Chapter 6

Project Management
 Learning Objectives
After completing this chapter, students will be able to:

1. Understand how to plan, monitor, and control projects with the

use of PERT and CPM
2. Determine the earliest start/finish, the latest start/finish, and
slack times for each activity, along with the total project
completion time
3. Reduce the total project time at the least total cost by crashing
the network using manual or linear programming techniques
4. Understand the important role of software in project
management
Introduction
 Six Steps of PERT/CPM

1. Define the project and all of its significant activities/tasks

2. Develop the relationships among the activities. Decide
which activities must precede others.
3. Draw the network connecting all activities
4. Assign time and/or cost estimates to each activity
5. Compute the longest time path through the network 
the critical path
6. Use the network to help plan, schedule, monitor, and
control the project
 Questions to be asked
1. When will the entire project be completed?
2. What are the critical activities or tasks in the project, that is, the
ones will delay the whole project if they are late?
3. Which are the non-critical activities, that is, the ones that can run
late without delaying the whole project?
4. What is the probability that the project will be completed by a
specific date?
5. At any particular date, is the project on/behind/ahead of
schedule?
6. On any given date, is the money spent equal/less/greater than
the budget?
7. Are there enough resource available to finish the project on time?
 General Foundry Example
General Foundry Inc. – a metalwork plants in Milwaukee, trying to avoid the
expense of installing air pollution control equipment. They have 16 weeks to
install a complex air filter system or they will be forced to shut down by an
environmental protection group. A project is currently designed to finish this
installation smoothly and on time.
ACTIVITY DESCRIPTION IMMEDIATE PREDECESSORS
A Build internal components _
B Modify roof and floor _
C Construct collection stack A
D Pour concrete and install frame B
E Build high – temperature burner C
F Install control system C
G Install air pollution device D, E
H Inspect and test F, G
 Drawing the PERT/CPM Network
Two common techniques to draw PERT network:
 Activity – on – node (AON): nodes represent activities
 Activity – on – arc (AOA): arcs represent activities

Points to note when drawing network:

 All the activities have to be specified
 Which activities must precede others
 The beginning node
 The finishing node
 Arcs (arrows) used to show predecessors for the activities
Drawing the PERT/CPM Network
 Activity Times
Estimating the completing time for a activity is crucial. But it is not an easy job. Not always completion
time is deterministic
 Optimistic time (a) = time an activity will take in the best case scenario
 Pessimistic time (b) = time an activity will take in the worst case scenario
 Most likely time (m) = time an activity will take in the most realistic scenario

Expected activity time:

𝑎 + 4𝑚 + 𝑏
𝑡=
6
Variance of activity completion time

𝑏−𝑎 2
𝑉𝑎𝑟 = ( )
6
 Finding the Critical Path (CP)
The CP is the longest time path route through the network. Any delay of
activity on the CP will delay the project’s completion time

 Expected Activity Time: Completion time of an activity

 Earliest Start Time (ES): the earliest time an activity can begin without
violate the immediate predecessor requirements
 Earliest Finish Time (EF): the earliest time an activity can end
 Latest Start Time (LS): the latest time an activity can begin without
delaying the entire project
 Latest Finish Time (LF): the latest time an activity can end without
delaying the entire project
 Finding the Critical Path (CP)
ACTIVITY t
ES EF
LS LF

The CP can be found

by filling the network
with Earliest Time and
Latest Time

Earliest Time Calculation: Forward Pass method Latest Time Calculation: Backward Pass method
EF = ES + t LS = LF - t
ES = Largest EF of Immediate Predecessors LF = Smallest LS of following activities
 Concept of Slack
Slack: length of time an activity can be delayed without delaying the whole project

Slack = LS – ES or LF – EF
• B and D has slack = 1  can
SLACK =
be delayed up to 1 week
ES EF LS LF LS - ES CP ?
without delaying the whole
A 0 2 0 2 0 Yes
project
B 0 3 1 4 1 No
C 2 4 2 4 0 Yes
• F has slack = 6  can be
D 3 7 4 8 1 No
delayed up to 6 weeks
E 4 8 4 8 0 Yes
F 4 7 10 13 6 No
G 8 13 8 13 0 Yes • Activity A, C, E, G, H: 0 slack
H 13 15 13 15 0 Yes time  Critical Activities
 Probability of Project Completion

 Variation in activities on CP does have impact

 𝑃𝑟𝑜𝑗𝑒𝑐𝑡 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 = σ 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒𝑠 𝑜𝑓 𝐴𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠 𝑜𝑛 𝐶𝑃
𝑷𝒓𝒐𝒋𝒆𝒄𝒕 𝑽𝒂𝒓𝒊𝒂𝒏𝒄𝒆
= 4ൗ36 + 4ൗ36 + 36ൗ36 + 64ൗ36 + 4ൗ36
= 3.111

⇒ 𝑷𝒓𝒐𝒋𝒆𝒄𝒕 𝑺𝒕𝒂𝒏𝒅𝒂𝒓𝒅 𝑫𝒆𝒗𝒊𝒂𝒕𝒊𝒐𝒏

= 3.111 = 1.76 𝑤𝑒𝑒𝑘𝑠
Assumption: The Project’s
Completion time follows Normal
Distribution

Probability of finishing project

before the due date
𝐷𝑢𝑒 𝐷𝑎𝑡𝑒 − 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑑𝑎𝑡𝑒 𝑜𝑓 𝑐𝑜𝑚𝑝𝑙𝑒𝑡𝑖𝑜𝑛
𝑍=
𝜎
16 − 15
= = 0.57
1.76
 Summary of PERT/CP
 What PERT and CP’s benefits?
 The project’s expected completion day
 Probability of finishing the project within a specific deadline
 Activities on the CP
 Activities off the CP (with slacks)
 A detailed schedule of activity starting and ending dates
 A sensitivity analysis of Increase/Decrease Activity time
impact on the project
 PERT/Cost
 PERT/Cost is a modification of PERT/CP that consider
project’s cost and budget

 4 Steps of Budgeting Process:

1. Identify all costs associated with each activity. Sum of cost 
estimated project’s cost
2. Define work package as an individual activity or combined activities
3. Convert the budgeted cost per activity into cost per time period
4. Using the Earliest and Latest start time, calculate how much money
should be spent during each period
PERT/Cost Example
Budgeted Cost for General Foundry using ES
Budgeted Cost for General Foundry using LS
Budget Ranges
 Using LS budget
consumes less
financial resource in
the initial state, but
higher toward the
end

 A Project Manager
can choose any
budget plan between
two plans
 Monitoring and Controlling Project Costs
 Ensure the project’s progress is on schedule and cost
overruns are kept to a minimum level

 Require periodical checks on the project’s status

Value of work completed = (% of work completed) * (Total activity budget)

Activity difference = Actual cost – Value of work completed

 Negative = underrun; Positive = overrun
Monitoring and Controlling Project Costs
 Project Crashing
 Sometimes project’s deadline is impossible to meet
using normal procedures  requires addition overtime,
weekends production, extra hiring or equipment
 Crashing = process to consider extra actions with cost
constraints
 Crash time = the shortest possible activity time that
requires additional resource
 Crash cost = price of completing activity earlier – than –
normal time  minimize
 4 Steps of Project Crashing
1. Find the normal CP, identify critical activities

2. Compute crash cost per week

𝐶𝑟𝑎𝑠ℎ 𝑐𝑜𝑠𝑡 − 𝑁𝑜𝑟𝑚𝑎𝑙 𝑐𝑜𝑠𝑡
𝐶𝑟𝑎𝑠ℎ 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 =
𝑁𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒 − 𝐶𝑟𝑎𝑠ℎ 𝑡𝑖𝑚𝑒

3. Select activity on CP with the smallest crash cost per week. Crash this
activity to the maximum extent possible or to the point at which desired
deadline has been reached

4. Make sure CP remains after crashing. If CP is still the longest path

through the network, return to step 3. Otherwise, find the new CP then
return to step 3