17

Project
Management

McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All

 Learning Objectives
 Discuss the behavioral aspects of projects
in terms of project personnel and the
project manager.
 Discuss the nature and importance of a
work breakdown structure in project
management.
 Give a general description of PERT/CPM
techniques.
 Construct simple network diagrams.

17-2
 Learning Objectives
 List the kinds of information that a PERT or
CPM analysis can provide.
 Analyze networks with deterministic times.
 Analyze networks with probabilistic times.
 Describe activity “crashing” and solve
typical problems.

17-3
 Projects
JAN FEB MAR APR MAY JUN
Build A

A Done

Build B

B Done

Build C

C Done
On time!
Build D

Ship

Unique, one-time operations designed to

accomplish a specific set of objectives in a
limited time frame.

17-4
 Project Management
 How is it different?
 Limited time frame
 Narrow focus, specific objectives
 Less bureaucratic
 Why is it used?
 Special needs
 Pressures for new or improves products or
services

17-5
 Project Management
 What are the Key Metrics
 Time
 Cost
 Performance objectives
 What are the Key Success Factors?
 Top-down commitment
 Having a capable project manager
 Having time to plan
 Careful tracking and control
 Good communications

17-6
 Project Management
 What are the Major Administrative
Issues?
 Executive responsibilities
 Project selection
 Project manager selection
 Organizational structure
 Organizational alternatives
 Manage within functional unit
 Assign a coordinator
 Use a matrix organization with a project leader

17-7
 Project Management
 What are the tools?
 Work breakdown structure
 Network diagram
 Gantt charts
 Risk management

17-8
 Planning and Scheduling

Gantt Chart MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Locate new
facilities

Interview staff

Hire and train staff

Select and order

furniture

Remodel and install

phones

Move in/startup

17-9
 Key Decisions
 Deciding which projects to implement
 Selecting a project manager
 Selecting a project team
 Planning and designing the project
 Managing and controlling project
resources
 Deciding if and when a project should be
terminated
17-10
 Project Manager
Responsible for:

Work Quality
Human Resources Time
Communications Costs

17-11
 Ethical Issues
 Temptation to understate costs
 Withhold information
 Misleading status reports
 Falsifying records
 Comprising workers’ safety
 Approving substandard work

17-12
 Project Life Cycle

Feasibility

Management
Planning
Concept
Execution

Termination

17-13
 Work Breakdown Structure
Figure 17.2

Project
Project X
X

Level 1

Level 2

Level 3

Level 4

17-14
 PERT and CPM
PERT: Program Evaluation and
Review Technique
CPM: Critical Path Method

 Graphically displays project activities

 Estimates how long the project will take
 Indicates most critical activities
 Show where delays will not affect project

17-15
 The Network Diagram
 Network (precedence) diagram – diagram of
project activities that shows sequential
relationships by the use of arrows and nodes.
 Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
 Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
 Activities – steps in the project that consume
resources and/or time.
 Events – the starting and finishing of activities,
designated by nodes in the AOA convention. 17-16
The Network Diagram (cont’d)
 Path
 Sequence of activities that leads from the starting
node to the finishing node
 Critical path
 The longest path; determines expected project
duration
 Critical activities
 Activities on the critical path
 Slack
 Allowable slippage for path; the difference the
length of path and the length of critical path

17-17
 Project Network – Activity on
Figure 17.4 Arrow
Order
AOA furniture 4
Furniture
Locate 2 setup
facilities
Remodel
1 5 6
Move
in
Interview
Hire and
train
3

17-18
 Project Network – Activity on
Figure 17.4 Node
Order
furniture
Locate Furniture
2 setup
facilities
AON
1 6
Move
Remodel
in

S 5 7

Hire and
Interview
train

3 4

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Network Conventions
a
b
c a

c
b

a c
a c

b Dummy
activity
b d

17-20
 Time Estimates
 Deterministic
 Time estimates that are fairly certain

 Probabilistic
 Estimates of times that allow for variation

17-21
 Example 1
Figure 17.5

6 weeks
Deterministic 4
time estimates rd er e
O i tu r

Fu r p
n 3 weeks
fu r

set
8 weeks 2

n i tu
u
Rem
ate s od e

re
c
L o i l i ti e 11 weeks
l Move
fac in
1 5 6
In 1 week
te ain
rv r
i dt
4 weeks ew an
re
Hi 9 weeks

17-22
 Example 1 Solution
Critical Path

P a th L e n g th S la c k
(w e e k s )
1 -2 -3 -4 -5 -6 18 2
1 -2 -5 -6 20 0
1 -3 -5 -6 14 6

17-23
 Computing Algorithm
 Network activities
 ES: early start
 EF: early finish
 LS: late start
 LF: late finish
 Used to determine
 Expected project duration
 Slack time
 Critical path

17-24
 Probabilistic Time Estimates
 Optimistic time
 Time required under optimal conditions
 Pessimistic time
 Time required under worst conditions
 Most likely time
 Most probable length of time that will be
required

17-25
 Probabilistic Estimates
Figure 17.8

Beta Distribution

to tm te tp

Activity Optimistic Most likely Pessimistic

start time time (mode) time

17-26
 Expected Time

te = t o + 4t m +t p
6
te = expected time
to = optimistic time
tm = most likely time
tp = pessimistic time

17-27
 Variance

(t –
 p o t ) 2

36

= variance
to = optimistic time
tp = pessimistic time

17-28
 Example 5

Optimistic Most likely Pessimistic

time time time

2-4-6
b

2- c
-4

3-
- 3

5
1 a
3-4-5 3-5-7 5-7-9
d e f
-6
2- g

4
3- i
3-
6

4-6-8
h

17-29
 Example 5 Time Estimates

Tabc = 10.0
Tdef = 16.0 4.00
b
Tghi = 13.50

3.1 c
. 83

7
2
a
4.00 5.0 7.0
d e f
.4 17
3.3 g
3

i
6.0
h

17-30
 Path Probabilities

Specified time – Path mean

Z =
Path standard deviation

Z indicates how many standard deviations

of the path distribution the specified tine
is beyond the expected path duration.

17-31
 Example 6
17
Weeks
1.00
a-b-c
Weeks
10.0

d-e-f
Weeks
16.0

1.00
g-h-i
13.5 Weeks

17-32
Time-cost Trade-offs: Crashing
 Crash – shortening activity duration
 Procedure for crashing
 Crash the project one period at a time
 Only an activity on the critical path
 Crash the least expensive activity
 Multiple critical paths: find the sum of
crashing the least expensive activity on
each critical path

17-33
 Time-Cost Trade-Offs: Crashing
Figure 17.11

Total
cost

Expected indirect costs

Shorten

Cumulative CRASH
cost of
crashing
Shorten

Optimum

17-34
 Example 7

10
6 b
a
2
f
5

9
c

e
4
d

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 Advantages of PERT
 Forces managers to organize
 Provides graphic display of activities
 Identifies
4
 Critical activities 2

 Slack activities 1 5 6

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 Limitations of PERT
 Important activities may be omitted
 Precedence relationships may not be
correct
4
 Estimates may include 2
a fudge factor
 May focus solely 1 5 6

on critical path 142 weeks

17-37
 Goldratt’s Critical Chain
 Goldratt’s insight on project management
 Time estimates are often pessimistic
 Activities finished ahead of schedule often go
unreported
 With multiple projects, resources needed for one
project may be in use on another

17-38
 Project Management Software
 Computer aided design (CAD)
 Groupware (Lotus Notes)
 CA Super Project
 Harvard Total Manager
 MS Project
 Sure Track Project Manager
 Time Line

17-39
 Advantages of PM Software
 Imposes a methodology
 Provides logical planning structure
 Enhances team communication
 Flag constraint violations
 Automatic report formats
 Multiple levels of reports
 Enables what-if scenarios
 Generates various chart types
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 Project Risk Management

 Risk: occurrence of events that have

undesirable consequences
 Delays
 Increased costs
 Inability to meet specifications
 Project termination

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 Risk Management

 Identify potential risks

 Analyze and assess risks
 Work to minimize occurrence of risk
 Establish contingency plans

17-42
 Summary
 Projects are a unique set of activities
 Projects go through life cycles
 PERT and CPM are two common
techniques
 Network diagrams
 Project management software available

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Video: Work Breakdown

17-44
Video: Project Materials/Delays

17-45
Video: Project Scheduling

17-46
Video: PERT/CPM

17-47