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## Project Management

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**Managing Projects**• Projects are usually large & infrequent or one-time. • No two projects are the same. • Projects are usually fairly long. • Several months to many years • They Involve different people in different phases • Most people are only involved with a part of a project • Even though a project may be under the overall purview of a single department or group, other departments are often involved.**Projects**• The three main goals of project management are… • Complete the project on time or earlier. • Complete the project on or under budget. • Meet the specifications to the satisfaction of the customer.**Project Scope & Objectives**• Defining a project’s scope, time frame, allocated resources and objective, is essential. • An Objective Statement provides the purpose of the project. • A Specific time frameis established for starting and ending the project. • Necessary resourcesmust be defined. • Project costs and personnel allocations are stated.**Project Structures**• Functional Structure: The team is housed in a specific functional area. Assistance from other areas must be negotiated. • Pure Project: Team members work exclusively for the project manager. (Best for large projects.) • Matrix Structure: A compromise between the functional and project structures. Members remain in various functional areas and the project manager coordinates across functional areas. Having two bosses (dual authority) can cause problems.**Project Management TechniquesPERT • CPM • GERT**Program Evaluation and Review Technique • PERT (Program Evaluation and Review Technique) is utilized when activity times are uncertain (involved risk). Critical Path Method • CPM(Critical Path Method) is used when activity times are known and certain. Graphic Evaluation and Review Technique • Rarely used, and then only in very complex projects. • It overcomes many of the limitations of PERT and CPM • Provides much more project flexibility.**Project Management Steps**1. Describe the Project (Defining all the tasks that must be completed, and in what sequence.) 2. Develop a Graph Model (diagram the network showing task relationships) 3. Develop an activity Schedule (Determine the time estimates for each task) 4. Analyzing cost-time trade-offs(Determine the cost of each task.) 5. Assess Risks (Probability analysis)**Step 1Describe the project**• What is the project? • When does the project start and end? • What activities make up the project? • Activities are defined as the smallest units of work that a project manager is expected to schedule and control. “...a manager’s project description should reflect only the level of detail that he or she needs in order to make scheduling and resource allocation decisions.” • Task Ownership: Each activity must have an owner who is responsible for seeing that the work is accomplished.**Relationshipsbetween Activities**• A project is a sequence of activities. • Large projects have interrelated sequences. • Except for the beginning activity/activities, every activity in a project has one or more activities that must be done immediately prior. • These are called Precedent (Pre-ceeď-ent) activities • Theymust be definedbefore the project begins. • EG: In order to bury a body you must first dig a hole.**Step 2 Develop a Network Model**• A Network Diagram visually displays the interrelated activities using nodes (circles) and arcs (arrows) that depict the relationships between activities. • It is a graphical diagram. • For very large projects it may only be a numerical arrangement of activities rather than graphical. • Two types of Graphical Network Models • Activity On Arc (AOA) • Activity On Node(AON) (We will use AON)**Time**Time Time Activity E Activity D Activity Activity Link Two Types of Network Models Activity-on-Arc (AOA) Activity-on-Node (AON) We will use this! D E**What AON Nodes look like.**Slack (S) is the difference, if any, between the early start (ES) and late start times (LS) or the early finish (EF) and late finish (EF) times. S = LS - ES or S = LF - EF The is the earliest you can start an activity. It is determined by the early finish time of the precedent activity. If there are two or more precedent activities, this time is the same as precedent activity with the latest “Early Finish” time. Slack The earliest you can complete an activity--determined by adding the activity time (duration) to the early start time. ActivityName Early Start Early Finish Late Finish Late Start This is the latest you can finish an activity without delaying project completion. It is the same as the Late Start time of the next activity. If there are two or more subsequent activities, this time is the same as the earliest of those “Late Start” times. Activity Duration This is the Late-Finish time minus the activity duration. © 2014 Lew Hofmann**Example: This homework Assignment**The slack in this case would be one week, expressed in hours, since that is the unit of time used for the activities. It would be how long you could delay doing the assignment. The earliest you can start this assignment it is immediately after this class ends. Slack If it takes one hour, the earliest you can complete this assignment is one hour after class ends. Home-work #2 Early Start Early Finish Late Finish Late Start 1 hour You can wait until one hour before the class in which it is due to start it; in this case one week from now. One hour after your late start time. © 2014 Lew Hofmann**AON**Activity On Node approach S T U “S” precedes “T” which precedes “U” • Precedent relationships determine the sequence for accomplishing activities. They specify that any given activity cannot start until its preceding activity or activities have been completed. Precedent Relationships In our AON approach, the nodes (circles) represent activities, and the arcs (arrows) represent the sequential relationships between them. Nodes are simplified in the following examples.**S & T must be completed before U can be started.**S T & U cannot begin until S has been completed. U T T S U Activity Relationships**U cannot begin until S & T have been completed. V cannot**begin until T has been completed. U & V can’t begin until S & T have been completed. S U S U T V T V Activity Relationships**T & U cannot begin until S has been completed; V cannot**begin until both T & U have been completed. S T V U Activity Relationships**This is a logic error. “C” cannot be an immediate**predecessor of both “G” &”H” if “G” is also an immediate predecessorof H. C H G Logic Errors Logic errors are hard to identify except on the network diagrams. If you see a triangle, then it is a logic error. Eliminate the short cut.**St. Adolf’s Hospital(A sample project)**Immediate Activity Description Predecessor(s) Responsibility A Select administrative and medical staff. B Select site and do site survey. C Select equipment. D Prepare final construction plans and layout. E Bring utilities to the site. F Interview applicants and fill positions in nursing, support staff, maintenance, and security. G Purchase and take delivery of equipment. H Construct the hospital. I Develop an information system. J Install the equipment. K Train nurses and support staff.**St. Adolf’s Hospital(A sample project)**Immediate Activity Description Predecessor(s) Activity Times A Select administrative and medical staff. — 12 B Select site and do site survey. — 9 C Select equipment. A 10 D Prepare final construction plans & layout. B 10 E Bring utilities to the site. B 24 F Interview applicants and fill positions in A 10 nursing, support staff, maintenance, and security. G Purchase and take delivery of equipment. C 35 H Construct the hospital. D 40 I Develop an information system. A 15 J Install the equipment. E,G,H 4 K Train nurses and support staff. F,I,J 6 *We won’t assigning “Responsibility” data, but it is important in project management.**I**A F K C G Start Finish D B H J E St. Adolf’s HospitalDiagramming the Network Activity Times (wks) Immediate Predecessors**I**Path Time (wks) A-I-K 33A-F-K 28 A-C-G-J-K 67 B-D-H-J-K 69 B-E-J-K 43 A F K C G Start Finish D B H J E St. Adolf’s HospitalActivity Paths Paths are sequences of activities between a project’s start and finish.**I**Path Time (wks) A-I-K 33A-F-K 28 A-C-G-J-K 67 B-D-H-J-K 69 B-E-J-K 43 A F K C G Start Finish D B H J E St. Adolf’s Critical Path The longest path is the critical path! Project Expected Time is 69 wks.**Activity Time EstimatesPERT or CPM ?**• CPM (Critical Path Method) Activity times are certain, so only one time estimate for each activity is needed. • Decision making under Certainty • PERT (Program Evaluation and Review Technique) is used when activity times are uncertain. (Decision making under risk) • It requires three time estimates for each activity. (Best case, most likely time, and worst case)**PERT’sThree time-estimates**• OPTIMISTIC TIME: Best time if everything goes perfectly when doing the activity. • REALISTIC TIME: Most likely time for the activity • PESSIMISTIC TIME: A worst-case situation B + 4M + P Expected Time = ------------------- 6 In this example, the most likely time is given a weight of four, and the other two times (pessimistic and optimistic) are each given weights of one. Risky activity times make the project length risky, so there is a need for risk assessment based on the probability distribution of times. (Standard deviation and variance are computed by the software.)**Activity Slack**Activity slack is the maximum length of time that an activity can be delayed without delaying the entire project. • It is the difference between the earliest time we can start an activity and the latest time we can start the activity without delaying the project. • The critical path activities have zero slack. • For the St. Adolf’s Hospital project, 69 weeks is the project lengthbecause 69 weeks is the longest path. • Project delays beyond the projected completion date often involve penalties.**Activity Start and Finish Times**• Earliest Start Time (ES) for an activity is the earliest finish time of the immediately preceding activity. • Earliest Finish Time (EF) for an activity is its earliest start time plus how long it takes to do it (activity time). • Latest Start Time (LS) is the latest you can finish the activity minus the activity’s estimated duration. • Latest Finish Time (LF) is the latest start time plus the activity time. • The latest finish time is the same as the latest start time of the activity activity which follows it. (Latest start and finish times for each activity are computed starting at the project’s last activity completion time and working forward.) • Slackis the difference between the Earliest Start and Latest start times for an activity (or earliest finish and latest finish times.)**I**15 12 27 Earliest finish time Earliest start time A 12 K 6 F 10 12 0 12 22 C 10 G 35 12 22 22 57 Start Finish H 40 J 4 B 9 D 10 E 24 Earliest Start and Earliest Finish Times 63 69 9 19 19 59 59 63 0 9 9 33 © 2014 Lew Hofmann**I**15 12 27 A 12 K 6 F 10 0 12 63 69 12 22 Path Time (wks) A-I-K 33A-F-K 28 A-C-G-J-K 67 B-D-H-J-K 69 B-E-J-K 43 C 10 G 35 12 22 22 57 Start Finish H 40 J 4 B 9 D 10 9 19 19 59 59 63 0 9 Critical Path E 24 9 33 Earliest Start and Earliest Finish Times The Critical Path takes 69 weeks © 2014 Lew Hofmann**Latest Start and Latest Finish Times(You start with the last**activity and work toward the first activity) I 15 12 27 48 63 A 12 K 6 F 10 Latest start time Latest finish time 0 12 63 69 12 22 63 69 53 63 2 14 C 10 G 35 12 22 22 57 Start Finish 24 59 14 24 H 40 J 4 B 9 D 10 9 19 19 59 59 63 0 9 19 59 9 19 59 63 0 9 E 24 9 33 35 59 © 2014 Lew Hofmann**Slack is the difference between LS and ES or EF and**LF I 15 12 27 48 63 A 12 K 6 F 10 0 12 63 69 12 22 63 69 53 63 2 14 C 10 G 35 12 22 22 57 Start Finish 24 59 14 24 H 40 J 4 B 9 D 10 9 19 19 59 59 63 0 9 19 59 9 19 59 63 0 9 E 24 9 33 35 59 Activity Slack Analysis © 2014 Lew Hofmann**Analyzing Cost-Time Trade-Offs.**• There are always cost-time trade-offs in project management. • You can completing a project early by hiring more workers or running extra shifts. • There are often penalties if projects extends beyond some specific date, and a bonus may be provided for early completion. • Crashing a project means finishing the project early by expediting one or more activities. • Not all activities can be shortened.**Project Costs**Total Project Costs = direct costs + indirect costs + penalty costs • Direct costs include labor, materials, and any other costs directly related to project activities. • Indirect costs include administration, depreciation, financial, and other variable overhead costs. • These can be reduced by reducing total project time. • The shorter the duration of the project, the lower the indirect costs will be. • Penalty costs are essentially late fees incurred for going over the projected due date.**Minimizing Costs**• We do cost analysis to determine the project schedule that minimizes total project costs. • When crashing an activity or project, extra money is spent on direct costs, but money is saved on indirect costs and possible penalties. • A minimum-cost schedule is determined by starting with the normal project time schedule andshortening activities along the critical pathuntil the costs of crashing (direct costs) start to exceed the savings in indirect costs and penalty costs. • New critical paths usually appears while doing this.**St. Adolf’s HospitalMinimum Cost Schedule**• Determine the project’s critical path(s). • Find the activity or activities on the critical path(s) with the lowest cost of crashing (shortening) per week. • Reduce the time for this activity until… • it cannot be further reduced, • or another path becomes critical, • or the increase in direct costs exceed the savings that result from lower indirect costs. • Repeat this process until the total project costs are no longer decreasing. • Sophisticated project management software will do this.**Of the five critical-path activities, the contractor says D**and H cannot be shortened. J is the least costly to shorten at $1000 a week. Contractor says it can be shortened to 1 week. I 15 12 27 48 63 A 12 K 6 F 10 0 12 63 69 12 22 63 69 53 63 2 14 C 10 G 35 12 22 22 57 Start Finish 24 59 14 24 H 40 J 4 B 9 D 10 9 19 19 59 59 63 0 9 19 59 9 19 59 63 0 9 E 24 9 33 35 59 Shorten from 4 weeks to 1 week The project manager must now compare the cost of shortening J by 3 weeks ($3,000 in additional direct costs) with savings in indirect costs, to see if the total cost is lower. © 2014 Lew Hofmann**Assessing Risks**• Risk is a measure of the probability (and consequences) of not completing a project on time. • A major responsibility of the project manager at the start of a project is to develop a risk-management plan. • A Risk-Management Plan identifies the key risks to a project’s success and prescribes ways to circumvent them.**Causes of Project Risk**• Service/Product Risks: If the project involves a new service or product, several risks can arise. • Market riskcomes from competition. • Technological riskcan arise from technology advances made once the project has started, rendering obsolete the technology chosen for service or product. • Legal riskfrom liability suits or other legal action. • Project Team Problems: Poor member selections and inexperience, lack of cooperation, etc. • Operations Risk: Information inaccuracy, miss-communications, bad project timing, weather…**ANALYZING PROBABILITIES**• What is the probability that our sample project will finish in 69 weeks as scheduled? 100% (Why?) • Because we used CPM! • (This means we were certain of all of our activity times.) • If we weren’t certain, we should have used PERT • You only do risk analysis if you use PERT**PERT and PROBABILITIES**• With PERT’s three time-estimates, we get a mean (average) time and a variance for each activity and each path. • We also get a project mean time and variance. • In order to compute probabilities (assuming a normal distribution) we need the activity means and variances. • Most computer packages calculate this for you.**Probability of Project Completion**• The probability of a project being completed by a given date is a function of the mean activity times and variances along the critical path(s). • The probability of a specific activity being completed by a given date is a function of the mean activity times and variances along the longest path leading up to that activity. • If you have more than one critical path, focus on the path with the greatest variance. • A near-critical path may also be a problem, depending on the mean and variance of it’s activities.**Distributions & Probability**• A Beta distribution is often used for the three estimates of each activity • This allows skewed distributions. Optimistic------Most likely -----------------------Pessimistic (3 ------------- 5 ---------------------------------- 11) • Normal distributions are needed for probabilities. • A distribution of activity-means is a normal distribution, even though each activity time may be a beta distribution.**Probability**Time a m b Mean Beta Distribution Each activity may have its three time estimates skewed (Beta Distribution), but the path along which this activities lie has a normal distribution and thus a mean and variance. Pessimistic Optimistic**Figuring Probabilities**• Assume a PERT project critical path takes 40 days, and that the variance of the critical path is 2.147 • You wish to know the probability of the project going over 42 days. • Compute the standard deviation of the critical path. • The square root of the variance of 2.147 = Std. Dev. = 1.465 • POM/QM software gives you the variance of the critical path. • Compute the Z value: Z = (absolute time difference) / Std. Dev. In this example, Z= (42 days - 40 days) / 1.465 = 1.365 • Look up the Z value of 1.365in a Normal Distribution table to get the probability of the project taking 42 days. • Subtract it from 100% to get the probability of going over 42.**.9139**Look up the Z value (1.365) in the table of normal distribution. (In this case you need to interpolate between the Z values of .9313 and .9147) .9139 or 91.39% is the probability of the project taking 42 days. Thus the probability of going over 42 days is 100 - 91.39 = 8.61%**Normal distribution of variances along the critical path.**Sum of its variances = 2.147 Std. Dev. = 1.465 weeks Project Length (critical path) is 40 weeks Probability of completing the project in 42 weeks is 91.39% Probability of exceeding 42 weeks is 8.61% 40 42 Project duration (weeks)**What is the Probability of it taking 72 weeks?**Critical Path = B - D - H - J – K = 69 weeks T= 72 weeksC= 69weeks T – C 2 z = 2 = (variances of activities along critical path) 3 3.44818 72 – 69 11.89 z = z = St. Adolf’s HospitalA 69-week Project Critical Path Variance 2 = 1.78 + 1.78 + 2.78 + 5.44 + 0.11 = 11.89 Z = 0.870 Look up Z value in normal distribution table**Look up the Z value (0.870) in the table of normal**distribution. .8078 or 80.78%is the probability of the project taking 72 wks. Going over 72 weeks would be 100 – 80.78 = 19.22%**Normal distribution: Mean = 69 weeks;** = 3.45 weeks Length of critical path is 69 weeks Probability of taking 72 weeks is 0.8078 or 80.78% Probability of exceeding 72 weeks is 0.1922 or 19.22% St. Adolf’s HospitalProbability of Completing Project On Time 69 72 Project duration (weeks)**Resource-Related Problems**• Padded Time Estimates: Many time-estimates come with a built-in cushion that management may not realize. • Latest Date Mentality: The tendency for employees (and students) to procrastinate until the last moment before starting. • Failure to Deliver Early, even if the work is completed before the latest finish date.