Project Management

2013 Lew Hofmann

Managing Projects
Projects are usually large & infrequent or one-time.
No two projects are the same. Projects are usually fairly long.
Several months to many years

They Involve different people in different phases

Most people are only involved with a part of a project

Even though a project may be under the overall purview of a single department or group, other departments are often involved.
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Projects
The three main goals of project management are 1. Complete the project on time or earlier. 2. Complete the project on or under budget. 3. Meet the specifications to the satisfaction of the customer.

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Project Scope & Objectives

Defining a projects scope, time frame, allocated resources and objective, is essential.
An Objective Statement provides the purpose of the project. A Specific time frame is established for starting and ending the project.

Necessary resources must be defined.

Project costs and personnel allocations are stated.
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Project Structures
Functional Structure: The team is housed in a

specific functional area. Assistance from other

areas must be negotiated. Pure Project: Team members work exclusively for

the project manager. (Best for large projects.)

Matrix Structure: A compromise between the

functional and project structures. Members remain

in various functional areas and the project manager coordinates across functional areas. Having two bosses (dual authority) can cause problems.
2013 Lew Hofmann

Project Management Techniques PERT CPM GERT

Program Evaluation and Review Technique
PERT (Program Evaluation and Review Technique) is utilized when activity times are uncertain (involved risk).

Critical Path Method

CPM (Critical Path Method) is used when activity times are known and certain.

Graphic Evaluation and Review Technique

2013 Lew Hofmann

Rarely used, and then only in very complex projects. It overcomes many of the limitations of PERT and CPM Provides much more project flexibility.

Project Management Steps

1. Describe the Project (Defining all the tasks
that must be completed, and in what sequence.)

2. Develop a Graph Model (diagram the

network showing task relationships)

3. Develop an activity Schedule (Determine

the time estimates for each task)

4. Analyzing cost-time trade-offs

(Determine the cost of each task.)

5. Assess Risks (Probability analysis)

2013 Lew Hofmann

Step 1 Describe the project

What is the project? When does the project start and end? What activities make up the project?
Activities are defined as the smallest units of work that a project manager is expected to schedule and control.
...a managers project description should reflect only the level of detail that he or she needs in order to make scheduling and resource allocation decisions.

Task Ownership: Each activity must have an owner who is responsible for seeing that the work is accomplished.
2013 Lew Hofmann

Relationships between Activities

A project is a sequence of activities.
Large projects have interrelated sequences.

Except for the beginning activity/activities, every activity in a project has one or more activities that must be done immediately prior. These are called Precedent (Pre-cee-ent) activities
They must be defined before the project begins.
EG: In order to bury a body you must first dig a hole.
2013 Lew Hofmann

Step 2 Develop a Network Model

A Network Diagram visually displays the interrelated activities using nodes (circles) and arcs (arrows) that depict the relationships between activities. It is a graphical diagram.
For very large projects it may only be a numerical arrangement of activities rather than graphical.

Two types of Graphical Network Models

Activity On Arc (AOA) Activity On Node (AON) (We will use AON)

2013 Lew Hofmann

Two Types of Network Models

Activity-on-Arc (AOA)
Time Activity D Time Activity E Time

Activity-on-Node (AON)
Activity
Activity

D
Link
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We will use this!

What AON Nodes look like.

The is the earliest you can start an activity. It is determined by the early finish time of the precedent activity. If there are two or more precedent activities, this time is the same as precedent activity with the latest Early Finish time. Slack (S) is the difference, if any, between the early start (ES) and late start times (LS) or the early finish (EF) and late finish (EF) times. S = LS - ES or S = LF - EF

Slack
The earliest you can complete an activity--determined by adding the activity time (duration) to the early start time.

Activity Early Name Early

Start

Finish

Late Late Start Activity Finish

Duration This is the LateFinish time minus the activity duration.

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This is the latest you can finish an activity without delaying project completion. It is the same as the Late Start time of the next activity. If there are two or more subsequent activities, this time is the same as the earliest of those Late Start times.

Example: This homework Assignment

The slack in this case would be one week, expressed in hours, since that is the unit of time used for the activities. It would be how long you could delay doing the assignment.

The earliest you can start this assignment it is immediately after this class ends.

Slack
If it takes one hour, the earliest you can complete this assignment is one hour after class ends.

HomeEarly work #2 Early

Start Late Start 1 hour

You can wait until one hour before the class in which it is due to start it; in this case one week from now.
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Finish Late Finish

One hour after your late start time.

Precedent Relationships
Precedent relationships determine the sequence for accomplishing activities. They specify that any given activity cannot start until its preceding activity or activities have been completed.
Activity On Node approach

In our AON approach, the nodes (circles) represent activities, and the arcs (arrows) represent the sequential relationships between them.
Nodes are simplified in the following examples. 2013 Lew Hofmann

AON

S precedes T which precedes U

Activity Relationships

S & T must be completed before U can be started.

S U T

T & U cannot begin until S has been completed.

T S U

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Activity Relationships
U cannot begin until S & T have been completed. V cannot begin until T has been completed.
S U

U & V cant begin until S & T have been completed.

S U

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Activity Relationships

T & U cannot begin until S has been completed; V cannot begin until both T & U have been completed.
S T V

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Logic Errors
This is a logic error. C cannot be an immediate predecessor of both G &H if G is also an immediate predecessor of H.

Logic errors are hard to identify except on the network diagrams. If you see a triangle, then it is a logic error. Eliminate the short cut.
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St. Adolfs Hospital

(A sample project)
Activity Description Immediate Predecessor(s) Responsibility

A B C D E F

G H I J K

Select administrative and medical staff. Select site and do site survey. Select equipment. Prepare final construction plans and layout. Bring utilities to the site. Interview applicants and fill positions in nursing, support staff, maintenance, and security. Purchase and take delivery of equipment. Construct the hospital. Develop an information system. Install the equipment. Train nurses and support staff.

2013 Lew Hofmann

St. Adolfs Hospital

(A sample project)
Activity Description Immediate Predecessor(s) A B B A Activity Times

A B C D E F

G H I J K

Select administrative and medical staff. Select site and do site survey. Select equipment. Prepare final construction plans & layout. Bring utilities to the site. Interview applicants and fill positions in nursing, support staff, maintenance, and security. Purchase and take delivery of equipment. Construct the hospital. Develop an information system. Install the equipment. Train nurses and support staff.

12 9 10 10 24 10

C D A E,G,H F,I,J

35 40 15 4 6

*We wont assigning Responsibility data, but it is important in project management.

2013 Lew Hofmann

St. Adolfs Hospital

Diagramming the Network
Activity Times (wks)

Immediate Predecessors
A B C D E F G H I J K A B B A C D A E,G,H F,I,J 12 9 10 10 24 10 35 40 15 4 6

Start

Finish

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St. Adolfs Hospital

Activity Paths
Paths are sequences of activities between a projects start and finish.
Path A-I-K A-F-K A-C-G-J-K B-D-H-J-K B-E-J-K
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Time (wks) 33 28 67 69 43

Start

Finish

St. Adolfs Critical Path

The longest path is the critical path!
Path A-I-K A-F-K A-C-G-J-K B-D-H-J-K B-E-J-K Time (wks) 33 28 67 69 43
A I

Start

Finish

Project Expected Time is 69 wks.

2013 Lew Hofmann

Activity Time Estimates PERT or CPM ?

CPM (Critical Path Method) Activity times are certain, so only one time estimate for each activity is needed.
Decision making under Certainty

PERT (Program Evaluation and Review Technique) is used when activity times are uncertain. (Decision making under risk)
It requires three time estimates for each activity.
(Best case, most likely time, and worst case)
2013 Lew Hofmann

PERTs Three time-estimates

OPTIMISTIC TIME: Best time if everything goes perfectly when doing the activity. REALISTIC TIME: Most likely time for the activity PESSIMISTIC TIME: A worst-case situation
Expected Time B + 4M + P = ------------------6

In this example, the most likely time is given a weight of four, and the other two times (pessimistic and optimistic) are each given weights of one. Risky activity times make the project length risky, so there is a need for risk assessment based on the probability distribution of times. (Standard deviation and variance are computed by the software.)
2013 Lew Hofmann

Activity Slack
Activity slack is the maximum length of time that an activity can be delayed without delaying the entire project. It is the difference between the earliest time we can start an activity and the latest time we can start the activity without delaying the project.

The critical path activities have zero slack.

For the St. Adolfs Hospital project, 69 weeks is the project length because 69 weeks is the longest path. Project delays beyond the projected completion date often involve penalties.
2013 Lew Hofmann

Activity Start and Finish Times

Earliest Start Time (ES) for an activity is the earliest finish
time of the immediately preceding activity.

Earliest Finish Time (EF) for an activity is its earliest start

time plus how long it takes to do it (activity time).

Latest Start Time (LS) is the latest you can finish the activity
minus the activitys estimated duration.

Latest Finish Time (LF) is the latest start time plus the activity
time.
The latest finish time is the same as the latest start time of the activity activity which follows it. (Latest start and finish times for each activity are computed starting at the projects last activity completion time and working forward.)

Slack is the difference between the Earliest Start and Latest start
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times for an activity (or earliest finish and latest finish times.)

Earliest Start and Earliest Finish Times

12

I 27 15

Earliest start time

0 A 12

Earliest finish time

63 K 69

12 F 22

12

10 C 22 10 G 57 35

Start

12

22

Finish

B 9 9

D 19
10

19

H 59 40

59

J 63 4

9 E 33

24
2013 Lew Hofmann

Earliest Start and Earliest Finish Times

Path
A-I-K A-F-K A-C-G-J-K B-D-H-J-K B-E-J-K

Time (wks)
12

I 27 15

33 28 67 69 43

The Critical Path takes 69 weeks

63 K 69

A 12

12

12 F 22

10 C 22 10 G 57 35

Start

12

22

Finish

Critical Path

B 9 9

D 19
10

19

H 59 40

59

J 63 4

9 E 33

24
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Latest Start and Latest Finish Times

(You start with the last activity and work toward the first activity) I
12 27 48 15 63

12

12 F 22 53 10 63

2 12 14

Latest start time

22 G 57 24 59

63 K 69 63 6 69

Latest finish time

Finish

Start

12 22 14 10 24

35

B 9

0 9 9

9 19 9 10 19

19 19

H 59

59

J 63

40 59

59 4 63

9 E 33 35 24 59 2013 Lew Hofmann

Node A B C D E F G H I J K

Duration 12 9 10 10 24 10 35 40 15 4 6

ES 0 0 12 9 9 12 22 19 12 59 63

LS 2 0 14 9 35 53 24 19 48 59 63

Slack 2 0 2 0 26 41 2 0 36 0 0

Slack is the difference between LS and ES or EF and LF I

12 27 48 15 63

12

12 F 22 53 10 63

2 12 14

63 K 69 63 6 69

Start

12 22 14 10 24

22 G 57 24 59

35

Finish

Activity Slack Analysis

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B 9

0 9 9

9 19 9 10 19

19 59 19 40 59

59

J 63

59 4 63

9 E 33 35 24 59

Analyzing Cost-Time Trade-Offs.

There are always cost-time trade-offs in project management.
You can completing a project early by hiring more workers or running extra shifts. There are often penalties if projects extends beyond some specific date, and a bonus may be provided for early completion.

Crashing a project means finishing the project early by expediting one or more activities.
Not all activities can be shortened.
2013 Lew Hofmann

Project Costs
Total Project Costs = direct costs + indirect costs + penalty costs Direct costs include labor, materials, and any other costs directly related to project activities.

Indirect costs include administration, depreciation, financial, and other variable overhead costs. These can be reduced by reducing total project time.
The shorter the duration of the project, the lower the indirect costs will be.

Penalty costs are essentially late fees incurred for going over the projected due date.
2013 Lew Hofmann

Minimizing Costs
We do cost analysis to determine the project schedule that minimizes total project costs.
When crashing an activity or project, extra money is spent on direct costs, but money is saved on indirect costs and possible penalties. A minimum-cost schedule is determined by starting with the normal project time schedule and shortening activities along the critical path until the costs of crashing (direct costs) start to exceed the savings in indirect costs and penalty costs.
New critical paths usually appears while doing this.
2013 Lew Hofmann

St. Adolfs Hospital Minimum Cost Schedule

a. Determine the projects critical path(s). b. Find the activity or activities on the critical path(s) with the lowest cost of crashing (shortening) per week.

c. Reduce the time for this activity until

a. it cannot be further reduced, b. or another path becomes critical, c. or the increase in direct costs exceed the savings that result from lower indirect costs.

d. Repeat this process until the total project costs are no longer decreasing.

2013 Lew Hofmann

Sophisticated project management software will do this.

12 27 48 15 63

Of the five critical-path activities, the contractor says D and H cannot be shortened. J is the least costly to shorten at $1000 a week. Contractor says it can be shortened to 1 week.
63 K 69 63 6 69

12

12 F 22 53

2 12 14

10 63 C
22 G 57 24 59

Start

12 22 14 10 24

35

Finish

B 9 0
0 9 9

9 19 9 10 19

19 19

H 59 40 59

59

J 63

Shorten from 4 weeks to 1 week

59 4 63

9 E 33 35 24 59

The project manager must now compare the cost of shortening J by 3 weeks ($3,000 in additional direct costs) with savings in indirect costs, to see if the total cost is lower.

2012 2013 Lew Hofmann

Assessing Risks
Risk is a measure of the probability (and consequences) of not completing a project on time. A major responsibility of the project manager at the start of a project is to develop a riskmanagement plan. A Risk-Management Plan identifies the key risks to a projects success and prescribes ways to circumvent them.
2013 Lew Hofmann

Causes of Project Risk

1. Service/Product Risks: If the project involves a new service or product, several risks can arise.
Market risk comes from competition. Technological risk can arise from technology advances made once the project has started, rendering obsolete the technology chosen for service or product. Legal risk from liability suits or other legal action.

2. Project Team Problems: Poor member selections and inexperience, lack of cooperation, etc. 3. Operations Risk: Information inaccuracy, misscommunications, bad project timing, weather
2013 Lew Hofmann

ANALYZING PROBABILITIES
What is the probability that our sample project will finish in 69 weeks as scheduled?
100% (Why?)
Because we used CPM!
(This means we were certain of all of our activity times.)

If we werent certain, we should have used PERT

You only do risk analysis if you use PERT

2013 Lew Hofmann

PERT and PROBABILITIES

With PERTs three time-estimates, we get a mean (average) time and a variance for each activity and each path. We also get a project mean time and variance. In order to compute probabilities (assuming a normal distribution) we need the activity means and variances.
Most computer packages calculate this for you.

2013 Lew Hofmann

Probability of Project Completion

The probability of a project being completed by a given date is a function of the mean activity times and variances along the critical path(s). The probability of a specific activity being completed by a given date is a function of the mean activity times and variances along the longest path leading up to that activity. If you have more than one critical path, focus on the path with the greatest variance. A near-critical path may also be a problem, depending on the mean and variance of its activities.
2013 Lew Hofmann

Distributions & Probability

A Beta distribution is often used for the three estimates of each activity
This allows skewed distributions.
Optimistic------Most likely -----------------------Pessimistic
(3 ------------- 5 ---------------------------------- 11)

Normal distributions are needed for probabilities. A distribution of activity-means is a normal distribution, even though each activity time may be a beta distribution.

2013 Lew Hofmann

Beta Distribution
Each activity may have its three time estimates skewed (Beta Distribution), but the path along which this activities lie has a normal distribution and thus a mean and variance.

Probability

a
Optimistic
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m Mean

b
Pessimistic

Time

Figuring Probabilities
Assume a PERT project critical path takes 40 days, and that the variance of the critical path is 2.147
You wish to know the probability of the project going over 42 days.

Compute the standard deviation of the critical path.

The square root of the variance of 2.147 = Std. Dev. = 1.465 POM/QM software gives you the variance of the critical path.

Compute the Z value: Z = (absolute time difference) / Std. Dev. In this example, Z = (42 days - 40 days) / 1.465 = 1.365 Look up the Z value of 1.365 in a Normal Distribution table to get the probability of the project taking 42 days. Subtract it from 100% to get the probability of going over 42.
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.9139

Look up the Z value (1.365) in the table of normal distribution.

(In this case you need to interpolate between the Z values of .9313 and .9147)

.9139 or 91.39% is the probability of the project taking 42 days. Thus the probability of going over 42 days is 100 - 91.39 = 8.61%

2013 Lew Hofmann

Project Length (critical path) is 40 weeks Probability of completing the project in 42 weeks is 91.39%

Normal distribution of variances along the critical path. Sum of its variances = 2.147 Std. Dev. = 1.465 weeks

Probability of exceeding 42 weeks is 8.61%

40 42 Project duration (weeks)

2013 Lew Hofmann

St. Adolfs Hospital

A 69-week Project
What is the Probability of it taking 72 weeks?
Critical Path Variance

Critical Path = B - D - H - J K = 69 weeks T = 72 weeks C = 69 weeks

2 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89

TC = (variances of activities along critical path) z = 2

z=
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72 69 11.89

z=

3 3.44818

Z = 0.870

Look up Z value in normal distribution table

Look up the Z value (0.870) in the table of normal distribution. .8078 or 80.78% is the probability of the project taking 72 wks. Going over 72 weeks would be 100 80.78 = 19.22%

2013 Lew Hofmann

St. Adolfs Hospital

Probability of Completing Project On Time
Normal distribution: Mean = 69 weeks; = 3.45 weeks

Length of critical path is 69 weeks Probability of taking 72 weeks is 0.8078 or 80.78%

Probability of exceeding 72 weeks is 0.1922 or 19.22%

69 72

Project duration (weeks)

2013 Lew Hofmann

Resource-Related Problems
Padded Time Estimates: Many timeestimates come with a built-in cushion that management may not realize. Latest Date Mentality: The tendency for employees (and students) to procrastinate until the last moment before starting. Failure to Deliver Early, even if the work is completed before the latest finish date.
2013 Lew Hofmann

Resource-Related Problems
Path Mergers occur when two or more activity
paths combine at a particular node. Both paths must be completed up to this point, which will eliminate any built-up slack.

Multitasking is the performance of multiple project

activities at the same time. Work on some activities is often delayed for other work.

Loss of Focus by a manager can happen if the

critical path changes frequently. Failure to have all the needed resources on time.
2013 Lew Hofmann

PERT / CPM ADVANTAGES

Enables Resource Management & Allocation
You can move slack resources to critical points

Focuses on your critical activities

Visualize relationships (The big picture)

Enables Cost analysis

2013 Lew Hofmann

PERT / CPM PITFALLS

Can be complex to set up relationships in large project Time estimates are often biased. Near critical paths are easily overlooked.

2013 Lew Hofmann

GERT
(Graphical Evaluation and Review Technique) Gives more flexibility to project planning than PERT/CPM

Allows any individual activity to either be completed or not completed (Succeed or fail)
PERT & CPM both require all activities be successfully completed. GERT does not require this. GERT Allows looping back (redoing an activity) or skipping an activity entirely. There are computerized GERT packages.
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Solved Problem
What is the probability of completing the project in 23 weeks?

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Solved Problem

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Solved Problem
4.0 8.0 0.0 4.0 A 4.0 8.0 D 12.0 16.0 20.0 9.0 9.0 E 15.5 15.5

Finish

4.0

6.5

Start

5.5 5.5 B 5.5

C 3.5

9.0 9.0 G

0.0 0.0

5.5 5.5
F 9.0

15.5 15.5

4.5

20.0 20.0

5.5 6.5
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14.5 15.5

Solved Problem

Critical path = 20 weeks 2013 Lew Hofmann

Using the Normal Distribution appendix, we find that the probability of completing the project in 23 weeks or less is 0.9357.

Homework #2 Due next week

Problem 1 is on the next slide. Draw the network and solve it manually using the AON method. No credit if you use the computer. Problems 2 and 3 are on the following slides. Use the POM/QM software for these last two problems.
2013 Lew Hofmann

Problem 1
Do manually (no computer)
A project has the following precedence relationships and activity times. Draw the network diagram and calculate the total slack for each activity. Which activities are on the critical path?
Activity A B C D E F G H
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Activity Time (wks) 4 9 5 15 12 4 8 7

Immediate Predecessor(s) A B,C B D E F,G

PROBLEM 2 (Use POM/QM)

1. There are logic errors in the data. You will have to run the program in order to find them. Then make the appropriate corrections and re-run the problem to get the correct solution. Identify the critical path and its length. 2. Include 4 printouts: Input screen, PERT/CPM results table, Precedence graph and the Gantt chart of early & late times. Activities for Problem #2 A B
Demolition of present structures Excavation and filling of site

Time 3 2

Precedents None A

C
D E F G H

Forming & pouring of concrete

Construction of steel skeleton Construction of concrete structure Construction of exterior skin Installation of plumbing Installation of electrical

2
3 2 1 3 3

B
C C D,E E D,E

I
J

Installation of heating & cooling

Construction of interior flooring

3
3

D,E,F
I

Lighting fixtures and finish work

Lew Hofmann Hofmann 2013 2013 Lew

Homework, Problem 3
(next slide)

This is a PERT problem so it has three time estimates. Use the POM/OM package. Answer the following questions: a. Identify the critical path(s). b. How long is the path nearest to the critical path? c. What is the probability that the project will take longer than 38 days? (Table of Normal Probabilities is on the last slide.)

d. What is the probability that the near critical path will take longer than 38 days? e. Include 5 printouts: Input screen, PERT/CPM results table, Precedence graph, Task time computations, and the Gantt chart of early & late times.
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Problem #3
Activity Precedent Optimistic Most Likely Pessimistic

B C
D E

A A
B B

4 5
8 7

4 6
10 10

4 8
10 15

F G
H I J

C C
D E, F G

9 7
4 6 8

9 7
6 9 9

13 7
8 11 10

K
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H, I, J

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Sample POM/QM Input Table Printout

Note that this is CPM since there is only one time estimate for each activity. You will need to change the method for PERT.

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Sample POM/QM Solution Table printout

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Sample PERT/CPM
Precedence Graph Printout

Note that the software does not add start blocks or end blocks. In your homework computer problem, you will have more than one ending node. This is not an error. Connect them to an End Block if it will help you visualize it.

Note also that there is a logic error. D should not be an immediate predecessor of F.

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Sample Gantt Chart Printout

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POM/QM Printing Hint

Avoid using the print screen button on the bottom left of the screen or in the file menu. Screen prints are small and very hard to read. Select the File pull-down menu and use the Print option. You can then indicate which items you wish to print and get a much better output. OPTION: Download the free program Jing. It is available for Mac and PC, and what I use for the printouts on my PPT slides.
2013 Lew Hofmann

http://www.techsmith.com/jing.html