FACULTY OF SCIENCE & TECHNOLOGY

MAY 2012

EBTM3103

PROJECT MANAGEMENT

MATRICULATION NO

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PROJECT MANAGEMENT EBTM 3103

Table of Contents
1.0

INTRODUCTION...........................................................................................................3

2.0

PLANNING AND SCHEDULING................................................................................3

3.0

MANAGEMENT PROCESS..........................................................................................7

3.1

PLANNING.................................................................................................................7

3.2

ORGANIZING............................................................................................................8

3.3

LEADING...................................................................................................................8

3.4

CONTROLLING.........................................................................................................8

4.0

CRITICAL PATH METHOD..........................................................................................9

5.0

ENGINEERING ECONOMICS ANALYSIS...............................................................13

5.1

NET PRESENT VALUE (NPV) AND INTERNAL RATE OF RETURN (IRR)........13

6.0

CONCLUSION.............................................................................................................14

7.0

REFERENCE................................................................................................................15

PROJECT MANAGEMENT EBTM 3103

1.0

INTRODUCTION

Project Management is an important topic because all organisations, large and small, are
involved in implementing new undertakings as diverse as the development of a new product
or service, or a public relations campaign. To keep ahead of their competitors, every
organisation is faced with development of complex services and processes. These need crossfunctional expertise in a given organisation.
The justification for undertaking project management in any organisation lies at two levels,
namely, the macro and the micro levels. On the macro or broader level, an organisation is
motivated to implement project management techniques to ensure that what is undertaken,
small or major, is delivered on time, within budget and to specified standards. On the micro
level, project management has the objectives of

Making the project workplace conducive to teamwork

Ensuring that deadlines are met
Reducing cost; operating within real-time basis; and
Ensuring that important documents and information is shared among members of the
team.

2.0

PLANNING AND SCHEDULING

Project planning includes specifying the overall goals to be achieved by the project, phases of
the project, the objectives associated with each goal, responsibilities to achieve each
objective. Planning might also include specifying milestones or deliverables to be produced,
and timelines for achieving the objectives and milestones.
Project schedule plan is the main plan included in any Project Management Plan. Project
schedule is responsible for bringing project time, cost and quality under control. Project
schedule links resources, tasks and time line together. Once a Project Manager has list of
resources, work breakdown structure (WBS) and effort estimates, he is good to go for
planning project schedule. Schedule network analysis helps Project Manager to prevent
undesirable risks involved in the project. Critical Path Method (CPM) and Critical Chain

PROJECT MANAGEMENT EBTM 3103

Project Management (CCPM) are key elements of schedule network analysis. In the
following sections we will explore these elements in details to understand their importance
in keeping project on schedule to get increase in ROI.
There are several reason why planning and scheduling is important for project. They are :
a.
b.
c.
d.
e.
f.
g.

To know whether the project will turn out to be a good or bad one.
To know whether it will cost more than your client thought it should.
To know whether it will take too long to complete.
To communicate information to people.
To define the sequence of activities to ensure the optimum use of resource.
To persuade people to complete tasks before they delay subsequent activities.
To provide a framework for decision making in the event of change.

To achieve all this objective of planning and scheduling there are several element will be
identified. There are :
1) Aim of project
It is about what do we want to produce? The aim of the project is a mixture of
the reasons for doing the project and the benefits that are expected from it. This
section of the plan can be either fulfilled by linking to the main business case, or
by restating it in language for the expected audience.
2) Outputs.
Its about what we need to produce to achieve the goal of the project. What will
the completed project be made up of? These need to be clearly defined.
3) Quality criteria.
Now we have the outputs, we need to understand what quality they need to be
of. This means we need the completed output to be of a certain quality, and we
need to define what that quality is. These targets tell you what success is, what
completion of the project is. They need to be SMART:

Specific: Clearly defined and precise.

PROJECT MANAGEMENT EBTM 3103

Measurable: e.g. not "new computers," but "computers with 2Gb of

memory," etc.

Attainable: Don't ask for the impossible.

Relevant: Is the criterion actually related to the aim of the project?

Time-based: Enough time to achieve this. There is no point expecting a

year's worth of work in one week!

It is important to take some time with the stakeholders in the project to produce
this list. The final customer of the project will naturally be very involved.
Finally, there will also need to decide who has the final say over the quality of
the outputs.
4) Resources.
We have now set down what outputs we need to produce, and what quality they
need to be at. This means we are now in a position to look at the resources we
will need to achieve this. Resources include staff time, particular knowledge or
skill sets, money (e.g. buying equipment), and time (some tasks can't be
increased by throwing more people at the problem, e.g. delivery times, setting
time for concrete, etc.).
5) Management structure.
How are we going to manage the work? You need to describe the general
approach to the project here. Who will be the decision makers for the various
different streams of work? For example, you may be doing a significant
procurement - who makes the decision about what company to buy from?
How will we share progress on the project? Who will we share it to? For
example, you may decide to have regular project team meetings - who needs to
attend? What level of information will you be sharing? Who else needs to be
kept informed, at what level of detail, and how often? For example, you may
want to keep the project executive updated at an overview level of detail on a
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weekly basis, while you keep other managers appraised at a higher level of
detail.
You will also need to spell out the relationship of yourself to the project
executive, in terms of the monitoring of progress. Equally, you need to put down
how you will be monitoring progress of the allocated tasks.
There is no one right answer for how this should be done, and indeed it will
vary with every project. Make sure you think about the size and complexity of
the project, and also the organisation's ethos and current management style.
6) Milestones.
Here you need to think about how you will break up the project. Unless it is
very small, you don't want to have the entire project as one lump of work, with
the only check on progress at the very end. Instead, it makes sense to break the
project up into discrete chunks, where related tasks can be lumped together, with
a sensible milestone at the end of them. For example, in the technology refresh
in the example above, you may want to break the project down into something
like:
-

Requirements Gathering
Tender Writing.
Tendering Process
Contract Negotiation
Deployment.
Testing.

7) Tolerances.
8) Dependencies.
9) Risks.
10) Schedule.

PROJECT MANAGEMENT EBTM 3103

3.0

MANAGEMENT PROCESS

A successful completion of a project will depends on several factors. One of it the

management process. Its the managerial functions that need to be performed by the
managers. One of the earliest classifications of managerial functions was made by Fayol,
who suggested that planning, organizing, coordinating, commanding, and controlling were
the primary functions. Some others theorists identify additional management functions, such
as staffing, communicated, or decision making. But now generally, there is agreement that the
basic managerial functions are: planning, organizing, leading, and controlling. The additional
functions (e.g., communicated, or decision making) will be discussed as subsets of the four
primary functions.

3.1

PLANNING

Planning is considered to be the central function of management because it sets the pattern
for the other activities to follow. "Planning means defining goals for future organizational
performance and deciding on the tasks and use of resources needed to attain them" (Richard
Daft). Planning encompasses four elements:

Evaluating environmental forces and organizational resources

Establishing a set of organizational goals

Developing strategies and plans to achieve the stated goals

Formulating a decision-making process

These elements are concerned with organizational success in the near future as well as
success in the more distant future. Planning to the future, the manager develops a strategy for
getting there. This process is referred to as strategic planning.

PROJECT MANAGEMENT EBTM 3103

3.2

ORGANIZING

Organizing is the managerial function of making sure there are available the resources to
carry out a plan. "Organizing involves the assignment of tasks, the grouping of tasks into
departments, and the allocation of resources to departments" (Richard Daft). Managers must
bring together individuals and tasks to make effective use of people and resources. Three
elements are essential to organizing:

Developing the structure of the organization

Acquiring and training human resources
Establishing communication patterns and networks

Determining the method of grouping these activities and resources is the organizing process.

3.3

LEADING

Leading is another of the basic function within the management process "Leading is the use
of influence to motivate employees to achieve organizational goals" (Richard Daft).
Managers must be able to make employees want to participate in achieving an organization's
goals. Three components make up the leading function:

Motivating employees

Influencing employees

Forming effective groups.

The leading process helps the organization move toward goal attainment.

3.4

CONTROLLING

The final phase of the management process is controlling. "Controlling means monitoring
employees' activities, determining whether the organization is on target toward its goals, and
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making correction as necessary (Richard Daft). Controlling ensures that, through effective
leading, what has been planned and organized to take place has in fact taken place. Three
basic components constitute the control function:

Elements of a control system

Evaluating and rewarding employee performance

Controlling financial, informational, and physical resources.

Controlling is on-going process. An effective control function determines whether the

organization is on target toward its goals and makes corrections as necessary.

4.0

CRITICAL PATH METHOD

The Critical Path Method (CPM) is a schedule network analysis technique. CPM was
developed by the DuPont Corporation in 1957.Critical path determines the shortest time to
complete the project and it is the longest duration path through a network of tasks. Critical
tasks (activities) are tasks (activities) on the critical path.
4.1

Steps in CPM Project Planning

1. Specify the individual activities
All the activities in the project are listed. This list can be used as the basis for adding
sequence and duration information in later steps.
2. Determine the sequence of the activities
Some activities are dependent on the completion of other activities. A list of the
immediate predecessors of each activity is useful for constructing the CPM network
diagram.
3. Draw the Network Diagram

PROJECT MANAGEMENT EBTM 3103

Once the activities and their sequences have been defined, the CPM diagram can be
drawn. CPM originally was developed as an activity on node network.
4. Estimate activity completion time
The time required to complete each activity can be estimated using past experience.
CPM does not take into account variation in the completion time.
5. Identify the Critical Path
The critical path is the longest-duration path through the network. The significance of
the critical path is that the activities that lie on it cannot be delayed without delaying
the project. Because of its impact on the entire project, critical path analysis is an
important aspect of project

planning.

The critical path can be identified by determining the following four parameters for
each activity:
Early Start (ES): Earliest possible point in time on which a task can start.
Early Finish (EF): Earliest possible point in time on which a task can finish.
Late Start (ES): Latest possible point in time on which a task can start.
Late Finish (EF): Latest possible point in time on which a task can finish.
The slack time for an activity is the time between its earliest and latest start time, or
between its earliest and latest finish time. Slack is the amount of time that an activity
can be delayed past its earliest start or earliest finish without delaying the project.
The critical path is the path through the project network in which none of the
activities have slack, that is, the path for which ES=LS and EF=LF for all activities in
the path. A delay in the critical path delays the project. Similarly, to accelerate the
project it is necessary to reduce the total time required for the activities in the critical
path.
Early Start and finish dates are calculated by means of Forward Pass and Late Start
and Late Finish dates are calculated by means of Backward Pass. Many Tasks have
some amount of buffer added to them referred as Slack Time or Float. Float time is
amount of time a task can slip before it delays project schedule.
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There are two common types of floats.

Free Float: Amount of time a single task can be delayed without delaying the early
start of any successor task.
Total Float: Amount of time a single task can be delayed without delaying project
completion.

Mathematically Float is defined as: Float = LS - ES or LF - EF.

6. Update CPM diagram

As the project progresses, the actual task completion times will be known and the
network diagram can be updated to include this information. A new critical path may
emerge, and structural changes may be made in the network if project requirements
change.

Critical path has zero or negative Total Float. A project can have several critical paths.
Here is our project CPM diagram.
Activity
ID

Description

Duration

Project approval/

Design of system functions and

parameters

Procurement of assets for the

system

Integration of hardware and

software

Trial run to test capability of

system and fixing technical
errors

Commissioning of system

(weeks)

Immediately Preceding
Activity (IPA)

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G

Pilot study Road inspection

Data processing

Reporting of pilot results

Actual road inspection

Data processing

Selection of roads for inspection

Compilation of accident records

Analysing accident data

Validating road inspection

results and accident data

K, N

Reporting of validation results

Presenting results to
stakeholders

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5.0

ENGINEERING ECONOMICS ANALYSIS

Engineering Economics Analysis is the quantitative approach of comparing alternatives on

the basis of their projected cash flows, properly accounting for the time value of money.
There are several rules of thumb in accounting that need to be introduced first before you can
start analysing. Additionally, basic terms and definitions also need to be made familiar for
better understanding of the concepts.
Before going to set up this plant, we have to carry out a detailed economic analysis on the
projects in order to determine whether it is worthwhile to venture in to new business.

5.1
NET PRESENT VALUE (NPV) AND INTERNAL RATE OF RETURN
(IRR)

5.1.1

NET PRESENT VALUE

In this method, the discount factor is of prime importance as it significantly affects the
results. The main use of this method is to measure the profitability of a project. Basic
information needed to calculate Net Present Value (NPV) are:
a. Length of the project years.
b. Value of cash flow years.
c. Discount factor/cost of capital to the company.
There are two ways in calculating NPV. It is either to use table or formula. The formula for
NPV is:

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Where:
P

= Present investment

NCIF (m)
i
CR

Net cash in-flow (RM) in the period of m, which represents revenue earned
cost

= Cost of capital rate

=

Capital recovery (RM), which is the amount regained at the end of the
project through resale or other methods of dispositions

Once the calculation has been performed, projects with the largest NPV are to be preferred.

5.1.2

INTERNAL RATE OF RETURN

The internal rate of return (IRR) is the average annual rate of return (usually annual) realised
by an investment with a zero NPV at the end of its project life cycle. In other words, initial
investment is fully compensated by the earnings and capital recovery of the project.
Therefore the formula for IRR is:
NPV = 0

6.0

CONCLUSION

The project management planning process, when implemented correctly, gives the project
team up-front senior management support, clear strategic direction and the right tools to
manage a project to its desired conclusion. Supply managers who embrace this process will
be more successful in directing their key projects and delivering the results that top
management demands. Furthermore, developing and maintaining effective project
management systems bridges the gap between the end products or services your company
offers and what the customer really desires. Organization design/redesign must involve all of
the appropriate people (the principals who must lead the people in the structure) in thinking
through the design. It is not useful for the staff to design a structure and to give it to the
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managers who must make it work. Forthright assessments of the existing organization and
clarity about what is wanted in the future are hallmarks of these "thinking through"
discussions. Organization design is not an engineering problem -the thinking through that is
required will, by necessity, be messy. As with any significant managerial activity it also
requires courage.

7.0

REFERENCE

GREGORY M.H (2012). Project Management Absolute Beginners Guide (3 rd Edition). Que
Publishing.
Chase, Richard, Nicholas Aquilano and Robert Jacobs, (2001) Operations Management for
Competitive Advantage, ninth edition, McGraw-Hill.
Choudhury.S. (2008). Projects: Planning, Analysis, Selection, Implementation and Review.
Tata McGraw Hills.
Kris Moodley. (2001). Notes from Strategic Management.

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