Project Management

Introduction

• There are several occasions when organization perform

large-scale activities (for a project) in a non-repetitive
manner.
• Typically, these are one-off activities done at less frequent
intervals and in a particular order to accomplish the task.

Project management offers alternative tools and techniques

to handle the planning and control of the activities pertaining
to large-scale activities performed in a non-repetitive
manner.
Key decisions in project management

1. Deciding which projects to implement

2. Selecting the project manager
3. Selecting the project team
4. Planning and designing the project
5. Managing and controlling project resources
6. Deciding if and when a project should be terminated (if
required)
 Project management triangle

• The project management triangle is a

model in project management that shows Time
how the balance between three
constraints—scope, time, and budget—
affects the quality of the project.
• The triangle shows that affecting one
constraint will mean adjusting one or both Quality
of the others in order to maintain the
quality. It’s also called the triple
Scope Cost
constraint model or the iron triangle.
Project managers must oversee all three
of these constraints in order to complete a
project successfully.
1. Work Breakdown Structure (WBS) – What of PM?
WBS is an organized methodology used to split an overall project into non-
overlapping components and identify deliverables for each component.

WBS generally resembles a bill of

materials in a PROJECT MANAGEMENT
scenario.
2. Organization Breakdown
Structure (OBS) – Who of
PM?
While WBS identifies WHAT
NEEDS TO BE DONE FOR
PROJECT EXECUTION, OBS
focuses on executing the tasks
listed under each work package.
Based on the nature of tasks
involved, the functional expertise
required is identified for each
element of WBS. This
complementary structure is known
as OBS.
3. Cost Breakdown Structure
(CBS) – How much of PM?
CBS is a methodology that links
the individual elements in a WBS
to a dimension of cost. By
estimating the cost of each work
package that constitutes an
element in the WBS structure,
CBS enables a project manager to
set up project monitoring and
control mechanism..
• Clearly identifying “what, who, and how much” of every
work package is fundamental to planning and control of
projects.
• Using this information one can identify the relationship
among various activities and estimate the duration of
each activity.
• Using this information, a project manager can construct
a NETWORK REPRESENTING the project and identify
the duration of the project.
Project management techniques: PERT and CPM – Tells When of PM?

Program evaluation and review technique (PERT) and critical path method
(CPM) were both developed in the 1950s to help managers schedule,
monitor, and control large and complex projects. CPM arrived first, as a
tool developed to assist in the building and maintenance of chemical
plants at duPonT. PERT was developed in 1958 for the US Navy.

Steps
1. Define the project and prepare the WBS.
2. Define the relationships among the activities. Decide which activities must precede and
which must follow others.
3. Draw the network connecting all the activities.
4. Assign time and/or cost estimates to each activity.
5. Compute the longest time path through the network. This is called the critical path.
6. Use the network to help plan, schedule, monitor, and control the project.
Step 5, which is finding the critical path is most important
for controlling the project.
The activities on the critical path represent tasks that
will delay the entire project if they are not completed on
time.
Managers can gain flexibility needed to complete
critical tasks by identifying noncritical activities and
replanning, rescheduling, and reallocating labor and
financial resources.
PERT and CPM advantage

It helps to answer the following questions:

1. When will the entire project be completed?
2. What are the critical and noncritical activities?
3. What is the probability that the project will be completed withing the
specified date?
4. At any particular date, is the project on schedule, behind schedule, or
ahead of schedule?
5. On any given date, is the money spent equal to, less than, or greater
than the budgeted amount?
6. If the project is to be finished in a shorted amount of time, what is the
best way to accomplish this goal at the least cost?
Detailed Analysis

The first step in PERT and CPM is to divide the entire project into significant
activities in accordance with the WBS.
There are two approaches for drawing a project network:
i. activity on node (AON) – nodes designates activity
ii. activity on arrow (AOA) – arrows represents activity

The basic difference between AON and AOA is that the nodes in an AON
diagram represent activities. In an AOA network, the nodes represent the
starting and finishing points of an activity and are also called events.
We will use AON in our course.
Example
Activity Description Immediate Time (Weeks)
predecessors
A Build internal - 2
COMPONENTS
B MODIFY ROOF AND - 3
FLOOR
C CONSTRUCT A 2
COLLECTION STACK
D POUR CONCRETE AND A,B 4
INSTALL FRAME

E BUILD HIGH- C 4
TEMPERATURE BURNER
F INSTALL POLLUTION C 3
control system
G Install air pollution device D,E 5

H Inspect and test F,G 2

Common errors in drawing networks

1. Two activities starting from a tail event must not have a same end event.
To ensure this, it is absolutely necessary to introduce a dummy activity,
as shown. Dummy activity is an activity which does not consume time
and resource and is just introduced to maintain precedence relationship.

dummy

2,
1 1 2
3
incorrect correct
2. Dangling: To disconnect an activity before the completion of all activities
in a network diagram is known as dangling. As shown in the figure
activities (5 – 10) and (6 – 7) are not the last activities in the network.
So, the diagram is wrong and indicates the error of dangling.

dangling 7

1
4 5 6 8
2

1
0
dangling 11
3. Looping or Cycling: Looping error is also known as cycling
error in a network diagram. Drawing an endless loop in a
network is known as error of looping as shown in the following
figure.

5 9
looping
6

4 8 11

1
0
 AON In the example A and B do not have predecessors. Although not required, it is usually
convenient to have a unique starting activity for a project. We have therefore included
dummy activity called Start, which does not consume any time and resource.

These are
called nodes

A C

E
Start H Finish

B D G
AOA We see that activity A starts at event 1 and ends at event 2. Likewise, activity B starts at event 1
and ends at event 3. Activity C, whose only predecessor is activity A, starts at node 2 and ends
at node 4. Activity D, however, has two predecessors (A and B). Hence, we need both activities
A and B to end at event 3, so that activity D can start at that event. However, we cannot have
multiple activities with common starting and ending nodes in an AOA network. To overcome this
difficulty, in such cases, we may need to add a dummy line (activity) to enforce the precedence
relationship. Thus, we draw the AOA shown below.

C
2 4 F
A
H
6 7
Dummy
1 activity E
B G
D
3 5

AOA is not in this course, so we ignore it for rest of our work.

Critical path method (CPM)

CPM is the method of computing the critical path, the early and
late schedules for activities, and the slack and using this
information for addressing resource-and cost-based issues. CPM
we assume no uncertainty, and everything will go as planned.
• The critical path (or paths) is the longest path (in time) from
Start to Finish; it indicates the minimum time necessary to
complete the entire project.
• To calculate critical path, identify all paths from start to end, and
the maximum time will give critical path.
• Slack (also called float) is the difference between late finish and
early finish or late start and early start. Slack can be total slack
and free slack.
• Free slack is the amount of time a task can be delayed
without affecting the next task. Total slack is the amount of
time a task can be delayed without impacting the delivery
of the project.
• Critical path has zero slack.
i. Earliest start (ES) = earliest time at which an activity
can start, assuming all predecessors have been
completed
ES = Max{EF of all immediate predecessors}
if an activity has only a single immediate predecessor, its
ES equals the EF of the predecessor. If it has multiple
use above formula
ii. Earliest finish (EF) = earliest time at which an activity
can be finished
EF= ES + activity time
iii. Latest start (LS) = latest time at which an activity can start so
as to not delay the completion time of the entire project
LS = LF – activity time
iv. Latest finish (LF) = latest time by which an activity has to finish
so as to not delay the completion time of the entire project
LF = Min{LS of all immediate following activities}
if an activity is an immediate predecessor for just a single activity,
its LF equals the LS of an activity that immediately follows it. If
more than one activity use above formula.

Thus, slack will be

Slack (Total) = LS - ES or LF - EF
 3
2 2 F

A C 4
0 2
E

Start H Finish

B D G

3 4 5

To calculate critical path, identify all paths from start to end and their duration
1. A-C-F-H = 2+2+3+2 = 9 weeks
2. A-C-E-G-H = 2+2+4+5+2 = 15 weeks
3. B-D-G-H = 3+4+5+2 = 14 weeks
4. A-D-G-H =
So critical path is A-C-E-G-H with time 15 weeks.
 F

A C

Start H Finish

B D G

Both A and B have only Start as immediate predecessor which consumes no

time. Using the earliest start time rule, the ES for both activities A and B equal
0. Now using the EF rule, EF for A = ES + activity time = 0+2=2; B=0+3=3.
for C; ES = max{EF of all immediate predecessors) = 2 and EF = ES + activity
time = 2+2 = 4.
for D, immediate predecessors are B and A, so ES = max{2,3}=3 and EF =
3+4 = 7
For calculating late times, we assume latest finish time for the entire project
is the same as its earliest finish time. Thus, LF for H is 15.
Now, using LS rule; LS of H = 15 - activity time = 15-2=13. Because H is the
longest succeeding activity for both F and G, the LF for F and G equals 13
(LF= Min{LS of all immediate following activities). LS for G is 13-5 = 8; and
LS for F is 13-3 = 10.
Similarly, LF of E is LS of G = 8, and its LS = 8-4=4. LF of D is LS of G = 8
and LS is 8-4=4.
We now consider C, which is an immediate predecessor to E and F. Using
LF rule, LF of C = Min{LS of E, LS of F} = Min{4,10}=4. LS of C = 4-2 = 2.
LF of B = LS of.
LF of A = 2 and LS = 0 (2-2).
 Activity Time Earliest Earliest Latest Latest Slack On
(Weeks) start finish start finish (LS-ES; critical
(ES) (EF) (LS) (LF) or LF- path
EF)
A 2 0 2 0 2 0 Yes

B 3 0 3 1 4 1 No

C 2 2 4 2 4 0 Yes

D 4 3 7 4 8 1 No
E 4 4 8 4 8 0 Yes

F 3 4 7 10 13 6 No

G 5 8 13 8 13 0 Yes

H 2 13 15 13 15 0 Yes

Project completion time = critical path = 15 weeks

Crashing – Cost-time Trade Offs

• While managing a project, it is not uncommon for a project manager to run

behind the schedule.
• Thus, in such cases, some or all of the remaining activities need to be
speeded up (usually by adding resources) to finish the project by the
desired due date.
• The process by which we shorten the duration of a project in the cheapest
manner possible is called crashing.

CRASHING - Shortening activity time in a network to reduce time on the

critical path so total completion time is reduced.
• CPM is a technique (discussed earlier) in which activity has a normal or
standard time that we use in our computation.
• Associated with this normal time is the normal cost of the activity.
However, another time in project management is the crash time, which is
defined as the shortest duration required to complete an activity.
• Associated with this crash time is the crash cost of the activity. Usually, we
can shorten an activity by adding extra resources to it. Hence, it is logical
for the crash cost of an activity to be higher than its normal cost.

Crash cost per period =

Since, critical path determines when the project will be completed, so

activities only on critical path can be crashed.
Steps
1. Calculate the crash cost per period for each activity.
2. Calculate the critical path of the network.
3. Crash the project one period at a time with focus only on
critical path activities.
4. Crash the least expensive activity that is on the critical path.
When there are multiple critical paths, find the sum of
crashing the least expensive activity on each critical path. If
two or more critical paths share common activities, compare
the least expensive cost of crashing a common activity shared
by critical paths with the sum for the separate critical paths.
5. Update all activity times. Check the due date. If due date is
achieved stop, else if crashing is still possible continue by
also seeing the project cost.
 Example
Project costs are $1,000 per day.

Activity Immediate Normal time Crash time Crash cost

predecessors per day ($)
A - 6 6 -
B A 10 8 500
C - 5 4 300
D C 4 1 700
E D 9 7 600
F E, B 2 1 800
 6 10

A B
2
0

Start F Finish

5 4 9

C D E

To calculate critical path, identify all paths from start to

end and their duration
1. A-B-F = 6+10+2 = 18 days
2. C-D-E-F = 5+4+9+2 = 20 days
So critical path is C-D-E-F with time 20 days.
Activity Immediate Normal Crash Crash On critical
predecessors time time cost per path
day ($)
A - 6 6 - NO

B A 10 8 500 NO

C - 5 4 300 YES

D C 4 1 700 YES

E D 9 7 600 YES

F E, B 2 1 800 YES
• Activities only on critical path must be crashed.
• There is only one critical path as of now.
• Select the minimum crash cost per day from the
entire activities, which is activity C with $300.
• Available time (in days) to crash = normal time –
crash time = 5 – 4 = 1 day.
• Crash activity C by one day at a cost of $300.
The length of the critical path now becomes = 20
– 1 = 19 days.
• After crashing C, check whether the original path is still
the critical path or any other path has also become
critical path.
• So critical path is C-D-E-F with time 19 days, which is
still critical path.
• Now, C cannot be crashed further. Select minimum cost
from the remaining activities on critical path.
Activity Crash cost On critical
per day ($) path
A - NO
B 500 NO
C 300 YES
D 700 YES
E 600 YES
F 800 YES
 • Shorten activity E one day at a cost of $600. The length of path
C-D-E-F now becomes 18 days, which is the same as the
length of path A-B-F.
• Now, we have two critical paths, improvements will necessitate
shortening both paths.
6 10

A B
0 2

Star Finis
F
t h
4 4 8

C D E
• The remaining activities for crashing and their costs are:

Activity On critical Available time Crash cost

path to crash per day ($)
A YES 0 No reduction
possible
B YES 2 500
C YES 0 No reduction
possible

D YES 3 700
E YES 1 600
F YES 1 800
• At first glance, it would seem that crashing F would not be
advantageous, because it has the highest crashing cost.
However, F is on both paths, so shortening F by one day
would shorten both paths (and hence, the project) by one day
for a cost of $800.
• The option of shortening the least expensive activity on each
path would cost $500 for B and $600 for E, or $1,100 (that
would exceed the indirect project costs of $1,000 per day).
Thus, shorten F by one day. The project duration is now 17
days.
• At this point, no additional improvement is feasible. The cost
to crash B is $500 and the cost to crash E is $600, for a total
of $1,100, and that would exceed the indirect project costs of
$1,000 per day.
• The crashing sequence is summarized below:

Length after crashing n days

Path n=0 1 2 3

A-B-F 18 18 18 17

C-D-E-F 20 19 18 17
Activity C E F
crashed
Cost $300 $600 $800
Example
Suppose the plant manager at Milwaukee paper has been given only 13 weeks (instead of
16 weeks) to install the new pollution control equipment. As you recall, the length of the
critical path is 15 weeks, but she must now complete the project in 13 weeks.
Activity Time (Weeks) Cost ($) Crash Cost Per On Critical
Week ($) Path
=
Normal Crash Normal Crash

F
A 2 1 22000 22750 750 Yes
A C
B 3 1 30000 34000 2000 No
C 2 1 26000 27000E 1000 Yes
Start H Finish
D 4 3 48000 49000 1000 No
E 4 2 56000 58000 1000 Yes
F 3 2 30000 30500 500 No
B D G
G 5 2 80000 84500 1500 Yes
H 2 1 16000 19000 3000 Yes
PERT (Program evaluation and review technique) – To
manage uncertainty
• In identifying all the earliest and latest times so far, and the associated critical path(s),
we have adopted CPM approach of assuming that all activity times are known and
fixed constant. That is, there is no variability or uncertainty in the activity times.

• However, in practice, it is likely that activity completion times vary depending on

various factors. For instance, building internal components there is a breakdown or
late arrival of raw material.

• Therefore, it is imperative that project manager should not ignore the impact of
variability in activity times when deciding the schedule for a project.

• PERT addresses this issue.

PERT CPM

PERT is that technique of project CPM is that technique of project management

management which is used to manage which is used to manage only certain (i.e.,
uncertain (i.e., time is not known) time is known) activities of any project
activities of any project

It is a probability model It is a deterministic model

It majorly focuses on time as meeting It majorly focuses on Time-cost trade off as

time target or estimation of percent minimizing cost is more important
completion is more important

There is no chance of crashing as there There may be crashing because of certain

is no certainty of time time boundation

Three time estimates One time estimate

Suitable for research and development Non-research projects like civil construction,
project ship building etc.
Three-time estimates in PERT
In PERT we employ a probability distribution based on three-time estimates
for each activity, as follows:
1. Optimistic time (a) = time an activity will take if everything goes as
planned
2. Pessimistic time (b) = time an activity will take assuming very
unfavourable conditions
3. Most likely time (m) = most realistic estimate of the time required to
complete an activity

In PERT, we assume that activity time estimates follows beta probability

distribution. This continuous distribution is often appropriate to determine the
expected value and variance for activity completion times
 probability

optimistic pessimisti
time (a) c time (b)
Most
likely time
(m)
Optimisti
c time activity time

To find the expected activity time (t), the beta distribution weights the three-time estimates as follows:

t=
To compute the expected project completion time (critical path) = same as CPM, that is maximum path
time, but use expected activity time (t) for each activity now instead of normal time

To compute the dispersion or variance of activity completion time:

Variance () =
To compute the total project variance :

= Sum of all activity variance (

To compute the project standard deviation :

σ p= √ project variance
To compute the probability that project will finish on or before certain time (PERT assumes expected
project completion time, that is critical path, follows normal distribution)

Z =

Z is standard normal variate and indicates the number of standard deviation from mean (or due
date in our case) in normal probability distribution. Z can be positive or negative.
After calculating Z, we can see its value in Z-table to find the probability or area under the
curve. This will give probability of completion of project in some mentioned time period.
However, it is not important in this course at present to see Z-table.
You just have to find Z.
Example – same network problem with following time estimates

Activity Optimistic (a) Most likely (m) Pessimistic (b) Expected time (t) Variance ()
= =

A 1 2 3 2 0.11
B 2 3 4 3 0.11
C 1 2 3 2 0.11
D 2 4 6 4 0.44
E 1 4 7 4 1.00
F 1 2 9 3 1.78
G 3 4 11 5 1.78
H 1 2 3 2 0.11
• Critical path is same and its expected completion time = 15 weeks
• Total project variance = Sum of all activity variance (
= 0.11+0.11+1.00+1.78+0.11 = 3.11
• Project standard deviation =
• Now the company manager wants to determine the probability that her project will be
finished on or before the 16-week.
Z= =
Referring to Z-table; we find a Z-value of 0.57 to the right of the mean indicates a probability
of 0.7157. Thus, there is a 71.57% chance that the pollution control equipment can be put
in place in 16 weeks or less.

Note: you don’t need to find probability, it is just for your

understanding. Till Z you have to solve in exam.
Practice set
1. Draw the network and find the critical path. Ans 21 weeks
Activity Immediate Time (Weeks) After making the network diagram,
predecessors suppose the manager wants to
reduce the project completion time
A - 3
and chooses crashing method.
B - 6 Suppose activity A has normal time of
3 weeks and crashing time of 1 week.
C A 2
Its normal cost is $900 and crashing
D B,C 5 cost is $1700. Similarly, activity B has
normal time of 6 weeks and crashing
time of 3 weeks, its normal cost is
E D 4
$2000 and crashing cost is $4000.
F E 3 So, which activity, that is, either A or
B, the manger should choose for
G B,C 9
crashing and what will be its crash
H F,G 3 cash per period?
 After making the network diagram,
which activity, that is, either A, B, D,G
the manger should choose for
2. Draw the network and find the critical path. Ans 14 weeks crashing? Also calculate slack of
each activity? Which activity/activities
has most slack time?

Activity Immediate Time ES EF LS Slack

predecessor (Weeks)
s
A - 3 3 0

B - 2 2 1

C A 5 8 3

D B 5 7 3

E C,D 6 14 8

F C,D 2 10 10

G F 2 12 12
 3. Consider the following project network and activity times (in weeks)

C H

Star D F
t Finish

B E G

Activity A B C D E F G H

Time 5 3 7 6 7 3 10 8

i. Identify the critical path and total time to complete the project?
ii. Which activities are the critical activities?
iii. Calculate the earliest start (ES) and earliest finish time (EF) for activities A, B, C, D, E, F
4. Suppose in problem 3 (previous network), instead of deterministic times, PERT is to be used with the
following time estimates

i. What is the expected project completion

Activity Optimistic (a) Most likely (m) Pessimistic (b) time? Ans 22 weeks
ii. What is the probability that the project will
be completed within 21 weeks, 22 weeks,
and 25 weeks? Ans Z = -0.64, 0.00, +1.92

A 4 5 6
B 2.5 3 3.5
C 6 7 8
D 5 5.5 9
E 5 7 9
F 2 3 4
G 8 10 12
H 6 7 14