Project Management

Introduction

Project Management can be used to

manage complex projects

y
Almost every industr
worries about how to
manage large-scale,
complicated projects
ult
c
if
d
a
is
It
.
ly
e
v
ti
c
e
ef
es
k
ta
s
e
th
d
n
a
,
m
le
b
pro
are high.

The frst step in

planning and
scheduling a proje
ct is
to develop the wo
rk
breakdown structu
re.

Work
Breakdown
Structure.

This involves identifying the activities that must be

performed in the project. There may be varying
levels of detail, and each activity may be broken
into its most basic components. The time, cost,
resource requirements, predecessors, and
person(s) responsible are identifed for each
activity.

Quantitative Analysis
Techniques

Program Evaluation and Review

Technique (PERT)

Critical Path Method (CPM)

1
2
3
4
5
6

6Steps of PERT and CPM

Defne the project and all of its signifcant

activities or tasks.

Develop the relationships among the activities.

Decide which activities must precede others.

Draw the network connecting all of the

activities.
Assign time and/or cost estimates to each
activity.
Compute the longest time path through the
network critical path.
Use the network to help plan, schedule,
monitor, and control the project.

Framework
The critical path is
important because
activities on the
critical path can d
elay
the entire project
T
R
E
P
h
g
u
o
h
lt
A
and CPM are
ir
similar in the
h,
basic approac
in
they do difer
ity
v
i
t
c
a
y
a
w
e
h
t
times are
ted.

PERT is a
probabilistic
technique it
allows us to fnd
the probability that
the entire project
will be completed
by any given date.

CPM is a deterministic
approach it uses two
time estimates, the
normal time and the

Framework

Normal Completion Time

- time estimated that it will take under normal
conditions to complete the activity.

Crash Completion Time

- shortest time it would take to fnish an
activity if additional funds and resources were
allocated to the task.

CPM is a deterministic
approach it uses two
time estimates, the
normal time and the

Questions answered by
PERT

1When will the entire project be completed?

What are the critical activities or tasks in the
2project, that are, the ones that will delay the
entire project if they are late?

are the noncritical activities, that are, the

3Which
ones that can run late without delaying the
entire projects completion?
is the probability that the project will be
4What
completed by a specifc date?

Questions answered by
PERT

At any particular date, is the project on schedule,

behind the schedule, or ahead of schedule?

any given date, is the money spent equal to,

6On
less than, or greater than the budgeted amount?
there enough resources available to fnish
7Are
the project on time?
the project is to be fnished in a shorter
8Ifamount
of time, what is the best way to
accomplish this at the least cost?

Drawing the PERT Network

Two common techniques:

(AON)
1Activity-on-node
nodes represent the activities

(AOA)
2Activity-on-arc
arcs represent the activities

Activity-on-node (AON)

In constructing, there should be one

node representing the start of the
project and one node representing
the fnish of the project.

General Foundry, Inc. Example

General Foundry, Inc., a metalworks plant in Cebu
City, has long been trying to avoid the expense of
installing a air pollution control equipment. The local
environmental protection group has recently given
the foundry 16 weeks to install a complex air flter
system on its main smokestack. General Foundry
was warned that it will be forced to close unless the
device is installed in the allotted period. The Plant
Manager, wants to make sure that installation of the
fltering system progresses smoothly and on time.

General Foundry, Inc. Example

ACTIVITY

DESCRIPTION

IMMEDIATE
PREDECESSORS

Build internal components

--

Modify roof and floor

--

Construct collection stack

Pour concrete and install frame

Build high-temperature burner

Install control system

Install air pollution device

D, E

Inspect and test

F,G

General Foundry, Inc. Example

A

Build
Internal
Components

Construct
Collection
Stack

Install
Control
System

Start

Inspect and
Test

Build
Burner

Modify Roof
and Floor

Modify Roof
and Floor

G
Install
Pollution
Device

Finish

Activity Times

Optimistic Time (a) = time an activity will take if

everything goes as well as possible.
There should be only a small
probability (say, 1/100) of this
occurring.

Pessimistic Time (b) = time an activity would take

assuming very unfavourable
conditions. There should also be only
a
small probability that the activity
will
really take this long

Activity Times

Most likely time (m) = most realistic time

estimate to
complete the activity.

Probabilit
y

PERT often assumes that time estimates follow the

beta probability distribution
Probability of 1 in
100 of b occurring

Probability of 1 in
100 of a occurring

Activit
y Time
Most Optimistic
Time
(a)

Most Likely Time

(m)

Most Pessimistic Time

(b)

Activity Times

The expected activity time (t), from beta

distribution:

t = (a + 4m + b) / 6

The variance of activity completion time:

variance = [(b a) / 6]2

Time estimates (Weeks)

for General Foundry, Inc.
Activit Optimistic, a
y

Most
Probable,
m

Pessimistic,
b

Expecte
d
Time, t

Varianc
e

4/36

4/36

4/36

16/36

36/36

64/36

11

64/36

4/36

Network with Expected Activity Times

for General Foundry, Inc.
A

Start

Finish

Finding the Critical Path

Critical Path longest time path route through the

network.

Finding the critical path, we need to determine the

following quantities for each activity in the network:

Earliest start time (ES): the earliest time an activity can

begin without violation of immediate predecessor
requirements

2Earliest finish time (EF): the earliest

time at which an activity can end.

Finding the Critical Path

start time (LS): the latest time an activity
3Latest
can begin without delaying the entire project.
finish time (LF): the latest time at activity
4Latest
can end without delaying the entire project.

Earliest Times

earliest fnish time = earliest start time + expected activity

time
EF = ES + t

before any activity can be started, all of its predecessors

activities must be completed. In other words, we search for the
largest EF for all of the immediate predecessors in determining
ES

2earliest start = largest of the earliest fnish

times of immediate predecessors
ES = largest EF of immediate
predecessors

Earliest Times
A
ES = 0

t=2
EF = 0 + 2 = 2

Start

B
ES = 0

t=3
EF = 0 + 3 = 3

Earliest Start (ES) & Earliest Finish (EF) Times

for General Foundry, Inc.
Using Forward Pass through the network:
A

Start

13

15

13

The fnish time for the project will be 15 weeks, which is the EF for
activity H.

Finish

Latest Times

1latest start time = latest fnish time activity tim

LS = LF - t

the latest start time for an activity determines the latest finish
time for its immediate predecessors. If an activity is the
immediate predecessor for two or more activities, it must be
finished so that all following activities can begin by their latest
start times.

2latest fnish time = smallest of latest start

times for following activities

LF = smallest LS of following activities

Earliest Start (ES) & Earliest Finish (EF) Times

for General Foundry, Inc.
Using Backward Pass through the network:
A

10

13

Start

13

15

13

15

13

13

Finish

For activity C, which is the immediate predecessor for two activities (E &
F), the latest fnish time is the smaller of the latest start times (4 & 10)
for E & F activity.

Slack in Critical Path

Slack time or free time, that each activity has.

Slack the length of time an activity can be
delayed

without delaying the whole project.

slack = LS ES or slack = LF
- EF

Slack in Critical Path

for General Foundry, Inc.
Activit
y

Earliest
Start,
ES

Earliest
Finish,
EF

Latest
Start,
LS

Latest
Finish,
LF

Slack

On
Critical
Path?

Yes

No

Yes

No

Yes

10

13

No

13

13

Yes

13

15

13

15

Yes

Activities A, C, E, G, and H have no slack time; this means that

none of them can be delayed without delaying the entire project.
These are called, critical activities and are said to be on critical
path.

Critical Path for General Foundry, Inc.

A

10

13

Start

13

15

13

15

13

13

Finish

Probability of Project Completion

PERT uses the variance of critical path activities to

help determine the variance of the overall project.
If the activity times are statistically independent,
the project variance is computed by summing the
variances of the critical activities:
project variance = variances of activities on the critical path

Probability of Project Completion

Critical
Activity

Variance

4/36

4/36

36/36

64/36

4/36

Hence, the project variance is

project variance = 4/36 + 4/36 + 36/36
+ 64/36 + 4/36
= 3.111

Probability of Project Completion

Standard Deviation =
1.76 Weeks

15 Weeks
(Expected Completion
Time)

project standard deviation = T = (project

variance)1/2
= (3.111)1/2 = 1.76 Weeks

Probability of Project Completion

Z = (due date expected date of
completion) T
= (16 -15 Weeks ) 1.76
= 0.57

General Foundry,
Inc. Example

where,
Z is the number of standard
deviations the due date or target date
lies from the mean or expected date

Probability of General Foundrys

Meeting the 16-Week Deadline

Expected Time is 15 Weeks

0.57 Standard
Deviation

Probability
(T 16
Weeks)
is 71.6%

15 Weeks16 Weeks

Time

What PERT was able to Provide

projects expected completion date is 15
1The
weeks.
is a 71.6% chance that the equipment will be
2There
in place within the 16-week deadline. PERT can easily
fnd the probability of fnishing by any expected date.

activities (A, C, E, G, H) are on the critical

3Five
path. If any one of them is delayed for any
reason, the entire project will be delayed.

What PERT was able to Provide

activities (B, D, F) are not critical but
4Three
have some slack time built in. This means that
resources can be borrowed, if needed,
possibly to speed up the entire project.
detailed schedule of activity starting and
5Aending
dates has been made available.

Sensitivity Analysis and

Project Management

Predecessor Activity one that must be completed

before the given activity can be started.

Successor Activity an activity that can be started

only after the given activity is finished.

Parallel Activity an activity that does not directly

depend on the given activity.

Sensitivity Analysis and

Project Management
Activity
Time

Successor
Activity

Parallel Activity

Predecessor
Activity

Earliest Start

Increase
(decrease)

No change

No change

Earliest
Finish

Increase
(decrease)

No change

No change

Latest Start

Increase
(decrease)

Increase
(decrease)

No change

Latest Finish

Increase
(decrease)

Increase
(decrease)

No change

Slack

No change

Increase
(decrease)

No change