Topic 5: Project Management

Introduction

• All organizations frequently engage in large, complex projects that require many different
steps or operations to be performed in order to complete the project.
• Examples are construction of a building (airport, skyscraper, dam), a highway,
manufacturing facility (large items like ships, generators), introduction of new product (steps
involved are R&D, product testing, market research and package design)
• The first step in planning and scheduling a project is to develop the work breakdown
structure.
• This involves identifying the activities that must be performed in the project.
• The time, cost, resource requirements, predecessor activities and person(s) responsible are
identified.

Project Management Models

Two popular quantitative analysis techniques that help managers plan, schedule, monitor and
control large and complex projects are:

a) Project Evaluation and Review Technique (PERT)

b) Critical Path Method (CPM)

Questions answered by PERT/ CPM

When will the entire project be completed?

What are the critical activities in the project?
Which are the non – critical activities?
How long each activity in the project can be delayed without delaying the completion of the
project.
What is the probability that the project will be completed by a specific date?

Steps of PERT and CPM

1. Define the project and all of its significant activities.

2. Develop the relationships among the activities. Decide which activities must precede others.
3. Draw the network connecting all of the activities.
4. Assign time estimates to each activity.

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Example 5.1: Activities in building a house

Activity Description Predecessor Duration (months)

activities
A Design house and obtain - 3
financing
B Lay foundation A 2
C Order and receive materials A 1
D Build house B, C 3
E Select paint B, C 1
F Select carpet E 1
G Finishing work D, F 1

Determine the critical path and project completion time.

Step 1 and 2:

Activity Description Predecessor Duration (months)

activities
A Design house and obtain - 3
financing
B Lay foundation A 2
C Order and receive materials A 1
D Build house B, C 3
E Select paint B, C 1
F Select carpet E 1
G Finishing work D, F 1

Step 3 and 4:

Network Diagram (Activities in building a house)

B D G Finish
2 3 1
A
Start 3
C E F
1 1 1

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Finding Critical Path

To find the critical path, we need to determine the following quantities for each activity in the
network.

Earliest start time (ES)

• The earliest time an activity can begin without violation of immediate predecessors
requirements.

Earliest finish time (EF)

• The earliest time an activity can end.

Latest start time (LS)

• The latest time an activity can begin without delaying the entire project.

Latest finish time (LF)

• The latest time an activity can end without delaying the entire project.

Node to represent the times

Activity ES EF
Expected activity time (t) LS LF

Earliest Start (ES) and Earliest Finish Times (EF)

The earliest times are found by beginning at the start of the project and making a forward pass
through the network.

B 3 5 D 5 8 G 8 9 Finish
2 3 1
A 0 3
Start 3
C 3 4 E 5 6 F 6 7
1 1 1

• EF = ES + expected activity time (t)

• ES = largest of the EF of immediate predecessors

Latest Start (LS) and Latest Finish Times (LF)

The latest times are found by beginning at the finish of the project and making a backward pass
through the network.

B 3 5 D 5 8 G 8 9 Finish
2 3 5 3 5 8 1 8 9
A 0 3
Start 3 0 3
C 3 4 E 5 6 F 6 7
1 4 5 1 6 7 1 7 8

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• LS = LF – expected activity time (t)
• LF = smallest of the LS of the following activities

*Project completion time is within 9 months.

Critical path

• Is the longest path through the network.

• For those activities on the critical path, ES = LS and EF = LF.
• A delay for any activity that is on the critical path will delay the completion of the entire
project.

Slack time

• Is the amount of time that an activity can be delayed without delaying the project.
• ¹ ¹
Slack time exist for those activities not on the critical path, ES LS and EF LF.
• Slack time for critical activities = 0.
• Slack, S, is computed using either of the following formula:
or
S = LS – ES S = LF – EF

Slack time On Critical

Activity ES EF LS LF Path?
A 0 3 0 3 0 Yes
B 3 5 3 5 0 Yes
C 3 4 4 5 1 No
D 5 8 5 8 0 Yes
E 5 6 6 7 1 No
F 6 7 7 8 1 No
G 8 9 8 9 0 Yes

Interpretation of slack time

• Activities C, E and F have a slack time of 1, this means activity C, E and F can be delayed
up to 1 month without delaying the project’s expected completion time of 9 months.
• Activities A, B, D and G have no slack time. This means none of them can be delayed
without delaying the entire project.

*Critical path A-B-D-G

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Exercises

5.1.1 A firm is going to renovate its office. The activities for the renovation are listed in the
table below:

Activities Immediate Predecessors Duration (days)

A - 5
B - 1
C A 2
D B 4
E B,C 6
F E,D 1
G C 2
H G 3
I F,H 2
J H 3

a) Draw the network to represent this situation.

b) Determine the critical path and expected completion time for this project.
c) If the renovation is going to start on the 2nd August, when is the earliest time to complete
the renovation?
d) If the duration of activity C is extended by one day and activity G by 3 days, what will be
the effect on the completion time of the project?

5.1.2 The marketing department of Good Skill Company wants to carry out a survey on a new
product. The survey consist of the following activities:

Activities Immediate Predecessors Duration (days)

A: Design questionnaire - 5
B: Determine sampling - 12
frame and sampling
design
C: Pilot study and review A 5
questionnaire
D: Hire personnel B 3
E: Train personnel A,D 2
F: Assign personnel B 6
G: Conduct survey C,E,F 14
H: Analysis and report G 20
writing

a) Draw a network diagram for the survey process.

b) Determine the critical path and the project completion time.
c) Determine the earliest completion time for activity C.
d) Find the latest start time for activity D.
e) If activity D were delayed by 2 weeks, when would the project be completed?

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Probabilistic Activity Times

• In the project network presented in the previous section, all of the activity time estimates
were single values.

• By using only a single activity time estimate, we are assuming that activity times are known
with certainty.

• In reality, however it is rare that activity time estimates can be made with certainty.
• The next step in the PERT procedure is to assign estimates of the time require to complete
each activity.

• Three time estimates for each activity:

a) Optimistic time estimate (a) – The minimum activity time if everything progresses
ideally.

b) Most likely time estimate (m) – The most probable activity time under normal
conditions.

c) Pessimistic time estimate (b) – The maximum activity time if significant delays are
encountered.

• Time estimates follow the beta probability distribution (a distribution that is continuous and
can take various shapes).

• These three time estimates can subsequently be used to estimate the mean and variance of
a beta distribution.

• The mean and variance are computed are as follows:

a + 4m + b
mean(exp ected time ), t =
6

2
æb - aö
var iance, v = ç ÷
è 6 ø

• The expected project completion time ( µ ) is the sum of the expected time of the critical path
activities.

• The project variance ( s 2 ) is the sum of the variance of the critical path activities.

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Example 5.2:

Activity Immediate Time estimates (week)

Predecessors a + 4m + b 2
a m b t= æb-aö
6 v=ç ÷
è 6 ø
A - 1 2 3 2 0.11
B - 2 3 4 3 0.11
C A 1 2 3 2 0.11
D A,B 2 4 6 4 0.44
E C 1 4 7 4 1
F C 1 2 9 3 1.78
G D,E 3 4 11 5 1.78
H F,G 1 2 3 2 0.11

From the above project, determine the critical path and project completion time.

F 4 7
3 10 13

A 0 2 C 2 4 E 4 8 H 13 15 Finish
2 0 2 2 2 4 4 4 8 2 13 15

Start
B 0 3 D 3 7 G 8 13
3 1 4 4 4 8 5 8 13

Expected project completion time is within 15 weeks = µ

Critical path A-C-E-G-H
Project variance = 0.11 + 0.11 +1 + 1.78 + 0.11 = 3.11 weeks2 = s 2
Project standard deviation = 3.11 = 1.76 weeks = s

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Exercise 5.2.1

Zain Electric (ZE) is a company that installs wiring and electrical fixtures in residential
construction. Zain has been concerned with the amount of time that it takes to complete wiring
jobs. Some of his workers are very unreliable. A list of activities and their optimistic, most likely,
and pessimistic times in days are given in the table below.

Activity Immediate a m b
Predecessors
A - 3 6 8
B - 2 4 4
C - 1 2 3
D C 6 7 8
E B,D 2 4 6
F A,E 6 10 14
G A,E 1 2 4
H F 3 6 9
I G 10 11 12
J C 14 16 20
K H,I 2 8 10

a) Determine the expected completion time and variance for each activity.
b) Determine the total project completion time and the critical path for installing
electrical wiring and equipment in residential houses.

Probability of Project Completion

• To determine the probability of project completion time by specific date.

• Using normal distribution, probabilities can be determined by computing the number of
standard deviations (Z) a value is from the mean.
• The value , Z, is computed using the following formula:
x-µ
Z=
s

where, x = due date

µ = expected project completion time
s = project standard deviation

• This value is then used to find the corresponding probability in Normal Table.

• If Z < 0, the probability will be less than 0.5.

• If Z > 0, the probability will be greater than 0.5.

• If Z = 0, the probability will be 0.5.

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From Example 5.2,

Total project completion times follow a normal distribution.

This normal curve implies that there is a 50% chance that the project completion time will be
less than 15 weeks and a 50% chance that it will exceed 15 weeks.

Example 5.3

What is the probability that the project will be finished on or before 16 weeks?

x - µ 16 - 15
Z= = = 0.57
s 1.76

- Z value of 0.57 corresponds to probability of 0.2843 in Normal Table, P(Z ³ z).

- Probability of completing project on or before 16 weeks: (1 – 0.2843) = 0.7157 = 71.57%

- P(x £ 16) = P( Z £ 0.57)

= 1 - P( Z ³ 0.57)
= 1 - 0.2843
= 0.7157
= 71.57%

Exercise 5.3.1

What is the probability that the project will be finished on or before:

a) 20 weeks
b) 15 weeks
c) 25 weeks
d) 14 weeks

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Problems

5.1 Kancil Machinery (KM) specializes in developing weed-harvesting equipment that is used
to clear small lakes of weeds. Rashid, president of KM, is convinced that harvesting weeds is far
better than using chemicals to kill weeds. Rashid is contemplating the construction of a machine
that would harvest weeds on narrow rivers and waterways. The activities and their times that are
necessary to build one of these experimental weed-harvesting machines are listed in the
accompanying table.

Activities Immediate Time (weeks)

Predecessors
A - 6
B - 5
C A 3
D A 2
E B 4
F B 6
G C,E 10
H D,F 7

a) Construct a network for these activities and determine the critical path and total project
completion time.
b) If the project variance equal to 2.65, calculate the probability that the project can be
completed in:
• 17 weeks
• 19 weeks
• 21 weeks

5.2 A manager of a company plans to execute a project. The project activities and the
estimated time shown in table below:

Activities Immediate Time (weeks)

Predecessors Optimistic Most likely Pessimistic
A - 1 2 3
B - 1 3 11
C A 1 1 1
D B 2 3 4
E A 2 5 14
F D 2 2 2
G D 0.5 1 1.5
H C 2 5 8
I E,F,G 1 2 9

a) Construct a network for the project.

b) Determine the critical path and expected completion time of the project.
c) What is the probability that the project can be completed within 17 weeks?

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5.3 The Bagus Company has identified the following activities that must be completed before
the successful launching of a new product:

Activities Immediate Time (days)

Predecessors Optimistic Most likely Pessimistic
A - 2 8 14
B A 3 12 21
C A 2 5 8
D B 4 5 12
E B 1 3 17
F C 2 3 10
G C 3 9 15
H D 7 8 9
I E 3 11 13
J E 7 10 13
K F,I 3 4 5
L G,J 1 2 9
M H,K 1 5.5 7

a) Find the estimated time for each activity.

b) Draw a network diagram to represent the above project. State the critical path and the
expected completion time of the project.
c) Calculate the probability that the new product can be launched within 50 days.

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5.4 Canon Sdn. Bhd. has recently developed a new color scanner and is planning to launch
it in the next Education Exhibition at PWTC. In order to have a successful launch, the marketing
executive has listed all the relevant activities, associated time and cost for each activity.

Activity Predecessor Duration (week) Cost

Activity Optimistic Most Pessimistic (RM’000)
probable
A - 1 2 3 1
B A 2 3 4 3
C A 1 2 9 3
D A 2 3 4 12
E B 1 2 3 4
F D 1 2 9 6
G D 1 2 3 2
H G 2 3 4 12
I C,E,F 1 2 3 9
J G,I 1 2 3 4
K J,H 1 2 2 3
L J,H 1 3 5 3
M L 1 2 3 16

You are required to:

a) Calculate the expected time and variance for each activity.

b) Construct a network for the above activities.
c) Determine critical path and duration of the project.
d) Determine the total cost and the variance in the project completion time.
e) Calculate the probability that the project can be completed within 17 weeks.

5.5 A project has an expected completion time of 38 weeks and a standard deviation of 7
weeks. It is assumed that the project completion time is normally distributed. What is the
probability of finishing the project in 42 weeks or less?

5.6 In a particular project, it is known that the expected project duration is 20 weeks and the
variance of project duration is 2.76 weeks2. Find the probability that the project will complete in
21 weeks or less.

5.7 The expected completion time of a project is 36 days. If the probability that the project
can be completed within 38 days is 0.7939, find the variance.

5.8 A project has an expected completion time of 50 weeks and a standard deviation of 7
weeks. It is assumed that the project completion time is normally distributed.

a) What is the probability of finishing the project in 44 weeks or less?

b) The due date for the project is set so that there is a 95% chance that the project
will be completed by this date. What is the due date?

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STANDARD NORMAL TABLE

Normal Curve Areas : P( Z ³ z )

[Standard Normal Probability in right-hand tail]

Second decimal place of z

.00 .01 .02 .03 .04 .05 .06 .07 .08 .09

0.0 .5000 .4960 .4920 .4880 .4840 .4801 .4761 .4721 .4681 .4641
0.1 .4602 .4562 .4522 .4483 .4443 .4404 .4364 .4325 .4286 .4247
0.2 .4207 .4168 .4129 .4090 .4052 .4013 .3974 .3936 .3897 .3859
0.3 .3821 .3783 .3745 .3707 .3669 .3632 .3594 .3557 .3520 .3483
0.4 .3446 .3409 .3372 .3336 .3300 .3264 .3228 .3192 .3156 .3121

0.5 .3085 .3050 .3015 .2981 .2946 .2912 .2877 .2843 .2810 .2776
0.6 .2743 .2709 .2676 .2643 .2611 .2578 .2546 .2514 .2483 .2451
0.7 .2420 .2389 .2358 .2327 .2296 .2266 .2236 .2206 .2177 .2148
0.8 .2119 .2090 .2061 .2033 .2005 .1977 .1949 .1922 .1894 .1867
0.9 .1841 .1814 .1788 .1762 .1736 .1711 .1685 .1660 .1635 .1611

1.0 .1587 .1562 .1539 .1515 .1492 .1469 .1446 .1423 .1401 .1379
1.1 .1357 .1335 .1314 .1292 .1271 .1251 .1230 .1210 .1190 .1170
1.2 .1151 .1131 .1112 .1093 .1075 .1056 .1038 .1020 .1003 .0985
1.3 .0968 .0951 .0934 .0918 .0901 .0885 .0869 .0853 .0838 .0823
1.4 .0808 .0793 .0778 .0764 .0749 .0735 .0722 .0708 .0694 .0681

1.5 .0668 .0655 .0643 .0630 .0618 .0606 .0594 .0582 .0571 .0559
1.6 .0548 .0537 .0526 .0516 .0505 .0495 .0485 .0475 .0465 .0455
1.7 .0446 .0436 .0427 .0418 .0409 .0401 .0392 .0384 .0375 .0367
1.8 .0359 .0352 .0344 .0336 .0329 .0322 .0314 .0307 .0301 .0294
1.9 .0287 .0281 .0274 .0268 .0262 .0256 .0250 .0244 .0239 .0233

2.0 .0228 .0222 .0217 .0212 .0207 .0202 .0197 .0192 .0188 .0183
2.1 .0179 .0174 .0170 .0166 .0162 .0158 .0154 .0150 .0146 .0143
2.2 .0139 .0136 .0132 .0129 .0125 .0122 .0119 .0116 .0113 .0110
2.3 .0107 .0104 .0102 .0099 .0096 .0094 .0091 .0089 .0087 .0084
2.4 .0082 .0080 .0078 .0075 .0073 .0071 .0069 .0068 .0066 .0064

2.5 .0062 .0060 .0059 .0057 .0055 .0054 .0052 .0051 .0049 .0048
2.6 .0047 .0045 .0044 .0043 .0041 .0040 .0039 .0038 .0037 .0036
2.7 .0035 .0034 .0033 .0032 .0031 .0030 .0029 .0028 .0027 .0026
2.8 .0026 .0025 .0024 .0023 .0023 .0022 .0021 .0021 .0020 .0019
2.9 .0019 .0018 .0017 .0017 .0016 .0016 .0015 .0015 .0014 .0014

3.0 .00135
3.5 .000 233
4.0 .000 031 7
4.5 .000 003 40
5.0 .000 000 287

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