Project Management

Chapter 2

Project Management
Project:
An interrelated set of activities with a definite starting
and ending point, which results in a unique outcome
for a specific allocation of resources.

Project Management:
A systemized, phased approach to defining,
organizing, planning, monitoring, and controlling
projects.

Program:
Interdependent set of projects with a common
strategic purpose.
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Defining and Organizing Projects

1. Defining the Scope and Objectives:

Statement about scope, time frame, and allocated

resources.
Scope creep.

2. Selecting the Project Manager and Team:

PM: facilitator; communicator; decision maker.

Team: technical competence; sensitivity; dedication.

3. Recognizing Organizational Structure:

Functional: housed in specific department or functional

area.
Pure project: members work exclusively for the PM on a
particular project.
Matrix: compromise structure; PM reports to a Program
Manager.
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Planning Projects
1. Defining the Work Breakdown
Structure.
2. Diagramming the Network.
3. Developing the Schedule.
4. Analyzing cost-time trade-offs.
5. Assessing risks.

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1. Work Breakdown Structure

A statement of all the work that has to be completed.
Activity: the smallest unit of work effort consuming both time and
resources that can be planned and controlled.

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2. Diagramming the Network

Program Evaluation and Review
Technique (PERT).
Critical Path Method (CPM).
Establishing Precedence
Relationship.
Estimating Activity Times.
Using Activity-on-Node (AON)
Approach.
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Establishing Precedence Relationships

5899504 2014/08/05 130.113.185.89

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Example 2.1 (Page 56)

Judy Kramer, the project manager for the St. Johns Hospital project, divided
the project into two major modules. She assigned John Stewart the overall
responsibility for the Organizing and Site Preparation module and Sarah
Walker the responsibility for the Physical Facilities and Infrastructure
module. The project team developed the precedence relationships, activity
time estimates, and activity responsibilities shown in the following table.
Draw the network diagram. Assume a work week of 5 days.

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3.Developing the Schedule

Path:
The sequence of activities between a projects start and finish.

Critical Path:
The sequence of activities between a start and finish that
takes the longest time to complete.

Project Schedule:

Earliest start time (ES)

Earliest finish time (EF)= ES t.
Latest finish time (LF)
Latest start time (LS) = LF t.
Slack: the maximum length of time an activity can be delayed
without delaying the entire project: LS-ES or LF-EF.

Calculate the ES, EF, LS and LF times for each activity

in the hospital project. Which activity should Kramer
start immediately?
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4. Analyzing Cost-Time Trade-Offs

Crashing:
Completion times of individual activities can
be shortened by using additional direct
resources thereby reducing the time to
complete the project.

Project Costs:
Direct Costs: labor; materials; etc.
Indirect Costs: administration; depreciation;
financial; etc.
Penalty Costs: incurred if project extends
beyond some specific date.
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Cost to Crash (an activity)

Normal time (NT): time needed under normal
conditions.
Normal cost (NC): cost associated with normal time.
Crash time (CT): shortest possible time to
complete.
Crash cost (CC): cost associated with the crash
time.
CC NC
NT CT

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Example 2.3 (page 62)

Use the following table, and the earlier information to develop
a Minimum-Cost Schedule for the St. Johns Hospital project.
DIRECT COST AND TIME DATA FOR THE ST. J OHNS HOSPITAL PROJ ECT
Activity

Normal
Time (NT)
(weeks)

Normal
Cost (NC)
($)

12

$12,000

11

$13,000

1,000

50,000

64,000

7,000

10

4,000

7,000

600

10

16,000

20,000

2,000

24

120,000

14

200,000

10

8,000

10

10,000

16,000

1,500

35

500,000

25

530,000

10

3,000

40

1,200,000

35

1,260,000

12,000

15

40,000

10

52,500

2,500

10,000

13,000

1,000

30,000

34,000

4,000

Totals $1,992,000

Crash Time Crash Cost

(CT)(weeks) (CC)($)

Maximum Cost of
Time
Crashing per
Reduction Week ($)
(week)

$2,209,500
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5. Assessing Risks
Risk:
A measure of the probability and consequence of not
reaching a defined project goal.
Involves the notion of uncertainty.

Risk Management Plans:

Strategic Fit.
Service/ Product Attributes.
Project Team Capability.
Operations.

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Risk Analysis Tools

1. Simulation:

Computer: the time for each activity is randomly

chosen from its probability distribution
(Supplement E).
Procedure is repeated many times probability
distribution for the completion time.

2. Statistical Analysis:

Optimistic time (a): shortest time.

Most likely time (m): probable time.
a +4m
+b
Pessimistic timet (b):
longest
estimated time.
=
6
2
b

a
Most likely time =
2 =
6
Variance for each activity =
e

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Example 2.4 (page 67)

Suppose that the project team has arrived at the
following time estimates for activity B (site
selection and survey) of the St. Johns Hospital
project: a=7 weeks; m=8 weeks; and, b=15 weeks.
Calculate the expected time and variance for
activity B.

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Other Activities
Time Estimates (week)

Activity Statistics

Activity

Optimistic
(a)

Most Likely
(m)

Pessimistic
(b)

Expected Time
(te)

Variance
(2)

11

12

13

12

0.11

15

10

15

10

2.78

16

10

1.78

14

25

30

24

7.11

18

10

4.00

25

36

41

35

7.11

35

40

45

40

2.78

10

13

28

15

9.00

15

5.44

0.11

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Analyzing Probabilities

Calculate the probability that St. Johns Hospital will become

operational in 72 weeks, using (a) the critical path, and (b) near-critical
path A-C-G-J-K.
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Monitoring and Controlling Projects

Monitoring Project Status
Open Issues and Risks.
Schedule Status.

Monitoring Project Resources

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Additional Example
Three recent university graduates have formed a partnership and
have opened an advertising firm. Their first project consists of
activities listed in the following table.
a) Draw the precedence diagram (activity-on-node).
b) What is the probability that the project can be completed in 21 days or
less?
c) Suppose it is now the end of the seventh day and that activities a and b
have been completed while activity d is 50 percent completed. Time
estimates for the completion of activity d are 5, 6 and 7. Activities c
and h are ready to begin. Determine the probability of finishing the
project by day 21.

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Practice Problems
5, 13, 21 and 23.
Active Model Exercise (in MyOMLab).

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