- Explain the major activities associated with defining and organizing a project.
- Describe the procedure for constructing a project network.
- Develop the schedule of a project.
- Analyze cost–time trade-offs in a project network.
- Assess the risk of missing a project deadline.
- Identify the options available to monitor and control projects.
7 PROJECT MANAGEMENT
Burj Khalifa Case
Defining and Organizing Projects
Defining the Scope and Objectives of a Project
Selecting the Project Manager and Team
Recognizing Organizational Structure
A project is an interrelated set of activities with a definite starting and ending point,
which results in a unique outcome.
The three main goals of any project are (1) complete the project on time as per plan or earlier, (2) within the budgeted cost, and (3) meet the specifications to the satisfaction of the customer.
Project management is a systemized, phased approach to defining, organizing,
planning, monitoring, and controlling projects.
Definition of a project’s scope, time frame, and allocated resources are basic guidelines or guideposts to managing the project. These three specifications form part of the project’s objective statement. The scope specifies the major deliverables, the concrete outcomes of the project.
A project manager is put in charge of each project. The project manager has to play the roles of .
facilitator., communicator and decision maker.
The project team has to be developed and the characteristics to be considered in forming the team are:
▪ Technical Competence required for the tasks to which they will be assigned.
▪ Sensitivity to understand the team members, client team members and upper management personnel.
▪ Dedication to getting the project done in preference to maintaining a comfortable work schedule.
The organizational structure used can be functional, pure project or matrix.
Constructing Project Networks
Defining the Work Breakdown Structure
Diagramming the Network
After the project is defined and deliverables are specified along with time and cost estimates or preliminary plans, more detailed planning and organization are to be done. As part of organization, the project management team must formulize the specific work to be accomplished in various activities and the relationships between the activities in the project. The activity relations form a net work and the last event in the next work completes the project. Constructing a project network involves two steps: (1) defining the work breakdown structure, and (2) diagramming the network.
The work breakdown structure (WBS) is a statement of all work that has to be completed to deliver the project to the client.
An activity is the smallest unit of work effort consuming both time and resources. Project
manager can schedule and control the activities in projects under his management.As part of the organization and identifying activities. a hierarchical work components are developed that go up to the level of activities. breakdown. Major work components are broken down to smaller tasks
that ultimately are broken down to activities that are assigned to individuals.
Each activity must be given to an “owner” who is responsible for managing and executing the work. Activity ownership avoids confusion in the execution of activities and assigns responsibility for timely completion.
Network planning methods are available. The project and its set of interrelated activities can be visually displayed in a network diagram. It consists of nodes (circles) and arcs (arrows) that depict the relationships between activities. Two popular network planning methods are the program evaluation and review tech nique (PERT) and the critical path method (CPM) In the book, there is common discussion of both the methods.
Benefits to project managers – Network Planning
1. . This process also provides a forum for managers of different functional areas to discuss the nature of the various activities and their resource requirements.
2. Networks enable project managers to estimate the completion time of projects and in planning other events and in conducting contractual negotiations with customers and suppliers.
3. Project network plan highlights the activities that are crucial to completing projects on
schedule. It also indicates activities that may be delayed without affecting completion dates,
thereby freeing up resources for other, more critical activities.
4. Network methods enable project managers to analyze the time and cost implications of resource
In developing the diagram of project network, precedence and parallel relationships among activies are identified. Estimates of activity times are done from past data, enquiries with suppliers and contractors and other estimation methods.
Developing the Project Schedule
Using the project network, managers can (1) estimate the completion time of a project by finding the critical path, (2) identify the start and finish times for each activity for a project schedule, and (3) calculate the amount of slack time for each activity.
The critical path is the sequence of activities between a project’s start and finish that takes the longest time to complete. If one of the activities on the critical path is delayed, the entire project will be delayed.
The typical objective can be to finish the project as early as possible as determined by the critical path. The complete project schedule is specified by specifying the the start and finish times for each activity. For any activity, managers can use the earliest start or the latest start time or times in between these two extremes if the activity is not on the critical path.
The maximum length of time that an activity can be delayed without delaying the entire project is called activity slack. Activities on the critical path have zero slack.
Gantt Chart: After the network plan is created, the schedule can be shown on a Gantt chart which gives the activity plan over the time.
Analyzing Cost–Time Trade-Offs
Cost to Crash
Keeping costs at acceptable levels is almost always as important as meeting schedule dates. The
PERT/CPM methods are used to obtain minimum-cost schedule also. Activities can often
be completed earlier than scheduled by hiring more resources including workers and running extra shifts. Such actions could be advantageous if savings or additional revenues accrue from completing the project early or by due date by incurring extra cost in some activities. Total project costs are the sum of direct costs, indirect costs, and penalty costs. . Direct costs include labor, materials, and any other costs directly
related to project activities. Indirect costs include administration, depreciation, financial, and other variable overhead costs that can be avoided by reducing total project time: Increasing the project duration means additional indirect costs and penalty costs. Therefore, a project manager may consider crashing, or expediting, some activities by incurring extra direct costs at any time to meet deadline or to reduce overall project delay and total project costs.
Cost to Crash
To assess the benefit of crashing certain activities—from either a cost or a schedule perspective—the
project manager needs to know the following times and costs:
1. The normal time (NT) is the time necessary to complete an activity under normal conditions.
2. The normal cost (NC) is the activity cost associated with the normal time.
3. The crash time (CT) is the shortest possible time to complete an activity.
4. The crash cost (CC) is the activity cost associated with the crash time.
The minimum possible project duration can be found by using the crash times of each activity for
scheduling purposes. However, the cost of that schedule could be prohibitive. Project managers are most interested in minimizing the costs of their projects so that budgets are not exceeded. In determining the minimum-cost schedule, start with the normal time schedule and crash activities along the critical path, whose length equals the length of the project. Project managers has to determine how much crash costs can be increased without exceeding the savings in indirect and penalty costs.
Assessing and Analyzing Risks
Managerial Practice 7.1 San Francisco—Oakland Bay Bridge
Often, in projects there is uncertainty caused by labor shortages, weather, supply delays, or the outcomes of critical tests. Risk management tools can be used to analyze the risks, such as simulation and statistical analysis, which enable managers to estimate the probability of completing a project on time and the potential for near-critical paths to affect the project completion time.
A major responsibility of the project manager at the start of a project is to develop a risk-management
plan, which identifies the key risks to a project’s success and prescribes ways to prevent them or or contingency plans to manage them when they occur. A good risk-management plan will quantify the risks, predict their impact on the project, and provide contingency plans.
Project risk can occur in four categories:
▪ Strategic Fit The project may not be a good strategic fit in that it may not be clearly linked to the
strategic goals of the firm.
▪ Service/Product Attributes If the project involves the development of a new service or product,
there may be market, technological, or legal risks. There is a chance that competitors may offer a
superior product or a technological discovery may render the service or product obsolete before it
even hits the market. There may also be a legal risk of potential lawsuits or liability that could force
a design change after product development has begun.
▪ Project Team Capability The project team may not have the capability to complete the project successfully because of the size and complexity of the project or the technology involved.
▪ Operations There may be an operations risk because of poor information accuracy, lack of communication, missing precedence relationships, or bad estimates for activity times.
Operations risks are discussed in this chapter.
The statistical analysis approach requires that activity times be stated in terms of three reasonable time estimates:
1. The optimistic time (a) is the shortest time in which an activity can be completed, if all goes exceptionally well.
2. The most likely time (m) is the probable time required to perform an activity.
3. The pessimistic time (b) is the longest estimated time required to perform an activity
The pessimistic time estimate given the loss of time if the negative events occur. Contingency plans can be formulated for each negative event anticipated in the pessimistic time estimate.
Monitoring and Controlling Projects
Monitoring Project Status
Monitoring Project Resources
Monitoring and Controlling Projects
Once project planning is over, the execution challenge is to keep the project on schedule
within the budget of allocated resources.
Monitoring Project Status
Effective tracking systems collect information on three topics: (1) open issues, (2) risks, and
(3) schedule status.
Monitoring Project Resources
Experience has shown that the resources allocated to a project are consumed at an uneven rate that is a function of the timing of the schedules for the project’s activities. Project
managers have several options to make resource use more uniform and optimal .
▪ Resource Leveling. The attempt to reduce the peaks and valleys in resource needs by shifting the schedules of conflicting activities within their earliest and latest start dates. Software packages such as MS Project have algorithms that move activities to avoid violating resource constraints.
▪ Resource Allocation. The assignment of resources to the most important activities. Most popular
project management software packages have a few priority rules that can be used to decide which
activity a critical resource should be scheduled to perform when conflicts arise. For example, for all
the activities requiring a given resource, assign the resource to the one with the earliest start time.
An activity slack report identifies potential candidates for resource shifting—shift resources from
high slack activities to those behind schedule.
▪ Resource Acquisition. The addition of more of an overloaded resource to maintain the schedule of
Project managers have the responsibilities of accounting for the effective use of the firm’s resources
as well as managing the activities to achieve the time and quality goals of the project. The firm’s assets include the physical assets, human resources, and financial resources. Physical assets need to have timely maintenance of machines and equipment so that their failure does not delay the project. Inventories must be received, stored for future use, and replenished. Project managers are also
responsible for human resource development. Last, but not least, project managers must control
the expenditures of the firm’s financial resources. Most project management software packages contain accounting reports, budget reports, capital investment controls, and cash flow reports. Deviations from the project plan, often referred to as variances, must be periodically reported and analyzed for their causes.
Monitoring and controlling projects are ongoing activities throughout the execution phase of the
project life cycle till the project close out.
In the final phase of project management after the output of the project is delivered to the client, writing final reports is done. An important aspect of this phase is compiling the team’s recommendations for improving the project process of which they were a part. These observations are used in other projects where they apply.
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