Slides prepared

by John Loucks

 2002 South-Western/Thomson Learning TM 1 1

 Chapter 10

Project Management

2
 Overview


Characteristics of a Project

Project Management

Project-Planning and Control Techniques

Computer Software for Project Management

An Evaluation of CPM/PERT

Wrap-Up: What World-Class Companies Do

3
 Characteristics of a Project


A unique, one-time effort

Requires the completion of a large number of
interrelated activities

Resources, such as time and/or money, are limited

Typically has its own management structure

4
 Project Management


A project manager is appointed to head the project
management team

The team members are drawn from various
departments and are temporarily assigned to the
project

The team is responsible for planning, scheduling and
controlling the project to its completion

Plan Schedule Control

5
 Project Team

Project Update and Resources:

Plan Revise Plan Internal
Exec.Mgt.
Marketing
Project Engineering
Management Manager Production
Information Qual.Control
System Project
Hum.Res.
Team
Purchasing

Update
External
Project Suppliers
and Revise
Schedule Schedule Subcontract.
6
 Planning Projects


Tasks:

Develop internal and external resource
requirements and time-phase them to the project
activities

Means of Task Accomplishment:

Activity descriptions, milestone charts, cash flow
charts, CPM/PERT, engineering designs, time and
cost estimates, material delivery plans, and so on.

Timing of Tasks:

Before project is begun and modified as required
during project
7
 Scheduling Projects


Tasks:

Develop/revise detailed guides for each resource
indicating quantity, quality, and timing

Means of Task Accomplishment:

Milestone charts for departments, subcontractors,
and suppliers; cash flow schedule; CPM/PERT:
begin-activity and complete-activity dates, and
updated activity slack

Timing of Tasks:

Slightly before project is begun and continued
throughout project
8
 Controlling Projects


Tasks:

Sense noncompliance of resources with schedules,
standards, and budgets; take corrective actions,
shift resources, develop alternatives

Means of Task Accomplishment:

Department budget reports, activity cost reports,
quality compliance reports, time performance
reports

Timing of Tasks:

During project
9
 Scheduling and Control Charts


Horizontal Bar Charts

A version of the Gantt chart

Used to plan and schedule activities

As the project progresses, the status of activities is
plotted on the chart, compared to the plan, and, if
necessary, corrective action is taken

… more

10
 Scheduling and Control Charts


Horizontal Bar Charts (continued)

Advantages

Easy to understand

Easy to modify and update

Low cost

Disadvantages

Cumbersome for large project

Must be keep up to date

Does not indicate the relationships among the
activities
11
 Horizontal Bar Chart

Project Activities Apr. May June July Aug.

a. Prelim. Propulsion Design

b. Prelim. Flight Sys. Design
c. Static Tests A a
d. Propulsion Design Modif. c
e. Static Tests B d
f. Flight Tests A b
g. Flight Sys. Design Modif. ef
h. Flight Tests B g
i. Mat’l & Component Costs d
j. Labor & Overheads Costs d

12
 Key questions


What is a project and what is project
management?

How are specific projects defined?

What is project planning and why is it important?

What techniques can be used for project
planning?

What is project control and how is it done?

13
 What is a project?

A project is a set of activities with a defined start point
and a defined end state, which pursues a defined goal and
uses a defined set of resources. Technically many small-
scale operations management endeavors, taking minutes or
hours, conform to this definition of a project. However, in
this chapter we will be examining the management of
larger-scale projects taking days, months or years. Large-
scale (and therefore complex) undertakings consume a
relatively large amount of resources, take a long time to
complete and typically involve interactions between
different parts of an organization. Projects come in many
and various forms, including the following:
14
 What is a project?

organizing emergency aid to earthquake victims;

producing a television programme;

constructing the Channel Tunnel;

designing an aircraft;

running a one-week course in project management;

relocating a factory;

refurbishing a hotel;

installing a new information system.

15
 What do projects have in common?

To a greater or lesser extent, all the projects listed above
have some elements in common.

They all have an objective, a definable end result or output
that is typically defined in terms of cost, quality and
timing.

They are all unique.

A project is usually a ‘one-off ’, not a repetitive
undertaking.

16
 What do projects have in common?


Even ‘repeat’ projects, such as the construction of
another chemical plant to the same specification, will
have distinctive differences in terms of resources
used and the actual environment in which the project
takes place.

They are all of a temporary nature.

Projects have a defined beginning and end, so a
temporary concentration of resources is needed to
carry out the undertaking.

17
 What do projects have in common?

Once their contribution to the project objectives has been
completed, the resources are usually redeployed.

They will all have some degree of complexity. Many
different tasks are required to be undertaken to achieve a
project’s objectives.

The relationship between all these tasks can be complex,
especially when the number of separate tasks in the project
is large.

18
 What do projects have in common?


Finally, all projects have to cope with some
uncertainty.

All projects are planned before they are executed and
therefore carry an element of risk.

A ‘blue sky’ research project carries the risk that
expensive, high-technology resources will be
committed with no worthwhile outcome.

19
 Project managers

 In order to coordinate the efforts of many people in

different parts of the organization (and often outside
it as well), all projects need a project manager.
 Many of a project manager’s activities are
concerned with managing human resources.
 The people working in the project team need a
clear understanding of their roles in the (usually
temporary) organization.

20
 Project managers


Controlling an uncertain project environment requires
the rapid exchange of relevant information with the
project stakeholders, both within and outside the
organization.

People, equipment and other resources must be
identified and allocated to the various tasks.

Undertaking these tasks successfully makes the
management of a project a particularly challenging
operations activity.

Five characteristics in particular are seen as important
in an effective project manager: 21
 Project managers

background and experience which are consistent with the
needs of the project;

leadership and strategic expertise, in order to maintain an
understanding of the overall project and its environment,
while at the same time working on the details of the project;

technical expertise in the area of the project in order to
make sound technical decisions;

interpersonal competence and the people skills to take on
such roles as project champion,motivator, communicator,
facilitator and politician;

proven managerial ability in terms of a track record of
22
getting things done.
 The project planning and control process

Figure 16.3 shows the stages in project management, four of which are
relevant to project planning and control:

Stage 1 Understanding the project environment – internal and external
factors which may influence the project.

Stage 2 Defining the project – setting the objectives, scope and strategy for
the project.

Stage 3 Project planning – deciding how the project will be executed.

Stage 4 Technical execution – performing the technical aspects of the
project.

Stage 5 Project control – ensuring that the project is carried out according
to plan.

However, it is important to understand that the stages are not a simple
sequential chain of steps. Project management is essentially an iterative
process. Problems or changes which become evident in the control stage
may require re-planning and may even cause modifications to the original
23
project definition.
24
 Stage 1 – Understanding the project
environment


The project environment comprises all the factors
which may affect the project during its life. It is the
context and circumstances in which the project takes lace.

Understanding the project environment is important
because the environment affects the way in which a
project will need to be managed and (just as important)
the possible dangers that may cause the project to fail.
Environmental factors can be considered under the
following four headings.

Geo-social environment – geographical, climatic and
cultural factors that may affect the project .

25
 Stage 1 – Understanding the project
environment

Econo-political environment – the economic,
governmental and regulatory factors in which the
project takes place.

The business environment – industrial, competitive,
supply network and customer expectation factors that
shape the likely objectives of the project.

The internal environment – the individual company’s
strategy and culture, the resources available and the
interaction with other projects that will influence the
project.

26
 Stage 2 – Project definition

Before starting the complex task of planning and executing
a project, it is necessary to be clear about exactly what the
project is – its definition. This is not always straightforward,
especially in projects with many stakeholders. Three
different elements define a project:

its objectives: the end state that project management is
trying to achieve;

its scope: the exact range of the responsibilities taken on by
project management;

its strategy: how project management is going to meet its
objectives.
27
 Project objectives

Objectives help to provide a definition of the
end point which can be used to monitor
progress and identify when success has been
achieved.

They can be judged in terms of the five
performance objectives – quality, speed,
dependability, flexibility and cost.

28
 Project objectives


However, flexibility is regarded as a ‘given’ in most
projects which, by definition, are to some extent one-
offs, and speed and dependability are compressed to
one composite objective – ‘time’.

This results in what are known as the ‘three
objectives of project management’ – cost, time and
quality. Figure 16.5 shows the ‘project objectives
triangle’ with these three types of project marked.

29
 Project objectives

The relative importance of each objective
will differ for different projects.

Some aerospace projects, such as the
development of a new aircraft, which impact
on passenger safety, will place a very high
emphasis on quality objectives.

With other projects, for example a research
project that is being funded by a fixed
government grant, cost might predominate

30
 Project objectives

Other projects emphasize time: for example, the
organization of an open-air music festival has to
happen on a particular date if the project is to meet its
objectives.

In each of these projects, although one objective might
be particularly important, the other objectives can never
be totally forgotten.

Good objectives are those which are clear, measurable
and, preferably, quantifiable.

Clarifying objectives involves breaking down project
objectives into three categories – the purpose, the end
results and the success criteria. 31
 Project objectives


For example, a project that is expressed in general terms
as ‘improve the budgeting process’ could be broken down
into:

purpose – to allow budgets to be agreed and confirmed
prior to the annual financial meeting;

end result – a report that identifies the causes of budget
delay and which recommends new budgeting processes
and systems;

success criteria – the report should be completed by 30
June, meet all departments’ needs and enable integrated
and dependable delivery of agreed budget statements. Cost
of the recommendations should not exceed $200,000.
32
 Project scope


The scope of a project identifies its work content and
its products or outcomes.

It is a boundary-setting exercise which attempts to
define the dividing line between what each part of the
project will do and what it won’t do.

Defining scope is particularly important when part of
a project is being outsourced.

33
 Project scope


A supplier’s scope of supply will identify the legal
boundaries within which the work must be done.

Sometimes the scope of the project is articulated in a
formal ‘project specification’.

This is the written, pictorial and graphical
information used to define the output, and the
accompanying terms and conditions.

34
 Project strategy

The third part of a project’s definition is the
project strategy, which defines, in a general rather
than a specific way, how the project is going to
meets its objectives.

It does this in two ways: by defining the phases
of the project and by setting milestones and/or
‘stage gates’.

Milestones are important events during the
project’s life. Stage gates are the decision points
that allow the project to move on to its next
phase.
35
 Project strategy


A stage gate often launches further activities and
therefore commits the project to additional costs, etc.
Milestone is a more passive term, which may herald
the review of a part-complete project or mark the
completion of a stage, but does not necessarily have
more significance than a measure of achievement or
completeness.

At this stage the actual dates for each milestone are not
necessarily determined. It is useful, however, to at least
identify the significant milestones and stage gates,
either to define the boundary between phases or to help
in discussions with the project’s customer. 36
 Stage 3 – Project planning


The planning process fulfils four distinct
purposes:

It determines the cost and duration of the
project. This enables major decisions to be
made – such as the decision whether to go
ahead with the project at the start.

It determines the level of resources which will
be needed.

It helps to allocate work and to monitor
progress. Planning must include the
identification of who is responsible for what. 37
 Stage 3 – Project planning


It helps to assess the impact of any changes to the
project.

Planning is not a one-off process; it may be repeated
several times during the project’s life as circumstances
change.

Nor is re-planning a sign of project failure or
mismanagement.

In uncertain projects, in particular, it is a normal
occurrence. In fact, later-stage plans typically mean that
more information is available and that the project is
becoming less uncertain. The process of project planning
involves five steps (see Figure 16.6). 38
39
 Identify activities – the work breakdown
structure


Most projects are too complex to be planned
and controlled effectively unless they are first
broken down into manageable portions.

This is achieved by structuring the project
into a ‘family tree’, along similar lines to the
component structure, but which specifies
major tasks or sub-projects.

These in turn are divided up into smaller tasks
until a defined, manageable series of tasks,
called a work package, is arrived at.
40
 Identify activities – the work breakdown
structure

Each work package can be allocated its own objectives
in terms of time, cost and quality.

The output from this is called the work breakdown
structure (WBS).

The WBS brings clarity and definition to the
project planning process.

It shows ‘how the jigsaw fits together'. It also provides
a framework for building up information for reporting
purposes.

41
 Estimate times and resources

The next stage in planning is to identify the time and
resource requirements of the work packages.

Without some idea of how long each part of a project
will take and how many resources it will need, it is
impossible to define what should be happening at any
time during the execution of the project.

Estimates are just that, however – a systematic best
guess, not a perfect forecast of reality. Estimates may
never be perfect but they can be made with some idea
of how accurate they might be.

42
 Estimate times and resources


Estimates are just that, however – a
systematic best guess, not a perfect
forecast of reality.

Estimates may never be perfect but they
can be made with some idea of how
accurate they might be.

43
Identify relationships and dependencies

All the activities which are identified as
comprising a project will have some
relationship with each other that will depend
on the logic of the project.

Some activities will, by necessity, need to be
executed in a particular order.

For example, in the construction of a house,
the foundations must be prepared before the
walls are built, which in turn must be
completed before the roof is put in place.

44
Identify relationships and dependencies


These activities have a dependent or series
relationship. Other activities do not have
any such dependence on each other.

The rear garden of the house could
probably be prepared totally independently
of the garage being built.

These two activities have an independent or
parallel relationship.

45
 Identify schedule constraints

Once estimates have been made of the time and
effort involved in each activity and their
dependencies identified, it is possible to compare
project requirements with the available resources.

The finite nature of critical resources – such as
special skills – means that they should be taken into
account in the planning process.

This often has the effect of highlighting the need for
more detailed re-planning. There are essentially two
fundamental approaches:

46
 Identify schedule constraints


Resource-constrained. Only the available resource
levels are used in resource scheduling and are never
exceeded.

As a result, the project completion may slip.
Resource-limited scheduling is used, for example,
when a project company has its own highly
specialized assembly and test facilities.

Time-constrained. The overriding priority is to
complete the project within a given time. Once
normally available resources have been used up,
alternative (‘threshold’) resources are scheduled.
47
 Fix the schedule

Project planners should ideally have a number
of alternatives to choose from.

The one which best fits project objectives can
then be chosen or developed.

For example, it may be appropriate to
examine both resource-limited and time-
limited options

48
 Fix the schedule


However, it is not always possible to examine several
alternative schedules, especially in very large or very
uncertain projects, as the computation could be
prohibitive.

However, modern computer-based project
management software is making the search for the
best schedule more feasible.

49
 Stage 5 – Project control

The stages in project planning and control have
so far all taken place before the actual project
takes place.

This stage deals with the management activities
which take place during the execution of the
project.

Project control is the essential link between
planning and doing. It involves three sets of
decisions:

50
 Stage 5 – Project control


how to monitor the project in order to check on
its progress;

how to assess the performance of the project by
comparing monitored observations of the
project with the project plan;

how to intervene in the project in order to
make the changes that will bring it back to
plan.

51
 Project monitoring

Project managers have first to decide what they
should be looking for as the project progresses.

Usually a variety of measures is monitored. To
some extent, the measures used will depend on
the nature of the project.

However, common measures include current
expenditure to date, supplier price changes,
amount of overtime authorized, technical changes
to project, inspection failures, number and length
of delays, activities not started on time, missed
milestone, etc.
52
 Project monitoring


Some of these monitored measures affect mainly cost,
some mainly time.

However, when something affects the quality of the
project, there are also time and cost implications.

This is because quality problems in project planning
and control usually have to be solved in a limited
amount of time.

53
Assessing project performance


The monitored measures of project
performance at any point in time need to be
assessed so that project management can make
a judgment concerning overall performance.

A typical planned cost profile of a project
through its life is shown in Figure 16.12.

At the beginning of a project some activities
can be started, but most activities will be
dependent on finishing. Eventually, only a few
activities will remain to be completed..
54
 Assessing project performance


This pattern of a slow start followed by a faster pace with an
eventual tail-off of activity holds true for almost all projects,
which is why the rate of total expenditure follows an S-shaped
pattern as shown in Figure 16.12, even when the cost curves for
the individual activities are linear.

It is against this curve that actual costs can be compared in order
to check whether the project’s costs are being incurred to plan.

Figure 16.13 shows the planned and actual cost figures compared
in this way.

It shows that the project is incurring costs, on a cumulative basis,
ahead of what was planned

55
56
57
Intervening to change the project

If the project is obviously out of control in the
sense that its costs, quality levels or times are
significantly different from those planned, some
kind of intervention is almost certainly likely to be
required.

The exact nature of the intervention will depend on
the technical characteristics of the project, but it is
likely to need the advice of all the people who
would be affected.

Given the interconnected nature of projects – a
change to one part of the project will have knock-
on effects elsewhere – this means that interventions
often require wide consultation.
58
 Intervening to change the project


Sometimes intervention is needed even if the project
looks to be proceeding according to plan.

For example, the schedule and cost for a project may
seem to be ‘to plan', but when the project managers
project activities and cost into the future, they see that
problems are very likely to arise.

In this case it is the trend of performance which is
being used to trigger intervention.

59
 Network planning


The process of project planning and control is
greatly aided by the use of techniques which help
project managers to handle its complexity and
time-based nature.

The simplest of these techniques is the Gantt chart
(or bar chart) .

Gantt charts are the simplest way to exhibit an
overall project plan because they have excellent
visual impact and are easy to understand.

They are also useful for communicating project
plans and status to senior managers as well as for
day-to-day project control.
60
 Network planning


Later techniques, most of which go under the
collective name of network analysis, are now used,
almost universally, to help plan and control all
significant projects, but can also prove helpful in
smaller ventures.

The two network analysis methods we will examine
are the critical path method (CPM) or analysis
(CPA) and programme evaluation and review
technique (PERT).

61
 Critical Path Method (CPM)


Designed to provide intense micro-control

The system is dynamic; it continues to provide
periodic reports as the project progresses.

As project complexity increases, so it becomes
necessary to identify the relationships between
activities.

62
 Critical Path Method (CPM)


It becomes increasingly important to show the logical
sequence in which activities must take place.

The critical path method models the project by
clarifying the relationships between activities
diagrammatically.

The first way we can illustrate this is by using arrows
to represent each activity in a project.

63
 Critical Path Method (CPM)


For example, examine the simple project in
Figure 16.14 which involves the decoration of an
apartment. Six activities are identified together
with their relationships.

The first, activity a, ‘remove furniture’, does not
require any of the other activities to be
completed before it can be started.

However, activity b, ‘prepare bedroom’, cannot
be started until activity a has been completed.
The same applies to activity d, ‘prepare the
kitchen’.

64
 Critical Path Method (CPM)


Similarly activity c, ‘paint bedroom’, cannot be
started until activity b has been completed.

Nor can activity e, ‘paint the kitchen’, be started until
the kitchen has been prepared.

Only when both the bedroom and the kitchen have
been painted can the apartment be furnished again.
The logic of these relationships is shown as an arrow
diagram, where each activity is represented by an
arrow (the length of the arrows is not proportional to
the duration of the activities).

65
66
This arrow diagram can be developed into a network
diagram as shown in Figure 16.15. At the tail (start) and
head (finish) of each activity (represented by an arrow) is a
circle which represents an event.
Events are moments in time which occur at the start or
finish of an activity.
They have no duration and are of a definite recognizable
nature. Networks of this type are composed only of
activities and events.
The rules for drawing this type of network diagram are
fairly straightforward:
Rule 1 An event cannot be reached until all activities
leading to it are complete. Event 5 in Figure 16.15 is not
reached until activities c and e are complete. 67
Rule 2 No activity can start until its tail event is
reached. In Figure 16.15 activity f cannot start
until event 5 is reached.
Rule 3 No two activities can have the same head
and tail events. In Figure 16.16 activities x and y
cannot be drawn as first shown; they must be
drawn using a dummy activity.
These have no duration and are usually shown
as a dotted-line arrow. They are used either for
clarity of drawing or to keep the logic of the
diagram consistent with that of the project.
68
69

In all network diagrams where the activities have some parallel
relationships, there will be more than one sequence of activities
which will lead from the start to the end of the project.

These sequences of activities are called paths through the
network. Each path will have a total duration which is the sum of
all its activities.

The path which has the longest sequence of activities is called
the critical path of the network (note that it is possible to
have more than one critical path if they share the same joint
longest time).

70

It is called the critical path because any delay in any
of the activities on this path will delay the whole
project.

In Figure 16.15,therefore, the critical path through the
network is a, b, c, f, which is seven days long.

This is the minimum duration of the whole project.
By drawing the network diagram we can:

identify which are the particularly important
activities;

calculate the duration of the whole project.
71
72
 Calculating float

Earlier in the chapter we described the flexibility to
change the timings of activities, which is inherent in
various parts of a project, as float. We can use the
network diagram to calculate this for each activity.
The procedure is relatively simple:

1 Calculate the earliest and latest event times for each
event. The earliest event time (EET) is the very earliest
the event could possibly occur if all preceding activities
are completed as early as possible.

The latest event time (LET) is the latest time that the
event could possibly take place without delaying the
whole project.

73

2 Calculate the ‘time window’ within which an
activity must take place. This is the time between the
EET of its tail event and the LET of its head event.

3 Compare the actual duration of the activity with the
time window within which it must take place. The
difference between them is the float of the activity.

74
75
Consider again the simple network example.
The critical path is the sequence of activities a, b,
c, f.
We can calculate the EET and LET for each event
as shown in Figure 16.17.
If activity a starts at time 0, the earliest it can finish
is 1 because it is a one-day activity.
If activity b is started immediately, it will finish at
day 3 (EET of tail event + duration, 1 + 2).
Activity c can then start at day 3 and because it is
of three days’ duration it will finish at day 6.
Activity e also has event number 5 as its head
event so we must also calculate the EET of activity
e’s tail event.
76

This is determined by activity d. If activity d starts at
day 1 (the earliest it can) it will finish at day 2. So the
EET of event number 4 is day 2.

If activity e is started immediately, it will then finish
at day 4.

Event number 5 cannot occur, however, until both e
and c have finished, which will not be until day 6 (see
rule 1 above).

Activity f can then start and will finish at day 7.

77

The LETs can be calculated by using the
reverse logic. If event number 6 must occur no
later than day 7, the LET for event number 5 is
day 6. Any later than this and the whole
project will be delayed. Working back, if
activity c must finish by day 6 it cannot start
later than day 3, and if activity b must finish
by day 3 it must start by day 1.

78

Similarly, if activity e is to finish by day 6 it must
start no later than day 4, and if activity d is to finish
by day 4 it must start no later than day 3.

Now we have two activities with event number 2 as
their tail event, one of which needs to start by day 1
at the latest, the other by day 3 at the latest.

The LET for event number 2, therefore, must be the
smaller of the two. If it was delayed past this point,
activity b, and therefore the whole project, would be
delayed.

79
 Manager’s View of CPM

INPUTS
• List of project activities
• Precedence relationship among activities
• Estimate of each activity’s duration

CPM processing procedures

OUTPUTS
• Estimated duration of project
• Identification of critical activities
• Amount of slack for each activity
80
 CPM Terminology


Activity

A task or a certain amount of work required in the
project

Requires time to complete

Represented by an arrow

Dummy Activity

Indicates only precedence relationships

Does not require any time of effort

81
 CPM Terminology


Event

Signals the beginning or ending of an activity

Designates a point in time

Represented by a circle (node)

Network

Shows the sequential relationships among
activities using nodes and arrows

82
 CPM Terminology


Path

A connected sequence of activities leading from
the starting event to the ending event

Critical Path

The longest path (time); determines the project
duration

Critical Activities

All of the activities that make up the critical path

83
 CPM Terminology


Earliest Start (ES)

The earliest that an activity can begin; assumes all
preceding activities have been completed

Earliest Finish (EF)

ES + activity time

Latest Finish (LF)

The latest that an activity can finish and not
change the project completion time

Latest Start (LS)

LF - activity time
84
 CPM Network Conventions

I a b a c
1 IV 1
b d
II b
a
1 V 2
c c
a
1 3
III b d
a
c
1 a c
b 2
VI
b d
1
85
 NETWORK INTERPRETATION

REPRESENTATION
I a 1 b 1 Activity a must be completed
before activity b can begin

II b Activity b and c can occur

a
1 concurrently , but activity a
c must be completed before
either activity b or c can
begin
III a c Activity a & b , c & d can occur
2 concurrently, but activity a & b must be
completed before activity c begin,
b d Activity b must be completed before
1 activity d can begin. Dummy activities
have zero time duration and show 86only
precedence relationship.
 Activities b and c can occur
IV concurrently ,but activity a must be
a
c completed before either activity b
1 or c can begin
b
V b
Activities a and b , c and d
a occur concurrently, But both
1 a & b must be completed
b d before either activity c or d
can begin
Activity a must be completed before
VI either activity b or c begins.
2 Activity b & c must be completed
c before activity d begins. The dashed
a arrow is dummy activity. Dummy
1 3
b d activity has zero duration and
shows only precedence relationship
87
 Steps in CPM Analysis


Draw the CPM network

A graphic view of the relationships among the
required activities

Analyze the paths through the network

Determine the length of each path (the time
required to complete each path)

Starting at the beginning of the network and
working toward the end (from left to right),
determine the ES and the EF for each activity

. . . more
88
 Steps in CPM Analysis


Path analysis (continued)

Identify the critical path(s) (the longest path[s]
through the network)

The critical path(s) determines how long the
project will take

. . . more

89
 Steps in CPM Analysis


Determine the slack for each activity

Working from the end of the project network
(from right to left), find the LF and the LS for each
activity

Compute the activity’s slack
slack = LS - ES = LF - EF

Slack is the maximum amount of time that this
activity can be delay in its completion before it
becomes a critical activity, i.e., delays completion
of the project
90
CPM EXAMPLE 1

91
ACTIVITY Duration Immediate
predecessor
Activity
a 6 -
b 8 -
c 5 -
d 13 b
e 9 c
f 15 a
g 17 a
h 9 f
i 6 g
j 12 d,e
92
 CPM Example


CPM Network
f, 15

g, 17 h, 9
a, 6
i, 6

b, 8
d, 13 j, 12

c, 5
e, 9

93
 CPM Example


Paths Enumerated
Path Length of Path
a-f-h 6 + 15 + 9 = 30
a-g-I 6 + 17 + 6 = 29
b-d-j 8 + 13 + 12 = 33*
c-e-j 5 + 9 + 12 = 26
* Critical path

94
 CPM Example


ES and EF Times f, 15

g, 17 h, 9
a, 6
0 i, 6

b, 8
0 d, 13 j, 12

c, 5
0 e, 9

95
 CPM Example


ES and EF Times f, 15

g, 17 h, 9
a, 6
0 6 i, 6

b, 8
0 8 d, 13 j, 12

c, 5
0 5 e, 9

96
 CPM Example


ES and EF Times f, 15
6
g, 17 h, 9
a, 6
0 6 6 i, 6

b, 8
0 8 d, 13 j, 12
8
c, 5
0 5 e, 9
5
97
 CPM Example


ES and EF Times f, 15
6 21
g, 17 h, 9
a, 6
0 6 6 23 i, 6

b, 8
0 8 d, 13 j, 12
8 21
c, 5
0 5 e, 9
5 14
98
 CPM Example


ES and EF Times f, 15
6 21
g, 17 h, 9
a, 6
6 23 21
0 6 i, 6
23
b, 8
0 8 d, 13 j, 12
8 21 21
c, 5
0 5 e, 9
5 14
99
 CPM Example


ES and EF Times f, 15
6 21
g, 17 h, 9
a, 6
6 23 21 30
0 6 i, 6
23 29
b, 8
0 8 d, 13 j, 12
8 21 21 33
c, 5
0 5 e, 9
Project’s EF = 33
5 14
100
 CPM Example
f, 15

LS and LF Times
6 21
h, 9
21 30
a, 6 g, 17
6 23 33
0 6 i, 6
23 29
b, 8 33
0 8 d, 13 j, 12
8 21 21 33
c, 5 33
0 5 e, 9
5 14
101
 CPM Example
f, 15

LS and LF Times
6 21
h, 9
21 30
a, 6 g, 17
6 23 24 33
0 6 i, 6
23 29
b, 8 27 33
0 8 d, 13 j, 12
8 21 21 33
c, 5 21 33
0 5 e, 9
5 14
102
 CPM Example
f, 15

LS and LF Times
6 21
h, 9
24
21 30
a, 6 g, 17
6 23 24 33
0 6 i, 6
27 23 29
b, 8 27 33
0 8 d, 13 j, 12
8 21 21 33
c, 5 21
21 33
0 5 e, 9
5 14
21 103
 CPM
CPM Example
Example
f, 15

LS and LF Times
6 21
h, 9
9 24
21 30
a, 6 g, 17
6 23 24 33
0 6 i, 6
10 27 23 29
b, 8 27 33
0 8 d, 13 j, 12
8 21 21 33
c, 5 8 21 21 33
0 5 e, 9
5 14
12 21 104
 CPM
CPM Example
Example
f, 15

LS and LF Times
6 21
h, 9
9 24
21 30
a, 6 g, 17
6 23 24 33
0 6 i, 6
9 10 27 23 29
b, 8 27 33
0 8 d, 13 j, 12
8 8 21 21 33
c, 5 8 21 21 33
0 5 e, 9
12 5 14
12 21 105
 CPM
CPM Example
Example
f, 15

LS and LF Times
6 21
h, 9
9 24
21 30
a, 6 g, 17
6 23 24 33
0 6 i, 6
3 9 10 27 23 29
b, 8 27 33
0 8 d, 13 j, 12
0 8 8 21 21 33
c, 5 8 21 21 33
0 5 e, 9
7 12 5 14
12 21 106
 CPM
CPM Example
Example
f, 15

Slack
3 6 21 h, 9
9 24
21 30
a, 6 g, 17 3
6 23 24 33
i, 6
3 0 6 4
10 27
3 9 4 23 29
b, 8 27 33
0 8 d, 13 j, 12
0
0 8 0 8 21 21 33
8 21 0
c, 5 21 33
0 5 e, 9
7
7 12 7 5 14
12 21 107
 CPM Example


Critical Path f, 15

g, 17 h, 9
a, 6
i, 6

b, 8
d, 13
j, 12

c, 5
e, 9

108
CPM EXAMPLE 2

109
110
111

Figure 16.18 shows the network diagram for the
project. Drawing these diagrams from the type of
information in Table 16.3 is a matter of sketching
the logic of the relationships between the activities
on a piece of paper until it conforms to the
relationships as stated, and then drawing the
diagram again in a neater fashion.

So, for example, A, B and C have no predecessors
and therefore are the activities that can be
commenced at the beginning of the project.

112

Activities D, E and F all can start after the completion
of activity B, and so on.

The diagram also shows the latest and earliest event
times for the activities. It shows that the critical path
for the project is the sequence of activities B, F, J, K,
L.

The total length of the project is 35 days, this being
the length of the critical path sequence of activities.

113
EXAMPLE 3

114
 RAMOV PROJECT

ACTIVITY ACTIVITY ACTIVITY IMMEDIATE

DURATION DAYS PREDECESSOR
ACTIVITY
DESIGN RAMOV a 20 -
BUILD PROTOTYPE UNITS b 10 a
PERFORM TEST OF c 8 b
PROTYPES
ESTIMATE MATERIAL COST d 11 a
REFINE RAMOV DESIGN e 7 c.d
DEMONSTRATE RAMOV TO f 6 e
CUSTOMER
ESTIMATE LABOUR COST g 12 d
PREPORE TECHNICAL h 13 e
PROPOSAL
DELIVER PROPOSAL TO i 5 g,h
CUSTOMER 115
 Analyzing critical path

Paths Enumerated
Path Length of Path
a-b-c-e-f 20 +10+8+7+6 = 51
a-b-c-e-h-I 20+10+8+7+13+5 = 63*
a-d-e-f 20+11+7+ 6= 44
a-d-e-h-i 20+11+7+13+5= 56
a-d-g-i 20+11+12+5=48
* Critical path
116
 Analyzing critical path

1 2 3 4 6 8
a, 20 b, 10 c, 8 e, 7 f, 6

h,1
MM

i, 5
d,

3
DU
11

5 7
g, 12

117
 Analyzing critical path

ES and EF Times
0 20 20 30 30 38 38 45 45 51
1 2 3 4 6 8
a, 20 b, 10 c, 8 e, 7 f, 6

h,1
20 31 45 58
MM 58 63
d,

3
DU
11

i, 5
5 7
g, 12
31 43
118
 Analyzing critical path

ES and EF Times
0 20 20 30 30 38 38 45 45 51
1 2 3 4 6 8
a, 20 b, 10 c, 8 e, 7 f, 6

h,1
20 31 45 58
MM 58 63
d,

3
DU
11

i, 5
5 7
g, 12
31 43
119
 
LS and LF Times

0 20 20 30 30 38 38 45 57 63
0 20 20 30 30 38 38 45 45 51
1 2 3 4 6 8
a, 20 b, 10 c, 8 e, 7 f, 6

27 38 45 58
58 63

h,1
20 31 45 58
MM 58 63
d,

3
DU
11

i, 5
5 7
g, 12
46 58
31 43 120
 Slack
0 20 20 30 30 38 38 45 57 63
0 20 20 30 30 38 38 45 45 51
0 0 0 0 12
1 2 3 4 6 8
a, 20 b, 10 c, 8 e, 7 f, 6

27 38 45 58
58 63

h,1
20 31 45 58
MM 58 63
d,

3
7
DU
0
11

i, 5
5 7
15 g, 12
46 58
31 43 121
Programme evaluation and review technique
(PERT)
The programme evaluation and review technique,
or PERT as it is universally known, had its origins
in planning and controlling major defense projects
in the US Navy.
PERT had its most spectacular gains in the highly
uncertain environment of space and defense
projects.
The technique recognizes that activity durations
and costs in project management are not
deterministic (fixed) and that probability theory
can be applied to estimates, as was mentioned
earlier.
122

In this type of network each activity duration is
estimated on an optimistic, a most likely and a
pessimistic basis, as shown in Figure 16.21.

If it is assumed that these time estimates are
consistent with a beta probability distribution, the
mean and variance of the distribution can be
estimated as follows:

123
124
125
126
127

It is generally assumed that the whole path will be normally
distributed.

The advantage of this extra information is that we can examine the
‘riskiness’ of each path through a network as well as its duration.

For example, Figure 16.22 shows a simple two path network. The
top path is the critical one; the distribution of its duration is 10.5
with a variance of 0.06 (therefore a standard deviation of 0.245).

The distribution of the non-critical path has a mean of 9.67 and a
variance of 0.66 (therefore a standard deviation of 0.812).

128

The implication of this is that there is a chance that
the non-critical path could in reality be critical.

Although we will not discuss the probability
calculations here, it is possible to determine the
probability of any sub-critical path turning out to be
critical when the project actually takes place.

However, on a practical level, even if the probability
calculations are judged not to be worth the effort
involved, it is useful to be able to make an
approximate assessment of the riskiness of each part
of a network.
129
 Program Evaluation
and Review Technique (PERT)

The technique is based on the assumption that an
activity’s duration follows a probability distribution
instead of being a single value.

The probabilistic information about the activities is
translated into probabilistic information about the
project.

130
 PERT


Three time estimates are required to compute the
parameters of an activity’s duration distribution:

pessimistic time (tp ) - the time the activity would
take if things did not go well

most likely time (tm ) - the consensus best estimate
of the activity’s duration

optimistic time (to ) - the time the activity would
take if things did go well

. . . more

131
 PERT


From these three time estimates about an activity, two
probability distribution parameters are calculated: the
mean (te ) and the variance (Vt ).

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

Vt = [ ( tp - to ) / 6 ] 2

132
 Steps in PERT Analysis


Draw the network.

Analyze the paths through the network and find the
critical path.

The length of the critical path is the mean of the
project duration probability distribution which is
assumed to be normal.

. . . more

133
 Steps in PERT Analysis


The standard deviation of the project duration
probability distribution is computed by adding the
variances of the critical activities (all of the activities
that make up the critical path) and taking the square
root of that sum

Probability computations can now be made using the
normal distribution table.

134
 PERT Example

Immed. Optimistic Most Likely Pessimistic

Activity Predec. Time (Hr.) Time (Hr.) Time (Hr.)
A -- 4 6 8
B -- 1 4.5 5
C A 3 3 3
D A 4 5 6
E A 0.5 1 1.5
F B,C 3 4 5
G B,C 1 1.5 5
H E,F 5 6 7
I E,F 2 5 8
J D,H 2.5 2.75 4.5
K G,I 3 5 7
135
 PERT Example


PERT Network
D

A E H J

C
B I K
F
G

136
 PERT Example


Activity Expected Time and Variance
Activity Expected Time Variance
A 6 4/9
B 4 4/9
C 3 0
D 5 1/9
E 1 1/36
F 4 1/9
G 2 4/9
H 6 1/9
I 5 1
J 3 1/9
K 5 4/9
137
 PERT Example


Earliest/Latest Times
Activity ES EF LS LF Slack
A 0 6 0 6 0
*critical
B 0 4 5 9 5
C 6 9 6 9 0*
D 6 11 15 20 9
E 6 7 12 13 6
F 9 13 9 13 0*
G 9 11 16 18 7
H 13 19 14 20 1
I 13 18 13 18 0*
J 19 22 20 23 1
K 18 23 18 23 0 * 138
 PERT Example

Probability the project will be completed within 24
hours
Vpath = VA + VC + VF + VI + VK
= 4/9 + 0 + 1/9 + 1 + 4/9
= 2
path = (Vpath)0.5 = 1.414
z = (X - )/(24-23)/1.414 = .71

139
 PERT Example


Probability the project will be completed within 24
hours

.2612
.5000

23 24
From the Standard Normal Distribution table:
P(z < .71) = .5 + .2612 = .7612
140
 PERT Example


Probability the project will be completed within 24
hours (via Excel)

=NORMDIST(24,23,1.414,1) = .7603

141
 A PERT ANALYSIS OF RAMOV PROJECT

Activity Optimistic Most Pessimistic Mean distribution Variance

Time likely time te = ( to + 4tm + tp ) / 6 Vt = [ ( tp - to ) / 6 ] 2
time

a 18 20 22 20.00 0.44
b 8 10 14 10.33 1.00
c 5 8 9 7.67 0.44
d 10 11 12 11.00 0.11
e 7 7 7 7.00 0
f 4 6 7 5.83 0.25
g 10 12 14 12.00 0.44
h 12 13 15 13.17 0.25
i 5 5 5 5.00 0
142
 Slack
0 20 20 30.33 30.33 38 38 45 57.34 63.17
0 20 20 30.33 30.33 38 38 45 45 50.83
0 0 0 0 12.34
1 2 3 4 6 8
a, 20 b, 10.33 c, 7.67 e, 7 f, 5.83

27 38 45 58.17

h,1
58.17 63.17

Y
20 31 45 58.17
MM

3.1
58.17 63.17
d,

7 0
DU

7
0
11

i, 5
5 7
15.17 g, 12
46.17 58.17
31 43 143
 Standard Deviation


Standard Deviation
 Vpath = Va+ Vb + Vc + Ve + Vh + Vi

= 0.44+1.0+0.44+0+0.25+0

= 2.13
 path = (Vpath)0.5 = (2.13)0.5 = 1.46 days

144
 PERT Example

Probability the project will be completed within 65 days

63.17 65
z = (X - )/(65-63.17)/1.46 = 1.25
From the Standard Normal Distribution table: Probability that
project completed in less than 65 days is 0.89435
145
 Crashing networks

Crashing networks is the process of reducing
time spans on critical path activities so that the
project is completed in less time.

Usually, crashing activities incurs extra cost.

This can be as a result of: overtime working;
additional resources, such as manpower; sub-
contracting.

Figure 16.25 shows an example of crashing a
simple network. For each activity the duration and
normal cost are specified, together with the
(reduced) duration and (increased) cost of
crashing them. 146

Not all activities are capable of being crashed; here
activity e cannot be crashed.

The critical path is the sequence of activities a, b, c, e.
If the total project time is to be reduced, one of the
activities on the critical path must be crashed.

In order to decide which activity to crash, the ‘cost
slope’ of each is calculated. This is the cost per time
period of reducing durations.

147
 Crashing networks
The most cost-effective way of shortening the whole
project then is to crash the activity on the critical
path which has the lowest cost slope.
This is activity a, the crashing of which will cost an
extra £2000 and will shorten the project by one
week.
After this, activity c can be crashed, saving a further
two weeks and costing an extra £5000.
At this point all the activities have become critical
and further time savings can be achieved only by
crashing two activities in parallel.
148

The shape of the time–cost curve in Figure 16.25 is
entirely typical.

Initial savings come relatively inexpensively if the
activities with the lowest cost slope are chosen.

Later in the crashing sequence the more expensive
activities need to be crashed and eventually two or
more paths become jointly critical.

Inevitably by that point, savings in time can come
only from crashing two or more activities on parallel
paths.
149
150
 Activity Cost-Time Tradeoffs


Project managers may have the option or requirement
to crash the project, or accelerate the completion of
the project.

This is accomplished by reducing the length of the
critical path(s).

The length of the critical path is reduced by reducing
the duration of the activities on the critical path.

. . . more

151
 Cost-Time Tradeoffs


If each activity requires the expenditure of an amount
of money to reduce its duration by one unit of time,
then the project manager selects the least cost critical
activity, reduces it by one time unit, and traces that
change through the remainder of the network.

. . . more

152
 Cost-Time Tradeoffs


As a result of a reduction in an activity’s time, a new
critical path may be created.

When there is more than one critical path, each of the
critical paths must be reduced.

If the length of the project needs to be reduced
further, the process is repeated.

153
 Computer Software
for Project Management

Artemis Views (Artemis Management Systems)

FastTrack Schedule (AEC Software)

Microsoft Project (Microsoft Corp.)

Oracle Projects (Oracle Corp.)

PowerProject (ASTA Development)

Primavera Project Planner (Primavera Systems)

SuperProject (Computer Associates International)

TurboProject (IMSI)

154
 Evaluation of CPM/PERT


Activities are assumed to be independent.

It is assumed that there is a precise breaking point
where one activity ends and another begins.

Initially-critical activities might not receive the
attention they deserve until it is too late.

Activity time estimates might be biased.

The cost of CPM/PERT might not be justified by the
value of the information it provides.

Personnel might not understand the statistical
underpinnings of PERT.
155
 Wrap-Up: World-Class Practice


The project organizations are flexible enough to
respond aggressively to business opportunities.

Personnel are selected and trained to be flexible in
moving from department to department and project to
project as needed.

Scheduling and control charts are frequently used
because of their simplicity, flexibility , low cost, and
effectiveness as communication devices.

CPM, PERT, and PERT/Cost are also used to provide
computerized activity-by-activity planning and
control.

156
End
End of
of Chapter
Chapter 10
10

157