Presentation on

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Presented by Mr. Samee

Bhangu

MBSM 4th Sem

College of Statistics & Actuarial Sciences

University of the Punjab Lahore, Pakistan.

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A project is a unique endeavor to produce a set of deliverables within clearly specified time, cost and quality constraints.Projects are different from standard business operational activities as they: Are unique in nature. Have a defined timescale. Have an approved budget. Have limited resources. Involve an element of risk. Achieve beneficial change.

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A unique, one-time operational activity or effort

Requires the completion of a large number of interrelated activities

Established to achieve specific objective Resources, such as time and/or money,

are limited Typically has its own management

structure Need leadership

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constructing houses, factories, shopping malls, athletic stadiums or arenas

developing military weapons systems, aircrafts, new ships

launching satellite systems constructing oil pipelines developing and implementing new

computer systems planning concert, football games, or

basketball tournaments introducing new products into market

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Project Management is the skills, tools and management processes required to undertake a project successfully. It incorporates: A set of skills. A suite of tools. A series of processes.

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Sales

President

FinanceHumanFactors

EngineeringQualityControl

Production

TechnicianTest

EngineerPropulsionEngineer

Physiologist

ProjectManager

PsychologistStructuralEngineer

InspectionTechnician

Technician

Project 1

Project 2

ProjectManager

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1. Major Projects2. Large Projects3. Medium

Projects4. Small Projects

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= of capital of Organization

=1/10 of capital of Organization

=1/100 of capital of Organization

=1/1000 of capital of Organization

Payne & Turner categorized into 4 types in 1999

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Type 2 projects

Product Development(Water)

Type 4 projects

Research and Organizational change(Air)

Type 1 Projects

Engineering(Earth)

Type 3 Projects

System development(Fire)

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Greater

Chances of

Success

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Project planning Project scheduling Project control Project team

made up of individuals from various areas and departments within a company

Matrix organization a team structure with members from functional

areas, depending on skills required Project Manager

most important member of project team

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Scope statement a document that provides an understanding, justification,

and expected result of a project Statement of work

written description of objectives of a project Organizational Breakdown Structure

a chart that shows which organizational units are responsible for work items

Responsibility Assignment Matrix shows who is responsible for work in a project

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Figure 5: Full circle and arrow diagram for the computer project we are using as an example

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Where one activity cannot start until another has been completed, we start the arrow for the dependent activity at the completion event circle of the previous activity. An example of this is shown below:

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A different case is shown below

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Activity Description Duration

1-2 Social work team to live in village 5w

1-3 Social research team to do survey 12w

3-4 Analyse results of survey 5w

2-4 Establish mother & child health program 14w

3-5 Establish rural credit programme 15w

4-5 Carry out immunization of under fives 4w

3

1

24

5

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Project Leader The TeamWork Methods and ProceduresWork Plan

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Establishing objectivesDefining projectCreating work breakdown structure Determining resourcesForming organization

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Resource Availability and/or Limits Due date, late penalties, early completion

incentives Budget

Activity Information Identify all required activities Estimate the resources required (time) to

complete each activity Immediate predecessor(s) to each activity

needed to create interrelationships

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Gantt chart Critical Path Method (CPM) Program Evaluation &

Review Technique (PERT) Network Diagrams

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Graph or bar chart with a bar for each project activity that shows passage of time

Provides visual display of project scheduleProvides visual display of project schedule

Gantt Chart

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Critical Path Method (CPM) E I Du Pont de Nemours & Co. (1957) for construction

of new chemical plant and maintenance shut-down Deterministic task times Activity-on-node network construction Repetitive nature of jobs

Project Evaluation and Review Technique (PERT) U S Navy (1958) for the POLARIS missile program Multiple task time estimates (probabilistic nature) Activity-on-arrow network construction Non-repetitive jobs (R & D work)

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PERT-Program Evaluation and Review Technique, for planning and coordinating large projects and is concern about scheduling of activities

CPM-Critical Path Method, for planning and coordinating large projects and is concern about importance of activities

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Learning Objectives Aware and Understand the Concepts

and Principles of PERT/CPM Analyze Business Problem and Relate to

the Applicability Of the Use of PERT/CPM Identify Business Problems and Use

PERT/CPM in its solution Solve Business Problems Using

PERT/CPM 29Samee Bhangu

Path A connected sequence of activities leading

from the starting event to the ending event Critical Path

The longest path (time); determines the project duration

Critical Activities All of the activities that make up the critical

path

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Earliest Start Time (ES) earliest time an activity can start ES = maximum EF of immediate predecessors

Earliest finish time (EF) earliest time an activity can finish earliest start time plus activity time

EF= ES + t

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Latest Start Time (LS)

Latest time an activity can start without delaying critical path time

LS= LF - t

Latest finish time (LF)

latest time an activity can be completed without delaying critical path time

LS = minimum LS of immediate predecessors

Backward Pass

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Draw the CPM network Analyze the paths through the network Determine the float for each activity

Compute the activity’s float float = LS - ES = LF - EF

Float is the maximum amount of time that this activity can be delay in its completion before it becomes a critical activity, i.e., delays completion of the project

Find the critical path is that the sequence of activities and events where there is no “slack” i.e.. Zero slack Longest path through a network

Find the project duration is minimum project completion time

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CPM Network

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a, 6a, 6a, 6a, 6

f, 15f, 15f, 15f, 15

b, 8b, 8b, 8b, 8

c, 5c, 5c, 5c, 5

e, 9e, 9e, 9e, 9

d, 13d, 13d, 13d, 13

g, 17g, 17g, 17g, 17 h, 9h, 9h, 9h, 9

i, 6i, 6i, 6i, 6

j, 12j, 12j, 12j, 12

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PERT is based on the assumption that an activity’s duration follows a probability distribution instead of being a single value

Three time estimates are required to compute the parameters of an activity’s duration distribution: pessimistic time (tp ) - the time the activity would

take if things did not go well most likely time (tm ) - the consensus best

estimate of the activity’s duration optimistic time (to ) - the time the activity would

take if things did go well

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Mean (expected time): te = tp + 4 tm + to

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Variance: Vt =2 = tp - to

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2

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Expected project time (T) Sum of critical path

activity times, t

Project variance (V) Sum of critical path

activity variances, v

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Used to obtain probability of project completion!

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You’re a project planner for General Dynamics. A submarine project has an expected completion time of 40 weeks, with a standard deviation of 5 weeks. What is the probability of finishing the sub in 50 weeks or less?

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© 1995 Corel Corp.

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T = 40

s = 5

50 X

Normal Normal DistributionDistribution

ZX T=

-=

-=

s50 40

52 0.

mz = 0

sZ = 1

Z2.0

Standardized Normal Standardized Normal DistributionDistribution

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Draw the network. Analyze the paths through the network and find the

critical path. The length of the critical path is the mean of the

project duration probability distribution which is assumed to be normal

The standard deviation of the project duration probability distribution is computed by adding the variances of the critical activities (all of the activities that make up the critical path) and taking the square root of that sum

Probability computations can now be made using the normal distribution table.

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PERT (Program Evaluation and Review Technique)

PERT is a variation on Critical Path Analysis that takes a slightly more skeptical view of time estimates made for each project stage.

Use the formula below to calculate the time to use for each project stage:

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40

= tp Timex

Z

Probability

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Immed. Optimistic Most Likely Pessimistic

Activity Predec. Time (Hr.) Time (Hr.) Time (Hr.) A -- 4 6 8B -- 1 4.5 5C A 3 3 3

D A 4 5 6 E A 0.5 1 1.5 F B,C 3 4 5 G B,C 1 1.5 5 H E,F 5 6 7 I E,F 2 5 8 J D,H 2.5 2.75 4.5 K G,I 3 5 7

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AA

DD

CC

BBFF

EE

GG

II

HH

KK

JJ

PERT Network

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Activity ES EF LS LF Slack A 0 6 0 6

0 *critical B 0 4 5 9

5 C 6 9 6 9

0 * D 6 11 15 20 9 E 6 7 12 13 6 F 9 13 9 13

0 * G 9 11 16 18 7 H 13 19 14 20 1 I 13 18 13 18 0

* J 19 22 20 23 1 K 18 23 18 23 0 *

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Vpath = VA + VC + VF + VI + VK

= 4/9 + 0 + 1/9 + 1 + 4/9 = 2path = 1.414

z = (24 - 23)/(24-23)/1.414 = .71

From the Standard Normal Distribution table:

P(z < .71) = .5 + .2612 = .7612

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Define the project and all of its significant activities or tasks

Develop relationships among the activities. (Decide which activities must precede and which must follow others.)

Draw the network connecting all of the activities

Assign time and cost estimates to each activity

Compute the longest time path through the network. This is called the critical path

Use the network to help plan, schedule, monitor, and control the project

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Useful at many stages of project management

Mathematically simple Uses graphical displays Gives critical path & slack time Provides project documentation Useful in monitoring costs

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Assumes clearly defined, independent, & stable activities

Specified precedence relationships Activity times (PERT) follow

beta distribution Subjective time estimates Over-emphasis on critical path

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Use of nodes and arrows Arrows An arrow leads from tail to head directionally

Indicate ACTIVITY, a time consuming effort that is required to perform a part of the work.

Nodes A node is represented by a circle- Indicate EVENT, a point in time where one or more activities

start and/or finish.

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• Network analysis is the general name given to certain specific techniques which can be used for the planning, management and control of projects

• Activity– A task or a certain amount of work required in the project– Requires time to complete– Represented by an arrow

• Dummy Activity– Indicates only precedence relationships– Does not require any time of effort

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Main features of PERT/CPM is the use of a network or precedence diagram to depict major project activities and their sequential relationships

Two conventions in network construction;

1. Activities on Arrow- arrows designate activities.

2. Activities on node- nodes designate activities

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Event Signals the beginning or ending of an activity Designates a point in time Represented by a circle (node)

Network Shows the sequential relationships among

activities using nodes and arrows

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Activity-on-node (AON)

nodes represent activities, and arrows show precedence relationships

Activity-on-arrow (AOA)

arrows represent activities and nodes are events for points in time

Project Network

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32 0

1

31 1

11 2 4 6 7

3

5

Lay foundation

Design house and obtain financing

Order and receive materials

Dummy

Finish work

Select carpet

Select paint

Build house

AON Project Network for House

13

22

43

31 5

1

61

71Start

Design house and obtain financing

Order and receive materials

Select paintSelect carpet

Lay foundations Build house

Finish work

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AB

C

A must finish before either B or C can start

A

B

C both A and B must finish before C can start

D

C

B

Aboth A and C must finish before either of B or D can start

A

C

B

D

Dummy

A must finish before B can start

both A and C must finish before D can start

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2 3

Lay foundationLay foundation

Order materialOrder material

(a)(a) Incorrect precedence Incorrect precedence relationshiprelationship

(b)(b) Correct precedence Correct precedence relationshiprelationship

3

42

DummyDummyLay Lay foundationfoundation

Order materialOrder material

11

22 00

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Illustration of network analysis of a minor redesign of a product and its associated packaging.

The key question is: How long will it take to complete this project ?

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For clarity, this list is kept to a minimum by specifying only immediate relationships, that is relationships involving activities that "occur near to each other in time".

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Is this a Start Activity? Is this a Finish Activity? What Activity Precedes this? What Activity Follows this? What Activity is Concurrent with this?

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Crashing reducing project time by expending additional

resources Crash time

an amount of time an activity is reduced Crash cost

cost of reducing activity time Goal

reduce project duration at minimum cost

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Act

ivity

cos

t

Activity time

Crashing activity

Crash time

Crash cost

Normal Activity

Normal time

Normal cost

Slope = crash cost per unit time

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Crashing costs increase as project duration decreases Indirect costs increase as project duration increases Reduce project length as long as crashing costs are less than indirect costs

Time-Cost Tradeoff

cost

time

Direct cost

Indirect cost

Total project costMin total cost = optimal project time

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111212

2288

441212

3344 55

44

6644

7744

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Activity Normal time

Normal cost Rs

Crash time

Crash cost Rs

Allowable crash time

slope

1

2

3

4

5

6

7

12

8

4

12

4

4

4

3000

2000

4000

50000

500

500

1500

7

5

3

9

1

1

3

5000

3500

7000

71000

1100

1100

22000

5

3

1

3

3

3

1

400

500

3000

7000

200

200

7000

75000 110700

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Crash ActionYou may find that you need to

complete a project earlier than your Critical Path Analysis says is possible. In this case you need to take action to reduce the length of time spent on project stages.

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As with Gantt Charts, in practice project managers tend to use software tools like Microsoft Project to create CPA Charts. Not only do these ease make them easier to draw, they also make modification of plans easier and provide facilities for monitoring progress against plans. Microsoft Project is reviewed at the top of our left hand title bar.

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Learning Objectives Be Familiar and Understand the Concepts

and Principles of Project Financing and Budgeting

Know and understand how project cost is analysed and identify sources of financing

Identify and Analyze Project Costs and Benefits

Compute for the Financial and Economic Viability of Projects

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How much will the project cost To develop To operate To maintain

Can we sustain project operations and maintenance?

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How much is needed to operate and maintain the project in usable form?

If we can charge user fees, how much should it be? How much more is needed to collect the fees (administrative cost of collecting the fees)?

Given the fees, what is the projected number of users?

If we do not collect the fees, what is the projected number of users?

If the project cannot be expected to pay for itself, will the provincial government be willing to subsidize its operations and maintenance? By how much?

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If operations and maintenance of the project cannot be sustained, either from project revenues or subsidies from the province, the project investment should not be undertaken.

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Equity (Owner’s Investment)

Loan (Banks and other sources)

Grant (Government and other Sources)

Co-Financing

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BudgetPreparation

BudgetExecution

BudgetAccountability

BudgetReview

BudgetAuthorization

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What is the output of the project? Output, not outcomes

Characterize the output Public, private, mixed Tradeable, nontradeable, partly

tradeable

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?

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Financial considerations are often an important consideration in selecting projects

Three primary methods for determining the projected financial value of projects: Net present value (NPV) analysis Return on investment (ROI) Payback analysis

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Net present value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time

Projects with a positive NPV should be considered if financial value is a key criterion

The higher the NPV, the better

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UsesExcel’snpvfunction

Notethat totalsare equal,butNPVsare not.

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Multiplyby thediscountrate eachyear, thentake cum.benefits –costs toget NPV

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Determine estimated costs and benefits for the life of the project and the products it produces

Determine the discount rate (check with your organization on what to use)

Calculate the NPV (see text for details) Notes: Some organizations consider

the investment year as year 0, while others start in year 1. Some people enter costs as negative numbers, while others do not. Check with your organization for their preferences.

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Determine estimated costs and benefits for the life of the project and the products it produces

Determine the discount rate (check with your organization on what to use)

Calculate the NPV (see text for details) Notes: Some organizations consider

the investment year as year 0, while others start in year 1. Some people enter costs as negative numbers, while others do not. Check with your organization for their preferences.

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Project Sponsorship at executive level

Good project charterStrong project managementThe right mix of team playersGood decision making structureGood communicationTeam members are working toward

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Failure to align project with organizational objectives

Poor scopeUnrealistic expectationsLack of executive sponsorshipLack of project management Inability to move beyond individual

and personality conflictsPolitics

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Microsoft Project (Microsoft Corp.) MacProject (Claris Corp.) PowerProject (ASTA Development Inc.) Primavera Project Planner (Primavera) Project Scheduler (Scitor Corp.) Project Workbench (ABT Corp.)

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