1 project management by miles m. hamby, phd principle, ariel training consultants drhamby@cox.net

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Project Management

by

Miles M. Hamby, PhD

Principle, Ariel Training Consultants

drhamby@cox.net

2

• The Elements of Project Management

• Elements of a Project Proposal Document

• SOW, OBS, RAM, CPM/PERT Networks

• Probabilistic Activity Times

• Using Excel to create Gantt charts

• Cost-Benefit and Earned Value Analysis

Topics

3

Nature of a Project

Unique (one-time effort)

Fixed duration

Specific goal

4

Includes engineers, line workers, HR personnel, budget experts, technical experts, outside consultants

Headed by the Project Manager

• Must coordinate various skills of team members into single, focused effort

• Great pressure due to uncertainty inherent in project schedule, budget, and quality.

The Project Team

5

Nature of Project Management

Why manage a project?

Murphy’s Law

If anything can go wrong – it will!

• Complete on-time

• In budget

• Meet expectations (quality)

6

Nature of Project Management

Controlling an activity for a relatively short period of time until project is completed, then operations begin.

Project manager not involved in operations.

3 components of PM:

• Planning

• Scheduling

• Controlling individual activities.

7

The Project Management Process

asdf asdf asdf

asdf

OBSOBS

PLANNING SCHEDULING CONTROLLING

RAMRAM

ACTACT DESIGNDESIGN RESOUCRESOUC CPMSTRCPMSTR QAQA

1 O.P S S S

2 S P O S

3 P O S

Sco

pe

1

3

2 5

4

6

START FINISH

PERT/CPMPERT/CPM

Bull Run Defenses

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Activity

receive orders

Move Eng Div

3

4

5

6

7

8

9

10

11

Act

ivit

y

Days

GANTTGANTT

RESOURCES

ON TIMEON TIME

IN BUDGETIN BUDGET

MEETS MEETS EXPECTATIONSEXPECTATIONS

SOWSOW

$

CREDIT DEBIT

$24,200 $21,300

$34,000 $33,450

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Elements of Project ManagementProject Control

Process of ensuring progress toward successful completion ~ on time, in budget, meet expectations.

Monitoring project to minimize deviations from project plan and schedule.

Corrective actions necessary if deviations occur.

Key elements of project control• Time management• Cost management• Performance management• Earned value analysis.

9

Project Planning Document

- a document for the customer, individuals, team members, groups, departments, subcontractors and suppliers, describing what is required for successful completion - on time, in budget, meet expectations.

10

The Project Planning Document

Cover page TOC SOW and Scope OBS RAM Activity Schedule PERT/CPM – AON diagram & Gantt Chart Budgeting Resources (Human and Materials) Technology Cost-Benefit and Earned Value Analysis (EVA) Execution and Control Plan (Quality Assurance) Protection of the Environment Risk Assessment and Management

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SOW and Scope

Statement of Work (SOW) – statement of work to be performed, justification describing the factors giving rise to need for project, expected duration (on time), total cost (budget), and performance standards (meeting expectations).

Scope – identification of boundaries and limitations on specific aspects of the project, including size, resources, work to be performed and performance standards

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Organizational Breakdown Structure (OBS)

Wilson Bridge Renovation ProjectAcme Construction Company

Organization Breakdown Structure (OBS)

Design ManagerJane Doe

Construction MgrBill Jones

Resources MgrJohn Henry

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

(Tasking)

Electrical MgrRene Flemming

Electrical MgrRene Flemming

Project ManagerBob Smith

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Responsibility Assignment Matrix

OBS leads to the responsibility assignment matrix (RAM)

RAM is a table or a chart showing which organizational units are responsible for work items.

Project Manager assigns work elements to organizationalunits, departments, groups, individuals or subcontractors.

RAM shows who is responsible for oversight (O), performance (P), and support (S) of each task

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Responsibility Assignment Matrix

ACME Construction CompanyWilson Bridge Renovation

Responsibility Assignment Matrix (RAM)

Key: O = Oversight, P = Performance, S = Support

Activity OBS Unit

Design Construction

Electrical Resources

1 – Design O, P S

2 - Acquire materials S O, P

3 - Prepare foundation O, P S S

4 - Set piles S O, P

5 - Construct piers PP

6 - Construct roadway PP

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Project Scheduling

Project Schedule evolves from planning documents, with focus on timely completion.

Scheduling is the source of most conflicts and problems.

Schedule development steps:

1. Define activities

2. Sequence activities,

3. Estimate activity times

4. Construct schedule.

Gantt chart and CPM/PERT techniques used.

Computer software packages available, e.g. Microsoft Project.

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Work Breakdown Structure (WBS)

Basis for project development, management , schedule, resources and modifications.

WBS breaks down project into major modules.

Modules are further broken down into activities and, finally, into individual tasks.

Identifies activities, tasks, resource requirements and relationships between modules and activities.

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Activity Schedule

ACME Construction CompanyWilson Bridge Renovation

Activity Schedule

ACTVITY PREDESSOR DURATION (months)

1 – Design -- 1414

2 - Acquire materials 11 11

3 - Prepare foundation 1 1

4 - Set piles 3 33

5 - Construct piers 44 88

6 - Construct roadway 55 44

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CPM/PERT

CPM – Critical Path Method

PERT – Project Evaluation and Review Technique

AON – Activity on Node

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A branch reflects an activity of a project.

A node represents the beginning and end of activities, referred to as events.

Branches in the network indicate precedence relationships.

When an activity is completed at a node, it has been realized.

CPM/PERT

Activity-on-Node (AON) Network

114

22

33

44

58

62STAR

T

FINISH

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Network aids in planning and scheduling.

Time duration of activities shown on branches.

Activities can occur at the same time (concurrently).

A dummy activity shows a precedence relationship but reflects no passage of time.

Two or more activities cannot share the same start and end nodes.

AON Concurrent Activities

112

22

33

44

58

62STAR

T

FINISH

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The critical path is the longest path through the network; the minimum time the network can be completed

Path A: 1 2 4 5 6

14 + 2 + 4 + 8 + 2 = 28 month

Path B: 1 3 4 5 6

14 + 3 + 4 + 8 + 2 = 29 months Critical Path

The Critical Path (CPM)

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Gantt Chart

Bar chart developed by Henry Gantt (1914).

A visual display of project schedule showing activity start and finish times and where extra time is available.

Based on Activity Schedule – order, duration, predecessors

Drawback: precedence relationships are not always discernible.

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Activity Early Start Schedule(for Gantt Chart)

ACME Construction CompanyWilson Bridge Renovation

Activity Schedule

ACTVITY EARLY START DURATION (months)

1 – Design 0 66

2 - Acquire materials 66 77

3 - Prepare foundation 12 1

4 - Set piles 13 66

5 - Construct piers 1919 88

6 - Construct roadway 2727 88

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Gantt Chart

Wilson Bridge Renovation Gantt Chart

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

1 Design

2 Acquire materials

3 Prepare foundation

4 Set piles

5 Construct piers

6 Construct roadway

Activ

ity

Duration (months)

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House Building Project Example

No. Activity Predecessor Duration (Months)

1. Design house and - 3 obtain financing

2. Lay foundation 1 2

3. Order Materials 1 1

4. Build house 2, 3 3

5. Select paint 2, 3 1

6. Select carpet 5 1

7. Finish work 4, 6 1

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The critical path is the longest path through the network; the minimum time the network can be completed.

Path A: 1 2 4 7,

3 + 2 + 3 + 1 = 9 month CPM

Path B: 1 2 5 6 7,

3 + 2 + 1 + 1 + 1 = 8 months

Path C: 1 3 4 7,

3 + 1 + 3 + 1 = 8 months

Path D: 1 3 5 6 7,

3 + 1 + 1 + 1 + 1 = 7 months

The Critical Path (CPM)

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Activity Early Start Times

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AON Earliest/Latest Times Configuration

1

1

0 3

1203

Earliest Start

Earliest Finish

Activity

Duration

Latest Start Latest Finish

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ES – Earliest Start time an activity can start: ES = Maximum (EF)

EF - Earliest Finish, start time plus the activity time: EF = ES + t

Activity Scheduling: Earliest/Latest Times

1

12

0 3

03

1

12

0 12

03

1

12

0 12

03

1

12

0 12

03

1

12

0 12

03

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Computer Network Example

Computer Network ProjectComputer Network Project

ActivityActivity

OptimisticOptimistic

(a)(a)

Most Most

ProbableProbable

(m)(m)

PessimisticPessimistic

(b)(b)

WeightedWeighted

Mean Time Mean Time (t)(t)

VarianceVariance

(v)(v)

1 – Equipment Installation1 – Equipment Installation 66 88 1010

2 – System Development2 – System Development 33 66 99

3 – Position Recruiting3 – Position Recruiting 11 33 55

4 – Equip testing & Mod4 – Equip testing & Mod 22 44 1212

5 – Manual Testing5 – Manual Testing 22 33 44

6 – Job Training6 – Job Training 33 44 55

7 – Orientation7 – Orientation 22 22 22

8 – System training8 – System training 33 1111

9 – System Testing9 – System Testing 22 44 66

10 – Final Debugging10 – Final Debugging 11 44 77

11 – System Changeover11 – System Changeover 11 1010 1313

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AON Probabilistic Times Configuration

1

2, 3, 5

Activity

Optimistic (a) Most likely (m) Pessimistic (b)

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AON Probabilistic Times

101,4,78

3,7,11

42,4,12

63,4,5

72,2,2

31,3,5

16,8,10

92,4,6

111,10,13

52,3,4

23,6,9

FINISHSTART

Computer Network Project

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Activity time estimates usually cannot be made with certainty.

PERT used for probabilistic activity duration times.

In PERT, three time estimates are used: most likely time (m), the optimistic time (a) , and the pessimistic time (b).

These provide an estimate of the mean and variance of a beta distribution:

• Weighted Mean (expected time):

• Variance:6

b 4m a t 2

6a - b

v

Probabilistic Activity Times

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Computer Network Example

Computer Network ProjectComputer Network Project

ActivityActivity

OptimisticOptimistic

(a)(a)

Most Most

ProbableProbable

(m)(m)

PessimisticPessimistic

(b)(b)

WeightedWeighted

Mean Time Mean Time (t)(t)

VarianceVariance

(v)(v)

1 – Equipment Installation1 – Equipment Installation 66 88 1010 88 .44 (4/9).44 (4/9)

2 – System Development2 – System Development 33 66 99 66 11

3 – Position Recruiting3 – Position Recruiting 11 33 55 33 .44 (4/9).44 (4/9)

4 – Equip testing & Mod4 – Equip testing & Mod 22 44 1212 55 2.78 (25/9)2.78 (25/9)

5 – Manual Testing5 – Manual Testing 22 33 44 33 .11 (1/9).11 (1/9)

6 – Job Training6 – Job Training 33 44 55 44 .11 (1/9).11 (1/9)

7 – Orientation7 – Orientation 22 22 22 22 1.78 (0)1.78 (0)

8 – System training8 – System training 33 1111 77 2.11 (16/9)2.11 (16/9)

9 9 – System Testing– System Testing 22 44 66 44 .44 (4/9).44 (4/9)

10 – Final Debugging10 – Final Debugging 11 44 77 44 1 (9/9)1 (9/9)

11 – System Changeover11 – System Changeover 11 1010 1313 99 4 (36/9)4 (36/9)

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Critical Path is the path with the longest mean time and is also the Expected Project Time (tp)

Probabilistic Activity TimesCritical Path

Path Mean Times

1 4 10 8 + 5 + 4 = 17 weeks

2 5 8 6 + 3 + 7 = 16 weeks

2 5 9 11 6 + 3 + 4 + 9 = 22 weeks CPM

3 6 8 3 + 4 + 7 = 14 weeks

3 6 9 11 3 + 4 + 4 + 9 = 20 weeks

3 7 11 3 + 2 + 9 = 14 weeks

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The Project Variance (vp) is the sum of the variances of the critical path activities.

Critical Path: 2 5 9 11

Project time: 6 + 3 + 4 + 9 = 22 weeks

Variance: .44 + .11 + 2.11 + 4 = 7.22 weeks

Standard Deviation: Sqrt of Variance = 2.69

Expected Project Time and Variance

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Expected project time (tp) is assumed to be normally distributed (based on central limit theorem).

As such, the expected project time (tp) and variance (vp) are interpreted as the mean () and variance (2) of a normal distribution

Probability Analysis of a Project Network

Time (Duration) = 22 weeks

Project time: 6+3+4+9 = 22 weeks

Variance: .44+.11+2.11+4 = 7.22 weeks

Std Dev: Sqrt 7.22 = 2.69

-3 = 13.93 weeks 3 = 30.07 weeks

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From Computer Network example:

Critical Path: 2 5 9 11

Project time: 6 + 3 + 4 + 9 = 22 weeks

Variance: .44 + .11 + 2.11 + 4 = 7.22 weeks

What is the probability that the new order processing system will be ready in 20 weeks?

µ = 22 weeks

2 = 7.22, therefore, = 2.69 weeks

Z = (x-)/ = (20 - 22)/2.69 = -.74

Probability Analysis of a Project NetworkExample 1

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Table of Areas (p-values)

+/- Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

0.00.10.20.30.40.50.60.70.80.91.01.11.21.31.41.51.61.71.81.92.02.12.22.32.42.52.62.72.82.93.0

0.00000.03980.07930.11790.15540.19150.22570.25800.28810.31590.34130.36430.38490.40320.41920.43320.44520.45540.46410.47130.47720.48210.48610.48930.49180.49380.49530.49650.49740.49810.4987

0.00400.04380.08320.12170.15910.19500.22910.26110.29100.31860.34830.36650.38690.40490.42070.43450.44630.45640.46490.47190.47780.48260.48640.48960.49200.49400.49550.49660.49750.49820.4987

0.00800.04780.08710.12550.16280.19850.23240.26420.29390.32120.34610.36860.38880.40660.42220.43570.44740.45730.46560.47260.47830.48300.48680.48980.49220.49410.49560.49670.49760.49820.4987

0.01200.05170.09100.12930.16640.20900.23570.26730.29670.32380.34850.37080.39070.40820.42360.43700.44840.45820.46640.47320.47880.48340.48710.49010.49250.49430.49570.49680.49770.49830.4988

0.01600.05570.09480.13310.17000.20540.23890.27040.29950.32640.35080.37290.39250.40990.42510.43820.44950.45910.46710.47380.47930.48380.48750.49040.4927049450.49590.49690.49770.49840.4988

0.01990.05960.09870.13680.17360.20880.24220.27340.30230.32890.35310.37490.39440.41150.42650.43940.45050.45990.46780.47440.47980.48420.48780.49060.49290.49460.49600.49700.49780.49840.4989

0.02390.06360.10260.14060.17720.21230.24540.27640.30510.33150.35540.37700.39620.41310.42790.44060.45150.46080.46860.47500.48030.48460.48810.49090.49310.49480.49610.49710.49790.49850.4989

0.02790.06750.10640.14130.18080.21570.24860.27940.30780.33400.35770.37900.39800.41470.42920.44180.45250.46160.46930.47560.48080.48500.48840.49110.49320.49490.49620.49720.49790.49850.4989

0.03190.07140.11030.14800.18440.21900.25170.28230.31060.33650.35990.38100.39970.41620.43060.44290.45350.46250.46990.47610.48120.48540.48870.49130.49340.49510.49630.49730.49800.49860.4990

0.03590.07530.11410.15170.18790.22240.25490.28500.31330.33890.36210.38300.40150.41770.43190.44410.45450.46330.47060.47670.48170.48570.48900.49160.49360.49520.49640.49740.49810.49860.4990

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Probability Analysis of a Project Network

Z value of -.74 corresponds to probability of .2704 (table of areas under the curve). Therefore, the probability of completing the project in 20 weeks is .5000 - .2704 = .2296.

Time (Duration)

P = .2704

.5 - .2704 = .2296

x - µ

Z =20 - 22

2.69=

= 22 weeks

Z= -.74 (20 weeks)

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Cost – Benefit Analysis

Given an amount of capital to invest, what is the cost and what is the benefit?

• Project Owner’s perspective ~ is the project worth doing, or do we invest in something else, like another project or the market?

• Project Manager’s perspective ~ what do I do with money waiting to be spent on the project – keep it in the bank, or invest it?

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Cost - BenefitProject – replace old computerized production

control system for an auto assembly plant

• The project will cost $3M over 3 years and save $7M over 10 years

• However, if we invest $3M over ten years, we make $8M, but lose $5M in extra costs from the outdated system

ITEMITEM BENEFITBENEFIT

($M)($M)COST COST

($M)($M)GAIN or (LOSS)GAIN or (LOSS)

(Benefit-Cost)(Benefit-Cost)

New New SystemSystem

7 (in savings)7 (in savings) 3 (install new 3 (install new system)system)

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Old Old SystemSystem

8 (from 8 (from investment)investment)

5 (using old 5 (using old system)system)

33

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Earned Value Analysis (EVA)

Measures progress of a project in terms of:

• Planned Value (PV) or Budgeted Cost Work Scheduled (BCWS) – what is supposed to be done

• Earned Value (EV) or Budgeted Cost, Work Performed (BCWP) – what has actually been done

• Actual Cost (AC) or Work Performed (ACWP) – actual labor and materials expended

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Earned Value - Example

Project: Build a deck

PV: 40 labor-hours x $20/hr = $800

+ $600 materials

$1,400 PV (BCWS)

Changes after work begun: Labor rate now $22/hr, materials price increase to $700, project only 95% completed after 40 hours

EV: 95% completed x $1,400 = $1,330 EV(BCWP)

AC: 40 hrs x $22/hr = $880 labor

+ 700 materials

$1,580 AC (ACWP)

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Earned Value

Should be proportionate to project time

Project TimeProject Time Monitoring Monitoring ScheduleSchedule

1 week1 week

1 month1 month

6 months6 months

> 6 months> 6 months

DailyDaily

Twice weeklyTwice weekly

WeeklyWeekly

MonthlyMonthly

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End of Chapter