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Master of Business Administration-MBA Semester 3

Introduction to Project Management – PM0010


Assignment Set- 1

Q.1 Explain the following


a. Project Vs. Program Vs. Portfolio
b. Project work and Traditional functional work
Ans:
a. Project Vs. Program Vs. Portfolio: Businesses use various terms to represent a range of
project management services. Unfortunately these terms are often used interchangeably and
inconsistently. This article attempts to clear the confusion and establish a common definition.
Project Management
Hopefully we all know what a project is. PMBOK defines a project as “a temporary endeavor
undertaken to create a unique product, service or result”. In my terms, a project has a specific
start and end date with a clearly defined deliverable produced. Project management is the
application of knowledge, skill, tools, techniques and processes to effectively manage a team
towards this final deliverable.
In real life this means the management of a specific project (e.g. implementing a new
accounting system). This project will start on a specific date and end according to our project
plan with the delivery of your new accounting system.
Pretty simple … something we can all understand.
Program Management
This is where the confusion seems to start. A program is a group of related projects managed
together to obtain specific benefits and controls that would likely not occur if these projects
were managed individually. While project management focuses on delivering the specific
objectives of the project – program management is focused on achieving the strategic objectives
and benefits of the integrated program.
The implementation of an Enterprise Resource Planning (ERP) system is often performed as a
program. The ERP system will include several specific individual projects (i.e. Finance,
Purchasing, Materials Management, etc.). Each of these specific projects should be run by a
project manager using a formal project management approach. The overall grouping of these
related projects will be run by a Program Manager.
The Program Manager will be responsible for the rolling up of information from each of the
projects and ensuring the overall program is driving towards achieving the business objectives.
This requires each of the project managers to manage their individual projects in a fashion that
easily integrates into the overall program plan (easily said – more challenging in actual
practice).
The Program Manager is also responsible for tracking and analyzing across the entire program.
This involves considering risk management strategies not only for each individual project but
also analyzing the ‘collective’ risk across the program.
The same goes for quality management, schedule management, cost management,
communications, etc.
Portfolio Management
A portfolio is a collection of projects or programs grouped together to facilitate effective
management of efforts to meet strategic business objectives. These projects or programs are
not necessarily interdependent or directly related. Portfolio management is the centralized
management of multiple projects, programs and possibly portfolios. This typically includes
identifying, prioritizing and authorizing projects and programs to achieve specific strategic
business objectives.
The group of projects and programs within a specific business division could be an example of a
portfolio. This might include the implementation of a Customer Relationship Management (CRM)
program; Sales Data Warehouse program; Commission Tracking project; and a project to launch
a new product within the Sales & Marketing Division. In this case the Portfolio Manager is
managing this broad range of somewhat unrelated programs and projects towards a specific set
of strategic divisional business objectives.
The Portfolio Manager will become very involved in the frontend activities of identifying,
prioritizing and initiating projects and programs. All of these activities will be within the context
of achieving the strategic business objectives. The Portfolio Manager will also track these
projects/programs to ensure they continue to deliver towards the expected strategic outcome in
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terms of quality, cost, schedule and scope. They will also be responsible for analyzing and
tracking project management elements across the entire portfolio – looking for ways to leverage
economies of scale, reduce risk and improve the probability of successfully delivering expected
business results.

b. Project work and Traditional functional work


Ans:
Project work and traditional functional work differ in significant ways, and it is important to
understand these differences.

Functional Work
Functional work is routine, ongoing work. Each day, secretaries, financial analysts, and car
salespeople perform functional work that is routine, even if their activities vary somewhat from
day to day. A manager assigned to the specific function provides training and supervision, and
manages them according to standards of productivity in terms of typing speed or sales quotas.
The following are distinguishing characteristics of functional work:
• Functional work is ongoing, routine work.
• Managers manage the specific function and provide technical direction.
• People and other resources are assigned to the functional department.
• Functional departments are responsible for the approved objectives of the function, such
as technical competency, standards of performance and quality, and efficient use of
resources.
Functional work is typically structured as a hierarchical organization with traditional formal lines
of authority, as shown in Diagram 1.
Diagram 1
Functional Organizational Structure

Vice President

Director

Manager, Writing Manager, Editing Manager, Design

Writer Editor Designer

Writer Designer

Writer
Project Work

In contrast to ongoing, functional work, a project is “a temporary endeavor undertaken to create


a unique product or service” (A Guide to the Project Management Body of Knowledge (PMBOK®
Guide), Project Management Institute, 2000, p. 4). Projects are temporary because they have a
definite beginning and a definite end. They are unique because the product or service they
create is different in some distinguishing way from similar products or services. The construction
of a headquarters building for ABC Industries is an example of a project. The unique work is
defined by the building plans and has a specific beginning and end. A project manager is
responsible for the project, overseeing the contractors and managing the schedule and budget.
The following are distinguishing characteristics of project work:
• Project work is a unique, temporary endeavor.
• A project manager manages a specific project.
• People and other resources are not assigned to project managers on an ongoing basis,
except for project management support.
• A project manager is responsible for the approved objectives of a project, such as
budget, schedule, and scope.

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Project teams typically are not organized in the same hierarchical structure as that of traditional
functional groups.

Diagram 2
Functional and Project Responsibilities

Diagram 2 illustrates how functional and project responsibility fit together, using the functional
departments in a publishing company, with project managers assigned to accomplish specific
publication projects. Solid vertical lines show the functional responsibilities of the writing,
editing, design, printing, and distribution departments. Broken horizontal lines show the project
responsibilities of specific project managers assigned to given publications (projects). Because
not all projects require the services of every functional department, circles indicate where
people are assigned to a project. Project #2 uses outsourced resources. Project #3 is a video
that uses an external video duplication company rather than the internal printing facility.

A project manager manages horizontally via projects rather than vertically via functional
experts. Diagram 2 shows that Dennis is responsible for Project #1. To get the job done, he
must enlist the help of editors and designers from one functional manager, and printers and
distributors from another functional manager. In some organizations, functional managers are
called resource managers because they are responsible for assigning resources to the project.

In the real world, there are at times overlaps between project and functional managers. If
functional resources (other than a project management staff) are assigned to a project
manager, then the manager has functional responsibility and is acting as both project manager
and functional manager. If projects are assigned to a functional manager, then the functional
manager also has project responsibility and is acting in both roles. Diagram 3 compares
functional and project work.

Diagram 3
Comparison of Project and Functional Work

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Q.2 Compare Operation and project procurement. Also list and explain the project procurement
process.
Ans:
Operations Procurement and Project Procurement
The differences between the procurement carried out for the overall operation of an
organization, and the procurement carried out for a specific project, are shown in Table 1.
Table 1: Differences between Operations Procurement and Project Procurement

Project Procurement Management Process


The project procurement method varies depending on the category of the contracted product or
service. The broad categories are:
· Materials or products
· Equipment or tools
· Labors
· Professional services
· Totally engineered systems
· Total project

Project Procurement Management generally involves the following:

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· Deciding to ‘Make or Buy’
· Outsourcing the work for a ‘Buy’ decision.
· Managing risk (although risk management is often addressed separately, it is noteworthy
that contracts are, at their core, risk management tools.)

All procurement requires some level of planning. The intensity and the effort required in
planning depend on the complexity of the scope of work in the procurement package.

For a manufacturing company deciding to starts a project, the ‘make or buy’ decision forms the
first step in the procurement planning. This decision is based on a cost comparison between
‘make’ and ‘buy’, and the timely availability of the manufacturing equipment or shop personnel
for meeting deliveries without adversely affecting their other job orders. Several companies in
India exist, wherein; the company or a division of the company already manufactures a product,
and the company is also executing projects for its clients which require the same product as
part of another project scope. For example, Larsen & Turbo manufactures switchgear, pressure
vessels, heat exchangers etc. These products are also required in several electrical projects or
petrochemical projects that they execute for clients. Another example, Kamani Engineering
manufactures transmission towers, and also executes large power transmission projects for
Power Grid Corporation of India, where the bulk of the transmission towers are their in-house
supply. The Table 2 shows the comparison of costs for in-house development and outsourcing.
Table 2: Comparison of Costs for In-house Development and Outsourcing

The additional investment of Rs 30000 for In-house option will break even if the software usage
is for more than 20 months i.e. (Rs. 3500/month –
Rs. 2500/month) x 20 months.

Therefore if you plan to use the software for less than 20 months then go for outsourcing but if
plan to use the software for more than 20 months then go for In-house development. The
market scenario for the product or service to be procured gives rise to any of the following three
conditions:
· Sole Source: In this case there is only one qualified seller in the market. For example,
Dow Chemicals under their patent was the only manufacturer Reverse Osmosis (RO)
membranes which were utilized for desalinating saline water and all water treatment
package vendors had to buy RO membranes only from them or their licensee in a
country.
· Single Source: This is a case when your organization prefers to work with an identified
seller, even though other sellers may offer a lower price. Sometimes companies show a
preference for a supplier with a view to create a long term relationship for a niche
product which the company may require to procure often.
· Oligopoly: This is a condition where the providers of the product or service are so few in
number that the actions and pricing of one seller affect the actions and pricing of the
other sellers. Examples of airline fares, oil prices, and hardware prices can fall in this
category.
The Table 3 summarizes the actual procurement processes involved in each of the process
groups.
The function performed by each process is explained below.
Plan Purchases and Acquisition
Plan Purchases and Acquisitions is the process for deciding what to buy or acquire and when and
how to buy that. It is a process of identifying the risks involved in each make or buy decision. It
also reviews the type of contract with regard to mitigating the risk by determining what risks
can be transferred to seller.
The outputs of this process are:

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· Project management plan describing how procurement process will be managed starting
with development of procurement documentation and culminating in contract closure.
· Contract Statement of Work (SOW) (describes the portion of the project scope which is
included in the particular contract).
Table 3: Procurement Management Processes (As per PMBoK)

Plan Contracting
This process includes preparation of a procurement document for each contract planned. This
document is issued to prospective sellers who are invited to bid. The invitation is termed
Invitation To Bid (ITB), Request For Quotation (RFQ), tender notice, Request For Proposal (RFP),
invitation for negotiation or contractor initial response.
ITB and RFQ (both imply the same type of invitation) are focused on getting the seller’s price,
and not his ideas. For example if RFP asks for a price that means in addition, it necessarily asks
for the sellers’ and ideas on how the project work should be done, which implies that there is a
bit of consultancy service demanded from the sellers in their response.
Evaluation criteria: The first category of evaluation relates to prequalification of a firm for
receiving the ITB. Here, a prior assessment of the capability of a firm to perform the intended
scope of work is made. For large value contracts, the ITB is preceded by an invitation to submit
a prequalification offer, in which the seller is asked to submit his experience list for similar works
carried out by enumerating the following:
· List of projects completed with contract value, completion period, and scope of work.
· Audited financial statements like balance sheet, Profit and Loss (P & L) account for the
last 3 to 5 years.
· Contract completion certificates from his clients.
· Firm’s organizational structure
· List of key personnel of the firm
· List of construction equipment/production machinery owned.
· Any other technical/financial/organizational data considered relevant by the owner.
This data submitted by all prospective bidders is analyzed to arrive at a list of pre-qualified
bidders, eligible to receive the ITB/RFP.
The second category of evaluation criteria relates to evaluating the bids received in response to
the ITB/RFP. These may involve price loading criteria for technical and commercial deviations
stipulated by the bidders in their bids, as well as specific criteria for price loading on utilities
consumption (electricity, water etc.) where system performance is evaluated based on system
life-cycle costs.
Request Seller Responses
While the prospective sellers are expected to submit their bids in response to the ITB/RFP as
issued to them, it is a common practice in large value contracts to host a bidders’ conference,
where all bidders are present and are permitted to ask questions concerning the SOW. This

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method is followed to ensure that all bidders possess the same information on which to base
their prices and proposals. After satisfactory completion of this step, a due date for submission
of the bid/proposal is communicated to all bidders. This process is called solicitation.
The output of this process is a bunch of bids proposals from the bidders. The proposals are the
seller’s prepared document that describes the seller’s ability to provide the requested
products/services at his quoted price.
Select Sellers
This process involves complete evaluation (techno-commercial evaluation and price evaluation)
of the bids received, followed by negotiations with the bidders. Here the bidders have been pre-
qualified following a fairly extensive evaluation; the final selection of the seller is usually based
on the lowest evaluated price.
The outputs of this process are:
· The Contract: This can be a simple purchase order or a complex document. A contract
is a legal document backed by the country’s legal system (as long as it does not include
illegal activities).
· Contract Management Plan: This covers contract administration activities through the
life of the contract.
Contract Administration
Contract administration is a process of managing the contract between buyer and seller. It is
also provides:
· Regular review of seller’s performance in executing the SOW, as well as documentation
of this performance.
· Continuously manage contract related changes.
· Provide a basis for future relationship with the seller.
Contract Closure
Contract closure is a process of completing the contract by resolving all open items. Sometimes,
a contract may be foreclosed or terminated by mutual agreement between buyer and seller.

Q.3 Describe the role of project managers in Human resource management and communication
management.
Ans: Role of Project Manager in HR and Communications Management
A project manager is responsible for managing various tasks, activities and processes to ensure
that the project is delivered in the defined time. He is responsible for defining the goals and
objectives of the project and ensures that the resources that are required for the smooth
working of the project are available. He also monitors and controls the project process to keep
track of the status of the work. This ensures that the progress, schedule, procedures and the
cost of the project are well monitored. Apart from monitoring and controlling the implementation
and execution of the project, a project manager also plays a vital role in Human Resources and
communications management such as:
· Assists in effective communications among the team members,
· Consistency in methodology,
· Consistency in process, documentation, procedure,
· Meet deadlines and commitments
· Facilitate formal metrics and reporting to upper management/project sponsors.
· Entrusted with the authority and accountability necessary to get the job done.
· Able to cope with conflicting scope, quality, schedule, risk, and other requirements.
· Single point of integration to meet customer’s needs.
· Held accountable for project failure.
· Maintain control over the project by measuring performance and correcting as necessary.

Q.4 If the optimistic estimate of an activity is 12 days & pessimistic estimate is 18 days. What is
the variance of this activity?
Ans:
If three standard deviations are chosen for the optimistic and pessimistic times, then there will
be six standard deviations between them. In this case the variance of each activity completion
time is given by
tp = 18 days
to = 12 days
Variance = [(tp - to) / 6]2

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= [(18 – 12) / 6]2
= 2 days

Q.5 Describe the following quality control tools:


a. Ishikawa diagram
b. Flow chart
c. Pareto chart
d. Scatter diagram
Ans:
a. Ishikawa diagrams (also called fishbone diagrams, cause-and-effect diagrams or
Fishikawa) are diagrams that show the causes of a certain event -- created by Kaoru

Ishikawa (1990).
Ishikawa diagram, in fishbone shape, showing factors of Equipment, Process, People,
Materials, Environment and Management, all affecting the overall problem. Smaller
arrows connect the sub-causes to major causes.

Ishikawa diagram

One of the Seven Basic Tools of Quality


First described by Kaoru Ishikawa
Purpose To break down (in successive layers of detail) root causes
that potentially contribute to a particular effect

Common uses of the Ishikawa diagram are product design and quality defect prevention,
to identify potential factors causing an overall effect. Each cause or reason for

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imperfection is a source of variation. Causes are usually grouped into major categories to
identify these sources of variation. The categories typically include:
• People: Anyone involved with the process
• Methods: How the process is performed and the specific requirements for doing it,
such as policies, procedures, rules, regulations and laws
• Machines: Any equipment, computers, tools etc. required to accomplish the job
• Materials: Raw materials, parts, pens, paper, etc. used to produce the final product
• Measurements: Data generated from the process that are used to evaluate its quality
• Environment: The conditions, such as location, time, temperature, and culture in
which the process operates

a. Flowchart: is a type of diagram that represents an algorithm or process, showing the


steps as boxes of various kinds, and their order by connecting these with arrows. This
diagrammatic representation can give a step-by-step solution to a given problem.
Process operations are represented in these boxes, and arrows connecting them
represent flow of control. Data flows are not typically represented in a flowchart, in
contrast with data flow diagrams; rather, they are implied by the sequencing of
operations. Flowcharts are used in analyzing, designing, documenting or managing a
process or program in various fields.

A simple flowchart representing a process for dealing with a non-functioning lamp.

b. A Pareto chart, named after Vilfredo Pareto, is a type of chart that contains both bars
and a line graph, where individual values are represented in descending order by bars,
and the cumulative total is represented by the line.
The left vertical axis is the frequency of occurrence, but it can alternatively represent
cost or another important unit of measure. The right vertical axis is the cumulative
percentage of the total number of occurrences, total cost, or total of the particular unit of
measure. Because the reasons are in decreasing order, the cumulative function is a
concave function. To take the example above, in order to lower the amount of late
arriving by 80%, it is sufficient to solve the first three issues.
The purpose of the Pareto chart is to highlight the most important among a (typically
large) set of factors. In quality control, it often represents the most common sources of
defects, the highest occurring type of defect, or the most frequent reasons for customer
complaints, and so on.

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Simple example of a Pareto chart using hypothetical data showing the relative frequency of
reasons for arriving late at work

Pareto chart

One of the Seven Basic Tools of Quality


Joseph M. Juran
First described by
To assess the most frequently-occurring defects by category
Purpose

c. Scatter Diagram: A scatter plot or scattergraph is a type of mathematical diagram


using Cartesian coordinates to display values for two variables for a set of data.
The data is displayed as a collection of points, each having the value of one variable
determining the position on the horizontal axis and the value of the other variable
determining the position on the vertical axis. This kind of plot is also called a scatter
chart, scatter diagram and scatter graph.
A scatter plot is used when a variable exists that is under the control of the
experimenter. If a parameter exists that is systematically incremented and/or
decremented by the other, it is called the control parameter or independent variable and
is customarily plotted along the horizontal axis. The measured or dependent variable is
customarily plotted along the vertical axis. If no dependent variable exists, either type of
variable can be plotted on either axis and a scatter plot will illustrate only the degree of
correlation (not causation) between two variables.

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A scatter plot can suggest various kinds of correlations between variables with a certain
confidence interval. Correlations may be positive (rising), negative (falling), or null
(uncorrelated). If the pattern of dots slopes from lower left to upper right, it suggests a
positive correlation between the variables being studied. If the pattern of dots slopes
from upper left to lower right, it suggests a negative correlation. A line of best fit
(alternatively called 'trendline') can be drawn in order to study the correlation between
the variables. An equation for the correlation between the variables can be determined
by established best-fit procedures. For a linear correlation, the best-fit procedure is
known as linear regression and is guaranteed to generate a correct solution in a finite
time. Unfortunately, no universal best-fit procedure is guaranteed to generate a correct
solution for arbitrary relationships.
A scatter plot is also very useful when we wish to see how two comparable data sets
agree with each other. In this case, an identity line, i.e., a y=x line, or a 1:1 line, is often
drawn as a reference. The more the two data sets agree, the more the scatters tend to
concentrate in the vicinity of the identity line; if the two data sets are numerically
identical, the scatters fall on the identity line exactly.
One of the most powerful aspects of a scatter plot, however, is its ability to show
nonlinear relationships between variables. Furthermore, if the data is represented by a
mixture model of simple relationships, these relationships will be visually evident as
superimposed patterns.
The scatter diagram is one of the basic tools of quality control.
Scatter plot

One of the Seven Basic Tools of Quality


First described Francis Galton
by
Purpose To identify the type of relationship (if any) between two variables

Q.6 List the benefits of WBS? Need for risk management in an organization-comment.
Ans:
Work Breakdown Structure
Work breakdown structure (WBS) is a fundamental component of project management process
that helps in defining and organizing the total scope of a project using hierarchical tree
structure. According to Project Management Body of Knowledge (PMBoK), ‘WBS is a deliverable-
oriented hierarchical decomposition of the work to be executed by the project team to
accomplish the project objectives and create the required deliverables’. The hierarchy structure
approach of WBS helps the project team to know the requirements of total project more
accurately and specifically. WBS can also be used to assign responsibilities and allocate
resources to the project. It helps the team to monitor and control the project.

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WBS is the critical input to various project management processes and deliverables like activity
definitions, project schedule network diagrams, project and program schedules, performance
reports, risk analysis and response, control tools or project organization. WBS has several levels
in its hierarchy structure. These can be further used as an input to the scheduling process that
supports elaboration of tasks, activities, resources and milestones which can be cost estimated,
monitored, and controlled.
Development of WBS
WBS is a tool used in project management that defines a project and groups the discrete
element of project in a way that helps to organize and define the total work scope of the project.
A WBS element may be a product, data, service or any combination of it. WBS provides the
necessary framework for detailed cost estimating, and controls it by providing guidance for
schedule development.
WBS is a dynamic tool. It can be revised and updated as required by the project manager. Each
descending level of WBS represents an increased level of detailed definition of the project work.
The successful implementation of any project depends on the ability of the subject professionals
such as project manager to break down a large project into smaller manageable sub-projects.
The process of breaking down of mammoth projects into several smaller projects is called as
work breakdown structure. Although not all successful projects have a work breakdown
structure, there are enough reasons to go for WBS, since WBS:
· Provides a framework for organizing and managing the approved project scope.
· Helps to ensure that the project team has identified all the activities and tasks that
complete the project.
· Provides a framework for planning and controlling the cost and schedule information.
It is very common that many organizations and companies’ work on many projects
simultaneously. Each project is competing for the limited resources available in the company.
WBS helps in distinguishing the need of one project from the other within the organization. This
helps the organization to identify resource requirements and allocate resources more
effectively.
While developing a WBS, one must know that there are multiple ways to develop it for a given
project. One way of developing a WBS may be better than the other. The two most important
things to remember are that the WBS must contain all approved scope and the project manager
should ensure that the developed WBS reflects the way he/she intends to manage the project.
The other items to be given importance while developing a work breakdown structure for a
project are:
· Reporting requirements.
· Size of the project.
· Resource executing the work or activities.
· Complexity of the project.
WBS is a hierarchy structure where the first two levels of hierarchy are set up first. The first level
is usually the name of project or project title. The second level of the WBS hierarchy consists of
all the deliverables of the project. At this level, the WBS should include 100% of all the work
defined in the project scope statement and project management plan. Although in actual
practice, 100% may not be achieved (it will most likely be about 95 – 98%, depending on the
size of the project and the diversity of its various components), the goal should be 100%. This is
called the 100% rule.
After setting up the first two levels in the WBS hierarchy, the project team works on the
decomposition or breakdown of the larger project into smaller chunks of work. The breaking
down of the deliverables into successively smaller chunks of work is continued until a work
package level is reached which is the lowest level of WBS. Project manager assigns a person or
a specific team to complete each work identified in the WBS.
There are number of steps involved is developing a WBS of project. Every step should be given
equal importance in order to ensure that the developed structure helps the project team to
arrive at successful completion of the project. The steps to follow to develop the work
breakdown structure of a project are:
Benefits of WBS
Work breakdown structure represents family tree hierarchy structure of project operations
required to accomplish the objectives of the project. Tasks identified in the WBS collectively
describe the overall project. It serves to describe the link between the end objective and
activities required to reach that objective. Implementing work breakdown structure approach in
project planning offers various benefits which are given in table 10.1.
Table 1: Benefits of Work Breakdown Structure

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Master of Business Administration-MBA Semester 3
Introduction to Project Management – PM0010
Assignment Set- 2

Q.1 Describe the various ways of representing network diagram logic.


Ans: Network Logic Diagrams
The logic development in project planning is an iterative process. Initial logic development starts
after identification of the activities of the project and before scheduling process occurs. The
logic development process is further refined during schedule development and optimization.
There are two common methods of logic diagramming which are referred as network logic
diagrams. Before knowing the types of network logic diagrams, we should be familiar with rules
to be followed while developing and analyzing it. The rules are described in the table 1.
Table 1: Rules to Develop a Network Logic Diagram

The two types of network logic diagram are:


Precedence Diagramming Method
This method is also known as Activities On Node (AON). In this network logic diagram, each
activity is represented by a node and connecting lines represents the relationships between
activities. Each preceding activity controls the start and finish of the succeeding activity.
In precedence diagramming method, all the four dependency relationships can be implemented
between the activities. Finish to Start dependency relationship is the most commonly used in
this network logic diagram. Start to Finish dependency relationship is rarely used and it is
typically used only by professional scheduling engineers. Usage of start-to-start, finish-to-finish,
or start-to-finish relationship with project management software can produce unexpected
results, since these relationships are not consistently implemented.
The figure 1 shows the implementation of activities on node network logic diagram where the
alphabets within the circle represents the activities of the project and linking lines shows the
relationship between them.
Precedence Diagramming Method network logic diagram has the various advantages, they are:
· It is amendable with most of project management software.
· It is does not need introduction of a dummy activity in the network.
· It offers greater flexibility as it can incorporate any of the four dependency relationships.

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Figure 1: Activity on Node Network Logic Diagram
Arrow Diagramming Method
This method of network logic diagram is also known as Activity On Arrow (AOA). This is the
historical basis for network diagrams. It was used for the development of PERT networks in the
1950s by the Department of Navy for tracking very large, complex Polaris program. In this
method, each activity of the project is represented by an arrow between the nodes of the
network and the nodes are mere symbols representing the connection points.
In AOA method of network logic diagram, finish to start relationships is used. The activities
follow the order of precedence as defined by their immediate predecessors. When there is more
than one immediate predecessor for an activity, the network must show that the activity can be
started only after all of its immediate predecessors activities have been completed. The dummy
activity defined above is used for this depiction in the network.
In AOA network logic diagram, the important points mentioned below should be followed to
ensure the correct representation:
· Activities of the project are represented by Arrows.
· Events are numbered and are represented by Nodes.
· Two dummy activities should be introduced to show the precedence relationships.
The figure 2 shows the representation of AOA, where alphabets on the arrow are the activities of
the project and nodes between them represents the relationships between the activities.

Figure 2: Activity on Arrow Network Logic Diagram

Q.2 Explain the following:


a. Organizational breakdown structure.
Ans: Organization Breakdown Structure
Organization Breakdown Structure (OBS) depicts the relationships within the organization. It is
used as a framework for assigning the work responsibilities for every person in an organization.
OBS is the next step in project planning after developing the work breakdown structure. This
process defines the responsibility of each team involved in the project. It assigns each work
package identified in WBS to an individual team who are held responsible to deliver the
expected output of the project.
The OBS, groups similar project activities together and relates them to the organization
structure. OBS also defines the responsibilities of project management, costing, budgeting, and
project monitoring and control. It provides an organizational based perspective of the project
rather than task oriented. The hierarchical structure of the OBS aggregates the project
information to higher levels. After defining the responsibilities of the project, both the OBS and
WBS of the project are merged and together assure that all the elements and scope of the
project are assigned to a responsible team.
OBS has various functions to perform. It helps to:
· Decompose the necessary resources to perform job.

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· Identify and organize the resources responsible for carrying out the activities associated
with the project.
· Keep the track of specific work assignments and resource allocations.
· To develop an organization breakdown structure of an organization. The steps given
below should be followed:
· Draw the entire organization hierarchy structure for the resources involved in the project.
· Identify all the team members after drawing the structure. Assign each team member a
position in the structure. If there are extra positions that have not been filled in the
structure, fill them now. If there are additional resources left free, assign those resources
so that all resources and positions are accounted for.
· Ensure that the OBS is structured from the most responsible department and followed by
the performing departments at the lower levels. The lower levels of the structure are
where the project responsibilities are matched up with the resource needed.
· Specify the functional group to every user where cost for the work the user does is
allocated.
· Specify the approval group to every user who approves the work of the user and any
leave approvals.
The figure 1 shows the organizational structure of resources which depicts the various teams
involved in a software development organization.

b. Cost breakdown structure


Ans: Cost Breakdown Structure
Cost of a specific project activity refers to the monetary value or financial pricing. It includes all
anticipated expenditures that are expected to be part of the entire project, as well as the
monetary value of the total sum of resources to be expended during the process.
Cost estimation and control is vital for success of a project. This is the reason that Cost
Breakdown Structure (CBS) is considered to be a major part of project breakdown structure. CBS
describes how different cost elements contribute to the total cost of a project. According to
Hundal, “the contributions to the cost of a product can be estimated in a variety of ways. These
breakdowns are expressed in the forms of cost structures”.
A CBS is a document which outlines the criteria and activities that should be carried out as part
of project management. It provides details about the input/output cost estimates and the
amount of money being spent. It provides the plan and structure necessary to control costs of
the project and keep them within the limits of the project budget.
In CBS, a specific project cost is broken down into sub costs, which includes number of unique
categories. The identified categories of cost breakdown structure include direct labor hours,
indirect labor hours and other direct/indirect costs of the project. It also includes the purchased
price of any specific materials and equipment which falls into resource cost category.
In a business, providing a budget that is adjusted to time is referred as a cost baseline. It is the
integral part of the cost breakdown structure. A cost baseline is an essential facet of the project
management plan used by companies to ensure success of the project. Most larger projects
have a variety of cost baselines which should be calculated. The basic cost baselines of a project
are resources baselines and production variations baselines. These cost baselines measurement
ensure that the cost is evaluated in regards to the overall yield of a specific project.
CBS defines and arranges all relevant cost elements suitable for a specific project. It is a
framework which shows the estimated cost requirement of the project divided among different

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activities of the project identified at work breakdown. A cost breakdown structure must have the
following characteristics shown in the table 2.
Table 2: Characteristics of Cost Breakdown Structure

There are five major forms of cost breakdown structures. They are:
· Grouped on the basis of the components that the product is made of and thus following
the bill of materials.
· Divided on the basis of organizational departments.
· Divided based on the product functionalities which are very beneficial for a product
development purposes.
· Divided based on the various activities and operations of the project.
· Divided based on any desired way and then the result is arranged using the Pareto chart
rule. This indicates the most important and the least important cost elements from the
desired point of view.
The cost elements of a CBS are usually associated with the three basic elements. They are:
· Resources
· Activities
· Product

Q.3 If optimistic time for an activity is 5 days, estimated time to complete the activity 85 and
most likely time 10 days. What is the variance of the activity?
Ans: to = 5 days te = 85 days tm = 10 days tp = ?
Estimated time of the project (te) = (to + 4*tm + tp)
 85 = (5 + 4*10 + tp)
 85 = (45 + tp)
 tp = 85-45
 tp = 40
Variance = [(tp - to) / 6]2 = [(40 – 5) / 6]2 = 35/6 * 2
Variance = 11.667

Q.4 Explain the following types of contract:


a. Cost reimbursable and its variation
b. Fixed price and lump sum contract
c. Time & material contract
Ans:
a: Cost-reimbursable contracts: Here the seller is paid for his actual costs plus a fee to cover
his profit. The actual cost includes direct cost (salaries of full-time project staff) and indirect cost
(salaries of management and support staff indirectly involved in the project plus cost of office
facilities like rent, electricity etc.). The variations in this category are:
– Cost-Plus-Fee (CPF) or Cost-Plus-Percentage of Cost (CPPC): The payment is made for the
actual cost plus an agreed percentage of the actual cost as fee.
– Cost-Plus-Fixed-Fee (CPFF): This is same as CPPC except that the fee is fixed and does not
increase or decrease with the actual cost unless project scope changes.
– Cost-Plus-Incentive-Fee (CPIF); Here, in addition to the payment as per the CPPC or CPFF
mode, an incentive is paid upon achieving certain specified performance levels of the
project.

b: Traditional lump sum fixed cost/time (Fixed Price Contracts)


In fixed type contracts, the design is already developed by the owner (usually through a design
consulting firm). Subsequently, the project is tendered and awarded to a construction contractor

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at a fixed price and then the construction delivery is completed. Theoretically, each of these
phases, i.e., design, tendering and contract award is discrete and separate. First, the owner
fixes a Design Consultant, based on which a design is generated which is as comprehensive as
possible. Tenders for construction are invited for this design. Tendering can be either ‘open
tendering’ or ‘pre-qualified tendering’. By ‘pre-qualified tendering’, it is implied that bidders are
pre-qualified. The evaluation of the bids received leads to selection of the seller at a fixed
cost/time, on the premise that the design is complete and comprehensive.
The advantage of this type of contract is that the owner is aware of the cost at the time of
award based on which the design was finalized.
In practice, however, the designs always have gaps which lead to the under-mentioned possible
disadvantages:
· The construction contractor makes extra cost claims to the owner if the design is not
complete before tendering.
· Additional cost claims by the construction contractor on account of consequential
damages due to the changes are also likely.
· The construction contractor is excluded from the design development phase, and thus a
substantial value addition opportunity by valuable management and constructability
information is lost.
· The construction contractor becomes answerable to the principal design consultant,
while he cannot make suggestions on improved design for constructability[4].
· Many owners perceive that they may be at the mercy of construction contractors looking
for opportunities to create additional revenue and profit from such gaps in the tender.
This may lead to a confrontational approach over disputes which may ultimately need to
be settled by arbitration or a court of law.
· Notwithstanding these disadvantages, fixed contracts are in vogue where designs can be
more or less frozen prior to tendering for construction, with some contractual provisions
for price variations incorporated in the contract.

c: Time and Material (T&M) contracts: Here the contract contains the feature of both cost
reimbursable and fixed price contracts. Unit rate contracts are an example, where the unit rates
for specific items of work are fixed, but the contractor is paid for the actual quantities executed,
since quantities are not known at the time of signing the contract with the contractor.

Q.5 Describe the factors to be considered when feasibility of a project is examined. Also explain
the various qualities that a good project management process encompasses.
Ans: Feasibility Study on Project
Feasibility study on project defines the probabilities associated with it. Various measures are
taken to identify whether a project is feasible or not. Initially, an analysis is performed to
determine if the project meets all the requirements to proceed to next stage. However, when a
feasibility of the project is to be examined, the following factors have to be taken into
consideration:
· Cost: The project management team makes a cost analysis to ensure that the estimated
costs of the project fall within the range set by the organization. However, there are
certain factors that have to be considered while determining the costs of the projects. It
includes the implications of the capital expenditure, the project costs, determining the
effects of finances on the organization, determining the expenses required in the current
year as well as the subsequent years.
· Timing: The project manager makes a timing analysis to ensure that the project meets
its delivery date with the expected quality outcome. The timing phase of the project
ensures that any legal or requirements from the government are complied on date. It
also ensures that the finances are used by the company in the restricted period of time.
Timing policies are also important for the operational concerns such as requirement of
equipments or systems to meet the defined deadlines and specific procedures.
· Performance: The project manager fixes the job responsibilities to the members of the
team based on the skill set they possess. It is vital to monitor the performance both
technically and personally. It is necessary that the performance of the members
participating in the project meet the standards as specified by the client as well as the
organization internally.

Quality of a Project Management Process

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The various qualities that a good Project Management process should encompass are as listed
below:
· Creativity: A good Project Management process should be creative that facilitates
integrating various categories of the project into a unified structure. It should provide
abilities to create enthusiasm and appeal in the process.
· Structure: The structure of the organization will have a set of specifications,
parameters, limitations as well as certain guidelines that has to be followed. The
members of the organizations are expected to work effectively within the defined
framework and structure of the organization.
· Intuition: Intuition is very important part of maintaining a good Project Management
process. It is that ability of understanding the uncertainties and the things forth coming
without the use of any rational processes. It is the foundation of emotional intelligence. It
is vital to have a stronger intuition that enables to sense what the other members are
feeling and thinking.
· Knowledge: Knowledge is an important part of the Project Management process. It is
required for the deeper understanding of the project with ease and also to delegate the
technical aspects training to the other members participating in the project team.
· Commitment: The commitment of the project manager is responsible for holding the
team together to pull the project to meet its delivery dates successfully. Commitment
ensures that there are fixed allotted timings for every activity to be performed in the
process.
· Being Considerate: Being considerate infers that a task allotted to the members of the
team can be well completed in the allotted time. It ensures that no employee is heavily
loaded with unnecessary work he is not responsible for. Thus, the loyalty and
humbleness of the manager will further take the project team to meet its objectives
defined.
· Versatility: The primary qualities of a Project Management process include flexibility to
any kind of environment. It requires versatility that enables the project manager to
change any decisions with respect to resources and other constraints quickly.
· Lightness: It complements the importance of the tasks as well as provides options to
resolve them. This leads to strong team results and team maintenance.
· Discipline/focus: It is very essential to be self focused and disciplined to maintain the
moralities and ethics of self and the company.
· Big picture, small actions: It is very essential for a good Project Management process
to visualize things in a broader perspective. This leads to thinking in a wider range
meanwhile paying attention to the details of the project. However, it requires good
communication skills to interact with the team members in order to establish the clear
expectations of the clients. It is required that the members of the team are also given the
authority to make shared decisions regarding developing the project. It gives a clear
picture of the people who are assigned to the specific tasks. Effective Project
Management process adopts various customs and ways in order to correspond and share
the relevant information such as conducting meetings and informal conversations with
the relevant and concerned people such as with the other members of the team, the
clients and other senior officials of the project. This requires that the manager of the
project have good communication skills and believe in listening skills than talking skills.

Q.6 Describe the following project management approaches:


a. Critical chain project management approach
b. Event chain methodology approach
c. Incremental approach
d. Phased approach
Ans:
a. Critical Chain Project Management Approach (CCPM): It is an approach of scheduling
and managing the projects with respect to resources. It ensures planning and structuring of
projects so that resources are available when the critical chain begins. It ensures that the
project plan undertakes resource leveling. Resource leveling is a part of the project
management process. It inspects resources that are not balanced. These resources can
include people or equipment.

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For example, when requirements of resources such as equipment or manpower are far more
than that is available at that instant, the resources need to be rescheduled. When a team
member is a critical resource for multiple tasks, the responsibilities of that person need to be
redistributed among other personnel in order to complete the tasks simultaneously. Project
resource leveling resolves such conflicts by balancing the resources and the workload.

b. Event Chain Methodology Approach: This method allows modeling of uncertainties in an


easy and simple way in the project. The various principles that event chain methodology
works on are as follows:
– Probabilistic moment of risk: It monitors the uncertain risks that occur at the some point
when the project is in flow.
– Event chains: An analysis is performed to determine an increasing effect of event chains
in the project.
– Critical events or event chains: Critical events are defined as those events that have the
ability to disturb the progressive workflow of the entire project. An analysis is performed
to determine such uncertain situations in the project.
– Project tracking with events: tracking makes it possible to gather information about
future events from the incomplete information available.
– Event chain visualization: Event chain diagrams are used to visualize events and event
chains.

c. Incremental Approach: The incremental approach adopts a sequential approach in


preparing a project for delivery. The main objective of incremental approach is to reduce
development time to a large extent. This is achieved by adopting measures such as finding
the most deserving and suitable people for the task, facilitating good human relations and
communication within the project team and providing solutions to anticipate customer wants
and queries. This approach is very useful in situations where complete funding is not readily
available or when there is a delay in the delivery of the deliverables.

d. Phased Approach: A project life cycle includes initiation, planning, execution, control and
close. The phased approach is responsible in fitting the requirements according to the need
of the organizations of various sizes. There are various benefits of using phased approach in
project development. This approach assists in laying down a firm and structured foundation
for the project.

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