PROJECT
MANAGEMENT
K. Mare
Learning Objectives
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Having completed this course participants will be able to:
Describe the main aspects of the project lifecycle and detail the
major responsibilities of a project manager
Explain the effect of the project parameters of project Scope,
time, cost and performance in establishing the project and its
execution.
Summarise the process of obtaining Human Resources and
contracting for building project teams
Describe the systems & procedures for project execution and
application of PERT/CPM for scheduling and monitoring
projects.
Identify techniques for Project direction, coordination and
control.
1
The Nature of Projects and Project
Management Concepts
Chapter Objectives
At the end of the chapter the learner shall be able to;
 Define a project and its attributes
 Define project management and its application.
 Describe project management and key elements of the project
management framework.
 Understand the nine knowledge areas
 Discuss the relationship between project, programme, and
portfolio mgt and their contribution to organisational success
 Benefits of Project Management
Definition
A project is a temporary endeavour
undertaken to create a unique product, service
or result (Clements and Gido, 2012:04).
 A project is temporary in that it has
a defined beginning and end in time, and
therefore defined scope and resources.
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Definition
Project Management is a set of principles and
techniques for effective planning, scheduling,
execution and controlling of projects to produce
the desired outcomes.
 In other words, it provides an organization with
powerful tools that improve the organization's
ability to plan, organize, lead and control unique
and sensitive activities to give them better
chances for success.
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Project V operations
What is not a project?
A project is distinguished from regular work
in that it’s a one-time effort to change things
in some way.
 So the creation of a new web site would be a
project; ongoing maintenance and minor
updates would not.
 Project management is applicable to small as
well as very large projects e.g Building the
Titanic or a small activity like lighting a fire
without matches.
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DIFFERENCES BETWEEN PROJECT
AND OPERATION
PROJECT
A project is temporary
The project is undertaken to produce
a unique output, for example, a
product, service, or a result.
A project has a definitive start and
end: It cannot continue forever. It
has to end when the objective is
achieved, or it is terminated.
Projects have a fixed budget
OPERATION
Operations are permanent in nature, and their
only constraint is to make profit for the
organisation.
Operations don’t produce anything new, but
they are necessary to maintain and sustain the
system.
Operations are ongoing.
Operations are used to run regular business
models, achieve the goals of the business, and
sustain the business.
Operations have to earn a profit in order to run
the business.
Project Characteristics
A project is not normal day to day activity
undertaken by organization rather it is
specific, non-routine activity of varying time
frame and impact viability of the business in
the long run.
 A typical project has the following
characteristics:
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Project Characteristics
Are unique in nature.
 Have a defined timescale.
 Have an approved budget.
 Have limited resources.
 Involve an element of risk and uncertainty
 Achieve beneficial change.
 Clear objective with specific deliverable
 A project has a sponsor or customer
 A project is carried through a series of
interdependent tasks
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The Triple Constraints
The balance quadrant
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Projects must be delivered within cost
Projects must be delivered on time
Projects must meet the agreed scope – no more, no less
Projects must also meet customer quality requirements
The balance quadrant demonstrates the
interrelationship between the four aspects and
how a change to one aspect will unbalance the
quadrant. For instance, an increase in the
project’s scope will have an impact on the time,
the cost, and the quality of the project.
The balance quadrant
Why you need to understand the
triple constraints
These are the primary competing project
constraints that you have to be most aware of
though there may be additional constraints
 You have to balance the needs of these
constraints against the needs of the stakeholders
and your project goals.
 For instance, if your sponsor wants to add
functionality to the original scope, you will very
likely need more money to finish the project,
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Why you need to understand the
triple constraints
Or if they cut the budget, you will have to
reduce the quality of your scope, and if you
don’t get the appropriate resources to work on
your project tasks, you will have to extend
your schedule because the resources you have
take much longer to finish the work.
 The constraints are all dependent on each
other.
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Why you need to understand the
triple constraints
As a project manager, you need to educate
your customers about project management's
triple constraint or balanced quadrant;
 any project decision you or your clients make
will have an impact on these four
aspects—might make the project more
expensive, take longer, be of lower or higher
quality, or affect its scope?
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Project Stakeholders
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Stakeholders are the people involved in or
affected by project activities.
Key stakeholders can make or break the success
of a project.
The most key of all stakeholders is the customer.
Even if all the deliverables are met and the
objectives are satisfied, if the customer is not
happy then the project has failed.
Stakeholders cannot be classified under one
umbrella as they have different interests, there
are positive and negative stakeholders.
Project Stakeholders
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Stakeholders include:
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Project sponsor
Project manager
Project team
Support staff
Customers
Users
Suppliers
Opponents to the project
Stakeholder Relations Tips
Analyze stakeholders
 Assess influence
 Understand their expectations
 Define “success”
 Keep stakeholders involved
 Keep stakeholders informed
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Objectives of Project Management
The basic purpose for initiating a project is to
accomplish some goals.
 The reason for organizing the task as a project
is to give the endeavour complete attention.
 Project Management fulfils two purposes:
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Technical: Documentation techniques to generate
and communicate the plan,
 Human: Managerial skills to be a better 'manager'
of people as well as the project
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Technical and Human Objectives
The project management tools and principles
provide the means for
 project breakdown into tasks and sub-tasks
 finding interdependencies between the tasks
 allocating resources, human and material and
smoothing resources
 estimation for total project duration and budget
 monitoring more efficiently project progress
Project life cycle phases
A typical project is divided into 5 phases;
1. Initiation Phase: Brainstorming is done to
solve the problem or grab an opportunity and
feasibility studies are undertaken. “Project
Charter” is an essential outcome of this phase.
2. Planning: Plans and project objectives are set
to manage cost, quality, risk, changes and time.
Covers the list of activities, the time frame,
dependencies, constraints, and potential risks.
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Project life cycle phases
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Executing: Activities and milestones
established earlier are executed in a timely and
orderly manner. This phase utilizes maximum
of all resources.
Controlling: Involves measuring the
performance of the project and tracking
progress. It begins in the execution phase.
Closing: Project deliverable is handed to the
customer or is handed over to the operations
team for commercial production.
Project life cycle phases
9 Project Management
Knowledge Areas
PMBOK recognises nine knowledge areas
typical of almost all projects
 It can be divided into four core elements:
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Scope
Time
Cost
Quality
9 Project Management
Knowledge Areas
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The other knowledge areas provide the means
of achieving the deliverable objectives,
namely:
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4.
5.
Integration
Human resources
Communication
Risk
Procurement.
The duties of a Project manager
Activity and resource planning
 Organizing and motivating a project team
 Controlling time management
 Cost estimating and developing the budget
 Ensuring customer satisfaction
 Analysing and managing project risk
 Monitoring progress
 Managing reports and necessary documentation
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Suggested Skills for Project Managers
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Communication skills: Listens, persuades.
Organizational skills: Plans, sets goals, analyzes.
Team-building skills: Shows empathy, motivates,
promotes esprit de corps.
Leadership skills: Sets examples, provides vision (big
picture), delegates, positive, energetic.
Coping skills: Flexible, creative, patient, persistent.
Technology skills: Experience, project knowledge.
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Project Initiation
Defining the project outcomes
 Outcomes are the events, occurrences, or
changes in conditions, behavior, or attitudes
that indicate progress toward a project’s goals.
 Stating in advance project outcomes provide
guidance during the execution and help ensure
your project’s overall success.
 Outcomes are specific, measurable, and
meaningful.
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Defining the project outcomes
Outcomes are not:
Activities or processes (hosting an event is an
activity, increasing awareness is an outcome).
 Immeasurable long-term change.
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Often project outcomes are not fully achieved
because:
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Project outcomes were not clearly defined at the onset;
Outcomes were changed but not communicated;
Stakeholders were not all aligned; or
Objectives were incapable of being measured.
Value of Outcomes
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By focusing on project outcomes, You can
Pick performance problems early, execute
project activities that deliver the intended
outcomes, and more easily measure and
demonstrate results.
Stakeholder consultation
A project is successful if stakeholders are
satisfied therefore, you must identify the
stakeholders at the onset of the project and
manage them throughout the life cycle.
 The project team identifies internal and
external, positive and negative, and
performing and advising stakeholders in order
to determine the project requirements and the
expectations of all parties involved.
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Stakeholder consultation
The project manager should manage the
influences of these various stakeholders in
relation to the project requirements to ensure a
successful outcome.
 Stakeholders have varying levels of
responsibility and authority when
participating on a project. This level can
change over the course of the project’s life
cycle.
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Stakeholder consultation
Their involvement may range from occasional
contributions in surveys and focus groups to full
project sponsorship which includes providing
financial, political, or other support.
 Some stakeholders may also detract from the
success of the project, either passively or
actively. These stakeholders require the project
manager’s attention throughout the project’s life
cycle, as well as planning to address any issues
they may raise
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Stakeholder identification
Stakeholder identification is a continuous process
throughout the entire project life cycle.
 Identifying stakeholders, understanding their
relative degree of influence on a project, and
balancing their demands, needs, and expectations
are critical to the success of the project.
 Failure to do so can lead to delays, cost
increases, unexpected issues, and other negative
consequences including project cancellation.
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Stakeholder identification
An important part of a project manager’s
responsibility is to manage stakeholder
expectations, which can be difficult because
stakeholders often have very different or
conflicting objectives.
 Part of the project manager’s responsibility is
to balance these interests and ensure that the
project team interacts with stakeholders in a
professional and cooperative manner.
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List of stakeholders
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Sponsor. A sponsor is the person or group who provides resources
and support for the project and is accountable for enabling success.
The sponsor may be external or internal to the project manager’s
organization.
The sponsor leads the project through the initiating processes until
formally authorized, and plays a significant role in the development
of the initial scope and charter.
For issues that are beyond the control of the project manager, the
sponsor serves as an escalation path.
The sponsor may also be involved in other important issues such as
authorizing changes in scope, phase-end reviews, and go/no-go
decisions when risks are particularly high.
The sponsor also ensures a smooth transfer of the project’s
deliverables into the business of the requesting organization after
project closure.
List of stakeholders
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Customers and users. Customers are the persons or
organizations who will approve and manage then project’s
product, service, or result. Users are the persons or
organizations who will use the project’s product, service, or
result.
Customers and users may be internal or external to the
performing organization and may also exist in multiple
layers. For example, the customers for a new
pharmaceutical product could include the doctors who
prescribe it, the patients who use it and the insurers who
pay for it.
In some application areas, customers and users are
synonymous, while in others, customers refer to the entity
acquiring the project’s product, and users refer to those
who will directly utilize the project’s product.
List of stakeholders
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Sellers. Sellers, also called vendors, suppliers, or
contractors, are external companies that enter into a
contractual agreement to provide components or services
necessary for the project.
Business partners. Business partners are external
organizations that have a special relationship with the
enterprise, sometimes attained through a certification
process. Business partners provide specialized expertise or
fill a specified role such as installation, customization,
training, or support.
List of stakeholders
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Organizational groups. Organizational groups are internal
stakeholders who are affected by the activities of the
project team. E.g marketing and sales, HR, legal, finance,
operations, manufacturing, and customer service.
There is generally a significant amount of interaction
between the various business elements of an organization
and the project team as they work together to achieve
project goals.
These groups may provide input to requirements and
accept deliverables necessary for a smooth transition to
production or related operations.
List of stakeholders
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Functional managers.
The functional manager may provide subject matter
expertise or their function may provide services to the
project. Members of functional teams may also be assigned
to work in project teams thereby creating a dual reporting
system.
Other stakeholders. Additional stakeholders, such as
procurement entities, financial institutions, government
regulators, subject matter experts, consultants, and others,
may have a financial interest in the project, contribute
inputs to the project, or have an interest in the outcome of
the project.
STAKEHOLDER
CONSULTATION PROCESS
Planning questions;
What are the aims and objectives?
 Who are the key stakeholder groups?
 How accessible are they?
 Are there any hard-to-reach groups?
 How can their co-operation and engagement be gained?
 What is the best method of consulting with the groups?
 What do they need to see beforehand?
 How can this be disseminated?
 Will any pre-consultation be required to prepare
stakeholders for the exercise?
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STAKEHOLDER
CONSULTATION PROCESS
The process;
The “process” stage is the “doing” stage; this involves
carrying out the consultation.
 Good planning will ensure this stage runs smoothly.
 Considerations in this stage mainly centre on
developing effective relationships with stakeholders
and facilitating open and honest sharing of views, and
accurate recording of the process and the data.
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STAKEHOLDER
CONSULTATION PROCESS
Presentation;
The next stage, “presentation“, is concerned with the
analysis and the reporting of the data.
 The data will need to be analysed and reporting
prepared for the relevant audiences i.e. back to the
corporation, to policy makers, etc. but also feedback to
those who have engaged in the process and taken part.
 The form of reporting will need to take into account
audiences and ensure the highest possibility of actions
as a result of the consultation.
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STAKEHOLDER
CONSULTATION PROCESS
Promise;
The final stage relates to the promise.
 Part of the process of engaging with stakeholders is the
investment in a longer-term relationship of mutual
benefit and trust.
 Without demonstrable use of stakeholder feedback in
resultant action, this can be damaged.
 The final stage, therefore, has an element of PR
contained within it; communications about resultant
actions need to be carefully considered to reach
stakeholder audiences.
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Determining the scope of the project
Project scope— is the work that must be done
in order to deliver a product with the specified
features and functions.
 Project Scope Management are the processes
required to ensure that the project includes all
the work required, and only the work
required, to complete the project successfully.
 It is primarily concerned with defining and
controlling what is or is not included in the
project.
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Importance of defining scope
Define the boundaries of the project.
 Improves accuracy of cost, duration, and
resource estimates
 Defines baseline for performance
measurement and control
 Facilitates clear responsibility assignments
 Identify constraints that limit a project team’s
options for developing a solution.
 List assumptions regarding decisions outside
the project team’s control.
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Dangers of Poor scope definition
Poor scope definition results in:
 Higher final project costs
 Changes that disrupt the project rhythm
 Rework
 Increase in project time
 Lower productivity
 Lower morale of workforce
Steps to Developing a Project
Scope Statement
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Understand why the project was initiated.
Define the key objectives of the project.
Outline the project statement of work.
Identify major deliverables.
Select key milestones.
Identify major constraints.
List scope exclusions.
Write an official project scope statement and
get the client to sign
Scope Creep
What is Scope Creep?
 Scope creep in project management happens
when additional features, functions,
requirements or work are added beyond the
agreed-upon scope with no consideration to
impacts on time, cost and resources or
stakeholders/customer approval.
Reasons for scope creep
Scope definition (unclear, ambiguous, and
unrefined, etc.)
 Poor management of scope and requirements
(change management wasn’t followed)
 Inconsistent collection of project requirements
 Stakeholders’ or sponsor engagement (lack of
sponsorship or stakeholder involvement)
 Length of a project (the longer a project, the
greater the chance for scope creep)
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Project Planning Stage
Project planning is the process of defining
your objectives and scope, your goals and
milestones (deliverables), and assigning tasks
and budgetary resources for each step.
 A good plan is easily shareable with everyone
involved, and it’s most useful when it’s
revisited regularly.
 Project planning is often used to organize
different areas of a project, including project
plans, work loads and the management of
teams and individuals.
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Reasons for planning
to understand your project better
 to work out the best way to approach things
 to communicate to both your team and the
client or customer exactly how the project is
going to be approached
 to help you get work done and keep track of
progress
 to provide direction
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Establishing the project goals
The very first step in all projects is to define goals
and objectives. This step defines the projects outcome
and the steps required to achieve that outcome.
 Poorly defined goals and objectives, or goals without
objectives, pushes a project into overruns, territory
battles, personality clashes, missed milestones, and
unhappy clients.
 Goals and objectives must be clear statements of
purpose. Each with its own purpose that drives the
end result of the project and they must be measurable.
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Goals and Objectives
Goals and objectives are statements that
describe what the project will accomplish, or
the business value the project will achieve.
 Goals are high level statements that provide
overall context for what the project is trying
to achieve, and should align to business goals.
 Objectives are lower level statements that
describe the specific, tangible products and
deliverables that the project will deliver.
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The statement of work
A Statement of Work (SOW) is a document
within a contract that describes the work
requirements for a specific project along with its
performance and design expectations.
 The main purpose of the SOW is to define the
liabilities, responsibilities and work agreements
between parties.
 SOW should be written in precise language that
is relevant to the field of business. This prevents
misinterpretations of terms and requirements.
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Contents of SOW
Purpose and scope of work
 Deliverables and due dates
 Location of work
 Tasks that make up the deliverables
 Task responsibility distribution
 Deliverables timeline
 Criteria for acceptance
 Payment schedule
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Importance of SOW
A Statement of Work Shows Your Project
Stakeholders Your Methods
 SOW show contractors and internal teams
what you require from them.
 SOW also show the clients and stakeholders
how the work will be tackled and may be
useful in winning a tender. Once they have
evaluated the SOW, they will approve it if
they are satisfied.
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Milestones and schedules
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Planning a project schedule is a 6-step process:
Break down the project into pieces small
enough to work with
Identify dependencies.
Estimate how long each piece will take.
Add some contingency.
Consider the risks.
Represent the plan in a format that the team,
board, and stakeholders will understand.
Work Breakdown structure
The Project Management Body of
Knowledge defines the work-breakdown
structure as a "hierarchical decomposition of
the total scope of work to be carried out by
the project team to accomplish the project
objectives and create the required deliverables.
 A work breakdown structure defines all the
things a project needs to accomplish, organized
into multiple levels, and displayed graphically.
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Work Breakdown structure
The WBS describes everything you need to
accomplish in the project in a chart.
 The purpose of this chart is to break down
complex activities into smaller, management
constituents.
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Example 1Yard project WBS
Example 2
WBS for bicycle assembly
Project Charter
The project charter is a document that officially
starts a project or a phase.
 It formally authorizes the existence of the
project and provides a reference source for the
future.
 A project charter names the project manager and
defines the authority of the project manager.
 It gives the project manager the power to utilize
organizational resources to accomplish the
project objectives.
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Project Charter
It covers the scope of what the project will
achieve, as well as the people involved,
milestones, budget, and possible risks.
 Many organizations consider this document as
an essential part of project planning—although
it's not the same thing as a project plan because
it doesn't get into the details of individual tasks
within the project.
 It thus precedes the work breakdown structure.
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Project Charter
Project Charter is issued during the Project
Initiation
 It is used as the basis to create the Project Plan.
 The Project Charter contains the following
attributes within it:
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Project Scope
 Project Authority
 Critical Success Factors
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Purpose of project charter
Outline the project scope and objectives
 Ensure project sponsors and all stakeholders
are in alignment on a project
 Be a clear, single reference for all involved in
a project
 Help project sponsors get approval of
stakeholders when buy-in is still needed
 Act as a contract between the project sponsor,
key stakeholders and the project team.
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The project Budget
The Project Budget is a tool used by project
managers to estimate the total cost of a
project.
 A project budget template includes a detailed
estimate of all costs that are likely to be
incurred before the project is completed.
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The project Budget
Budget inputs
WBS
 Project contract or initial budget
 Resource requirements
 Resource cost estimates
 Activity duration estimates
 Historical information
 Market conditions
 Donor and organization policies
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The project Budget
Budget Outputs
 Outputs: The project team will use the above
information to develop three important
documents for the project:
Cost estimates by activity
 The Project Budget
 The Budget Variance Report
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Project Roles
The project manager
 documenting the detailed project plan;
 Availing project resources;
 managing assigned resources according to the
defined scope of the project;
 implementing the project processes(time/cost/
quality/change/risk/issue/ procurement/
communication/acceptance management);
Project Roles
The project manager
 monitoring and reporting project performance
(schedule, cost, quality and risk);
 ensuring compliance with the processes and
standards outlined in the quality plan;
 adjusting the project plan to monitor and control
the progress of the project;
 reporting and escalating project risks and issues;
 managing project interdependencies.
Project Roles
The project team: Each project team member
undertakes the tasks necessary to design, build
and implement the final solution.
Responsibilities include:
completing tasks allocated by the project manager;
 reporting progress to the project manager on a
frequent basis;
 maintaining documentation relating to the execution
of allocated tasks;
 escalating risks and issues to be addressed by the
project manager.
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Project Teams
In order to kick start the project there is need
to first establish the project team that will
shoulder the responsibility of the project.
 The Project Team Is comprised of the people
with assigned roles and responsibility for
completing the project and they are led by the
project manager.
 As a precursor to project team there is need
for an HR plan first.
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Develop Human Resource
Plan
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Human Resource plan provides guidance on
how project human resources should be defined,
staffed, managed, controlled, and eventually
released, it includes:
- Roles and Responsibilities
- Project Organization Charts.
- Staffing management plan:
- Staff acquisition.
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Develop Human Resource
Plan
Human Resource plan
- Resource calendar.
- Staff release plan.
- Training needs.
- Recognition & Rewards.
- Complains & Safety.
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Project Organisational
Structure
The choice of organisation structure is key to
the success of a project.
 A good structure can be a source of strength
that give the project a distinct advantage.
 The essential qualities in all structures is that
they should clarify authority lines, identify the
main roles in the project and the responsible
officers in charge of them, and spell out the
sub teams that make up the project for easier
control and sharing of project resources.
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Project Organisational
Structure
Functional Organisation structure
 Most popular for regular operations
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Project team operate within existing functional
departments and the functional head such as
operations manager or IT manager has the
ultimate authority.
Project Organisational
Structure
Projectized Organisational structure
 Give the project manager complete authority
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Team members may still be grouped on
functional speciality lines but they are
responsible over project roles only
Project Organisational
Structure
Matrix Organisational structure
 Is a hybrid of the two earlier structures
Creates a dual reporting structure -between the
functional head and the project manager
 Project team members are not fully dedicated
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The Project team
- The first step in building the Project Team is the
process of confirming human resource
availability and obtaining the team necessary to
complete project assignment.
- Then next is the process of improving the
competencies, team interaction, and the overall
team environment to enhance project
performance.
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The Project team
- They should focus on developing and
sustaining the project team throughout the
project life cycle, and
- promote working together interdependently in a
climate of mutual trust.
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The Project team
- Project mangers should acquire skills to
identify, build, maintain, motivate, lead, and
- inspire project team to achieve high team
performance and meet the project’s objectives.
- Because of the differentiation among the
project team, the project management team
should capitalize on the cultural differences,
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The Project team
Objectives of developing a project team
include:
- Improve knowledge and skills.
- Improve feeling of trust and agreement
among team members.
- Create a dynamic and cohesive team culture
to improve both individual and team
productivity, team spirit, and cooperation.
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The Project team
Stages of Project Team Development
1- Forming: this phase is where the team meets
and learns about the project and what their
formal roles and responsibilities are.
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2- Storming: the begins to address the project
work, technical decisions, and the project
management approach.
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The Project team
Stages of Project Team Development
3- Norming: people know where they fit in,
conflicts are resolved and there is a stronger
sense of belonging to the group.
4- Performing: team that reach the performing
stage function as a well-organized unit.
.
.
5- Adjourning: the team completes the work
and moves on from the project.
48
Leading a Project Team
58
Manage Project Team
 Manage Project Team is the process of
tracking team members performance,
providing feedback, resolving issue, and
managing changes to optimize project
performance.
 The project management team observes team
behavior, manages conflicts, resolves issues,
and appraises team member performance.
68
Manage Project Team
 Team management involves a combination of
skills with special emphasis on
communication, conflict management,
negotiation, and leadership.
 Project manger should provide challenging
assignments to team members, and provide
recognition for high performance.
78
4. Network Scheduling and
Techniques
Network FundamentalsRules in constructing a network
1.
2.
3.
4.
5.
No single activity can be represented more than once in a
network. The length of an arrow has no significance.
The event numbered 1 is the start event and an event with
highest number is the end event. Before an activity can be
undertaken, all activities preceding it must be completed. That
is, the activities must follow a logical sequence (or –
interrelationship) between activities.
In assigning numbers to events, there should not be any
duplication of event numbers in a network.
Dummy activities must be used only if it is necessary to
reduce the complexity of a network.
A network should have only one start event and one end event.
Project Management Techniques
There are several techniques utilized for
project management. Some of the techniques
are as follows, and they are mainly used for
project scheduling.
 Gantt Charts: These charts are used to depict
the project tasks against time. It monitors
progress of individual project tasks and also
highlights dependency if any between those
project tasks.

Gantt Chart
MAR
Locate new facilities
Interview staff
Hire and train staff
Select and order
furniture
Remodel and install
phones
Move in/startup
17-91
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Network Planning Techniques
These techniques show the relationship
between project activities, project duration,
critical path, constraints of non-critical
activities and resource utilization.
 There are two types of network planning
techniques Critical Path Method (CPM) and
Program Evaluation and Review Technique
(PERT).

Work Breakdown Structure
Project X
Level 1
Level 2
Level 3
Level 4
17-93
PERT and CPM
PERT:
CPM:
Program Evaluation and Review
Technique
Critical Path Method
Graphically displays project activities
 Estimates how long the project will take
 Indicates most critical activities
 Show where delays will not affect project

The Network Diagram





Network (precedence) diagram – diagram of project
activities that shows sequential relationships by the use
of arrows and nodes.
Activity-on-arrow (AOA) – a network diagram
convention in which arrows designate activities.
Activity-on-node (AON) – a network diagram
convention in which nodes designate activities.
Activities – steps in the project that consume resources
and/or time.
Events – the starting and finishing of activities,
designated by nodes in the AOA convention.
The Network Diagram (cont’d)

Path

Critical path

Critical activities

Slack
17-96




Sequence of activities that leads from the starting
node to the finishing node
The longest path; determines expected project
duration
Activities on the critical path
Allowable slippage for path; the difference the length
of path and the length of critical path
Network Conventions
a
c
a
b
c
b
a
c
b
d
a
b
c
Dummy
activity
Network Conventions
Example – Activity on Arc
Activity
Predecessor
A - locate facilities
B - Interview
C - Order furniture
A
D - Remodel
A
E - Hire and train
B
F - Furniture setup
C
G - Move in
F,D,E
Time (Weeks)
8
4
6
11
9
3
1
Project Network – Activity on Arc
AOA
Locate
facilities
Order
furniture
2
4
Remodel
1
Interview
3
Furniture
setup
5
Hire and
train
Move in
6
Project Network – Activity on Node
AON
Locate
facilities
1
Order
furniture
2
Remodel
5
S
Interview
3
Hire and
train
4
Furniture
setup
6
Move in
7
Example
Activity
A
B
C
D
E
F
Pred
A
C
D
B,E
Example
b
a
9
5
c
17-103
2
f
4
d
e
6
10
Example with Dummy
Activity
A
B
C
D
E
F
Pred
A,B
C
B
D,E
Example 1 Solution
Critical Path
Path
1-2-3-4-5-6
Length
(weeks)
Slack
18
2
1-2-5-6
20
0
1-3-5-6
14
6
17-105
When to use dummy activity
Dummy activity: An activity which does not
consume any kind of resources but merely
depicts the technological dependence is called
a dummy activity.
 Dummy activity is inserted :

i.
ii.
To make activities with common starting and
finishing points distinguishable.
To identify and maintain the proper precedence
relationship between activities those are not
connected by events.
When to use dummy activity


Lets consider a situation where A and B are concurrent
activities and activity D is dependent on B and C is dependent
on both A and B. Such a situation can be handled by use of
dummy activity.
When two or more activities are exactly parallel such that
they would start at the same node (event) and finish at the
same node. A dummy would be inserted between the end of
one of the activities and the common finishing node.
Time Estimates


Deterministic

Time estimates that are fairly certain

Estimates of times that allow for variation
Probabilistic
Example 1
Deterministic
time estimates
6 weeks
1
te
a
c
Lo ilities
fac
In
4 weeks
te
rv
iew
3
17-109
3 weeks
re
nitu
Fur p
setu
8 weeks
2
4
er e
d
r
O itur
n
fur
Rem
ode
l
11 weeks
r
Hi
d
n
ea
in
tra
9 weeks
5
Move in
1 week
6
Computing Algorithm

Network activities

Used to determine
17-110
ES: early start
 EF: early finish
 LS: late start
 LF: late finish

Expected project duration
 Slack time
 Critical path

Probabilistic Time Estimates



Optimistic time

Time required under optimal conditions

Time required under worst conditions
Pessimistic time
Most likely time

Most probable length of time that will be
required
Time-cost Trade-offs: Crashing


Crash – shortening activity duration
Procedure for crashing

Crash the project one period at a time

Crash the least expensive activity


Only an activity on the critical path
Multiple critical paths: find the sum of
crashing the least expensive activity on each
critical path
Advantages of PERT



Forces managers to organize
Provides graphic display of activities
Identifies


17-113
Critical activities
Slack activities
Limitations of PERT




Important activities may be omitted
Precedence relationships may not be
correct
4
Estimates may include
a fudge factor
May focus solely
on critical path
2
1
5
142 weeks
3
6
Chapter 5
Project pricing and Estimations
Global pricing strategies
 Types of estimates
 Pricing process
 Pricing out the work
 Systems pricing
 Estimating pitfalls
 Estimating high risk projects
 Overhead rates

Project pricing and Estimations
Project cost estimation is the process of
predicting the quantity, cost, and price of the
resources required by the scope of a project.
 Since cost estimation is about the prediction
of costs rather than counting the actual cost, a
certain degree of uncertainty is involved. This
uncertainty arises from the fact that the
project scope definition is never entirely
complete until the project has been finished.

Global pricing strategies
one of two situations prevails when one is pursuing
project acquisitions competitively.
 First, the new business opportunity may be a oneof-a-kind program with little or no follow-on
potential, a situation classified as type I acquisition.
 Second, the new business opportunity may be an
entry point to a larger follow-on or repeat business,
or may represent a planned penetration into a new
market. This acquisition is classified as type II.

2 GLOBAL PRICING STRATEGIES
Type I Acquisition:
 One-of-a-Kind Program with Little or No Follow -On Business
1. Develop cost model and estimating guidelines; design proposed
project/program baseline for minimum cost, to minimum
customer requirements.
2. Estimate cost realistically for minimum requirements.
3. Scrub the baseline. Squeeze out unnecessary costs.
4. Determine realistic minimum cost. Obtain commitment from
performing organizations.
5. Adjust cost estimate for risks.
6. Add desired margins. Determine the price.
7. Compare price to customer budget & competitive cost informn.
8. Bid only if price is within competitive range.
2 GLOBAL PRICING STRATEGIES
Type II Acquisition:
New Program with Potential for Large Follow -On Business or
Representing a Desired Penetration into New Markets
o
Design proposed project/program baseline compliant with customer
requirements, with innovative features but minimum risks.
o
o
o
o
o
Estimate cost realistically.
Scrub baseline. Squeeze out unnecessary costs.
Determine realistic minimum cost. Obtain commitment from
performing organizations.
Determine "should-cost" including risk adjustments.
Compare your final cost estimate to customer budget and the "most
likely" winning price.
2 GLOBAL PRICING STRATEGIES
1.
2.
3.
4.
Determine the gross profit margin necessary for your winning
proposal. This margin could be negative!
Decide whether the gross margin is acceptable according to the
must-win desire.
Depending on the strength of your desire to win, bid the "most
likely" winning price or lower.
If the bid price is below cost, it is often necessary to provide a
detailed explanation to the customer of where the additional
funding is coming from. The source could be company profits
or sharing of related activities. In any case, a clear resource
picture should be given to the customer to ensure cost
credibility.
Types of estimates
1.
2.
Order-of-magnitude analysis - made without any
detailed engineering data. Use past experience (not
necessarily similar), scale factors, parametric
curves or capacity estimates, accurate to ±35%.
Approximate estimate (or top-down estimate) made without detailed e data, accurate to ±15%.
Estimate is prorated from previous projects than in
scope and capacity, and may be done by rule of
thumb, or cost of similar activities adjusted for
capacity and technology.
Types of estimates
1.
2.
The definitive estimate, or grassroots buildup
estimate, is prepared from well-defined engineering
data, vendor quotes, fairly complete plans,
specifications, unit prices, etc. Also referred to as
detailed estimating, has an accuracy of ±95 %.
Use of learning curves. Learning curves are graphical
represents repetitive functions in which continuous
operations will lead to a reduction in time, resources,
and mo theory behind learning curves is usually
applied to manufacturing operations.
Pricing process
The pricing process requires development of a
work-break-down structure, then one of 3
models can be adopted.
o Fixed Price Model: the price for a project
consists of the project costs plus certain
markup added by the contractor.
 Works effectively when a project is
characterized by well-defined requirements
and well-elaborated plan – probably it is a
standardized or recurring project.

Pricing process
1.

2.
Time and Material Price Model: the price for a
project is reasoned by a unique amount of labour
and materials consumed.
Works well for a flexible and agile project execution
where the client requires a great portion of
individualized approach.
Milestone-based Price Model: this way of project
pricing is based upon a concept of progressive
payments and is managed through progress
monitoring by the customer who pays according to a
visible milestone achieved and appraised level of
progress done.
Pricing out the work, step 1-13
Step 1: Provide a complete definition of the work
Step 2: Establish a logic network with checkpoints.
Step 3: Develop the work breakdown structure.
Step 4: Price out the work breakdown structure.
Step 5: Review WBS costs with each functional manager.
Step 6: Decide on the basic course of action.
Step 7: Establish reasonable costs for each WBS element.
Step 8: Review the base case costs with upper-level management.
Step 9: Negotiate with functional managers for qualified
personnel.
Step 10: Develop the linear responsibility chart.
Step 11: Develop the final detailed and PERT/CPM schedules.
Step 12: Establish pricing cost summary reports.
Step 13: Document the result in a program plan.
Estimating pitfalls
There are many things that can undermine the
accuracy or validity of your estimates. Some you
have control over and many that you can’t really
control.
 Pitfalls in cost estimating include failing to correctly
estimate costs, including overhead, which will result
in a low bid, but ultimately your company will lose
money.
 In the event a company overestimates costs, the bid
will be too high and your company will probably not
get the job.

Estimating high risk projects
It is tempting at times to avoid looking objectively at
the project when one is eager for business.
 A risk assessment should always be carried out, no
matter the size of the project.
Risk assessments are necessary for the following
reasons:
 A good risk assessment will inform you as to whether
or not the project is worth taking on.
 It will inform what contingencies need to be
accounted for in order to avoid cost overruns.
 The bigger the risk, the more detailed the assessment

Overhead rates
Failure to account for overheads will hurt
your profit margins.
 You need to have an accurate reading as to
what your mean overheads are. As your
business scales over time, your overhead costs
should be reviewed accordingly.

Project risk Management
According to PMI’s PMBOK (Project
Management Body of Knowledge), a risk is a
“situation or condition that, if it occurs, has a
positive or negative impact on project
objectives.”
 Risk management exists with one purpose —
to maximize the chances of project success.
 In project management, this is done by
identifying risks, analyzing them, and creating
response plans for each one.

Tolerance of risk
Risk and returns tend to move together so one cannot
completely avoid risk.
 People (and organisations) have different risk
tolerance i.e the level of risk they can accept.
 3 levels of risk tolerance exist;

1.
2.
o
Risk avoider
Risk neutral
Risk lover
Definition of Risk Management

Risk management is the act or practice of
dealing with risk. It includes: planning for
risk, assessing risk issues, developing risk
handling strategies, and monitoring risk to
determine how they have changed.
Certainty risk and uncertainty
Decision-Making Categories
Complete uncertainty
 Relative uncertainty (partial information)
 Complete certainty Complete uncertainty

Certainty risk and uncertainty
Developing and using pay off tables
Five Steps To Develop Payoff Table
List all the alternatives.
 List the future consequences of each
alternative.
 Identify the payoffs associated with each
combination.
 Assess the degree of certainty that these
combinations will materialize
 Decide on a decision criterion. List all the
alternatives.

Risk management process
Risk planning
 Risk assessment

Risk identification
 Risk analysis/quantification

Risk handling
 Risk monitoring

Risk planning
Risk planning is the first step in managing
project risk.
 It is the acknowledgement of the presence of risk
in the first place.
 It involves evaluation of different risk categories
where risk can emanate e.g Technical, Cost,


Schedule, Client, Contractual, Weather, Financial etc
The past experience of the project team, project
experience within the company, and experts in
the industry can be valuable resources for
identifying potential risk on a project.
Risk Assessment
Assessment of risk involves identifying the
risk and quantifying or classifying.
 One common way of identifying risk is by
brainstorming together with your team and
stakeholders.
 Once you identify risks, you can begin to
analyse them. This step includes analysing the
likelihood, severity, and response plan for
each risk you have found.

Risk handling


o
o
o
o
Every risk needs to be eliminated or contained.
There are four possible responses to risk events:
Avoid. Eliminate the threat.
Transfer. Off-load the risk to a third party.
Mitigate. Reduce the probability or impact of the risk event.
Accept. Sometimes there is no other alternative than to proceed
with the project and accept the risk. But
producing documentation, holding meetings, and
communicating the risk with stakeholders can go a long ways
toward minimizing the damage.
Risk monitoring
This step is tracking the progress of the
initiative chosen for risk resolvement.
 Whoever is in charge of the risk will also be
responsible to monitor and report its progress
towards resolution.

Risk management process
The risk management process is a framework
for the actions that need to be taken.
 It begins with risk planning, then an
assessment of the risks through risk
identification and risk quantification, then a
solution is implemented and finally, the risk is
monitored.

Modern developments in project
management
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