UNIVERSITY OF SAN CARLOS – BA DEPARTMENT –

OPERATIONS MANAGEMENT CLUSTER

PROJECT
MANAGEMENT
CBA OM-PM

Glenn Java
8-21-2020
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PROJECT MANAGEMENT
CBA OM-PM

LEARNING OBJECTIVES

After completing this course, students will be able to:

1. Understand how to plan, monitor, and control projects with the use of PERT
and CPM.
2. Determine earliest start, earliest finish, latest start and latest finish, and slack
times for each activity, along with the total project completion time.
3. Reduce total project time at the least total cost by crashing the network using
manual or linear programming techniques.
4. Understand the important role of software in project management.

COURSE OUTLINE

1. Introduction
2. PERT/CPM
3. PERT/Cost
4. Project Crashing
5. Other Topics in Project Management

1. INTRODUCTION

Almost every industry worries about how to manage similar large-scale,

complicated projects effectively. It is a difficult problem, and the stakes are high.
Millions of pesos in cost overruns have been wasted due to poor planning of
projects. Unnecessary delays have occurred due to poor scheduling. How can such
problems be solved? (Note: Project management can be used to manage complex
projects)

The first step in planning and scheduling a project is to develop the work
breakdown structure. This involves identifying the activities that must be
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performed in the project. An activity is a job or task that is a part of a project. The
beginning or the end of an activity is called an event.

There may be varying levels of details, and each activity may be broken into its
most basic components. The time, cost, resources requirements, predecessors, and
person(s) responsible are identified for each activity. When this has been done, a
schedule for the project can be developed.

The program evaluation and review technique (PERT) and the critical path
method (CPM) are two popular quantitative analysis techniques that help
managers plan, schedule, monitor, and control large and complex projects. They
were developed because there was a critical need for a better way to manage.
(Note: PERT is probabilistic, whereas CPM is deterministic)

When they were first developed, PERT and CPM were similar in their basic
approach, but they differed in the way activity times were estimated. For every
PERT activity, three times estimates are combined to determine the expected
activity completion time. Thus, PERT is a probabilistic technique. On the other
hand, CPM is a deterministic method since it is assumed that the times are known
with certainty. While these differences are still noted, the two techniques are so
similar that the term PERT/CPM is often to describe the overall approach. This
reference is used in this course, and differences are noted where appropriate.

There are six steps common to both PERT and CPM. The procedure follows:

1. Define the project and all of its significant activities or tasks.

2. Develop the relationships among the activities. Decide which activities
must precede others.
3. Draw the network connecting all of the activities.
4. Assign time and/or cost estimates to each activity.
5. Compute the longest time path through the network; that is called the
critical path.
6. Use the network to help plan, schedule, monitor, and control the project.
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Finding the critical path is a major part of controlling a project. The activities in
the critical path represent tasks that will delay the entire project if they are delayed.
Managers derive flexibility by identifying noncritical activities and planning,
rescheduling, and reallocating resources such as personnel and finances. (Note: the
critical path is important because activities on the critical path can delay the
entire project)

2. PERT/CPM

Almost any large project can be subdivided into a series of smaller activities or
tasks that can be analyzed with PERT/CPM. When you recognize that projects can
have thousands of specific activities, you can see why it is important to be able to
answer questions such as the following:

1. When will the entire project be completed?

2. What are the critical activities or tasks in the project, that is, the ones that
will delay the entire project if they are late?
3. Which are the non-critical activities, that is, the ones that can run late
without delaying the entire project’s completion?
4. If there are three-time estimates, what is the probability that the project will
be completed by a specific date?
5. At any particular date, is the project on schedule, behind schedule, or ahead
of schedule?
6. On any given date, is the money spent equal to, less than, or greater than the
budget amount?
7. Are there enough resources available to finish the project on time?

Example of PERT/CPM: Five Star Foundry

The Five Star Foundry, Inc. a metalworks plant in Batangas, has long been trying
to avoid the expense of installing air pollution control equipment. The Regional
Department of Environmental and Natural Resources (DENR) has recently given
the foundry 16 weeks to install a complex air filter system on its make smokestack.
General Foundry was warned that it will be forced to close down its entire
operations unless the device is installed during the allotted grace period. Eduardo
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Givenchy, the owner, wants to make sure that installation of the filtering system
progresses smoothly and according to schedule.

When the project be the project began, the building of the internal components for
the device (activity A) and the modifications that are necessary for the floor and
roof (activity B) was started. The construction of the collection stack (activity C)
can begin once the internal components are completed, and pouring of the new
concrete floor and installation of the frame (activity D) can be completed as soon
as the roof and floor have been modified. After the collection stack has been
constructed, the high-temperature burner can be built (activity E), and the
installation of the pollution control system (activity F) can begin. The air pollution
device can be installed (activity G) after the high-temperature burner built, the
concrete floor has been poured, and the frame has been installed. Finally, after the
control system and pollution device have been installed, the system can be
inspected and tested (activity H).

All of these activities seem rather confusing and complex until they are placed in a
network. First, all of the activities must be listed and written down. This
information is shown in Table 1. We see in the table that before the collection
stack can be constructed (activity C), the internal components must be built
(activity A). thus, activity A is the immediate predecessor of activity C. Similarly,
both activities D and E must be performed just prior to installation of the air
pollution device (activity G). (Note: Immediate predecessors are determined in the
second step.)

Table 1: Activities and immediate Predecessors for Five Star foundry, Inc.

Immediate
Activity Description
Predecessor
A Build internal components -
B Modify roof and floor -
C Construct collection stack A
D Pour concrete and install frame B
E Built high-temperature burner C
F Install control system C
G Install air pollution device D, E
H Inspect and test F, G
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Drawing the PERT/CPM Network

Once the activities have all been specified (step 1 of the PERT procedure) and
management has decided which activities must precede other (step 2), the network
can be drawn (step 3).

There are two common techniques for drawing PERT networks. The first is called
activity-on-node (AON) because the nodes represent the activities. The second is
called activity-on-arc (AOA) because the arcs are used to represent the activities.
We present the AON technique, as this is easier and is often used in commercial
software.
In constructing an AON network, there should be one node representing the start of
the project and one node representing the finish of the project. There will be one
node (represented as a triangle in this discussion) for each activity. Figure 1 gives
the entire network for Five Star Foundry. The arcs (arrows) are used to show the
predecessors for the activities. For example, the arrows leading into activity G
indicate that both D and E are immediate predecessors for G.
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MODELING IN THE REAL WORLD: PERT Helps changes the Face of Philippine
Airlines

Defining the Problem

Defining the
Philippine Air Lines wanted to rejuvenate it imagine using design consultants to help develop a new identity.
Problem The “makeover” was to be completed in all areas of PAL public image as quickly as possible.

Developing a Model
Developing a
Using a computerized project management package – PERTMASTER from Abex Software – a BA team
Model constructed a PERT model of tasks involved.

Acquiring Input Data

Acquiring
Data are collected from each department involved. Printers were asked to develop time estimates for new
Input Data company stationary, tickets, timetables, and baggage tags; clothing suppliers for uniforms; and Boeing Corp. for
all the tasks involved in remaking the inside and outside of PAL’s jets.

Developing a Developing a Solution

Solution All the data were entered into PERTMASTER for a schedule and critical path.

Testing the
Testing the Solution
The resulting schedule did not please PAL management. Boeing could not prepare a huge 747 in time for a
Solution
December 4 gala launch date. Uniform designs were also going to delay the entire project.

Analyzing the Analyzing the Results

Results An analysis of the earliest possible date that all items for a refurbished airplane could be ready (new paint,
upholstery, carpets, trim, and so on) revealed that there were just sufficient materials to totally convert a
smaller Boeing 737 that was available in the Terminal Hangar. Critical path analysis also showed that uniforms
=the work of Filipino designer would have to be launched six month later in a separate ceremony.

Implementing Implementing the Results

the Results The smaller 737 was outfitted just in time for a brilliant light show in an auditorium specially built in a Terminal
3 Hangar. Ground vehicles were also prepared in time.
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FIGURE 1: Network for Five Star Foundry, Inc.

A C F
Build internal CONSTRUCT Install Control
components Collection stack System

E H
Start Inspect and Finish
Build Burner
Test

B D G
Modify roof Pour Concrete Install Pollution
and install Frame Device
and floor

Activity Times

The next step in both CPM and PERT is to assign estimate of the time required to
complete each activity. For some projects, such as construction projects, the time
to complete each activity may now be known with certainty. The developers of
CPM assigned just one time estimate to each activity. These times are then used to
find the critical path, as described in the sections that follow.

However, for one-of-a-kind projects or for new jobs, providing activity time
estimates is not always an easy task. Without solid historical data, managers are
often uncertain about the activity times. For this reason, the developers of PERT
employed a probability distribution based on three time estimates for each activity.
A weighted average of these times is used with PERT in place of the single time
estimate used with CPM, and these averages are used to find the critical path. The
time estimate in PERT are:
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Optimistic time (a) = time an activity will take if everything goes as well as
possible. There should be only a small probability (say, 1/100) of
this occurring.

Pessimistic time (b) = time an activity would take assuming very unfavorable
conditions. There should also be only a small probability that the
activity will really take this long.

Most likely time (m) = most realistic time estimate to complete the activity.

PERT often assumes that time estimates follow the beta probability distribution
(see Figure 2)

Probability of 1 in 100 of
(a) Occurring
Probability of 1 in 100 of
Probability (b) Occurring

Most Most Most

Optimistic Likely Pessimistic
Time Time Time

(a) (m) (b)

This continuous distribution has been funded to be appropriate, in many cases, for
determining an expected value and variance for activity completion times.

To find the expected activity time (t), the beta distribution weights the estimates
as follows:

a+ 4 m+ b
t= (Eq. 1)
6
To compute the dispersion or variance of activity completion time, we use this
formula:
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( )
2
b−a
Variance = 6
(Eq. 2)

Table 2 shows Five Star Foundry’s optimistic, most likely, and pessimistic time
estimates for each activity. It also reveals the expected time (t) and variance for
each of the activities, as computed with Equation 1 and 2.

How to Find the Critical Path

Once the expected completion time for each activity has been determined, we
accept it as the actual time of that task. Variability in times will be considered later.

Although Table 2 indicates that the total expected time for all eight of Five Star
Foundry’s activities is 25 weeks, it is obvious in Figure 3 that several of the tasks
can be taking place simultaneously. To find out just how long the project will take,
we perform the critical path analysis for the network.

TABLE 2: Time Estimate (Weeks) for Five Star foundry, Inc.

VARIANCE
Most EXPECTED
( )
2
OPTIMISTIC Probable PESSIMISTIC b−a
TIME
ACTIVITY a m b t = [(a + 4m+b)/6] 6

( 3−1 )
2
4
A 1 2 3 2 =
6 36

( 4−2
6 ) 36
2
4
B 2 3 4 3 =

( 3−1 )
2
4
C 1 2 3 2 =
6 36

( 6 ) 36
2
6−2 16
D 2 4 6 4 =

( 7−1 )
2
36
E 1 4 7 4 =
6 36

( 9−1 )
2
64
F 1 2 9 3 =
6 36

( 11−3 )
2
64
G 3 4 11 5 =
6 36
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H 1 2 3 2 ( )
3−1 2 4
6
=
36
25 weeks

The critical path is the longest time path route through the network. If Eduardo
Givenchy wants to reduce the total project time for Five Star Foundry, he will have
to reduce the length of some activity on the critical path. Conversely, any delay of
an activity on the critical path will delay completion of the entire projects. (Note:
The fifth step is to compute the longest path through the network -the critical path)

FIGURE 3: Five Star Foundry’s Network with Expected Activity Times

A C 2 F 3

E 4 H 2
Start Finish

B 3 D 4 G 5

To find the critical path, we need to determine the following quantities for each
activity in the network:

1. Earliest start time (ES): the earliest time an activity can begin without
violation of immediate predecessor requirements.
2. Earliest finish time (EF): the earliest time at which an activity can end.
3. Latest start time (LS): the latest time an activity can begin without
delaying the entire project.
4. Latest finish time (LF): the latest time an activity can end without delaying
the entire project.
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In the network, we represent these times as well as the activity times (t) in the
nodes, as seen here:

ACTIVITY t
ES EF
LS LF

We first show how to determine the earliest times. When we find these, the latest
times can be computed.

EARLIEST TIMES There are two basic rules to follow when computing ES
and EF times. The first rule is for the earliest finish time, which is computed as
follows:

Earliest finish time = Earliest start time + Expected activity time

EF = ES + t (Eq. 3)

Also, before any activity can be started, all of its predecessor activities must be
completed. In other words, we search for the largest EF for all of the immediate
predecessors in determining ES. The second rule is for the earliest start time, which
is computed as follows:

Earliest start = Largest of the earliest finish times of immediate

predecessors

ES = Largest EF of immediate predecessors

The start of the whole project will be set at zero. Therefore, any activity that has no
predecessors will have an earliest start time of zero.so, ES = 0 for both A and B in
the Five Star Foundry problem.as seen here:

A t=2
ES = 0 EF = 0 + 2= 2
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Start

B t=3
ES = 0 EF = 0 + 3= 3
Note: the earliest times are found by beginning at the start of the project and
making a forward pass through the network.

The rest of the earliest times for Five Star are shown in Figure 4. These are found
using a forward pass through the network. At each step, EF = ES + t, and ES is
the largest EF of the predecessors. Notice that activity G has an earliest start time
of 8 since both D (with EF = 7) and E (with EF = 8) are immediate predecessors.
activity cannot start until both predecessors are finished, and so we choose the
larger of the earliest finish times for theses. Thus, G has ES = 8. The finish time for
the project will 15 weeks, which is the EF for activity H.

FIGURE 4: Five Star Foundry’s Earliest Start (ES) and Earliest Finish (EF)
Times

A C 2 F 3
0 2 4 4 7
2

E 4 H 2
Start 13 Finish
4 8
15

B 3 D 4 G 5
0 3 2 6 8

LATEST TIMES
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The next step in finding the critical path is to compute the latest start time (LS) and
the latest finish time (LF) for each activity. We do this by making a backward
pass through the network, that is starting at the finish and working backward.

There are two basic rules to follow when computing the latest times. The first rule
involves the latest start time, which is computed as

Latest start time = Latest finish time - Activity time

LS = LF – t (Eq. 4)

Also, since all immediate predecessors must be finished before an activity can
begin, the latest start time for an activity determines the latest finish time for its
immediate predecessors. If an activity is the immediate predecessor for two or
more activities, it must be finished so that all following activities can begin by their
latest start times. Thus, the second rule involves the latest finish time, which is
computed as

Latest finish time = Smallest of latest start times for following

activities, or
LF = Smallest LS of following activities
(Note: The LF is the smallest LS of the activities that immediately follow.)

To compute the latest times, we start at the finish and work backwards. Since the
finish time for the Five Star Foundry project is 15, activity H has LF = 15. The
latest start for activity H is

LS = LF – t = 15 – 2 = 13 weeks

Continuing to work backward, this latest start time of 13 becomes the latest finish
time for immediate predecessors F and G. All of the latest times are shown in
figure 5. Notice that for activity C, which is the immediate predecessor for two
activities (E and F), the latest finish time is the smaller of the latest start times (4
and 10) for activities E and F.
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CONCEPT OF SLACK IN CRITICAL PATH COMPUTATIONS

When ES, LS, EF, and LF have been determined, it is a simple matter to find the
amount of slack time, or free time, that each activity has. Slack is the length of
time an activity can be delayed without delaying the whole project.
Mathematically,

Slack = LS – ES or Slack = LF – EF (Eq.

5)

Table3 summaries the ES, EF, LS, LF, and slack times for all of Five Star
Foundry’s activities. Activity B, for example, has 1 week of slack time since LS –
ES = 1 - 0 = 1 (or, similarly, LF – EF = 4 – 3 = 1). This means that it can be
delayed up to 1 week without causing the project to run any longer than expected.

FIGURE 5: Five Star Foundry’s Latest Start (LS) and Latest Finish (LF)
Times

A C 2 F 3
0 2 4 4 7
2

E 4 H 2
Start 13 Finish
4 8
15

B 3 D 4 G 5
0 3 2 6 8

Table 3: Five Star Foundry’s Schedule and Slack Times

EARLIEST START EARLIEST FINISH LATEST START LATEST FINISH SLACK ON CRITICAL
ACTIVITY ES EF LS LF LS - ES PATH?
A 0 2 0 2 0 Yes
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B 0 3 1 4 1 No
C 2 4 2 4 0 Yes
D 3 7 4 8 1 No
E 4 8 4 8 0 Yes
F 4 7 10 13 6 No
G 8 13 8 13 0 Yes
H 13 15 13 15 0 Yes
FIGURE 6: Five Star Foundry’s Critical Path (A-C-E-G-H)

A C F 3
0 2 4 4 7
2
0 2 2 4 10
13

E H 2
Start 13 Finish
4 8
15
4 8 13

B 3 D 4 G 5
0 3 3 7 8
1 4 4 8 8 13

(Note: Critical activities have no slack time.)

On the other hand, activities A, C, E, G, and H have no slack time; this means that
some of them can be delayed without delaying the entire project. Because of this,
they are called critical activities and are used to be on the critical path. Eduardo
Givenchy ‘s critical path is shown in network form in Figure 6. The total project
completion time (T), 15 weeks, is seen as the largest number in the EF or LF
columns of Table 3. Industrial managers call this a boundary timetable.

PROBABILITY OF PROJECT COMPLETION

The critical path analysis helped us determine that the factory’s expected project
completion time is 15 weeks. Eduardo knows, however, that if the projects is not
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completed in 16 weeks, Five Star Foundry will be forced to close by the DENR.
He is also aware that there is significant variation in the time estimates for several
activities. Variation in activities that are on the critical path can affect overall
project completion – possibly delaying it. This is one occurrence that worries
Eduardo considerably.

PERT uses the variance of critical path activities to help determine the variance of
the overall project. If the activity times are statistically independent, the project
variance is computed by summing the variances of the critical activities:

Project variance = ∑ variances of activities on the critical path

(Eq. 6)

From Table 2 we know that

CRITICA
L
ACTIVIT VARIANC
Y E
4
A 36
4
C 36
36
E 36
64
G 36
4
H 36

Hence, the project variance is

4 4 36 64 4 112
Project variance = 36 + 36 + 36 + 36 + 36 = 36 = 3.111

Figure 7: Probability Distribution for Project Completion Times

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Standard Deviation = 1.76 Weeks

15 Weeks
(Expected Completion Time)

We know that the standard deviation is just the square root of the variance, so

Project standard deviation = σT = 2 √ Project variance

= 1 √ 3.11 = 1.76 weeks

How can this information be used to help answer questions regarding the
probability of finishing the project on time? In addition to assuming that the
activity times are independent, we also assume that total project completion time
follows a normal probability distribution. With these assumptions, the bell-shaped
curve shown in Figure 7 can be used to represent project completion dates. It also
means that there a 50% chance that the entire project will be completed in less than
the expected 15 weeks and a 50% chance that it will exceed the 15 weeks. You
should be aware that noncritical activities also have variability (as shown in Table
2).in fact, a different critical path can evolve because of the probabilistic situation.
This may also cause the probability estimates to be unreliable. In such instances, it
is better to use simulation to determine the probabilities.

For Eduardo to find the probability that this project will be finished on or before
the 16-week deadline, he needs to determine the appropriate area under the normal
curve. The standard normal equation can be applied as follows:

Due date−Expected date of completion

Z= σT (Eq. 7)

16 weeks−15 weeks
Z= 1.76 weeks
= 0.57
where
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Z is the number of standard deviations the due date or target date lies
from the mean or expected date.

Referring to the normal table in Appendix A, we find a probability of 0.71566.

thus, there is a 71.6% chance that the pollution control equipment can be put in
place in 16 weeks or less. This is shown in Figure 8.

Figure 8: Probability of Five Star Foundry’s Meeting the 16-week Deadline

Expected Time is 15 Weeks 0.57 Standard Deviations

Probability (T≤ 16 weeks)

is 71.6%

15 16 Time
Weeks Weeks

What PERT Was Able to Provide

PERT has thus far been able to provide Eduardo Givenchy with several valuable
pieces of management information:

1. The project’s expected completion date is 15 weeks.

2. There is a 71.6% chance that the equipment will be in place within the 16-
week deadline. PERT can easily find the probability of finishing by any date
Eduardo is interested in.

3. Five activities (A, C, E, G, H) are on the critical path. If any one of them is
delayed for any reason, the entire project will be delayed.
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4. Three activities (B, D, F) are critical but have some slack time build in. this
means that Eduardo can borrow from their resources, if needed, possibly to
speed up the entire project.

5. A detailed schedule of activity starting and ending dates has been made
available (see Table 3)

Sensitivity Analysis and Project Management

During any project, the time required to complete an activity can vary from the
projected or expected time. If the activity is on the critical path, the total project
completion time will change, as discussed previously. In addition to having an
impact on the total project completion time, there is also an impact on the earliest
start, earliest finish, latest start, latest finish, and slack times for other activities.

In previous sections we define an immediate predecessor activity as an activity that

comes immediately before a given activity. In general, a predecessor activity is one
that must be completed before the given activity can be started. Consider activity
G (install pollution device) for the Five Star Foundry example. As seen previously,
this activity is on the critical path. Predecessor activities are A, B, C, D, and E. All
of these activities must be completed before activity G can be started. A successor
activity is an activity that can be started only after the given activity is finished.
Activity H is the only successor activity for activity G. A parallel activity is an
activity that does not directly depend on the given activity. Again, consider activity
G. Are there any parallel activities for this activity? Looking at the network for
Five Star Foundry, it can be seen that activity F is a parallel activity of activity G.

After predecessor, successor, and parallel activities have been defined, we can
explore the impact that an increase (decrease) in an activity time for a critical path
activity would have on other activities in the network. The results are summarized
in Table 4. If the time it takes to complete activity G increases, there will be an
increase in the earliest start, earliest finish, latest start, and latest finish times for all
successor activities. Because these activities follow activity G, these times will
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increase. Because slack time is equal to latest finish time minus the earliest finish
time (or the latest start time minus earliest time: LF – EF or LS – ES), there will be
no change in the slack for successor activities. Because activity G is on the critical
path, an increase in activity time will increase the total project competition time.
This would mean that the latest start, and slack time will also increase for all
parallel activities. You can prove this to yourself by completing a backward pass
through the network using a higher total project competition time. There are no
changes for predecessor activities.

Table 4. Impact of an Increase (Decrease) in an Activity Time for a Critical

Path Activity

ACTIVITY SUCCESSOR PARALLEL PREDECESSOR

TIME ACTIVITY ACTIVITY ACTIVITY
Earliest start Increase (decrease) No change No change
Earliest finish Increase (decrease) No change No change
Latest start Increase (decrease) Increase (decrease) No change
Latest finish Increase (decrease) Increase (decrease) No change
Slack No change Increase (decrease) No change

3. PERT/Cost

Using PERT/Cost to plan, schedule, monitor, and control project cost helps
accomplish the sixth and final step of PERT.

Although PERT is an excellent method of monitoring and controlling project

length, it does not consider another especially important factor, project cost.
PERT/Cost is a modification of PERT that allows a manager to plan, schedule,
monitor, and control cost as well as time.

We begin this section by investigating how costs can be planned and scheduled.
Then we see how costs can be monitored and controlled.

Planning and Scheduling Costs: Budgeting Process

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The overall approach in the budgeting process of a project is to determine how

much is to be spent every week or month. This is accomplished as follows:

Four Steps of the Budgeting Process

1. Identify all costs associated with each of the activities. Then add these costs
together to get one estimated cost or budget for each activity.

2. If you are dealing with a large project, several activities can be combined
into large work packages. A work package is simply a logical collection of
activities. Since the Five Star Foundry project we have been discussing is
mall, one activity will be a work package.

3. Convert the budgeted cost per activity into cost per time period. To do this,
we assume that the cost of completing any activity is spent at a uniform rate
over time. Thus, if the budgeted cost per week is P12,000 (=P48,000/4
weeks).

4. Using the earliest and latest start times, find out how much money should be
spent during each week or month to finish the project by the date desired.

BUDGETING FOR FIVE STAR FOUNDRY

Let us apply this budgeting process to the Five Star Foundry problem. The Gantt
chart for this problem, shown in Figure 9, illustrates this process. In this chart, a
horizontal bar shows when each activity will be performed based on the earliest
times. To develop a budget schedule, we will determine how much will be spent on
each activity during each week and fill these amounts into the chart in place of the
bars. Eduardo Givenchy has carefully computed the costs associated with each of
his eight activities. He has also divided the total budget for each activity by the
activity’s expected completion time to determine the weekly budget for the
activity. The budget for activity A, for example, is P22,000 (see Table 5). Since its
expected time (t) is 2 weeks, P11,000 is spent each week to complete the activity.
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Table 5 also provides two pieces of data we found earlier using PERT: the earliest
start time (ES) and latest start time (LS) for each activity.

Looking at the total of the budgeted activity costs, we see that the entire project
will cost P308,000. Finding the weekly budget will help Eduardo Givenchy
determine how the project is progressing on a week-to-week basis.

The weekly budget for the project is developed from the data in Table 5. The
earliest start time for activity A, for example, is 0. Because A takes 2 weeks to
complete, its weekly budget of P11,000 should be spent in weeks 1 and 2. For
activity B, the earliest start time is 0, the expected completion time is 3 weeks, and
the budget cost per week is P10,000. Thus, P10,000 should be spent for activity B
in each of weeks 1, 2, and 3. Using the earliest start time, we can find the exact
weeks during which the budget for each activity should be spent. These weekly
amounts can be summed for all activities to arrive at the weekly budget for the
entire project. This is shown in Table 6. Notice the similarities between this chart
and the Gantt chart shown in Figure 9.

Do you see how the weekly budget for the project (total per week) is determined in
Table 6? The only two activities that can be performed during the first week are
activities A and B because their earliest start times are0. Thus, during the first
week, a total of P21,000 should be spent. Because activities A and B are still being
performed in the second week, a total of P21,000 should also be spent during that
period. The earliest start time for activity C is at the end of week 2 (ES = 2 for
activity C). thus, P13,000 is spent on activity C in both week 3 and 4. Because
activity B is also being performed during week 3, the total budget in week 3 is
P23,000. Similar computations are done for all activities to determine the total
budget for the entire project for each week. Then these weekly totals can be added
to determine the total amount that should be spent to date (total to date). This
information is displayed in the bottom row of the table.

Those activities along the critical path must spend their budgets at the times shown
in Table 6. The activities that are not on the critical path, however, can be started at
a later date. This concept is embodied in the latest starting time, LS, for each
activity. Thus, if latest starting times are used, another budget can be obtained.
 P a g e | 23

This budget will delay the expenditure of funds until the last possible moment. The
procedures for computing the budget when LS is used are the same as when ES is
used. The results of the new computation are shown in Table 7.

Compare the budgets given in Table 6 and 7. The amount that should be spent to
date (total to date) for the budget in Table 7 uses fewer financial resources in the
first few weeks. This is because this budget is prepared using the latest start times.
Thus, the budget in Table 7 shows the latest possible time that funds can be
expended and still finish the project on time.

FIGURE 9: Gantt Chart for Five Star Foundry Examples

A
B
Activity
C
D
E
F
G
H
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Week
TABLE 5: Activity Cost for Five Start Foundry, Inc.

EARLIEST LATEST TOTAL BUDGETED

START TIME, START TIME, EXPECTED BUDGETED COST PER
ACTIVITY ES LS TIME, t COST (Php) WEEK (Php)
A 0 0 2 22,000 11,000
B 0 1 3 30,000 10,000
C 2 2 2 26,000 13,000
D 3 4 4 48,000, 12,000
E 4 4 4 56,000 14,000
F 4 10 3 30,000 10,000
G 8 8 5 80,000 16,000
H 13 13 2 16,000 8,000
TOTAL 308,000

TABLE 6: Budget Cost (Thousands of Pesos) for Five Star foundry Inc., Using Earliest Start Times
 P a g e | 24

ACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 TOTAL
A 11 11 22
B 10 10 10 30
C 13 13 26
D 12 12 12 12 48
E 14 14 14 14 56
F 10 10 10 30
G 16 16 16 16 16 80
H 8 8 16
308
Total per week 21 21 23 25 36 36 36 14 16 16 16 16 16 8 8
Total to date 21 42 65 90 126 16 198 212 228 24 260 276 292 300 30
2 4 8

TABLE 7: Budget Cost (Thousands of Pesos) for Five Star foundry Inc., Using Latest Start Times

ACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 TOTAL
A 11 11 22
B 10 10 10 30
C 13 13 26
D 12 12 12 12 48
E 14 14 14 14 56
F 10 10 10 30
G 16 16 16 16 16 80
H 8 8 16
308
Total per week 11 21 23 23 26 26 26 26 16 16 26 26 26 8 8
Total to date 11 32 55 78 104 13 156 182 198 21 240 266 292 300 30
0 4 8

FIGURE 10: Budget Ranges for Five Star Foundry

Total
Budgeted
Cost

300,000
Budget Using
Earliest Start
Times, ES
250,000

200,000

150,000

100,000

50,000
 P a g e | 25

Budget Using
Latest Start
Times, LS

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

The budget in Table 6 reveals the earliest possible time that funds can be
expanded. Therefore, a manager can choose any budget that falls between the
largest presented in these two tables. These two tables form feasible budget ranges.
This concept is illustrated in Figure 10.

The budget ranges for Five Star Foundry were established by plotting the total-to-
date budgets for ES and LS. Eduardo Givency can use any budget between these
feasible ranges and still complete the air pollution project on time. Budgets like the
ones shown in Figure 10 are normally developed before the project is started.
Then, as the project is being completed, funds expended should be monitored and
controlled.
Although there are cash flow and money management advantages to delaying
activities until their latest start times, such delays can create problems with
finishing the project on schedule. If an activity is not started until its latest start
time, there is no slack remaining. Any subsequent delays in this activity will delay
the project. For this reason, it may not be desirable to schedule all activities to start
at the latest start time.

Monitoring and Controlling Project Costs

The purpose of monitoring and controlling project costs is to ensure that the project
is progressing on schedule and that cost overruns are kept to a minimum. The
status of the entire project should be checked periodically.

Eduardo Givenchy wants to know how his air pollution project is going. It is now
the sixth week of the 15-week project. Activities A, B, and C have been finished.
These activities incurred costs of P20,000, P36,000, and P26,000 respectively.
 P a g e | 26

Activity D is only 10% completed and so far, the cost expended has been P6,000.
Activity E is 20% completed with an incurred cost of P20,000, and activity F is
20% completed with an incurred cost of P4,000. Activities G and H have not been
started. Is the air pollution project on schedule? What is the value of work
completed? Are there any cost overruns?

The value of work completed, or the cost to date for any activity, can be computed
as follows:

Value of work completed = (Percentage of work completed) x (Total activity

budget) (Eq.8)

The activity difference is also of interest:

Activity difference = Actual cost – Value of work completed

(Eq. 9)

If an activity difference is negative, there is a cost underrun, but if the number is

positive, there has been a cost overrun.

Table 8 provides this information for Five Star Foundry. The second column
contains the total budgeted cost (from Table 6), and the third column contains the
percent of completion. With these data and the actual cost expended for each
activity, we can compute the value of work completed and the overruns or
underruns for every activity.

One wat to measure the value of the work completed for every activity. Activity D,
for example, has a value of work completed of P4,800 (=P48,000 times 19% 1). To
determine the amount of overrun or underrun for any activity, the value of work
completed is subtracted from the actual cost. These differences can be added to
determine the overrun or underrun for the project. As you see, at week 6 there is a
P12,000 cost overrun. Furthermore, the value of work completed is only P112,000.
How do these costs compare with the budgeted costs for week 6? If Givenchy had
decided to use the budget for earliest start times (see Table 6) we can see that
P162,000 should have been spent. Thus, the project is behind schedule and there
 P a g e | 27

are cost overruns. Givenchy needs to move faster on this project to finish on time,
and he must control future costs carefully to try to eliminate the current cost
overrun of P12,000. To monitor and control costs, the budget amount, the value of
work completed, and the actual costs should be computed periodically.

In the next section we see how a project can be shortened by spending additional
money. The technique is called crashing and is part of the critical path method
(CPM).

TABLE 8: Monitoring and Controlling Budget Cost

VALUE OF
TOTAL WORK ACTIVITY
BUDGETED PERCENT OF COMPLETED ACTUAL DEFERENCE
ACTIVITY COST (Php) COMPLETION (Php) COST (Php) (Php)
A 22,000 100 22,000 20,000 -2,000
B 30,000 100 30,000 36,000 6,000
C 26,000 100 26,000 26,000 0
D 48,000 10 4,800 6,000 1,200
E 56,000 20 11,200 20,000 8,800
F 30,000 20 6,000 4,000 -2,000
G 80,000 0 0 0 0
H 16,000 0 0 0 0
TOTAL 100,000 112,000 12,000

OVERRUN

4. Project Crashing

At times, projects have deadlines that may be impossible to meet using the normal
procedures for completion of the project. However, by using overtime, working
weekends, hiring extra workers, or using extra equipment, it may be possible to
finish a project in less time than is normally required. However, the cost of the
project will usually increase as a result. When CPM was developed, the possibility
of reducing the project completion time was recognized; this process is called
crashing.
 P a g e | 28

When crashing a project, the normal time for each activity is used to final the
critical path. The normal cost is the cost for completing the activity using normal
procedures. If the project completion time using normal procedures meets the
deadline that has been imposed, there is no problem. However, if the deadline is
before the normal project completion time, some extraordinary measures must be
taken. Another set of times and costs is then developed for each activity. The crash
time is the shortest possible activity time, and this requires the use of additional
resources. The crash out is the price of completing the activity in an earlier-than-
normal time. If the project must be crashed, it is desirable to do this at the least
additional cost.
Project crashing with CPM involves four steps.

Four Steps of Project Crashing

1. Find the normal critical path and identify the critical activities.

2. Compare the crash cost per week (or other time period) for all activities in
the network.
This process uses the following formula: *
(Note*: This formula assumes that crash costs are linear. If they are not,
adjustments must be made)

Crash cost−Normal cost

Crash cost/Time period = Normal time −Crashtime (Eq. 10)

3. Select the activity on the critical path with the smallest crash cost per week.
Crash this activity to the minimum extent possible or to the point at which
your desired deadline has been reached.

4. Check to be sure that the critical path you were crashing is still critical.
Often, a reduction in activity time along the critical path causes a noncritical
path or paths to become critical. If the critical path is still the longest path
through the network, return to step 3. If not, find the new critical path and
return to step 3.
 P a g e | 29

Five Star Foundry Example

Suppose that Five Star Foundry had been given 14 weeks instead of 16 weeks to
install the new pollution control equipment or face a court-ordered shutdown as
you recall, the length of Eduardo Givenchy’s critical path was 15 weeks. What can
he do? We see that Givenchy cannot possibly meet the deadline unless he is able to
shorten some of the activity times.

Five Start Foundry normal and crash times and normal and crash costs are shown
in Table 9. Note, for example, that activity B’s normal time is 3 weeks (this
estimate was also used for PERT) and its crash time is 1 week. This means that the
activity can be shortened by 2 weeks if extra resources are provided. The normal
cost is P30,000, and the crash cost is P34,000. This implies that crashing activity B
will cost Five Star Foundry an additional P4,000. Crash cost are assumed to be
linear. As shown in Figure 11, activity B’s crash cost per week is P2,000. Crash
costs for all other activities can be computed in a similar fashion. The step 3and 4
can be applied to reduce the project’s completion time.

Activities, A, C, and E are on the critical path, and each have a minimum crash cost
per week of P1,000. Givenchy can crash activity A by 1 week to reduce the project
completion tome to14 weeks. The cost is an additional P1,000.

At this stage, there are two critical paths. The original critical path consists of
activities A, C, E, G, and H, with the total completion time of 14 weeks. The new
critical consists of activities B, D, G, and H, also with a total completion time of 14
weeks. Any further crashing must be done to both critical paths. For example, if
Givenchy wants to reduce the project completion time by an additional 2 weeks,
both paths must be reduced. This can be done by reducing activity G, which is on
both critical paths, by two weeks for an additional cost of P2,000 per week. The
total completion time would be 12 weeks, and total crashing cost would be P5,000
(P1,000 to reduce activity A by one week and P4,000 to reduce activity G by two
weeks).
 P a g e | 30

For the small networks, such as Five Star Foundry’s it is possible to use the four-
step procedure to find the least cost of reducing the project completion dates. For
larger networks, however, this approach is difficult and impractical, and more
sophisticated techniques, such as linear programming, must be employed.

Project Crashing with Linear Programming

Linear programming is another approach to finding the best project crashing

schedule. We illustrate it is use on Five Star Foundry’s network. The data needed
are derived from Table 9 and Figure 12.

TABLE 9: Normal and Crash Data for Five Stat Foundry, Inc.

TIME (WEEKS) COST (Php) CRASH COST

PER WEEK CRITICAL
ACTIVITY NORMAL CRASH NORMAL CRASH (Php) PATH?
A 2 1 22,000 23,000 1,000 Yes
B 3 1 30,000 34,000 2,000 No
C 2 1 26,000 27,000 1,000 Yes
D 4 3 48,000 49,000 1,000 No
E 4 2 56,000 58,000 1,000 Yes
F 3 2 30,000 30,500 500 No
G 5 2 80,000 86,000 2,000 Yes
H 2 1 16,000 19,000 3,000 Yes

FIGURE 11: Crash and Normal Times and Costs for Activity B
Activity
Cost

Crash Cost/Week =
Crash
P34,000
Crash Cost −Normal cost
Crash Normal Time−Crash Time
Cost P33,000
P 34,000−P30,000
=
P32,000 3−1
P31,000 Normal

P30,000
Normal
Cost
 P a g e | 31

0 1 2 3 Time (Weeks)

Crash Time Normal Time

FIGURE 12: Five Star Foundry’s Network with Activity Times

A 2 C 2 F 3

Start E 4 H 2 Finish

B 3 D 4 G 5

CRASH TIME CONSTRAINTS

Constraints are required to ensure that each activity is not crashed more than its
maximum allowable crash time. The maximum for each Y variable is the difference
between the normal time (from Table 9).

YA ≤ 1
YB ≤ 2
YC ≤ 1
YD ≤ 1
YE ≤ 2
YF ≤ 1
YG ≤ 3
YH ≤ 1

PROJECT COMPLETION CONSTRAINT

 P a g e | 32

This constraint specifies that the last event must take place before the project
deadline date. If Givenchy’s project must be crashed down to 12 weeks, then

X finish ≤ 12

CONSTRAINT DESCRIBING THE NETWORK

The final set of constraint describe the structure of the network. Every activity will
have on constraint for each of its predecessors. The form of these constraints is

Earliest finish time ≥ Earliest finish time for predecessor + Activity time
EF ≥ EF predecessor + (t – Y)
X ≥ X predecessor + (t – Y)
or

The activity time is given as t – Y, or the normal activity time minus the time saved
by crashing. We know EF = ES + Activity time, and ES = Largest EF of
predecessors,

We begin by setting the start of the project to time zero: X start = 0.

For activity A,
X A ≥ X start + (2 – Y A)
Or XA – X start + Y A ≥ 2
For activity B,
X B ≥ X start + (3 – Y B)
Or XB – X start + Y B ≥ 3
For activity C,
X C ≥ X A+ (2 – Y C)
Or X C – X A + YC ≥ 2
 P a g e | 33

For activity D,
X D ≥ X B+ (4 – Y D)
Or XD – X B + Y D ≥ 4

For activity E,
XE ≥ X C+ (4 – Y E)
Or XE– X C + Y E ≥ 4

For activity F,
X F ≥ X E + (3 – Y F)
Or XF – X E + Y F ≥ 3

For activity G, we need to constraint since there are two predecessors.

For activity G
X G ≥ X D + (5– Y G)
Or XG – X D + Y G ≥ 5
The second constraint for activity G is

X G ≥ X E + (5– Y H)
Or XG– X E + Y H ≥ 5
For activity H we need two constraints since there are two predecessors. The first
constraint for activity H is
X H ≥ X F + (2– Y H)
Or XH– X F + Y H ≥ 2
The second constraint for H is

X H ≥ X G + (2– Y H)
Or X H– X G + Y H ≥ 2
To indicate the project is finished when activity H is finished, we have
 P a g e | 34

X finish ≥ XH
After adding nonnegatively constraints, this LP problem can be solved for the
optimal Y values. This can be done with QM for Windows or Excel QM. Program
1 provides the Excel QM solution to this problem.

5. Other Topics in Project Management

We have seen how to schedule a project and develop budget schedules. However,
there are other things that we are important and helpful to a project manager. We
now briefly introduce these.

Subprojects

For extremely large projects, an activity may be made of several smaller sub-
activities. Each activity might be viewed as a smaller projector a subproject of the
original project. The person in charge of the activity might wish to create a
PERT/CPM chart for managing this subproject. Many software packages have the
ability to include several levels of subprojects.

Milestones

Major events in a project are often referred to as milestones. These are often
reflected in Gantt charts and PERT charts to highlight the importance of reaching
these events.

Resource Leveling

In addition to managing the time and costs involved in a project, a manager must
also be concerned with the resources used in a project. These resources might be
equipment or people. In planning a project (and often as part of the work
 P a g e | 35

breakdown structure), a manager must identify which resources are needed with
each activity. For example, in a construction project there may be several activities
requiring the use of heavy equipment such as a crane. If the construction company
has only one such crane, then conflicts will occur if two activities requiring the use
of this crane are scheduled for the same day. To alleviate problems such as this,
resourcing leveling is employed. This means that one or more activities are moved
from the earliest start time to another time (no later than the latest start time) so
that the resource utilization is more evenly distributed over time. If the resources
are construction crews, this is greatly beneficial in that the crews are kept busy and
overtime is minimized.

SUMMARY

The fundamentals of PERT and CPM are presented in this course. Both of these
techniques are excellent for controlling large and complex projects.

PERT is probabilistic and allows three time estimates for each activity. These
estimates are used to compute the project’s expected completion time, variance,
and the probability that the project will be completed by a given date. PERT/Cost,
an extension of standard PERT, can be used to plan, schedule, monitor, and control
project costs. PERT/Cost, it is possible to determine if there are cost overruns or
underruns at any point in time. It is also possible to determine whether the project
is on schedule.

CPM, although similar to PERT, has the ability to crash projects by reducing their
completion time through additional resource expenditures. Finally, we see that
linear programming can also be used to crash a network by a desired amount at a
minimum cost.
 P a g e | 36

GLOSSARY

Activity – a time consuming job or task that is a key subpart of the total project.

Activity-on-Arc (AOA) – a network in which the activities are represented by

arcs.

Activity-on-Node (AON) – a network in which the activities are represented by

nodes. This is the model illustrated in our lecture notes.

Activity Time Estimate – three time estimates that are used in determining the
expected completion time and variance for an activity in Apert NETWORK.

Backward Pass – a procedure that moves from the end of the network to the
beginning of the network. It is used in determining the latest finish and start times.

LF = Min {LS of all immediately following activities}

LS = LF – Activity time
 P a g e | 37

Beta Probability Distribution – a probability of distribution that is often used in

computing the expected activity completion times and variances in networks.

CPM – critical path method. A deterministic network technique that is similar to

PERT but allows for project crashing.

Crashing – the process of reducing the total time that it takes to complete a project
by expanding additional funds.

Critical Path – the series of activities that have zero slack. It is the longest time
path through the network. A delay for any activity that is on the critical path will
delay the completion of the entire project.

Critical Path Analysis – an analysis that determines the total project completion
time, the critical path for the project, slack, ES, EF, LS, and LF for every activity.

Earliest Finish Time (EF) – the earliest time that an activity can be finished
without violation of precedence requirements.

Earliest Start Time (ES) – the earliest time that an activity can start without
violation of precedence requirements.

Event – a point in time that marks the beginning or ending of an activity.

Expected Activity Time – the average time that it should take to complete an
activity.
t = (a + 4m + b)/6

Forward Pass – a procedure that moves from the beginning of a network to the
end of the network. It is used in determining earliest activity start times and earliest
finish time.

ES= Max {EF of all immediate predecessors}

EF = ES + Activity time
 P a g e | 38

Gantt Chart – a bar chart indicating when the activities (represented by bars) in a
project will be performed.

Immediate Predecessor – an activity that must be completed before another

activity can be started.

Latest Finish Time (LF) – the latest time that an activity can be finished without
delaying the entire project.

Latest Start Time (LS) – the latest time that an activity can be started without
delaying the entire project.

Milestone – a major event in a project.

Most Likely Time (m) – the amount of time that you would expect it would take
to complete the activity.

Network – a graphical display of a project that contains both activities and events.

Optimistic Time(a) – the shortest amount of time that could be required to

complete the activity.

PERT – Program evaluation and review technique. A network technique that

allows three time estimates for each activity in a project.

PERT/Cost – a technique that allows a decision makes to plan, schedule, monitor,

and control project cost as well as project time.

Pessimistic Leveling (b) - the greatest amount of time that could be required to
complete the activity.

Resource Leveling – the process of smoothing out the utilization of resources in a

project.
 P a g e | 39

Slack Time – the amount of time that an activity can be delayed without delaying
the entire project. Slack is equal to the latest start time minus the earliest start time,
or the latest finish time minus the earliest finish time.
Slack = LS – ES or Slack = LF - EF

Variance of Activity Completion time – a measure of dispersion of the activity

completion time.
Variance = [(b – a)/6]2

Work Breakdown Structure (WBS) – a list of the activities that must be

performed in a project.

KEY EQUATIONS

a+ 4 m+ b
(Eq. 1) t= 6
Expected activity completion time for
activity.

( )
2
b−a
(Eq. 2) Variance = Activity variance.
6

(Eq. 3) EF = ES + t Earliest finish time.

(Eq. 4) LS = LF – t Latest start time.

(Eq. 5) Slack = LS – ES or Slack = LF – EF Slack time in an

activity.

2
(Eq. 6) σ ρ = Project variance = ∑ variance of activities on critical path.
 P a g e | 40

Due date−Expected date of completion

(Eq. 7) Z= σT Number of standard
deviations the target date lies from the expected date, using the normal
distribution.

Due Date = Expected completion time + (Z -σ ρ ¿

(Eq. 8) Value of work completed = (Percentage of work completed) X

(Total activity budget)

(Eq. 9) Activity difference = Actual cost – Value of work completed

Crash cost−Normal cost

(Eq. 10) Crash cost/Time period = Normal time −Crashtime the cost in CPM of
reducing an activity’s length per time period.

EXAMPLE PROBLEMS AND SOLUTION

PROBLEM # 1
Too complete the wing assembly for a jet aircraft, the Wing Maintenance
Operations Officer has laid out the major steps and seven activities involved. These
activities have been approved by the Wing Inspector and labeled A through G in
the following table, which also shows their estimated completion times (in weeks)
and immediate predecessors. Determine the expected time and variance for each
activity.

IMMEDIATE
ACTIVITY a m b
PREDECESSORS
A 1 2 3 -
B 2 3 4 -
C 4 5 6 A
D 8 9 10 B
 P a g e | 41

E 2 5 8 C, D
F 4 5 6 B
G 1 2 3 E

SOLUTION
Although not required for this problem, a diagram of all the activities can be
useful. A PERT diagram for the wing assembly is shown in Figure 13.

A C E G

Start Finish
F

A A

Expected times and variances can be computed using the formulas presented in the
lecture notes. The results are summarized in the following table:

EXPECTED
TIME
ACTIVITY (IN WEEKS) VARINCE
1
A 2
9
1
B 3
9
1
C 5
9
1
D 9
9
E 5 1
1
F 5
9
1
G 2
9

Now the Wing Maintenance Operations Officer would determine the critical path
for the entire wing assembly project as well as the expected completion time for
 P a g e | 42

the total project. In addition, he would like to determine the earliest start and finish
times for all activities.

Solution
The critical path, earliest start times, latest start times, and latest finish times can be
determined using the procedures outlined in the lecture. The results are
summarized in the following table.

ACTIVITY TIME
ACTIVITY ES EF LS LF SLACK
A 0 2 5 7 5
B 0 3 0 3 0
C 2 7 7 12 5
D 3 12 3 12 0
E 12 17 12 17 0
F 3 8 14 19 11
G 17 19 17 19 0

Expected project length = 19 weeks

Variance of the critical path = 1.333
Standard deviation of the = 1.155
critical path weeks

PROBLEM # 2
Using AOA, diagram the network described below for Cebu Construction Project.
Calculate its critical path. How long is the minimum duration of this network?

TIME
ACTIVITY NODES (WEEKS) J L
S 1 2 4
J 1–2 10 1
1

K 1–3 8 K M N O
L 2–4 6 P
3 5 F
M 2–3 3 1

N 3–4 2
 P a g e | 43

O 4–5 7
P 3-5 5

SOLUTION
The paths through this network are
J – L – O, J – M – P, J – M – N – O, K – P, K–N-O

Their path duration is:

J–L-O = 10 + 6 + 7 = 23
J–M-P = 10 + 3 + 5 = 18
J–M–N- = 10 + 3 + 2 + 7 = 22
O
K-P = 8+5 = 13
K–N-O = 8+2+7 = 17

The critical path is J – L – O, its duration is 23

PROBLEM #3

a) The activities needed to build a protype laser scanning machine at Cebu

Scanner Corporation are listed in the following table. Construct an AON
network for these activities

IMMEDIATE C
ACTIVITY PREDECESSORS
A An AON networks
A -
B - D
C A G
D A S
E B E F
D

F H
D
 P a g e | 44

F B
G C, E
H D, F

b) Cebu Scanner Corp. was able to determine the activity times for constructing
the laser scanner for each activity. The total project completion time and the
critical path should also be determined. Here is the activity time.

TIME
ACTIVITY (in Weeks) ES EF LS LF SLACK CRITICAL
A 6 0 6 2 8 2 NO
B 7 0 7 0 7 0 YES
C 3 6 9 8 11 2 NO
D 2 6 8 12 14 6 NO
E 4 7 11 7 11 0 YES
F 6 7 13 8 14 1 NO
G 10 11 21 11 21 0 YES
H 1 13 20 14 21 1 NO

The critical path is given for activities: B, E, G = 7, 4, 10 = 21

Total project completion time is: 21 weeks

ES = {Max EF of all immediate predecessor(s)}

EF = ES + Activity Time
LF = {MIN LS of all immediately following activities}
LS = LF – Activity Time
Slack = LS – ES or Slack = LF – EF
Note:
1. The activity with zero slack is called critical activities and are said to be
on the critical path.
2. The critical path is a continuous path through the project network that
starts at the first activity in the project, terminates at the last activity in
the project and includes only critical activities.
3. Slack time is a free time for an activity.
 P a g e | 45

PROBLEM #4

TIME IMMEDIATE
CODE ACTIVITY DESCRIPTION (IN HOURS) PREDECESSOR(S)
A Planning Find location; determine resource 20 None
requirement
B Purchasing Requisition of lumber and sand 60 Planning
C Excavation Dig and grade 100 Planning
D Sawing Saw lumber into appropriate sizes 30 Purchasing
E Placement Position lumber in correct locations 20 Sawing, excavation
F Assembly Nail lumber together 10 Placement
G Infill Put sand in and under the equipment 20 Assembly
H Out-fill Put dirt around the equipment 10 Assembly
I decoration Put grass all over the garden, landscape, paint 30 Infill, outfill

a) Draw the AON network for the construction activity

 P a g e | 46

b) Draw the AOA network for the construction activity

SOLUTION:

1) AON network
60 30 20

B D G
10 30
20
Purchasing Sawing 20 Infill

E F I
A
Decoration
Planning Placement Assembly 10
100

H
C
Outfill
Excavation

2) AOA network

G 8
Dummy
A
Infill
B D E F I
Plan Purchase Sawing Placement Assembly H Decor
10
1 2 3 5 6 7 Outfill 9

C Dummy
Excavation

4
Note:
1) Dummy Activity is an activity having no time that is inserted into a network
to maintain the logic of the network.
2) A dummy ending activity can be added to the end of an AON diagram for a
project that the multiple ending activities.
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PROBLEM SOLVING EXERCISES:

PROBLEMS #1
1) Daniel Bartolutti is the personal director of Bart’s Inc., a company that
specialist in customized car upgrades and restoration. One of the special
customized job is vehicle interior custom built. Daniel has listed a number of
exterior car work activities that must be completed before starting the
interior of the vehicle. The activities and immediate predecessors appear in
the following table:

ACTIVI IMMEDIATE
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PREDECESS
TY ORS
A -
B -
C -
D B
E A, D
F C
G E, F

2) Daniel Bartolutti was able to determine the activity times for the exterior car
restoration activities. He would like to determine the total project
completion time and the critical path. The activity times appear in the
following table (Problem #1):

ACTIVIT TIME
Y (DAYS
)
A 2
B 5
C 1
D 10
E 3
F 6
G 8
Total 35

PROBLEM #2

Sister Pebbles, Jessa and Pia are making plans for summer vacation at the beaches
of Batayan Island. In applying techniques Pebbles being the oldest among the three
learned in her quantitative method class last semester, she has identified the
activities that are necessary to prepare for their trip. The following table lists the
activities and the immediate predecessors. Draw the network for this project.

ACTI IMMEDIA
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TE
PREDECE
VITY SSORS
A -
B -
C A
D B
E C, D
F A
G E, F

PROBLEM #3

The following are the activity times for the project in Problem 3. Find the earliest,
latest, and slack times for each activity. Then find the critical path.

ACTIVIT TIME
Y (DAYS
 P a g e | 50

)
A 3
B 7
C 4
D 2
E 5
F 6
G 3

PROBLEM #4

Betan Machinery specialized in developing Compressed Concrete Earth Block

(CEB) machine that used to mold compressed concrete bricks. Given the recent
demand by the National Housing authority (NHA) to construct low cost housing
project for the victims of typhoons and earthquakes and those families affected in
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the relocation program of the government for affordable housing programs. Betan
Machinery decided to fabricate another compress earth block machine using a
hydraulic compression system to be applied to a four-barrel system. The activities
for this new machine are listed in the following table. Construct a network for
these activities.
IMMEDIA
TE
ACTI PREDECE
VITY SSORS
A -
B -
C A
D A
E B
F B
G C, E
H D, F

PROBLEM #5

After consulting with the Department of Science and Technology (DOST) Betan
Machinery was able to determine the activity times for constructing the compress
 P a g e | 52

concrete earth block machine. The machine shop would like to determine ES, EF,
LS, LF and Slack for each activity. The total project completion time and the
critical path should also be determined. (see problem6for details). The activity
times are shown in the following table:

ACTIVIT TIME
Y (DAYS
)
A 6
B 5
C 3
D 2
E 4
F 6
G 10
H 7

PROBLEM #6
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Draw the activity – on – node (AON) project network associated with the
following activities for Cebu Construction Corp. construction project.

1) How long should it take CCC and his construction team to complete the
project?
2) What are the critical path activities?

ACTIVITY A B C D E F G H
IMMEDIATE E,
- A A B B C D
PREDECESSORS F
TIMES (DAY) 3 4 6 6 4 4 6 8

PROBLEM #7
The activities described by the following table are given for the Cebu Construction
Corp.
 P a g e | 54

IMMEDIATE TIME ES = {max EF of all immediate

ACTIVITY PREDECESSORS (t) predecessor(s)}
A - 9
B A 7 EF = ES + Activity time
C A 3 LF = {MIN LS of all immediately
D B 6 following activities}
E B 9
LS = LF – Activity time
F C 4
G E, F 6
H D 5
I G-H 3

a) Draw the appropriate AON PERT diagram

b) Find the critical path
c) What is the project completion time?

PROBLEM #8
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The following is the table of activities associated with a project at Cebu

Construction Corp. located at N. Bacalso Ave. their durations and what activities
each must precede:

Duratio
n
Activity (Weeks) Precedes
A
1 B, C
(Start)
B 1 E
C 4 F
E 2 F
F
2 -
(End)
a) Draw an AON diagram of the project, including activity durations.
b) Define the critical path, listing all critical activities in chronological order.
c) What is the project duration (in weeks)?
d) What is the slack (in weeks) associated with any and all non-critical paths
through the projects?
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PROBLEM #9

Cebu Carpet International installs carpets in commercial building offices. The

manager has been genuinely concerned with the amount of time it took to complete
several recent jobs. Some of their workers are very unreliable a list of activities and
their optimistic completion time, the most likely completion time, and the
pessimistic completion time (all in days) for a new contract are given in the
following table:
TIME IMMEDIATE
(Days) PREDECESSOR
ACTIVITY a m b (S)
A 3 6 8 -
B 2 4 4 -
C 1 2 3 -
D 6 7 8 C
E 2 4 6 B, D
F 6 10 14 A, E
G 1 2 4 A, E
H 3 6 9 F
I 10 11 12 G
J 14 16 20 C
K 2 8 10 H, I

1) Determine the expected completion time and variance for each activity.
2) Determine the total project completion time and the critical path for the project.
3) Determine ES, EF, LS, LF, and Slack for each activity.
4) What is the probability that Cebu Carpet International will finish the project in 40 days or
less?
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PROBLEM #10

Draw the activity-on-node (AON) project network associated with the following
activities for Cebu Construction Corp.
1. How long should it take CCC and his construction team to complete the
project?
2. What are the critical path activities?

IMMEDIATE TIME
ACTIVITY PREDECESSOR (DAYS)
A - 3
B A 4
C A 6
D B 6
E B 4
F C 4
G D 6
H E, F 8
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PROBLEM #11

The owner of Happy Fun House has developed the tasks, durations and
predecessor relationships in the following table building new entertainment
business.

Draw the AON network and answer the questions that follow.

IMMED TIME ESTIMATES (IN

IATE WEEKS)
PREDE MOST PESSI
ACTI CESSO OPTIM LIKEL MISTI
VITY R ISTIC Y C
A - 4 8 10
B A 2 8 24
C A 8 12 16
D A 4 6 10
E B 1 2 3
F E, C 6 8 20
G E, C 2 3 4
H F 2 2 2
I F 6 6 6
J D, G, H 4 6 12
K I, J 2 2 3

a) What is the expected (estimated) time for activity C?

b) What is the variance for activity C?
c) Based on the calculation of estimated times, what is the critical path?
d) What is the estimate time of the critical path?
e) What is the activity variance along the critical path?
f) What is the probability of completion of the project before the week 36?
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PROBLEM #12

The College Department has been given the responsibility of managing a course
development program for the New Normal Online Learning System. The College
head knows the earliest start time, the latest start time, and the total cost for each
activity. This information is given in the following table:

TOTAL
COST
ACTIVITY ES LS t (Php1,000s)
A 0 0 6 10
B 1 4 2 14
C 3 3 7 5
D 4 9 3 6
E 6 6 10 14
F 14 15 11 13
G 12 18 2 4
H 14 14 11 6
I 18 21 6 18
J 18 19 4 12
K 22 22 14 10
L 22 23 8 16
M 18 24 6 18

a) Using the earliest start times, determine the College total monthly budget.
b) Using the latest start times, determine the College total monthly budget.
 P a g e | 60

PROBLEM #13

A local Cebu based Stage Performance Theater Guild was in the final phases of its
new musical stage play “The Song of Bernadette”, to be shown during the feast
day of the Our Lady of Lourdes. The production hired a 3 rd Party Firm to
coordinate the showing of the musical play here in Cebu City, identified 16 critical
tasks to be completed before the showing of the musical play.
a) How many weeks in advance of the play showing should 3 rd Party Firm start
its marketing campaign? What are the critical path activities? The tasks are
as follows:
MOST
IMMEDIATE LIKEL
ACTIVI PREDECESO OPTIMIST Y PESSIMIST
TY RS IC TIME TIME IC TIME
Task 1 - 2 2 4
Task 2 - 3.5 3.5 4
Task 3 - 12 12 13
Task 4 - 5 5 7
Task 5 - 4 4 5
Task 6 Task 1 7 7 8
Task 7 Task 2 4 4 5.5
Task 8 Task 3 7.7 7.7 9
Task 9 Task 3 10 10 12
Task 10 Task 3 4 4 5
Task 11 Task 4 4 4 6
Task 12 Task 5 4 4 6
Task 13 Task 6, 7, 8 6 6 6.5
Task 14 Task 10, 11, 12 1.1 1.1 2
Task 15 Task 9, 13 7 7 8
Task 16 Task 14 7 7 9
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b) If Tasks 9 and 10 were not necessary, what impact would this have on the
critical path and the number of weeks needed to complete the marketing
campaign?
PROBLEM #14

The estimate times (in weeks) and immediate predecessors for the activities in a
project are given in the following table. Assume that the activity times are
independent.

IMMEDIATE
ACTIVITY PREDECESSOR a m b
A - 9 10 11
B - 4 10 16
C A 9 10 11
D B 5 8 11

a) Calculate the expected time and variance for each activity.

b) What is the expected completion time of the critical path? What is the
expected completion time of the other path in the network?
c) What is the variance of the critical path? What is the variance of the other
path in the network?
d) If the time complete path A-C in normally distributed, what is the
probability that this path will be finished in 22 weeks or less?
e) If the time to complete path B-D is normally distributed, what is the
probability that this path will be finished in 22 weeks or less?
f) Explain why the probability that the critical path will be finished in 22
weeks or less is not necessarily the probability that the project will be
finished in 22 weeks or less.
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PROBLEM #15

The following cost have been estimated for the activities in a project.

IMMEDIATE COST
ACTIVITY TIME
PREDECESSORS (Php)
A - 8 8,000
B - 4 12,000
C A 3 6.000
D B 5 15,000
E C, D 6 9,000
F C, D 5 10,000
G F 3 6,000

a) Develop a cost schedule based on earliest start times.

b) Develop a cost schedule based on latest start times.
c) Suppose that it has been determined that the P6,000 for activity G is not
evenly spread over the three weeks. Instead, the cost for the first week is
P4,000, and the cost is P1,000 per week for each of the last two weeks.
Modify the cost schedule based on earliest start times to reflect this
situation.