1 Project Management Chapter 14

2 Lecture outline Project planning Project scheduling Project control CPM/PERT Project crashing and time-cost trade-off

3 What is a project? Project –unique, one-time operational activity or effort Examples –constructing houses, factories, shopping malls, athletic stadiums or arenas –developing military weapons systems, aircrafts, new ships –launching satellite systems –constructing oil pipelines –developing and implementing new computer systems –planning concert, football games, or basketball tournaments –introducing new products into market

4 Project elements Objective Scope Contract requirements Schedules Resources Personnel Control Risk and problem analysis

5 Project management process Project planning Project scheduling Project control Project team –made up of individuals from various areas and departments within a company Matrix organization –a team structure with members from functional areas, depending on skills required Project Manager –most important member of project team

6 Project scope Scope statement –a document that provides an understanding, justification, and expected result of a project Statement of work –written description of objectives of a project Work breakdown structure –breaks down a project into components, subcomponents, activities, and tasks

7 Organizational Breakdown Structure –a chart that shows which organizational units are responsible for work items Responsibility Assignment Matrix –shows who is responsible for work in a project

8 Project scheduling Steps –Define activities –Sequence activities –Estimate time –Develop schedule Techniques –Gantt chart –CPM –PERT –Microsoft Project

9 Gantt chart Graph or bar chart with a bar for each project activity that shows passage of time Provides visual display of project schedule Slack –amount of time an activity can be delayed without delaying the project

10 |||||||||| Activity Design house and obtain financing Lay foundation Order and receive materials Build house Select paint Select carpet Finish work MonthMonth Example of Gantt chart

11 Project control Time management Cost management Quality management Performance management –Earned Value Analysis a standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and measuring schedule and budget variation Communication Enterprise project management

12 CPM/PERT Critical Path Method (CPM) –DuPont & Remington-Rand (1956) –Deterministic task times –Activity-on-node network construction Project Evaluation and Review Technique (PERT) –US Navy, Booz, Allen & Hamilton –Multiple task time estimates –Activity-on-arrow network construction

13 Project network Activity-on-node (AON) –nodes represent activities, and arrows show precedence relationships Activity-on-arrow (AOA) –arrows represent activities and nodes are events for points in time Event –completion or beginning of an activity in a project Branch Node

14 AOA Project Network for a House Lay foundation Design house and obtain financing Order and receive materials Dummy Finish work Select carpet Select paint Build house

15 23 Lay foundation Order material (a)Incorrect precedence relationship (b)Correct precedence relationship 3 42 Dummy Layfoundation Order material 1 20 Concurrent activities

16 AON Network for House Building Project Start Design house and obtain financing Order and receive materials Select paint Select carpet Lay foundations Build house Finish work

Critical Path Method (CPM) CPM is a project network analysis technique used to predict total project duration A critical path for a project is the series of activities that determines the earliest time by which the project can be completed The critical path is the longest path through the network diagram and has the least amount of slack or float

Start Critical path –Longest path through a network –Minimum project completion time A: = 9 months B: = 8 months C: = 8 months D: = 7 months Critical Path

More on the Critical Path If one or more activities on the critical path takes longer than planned, the whole project schedule will slip unless corrective action is taken Misconceptions: –The critical path is not the one with all the critical activities; it only accounts for time. –There can be more than one critical path if the lengths of two or more paths are the same –The critical path can change as the project progresses

Using Critical Path Analysis to Make Schedule Trade-offs Knowing the critical path helps you make schedule trade-offs Free slack or free float is the amount of time an activity can be delayed without delaying the early start of any immediately following activities Total slack or total float is the amount of time an activity may be delayed from its early start without delaying the planned project finish date A forward pass through the network diagram determines the early start and finish dates A backward pass determines the late start and finish dates

21 Activity Start Times Start Start at 3 months Start at 6 months Start at 5 months Finish at 9 months Finish

22 Mode Configuration Activity number Activity duration Earliest start Latest start Earliest finish Latest finish

23 Forward Pass Start at the beginning of CPM/PERT network to determine the earliest activity times Earliest Start Time (ES) –earliest time an activity can start –ES = maximum EF of immediate predecessors Earliest finish time (EF) –earliest time an activity can finish –earliest start time plus activity time EF= ES + t

24 Earliest Activity Start and Finish Times Start Design house and obtain financing Select paint Lay foundations Select carpet Build house Finish work Order and receive materials

25 Backward Pass Determines latest activity times by starting at the end of CPM/PERT network and working forward Latest Start Time (LS) –Latest time an activity can start without delaying critical path time LS= LF - t Latest finish time (LF) –latest time an activity can be completed without delaying critical path time –LS = minimum LS of immediate predecessors

26 Latest Activity Start and Finish Times Start Design house and obtain financing Select paint Lay foundations Select carpet Build house Finish work Order and receive materials

27 * Critical Path *7* *4* *2* *1*1 Slack S EF LF ES LS Activity Activity Slack

28 Probabilistic Time Estimates Beta distribution –a probability distribution traditionally used in CPM/PERT a = optimistic estimate m = most likely time estimate b = pessimistic time estimate where Mean (expected time): t = a + 4 m + b 6 Variance:  2 = b - a 6 2

29 P(time) Time amtbamtb m = t Time Time ba Examples of Beta Distributions

30 Project Network with Probabilistic Time Estimates: Example StartFinish 2 3,6,9 3 1,3,5 1 6,8,10 5 2,3,4 6 3,4,5 4 2,4,12 7 2,2,2 8 3,7,11 9 2,4,6 10 1,4,7 11 1,10,13 Equipment installation System development Position recruiting Equipment testing and modification Manual testing Job Training Orientation System training System testing Final debugging System changeover

TIME ESTIMATES (WKS)MEAN TIMEVARIANCE ACTIVITY ambt б 2 Activity Time Estimates

32 ACTIVITY t б  ESEFLSLFS Activity Early, Late Times, and Slack

33 StartFinish Critical Path Earliest, Latest, and Slack

34 Project “crashing” Crashing –reducing project time by expending additional resources Crash time –an amount of time an activity is reduced Crash cost –cost of reducing activity time Goal –reduce project duration at minimum cost

Project Crashing: Example

36 Project Crashing: Example (cont.) $7,000 – $6,000 – $5,000 – $4,000 – $3,000 – $2,000 – $1,000 – – ||||||| Weeks Normal activity Normal time Normal cost Crash time Crashed activity Crash cost Slope = crash cost per week

37 Normal Activity and Crash Data TOTAL NORMALCRASHALLOWABLECRASH TIMETIMENORMALCRASHCRASH TIMECOST PER ACTIVITY(WEEKS)(WEEKS)COSTCOST(WEEKS)WEEK 1127$3,000$5,0005$ ,0003, ,0007,00013, ,00071,00037, , , ,00022,00017,000 $75,000$110,700

$400 $500 $3000 $7000 $200 $ Project Duration: 36 weeks FROM … $400 $500 $3000 $7000 $200 $ Project Duration: 31 weeks Additional Cost: $2000 TO…

39 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

40 Time-Cost Tradeoff Cost ($) Project duration CrashingTime Minimum cost = optimal project time Total project cost Indirect cost Direct cost

Words of Caution on Using Project Management Software Many people misuse project management software because they don’t understand important concepts and have not had good training You must enter dependencies to have dates adjust automatically and to determine the critical path You must enter actual schedule information to compare planned and actual progress