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. • Determine the “critical path” for a project. • Demonstrate how to “crash,” or reduce the length, of a project.
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 • Pure project • Functional project • Matrix project LO 2
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
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 A functional project is housed within a functional division. Example: Project “B” is in the functional area of Research and Development LO 2
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 Project LO 2
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
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 • 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 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 Quality is Job 1 ISO 9001 MPG Data Collection Taurus, Sable LO 3
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) • 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 • 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 • 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 • 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 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) • 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) • 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 • 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
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.
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) • 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
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 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 • 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 Variance of Project = Sum of Variance of Activities on CP LO 5
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.
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 • 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
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 • 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
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
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=
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=
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
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?