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Project Planning and Budgeting Recall the four stages Project Definition and Conceptualization Project Planning and Budgeting Project Execution and Control.

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Presentation on theme: "Project Planning and Budgeting Recall the four stages Project Definition and Conceptualization Project Planning and Budgeting Project Execution and Control."— Presentation transcript:

1

2 Project Planning and Budgeting

3 Recall the four stages Project Definition and Conceptualization Project Planning and Budgeting Project Execution and Control Project Termination and Closeout

4 Ch 17 - 2 Elements Of Project Management Project team –individuals from different departments within company Matrix organization –team structure with members from different functional areas depending on skills needed Project manager –leader of project team

5 Ch 17 - 3 Project Planning Statement of work –written description of goals, work & time frame of project Activities require labor, resources & time Precedence relationship shows sequential relationship of project activities

6 WORK BREAKDOWN 1

7 WORK BREAKDOWN 2

8 GANTT CHART

9 Ch 17 - 4 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Simplified Project Network 132 Construct formsPour concrete

10 NETWORK CHART 1

11 NETWORK CHART 2

12 Ch 17 - 5 Elements Of Project Planning Define project objective(s) Identify activities Establish precedence relationships Make time estimates Determine project completion time Compare project schedule objectives Determine resource requirements to meet objective

13 Ch 17 - 6 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Work breakdown structure (WBS) –determine subcomponents, activities & tasks

14 Ch 17 - 7 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Gantt Chart Popular tool for project scheduling Graph with bar for representing the time for each task Provides visual display of project schedule Also shows slack for activities –(amount of time activity can be delayed without delaying project)

15 Ch 17 - 8 2 0 41068 31579 Month   Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work A Gantt Chart

16 Ch 17 - 9 CPM/PERT Critical Path Method (CPM) –DuPont & Remington-Rand (1956) –deterministic task times –activity-on-node network construction Project Eval. & Review Technique (PERT) –US Navy, Booz, Allen & Hamilton –multiple task time estimates –activity-on-arrow network construction

17 Ch 17 - 10 The Project Network Network consists of branches & nodes 132 Branch Node

18 Ch 17 - 11 Network Construction In AON, nodes represent activities & arrows show precedence relationships In AOA, arrows represent activities & nodes are events for points in time An event is the completion or beginning of an activity A dummy shows precedence for two activities with same start & end nodes

19 Ch 17 - 12 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Project Network For A House 124 6 7 3 5 3 2 0 1 3 1 1 1 Lay foundation Design house and obtain financing Order and receive materials Dummy Finish work Select carpet Select paint Build house

20 Ch 17 - 13 Critical Path A path is a sequence of connected activities running from start to end node in network The critical path is the path with the longest duration in the network Project cannot be completed in less than the time of the critical path

21 Ch 17 - 14 All Possible Paths A: 1-2-3-4-6-7 3 + 2 + 0 + 3 + 1 = 9 months; the critical path B: 1-2-3-4-5-6-7 3 + 2 + 0 + 1 + 1 + 1 = 8 months C: 1-2-4-6-7 3 + 1 + 3 + 1 = 8 months D: 1-2-4-5-6-7 3 + 1 + 1 + 1 + 1 = 7 months

22 Ch 17 - 15 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Concurrent Activities 4 3 2 Dummy Lay foundation 2 3 Lay foundation Order material Incorrect precedence relationship Correct precedence relationship

23 Ch 17 - 16 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Early Times (House-building example) ES - earliest time activity can start Forward pass starts at beginning of CPM/PERT network to determine ES times EF = ES + activity time –ES ij = maximum (EF i ) –EF ij = ES ij + t ij –ES 12 = 0 –EF 12 = ES 12 + t 12 = 0 + 3 = 3 months

24 Ch 17 - 17 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Computing Early Times –ES 23 = max (EF 2 ) = 3 months –ES 46 = max (EF 4 ) = max (5,4) = 5 months –EF 46 = ES 46 + t 46 = 5 + 3 = 8 months –EF 67 =9 months, the project duration

25 Ch 17 - 18 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Late Times LS - latest time activity can start & not delay project Backward pass starts at end of CPM/PERT network to determine LS times LF = LS + activity time –LS ij = LF ij - t ij –LF ij = minimum (LS j )

26 Ch 17 - 19 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Computing Late Times –LF 67 = 9 months –LS 67 = LF 67 - t 67 = 9 - 1 = 8 months –LF 56 = minimum (LS 6 ) = 8 months –LS 56 = LF 56 - t 56 = 8 - 1 = 7 months –LF 24 = minimum (LS 4 ) = min(5, 6) = 5 months –LS 24 = LF 24 - t 24 = 5 - 1 = 4 months

27 Ch 17 - 20 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Early And Late Times 124 6 7 3 5 3 2 0 1 3 1 1 1 ( ) ES=0, EF=3 LS=0, LF=3 ( ) ES=3, EF=5 LS=3, LF=5 ( ) ES=5, EF=5 LS=5, LF=5 ( ) ES=5, EF=8 LS=5, LF=8 ( ) ES=6, EF=7 LS=7, LF=8 ( ) ES=8, EF=9 LS=8, LF=9 ( ) ES=3, EF=4 LS=4, LF=5 ( ) ES=5, EF=6 LS=6, LF=7

28 Ch 17 - 21 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Activity Slack Activities on critical path have ES=LS & EF=LF Activities not on critical path have slack –S ij = LS ij - ES ij –S ij = LF ij - EF ij –S 24 = LS 24 - ES 24 = 4 - 3 = 1 month

29 Ch 17 - 22 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Activity Slack Data ActivityLSESLFEFSlack (S) 1-2*00330 2-333550 2-443541 3-4*55550 4-565761 4-6*55880 5-676871 6-7*88990 * Critical path

30 Ch 17 - 23 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Probabilistic Time Estimates Reflect uncertainty of activity times Beta distribution is used in PERT b - a 6 ( ) Variance:  2 = a = optimistic estimate m = most likely time estimate b = pessimistic time estimate Where, 2 Mean (expected time): a + 4m + b 6 t =

31 Ch 17 - 24 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Example Beta Distributions m = t ba P (time) ba tm b mta

32 Ch 17 - 25 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e PERT Example 1 2 4 6 7359 8 Manual Testing Dummy System Training Dummy System Testing Orientation Position recruiting System development Equipment installation Equipment testing and modification Final debugging System changeover Job training

33 Ch 17 - 26 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Activity Information 1 - 268108.44 1 - 336961.00 1 - 41353.44 2 - 50000.00 2 - 6 241252.78 3 - 5 2343.11 4 - 53454.11 4 - 82222.00 5 - 7371171.78 5 - 82464.44 7 - 80000.00 6 - 914741.00 7 - 91101394.00 Time estimates (wks)Mean Time Variance Activityabct  2

34 Ch 17 - 27 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Early And Late Times 1 - 280.4408191 1 - 361.0006060 1 - 430.4403252 2 - 500.0088991 2 - 6 52.7881316218 3 - 5 30.1169690 4 - 540.1137592 4 - 820.0035141611 5 - 771.789169160 5 - 840.4491312163 7 - 800.00131316163 6 - 941.00131721258 7 - 994.00162516250 Activityt  2 ESEFLSLFS

35 Ch 17 - 28 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Network With Times 1 2 4 6 7359 8 ( ) ES=8, EF=8 LS=9, LF=9 ( ) ES=6, EF=9 LS=6, LF=9 ( ) ES=3, EF=5 LS=14, LF=16 ( ) ES=0, EF=3 LS=2, LF=5 ( ) ES=0, EF=6 LS=0, LF=6 ( ) ES=0, EF=8 LS=1, LF=9 3 8 0 5 4 4 7 0 2 93 6 ( ) ES=3, EF=7 LS=5, LF=9 4 ( ) ES=9, EF=13 LS=12, LF=16 ( ) ES=9, EF=13 LS=9, LF=16 ( ) ES=13, EF=13 LS=16 LF=16 ( ) ES=13, EF=25 LS=16 LF=25 ( ) ES=13, EF=25 LS=16 LF=25 ( ) ES=8, EF=13 LS=16 LF=21

36 Ch 17 - 29 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Project Variance Project variance is the sum of variances on the critical path

37 Ch 17 - 30 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Probabilistic Network Analysis Determine probability that project is completed within specified time where  = t p = project mean time  = project standard deviation x = proposed project time Z = number of standard deviations x is from mean Z = x -  

38 Ch 17 - 31 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Normal Distribution Of Project Time  = t p Timex ZZ Probability

39 Ch 17 - 32 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Probabilistic Analysis Example What is the probability that the project is completed within 30 weeks?

40 Ch 17 - 33 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Determining Probability From Z Value Z0.000.01...0.09 1.90.47130.4719…0.4767............  = 25 Time (weeks) x = 30 P( x<= 30 weeks) = 0.9719

41 Ch 17 - 34 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e What is the probability that the project is completed within 22 weeks?  = 25 Time (weeks) x = 22 P( x<= 22 weeks) =0.1271

42 Ch 17 - 35 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Project Crashing Crashing is reducing project time by expending additional resources Crash time is an amount of time an activity is reduced Crash cost is the cost of reducing the activity time Goal is to reduce project duration at minimum cost

43 Ch 17 - 36 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e House-building Network Activity times in weeks 124 6 7 3 5 1212 8 0 4 1212 4 4 4

44 Ch 17 - 37 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Normal Activity And Crash Data 1-2127$3,000$5,0005$400 2-3852,0003,5003500 2-4434,0007,00013,000 3-4000000 4-5415001,1003200 4-612950,00071,00037,000 5-6415001,1003200 6-74315,00022,00017,000 $75,000$110,700 Total NormalCrashAllowableCrash TimeTimeNormalCrashCrash TimeCost per Activity(wks)(wks)CostCost(wks)Week

45 Ch 17 - 38 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Network With Crashing Costs 124 6 7 3 5 12 8 0 4 4 4 4 $7,000 $500 $3,000 $400 $200 Activity 1-2 can be crashed a total of 5 weeks for $2000 Crash cost per week = Total crash cost/Total crash time = $2,000/5 = $400 per week

46 Ch 17 - 39 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Normal And Crash Relationships 12426810140 1,000 3,000 4,000 5,000 7,000 2,000 6,000 $ Weeks Crashed activity Normal activity Crash cost Normal cost Crash timeNormal time Slope = crash cost per week

47 Ch 17 - 40 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Crashing Solution 1-21275$400$2,000 2-38535001,500 2-44303,0000 3-400000 4-54102000 4-612937,00021,000 5-64102000 6-74317,0007,000 12$31,500 NormalCrash Crash Crash Crashing TimeTimeTimeCost perCost Activity(wks)(wks)UsedWeekIncurred

48 Ch 17 - 41 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Crashed Project 124 6 7 3 5 12 7 8 5 0 4 3 12 9 4 4 4 3 Original time Crashed times

49 Ch 17 - 42 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Time-Cost Relationship Crashing costs increase as project duration decreases Indirect costs increase as project duration increases Reduce project length as long as crashing costs are less than indirect costs

50 Ch 17 - 43 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Time-Cost Tradeoff Cost ($) Project Duration Crashing Total cost Indirect cost Direct cost Time Minimum cost = optimal project time

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