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Copyright©2012 Miles M. Hamby

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1 Copyright©2012 Miles M. Hamby
Project Management presented by Miles Hamby, PhD Copyright©2012 Miles M. Hamby

2 Topics The Nature of Project Management
The Elements of Project Management The Project Proposal Document SOW, OBS, RAM, CPM/PERT Networks Weighted Average & Probabilistic Activity Times Cost-Benefit and Earned Value Analysis Project Costs & Project Crashing Using Excel to create Gantt charts

3 Nature of Project Management

4 Nature of Project Management
What is a project? Unique (one-time effort) Fixed duration Specific goal

5 The Project Team Includes engineers, line workers, HR personnel, budget experts, technical experts, outside consultants Headed by the Project Manager Must coordinate various skills of team members into single, focused effort Great pressure due to uncertainty inherent in project schedule, budget, and quality.

6 If anything can go wrong – it will!
Nature of Project Management Why manage a project? Murphy’s Law If anything can go wrong – it will! Complete on-time In budget Meet expectations (quality)

7 Nature of Project Management
Controlling an activity for a relatively short period of time until project is completed, then operations begin. Project manager not involved in operations. 3 components of PM: Planning Scheduling Controlling individual activities.

8 The Project Management Process
PLANNING SCHEDULING CONTROLLING 1 3 2 5 4 6 START FINISH PERT/CPM ON TIME SOW Scope OBS GANTT IN BUDGET PM CREDIT DEBIT $24, $21,300 $34, $33,450 HR Design Const MEETS EXPECTATIONS RAM TASK HR DESIGN CONST 1 O.P S 2 P O 3 RESOURCES $

9 Project Control Process of ensuring progress toward successful completion ~ on time, in budget, meet expectations. Monitoring project to minimize deviations from project plan and schedule. Corrective actions necessary if deviations occur. Key elements of project control Time management Cost management Performance management Earned value analysis.

10 The Project Planning Document
- a document for the customer, individuals, team members, groups, departments, subcontractors and suppliers, describing what is required for successful completion - on time, in budget, meet expectations.

11 The Project Planning Document
Cover page TOC SOW and Scope OBS RAM Work Breakdown Schedule (WBS) PERT/CPM – AON diagram & Gantt Chart Budgeting Resources (Human and Materials) Technology Cost-Benefit and Earned Value Analysis (EVA) Execution and Control Plan (Quality Assurance) Protection of the Environment Risk Assessment and Management

12 SOW and Scope Statement of Work (SOW) – statement of work to be performed, justification describing the factors giving rise to need for project, expected duration (on time), total cost (budget), and performance standards (meeting expectations). Scope – identification of boundaries and limitations on specific aspects of the project, including size, resources, work to be performed and performance standards

13 Organizational Breakdown Structure (OBS)
Wilson Bridge Renovation Project Acme Construction Company Organization Breakdown Structure (OBS) Project Manager Bob Smith Design Manager Jane Doe Construction Mgr Bill Jones Electrical Mgr Rene Flemming Resources Mgr John Henry (Tasking) (Tasking) (Tasking) (Tasking)

14 Responsibility Assignment Matrix (RAM)
OBS leads to the responsibility assignment matrix (RAM) RAM is a table or a chart showing which organizational units are responsible for work items. Project Manager assigns work elements to organizational units, departments, groups, individuals or subcontractors. RAM shows who is responsible for oversight (O), performance (P), and support (S) of each task

15 Responsibility Assignment Matrix (RAM)
ACME Construction Company Wilson Bridge Renovation Responsibility Assignment Matrix (RAM) Key: O = Oversight, P = Performance, S = Support Activity OBS Unit Design Construction Electrical Resources 1 – Design O, P S 2 - Acquire materials 3 - Prepare foundation 4 - Set piles 5 - Construct piers P 6 - Construct roadway

16 Activity Scheduling Project Schedule evolves from planning documents, with focus on timely completion. Scheduling is the source of most conflicts and problems. Schedule development steps: 1. Define activities 2. Sequence activities 3. Estimate activity times 4. Construct schedule. Gantt chart and CPM/PERT techniques used. Computer software packages available, e.g. Microsoft Project.

17 Work Breakdown Schedule (WBS)
Basis for project development, management , schedule, resources and modifications. WBS breaks down project into major modules. Modules are further broken down into activities and, finally, into individual tasks. Identifies activities, tasks, resource requirements and relationships between modules and activities.

18 Work Breakdown Structure (WBS)
ACME Construction Company Wilson Bridge Renovation Activity Schedule ACTVITY PREDESSOR EARLY START DURATION (months) 1 – Design -- 14 2 - Acquire materials 1 6 3 - Prepare foundation 12 4 - Set piles 3 5 - Construct piers 4 20 8 6 - Construct roadway 5 28

19 CPM – Critical Path Method
CPM/PERT CPM – Critical Path Method PERT – Project Evaluation and Review Technique AON – Activity on Node

20 CPM/PERT – Activity on Node
Activity-on-Node (AON) Network A node represents the beginning and end of activities, referred to as events. Each node depicts ID and duration (often more info) Branches in the network indicate precedence relationships. When an activity is completed at a node, it has been realized. -- / C / -- 1 CONSTRUCT APP -- / 7 / -- --/ D / -- 0 SINK PILINGS -- / 8 / -- / E / 2 LAY SPAN -- / 3 / -- -- / B / -- 4.8 GET MATERIALS / 3 / -- / A / PLAN & DESIGN 0 / 14 / -- / F / -- 0 FINISH ROADBED --/ / -- WILSON BRIDGE Project

21 AON Concurrent Activities
Activities can occur at the same time (concurrently). A dummy activity shows a precedence relationship but reflects no passage of time. Two or more activities cannot share the same start and end nodes. 14 / C / 21 1 CONSTRUCT APP 15/ 7 / 22 14 / D / 22 0 SINK PILINGS 14 / 8 / 22 22 / E / 25 0 LAY SPAN 22 / 3 / 25 14 / B / 17 5 GET MATERIALS 19 / 3 / 22 / A / 14 0 PLAN & DESIGN 0 / 14 / 14 25 / F / 28 0 FINISH ROADBED 25 / / 28 WILSON BRIDGE Project

22 The Critical Path Method (CPM)
The critical path is the longest path through the network; the minimum time the network can be completed Path A: A  B  E  F = 27 months Path B: A  C  E  F Path C: A  D  E  F = 29 months  Critical Path

23 Activity Early Start Schedule (for Gantt Chart)
ACME Construction Company Wilson Bridge Renovation Activity Schedule ACTVITY PREDESSOR EARLY START DURATION (months) 1 – Design -- 14 2 - Acquire materials 1 6 3 - Prepare foundation 12 4 - Set piles 3 5 - Construct piers 4 20 8 6 - Construct roadway 5 28

24 Gantt Chart Bar chart developed by Henry Gantt (1914).
A visual display of project schedule showing activity start and finish times and where extra time is available. Based on Early Start of activities – order, duration, predecessors Drawback: precedence relationships are not always discernible.

25 Gantt Chart for Wilson Bridge Project

26 AON Earliest/Latest Times Configuration
12 RECRUITING 2 / 9 / 11 ES Earliest Start EF Earliest Finish Activity Duration LS Latest Start LF Latest Finish Slack

27 AON Earliest/Latest Times Configuration
ES: Earliest an activity can start EF: ES + duration LF: Latest time an activity can finish LS: LF – duration Slack: LS - ES 0 / A / 9 12 RECRUITING 12 / 9 / 11

28 Wilson Bridge Project Activity Schedule Task DUR ES EF LS LF Slack A
13 B 3 16 18 21 C 7 20 27 D 8 22 E 24 2 F *Critical Activities

29 AON Diagram for Wilson Bridge
14 / C / 17 0 CONSTRUCT APP 14 / 3 / 17 14 / D / 15 2 SINK PILINGS 16 / 1 / 17 17 / E / 25 0 LAY SPAN 17 / 8 / 25 14 / B / 15 2 GET MATERIALS / 1 / 17 / A / 14 0 PLAN & DESIGN 0 / 14 / 14 25 / F / 29 0 FINISH ROADBED 25 / / 29 WILSON BRIDGE Project

30 Probabilistic Activity Times
Weighted Average & Probabilistic Activity Times

31 Weighted Average ACME Computer Network Project
Work Breakdown Structure (WBS) Activity Optimistic (a) Most Probable (m) Pessimistic (b) Weighted Mean Time (t) Variance (v) A – Recruiting 6 8 10 B – Development 3 9 C – System Training 1 5 D – System Training 2 4 12 E – Equipment Test F – System Test G – Equipment Mod H – System Debug 11 I – Equipment Change J – Pre-interface 7 K – Interface 13

32 Probabilistic Activity Times
Activity time estimates usually cannot be made with certainty. PERT used for probabilistic activity duration times. In PERT, three time estimates are used: most likely time (m), the optimistic time (a) , and the pessimistic time (b). These provide an estimate of the mean and variance of a beta distribution: Weighted Mean (expected time): Variance:

33 WBS – Computer Network Example
Computer Network Project Work Breakdown Structure (WBS) Activity Optimistic (a) Most Probable (m) Pessimistic (b) Weighted Mean Time (t) Variance (v) A – Equipment Installation 6 8 10 .44 (4/9) B – System Development 3 9 1 C – Position Recruiting 5 D – Equip testing & Mod 2 4 12 2.78 (25/9) E – Manual Testing .11 (1/9) F – Job Training G – Orientation 1.78 (0) H – System training 11 7 2.11 (16/9) I – System Testing J – Final Debugging 1 (9/9) K – System Changeover 13 4 (36/9) 33 33

34 AON – Computer Network Example
ACME CORP Computer Network Activity on Node 0/C/9 2.8 RECRUTING 2.8/3/11.8 0/A/9 2.8 RECRUTING 2.8/8/11.8 0/D/9 2.8 RECRUTING 2.8/5/11.8 0/J/9 2.8 RECRUTING 2.8/4/11.8 0/K/9 2.8 RECRUTING 2.8/9/11.8 START 0/E/9 2.8 RECRUTING 2.8/3/11.8 0/G/9 2.8 RECRUTING 2.8/2/11.8 FINISH 0/B/9 2.8 RECRUTING 2.8/6/11.8 0/I/9 2.8 RECRUTING 2.8/4/11.8 0/F/9 2.8 RECRUTING 2.8/4/11.8 0/H/9 2.8 RECRUTING 2.8/7/11.8 LEGEND ES’/A/EF Sl ECRUTING LS/Dur/LF

35 Critical Path for Computer Network Example
Critical Path is the path with the longest mean time and is also the Expected Time to Completion (ETC) Path Mean Times A  D  J = 17 weeks B  E  H = 16 weeks B  E  I  K = 22 weeks CPM C  F  H = 14 weeks C  E  I  K = 20 weeks C  G  K = 14 weeks

36 ETC and Variance The Project Variance (vp) is the sum of the variances of the critical path activities. Critical Path: B  E  I  K Project time: = 22 weeks Variance: = 7.22 weeks Standard Deviation: Sqrt of Variance = 2.69

37 Probability Analysis of a Project Network
ETC is assumed to be normally distributed (based on central limit theorem). As such, the ETC and variance (vp) are interpreted as the mean () and variance (2) of a normal distribution Time (Weighted Average Duration)  = 22 weeks Project time: = 22 weeks Variance: = 7.22 weeks Std Dev: Sqrt 7.22 = 2.69 -3 = weeks 3 = weeks

38 Probability Analysis of a Project Network
Example 1 From Computer Network example: Critical Path:  5  9  11 Project time: = 22 weeks Variance: = 7.22 weeks What is the probability that the new order processing system will be ready in 20 weeks? µ = 22 weeks 2 = 7.22, therefore,  = weeks Z = (x-)/  = ( )/2.69 = -.74

39 Table of Areas (p-values)
+/- Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3.0 0.0000 0.0398 0.0793 0.1179 0.1554 0.1915 0.2257 0.2580 0.2881 0.3159 0.3413 0.3643 0.3849 0.4032 0.4192 0.4332 0.4452 0.4554 0.4641 0.4713 0.4772 0.4821 0.4861 0.4893 0.4918 0.4938 0.4953 0.4965 0.4974 0.4981 0.4987 0.0040 0.0438 0.0832 0.1217 0.1591 0.1950 0.2291 0.2611 0.2910 0.3186 0.3483 0.3665 0.3869 0.4049 0.4207 0.4345 0.4463 0.4564 0.4649 0.4719 0.4778 0.4826 0.4864 0.4896 0.4920 0.4940 0.4955 0.4966 0.4975 0.4982 0.0080 0.0478 0.0871 0.1255 0.1628 0.1985 0.2324 0.2642 0.2939 0.3212 0.3461 0.3686 0.3888 0.4066 0.4222 0.4357 0.4474 0.4573 0.4656 0.4726 0.4783 0.4830 0.4868 0.4898 0.4922 0.4941 0.4956 0.4967 0.4976 0.0120 0.0517 0.0910 0.1293 0.1664 0.2090 0.2357 0.2673 0.2967 0.3238 0.3485 0.3708 0.3907 0.4082 0.4236 0.4370 0.4484 0.4582 0.4664 0.4732 0.4788 0.4834 0.4871 0.4901 0.4925 0.4943 0.4957 0.4968 0.4977 0.4983 0.4988 0.0160 0.0557 0.0948 0.1331 0.1700 0.2054 0.2389 0.2704 0.2995 0.3264 0.3508 0.3729 0.3925 0.4099 0.4251 0.4382 0.4495 0.4591 0.4671 0.4738 0.4793 0.4838 0.4875 0.4904 0.4927 04945 0.4959 0.4969 0.4984 0.0199 0.0596 0.0987 0.1368 0.1736 0.2088 0.2422 0.2734 0.3023 0.3289 0.3531 0.3749 0.3944 0.4115 0.4265 0.4394 0.4505 0.4599 0.4678 0.4744 0.4798 0.4842 0.4878 0.4906 0.4929 0.4946 0.4960 0.4970 0.4978 0.4989 0.0239 0.0636 0.1026 0.1406 0.1772 0.2123 0.2454 0.2764 0.3051 0.3315 0.3554 0.3770 0.3962 0.4131 0.4279 0.4406 0.4515 0.4608 0.4686 0.4750 0.4803 0.4846 0.4881 0.4909 0.4931 0.4948 0.4961 0.4971 0.4979 0.4985 0.0279 0.0675 0.1064 0.1413 0.1808 0.2157 0.2486 0.2794 0.3078 0.3340 0.3577 0.3790 0.3980 0.4147 0.4292 0.4418 0.4525 0.4616 0.4693 0.4756 0.4808 0.4850 0.4884 0.4911 0.4932 0.4949 0.4962 0.4972 0.0319 0.0714 0.1103 0.1480 0.1844 0.2190 0.2517 0.2823 0.3106 0.3365 0.3599 0.3810 0.3997 0.4162 0.4306 0.4429 0.4535 0.4625 0.4699 0.4761 0.4812 0.4854 0.4887 0.4913 0.4934 0.4951 0.4963 0.4973 0.4980 0.4986 0.4990 0.0359 0.0753 0.1141 0.1517 0.1879 0.2224 0.2549 0.2850 0.3133 0.3389 0.3621 0.3830 0.4015 0.4177 0.4319 0.4441 0.4545 0.4633 0.4706 0.4767 0.4817 0.4857 0.4890 0.4916 0.4936 0.4952 0.4964

40 Probability Analysis of a Project Network
Z value of -.74 corresponds to probability of (table of areas under the curve). Therefore, the probability of completing the project in 20 weeks is = x - µ Z = 2.69 = P = .2704 = .2296 Z= -.74 (20 weeks) Time (Duration)  = 22 weeks

41 Cost – Benefit Analysis

42 Cost – Benefit Analysis
Given an amount of capital to invest, what is the cost and what is the benefit? Project Owner’s perspective ~ is the project worth doing, or do we invest in something else, like another project or the market? Project Manager’s perspective ~ what do I do with money waiting to be spent on the project – keep it in the bank, or invest it?

43 Cost - Benefit Project – replace old computerized production control system for an auto assembly plant The project will cost $3M over 3 years and save $7M over 10 years However, if we invest $3M over ten years, we make $8M, but lose $5M in extra costs from the outdated system ITEM BENEFIT ($M) COST GAIN or (LOSS) (Benefit-Cost) New System 7 (in savings) 3 (install new system) 4 Old System 8 (from investment) 5 (using old system) 3

44 Earned Value Analysis (EVA)
Measures progress of a project in terms of: Planned Value (PV) or Budgeted Cost Work Scheduled (BCWS) – what is supposed to be done Earned Value (EV) or Budgeted Cost, Work Performed (BCWP) – what has actually been done Actual Cost (AC) or Work Performed (ACWP) – actual labor and materials expended

45 Earned Value - Example Project: Build a deck
PV: 40 labor-hours x $20/hr = $800 + $600 materials $1,400 PV (BCWS) Changes after work begun: Labor rate now $22/hr, materials price increase to $700, project only 95% completed after 40 hours EV: 95% completed x $1,400 = $1,330 EV(BCWP) AC: hrs x $22/hr = $880 labor materials $1,580 AC (ACWP)

46 Should be proportionate to project time
Earned Value Should be proportionate to project time Project Time Monitoring Schedule 1 week 1 month 6 months > 6 months Daily Twice weekly Weekly Monthly

47 Project Costs & Project Crashing

48 Project Crashing and Time-Cost Trade-Off
Project crashing is a method for shortening project duration by reducing one or more critical activities to a time less than normal activity time. Achieved by devoting more resources to ‘crashed’ (compressed) activities However, total cost of project will increase. Crashing cost – original cost plus cost of additional resources Decision to crash is based on analysis of trade-off between time and cost.

49 Project Crashing Project crashing costs and indirect costs have an inverse relationship. Indirect costs decrease as the project duration crashes (decreases) while Direct costs increase. Optimal project time is at minimum point on the total cost curve.

50 Optimum Time-Cost Trade-Off
Optimum project Time is at minimum Total Cost TOTAL COST INDIRECT COST $ DIRECT COST TIME 50 50

51 (Crash Cost-Planned Cost/Time Saved)
Crash Cost – Time Tradeoff Project crash cost is Crash Cost per Unit of Time Saved Activity (*Crit. Path) Planned Duration (weeks) Crash Time Planned Cost Crash Cost Time Saved Crash Cost per Week (Crash Cost-Planned Cost/Time Saved) 1* 12 7 $3,000 $5,000 5 $400 2* 8 2,000 3,500 3 500 4 4,000 7,000 1 3,000 4* 9 50,000 71,000 1,100 200 6 7* 15,000 22,000 TOTAL 69 75,000 108,700 21

52 Project Activity Costs
Project Cost Each activity incurs a cost. Project cost is total of costs of all activities 4 12 $50,000 5 $500 1 $3000 3 $4000 2 8 $2000 6 7 $15,000 Project Activity Costs Total Cost = $75,000 52 52

53 Project Cost Each activity incurs a cost.
Project cost is total of costs of all activities 4 12 $50,000 5 $500 1 $3000 3 $4000 2 8 $2000 6 7 $15,000 Project Activity Costs 53 53

54 Project Cost Depending on which Critical Path activities are crashed, a new Critical Path could emerge 4 12>9 $50,000 5 $500 1 12 $3000 3 $4000 2 8 $2000 6 7 $15,000 Project Activity Costs 54 54

55 End

56 PERT/CPM on MS Project™ 2003

57 Analysis with Microsoft Project (1 of 13)
Microsoft Project handles only AON networks.

58 Analysis with Microsoft Project (2 of 13)

59 Analysis with Microsoft Project (3 of 13)

60 Analysis with Microsoft Project (4 of 13)
Exhibit 8.6

61 Analysis with Microsoft Project (5 of 13)
Figure 8.7

62 Analysis with Microsoft Project (6 of 13)

63 Analysis with Microsoft Project (7 of 13)
Exhibit 8.9

64 Analysis with Microsoft Project (8 of 13)

65 Analysis with Microsoft Project (9 of 13)
Exhibit 8.11

66 Analysis with Microsoft Project (10 of 13)
Figure 8.12

67 Analysis with Microsoft Project (11 of 13)

68 Analysis with Microsoft Project (12 of 13)
Exhibit 8.14

69 Analysis with Microsoft Project (13 of 13)
Exhibit 8.15

70 Linear Programming Model
Formulating PERT/CPM as a Linear Programming Model

71 Linear Programming Model
General linear programming model with AOA convention: Minimize Z = xi subject to: xj - xi  tij for all activities i  j xi, xj  0 Where: xi = earliest event time of node i xj = earliest event time of node j tij = time of activity i  j The objective is to minimize the project duration (i.e., the critical path time). i

72 Project Crashing with QM for Windows
Exhibit 8.16

73 Example Problem Formulation and Data (1 of 2)
The CPM/PERT Network Example Problem Formulation and Data (1 of 2) Figure 8.24 CPM/PERT Network for the House-Building Project with Earliest Event Times

74 Example Problem Formulation and Data (2 of 2)
The CPM/PERT Network Example Problem Formulation and Data (2 of 2) Minimize Z = x1 + x2 + x3 + x4 + x5 + x6 + x7 subject to: x2 - x1  12 x3 - x2  8 x4 - x2  4 x4 - x3  0 x5 - x4  4 x6 - x4  12 x6 - x5  4 x7 - x6  4 xi, xj  0

75 Example Problem Solution with Excel (1 of 4)
The CPM/PERT Network Example Problem Solution with Excel (1 of 4) B6:B12 Exhibit 8.17

76 Example Problem Solution with Excel Solver
The CPM/PERT Network Example Problem Solution with Excel Solver Exhibit 8.18

77 Example Problem Solution with Excel Solver
The CPM/PERT Network Example Problem Solution with Excel Solver Exhibit 8.19

78 Example Problem Solution with Excel Solver
The CPM/PERT Network Example Problem Solution with Excel Solver Exhibit 8.20

79 Project Crashing with Linear Programming
Example Problem – Model Formulation Objective is to minimize the cost of crashing xi = earliest event time of node I xj = earliest event time of node j yij = amount of time by which activity i  j is crashed Minimize Z = $400y y y y y y y67 subject to: y12  5 y12 + x2 - x1  12 x7  30 y23  3 y23 + x3 - x2  8 xi, yij ≥ 0 y24  1 y24 + x4 - x2  4 y34  0 y34 + x4 - x3  0 y45  3 y45 + x5 - x4  4 y46  3 y46 + x6 - x4  12 y56  3 y56 + x6 - x5  4 y67  1 x67 + x7 - x6  4

80 Project Crashing with Linear Programming
Excel Solution (1 of 3) Exhibit 8.21

81 Project Crashing with Linear Programming
Excel Solver (2 of 3) Exhibit 8.12

82 CPM/PERT Analysis with QM for Windows & Excel QM (1 of 2)

83 CPM/PERT Analysis with QM for Windows & Excel QM (2 of 2)
Exhibit 8.1

84 Project Crashing with Linear Programming
Excel Solver (3 of 3) Exhibit 8.23

85 Project Crashing and Time-Cost Trade-Off Example Problem (2 of 5)
Crash cost and crash time have linear relationship: total crash cost/total crash time = $2000/ = $400/wk Figure 8.20 Time-Cost Relationship for Crashing Activity 1 85 85

86 House Building Project Example
No. Activity Predecessor Duration (Months) Design house and obtain financing 2. Lay foundation 3. Order Materials 4. Build house , 5. Select paint , 6. Select carpet 7. Finish work ,

87 Project Crashing and Time-Cost Trade-Off
Normal Activity Times and Activity Crashing Costs

88 Project Crashing and Time-Cost Trade-Off Example Problem (5 of 5)
As activities are crashed, the critical path may change and several paths may become critical. Figure Revised Network with Activity 1 Crashed


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