Project Management

Lecture Notes

Course Instructor

Dr. Bipul Das

Assistant Professor
Department of Mechanical Engineering
National Institute of Technology Silchar
Silchar – 788010, Assam, India
ME 1472 PROJECT MANAGEMENT L T P C
(Open Elective – I) 3 0 0 6
Seventh Semester
(Mechanical Engineering Branch)
Pre-requisite – HS 1201, HS 1301

Module 1: Project Planning: Project Management scenario, Project Asset – issues &
problems, Gantt Chart & LOB, Network Analysis, PERT / CPM, Resource Monitoring &
Control.

Module 2: Contract Management: principles of Project Contracts, compilation of Project

Contracts, practical aspects of Contract, legal aspects of Project Management, global tender,
negotiations for Projects, insurance for Projects.

Module 3: Project Buying: Projects Procurement Process, Life – cycle Costing, Project Cost
Reduction methods, Project Stores, organization & HRD issues, Computerization.

Module 4: Investment Feasibility Studies: managing Project Resources Flow, Project

Feasibility studies, Project Cost – Capital & Operating , Forecasting Income, Estimation of
Investment & ROI, Project Evaluation, Financial Sources, Appraisal Process.

Module 5: Issues in Project Management: Project Audit, Project Monitoring & MIS, Cost
Control, Real Time Planning, Intangibles.

Module 6: Project Management: Case Studies.

Tests/Reference:

1. Chandra: Projects: McGraw-Hill, 7/e

2. Chitkara: Construction Project Management: Planning, Scheduling and Control (With CD):

McGraw-Hill, 2/e

3. Gray: Project Management: The Managerial Approach (SIE): McGraw-Hill, 4/e,

4. P Gopalkrishnan & V E Ramamurthy: Text Book of Project Management: McMillan.

5. N Singh: Project Management & Control: Himalaya

6. V Desai: Project Management:

7. B M Patel: Project Management: Vikas.

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ME 1472 PROJECT MANAGEMENT L T P C
(Open Elective – I) 3 0 0 6
Seventh Semester
(Mechanical Engineering Branch)
Pre-requisite – HS 1201, HS 1301
Day Topic CO
1–7 Project Planning: Project Management scenario, Project Asset – issues a, b
& problems, Gantt Chart & LOB, Network Analysis, PERT / CPM,
Resource Monitoring & Control.
8 – 15 Contract Management: principles of Project Contracts, compilation of b, c,
Project Contracts, practical aspects of Contract, legal aspects of Project e
Management, global tender, negotiations for Projects, insurance for
Projects.
16 – 23 Project Buying: Projects Procurement Process, Life – cycle Costing, a–e
Project Cost Reduction methods, Project Stores, organization & HRD
issues, Computerization.
24 – 31 Investment Feasibility Studies: managing Project Resources Flow, c, e
Project Feasibility studies, Project Cost – Capital & Operating,
Forecasting Income, Estimation of Investment & ROI, Project Evaluation,
Financial Sources, Appraisal Process.
31 – 35 Issues in Project Management: Project Audit, Project Monitoring & c, d,
MIS, Cost Control, Real Time Planning, Intangibles. e
35 – 39 Project Management: Case Studies. a–e
40 – 42 Revision/Discussion/Software demonstration (if available) e

Course Outcome (CO):

a. Students will be able to recognize project management related issues with its various
techniques.
b. Students will be able to classify different project types, infer different need of project, and
explain of project requirements.
c. Student can apply various methods for controlling and managing project and related issues.
d. Students will be able to evaluate progress of project, and organize the project requirements.
e. Students will be able to generate new ideas for monitoring of project with different
applications.

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 Module 1

Project Planning

1. Introduction

Problems, needs, and opportunities continually arise in every organization. Problems

like low operational efficiency, needs like additional office space, and opportunities like
penetrating a new product market are just a few of a nearly endless number of situations that
management must address in the process of operating an organization or company. These
problems, needs, and opportunities give rise to the identification of solutions. Executing those
solutions entails a change for the organization. Projects are generally established to carry out
this change and there’s always someone responsible for the successful completion of each
project.

2. What is project?

At the most basic level, a project is actually the response to a need, the solution to a
problem. Further, it’s a solution that promises a benefit—typically a financial benefit. The
fundamental purpose for most projects is to either make money or save money.

By definition, a project is temporary in nature; that means that it has a specific start
and finish. A project consists of a well-defined collection of small jobs (tasks) and ordinarily
culminates in the creation of an end product or products (deliverables). There will be a
preferred sequence of execution for the project’s tasks (the schedule).

Newman define that “a project typically has a distinct mission that it is designed to
achieve and a clear termination point the achievement of the mission”.

Gillinger defines “project” as the whole complex of activities involved in using

resources to gain benefits. Project management institute, USA defined project as “a system
involving the co-ordination of a number of separate department entities throughout
organization, in a way it must be completed with prescribed schedules and time constraints”.

According to the encyclopaedia of management, “project is an organized unit

dedicated to the attainment of goal, the successful completion of a development project on
time, within budget, in conformance with predetermined programme specification.”

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3. Characteristics of project

(1) Objectives: A project has a set of objectives or a mission. Once the objectives are
achieved the project is treated as completed.

(2) Life cycle: A project has a life cycle. The life cycle consists of five stages i.e. conception
stage, definition stage, planning & organising stage, implementation stage and
commissioning stage.

(3) Uniqueness: Every project is unique and no two projects are similar. Setting up a cement
plant and construction of a highway are two different projects having unique features.

(4) Team Work: Project is a team work and it normally consists of diverse areas. There will
be personnel specialized in their respective areas and co-ordination among the diverse areas
calls for team work.

(5) Complexity: A project is a complex set of activities relating to diverse areas.

(6) Risk and uncertainty: Risk and uncertainty go hand in hand with project. A risk-free, it
only means that the element is not apparently visible on the surface and it will be hidden
underneath.

(7) Customer specific nature: A project is always customer specific. It is the customer who
decides upon the product to be produced or services to be offered and hence it is the
responsibility of any organization to go for projects/services that are suited to customer
needs.

(8) Change: Changes occur throughout the life span of a project as a natural outcome of
many environmental factors. The changes may vary from minor changes, which may have
very little impact on the project, to major changes which may have a big impact or even may
change the very nature of the project.

(9) Optimality: A project is always aimed at optimum utilization of resources for the overall
development of the economy.

(10) Sub-contracting: A high level of work in a project is done through contractors. The
more the complexity of the project, the more will be the extent of contracting.

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(11) Unity in diversity: A project is a complex set of thousands of varieties. The varieties are
in terms of technology, equipment and materials, machinery and people, work, culture and
others.

4. Project selection process

Identification of a new project is a complex problem. Project selection process starts

with the generation of project ideas. In order to select the most promising project, the
entrepreneur needs to generate a few ideas about the possible project one can undertake. The
project ideas as a process of identification of a project begin with an analytical survey of the
economy (also known as pre-investment surveys). The surveys and studies will give us ideas.
The process of project selection consists of following stages:

Fig. 1.1 Various stages of project selection

Idea Generation: Project selection process starts with the generation of a project idea. Ideas
are based on technological breakthroughs and most of the project ideas are variants of present
products or services. To stimulate the flow of ideas, the following are helpful:

SWOT Analysis: SWOT is an acronym for strengths, weaknesses, opportunities and threats.
SWOT analysis represents conscious, deliberate and systematic effort by an organisation to
identify opportunities that can be profitably exploited by it. Periodic SWOT analysis

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facilitates the generation of ideas. Operational objectives of a firm may be one or more of the
following.

 Cost reduction.
 Productivity improvement.
 Increase in capacity utilisation.
 Improvement in contribution margin

Fostering a conducive climate: To tap the creativity of people and to harness their
entrepreneurial skills, a conducive organisation climate has to be fostered. Two conspicuous
examples of organisation which have been exceptionally successful in tapping the creativity
of employees are the Bell Telephone Laboratory and the 3M Corporation. While the former
has succeeded in harnessing creativity by providing an unconstrained environment, the latter
has effectively nurtured the entrepreneurial skills of its employees as sources of idea
generation. The project ideas can be generated from various internal and external sources.
These are highlighted as follows.

 Knowledge of market, products, and services.

 Knowledge of potential customer choice.
 Emerging trends in demand for particular product.
 Scope for producing substitute product.
 Market survey & research.
 Going through Professional magazines.
 Making visits to trade and exhibitions.
 Government guidelines & policy.
 Ideas given by the experienced person.
 Ideas by own experience.
 SWOT analysis

Environment appraisal: An entrepreneur or a firm systematically appraise the environment

and assess its competitive abilities. For the purposes of monitoring, the business environment
may be divided into six broad sectors as shown in Fig. 1.2. The key elements of the
environment are as follows:

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 Fig. 1.2 Various business environments

Economic Sector

 State of the economy

 Overall rate of growth
 Cyclical fluctuations
 Inflation rate
 Growth rate of primary, secondary and territory sector
 Growth rate of world economy
 Trade surplus and deficits
 Balance of Payment

Government Sector

 Industrial policy
 Government programmes and projects
 Tax structure
 EXIM policy
 Financing norms
 Subsidies incentives and concessions
 Monetary policy

Technological Sector

 Emergence of new technologies

 Access to technical know-how, foreign as well as indigenous

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Socio-demographic Sector

 Population trends
 Age shifts in population
 Income distribution
 Educational profile
 Employment of women
 Attitudes toward consumption and investment

Competition Sector

 Number of firms in the industry and the market share of the top few establishments
 Degree of homogeneity and differentiation among the products
 Entry barrier
 Comparison with substitutes in term of quality and price
 Marketing policies and practices

Supplier Sector

 Availability and cost of raw material

 Availability and cost of energy
 Availability and cost of capital

Corporate Appraisal: A realistic appraisal of corporate strengths and weaknesses is

essential for identifying investment opportunities which can be profitably exploited. The
broad areas of corporate appraisal and the important aspects to be considered under them are
as follows:

Marketing and Distribution

 Market Image
 Product Line
 Product Mix
 Distribution Channels
 Customer loyalty
 Marketing & distribution costs

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Production and Operations

 Condition and capacity of plant and machinery

 Availability of raw material and power
 Degree of vertical integration
 Location advantage
 Cost structure

Research and Development

 Research capabilities of the firm

 Track record of new product developments
 Laboratories and testing facilities
 Coordination between research and operations

Corporate Resources and Personnel

 Corporate identity and image

 Dynamism of top management
 Relation with government and regulatory agencies
 State of industry relations

Finance and Accounting

 Financial leverage and borrowing capacity

 Cost of capital
 Tax structure
 Relation with share holders and creditors
 Accounting & control system
 Cash flow and liquidity

5. Project life cycle

A project starting from the initiation goes through different stages and these stages
collectively referred as life of a project and the cycle of flow of various activities leads to the
project life cycle. It is essential for a project manager to effectively formulate and understand

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the life cycle of a project for its efficient execution. In Fig. 1.3 a schematic representation of
a typical project life cycle is shown with different project activities.

Fig. 1.3 Schematic of project life cycle with various possible activities

In any project there are distinct stages and all these stages have salient contribution
towards the successful completion of the project. Although, the activities can differ from
project to project and sequence of execution of the activities depends on the project
environment and the experience of project manager. The stages are listed in the following
with its various characteristics.

Definition: This is the initial stage of any project. The project is originated from an idea of an
individual or may be a group. With the idea being realized, the team with a leader usually the
project manager evaluates the different aspects of the project for its execution. This stage
includes various tasks like goal setting, project specifications, realizing the various tasks to be
completed and distribution of different responsibilities of the team members and the team as a
whole. As shown in the figure the time taken for the completion of this phase is less
compared to other activities. However, the effort required for this phase is considerable as
this decides the overall project implementation.

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Planning: This is one of the most crucial phases in a project life. This decides the paradigm
of the project for its successful completion. The effort required for this phase is relatively
high with a wide spread time consumption. The origination of this phase started with the
definition phase and continues till the project schedule. This phase includes activities like
scheduling, budget determination, resource planning, risk estimation and staffing.

Execution: The completion of a project depends on the activities performed during this
phase. This phase have activities like forecasting, quality assessment, status monitoring,
change identification and implementation, quality monitoring etc. Out of these activities,
forecasting is crucial in project management as it indicates the growth of the project as well
as the future functioning and possible challenges to be faced by the project during its
execution. Forecasting can be achieved with both qualitative and qualitative techniques.

Delivery/Completion: This is the final stage on any project. In this phase the effort and time
required is comparatively less than planning and execution phases. This include customer
orientation and training, documentation and project report writing, resource release and staff
relocation and release, and identification of future scopes with sharing of experiences
gathered during the execution of the project execution.

4. Project management

Project management is an organised venture for managing projects, involves scientific

application of modern tools and techniques in planning, financing, implementing, monitoring,
controlling and coordinating unique activities or task produce desirable outputs in accordance
with the determined objectives with in the constraints of time and cost.

5. Tools and techniques for project management

There are several tools and techniques which would contribute significantly towards
effective project management these can be broadly grouped under the following heads:

i. Project selection techniques

a. Cost benefit analysis and
b. Risk and sensitivity analysis
ii. Project execution planning techniques
a. Work breakdown structure (WBS)
b. project execution plan (PEP)

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 c. Project responsibility matrix and
d. Project management manual
iii. Project scheduling and coordinating techniques
a. Bar charts
b. Life cycle curves
c. Line of balance (LOB) and
d. Networking techniques (PERT/CPM)
iv. Project monitoring and progress review techniques
a. Progress measurement technique (PROMPT)
b. Performance monitoring technique (PERMIT) and
c. Updating, reviewing and reporting technique (URT)
v. Project cost and productivity control techniques
a. Productivity budgeting techniques
b. Value engineering (VE) and
c. COST/WBS

6. Role and responsibilities of a project manager

The basic roles and responsibilities of a project manager could be grouped under
following twelve heads:

i. Defining and maintaining the integrity of a project;

ii. Development of project execution plan;
iii. Organization for execution of the plan;
iv. Setting of targets and development of systems and procedures for accomplishment of
project objectives and targets;
v. Negotiation for commitments;
vi. Direction, coordination and control of project activities;
vii. Contract management;
viii. Non-human resource management including fiscal matters;
ix. Problem-solving;
x. Man management;
xi. Satisfaction of customer, Government and the public; and
xii. Achievement of project objectives, cash surplus and higher productivity

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 A project is an organized programme of pre-determined group of activities that are
non-routine in nature and that must be completed using the available resources within the
given time limit. Project management is an organized venture for managing projects. The
location, type, technology, size, scope and speed are normally the factors which determine
the effort needed in executing a project. Project can be classified under different heads. The
project ideas as a process of identification of a project begin with an analytical survey of the
economy. Project life cycle is spread over a period of time. Project report is a kind of course
of action what the entrepreneur hopes to achieve in his business and how he is going to
achieve it. Project appraisal is made for both proposed and executed projects. For appraising
a project, its economic, financial, technical, market and social aspect are analysed. There are
several tools and techniques which contribute significantly towards effective project
management.

7. Project monitoring techniques

In the project execution phase it has be constantly monitored for its effective
completion. In project management this is a crucial responsibility of the project team
members and mostly the project manager to analyze the project execution with various
available techniques. These techniques are broadly classified into quantitative and qualitative
groups. Quantitative techniques are useful for finding effective parameters of project
characteristics and qualitative methods are useful for decision making and evaluation. Among
these techniques Gantt chart, line of balance (LOB), network analysis, critical path method
(CPM), program evaluation and review technique (PERT), resource monitoring and control
are notable ones.

7.1 Gantt chart

Gantt chart is one of the most popular visualization tools for project monitoring. Gantt
chart is initially developed by Henry Laurence Gantt during the period 1910 – 1915. This is a
visualization tool for various activities or task to be performed as a part of any project
scheduled over time. This is a graphical representation between the horizontal axis
representing time domain and the vertical axis representing the various activities or task of a
project. Usually hard thick colour lines are used for showing progress of a task or activity in
the Gantt chart. This tool is an old but effective tool for reviewing progress of project
activities and creating comments during the progress of the project. The procedure for
developing Gantt chart includes the following few steps.

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i) Identification of various tasks: In this phase, different activities related to a project are
identified.

ii) Scheduling of the identified tasks: Once the tasks are identified, those are scheduled to
prepare an order over time for its execution. This phase is crucial during project management
as this decides the precedence relationship of one activity with another. Further, these
relations are used during network analysis.

iii) Time unit: Although the horizontal axis represents time unit in a Gantt chart, usually time
is represented in blocks of month, quarter or year. Some special activity may not be suitable
to represent over the same scale of unit in time, then special measure has to be taken to
represent the activity in the Gantt chart.

iv) Update information: Once the Gantt chart is prepared, it should be updated on a regular
basis for monitoring the project or to control the project or both. The Gantt chart is a tool to
be used by each member of the team of a project during the project duration.

7.1.1 Few terminologies used in Gantt chart

1. Float: float or slack is the amount of time that a task in a project network can be delayed
without causing a delay to: subsequent tasks.

2. Buffer: Buffer is additional time allowed over some activities for its start and completion.

3. Parallel activities: Any activities which have the same start point or can be started without
any precedence relation are referred as parallel activities.

4. Leading activity: Any activity which is leading over other activity in terms of time
consumption is referred as leading activity.

5. Lagging activity: Any activity which is lagging over other activity in terms of time
consumption is referred as leading activity.

6. Milestone: Any definite point in time or completion of activity is referred as milestone.

This has to be indicated in the Gantt chart for easy identification and project tracking.

7. Progress: Flow of project with respect to the formulated schedule with respect to time is
referred as progress of the project or activities.

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7.1.2 Example 1: A businessman wants to repaint his house and he has decided to allot the
contract to FineTune Art Work for the job. After receiving the order, manager at the
FineTune Art Work visits the site and has formulated few major activities that need to be
performed as a part of the contract during the project. The major tasks are being given to his
subordinate and asked to schedule and plan the overall project and to develop a Gantt chart
for the same.

The manager has formulated the following tasks with estimated time in hour:

A. Removing of items inside the household and packing of items to keep it safe during
painting (2)
B. Removing existing paint (2)
C. Plastering repair (3)
D. Purchasing of paints and allied equipments (1)
E. Hire specialized painter (1)
F. Painting main frame house (4)
G. Painting additional house components (3)
H. Cleaning (1)
I. Delivering (1)

Solution:

Step 1: First step in the formation of Gantt chart is the identification of various tasks. In the
aforementioned problem statement the task has already been identified.

Step 2: After finalizing all the possible tasks, next the manager has to schedule the identified
tasks along with the precedence relationship among the various tasks. For the given problem
statement time taken for each activity has been identified. But the relationship among
different activities has not been designated. For this purpose let us create a sequence of
activities that need to be performed as a part of the project exactly in the order of its
occurrence in the actual work schedule. During the process we need to select the relationship
among different activities before putting it in the graphical form as Gantt chart.

Activity precedence relationship Time (hour)

A 2
B A 2

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 C B 3
D 1
E 1
F 4
G 3
H F,G 1
I H 1

Step 3: Once the scheduling is over along with the estimation of prior relationship, next task
is to represent the available data in a graphical form known as Gantt chart. To draw the Gantt
chart, two axes needs to be selected. Horizontal axis should represent time and vertical axis
should represent various activities as per the order formed in step 2. During the graphical
representation one needs to be careful in identifying parallel activity and prior relationship of
various tasks as per the earlier formulation. In general planned and ongoing activities or tasks
are represented in blue colour and completed activities are represented in green colour in the
Gantt chart. In representing the Gantt chart sometimes it is advisable to select a suitable time
index. Time index is a factor obtained as the ratio between the actual time and the time used
for representation in the chart. In Gantt chart one headed arrow are indicated to show the
prior relationship among the activities.

Fig. 1.4 Developed Gantt chart for Example 1

Step 4: After the completion of the Gantt chart, the project manager now can keep track of
the activities for its successful completion on time. The completed tasks are usually shown in
green colour. Timely update of the chart is required for effective monitoring of the project.

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7.1.3 Advantages and limitations of Gantt chart

Gantt chart is useful tool in project management during planning, scheduling and
execution stage. It provides an effective graphical method for project management through
proper monitoring. It is relatively easier to construct and follow. Parallel activities can be
identified and monitored in the same chart. Correlation among activities is possible to
observe through Gantt chart.

On the other hand Gantt chart has few limitations. It is time relatively time consuming
than other project management techniques. It does not accommodate change in planned
activities effectively. Crashing of activities demands high time than other methods. It requires
time dependent axis which sometimes difficult to manage for some projects.

7.2 Network analysis

The limitations of the Gantt chart led the project managers to develop more flexible
and useful at the same time more effective methods for project monitoring and control.
During this endeavour, management scientists came with the concept of network techniques
which are found to be more versatile compared to Gantt chart.

A network is a graphical representation of various project activities with the

configuration of arrows and nodes showing the logical sequence of activities to achieve the
project completion. Network analysis uses following terms in project management scenario.

Activity: An effort that is required to complete a part of a project. In network diagram it is

usually represented as an arrow with the pointed head towards the following activity.
Dummy activity: In network analysis, to complete the flow of activities towards the project
completion, sometimes pseudo activity has to be presented in the network. This activity does
not consume any resources or time but helps in the flow of the project towards completion.

Event: The commencement or completion of an activity is referred as event. In general a

circle is used to represent an event.

Tail event: A tail event is the one which marks the beginning of an activity.

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Head event: A head event is the termination point in time for an activity.

Dual role event: In actual practice, most of the event represents either beginning to some
event(s) and termination or completion to some event(s). Those are referred as dual role
event. All events except the initial and final event are dual role event.

Node: It represents the start and end point of an activity on the network diagram. Usually,
nodes are denoted in numbers to show the start and end points.

Bursting node: This is a node from which more than one activity originates.

Merging node: This is a node where more than one activity merges.

7.2.1 Network rules

The following network rules are noteworthy

1. There must be only single initial node in a network.

2. An event cannot occur until all the activities leading to it are completed.
3. An event cannot occur twice, i.e., there cannot be any network path looping back to
previously occurred event.
4. No event depends, for its occurrence upon the occurrence of a succeeding event.
5. There must not be any dead event left except the final node. Final node should only
have incoming arrows. There must be only single final node.
6. No activity can start until its tail end event has occurred.
7. An arrow in the network diagram should represent only one particular activity.
Number of arrows should be equal to the number of activities in a project.
8. Network should be developed to meet the objectives of the project in a sequential
manner from beginning to the end.

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7.2.2 Graphical guidelines for network

The following guidelines should be followed for development of a network diagram.

1. Arrows are not vectors. They are never used to indicate time duration through its
length.
2. Curved arrows are not preferred and straight arrows should be used to represent any
activity.
3. Crossing of arrows are not permitted in network diagram. For any crossing instances,
bridging of arrows should be used.
4. No node should be repeated in the network. Each node each has activities to precede
and to follow except the initial and final nodes.

Example 2: Draw a suitable network diagram for the following project activities.

Predecessor Predecessor
Activity Duration Activity Duration
relation relation
A --- 2 H C,D 6
B --- 5 I C,D 2
C --- 4 J E 5
D B 5 K F,G,H 4
E A 7 L F,G,H 3
F A 3 M I 12
G B 3 N J,K 8

Solution:

Fig. 1.5 Project activity network for project in Example 1

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7.2.3 Critical path in a network

A network can have more than one path that leads to the project completion in some
aspects. These paths may or may not consider all the activities at the same time. The critical
path in a network is the itinerary to the project completion with the following conditions.
These conditions need to be satisfied at the same time for a path to be critical in a network.

Conditions to be satisfied for a critical path





To find the critical path parameters need to be computed are earliest start time of the node,
latest completion time of a node.

Earliest start time of a head node is computed from the following mathematical relation.

where, represents earliest start time of head event or node ( ), is the earliest start time
of tail node , and is the activity duration between node . The computation of earliest
start time is referred as forward pass calculation.

Latest completion time of tail node is computed from the following mathematical relation.

where, represents earliest start time of tail event or node ( ), is the earliest start time
of head node , and is the activity duration between node . The computation of latest
completion time is referred as backward pass.

Graphically, this is represented in the network diagram as rectangular box near each node as
shown in the following figure.

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 The complete diagram will be as follows with all the computation for forward and
backward pass.

From the above network diagram and conditions, it can be observed that the path 1 – 3 – 4 –
6 – 8 – 9 is the critical path with project completion time of 28 unit. In graphical
representation, the critical path is shown as a thickened arrow or double line arrow.

7.2.4 Calculation of total float and free float for the project activities

In the project management scenario, float is the time by which an activity can be
delayed without compromising the occurrence and completion of the subsequent activities. In
critical path method, total float is computed using the following mathematical relationship.

where, is the total float for an activity with initial (tail) node and end (head) node ,
is the latest completion time of node and is the earliest start time of node and is the
duration of the activity with nodes and .

The mathematical relationship for free float is expressed as follows.

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where, is the free float, is the earliest start time for node and is the earliest start
time of node .

With the above relationship it can be found that the critical path has zero total float and free
float.

The table below summarizes the total float and free float for the above network.

Activity Node notation Total float Free float

A 1–2 6 0
B 1–3 0 0
C 1–4 6 6
D 3–4 0 0
E 2–5 6 0
F 2–6 11 11
G 3–6 8 8
H 4–6 0 0
I 4–7 4 0
J 5–8 6 6
K 6–8 0 0
L 6–9 9 9
M 7–9 4 4
N 8–9 0 0

7.2.5 Program evaluation and review technique (PERT)

The critical path method as discussed in the aforementioned sections reveals it to be

one of the most effective methods for project management. The method not only helps in
planning but also effective during execution stage as well. It has advantage over Gantt chart
by accommodating changes in the project duration more quickly without disturbing the
overall project schedule. But, in this method the duration of each and every activity are
deterministic in nature. Hence, sometime the network is referred and deterministic network in
project management. The difficulty lies in predicting and formulating a deterministic time for
the completion of a particular activity. In reality, no framework is available for accurately
judging the completion time of an activity with at most accuracy. Thus, sometimes it is often
realized during the execution of a project that most of the activities are either delayed or even
not completed. One can think of a solution of adding more time than the normal one to avoid
non completion or delay but that may result in excessive and useless time of completion of a
project. Thus, project management practitioners realized the need of probabilistic time in
formulating the time required for completion of an activity in a project. With the infusion of

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probabilistic approach in network it becomes more flexible to accommodate delays in
activities without effecting the project completion.

In PERT method, there are three time estimates for a single activity. These estimates
are determined from past project record of similar projects, experience of project managers,
brainstorming sessions with project members or following some regular patterns in
probability theory. Inclusion of probability theory brings the flexibility in the network to
handle the uncertain behaviour of time. The three time estimates are as follows.

 Optimistic time estimate ( ): This is the shortest time needed to carry out the activity
on the assumptions that everything goes better than planned.
 Pessimistic time estimate ( ): This is the maximum time in which the activity can be
completed assuming everything goes badly.
 Most likely time estimate ( ): This is the most likely time for the completion of an
activity. It is the time which would be given in any event if the executants had been
asked to give a single estimate instead of three.

In spite of the subjective nature of the time estimates, these can be used for the basis
for calculating the magnitude – the standard time – which obeys a law of probability; it is
therefore possible to analyze the chances of completing a project within the available time.
The standard time is computed using the following mathematical expression. The expression
is somewhat similar to weighted average between the three time estimates. In other words,
the standard time represents a statistical mean between the three time estimates with more
weight given to the most likely time estimate. Sometime standard time is also referred as
expected competition time.

Example 3: Represent the following project information into a network diagram and compute
the following.

a) Find the critical path of the project network.

b) Expected time for the completion of the project.
c) Compute the variance of each activity
d) Compute the probability of completion of the project within 20 weeks duration.

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 Activity Predecessor relation Time estimates (week)
Optimistic time Most likely time Pessimistic time
( ) ( ) ( )
A --- 5 6 7
B --- 1 3 5
C --- 1 4 7
D A 1 2 3
E B 1 2 9
F C 1 5 9
G C 2 2 8
H E,F 4 4 10
I D 2 5 8
J H,J 2 2 8

Solution: From the given project estimate compute the standard time using the mathematical
relation for the same.

Activity Predecessor Optimistic time Most likely Pessimistic Standard

relation ( ) time ( ) time ( ) time ( )
A --- 5 6 7 6
B --- 1 3 5 3
C --- 1 4 7 4
D A 1 2 3 2
E B 1 2 9 3
F C 1 5 9 5
G C 2 2 8 3
H E,F 4 4 10 5
I D 2 5 8 5
J H,J 2 2 8 3

Now with the standard time, graphically represent the network diagram to represent the
project activities. The network diagram will appear to be as follows.

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Now, from the earlier discussion on finding the critical path, the present network has the
critical path as 1 – 4 – 6 – 7 – 8 with expected project completion time of 17 weeks.

Now, to find the probability of completing the project within 20 weeks can be formulated as
follows.

Now the variance of each activity can be computed using the following mathematical
relation.

where, is the variance and are pessimistic and optimistic time estimates,
respectively.

From the above relation, the variance of each activity is computed and presented in the
following table.

Activity Optimistic time Most likely Pessimistic Standard Variance

( ) time ( ) time ( ) time ( ) ( )
A 5 6 7 6 0.1111
B 1 3 5 3 0.4444
C 1 4 7 4 1.0000
D 1 2 3 2 0.1111
E 1 2 9 3 1.7778
F 1 5 9 5 1.7778
G 2 2 8 3 1.0000
H 4 4 10 5 1.0000
I 2 5 8 5 1.0000
J 2 2 8 3 1.0000

To compute the probability of completion of the project latest by 20 weeks the following
probability theory needs to be incorporated.

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Now, x = expected time duration = 20 weeks

σ = average standard deviation =

μ = Time taken for completion of the project = total time taken by critical activities = 17
weeks

P( ) = P(3.25)

From the standard normal probability distribution chart, P(3.25) = 0.9994 or 99.4%

***

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