1. project management
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ADM2302 ~ Rim Jaber 1
PROJECT MANAGEMENTPROJECT MANAGEMENT
ADM2302 ~ Rim Jaber 2
Learning ObjectivesUnderstand how to plan, monitor, and control projects
using PERT/CPM.Determine earliest start, earliest finish, latest start,
latest finish, and slack times for each activity.Understand impact of variability in activity times.Develop load charts to plan, monitor, and control use
of various resources during project.Use LP to find least cost solution to reduce total
project time, and solve LP models using Excel’s Solver.
Understand important role of software such as Microsoft Project in project management.
ADM2302 ~ Rim Jaber 3
Introduction Every organization will take on a large and complex
project. Scheduling large projects is difficult challenge to most
managers when stakes are high. Millions of dollars in cost overruns have been wasted
due to poor project planning.Unnecessary delays have occurred due to poor
scheduling, and companies have gone bankrupt due to poor controls.
How can such problems be solved? Answers lie in popular decision modeling approach
known as project management.
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Project Planning, Scheduling, and Controlling
Source: J. Heizer and B. Render. Operations Management. 6/e. Prentice Hall. 2001.
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Project Planning, Project Planning, Scheduling, and Scheduling, and
ControllingControllingProject Planning1. Setting goals2. Defining the project3. Tying needs into timed project activities4. Organizing the team
Project Scheduling1. Tying resources to specific activities2. Relating activities to each other3. Updating and revising on regular basis
Project Controlling1. Monitoring resources, costs, quality and budgets2. Revising and changing plans3. Shifting resources to meet demands
Before Project
During Project
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Software Packages in Project ManagementSoftware Packages in Project Management
• Managing large and complex projects has become easier due to availability of specialized project management software packages.
• Primavera (by Primavera Systems, Inc.), • Microsoft Project (by Microsoft Corp.), • MacProject (by Apple Computer Corp.), • Pertmaster (by Westminster Software, Inc.),• VisiSchedule (by Paladin Software Corp.), and • Time Line (by Symantec Corp.). • Microsoft Project 2000.
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PROJECT SCHEDUELING PROJECT SCHEDUELING TECHNIQUES: CPM and PERT TECHNIQUES: CPM and PERT Network Techniques CPM: Critical Path Method PERT: Project Evaluation and Review
Technique
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CPM vs. PERTCPM vs. PERT
Primary difference between PERT and CPM is how time needed for each activity in project is estimated.
CPM is a deterministic technique:It estimates completion time of each activity using a single
time estimate. PERT is a probabilistic technique:
each activity has three time estimates that are combined to determine expected activity completion time and its variance
Allows you to find the probability that the entire project will be completed at a given date.
9
Questions That May Be Questions That May Be Addressed by PERT and Addressed by PERT and
CPMCPM 1. When will the project be completed? 2. What are the critical activities or tasks in the project? 3. Which are the noncritical activities? 4. What is the probability that the project will be
completed by a specific date? 5. Is the project on schedule, ahead of schedule, or
behind schedule? 6. Is the project over or under the budgeted amount? 7. Are there enough resources available to finish the
project on time? 8. If the project must be finished in less than the
scheduled amount of time, what is the best way to accomplish this at least cost?
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Six Steps Common toSix Steps Common toPERT and CPMPERT and CPM
1. Define the project and all of its significant activities or tasks.
2. Develop relationships among the activities. Determine the intermediate predecessors (activities or tasks that must be completed before the current activities can begin).
3. Draw the network connecting all of the activities. 4. Assign time and/or cost estimates to each activity 5. Compute the longest time path through the
network. This is called the critical path. 6. Use the network to help schedule, monitor, and
control the project.
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General Foundry, Inc., a metalwork plant in Milwaukee, has long been trying to avoid the expense of installing air pollution control equipment. The local environment protection group has recently given the foundry 16 weeks to install a complex air filter system on its main smokestack. General Foundry was warned that it will be forced to close unless the device is installed in the allotted period. Lester Harky, the managing partner, wants to make sure that installation of the filtering system progresses smoothly and on time.
When the project begins the building of the internal components for the device, and the modifications that are necessary for the floor and roof can be started. The construction of the collection stack can begin once the internal components are completed. Pouring the new concrete floor and installation of the frame can be completed as soon as the internal components are completed and the roof and floor have been modified. Once the collection stack has been constructed, the high-temperature burner can be built, and the installation of the pollution control system activity can begin. The air pollution device can be installed after the high-temperature burner has been built, the concrete floor has been poured, and the frame has been installed. Finally, after the control system, and pollution device have been installed, the system can be inspected and tested.
General Foundry ExampleGeneral Foundry Example
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General Foundry Example General Foundry Example (Cont’d)(Cont’d)
1. Define all project activities.
2. Determine the intermediate predecessors (activities/tasks that must be completed before the current activities can begin).
3. Draw the corresponding network.
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General Foundry Example: General Foundry Example: Activity, Immediate Activity, Immediate Predecessor, TimePredecessor, Time
Activity Description Immediate Predecessor Time (weeks)
ABCDEFGH
Build internal componentsModify roof and floorConstruct collection stackPour concrete and install frameBuild high temperature burnerInstall control systemInstall air pollution deviceInspection and testing
AA,BCCD, EF,G
23244352
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Network FundamentalsNetwork Fundamentals
Network: A graphical display of project that contains the activities and shows the precedence relationships among the activities.
Activity: A time consuming job or task that is a key subpart of the whole project. Number of activities in project will depend:
On nature and scope of project. On level of detail with which project manager
monitors and controls project.
ADM2302 ~ Rim Jaber 15
Drawing Project NetworkThere are two approaches for drawing project network --
Activity on Node (AON), and Activity on Arc (AOA).
Although both approaches are popular in practice, many
project management software packages, including
Microsoft Project 2000, use AON networks.
Focus is on AON network:The nodes of the network represent the activities.The arcs (the line with arrows) represent/show the precedence
relationships among the activities.
16
Some Network Construction RulesSome Network Construction Rules If activity A precedes activity B, activity A must
be completed before starting activity B.Each network has only one start and only one
termination point. If there are two activities or more that do not have any
predecessors, then include a dummy activity called Start.
In case of two activities or more with no successors, all arrows must meet at the same Finish-of-project node. Include a dummy activity called Finish
Dummy activity does not really exist and takes up zero time and resources.
Two or more activities cannot share both the same start and end event (AOA)Dummy activities may be needed in AOA networks to
show all precedence relationships
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Network for General Foundry, Network for General Foundry, Inc.--Activity on Node (AON)Inc.--Activity on Node (AON)
s
A C
DB
H f
G
E
F
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Network for General Foundry, Network for General Foundry, Inc.--Activity on Node (AON)Inc.--Activity on Node (AON)
s
A C
DB
H f
G
E
F
2
3
2
4
4
3
5
20 0
ADM2302 ~ Rim Jaber 19
Network for General Foundry, Network for General Foundry, Inc.--Activity on Arc(AOA)Inc.--Activity on Arc(AOA)
1
2 4
53
6
(Build Internal Components) (Construct
Collection Stack)
(Modify Roof and Floor)
(Pour Concrete and
Install Frame)
(Install Control System)
(Install PollutionDevice)
7
(Inspect andTest) (Build
Burner)
A
B
D
C
E
F
GH
ADM2302 ~ Rim Jaber 20
Network for General Network for General Foundry, Inc. (AOA)Foundry, Inc. (AOA)
1
2 4
53
6 7
A
B
D
C
E
F
GH
t = 2
t = 4
t = 3
t = 2
t = 3
t = 5
t = 2t = 4Dummy
Activity
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Once project network has been drawn to show all activities and precedence relationships, determine project schedule.
Determining The Project Schedule
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Critical PathCritical PathDefinition
The critical path is the longest time path route through the network.
To find out just how long the project will take, perform critical path analysis for network:
Find the Critical Path
How to find the Critical Path?Determine: ES, EF, LS, LF, and slack time.
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What is ES and EF?What is ES and EF?
Earliest Start Time (ES): Earliest time at which an activity can start, assuming all predecessors have been completed.All predecessors activities must be completed
before an activity can be started
Earliest Finish Time (EF): Earliest time at which an activity can be finished.
ADM2302 ~ Rim Jaber 24
Compute ES and EF for Compute ES and EF for each Activityeach Activity
EF = ES + t
= Earliest start time + activity timeES : make a forward Pass through the
network.
==>the earliest start time is the time when all the activities ending at the node have been completed
==> ES =Max{ EF of all immediate predecessors}
ADM2302 ~ Rim Jaber 25
General Foundry’s Earliest Start General Foundry’s Earliest Start (ES) and Earliest Finish (EF) (ES) and Earliest Finish (EF)
Times--AONTimes--AON
s
A C
DB
H f
G
E
F
2
3
2
4
4
3
5
20 0
ESEF
ESEF
ESEF
ESEF
ESEF
ESEF
ESEF
ESEF
ESEF
ESEF
ADM2302 ~ Rim Jaber 26
What is LS and LF?What is LS and LF?
Latest Start Time (LS): Latest time at which an activity can start so as to not delay completion time of entire project.
Latest Finish Time (LF): Latest time by which an activity has to finish so as to not delay the completion time of entire project.
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Compute LS and LF for each Compute LS and LF for each activityactivity
For each activity, determine its LF value, followed by its LS value.
LS = LF - t= Latest Finish time - activity time.
LF : make a backward pass through the network (begins with last
activity in project)==> computed by making sure that the project will not be delayed for any activity
LF = Min{ LS of all immediate following activities}
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General Foundry’s Latest General Foundry’s Latest Start (LS) and Latest Finish Start (LS) and Latest Finish
(LF) Times(LF) Times--AON--AON
s
A C
DB
H f
G
E
F
2
3
2
4
4
3
5
20 0
LSLF
LSLF
LSLF
LSLF
LSLF
LSLF
LSLF
LSLF
LSLF
LSLF
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General Foundry’s ES,LS,EF General Foundry’s ES,LS,EF and LFand LF--AON--AON
s
A C
DB
H f
G
E
F
2
3
2
4
4
3
5
20 0
S=(0 ,0)F=(0,0)
S= ( 0,0)F= ( 2,2)
S=( 2,2)F=( 4,4)
S= (4 ,10)F=(7 ,13)
S= ( 13,13)F=( 15,15)
S=( 0,1)F=(3 ,4)
S=(3 ,4)F=(7,8)
S=( 8,8)F= (13 ,13)
S= ( 15,15)F=( 15,15)
S=(4 ,4)F=( 8,8)
ADM2302 ~ Rim Jaber 30
Results of CPM: Results of CPM: Activities Along Critical Activities Along Critical
PathPath
General Foundry’s Schedule and Slack Times
OnCriticalPath?
Slack(LS - ES)
LatestStart (LS)
EarliestFinish (EF)
EarliestStart (ES)Activity
ABCDEFGH
0023448
13
234787
1315
01244
108
13
01010600
YesNoYesNoYesNoYesYes
LatestFinish (LF)
24488
131315
ADM2302 ~ Rim Jaber 31
s
A C
DB
H f
G
E
F
2
3
2
4
4
3
5
20 0
Results of CPM: Activities Results of CPM: Activities Along Critical Path (cont’d.)--Along Critical Path (cont’d.)--
AONAON
General Foundry’s Critical Path (A - C - E - G - H)
ADM2302 ~ Rim Jaber 32
Multiple Critical PathsIn General Foundry’s case, there was just a single
critical path.
Can project have multiple critical paths?
Answer is yes.
For example, what if time required for activity B had
been estimated as 4 weeks, instead of 3 weeks?
Due to this change, earliest and latest times for
activities B and D would have to be revised.
ADM2302 ~ Rim Jaber 33
Project Evaluation and Review Project Evaluation and Review Technique (PERT)Technique (PERT)
An alternative to CPM
Uses Probabilistic activities times
Same step as taken for the CPM Network Except:
on the fourth step instead of assuming a single time estimate we determine three time estimates for each activity: m, a, and b
ADM2302 ~ Rim Jaber 34
Three Time Estimates in PERT Optimistic time (a)= time an activity will take if
everything goes as planned.
Pessimistic time (b) = time an activity will take
assuming very unfavorable conditions.
Most likely time (m) = most realistic estimate of
time required to complete an activity.
ADM2302 ~ Rim Jaber 35
Beta Probability Beta Probability Distribution with Three Distribution with Three
Time EstimatesTime Estimates
Pro
bab
ilit
y
OptimisticTime(a)
MostLikelyTime(m)
PessimisticTime(b)
Activity Time
Probability of1 in 100
(b) Occuring
Probability of1 in 100
(a) Occuring
ADM2302 ~ Rim Jaber 36
Expected Time and Variability To find expected activity time, t, beta distribution weights
three time estimates as follows:
• t = (a + 4m + b) / 6 Most likely time (m) is given four times weight as optimistic time (a)
and pessimistic time (b)
To compute dispersion or variance of activity completion
time, use formula:
• Variance = [ (b - a) / 6 ] 2
Standard deviation of activity completion time is square root
of variance.
• Standard deviation = Variance = (b - a) / 6
37
Time Estimates (in weeks) Time Estimates (in weeks) for General Foundry, Inc. for General Foundry, Inc.
(Table 13.2)(Table 13.2)t =
a + 4m + b
6Variance =
b - a
6( )
2
ActivityOptimistic
aMost
Probable- mPessimistic
bExpected Time
t = [(a + 4m + b)/6]Variance[(b - a)/6]2
A
B
C
D
E
F
G
H
1
2
1
2
1
1
3
1
2
3
2
4
4
2
4
2
3
4
3
6
7
9
11
3
2
3
2
4
4
3
5
2
3 - 16( ) 4
36=2
4 - 26( ) 4
36=2
3 - 16( ) 4
36=2
6 - 26( ) 16
36=2
7 - 16( ) 36
36=2
9 - 16( ) 64
36=2
11 - 36( ) 64
36=2
3 - 16( ) 4
36=2
Total 25 weeks
ADM2302 ~ Rim Jaber 38
s
A C
DB
H f
G
E
F
2
3
2
4
4
3
5
20 0
General Foundry’s Critical Path (A - C - E - G - H)
Results of PERT: Results of PERT: Activities Activities
Along Critical PathAlong Critical Path
Activities Along Critical Path
ADM2302 ~ Rim Jaber 39
PERT Time EstimatesPERT Time Estimates
ActivityOptimistic
(a)
MostProbable
(m)Pessimistic
(b)Expected
Time Variance
ADM2302 ~ Rim Jaber 40
PERT WorksheetPERT WorksheetActivity Expected
TimeES EF LF Slack Critical?
ADM2302 ~ Rim Jaber 41
The Expected Project The Expected Project Completion Time Completion Time
tp = Sum of the expected (mean) time of all the activities on the critical path.
ADM2302 ~ Rim Jaber 42
The project VarianceThe project Variance
PERT uses variance of critical path activities to help determine variance of overall project.
Project variance computed by summing variances of critical activities:• Project variance = (variances of activities on critical path)
Variance of activities are: A is 0.11, C is 0.11, E is 1.00, G is 1.78, and H is 0.11. Total project variance and project standard deviation are computed
as follows:• Project variance (P
2) = 0.11 + 0.11 + 1.00 + 1.78 + 0.11 = 3.11 weeks2
• Project standard deviation (P) = (Project variance) = (3.11) = 1.76 weeks
ADM2302 ~ Rim Jaber 43
Probability of Completing Project on Time
• How can information be used to answer questions regarding probability of finishing project on time?
• PERT makes two more assumptions: (1) total project completion times follow normal probability distribution; and (2) activity times are statistically independent.
• Normal curve implies there is 50% chance project completion time will be less than 15 weeks, and 50% chance it will exceed 15 weeks.
General Foundry, Inc.
44
Probability of General Foundry’s Probability of General Foundry’s Meeting the Deadline of 16 weeksMeeting the Deadline of 16 weeks
Z = Due Date - Expected Completion Date
σp= 16 - 15
1.76= 0.57
.57 Standard Deviations
16Weeks
15Weeks
Time
Probability(T <= 16 Weeks)is 71.6%
Compute « Standardized Data Values”: the number of standard deviations (Z) a value is from the mean, then refer to the normal table to find the probability
ADM2302 ~ Rim Jaber 45
Meeting 16-week Deadline
• Z = (due date - expected date of completion) / P
• = (16 weeks - 15 weeks) / 1.76 weeks = 0.57 • Referring to Normal Table in Appendix A, there is 71.6%
chance pollution control equipment can be put in place in 16 weeks or less.
General Foundry, Inc.
ADM2302 ~ Rim Jaber 46
Determining Project Completion Time for
Given Confidence Level Project completion time follows normal probability
distribution with mean of 15 weeks and standard deviation of 1.76 weeks.
Find due date deadline for 99% chance of project completion.
Determine Z value corresponding to 99%. In Normal Table in Appendix A, identify a Z value of 2.33
as closest to a 0.99 probability.
Due Date = Expected completion time + Z x P
= 15 + 2.33 x 1.76 = 19.1 weeks
ADM2302 ~ Rim Jaber 47
Determining Project Completion Time for
Given Confidence Level
• Due Date = Expected completion time + Z x P
= 15 + 2.33 x 1.76 = 19.1 weeks
General Foundry, Inc.
ADM2302 ~ Rim Jaber 48
Project CrashingProject Crashing
ADM2302 ~ Rim Jaber 49
Project Crashing • Project manager may be faced with either (or both) situations:
(1) the project is behind schedule, and/or
(2) the scheduled project completion time has been moved forward.
• Some or all of remaining activities need to be expedited to finish project by desired due date.
• Process to shorten duration of project in lowest cost possible is called project crashing.
• Choose which activities to crash, and by how much to ensure:
– Amount by which activity is crashed is permissible.
– Shortened activity durations enable one to finish project by due date and
– Total cost of crashing is as small as possible.
50
Crashing Project - Hand Calculations
Four Steps of Project Crashing1. Compute crash cost per week for all activities in
network. If crash costs are assumed to be linear over time, following formula may be used: Crash cost per period = (Crash cost - Normal cost)
(Normal time -Crash time) 2. Using current activity times, find critical path(s) in project
network. Identify the critical activities.
3. If there is only one critical path, then select activity on critical path that: (a) can still be crashed, and (b) has smallest crash cost per period. Crash this activity by one period.
ADM2302 ~ Rim Jaber 51
Crashing Project - Hand CalculationsIf there is more than one critical path, then select one
activity from each critical path such that: (a) each
selected activity can still be crashed, and (b) total crash
cost per period of all selected activities is smallest.
Crash each activity by one period each.
4. Update all activity times.
If desired due date has been reached, stop.
If not, return to Step 2.
ADM2302 ~ Rim Jaber 52
Crash and Normal Crash and Normal Times and CostsTimes and Costs
$34,000
$33,000
$32,000
$31,000
$30,000
ActivityCost
CrashCost
NormalCost
Crash Time Normal Time
Time (Weeks)
Crash Cost/Week =
1 2 3
Crash Cost - Normal CostNormal Time - Crash Time
$34,000 - $30,0003 - 1
=
= $4,0002 Weeks
= $2,000/Week
Normal
Crash
ADM2302 ~ Rim Jaber 53
Project CrashingProject Crashing
CriticalPath?CrashCrashNormalActivity
ABCDEFGH
23244352
11132221
$23,000 $34,000 $27,000 $49,000 $58,000 $30,500 $86,000 $19,000
$1,000 $2,000 $1,000 $1,000 $1,000 $500 $2,000 $3,000
Normal
$22,000 $30,000 $26,000 $48,000 $56,000 $30,000 $80,000 $16,000
Time (Weeks) Cost ($)Crash Costper Week
YesNoYesNoYesNoYesYes
ADM2302 ~ Rim Jaber 54
A Linear Programming Model A Linear Programming Model for Crashing Decisionsfor Crashing Decisions
Use Linear programming to determine which activities to crash and how much they should be crashed
Decision VariablesXfin= the finish time of the projectXi = the earliest start time for activity iYi = the amount of time activity i is crashed
i = A, B, C, D,E, F, G, H
ADM2302 ~ Rim Jaber 55
Objective functionMinimize Crash Cost =
ConstraintsCrash Time Constraints (maximum allowable crashing
time for each activity)
Project Completion ConstraintXfin <= 13
Constraints Describing the Network: Precedence Constraints. (ES of an activity)>= (EF of the Immediate Predecessor activity)
EF = ES + t If ES the earliest start time for an activity is known, the effect of crashing a
particular activity will be to reduce the t and hence EF, the earliest finish time
ADM2302 ~ Rim Jaber 56
Precedence Constraints
Duration of activity i may be reduced by Yi. If activity A starts the earliest at XA, then the earliest finish (EF) is at (XA+2-YA). Earliest start time of activity C (namely, XC) can be no earlier than (XA+2-YA). XA =0
XB = 0XC XA + 2 - YA (precedence AC)
XD XA + 2 – YA (precedence AD) XD XB + 3 - YB (precedence BD) XE XC + 2 - YC (precedence CE) XF XC + 2 - YC (precedence CF) XG XD + 4 - YD (precedence DG) XG XE + 4 - YE (precedence EG) XH XF + 3 - YF (precedence FH) XH XG + 5 – YG (precedence GH) Xfin XH + 2 – YH (precedence HFin)
All Xi and Yi 0 (non-negativity)
General Foundry, Inc.
ADM2302 ~ Rim Jaber 57
Managing Project Costs
Steps of the Budgeting ProcessSteps of the Budgeting Process • Identify all costs with each of the activities.
Then add these costs together to get one estimated cost or budget for each activity.
• If you are dealing with a large project, several activities may be combined into larger work packages. A work package is simply a logical collection of activities. Since the Genaral Foundry project we have been discussing is small, one activity will be a work package.
ADM2302 ~ Rim Jaber 58
Steps of the Budgeting ProcessSteps of the Budgeting Process
3. Convert the budget cost per activity into a cost per time period. To do this, we assume that the cost of completing any activity is spent at a uniform rate over time.
– If budgeted cost for given activity is $48,000 and activity's expected time is four weeks, budgeted cost per week is $12,000 (= $48,000/4 weeks).
4. Using the earliest and latest start times, find out how much money should be spent during each week or month to finish the project by the date desired.
ADM2302 ~ Rim Jaber 59
PERT and Budgeting: Activity PERT and Budgeting: Activity Cost for General Foundry, Inc.Cost for General Foundry, Inc.
BudgetedCost per
Week
TotalBudgeted
Cost
LatestStart (LS)
EarliestStart (ES)Activity
ABCDEFGH
0023448
13
01244
108
13
$22,000 $30,000 $26,000 $48,000 $56,000 $30,000 $80,000 $16,000
$11,000 $10,000 $13,000 $12,000 $14,000 $10,000 $16,000 $ 8,000
ExpectedTime, t
23244352
Total $308,000
ADM2302 ~ Rim Jaber 60
PERT and BudgetingPERT and Budgeting
Using the earliest start time, we can find the exact weeks during which the budget for each activity should be spent. These weekly amount can be summed for all the activities to arrive at the weekly budget for the entire project.
ADM2302 ~ Rim Jaber 61
Budget Cost ($1000)for General Foundry Budget Cost ($1000)for General Foundry Inc., Using Earliest Start TimesInc., Using Earliest Start Times
Activity
ABCDEFGH
11110
2121
4
1312
2590
21110
2142
3
1013
2365
6
121410
36162
5
121410
36126
7
121410
36198
9
16
16228
8
14
14212
11
16
16260
10
16
16244
13
16
16292
12
16
16276
14
8
8300
15
8
8308
Total2230264856308016
Total to dateTotal/Week
Week
308
ADM2302 ~ Rim Jaber 62
PERT and BudgetingPERT and Budgeting
Another budget can be computed using the latest start time. This budget will delay the expenditure of funds until the last possible moment.
ADM2302 ~ Rim Jaber 63
Budget Cost ($1000)for General Foundry Budget Cost ($1000)for General Foundry Inc., Using Latest TimesInc., Using Latest Times
Activity
ABCDEFGH
111
1111
4
1013
2378
21110
2132
3
1013
2355
6
1214
26130
5
1214
26104
7
1214
26156
9
16
16198
8
1214
26182
11
1016
26240
10
16
16214
13
1016
26292
12
1016
26266
14
8
8300
15
8
8308
Total2230264856308016
Total to dateTotal/Week
Week
308
ADM2302 ~ Rim Jaber 64
Budget Ranges for General Budget Ranges for General Foundry, Inc.Foundry, Inc.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
TotalBudgetedCost
Weeks
Budget UsingEarliest Start
Times, ES
Budget UsingLatest StartTimes, LS
ADM2302 ~ Rim Jaber 65
Budget Ranges for General Budget Ranges for General Foundry, Inc.Foundry, Inc.
Lester Harky can use any budget between the feasible ranges and still complete the air pollution project on time.
Budget shown in the previous figure are normally developed before the project is started. Then as the project is being completed, funds expended should be monitored and controlled.
Purpose of monitoring and controlling project costs is to ensure project is progressing on schedule and cost overruns kept to minimum.
ADM2302 ~ Rim Jaber 66
Monitoring and Controlling Monitoring and Controlling Projects CostsProjects Costs
Is the Project on Schedule and within the budget?Value of work completed =
(percent of work completed)*(total activity budget)Activity difference =
actual cost –value of work completed
Activity difference <= 0 cost underrun
Activity difference >= 0 Cost overrun
ADM2302 ~ Rim Jaber 67
Monitoring and Controlling budget Monitoring and Controlling budget Cost (week 6)Cost (week 6)
ActivityDifference
($)
TotalBudgeted
Cost
Percent ofCompletion
Actual Cost($)Activity
ABCDEFGH
20,00036,00026,0006,000
20,0004,000
00
10010010010202000
$22,000 $30,000 $26,000 $48,000 $56,000 $30,000 $80,000 $16,000
-2,000 6,000
0 1,200 8,800 -2,000
0 0
Value of WorkCompleted
($)
22,00030,00026,0004,800
11,2006,000
00
Total 100,000 112,000 12,000
Overrun
ADM2302 ~ Rim Jaber 68
Monitoring and Controlling Monitoring and Controlling budget Costbudget Cost
Question: The value of work completed is on
$100,000, and the actual cost of the project to date is $112,000. How do these costs compare to the budget cost for week 6?
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