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Project Management

Managing Projects
Projects are usually large & infrequent or onetime.
No two projects are the same.
Projects are usually fairly long.
Several months to many years

They Involve different people in different


phases
Most people are only involved with a part of a
project

Even though a project may be under the


overall purview of a single department or
group, other departments are often involved.

Projects
The three main goals of project
management are
1. Complete the project on time or earlier.
2. Complete the project on or under
budget.
3. Meet the specifications to the
satisfaction of the customer.

Project
Scope & Objectives
Defining a projects scope, time frame,
allocated resources and objective, is
essential.
An Objective Statement provides the
purpose of the project.
A Specific time frame is established for
starting and ending the project.
Necessary resources must be defined.
Project costs and personnel allocations
are stated.

Project Structures
The team is housed in a
specific functional area. Assistance from other

Functional Structure:

areas must be negotiated.

Team members work exclusively


for the project manager. (Best for large projects.)

Pure Project:

A compromise between the


functional and project structures . Members remain

Matrix Structure:

in various functional areas and the project manager


coordinates across functional areas. Having two
bosses (dual authority) can cause problems.

Project Management Techniques


PERT CPM GERT
Program Evaluation and Review Technique
PERT (Program Evaluation and Review Technique)
is utilized when activity times are uncertain
(involved risk).

Critical Path Method

CPM (Critical Path Method) is used when activity


times are known and certain.

Graphic Evaluation and Review Technique

Rarely used, and then only in very complex


projects.
It overcomes many of the limitations of PERT and
CPM

Project Management
Steps

1. Describe the Project

(Defining all the


tasks that must be completed, and in what
sequence.)

2. Develop a Graph Model (diagram the


network showing task relationships)

3. Develop an activity Schedule


(Determine the time estimates for each task)

4. Analyzing cost-time trade-offs


(Determine the cost of each task.)

5. Assess Risks

(Probability analysis)

Step 1
Describe the project
What is the project?
When does the project start and end?
What activities make up the project?
Activities are defined as the smallest
units of work that a project manager is
expected to schedule and control.
...a managers project description should reflect
only the level of detail that he or she needs in
order to make scheduling and resource allocation
decisions.

Task Ownership: Each activity must


have an owner who is responsible for
seeing that the work is accomplished.

Relationships
between Activities
A project is a sequence of activities.
Large projects have interrelated sequences.

Except for the beginning activity/activities,


every activity in a project has one or more
activities that must be done immediately
prior.
These are called Precedent (Pre-cee-ent)
activities
They must be defined before the project begins.
EG: In order to bury a body you must first dig a hole.

Step 2
Develop a Network Model
A Network Diagram visually displays the
interrelated activities using nodes (circles)
and arcs (arrows) that depict the
relationships between activities.
It is a graphical diagram.
For very large projects it may only be a numerical
arrangement of activities rather than graphical.

Two types of Graphical Network Models


Activity On Arc (AOA)
Activity On Node (AON) (We will use AON)

Two Types
of Network Models
Activity-on-Arc (AOA)
Time

Time

Time
Activity D

Activity E

Activity-on-Node (AON)
Activity

Activity

E
Link

We will
use this!

What AON Nodes look


like.
The is the earliest you can start an
activity. It is determined by the early
finish time of the precedent activity. If
there are two or more precedent
activities, this time is the same as
precedent activity with the latest
Early Finish time.

Slack (S) is the difference, if any,


between the early start (ES) and late
start times (LS) or the early finish
(EF) and late finish (EF) times.
S = LS - ES

S = LF - EF

Slack

Activity
Early Name Early

Start

Finish

Late
Late
Start Activity Finish
Duration

This is the LateFinish time minus


the activity duration.

or

The earliest you can complete


an activity--determined by
adding the activity time
(duration) to the early start time.

This is the latest you can finish


an activity without delaying
project completion. It is the
same as the Late Start time of
the next activity. If there are two
or more subsequent activities,
this time is the same as the
earliest of those Late Start
times.

Example: This homework


Assignment
The earliest you can start this
assignment it is immediately after
this class ends.

The slack in this case would be one


week, expressed in hours, since that
is the unit of time used for the
activities. It would be how long you
could delay doing the assignment.

Slack

HomeEarly work #2 Early

You can wait until


one hour before the
class in which it is
due to start it; in
this case one week
from now.

Start

Finish

Late
Start 1 hour

Late
Finish

If it takes one hour, the


earliest you can complete this
assignment is one hour after
class ends.

One hour after your late start


time.

Precedent
Relationships
Precedent relationships determine the sequence
for accomplishing activities. They specify that any
given activity cannot start until its preceding activity
or activities have been completed.
Activity On Node approach

In our AON approach, the


nodes (circles) represent
activities, and the arcs
(arrows) represent the
sequential relationships
between them.
Nodes are simplified in the following examples.

AON

S precedes T which
precedes U

Activity Relationships
S & T must be completed
before U can be started.

T & U cannot begin until


S has been completed.
T

S
U
T

S
U

Activity Relationships

U & V cant begin until S & T


have been completed.

U cannot begin until S & T have


been completed. V cannot begin
until T has been completed.

Activity Relationships

T & U cannot begin until S has been


completed; V cannot begin until both T &
U have been completed.
S

Logic
Errors
This is a logic error. C cannot be an
immediate predecessor of both G &H if
G is also an immediate predecessor of H.

Logic errors are hard to identify except on the


network diagrams. If you see a triangle, then it is a
logic error. Eliminate the short cut.

St. Adolfs Hospital


(A sample project)
Activity
A
B
C
D
E
F
G
H
I
J
K

Description

Immediate
Predecessor(s)

Select administrative and medical staff.


Select site and do site survey.
Select equipment.
Prepare final construction plans and layout.
Bring utilities to the site.
Interview applicants and fill positions in
nursing, support staff, maintenance,
and security.
Purchase and take delivery of equipment.
Construct the hospital.
Develop an information system.
Install the equipment.
Train nurses and support staff.

Responsibility

St. Adolfs Hospital


(A sample project)
Activity
A
B
C
D
E
F
G
H
I
J
K

Description

Immediate
Predecessor(s)

Select administrative and medical staff.


Select site and do site survey.
Select equipment.
Prepare final construction plans & layout.
Bring utilities to the site.
Interview applicants and fill positions in
nursing, support staff, maintenance,
and security.
Purchase and take delivery of equipment.
Construct the hospital.
Develop an information system.
Install the equipment.
Train nurses and support staff.

Activity Times

A
B
B
A

12
9
10
10
24
10

C
D
A
E,G,H
F,I,J

35
40
15
4
6

*We wont assigning Responsibility data, but it is important in project management.

St. Adolfs Hospital


Diagramming the Network
Activity
Times (wks)

Immediate
Predecessors
A

12

10

10

24

10

35

40

15

E,G,H

F,I,J

Start

Finish

St. Adolfs Hospital


Activity Paths
Paths are sequences of
activities between a
projects start and finish.
Path
A-I-K
A-F-K
A-C-G-J-K
B-D-H-J-K
B-E-J-K

Time (wks)
33
28
67
69
43

Start

Finish

St. Adolfs Critical


Path
The longest path is the
critical path!
Path
A-I-K
A-F-K
A-C-G-J-K
B-D-H-J-K
B-E-J-K

Time (wks)
33
28
67
69
43

Project Expected
Time is 69 wks.

Start

Finish

Activity Time Estimates


PERT or CPM ?
CPM (Critical Path Method) Activity
times are certain, so only one time
estimate for each activity is needed.
Decision making under Certainty

PERT (Program Evaluation and Review


Technique) is used when activity times
are uncertain. (Decision making under risk)
It requires three time estimates for each
activity.
(Best case, most likely time, and worst case)

PERTs
Three time-estimates
OPTIMISTIC TIME: Best time if everything
goes perfectly when doing the activity.
REALISTIC TIME: Most likely time for the
activity
PESSIMISTIC TIME: A worst-case situation
B + 4M + P
Expected Time = ------------------6 is given a weight of four, and the
In this example, the most likely time
other two times (pessimistic and optimistic) are each given weights of
one.
Risky activity times make the project length risky, so there is a need
for risk assessment based on the probability distribution of times.
(Standard deviation and variance are computed by the software.)

Activity Slack
Activity slack is the maximum length of time that an
activity can be delayed without delaying the entire project.

It is the difference between the earliest time we


can start an activity and the latest time we can
start the activity without delaying the project.
The critical path activities have zero slack.
For the St. Adolfs Hospital project, 69 weeks is
the project length because 69 weeks is the
longest path.
Project delays beyond the projected completion
date often involve penalties.

Activity Start and Finish


Times
Earliest Start Time (ES) for an activity is the earliest
finish time of the immediately preceding activity.

Earliest Finish Time (EF) for an activity is its


earliest start time plus how long it takes to do it (activity
time).

Latest Start Time (LS) is the latest you can finish the
activity minus the activitys estimated duration.

Latest Finish Time (LF) is the latest start time plus


the activity time.
The latest finish time is the same as the latest start time of the activity
activity which follows it. (Latest start and finish times for each activity
are computed starting at the projects last activity completion time
and working forward.)

Slack is the difference between the Earliest Start and

Earliest Start and Earliest Finish Times


12

I 27

Earliest finish time

15

Earliest start time


0 A 12

12 F 22

63 K 69

12

10

12

Start

C 22

22

10

B 9
9

D 19
10

9 E 33

24

G 57

Finish

35

19

H 59
40

59

J 63
4

Earliest Start and Earliest Finish Times


Path
A-I-K
A-F-K
A-C-G-J-K
B-D-H-J-K
B-E-J-K

Time (wks)
33
28
67
69
43

12

The Critical Path


takes 69 weeks

15

12

12 F 22

63 K 69

10

12

12

Start

Critical Path

I 27

C 22

22

10

B 9
9

D 19
10

9 E 33

24

G 57

Finish

35

19

H 59
40

59

J 63
4

Latest Start and Latest Finish Times


(You start with the last activity and work toward the first activity)
I

12
27
48 15 63

12

12 F 22

2 12 14

53 10 63

12
22
14 10 24

Start

B 9

0 9 9

9
19
9 10 19

9 E 33
35 24 59

Latest
start
time

63 K 69
63 6 69

22 G 57
24
59

Finish

35
H

19
59
19 40 59

Latest
finish
time

59

J 63

59 4 63

Nod
e

Duratio
n

ES

LS

Slac
k

12

10

12

14

10

24

35

26

10

12

53

41

35

22

24

40

19

19

12

12 F 22

15

12

48

36

2 12 14

53 10 63

59

59

63

63

Slack is the difference between


LS and ES or EF and LF
I

12
27
48 15 63

12
22
14 10 24

Start

Activity Slack
Analysis

B 9

0 9 9

9
19
9 10 19

9 E 33
35 24 59

63 K 69
63 6 69

22 G 57
24
59

Finish

35
H

19
59
19 40 59

59

J 63

59 4 63

Project Costs
Total Project Costs =
direct costs + indirect costs + penalty costs
Direct costs include labor, materials, and any other
costs directly related to project activities.
Indirect costs include administration, depreciation,
financial, and other variable overhead costs.

These can be reduced by reducing total


project time.
The shorter the duration of the project, the lower the indirect
costs will be.

Penalty costs are essentially late fees incurred for


going over the projected due date.

Minimizing Costs
We do cost analysis to determine the
project schedule that minimizes total
project costs.
When crashing an activity or project, extra money is
spent on direct costs, but money is saved on indirect
costs and possible penalties.
A minimum-cost schedule is determined by starting
with the normal project time schedule and shortening
activities along the critical path until the costs of
crashing (direct costs) start to exceed the savings in
indirect costs and penalty costs.
New critical paths usually appears while doing this.

St. Adolfs Hospital


Minimum Cost Schedule
a. Determine the projects critical path(s).
b. Find the activity or activities on the critical
path(s) with the lowest cost of crashing
(shortening) per week.
c. Reduce the time for this activity until
a. it cannot be further reduced,
b. or another path becomes critical,
c. or the increase in direct costs exceed the savings that
result from lower indirect costs.

d. Repeat this process until the total project costs


are no longer decreasing.
.

Sophisticated project management software will


do this.

Of the five critical-path activities, the


contractor says D and H cannot be
shortened. J is the least costly to
shorten at $1000 a week. Contractor
says it can be shortened to 1 week.

12
27
48 15 63

12

12 F 22

2 12 14

53 10 63

63 K 69
63 6 69

12
22
14 10 24

22 G 57
24
59

B 9
0

D 19
9

H 59
19

J 63
59

0 9 9

9 10 19

19 40 59

59 4 63

Start

9 E 33
35 24 59

Finish

35

Shorten from 4
weeks to 1 week

The project manager must now


compare the cost of shortening J by 3
weeks ($3,000 in additional direct
costs) with savings in indirect costs,
to see if the total cost is lower.

Assessing Risks
Risk is a measure of the probability
(and consequences) of not completing
a project on time.
A major responsibility of the project
manager at the start of a project is to
develop a risk-management plan.
A Risk-Management Plan identifies
the key risks to a projects success and
prescribes ways to circumvent them.

Causes of Project Risk


1. Service/Product Risks: If the project involves a
new service or product, several risks can arise.

Market risk comes from competition.

Technological risk can arise from technology


advances made once the project has started, rendering
obsolete the technology chosen for service or product.

Legal risk from liability suits or other legal action.

2. Project Team Problems: Poor member


selections and inexperience, lack of cooperation,
etc.
3. Operations Risk: Information inaccuracy, misscommunications, bad project timing, weather

ANALYZING PROBABILITIES
What is the probability that our sample
project will finish in 69 weeks as scheduled?
100%

(Why?)

Because we used CPM!


(This means we were certain of all of our activity
times.)

If we werent certain, we should have used PERT


You only do risk analysis if you use PERT

PERT and
PROBABILITIES
With PERTs three time-estimates, we get a
mean (average) time and a variance for
each activity and each path.

We also get a project mean time


and variance.
In order to compute probabilities (assuming a
normal distribution) we need the activity
means and variances.
Most computer packages calculate this for you.

Probability
of Project Completion
The probability of a project being completed by a
given date is a function of the mean activity times and
variances along the critical path(s).
The probability of a specific activity being completed
by a given date is a function of the mean activity times
and variances along the longest path leading up to that
activity.
If you have more than one critical path, focus on the
path with the greatest variance.

A near-critical path may also be a problem,


depending on the mean and variance of its
activities.

Distributions &
Probability
A Beta distribution is often used for the three
estimates of each activity
This allows skewed distributions.
Optimistic------Most likely -----------------------Pessimistic
(3 ------------- 5 ---------------------------------- 11)

Normal distributions are needed for


probabilities.
A distribution of activity-means is a normal
distribution, even though each activity time
may be a beta distribution.

Beta Distribution

Probability

Each activity may have its three time


estimates skewed (Beta Distribution), but
the path along which this activities lie has a
normal distribution and thus a mean and
variance.

a
Optimistic

b
Mean

Pessimistic

Time

Figuring
Probabilities

Assume a PERT project critical path takes 40 days, and


that the variance of the critical path is 2.147
You wish to know the probability of the project going over
42 days.

Compute the standard deviation of the critical path.


The square root of the variance of 2.147 = Std. Dev. =
1.465
POM/QM software gives you the variance of the critical
path.

Compute the Z value: Z = (absolute time difference) /


Std. Dev.
In this example, Z = (42 days - 40 days) / 1.465 = 1.365

Look up the Z value of 1.365 in a Normal Distribution


table to get the probability of the project taking 42 days.

.9139

Look up the Z value (1.365) in the table of normal distribution.


(In this case you need to interpolate between the Z values of .9313 and .9147)

.9139 or 91.39% is the probability of the project taking 42 days.


Thus the probability of going over 42 days is 100 - 91.39 = 8.61%

Normal distribution of variances


along the critical path. Sum of
its variances = 2.147
Std. Dev. = 1.465 weeks

Project Length
(critical path)
is 40 weeks
Probability of
completing
the project in
42 weeks is
91.39%

Probability of
exceeding 42
weeks is 8.61%

40 42
Project duration (weeks)

St. Adolfs Hospital


A 69-week Project
What is the Probability of it taking 72 weeks?
Critical
Path
Variance

Critical Path = B - D - H - J K = 69 weeks


T = 72 weeks

C = 69 weeks

TC
2 = (variances of activities along critical path) z = 2
2 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89

z=

72 69
11.89

Z = 0.870

z=

3
3.44818

Look up Z value in normal distribution table

Look up the Z value (0.870) in the table of normal distribution.


.8078 or 80.78% is the probability of the project taking 72 wks.
Going over 72 weeks would be 100 80.78 = 19.22%

St. Adolfs Hospital


Probability of Completing Project On Time
Normal distribution:
Mean = 69 weeks;
= 3.45 weeks

Length of
critical path is
69 weeks
Probability of
taking 72 weeks
is 0.8078 or
80.78%

Probability of
exceeding 72
weeks is 0.1922
or 19.22%

69 72
Project duration (weeks)

Resource-Related Problems
Padded Time Estimates: Many timeestimates come with a built-in cushion
that management may not realize.
Latest Date Mentality: The tendency
for employees (and students) to
procrastinate until the last moment before
starting.
Failure to Deliver Early, even if the
work is completed before the latest finish
date.

Resource-Related Problems
Path Mergers

occur when two or more


activity paths combine at a particular node.
Both paths must be completed up to this point,
which will eliminate any built-up slack.

Multitasking

is the performance of
multiple project activities at the same time.
Work on some activities is often delayed for
other work.

Loss of Focus

by a manager can happen


if the critical path changes frequently.
Failure to have all the needed resources on

PERT / CPM
ADVANTAGES
Enables Resource Management &
Allocation
You can move slack resources to
critical points

Focuses on your critical activities


Visualize relationships (The big
picture)

PERT / CPM PITFALLS


Can be complex to set up
relationships in large project
Time estimates are often biased.
Near critical paths are easily
overlooked.

GERT
(Graphical Evaluation and Review
Technique)
Gives more flexibility to project planning than
PERT/CPM

Allows any individual activity to either


be completed or notcompleted
(Succeed or fail)
PERT & CPM both require all activities be
successfully completed. GERT does not require
this.
GERT Allows looping back (redoing an
activity) or skipping an activity entirely.

GERT
(Graphical Evaluation and Review
Technique)
What the book says: It is a procedure for the
study of stochastic networks composed of
EXCLUSIVE-OR, INCLUSIVE-OR, and AND nodes
(vertices) and multi-parameter branches
(transmittances or edges).The total concept of
stochastic networks, the transformation, and the
evaluation method is labeled GERT.
GERT is a means of handling stochastic networks
with logical nodes. The GERT analysis is finished
when the system is represented by an equivalent
one-branch function yielding the system's failure
or success probabilities as time dependent
probabilities.

Sample Problem
What is the probability of
completing the project in
23 weeks?

Sample Problem
4.0
8.0
0.0
4.0

A
4.0

Start

B
5.5

12.0

16.0
20.0

Finish

9.0
9.0

4.0
8.0

5.5
5.5
0.0
0.0

C
3.5

15.5
15.5
F
9.0

6.5

15.5
15.5

9.0
9.0

5.5
5.5

5.5
6.5

14.5
15.5

G
4.5

20.0
20.0

Sample Problem
This is how the POM-QM software package draws the solution.
Note that D is not an immediate predecessor of E, but A is
an immediate predecessor of E. The program draws the line
from A through D to E.

Sample Problem

Critical path = 20
weeks

Using the Normal Distribution appendix,


we find that the probability of completing
the project in 23 weeks or less is 0.9357.

Homework #2
Due next week

Problem 1 is on the next slide. Draw


the network and solve it manually
using the AON method. No credit if you
use the computer.
Problems 2 and 3 are on the following
slides.
Use the POM/QM software for these last
two problems.

Problem 1
Do manually (no computer)
A project has the following precedence relationships and
activity times. Draw the network diagram and
calculate the total slack for each activity. Which
activities are on the critical path?
Activity

Activity Time (wks)

Immediate
Predecessor(s)

15

B,C

12

F,G

PROBLEM 2 (Use POM/QM)


1. There are logic errors in the data. You will have to run the program in order
to find them. Then make the appropriate corrections and re-run the problem
to get the correct solution. Identify the critical path and its length.
2. Include 4 printouts: Input screen, PERT/CPM results table, Precedence
graph and the Gantt chart of early & late times.
Activities for Problem #2

Time

Precedents

Demolition of present structures

None

Excavation and filling of site

Forming & pouring of concrete

Construction of steel skeleton

Construction of concrete structure

Construction of exterior skin

D,E

Installation of plumbing

Installation of electrical

D,E

Installation of heating & cooling

D,E,F

Construction of interior flooring

Lighting fixtures and finish work

Homework, Problem 3

(next slide)

This is a PERT problem so it has three time estimates.


Use the POM/OM package. Answer the following
questions:
a. Identify the critical path(s).
b. How long is the path nearest to the critical path?
c. What is the probability that the project will take longer
than 38 days? (Table of Normal Probabilities is on the
last slide.)
d. What is the probability that the near critical path will
take longer than 38 days?
e. Include 5 printouts: Input screen, PERT/CPM results
table, Precedence graph, Task time computations, and
the Gantt chart ofearly & late times.

Problem #3
Activity

Precedent

Optimistic

Most Likely

Pessimistic

10

10

10

15

13

E, F

11

10

H, I, J

Sample POM/QM
Input Table Printout
Note that this is CPM since there is only one time estimate for
each activity. You will need to change the method for PERT.

Sample POM/QM
Solution Table printout

Sample PERT/CPM
Precedence Graph Printout

Note that the software does not add


start blocks or end blocks.
In your homework computer
problem, you will have more than
one ending node. This is not an
error. Connect them to an End
Block if it will help you visualize it.

Note also that there is a


logic error. D should
not be an immediate
predecessor of F.

Sample Gantt
Chart Printout

POM/QM Printing
Hint
Avoid using the print screen button on the bottom left
of the screen or in the file menu.
Screen prints are small and very hard to read.
Select the File pull-down menu and use the Print
option.
You can then indicate which items you wish to print
and get a much better output.
OPTION: Download the free program Jing. It is
available for Mac and PC, and what I use for the
printouts on my PPT slides.