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Chapter 14
Project Planning & Acquisition
D ecision M aking
P lanning
O rganizing
Leading
C ontro lling
M anagem ent Functions
R esearch
D esign
Production
Q uality
M arketing
Pro ject M anagem ent
M anaging Technology
T im e M anagem ent
E th ics
C areer
Personal Technology
Managing Engineering and Technology
Advanced Organizer
Chapter Objective
• Describe the main elements of a project
• Describe the management tools used in project planning (scheduling techniques)
• Steps in a project life cycle• Describe the different types of project
contracts
Characteristics of a Project
• A collection of tasks aimed toward a single set of objectives with finite life span and budget
• A one-of-a-kind activity that has definite starting and ending points
Essential Considerations
• Time (project schedule)• Cost (dollar & other resources)• Performance (extent the objectives
are achieved)
Project Proposal ProcessProject Initiating Phase
• Description of what is to be accomplished
• Proposal or estimate of time and cost
Keys of Successful Project Proposal
• Prepare in advance (pro-active)– Technical capabilities/skills/skill mix– Assessment of future technologies– Assessment of future markets
• Maintain new business groups– Preliminary bid decision
• Start early on developing a response
Proposal Preparation
Identify new businessopportunity
Prelim. biddecision
Assess and plan the new
business acquisition
Develop the new
opportunity
Biddecision
RFPDevelop
proposal & pricing
Negotiate contractWin
Proposal Preparation• Proposal manager• Proposal team (from functional dept.)• Kickoff meeting
Department ManagerSales Representative
Proposal Contents
• Management proposal• Technical proposal• Cost proposal
Project Planning
Elements:• Scope• Schedule• Budget
Concerns:• Quality of the
deliverables• Quality of the project
process
Project Planning -- Scope
• Statement of work (SOW)– Problem or opportunity– Goal– Objectives
• Outcome, Time frame, Measure, Action– Success criteria– Assumptions– Risk– Obstacles
Project Planning -- Schedule
• Work Breakdown Structure (WBS)– Level-by-level subdivision of work to be
performed in a contract– Common framework or outline– Complicated task is subdivided into
several smaller tasks– Process continued until task can no
longer be subdivided
Project Planning -- Schedule
Minor Fan Rig
WBS
Functional Organization• Manufacturing• Engineering
• Design• Mechanical• Analytical• Drafting
• Testing
Cost Account
Cost Account
Cost Account
Project Planning -- Schedule
• Cost account consists of 1 or more work packages
• Work package incorporates:– Tasks to be performed– Schedule– Budget– Work package manager
• Work packages provide the framework of project reporting and control
• Milestone Schedule–Key dates–May include entrance and exit
criteria for each milestone
Project Planning Tools – Milestone Schedule
Project Planning Tools –Milestone Schedule
Production release
Final design review
System test complete
Prototype complete
90% design release
Prelim. design review
Complete project plan
Project go-ahead
JMAMFJDNOSAJJMAMFJ
2008 2009Milestone
Project Planning Tools –Gantt Chart
• Popular tool for project scheduling• Graph with bar for representing the
time for each task• Provides visual display of project
schedule• Also shows slack for activities
– (amount of time activity can be delayed without delaying project)
Month
20 4 106 8
31 5 7 9
Activity
Design house &obtain financing
Lay foundation
Order & receivematerials
Build house
Select paint
Select carpet
Finish work
Project Planning Tools –Gantt Chart
Project Planning Tools – CPM/PERT
• Critical Path Method (CPM)– DuPont (1958)– deterministic task times– activity-on-node network construction
• Project Eval. & Review Technique (PERT)
– US Navy, Booz, Allen & Hamilton (1958)– multiple task time estimates– activity-on-arrow network construction
The Project Network
Network consists of branches & nodes
1 32
Branch
Node
Network Construction
• In AON, nodes represent activities & arrows show precedence relationships
• In AOA, arrows represent activities & nodes are events for points in time
• An event is the completion or beginning of an activity
• A dummy shows precedence for two activities with same start & end nodes
Guidelines for dividing tasks into activities
• Length of each activity should be ~ 0.5 -2.0% of the length of the project;
• Exception for critical activities;• # of activities should be less than 250
Estimating Duration of Project Activities
• Stochastic Approach (past data available)• Deterministic Approach (past data
available, variability negligible)• Modular Technique (decomposing activity
into sub-activities)• Benchmark Job Technique (repetitions of
activities)• Parametric Technique (cause-effect)
A House Project
TaskFollowsTask(s)
Duration
(Weeks) Task Description
Manning Level
A Start 1.0 Clear site 3
B Start0.6 Obtain lumber and other basic
materials1
C Start2.0 Obtain other materials and
components1
D B 2.0 Prefabricate wall panels 4E B 0.9 Prefabricate roof trusses 3
F A, B1.0 Form and pour footings and floor
slab3
G D, F 0.3 Erect wall panels 4H E, G 0.2 Erect roof trusses 4J C, H 0.5 Complete roof 3K J 2.0 Finish interior 4L J 1.0 Finish exterior 2M L 0.4 Clean up site 1N K, M 0.2 Final inspection and approval 1
Project Network for a House(AOA)
1
A1.0
2
3B0.6
C2.0
4 5 6 7 109
8
D2.0
E0.9
F1.0
G0.3
H0.2
J0.5
K2.0
L1.0
M0.4
N0.2
Concurrent Activities
1
DummyA
1 2
A
BB
Incorrect precedence relationship
3
2
Correct precedence relationship
Project Network for a House(AON)
Start End
A1.0A
1.0
B0.6
C2.0
D2.0
E0.9
F1.0
G0.3
H0.2
J0.5
K2.0
L1.0
M0.4
N0.2
Critical Path
• A path is a sequence of connected activities running from start to end node in network
• The critical path is the path with the longest duration in the network
• Project cannot be completed in less than the time of the critical path
Critical Path (AOA)
1
A1.0
2
3B0.6
C2.0
4 5 6 7 109
8
D2.0
E0.9
F1.0
G0.3
H0.2
J0.5
K2.0
L1.0
M0.4
N0.2
1-3-4-5-6-7-9-10
0.6+2.0+0.3+0.2+0.5+2.0+0.2 = 5.8 weeks
Critical Path (AON)
Start End
A1.0A
1.0
B0.6
C2.0
D2.0
E0.9
F1.0
G0.3
H0.2
J0.5
K2.0
L1.0
M0.4
N0.2
B-D-G-H-J-K-N0.6+2.0+0.3+0.2+0.5+2.0+0.2 = 5.8 weeks
Early Times(House building example)
• ES - earliest time activity can start• Forward pass starts at beginning of
CPM/PERT network to determine ES times
• EF = ES + activity time ESij = maximum (EFi)
EFij = ESij + tij
Late Times
• LF - latest time activity needs to finish & not delay project
• Backward pass starts at end of CPM/PERT network to determine LF times
• LS = LF - activity time LFij = minimum (LSj)
LSij = LFij - tij
ExampleDetermining ES, EF, LS, LF
1 2 4 6 7
3
5
32
0
1
31
1
1
B
A C
Dummy
G
FD
E
ExampleDetermining ES, EF, LS, LF
1 2 4 6 7
3
5
A, 3B, 2 0
C, 1E, 3
Dummy
G, 1
F, 1D, 1( )ES=0, EF=3
( )ES=3, EF=5
( )ES=3, EF=4
( )ES=5, EF=5
( )ES=5, EF=8
( )ES=5, EF=6 ( )
ES=6, EF=7
( )ES=8, EF=9LS=8, LF=9
LS=7, LF=8
LS=5, LF=8
LS=6, LF=7
LS=5, LF=5
LS=4, LF=5
LS=3, LF=5
LS=0, LF=3
Activity Slack
• Activities on critical path have ES=LS & EF=LF
• Activities not on critical path have slack
Sij = LSij - ESij
Sij = LFij - EFij
Example:Activity Slack Data
010101003300
6-75-64-64-53-42-42-31-2
9988786788556756555545345533
Slack(S)EFLFESLSActivity
Example:Activity Slack Data
010101003300
6-75-64-64-53-42-42-31-2
9988786788556756555545345533
Slack(S)EFLFESLSActivity
0
0
0
4-6
3-4
2-3
8855
5555
5533
Probabilistic Time Estimates
• Reflect uncertainty of activity times• Beta distribution is used in PERT
a = optimistic estimatem = most likely time estimateb = pessimistic time estimate
6
bm4ate
Mean (expected time):
Standard Deviation:6
ab
Examples of Beta Distribution
m = t ba
P (
time
)P
(tim
e)
ta bm
P (
time
)
ta bm
PERT Example
Equipment installation
1
2
4
6
73 5 9
8
Manual Testing
Dummy
System Training
Dummy
System Testing
Orientation
Position recruiting
System development
Equipment testing and modification
Final debugging
System changeover
Job training
PERT ExampleActivity Information
1 - 2 6 8 10 8 .441 - 3 3 6 9 6 1.001 - 4 1 3 5 3 .442 - 5 0 0 0 0 .002 - 6 2 4 12 5 2.783 - 5 2 3 4 3 .114 - 5 3 4 5 4 .114 - 8 2 2 2 2 .005 - 7 3 7 11 7 1.785 - 8 2 4 6 4 .447 - 8 0 0 0 0 .006 - 9 1 4 7 4 1.007 - 9 1 10 13 9 4.00
Time estimates (wks) Mean Time VarianceActivity a b c t 2
PERT ExampleNetwork with Times
1
2
4
6
73 5 9
8
( )ES=8, EF=8
LS=9, LF=9
( )ES=6, EF=9
LS=6, LF=9
( )ES=3, EF=5
LS=14, LF=16
( )ES=0, EF=3
LS=2, LF=5
( )ES=0, EF=6
LS=0, LF=6
( )ES=0, EF=8
LS=1, LF=9
3
80
5
4
4
7
0
2
93
6
( )ES=3, EF=7
LS=5, LF=9
4 ( )ES=9, EF=13
LS=12, LF=16
( )ES=9, EF=16
LS=9, LF=16
( )ES=13, EF=13
LS=16 LF=16
( )ES=16, EF=25
LS=16 LF=25
( )ES=13, EF=25
LS=16 LF=25
( )ES=8, EF=13
LS=16 LF=21
1
2
4
6
73 5 9
8
1
2
4
6
73 51
PERT ExampleNetwork with Times
1
2
4
6
73 5 9
8
( )ES=8, EF=8
LS=9, LF=9
( )ES=6, EF=9
LS=6, LF=9
( )ES=3, EF=5
LS=14, LF=16
( )ES=0, EF=3
LS=2, LF=5
( )ES=0, EF=6
LS=0, LF=6
( )ES=0, EF=8
LS=1, LF=9
3
80
5
4
4
7
0
2
93
6
( )ES=3, EF=7
LS=5, LF=9
4 ( )ES=9, EF=13
LS=12, LF=16
( )ES=9, EF=16
LS=9, LF=16
( )ES=13, EF=13
LS=16 LF=16
( )ES=16, EF=25
LS=16 LF=25
( )ES=13, EF=25
LS=16 LF=25
( )ES=8, EF=13
LS=16 LF=21
1
2
4
6
73 5 9
8
1
2
4
6
73 51
PERT Example Early And Late Times
1 - 2 8 0.44 0 8 1 9 11 - 3 6 1.00 0 6 0 6 01 - 4 3 0.44 0 3 2 5 22 - 5 0 0.00 8 8 9 9 12 - 6 5 2.78 8 13 16 21 83 - 5 3 0.11 6 9 6 9 04 - 5 4 0.11 3 7 5 9 2
4 - 8 2 0.00 3 5 14 16 115 - 7 7 1.78 9 16 9 16 05 - 8 4 0.44 9 13 12 16 37 - 8 0 0.00 13 13 16 16 36 - 9 4 1.00 13 17 21 25 87 - 9 9 4.00 16 25 16 25 0
Activity t 2 ES EF LS LF S
Project Variance
• Project variance is the sum of variances on the critical path
weeks89.6
00.478.111.000.1
2
79
2
57
2
35
2
13
2
Probabilistic Network Analysis
Determine probability that project is completed within specified time
= tp = project mean time
= project standard deviationx = proposed project timez = number of standard deviations x is from
mean
x
z
Normal Distribution of Project Time
= tp x
Probability
Time
f(x)
Z
Probabilistic Analysis Example
What is the probability that the project is completed within 30 weeks?2 6 89
6 89 2 62
30 252 62
191
191 0 9719
.
. .
..
( . ) .
weeks
weeks
Zx
P Z 30
What is the probability that the project is completed within 22 weeks?
Z
P Z
22 252 62
32 62
114
114 01271. .
.
( . ) .
Probabilistic Analysis Example
22
Project Planning Tools
• Resource Allocation– Managing the utilization of limited
resources– Using slacks
A House Project
TaskFollowsTask(s)
Duration
(Weeks) Task Description
Manning Level
A Start 1.0 Clear site 3
B Start0.6 Obtain lumber and other basic
materials1
C Start2.0 Obtain other materials and
components1
D B 2.0 Prefabricate wall panels 4E B 0.9 Prefabricate roof trusses 3
F A, B1.0 Form and pour footings and floor
slab3
G D, F 0.3 Erect wall panels 4H E, G 0.2 Erect roof trusses 4J C, H 0.5 Complete roof 3K J 2.0 Finish interior 4L J 1.0 Finish exterior 2M L 0.4 Clean up site 1N K, M 0.2 Final inspection and approval 1
Critical Path (AON)
Start End
A1.0A
1.0
B0.6
C2.0
D2.0
E0.9
F1.0
G0.3
H0.2
J0.5
K2.0
L1.0
M0.4
N0.2
B-D-G-H-J-K-N0.6+2.0+0.3+0.2+0.5+2.0+0.2 = 5.8 weeks
A House Project
TaskDuration(Weeks) ES EF LS LF S
Manning Level
A 1.0 0 1.0 0.6 1.6 0.6 3B 0.6 0 0.6 0 0.6 0 1C 2.0 0 2.0 1.1 3.1 1.1 1D 2.0 0.6 2.6 0.6 2.6 0 4E 0.9 0.6 1.5 2.0 2.9 1.4 3F 1.0 1.0 2.0 1.6 2.6 0.6 3G 0.3 2.6 2.9 2.6 2.9 0 4H 0.2 2.9 3.1 2.9 3.1 0 4J 0.5 3.1 3.6 3.1 3.6 0 3K 2.0 3.6 5.6 3.6 4.6 0 4L 1.0 3.6 4.6 4.2 5.2 0.6 2M 0.4 4.6 5.0 5.2 5.6 0.6 1N 0.2 5.6 5.8 5.6 5.8 0 1
A House ProjectWorker-level Profile (ES)
1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 24 25 26 1 2 3 4 5 8 9 10 11A 3 3 3 3 3B 1 1 1C 1 1 1 1 1 1 1 1 1 1D 4 4 4 4 4 4 4 4 4 4E 3 3 3 3F 3 3 3 3 3G 4H 4J 3 3 3K 4 4 4 4 4 4 4 4 4 4L 2 2 2 2 2M 1 1N 1
5 5 5 11 11 11 11 8 8 8 4 4 4 4 4 3 3 3 6 6 6 6 6 5 5 4 4 4 1
A House ProjectWorker-level Profile (ES)
0
2
4
6
8
10
12
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Date
Wo
rke
r-L
ev
el
A House ProjectWorker-level Profile (Adjusted)
1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 24 25 26 1 2 3 4 5 8 9 10 11A 3 3 3 3 3B 1 1 1C 1 1 1 1 1 1 1 1 1 1D 4 4 4 4 4 4 4 4 4 4E 3 3 3 3F 3 3 3 3 3G 4H 4J 3 3 3K 4 4 4 4 4 4 4 4 4 4L 2 2 2 2 2M 1 1N 1
5 5 5 8 8 8 8 8 8 8 7 7 7 7 4 3 3 3 6 6 6 6 6 5 5 4 4 4 1
A House ProjectWorker-level Profile (Adjusted)
0
2
4
6
8
10
12
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Date
Wo
rke
r-le
ve
l
Types of Contracts
• Fixed-Price Contracts– Fixed-price with escalation contracts– Fixed-price, re-determinable contracts– Fixed-price incentive contracts
• Cost Type Contracts– Cost plus incentive fee contracts– Cost plus fixed-fee contracts– Time & materials contracts– Letter contract