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Chapter 10. Projects. Learning Objectives. Explain what project management is and why it is important. Identify the different ways projects can be structured. Describe how projects are organized into major subprojects. Understand what a project milestone is.

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chapter 10

Chapter 10

Projects

learning objectives
Learning Objectives
  • Explain what project management is and why it is important.
  • Identify the different ways projects can be structured.
  • Describe how projects are organized into major subprojects.
  • Understand what a project milestone is.
  • Determine the “critical path” for a project.
  • Demonstrate how to “crash,” or reduce the length, of a project.
what is project management
What is Project Management?
  • Project:
  • A series of related jobs usually directed toward some major output and requiring a significant period of time to perform
  • Usually infrequent
  • Exact duration difficult to estimate
  • Project management:
  • The management activities of planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project
  • Control may be difficult
  • Makeup of the project team
  • Expert among experts

LO 1

structuring projects
Structuring Projects
  • Pure project
  • Functional project
  • Matrix project

LO 2

pure project
Pure Project
  • In Pure Project Self-contained team works full-time on the project
  • Advantages
    • The project manager has full authority
    • Team members report to one boss
    • Shortened communication lines
    • Team pride, motivation, and commitment are high

LO 2

slide7

Pure Project

  • Disadvantages
    • Duplication of resources
    • Equipment and people not shared across projects
    • Organizational goals and policies are ignored
    • Team members detached from headquarters
    • Lack of technology transfer
    • Due to weakened functional division
    • Team members have no functional area "home“
    • Project termination often delayed as members worry about life after the project

LO 2

functional project
Functional Project

A functional project is housed within a functional division.

Example: Project “B” is in the functional area of Research and Development

LO 2

functional project1
Functional Project
  • Advantages
    • A team member can work on several projects
    • Technical expertise maintained in functional area
    • Functional area is “home” after project completed
    • Critical mass of specialized knowledge
  • Disadvantages
    • Aspects of the project that are not directly related to the functional area get short-changed
    • Motivation of team members is often weak
    • Needs of the client are secondary and are responded to slowly

LO 2

matrix project1
Matrix Project
  • Advantages
    • Better communications between functional areas
    • Project manager held responsible for success
    • Duplication of resources is minimized
    • Functional “home” for team members
    • Policies of the parent organization are followed
  • Disadvantages
    • Too many bosses
    • Functional manager often listened to first because of direct influence on promotion and raises
    • Depends on project manager’s negotiating skills
    • Potential for sub-optimization
    • PM’s could hold resources for own projects
    • Other projects could be harmed

LO 2

slide12

Phases of Project Management

  • Planning
    • Work breakdown structure
    • Feasibility study
    • Precedence determination
  • Scheduling
    • Construct the chart and apply times
    • Identify priorities
  • Execution and control
    • Review and modify the project
work breakdown structure
Work Breakdown Structure
  • Statement of work (SOW): a written description of the objectives to be achieved
  • Task: a further subdivision of a project
    • Usually shorter than several months
    • Performed by one group or organization
  • Work package: a group of activities combined to be assignable to a single organizational unit
  • Project milestones: specific events on the project

LO 3

work breakdown structure1
Work Breakdown Structure
  • Work breakdown structure (WBS): defines the hierarchy of project tasks, subtasks, and work packages
  • Defines hierarchy of project tasks, subtasks and work packages
  • Allows the elements to be worked on independently
  • Make team manageable in size
  • Give authority to carry out the project
  • Monitor and measure the project
  • Provide the required resources
  • Activities: pieces of work that consume time
    • Defined within the context of the WBS

LO 4

an example of a work breakdown structure
An Example of a Work Breakdown Structure

Quality is Job 1

ISO 9001

MPG

Data Collection

Taurus, Sable

LO 3

project control charts
Project Control Charts
  • Charts are useful because their visual presentation is easily understood
  • Software is available to create the charts
  • Gantt chart: a bar chart showing both the amount of time involved and the sequence in which activities can be performed

LO 3

earned value management evm
Earned Value Management (EVM)
  • A technique for measuring project progress in an objective manner
  • Has the ability to combine measurements of scope, schedule, and cost in a project
  • Provides a method for evaluating the relative success of a project at a point in time

LO 3

essential features of any evm implementation
Essential Features of any EVM Implementation
  • A project plan that identifies the activities to be accomplished
  • A valuation of each activity work
  • Predefined earning or costing rules to quantify the accomplishment of work

LO 3

project tracking without evm
Project Tracking Without EVM
  • Chart A shows the cumulative cost budget for the project as a function of time
    • Blue line, labeled BCWS
  • Also shows the cumulative actual cost of the project
    • Red line
  • Appears project was over budget through week 4 and then under budget
  • What is missing is any understanding of how much work has been accomplished

LO 3

project tracking with evm
Project Tracking With EVM
  • Chart B shows the BCWS curve along with the BCWP curve from chart A
  • Technical performance started more rapidly than planned but then slowed significantly and feel behind at week 7
  • Chart illustrates the schedule performance aspect of EVM

LO 3

project tracking with evm1
Project Tracking With EVM
  • Chart C shows the same BCWP curve with actual cost data
  • Project is actually under budget, relative to the amount of work accomplished
  • Chart D shows all three curves together
    • Typical for EVM line charts

LO 3

example budgeted cost of work scheduled bcws
Example: Budgeted Cost of Work Scheduled (BCWS)
  • 100% of $18K = $18K
  • 100% of $10K = $10K
  • 80% of $20K = $16K
  • 15% of $40K = $6K

BCWS = $18K+$10K+$16K+$6K = $50K

LO 3

example budgeted cost of work performed bcwp
Example: Budgeted Cost of Work Performed (BCWP)
  • 100% of $18K = $18K
  • 80% of $10K = $8K
  • 70% of $20K = $14K
  • 0% of $40K = $0

BCWP = $18K+$8K+$14K+$0 = $40K

LO 3

network planning models
Network-Planning Models
  • A project is made up of a sequence of activities that form a network representing a project
  • The path taking longest time through this network of activities is called the “critical path”
  • The critical path provides a wide range of scheduling information useful in managing a project
  • Critical path method (CPM) helps to identify the critical path(s) in the project networks

LO 3

slide30

Prerequisites for

Critical Path Methodology

  • A project must have:
  • well-defined jobs or tasks whose completion marks the end of the project;
  • independent jobs or tasks;
  • and tasks that follow a given sequence.
slide31

Types of

Critical Path Methods

  • CPM with a Single Time Estimate
    • Used when activity times are known with certainty
    • Used to determine timing estimates for the project, each activity in the project, and slack time for activities
  • CPM with Three Activity Time Estimates
    • Used when activity times are uncertain
    • Used to obtain the same information as the Single Time Estimate model and probability information
  • Time-Cost Models
    • Used when cost trade-off information is a major consideration in planning
    • Used to determine the least cost in reducing total project time
critical path method cpm
Critical Path Method (CPM)
  • Identify each activity to be done and estimate how long it will take
  • Determine the required sequence and construct a network diagram
  • Determine the critical path
  • Obtain all project and activity timing information
  • Determine the early start/finish and late start/finish schedule

LO 5

slide35

Determining the Critical

Path & Slack

  • A path is a sequence of connected activities running from start to end node in a network
  • The critical path is the path with the longest duration in the network
    • It is also the minimum time, under normal conditions, to complete the project
    • Delaying activities on the critical path will delay completion time for the project
  • A slack is amount of scheduling flexibility
    • Critical activities have no slacks
example 1 finished schedule
Example 1: Finished Schedule

Forward Pass

Backward Pass

SLACK=LS-ES=LF-EF

Slack=(36-33)=(31-28)=3

A PATH IS CRITICAL IF:

ES=LS,

EF=LF, and

EF-ES=LF-LS=D

LO 5

critical path method three activity time estimates
Critical Path Method:Three Activity Time Estimates
  • If a single time estimate is not reliable, then use three time estimates
  • Task times assumed variable (probabilistic)
    • Minimum (optimistic)
    • Maximum (pessimistic)
    • Most likely (normally)
  • Allows us to obtain a probability estimate for completion time for the project

LO 5

example 2 activity expected times and variances
Example 2: Activity Expected Times and Variances

Variance of Project = Sum of Variance of Activities on CP

LO 5

slide41

Probability Estimates

p(t < D)

t

TE = 38

D=35

From Appendix G, page 765

There is about a 19.78% probability that this

project will be completed in 35 weeks or less.

slide42

p(t < D)

t

TE = 38

Probability Estimates

0.95994

D=44

There is about a 4% probability that this

project will not be completed in 44 weeks.

time cost models and project crashing
Time-Cost Models and Project Crashing
  • Basic assumption: Relationship between activity completion time and project cost
  • Time cost models: Determine the optimum point in time-cost tradeoffs
    • Activity direct costs
    • Project indirect costs
    • Activity completion times

LO 6

slide44

Time-Cost Models and Project Crashing

Cost $

CC

100+C

Rate of Change =

100+B

CC-NC

100+A

100

NC

Time

5

10

20

30

CT

NT

NT-CT

procedure for project crashing
Procedure for Project Crashing
  • Prepare a CPM-type network diagram
    • Normal and crash times for each
    • Normal and crash costs for each
  • Determine the cost per unit of time to expedite each activity
    • Incremental cost = (CC-NC)/(NT-CT)
  • Compute the critical path
  • Shorten the critical path at the least cost
  • Plot project direct, indirect, and total-cost curves and find the minimum-cost schedule

LO 6

slide46

Time-Cost Model: Example

For the project with the following times, find the cost of reducing its duration to its lowest possible time. If the project is reduced by just 2 days, how much would it cost?

CRASH

NORMAL

Activity Time Cost Time Cost IN CL=NT-CT

A 2 6 1 10

B 5 9 2 18

C 4 6 3 8

D 3 5 1 9

4

1

3

3

2

1

2

2

slide47

NORMAL

CRASHED

1

2

ES=

EF=

ES=

EF=

B

B

,2

,5

10

5

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

LS=

LF=

LS=

LF=

A

A

D

D

,1

,1

,2

,3

LS=

LF=

LS=

LF=

LS=

LF=

LS=

LF=

ES=

EF=

ES=

EF=

C

C

,4

$26

,3

$45

LS=

LF=

LS=

LF=

ES=

EF=

ES=

EF=

3

4

B

B

,2

,5

8

7

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

LS=

LF=

LS=

LF=

A

A

D

,1

D

,2

,2

,1

LS=

LF=

LS=

LF=

LS=

LF=

LS=

LF=

ES=

EF=

ES=

EF=

C

C

$30

,4

,4

$39

LS=

LF=

LS=

LF=

slide48

1

2

ES=

EF=

ES=

EF=

B

B

,4

,4

7

6

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

LS=

LF=

LS=

LF=

A

A

D

D

,2

,1

,1

,1

LS=

LF=

LS=

LF=

LS=

LF=

LS=

LF=

ES=

EF=

ES=

EF=

$33

C

C

,4

,4

$37

LS=

LF=

LS=

LF=

ES=

EF=

ES=

EF=

3

4

B

B

,3

5

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

LS=

LF=

LS=

LF=

A

A

D

D

,1

,1

LS=

LF=

LS=

LF=

LS=

LF=

LS=

LF=

ES=

EF=

ES=

EF=

C

C

,3

$42

LS=

LF=

LS=

LF=

slide49

CPM Assumptions/

Limitations

  • Project activities can be identified as entities (There is a clear beginning and ending point for each activity.)
    • But this is seldom true
  • Project activity sequence relationships can be specified and networked
    • Sometime we do not know all project activities ahead of time
slide50

CPM Assumptions/

Limitations

  • Project control should focus on the critical path
    • But there are near-critical activities
  • The activity times follow the beta distribution, with the variance of the project assumed to equal the sum of the variances along the critical path
    • But activities are infrequent. Can we assume normality?
    • Are we really sure that it is beta distributed?
managing resources
Managing Resources
  • In addition to scheduling each task, must assign resources
  • Software can spot over-allocation
    • Allocations exceed resources
  • Must either add resources or reschedule
    • Moving a task within slack can free up resources

LO 1

tracking progress
Tracking Progress
  • Actual progress on a project will be different from the planned progress
    • Planned progress is called the baseline
  • A tracking Gantt chart superimposes the current schedule onto a baseline so deviations are visible
  • Project manager can then manage the deviations

LO 1

slide53

Chapter 10: Problem 8

#s: a, b, c

ES=

EF=

ES=

EF=

B,2

E,3

ES=

EF=

H,4

H,4

23.8

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

26.8

A,3

C,6

F,2

I,5

A,3

C,6

F,2

I,5

ES=

EF=

26.8

25.8

K,6.8

K,6.8

ES=

EF=

ES=

EF=

ES=

EF=

D,5

G,7

J,4

slide54

Chapter 10: Problem 8

#: d(1)

Reduced by 2 Days

ES=

EF=

ES=

EF=

B,2

E,1

  • Not on CP
  • Duration still 26.8
  • No Gain
  • Loss $1,500

ES=

EF=

H,4

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

A,3

C,6

F,2

I,5

ES=

EF=

26.8

K,6.8

ES=

EF=

ES=

EF=

ES=

EF=

D,5

G,7

J,4

slide55

Chapter 10: Problem 8

#: d(2)

  • CP changes
  • Duration 25.8
  • Net Gain 1 day
  • Cost $1,500
  • Savings $1,000
  • Net Loss $ 500

ES=

EF=

ES=

EF=

B,2

E,3

ES=

EF=

H,4

23.8

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

24.8

A,3

A,3

C,4

F,2

I,5

ES=

EF=

25.8

25.8

Reduced by 2 Days

K,6.8

K,6.8

ES=

EF=

ES=

EF=

ES=

EF=

D,5

G,7

J,4

D,5

G,7

J,4

slide56

Chapter 10: Problem 8

ES=

EF=

ES=

EF=

#: d(3)

  • Not on CP
  • Duration still 26.8
  • No Gain
  • Loss $1,500

B,2

E,3

ES=

EF=

H,4

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

A,3

C,6

F,2

I,5

ES=

EF=

26.8

K,6.8

ES=

EF=

ES=

EF=

ES=

EF=

D,5

G,5

J,4

Reduced by 2 Days

slide57

Chapter 10: Problem 8

#: e

26.8 30

0.00 1.37

ES=

EF=

B,2

E,3

ES=

EF=

ES=

EF=

H,4

ES=

EF=

ES=

EF=

ES=

EF=

ES=

EF=

A,3

C,6

F,2

I,5

ES=

EF= 26.8

K,6.8

ES=

EF=

ES=

EF=

ES=

EF=

D,5

G,7

J,4

slide58

Chapter 10: Problem 9

a & b

ES= EF=

ES= EF=

ES= EF=

21

B,2

E,5

H,3

LS= LF=

LS= LF=

LS= LF=

23

26

ES= EF=

ES= EF=

ES= EF=

ES= EF=

ES= EF=

26

A,4

C,4

F,6

I,5

J,7

LS= LF=

LS= LF=

LS= LF=

LS= LF=

LS= LF=

Activity Cost $ CL

1—A * *

2—B 10,000 1

3—C 10,000 3

4—D 10,000 2

5—E 10,000 4

6—F 10,000 5

7—G 10,000 1

8—H 10,000 2

9—I 10,000 4

10—J * *

ES= EF=

ES= EF=

D,3

21

G,2

LS= LF=

LS= LF=

slide59

Chapter 10: Problem 9

c

ES= EF=

ES= EF=

ES= EF=

21

B,2

E,5

H,3

LS= LF=

LS= LF=

LS= LF=

23

26

ES= EF=

ES= EF=

ES= EF=

ES= EF=

ES= EF=

26

A,4

C, 4

F, 6

I, 5

J,7

LS= LF=

LS= LF=

LS= LF=

LS= LF=

LS= LF=

ES= EF=

ES= EF=

D,3

21

G,2

Activity Cost $ CL

1—A * *

2—B 10,000 1

3—C 10,000 3

4—D 10,000 2

5—E 10,000 4

6—F 10,000 5

7—G 10,000 1

8—H 10,000 2

9—I 10,000 4

10—J * *

LS= LF=

LS= LF=

slide60

Chapter 10: Problem 9

ES= EF=

ES= EF=

ES= EF=

21

B,2

E,5

H,3

LS= LF=

LS= LF=

LS= LF=

20

23

ES= EF=

ES= EF=

ES= EF=

ES= EF=

ES= EF=

23

A,4

C, 1

F, 6

I, 5

J,7

LS= LF=

LS= LF=

LS= LF=

LS= LF=

LS= LF=

ES= EF=

ES= EF=

D,3

21

G,2

Activity Cost $ CL

1—A * *

2—B 10,000 1

3—C 10,000 0

4—D 10,000 2

5—E 10,000 4

6—F 10,000 5

7—G 10,000 1

8—H 10,000 2

9—I 10,000 4

10—J * *

  • Reduce C by 3 $30,000

LS= LF=

LS= LF=

slide61

Chapter 10: Problem 9

ES= EF=

ES= EF=

ES= EF=

21

B,2

E,5

H,3

LS= LF=

LS= LF=

LS= LF=

20

22

ES= EF=

ES= EF=

ES= EF=

ES= EF=

ES= EF=

22

A,4

C, 1

F, 5

I, 5

J,7

LS= LF=

LS= LF=

LS= LF=

LS= LF=

LS= LF=

ES= EF=

ES= EF=

D,3

21

G,2

Activity Cost $ CL

1—A * *

2—B 10,000 1

3—C 10,000 0

4—D 10,000 2

5—E 10,000 4

6—F 10,000 4

7—G 10,000 1

8—H 10,000 2

9—I 10,000 4

10—J * *

  • Reduce C by 3 $30,000

LS= LF=

LS= LF=

  • Reduce F or I by 1 $10,000

Total Cost $40,000

slide62

Chapter 10: Problem 9

ES= EF=

ES= EF=

ES= EF=

21

B,2

E,5

H,3

LS= LF=

LS= LF=

LS= LF=

22

22

ES= EF=

ES= EF=

ES= EF=

ES= EF=

ES= EF=

22

A,4

C, 3

F, 3

I, 5

J,7

LS= LF=

LS= LF=

LS= LF=

LS= LF=

LS= LF=

  • Reduce C by 3 $30,000

ES= EF=

ES= EF=

  • Reduce F or I by 1 $10,000

D,3

21

G,2

Activity Cost $ CL

1—A * *

2—B 10,000 1

3—C 10,000 2

4—D 10,000 2

5—E 10,000 4

6—F 10,000 2

7—G 10,000 1

8—H 10,000 2

9—I 10,000 4

10—J * *

Total Cost $40,000

LS= LF=

LS= LF=

OR

  • Reduce F or I by 3 $30,000
  • Reduce C by 1 $10,000

Total Cost $40,000

But new CP=More resources

slide63

Chapter 10: Problem 13

D, 6

B,10

E, 7

G, 4

A,5

C,8

F, 4

Normal Normal Crash Crash

Activity Time Cost Time Cost IC CL

A 5 7,000 3 13,000

B 10 12,000 7 18,000

C 8 5,000 7 7,000

D 6 4,000 5 5,000

E 7 3,000 6 6,000

F 4 6,000 3 7,000

G 4 7,000 3 9,000

slide64

Chapter 10: Problem 13

5

D, 6

24

25

B,10

24

24

E, 7

G, 4

25

A,5

21

C,8

F, 4

Act NT NC CT CC

A 5 7,000 3 13,000

B 10 12,000 7 18,000

C 8 5,000 7 7,000

D 6 4,000 5 5,000

E 7 3,000 6 6,000

F 4 6,000 3 7,000

G 4 7,000 3 9,000

CP

Reduce

$

Time

IC

CL

ABDG

1st D

1000

45K

24

3000

2

2000

3

2000

1

0

1000

1

3000

1

1000

1

2000

1

$44,000

slide65

Chapter 10: Problem 13

D, 5

22

23

24

B,10

22

23

22

23

3

24

E, 7

G, 4

24

4

A,5

20

21

C,8

F, 4

Act NT NC CT CC

A 5 7,000 3 13,000

B 10 12,000 7 18,000

C 8 5,000 7 7,000

D 6 4,000 5 5,000

E 7 3,000 6 6,000

F 4 6,000 3 7,000

G 4 7,000 3 9,000

IC

CL

CP

Reduce

$

Time

1

3000

2

ABDG

1st D

1000

45K

24

2000

3

ABDG

2000

1

2nd G

2000

47K

23

1000

0

ACEG

3000

1

ABDG

1000

1

3rd A

3000

50K

22

0

2000

1

ACEG

$44,000