Project Chartering

BLOCK 2
PROJECT PLANNING
Unit 4 Project Scope Management
Unit 5 Project Network Analysis (PERT and CPM)
Unit 6 Project Scheduling
Unit 7 Project Crashing
Unit 8 Earned Value Analysis (EVA)

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Project Initiation

60
 Project Scope
UNIT 4 PROJECT SCOPE MANAGEMENT Management

Objectives

After studying this unit, you will be able to:

• Define project scope

• Establishing project priorities
• What are the deliverables
• Work breakdown structure (WBS)
• Time estimation
• Resource estimation
• Responsibility Matrix (RM)

Structure

4.1 Introduction
4.2 Defining Project Scope
4.2.1 Example of a Project Scope Statement
4.2.2 Priorities of a Project

4.3 Work Breakdown Structure (WBS)

4.3.1 Hierarchical Composition of WBS
4.3.2 Work Breakdown Structure of Motorcycle (Sample)
4.3.3 Advantages of WBS
4.3.4 Work Packages
4.3.5 Responsibility Matrix (RM)

4.4 Let Us Sum Up

4.5 Self-Assessment Exercise
4.6 Further Readings

4.1 INTRODUCTION
A project is a unique activity in the sense that you can’t compare one project
with another as there is a change in time, cost and scope. Project managers
are the custodians / in-charge of a single small project and are responsible for
planning and scheduling the project. The scope is defined by the cost, time,
and quality of the deliverable in project terms.

Project scope management (PSM) is a part of the project planning exercise;

one needs to clearly draw a boundary with respect to all the aspects of the
project, including all connected activities, resources requirement, timelines,
and deliverables (with all the expected parameters which defines the final
product/service quality). PSM is the guide for executing the project to its end,
so defining the scope of the project is very much essential for successfully
completing the project.
61
Project Planning PSM also summarizes the key stakeholders, procedures, activities,
hypotheses, and limitations, along with dos and don’ts too. Without a clear
project scope statement, your project will end up beyond your team’s ability
to complete it due to delays (time overrun) and cost overrun.

4.2 DEFINING PROJECT SCOPE

For any project, one needs to define the objectives, needs and limitations.
The project scope is a function of project objectives/goals, needs, limitations,
deliverables, resources, and budget. The project manager needs to clearly
document the project objectives, resource plan (if you have one) / planning
resource, stating the budget requirement, time schedule (for completing the
project), constraints and deliverables at the end. Make sure that all the project
stakeholders have clearly understood the project boundaries.

The Key Steps for Defining any Project’s Scope are as Follows.

• Clearly defining the objectives.

• Create a sound resource plan.
• Budget requirement (maybe stage-wise/phase-wise).
• Project time durations (for completion of the total project along with the
time taken to complete each stage of the project).
• Identify and clearly state the project deliverables.
• Define the key milestones/stages of the project.
• Constraints, if any.
• Drafting the scope documents and getting them approved by all the
stakeholders.

A project scope document is a powerful tool for the successful completion of

the project, provided the plan has been communicated properly to all the
stakeholders.

Sometimes due to changing requirements, specifications, and priorities, the

project scope gets expanded over time is called scope creep.

4.2.1 Example of a Project Scope Statement

Project: Creating a website for the new venture which you’re planning for.
Following is the way the project scope might look like.

Key Project Objectives: To create a user-friendly and attractive website for

the new venture with easy to browse smoothly.

Resources: Web designer team (two people), 30 hours of work a week for 3
weeks. Software manager (one person), 10 hours of work a week for 2 weeks
and IT & Legal review as for the statutory compliances (two teams), 4 hours
of ad-hoc work for 1 week.

Budget: Rs. 200,000/- (you may also give the break-up for each activity).
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 Project Scope
Deliverables: User-friendly, attractive website. Management

Time Schedule: Timelines/milestones of the project are as follows.

• Project initiation and identifying the stakeholders – 2 weeks.

• Work breakdown structure, resource estimation and budget estimation –
1 week
• Drafting the project scope – 1 week
• Project allocation – 1 week
• Designing the webpage – 4 weeks
• Final launch of the website – 5th week.

Check Your Progress

Exercise 1:

You have been asked to lead an event for a marriage. The event is to organize
an orchestra–dance concert on the marriage eve. You have reserved a hall that
will accommodate 200 couples and have hired the orchestra troop. Develop a
scope statement for this project that contains all the elements (project
objectives, deliverables, milestones, schedule, technical requirements,
resources, budget, limits & exclusions, and audiences). Assume that the event
will occur in 3 weeks from now and provide your best guess estimate of the
dates for milestones.
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

4.2.2 Priorities of a Project

The project objectives answer what, when and how much. It also defines the
priorities of a project which include Time, Scope, and Cost. One will have
three scenarios on which these priorities are viewed. These priorities will
have constraints where no other option will be available because as the
requirement is fixed with a parameter, accepting whatever is available and
last, there is a chance for enhancement / optimizing over others. The reasons
for project trade-off are due to the relative importance of criterion-related
cost, time, and scope. For example, if the date is fixed, then the project is
time -constrain, scope-accept and cost-enhance, meaning the project must be
completed on a specific date, the scope re-worked to meet the objective of
time and cost, and look for possibilities to reduce the cost. For the given
priorities, one can have the following three scenarios.

For the priority scenario– I: Time-constrain, Scope-accept, Cost-enhance

Examples: 1. Corona Vaccine 2. Energy efficient engine
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Project Planning For the priority scenario–II:Time-constrain, Scope-enhance, Cost-accept
Examples: 1. Wedding Party in India 2. Birthday Celebration
For the priority scenario– III: Time-accept, Scope-constrain, Cost-accept
Examples: 1. Construction of a living colony on the moon
2. Hyperloop transport system

Check Your Progress

Exercise 2:
Identify at least two real-life examples of a project that would fit in each of
the priority scenarios (I, II &III) described above.
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

4.3 WORK BREAKDOWN STRUCTURE (WBS)

Work breakdown structure (WBS) is a project management tool which
establishes a step-by-step approach for completing any kind of project, which
ranges from very small to complex one. WBS will help in planning various
deliverables with timelines.

WBS is used to estimate the time, cost and scope which are required for a
project. This is a top-down approach for making the work packages to an
extent of the smallest assignment where there is a very slim scope for
subjectivity. WBS is breaking down the project into possible levels where
there is much scope for objectivity to estimate the appropriate requirement of
time, cost and scope. The WBS levels depend on the size and complexity of
the project. Smaller projects will have a maximum of two levels, and a
complex project like the Mangalyaan mission may have multiple levels.

4.3.1 Hierarchical Composition of WBS

Level I : Project (Complete Project)
Level II : Major Deliverables (main major parts ranging from minimum 2
to 10)
Level III : Sub-deliverables
Level IV : Sub-deliverables (Next lower level)
Level V : Cost / Resource Account (Summing of work packages for
monitoring progress and responsibility)
Level VI : Work packages / Assignments (Identifying time, cost and scope)

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 Project Scope
4.3.2 Work Breakdown Structure of Motorcycle (Sample) Management

Motor

Fram Gears Whe Brake Engine

Handle Body Sea Gear Shifting Tire Ri 2 Stroke 4 stroke

bars Spok Fron Bac
Box mechani

D M D
D M D M M M D M D M

Dis Norma
Leathe Syntheti

Clutch Gear shift Throttl

lever lever
mechanism

Figure 4.1
Source-D: Design, M: Material

Check Your Progress

Exercise 3: Develop a WBS for Solar Car
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Exercise 4: Develop a WBS for Mobile Phone
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Exercise 5: Develop a WBS for Corona Vaccine Project
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

4.3.3 Advantages of WBS.

• WBS is a widely used project management tool for decision-making.
• It allows evaluation of the cost, time and technical performance of a
project along with the organization which is executing the project. 65
Project Planning • It helps in project planning, time scheduling and budget estimation.
• It describes communication channels and helps in coordinating various
project components and stakeholders.
• It enables management with the required information to various
departments and functions in the organization.
• It assists in the development of an organization breakdown structure
which helps in assigning project responsibilities to various departments,
centres, units and individuals.

4.3.4 Work Packages

The work package is the lowest/bottom level of the work breakdown
structure, which gives quantifiable/subjective parameters.

• At the work package level, one can easily estimate how much work is
there / how much work needs to be done.
• What are the resources required for completing the work can be easily
assessed.
• Easy to estimate the time taken to complete the work.
• It identifies the number of manpower required to complete the work
package.
• It determines milestones in the work package completion.

Check Your Progress

Exercise 6: Below is a software development project WBS with cost

apportioned by percent. If the total project cost is estimated to be Rs.
1,000,000, what are the estimated costs for the following deliverables?

Software Development Project

Cost: Rs. 1,000,000

Initiation Planning & Design Execution and Monitoring

15% 35% 50%

Objectives Requirements In-house testing Customer testing & review

7% 8% 40% 10%

Outputs Files Interfaces Programming

Inputs
8% 20%
3% 3% 4%

66 Figure 4.2
 Project Scope
4.3.5 Responsibility Matrix (RM) Management

It is a simple matrix used by the project manager in assigning roles and

responsibilities for individuals to complete the tasks/deliverables assigned to
them.

RM is also called as linear responsibility chart, which clearly identifies the

list of tasks to be accomplished and the responsibility of individuals w.r.to a
particular task completion in the project.

Example: You are one of the four members (father, mother, son – 15 years
and daughter, 13 – years) planning a weekend tour to a hill station. Develop a
responsibility matrix for the work that needs to be done before starting your
family trip to a hill station. The partial responsibility matrix is shown in table
4.1.

Table 4.1 The partial responsibility matrix

Task Date Father Mother Son Daughter

Research sites S R S S
Decide on site S R S S
Reserve site R - - -
Shopping list S R S R
Packing for the trip R R R R
Travel arrangements R - - -
Boarding arrangements R S - -
Fill car with gas R - - -
Get cash S R - -

R: Responsible, S: Supervision

Check Your Progress

Exercise 7: Develop a Responsibility Matrix for your son’s marriage (in the
family, you, your wife/husband, son – 25 years and daughter – 22 years).

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

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Project Planning
4.4 LET US SUM UP
Prior to the commencement of any project, it is necessary to define the scope,
priorities and breakdown structure. While defining the scope of the project,
the project managers primarily focus on the end product/items of the project.
It is essential to develop a priority list for every project to take meaningful
decisions. In project management, the structure provides two views of the
project—one on deliverables and one on organizational responsibility—
helping to ensure that all of the project's duties are defined. The WBS
prevents the project from being controlled by an organizational function or a
financial system. The organizational design demands consideration of
reasonable staffing, equipment, and financial needs.

Without a systematic, disciplined approach, it is impossible to design a

project plan or control system that works properly. This discipline is offered
by the cost account codes, WBS, and OBS. The project network, which sets
the schedule of work, personnel, equipment, and costs, will be developed
using the WBS as the database. Responsibilities matrices can be used in
small projects to define individual responsibility.

Planning begins with defining your project precisely, which is the first and
most significant stage. Project failures are most frequently attributed to a lack
of a well-defined project plan. Using a WBS or a responsibility matrix will
mostly depend on the scope and scale of your project.

4.5 SELF-ASSESSMENT EXERCISE

1. What are the elements of a project scope statement? Discuss.
2. What do you mean by project objective? What kind of questions does a
project objective answer? Write an example of a good project objective.
3. What are the project priorities? What are the most relevant priorities of a
project? Discuss some of the priorities, including Time-constrain, Scope
acceptance, and Cost-enhance.
4. What is a work package? Discuss what kinds of information are included
in a work package.
5. What do you mean by responsibility matrix? When do you use the
responsibility matrix? Discuss with suitable examples.

4.6 FURTHER READINGS

1. Clifford F.Gray, Erik W. Larson, Gautam V.Desai, Project Management:
The Managerial Process, 2010, Tata McGraw – Hill 6th Edition.
2. Jack R. Meredith & Samuel J.Mantel, 2010, Project Management: A
Managerial Approach, 7th edition, Wiley India Edition.
3. Rory Burke, Project Management: Planning and control Techniques, 4th
edition 2010, John Wiley & Sons.
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 Project Scope
4. Pinto Jeffrey K, Project Management-Achieving Competitive Management
Advantage, Indian edition, Pearson
5. Jhon M.Nicholas, Herman Steyn. Project Management for Business,
engineering, and Technology, 3rd edition, 2010, Elsevier.
6. Jack Gido, James P. Clements. Project Management, 2011, Cengage
Learning India Private Limited.
7. The Project Management Institute. A Guide to the Project Management
Body of Knowledge (PMBOK Guide). Upper Darby, Pa: PMI.
8. Harold Kerzner. Project Management: A Systems Approach to Planning,
Scheduling, and Controlling, 7th edition. New York: John Wiley &
Sons, 2010.
9. Chandra, Prasanna, PROJECTS – Planning, Analysis, Selection,
Financing, Implementation, and Review, Tata McGraw – Hill 7th Edition.
10. Gary L. Richardson, Project Management Theory and Practice, 2011,
Taylor & Francis Group.

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Project Planning
UNIT 5 PROJECT NETWORK ANALYSIS
(PERT & CPM)

Objectives

After completion of this unit you should be able to:

• Develop a network diagram of projects

• Differentiate between various levels of networks
• Carry out time-analysis of networks
• Use time-analysis results for time management of projects
• Use probabilistic estimates of project activity durations to compute
probability of completion in projects with high degree of uncertainty
• Develop time-scaled networks of projects A Schedule projects through
an iterative process

Structure

5.1 Introduction
5.2 Network Diagramming of Projects (AOA) Diagrams
5.3 Time-Analysis of Networks
5.4 Probabilistic Durations
5.5 Other Types of Diagrams
5.6 Project Scheduling
5.7 Let Us Sum Up!
5.8 Self-Assessment Exercises
5.9 Bibliography and Further Readings

5.1 INTRODUCTION
Time is of great essence in all projects and one of the most important
objectives of all project managers is to ensure completion of a project in time.
In this unit we shall discuss the various tools and techniques as well as the
concepts which are vital in effective planning, scheduling and control of
projects.

As projects are unique, one-time endeavours, the normal planning and control
tools are not very effective in the planning and scheduling of projects.
Network diagrams provide a framework which can be used to develop project
schedules and also for updating and control of projects. We begin our
discussion by developing the concepts required to draw project networks and
go on to use the same for scheduling of projects.

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 Project Network
5.2 NETWORK DIAGRAMMING OF PROJECTS Analysis (Pert &
(AOA) DIAGRAMS CPM)

Network diagrams provide a mechanism to depict the interdependencies of

various activities that constitute a project. We will first describe AOA
(Activities on Arrows) diagrams which are the simplest and later, in section
6.5, we shall introduce some other types of diagrams.

5.2.1 Concept of Activity and Event

For effective monitoring and control, it is necessary to break-up a project into
smaller activities. The basic idea is that if individual project activities are
completed in time, the project itself should also be completed in time.
Activity
An activity is a homogenous element of work consuming some resources and
requiring some definite amount of time for its completion. An activity is the
smallest unit of productive effort to be planned, scheduled and controlled in a
project and is represented by an arrow in a network diagram. The arrows are
usually labelled by the activity codes and the estimated duration of the
activity.
Event
The starting of an activity or the ending of an activity is called an event.
Activities are completed over a period of time (for example 2 weeks) while
events take place at an instant of time. In AOA networks events are
represented by small circles. Thus each activity has a head event as well as a
tail event. For example, activity A in Figure 5.1 below has event 7 as the
head event and event 6 as the tail event:

6 A 7

Figure 5.1: Head event (7) and tail event (6) of activity A

Completion of a Project
A project is completed only when all its activities have been completed.
However, as many activities may be going on simultaneously, it is difficult to
compute the project completion time even if the estimated duration of each
activity is known. Except in a very rare case, the project activities are not all
sequential in nature. Thus it becomes important for us to identify which
activity may be going on simultaneously, and which others have to be done
one after the other. The different types of events described in the next sub-
section helps in this regard.

5.2.2 Simple, Merge and Burst Events

To get a clear understanding regarding the nature of activity interdependencies,
it is important to understand different types of events. 71
Project Planning Simple Event

A simple event is one which has only one preceding activity and only one
succeeding activity. Thus in Figure 5.2 below, event 2 is a simple event and
activity B can begin only after activity A has been completed.

Figure 5.2: Event 2 is a simple event

Merge Event

A merge event is one which has more than one preceding activities and only
one succeeding activity. For example, in Figure 5.3 below, event 4 is a merge
event with C as the succeeding activity and A and B as two preceding
activities. This shows that activity C can begin only after both the activities A
and B have been completed.

Figure 5.3: Event 4 is a merge event

Burst Event

A burst event is one which has only one preceding activity and more than one
succeeding activities. For example in Figure 5.4 below, activities B and C are
the succeeding activities for the burst event 4, whereas A is the only
preceding activity. This shows that activity B and activity C both of them can
start only after activity A has been completed.

Figure 5.4: Event 4 is a burst event

Combined merge and burst event

An event having more than one preceding activities as well as more than one
succeeding activities is a combined merge and burst event. For example, in
Figure 5.5 below, event 4 is a combined burst and merge event, having C and
D as succeeding activities and A and B as preceding activities. This shows
that activities C and D can begin only after both activities A and B have been
completed.

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 Project Network
Analysis (Pert &
CPM)

Figure 5.5:Event 4 is a combined merge and burst event

There are certain situations where the interdependency cannot be shown

clearly using the above conventions. As an example, suppose activity D can
start only after both A and B have been completed, whereas activity C can
start only after the completion of

A. This relationship cannot be shown using the simple conventions

developed above. To show the activity interdependency explicitly, we need to
introduce dummy activities in our networks. A dummy activity is one which
does not consume any resource and does not require any amount of time for
its completion. Dummy activities are required only for the purpose of
explicitly depicting certain activity interdependencies which cannot be shown
otherwise. Dummy activities are represented by dotted arrows in network
diagrams. After a dummy activity has once been introduced in a network, it is
treated exactly like any other activity for any further analysis. Figure 5.6
below uses a dummy activity connecting events 2 and 4 to resolve the
difficulty in showing the activity interdependencies encountered above.

Figure 5.6: Dummy activity is needed for explicitly representation of interdependencies

of activities C and D

If two or more activities have common tail and head events, then again
dummy activities may be needed to diagram the network elegantly – e.g. in
Figure 5.7 below, activities B and C have the same dependency relationships
and a dummy activity has been used to have an elegant representation of the
same.

Figure 5.7: Need for dummy activity when activities B and C both have common
predecessors and successors

Conventions while drawing network diagrams

A network diagram is a set of activities and events represented by arrows and

circles, respectively. The length of an arrow does not represents anything, nor
does its direction. Events` are numbered as 1, 2, 3, etc., while activities are
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Project Planning labelled using activity codes as A;-B, C, etc. By convention, the head event
number for any activity is always larger than the corresponding tail event
number. The orientation of the arrows is usually kept from left to right,
signifying the flow of time from left to right in a general way. Criss-crossing
of arrows are avoided as much as possible. It is a good practice to represent
both the start of the project and its completion as single events. Similarly, one
should use as few dummy activities as possible.

Information Required for Drawing of Networks

The basic information required for drawing of networks has two components,
viz. a list of individual activities, and activity interdependencies. In order to
be able to carry out time analysis, time estimates for individual activities are
also typically collected at this stage.
Project Activities
A project has to be broken up into its constituent activities for detailed
planning and scheduling. Each activity is homogeneous, requires specific
amount of resources and is the responsibility of a specific individual. Work
breakdown structure is usually employed to break a large project into its
constituent activities,
Activity Interdependencies
The immediate predecessors of each activity are typically listed. When' this
listing is completed for all project activities, the relationship between any pair
of activities can be known. If activity A is an immediate predecessors for
activity B, this implies that activity B can begin only after activity A has been
completed. The beginning activities do not have any predecessors, whereas
the finishing activities are not the predecessors of any project activity. The
precedence relationships are decided based on technological constraints (e.g.
roof can be cast only after the walls have been built), management policy
constraints and legal constraints. Precedence relationships are sometimes
used where the activities use a common critically scarce resources-e.g.
equipment or money. However, this is not a good practice and it is better to
look at resource constraints separately and explicitly.
Time Estimates
The time required for completion, of each of these activities can be estimated
by a person or a group of persons who are familiar with the activity and its
details. These estimates can vary in terms of their reliability, depending on
the nature of the activity as well as the relevance of prior experience in
execution of the activity. While estimating the activity duration, an implicit
assumption about some "normal" amount of resources is also made. It is
possible to complete some activities quicker by employing a greater amount
of resources and vice-versa. Similarly, the estimated duration of some
activities (e.g. leveling a road) may be expressed in working time (e.g. 5
working days) while some other activities (e.g. curing of concrete) m4y be
expressed in elapsed time (e.g. 15 days).
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 Project Network
Levels of Networks Analysis (Pert &
CPM)
Large projects consume a huge amount of resources and have to be planned,
monitored and controlled at various levels. The top management may not be
interested in the details, but would still be interested in knowing if the project
is proceeding according to the schedule or not. On the other hand, the
supervisor responsible for one activity is interested in all the details for that
activity. This is achieved by drawing different levels of project network
incorporating different levels of details. At the highest (say L1) level, the
project may have 20 to 30 different major activities and it may be reviewed
once every quarter at the top management level. At the lowest (say L3) level,
the project may have 200 to 300 detailed activities - each activity may be the
responsibilities of a specific supervisor. For the senior management, an
intermediate level of detail (L2 say having 60 to 90 activities) may be
adequate and this may be reviewed once every month for taking corrective
actions. An activity in an L1 level network is actually a sub-project in an L2
level network and so on.
An Example
Let us consider a comprehensive example to highlight the concepts discussed
in this unit so far. A company manufacturing and selling consumer products
has recently developed a new brand of soap and has prepared a project for
launching the new brand. An activity analysis is first carried out to break up
the project into homogeneous activities. From a careful analysis of the
activities, the immediate predecessors for each activity is also determined.
Finally, the duration of each activity is estimated based on previous
experience of similar in the past. This information is presented as Table 6.1
below.
Table 5.1 Details of Activities for New Product Launch Project

75
Project Planning From the information contained in Table 5.1, we can easily see that activities
A, C and E do not have any predecessors and so all of them are starting
activities. Activity B is the only one with activity A as its predecessor and so
it is a simple event connecting activities A and B. Activity D has two
predecessors - B and C and so it is a merge event connecting activities B and
C to activity D. Again, activities F, H and K all have activity E as their
predecessor and so the completion of activity E and the starting of activities
F, H and K is a burst event. Working step by step in this manner, we build up
the project network for this project. In this case it is possible to develop the
project network without using any dummy activity as shown in Figure 5.8.

5.3 TIME ANALYSIS OF NETWORKS

One of the key-questions a project manager has to ask herself is "In how
much time can I complete the project?" Time analysis helps us to answer
such questions. Once the project network and the activity durations are
known, time analysis is a relatively straight-forward exercise. In fact, at the
end of time analysis we have much more insight into the project and its
activities than merely the answer to the question asked earlier regarding the
project completion. In this section, we shall describe the steps involved in
performing a forward pass and, a backward pass -- which together comprise
time analysis. We shall again take the new product launch project as an
example for this purpose.

5.3.1 Forward Pass

Each project has a zero date- the date when the project clock starts ticking.
All references to time for any activity or event are made relative to the zero
date of the project. As suggested by

Figure 5.8 Network diagram for the New Product Launch Projects

Its name itself, in forward pass we begin with the starting activity or the
starting activities of the project and gradually move to their respective
succeeding activities - i.e., move forward in time. Assuming our activity
interdependencies and time estimates are correct, we ask two questions for
each activity:
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 Project Network
1) What is the earliest time at which we can start the activity? Analysis (Pert &
CPM)
2) What is the earliest time at which we can finish the activity?

In other words, for each activity, we shall be working out its Early Start (ES)
time and its Early Finish (EF) time, relative to the zero date of the project.

For the new product launch project of Figure 5.8 we can easily see that ES
for activity A is 0 as A is a starting activity with no predecessor. EF for
activity A can then be computed as 2 weeks as it is not possible to finish A
before this time. When we move to activity B. which is the successor to
activity A, we find that ES for B is 2 weeks and its EF is 10 weeks, since
activity B requires 8 weeks for its completion after its start. Similarly ES and
EF for activity C can be easily seen to be 0 and 12 weeks respectively. Now,
activities B and C have a common successor - biz. activity

D. Since activity D can start only after both B and C have been completed,
ES for D will be 12 weeks and not 10 weeks because C cannot he finished
before 12 weeks (its EF is 12 weeks). In a similar manner, this process can be
continued till we have covered all the project activities.

For activity 1, we can say that

ESi = max {EFf, EFg, EFh, ... }
where f, g, h, .., are the immediate predecessors of activity i; and EFi = ESi + ti
where ti is the estimated duration of activity i.

As the EF for activity N is 26 weeks, we can say that the earliest completion
time for the new product launch project is 26 weeks. Table 5.2 lists the
results of the forward pass for this project.

Table 5.2: ES and EF for all activities of new product launch project.

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Project Planning 5.3.1 Backward Pass
If the project has to be completed by a given date, then we can again ask two
questions for each activity:.

1) What is the latest time by which the activity has to be finished?

2) What is the latest time by which the activity has to start?

In other words, for each activity we can work out its Late Finish (LF) time
and its Late Start (LS) time, given that the completion of the project must be
achieved by a certain date.

After the LF and LS times for any activity have been worked out, the same
can be done for its immediate predecessors. The process thus begins with the
finishing activities of the project and continues through their predecessors till
we reach the start of the project. Since we are moving backwards in time, the
exercise is referred to as the backward pass.

For the new product launch project, we can conduct the backward pass
assuming that the project has to be finished in 26 weeks - its earliest
completion time. Thus, LF for N is 26 weeks and consequently its LS must
be 22 weeks since it takes 4 weeks for N to be completed. For both activities
J and M, LF is 22 weeks as N cannot start at 22 unless and until J and M are
completed. The LS for J can then be worked out as (22- 5) i.e. 17 weeks,
where 5 weeks is the duration of J. Moving one further step backwards, the
LF for D and I have to be 17 weeks. This process can be continued in a
similar manner till we have covered all the project activities.

Table 5.3: LF and LS for all activities of New Product Launch Project

For activity i, we can say that

LFi = min {LSj, LSk, LKl,............... }
where j, k, 1, ................are the immediate successors of activity i;
and LSi = LFi - ti
where ti is the estimated duration of activity i. Table 5.3 above lists the results
of the backward pass for this project.
78
 Project Network
5.3.3 Total, Free and Independent Slack Analysis (Pert &
CPM)
If we look at the results of the forward and the backward pass together, as in
Table 5.4 below, we observe some interesting facts. For activity A, although
the ES is 0 weeks, its LS is 3 weeks showing that due to some reason if this
activity is not started at 0 weeks but say at 1, 2 or 3 weeks, even then the
completion of the project is not delayed. On the other hand, for activity E
both its ES and its LS is 0 weeks showing that any delay in its start will
immediately affect the completion of the project. In other words, some
activities have some looseness or cushion and some others do not. This
property is referred to as activity slack and in this sub-section we shall try to
develop a deeper understanding of the same. Activity slacks are very useful
when preparing project schedules.

Table 5.4: Activity Slacks for all activities of New Product Launch
Project

Total Slack

Total slack for an activity is the difference between its LF and EF or that
between its LS and ES. If the total slack for activity K is 4 weeks, then there
can be a maximum. delay of 4 weeks in the completion of activity K from its
EF or a maximum delay of 4 weeks in its start from its ES, without affecting
the timely completion of the project in 26 weeks.

On careful observation of Table 5.4 together with the network diagram of

Figure 5.8, we find that activities K, L and M - all have a total slack of 4
weeks. However, this does not mean that each of the activities K, L and M
can be delayed by 4 weeks" without delaying the completion of the project. In
fact, the total slack of 4 weeks is shared by activities K, L and M and that is
why the total slack of an activity is sometimes referred to as its path slack as
it is shared with other activities on the same path or sub-path. Another way to
view total slack for an activity is that if all other activities take exactly the
same time for their completion as given by their respective estimated
durations, then the maximum delay possible in the execution of this activity
form its estimated duration is its total slack. 79
Project Planning The computation of total slack for activity i can be done as follows: [Total
Slack]i = EFi - ESi

Free Slack

Consider activities B, C and Din the network diagram of new product launch
project shown in Figure 5.8 and its time analysis shown in Table 6.4. Activity
B has a total slack of 3 weeks, whereas both C and D have a total slack of 1
week each. In other words, out of a total slack of 3 weeks for activity C, only
1 week is shared with its successor and other 2 weeks of total slack are not
shared with its successor. We say that activity B has a free slack of 2 weeks,
which it does not share with its successor(s). Free slack can occur for only
those activities whose head events are merge events (or combined merge and
burst events) and this slack is available only to the activity concerned and not
to its successor. If the activity concerned cannot make use of the free slack, it
is no longer available to any of its succeeding activities:

The computation of free slack can be done as shown below: [Free Slack]i =
ESj - EFi,

where j is a succeeding activity of activity i.

e.g. [Free slack of activity B] = (ES of activity D] - [EF of activity B] = 12 -
10 = 2 weeks

Independent Slack

Some activities may have some slack which they do not share with any of
their predecessors or any of their successors. This slack is referred to as the
independent slack of the activity concerned.

If we take a closer look at activity H in the project network of Figure 6.8, we

find that H does not share any of its total slack of 2 weeks with its
predecessor E which does not have any total slack - nor does it share it with
its successor I which again has a total slack of 0 weeks. Thus, the total slack
of 2 weeks available to activity H is independent of any of its predecessor(s)
or its successor(s). Independent slack can occur only for those activities
where there is at least one more sub-path between the tail event and the head
event of the activity concerned. The tail event for activity H is 4 and the head
event is 6 and the activity H provides a direct path between these two events.
However, there is another sub-path between these two events - viz, via
activities F and G and the difference between the two sub-path lengths i.e.
between F and G on one side and H on the other is the independent slack of
H. Activity H does not share its independent slack-with either its predecessor
or its successor. Even if all its predecessors finish at their latest possible
times (i.e. at their LF) and even if we want all its successors to begin at their
earliest possible times (i.e. at their ES), even then activity H has its
independent slack of 2 weeks.

The computation of independent slack for activity i can be done as follows :

80 [Independent Slack]i = ESj - LFh – ti
 Project Network
where j is a succeeding activity and h is a preceding activity of activity i. Analysis (Pert &
CPM)
e.g. [Independent Slack of activity H] = [ES of activity I] - [LF of activity E]
(Estimated duration of activity H]
=14-4-8=2 weeks

5.3.4 Critical Path

If the project has to be finished at its earliest completion then some activities
cannot be delayed at all. These are the activities with zero slack and they are
called critical activities as their timely completion is critically important for
the timely completion of the project. From Table 5.4 we can see that
activities E, F, G, I. J and N are all critical activities for the new product
launch project. The path obtained by joining the critical activities is called the
critical path of the project. Thus the path E-F-G-I-J-N is the critical path for
the new product launch project as shown in Figure 5.9 below.

Figure 5.9: Critical Path for the New Product Launch Project

The critical path is also the longest path from the start of the project to its
finish. However, a project may have more than one critical path. While a
project is under execution, critical activities need to be monitored very
closely as any delay in their completion is immediately reflected as a delay in
the project completion:

5.3.5 Time-scaled Networks

As the network diagram are not drawn on time scale, they do not
communicate much visually except showing the activity interdependencies.
On the other hand, managers have always found it more convenient to
interact with bar charts when it comes to monitoring and controlling the
actual performance vis-à-vis the scheduled performance.

This anomaly can be removed by drawing time-scaled networks. In these

networks, all activities are drawn horizontal arrows and the length of the
arrows represent their durations. The critical path is first drawn as the longest
path and then the other paths and sub-paths are drawn.

The time-scaled network diagram for the new product launch project is
shown in Figure 5.10 below.
81
Project Planning

Figure 5.10: Time-scaled Network for the New Products Launch Project

For easy reference, the event numbers used are exactly the same as used in
Figure 5.8 earlier. The time-scaled networks show not only the activity
interdependencies but also their durations and their slacks - dotted horizontal
lines show the activity slacks and it is quite clear that activities K. L and M.
each has a total slack of 4 weeks which they share among themselves. It is
also clear that if there is any delay in the completion of activity K, the total
slacks of activities L and M automatically get reduced to the same extent and
hence the appropriateness of the terns path slack. Free slack and independent
slack for different activities can also he seen in the time-scaled network. In
Figure 5.10, all the activities are shown at their respective earliest start and
finish and so the ES. EF times can be seen directly. The LF and the LS times
can also be interpreted from the figure.

Activity 1
What are the benefits to manager for determining the critical path of a
project?
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

5.4 PROBABILISTIC DURATION

In many projects there are activities whose time durations cannot he
estimated very precisely because of the high degree of uncertainty associated
with them. In fact, it may become impossible to get satisfactory time
estimates for some activities because of the uncertainty in their durations. In
Programme Evaluation and Review Technique (PERT), one of the early
network approaches to project management, a special mechanism has been
82 developed to handle these uncertainties. We shall first develop the concepts
 Project Network
in section 5.4.1, use the same in section 5.4.2 to answer questions regarding Analysis (Pert &
the probability of completion of a project in a given amount of time and CPM)
finally in section 5.4.3 discuss some limitations of this approach.

5.4.1 Three Time Estimates

For some activities where the degree of uncertainty is high, it may he easier
and more appropriate to get three different estimates for each activity
duration rather than trying to get the best estimate. We can thus try to find-an
optimistic estimate, a pessimistic estimate and a most likely estimate of the
activity duration.

Optimistic Time

If all conditions are favourable, then the minimum time in which an activity
can be finished is called the optimistic time of the activity concerned. Of
course the probability of all the conditions being favourable is very low and
so the probability that the activity will actually be finished in its optimistic
time is very low. In fact, we can say that it is impossible to finish an activity
in less than its optimistic time. a

Pessimistic Time

This is the reverse of optimistic time. If all conditions are unfavourable, then
the maximum time in which an activity will be finished is called its
pessimistic time. Using the same logic as earlier. we can say that the
probability that an activity will require as much time as its pessimistic time
for finishing is very low and that it is impossible for an activity to take longer
than its pessimistic time for finishing.

Most Likely Time

In reality, some factors may be favourable and some others unfavourable for
the timely finishing of an activity and so in almost all cases the actual time to
finish an activity will be somewhere between the optimistic and the
pessimistic times. The most likely time is that duration of the activity which
has the highest probability of occurrence among all possible values of the
activity duration.
Once the optimistic, pessimistic and the most likely times of an activity are
estimated, one has a reasonable idea about the degree of uncertainty in the
duration of that activity. It is also known empirically that the probability
density function of activity duration closely follows a beta distribution as
shown in Figure 6.11 below. The expected duration (or the mean duration) of
the activity and its standard deviation are easily calculated as shown below:
a 4m b
expected duration of an activity, t e
6
b a
standard deviation of activity duration,
6

where, a = optimistic lime of the activity m = most likely time of the activity 83
Project Planning and h = pessimistic time of the activity

Figure 5.11: Probability Distribution of Activity Duration

Thus, it can he seen from the above expressions as well as from the Figure
6.11 above that if m is equidistant from both a and h, then the probability
density function becomes a symmetrical curve with te = m. Also that the
interval (b - a) governs the variability of the activity duration as measured by
its standard deviation or its variance which is nothing hut the square of the
standard deviation.

5.4.2 Probability of Completion of a Project

A path on a project network diagram is simply a sequence of activities and
the path length (or duration) is nothing hut the sum of the durations of all the
activities on the path. If the various activity durations are independent or each
other, then the expected duration of a path is the sum of the expected
durations of all the activities on the path and the variance of the path duration
is the sum of the variances of all the activity durations on the path. Moreover,
the general version of the central limit theorem assures us that the sum of a
large number of independent random variables will be approximately
normally distributed regardless of the distribution of the individual random
variables. We can, therefore, not only find the expected duration of any path
but also its variance and the shape of the distribution.

Earlier, we had defined the longest path in a project network diagram as the
critical path. However, if the individual activity durations are uncertain, the
longest path in the network may also not be known with certainty. If we now
define the path with the longest expected duration as the critical path, we can
rind the expected time of completion of a project as well as its variance. Also,
we can find the probability that the critical path will he completed within a
given duration and this may he taken as the probability that the project itself
will he completed within the specified duration. We now propose to show
how all this can be done by taking the new product launch project as our
example.

84
 Project Network
Table 5.5 Three time estimates of Activity durations for New Product Analysis (Pert &
Launch Project CPM)

Table 5.5 above shows the three time estimates for cacti activity of the new
product launch project. As can be seen from the table. some activities like G
and M have no uncertainty (e.g. for activity G, optimistic, most likely and
pessimistic times are all estimated as 6 weeks), whereas some other lire
activity C have a relatively high degree of uncertainty in their activity
durations (this can he seen from the low optimistic time of 9 weeks and the
high pessimistic time of 19 weeks for activity Q. We can also see that some
activities like B have, a longer left tail, whereas some others like E have a
longer right tail and many other activities like A, D. F etc. have both their
tails of equal length. The last two columns in Table 5.5 above show the
computed values of the expected duration and the standard deviation of each
activity. Figure 5.12 below shows the network diagram of the new product
haunch project where the expected value and the standard deviation of each
activity duration is shown by the side of the respective activity code. The
path with the longest expected duration is also identified as the critical path
on this network diagram. As the expected duration of each activity has
remained unchanged as compared to the earlier estimated single time
estimate for each activity, the critical path is also unchanged.

85
Project Planning

Figure 5.12 Critical Path for the New Product Launch Project with Expected Value and
Standard Deviation of each Activity Duration

The expected duration of the critical path,

The variance of duration of the critical path,

Let t be the length of the critical path EFGIJN for this project. So, we know
that t has a normal distribution with mean µ = 26 weeks and variance σ2 =
1.472 weeks.

Obviously, the probability that the critical path will be completed in 26

weeks is 0.50. As the critical path is the path with the longest expected
duration, this may be taken as the probability of completing the project in 26
weeks as well. What is the probability that the project will be completed in
28 weeks?

[ From Tables of Area under the Standard Normal Curve ]

This is shown in Figure 5.13 below as the shaded area under the standard
normal curve. We can therefore say that the probability of completing the
project in 28 weeks is 95.05%.
86
 Project Network
Analysis (Pert &
CPM)

Figure 5.13: Area under the Standard Normal Curve for 2 < 1.65

5.4.3 Interpreting the Probability of Completion of a Project

We must keep in mind that what we computed as the probability of
completion of the project is actually the probability of completing the critical
path in the given time and the two may not be the same. In case there is
another path which is near critical in terms of the expected duration but with
a higher variability, then the probability of completing that near-critical path
may be smaller than the probability of completing the critical path. It may be
better to demonstrate this with an example and for this we go hack to Figure
5.12. The path CDJN has an expected duration of 25 weeks and a much
higher variability than that of the critical path EFGIJN. For the near-critical
path CDJN, we can compute the probability of completion in 28 weeks
following the same steps as used earlier.

The expected duration of the critical path, CDJN,

= 0.9382 [From Tables of Area under the Standard Normal Curve]

We therefore conclude that the probability of completing the project in 28

weeks cannot exceed 93.82% which is lower than 95.05% which was
obtained by considering the critical path EFGIJN.

In such cases the Project Manager may get false assurance of a relatively
87
Project Planning higher probability of completion of a project than is actually the case. In fact,
one way of getting a valid probability distribution of project completion time
is to perform a computer simulation of the project. In such a simulation, the
project is run many times - say 100 times or 1000 times on the computer and
by studying the project completion times in these runs, a probability
distribution can he constricted. For each run, the computer first picks up one
value randomly for each activity - representing the duration of the activity.
These values are picked up such that for each activity, these values follow the
probability distribution of the activity duration as known from its optimistic,
most likely and pessimistic times. For each set of such values, (i.e. each run),
the project is analysed to find the project completion time as well as the
critical activities.

The distribution of project completion time can he used directly to answer

questions like, ``what is the probability of completing the project in n
weeks?" One can also find out how frequently a particular activity became
critical and interpret the same as the probability that the particular activity is
critical. This is referred to as the criticality index of the activity when activity
durations are uncertain and is a number between 0 and 1. For example, in the
new product launch project of Figure 5.12, the criticality index of activity N
would he 1.0 since activity N would always be critical, the criticality index of
activity J is expected to be very high (close to 1.0) as activity J would be
critical as long as any one of the paths ABDJN, CDJN, EFGIJN and EHIJN
is critical, whereas the criticality index of activity M is expected to be low
(close to 0.0) as activity M would be critical only when path EKLMN
happens to be the longest path in the project network. In this analysis, the
focus is on critical activities (more specifically the criticality index of
activities) rather than on critical paths.

Activity 2

What is the probability of achieving the project duration computed on the

basis of average or mean values of activity duration? How can we enhance
the probability of achieving project completion within the deadlines agreed?
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

5.5 OTHER TYPES OF DIAGRAMS

We have so far been using Activities-On-Arrows (AOA) diagrams to
represent activity interdependencies. Although these are still the most
commonly used network diagrams, some other network diagrams are also
used. In this section we present two of these - the first one is an Activity-On-
Node (AON) diagram and the other one is the Precedence Network (PN)
88 diagram which is an extension of both AOA and AON diagrams.
 Project Network
5.5.1 AON Diagrams Analysis (Pert &
CPM)
AON diagrams are similar to the AOA diagrams or the arrow diagrams that
we introduced in section 5.2 earlier. In these diagrams also, we use circles
and arrows, but the circles (or nodes) now represent activities. The arrows do
not represent any entity but only show the precedence relationships between
the nodes. The arrowhead points to the succeeding activity. The precedence
relationship "activity B can start only after activity A has been completed",
will have an AON diagram as shown in Figure 5.14 (a) below. The
corresponding AOA diagram for the same precedence relationship is also
shown as Figure 5.14(b).

Figure 5.14: Activity B can start only after activity A has been completed

In an AON diagram, each arrow represents a precedence relationship and so

the number of arrows is simply the number of precedence relationship in the
project. Also, in this case there is no need to use dummy activities as any
complex set of precedence relationships can be explicitly represented without
using any dummy.

Figure 5.15: No need for Dummy activities in AON Diagrams

Figure 5.16: AON Diagram of the New Product Launch Project with the data given in Table 5.1

For example, the situation described earlier in Figure 5.6 to justify the use of
dummy activities in AOA diagrams (and shown again as Figure 5.15a) can be
easily represented by its AON diagram shown as Figure 5.15b above:
89
Project Planning It should also be noted that there is no concept of an event in an AON
diagram. However, if required, special events or milestones can also be
represented as additional nodes in AON diagrams. However, they are not
used as extensively as the AOA diagrams. This is largely due to historical
reasons as PERT was based on an event-oriented approach. AON diagrams
are now getting popular as some popular Project Management software use
this form of diagramming as also because the Precedence Network (PN)
diagrams, which are more versatile and which we describe in the next
section, are based on AON diagrams.

The AON diagrams for the new product launch project, based on the data
given in Table 5.1, is shown in Figure 5.16 above. As is generally done in
AON diagrams, we have also added two fictitious nodes called Start and
Finish in our diagram to identify the starting and the finishing activities
clearly.

5.5.2 Precedence Network Diagrams

Both AOA and AON diagrams can represent only one type of
interdependency between two activities - that of complete precedence. The
successor activity can start only after the predecessor activity is completed.
However, there may be partial precedence between two activities in the sense
that one of them can start only after the other one has started or can be
finished only after the other one has finished and so on. Precedence
Networking (PN) or Precedence Diagramming Method (PDM) allows
explicit representation of four types of precedence relationships and these are
shown in Figure 5.17 below. In these diagrams, activities are represented as
square or rectangular nodes. This allows easier depiction of the "start" (the
left side of the rectangle) or the "finish" (the right side of the rectangle) of
activities. The flow of time is again assumed to be from left to right. Arrows
represent precedence relationships and they also have a symbolic
representation with a precedence symbol (e.g. FS) and a lead-lag factor (e.g.
n weeks).

Figure 5.17: Four types of Precedence Relationships in PN Diagrams

90
 Project Network
Analysis (Pert &
CPM)
Table 5.6: Details of Activities for Drawing Precedence Network of New
Product Launch Project

Figure 5.18 Precedence Network (PN) Diagram for the New Product Launch Project

FS Relationship

The first precedence relationship is an FS relationship. FG SI = 1 means that

there is a finish. to start relationship between the activities G and I with a
lead-lag factor of 1, More specifically, activity I can start only 1 week after
the finish of activity G and not before that. FS relationships are very common
91
Project Planning and are the only relationships which can be shown on AOA or AON
diagrams (with a lead-lag factor of zero).

SS Relationship

This is a start-to-start relationship. SE SF = 2 would mean that activity F can

start only 2 weeks after the start of activity E and not before that. After
activity F has started, it is possible for both activities E and F to continue
simultaneously till one of them is finished.

FF Relationship

Two activities may have an FF relationship if one of them cannot be finished

before the finish of the other. For example, FB FD = 3 would imply that
activity D can finish only 3 weeks after the finish of activity B and not before
that.

SF Relationship

The fourth and the least common precedence relationship between two
activities is the start-to-finish relationships. SAFB= 7 would mean that activity
B can finish only 7 weeks after the start of activity A and not before that.

It is perhaps possible to split some activities in two or more parts to represent

some of these precedence relationships or introduce fictitious activities to
represent lead- lad factors, hut these are only crude approximations and not
complete representations and may result in undesirable interruptions while
working on some activities. PN algorithms are available to compute the ES
and EF times of activities in the forward pass and LS and LF times in the
backward pass and thus to compute activity slacks and identify critical paths.
However, because of the variety of precedence relationships, the
interpretation of slack and critical path is not as straight forward as we
developed in the AOA (or AON) diagrams and has to be done with great
care.

If we go hack to the new product launch project as an example and look at

the data of Table 5.1, we may find that some of the precedence relationships
may not have been of the type FS = O. By questioning the Project Manager
about each precedence relationship, suppose we find the precedence
relationships as listed in Table 5.6 above. Activity B is related to activity A
through the relationship FA SB = 0, which is the same as listed in Table 5.1
earlier while drawing the AOA diagram. On the other hand, earlier we had
stated that activity D follows activities B and C. On closer scrutiny, the
Project Manager finds that there has to be a minimum gap of 1 week between
the finish of C (produce the first hatch) and the start of D (package the first
hatch). This is represented as FC SD= 1. Similarly, activity D can start before
activity B (set up packaging equipment and procure raw materials) is
completely finished - as soon as some raw materials are procured, but activity
D can be finished only 3 weeks after the finish of activity B and not before
that. This can now be represented as FBFD= 3. We can also agree with the
92
 Project Network
Project Manager's view that the recruitment of salesman (activity F) may not Analysis (Pert &
wait till the setting up of the sales office (activity E) is finished but that we CPM)
can start F 2 weeks after the start of E. This has been shown as SESF= 2.

Figure 5.18 above shows the precedence network diagram (PN diagram) of
the new product. launch project based on the information contained in Table
5.6. Since the symbolic representations are associated with the arrows, no
subscripts are used to identify the activities associated with a preceding
relationship. Also, lead-lag factors of zero are not mentioned separately and
are implicit.

Activity 3
By and large, we launch the project based on Earliest Start Time (EST)
schedule for all activities. Is there any justification?
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

5.6 PROJECT SCHEDULING

In this unit, we have so far looked at time analysis of projects and worked out
Early Start, Early Finish and Late Start, Late Finish times of different
activities. In activities with a high degree of uncertainty in their durations, we
have also seen the role of three time estimates - which allow us to compute
the probability of completion of the project in a given amount of time.
However, we still have not discussed how to obtain a project schedule in
terms of setting dates for the start and finish of each activity and each
milestone. In this section we propose to discuss project scheduling and while
doing so - to introduce concepts of project resources and project costs.

5.6.1 ES and LS Schedules as Limits

Assuming that the activity durations estimated are correct, we can view the
two schedules obtained - viz. the ES schedule and the LS schedule as the
limits between which the actual schedule must lie - else the project
completion will get delayed. This is because the ES time of an activity is the
earliest time at which the activity can begin or the earliest time at which all
its predecessors can be completed and so no feasible schedule can have a
planned start time for an activity earlier than its ES time. Similarly, the LS
time for an activity is the latest time by which the activity must start if the
project has to be completed by a given date and if the planned start time is
later than its LS time then again it will lead to an infeasible schedule since
the project cannot be completed by the given date. For the critical activities-
the ES and the LS times are the same and for these activities their planned
start should also be the same as their ES or LS times. On the other hand, for
those activities which have a slack, the LS times are later than their ES times
and any feasible schedule must have the planned start times not earlier than
93
Project Planning the respective ES and not later than the LS times. While deciding the planned
start time some other considerations like resource availability, unevenness of
employment of workers, cost optimisation, etc. also need to be looked into. It
may also be true that because of these considerations the planned start of
some activity is scheduled after its LS time.

5.6.2 Resource Scheduling

Earlier in section 5.2.1 we defined an activity as a homogeneous element of
work consuming some resources and requiring some definite amount of time
for-its completion. Each activity will require some resources - which could be
manpower, equipment, money, space or any other thing which is available in
a limited quantity. The cost incurred on an activity is largely due to the cost
of the resources consumed and a better resource scheduling may be able to
lower project costs or make the project more cost-effective.

Time analysis by itself may not produce a feasible schedule because resource
availability constraints have not been considered. If we review the process of
project planning discussed so far we find that we started with breaking up the
project into its constituent activities, listed the activity interdependencies
based on technological constraints, management policy constraints and legal
constraints and finally estimated the activity durations based on an implicit
assumption about some "normal" amount of resources available. With the
data so generated we proceeded to carry out time analysis. Stated differently;
we have not yet ensured that the resources required for an activity are
actually available in the period when the activity is scheduled. For example,
if activities A and B both require a crew of a mechanic and a helper and we
have only one such crew assigned to the project, then A and B cannot be
done simultaneously, even though the ES or the LS schedule calls for their
parallel execution. This is because resource availability constraints have not
yet been considered. If, however, the schedule is changed and the parallel
activities A and B are made sequential - i.e. one after the other- then it
becomes a feasible schedule although the project duration may get extended
due to this change. This is the heart of resource scheduling.

In resource scheduling, we first identity resource conflicts--i.e. periods where

the current schedule requires more resources than are available and then we
try to remove the resource conflicts to get a feasible schedule. However, the
problem is not as simple as it sounds here because the number of resources
used in a project is very large and any of these could give rise to a resource
conflict. Secondly, even if a resource conflict is identified, its removal may
have many consequences: it may increase the project duration, it may lead to
uneven resource use rate and it may affect the resource utilisation; This, in
turn, might complicate the process of removal of resource conflict because
the alternative which minimises the increase in project duration may make
the resource use more uneven and so on.

While manpower is usually a resource for most activities - in a large number

94 of projects there are various skills of manpower required and each skill and
 Project Network
each level of personnel is a separate resource. Not only that, when these Analysis (Pert &
people are grouped into sections and departments - each skill or level of CPM)
workman in each section is a separate resource. It is therefore not unusual to
have 100 or 200 different resources in large projects and a feasible schedule
cannot have a resource conflict for any of its resources. Further, a resource
may not be required for the complete activity duration (e.g. the activity "build
a wall" may be estimated to take 3 weeks whereas the resource "painter" may
be required only for the last three days of its estimated duration) or may not
be required for the complete day (e.g. 8 working hours) even for those days
when it may be required: There maybe alternate resources which could be
used - perhaps at a higher cost - e.g. an Electrician Grade I may also do the
work of an Electrician Grade 11 but not vice versa. All these factors make the
resolution of resource conflicts a very difficult problem and that is why
computers are very helpful at this stage. There are very good software
packages available in the market which carry out resource scheduling using
their own individual procedures. Basically, these try to remove resource
conflicts by first trying to change the use of the resource within the duration
of the activity, then delaying some activities having a slack and finally by
delaying the start of critical activities.

5.6.3 An Example
We shall try to understand this process by taking a small project whose
details are shown in Figure 5.19. Here we make a simplifying assumption
that the resource requirement is uniform and for the complete' 4uration of the
activity.

Fig. 5.19 A small project with eight activities, their interdependencies estimated
duration and resource requirements.

We can easily carrying out a time analysis of this project and identify AEG as
the critical path having a length of 13 days. If each activity is scheduled at its
earliest, we can get the ES schedule which is shown in the form of a time-
scaled network in Figure 5.20(a). By summing up the number of men
required to perform each activity, the resource requirement for the whole
95
Project Planning project can be easily computed. Figure 5.20(b) shows the resource
requirement for the ES schedule of this project. For example, on day 1 -
activities A, B and C are scheduled and this would require (6+2+2=) 10 men.
We find that the peak resource requirement is of 11 men required on days 6,
7 and 8. However-, if only 8 men 'are available on this project, then this
schedule is not feasible - for feasibility, the resource requirement on any day
cannot exceed 8 men.

Suppose we use the following heuristic to remove resource conflicts:

Step 1 On the project schedule, locate the first period with a resource conflict
as one move forward in time from the start of the project to its finish. If there
is no such period, stop as the schedule is resource feasible - else go to step 2.

Step 2 Among all the activities scheduled to start at this period, pick up the
one with the largest total slack (where Total Slack = Late Start - Planned
Start for the activity) and delay its start. This activity cannot be performed
alongwith the other conflicting activities - i.e. the remaining activities
scheduled to start at this period and the ones continuing from a previous
period. Schedule the start of this activity immediately after the first of the
other conflicting activities is finished.

Step 3 If there is no resource conflict in this period go to step 1, else go to

step 2.

Let us apply this heuristic to the small project of Figure 5.19. We begin with
the ES schedule and the corresponding resource profile of Figure 5.20. At
step 1, we find that day 1 is the first period with a resource conflict since the
schedule requires 10 persons on that day whereas we have only 8. At step 2,
we find from Figure 5.20(a) that three activities viz. A, B and C are
scheduled to start on that day. Their total slacks are 0, 3 and 5 days
respectively and so we pick up activity C and delay its start. The other
conflicting activities are A and B and the first of these to get finished is B.
So, we schedule the start of C immediately after the start of B. This schedule
is shown in Figure 5.21. As there is no resource conflict on day 1 we go to
step 1. The first period with a resource conflict is now day 6 and D and E are
two activities scheduled to start on this day. As D has a total slack of 1 day
whereas E does not have any slack, we pick up D at step 2 and delay its start.
The other conflicting activities are E - the other activity scheduled to start at
this period - and C - continuing from a pervious period. Of these C is the one
scheduled to finish first and so we schedule the start of D immediately after
the finish of C. This schedule is shown in Figure 5.22. As there is no resource
conflict on day 6, we go to step 1.

96
 Project Network
Analysis (Pert &
CPM)

(a) ES schedule for the project Figure 5.19 (a) Schedule with delayed start of C by 2 days

(b) Corresponding Resource Profile Figure 5.20 (b) Corresponding Resource Profile Figure 5.21

Day 7 is now the first period with a resource conflict and between D and F
which are scheduled to start on this day, we delay the start of F as it has a
total slack of 3 days whereas D has zero slack. As both the other conflicting
activities D and E are scheduled to finish on day 9. We schedule the start of
activity F immediately after this- i.e. on day 10. This schedule is shown in
Figure 5.23. As there is no resource conflict on day 7, we go back to step 1
and as there is no resource conflict in any period, we stop as we have reached
a resource feasible schedule. The heuristic seems to have worked very well
since we could get a resource feasible schedule without any delay in the
project completion from its earliest completion of 13 days.

(b) Corresponding Resource Profile (b) Corresponding Resource Profile

Figure 5.23 Figure 5.23
97
Project Planning Now suppose that we had only six men available to work on this project.
Figure 5.24(a) through (e) show the schedule as it evolves on application of
the heuristic. We finally get a resource feasible schedule which shows that
the project can be completed in 22 days with not more than men required on
any day. Obviously, this is not the best as Figure 5.25 gives us a resource
feasible schedule with 20 days as the project duration. The same heuristic
which worked well with a resource constraint of 8 men does not work well
when the constraint is 6 - men. This is a general problem with all resource
scheduling heuristics.

5(a) ES Schedule. Project duration -13 days:

Figure 5.24 Resource scheduling with only 6 men available

Imagine the complexities involved in a large project with hundreds of

activities and scores of resources. The resource scheduling in such cases can
be handled efficiently, only by computers. However, the heuristics or rules
98
 Project Network
used by different project management software are proprietary and also none Analysis (Pert &
of them claim to give the optimal solution - but they do give good schedules. CPM)
They all try to minimise the delay in project completion by altering good
schedules. They all try to minimize the delay in project completion by
altering the intensiveness of resource use (e.g. where the resource is not used
for all 8 hours in a shift) altering the allocation of resource within an activity
(e.g. where a resource is required only for a part of the activity duration and
making use of different types of activity slack.

Figure 5.25: Resource feasible schedule with 6 men and project duration of 20 days

Activity 4

If resources for meeting the Earliest Start Time (EST) Schedule are available,
is there any valid justification for undertaking resources planning?

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

5.6.4 Time/Cost Trade-off

In most projects, many activities may be expedited - i.e. completed in a
shorter duration by changing the intensiveness of resource use, changing the
method or procedure, changing the resources, changing the material and so
on. However, all such reductions in activity durations are accompanied by
rise in activity costs and so all such activity duration reduction may not be
desirable. This trade-off between the activity duration and the associated cost
is the subject of interest in this sub-section.

The reduction in activity duration by any change in its resources, resource

use, method, procedure or material is referred to as the crashing of the
activity. There are activities (e.g. curing of concrete) which cannot be
crashed, some others which can be crashed very ' marginally and still others
which can be crashed by a significant amount of time. If we take a look at the
details of activities for New Product Launch Project in Table 5.1, we may
find that it is not possible to crash activity A "finalise package design" - from
its "normal" duration of 2 weeks whereas activity B - "set up packaging
equipment and procure raw materials" - having a "normal" duration of 8
weeks may be crashed to a "crash" duration of only 6 weeks. This is because,
overtime may be used while setting up the packaging equipment and local
purchase may be used while procuring raw materials. However, there is an
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Project Planning overtime premium and local purchase is at a higher price resulting in an
increase in the activity cost from a `"normal" cost of Rs.10,00,000 to a
"crash" cost of Rs 12,00,000. Table 5.7 lists all the normal and crash times
and costs for all fourteen activities of the new product launch project.

From Table 5.7 we can easily see that the cost of the project will be Rs
46,98,000 if all the activities are executed as per their "normal" durations. We
know from the earlier time analysis that the earliest project completion in
such a case is in 26 weeks. However, if the project has to be finished sooner
then we have to crash some activities. Let us now determine an efficient
method of crashing the project duration.

Table 5.7: Normal and Crash Durations and Costs for New Product
Launch Project

If the project duration has to be reduced, then the length of the critical path
has got to be reduced. Obviously, there is no advantage in crashing a non-
critical activity as that would not reduce the length of the critical path. On the
other hand, if any of the critical activities is crashed, it would immediately
result in a reduction in the length of the critical path and consequently the
project duration.

The question then is, which critical activity should be crashed? The answer to
this should be simple - the one which is the cheapest to crash i.e. where the
increase in cost is the minimum.
100
 Project Network
Analysis (Pert &
CPM)

Figure 5.25: Linear interpolation of Cost for Activity C

We assume that for activities whose durations could be crashed by 2 or more

weeks, partial crashing is also possible and the cost increase can be estimated
by linear interpolation of the activity cost curve as shown in Figure 5.25 for
activity C. Thus, if the activity C is crashed to 11 weeks, the activity cost
would increase to Rs 780,000. It is easier to capture the same information
through computation of the cost slope for each activity as shown below:

Cost slope for an activity = Crash Cost - Normal Cost

Normal Duration - Crash Duration

The cost slope for each activity is also shown in Table 5.7 and it captures the
increase in activity cost per week of crashing. However, no activity can be
crashed beyond its crash duration which is an absolute minimum.

We know from Figure 5.9 that E, F, G, I, J and N are six critical. activities.
Of these G, I and N cannot be crashed and E, F and J can each be crashed by
one week only at a cost of Rs. 8,000, Rs. 21,000 and Rs. 27,000 respectively.
Hence the cheapest way of reducing the project duration from 26 to 25 weeks
is by crashing activity E to its crash duration of 3 weeks. The project cost
would rise to (Rs. 4698,000 + Rs. 8.000 i.e.) Rs. 4706,000.

If we want to reduce the project duration by one more week. we have to wash
some critical activity again. However, now there are two critical paths viz.
EFGJN and CDJN and the project duration will reduce only if both the
critical path lengths can be reduced. Of these critical activities only F can be
crashed by 1 week at a cost of Rs. 21,000, J by 1 week at a cost of Rs.
27,000, C by 3 weeks at a cost of Rs. 60,000 per week and D by 1 week at a
cost of Rs. 15,000. One way of reducing the project duration to 24 weeks is
by crashing both D and F by 1 week each costing (Rs. 15,000 + Rs. 21,000
i.e.) Rs. 36,000. The other way is by crashing J by 1 week costing only.Rs.
27,000. As J is an activity lying on both the critical paths - crashing it by 1
week will reduce the project duration by 1 week. This is the cheapest way of
101
Project Planning completing the project in 24 weeks and the project cost would rise to (Rs.
4706,000 + Rs. 27,000 i.e.) Rs. 4733,000.

We still have only two critical paths - viz. EFGIJN and CDJN and the only
critical activities which can be crashed are - F which can be crashed by 1
week at a cost of Rs. 21,000, C which can he crashed by 3 weeks at a cost of
Rs. 60,000 per week and D which can be crashed by 1 week at a cost of Rs.
15,000. The only way in which the project duration can be reduced from 24
to 23 weeks is by crashing both F and D by 1 week each costing (Rs. 21,000 -
Rs. 15,000 i.e.) Rs. 36,000. The project cost will now increase to (Rs.
4733,000 + Rs. 36,000 i.e.) Rs. 4769,000.

At this stage no activity on the critical path EFGIJN can he crashed any
further and so it is no possible to reduce the project duration beyond 23
weeks. Although it is possible to crash the project duration from 26 to 23
weeks, it may not be economically justified. Suppose the economic benefit of
launching the new product earlier is Rs. 30,000 per week of early launch.
Then we will crash the project duration by only 2 weeks as the incremental
cost of crashing by one more week (i.e. the third week) is Rs. 36,000 whereas
the incremental benefit is only Rs. 30,000.

Some projects carry an incentive for early completion or a penalty for late
completion and these can also be treated in the same way for determining the
optimum project duration. The guiding principle in all crashing decisions is
the same - the cost of crashing by 1 week (or 1 month or any other period)
goes on increasing with each successive round of crashing and we should
crash only as far as it is economically beneficial and not beyond that.

5.6.5 Project Scheduling as an Iterative Process

As described in the previous sections, the steps involved in project planning
and scheduling could be summarised as follows

• Establishing the Project goals and objectives

• Defining the work - i.e. breaking up the project into its constituent
activities
• Estimating the activity duration and defining activity interdependencies
• Carrying out time analysis of the project
• Establishing the resource availability and requirements

Developing a resource feasible schedule Analysing activities to find

feasibility of crashing Optimising the baseline plan and schedule Freezing the
baseline plan and schedule a simple single-pass sequence of steps to be
followed one after the other. As the objective is to get an optimised project
schedule and baseline plan some of these steps may have to be repeated in an
iterative way to get closer to the baseline plan. After going through the
time/cost trade off analysis once, one may realise that it is better to Modify
the resource allocated to a particular activity - say from 10 to 8. With this
102 change, resource scheduling may have to be repeated with consequent
 Project Network
changes in crashing of activities. Similarly, after one round one may realise Analysis (Pert &
that the resources available to the project must be increased to complete the CPM)
project in time. This in turn calls for another iteration. The final outcome
after this whole exercise is a project schedule and baseline plan which is
feasible, meets the projects goals and has been optimised on cost. The
baseline plan then becomes the basic document against which the project
progress is monitored and controlled.

Activity 5

Project delays can be very costly and can 'impact adversely on the fiscal
health of the company,. If we are engaged in crashing the overall project
duration because of its high profitability, are there any other cost factors that
must be taken into account?
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

5.7 LET US SUM UP!

Project Scheduling is quite a complicated exercise - especially for large
projects. In this unit we have brought out the issues relevant to project
scheduling and time analysis of projects and also tried to discuss some
procedures for carrying out the same.

As projects are unique one-time endeavours having their own goals, we

found that project network diagrams could provide the basic framework to
carry out time analysis of projects. We described how project network
diagrams could be drawn and then used for time analysis of projects. We did
this through AOA network diagrams wherein activities are represented by
arrows and events by small circles or nodes.

The time analysis could give us Early Start and Early Finish times of
different activities during the forwarded pass and Late Finish and Late Start
times during the backward pass. We used these to define total slack, free
slack and independent slack of different activities. We interpreted those
activities having no total slack as critical activities as any delay in their
execution would be immediately reflected in project delay and the path (or
paths) formed by joining the critical activities together on the network
diagram as the critical path. Finally, we combined the project network
diagram and the time analysis results to draw the time-scaled network of
projects - which can visually deficit both the activity interdependencies and
their durations and slacks.

We then took a look at those activities having a high degree of uncertainty in

their estimated durations and discussed the role of three time estimates - viz.
optimistic time, pessimistic time and must likely time in capturing this
uncertainty
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Project Planning We used the three time estimated optimist compute activity expected duration
and variance and then using the central limit theorem the project expected
duration and variance. This information, once generated, can be used to
answer question regarding the probability of completion of the project in a
given amount of time.

We also introduced AON (Activity on Node) network diagrams in which

activities are, represented as modes and there is never a need to use dummy
activities.

Precedence Network (PN) diagrams are then introduced and these network
diagrams allow us to represent dependency .relationships between a pair of
activities other than the Finish - to Start (FS) which is used in AOA and AON
networks. In PN networks, we discussed how to use Start-to-Start (SS),
Finish-to-Finish (FF) and also the less commonly used Start-to-Finish (SF)
relationships. Each of these precedence relationships can also have their
respective lag times.

Time analysis alone does not give us a feasible schedule as we have not get
ensured that resources required for different activities will actually be made
available. This is done in resource scheduling where we first identify
resource conflicts and then try to remove the same through the use of
heuristics. We showed the use of one simple heuristic which worked well
with a resource availability of 8 men but did not work well when the resource
availability was changed to 6 men. This is true of all heuristics including the
ones used in computer packages to remove conflicts.

We also analysed time/cost trade off in project scheduling. We found that the
estimated duration of some activities can be crashed (i.e. reduced) from their
normal durations. This can he achieved only by incurring a higher cost on the
activity e.g. on overtime, local purchase, changed methods or procedures, etc.
Project crashing can be used in situations where the incremental benefit for
crashing is more than the incremental cost of crashing. It is true that the
greater the crashing, the higher the incremental crashing per period and so
beyond a point it may not be economical to resort to crashing.

The various steps involved in project scheduling may have to be used more
than once in an iterative manner to get the project schedule which uses the
right amount of resources. is estimated to be completed at the right time and
at an optimised cost.

Such a schedule called the baseline schedule is used for monitoring and
control of the project.

5.8 SELF-ASSESSMENT EXERCISES

1. Compare and Activity-on-Arrow (AOA) schools with Activity-on-Node
(AON) networks and justify why AOA networks are preferred
internationally.
104
 Project Network
2. Time-scaled networks are significant improvements over traditional Analysis (Pert &
networks and bar charts and their usage will grow in the next century.' CPM)
Justify with examples of their advantages.
3. W hat is the concept of "Free Float" (Primary slackness) and "Total
Float"(secondary slackness)? Bring out their significance in project
management.
4. A network comprises of the following activities:
Activity Duration(Weeks) Activity Duration(Weeks)
1-2 6 2-7 4
1-4 6 5-7 Dummy
1-3 2 4-8 6
3-5 4 6-8 8
2-4 Dummy 7-8 8
5-6 2

a) Draw an AOA network

b) Compute forward pass calculations (Earliest possible occurrences of
nodes), Backward Pass calculations (Latest possible) occurrences of
nodes); Free Float, Total Float of all activities and determine the
critical path. Mark the critical path in the network.
c) Prepare a time-scaled network and mark the critical path in the
network.
5. Draw an AOA network of the following activities:
Activity Precedes Duration(days)
Start A D 2
Start B E,H 3
Start C F,K 4
D G 7
E G 6
F E,H 5
Finish G - 8
H - 9
K - 10
a) Carry out all the calculations on the network, determine and mark
the critical path. What is the total project duration?
b) Calculate the amount by which the duration of activity ‘A’ may
increase without changing the total project duration.
c) Draw the time-scale network and reconfirm the answer to (b) above.
6. A network has following activities their normal duration and costs as
well as their minimal (crash) duration and costs are also indicated in the
tabulation below:

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Project Planning

a) Draw the time-scales network.

b) For the activities and their corresponding time and cost information,
determine how and at what additional cost; a deadline of completing the
project in 48 days can be met.
7. A project comprising of eight tasks (A to H) has the following
characteristics:

a) Draw an AOA network. Carry out all the calculations, determine the
critical path and markit in the network. What is the total project duration.
b) What is the probability of achieving the project within the deadline of 30
weeks?

5.9 BIBLIOGRAPHY AND FURTHER

READINGS
Harrison, F.L., 1992. Advanced Project Management: A Structured
Approach,

Metropolitan Book Co.: New Delhi.

Harvard Business Review, 1989. Managing Projects and Programs with a

Preface by Norman R. Augustine, Harvard Business Review: Boston,
Massachusetts.

Kerzner, Harold, 1992. Project Management: A Systems Approach to

Planning, Scheduling and Controlling, Van Nostrand Reinhold-. New York,

Levine, Harvey A.: 1986. Project Managing Using Micro Computers,

Osborne McGraw-Hill: Berkley, California.

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 Project Network
Moder J.J., Phillips C.R. and E.W. Davis, 1986. Project Management with Analysis (Pert &
CPM, PERT 34 and Precedence Diagramming, CBS Publishers : New Delhi CPM)

Saxena K.R. (ed.). 1991.. Project Management for Developing Countries,

Oxford & IBH Publishing Co. Pvt. Ltd.: New Delhi.

Stallworthy, E.A. and O.P. Kharbanda, 1983. Total Project Management:

From Concept to Completion, Grover Publishing Co.: Aldershot. Hants,
England.

Weist Jerome D and Ferdinand K. Levy, 1977. A Management Guide to

PERT/CPM with GERT/PDM/DCPM and other networks, Prentice-Hall of
India: New Delhi.

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Project Planning
UNIT 6 PROJECT SCHEDULING
Objectives

• Describe the types of project constraints.

• Understand the nature of resource constraints.
• To understand the time constraint situations.
• Explain the steps and issues involved in scheduling resources in a project
environment.
• To understand the heuristics for scheduling resources.
• Explain the benefits of resource scheduling.

Structure

6.1 Introduction
6.2 Defining the Schedule
6.3 Resource Scheduling Problem
6.3.1 Classification of a Scheduling Problem
6.3.2 Resource Allocation Methods

6.4 Time Constrained Projects: Smoothing Resource Demand

6.4.1 Steps Involved in Resource Smoothing

6.5 Resource – Constrained Projects

6.6 Let Us Sum Up
6.7 Self-Assessment Exercise
6.8 Further Readings

6.1 INTRODUCTION
Project scheduling is a process required to ensure the timely completion of a
project. Till now, we learned about activity on arrow (AOA) and activity on
node (AON) network representation, also calculated the cost and time
required for each activity. A real-life project involves hundreds of activities
for which it is important to evaluate early and late times at which the
activities start and finish. In addition, identifying the group of critical
activities so that they can be focused to reduce the cause for delay. All these
can be done by scheduling a project, which basically adds a time dimension
to the planning process. Project scheduling includes all the tools require to
ensure timely completion of the project. The project scheduling is sued for;

• Knowing the activities timing and the project completion time.

• Having resources available on site in the current time.
• Making corrective actions if schedule shows that the plan will result in
late completion.
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 Project Scheduling
• Assessing the value of penalties on project late completion.
• Determining the project cash flow.
• Evaluating the effect of change orders on the project completion time.
• Determining the value of project delay and the parties responsible for the
same.

But before creating a project schedule, one should typically have a work
breakdown structure (WBS), the time estimate for each task, and a resource
list with availabilities for each resource. A Schedule is created using a
consensus-driven estimation method, the reason for this is that a schedule
itself is an estimate, each date in the schedule is estimated, and if those dates
do not have the buy-in of the people (resource) who are going to do the work,
the schedule will be inaccurate. Setting overall completion dates must be
done by the project team and key stakeholders. The project manager assists
by assimilating information about scope, budget, resources, and estimating
times for completion of project tasks. Once an overall schedule is set, the
project manager is responsible for monitoring the progress of the project and
revising the schedule if needed. This must be done in consultation with
project team members who are doing the work. There will be typically give-
and-take as a project proceeds among budget, scope and schedule. It is
essential for the project manager to keep all participants informed as to
current schedule status.

The schedule development process should generate a project schedule that

meets the following criteria.

• Complete - the schedule must represent all the work to be done,

therefore, the quality and completeness of the WBS is very important.
• Realistic - the schedule must be realistic with respect to time
expectations and the availability of beneficiaries to participate.
• Accepted - the schedule must have ‘buy-in’ from team members and
stakeholders, especially the beneficiaries.

6.2 DEFINING THE SCHEDULE

The creation of the project schedule requires the team to define the conditions
that will lead to the development of the schedule. The first piece of
information needed for this step comes from the WBS that has all the
activities identified for the project. The quality and completeness of the WBS
will determine the quality of the schedule, and this is a good time for the
project team to review if all the project activities are accounted for. Building
the schedule is actually an easy part but once a project is published and issues
and changes start to creep, the schedule becomes difficult to manage since
it’s the resources with the less flexibility. The goal of defining the schedule is
for the project team to have a complete understanding of all the work that
needs they must accomplish, by defining the schedule the project also
develops an understanding of the constraints, dependencies and sequence of
the activities.
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Project Planning
6.3 RESOURCE SCHEDULING PROBLEM
After the assigning of staff and other resources have been taken place, a
project manager still needs to answer the following questions:

1. Will the assigned resource be adequate or available to deal with my

project?
2. Will there be need of outside contractors?
3. Do unforeseen resource dependencies exist? Is there a new critical path
4. The rate of flexibility available for using the resources
5. How realistic is the deadline?

Any project scheduling system should tend to facilitate easy answers to these
questions.

As of now, the start and sequence of activities were solely based on technical
or logical considerations. For, example, a project network for constructing a
home might show 3 activities in sequence: 1) Pour foundation, 2) Build
frame 3) Cover roof. In other words, you cannot perform activity 2 without
completing activity 1 and so on. The project network assumes that the
resources are available to perform the required work. But this is not often the
case! The absence of abundant amount resources can drastically affect the
timeline of a project.

The internal relationships and interactions among the time and resource
constraints are often complex for even smaller projects. Some efforts to
examine these interactions prior to starting the project frequently uncovers
surprising problems. Project managers who do nit look out for resource
availability in moderately complex projects usually learn when it’s too late
recover.

6.3.1 Classification of a Scheduling Problem

The scheduling of projects can be classified into either time constraint type or
resource constraint type. It is necessary for a project manager to consult their
priority matrix to determine which case fits their projects. One simple test to
check whether the project is time or resource constrained is to check, when
the critical path is delayed, will resource be added to get back to schedule? If
the answer is yes, the project is time constrained, of no, then the project is
resource constrained.

Time- Constrained: It means the project must be completed within the given
time period. It required, more resources can be added to make the process
faster and complete it on the given specific time zone. Although time is the
crucial factor, resources usage should be no more than is necessary and
sufficient.

Resource Constrained: It happens when the resources available are limited.

I such situation, it will be acceptable to delay the project, but as little as
110 possible.
 Project Scheduling
6.3.2 Resource Allocation Methods
Before demonstrating the allocation methods, there are certain assumptions
that must be followed through-out the procedure. The assumptions are as
follows:

1. Splitting activities is not allowed. i.e., if one activity is placed with the
schedule, it can’t be removed unfinished.
2. The level of resources used for an activity cannot be changed.

6.4 TIME CONSTRAINED PROJECTS:

SMOOTHING RESOURCE DEMAND
Time Constrained projects are scheduled based on resource utilization. When
the demand for specific resource is erratic, it is difficult to manage and the
utilization of the resource is poor. Many practitioners defend such problems
using resource leveling techniques that balance the demand for resources.
But, leveling techniques delay noncritical activities by using positive slack to
reduce peak demand and fill in the valleys for the resources.

If the duration of completion of project is the constraint, then resources

smoothing is applied without changing total project duration. The period of
minimum demand for resources are located and the activities are shifted
according to float availability and requirement of resources. Thus, intelligent
utilization of float can smoothen the demand of resources to the maximum
possible extent. This type of resources allocation is called as “Resource
Smoothing.”

6.4.1 Steps Involved in Resource Smoothing

1. List out the resources which will be required for execution of the various
activities and identify the ones which are considered important.
2. Resource profiles are prepared by carrying out the resource aggregation
exercise and cumulative resource requirement for each unit are plotted in
the form of histogram.
3. The periods of peak and low demands are identified and an attempt is
made to lower the peaks and fill up the troughs.
4. If there is no constraint on the availability of resources, make the demand
as uniform as possible. This can be achieved by altering the times of start
and finish of non-critical activities, to start with. These activities can
have certain amount of float. Therefore, available float can be used for
making adjustments in the start in start and finish of the activities
concerned and thus, lowering the peak demand by staggering of resource
requirements without delaying the project duration.

Now, let us look at an example and try to understand how resource

smoothing works in a project.
111
Project Planning Consider a project with seven activities as shown in the table below. The
predecessors of each activity and the duration of the activities are given. The
number of compressors (consider it as a resource) required by each activity is
also listed. The organization has only 6 compressors available with them.
Look at the table 6.1

Table 6.1

Activity Predecessors Duration No. of Compressors Needed

(Days)
A - 3 6
B A 2 1
C B 5 5
D B 4 2
E C 9 4
F C, D 2 4
G E, F 1 1

Solution:

Step 1: Draw the schedule network diagram and determine the critical path.

5 1 10 1
C, 5 E, 9
5 1 1 1

0 0 3 3 5 1 2 20
Start A, 3 B, 2 G, End
0 0 3 3 5 1 1 20 20

TF=8 TF=7
5 9 10 1
D, 4 F, 2
1 17 17 1
FF=1 FF=7

Fig. 6.1: Show the schedule network and critical path

From the schedule network diagram, you can understand the critical path is
A-B-C-E-G and the total duration of the project is 20 days. The problem with
the critical path method is it does not consider the availability of resources.
So, now we need to check whether there are any resource conflicts in the
schedule created by the critical path method. It will be easier if we present the
schedule in the Gantt chart/ bar chart format to understand the resource usage
over time periods.
112
 Project Scheduling
Chart. 6.1: Gant chart or bar chart

AC DU RE 1 1 1 1 1 1 1 1 1 1 2 2 2
T R S 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2

A 3 6

B 2 1

C 5 5

E 4 4

G 9 6

D 2 2

F 1 1
ACT: Activity DUR: Duration (Days) RES: Resources (No. of Compressors Needed)

With the bar chart representation, it is easier for us to calculate the

compressors needed on each day. For example, we know that from day 1 to
3, only activity A is in progress; so, we need 6 compressors on each of these
days. However, from day 6 to 9, activity C and activity D are running in
parallel. So, you need 7 compressors (5 for activity C and 2 for activity D) on
each of these days.

Let us plot the resources required as a histogram in fig. 6.2 below.

Fig. 6.2:

By drawing a line to show the resource limit, we can clearly see the days on
which the resource conflict occurs. You can see that the schedule requires
more compressors than available on six days; Day 6, 7, 8, 9, 11 and 12.
113
Project Planning Now, let us see how the application of resource smoothing helps to remove
the resource conflicts on these six days. Resource smoothing looks at
removing as much resource conflicts as possible without delaying the total
project duration.

Let us again start to adjust the original CPM schedule to avoid resource
peaks.

Chart. 6.2

AC DU RE 1 1 1 1 1 1 1 1 1 1 2 2 2
T R S 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2

A 3 6

B 2 1

C 5 5

E 4 4

G 9 6

D 2 2

F 1 1

Available no. of
compressors

Fig. 6.3:

Activity D is shifted from day 6 to day 11. This removes the resource peaks
from day 6 to 9. However, there is still resource conflicts on day 15 and day
16. This conflict cannot be removed without delaying the total project
114 duration. So, resource smoothing will stop here. Out of the six days of
 Project Scheduling
conflict, resource smoothing managed to remove 4 days of conflict.
However, if the organization wants to stick to the original schedule, they
should bring additional resources on day 15 & day 16.

6.5 RESOURCE – CONSTRAINED PROJECTS

Solving the resource scheduling problem for optimal solutions is extremely
complex, particularly for large project networks with many different resource
types. However, several heuristics are available to solve such problems.
These heuristics allocate resources to activities to minimize project delay
based on certain priority rules. The two most commonly used heuristics are
the serial and the parallel methods. In the serial method of resource
allocation, activities are sorted into a list and resources are allocated to each
of these activities one at a time until resources are allocated to all activities.
In the parallel method, however, resources are allocated on a period-by-
period basis rather than each activity. In this method only those activities
whose preceding activities have been completed will be considered. If two or
more activities compete for the same resources, then allocation of resources
is based on certain prescribed priority rules. Compared to the serial method,
the parallel method has been the most widely used heuristic. The following
priority rules, in the order presented, have been found to be the most effective
in minimizing project delay.

• Minimum slack
• Smallest duration
• Lowest activity identification number

The Parallel method

3 2 8

3 2P 3
5 5 10
6 5 8
2 1P 2

0 1 2 3 1 6 8 2 10
10 7 12
0 2P 0 0 2P 0
0 1P 0
0 3 2 2 3 6
10 2 12
6 6 10

0 1P 0

3 4 4 6 4 10

6 1P 6
8 2 10 ES ID EF

SL RES SL
LS DUR LF

115
Project Planning Regardless of the scheduling heuristic used, the primary impact of resource
constrained scheduling is the loss of flexibility due to the reduction in slack.
Furthermore, the reduction in slack also increases the number of critical or
near-critical activities.

ID RES DUR ES LF SL 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 2P 3 0 2 0 2 2 2
2 2P 5 3 10 3 2 2 2 2 2
3 2P 3 3 6 0 2 2 2
4 1P 2 3 10 6 1 1
5 1P 2 6 10 2 1 1
6 1P 4 6 10 0 1 1 1 1
7 1P 2 10 12 0 1 1

Fig.6.4:

Period Action
0-1 Only activity 1 is eligible. It required 2 programmers.
1-2 No activities are eligible to be scheduled
2-3 No activities are eligible to be scheduled
3-4 Activities 2, 3, 4 are eligible to be scheduled. Activity 3 has least slack (0) –
apply rule 1.
Load Activity 3 into schedule.
Activity 2 is next with the slack of 2 but activity 2 requires 2 programmers and
only 1 is available.
Delay activity 2. Update: ES = 3, Slack = 2.
The next eligible activity is activity 4, since it only requires 1 programmer.
Load activity 4 into schedule.

Resource-constrained schedule through period 2-3

Chart. 6.3:

id RES DUR ES LF SL 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 2P 3 0 2 0 2 2 2
2 2P 5 3 10 3 x
3 2P 3 3 6 0 2 2 2
4 1P 2 3 10 6 1 1
5 1P 2 6 10 2
6 1P 4 6 10 0
7 1P 2 10 12 0
Total resource load 2P 2P 2P 3P 3P 2P
Resource available 3P 3P 3P 3P 3P 3P 3P 3P 3P 3P 3P 3P
116
 Project Scheduling
Period Action
4-5 Activity 2 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 2. Update: ES = 4, slack = 1.
5-6 Activity 2 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 2. Update: ES = 5, slack = 0.
6-7 Activities 2, 5 and 6 are eligible with slack of 0, 2 and 0
respectively.
Activity 2 and 6 have slack (0) – rule 1 becomes inactive.
But since, Activity 6 requires 1 programmer and activity 2 requires
2 programmers, both are loaded at the same time.
Delay activity 5. Update: ES = 6, slack = 1.
7-8 Activity 5 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 5. Update: ES = 6, slack = 0.
8-9 Activity 5 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 5. Update: ES = 6, slack = -1.
9-10 Activity 5 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 5. Update: ES = 6, slack = -2.
10-11 Activities 5 and 7 are eligible with slack of -2 and 0 respectively.
Activity 5 with slack (-2) and activity 6 have slack (0) – rule 1
Load Activity 5 into schedule.
Delay activity 7. Update: ES = 10, slack = -1.

Chart. 6.4:
i RE DU L 1 1 1 1 1
d S R ES F SL 1 2 3 4 5 6 7 8 9 0 1 2 3 4
1 2P 3 0 2 0 2 2 2
1 0
2 2P 5 3 6 0 3 x x x 2 2 2 2 2
3 2P 3 3 6 0 2 2 2
1
4 1P 2 3 0 6 1 1
1 2
5 1P 2 6 0 -2
-1 x x x x
1
6 1P 4 6 0 0 1 1 1 1
1
7 1P 2 10 2 0
2 2 3 3 2 3 3 3 3
Total resource load 2P P P P P P P P P P
3 3 3 3 3 3 3 3 3 3 3
Resource available 3P P P P P P P P P P P P
117
 Project Planning

Chart. 6.4:

RE DU E 1 1 1 1 1
ID S R S LF SL 1 2 3 4 5 6 7 8 9 0 1 2 3 4
1 2P 3 0 2 0 2 2 2
2 2P 5 3 6 10 3 0 x x x 2 2 2 2 2
3 2P 3 3 6 0 2 2 2
2
S
4 1P 2 3 10 6 -2 1 1 L
5 1P 2 6 10 2 x x x x 1 1
6 1P 4 6 10 0 1 1 1 1
1
7 1P 2 0 12 0 -1 x 1 1
2 2 2 3 3 2 3 3 3 3 3 2 1
Total resource load P P P P P P P P P P P P P
3 3 3 3 3 3 3 3 3 3 3 3
Resource available P P P P P P P P P P P P

New network schedule network;

6 2 11

0 2P 0

5 5 11
10 5 12

0 1P 0

0 1 2 3 1 6 10 2 12
11 7 13
0 2P 0 0 2P 0
0 1P 0
0 3 2 2 3 6
11 2 13
6 6 10

0 1P 0

3 4 4 6 4 10

2 1P 2

4 2 6 ES ID EF

SL RES SL

LS DUR LF

Fig.6.5

118
 Project Scheduling
6.6 LET US SUM UP
The use of resources and their availability are very difficult issues for project
managers to deal with. By paying attention to these things when making a
project schedule, resource bottlenecks can be found before the project even
starts. Project managers should know what will happen if they don't schedule
their resources.

When you schedule resources, the results are often very different from what
you'd get with the standard CPM method. With how quickly technology
changes and how important it is to get products to market quickly, catching
problems with resource use and availability before a project starts can save
the cost of crashing project activities later. Any resource changes that don't
conform to the plan and schedule can be quickly recorded, and their effects
can be noted as the project is being carried out. If there was no quick way to
receive updates, the true negative effects of a change might not be known
until they occurred.

Connecting the availability of resources to a system with multiple projects

and multiple resources helps a project priority process that chooses projects
based on how much they contribute to the organization's goals and strategic
plan. Some people may need to be a better fit for the projects given to them
by computer software routines. The best course of action in these
circumstances is almost always to find a workaround that suits each person's
individual needs and abilities. The project resource schedule is important
because it gives you a time baseline that you can use to figure out how much
time is different between what you planned and what actually happened.
Your time-phased project cost budget baseline will be built around the
resource schedule.

The baseline (planned value, or PV) is the total of the cost accounts, and the
total of the work packages in each cost account is the total of that cost
account. Remember that if your budgeted costs aren't spread out over time,
you don't have a good way to measure how well things are going. The cost
baseline typically only includes the direct costs that the project manager can
control, such as labor, materials, and equipment, despite the fact that there are
many different types of project costs. Other indirect costs can be added to the
project costs separately.

6.7 SELF ASSESSMENT EXCERCISES

1. How does resource scheduling tie to project priority?
2. How does resource scheduling reduce flexibility in managing projects?
3. Present six reasons scheduling resources is an important task.
4. Why is it critical to develop a time-phased baseline?
5. You have prepared the following schedule for a project in which the key
resources is a tractor. There are three tractors available to the project.
119
Project Planning Activities A and D require 1 tractor to complete while activities B, C, E
and F require 2 tractors.

4 C 8

2 2 2

6 4 10
0 A 4

1 1 1

1 4 5
5 D 10 10 F 12

0 1 0 0 2 0

5 5 10 10 2 12
0 B 5

0 2 0

0 5 5 ES ID EF
5 E 8

2 2 2 SL RES SL

7 3 10 LS DUR LF

6.8 FURTHER READINGS

1. Clifford F.Gray, Erik W. Larson, Gautam V.Desai, Project Management:
The Managerial Process, 2010, Tata McGraw – Hill 6th Edition.
2. Jack R. Meredith & Samuel J.Mantel, 2010, Project Management: A
Managerial Approach, 7th edition, Wiley India Edition.
3. Rory Burke, Project Management: Planning and control Techniques, 4th
edition 2010, John Wiley & Sons.
4. Pinto Jeffrey K, Project Management-Achieving Competitive
Advantage, Indian edition, Pearson
5. Jhon M.Nicholas, Herman Steyn. Project Management for Business,
engineering, and Technology, 3rd edition, 2010, Elsevier

120
 Project Crashing
UNIT 7 PROJECT CRASHING

Objectives:

• How to reduce the project timelines when you’re forced to complete the
project before time?
• How to optimize the time and resources when there is time constraint?
• To find out the optimum time and resources required in case of reducing
the project timeline / crashing the project timelines.

Structure

7.1 Introduction
7.2 What is Project Crashing?
7.3 Time-Cost Relationship
7.4 Project Crashing Example
7.5 Let Us Sum Up
7.6 Self-Assessment Exercise
7.7 Further Readings

7.1 INTRODUCTION
Time is a very precious resource when it comes to project management.
Schedules for each job or activity must be very carefully developed to ensure
on-time completion of a project. But under certain circumstances and
challenges, which may occur along a new project, it is necessary to adopt
certain methods to overcome these challenges. As a project manager, you
need to reassess and adjust a plan in response to arising needs. For this, there
are several methods such as critical thinking, risk analysis and project
crashing are used.

Crashing in project management relates to cost-evaluation of reducing those

activities which are on the critical path. After which, the activities that
correspond to the lowest cost for crashing should worked on. In this chapter,
the underlying premise behind project crashing is explained and typical risks
involved in a schedule crashing effort are described. Combined, the project
crashing assessment and the risks can be brought to executive management
when you advise them about how best to proceed with your project.

7.2 WHAT IS PROJECT CRASHING?

Crashing is a method used in project management that assists in boosting up
the project timeline by employing additional resources in cases where the
scope and deadline of the project cannot be changed instead, you’re force to
complete the project before time without compromising the scope. Although
it will increase the cost of the project but in some cases, it is a good project
121
Project Planning strategy to be exercised when you’re forced to complete the project before
time. There are several situations where one can think of crashing the project
timelines, for example;

• When there is an emergency to complete the project before time

• When project is delayed due to unforeseen circumstances
• To avoid a delay in an upcoming phase of another project which is lined-
up
• Availability of free resources

Since crashing a project entails a large budget increase for employing

additional resources, it should only be used as a last resort when;

• It’s impossible to delay the project deadline.

• It’s impossible to reduce the scope of the project.
• When the cost of missing the deadline is greater than the cost of crashing
the project.

That said, the best, and most effective time to begin crashing a project is as
soon as the need for it is identified. But to be successful, project crashing
should be calibrated, decided upon, and applied at the very start of a project
for effective results.

Let’s consider this simple project crashing example. Your team is tasked with
launching a magazine to celebrate your company’s 50th anniversary, but
delays in approving the lead feature have caused the project to fall behind. In
order to ensure the magazine is in hand by the anniversary party, an element
of the project’s scope that can’t be changed, you choose to pay a rush fee for
the printer. This project crashing step helped you meet the immovable
deadline, but it also increased your project budget.

7.3 TIME-COST RELATIONSHIP

Estimation of time required for the performance of an activity depends upon
the quantity of resources. Except some fixed duration activities such as a
gestation, crop duration etc. for which it is possible to manage the duration of
an activity by varying the quantity of resources. For an instance, if cost is not
a constraint, adding more resources to the project might reduce the time
duration i.e., time is inversely proportional to cost. The relation can be better
understood from the figure below. The time for the activity at minimum cost
is called normal time and the minimum time for the activity is called crash
time. The costs associated with these times are called respectively the normal
cost and the crash cost. Although it is possible to estimate the time and cost
associated with the normal and crash conditions for each activity it is difficult
to estimate the time and cost at any intermediate stage between these two
points. To overcome this difficulty, it is assumed that the relationship
between the time and cost as linear in the range between normal and crash
situations.
122
 Project Crashing

Figure 7.1: Time cost relationship

There is a possibility that when a project is crashed another non-critical

activity may become critical and in next iteration this has to be considered for
further crashing.

Steps involved in project crashing as follows;

1. Identify critical path and critical activity

2. Compute crash cost slope i.e. [(Crash cost – Normal cost) / (Normal
Time – Crash Time)]
3. Select the activity with the least cost slope i.e., minimum crash cost per
unit time.
4. Check for the critical path.

As the project shortening (crashing) continues, a point is reached at which no

further crashing is possible. At this point, some activities might not have
reached their crash points. If these activities are crashed further, costs are
increased with no saving in project duration.

7.4 PROJECT CRASHING EXAMPLE

Example 1: The network and durations given in the following figure shows
the normal schedule for a project. You can crash (decrease) the durations at
an additional cost. The Table 7.1 given below summarizes the time-cost
information for the activities. The owner wants you to complete the project in
110 days. Find the minimum possible cost for the project if you want to
complete it in 110 days. Assume that for each activity there is a single linear,
continuous function between the crash duration and normal duration points.
Cost is given in dollars ($) and time duration in days.

123
Project Planning A
120

B C D E
1 2 3 4 5
20 40 30 50

F
60

Figure. 7.2:

Table 7.1:

Activity Normal Duration Crash Duration Normal Cost Crash Cost

A 120 100 13000 15000
B 20 15 1500 2500
C 40 30 18000 22500
D 30 20 1300 2000
E 50 40 3200 4200
F 60 55 12000 13050

Solution:

Assume that the duration-cost relationship for each activity is a single linear,
continuous function between the crash duration and normal duration points.
Using the normal duration (ND), crash duration (CD), normal cost (NC), and
crash cost (CC), the crash cost slope for each activity can be determined as
follows;
CC NC
SA =
ND CD
15000 13000
SA = = $ 100/day
120 100

SB = $200/day
SC = $450/day
SD = $70/day
SE = $100/day
SF = $250/day

The normal cost for the project is the sum of a normal cost for each activity.
The normal cost for the project is $49000 and the normal duration is 320
days. The activity which should be crashed is the one on the critical path
which will add the least amount to the overall project cost. This will be the
124
 Project Crashing
activity with the flattest or least-cost slope. The duration can be reduced as
long as the critical path is not changed, or a new critical path is created. In
addition, the activity duration cannot be less than the crash duration.

SD = $70/day (least-cost slope) Maximum of 10 days can be cut from this

schedule by reducing the duration of activity D to the crash duration of 20
days.

A
120

B C D E
1 2 3 4 5
20 40 30 50
20

F
60

Figure.7.3

Overall duration is 130 days and there are multiple critical paths (B-F-E and
B-C-D-E). Total project cost at this duration is the normal cost of $49000
plus the cost of crashing the activity D by 10 days (70 * 10 = $700) for a total
of $49700.

The next activity to be crashed would be the activity E, since it has the least-
cost slope ($100 per day) of any of the activities on the critical path. Activity
E can be crashed by a total of 10 days. Crashing the activity E by 10 days
will cost an additional $100 per day or $1000.

A
120

B C D E
1 2 3 4 5
20 40 30 50
20 40

F
60

Figure. 7.4

The project duration is now 120 days and the total project cost is $50700.
There are now three critical paths (A, B-C-D-E, and B-F-E). The next stage
of crashing requires a more thorough analysis since it is impossible to crash
one activity alone and achieve a reduction in the overall project duration.
125
Project Planning Activity A is paired with each of the other activities to determine which has
the least overall cost slope for those activities which have remaining days to
be crashed. Activity A ($100) + activity B ($200)

Activity A ($100) + activity C ($450) + activity F ($250)

The least-cost slope will be activity A + activity B for a cost increase of $300
per day. Reducing the project duration by 5 days will add 5*300 = $1500
dollar crashing cost and the total project cost would be $52200. Activity B
cannot be crashed any more.

A
120
115

B C D E
1 2 3 4 5
20 40 30 50
15 20 40

F
60

Figure. 7.5

Final step in crashing the project to 110 days would be accomplished by

reducing the duration of activity A by 5 days to 110 days, reducing activity C
by 5 days to 35 days, and reducing activity F by 5 days to 55 days. The
combined cost slope for the simultaneous reduction of activity A, activity C,
and activity F would be $800 per day. For 5 days of reduction this would be
an additional $4000 in total project cost. The total project cost for the crashed
schedule to 110 days of duration would be $56200.

A
120
115
110

B C D E
1 2 3 4 5
20 40 30 50
15 35 20 40

F
60
55

Figure. 7.6

126
 Project Crashing
7.5 LET US SUM UP
There are many things that can make it necessary to shorten the length of a
project, such as time-to-market concerns, incentive contracts, the need for
key resources, high overhead costs, or just delays that come up out of the
blue. These are called cost-time trade-off decisions, and they happen all the
time in real life.

This unit showed a formal, step-by-step way to figure out what will happen if
the project is finished earlier than planned. Rushing through a project makes
it more likely that it will run late. Depending on how sensitive the project
network is, the amount of time that needs to be cut from the normal time to
the best time varies. If a network has several critical or nearly-critical paths, it
is considered sensitive.

When shortening sensitive networks, it is important to be careful so that

project risks don't go up. On the other hand, insensitive networks offer the
chance to save a lot of money on a project by getting rid of some overhead
costs without much risk.

7.6 SELF ASSESSMENT EXCERCISE

1. How often do projects crash, and what are the top five causes?
2. What are the benefits and drawbacks of decreasing a project's scope in
order to move it along more quickly?
3. Why is putting projects on overtime a common strategy for rescheduling
work? What potential drawbacks could this choice have?
4. How can a project manager use a cost-duration graph? Explain.
5. Shortening the project's duration raises the possibility of being late.
Explain.
6. The critical path can be shortened in order to save money. Describe how
7. A project has activities with the following normal and crash times and
cost in dollars ($).
Table 7.2:
Activity Predecessor Normal Crash Normal Crash
Activity Duration Duration Cost Cost
(Weeks) (Weeks)
A - 6 4 18000 30000
B A 7 5 14000 1000
C A 4 3 19000 15000
D B 8 6 34000 30000
E C 2 1 3000 1500
F D 7 5 12000 10000
G E 4 2 15000 12000

127
Project Planning Determine a crashing scheme for the above project so that the total project
time is reduced by 3 weeks.

7.7 FURTHER READINGS

1. Clifford F.Gray, Erik W. Larson, Gautam V.Desai, Project Management:
The Managerial Process, 2010, Tata McGraw – Hill 6th Edition.
2. Jack R. Meredith & Samuel J.Mantel, 2010, Project Management: A
Managerial Approach, 7th edition, Wiley India Edition.
3. Rory Burke, Project Management: Planning and control Techniques, 4th
edition 2010, John Wiley & Sons.
4. Pinto Jeffrey K, Project Management-Achieving Competitive
Advantage, Indian edition, Pearson
5. Jhon M.Nicholas, Herman Steyn. Project Management for Business,
engineering, and Technology, 3rd edition, 2010, Elsevier.

128
 Earned Value
UNIT 8 EARNED VALUE ANALYSIS Analysis

Objectives

After studying this unit, you will be able to:

• Define Earned value analysis.
• Able to measure and control the performance and progress of a project

Structure

8.1 Introduction
8.2 Define Earned Value Analysis
8.3 Earned value Analysis Terms
8.4 Earned value – Performance metrics
8.5 Let Us Sum Up
8.6 Key Words
8.7 Self-Assessment Exercise
8.8 Further Readings

8.1 INTRODUCTION
In 1966, the United States Air Force mandated earned value management
(USAF EVMS) in addition to the other planning and controlling requirements
on Air Force programs, turning the idea of earned value management into a
basic approach to program management (EVM project management). The
Cost/Schedule Planning Control Specification (C/SPCS) was the name of the
demand. The idea and the necessary conditions have essentially not altered
over the years. Cost/Schedule Control System Criteria (C/SCSC), Earned
Value Management Systems Criteria (EVMSC), and the present 32
guidelines in the EIA-748 Standard for Earned Value Management Systems
have all undergone frequent modifications (EVMS).

Project managers use the Earned Value Management (EVM) approach to

monitor how their projects are performing in comparison to project baselines.
It’s common to think of a project’s progress as being ahead of schedule,
behind schedule, or over budget. In this global era of highly competitive
conditions, all the business practices operating in the public, as well as
private sectors are made to operate faster than ever before. As a result, it is
observed that industries are working on multiple projects simultaneously. To
make these projects work, regardless of the scope, companies need skilled
project managers. Project control is the activities conducted by the project
managers within the horizon of monitoring and updating the project, which
examines the current situation of the project and differentiates it from the
initial project plan to develop a current plan suiting the actual situation. If
there is a further delay in the project after updating, the manager may take
129
Project Planning necessary steps to prevent the delay. Deviations happening in a project can be
minimised by making a healthy decision using the proper tools. In addition to
that, with the moving time, sustainable measures related to quality and cost
should also need to be monitored. In this context, Earned Value Analysis
(EVA) is a very much useful and efficient tool used widely. For the
management of successful projects, project management presents several
tools and techniques, of which, Earned Value Analysis is the most regarded
one. It is a method used for measuring the performance project at any given
point in time. A technique, that uses “work in progress” status to predict the
future performance of the project.

To understand it better, let us consider you are a project manager working for
a client that contracted with your firm to produce 5 software. You developed
a plan to produce the five software during this year. In fact, the plan calls for
100 hours to be spent on each software. Finally, the ear ended, and five
software were produced. At year-end, you check with the finance department
to inquire about the total number of hours spent while developing the
software. The finance team informs you that 400 total hours were expended
to create the five software. At first, you are filled with a sense of
accomplishment, in fact, dazzling accomplishment as you finished the
planned five-hundred-hour production of software in 400 hundred hours,
saving the company 100 hours that may be applied to other projects in need.
Then, a sense of less-than-great feeling is recognized from deep within; why?
What’s wrong with this picture?

Maybe it is the fear of the unknown that gives Earned Value a less-than-
stellar review by many in the field. Information, which is power, can help
hold project fear at bay. Therefore, this unit sets out with the fundamental
expectation of providing the learner with basic information about Earned
Value Management.

8.2 DEFINE EARNED VALUE ANALYSIS

Earned Value Analysis is a method that allows measuring the amount of
work actually carried out on a project rather than the basic review of cost and
schedule reports. EVA provides a method that combines a project’s domain,
and schedule, under a bound together situated metrics to monitor and forecast
the project’s performance. The project manager is then able to use the
progress measured, to forecast a project’s total cost and date of completion,
based on trend analysis or application of the project’s “burn rate”. This
method relies on a key measure known as the project’s earned value. Often,
earned value is defined as the budgeted cost of worked performed. This
basically, enables the project manager to compute performance indices or
burn rates for cost and schedule performance, providing information on how
well the project is doing or performing relative to its original plans. These
parameters, when applied to future work, forecast how the project will do in
the future, assuming the burn rates will not fluctuate, which oftentimes is a
130 large assumption.
 Earned Value
Analysis

Figure 8.1: Risk management using EVA

8.3 EARNED VALUE ANALYSIS TERMS

As already discussed, Earned Value Analysis allows the project manager to
answer the following three questions, as they relate to the project:

1. Where have we been?

2. Where are we now?
3. Where are we going?

In Earned Value Analysis, unlike in traditional management, there are three

data sources:

• The budget (or planned) value of work scheduled (PV)

• The actual cost/value of work completed (AC)
• The earned value of the physical work completed (EV)

Planned Value (PV): It is the planned cost that has been estimated for the
following project. PV explains how much the project work is supposed to be
at any given point in the project schedule and cost estimate. Cost and
Schedule baseline refers to the physical work scheduled and the approved
budget to accomplish the scheduled work. PV can be looked at in two ways:
cumulative and current. Cumulative PV is the sum of the approved budget for
activities scheduled to be performed to date. Current PV is the approved
budget for activities scheduled to be performed during a given period. This
period could represent days, weeks, months, etc. PV, also known as Budget
Cost of Work Scheduled (BCWS).

Actual Cost (AC): It is the total cost incurred directly or indirectly in

completing a work on a particular project during a given period. This
numbers tells what amount has been spent and, as with Planned Value, can be
looked at in terms of cumulative and current. Cumulative AC is the sum of
the actual cost for activities performed to date. Current AC is the actual costs
of activities performed during a given period. This period could represent
days, weeks, months, etc. AC is also called Actual Cost of Work Performed
(ACWP).
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Project Planning Earned Value (EV): It is the estimated value of the work that has been
actually completed. To understand the accomplishments of the project, EV is
applied to the numbers and calculations in the project. EV basically
quantifies the worth of the work done to date. EV can be presented in a
Cumulative and Current fashion as well. Cumulative EV is the sum of the
budget for the activities accomplished to date. Current EV is the sum of the
budget for the activities accomplished in a given period. Earned Value is also
called Budgeted Cost of Work Performed (BCWP).

2/3 Time – ¾ Progress

Progress

1/3 Time – ¼ Progress

Time

Figure 8.2: Earned value – The standard Curve

Progress

No ramp up – no learning time

Time

Figure 8.3: Earned value – The Aggressive Curve

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 Earned Value
Analysis

Progress
About 30% of the
work done

70% to 80% of
the time gone

Time

Figure 8.4: Earned value – The Curve to avoid

8.4 EARNED VALUE- PERFORMANCE METRICS

Cost Variance (CV): It is the difference between earned value and actual
costs. (CV = EV – AC). Sometimes it is also expressed as the difference
between budgeted cost of work performed and actual cost work performed. If
the variance is equal to 0, the project is on budget. If a negative variance is
determined, the project is over budget and if the variance is positive the
project is under budget.

Schedule Variance (SV): It expresses the difference between work that is

ahead or behind the plan and reflects a given measurement method. The
formula utilized to express schedule variance is project earned value minus
the project planned value as of the date of examination. (SV = EV – PV) If
the variance is equal to 0, the project is on schedule. If a negative variance is
determined, the project is behind schedule and if the variance is positive the
project is ahead of schedule.

Schedule Performance Index (SPI): It is the measure of schedule efficiency

on a project. It is the ratio of earned value (EV) to planned value (PV). The
SPI is equal to earned value divided by planned value, (SPI = EV/PV). An
SPI equal to or greater than one indicates a favourable condition and a value
of less than one indicates an unfavourable condition.

Example: Calculation show a SPI of 1.4, that means project recognizing Rs.
1.40 for every Rs.1.00 spent to date on project. Assuming SPI efficiency
remains throughout the reminder of work, project will finish ahead of
schedule.

Cost Performance Index (CPI): It is as a measure of cost efficiency on a

project. It is the ratio of earned value (EV) to actual costs (AC). The CPI is
equal to the earned value divided by the actual costs, (CPI = EV – AC). A
CPI equal to or greater than one indicates a favourable condition and a value
of less than one indicates an unfavourable condition. 133
Project Planning Example: Calculation show a CPI of Rs. 0.50, that means project
recognizing Rs. 0.50 for every ₹ 1.00 spent to date on project. Assuming CPI
efficiency remains the same throughout the reminder of work, project will be
over budget.

Figure 8.5: Earned value performance metrics

Index values

<1: Over budget or behind schedule

>1: Under budget or ahead of schedule

CV
Progress SV

Update date

Time

Figure 8.6: Earned value analysis curve

Example 1:

1. You are the project manager on a project that has Rs. 900,000 in the
product development effort. There are two teams of workers that will
work for six months for a total of 12,000 hours. According to the project
schedule, your team should be done with 34% of the work. As of today,
the project is 37% complete, while 48% budget has been used. Calculate
and share your conclusion.
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 Earned Value
Solution: Analysis
Budget at Completion (BAC) = Rs. 900,000 (given)
AC = Rs. 432,000 (48% budget used)
PV = BAC × Planned % Complete
= 900,000 × 0.34 = Rs. 306,000
EV = BAC × Actual % Complete
= 900,000 × 0.37 = Rs. 333,000
CV = EV – AC
= 333,000 – 432,000 = -99,000
CPI = EV / AC
= 333,000 / 432,000 = 0.77
SV = EV – PV
= 333,000 – 306,000 = 27,000
SPI = EV / PV
= 333,000 / 306,000 = 1.08
Since CPI is less than 1, the project is over budget
And since SPI is more than 1, the project is ahead of schedule.

Check Your Progress 1:

For the following project, calculate SV, CV, SPI and CPI at the end of the
second month.
Month 1 2 3 4
Planned Rs. 11,10,000 Rs. 6,00,000 Rs. 25,00,000 Rs. 8,00,000
Value
Earned Rs. 10,00,000 Rs. 7,50,000
Value
Actual Cost Rs. 12,50,000 Rs. 5,00,000

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Check Your Progress 2:
You are managing a software project which is into eight months of its
execution. You are now reviewing the project status, and you have
ascertained that the project is behind schedule. The actual cost of Activity A
is Rs. 4,00,000 and that of Activity B is Rs. 2,00,000. The planned value of
these activities is Rs. 2,80,000 and Rs. 80,000, respectively. The Activity A
is 100% complete. However, Activity B is only 82% complete. Calculate the
schedule performance index and cost performance index of the project on the
review date.
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Project Planning …………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

8.5 LET US SUM UP

In short, the project manager and the project team should make an effort to
make sure that the realized value of their project is always more than the
projected value and the actual cost booked on the project. Proper data
collection and computation of the project’s completion percentage are
essential to the success of earned value analysis. Each person interprets the
percentage of work completed in their own unique way. Because of this, The
Practice Standard on Earned Value Management outlines the procedures to
be used for calculating the percent of work completed for various project
activity types and scenarios.

8.6 KEYWORDS
Planned Value (PV): The budgeted cost for the planned work is the planned
value (BCWS). PV fluctuates depending on the size of the project under
consideration and where you are in the overall timetable.

Actual Cost (AC): The cost expended for carrying out work on a project is
known as the actual cost (AC), also known as actual expenditures.

Earned Value (EV): EV measures the “value” of the job completed so far.
In other words, EV explains the project’s accomplishments in concrete terms.
EV can be expressed in a Cumulative and Current manner, just as PV and
AC.

Cost Variance (CV): It is defined as the discrepancy between the actual cost
incurred while carrying out the scheduled activity and the anticipated cost of
work accomplished (earned value).

Schedule Variance (SV): It is a measure of the schedule performance of the

project. It can be expressed as the difference between the budgeted cost of
work scheduled (planned value) and work performed (earned value).

Schedule Performance Index (SPI): SPI is a measure of the schedule

efficiency of the project and indices if the project is ahead of the baseline
schedule. SPI can be expressed mathematically as Earned Value divided by
Planned Value. Schedule Performance Index (SPI) = Earned Value (EV) /
Planned Value (PV)

Cost Performance Index (CPI): CPI is the measure of how efficiently the
budgeted resources are being utilized on a project. It is mathematically
expressed as Earned Value divided by Actual Cost. Cost Performance
Index (CPI) = Earned Value (EV) / Actual Cost (AC).
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 Earned Value
8.7 SELF-ASSESSMENT EXERCISE Analysis

1. What do you mean by the term ‘earned value? Explain.

2. What is Earned Value Management (EVM)? Discuss the roles of EVM
in Project Management.
3. What are the top three 3 EVM performance measures? Discuss.

8.8 FURTHER READINGS

Project Management Institute. (2004) A Guide to the Project Management
Body of Knowledge (PMBOK® Guide). (Third ed.) Newtown Square, PA:
Project Management Institute
Project Management Institute. (2005) Practice standard for earned value
management (PMI Global Standard) (2005 ed.) Newtown Square, PA:
Project Management Institute
Government Electronics and Information Association. (2002) Earned value
management systems Approved: May 19, 1998. Reaffirmed: August 28,
2002. ANSI/EIA-748-A-1998
United States Department of Energy (2005) Earned value management
application guide, version 1.6. January 1, 2005. Office of Engineering and
Construction Management.
Reichel, C. W. (2006). Earned value management systems (EVMS): "you too
can do earned value management" Paper presented at PMI® Global Congress
2006—North America, Seattle, WA. Newtown Square, PA: Project
Management Institute.

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Project Planning

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