Project Management

Suggested book : A Systems Approach to Planning, Scheduling,

and Controlling by H A R O L D K E R Z N E R , P h.D
Draw a picture of sea horse, Bombay Duck , Anas,
Project time : 5 Min for each team
Project scope : All members should have clearly defined role
and contribute in drawing the picture.
Penalty :
Characteristics of a good project management

• Completed Within the allocated time period

Within the budgeted cost
At the proper performance or specification level
With acceptance by the customer/user
With minimum or mutually agreed upon scope
changes
Without disturbing the main work flow of the
organization
 Booby ,

, Bombay duck

Boxer

Anas, Beagle
Six blind men ( inexperienced mangers ) were given the
task of drawing an elephant. None of the had a vision of
the entire beast , each caught hold of some part or other
and based on their own experience drew an elephant .
The project is to draw an elephant, as none of them had the big
picture of the entire beast (elephant) . Each relied on the utter
ignorance about the rest.
Can they draw an elephant by just adding all parts as they
comprehended as the whole , without understanding how and
where each part would fit into. ?????.
 Fifth one First one touched the
touched the ear elephant’s side and
and said it is expressed it as a big wall.
like a fan.

The sixth one

caught the
swinging tail
and said it is
like a rope.
Second one felt the
tusk and expressed it
as a spear.

Third one felt its Fourth one felt

squirming trunk and around its knee and
said it is like a snake. said it is like a tree. 5
Project work by six blind managers
The managers relied on
their utter ignorance to
draw an elephant based on
what each know about the
elephant . While they were
not wrong in their own
understanding , they were
not right too in getting the
big picture and vision of the
project .
As a result the entire
project of drawing elephant
was a big failure.
 Project Management

What is a Project : A group of diverse activities or tasks having

different time schedule and cost .

Project management demand active leadership and commitment

from the managers in planning , coordination, control and evaluation
of task for timely completion without compromising cost, scope and
time to accomplish business goal ( Profit maximization and customer
satisfaction ) .

7
 Commonly used project management terms
• Project deliverables : Tangible out comes to be competed for successful completion of
project
• Scope of work ( SOW ) for the project: A detailed narrative description of the work
required for a project. It Can be written in the form of a legal contract.

• Milestone : Project deadline ( dates) by which major activities need to be completed.

• Task : Critical activities undertaken

• Responsibility Assignment matrix: (RAM)

• Gantt chart : Visual diagram used for plotting interdependent task in project with time

• Work break down structure. : WBS is a deliverable oriented breakdown of a project into
smaller components. ( Decomposition of large complex task in easily manageable small
activities . ) It is is a key project deliverable that organizes the team’s work into
manageable sections.
• Project kick off : Formal start of project .

• Action item - An activity or task that must be completed.

• Backward pass - This calculates late-start and finish dates for project activities by working
backwards from the project end date.

• Baseline - This term represent the costs and schedules approved at the start of the project.
They use baselines as a basis for monitoring and evaluating performance.

• BOSCARD - This method details and considers the background, objectives, scope,
constraints, assumptions, risks, and deliverables of new projects.

• Burn down chart - A graph that shows the relationship between the number of tasks to be
completed and the amount of time left to complete these tasks.

• Burst point - A point in a network diagram at which multiple successor activities originate
from a common predecessor activity.
• Contingency reserve - An allocation of time or money (or both) set aside for the
occurrence of known possibilities that could delay a project or make it more expensive.

• Cost overrun - A cost overrun occurs when unexpected costs cause a project’s actual
cost to go beyond budget.

• Cost variance - The CV of a project is its earned value minus its actual cost ( assigned
cost to the activity). A negative cost variance indicates that a project is running over
budget. A positive cost variance indicates that a project is running below budget

• Hanger - An unplanned break in a network path, usually caused by oversights regarding

activities or dependent relationships between activities.

• Hammock activity - In a schedule network diagram, a hammock activity is a type of

summary activity that represents a number of grouped - but unrelated -smaller activities
that occur between two dates.
Break scope
into WBS
 Key Elements of project
planning
1. Project goals (Expressed through Project SOW):
• Project product specifications, costs, quality, deadlines, project deliverables etc.
2. Project management plan
3. Project cost analysis
4. Work breakdown structure (WBS)
5. Project network (inter relations of the tasks)
6. Responsibility assignment
7. Project schedule (timetable)
8. Budget (resources & costs)
9. Risk assessment and risk management
10. Project closure and documentation
1. BOSCARD : The acronym stands for background, objectives, scope,
constraints, assumptions, risks and deliverables. An executive summary

Statement of Work (SOW) for the project: A detailed narrative description of the work required for a project.

The effective SOW contains:

1. Introduction and background
2. Technical description
3. Timeline and milestones
4. Description of the tasks to be performed to meet Client expectations

It can be written in the form of a legal contract/agreement .

 Why projects fail???
 Due to lack of leadership, the project team members act like group of blind
men and loose sight of big picture of the project and get de focused from
the business goal.
 These team members lack commitment and coordination, focus on short
term goal based on the limited information they have gained.
 As a result , the entire project execution become a sure shot failure .
o Poorly defined project scope.
o Inadequate risk management.
o Failure to identify key customer assumptions and customer
involvement .
o Project managers lack experience and training.
o No use of formal methods and strategies.
o Lack of effective communication and coordination at
• Corporate goals and objectives are not understood at the lower
organizational levels.
Plans encompass too much in too little time.
Financial estimates are poor.
Plans are based on insufficient data.
No attempt is being made to systematize the planning process.
Planning is performed by a senior management without involving operation
group.
No one knows the manpower requirements.

’ know the key milestone .

Project estimates are best guesses, and are not based on standards or
history.
No formal communication and reporting /escalation .
People are not working toward the same specifications.
People are consistently shuffled in and out of the project with little regard
for
 Triple Constraint of Project Management

Successful project
management means
meeting all three goals
(scope, time, and cost)

Information Technology Project

16
Management, Fourth Edition
 What is a Project risk ?
Project risk is an uncertain event or condition, that, if it occurs, has a
positive or a negative effect on a project objective (cost, time, quality).

Project manager along with the team need to understand the impact of
the risk ( high or low ) and causes responsible for it . He also need to
analyse the likelihood of the causes happening .

In risk management, probability and impact (severity) of the risks are

considered.
Risk = Vulnerability X Severity
Impact Scale
RISK

Of RISK
Write down 6 action items which are likely to go wrong while organizing a product launch
event.
Sr no. Action items Likelihood Impact on ( C,S,T, Q) Exposure ( L x I)
( 1,2,3,4,5)
1
2
3
4
5
6
 A Risk Assessment Worksheet
Risk Identification Probability x Impact = Exposure
Reduced work force 5 x 2.0 = 10.0
Loss of resources 4 x 3.0 = 12.0
Failure to meet feature set requirements 2 x 1.5 = 3.0
Inadequate reviews 4 x 2.5 = 10.0
Budget cuts 2 x 2.5 = 5.0
Schedule slippage 5 x 1.5 = 7.5
Overall Project Risk Score: 48.5

Interpreting the score:

Overall Risk Score: 10-28 29-46 47-64 65-82 83-100
Project Risk Level: Low Moderate Medium High Very
High
 PROJECT TEAM
BUSINESS HEAD

FINANCE DELIVERY PROJECT

BDM HR LEGAL
CONTROLLER MANAGER MANAGER
ADVISOR

TECHNICAL DOCUMENTATION
TEAM MANAGER
COMMERCIAL
AND CONTRACT
MANAGEMENT IMPLEMENTATION
TEAM TEAM
WHO CAN BE A PROJECT MANAGER
 PM PHASES
BOSCARD preparation
SOW preparation .
Risk assessment matrix Baseline approvals , WBS , Responsibility
assignment Matrix , Gantt chart

POC study/ pilot study Scheduled meeting & Documentation

Full scale Implementation Review , Joint statement report/
vendor follow-up , liaison Burn down chart Completion report
with external team , Reporting Deviation/ Process documentation
escalation Audit , Signoff & handover
Re prioritizing
Expediting
24
 PROJECT INITIATION
Strategic fit expresses the degree to which an

Project
organization is matching its resources and
capabilities with the opportunities in the external
environment.
Screening Steps

Strategic fit could be classified into

1. Market related Fits.
2. Operating Fit
3. Management Fit.

25
 CAGR of the investment in the project
The compounded annual growth rate (CAGR) is the rate of return indicating the
cumulative growth rate of an investment from its beginning value to its maturity
value , assuming the profits were reinvested at the end of each year of the
investment’s lifespan.

It is essentially a number that describes the rate at which an investment would have
grown if it had grown the same rate every year and the profits were reinvested at the
end of each year.
Initial investment : 10,000
Matured value of the investment : 19,000
Time period : 3 years

(19,000 / 10,000 = 1.9).

Next, you would raise the result to the power of 1 divided by the number of years (1
/ 3 = 1/3 or 0.3333).

CAGR = (1.9)^.333 - 1 = .238 = 23.8%

The CAGR represents the growth rate of an initial investment assuming it is
compounding by the period of time specified.
Internal Rate of Return (IRR) : This is the most important alternative to NPV . It is a discount rate at
which the NPV of an investment becomes zero.

IRR is the discount rate which equates the present value of the future cash flows of an investment with the
initial investment.

PV of future cash flows − Initial Investment = 0

The IRR rule states that if the internal rate of return (IRR) on an investment is greater
than the minimum required rate of return, typically the cost of capital, then the
investment should be pursued.

The higher the IRR on a investment the greater the amount by which it exceeds the cost of
capital, the higher the net cash flows to the investor.

A project should only be accepted if its IRR > the target internal rate of
return.
 A rate at which net
present value of all future
cash flow becomes equal
to initial investment

if the internal rate of return

(IRR) on an investment is
greater than the minimum
required rate of return,
typically the cost of capital,
then the investment should
be pursued.

IRR values are used to rank multiple prospective investment options in a project that a firm is
considering on a comparatively even basis.
9-31
A project has an estimated fixed expense of 1,20,000 . The project is designed for
an output capacity of 50000 units. The project team has decided to sell per unit at a
price of Rs 16 . The estimated variable expense is Rs 12 per unit .
Assuming the project will deliver result at its 100% capacity , find the break even
stage in percentage.

If production capacity reduces by 20%, how will it effect the project.

Fixed expense of the project = 120000

Selling price = 16
Variable expense = 12

Break Even volume = F/ S-V = 120000/ 4 = 30000 units.

Break even stage % = (30000/50000) x 100 = 60 %

@ 20% capacity = (30000/40000) x 100 = 75%

Break even sales = B.E vol x sales price = 30000 x 16 = 4,80,000

If the price is dropped by one rupee what will be its impact on B.E volume and sales
at 100 % capacity utilization by the project.

Break even volume = 120000 / 3 = 40000 units.

Volume production has to increase by 10000 units.

New break even stage = (40000/50000) x 100 = 80 %

New break even sales = 40000 x 15 = 6,00,000

% sales increase = 600000 – 480000 = 120000/600000 = 20%

 Project Cost management

The S – Curve of Cost Baseline

Cumulative
values INR

Inter médiate
Initial Phases Final
Total budget of Phase Phase
the Project
Maximum variation
is observed

Start Time Finish

 Project Cost management
• Different cost for an activity

Planned Value (PV). The authorized budget to accomplish the planned work.
Previously, this was called the budgeted costs for work scheduled (BCWS).

Earned Value (EV). The sum of the approved cost estimates which may include
overhead allocation for activities or portions of activities completed during a given
period ( project review date). Previously called the budgeted cost of work
performed (BCWP) for an activity or group of activities.

Actual Cost (AC). Total costs incurred that must relate to whatever cost was
budgeted within the planned value and earned value (which can sometimes be direct
labor hours alone, direct costs alone, or all costs including indirect costs) in
accomplishing work during a given time period.
 % budget
of the total budget for the work

Cost Variance = EV – AC

Schedule variance = EV- PV Negative Schedule Variance of the project

Indicates the project is behind schedule.
Cost variance curve

EV
Example : If the budgeted cost of a project at 10,00,000 and it is
supposed to be completed in 10 months. After a month, you should
have completed 15 percent of the project , but the actual completion
is 10% at a total expense of 1,25,000.
Calculate the Cost Variance and Schedule Variance of the project .
Planned Value ???

Earned value ???

Actual cost ???
 Planned Value = 15% of budgeted cost
= 15% * 10,00,000 = 1,50,000
Earned Value = Actual Completion (%) x BAC
= 10% x 10,00,000 = 1,00,000
Schedule variance = EV- PV = - 50,000
Interpretation : Since Schedule Variance is negative, the project is behind schedule.

Cost Variance = EV – AC
= 1,00,000 – 1,25,000 = (25000)

Interpretation : The project is just off budget

Cost performance Index ( CPI ) = EV ÷ AC 1,00,000/ 1,25,000 = .8

Schedule Performance Index (SPI) is a ratio of the earned value (EV) to the planned value
(PV). If the SPI is less than one, it indicates that the project is potentially behind schedule to-
date whereas an SPI greater than one, indicates the project is running ahead of schedule.
Performance Evaluation Parameters for Projects
 Project Planning Process: Work Breakdown Structure (WBS)

A work breakdown structure (WBS), in project management is a

deliverable-oriented decomposition of a project into smaller
components. A work breakdown structure is a key project deliverable
that organizes the team's work into manageable sections.

Purpose of WBS : Mapping a Project

• Establishing project priorities
• Meeting the needs of all stakeholders
• Measuring performance against the strategic plan of the
organization
• Collecting information to use through all phases of the project
• Controlling costs
 Work Breakdown Structure (WBS)
■ WBS breaks down project into major components (modules).

■ Modules are further broken down into subcomponents, activities, and finally, into
individual tasks.

■ Identifies activities, tasks, resource requirements and relationships between modules

and activities.

■ Helps avoid duplication of effort.

■ Basis for project development, management , schedule resources and modifications.

For analytical purposes, the time required to produce a deliverable is estimated in hrs or
days and week

The work effort for each task is estimated and those estimates are rolled up into the final
deliverable estimate.

The tasks are also prioritized, dependencies between tasks are identified, and this
information is documented in a project schedule.

The dependencies between the tasks can affect the length of the overall project
(dependency constrained), as can the availability of resources (resource constrained).
Time is different from all other resources and cost categories.

43
WBS
Prepare a WBS for conducting a marketing promotion campaign drive in
three cities simultaneously for a new product launched by the company .

• Should list the major tasks , activities , time for each activities and total
time for the task .
• Priorities need to be assigned and dependencies between the tasks
• Create Responsibility assignment matrix.
 Project time management
• A list of all activities required to complete the project (categorized
within a WBS)
• The time (duration) that each activity will take to complete.
• The dependencies between the activities and, logical end points
such as milestones or deliverable items.

Critical Path of a Project : Critical path of a project schedule is the

longest path in the network . It is identified by listing all possible
path of the network & selecting the path having maximum sum of
the critical activity time.
 Project time management
•includes activity sequencing
• estimates activity duration
• elaborates schedule of activities

Activity duration model

 Mean Time = (a + 4m + b) /6

Variance = [ ( b – a) / 6] 2 Normal
σ = √ [ ( b – a) / 6] 2 Distribution

Area under

Probability
curve
between a
Probability

and b is
99.74%

3s 3s Time
a m b
a m b
Mean
Mean
 Program Evaluation Review Technique (PERT) For
Dealing With Uncertainty
• So far, times can be estimated with relative certainty, confidence

• Use 3 time estimates

m= most likely time estimate, mode.
a = optimistic time estimate,
b = pessimistic time estimate, and

Expected Value (TE) = (a + 4m + b) /6

Variance (V) = [ ( b – a) / 6] 2

Std Deviation (δ) =√ Variance

50
1. Following project schedule gives time estimates for activities codified as A to K . Find the critical path of
the project. What is the probability of project getting extended by 6 weeks from normal time.

Time Estimates (wk)

Optimistic Likely Pessimistic
Activity (a) (m) (b)
A 11 12 13
B 7 8 15
C- A 5 10 15
D-B 8 9 16
E-B 14 25 30
F- A 6 9 18
G-C 25 36 41
H-D 35 40 45
I-A 10 13 28
J-F,G 1 2 15
K-E,H,J 5 6 7
 Time Estimates (wk) Activity Statistics
Optimistic Likely Pessimistic Mean Variance
Activity (a) (m) (b) Time (te ) (s2 )
A 11 12 13 12 0.11
B 7 8 15 9 1.78
C 5 10 15 10 2.78
D 8 9 16 10 1.78
E 14 25 30 24 7.11
F 6 9 18 10 4.00
G 25 36 41 35 7.11
H 35 40 45 40 2.78
I 10 13 28 15 9.00
J 1 2 15 4 5.44
K 5 6 7 6 0.11
 12/12
I

15 67/ 67
C
End
F
A 10 57/57
12 10
G K
Start J 6
0/0 B 35 4
22/22 E 61/ 61
9
24 H
D

9/11 40
10 19/21
A – C- G- J- K = 67 weeks

Critical Path. The series of activities that determines the duration of the project. The
critical path comprises of those activities with zero float value. It is the longest path
through the project.
 Project time management

Float or Slack . The amount of time that an activity may be delayed from its early
start without delaying the project finish date. Float is a mathematical calculation, and
can change as the project progresses and changes are made to the project plan.

Free Float (FF). The amount of time that an activity can be delayed without
delaying the early start of any immediately following activities.

A B E
Start
Finish
D F
C

B
A E
Start Finish
C F
D
What is the Probability of exceeding the project to 73 weeks?
Given that: Critical Path= A – C- G- J- K = 67 weeks

T = 73 Weeks Mean time = 67 Weeks

Std Deviation (δ) =√ s2

= √ .11 + 2.78 + 7.11 + 5.44 + 0.11 = 3.94 Wks
T – Mean time
z=
σ

73 – 67
z= = 1.52
3.94
From Normal Distribution table
Pz = .1.52  .935 probability
 Activity predecessor O Most likely P
A - 1 2 3
B - 2 2 8
C A 6 7 8
D B 1 2 3
E A 1 4 7
F C,D 1 5 9
G C,D,E 1 2 3
H F 1 2 9

2. Above given are the activities of a project. Find the project completion time.
What is the Probability of not completing the project on or before 15 weeks.
If .8 is the probability of completing the project, find the project completion time?
 Duration in weeks

MEAN
Activity predecessor O M P Variance
A - 1 2 3 2 .11
B - 2 2 8 3
C A 6 7 8 7 .11
D B 1 2 3 2
E A 1 4 7 4
F C,D 1 5 9 5 1.78
G C,D,E 1 2 3 2
H F 1 2 9 3 1.78
 2/2
15/9
E
G

A
C
17/17

B H
0/0
F
D

7/3 9/9 14/14

A-C-F-H = 17 weeks.
Ʃ variance = .11+.11+1.78+1.78 = 3.78
@ .8 probability Z = .788
σ = Ѵ 3.78 = 1.945 .788 = x - 17 ÷ 1.945
P( x≤ 21) = (x - µ )/ σ 1.53 + 17 = X
= 15 - 17 /1.945 = - 1.028 18.53 Weeks
P(z ≤ -1.028)
= .153
Probability of completing the Project before 15 weeks is 15%
1.In the following project, the tasks are labeled A through G. Find the critical
path of the project and probability of completing the project in 17 weeks.
Time estimates
Activity
(a) (M) (b)
A- 2 4 6
B- 3 5 9
C- A 4 5 7
D-A 4 6 10
E – B,C 4 5 7
F-D 3 4 8
G-E 3 5 8
 D 10.33
4/4
15.01
6.33 F
A C
4.5
5.17
4
9.17
Start Finish 19.51
9.17

0/0 B E
5.17 G
5.33 5.17
14.34
5.33 14.34
9.17

The duration of path ACEG is 19.51 work days.

2.For the given marketing project , activities and the time estimates are as follows. Find the
critical path . Find the probability of completing the project in 19 weeks.
ACTIVITY a m b
A 4 6 8
B 2 3 10
C 6 8 16
D–A 1 2 3
E- C 6 7 8
F – B,D,E 6 7 14
G – B,D,E 3 5 7
H–C 4 11 12
I- H 2 4 6
J–G 2 9 10

If the probability is too low , find the probability of completing it in 24 weeks.

 A D J
G

22/22
C F
I
E
B
H

Critical path is C-G-J = 22 weeks

ACTIVITY a m b Mt (Variance )2
A 4 6 8 6 .44
B 2 3 10 4 1.77
C 6 8 16 9 2.77
D–A 1 2 3 2 .11
E- C 6 7 8 7 .11
F – B,D,E 6 7 14 8 1.77
G – B,D,E 3 5 7 5 .44
H–C 4 11 12 10 1.77
I- H 2 4 6 4 .44
J–G 2 9 10 8 1.77
 Probability of completing the project in 19 weeks is

Z value for - 1.3416 from Z table is .0901 ie 9 %

Probability of completing the project in 19 days is too less , probability for completing
in 24 days is

z = 24 - 22 ÷ √ 5 = .8944
from Z table .8944 = .813
= 81.3 %
3.Calculate the critical path for the given project data. Find the
probability of completing the project in 48 weeks.
Optimistic Most likely Pessimistic
Activity Description
time time time
A -- Develop product specifications 2 4 6
B -A Design manufacturing process 3 7 10
C -A Source & purchase materials 2 3 5
D -B Source & purchase tooling & equipment 4 7 9
E -D Receive & install tooling & equipment 12 16 20
F -C Receive materials 2 5 8
G -E,F Pilot production run 2 2 2
H G Evaluate product design 2 3 4
I G Evaluate process performance 2 3 5
J - H,I Write documentation report 2 4 6
K -J Transition to manufacturing 2 2 2
 Optimistic Most likely Pessimistic Expected Variance
Activity
time time time time
A 2 4 6 4 0.44
B 3 7 10 6.83 1.36
C 2 3 5 3.17 0.25
D 4 7 9 6.83 0.69
E 12 16 20 16 1.78
F 2 5 8 5 1.00
G 2 2 2 2 0.00
H 2 3 4 3 0.11
I 2 3 5 3.17 0.25
J 2 4 6 4 0.44
K 2 2 2 2 0.00
ABDEGIJK is the project’s critical path = 44.6 WEEKS
variance = 4.96
 48 weeks  44.66 weeks 
z     1.50
 4.96 

Probability of completing the project in 48 weeks is 93%

A project requires resources to execute the activities. These resources include human
resource , equipment and materials required to get the work done.

Equipment includes such things as cranes, test rigs, process simulators, etc. Materials
includes such things as the concrete to be poured, the wire to be installed, etc. Resources
are generally not unlimited and the project team needs to “level” out the use and
consumption of resources.

The Challenge : The basic challenge of the planner is to develop a project execution plan
that fits the allotted time and can be achieved with the available resources. As there are
many activities vying for resources at various times, it is a complex juggling job to try to
schedule the activities so that they will not be held back by the lack of resources.
But when resources are limited, the „critical path‟ and „slack‟ lose their significance. Activity may be
delayed due to non -availability of resources as well as due to change in the sequence of tasks.

The process of distribution of available resources to meet the objectives of various activities
constituting a project is called „Resource Allocation‟ or „Resource Loading‟. This is done in a way so
that the project completion schedule is least affected.

The act of taking a project with people assigned to a bunch of tasks and making it so that they don't
have to work overtime is called Resource Leveling.
Types of Resource leveling
1 Delaying the task : If a resource is not available for a given task, the given task would be delayed. Perform
the activity which is given higher priority. The priority for all the tasks may be assigned at the time of
preparation of the schedule structure.
To control which tasks take precedence over other tasks, user can set project priorities, so that if the user is
working with a common pool of resources among multiple projects, the right projects and tasks take
precedence.
 Time-Cost Trade-Off
Reducing both project’s cost and time is critical in today’s market-
driven economy. This relationship between projects’ time and
cost is called time-cost trade-off decisions.

Time-cost trade-off is an important management tool for

overcoming one the limitation of the critical path method being
unable to bring the project schedule to a specified duration.

73
Reasons to Reduce Project Durations:

1. To realize incentive pay

2. To fit within the contractually agreed time with the clients .
3. To avoid paying Liquated Damages/Damage for delay causes
4. To complete a project early & move the resources to another project .
5. To complete a project before adverse weather conditions begin (Avoid
temporary Heating, avoid completing site work during raining season).

74
Methods to reduce durations:
1. Have the existing resources work overtime. This increase the labor costs due
to increase pay rate and decrease productivity.

2. Deploy additional human resource . This increases labor costs.

3. Hire more or advanced equipment. This will usually increase costs due to
rental and transport fees.

4. Add subcontracted labor to the activity.

75
= Direct costs + Indirect costs

76
Network Compression steps
cost slope = crash cost - normal cost
normal duration- crash duration
• shortening the CRITICAL ACTIVITIES beginning with the activity having
the lowest cost-slope
• Determine the compression limit (Nil)
 - Crash Limit, or
Nil = Min  - Free Float of any of the non critical activities
in the parallel paths competing for critical path.*

77
Project Costs Definitions

78
Network Compression Algorithm
• When a new Critical path is formed:
• Shorten the combination of activity which Falls on Both Critical Paths, OR
• Shorten one activity from each of the critical paths. Use the combined cost of
shortening both activities when determining if it is cost effective to shorten
the project.
• At each shortening cycle, compute the new project duration and
project cost

79
Establish the least cost for expediting the contract. Determine the optimum
duration of the project assuming the indirect cost per week is Rs 125.
.

Normal Crash
Activity Preceded by Duration Cost Duration Cost
(weeks) (Rs ) (weeks) (Rs )
A — 12 7000 10 7200
B A 8 5000 6 5300
C A 15 4000 12 4600
D B 23 5000 23 5000
E B 5 1000 4 1050
F C 5 3000 4 3300
G E,C 20 6000 15 6300
H F 13 2500 11 2580
I D , G, H 12 3000 10 3140
å 36 ,500 38470

80
 20/22

B A-C-G-H = 59
12/12 D
A E
8 23 I
5
0/0 G 59/59
12
20 12
C 27/27 47/47
15 H 13

Activity Slope
F
Cc-Cn 5
A 100 27/27 32/34
Tn-Tc
C 200
G 60
I 70

Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0       36,500 59
1 G 5 2 2 60 120 36,620 57
Cycle # Project Direct Indirect Total Cost
duration cost cost 125/wk)
0 59 36500 7375 43875
1 57 36620 7125 43745

Cycle Project Direct Indirect Total

# Duration Cost Cost Cost
0 59 36500 7375 43875
1 57 36620 7125 43745
2 55 36760 6875 43635
3 53 36960 6625 43585
4 51 37160 6375 43535
5 49 37860 6125 43985

82
 20 23 43
D 4
24 4 47
0

0 12 12 12 8 20 20 5 25 27 20 47 47 12 59
A B E G I
0 0 12 14 2 22 22 2 27 27 0 47 47 0 59
2@100 2@150 1@50 5@60 2@70

2
12 15 27 27 5 32 32 13 45
F H ES D EF
C
29 2 34 34 2 47 Activity
12 0 27
3@200 1@300 2@40 LS F LF
Crash limit

Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0       36,500 59
1 G 5 2 2 60 120 36,620 57

83
 20 23 43
D
22 2 45
0

0 12 12 12 8 20 20 5 25 27 18 45 45 12 57
A B E G I
0 0 12 14 2 22 22 2 27 27 0 45 45 0 55
2@100 2@150 1@50 3@60 2@70

12 15 27 27 5 32 32 13 45
ES D E F
C F H
Activity
12 0 27 27 0 32 32 0 45
3@200 1@300 2@40 L S F LF
Crash limit

Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0       36 , 500 59
1 G 5 2 2 60 120 36 , 620 57
2 I 2 - 2 70 140 36 , 760 55

Spring 2008, King Time-Cost-Trade-off

84
Saud University Dr. Khalid Al-Gahtani
Spring 2008, King Time-Cost-Trade-off
85
Saud University Dr. Khalid Al-Gahtani
 18 23 41
D 2
20 2 43
0

0 10 10 10 8 18 20 5 25 25 18 43 43 10 53
A B E G I
0 0 10 12 2 20 22 2 27 25 0 43 43 0 53
0 2@150 1@50 3@60 0

10 15 25 25 5 30 30 13 43
ES D EF
C F H
Activity
10 0 25 25 0 30 30 0 43
3@200 1@300 2@40 LS F LF
Crash limit
Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0       36,500 59
1 G 5 2 2 60 120 36,620 57
2 I 2  2 70 140 36,760 55
3 A 2  2 100 200 36,960 53
4 H, G 2 2 2 60+40 200 37,160 51
Spring 2008, King Time-Cost-Trade-off
86
Saud University Dr. Khalid Al-Gahtani
 18 23 41
D
18 0 41
0

0 10 10 10 8 18 18 5 23 25 16 41 41 10 51
A B 0 E G I
0 0 10 10 0 18 20 2 25 25 0 41 41 0 51
0 2@150 1@50 1@60 0

10 15 25 25 5 30 30 11 41
ES D EF
C F H
Activity
10 0 25 25 0 30 30 0 41
3@200 1@300 0 LS F LF
Crash limit
Cycle Activity Can Be Days Cost per Cost for Total Project
Nil
# to Shorten Shortened Shortened Week Cycle Cost Duration
0       36,500 59
1 G 5 2 2 60 120 36,620 57
2 I 2  2 70 140 36,760 55
3 A 2  2 100 200 36,960 53
4 G, H 2 2 2 60+40 200 37,160 51
Spring 2008,
5 B, C
Saud University
King
2  Time-Cost-Trade-off
2 150+200
Dr. Khalid Al-Gahtani
700 37,860 49 87
 16 23 39
D
16 0 39
0

0 10 10 10 6 16 16 5 21 23 16 39 39 10 49
A B E G I
0 0 10 10 0 16 18 2 23 23 0 39 39 0 49
0 0 1@50 1@60 0

10 13 23 23 5 28 28 11 39
ES D EF
C F H
Activity
10 0 23 23 0 28 28 0 39
1@200 1@300 0 LS F LF
Crash limit

Cycle Project Direct Indirect Total

# Duration Cost Cost Cost
0 59 36500 7375 43875
1 57 36620 7125 43745
2 55 36760 6875 43635
3 53 36960 6625 43585
4 51 37160 6375 43535
5 49 37860 6125 43985
Spring 2008, King Time-Cost-Trade-off
88
Saud University Dr. Khalid Al-Gahtani
Class Work #2
Data on small maintenance project is given as below:

Depends Normal Crash

Activity on Time Cost Time Cost
A  6 days $700 4 days $800
B  4 days 400 4 days 400
C  5 days 650 4 days 700
D A 8 days 625 5 days 700
E B 10 days 200 7 days 350
F B 7 days 500 5 days 700
G C 3 days 600 3 days 600
H D, E 6 days 300 5 days 400
I F, G 7 days 350 4 days 425

On completion, the project will give a return of $110/day. Using time-cost trade-off method,
how much would you like to compress the project for maximizing the return? Show all
calculations.

Spring 2008, King Time-Cost-Trade-off

89
Saud University Dr. Khalid Al-Gahtani