Chapter
7 Project Management
Project Management
1. Define the term project
a. List some examples
b. What are three main goals of any project?
2. Define project management
3. How can projects be used?
1. Defining and Organizing Projects
1. Define the scope and objectives of a project
2. Select the project manager and project team
a. Project manager
• Roles of the project manager
• Characteristics
b. Project team
3. Organizational structures
2. Constructing Project Networks
Constructing a project network involves two steps.
1. Defining the work breakdown structure (WBS) (example from text shown)
2. Diagramming the network.
a. Establish precendence relationships
b. Estimate activity times
c. Application 7.1
The following information is known about a project
Activity
Activity Time (days)
Immediate
Predecessor(s)
A
7
—
B
2
A
C
4
A
D
4
B, C
E
4
D
F
3
E
G
5
E
Draw the network diagram for this project
3. Developing the Project Schedule
Once the project network is complete, project managers can find the critical path, identify start
and finish times for each activity to build a project schedule, and calculate slack time for each
activity.
1. Critical path defined:
2. Project schedule
• Earliest start time (ES)
• Earliest finish time (EF)
EF = ES + t
• Latest start time (LS)
LS = LF – t
• Latest finish time (LF)
LF = Earliest of the [LS times for all immediately following activities]
3. Activity slack and Gantt charts
4. Activity slack: maximum time an activity can be delayed without delaying the entire project
• Total slack = LS – ES or LF – EF.
• Critical path
5. Application 7.2, continuing Application 7.1
Calculate the four times for each activitity in order to determine the critical path and project
duration.
Start
A
7
B
2
C
4
Duration
Earliest
Start
(ES)
Latest
Start
(LS)
Earliest
Finish
(EF)
Latest
Finish
(LF)
Slack
On the Critical
Path?
7
0
0
7
7
0
2
2
4
0
4
0
4
0
3
2
5
0
4. Analyzing Cost-Time Tradeoffs
1. Cost to crash (or expedite)
• Normal time (NT)
• Normal cost (NC)
• Crash time (CT)
• Crash cost (CC)
Cost assumptions
Crash cost per week =
CC – NC
NT – CT
2. Minimum-cost schedule
• Step 1:
• Step 2:
• Step 3:
• Step 4:
3. Application 7.3
Project Activity and Cost Data
Activity
Normal Time
(days)
Normal
Cost
($)
Crash
Time (days)
Crash
Cost ($)
Immediate
Predecessor(s)
A
5
1,000
4
1,200
—
B
5
800
3
2,000
—
C
2
600
1
900
A, B
D
3
1,500
2
2,000
B
E
5
900
3
1,200
C, D
F
2
1,300
1
1,400
E
G
3
900
3
900
E
H
5
500
3
900
G
Indirect project costs= $250 per day and penalty cost = $100 per day for each day the project lasts
beyond day 14.
13
19
F
2
15
21
13
13
G
3
16
16
5
5
D
3
8
8
8
8
E
5
13
13
5
6
C
2
7
8
0
0
B
5
5
5
0
1
A
5
5
6
Start
ES
LS
ID
DUR
EF
LF
16
16
H
5
21
21
Finish
Direct cost and time data for the activities:
Maximum Crash
Activity
Crash Cost/Day
Time (days)
A
200
1
B
600
2
C
300
1
D
500
1
E
150
2
F
100
1
G
0
0
H
200
2
Solution:
Original costs:
Normal Total Costs =
Total Indirect Costs =
Penalty Cost =
Total Project Costs =
STAGE 1
Step 1: The critical path is _________ and the project duration is _________ days
Step 2:
Step 3:
Costs Last Trial =
Crash Cost Added =
Total Indirect Costs =
Penalty Cost =
Total Project Costs =
Step 4: repeat procedure until the increase in direct costs is larger than the savings
STAGE 2
Step 1: The critical path is _________ and the project duration is _________ days
Step 2
Step 3
Costs Last Trial =
Crash Cost Added =
Total Indirect Costs =
Penalty Cost =
Total Project Costs =
Step 4: repeat procedure
STAGE 3
Step 1: The critical path is _________ and the project duration is _________ days
Step 2
Step 3
Costs Last Trial =
Crash Cost Added =
Total Indirect Costs =
Penalty Cost =
Total Project Costs =
Step 4
A summary of the cost analysis follows. The recommended completion date is day ____ by
crashing
Resulting
Reduc-
Project
Costs
Crash
Total
Total
Total
Crash
Critical
tion
Duration
Last
Cost
Indirect
Penalty
Project
Trial
Activity
Paths
(days)
(days)
Trial
Added
Costs
Costs
Costs
0
1
2
Further reductions will cost more than the savings in indirect costs and penalties.
The critical path is B–D–E–G–H.
5. Assessing and Analyzing Risks
What is a project risk?
1. Risk management plans
a. Simulation, using PERT/CPM to quantify risks
2. Statistical analysis:
Optimistic time (a):
Most likely time (m):
Pessimistic time (b):
Activity’s mean time (te) and variance (
2) with beta distribution
te=a+4m+b
6
s
2=b–a
6
æ
è ö
ø
2
3. Application 7.4
Bluebird University: activity for sales training seminar
Activity
Immediate
Optimistic
Most
Pessimistic
Expected
Variance
Start
A
B
C
D
Finish
E
F
G
J
H
I
Predecessor(s)
(a)
Likely
(m)
(b)
Time
(te)
( )
A
—
5
7
8
B
—
6
8
12
C
—
3
4
5
D
A
11
17
25
E
B
8
10
12
F
C, E
3
4
5
G
D
4
8
9
H
F
5
7
9
I
G, H
8
11
17
J
G
4
4
4
( ) ( )( )
=
=
=
=
=
=
=
=
=
=
++
=
++
=
Jt
It
Ht
Gt
Ft
Et
Dt
Ct
Bt
bma
At
e
e
e
e
e
e
e
e
e
e83.6
6
8745
6
4
=
=
=
=
=
=
=
=
=
=
−
=
−
=
J
I
H
G
F
E
D
C
B
ab
A
2
2
2
2
2
2
2
2
2
22
225.0
6
58
6
4. Analyzing probabilities
Using the z-transformation formula:
Z=T–TE
s
2
where:
T
= due date of project
TE
= earliest expected completion date
s
2
= sum of variances on the critical path
5. Near-critical paths
Application 7.5 continuing with Application 7.4
The director of the continuing education at Bluebird University wants to conduct the seminar
in 47 working days from now. What is the probability that everything will be ready in time?
What is the critical path and duration?
=
−
=2
E
TT
z
6. Monitoring and Controlling Projects
1. Monitoring project status
a. Open issues and risks
2.
a. Schedule status
3. Monitoring project resources
a. Project life-cycle: four major phases
b. Options for managing resource problems
• Resource leveling
• Resource allocation
• Resource acquisition
4. Controlling projects
a. Project monitoring
b. Project closeout