LECTURE NOTES ON PROJECT

MANAGEMENT

Recapitulate

Learning Outcomes
After this session students will be able to:

- Explain the term ‘Project Management’.

- List the core components of Project Management.

- Explain the Critical Path Method (CPM).

- Explain the Programme Evaluation & Review Technique (PERT).

- Differentiate between CPM & PERT.

- Explain the Concept of Break-Even-Analysis (BEA).

- Construct a network diagram.

- Determine the critical path.

1 Project Management
Projects are backbone of any economy. The range of activities is so wide that it almost
encompasses all economic activities. These days project management is fast emerging as
a new profession. Project managers are required in a construction project, R& D project,
urban/rural development project, setting up a new factory for manufacture of some goods,
etc.

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1.1 Introduction & Meaning of Project Management
Project management is the discipline of organizing and managing resources in such a way
that these resources deliver all the work required to complete a project within defined scope,
time, and cost constraints.
A successful project management can therefore be defined as having achieved the project
objectives like; within the time limit, within estimated cost, desired performance/technology
level, and utilized the assigned resources effectively and efficiently.

Project management is a tool of management for planning and control.The objective of

which has been defined as an attempt to make the most efficient and effective use of re-
sources, viz.: manpower, equipment, facilities, materials, money,technology and informa-
tion, so that the organization’s objectives and goals can be achieved within budget, on sched-
ule and at the desired performance/technology level, while adhering to the ever changing
environmental input factors, like legal, social, political, economical and technological.

Project management can be defined as the planning, organizing, directing and controlling
of company resources for a relatively short-term objective that has been established to com-
plete specific goals and objectives.

1.2 Definitions of Project Management

Project management is the application of processes, methods, knowledge, skills and experi-
ence to achieve the project objectives.

According to Project Management Institute (PMI): “Project Management is the application

of knowledge, skills, tools and techniques to project activities in order to meet or exceed
stakeholder needs and expectations”.
A project is a temporary and one time endeavor undertaken to create a unique product or
service.

1.3 Result Expected from Project Management

Following results are expected from Project Management:

• Attainment of project objectives in a timely manner within budget.

• Progress reports with deviations from plan highlighted.

• Significant decisions from top management for approval.

1.4 Role & Responsibilities of Project Manager

The basic role & Responsibility of a Project manager are as under:

1. Organize and implement diverse and scattered activities to achieve time, cost and
performance goals.

2. Develop project execution plan.

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 3. Organize for execution of the plan. He should show his commitment to this plan.

4. He should inculcate enthusiasm, team spirit, confidence and reputations for excel-
lence.

5. Develop systems and procedure for accomplishment of project objectives.

6. Direct, coordinate and control the project activities.

7. Guiding and Problem solving.

8. Satisfaction of customers, government, and public.

9. He should be an entrepreneur.

1.5 Tools & Techniques for Project Management

Following are the important tools and techniques for effective project management.

1. Project selection techniques.

(a) Cost-benefit analysis.
(b) Risk and sensitivity analysis.

2. Project implementation (execution) planning techniques.

(a) Work break down structure (WBS)
(b) Project implementation plan.
(c) Project responsibility matrix.
(d) Project management manuals.

3. Project scheduling techniques.

(a) Line of Balance (LOB)
(b) Bar Charts
(c) Network Techniques (CPM/PERT).

4. Project monitoring techniques.

(a) Progress measurement technique.
(b) Performance monitoring technique.
(c) Updating, reviewing and reporting technique.

5. Project cost and productivity techniques

(a) Value engineering.
(b) Budgetary control.
(c) Cost/WBS.

6. Project communication techniques.

(a) Computerized information system.
(b) Control room.
(c) MIS.

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1.6 Project Formulation
“Project Formulation” is the systematic development of a project idea for arriving at an
investment decision. Project Formulation involves the following elements:-
a) Feasibility analysis
b) Techno-Economic analysis
c) Project Design and Network analysis
d) Input analysis
e) Financial analysis
f) Social Cost-benefit analysis
g) Project appraisal.

1.7 Phases/Stages of Project Management

. Gaya P
Source: https://researchadmin.asu.edu/themes/rtdoked/images/pmo-process.png

2 Introduction to CPM & PERT Technique

Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) are
two most widely used techniques in project management. The objectives of project man-
agement can be described in terms of a successful completion of project on time within the
budgeted cost and adhering to technical specifications which satisfy the end users. A project
is any human undertaking with a clear beginning and a clear ending.
These techniques have been created out of the need of Western industrial and military estab-
lishments to plan, schedule and control the complex projects.
Prior to the development of PERT and CPM, the most popular technique for project schedul-
ing was the Bar or Gantt Chart developed by Henry L. Gantt in around 1900. These Charts
show a graphic representation of work on a time scale.

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2.1 Introduction to Programme Evaluation Review Technique (PERT)
• PERT was first used in 1957 as a method of planning and controlling the Polaris Mis-
sile Programme by Booz, Allen and Hamilton together with U.S. Nawal department.
The aim was to finish the project two years in advance. PERT describes basic network
technique which includes planning, monitoring and control of projects.

• PERT is a very important technique in the field of project management. It is com-

monly employed for conducting the initial review of a project.

• PERT, actually, developed as a research and development planning tool where activity
timings could not be estimated with enough certainty.

• PERT can be employed at those places where a project can not be easily defined in
terms of time or resources required.

• PERT is mainly concerned with event and thus it is an event-oriented system.

• The basic tools used in PERT technique is the network or flow plan. Network consists
of series of related events and activities.

The PERT planning technique consists of the following steps:

1. The project is broken down into different activities.

2. Activities are arranged in logical sequence.

3. The network diagram is drawn. Events and activities are numbered.

4. Using three times estimate, the expected time for each activity is calculated.

5. Standard deviation and variance for each activity are computed.

6. Earliest starting times and Latest finishing times are calculated.

7. Expected time, earliest starting time, and latest finishing times are marked on the
network diagram.

8. Slack is calculated.

9. Critical path(s) are identified and marked on the network diagram.

10. Length of critical path or total project duration is found out.

11. Lastly, the probability that the project will finish at due date is calculated.

All activity arrows must begin and end with event nodes. It is shown in the following figure:

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 Diagram of Project Network (PERT)

a
1.1 Introduction to Critical Path Method (CPM)
• The E. I. Du Pont de Nemours Company (USA) in the year 1958 while overhauling
a chemical plant emloyed a technique is called Critical Path Method to schedule and
control the project and experienced a good amount of saving.

• Unlike PERT, CPM developed in civilian business and engineering industry where
activity timings were relatively well known.

• CPM is applicable to both large and small projects, taking from space programmes to
wedding or horse shows. It is widely recognized and is the most versatile and potent
management planning technique.

• CPM is a technique, used for planning and controlling the most logical and economic
sequence of operations for accomplishing a project. The project is analyzed into dif-
ferent activities whose relationship, as in PERT, are shown on the network diagram.
The network is then utilized for optimising the use of resources, progress and control.

The CPM employs the following steps for accomplishing a project planning:

1. Break down the project into various activities systematically.

2. Label all activities.

3. Arrange all the activities in logical sequence.

4. Construct the arrow diagram.

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 5. Number all the nodes (events) and activities.

6. Find the time of each activity.

7. Mark the activity times on the arrow diagram.

8. Calculate early and late, start and finishing times.

9. Tabulate various times and marks Earliest Start Time (EST) and Latest Finished Time
(LFT) on the arrow diagram.

10. Calculate total float for each activity.

11. Identify the critical activities and mark the critical path on the arrow diagram.

12. Calculate the total project duration.

13. If it is intended to reduce the total project duration, crash the critical activities of the
network.

14. Optimise the cost

15. Update the Network.

16. Smooth the network resources.

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Diagram of Project Network (CPM)

Source: http://www.pmknowledgecenter.com/

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1.2 Difference between PERT & CPM
There is not much difference between PERT & CPM. In fact both were developed simul-
taneously and independently for the similar requirements. The only difference lies in the
‘event’ or ‘activity’ on which network is constructed. The ‘activity’ stands for the time-
consuming parts of the project. It represents a job; on the other hand, an ‘event’, also called
‘node’ either beginning or an end of a job. The CPM analysis is activity-oriented and PERT
is event-oriented.
1. The CPM is a kind of technique commonly known for its use in constructions project;
whereas PERT mostly used in R & D projects like the projects considered being a
kind of non-repetitive nature.

2. Both techniques have different concept of working like CPM uses deterministic con-
cept for its work whereas probabilistic concept is used by PERT.

3. Networking approach also varies in both techniques like CPM uses networking that
based upon activity oriented; on contrary PERT uses networking that based on event.

4. In PERT technique, an estimation of time for different activities is not perfect and
accurate whereas in CPM activities duration are estimated with the quality of accuracy.

5. Both of the techniques used for same purpose but the nature of their working is dif-
ferent and some can do their work efficiently with CPM and some can do same with
PERT.

6. The most important thing to solute is to minimize time so that they can get good result
for their cost factor. In PERT, time is said to be a controlling factor.

7. CPM has one-time estimate while PERT has three time estimates.

8. Unpredicted activities are managed with the help of Program Evaluation and Review
Technique (PERT), whereas CPM is used for dealing those projects that have some
alarmed activities. These two techniques said to be a key element for the management
of any project.

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Glossary
Project: A project is an individual or collaborative enterprise that is carefully planned to
achieve a particular aim.

Activity: A clearly definable portion of a project that requires for its completion, the con-
sumption of resources and time in particular. (i.e. Activity is the actual performance of task.)

Critical Activity: An activity becomes critical, if delay in its estimated time duration delays
the whole project to that extent.

Critical Path: The longest path through the network, consisting of critical activities. The
length of the critical path is the shortest time allowable for project completion.

Event: An event refers to start or completion of task. It is represented by circle and do

not consume time and resources.

Successor Event: It is the event or events that immediately follows another event.

Predecessor Event: It is the event which comes immediately before another event.

Earliest Expected Time: The earliest time that an event can occur is on the latest com-
pletion of an activity.

Slack: It is the difference between Latest Allowable Time (TL) and Earliest Expected Time
(TE) i.e. slack = TL - TE.

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 Advantages of PERT

1. It determines the expected duration of activities and consequently of the the project
duration.

2. It helps the management in handling the uncertainties involved in the project and thus
reduces the risk element in the object.

3. In enables the management to make optimum allocation of limited resources.

4. It process for the right action, at the right point and the right times in the organization.

5. It determines the most economical schedule for fixed project duration.

Disadvantages of PERT

1. The time estimates to perform activities constitutes a major limitation of this tech-
nique. If the estimates are not satisfactory then the network will be highly unrealistic.

2. The probability distribution of total time is assured to be normal, which in real life
situation may not be true.

3. The simple PERT technique does not consider the resources required at various stages
of the project. If a certain resource may be used to perform more than one activity
and at the same time, it can be used for only one activity at a time, then the network
diagram will become infeasible.

4. Use of this technique for active control of a project requires frequent updating and
revision of PERT calculations and this proves quite a costly affair.

Advantages of CPM

1. It helps in ascertaining the time schedule of activities having sequential relationships.

2. It makes the control function of the management.

3. It makes better and detail planning possible.

4. It identifies the most critical elements in the project. Thus, the management is kept
alert and prepared to pay due attention to the critical activities of the project.

Disadvantages of CPM

1. CPM fails to incorporate statistical analysis in determining the time estimates.

2. It operates on the assumption that there is a precise known time that each activity in
the project will take. It may not be true in reality.

3. It can not be used as a controlling device since any change introduced will change the
entire structure of the network. Thus, CPM can not be used as a dynamic controlling
device.

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