e. the sequence of activities with

longest duration. It is known as critical path and any delay in
activities lying on this path would cause a delay in the whole project.
 Critical Path Method

 To quicken the process, the activities lying on the critical path should

be taken first. The activity lying on non-critical path has some

flexibility in their starting time and their delay in start is not likely to
affect the final completion date. These are known as slack activities
and should be given priority in order of their float value.

 If Total float (Slack) of an activity is zero, it means there is no

permissible delay in performing the activity i.e. any delay in

performing the activity will result in a corresponding delay in the
project completion time. Such activities are referred as critical
activities.
 Slide 16

Total Float of an Activity

 Total Float signifies the maximum permissible delay in

performing the activity without delaying the project
completion time. The following is the mathematical
relation forETotal Float Head Event
i

i j
tij
Tail Event Lj
Total Float of Activityi-j = Lj – Ei – tij
LFT EST
Total Float of Activity = (Head Event)
– (Tail Event)
– Duration of Activity
 Time Estimates in Critical Path Method

 Time estimates in CPM relate to estimating the time for the events
of the network diagram. Since the event signifies the status of the
project at a point of time, the time estimates in turn signify the
status of the project at different points of time.
 There are two important time estimates;
 (i) Earliest starting time (The earliest that an activity can start with
reference to the commencement status of the project)
 (ii) Latest finishing time (The latest that an activity should finish
otherwise the project completion time will be delayed).
 Guidelines for Earliest Start Time (EST)

Earliest Start Time (EST): It signifies the earliest that an

activity can start with reference to the commencement
status of the project. The following are the guidelines to
obtain EST.
i. Earliest starting time for event 1 is taken as zero because
event 1 signifies the commencement status of the project i.e.
status of the project corresponding to time ‘ t = 0’.
ii. For the calculation of EST we start from event I and
progressively move from left to right in the network diagram
(referred as forward pass)
 Slide 19
Guidelines for Earliest Start Time
(EST)
iii.Consider two adjacent events

Ei Ej

i j
tij
Tail Event Head Event

Ej = Ei + tij

EST of the head event = EST of the tail event + the duration of the activity
 Slide 20
Guidelines for Earliest Start Time
(EST)
iv. Consider a merging event (in case more
than one activity is merging towards an
event).
Ea
Ed = Ea + tad
a
tad Ed = Eb + tbd
Eb Ed
tbd
b d Ed = Ec + tcd
tcd
Ec
Take the maximum value
c
 Guidelines for Latest Finish Time (LFT)

Latest Finish Time (LFT): It is the latest time by which

an activity should finish, otherwise the project
completion time will be delayed. The following are the
guidelines to obtain LFT.
i. For the last event of the network diagram, LFT = EST (because
the last event signifies the project completion status and both
EST/LFT signify the project completion time)
ii. For the calculation of LFT, we start with the last event of the
network diagram & we proceed progressively from the right to
the left of the network diagram (referred as backward pass).
 Slide 22
Guidelines for Latest Finish Time
(LFT)
iii. For two adjacent events

Tail Event Head Event

i j
tij
Li Lj
Li = Lj – tij
LFT of the tail event = LFT of the head event – the duration of that activity
 Slide 23
Guidelines for Latest Finish Time
(LFT)
For a bursting event (If there are more than one subsequent
activities busting from an event), calculate LFT for each of
the head events and take the minimum value
2
t12 L1 = L2 – t12
L2
t13 L1 = L3 – t13
1 3
L1 t14 L3 L1 = L4 – t14
4
Take the minimum value
L4
Time Estimates in Critical Path Method

Both EST and LFT for starting event

1 are always zero (event 1 of the
network diagram signifies the status
of commencement of the project).
 Slide 25

Free Float of an Activity

Free float signifies the maximum permissible delay in
commencement of an activity without affecting the commencement
of the succeeding activity
Ei Ej

Tail Event i j Head Event

tij
Li Lj

Head Event Float = Lj – Ej

Free Float = Total Float – Head Event Float
Crashing of Activities / Compressing Project Completion time

 The Pioneers of CPM were asked a question, whether it

was possible to compress the project completion time.

 They replied that if the additional revenue earning

exceeds the additional cost incurred, then it is worth

compressing the project completion time. This
compression is referred as crashing of activities
 There are two broad situations of Crashing:
1. Maximization of Profit (Contribution)

2. Minimization of Total Cost

 Crashing of Activities / Compressing Project Completion time

1. Example on Maximization of Profit:

Consider a Project situation which is worth 15 Lakhs & it is to be completed

in 15 days. Suppose the customer offers an incentive of rupees 1 Lakh if
the project can be compressed by 1 day (i.e. 14 days). In this situation, it is
worth crashing if the additional cost (over the normal cost because of
overtime etc.) is less than one lakh
2. Example on Minimization of Total Cost:

Consider a Project situation where the indirect cost of the project is one
lakh per day. The Normal project completion time is 15 days. The
management wants to compress the project completion time by one day to
save indirect cost of 1 lakh. This compression would be feasible if the
additional direct cost required is less than 1 lakh
 Crashing of Activities / Compressing Project Completion time

Following information is needed for a rational decision on which activities to crash

1. Normal Time: is the time required to complete the activity using the

Normal resources of the Project

2. Normal Cost: is the cost required to complete the activity in Normal Time

3. Crash Time: is the minimum time required to complete the activity using

the existing resources of the project

4. Crash Cost: is the total cost which is inclusive of the normal cost & the

additional cost required to complete the activity in the minimum time

5. Cost Slope: is the additional cost required to compress the duration of

the activity by one time unit (Graphical representation of the variables

 How is PERT different from CPM?

1. CPM is a deterministic Model i.e. the duration of the activity is given

(known) from the past precedence of similar projects. The CPM Model was

developed by DuPont & Remington Rand in 1956 for scheduling of

Maintenance & Construction Projects. In both these applications, since

there was a past procedure, the duration was known.

2. PERT is a Probabilistic Model. In PERT, the duration of the activities is not

known because there is no past precedence. The PERT Model was

developed by USA Navy in 1958 for Polaris Submarine Project for carrying

Nuclear war heads. There was no past precedence for this project. It was

the first of its type. Therefore, the duration of the activities were not known.
 PERT: Program (Project) Evaluation & Review Technique:

 Since the duration of activities in PERT are not known, they have to be estimated.

The following are the three estimates in PERT application:

1. Optimistic time (t1) is the minimum time required to complete an activity

assuming there will be no delays (as an optimist, nothing will go wrong – best
case scenario).

2. Normal time (t2) is the most likely time required to complete an activity assuming
normal delays (based on our past experience we estimate the likely delays &
add the equivalent time to the minimum time of the activity – most likely
scenario).

3. Pessimistic time (t3) is the maximum time required to complete an activity

assuming the maximum possible delays and adding the equivalent time to the
minimum (as a pessimist, we assume everything that can go wrong will go
wrong – worst case scenario).
 PERT: Program (Project) Evaluation & Review Technique:

Assuming that the three time estimates follow a Normal distribution, we

define the following Normal distribution statistics:

(i) Arithmetic Mean (X bar) = estimated duration = te = t1 + 4t2 + t3

6
(ii) Standard Deviation = σ = Square root of Variance

2
Estimated variance = Ve = (t3 – t1)
36
 PERT: Program (Project) Evaluation & Review Technique:

 In conclusion, PERT is almost identical to CPM in regard to its functions, network

diagrams, internal calculations and resulting project management reports. The minor
exceptions surround the activity time estimates. In CPM an activity’s duration is
based on single time estimate. In PERT, three time estimates are made. PERT uses
three time estimates because we are uncertain about the duration of the activities.

 By estimating a pessimistic time & optimistic time, a likely range of duration is

provided. The most likely time is our best estimate of the duration. When the duration
distribution of a path is assumed to be normal & its mean & variance have been
computed, we can make probabilistic statements about the path for e.g. there is only
a 10% probability that duration of project will be greater than 35 weeks. On the other
hand, in CPM since duration of activities is known, the project completion time is
deterministic.