Project Management

Project Management A Managerial Prospective
PROJECT MANAGEMENT
2
Management
A process of working with people and
resources to accomplish organizational
goals.
Getting things done through other people.
3
Management (Contd)
The process of achieving organizational
goals through planning, organizing,
leading, and controlling the human,
physical, financial and informational
resources of the organization.
4
Managerial Functions
Planning
Organizing
Leading
Controlling
5
Manager as a.
Planner
Organizer
Leader
Controller
Motivator
Facilitator

Coordinator
Problem Solver
Decision Maker
Negotiator
Strategist

6
What is a Problem.....
7
Decision:
The choice made from among alternatives.
Decision making:
The process of organizing a problem,
generating and weighting alternatives
coming to a decision and taking action
with feedback.
8
Conditions of Decision making:
Certainty
Risk
Uncertainty
Ambiguity
9
Project
Culture of a Project
- Norms of an Organization
- Conflicts
Importance of Human Factor in Projects
Project
10
Project Management
The process of controlling of a project from
beginning to an end to achieve project
objectives in a given time.

11
Project Management (Contd)
A project is a well-defined set of
tasks/activities that must all be completed in
order to meet the projects goals.

Each task may be started/stopped
independently
Tasks must be performed in a given
sequence

12
Laws of Project Management
Projects progress quickly until they are 90% complete.
Then they remain at 90% complete forever.
When things are going well, something will go wrong.
When things just cant get worse, they will. When things
appear to be going better, you have overlooked
something.
If project content is allowed to change freely, the rate of
change will exceed the rate of progress.
Project teams detest progress reporting because it
manifests their lack of progress.
13
Trade-offs in Project Management
Performance
Cost
Time
14
Activity Networks
Which tasks have to be completed first?
Which tasks rely on the results of other
tasks?
Which tasks generate results for
subsequent tasks
15
Work Breakdown Structure
(WBS)
A hierarchical decomposition of all the
tasks to be accomplished for a project to
be completed.

16
A WBS is Not !!!
An Organizational chart
Not a flow chart showing temporal or
logical relationships among tasks
A listing of skills required to complete the
task
17
Why do projects fail?
Reliance on project management software
rather than an understanding of project
management principles
Communication problems
Failure to adequately adjust for changes
during the course of the project
18
Project Team and Its Required Area of Expertise
Project Management
1. Standard
Regulation
A. Interpersonal
Skills
19
Standard:
A document established by the consensus
and approved by organized body.
Requirement imposed by the Government
bodies.
Regulation:
20
Under Standing Project Environment
Cultural & Social Environment:
The teams need to understand how the project
affect the people and how the people affect the
project.

21
Under Standing Project Environment
(Contd)
Physical Environment:
Project people norms
If the project will affect its physical surroundings, some team
members should be knowledgeable about the local ecology and
physical geography that could affect the project or be affected by the
project.

22
General Management Knowledge & Skill
Financial Management & Accounting
Purchasing & Procurement
Sales & Marketing
Contracts & Commercial Laws
Logistics & Supply Chain

23
Interpersonal Skills
Communication
Leadership
Motivation
Negotiation & Conflict Management
Problem Solving
MBO

24
Cost Estimation
Cost Budgeting
Cost Controlling
Project Cost Management
25
Project Cost Management
Project Cost Management includes the
processes involved in planning,
estimating, budgeting, and controlling
costs so that the project can be completed
within the approved budget.
26
Life Cycle Costing
Cost Management should also consider the
effect of project decisions on the cost of
using, maintaining and supporting the
product, services or results. Life Cycle
Costing should improve decision making
and is used to reduce cost and execution
time and to improve the quality and
performance of the project deliverable.
27
Accounting Terminologies
Opportunity Cost
Sunk Cost
Direct vs Indirect Project Cost
Variable and Fixed Project Cost
Controllable and Non-Controllable Project Cost
Depreciation
28
Cost Management Plan
Process Description
Reporting Formats
Precision Levels
Units of Measure
Organizational Procedures Links Control Thresholds
Earned Value Rules
Cost Management Plan
29
Cost Estimating
Developing an approximation of the costs of
the resources needed to complete the
project activities
30
Cost Estimating (Contd)
Input Tools & Techniques Output
1. Enterprise Environmental
factors
2. Organizational Process
Assets
3. Project Scope Statement
4. Work Breakdown
Structure
5. Project Management Plan
Schedule management
plan
Staffing management
plan
Risk register
1. Analogous estimating
2. Determine resource cost
rates
3. Bottom up estimating
4. Project Management
software
5. Vendor bid Analysis
6. Reserve Analysis
7. Cost of Quality
Activity cost estimates
31
Reserve Analysis
An analytical technique to determine the
essential features and relationships of
components in the project management
plan to establish a reserve for the
schedule duration, budget, estimated cost
or funds for a project.
32
Activity Cost Estimate
An activity cost estimate is a quantitative
assessment of the likely costs of the
resources required to complete schedule
activities.
This includes but not limited to labor, materials,
equipment, services, facilities, information
technology and special category such as an
inflation allowance or cost contingency reserve.
33
Cost Budgeting
Aggregating the estimated costs of
individual activities or work packages to
establish a cost baseline.
34
Cost Budgeting
Input Tools & Techniques Output
1. Preliminary Scope
Statement
2. Work break down structure
3. WBS dictionary
4. Activity cost estimates
5. Project Schedule
6. Resource Calendar
7. Contract
8. Cost Management Plan
1. Cost Aggregation
2. Reserve Analysis
3. Parametric
Estimating
4. Funding Limit
Reconciliation
1. Cost Baseline
2. Project Funding Requirement
3. Cost Management Plan (Up dates)
4. Requested Changes
35
Fund Limit Reconciliation
Large variations in the periodic expenditure of
funds are usually undesirable for organizational
operations. Therefore the expenditure of funds is
reconciled with the funding limits set by the
customer or performing organization on the
disbursement of the funds for the project.
36
Budget
The approval estimate for the project or any work breakdown
structure component or any schedule activity.
Cost Baseline
The cost base line is a time phased budget that is used as a
basis against which to measure, monitor and control overall
cost performance on the project. The cost baseline is the
component of the project management plan.
37
Project Funding Requirements
Funding requirements, total and periodic (e.g. annual
or quarterly) are derived from the cost baseline and
can be established to exceed. Usually by a margin
to allow for either early performance/progress or
cost overruns. The total funds required are those
included in the cost baseline plus the management
contingencies reserve account.
38
Cost Control
Influencing the factor that create cost
variances and controlling changes to the
project budget.
39
Cost Controls
Budget at Completion (The amount you
budgeted for the entire project)
Estimate at Completion (The amount that you
expect that the total project to cost)
Estimate to Complete (From the point on, how
much more we expect the project to cost to finish the
project)
Variance at Completion (How much over or
under budget we expect to have)
40
Project Risk Management
Project Risk Management includes the processes
concerned with conducting risk management planning,
identification, analysis, responses and monitoring and
control on a project.
The objective of the risk management is to increase the
probability and impact of positive events and decrease
the probability and impact of events adverse to project
objectives.
41
Risk
An uncertain event or condition that if it occurs has a
positive or negative effect on a projects objectives.
Triggers
Indications that a risk has occurred or is about o occur.
Triggers may be discovered in the risk identifications
process and watched in the risk monitoring and control
process. Triggers are some time called risk symptoms or
warning signs.
42
Project Risk Management
Risk Management Planning
Risk Identification
Quantitative Risk Analysis
Qualitative Risk Analysis
Risk Response Planning
Risk Monitoring & Controls

43
Project Procurement Management
Project Procurement Management Includes the
process to purchase or acquire the products,
services, or results needed from outside the
project team to perform the work.
44
Project Procurement Management
1. Plan
Purchase or
Acquisition
2. Make or Buy
3. Plan
Contracting
1. Float
request/
Tendering
2. Receive Bid
or Quote
3. Selection of
vendor
4. Contract
awarding
1. Contract
Administratio
n
2. Managing
Interface
among
various
providers
1. Contract
Closure
2. Post
procurement
Audit
3. Post
performance
evaluation
Project Procurement
Management
Planning Executing Monitoring &
Controlling
Closing
45
Plan Purchase or Acquisition
Determination of What to purchase, why and
when to purchase.
Make or Buy Analysis
It is a general management technique that can be used to
determine whether a particular product or service can be
produced by the project team or buy from the market.
46
Contract
A contract is normally binding agreement that obliges the
seller to provide the specified product and obligates the
buyer to pay for it.
Contract Fundamentals
A contract may be written or oral and is both a legal
document and a relationship between the parties
47
Type of Contract
Fixed Price of
Lump-Sum Contracts
Cost Reimbursable
Contracts
Time & Material
Contract

Contracts
48
Type of Contracts
Fixed Price/ Lump sum Contracts
Cost Reimbursable Contracts
Time & Material Contract
49
Fixed Price or Lump-Sum Contract
A type of contract involving a fixed total price for a well defined
product.
Fixed price contracts may also include incentives for meeting or
exceeding project objective such as schedule targets.
Cost Reimbursable Contracts
A type of contract involving payment by the buyer to the seller for the
sellers actual cost plus a fee typically representing sellers profit.
These type of contracts often includes some incentive clauses.
Time & Material Contract

A type of contract that is a hybrid contractual agreement containing
aspects of both i.e. Fixed price & Cost Reimbursable Contracts
50
Contract Type Selection
What Contract type might best suit the project?

Degree of Cost and Schedule Risk
How Complex is the requirement
Cost & Price Analysis
Urgency of the Deliverables
Frequency of Changes
Degree of definition of the statement of the work
51
Project Evaluation and Review Technique
(PERT) /
Critical Path Method (CPM)
Graphical display of interrelationships among
activities and the order of project activities

Allows estimates of completion time and cost
52
PERT / CPM
1. List activities and duration; develop WBS.
2. Order activities through use of Gannt chart.
3. Develop immediate precedent activities.
4. Draw project graph.
5. Calculate early start / early finish.
6. Calculate late start / late finish.
7. Determine critical path using slack time.
8. Crash project
53
Example
(Build a new mountain bike)
A major manufacturer of bicycles is planning to enter the
high-end market for mountain bikes by designing a new,
state-of-the-art mountain bike. The bicycle is to be a
completely new design, and management has directed
the design team to incorporate the latest technology in
every facet of the productframe, gears, wheels,
brakes, and so onyet keep the price of the bike within
$100 of leading competitors prices.
Activities & Duration Times
Activity
Expected Duration
(months)
A Do preliminary market analysis 1.0
B Develop preliminary market designs 3.0
C Do preliminary manufacturing study 1.0
D Evaluate and select best product design 1.0
E Develop detailed marketing plans 1.0
F Design manufacturing process 3.0
G Develop detailed product design 3.0
H Build and test prototype 1.0
I Finalize product design 1.5
J Order components 1.0
K Order production equipment 3.0
L Install production equipment 2.0
55
Work Breakdown Structure (WBS)
The set of independent tasks or work packages
that constitute a project

Hierarchy of sub-projects that make of the total
project

Useful for controlling costs, time, and resource
allocation
56
Partial Work Breakdown Structure
(for step G)
Mountain
Bike
Wheel
Systems
Gearing
Systems
Frame
Systems
Seat Systems
Brake
Systems
Hubs
Rims &
Spokes
Gears &
Chains
Derailleur &
Shifters
Fork System
Frame
Structure
Bearing
Systems
Tubing
Structure
Joining
Systems
Tubing
Cover &
Padding
Seat Structure
Calipers
Levers &
Cables
57
Gantt Chart
(for mountain bike development project)
A Do preliminary market analysis
B Develop preliminary market designs
C Do preliminary manufacturing study
D Evaluate and select best product design
E Develop detailed marketing plans
F Design manufacturing process
G Develop detailed product design
H Build and test prototype
I Finalize product design
J Order components
K Order production equipment
L Install production equipment
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Time in Months
Precedence Relationships
Activity
Immediate
Predecessor
A Do preliminary market analysis --
B Develop preliminary market designs A
C Do preliminary manufacturing study A
D Evaluate and select best product design B, C
E Develop detailed marketing plans D
F Design manufacturing process D
G Develop detailed product design D
H Build and test prototype G
I Finalize product design F, H
J Order components I
K Order production equipment I
L Install production equipment E, J, K
59
A
C
B
D
ES EF
LS LF
(Duration)
ES = Early Start
EF = Early Finish
LS = Late Start
LF = Late Finish
PERT / CPM Chart Structure
A
C
B
D
E
F
G H
I J
K
L
PERT / CPM Chart
A(1)
C(1)
B(3)
D(1)
E(1)
F(3)
G(3) H(1)
I(1.5) J(1)
K(3)
L(2)
0 1
1 4
1 2
5 6
5 8
5 8
9 10.5
8 9
10.5 11.5
10.5 13.5
13.5 15.5
4?
Or
2?
4 5
Early Start / Early Finish
(start with A)

0 1
1 4
1 2
5 6
5 8
5 8
9 10.5
8 9
10.5 11.5
10.5 13.5
13.5 15.5
4 5
Late Start / Late Finish
(start with L)
A(1)
C(1)
B(3)
D(1)
E(1)
F(3)
G(3) H(1)
I(1.5) J(1)
K(3)
L(2)
13.5 15.5
12.5 13.5
10.5 13.5
9 10.5
8 9 5 8
6 9
12.5 13.5
4 5
3 4
1 4
0 1
63
Calculating Slack Time to Find the Critical Path
Slack time tells us how long a particular activity can be
delayed without delaying the entire project

Assumption: All preceding activities completed as early
as possible

Slack = LS ES or Slack = LF-EF

64
Calculating Slack Time
Activity Duration ES EF LS LF Slack
A 1 0 1 0 1 0
B 3 1 4 1 4 0
C 1 1 2 3 4 2
D 1 4 5 4 5 0
E 1 5 6 12.5 13.5 7.5
F 3 5 8 6 9 1
G 3 5 8 5 8 0
H 1 8 9 8 9 0
I 1.5 9 10.5 9 10.5 0
J 1 10.5 11.5 12.5 13.5 2
K 3 10.5 13.5 10.5 13.5 0
L 2 13.5 15.5 13.5 15.5 0
The critical path lies through those activities with no slack time.
Critical Path
1 2
5 6
5 8 10.5 11.5
C(1)
E(1)
F(3) J(1)
12.5 13.5 6 9
12.5 13.5
3 4
9 10.5
0 1
1 4
5 8
9 10.5
8 9 10.5 13.5
13.5 15.5
4 5
A(1)
B(3)
D(1)
G(3) H(1)
I(1.5)
K(3)
L(2)
13.5 15.5
10.5 13.5 8 9 5 8
4 5
1 4
0 1
66
Project Crashing
(Accounting for the Time/ Cost Trade-off)
What if the project cant be completed within the
targeted time?

Can the project be shortened by adding more
resources?
If so, do the necessary resources exist?
67
Project Crashing (Crunching)
1. Determine if critical path (CP) falls within
targeted time. If yes, stop.
2. If no, compute crash cost per time period for
each activity.
3. Select activity on CP with lowest crash cost
and crash.
4. Re-compute CP and check to see if within
targeted time.
5. Repeat as necessary.
68
Critical Path Enumeration
A-B-D-E-L 8
A-B-D-F-I-J-L 12.5
A-B-D-F-I-K-L 14.5
A-B-D-G-H-I-J-L 13.5
A-B-D-G-H-I-K-L 15.5
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 11.5
A-C-D-G-H-I-K-L 13.5

69
Critical Path Crashing
A-B-D-E-L 8
A-B-D-F-I-J-L 12.5
A-B-D-F-I-K-L 14.5
A-B-D-G-H-I-J-L 13.5 13
A-B-D-G-H-I-K-L 15.5 15
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 11.5 11
A-C-D-G-H-I-K-L 13.5 13

Spent $20 to shorten
0.5 months
70
A-B-D-E-L 8
A-B-D-F-I-J-L 12.5
A-B-D-F-I-K-L 14.5
A-B-D-G-H-I-J-L 13 11
A-B-D-G-H-I-K-L 15 13
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 11 9
A-C-D-G-H-I-K-L 13 11

New CP
(1)
(2)
(2)
(2)
(3)
71
A-B-D-E-L 8 6
A-B-D-F-I-J-L 12.5 10.5
A-B-D-F-I-K-L 14.5 12.5
A-B-D-G-H-I-J-L 11 9
A-B-D-G-H-I-K-L 11
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5
A-C-D-F-I-K-L 12.5
A-C-D-G-H-I-J-L 9
A-C-D-G-H-I-K-L 11

B and I can both be crashed for
$60pick one
(I picked B)
72
Critical Path crashing
A-B-D-E-L 6
A-B-D-F-I-J-L 10.5 9.5
A-B-D-F-I-K-L 12.5 11.5
A-B-D-G-H-I-J-L 9 8
A-B-D-G-H-I-K-L 11 10
A-C-D-E-L 6
A-C-D-F-I-J-L 10.5 9.5
A-C-D-F-I-K-L 12.5 11.5
A-C-D-G-H-I-J-L 9 8
A-C-D-G-H-I-K-L 11 10

73
Treating Time as Probabilistic
What if the time estimates for completion of
project activities arent certain?

optimistic time
most likely time
pessimistic time
74
Using Time Estimates
1. Calculate ET = Expected Time for each
activity.
2. Use ET to determine CP and, if necessary, to
crash the project.
3. Determine variance of expected time for each
activity.
4. Calculate Z and determine probability project
will be completed by a desired time.

75
Variable definitions
a = optimistic time for activity
m = most likely time for activity
b = pessimistic time for activity
ET = expected time of each activity
o
2
= variance of ET for each activity
T
E
= expected project completion time (CP time)
D = desired project completion time
Eo
CP
2
= sum of variances along CP
1. Calculate ET for each activity

2. Calculate T
E
= E(ETs) along CP
3. Determine variances

4. Calculate Z (use App. E (p. 742) or NORMSDIST in Excel)

a 4m b
ET
6
+ +
=
2
2
b a
6
| |
o =
|
\ .
E
2
CP
D T
Z

=
o
77
Optimistic Most Likely Pessimistic Expected Time Variance of ET
Activity a m b ET o2
A 0.5 1 1.5 1 0.028
B 2.5 3 3.5 3 0.028
C 0.5 0.75 1 0.75 0.007
D 0.5 1 1.5 1 0.028
E 0.5 0.75 1 0.75 0.007
F 2 2.5 3 2.5 0.028
G 2 4 6 4 0.444
H 1 2 3 2 0.111
I 0.5 1.5 2.5 1.5 0.111
J 0.5 1 1.5 1 0.028
K 1 2 3 2 0.111
L 1 1.5 2 1.5 0.028
A(1)
C(.75)
B(3)
D(1)
E(.75)
F(2.5)
G(4) H(2)
I(1.5) J(1)
K(2)
L(1.5)
0 1
1 4
1 1.75
5 5.75
5 7.5
5 9
11 12.5
9 11
12.5 13.5
12.5 14.5
14.5 16
4 5
Early Start / Early Finish
Using ET

0 1
1 4
3.25 4
4 5
13.75 14.5
8.5 11
5 9
11 12.5
9 11 12.5 14.5
13.5 14.5
14.5 16
Critical Path
Activity ET o2 ES EF LS LF Slack
A 1 0.028 0 1 0 1 0
B 3 0.028 1 4 1 4 0
C 0.75 0.007 1 1.75 3.25 4 2.25
D 1 0.028 4 5 4 5 0
E 0.75 0.007 5 5.75 13.75 14.5 8.75
F 2.5 0.028 5 7.5 8.5 11 3.5
G 4 0.444 5 9 5 9 0
H 2 0.111 9 11 9 11 0
I 1.5 0.111 11 12.5 11 12.5 0
J 1 0.028 12.5 13.5 13.5 14.5 1
K 2 0.111 12.5 14.5 12.5 14.5 0
L 1.5 0.028 14.5 16 14.5 16 0
Critical Path: A-B-D-G-H-I-K-L
T
E
= 1+3+1+4+2+1.5+2+1.5 = 16
o
CP
= .028+.028+.028+.444+.111+.111+.111+.028 = .889
Note: individual variances contain rounding errorsee imbedded Excel worksheet above,
double click and scroll down
80
E
2
CP
T 16
.889
D 12
12 16
Z 4.24 ~ 4.0
.889
=
o =
=
= =
Using Appendix E, p. 742,
probability project will be completed
in 12 months is .00003 or .003%
Using NORMSDIST(4.24) in Excel,
probability project will be completed
in 12 months is .0011%
See calculations in imbedded Excel
file on previous slide.
81
The End
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Project Management

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Project Management A Managerial Prospective

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