Project Management

Bechtel Projects

► Constructing 30 high-security data centers worldwide

for Equinix, Inc. ($1.2 billion)
► Building a rail line between London and the Channel
Tunnel ($4.6 billion)
► Developing an oil pipeline from the Caspian Sea
region to Russia ($850 million)
► Expanding the Dubai Airport in the UAE ($600
million), and the Miami Airport in Florida ($2 billion)

© 2014 Pearson Education, Inc.

 Bechtel Projects

► Building liquid natural gas plants in Yemen ($2 billion)

and in Trinidad, West Indies ($1 billion)
► Building a new subway for Athens, Greece ($2.6
billion)
► Constructing a natural gas pipeline in Thailand ($700
million)
► Building 30 plants for iMotors.com, a company that
sells refurbished autos online ($300 million)
► Building a highway to link the north and south of
Croatia ($303 million)

© 2014 Pearson Education, Inc.

 Project Characteristics

► Single unit
► Many related activities
► Difficult production planning and
inventory control
► General purpose equipment
► High labor skills
 Examples of Projects
► Building Construction

► Research Project
 Project Management Activities
► Planning
► Objectives ► Scheduling
► Resources ► Project
activities
► Work break-
down structure ► Start and end
times
► Organization
► Network

► Controlling
► Monitor, compare, revise, action
 Project Planning,
Scheduling, and Controlling

Figure 3.1
 Project Planning,
Scheduling, and Controlling

Figure 3.1
 Project Planning,
Scheduling, and Controlling

Figure 3.1
 Project Planning,
Scheduling, and Controlling

Figure 3.1
 Project Time/cost
Planning,
Budgets
estimates

Scheduling, and Controlling

Engineering diagrams
Cash flow charts
Material availability details

Budgets
Delayed activities report
Slack activities report

CPM/PERT
Gantt charts
Milestone charts
Figure
Cash 3.1schedules
flow
 Project Planning
► Establishing objectives
► Defining project
► Creating work
breakdown structure
► Determining
resources
► Forming organization
 Project Organization
► Often temporary structure
► Uses specialists from entire company
► Headed by project manager
► Coordinates activities
► Monitors schedule
and costs
► Permanent
structure called
‘matrix organization’
 Project Organization
Most Helpful When:
1. Work can be defined with a specific goal
and deadline
2. The job is unique or somewhat unfamiliar
to the existing organization
3. The work contains complex interrelated
tasks requiring specialized skills
4. The project is temporary but critical to the
organization
5. The project cuts across organizational
lines
 A Sample Project
Organization
President

Human Quality
Resources Marketing Finance Design Production
Mgt

Project Project Mechanical Test

Technician
No. 1 Manager Engineer Engineer

Project Project Electrical Computer

Technician
No. 2 Manager Engineer Engineer

Figure 3.2
 Matrix Organization
Marketing Operations Engineering Finance

Project 1

Project 2

Project 3

Project 4
 The Role of
the Project Manager
Highly visible
Responsible for making sure that:
1) All necessary activities are finished in order
and on time
2) The project comes in within budget
3) The project meets quality goals
4) The people assigned to the project receive
motivation, direction, and information
 The Role of
the Project Manager
Highly visible Project managers should be:
Responsible for making sure that:
► Good coaches
1) All necessary activities
► Goodare finished in order
communicators
and on time ► Able to organize activities

2) The project comes from a variety

in within of disciplines
budget
3) The project meets quality goals
4) The people assigned to the project receive
motivation, direction, and information
 Work Breakdown Structure

Level
1. Project
2. Major tasks in the project
3. Subtasks in the major tasks
4. Activities (or “work packages”)
to be completed
 Work Breakdown Structure
Develop Windows 8
Level 1 1.0
Operating System

Software Cost Management System

Level 2 1.1 1.2 1.3
Design Plan Testing

Develop Design Cost Module

Level 3 1.1.1 1.2.1 1.3.1
GUIs Tracking Reports Testing

Ensure Compatibility Develop Defect

with Earlier Versions 1.1.2 Cost/Schedule 1.2.2 Testing 1.3.2
Interface

Compatible with
Level 4 1.1.2.1
Windows 7
(Work packages)
Compatible with
1.1.2.2
Windows Vista

Compatible with Figure 3.3

Windows XP 1.1.2.3
Project Scheduling Techniques
1) Ensure that all activities
are planned for
2) Their order of
performance is
accounted for
3) The activity time
estimates are recorded
4) The overall project time is developed
 Purposes of Project
Scheduling
1. Shows the relationship of each activity to
others and to the whole project
2. Identifies the precedence relationships
among activities
3. Encourages the setting of realistic time and
cost estimates for each activity
4. Helps make better use of people, money,
and material resources by identifying critical
bottlenecks in the project
 Project Management
Techniques

► Gantt chart
► Critical Path Method (CPM)
► Program Evaluation and Review
Technique (PERT)
 A Simple Gantt Chart

Time
J F M A M J J A S

Design
Prototype
Test
Revise
Production
 Service For a Delta Jet
Deplaning
Passengers
Baggage claim
Baggage Container offload
Pumping
Fueling
Engine injection water
Cargo and mail Container offload
Main cabin door
Galley servicing
Aft cabin door
Lavatory servicing Aft, center, forward
Drinking water Loading
First-class section
Cabin cleaning
Economy section
Cargo and mail Container/bulk loading
Galley/cabin check
Flight services
Receive passengers
Operating crew Aircraft check
Baggage Loading
Passengers Boarding
0 10 20 30 40
Time, Minutes
Figure 3.4
 Project Controlling
► Close monitoring of
resources, costs,
quality, budgets
► Feedback enables
revising the project plan
and shift resources
► Computerized tools
produce extensive
reports
 PERT and CPM
► Network techniques
► Developed in 1950s
► CPM by DuPont for chemical plants (1957)
► PERT by Booz, Allen & Hamilton with the U.S.
Navy, for Polaris missile (1958)
► Consider precedence relationships and
interdependencies
► Each uses a different estimate of activity
times
 Six Steps PERT and CPM
1. Define the project and prepare the
work breakdown structure
2. Develop relationships among the
activities – decide which activities must
precede and which must follow others
3. Draw the network connecting all of the
activities
 Six Steps PERT and CPM
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
 Questions PERT and CPM
Can Answer
1. When will the entire project be completed?
2. What are the critical activities or tasks in the
project?
3. Which are the noncritical activities?
4. What is the probability the project will be
completed by a specific date?
 Questions PERT and CPM
Can Answer
5. Is the project on schedule, behind schedule,
or ahead of schedule?
6. Is the money spent equal to, less than, or
greater than the budget?
7. Are there enough resources available to
finish the project on time?
8. If the project must be finished in a shorter
time, what is the way to accomplish this at
least cost?
 A Comparison of AON and
AOA Network Conventions
Activity on Activity Activity on
Node (AON) Meaning Arrow (AOA)
A comes before
(a) A B C B, which comes
before C A B C
A A
A and B must both
(b) C be completed
before C can start C
B B
B
B and C cannot
(c) A begin until A is B
completed A
C C
 A Comparison of AON and
AOA Network Conventions
Activity on Activity Activity on
Node (AON) Meaning Arrow (AOA)

C and D cannot
A C begin until both A C
(d) A and B are
completed
B D B D

C cannot begin until

both A and B are
A C completed A C
(e) D cannot begin until Dummy activity
B is completed
B D A dummy activity is
introduced in AOA B D
 A Comparison of AON and
AOA Network Conventions
Activity on Activity Activity on
Node (AON) Meaning Arrow (AOA)

B and C cannot
begin until A is
completed
A B D D cannot begin A B D
until both B and C
(f) are completed Dummy
A dummy activity activity
C
C
is again
introduced in AOA
 AON Example
Table 3.1 Milwaukee Paper Manufacturing’s Activities and Predecessors
IMMEDIATE
ACTIVITY DESCRIPTION PREDECESSORS
A Build internal components —
B Modify roof and floor —
C Construct collection stack A
D Pour concrete and install frame A, B
E Build high-temperature burner C
F Install pollution control system C
G Install air pollution device D, E
H Inspect and test F, G
 AON Network for
Milwaukee Paper

F
A C

E
Start H

B D G

Arrows Show Precedence Figure 3.7

Relationships
 AOA Network for
Milwaukee Paper
C
2 4
(Construct
Stack)

H
1 Dummy 6 7
Activity (Inspect/
Test)

D
3 5
(Pour Figure 3.8
Concrete/
Install Frame)
Determining the Project Schedule

Perform a Critical Path Analysis

► The critical path is the longest path
through the network
► The critical path is the shortest time in
which the project can be completed
► Any delay in critical path activities delays
the project
► Critical path activities have no slack time
 Determining the Project Schedule

Table 3.2 Time Estimates for Milwaukee Paper Manufacturing

ACTIVITY DESCRIPTION TIME (WEEKS)
A Build internal components 2
B Modify roof and floor 3
C Construct collection stack 2
D Pour concrete and install frame 4
E Build high-temperature burner 4
F Install pollution control system 3
G Install air pollution device 5
H Inspect and test 2
Total time (weeks) 25
 Activities with zero slack are on the critical path. It:
Computing Slack Time
► Starts at the first activity in the project

► Terminates at the last activity in the project

► Includes only critical activities

TABLE 3.3 Milwaukee Paper’s Schedule and Slack Times
EARLIEST EARLIEST LATEST LATEST ON
START FINISH START FINISH SLACK CRITICAL
ACTIVITY ES EF LS LF LS – ES PATH
A 0 2 0 2 0 Yes
B 0 3 1 4 1 No
C 2 4 2 4 0 Yes
D 3 7 4 8 1 No
E 4 8 4 8 0 Yes
F 4 7 10 13 6 No
G 8 13 8 13 0 Yes
H 13 15 13 15 0 Yes
 Critical Path for
Milwaukee Paper
A C F
0 2 2 4 4 7

0 2 2 4 10 13
2 2 3

Start E H
0 0 4 8 13 15

0 0 4 8 13 15
0 4 2

B D G
0 3 3 7 8 13
1 4 4 8 8 13
3 4 5
 ES – EF Gantt Chart
for Milwaukee Paper
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

A Build internal
components
B Modify roof and floor
C Construct collection
stack
D Pour concrete and
install frame
E Build high-temperature
burner
F Install pollution control
system
G Install air pollution
device
H Inspect and test
 LS – LF Gantt Chart
for Milwaukee Paper
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

A Build internal
components
B Modify roof and floor
C Construct collection
stack
D Pour concrete and
install frame
E Build high-temperature
burner
F Install pollution control
system
G Install air pollution
device
H Inspect and test
Variability in Activity Times

► CPM assumes we know a fixed time

estimate for each activity and there is
no variability in activity times
► PERT uses a probability distribution for
activity times to allow for variability
 Variability in Activity Times

► Three time estimates are required

► Optimistic time (a) – if everything goes
according to plan
► Pessimistic time (b) – assuming very
unfavorable conditions
► Most likely time (m) – most realistic
estimate
 Variability in Activity Times
Estimate follows beta distribution
Expected activity time:
t = (a + 4m + b)/6
Variance of activity completion times:
v = [(b – a)/6]2
 Variability in Activity Times
Estimate follows beta distribution
Figure 3.11
Expected activity time:
t = (a + 4m + b)/6
Probability of 1t in =
100 (a + 4m + b)/6
of < a occurring
Probability

v =
Variance of activity completion[(b − a)/6]2Probability of 1 in 100
of >times:
b occurring

v = [(b – a)/6]2 Activity

Time

Optimistic Most Likely Pessimistic

Time (a) Time (m) Time (b)
 Computing Variance
TABLE 3.4 Time Estimates (in weeks) for Milwaukee Paper's Project

MOST
OPTIMISTIC LIKELY PESSIMISTIC EXPECTED TIME VARIANCE
ACTIVITY a m b t = (a + 4m + b)/6 [(b – a)/6]2
A 1 2 3 2 .11

B 2 3 4 3 .11

C 1 2 3 2 .11

D 2 4 6 4 .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 .11

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 Probability of Project
Completion
Project variance is computed by
summing the variances of critical
activities
p2 = Project variance
= (variances of activities
on critical path)
 Probability of Project
Completion
Project variance is computed by
summing the variances of critical
Project variance
activities
2p = .11 + .11 + 1.00 + 1.78 + .11 = 3.11

Project standard deviation

p = Project variance
= 3.11 = 1.76 weeks
 Probability of Project
Completion
PERT makes two more assumptions:

► Total project completion times follow a

normal probability distribution
► Activity times are statistically independent
 Probability of Project
Completion
What is the probability this project can
be completed on or before the 16 week
deadline?

Z = Due – Expected date /p

date of completion
= (16 weeks – 15 weeks)/1.76

= 0.57 Where Z is the number of

standard deviations the due
date or target date lies from the
mean or expected date
 Probability of Project
Completion
0.57 Standard deviations
Probability
(T ≤ 16 weeks)
is 71.57%

15 16 Time
Weeks Weeks
Figure 3.13
 Determining Project
Completion Time
Probability
of 0.99

Probability
of 0.01

2.33 Standard Z
From Appendix I deviations
0 2.33
Figure 3.14
Variability of Completion Time
for Noncritical Paths
► Variability of times for activities on
noncritical paths must be considered
when finding the probability of
finishing in a specified time
► Variation in noncritical activity may
cause change in critical path
What Project Management Has
Provided So Far
1. The project’s expected completion time is
15 weeks
2. There is a 71.57% chance the equipment
will be in place by the 16 week deadline
3. Five activities (A, C, E, G, and H) are on
the critical path
4. Three activities (B, D, F) are not on the
critical path and have slack time
5. A detailed schedule is available
Cost–Time Trade-Offs and Project
Crashing
It is not uncommon to face the
following situations:
► The project is behind schedule
► The completion time has been
moved forward

Shortening the duration of the

project is called project crashing
 Factors to Consider When
Crashing a Project
► The amount by which an activity is
crashed is, in fact, permissible
► Taken together, the shortened activity
durations will enable us to finish the
project by the due date
► The total cost of crashing is as small as
possible
 Steps in Project Crashing
Step 1: Compute the crash cost per time
period. If crash costs are linear over
time:
Crash cost (Crash cost – Normal cost)
per period = (Normal time – Crash time)

Step 2: Using current activity times, find the

critical path and identify the critical
activities
 Steps in Project Crashing
Step 3: If there is only one critical path, then
select the activity on this critical path
that (a) can still be crashed, and (b) has
the smallest crash cost per period. If
there is more than one critical path,
then select one activity from each
critical path such that (a) each selected
activity can still be crashed, and (b) the
total crash cost of all selected activities
is the smallest. Note that the same
activity may be common to more than
one critical path.
 Steps in Project Crashing
Step 4: Update all activity times. If the desired
due date has been reached, stop. If not,
return to Step 2.
 Crashing The Project
TABLE 3.5 Normal and Crash Data for Milwaukee Paper Manufacturing

TIME (WEEKS) COST ($)

CRASH COST CRITICAL
ACTIVITY NORMAL CRASH NORMAL CRASH PER WEEK ($) PATH ?
A 2 1 22,000 22,750 750 Yes

B 3 1 30,000 34,000 2,000 No

C 2 1 26,000 27,000 1,000 Yes

D 4 3 48,000 49,000 1,000 No

E 4 2 56,000 58,000 1,000 Yes

F 3 2 30,000 30,500 500 No

G 5 2 80,000 84,500 1,500 Yes

H 2 1 16,000 19,000 3,000 Yes

Copyright © 2017 Pearson Education, Inc. 3 - 67

 Crash and Normal Times
and Costs for Activity B
Activity
Cost
Crash

$34,000 — Crash Cost – Normal Cost

Crash Cost/Wk =
Normal Time – Crash Time
Crash $33,000 — $34,000 – $30,000
Cost =
$32,000 —
3–1
$4,000
= = $2,000/Week
$31,000 — 2 Wks

$30,000 —
Normal
Normal —
Cost
| | |
1 2 3 Time (Weeks)
Figure 3.15
Crash Time Normal Time
 Critical Path and Slack Times
for Milwaukee Paper
Figure 3.16

A C F
0 2 2 4 4 7

0 2 2 4 10 13
2 2 3

Start Slack = 0 Slack = 0 E Slack = 6 H

0 0 4 8 13 15

0 0 4 8 13 15
0 4 2

B D Slack = 0 G Slack = 0
0 3 3 7 8 13
1 4 4 8 8 13
3 4 5

Slack = 1 Slack = 1 Slack = 0

 Advantages of PERT/CPM
1. Especially useful when scheduling and
controlling large projects
2. Straightforward concept and not
mathematically complex
3. Graphical networks help highlight
relationships among project activities
4. Critical path and slack time analyses help
pinpoint activities that need to be closely
watched
 Advantages of PERT/CPM
5. Project documentation and graphics point
out who is responsible for various activities
6. Applicable to a wide variety of projects
7. Useful in monitoring not only schedules but
costs as well
 Limitations of PERT/CPM
1. Project activities have to be clearly defined,
independent, and stable in their
relationships
2. Precedence relationships must be specified
and networked together
3. Time estimates tend to be subjective and
are subject to fudging by managers
4. There is an inherent danger of too much
emphasis being placed on the longest, or
critical, path