Project Management

PROJECT MANAGEMENT
Project Management –A Managerial Prospective

Management
“A process of working with people and
resources to accomplish organizational
goals.”
“Getting things done through other people.”
Project Management –A Managerial Prospective 2

Management (Cont’d)
“The process of achieving organizational
goals through planning, organizing,
leading, and controlling the human,
physical, financial and informational
resources of the organization.”

Managerial Functions
• Planning
• Organizing
• Leading
• Controlling

Manager as a…….
• Planner • Coordinator
• Organizer • Problem Solver
• Leader • Decision Maker
• Controller • Negotiator
• Motivator • Strategist
• Facilitator

What is a Problem.....

Decision:
“The choice made from among alternatives.”
Decision making:
“The process of organizing a problem,
generating and weighting alternatives
coming to a decision and taking action
with feedback.”
Conditions of Decision making:
• Certainty
• Risk
• Uncertainty
• Ambiguity

Project
• Project
• Culture of a Project
- Norms of an Organization
- Conflicts
• Importance of Human Factor in Projects

Project Management
“The process of controlling of a project from
beginning to an end to achieve project
objectives in a given time.”

Project Management (Cont’d)
“A project is a well-defined set of
tasks/activities that must all be completed in
order to meet the project’s goals.”
• Each task may be started/stopped

independently
• Tasks must be performed in a given
sequence

Laws of Project Management
• Projects progress quickly until they are 90% complete.
Then they remain at 90% complete forever.
• When things are going well, something will go wrong.
When things just can’t get worse, they will. When things
appear to be going better, you have overlooked
something.
• If project content is allowed to change freely, the rate of
change will exceed the rate of progress.
• Project teams detest progress reporting because it
manifests their lack of progress.

Trade-offs in Project Management
Performance
Time
Cost

Activity Networks
• Which tasks have to be completed first?

• Which tasks rely on the results of other
tasks?
• Which tasks generate results for
subsequent tasks

Work Breakdown Structure
(WBS)
“ A hierarchical decomposition of all the

tasks to be accomplished for a project to
be completed.”

A WBS is Not !!!
• An Organizational chart
• Not a flow chart showing temporal or
logical relationships among tasks
• A listing of skills required to complete the
task

Why do projects fail?
• Reliance on project management software

rather than an understanding of project
management principles
• Communication problems
• Failure to adequately adjust for changes
during the course of the project

Project Team and Its Required Area of Expertise
Project Management
A. Interpersonal 1. Standard
Skills Regulation

Standard:
“A document established by the consensus
and approved by organized body.”
Regulation:
“Requirement imposed by the Government

bodies.”

Under Standing Project Environment
Cultural & Social Environment:
“The teams need to understand how the project
affect the people and how the people affect the
project.”

Under Standing Project Environment
(Cont’d)
Physical Environment:
• Project people norms
• If the project will affect its physical surroundings, some team
members should be knowledgeable about the local ecology and
physical geography that could affect the project or be affected by the
project.

General Management Knowledge & Skill
• Financial Management & Accounting
• Purchasing & Procurement
• Sales & Marketing
• Contracts & Commercial Laws
• Logistics & Supply Chain

Interpersonal Skills
• Communication
• Leadership
• Motivation
• Negotiation & Conflict Management
• Problem Solving
• MBO

Project Cost Management
• Cost Estimation
• Cost Budgeting
• Cost Controlling

Project Cost Management
“Project Cost Management includes the

processes involved in planning,
estimating, budgeting, and controlling
costs so that the project can be completed
within the approved budget.”

Life Cycle Costing
“Cost Management should also consider
the effect of project decisions on the
cost of using, maintaining and
supporting the product, services or
results. Life Cycle Costing should
improve decision making and is used
to reduce cost and execution time and
to improve the quality and performance
of the project deliverable.”
Accounting Terminologies
• Opportunity Cost
• Sunk Cost
• Direct vs Indirect Project Cost
• Variable and Fixed Project Cost
• Controllable and Non-Controllable Project Cost
• Depreciation

Cost Management Plan
Process Description Precision Levels
Cost Management Plan Units of Measure

Reporting Formats
Earned Value Rules
Control Thresholds Organizational Procedures Links

Cost Estimating
“Developing an approximation of the costs of
the resources needed to complete the
project activities”

Cost Estimating (Cont’d)
Input Tools & Techniques Output
1. Enterprise Environmental 1. Analogous estimating
factors 2. Determine resource cost
2. Organizational Process rates
Assets 3. Bottom up estimating
3. Project Scope Statement 4. Project Management
4. Work Breakdown software
Structure 5. Vendor bid Analysis Activity cost estimates
5. Project Management Plan 6. Reserve Analysis
 Schedule management 7. Cost of Quality
plan
 Staffing management
plan
 Risk register

Reserve Analysis
“An analytical technique to determine the
essential features and relationships of
components in the project management
plan to establish a reserve for the
schedule duration, budget, estimated cost
or funds for a project.”

Activity Cost Estimate
“An activity cost estimate is a quantitative
assessment of the likely costs of the
resources required to complete schedule
activities.”
“This includes but not limited to labor, materials,
equipment, services, facilities, information
technology and special category such as an
inflation allowance or cost contingency reserve.”

Cost Budgeting
“Aggregating the estimated costs of
individual activities or work packages to
establish a cost baseline.”

Cost Budgeting
Input Tools & Techniques Output
1. Preliminary Scope 1. Cost Aggregation 1. Cost Baseline

Statement 2. Reserve Analysis 2. Project Funding Requirement
2. Work break down structure 3. Parametric 3. Cost Management Plan (Up dates)
3. WBS dictionary Estimating 4. Requested Changes
4. Activity cost estimates 4. Funding Limit
5. Project Schedule Reconciliation
6. Resource Calendar
7. Contract
8. Cost Management Plan

Fund Limit Reconciliation
“Large variations in the periodic expenditure of
funds are usually undesirable for organizational
operations. Therefore the expenditure of funds is
reconciled with the funding limits set by the
customer or performing organization on the
disbursement of the funds for the project.”

Budget
“The approval estimate for the project or any work breakdown
structure component or any schedule activity.”
Cost Baseline
“The cost base line is a time phased budget that is used as a
basis against which to measure, monitor and control overall
cost performance on the project. The cost baseline is the
component of the project management plan.”

Project Funding Requirements
“Funding requirements, total and periodic (e.g. annual
or quarterly) are derived from the cost baseline and
can be established to exceed. Usually by a margin
to allow for either early performance/progress or
cost overruns. The total funds required are those
included in the cost baseline plus the management
contingencies reserve account.”

Cost Control
“Influencing the factor that create cost
variances and controlling changes to the
project budget.”

Cost Controls
• Budget at Completion (The amount you

budgeted for the entire project)
• Estimate at Completion (The amount that you
expect that the total project to cost)
• Estimate to Complete (From the point on, how
much more we expect the project to cost to finish the
project)
• Variance at Completion (How much over or
under budget we expect to have)

Project Risk Management
• Project Risk Management includes the processes
concerned with conducting risk management planning,
identification, analysis, responses and monitoring and
control on a project.
• The objective of the risk management is to increase the

probability and impact of positive events and decrease
the probability and impact of events adverse to project
objectives.
Risk
• An uncertain event or condition that if it occurs has a
positive or negative effect on a project’s objectives.
Triggers
• Indications that a risk has occurred or is about o occur.
Triggers may be discovered in the risk identifications
process and watched in the risk monitoring and control
process. Triggers are some time called risk symptoms or
warning signs.
Project Risk Management
• Risk Management Planning
• Risk Identification
• Quantitative Risk Analysis
• Qualitative Risk Analysis
• Risk Response Planning
• Risk Monitoring & Controls

Project Procurement Management
“Project Procurement Management Includes the
process to purchase or acquire the products,
services, or results needed from outside the
project team to perform the work.”

Project Procurement Management
Project Procurement
Management
Planning Executing Monitoring & Closing

Controlling
1. Plan 1. Float 1. Contract
request/ 1. Contract
Administratio Closure
Purchase or Tendering
n 2. Post
Acquisition 2. Receive Bid
or Quote 2. Managing procurement
2. Make or Buy 3. Selection of Interface Audit
vendor among 3. Post
3. Plan
4. Contract various performance
Contracting awarding providers evaluation

Plan Purchase or Acquisition
“Determination of What to purchase, why and
when to purchase”.
Make or Buy Analysis

“It is a general management technique that can be used to
determine whether a particular product or service can be
produced by the project team or buy from the market.

Contract
“A contract is normally binding agreement that obliges the
seller to provide the specified product and obligates the
buyer to pay for it”.
Contract Fundamentals
“A contract may be written or oral and is both a legal
document and a relationship between the parties

Type of Contract
Contracts
Fixed Price of Time & Material

Cost Reimbursable
Lump-Sum Contracts Contract
Contracts

Type of Contracts
• Fixed Price/ Lump sum Contracts
• Cost Reimbursable Contracts
• Time & Material Contract

Fixed Price or Lump-Sum Contract
• A type of contract involving a fixed total price for a well defined
product.
• Fixed price contracts may also include incentives for meeting or
exceeding project objective such as schedule targets.
Cost Reimbursable Contracts
• A type of contract involving payment by the buyer to the seller for the
seller’s actual cost plus a fee typically representing seller’s profit.
These type of contracts often includes some incentive clauses.
Time & Material Contract

• A type of contract that is a hybrid contractual agreement containing
aspects of both i.e. Fixed price & Cost Reimbursable Contracts

Contract Type Selection
What Contract type might best suit the project?
• Degree of Cost and Schedule Risk

• How Complex is the requirement
• Cost & Price Analysis
• Urgency of the Deliverables
• Frequency of Changes
• Degree of definition of the statement of the work

Project Evaluation and Review Technique
(PERT) /
Critical Path Method (CPM)
• Graphical display of interrelationships among

activities and the order of project activities
• Allows estimates of completion time and cost

PERT / CPM
1. List activities and duration; develop WBS.
2. Order activities through use of Gannt chart.
3. Develop immediate precedent activities.
4. Draw project graph.
5. Calculate early start / early finish.
6. Calculate late start / late finish.
7. Determine critical path using slack time.
8. Crash project

Example
(Build a new mountain bike)
• A major manufacturer of bicycles is planning to enter the
high-end market for mountain bikes by designing a new,
state-of-the-art mountain bike. The bicycle is to be a
completely new design, and management has directed
the design team to incorporate the latest technology in
every facet of the product—frame, gears, wheels,
brakes, and so on—yet keep the price of the bike within
$100 of leading competitors’ prices.
Activities & Duration Times
Expected Duration
Activity
(months)
A – Do preliminary market analysis 1.0
B – Develop preliminary market designs 3.0
C – Do preliminary manufacturing study 1.0
D – Evaluate and select best product design 1.0
E – Develop detailed marketing plans 1.0
F – Design manufacturing process 3.0
G – Develop detailed product design 3.0
H – Build and test prototype 1.0
I – Finalize product design 1.5
J – Order components 1.0
K – Order production equipment 3.0
L – Install production equipment 2.0
Work Breakdown Structure (WBS)
• The set of independent tasks or work packages
that constitute a project
• Hierarchy of sub-projects that make of the total

project
• Useful for controlling costs, time, and resource

allocation

Partial Work Breakdown Structure
(for step G)
Mountain
Bike
Wheel Gearing Frame Brake

Seat Systems
Systems Systems Systems Systems
Gears & Frame Cover &

Hubs Fork System Calipers
Chains Structure Padding
Rims & Derailleur & Bearing Joining Levers &

Seat Structure
Spokes Shifters Systems Systems Cables
Tubing
Tubing
Structure

Gantt Chart
(for mountain bike development project)
Time in Months
A – Do preliminary market analysis
B – Develop preliminary market designs
C – Do preliminary manufacturing study
D – Evaluate and select best product design
E – Develop detailed marketing plans
F – Design manufacturing process
G – Develop detailed product design
H – Build and test prototype

I – Finalize product design
J – Order components
K – Order production equipment
L – Install production equipment

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
57 16
Precedence Relationships
Immediate
Activity
Predecessor
A – Do preliminary market analysis --
B – Develop preliminary market designs A
C – Do preliminary manufacturing study A
D – Evaluate and select best product design B, C
E – Develop detailed marketing plans D
F – Design manufacturing process D
G – Develop detailed product design D
H – Build and test prototype G
I – Finalize product design F, H
J – Order components I
K – Order production equipment I
L – Install production equipment E, J, K
PERT / CPM Chart Structure
B
ES EF
A (Duration) D
LS LF
C
ES = Early Start
EF = Early Finish
LS = Late Start
LF = Late Finish

PERT / CPM Chart
E
B
A F I J
D
L
C G H K

Early Start / Early Finish
(start with A)
5 6
1 4
E(1)
B(3) 4?
Or 5 8 9 10.5 10.5 11.5
0 1 42? 5
F(3) I(1.5) J(1) 13.5 15.5
A(1) D(1)
L(2)
1 2 5 8 8 9 10.5 13.5
C(1) G(3) H(1) K(3)

Late Start / Late Finish
(start with L)
5 6
1 4
E(1)
12.5 13.5
B(3)
5 8 9 10.5 10.5 11.5
0 1 1 4 4 5
A(1) F(3) I(1.5) J(1) 13.5 15.5
D(1)
6 9 9 10.5 12.5 13.5
0 1 L(2)
4 5
1 2 5 8 8 9 10.5 13.5
13.5 15.5
C(1) G(3) H(1) K(3)
3 4 5 8 8 9 10.5 13.5

Calculating Slack Time to Find the Critical Path
• Slack time tells us how long a particular activity can be
delayed without delaying the entire project
• Assumption: All preceding activities completed as early

as possible
• Slack = LS – ES or Slack = LF-EF

Calculating Slack Time
Activity Duration ES EF LS LF Slack
A 1 0 1 0 1 0
B 3 1 4 1 4 0
C 1 1 2 3 4 2
D 1 4 5 4 5 0
E 1 5 6 12.5 13.5 7.5
F 3 5 8 6 9 1
G 3 5 8 5 8 0
H 1 8 9 8 9 0
I 1.5 9 10.5 9 10.5 0
J 1 10.5 11.5 12.5 13.5 2
K 3 10.5 13.5 10.5 13.5 0
L 2 13.5 15.5 13.5 15.5 0
The critical path lies through those activities with no slack time.

Critical Path
5 6
1 4
E(1)
12.5 13.5
B(3)
5 8 9 10.5 10.5 11.5
0 1 1 4 4 5
A(1) F(3) I(1.5) J(1) 13.5 15.5
D(1)
6 9 9 10.5 12.5 13.5
0 1 L(2)
4 5
1 2 5 8 8 9 10.5 13.5
13.5 15.5
C(1) G(3) H(1) K(3)
3 4 5 8 8 9 10.5 13.5

Project Crashing
(Accounting for the Time/ Cost Trade-off)
What if the project can’t be completed within the

targeted time?
• Can the project be shortened by adding more

resources?
– If so, do the necessary resources exist?

Project Crashing (Crunching)
1. Determine if critical path (CP) falls within
targeted time. If yes, stop.
2. If no, compute crash cost per time period for
each activity.
3. Select activity on CP with lowest crash cost
and crash.
4. Re-compute CP and check to see if within
targeted time.
5. Repeat as necessary.

Critical Path – Enumeration
A-B-D-E-L 8
A-B-D-F-I-J-L 12.5
A-B-D-F-I-K-L 14.5
A-B-D-G-H-I-J-L 13.5
A-B-D-G-H-I-K-L 15.5
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 11.5
A-C-D-G-H-I-K-L 13.5
Critical Path Crashing
A-B-D-E-L 8
A-B-D-F-I-J-L 12.5
A-B-D-F-I-K-L 14.5
A-B-D-G-H-I-J-L 13.5 13
Spent $20 to shorten
A-B-D-G-H-I-K-L 15.5 15 0.5 months
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 11.5 11
A-C-D-G-H-I-K-L 13.5 13

A-B-D-E-L 8
A-B-D-F-I-J-L 12.5
A-B-D-F-I-K-L (3) New CP 14.5
A-B-D-G-H-I-J-L 13 11 (2)
A-B-D-G-H-I-K-L 15 13 (1)
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 11 9 (2)
A-C-D-G-H-I-K-L 13 11 (2)

A-B-D-E-L 8 6
A-B-D-F-I-J-L 12.5 10.5
A-B-D-F-I-K-L 14.5 12.5
A-B-D-G-H-I-J-L 11 9
A-B-D-G-H-I-K-L 11
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
‘B’ and ‘I’ can both be crashed for
A-C-D-G-H-I-J-L 9 $60—pick one
A-C-D-G-H-I-K-L 11 (I picked ‘B’)

Critical Path crashing
A-B-D-E-L 6
A-B-D-F-I-J-L 10.5 9.5
A-B-D-F-I-K-L 12.5 11.5
A-B-D-G-H-I-J-L 9 8
A-B-D-G-H-I-K-L 11 10
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5 9.5
A-C-D-F-I-K-L 12.5 11.5
A-C-D-G-H-I-J-L 9 8
A-C-D-G-H-I-K-L 11 10
Treating Time as Probabilistic
What if the time estimates for completion of
project activities aren’t certain?
optimistic time
most likely time
pessimistic time

Using Time Estimates
1. Calculate ET = Expected Time for each
activity.
2. Use ET to determine CP and, if necessary, to
crash the project.
3. Determine variance of expected time for each
activity.
4. Calculate Z and determine probability project
will be completed by a desired time.

Variable definitions
a = optimistic time for activity
m = most likely time for activity
b = pessimistic time for activity
ET = expected time of each activity
s2 = variance of ET for each activity
TE = expected project completion time (CP time)
D = desired project completion time
SsCP2 = sum of variances along CP

1. Calculate ET for each activity
a  4m  b
ET 
6
2. Calculate TE = S(ET’s) along CP

3. Determine variances
2
ba
s 
2

 6 
4. Calculate Z (use App. E (p. 742) or NORMSDIST in Excel)
D  TE
Z
 sCP
2
Optimistic Most Likely Pessimistic Expected Time Variance of ET

Activity a m b ET s2
A 0.5 1 1.5 1 0.028
B 2.5 3 3.5 3 0.028
C 0.5 0.75 1 0.75 0.007
D 0.5 1 1.5 1 0.028
E 0.5 0.75 1 0.75 0.007
F 2 2.5 3 2.5 0.028
G 2 4 6 4 0.444
H 1 2 3 2 0.111
I 0.5 1.5 2.5 1.5 0.111
J 0.5 1 1.5 1 0.028
K 1 2 3 2 0.111
L 1 1.5 2 1.5 0.028

Early Start / Early Finish
Using ET
5 5.75
1 4
E(.75)
B(3) 13.75 14.5
11 12.5 12.5 13.5
0 1 1 4 5 7.5
4 5
F(2.5) I(1.5) J(1) 14.5 16
A(1) D(1) 11 12.5 13.5 14.5 L(1.5)
0 1 8.5 11
1 1.75 4 5 5 9 9 11 12.5 14.5 14.5 16
C(.75) G(4) H(2) K(2)
3.25 4 5 9 9 11 12.5 14.5

Critical Path
Activity ET s2 ES EF LS LF Slack
A 1 0.028 0 1 0 1 0
B 3 0.028 1 4 1 4 0
C 0.75 0.007 1 1.75 3.25 4 2.25
D 1 0.028 4 5 4 5 0
E 0.75 0.007 5 5.75 13.75 14.5 8.75
F 2.5 0.028 5 7.5 8.5 11 3.5
G 4 0.444 5 9 5 9 0
H 2 0.111 9 11 9 11 0
I 1.5 0.111 11 12.5 11 12.5 0
J 1 0.028 12.5 13.5 13.5 14.5 1
K 2 0.111 12.5 14.5 12.5 14.5 0
L 1.5 0.028 14.5 16 14.5 16 0
Critical Path: A-B-D-G-H-I-K-L

TE = 1+3+1+4+2+1.5+2+1.5 = 16
sCP = .028+.028+.028+.444+.111+.111+.111+.028 = .889
Note: individual variances contain rounding error—see imbedded Excel worksheet above,
double click and scroll down
TE  16
sCP
2
 .889 Using Appendix E, p. 742,
probability project will be completed
in 12 months is .00003 or .003%
D  12
Using NORMSDIST(4.24) in Excel,

12  16 probability project will be completed
Z  4.24 ~ 4.0 in 12 months is .0011%
.889
See calculations in imbedded Excel
file on previous slide.

ANY QUESTIONS
The End

Project Management

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PROJECT MANAGEMENT

Project Management –A Managerial Prospective

“Getting things done through other people.”

Project Management –A Managerial Prospective 2

Project Management –A Managerial Prospective 3

Project Management –A Managerial Prospective 4

Project Management –A Managerial Prospective 5

Project Management –A Managerial Prospective 6

Project Management –A Managerial Prospective 8

Project Management –A Managerial Prospective 9

Project Management –A Managerial Prospective 10

• Each task may be started/stopped

Project Management –A Managerial Prospective 11

Project Management –A Managerial Prospective 12

Project Management –A Managerial Prospective 13

• Which tasks have to be completed first?

Project Management –A Managerial Prospective 14

“ A hierarchical decomposition of all the

Project Management –A Managerial Prospective 15

Project Management –A Managerial Prospective 16

• Reliance on project management software

Project Management –A Managerial Prospective 17

Project Management –A Managerial Prospective 18

“Requirement imposed by the Government

Project Management –A Managerial Prospective 19

Cultural & Social Environment:

“The teams need to understand how the project

affect the people and how the people affect the

Project Management –A Managerial Prospective 20

• If the project will affect its physical surroundings, some team

members should be knowledgeable about the local ecology and

physical geography that could affect the project or be affected by the

Project Management –A Managerial Prospective 21

• Financial Management & Accounting

• Purchasing & Procurement

• Sales & Marketing

• Contracts & Commercial Laws

• Logistics & Supply Chain

Project Management –A Managerial Prospective 22

• Negotiation & Conflict Management

Project Management –A Managerial Prospective 23

Project Management –A Managerial Prospective 24

“Project Cost Management includes the

Project Management –A Managerial Prospective 25

• Direct vs Indirect Project Cost

• Variable and Fixed Project Cost

• Controllable and Non-Controllable Project Cost

Project Management –A Managerial Prospective 27

Cost Management Plan Units of Measure

Earned Value Rules

Control Thresholds Organizational Procedures Links

Project Management –A Managerial Prospective 28

“Developing an approximation of the costs of

the resources needed to complete the

Project Management –A Managerial Prospective 29

Project Management –A Managerial Prospective 30

Project Management –A Managerial Prospective 31

Project Management –A Managerial Prospective 32

“Aggregating the estimated costs of

individual activities or work packages to

establish a cost baseline.”

Project Management –A Managerial Prospective 33

1. Preliminary Scope 1. Cost Aggregation 1. Cost Baseline