Project Management

Dr. Nirav B. Halvadia

Associate Professor,
GUNI-VMPIM
Project Management
 Project and Project management: Munns and Bjeirmi (1996)
define a project as the achievement of a specific objective
which involves a series of activities and tasks that consume
resources, and project management as the process of
controlling the achievement of project objectives.
 Critical Path Method
 Draw a network diagram for the activities given below and determine the
critical path.
Duration of Immediate
Activity Description of Activity Activity Predecessor
(month) Activity

A Design Plant 12
B Select Site 8 A
C Select Vendor 4 A
D Select Personnel 3 A
E Prepare Site 12 B
F Manufacture Generator 18 C
G Prepare Operations Manual 5 C
H Install Generator
4 E,F
I Train Operators
9 D,G
J Obtain Licence
6 H,I
Total Float
 The total float of an activity represents the amount of time by
which it can be delayed without delaying the project
completion date.
PERT
 Programme Evaluation and Review Technique
 PERT is applied where the duration of various activities
cannot be predicted with certainty.

Example: PERT is especially suitable for research and

development (R & D) projects.
Researchers are usually not sure as to how much time a
particular research activity will take.
Time estimate in PERT
 Optimistic time estimate(a): This is the shortest possible time
estimate of an activity. It is based upon the premise that
everything will go right for the earliest completion of the
activity.
 Pessimistic time estimate (b): This is the longest possible time
estimate of an activity. It is based upon the premise that there
may be hindrances in the completion of the activity.
Time estimate in PERT
 Most likely time estimate (m): This is the time estimate that
has the highest probability of occurrence. This is based upon
the gut feeling or hunch of the project manager.
Expected time estimate (te)
 These three time estimates are clubbed together into a single
time estimate by taking a weighted average. This combined
estimate is called the expected time estimate (te) of the
activity.
 A weight of 4 is attached to m and weight of 1 each are
attached to a and b. te can thus be found by using the
following formula:
te=a+4m+b/6
PERT EXAMPLE
Below table gives details about the various activities of a project:

Activity Predecessor Activity a m b

A 10 11 12
B A 6 10 14
C A 5 8 11
D A 1 5 9
E B 3 5 13
F C 4 9 14
G D 1 2 3
H F,E 3 7 11
I G,H 3 5 7
J G,H 9 12 15

Find (a) the critical path of the project and its expected duration, and (b) the
probability that the project will be completed within 50 days.
Solution
Step 1: Calculation of te

Activity Predecessor Activity a m b te

A 10 11 12 11
B A 6 10 14 10
C A 5 8 11 8
D A 1 5 9 5
E B 3 5 13 6
F C 4 9 14 9
G D 1 2 3 2
H F,E 3 7 11 7
I G,H 3 5 7 5
J G,H 9 12 15 12
Solution
 Step 2: Network diagram
Block
Total Project Duration & Critical Path
Normal Rule
Beta Curve in Project Management
Calculation of Variance and Standard
Deviation
Calculation of Variance and Standard
Deviation

Predecess
Activity or a m b te Variance
Activity

A 10 11 12 11 0.111111
B A 6 10 14 10 0
C A 5 8 11 8 1
D A 1 5 9 5 0
E B 3 5 13 6 0
F C 4 9 14 9 2.777778
G D 1 2 3 2 0
H F,E 3 7 11 7 1.777778
I G,H 3 5 7 5 0
J G,H 9 12 15 12 1

Total Variance 6.666667

Total SD 2.581989
Calculation of Z value
 Example 2
 Bill Fredlund, president of Lincoln Log Construction, is
considering placing a bid on a building project. Bill has
determined that five tasks would need to be performed to
carry out the project. Using the PERT three-estimate
approach, Bill has obtained the estimates in the table below
for how long these tasks will take. Also shown are the
precedence relationships for these tasks.
 Example 2

Predecessor
Activity a m b
Activity
A 3 4 5
B A 2 2 2
C B 3 5 6
D A 1 3 5
E B,D 2 3 5
 Example 2
 There is a penalty of $500,000 if the project is not completed in 11
weeks. Therefore, Bill is very interested in how likely it is that his
company could finish the project in time.
 (a) Construct the project network for this project.
 (b) Find the mean critical path.
 (c) Find the approximate probability of completing the project within 11
weeks.
 (d) Bill has concluded that the bid he would need to make to have a
realistic chance of winning the contract would earn Lincoln Log
Construction a profit of about $250,000 if the project is completed
within 11 weeks. However, because of the penalty for missing this
deadline, his company would lose about $250,000 if the project takes
more than 11 weeks. Therefore, he wants to place the bid only if he has
at least a 50 percent chance of meeting the deadline. How would you
advise him?
Calculation of te

Prede
cessor
Activity a m b te
Activi
ty

A 3 4 5 4
B A 2 2 2 2
C B 3 5 6 4.83
D A 1 3 5 3
E B,D 2 3 5 3.17
Calculation of critical path
Calculation of variance and SD

Predecessor
Activity a m b te Variance
Activity

A 3 4 5 4 0.1111
B A 2 2 2 2 0
C B 3 5 6 5 0.25
D A 1 3 5 3
E B,D 2 3 5 4
Total Variance 0.361
Total SD 0.601
Calculation of z value
Direct cost and Indirect cost
 Direct costs are directly attributable to the project. Project
direct costs are the cost of materials, labours (salaries, wages,
overtime cost, hiring and firing cost etc.), and machine and
equipment.
 Indirect costs are not directly attributable to the project.
Project indirect cost is mainly the cost of supervision during
the implementation of the project, cost of quality control
etc... Project indirect cost is dependent upon the length of
duration of the project.
Crashing of a project
 It means intentionally reducing the duration of a project by
allocating more resources to it.
 A project can be crashed by crashing its critical activities
(Reason: Because duration of the project is dependent upon
the duration of its critical activities).
 We know that by adding more resources , the duration of an
activity can be reduced. If an activity gets completed in 10
days with 5 men working on it, the same activity gets
completed in (say) 6 days with 10 men working on it.
 Here, direct cost increases but indirect cost decreases.
Crash time and crash cost
 An activity can be crashed by adding more resources only up
to a definite limit. Beyond this limit, the duration of the
activity does not decrease by adding more resources. This is
due to decreasing efficiency of labour and also increasing
confusion due to the large number of resources.
 The limit beyond which the duration of the activity does not
decrease by adding any amount of resources is called the
crash time and the corresponding direct cost is called the
crash cost.
Normal time and normal cost
 Normal time: the duration of an activity when the minimum
possible resources required for its performance are deployed.
The corresponding minimum direct cost is called the
normal cost.
Example:Crashing
Activities Predecessor Normal Crash Incremental cost
Activities Time(days) Time of
(days) crashing(Rupees
/day)
A 6 5 50
B 8 7 100
C A 9 8 80
D A 11 7 60
E B 5 1 90
F B 7 7
G D,E 8 2 40
H F 3 3
I C 7 6 100
J G,H,I 2 1 50
Example:Crashing
 The total normal cost for performing the 10 given activities
= 2000 rupees, cost of supervision = 100 rupees per day,
penalty = 300 rupees per day over 25 days, reward = 200
rupees per day for less than or equal to 21 days.
Solution: Network Diagram
Critical Path
Crashing of G by 1 Day
Crashing of G by 2 Days
 Cost Calculation & Understanding of
the Concept

Direct Cost Indirect Cost

Crashi Total Total
Durati Crashi Norma ng Direct Superv Rewar Indirec Total
on ng l Cost Cost Cost ision Penalty d t Cost Cost
27 2000 2000 2700 600 3300 5300
26 I 2000 40 2040 2600 300 2900 4940
25 II 2000 80 2080 2500 2500 4580