REVISION CLASS FOR MIDTERM

WHAT IS A PROJECT
WHAT IS SCOPE
WHAT IS WBS
WHAT IS PROJECT ESTIMATING

What is a Project?
Project Defined
A complex, nonroutine, one-time effort limited by time, budget,
resources, and performance specifications designed to meet
customer needs.

Major Characteristics of a Project

Has an established objective.
Has a defined life span with a beginning and an end.
Requires across-the-organizational participation.
Involves doing something never been done before.
Has specific time, cost, and performance requirements.

Program versus Project

Program Defined
A series of coordinated, related, multiple projects that continue
over an extended time and are intended to achieve a goal.
A higher level group of projects targeted
at a common goal.
Examples:
Project:

completion of a required course

in project management.
Program: completion of all courses required
for a business major.

Major Functions of Portfolio Management: The

Science and Art of Project Management
Oversee project selection.
Monitor aggregate resource levels and skills.
Encourage use of best practices.
Balance projects in the portfolio in order to represent a risk level
appropriate to the organization.
Improve communication among all stakeholders.
Create a total organization perspective that goes beyond silo
thinking.
Improve overall management of projects over time.

Comparison of Routine Work with Projects

Routine, Repetitive Work

Projects

Taking class notes

Writing a term paper

Daily entering sales receipts into the

accounting ledger

Setting up a sales kiosk for a professional

accounting meeting

Responding to a supply-chain request

Developing a supply-chain information

system

Practicing scales on the piano

Writing a new piano piece

Routine manufacture of an Apple iPod

Designing an iPod that is approximately 2

X 4 inches, interfaces with PC, and
stores 10,000 songs

Attaching tags on a manufactured

product

Wire-tag projects for GE and

Wal-Mart

Defining the Project Scope

Project Scope
A definition of the end result or mission of the projecta
product or service for the client/customerin specific,
tangible, and measurable terms.

Purpose of the Scope Statement

To clearly define the deliverable(s) for the end user.
To focus the project on successful completion
of its goals.
To be used by the project owner and participants
as a planning tool and for measuring project success.

Project Scope: Terms and Definitions

Scope Statements
Also called statements of work (SOW)

Project Charter
Can contain an expanded version of scope statement
A document authorizing the project manager to initiate and
lead the project.

Scope Creep
The tendency for the project scope to expand over time due
to changing requirements, specifications, and priorities.

Creating the Work Breakdown Structure

Work Breakdown Structure (WBS)
An hierarchical outline (map) that identifies the products and
work elements involved in a project.
Defines the relationship of the final deliverable
(the project) to its subdeliverables, and in turn,
their relationships to work packages.
Best suited for design and build projects that have tangible
outcomes rather than process-oriented projects.

How WBS Helps the Project Manager

WBS
Facilitates evaluation of cost, time, and technical
performance of the organization on a project.
Provides management with information appropriate
to each organizational level.
Helps in the development of the organization breakdown
structure (OBS). which assigns project responsibilities to
organizational units and individuals
Helps manage plan, schedule, and budget.
Defines communication channels and assists
in coordinating the various project elements.

Work Packages
A work package is the lowest level of the WBS.
It is output-oriented in that it:
1.

Defines work (what).

2.

Identifies time to complete a work package (how long).

3.

Identifies a time-phased budget to complete

a work package (cost).

4.

Identifies resources needed to complete

a work package (how much).

5.

Identifies a person responsible for units of work (who).

6.

Identifies monitoring points (milestones)

for measuring success.

Coding the WBS

WBS Coding System
Defines:
Levels and elements of the WBS
Organization elements
Work packages
Budget and cost information
Allows reports to be consolidated at any level in the
organization structure

Estimating Projects
Estimating
The process of forecasting or approximating the time and
cost of completing project deliverables.
The task of balancing expectations of stakeholders and need
for control while the project is implemented.

Types of Estimates
Top-down (macro) estimates: analogy, group consensus, or
mathematical relationships
Bottom-up (micro) estimates: estimates of elements
of the work breakdown structure

Factors Influencing the Quality of Estimates

Developing Work Package Estimates

Why Estimating Time and Cost Are Important

To support good decisions.
To schedule work.
To determine how long the project should take and its cost.
To determine whether the project is worth doing.
To develop cash flow needs.
To determine how well the project is progressing.
To develop time-phased budgets and establish the project
baseline.

Developing the Project Plan

The Project Network
A flow chart that graphically depicts the sequence,
interdependencies, and start and finish times of the project
job plan of activities that is the critical path through the
network.
Provides the basis for scheduling labor and equipment.
Enhances communication among project participants.
Provides an estimate of the projects duration.
Provides a basis for budgeting cash flow.
Identifies activities that are critical.
Highlights activities that are critical and can not be delayed.
Help managers get and stay on plan.

Constructing a Project Network

Terminology
Activity: an element of the project
that requires time.
Merge Activity: an activity that has
two or more preceding activities on
which it depends.
Parallel (Concurrent) Activities:
Activities that can occur
independently and, if desired, not at
the same time.

Constructing a Project Network (contd)

Terminology
Path: a sequence of connected, dependent activities.
Critical path: the longest path through the activity network
that allows for the completion of all project-related activities;
the shortest expected time in which the entire project can be
completed. Delays on the critical path will delay completion of
the entire project.

Constructing a Project Network (contd)

Terminology
Event: a point in time when an activity is started
or completed. It does not consume time.
Burst Activity: an activity that has more than one activity
immediately following it (more than one dependency arrow
flowing from it).

Two Approaches
Activity-on-Node (AON)
Uses a node to depict an activity.

Activity-on-Arrow (AOA)
Uses an arrow to depict an activity.

Basic Rules for Developing Project Networks

1. Networks typically flow from left to right.
2. An activity cannot begin until all preceding connected
activities are complete.
3. Arrows indicate precedence and flow
and can cross over each other.
4. Each activity must have a unique identify number that is
greater than any of its predecessor activities.
5. Looping is not allowed.
6. Conditional statements are not allowed.
7. Use common start and stop nodes.

Network Computation Process

Forward PassEarliest Times
How soon can the activity start? (early startES)
How soon can the activity finish? (early finishEF)
How soon can the project finish? (expected timeET)

Backward PassLatest Times

How late can the activity start? (late startLS)
How late can the activity finish? (late finishLF)
Which activities represent the critical path?
How long can activity be delayed? (slack or floatSL)

Forward Pass Computation

Add activity times along each path in the network (ES +
Duration = EF).
Carry the early finish (EF) to the next activity where it
becomes its early start (ES) unless
The next succeeding activity is a merge activity, in
which case the largest EF of all preceding activities is
selected.

Backward Pass Computation

Subtract activity times along each path in the network
(LF - Duration = LS).
Carry the late start (LS) to the next activity where it
becomes its late finish (LF) unless
The next succeeding activity is a burst activity, in which
case the smallest LF of all preceding activities is
selected.

Determining Free Slack (or Float)

Free Slack (or Float)
Is the amount of time an activity can be delayed after the start
of a longer parallel activity or activities.
Is how long an activity can exceed its early finish date without
affecting early start dates of any successor(s).
Allows flexibility in scheduling scarce resources.

Sensitivity
The likelihood the original critical path(s) will change once the
project is initiated.
The critical path is the network path(s) that has (have) the
least slack in common.

PRECEDENCE DIAGRAMING
Activity
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P

Predecessor
A
A
B
C
C
D
D
E, F, G
H
I
J, K, L
M
N, O

PRECEDENCE DIAGRAMING

CONSTRUCTING NETWORK DIAGRAM

I

D
A

J
E

S
T
A
R
T

K
B

G
C
H

F
I
N
I
S
H

PRECEDENCE DIAGRAMING

PERT CALCULATIONS 3 POINT ESTIMATE

Activity
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P

Predecessor
A
A
B
C
C
D
D
E, F, G
H
I
J, K, L
M
N, O

Optimistic
1
1
1
1
8
1
2
3
2
9
5
1
5
5
4
2

Most Likely
3
4
1
2
9
1
8
4
5
9
8
3
7
7
8
5

Pessimistic
5
7
1
3
16
7
8
11
14
15
11
5
15
9
12
8

3 Point
3
4
1
2
10
2
7
5
6
10
8
3
8
7
8
5

PRECEDENCE DIAGRAMING

ADDING THE ACTIVITY DURATION

I

D
2
A

10

10
S
T
A
R
T

G
7
C
1
H

F
I
N
I
S
H

PRECEDENCE DIAGRAMING

FORWARD PASS ADDING ES & EF

I

11

6
D

M 11 19

19 27

2
A 0 3

15

10
E

S
T
A
R
T

13

10

B 0 4

13 21

C 0 1
1

L
3

28 33

21 28

F
I
N
I
S
H

PRECEDENCE DIAGRAMING

BACKWARD PASS ADDING LS & LF

S
T
A
R
T

13

10

13

12

15

12 20

13 21

13 18

18 21

11

11 13

13

O 19 27

N 21 28

M 11 19

13 21

11

10 11 21

21 28

20 28

28 33

28 33
F
I
N
I
S
H

PRECEDENCE DIAGRAMING

CALCULATING CRITICAL PATH

S
T
A
R
T

A 0 3
3 0 3

11

M 11 19

O 19 27

12

15

12 20

20 28

P 28 33

10 11 21

E 3 13

5 28 33

10 3 13

K 13 21

N 21 28

8 13 21

7 21 28

11

11 13

ALL ACTIVITIES WITH LS - ES = 0, OR LF - EF = 0

13

ARE TERMED AS CRITICAL ACTIVITIES AND THE

THE PATHS CONNECTING THEM IS CRITICAL PATH

THE CRITICAL PATH IS SHOWN WITH RED BLOCKS

H

13 18

18 21

THE CRITICAL PATH - AEKNP = 33

F
I
N
I
S
H

PROJECT DURATION
Activity

Predecessor

Optimistic

Most Likely

Pessimistic

Expected

SD,

Variance, 2

0.667

0.444

1.000

1.000

0.000

0.000

0.333

0.111

16

10

1.333

1.778

1.000

1.000

1.000

1.000

11

1.333

1.778

14

2.000

4.000

15

10

1.000

1.000

E, F, G

11

1.000

1.000

0.667

0.444

15

1.667

2.778

J, K, L

0.667

0.444

12

1.333

1.778

N, O

1.000

1.000

Variance, 2 of Critical Path Activities (A-E-K-N-P)

Total Project duration is 33 2.160

2.160

Rationale for Reducing Project Duration

Time Is Money: Cost-Time Tradeoffs
Reducing the time of a critical activity usually incurs
additional direct costs.
Cost-time solutions focus on reducing (crashing) activities on the

critical path to shorten overall duration of the project.

Reasons for imposed project duration dates:

Time-to-market pressures
Unforeseen delays
Incentive contracts (bonuses for early completion)
Imposed deadlines and contract commitments
Overhead and public goodwill costs
Pressure to move resources to other projects

Options for Accelerating Project Completion

Resources Not
Constrained

Resources Constrained
Fast-tracking

Adding resources

Critical-chain

Outsourcing project work

Reducing project scope

Scheduling overtime

Compromise quality

Establishing a core project

team
Do it twicefast and then
correctly

Explanation of Project Costs

Project Indirect Costs
Costs that cannot be associated with any particular work
package or project activity.
Supervision, administration, consultants, and interest

Costs that vary (increase) with time.

Reducing project time directly reduces indirect costs.

Project Direct Costs

Normal costs that can be assigned directly to
a specific work package or project activity.
Labor, materials, equipment, and subcontractors

Crashing activities increases direct costs.

Reducing Project Duration

to Reduce Project Cost

PROJECT CRASHING
Activity

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P

TIME

COST

Normal

Crash

Normal

Crash

Max Reduction
in Time

3
4
1
2
10
2
7
5
6
10
8
3
8
7
8
5

2
2
0
1
7
1
4
3
3
8
4
2
5
3
6
3

200,000
400,000
100,000
200,000
500,000
100,000
400,000
500,000
300,000
1,000,000
800,000
300,000
600,000
700,000
400,000
500,000

300,000
700,000
100,000
300,000
650,000
150,000
700,000
800,000
450,000
1,500,000
1,200,000
500,000
750,000
1,000,000
500,000
700,000

1
2
1
1
3
1
3
2
3
2
4
1
3
4
2
2

Crash Cost Per

Unit of Time

100,000
150,000
0
100,000
50,000
50,000
100,000
150,000
50,000
250,000
100,000
200,000
50,000
75,000
50,000
100,000

PROJECT CRASHING

LENGTHS OF PATHS
PATH
A-D-I-M-O-P
A-D-J-N-P
A-E-K-N-P
B-F-K-N-P
C-G-K-N-P
C-H-L-N-P

TIME/LENGTH
32
27
33
26
23
21

PROJECT CRASHING

LENGTHS OF PATHS
ACTIVITY
TO CRASH

CRASH A-D-I-M-O-P
COST

A-D-J-N-P

A-E-K-N-P

B-F-K-N-P

C-G-K-N-P

C-H-L-N-P

32

27

33

26

23

21

100,000

31

26

32

26

23

21

50,000

31

26

31

26

23

21

100,000

31

26

30

25

22

21

75,000

31

25

29

24

21

20

100,000

30

24

28

23

20

19

PROJECT CRASHING

LENGTHS OF PATHS
CRASH
TOTAL
ACTIVITY
CRASHED
COST PER
CRASHED
TO CRASH
DURATION
UNIT TIME
COST

A
P

100,000
100,000

1
2

100,000
200,000

A-D-I-M-O-P A-D-J-N-P

A-E-K-N-P

32 27 33
31 26 32
29 24 30

B-F-K-N-P

C-G-K-N-P

C-H-L-N-P

26
26
24

23
23
22

21
21
19