1. Project Management
LO4–1: Explain what projects are and how projects are organized.
LO4–2: Analyze projects using network-planning models.
LO4–3: Evaluate projects using earned value management.
LO4–4: Exemplify how these techniques are implemented in commercial software packages.

2. What is a Project? Project
An interrelated set of activities with a definite starting and ending point, which results in a unique outcome for a specific allocation of resources.

3. What is Project Management?
A systemized, phased approach to defining, organizing, planning, monitoring, and controlling projects.

4. Bechtel Projects
Building 26 massive distribution centers in just two years for the internet company Webvan Group ($1 billion)
Constructing 30 high-security data centers worldwide for Equinix, Inc. ($1.2 billion)
Building and running 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)
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5. 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)
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6. Strategic Importance of Project Management
Bechtel Project Management:
Iraq war aftermath
International workforce, construction professionals, cooks, medical personnel, security
Millions of tons of supplies
Hard Rock Cafe Rockfest Project:
100,000 + fans
planning began 9 months in advance

7. Characteristics of a Project
Project Defined
A complex, nonroutine, one-time effort limited by time, budget, resources, and performance specifications designed to meet customer needs.
Have a purpose, an established objective
Have a life cycle, a defined life span w/ a beginning and an end
Interdependencies, involvement of several departments and professionals at various levels
Uniqueness, doing something that has never been done before
Specific time, cost and performance requirements

8. Project , professional service
Unique
Single unit
Many related activities
Difficult production planning and inventory control
General purpose equipment
High labor skills

9. Types of Development Projects
Degree of Change
Type of Project

10. The project management process

11. Management of Projects
Planning - goal setting, defining the project, team organization
Scheduling - relates people, money, and supplies to specific activities and activities to each other
Controlling - monitors resources, costs, quality, and budgets; revises plans and shifts resources to meet time and cost demands

12. Elements Of Project Management
Project team
individuals from different departments within company
Matrix organization
team structure with members from different functional areas depending on skills needed
Project manager
leader of project team

13. Project Structure Pure Project
A self-contained team works full-time on the project.
Pure Project
Responsibility for the project lies within one functional area of the firm. Employees from that area work on the project, usually only part-time.
Functional Project
A blend of pure and functional project structures – people from different functional areas work on the project, possibly only part-time.
Matrix Project

14. Pure Project Structure
The project manager has full authority
Team members report to one boss
Shortened communication lines
Team pride, motivation, and commitment are high
Advantages
Duplication of resources
Organizational goals and policies are ignored
Lack of technology transfer
Team members have no functional area "home"
Disadvantages

15. Functional Project Structure
A team member can work on several projects
Technical expertise maintained in functional area
Functional area is “home” after project completed
Critical mass of specialized knowledge
Advantages
Aspects of the project that are not directly related to the functional area get short-changed
Motivation of team members is often weak
Needs of the client are secondary and are responded to slowly
Disadvantages

16. Matrix Project Structure
Better communications between functional areas
Project manager held responsible for success
Duplication of resources is minimized
Functional “home” for team members
Policies of the parent organization are followed
Advantages
Too many bosses
Depends on project manager’s negotiating skills
Potential for sub-optimization
Disadvantages

17. Matrix Organization Marketing Operations Engineering Finance Project 1

18. The Role of the Project Manager
Highly visible
Responsible for making sure that:
Project managers should be:
Good coaches
Good communicators
Able to organize activities from a variety of disciplines
All necessary activities are finished in order and on time
The project comes in within budget
The project meets quality goals
The people assigned to the project receive motivation, direction, and information

19. Project Planning: Define the project
Statement of Work
A written description of the objectives to be achieved
Task
A further subdivision of a project – usually shorter than several months and performed by a single group or organization
Work Package
A group of activities combined to be assignable to a single organizational unit

20. Defining the Project (continued)
Project Milestone
Specific events in the life of the project
Work Breakdown Structure
Defines the hierarchy of project tasks, subtasks, and work packages
Activities
Pieces of work that consume time

21. Project Planning, Scheduling, and Controlling
Before Start of project During
project Timeline project

22. Work Breakdown Structure Example
Overview
Details

23. Work Breakdown Structure – Large Optical Scanner Design
Overview
Details

24. Work Breakdown Structure
Relocation of St. John’s Hospital
Level 0
Organizing and Site Preparation
Physical Facilities and Infrastructure
Level 1
Select administration staff
Site selection and survey
Select medical equipment
Prepare final construction plans
Bring utilities to site
Interview applicants for nursing and support staff
Purchase and deliver equipment
Construct hospital
Develop information system
Install medical equipment
Train nurses and support staff
Level 2
02 -07
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25. Elements of Project Management Work Breakdown Structure
WBS for Computer Order-processing System Project

26. Project Planning, Scheduling, and Controlling
Before Start of project During
project Timeline project

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Project Scheduling
Identifying precedence relationships
Sequencing activities
Determining activity times & costs
Estimating material & worker requirements
Determining critical activities
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28. Network-Planning Models
A project is made up of a sequence of activities that form a network representing a project.
The path taking longest time through this network of activities is called the “critical path.”
The critical path provides a wide range of scheduling information useful in managing a project.
Critical path method (CPM) helps to identify the critical path(s) in the project networks.

29. Critical Path Method (CPM)
Identify each activity to be done and estimate how long it will take.
Determine the required sequence and construct a network diagram.
Determine the critical path.
Determine the early start/finish and late start/finish schedule.

30. Establishing Precedence Relationships
Determining the sequence for undertaking activities.
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31. Diagramming the Network
Program Evaluation and Review Technique (PERT)
Critical Path Method (CPM)
Activity-on-Node approach
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32. Project Planning, Scheduling, and Controlling
Before Start of project During
project Timeline project

33. Project Planning, Scheduling, and Controlling
Before Start of project During
project Timeline project

34. A Simple Gantt Chart Time J F M A M J J A S Design Prototype Test
Revise
Production
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35. Service For a Delta Jet 0 10 20 30 40 Time, Minutes Passengers
Baggage
Fueling
Cargo and mail
Galley servicing
Lavatory servicing
Drinking water
Cabin cleaning
Flight services
Operating crew
Deplaning
Baggage claim
Container offload
Pumping
Engine injection water
Main cabin door
Aft cabin door
Aft, center, forward
Loading
First-class section
Economy section
Container/bulk loading
Galley/cabin check
Receive passengers
Aircraft check
Boarding
Time, Minutes
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36. Project Planning, Scheduling, and Controlling
Time/cost estimates
Budgets
Engineering diagrams
Cash flow charts
Material availability details
Budgets
Delayed activities report
Slack activities report
CPM/PERT
Gantt charts
Milestone charts
Cash flow schedules
Before Start of project During
project Timeline project

37. PERT/CPM PERT stands for Program Evaluation Review Technique.
CPM stands for Critical Path Method.
PERT/CPM is used to plan the scheduling of individual activities that make up a project.
PERT/CPM can be used to determine the earliest/latest start and finish times for each activity, the entire project completion time and the slack time for each activity.

38. PERT/CPM Critical Path Method (CPM)
DuPont & Remington-Rand (1956)
deterministic task times
activity-on-node network construction
Project Eval. & Review Technique (PERT)
US Navy, Booz, Allen & Hamilton
multiple task time estimates
activity-on-arrow network construction

39. Critical Path
A path is a sequence of connected activities running from start to end node in network
The critical path is the path with the longest duration in the network
Project cannot be completed in less than the time of the critical path

40. Example 4.1 – Identify Activities and Construct Network
G(2)
B(5)
D(2)
E(5)

41. Determine Early Start/Early Finish and Late Start/Late Finish Schedule
Critical Path 1: ACFG 21 28 28 36
C(7)
F(8) 21 28 28 36 21 36 38
A(21)
G(2) 21 36 38 21 26 26 28 28 33
B(5)
D(2)
E(5)
Critical Path 2: ABDFG 21 26 26 28 31 36
Excel: Critical Paths

42. CPM with Activity Time Estimates
When activity times vary, a single time estimate may not be reliable.
Instead, estimate three values
Minimum
Maximum
Most likely
This allows calculation of a probability estimate of completion time.
This is the distinguishing characteristic of the PERT method.

43. PERT Method Calculations
Excel: PERT Calculations

44. Example 4.2 - Three Time Estimates

45. Example 4.2 - Network with Time Estimates21 28 28 36
C(7)
F(8) 21 28 28 36 21 36 38
A(21)
G(2) 21 36 38 21 26 26 28 28 33
B(5)
D(2)
E(5) 21 26 26 28 31 36

46. Example 4.2 – Three Time Estimates
Probability of finishing in 35 weeks (or less)

47. Example 4.2 – Three Time Estimates
Probability of finishing in 35 weeks (or less) is about 19%

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CPM Example
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CPM Example
A —
B —
C A
D B
E B
F A
G C
H D
I A
J E,G,H
K F,I,J
Immediate Predecessor I K
Start A F C
Finish G B J D H E
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50. Determining the Project Schedule
Perform a Critical Path Analysis A
Activity Name or Symbol
Activity Duration
(2)
Earliest Start ES
Earliest Finish EF
Latest Start LS
Latest Finish LF

51. Forward Pass Begin at starting event and work forward
Earliest Start Time Rule:
If an activity has only a single immediate predecessor, its ES equals the EF of the predecessor
If an activity has multiple immediate predecessors, its ES is the maximum of all the EF values of its predecessors
ES = Max {EF of all immediate predecessors}
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52. Forward Pass Begin at starting event and work forward
Earliest Finish Time Rule:
The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time
EF = ES + Activity time
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53. Backward Pass Latest Finish Time Rule:
Begin with the last event and work backwards
Latest Finish Time Rule:
If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity that immediately follows it
If an activity is an immediate predecessor to more than one activity, its LF is the minimum of all LS values of all activities that immediately follow it
LF = Min {LS of all immediate following activities}
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54. Backward Pass Latest Start Time Rule:
Begin with the last event and work backwards
Latest Start Time Rule:
The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time
LS = LF – Activity time
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55. Developing the Schedule
Latest finish time
Latest start time
Activity
Duration
Earliest start time
Earliest finish time 2 12 14 A
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56. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
Example 2.2
Paths are the sequence of activities between a project’s start and finish.
Finish
Start A B C D E F G H I J K
Path Time (wks)
A-I-K 33 A-F-K 28
A-C-G-J-K 67
B-D-H-J-K 69
B-E-J-K 43
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57. Developing the Schedule
Earliest start time (ES) - the latest earliest finish time of any immediately preceding activities
Earliest finish time (EF) - the earliest start time plus its estimated duration EF = ES + t
Latest finish time (LF) – the earliest of the latest start times of any of the immediately following activities.
Latest start time (LS) - the latest finish time minus its estimated duration LS = LF – t
Activity Slack - the maximum length of time an activity can be delayed without delaying the entire project
LF-EF or LS-ES
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58. Developing the Schedule
Path
The sequence of activities between a project’s start and finish.
Critical Path –
The sequence of activities between a start and finish that takes the longest time to complete.
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Developing a Schedule
Gantt chart
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60. Immediate Predecessor(s)
Application 2.1
The following information is known about a project
Activity
Activity Time (days)
Immediate Predecessor(s) A 7 — B 2 C 4 D
B, C E F 3 G 5
Draw the network diagram for this project
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61. Immediate Predecessor(s)
Application 2.1
Activity
Activity Time (days)
Immediate Predecessor(s) A 7 — B 2 C 4 D
B, C E F 3 G 5 B 2 F 3 D 4
Finish
Start A 7 E 4 C 4 G 5
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62. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
Application 2.2
Calculate the four times for each activity in order to determine the critical path and project duration for the diagram in Application Problem 1.
Activity
Duration
Earliest Start (ES)
Latest Start (LS)
Earliest Finish (EF)
Latest Finish (LF)
Slack (LS-ES)
On the Critical Path? A 7
0-0=0
Yes B 2 C 4 D E F 3 G 5
The critical path is A–C–D–E–G with a project duration of 24 days.
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63. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
Application 2.2
Calculate the four times for each activity in order to determine the critical path and project duration.
Activity
Duration
Earliest Start (ES)
Latest Start (LS)
Earliest Finish (EF)
Latest Finish (LF)
Slack (LS-ES)
On the Critical Path? A 7
0-0=0
Yes B 2 C 4 D E F 3 G 5 7 9 11
9-7=2 No 7 11
7-7=0
Yes 11 15
11-11=0
Yes 15 19
15-15=0
Yes 19 21 22 24
21-19=2 No 19 24
19-19=0
Yes
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64. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
Application 2.2
The critical path is A–C–D–E–G with a project duration of 24 days.
Start
Finish A 7 B 2 C 4 D E F 3 G 5
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65. Time-Cost Models and Project Crashing
A time-cost model extends the CPM model to consider the trade-off between time required to complete an activity and total project cost.
Considers direct activity costs, indirect costs of project, and activity completion times
It is often referred to as “crashing” the project to reduce overall duration.

66. Project Crashing Prepare a CPM-type network diagram.
Determine the cost per unit of time to expedite each activity.
Compute the critical path.
Shorten the critical path at the point where costs are lowest.
Plot project, indirect, and total cost curves to find the minimum-cost schedule.

67. Analyzing Cost-Time Trade-Offs
Project Crashing
Shortening (or expediting) some activities within a project to reduce overall project completion time.
Project Costs
Direct Costs
Indirect Costs
Penalty Costs
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68. Analyzing Cost-Time Trade-Offs
Project Costs
Normal time (NT) is the time necessary to complete an activity under normal conditions.
Normal cost (NC) is the activity cost associated with the normal time.
Crash time (CT) is the shortest possible time to complete an activity.
Crash cost (CC) is the activity cost associated with the crash time.
Cost to crash per period =
CC – NC
NT – CT
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69. Cost-Time Relationships
Linear cost assumption
8000 —
7000 —
6000 —
5000 —
4000 —
3000 —
0 —
Direct cost (dollars)
| | | | | |
Time (weeks)
Crash cost (CC)
Normal cost (NC)
(Crash time)
(Normal time)
Estimated costs for a 2-week reduction, from 10 weeks to
8 weeks
5200
Figure 2.6
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70. Earned Value Management (EVM)
A technique for measuring project progress in an objective manner
Has the ability to combine measurements of scope, schedule, and cost in a project
Provides a method for evaluating the relative success of a project at a point in time

71. Earned Value Management – Essential Features
A project plan that identifies the activities to be accomplished
A valuation of each activity work
Predefined earning or costing rules to quantify the accomplishment of work

72. Earned Value Management Charts
Budgeted costs (scheduled) and actual costs
Costs of scheduled and performed work
Budgeted costs (scheduled and performed work) and actual costs
Budgeted cost (work performed) and actual costs